Asstt.Commissioner of Income Tax , Kanpur V. Shri Pawan Kumar Gupta, Kanpur

ITA 54/LKW/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100349 (ITAT-LUCKNOW)
• Duration Of Justice: 3 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 07-07-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 06-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HARISH GIDWANI
• Assessee Lawyers: P K KAPOOR
• Keywords: Unexplained cash credit; Unexplained investment; Business income; Search and seizure; Loose papers; Document seized; Additional evidence; Corroborative evidences; Documents seized
• Section: 148; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI. A. K. GARODIA, ACCOUNTANT MEMBER ITA NO.54 & 86/LKW/2012 ASSESSMENT YEAR:2005-06 & 2006-07 ACIT CENTRAL CIRCLE KANPUR V. SHRI. PAWAN KUMAR GUPTA PROP. M/S COAL COMPANY 15/86, CIVIL LINES, KANPUR TAN/PAN:AGQPG6844C (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI. HARISH GIDWANI, D.R. RESPONDENT BY: SHRI. P. K. KAPOOR, C.A. DATE OF HEARING: 07 07 2015 DATE OF PRONOUNCEMENT: 20 08 2015 O R D E R PER SUNIL KUMAR YADAV: THESE APPEALS ARE PREFERRED BY THE REVENUE AGAINST THE RESPECTIVE ORDERS OF THE LD. CIT(A) FOR ASSESSMENT YEAR 2005-06 AND 2006-07. SINCE COMMON ISSUES ARE INVOLVED IN THESE APPEALS, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF THROUGH THIS CONSOLIDATED ORDER. WE, HOWEVER, FOR THE SAKE OF REFERENCE EXTRACT THE GROUNDS RAISED IN BOTH THE APPEALS. 2. GROUNDS RAISED IN I.T.A. NO. 86/LKW/2012:- 1. THAT LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 55,83,300/-MADE BY THE A.O. ON PROTECTIVE BASIS ON ACCOUNT OF COAL BUSINESS CARRIED OUT BY THE ASSESSEE THROUGH THE SYNDICATE OF BHUTORIA GROUP, WITHOUT APPRECIATING THE FACT THAT THE AO HAD GIVEN HIS FINDING ON THE BASIS OF SEIZED DOCUMENTS FOUND DURING THE COURSE OF SEARCH AT THE PREMISES OF MR. BHUTORIA AND THAT ON THE BASIS OF SEIZED :- 2 -: DOCUMENT PB-20, PB-17, THE ASSESSEE WAS FOUND TO HAVE RECEIVED RS.55,83,300/- IN CASH, WHICH WAS NOT DISCLOSED IN HIS BOOKS OF ACCOUNT. 2. THAT LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 55,83,300/-MADE BY THE AQ ON PROTECTIVE BASIS ON ACCOUNT OF COAL BUSINESS CARRIED OUT BY THE ASSESSEE THROUGH THE SYNDICATE OF BHUTORIA GROUP, WITHOUT APPRECIATING THE FACTS THAT THE AO'S FINDING OF ASSESSING RS. 55,83,300/- IN THE HANDS OF THE ASSESSEE WAS ALSO SUPPORTED BY THE STATEMENT OF SHRI BHUTORIA RECORDED AT THE TIME OF SEARCH AT HIS PREMISES, THOUGH SHRI P.C. BUTORIA COULD NOT BE CROSS- EXAMINED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, BECAUSE OF HIS NON-COOPERATION. 3. THAT LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 55,83,300/-MADE BY THE AO ON PROTECTIVE BASIS ON ACCOUNT OF COAL BUSINESS CARRIED OUT BY THE ASSESSEE THROUGH THE SYNDICATE OF BHUTORIA GROUP, WITHOUT APPRECIATING THE FACTS THAT THE A.O. WAS JUSTIFIED IN MAKING THE PROTECTIVE ADDITION IN THE HANDS OF THE ASSESSEE BECAUSE THE EXISTENCE OF THE SYNDICATE AOP, ITS ADDRESS AND PAN ETC. WERE NOT ASCERTAINABLE AND THE AO HAD TO MAKE THE ADDITION OF RS. 55,83,300/- ON PROTECTIVE BASIS IN THE HANDS OF THE ASSESSEE. 4. THAT LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 12,82,850/-MADE BY THE AO ON ACCOUNT OF PROFIT ON PREMIUM ON ACCOUNT OF PURCHASE AND SALE OF COAL IN OWN ACCOUNT OF THE ASSESSEE, IGNORING THE FACT THAT THE AO HAS GIVEN HIS FINDING ON THE BASIS OF SUFFICIENT EVIDENCE ON RECORD THAT THE ASSESSEE WAS ALSO ENGAGED IN THE TRADING OF COAL IN HIS OWN ACCOUNT. 5. THAT LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 18,17,200/- MADE BY THE A.O. ON ACCOUNT OF :- 3 -: PAYMENTS TO THE SUB-AGENT FOR DEPOSIT WITH M/S NCCF, BHUBNESHWAR, IGNORING THE FACT THAT THERE WAS SUFFICIENT EVIDENCE ON RECORD WITH THE AO IN SUPPORT OF THE ADDITION. 6. THAT LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 12,63,760/- MADE BY THE A.O. ON ACCOUNT OF UNEXPLAINED CREDIT BALANCE AS ON 31/03/2006 WITH M/S NCCF, KOLKATA ON THE BASIS OF ADDITIONAL EVIDENCE, IGNORING THE FACT THAT THE SAID ADDITIONAL EVIDENCE IN THE FORM OF LETTER FROM M/S NCCF, KOLKATA DID NOT CLARIFY THE ISSUE AND BY NOT PRODUCING THE EVIDENCE BEFORE THE A.O., THE ASSESSEE HAS INTENTIONALLY AVOIDED THE INVESTIGATION WHICH THE AO MIGHT HAVE CONDUCTED TO VERIFY THE CORRECTNESS OF CONTENTS OF THE LETTER. 7. THAT LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 1,17,93,900/-MADE BY THE A.O. ON ACCOUNT OF INVESTMENT IN THE COAL BUSINESS, IGNORING THE FACT THAT THE AO HAS GIVEN HIS FINDING ON THE BASIS OF SUFFICIENT EVIDENCE ON RECORD THAT THE ASSESSEE WAS ALSO ENGAGED IN THE TRADING OF COAL IN HIS OWN ACCOUNT. 8. THAT LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 1,17,93,900/- MADE BY THE A.O. ON ACCOUNT OF INVESTMENT IN THE COAL BUSINESS, WITHOUT APPRECIATING THE FACT THAT THE ADDITION WAS BASED ON THE CONTENTS OF THE SEIZED DOCUMENTS AND STATEMENT OF SHRI P.C. BHUTORIA THAT THE ASSESSEE WAS EARNING PREMIUM ON COAL SUPPLIES OTHER THAN THE REGULAR COMMISSION INCOME EARNED BY HIM. 9. THAT THE APPELLANT CRAVES LEAVE TO AMEND ANY ONE OR MORE OF THE GROUNDS OF THE APPEAL AS STATED ABOVE AS AND WHEN NEED FOR DOING SO MAY ARISE. 10. THAT THE ORDER OF THE LD. CIT (A) DESERVES TO BE VACATED AND THE ASSESSMENT ORDER PASSED BY THE A.O. BE RESTORED. 3. GROUNDS RAISED IN I.T.A. NO. 54/LKW/2012:- :- 4 -: 1. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.36 LACS MADE BY THE AO ON PROTECTIVE BASIS ON ACCOUNT OF COAL BUSINESS CARRIED OUT BY THE ASSESSEE THROUGH THE SYNDICATE OF BHUTORIA GROUP, WITHOUT APPRECIATING THE FACT THAT THE AO HAD GIVEN HIS FINDING ON THE BASIS OF SEIZED DOCUMENTS FOUND AT THE PREMISES OF MR. BHUTORIA AND THAT ON THE BASIS OF SEIZED DOCUMENT PB-20, PB-17 THE ASSESSEE WAS FOUND TO HAVE RECEIVED RS.36 LACS IN CASH, WHICH WAS NOT DISCLOSED IN HIS BOOKS OF ACCOUNT. 2. THAT THE .LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.36 LACS MADE BY THE AO ON PROTECTIVE BASIS ON ACCOUNT OF COAL BUSINESS CARRIED OUT BY THE ASSESSEE THROUGH THE SYNDICATE OF BHUTORIA GROUP, WITHOUT APPRECIATING THE FACT THAT THE AO'S FINDING OF ASSESSING RS.36 LACS IN THE HANDS OF THE ASSESSEE WAS ALSO SUPPORTED BY THE STATEMENT OF SHRI BHUTORIA RECORDED AT THE TIME OF SEARCH AT HIS PREMISES, THOUGH SHRI P.C. BHUTORIA COULD NOT BE CROSS-EXAMINED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, BECAUSE OF HIS NON COOPERATION. 3. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.36 LACS MADE BY THE AO ON PROTECTIVE BASIS ON ACCOUNT OF COAL BUSINESS CARRIED OUT BY THE ASSESSEE THROUGH THE SYNDICATE OF BHUTORIA GROUP, WITHOUT APPRECIATING THE FACT THAT THE AO WAS JUSTIFIED IN MAKING THE PROTECTIVE ADDITION IN THE HANDS OF THE ASSESSEE BECAUSE THE EXISTENCE OF THE SYNDICATE AOP, ITS ADDRESS AND PAN ETC. WERE NOT ASCERTAINABLE AND THE AO HAD TO MAKE THE ADDITION OF RS.36 LACS ON PROTECTIVE BASIS IN THE HANDS OF THE ASSESSEE.. 4. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.46,24,050/- MADE BY THE AO ON ACCOUNT OF INVESTMENT IN THE COAL BUSINESS IGNORING THE FACT THAT THE AO HAS GIVEN HIS FINDING ON THE BASIS OF SUFFICIENT EVIDENCE ON :- 5 -: RECORD THAT THE ASSESSEE WAS ALSO ENGAGED IN THE TRADING OF COAL IN HIS OWN ACCOUNT. 5. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.46,24,050/- MADE BY THE AO ON ACCOUNT OF INVESTMENT IN THE COAL BUSINESS WITHOUT APPRECIATING THE FACT THAT THE ADDITION WAS BASED ON THE CONTENTS OF THE SEIZED DOCUMENTS AND STATEMENT OF SHRI P. C. BHUTORIA THAT THE ASSESSEE WAS EARNING PREMIUM ON COAL SUPPLIES OTHER THAN THE REGULAR COMMISSION INCOME EARNED BY HIM. 6. THAT THE APPELLANT CRAVES LEAVE TO AMEND ANY ONE OR MORE OF THE GROUNDS OF APPEAL AS STATED ABOVE AS AND WHEN NEED FOR DOING SO MAY ARISE. 7. THAT THE ORDER OF THE LD. CIT(A) DESERVES TO BE VACATED AND THE ASSESSMENT ORDER PASSED BY THE AO BE RESTORED. 4. FIRST THREE GROUNDS IN BOTH THE APPEALS RELATE TO THE ADDITIONS MADE BY THE ASSESSING OFFICER ON PROTECTIVE BASIS IN THE HANDS OF THE ASSESSEE ON ACCOUNT OF COAL BUSINESS CARRIED OUT BY THE ASSESSEE THROUGH SYNDICATE OF BHUTORIA GROUP ON THE BASIS OF THE SEIZED DOCUMENTS PB-20 AND PB-17. 5. THE FACTS IN BRIEF BORNE OUT FROM THE RECORD ARE THAT ON 6.12.2005 A SEARCH AND SEIZURE ACTION UNDER SECTION 132 OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED IN SHORT THE ACT') WAS TAKEN PLACE IN THE CASE OF SHRI. PRAKASH CHAND BHUTORIA AT KOLKOTA, A PERSON BELONGING TO BHUTORIA GROUP WHICH WAS ENGAGED IN COAL BUSINESS. HIS FAMILY MEMBERS HAD BEEN DIRECTORS IN THE COMPANY, NAMELY PANCHSHEEL COMMODITIES PVT. LTD. HAVING ITS REGISTERED OFFICE AT KOLKATA. DURING THE COURSE OF SEARCH OPERATION, SOME COMPUTER PRINTOUTS (THREE IN NUMBER) FROM THE BUSINESS PREMISES OF THIS GROUP WAS SEIZED AND WITH RESPECT TO :- 6 -: THE SEIZED DOCUMENTS, STATEMENT OF SHRI. PRAKASH CHANDRA BHUTORIA WAS RECORDED UNDER SECTION 132(4) OF THE ACT AND SHRI. PRAKASH CHANDRA BHUTORIA HAS DEPOSED THAT THERE WAS A SYNDICATE CONSISTING OF 10 PERSONS IDENTIFIED THROUGH CODES WHICH WERE DECODED AS UNDER:- (I) PB : DECODED AS PRAKASH CHANDRA BHUTORIA (II) IB : DECODED AS INDRARAJ MULL BHUTORIA (III) LP : DECODED AS LAXRHAN PODDAR. (IV) MP : DECODED AS MAHENDRA BHUTORIA (V) LCS : DECODED AS LABH CHANDRA SURANA (VI) PG : DECODED AS PAWAN GUPTA (VII) LKM : DECODED AS LK. MUKHERJEE (VIII) BNM : DECODED AS B.N. MISHRA (IX) MA : DECODED AS MOHAN AGARWAL (X) BK : DECODED AS VICKERY KHANNA 6. SUBSEQUENTLY A SEARCH WAS CARRIED OUT AT THE BUSINESS-CUM COMMERCIAL PREMISES OF THE ASSESSEE AT 15/86, LATHAWALI KOTHI, CIVIL LINES, KANPUR ON 13.3.2006. DURING THE COURSE OF SEARCH, ASSESSEE HAS DISCLOSED AN INCOME OF RS75 LAKHS AND OFFERED TO PAY TAXES ON THE SAME. ON BEING INTERROGATED ABOUT THE CONTENTS OF THE THREE COMPUTER SHEETS AS ABOVE SEIZED FROM BHUTORIA GROUP, THE ASSESSEE SPECIFICALLY DENIED THE EXISTENCE OF ANY SYNDICATE AS STATED TO BE IN EXISTENCE AS PER THE STATEMENT OF SHRI. PRAKASH CHANDRA BHUTORIA. THE ASSESSEE HAS ALSO DENIED HIS INTEREST IN THE COAL BUSINESS, IF ANY, CARRIED OUT ON SYNDICATE IN ANY MANNER. 7. AFTER SURRENDERING THE INCOME OF RS.75 LAKHS FOR ASSESSMENT YEARS 2005-06 AND 2006-07, THE ASSESSEE HAS FILED RETURN OF INCOME FOR ASSESSMENT YEARS 2005-06 AND 2006-07 AND DECLARED INCOME AS UNDER:- SL. NO. PARTICULARS OF INCOME ASSESSMENT YEARS :- 7 -: 2005-06 (RS.) 2006-07 (RS.) (I) BUSINESS INCOME INCLUDING COMMISSION INCOME FOR HANDLING OF COAL FOR NCOF 7,46,024 39,62,285 (II) INCOME FROM OTHER SOURCES 30,20, 100 - TOTAL 37,66,124 39,62,285 8. THE ASSESSING OFFICER, HAVING CONSIDERED THE EXPLANATIONS OF THE ASSESSEE, HAS COMPLETED THE ASSESSMENT FOR ASSESSMENT YEAR 2005-06 AT AN INCOME OF RS.1,19,90,170/- BY MAKING THE FOLLOWING ADDITIONS:- (I) RS. 36,00,000/- ADDITION ON ACCOUNT OF COAL BUSINESS OF 18611 MT DONE BY THE ASSESSEE AT KOLKATA MADE ON PROTECTIVE BASIS. (II) RS. 46,24,050/- ADDITION ON ACCOUNT OF PROFIT ON SALE OF COAL AT RS.15413500/- AT KANPUR. 9. IN ASSESSMENT YEAR 2006-07, THE ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT AT AN INCOME OF RS.2,48,03,100/- BY MAKING THE FOLLOWING ADDITIONS:- I RS. 5583300/- ADDITION ON ACCOUNT OF COAL BUSINESS DONE BY THE AT KOLKATTA MADE ON PROTECTIVE BASIS. II RS.11793900/- ADDITION FOR ALLEGED PROFIT ON SALE PROCEEDS OF FOUR COAL RAKES AMOUNTING TO RS.3,93,13,000, TREATED AS 'TURNOVER' OF THE APPELLANT AT KANPUR. III RS.1282850/- INCOME SAID TO HAVE BEEN EARNED BY THE APPELLANT, IN THE COAL BUSINESS AT KOLKATA. IV RS.1817200/- INCOME SAID TO HAVE BEEN EARNED BY THE :- 8 -: APPELLANT, IN THE COAL BUSINESS AT BHUBANESHWAR. V RS.1263760/- DEPOSIT SAID TO HAVE BEEN MADE BY THE APPELLANT WITH 'NCCF' AT KOLKATA. VI RS.100000/- DISALLOWANCE OUT OF VARIOUS EXPENSES 10. WHILE COMPLETING THE ASSESSMENT IN BOTH THE YEARS, THE ASSESSING OFFICER HAS OBSERVED THAT THE INCOME FROM COAL BUSINESS SHOULD BE ASSESSED IN THE HANDS OF AOP AND ACCORDINGLY HE TAXED THE INCOME OF RS.36 LAKHS IN ASSESSMENT YEAR 2005-06 AND RS.55,83,300/- IN ASSESSMENT YEAR 2006-07 ON PROTECTIVE BASIS IN THE HANDS OF THE ASSESSEE. 11. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WITH THE SUBMISSION THAT NO SYNDICATE AS ALLEGED BY SHRI. PRAKASH CHANDRA BHUTORIA WAS EXISTED AND THEREFORE NO ADDITION OF RS.36 LAKHS IN ASSESSMENT YEAR 2005-06 AND RS.55,83,300/- IN ASSESSMENT YEAR 2006-07 IS ASSESSABLE IN THE HANDS OF THE ASSESSEE ON PROTECTIVE BASIS. 12. THIS ISSUE WAS DISCUSSED IN THE LD. CIT(A)S ORDER FOR ASSESSMENT YEAR 2005-06. THEREFORE, WE EXAMINE THE ORDER OF THE LD. CIT(A) IN ASSESSMENT YEAR 2005-06 IN THIS REGARD. 13. BEFORE THE LD. CIT(A), IT WAS STRONGLY CONTENDED THAT THIS ADDITION WAS MADE ON THE BASIS OF THE STATEMENT OF SHRI. PRAKASH CHANDRA BHUTORIA WHO WAS NOT ALLOWED TO BE CROSS-EXAMINED BY THE ASSESSEE TO TESTIFY THE VERACITY OF HIS STATEMENT. IT WAS FURTHER CONTENDED THAT THE ASSESSING OFFICER HAS NOT ALLOWED ANY OPPORTUNITY TO CROSS-EXAMINE SHRI. PRAKASH CHANDRA BHUTORIA. HE WAS SUMMONED TO BE APPEARED ON A PARTICULAR DAY IN KOLKATA, BUT SHRI. PRAKASH CHANDRA BHUTORIA DID NOT APPEAR ON THAT DAY, THEREFORE, HE WAS NOT ALLOWED TO BE CROS-EXAMINED. THEREAFTER, THE ASSESSING OFFICER HAS NOT ENFORCED THE ATTENDANCE OF SHRI. PRAKASH CHANDRA BHUTORIA FOR HIS CROSS-EXAMINATION. THUS, HIS :- 9 -: STATEMENT CANNOT BE RELIED ON FOR MAKING ADDITION IN THE HANDS OF THE ASSESSEE. THE THREE COMPUTER PRINTOUT SHEETS FOUND DURING THE COURSE OF SEARCH WAS FOUND FROM THE COMPUTER OF SHRI. PRAKASH CHANDRA BHUTORIA AND IT WAS NOT CORROBORATED BY ANY OTHER EVIDENCE. IT WAS FURTHER CONTENDED THAT THE OTHER MEMBER OF THIS SO CALLED SYNDICATE GROUP, SHRI. LAKSHMAN PODDAR WAS EXAMINED BY THE ASSESSING OFFICER AND IN HIS STATEMENT HE DENIED THE EXISTENCE OF SO CALLED SYNDICATE AS ALLEGED BY SHRI. PRAKASH CHANDRA BHUTORIA. THE ASSESSEE HAS ALSO DENIED ANY SORT OF CONNECTION WITH ANY SYNDICATE OR RECEIPT OF ANY AMOUNT ALLEGED TO HAVE BEEN MADE ON THE BASIS OF THE COMPUTER SHEETS. THE LD. CIT(A) RE-EXAMINED THE ENTIRE ISSUE IN THE LIGHT OF ASSESSEES CONTENTIONS AND BEING CONVINCED WITH THE EXPLANATIONS OF THE ASSESSEE, HE DELETED THE ADDITION OF RS.36 LAKHS IN ASSESSMENT YEAR 2005-06. ADDITION OF RS.55,83,300/- IN ASSESSMENT YEAR 2006-07 WAS ALSO DELETED FOLLOWING THE ORDER OF THE LD. CIT(A) PASSED IN ASSESSMENT YEAR 2005- 06. THE RELEVANT OBSERVATIONS OF THE LD. CIT(A) FOR ASSESSMENT YEAR 2005-06 ARE REPRODUCED HEREUNDER:- 6.1 THE LEARNED COUNSEL APPEARING ON BEHALF OF THE APPELLANT HAS STRONGLY OBJECTED TO THE ADDITIONS MADE BY THE A.O. THEY HAVE CONTENDED THAT THE ASSESSING OFFICER HAS NOT PROPERLY CONSIDERED THE FACTS OF THE CASE & SUBMISSIONS MADE BEFORE HIM FROM TIME TO TIME, IT HAS BEEN ARGUED THAT THE SAID COMPUTER SHEETS(ON THE BASIS OF WHICH ADDITION OF RS.36,00,000.00 HAS BEEN MADE)DO NOT CONSTITUTE ANY MATERIAL WHICH CAN BE TAKEN COGNIZANCE OF IN THE ASSESSMENT OF THE APPELLANT FOR THE REASONS THAT - (A) CONTENTS OF THE SAID COMPUTER PRINTOUTS ARE WHOLLY UNCORROBORATED AND UNTESTED (B) THE EXISTENCE OF THE 'SYNDICATE' IN THE COAL BUSINESS STANDS WHOLLY DISPROVED BY THE TESTIMONY OF SRI LAXMAN PODDAR WHO WAS ALLEGED TO BE ONE OF THE MEMBERS OF THE SYNDICATE AS PER THE STATEMENT OF SRI PRAKASH CHAND BHUTORIA (C) THE :- 10 -: ATTENDANCE OF SRI PRAKASH CHAND BHUTORIA (WHO WAS REQUIRED TO BE CROSS EXAMINED BY THE APPELLANT) WAS NOT ENFORCED BY THE ASSESSING OFFICER AND IN THE ABSENCE OF SUCH A CROSS EXAMINATION BEING CARRIED OUT NEITHER HIS STATEMENT NOR THE DOCUMENTS RECEIVED FROM HIS POSSESSION AND CONTROL WERE ADMISSIBLE AS EVIDENCE . 6.2 IN THE WRITTEN SUBMISSIONS DATED 12.03.2008 FILED BEFORE ME THE APPELLANT HAS FURTHER EXPLAINED THIS ISSUE AS UNDER:- '12. IN THE INSTANT CASE, THE APPELLANT WAS NOT GRANTED ANY OPPORTUNITY TO CROSS EXAMINE SRI P.O. BHUTORIA WHO IS SAID TO HAVE GIVEN A CULPABLE STATEMENT AND/OR AND FROM WHOSE POSSESSION THE SAID COMPUTER SHEETS ARE SAID TO HAVE BEEN FOUND. FOR THIS REASON ALONE, THE COMPUTER SHEETS REFERRED TO IN THE ASSESSMENT ORDER AND ALSO THE STATEMENT OF SRI BHUTORIA COULD NOT HAVE BEEN TREATED TO BE THE 'MATERIAL' AGAINST THE APPELLANT SO AS TO GIVE JURISDICTION TO THE ASSESSING OFFICER TO DRAW AN INFERENCE THAT THE APPELLANT HAD MADE INVESTMENT IN COAL BUSINESS FOR DOING 'TRADING' AT HIS OWN AND HAS EARNED INCOME FROM SUCH TRADING. THE APPELLANT'S CASE IS ON A BETTER FOOTING, AS EVEN AFTER THE APPELLANT AGREEING TO GO TO KOLKATA FOR CROSS EXAMINATION. THE WITNESS OF THE DEPARTMENT, OF SRI P.O. BHUTORIA AND EVEN THEN SRI P.O. BHUTORIA DID NOT TURN UP. NOT ONLY THIS, THE ASSESSING OFFICER DID NOT TAKE ANY STEP TO ENFORCE ATTENDANCE OF SN P.O. BHUTORIA. 13. ON THE OTHER HAND; STATEMENT OF SRI LAKSHMAN PODDAR (COPY APPEARING AT PAGE 115 TO 118 OF 1ST PAPER BOOK), WHO WAS ALSO ALLEGED TO BE A MEMBER OF 'SYNDICATE' FOR THE COAL BUSINESS WAS RECORDED BY THE ID. ASSESSING OFFICER AND IN SUCH STATEMENT, HE CATEGORICALLY DENIED THE EXISTENCE OF ANY :- 11 -: SUCH SYNDICATE. IN VIEW OF THE CATEGORICAL STATEMENT OF EXISTENCE OF SYNDICATE GETS WHOLLY DISPROVED. 14. FROM THE DISCUSSION MADE IN THE FOREGOING PARAGRAPHS, IT FOLLOWS THAT NO EVIDENCE OR MATERIAL WHATSOEVER WAS BROUGHT ON RECORD BY THE ASSESSING OFFICER, WHICH COULD GO TO SHOW (A) THAT ANY SUCH SYNDICATE EXISTED; (B) THE ASSESSES MADE ANY INVESTMENT THEREIN AND IN LIEU OF SUCH INVESTMENT, EARNED ANY INCOME THEREFROM. CONSEQUENTLY ADVERSE INFERENCE DRAWN BY THE ID. ASSESSING OFFICER ARE WHOLLY UNFOUNDED AND THE ADDITIONS MADE TO THE INCOME SHOWN BY THE APPELLANT DESERVE TO BE VACATED. ' 6.3 THE COUNSELS HAVE ALSO PLACED RELIANCE ON THE FOLLOWING DECISIONS IN SUPPORT OF THEIR AFORESAID CONTENTIONS: (I) - MALWA VANASPATI AND CHEMICALS CO. LTD. VS. C.S.T. REPORTED IN (1995) UPTC PAGE 987 WHEREIN THEIR LORDSHIPS HAVE OBSERVED AND HELD AS UNDER:- 'THIS COURT HAS REPEATEDLY EMPHASISED THAT THE ENTRIES IN THE BOOKS OF ACCOUNTS A THIRD PERSON CANNOT BE AUTOMATICALLY USED AGAINST A DEALER AND THEY HAVE TO BE PROVED ACCORDING TO LAW BY EXAMINING THE PERSON CONCERNED WHO CAN PROVE THE CORRECTNESS OF THE ENTRIES AND ALLOWING THE DEALER AGAINST WHOM THOSE ENTRIES ARE SOUGHT TO BE USED, AN OPPORTUNITY OF HEARING. THE ENTRIES IN THE BOOKS OF ACCOUNTS OF ANOTHER PERSON ARE MERELY STATEMENTS OF THAT PERSON AND THEY CANNOT BE USED AGAINST THE THIRD PARTY EXCEPT BY PROVING THEM IN ACCORDANCE WITH THE ESTABLISHED PROCE DURE. TRUE, THE PROVISION OF INDIAN EVIDENCE ACT DO NOT APPLY TO PROCEEDINGS :- 12 -: UNDER THE SALES TAX ACT BUT THAT DOES NOT MEAN THAT THE GENERAL PRINCIPLE THAT STATEMENT OF A PERSON MADE AT THE BACK OF THE PARTY SOUGHT TO BE BOUND BY IT CANNOT BE USED UNLESS IT IS MADE IN THE PRESENCE OF THAT PARTY AND THAT PARTY IS ALLOWED AN OPPORTUNITY OF CROSS EXAMINING THE PERSON CONCERNED. THERE IS NO LEGAL PRINCIPLE UNDER WHICH BOOKS OF ACCOUNTS OF VISHWAKARMA OIL TRADERS COULD BE GIVEN PRECEDENCE OVER THE BOOKS OF ACCOUNT OF THE PRESENT ASSESSEE. THEREFORE, THE BURDEN WAS ON THE REVENUE TO PROVE THAT ON MONEY' WAS IN FACT CHARGED BY THE DEALER IN RESPECT OF SALE OF VANASPATI TO VISHWAKARMA OIL TRADERS. THIS COULD BE DONE ONLY BY EXAMINING THE PERSON WHO PAID THE *ON MONEY' AND THE BOOKS OF ACCOUNTS COULD BE USED ONLY FOR CORROBORATING THE ORAL STATEMENT. NOTHING OF THIS SORT HAS BEEN DONE IN THIS CASE. THE MERE FACT THAT VISHVSAKARMAOIL TRADERS OR THE PERSON CONCERNED THEREWITH COULD NOT BE TRACED IS NO GROUND FOR DISPENSING WITH THE LEGAL MODES OF PROOF, APART FROM THIS CIRCUMSTANCE WHICH WAS-NOT LEGALLY ESTABLISHED, THERE VMS NOTHING IN THIS CASE TO JUSTIFY THE ENHANCEMENT OF THE TURNOVER. FOR THESE REASONS ENHANCEMENT UPHELD BY THE TRIBUNAL WAS UNJUSTIFIED AND THE TURNOVER OF VANASPATI BY THE DEALER OF RS.1,77,34,842 SHOULD HAVE BEEN ACCEPTED.' (II) STATE OF KERALA VS. K.T. SHADULI REPORTED IN (1977) (S.C.) AIR (1977)(S.C.) PAGE 1627 WHEREIN THEIR LORDSHIPS HAVE OBSERVED AND HELD AS UNDER:- 'THE SECOND PART OF THE PROVISO LAYS DOWN THAT WHERE A RETURN HAS BEEN SUBMITTED, THE ASSESSEE SHOULD BE GIVEN A REASONABLE OPPORTUNITY TO PROVE THE CORRECTNESS OR COMPLETENESS OF SUCH RETURN. THIS REQUIREMENT OBVIOUSLY APPLIES AT THE FIRST STAGE OF THE ENQUIRY BEFORE THE SALES TAX OFFICER COMES TO THE CONCLUSION THAT :- 13 -: THE RETURN SUBMITTED BY THE ASSESSEE IS INCORRECT OR INCOMPLETE SO AS TO WARRANT THE MAKING OF A BEST JUDGMENT ASSESSMENT. THE QUESTION IS V/HAT IS THE CONTENT OF THIS PROVISION WHICH IMPOSES AN OBLIGATION ON THE SALES TAX OFFICER TO GIVE AND CONFERS A CORRESPONDING RIGHT ON THE ASSESSEE TO BE AFFORDED, A REASONABLE OPPORTUNITY 'TO PROVE THE CORRECTNESS OR COMPLETENESS OF SUCH RETURN'. NOW, OBVIOUSLY 'TO PROVE' MEANS TO ESTABLISH THE CORRECTNESS OR COMPLETENESS OF THE RETURN BY ANY MODE PERMISSIBLE UNDER LAW. THE USUAL MODE RECOGNISED BY LAW FOR PROVING A FACT IS BY PRODUCTION OF EVIDENCE AND EVIDENCE INCLUDES ORAL EVIDENCE OF WITNESS. THE OPPORTUNITY TO PROVE THE CORRECTNESS OR COMPLETENESS OF THE RETURN WOULD, THEREFORE, NECESSARILY CARRY WITH IT THE RIGHT TO EXAMINE WITNESSES AND THAT WOULD INCLUDE EQUALLY THE RIGHT TO CROSS-EXAMINE WITNESSES EXAMINED BY THE SALES TAX OFFICER. HERE, IN THE PRESENT CASE, THE RETURN FILED BY THE ASSESSEE APPEARED TO THE SALES TAX OFFICER TO BE INCORRECT OR INCOMPLETE BECAUSE CERTAIN SALES APPEARING IN THE BOOKS OF ACCOUNT OF HAJI USMANKUTTY AND OTHER WHOLESALE DEALERS WERE NOT SHOWN IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE SALES TAX OFFICER RELIED ON THE EVIDENCE FURNISHED BY THE ENTRIES IN THE BOOKS OF ACCOUNT OF HAJI USMANKUTTV AND OTHER WHOLESALE DEALERS FOR THE PURPOSE OF COMING TO THE CONCLUSION THAT THE RETURN FILED BY THE ASSESSEE WAS INCORRECT OR INCOMPLETE. PLACED IN THESE CIRCUMSTANCES, THE ASSESSEE COULD PROVE THE CORRECTNESS AND COMPLETENESS OF HIS RETURN ONLY BY SHOWING THAT THE ENTRIES IN THE BOOKS OF ACCOUNT OF HAJI USMANKUTTY AND OTHER WHOLESALE DEALERS WERE FALSE, BOGUS OR MANIPULATED AND THAT THE RETURN SUBMITTED BY THE ASSESSEE SHOULD NOT BE DISBELIEVED ON THE BASIS OF SUCH ENTRIES, AND THIS OBVIOUSLY THE ASSESSEE COULD NOT DO, UNLESS HE WAS GIVEN AN OPPORTUNITY OF CROSS-EXAMINING HAJI USMANKUTTY AND OTHER WHOLESALE DEALERS WITH REFERENCE TO THEIR ACCOUNTS. SINCE THE EVIDENTIARY MATERIAL PROCURED FROM OR PRODUCED BY HAJI USMANKUTTY AND OTHER WHOLESALE DEALERS WAS :- 14 -: SOUGHT TO BE RELIED UPON FOR SHOWING THAT THE RETURN SUBMITTED BY THE ASSESSEE WAS INCORRECT AND INCOMPLETE, THE ASSESSEE WAS ENTITLED TO AN OPPORTUNITY TO HAVE HAJI USMANKUTTY AND OTHER WHOLESALE DEALERS SUMMONED AS WITNESSES FOR CROSS-EXAMINATION. IT CAN HARDLY BE DISPUTED THAT CROSS-EXAMINATION IS ONE OF THE MOST EFFICACIOUS METHODS OF ESTABLISHING TRUTH AND EXPOSING FALSEHOOD. HERE, IT WAS NOT DISPUTED ON BEHALF OF THE REVENUE THAT THE ASSESSEE IN BOTH CASES APPLIED TO THE SALES TAX OFFICER FOR SUMMONING HAJI USMANKUTTY AND OTHER WHOLESALE DEALERS FOR CROSS-EXAMINATION, BUT HIS APPLICATION WAS TURNED DOWN BY THE SALES TAX OFFICER. THIS ACT OF THE SALES TAX OFFICER IN REFUSING TO SUMMON HA// USMANKUTTY AND OTHER WHOLESALE DEALERS FOR CROSS- EXAMINATION BY THE ASSESSES CLEARLY CONSTITUTED INFRACTION OF THE RIGHT CONFERRED ON THE ASSESSEE BY THE SECOND PART OF THE PROVISO AND THAT VITIATED THE ORDERS OF ASSESSMENT MADE AGAINST THE ASSESSEE.' (III) HO DHARAM CHAND AGARWAL REPOTTED IN (2004) (4) MFC PAGE 474 LUCKNOW BENCH: 'I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RECORD CAREFULLY. THE ID CIT(A) HAS DISCUSSED THE ISSUE IN DETAIL AND NO INTERFERENCE IS CALLED FOR AS THE ADDITION WAS BASED ON THE CHIT WHICH WAS NOT FOUND FROM THE POSSESSION OF THE ASSESSEE AND THE A.O. HAS NOT BROUGHT ON RECORD ANY OTHER MATERIAL TO CO-RELATE THAT SUCH PAPER WAS RELATING TO THE ASSESSEE OR HE TRANSACTED THE HUGE AMOUNT PARTICULARLY WHEN STATEMENT OF SHN DHARAM CHANDRA AGARWAL IS A SPECIFIC THAT HE NEVER ENTERED INTO SUCH TRANSACTION.' (IV) AMARJIT SINGH BAKSHI HUF VS. AC/7 (2003) S6 ITD PAGE 13 (DELHI) TM. :- 15 -: 'WHETHER WHERE DOCUMENT IN QUESTION WAS NOT RECOVERED FROM ASSESSEE'S POSSESSION BUT WAS RECOVERED FROM N'S POSSESSION, AND ASSESSEE WAS NOT ALLOWED ANY OPPORTUNITY OF CROSS-EXAMINATION AND, FURTHER. N'S TESTIMONY WAS NOT FOUND CREDITABLE AT ALL, IT COULD NOT BE SAID THAT THERE WAS ANY IOTA OF EVIDENCE TO SUPPORT REVENUE'S CASE THAT A HUGE FIGURE OVER AND ABOVE FIGURE BOOKED IN RECORDS AND ACCOUNTS CHANGED HAND BETWEEN PARTIES AND, THEREFORE, NO ADDITION COULD BE MADE BASED OF SUCH DOCUMENT IN HAND OF ASSESSEE.' (V) PRARTHANA CONSTRUCTION (P) LTD. VS. DY.CIT REPORTED IN 118 TAXMANN PAGE 112 (AHMEDABAD BENCH): 'WHETHER LOOSE PAPERS AND DOCUMENTS SEIZED FROM PREMISES OF THIRD PARTIES AND STATEMENTS RECORDED AT BACK OF ASSESSEE WITHOUT IT BEING AFFORDED OPPORTUNITY TO INTERROGATE SAID DEPONENTS AND WITHOUT BRINGING ON RECORD ANY SUPPORTING EVIDENCE, COULD BE MADE BASIS FOR ADDING UNDISCLOSED INCOME IN HANDS OF ASSESSEE- HELD, NO- ADDITIONS WERE ALSO MADE TO ASSESSEE'S INCOME ON BASIS STATEMENT OF A PARTY, MADE BEHIND BACK OF ASSESSEE TO EFFECT THAT CASH PAYMENTS WERE MADE BY ASSESSEE TO SUCH PARTY FOR ACQUIRING DEVELOPMENT REIGHT- NO SEARCH HAD TAKEN PLACE M CASE OF SUCH PARTY AND NO DOCUMENTS OR RECORDS EVIDENCING PAYMENT OF ON MONEY WERE SEIZED ASSESSEE WAS GIVEN NO OPPORTUNITY TO CROSS-EXAMINE SAID PARTY. WHETHER ADDITION MADE ON BASIS OF STATEMENT OF SUCH PARTY WOULD BE UNSUSTAINABLE-HELD YES. (VI) S.P. GOYAL VS. DY. CIT REPORTED IN 82 ITD PAGE 85 (ITAT MUMBAI THIRD MEMBER) :- 16 -: 'IN THE PRESENT CASE, IT WAS A MERE LOOSE SHEET IN WHICH THE ASSESSEE CONFIRM THAT THE ENTRY WAS IN HIS OWN HANDWRITING. THE LOOSE PAPERS IN ITSELF HAS GOT NO INTRINSIC VALUE. IT DOES NOT REPRESENT NEGOTIABLE INSTRUMENT WHICH CAN BE EXCHANGED FOR A SUM OF RS.60 LAKHS. THEREFORE, THE ABOVE DECISION DID NOT HAVE DIRECT APPLICATION ON THE FACT OF THE PRESENT CASE. WHEN IT WAS A MERE ENTRY ON A LOOSE SHEET OF PAPER AND IF THE ASSESSEE CLAIMED THAT IT WAS ONLY A PLANNING, NOT SUPPORTED THAT THIS ENTRY REALLY REPRESENTED CASH OF RS.60 LAKHS. THERE WAS NO SUCH EVIDENCE FOUND BY THE REVENUE IN THE FORM OF EXTRA CASH, JEWELLERY OR INVESTMENTS OUTSIDE THE BOOKS. IN SUCH A CASE, EXPLANATION OFFERED BY THE ASSESSEE COULD NOT BE REJECTED. IN THAT VIEW OF THE MATTER, THE VIEW TAKEN BY THE ACCOUNTANT MEMBER WAS JUSTIFIED.' 6.3.2 THE LEARNED COUNSEL HAS ALSO RELIED ON THE DECISION OF SUPREME COURT IN THE CASE OF KISHINCHAND CHELLARAM VS. CIT REPORTED IN (1380) 125 FFR, PAGE 715 IN WHICH THE HON.BLE SUPREME COURT HAS HELD ......'.THE DEPARTMENT, OUGHT TO HAVE CALLED UPON THE MANAGER TO PRODUCE THE DOCUMENTS AND PAPERS ON BASIS OF WHICH HE MADE THE STATEMENTS AND CONFRONTED THE ASSESSEE WITH THOSE DOCUMENTS AND PAPERS. IT WAS TRUE THAT PROCEEDINGS UNDER THE INCOME TAX LAW WERE NOT GOVERNED BY THE STRICT RULES OF EVIDENCE, AND, THEREFORE, IT MIGHT BE SAID THAT EVEN WITHOUT CALLING THE MANAGER OF THE BANK IN EVIDENCE TO PROVE THE LETTER DATED FEBRUARY 18, 1955, IT COULD BE TAKEN INTO ACCOUNT AS EVIDENCE. BUT BEFORE THE INCOME TAX AUTHORITIES COULD RELY UPON IT THEY WERE BOUND TO PRODUCE IT BEFORE THE ASSESSEE SO THAT THE ASSESSEE COULD CONTROVERT THE STATEMENTS CONTAINED IN IT BY ASKING FOR AN OPPORTUNITY TO CROSS EXAMINE THE MANAGER OF THE BANK WITH REFERENCE TO THE STATEMENTS MADE BY HIM'. :- 17 -: 6.4 DECISION:- 6.4.1 IN THIS REGARDS IT WOULD BE USEFUL TO REPRODUCE THE RELEVANT PORTION OF THE ASSESSMENT ORDER WHICH IS AS UNDER: 'THE INFORMATION WAS RECEIVED FROM THE INVESTIGATION WING, KOLKATTA. DURING THE COURSE OF SEARCH AT THE PREMISES OF SRI PRAKASH CHAND BHUTORIA, A LAPTOP WAS FOUND WHICH CARRIES THE DETAILS OF THE SALES AND THEIR DETAILS AS GIVEN ABOVE. SRI PRAKASH CHAND BHUTORIA THROUGH A SYNDICATE OBTAINED COAL, THE FUNDS WERE CONTRIBUTED BY THE MEMBERS OF SYNDICATE, ITS SALE, EXPENSES OF THE TRANSACTIONS FOR THE PERIOD GIVEN ABOVE, THE PROFIT AND ITS DISTRIBUTION AMONGST THE MEMBERS OF SYNDICATE AND SHRI PAWAN KUMAR GUPTA. THE CHART WOULD SHOW THAT THERE IS NO INVESTMENT MADE BY SHRI PAVSAN KUMAR GUPTA IN THE RELATED MONTH. HIS SHARE OF PROFIT IS ON ACCOUNT OF HE BEING, PRINCIPAL AGENT AND THE PERSONS AUTHORIZED TO DEAL WITH THE M/S. NATIONAL COOPERATIVE CONSUMERS FEDERATION OF INDIA LTD. PS-20 PAGE-4 WOULD SHOW THAT HE HAS BEEN PAID IN CASH RS. 3600000/- @ 300/- PER METRIC TON FOR THE QUANTITY LIFTED THE DETAILS OF THE QUANTITY LIFTED FOR MARCH 2005 QUOTA AND THE SHARE OF EACH SYNDICATE MEMBERS USING 12000 METRIC TON HAS BEEN GIVEN IN THE COLUMN JUST BEFORE THE SAID COLUMN CONTAINING THE DERAILS OF CASH PAID TO SRI PAWAN KUMAR GUPTA @ RS. 300/- PER METRIC TON. PB-17 PAGE-29 WOULD SHOW THAT HE HAS BEEN PAID IN CASH RS. 1200000/- @ RS. 300/- PER METRIC TON FOR THE QUANTITY LIFTED FOR APRIL QUOTA. THE NAMES OF THE SYNDICATE MEMBERS HAVE BEEN GIVEN BEING THE SHORT NAMES. SRI PRAKASH CHAND BHUTORIA IN HIS :- 18 -: STATEMENTS DATED 7.12.2005 HAS EXPLAINED THE SHORT NAMES WHICH ARE AS UNDER:- I) PB - PRAKASH CHAND BHUTORIA II) IB - INDRAJMAL BHUTORIA III) LP - LAXMAN PODDAR IV) MB - MAHENDRA BHUTORIA V) LCS- LABHCHAND SURANA IN REPLY TO QUESTION NO. 10 OF PAGE NO. 5 OF STATEMENT OF SHRI PRAKASH CHAND BHUTORIA RECORDED, WHICH ARE AS UNDER:- 'PAGE-47: THIS RELATES TO THE TRANSACTION OF THE SYNDICATE WITH M/S. NATIONAL COOPERATIVE CONSUMERS FEDERATION OF INDIA LTD., THROUGH PAWAN GUPTA WHEN 36 LACS HAVE BEEN PAID TO HIM BY THE VARIOUS MEMBERS OF THE SYNDICATE BY IN THEIR SHARING RATIO OF INVESTMENT AND PROFIT MR. PAWAN GUPTA IS 50% SHARE HOLDER OF THE TOTAL TRANSACTION IN THIS ACCOUNT AND THE ENTIRE PAYMENT WAS MADE TO HIM IS-OUT OF BOOKS. THE DETAILS AND ADDRESS OF THE PAWAN GUPTA ARE KNOWN TO SRI INDRAJMAL BHUTORIA AND LAXMAN PODDAR. HOWEVER, THE MOBILE NUMBER OF SRI PAWAN GUPTA IS 09415043746.' THE OTHER PAPERS ARE SIMILAR IN NATURE.' 6.4.2 IT IS WORTHWHILE TO MENTION THAT THE MATERIAL ON WHICH RELIANCE HAS BEEN PLACED BY THE AO WAS NOT SEIZED FROM THE POSSESSION / PREMISES OF THE APPELLANT BUT S3F ADMITTEDLY FOUND FROM THE POSSESSION OF A THIRD PARTY AT KOLKATTA, THESE ARE NOT BOOKS OF ACCOUNT BUT LOOSE COMPUTER SHEETS. 'IT WAS SHRI PRAKASH GHAND BHUTORIA WHO HAD MADE A STATEMENT (DURING THE COURSE OF SEARCH & SEIZURE CONDUCTED AT HIS PREMISES AND FROM WHOM THESE :- 19 -: SHEET HAVE BEEN RECOVERED) THAT THESE SHEETS REFLECTED THE BUSINESS DEALINGS OF THE SYNDICATES WHICH CONSISTED OF VARIOUS MEMBERS, INCLUDING THE SHRI PAWAN GUPTA I.E. APPELLANT. DURING THE COURSE OF SEARCH & SEIZURE CONDUCTED ON THE APPELLANT, NO DOCUMENTS RELATED TO SUCH DEALING WERE FOUND OR RECOVERED THEREIN. THE APPELLANT WAS ALSO NOT GIVEN THE OPPORTUNITY TO CROSS EXAMINE SHRI P.C. BHUTORIA, BASED ON WHOSE STATEMENT, THE CURRENT PROCEEDING HAD BEEN UNDERTAKEN. SHRI BHUTORIA COULD NOT BE PRODUCED BY THE DEPARTMENT ALTHOUGH THE APPELLANT WENT TO KOLKATTA FOR THIS PURPOSE ALSO WAITED FOR HIM AT KANPUR. IT WAS SUBMITTED BY LEARNED A.R. THAT IT IS A SETTLED LAW THAT IN ABSENCE OF CROSS EXAMINATION NO COGNIZANCE OF SUCH MATERIAL COULD BE TAKEN BASED ON CATENA OF CASES CITED HEREIN BEFORE. ADMITTEDLY THERE WAS NO OTHER MATERIAL IN POSSESSION OF THE AO EXCEPT THESE THREE SHEETS AND THE STATEMENT OF SHRI P.C. BHUTORIA. 6.4.3 I HAVE CAREFULLY CONSIDERED THE FINDINGS OF A.O. SUBMISSIONS MADE BY THE APPELLANT BEFORE THE A.O. AS WELL AS BEFORE ME. HOWEVER, BEFORE GOING IN TO THE MERITS OF THE ADDITIONS, I FIND IT PRUDENT TO MENTION THAT THE A.O. HIMSELF WAS OF THE VIEW THAT THE INCOME ON ACCOUNT OF PURCHASE AND SALE OF COAL FOR MARCH 05 AND APRIL 05 QUOTA ( AS PER THE COMPUTERIZED SHEET SEIZED AT KOLKATA) BELONG TO THE SYNDICATE (AOP ) AND NOT TO ANY INDIVIDUAL MEMBERS OF THE SAID SYNDICATE (AOP). ACCORDING TO THE A.O., SRI PAWAN GUPTA (THE APPELLANT) WAS ALSO A MEMBER TO THE SAID SYNDICATE. TO REFRESH THE MATTER, I ONCE AGAIN REPRODUCE THE FINDING GIVEN BY THE A.O. IN THIS REGARD:- 'THE FIRST ISSUE NECESSARY TO DECIDE IS AS TO WHETHER THERE WAS A SYNDICATE WHO HAS DEALT WITH THE RELATED TRANSACTIONS. THE SECOND BEING AS TO WHETHER SHRI PAWAN KUMAR GUPTA WAS PAID THE SUM OF RS. 36,00,0007- & RS. 12,00,000/- OR NOT THE THIRD ISSUE IS AS TO WHETHER THE SYNDICATE SHOULD BE :- 20 -: TAXED AS AN ENTITY OR THE DEPARTMENT SHOULD REST WITH TAXING THE SUM GIVEN TO SHRI PAWAN KUMAR GUPTA BY SYNDICATE. TO MY VIEW IT BE ASSESSED AS AN A OP. IN THAT VIEW THE SUM OF RS. 36,00,000/- WILL BE TAXED IN A. Y. 2006-07 ON PROTECTIVE BASIS AND THE SUM OF RS. 55,53,300/- WILL BE TAXED IN A.Y. 2005-06 ON PROTECTIVE BASIS. THE ASSESSING OFFICER HOLDING JURISDICTION WILL BE INTIMATED TO TAKE ACTION UNDER SECTION 148 OF THE I.T. ACT 1961 TO ASSESS THE AOP 6.4.4 SINCE IT HAS BEEN THE DEPARTMENT'S STAND THAT SUCH INCOME BELONG TO THE SYNDICATE (AOP), RS.3600000.00 WAS ADDED IN THE HANDS OF APPELLANT (WHO WAS ALLEGEDLY A MEMBER OF THE SAID SYNDICATE (AOP) ONLY ON PROTECTIVE BASIS. ON PERUSAL OF RECORDS, STATEMENT RECORDED DURING THE COURSE OF SEARCH AT KOLKATA AND ALSO THE IMPUGNED SEIZED COMPUTERIZED SHEETS, IT IS SEEN THAT THE SAID TRANSACTIONS AS EMBODIED IN THESE SEIZED DOCUMENTS, (WHICH GIVE GRAPHIC DETAILS LIKE % OF PROFITS BETWEEN MEMBERS, PROFIT SHARES BETWEEN THE MEMBERS IN ABSOLUTE NUMBER CAPITAL CONTRIBUTION BY EACH OF MEMBERS ETC.) ACTUALLY REPRESENT THE TRADING TRANSACTIONS OF THE 'SYNDICATE WORKING AS A UNIT AND, THEREFORE, THE ASSESSMENT OF SUCH INCOME CAN BE DONE ONLY IN THE HANDS OF THE SAID 'SYNDICATE'. EVEN AFTER REPEATED REMINDERS BY THE UNDERSIGNED TO THE A.O., THE A.O. WAS NOT ABLE TO GIVE ANY ANSWER AS TO WHAT HAPPENED IN THE MATTER OF THE SAID AOP NOR HAS THE A.O. PLEADED THAT SUCH ADDITIONS SHOULD BE CONSIDERED IN THE HANDS OF THE APPELLANT ON SUBSTANTIVE BASIS, IT IS A SETTLED LAW THAT BEING AN APPELLATE AUTHORITY, NECESSARY FINDING OF FEE FACT IN RESPECT TO THE RIGHT ASSESSABLE PERSON HAS TO BE GIVEN. IN THIS VIEW OF THE MATTER, ADDITION MADE ON PROTECTIVE BASIS' CANNOT SURVIVE AS SUCH IN THE APPELLATE PROCEEDINGS. REFERENCE IN THIS REGARDS IS INVITED TO THE DECISION IN THE CASE OF CIT VS. SRNT. SARASWATI DEVI REPORTED IN 212 ITR, PAGE 445, (RAJASHTHAN). HON.BLE HIGH COURT HAS HELD:- :- 21 -: AN INCOME WHICH HAS BEEN EARNED CAN BE TAXED IN THE HANDS OF AN ASSESSEE, WHO IS LIABLE TO PAY THE TAX. PROTECTIVE ASSESSMENTS ARE ALSO PERMISSIBLE, BUT THEY CANNOT CONTINUE TO INFINITY'. XXXXXXXXXXXXXXX 'THAT BY NOW THE ITO MUST MAKE UP HIS MIND AS TO WHO HAS REALLY EARNED THE INCOME THE ADDITIONS ARE CONSEQUENTLY TO BE MADE IN THE HANDS OF SUCH PERSON ALONE AND NOT IN THE HANDS OF THE ASSESSEE WHERE THE DEPARTMENT ITSELF TREATED THAT THE INCOME IS NOT EARNED BY THE PERSON AND THE ASSESSMENT IS MADE ONLY ON A PROTECTIVE BASIS THE ADDITIONS, THEREFORE, HAD TO BE ADDED IN THE HANDS OF THE PERSON WHO HAS REALLY EARNED THE INCOME AND SUBSTANTIVE ASSESSMENT IS MADE IN RESPECT OF THE INCOME ITSELF '. 6.4.5 CONSIDERING THE ABOVE FACTS, CIRCUMSTANCES OF THE CASE & VARIOUS CASE LAWS, I HOLD THAT THE ADDITION MADE BY THE ASSESSING OFFICER ON 'PROTECTIVE BASIS IS NOT CALLED FOR SINCE THE INCOME BELONGS TO THE SYNDICATE WHICH WAS LIABLE TO BE ASSESSED AS AN AOP. FURTHER, I AM SURE THAT DEPARTMENT HAS TAKEN DUE ACTION AGAINST THE SAID AOP AS HAS BEEN MENTIONED BY THE AO IN THE ASSESSMENT ORDER. !N ANY CASE THE DEPARTMENT IS FREE TO PURSUE THE MATTER IN THE CASE OF AOP, AS PER THE PROVISIONS OF THE I.T. ACT. 6.4.6 I AM ALSO OF THE CONSIDERED VIEW THAT IN THE ABSENCE OF CROSS EXAMINATION OF SHRI P.C BHUTORIA, THE SAID DOCUMENTS AND HIS STATEMENT COULD NOT BE TAKEN AS SUCH. RELIANCE IS PLACED ON THE FOLLOWING DECISIONS OF HIGHER JUDICIAL AUTHORITIES:- :- 22 -: (I) MALWA VANASPATI AND CHEMICALS CO. LTD. VS. C.S.T. REPORTED IN (1995) UPTC PAGE 987 (II) STATE OF KERALA VS. K. T. SHADULI REPORTED IN (1977) (S.C.)AIR (1977)(S. C.) PAGE 1627 (III) DHARAM CHAND AGARWAL REPORTED IN (2004) (4) MFC PAGE 474 LUCKNOW BENCH (IV) AMARJIT SINGH BAKSHI HUF VS. ACIT (2003) 8SITD PAGE 13 (DELHI) TM. (V) PRATIHANA CONSTRUCTION (P) LTD. VS. DY. CIT REPORTED IN 118 TAXMANN PAGE 112 (AHMEDABAD BENCH) (VI) S.P. GOYAL VS. DY. CIT REPORTED IN 82 ITD PAGE 85 (ITAT MUMBAI THIRD MEMBER) 6.4.7. SINCE THERE WAS ADMITTEDLY NOTHING MORE IN THIS REGARDS, NO ADDITION (WHICH IS PURELY BASED ON THE IMPUGNED DOCUMENTS), CAN SURVIVE. THE ADDITION MADE IS, THEREFORE, DELETED. 14. AGGRIEVED, THE REVENUE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL WITH THE SUBMISSION THAT FROM THE STATEMENT OF SHRI. PRAKASH CHANDRA BHUTORIA AND THE SEIZED DOCUMENTS, IT HAS BEEN ESTABLISHED THAT THE COAL BUSINESS WAS CARRIED OWN BY THE SYNDICATE GROUP OF WHICH ASSESSEE WAS A MEMBER AND HAVE RECEIVED A PARTICULAR AMOUNT NARRATED IN THE SEIZED DOCUMENTS FROM THE COAL BUSINESS. THEREFORE, THE ASSESSING OFFICER HAS RIGHTLY MADE THE ADDITIONS. THE LD. D.R. HAS ALSO PLACED RELIANCE UPON THE ORDER OF THE ASSESSING OFFICER. 15. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, HAS CONTENDED THAT THIS ADDITION WAS MADE IN THE HANDS OF THE ASSESSEE, SOLELY ON THE BASIS OF THE STATEMENT OF SHRI. PRAKASH CHANDRA BHUTORIA AND SOME DOCUMENTS SEIZED FROM HIS COMPUTER. THE ASSESSEE WAS NOT ALLOWED TO CROSS-EXAMINE SHRI. PRAKASH CHANDRA BHUTORIA IN ORDER TO ASCERTAIN THE VERACITY OF HIS STATEMENT. ONCE AN OPPORTUNITY WAS GIVEN :- 23 -: BUT ON THAT DAY SHRI. PRAKASH CHANDRA BHUTORIA DID NOT TURN UP AND HE COULD NOT BE CROSS-EXAMINED BY THE ASSESSEE. THE LD. COUNSEL FOR THE ASSESSEE HAS FURTHER CONTENDED THAT THE ASSESSING OFFICER DID NOT MAKE ANY EFFORT TO ENSURE HIS PRESENCE FOR CROSS-EXAMINATION. THE LD. COUNSEL FOR THE ASSESSEE HAS FURTHER CONTENDED THAT IT IS A SETTLED POSITION OF LAW THAT NO STATEMENT CAN BE CONSIDERED ADVERSELY AGAINST THE ASSESSEE WITHOUT ALLOWING ANY OPPORTUNITY TO CROSS-EXAMINE THE SAID WITNESS. IT IS FURTHER CONTENDED ON BEHALF OF THE ASSESSEE THAT THE ASSESSEE HAS SPECIFICALLY ASKED THE ASSESSING OFFICER TO AFFORD AN OPPORTUNITY TO CROSS- EXAMINE SHRI. PRAKASH CHANDRA BHUTORIA BUT HIS ATTENDANCE WAS NOT ENFORCED BY THE ASSESSING OFFICER FOR CROSS-EXAMINATION. THEREFORE, THE STATEMENT OF SHRI. PRAKASH CHANDRA BHUTORIA CANNOT BE TAKEN INTO ACCOUNT FOR MAKING ADDITION ON THE BASIS OF THE SEIZED DOCUMENTS. THE LD. COUNSEL FOR THE ASSESSEE HAS FURTHER INVITED OUR ATTENTION TO THE PROVISIONS OF SECTION 153C OF THE ACT WITH THE SUBMISSION THAT IN CASE THE ASSESSING OFFICER HAS FOUND SOMETHING FROM SHRI. PRAKASH CHANDRA BHUTORIA WHICH RELATES TO THE ASSESSEE, THE MECHANISM OF SECTION 153C OF THE ACT COULD HAVE BEEN INVOKED AFTER RECORDING REQUISITE SATISFACTION IN THE CASE OF SHRI. PRAKASH CHANDRA BHUTORIA THAT THE MATERIAL FOUND BELONGS TO THE ASSESSEE. BUT NOTHING WAS DONE IN THE INSTANT CASE AND THEREFORE THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. GOPY APARTMENTS, 365 ITR 411. IT WAS FURTHER CONTENDED THAT THE ASSESSING OFFICER HAS FRAMED THE ASSESSMENT IN THE HANDS OF THE ASSESSEE ON PROTECTIVE BASIS AND NOTHING HAS BEEN BROUGHT ON RECORD TO ESTABLISH THAT IN WHOSE HANDS SUBSTANTIVE ADDITION WAS MADE. THE LD. COUNSEL FOR THE ASSESSEE HAS PLACED RELIANCE UPON THE FOLLOWING JUDGMENTS IN SUPPORT OF HIS CONTENTION THAT THE STATEMENT OF THIRD PARTY CANNOT BE RELIED ON UNLESS AND UNTIL THE ASSESSEE IS ALLOWED TO CROSS-EXAMINE THE :- 24 -: THIRD PARTY WITH RESPECT TO HIS STATEMENT IN ORDER TO JUDGE THE VERACITY OF THE SAME:- 1. CBI VS. V. C. SHUKLA AND OTHERS, AIR (1998) (SC) 1406. 2. MALWA VANASPATII AND CHEMICALS CO. LTD. VS. CST (1995) UPTC 987, 3. STATE OF KERALA VS. K.T. SHADULI, AIR (1977) (SC) 1627. 4. AMARJIT SINGH BAKSHI, HUF VS. ACIT, 86 ITD 13. 5. PRARTHANA CONSTRUCTION (P) LTD. VS. DCIT, 118 TAXMANN 112. 6. S.P. GOYAL VS. DCIT, 82 ITD 85. 16. HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWER AUTHORITIES IN THE LIGHT OF THE RIVAL SUBMISSIONS AND FROM A CAREFUL PERUSAL OF THE WRITTEN SUBMISSIONS, CASE LAWS FILED AND ALSO THE DOCUMENTS FILED BEFORE US, WE FIND THAT UNDISPUTEDLY THE ADDITION WAS MADE IN THE HANDS OF THE ASSESSEE ON PROTECTIVE BASIS. THOUGH IT WAS OBSERVED IN THE ASSESSMENT ORDER THAT SUBSTANTIVE ADDITION IS TO BE MADE IN THE HANDS OF THE ALLEGED SYNDICATE AOP POINTED OUT BY SHRI. PRAKASH CHANDRA BHUTORIA IN HIS STATEMENT RECORDED DURING THE COURSE OF SEARCH CONDUCTED AT BHUTORIA GROUP OR HIS PREMISES, BUT NOTHING HAS BEEN PLACED ON RECORD TO ESTABLISH WHETHER ANY SUBSTANTIVE ADDITION WAS MADE IN THE HANDS OF THE AOP SYNDICATE. NOW THE QUESTION ARISES WHETHER THE ADDITION ON PROTECTIVE BASIS MADE IN THE HANDS OF THE ASSESSEE CAN BE CONVERTED INTO SUBSTANTIVE ADDITION IN THE HANDS OF THE ASSESSEE IN THE ABSENCE OF THE FACT THAT NO SUBSTANTIVE ADDITION HAS BEEN MADE IN THE HANDS OF THE SYNDICATE GROUP, THE ANSWER IS CERTAINLY NO, AS THE ASSESSING OFFICER HIMSELF IS NOT CONFIDENT WITH REGARD TO THE ADDITION IN THE HANDS OF THE ASSESSEE ON THE BASIS OF THE STATEMENT OF SHRI. PRAKASH CHANDRA BHUTORIA AND THE SEIZED DOCUMENTS WHICH WERE :- 25 -: NEITHER CONFRONTED NOR THE ASSESSEE WAS ALLOWED TO CROSS-EXAMINE SHRI. PRAKASH CHANDRA BHUTORIA WHOSE STATEMENT WAS USED TO MAKE THE ADDITION IN THE HANDS OF THE ASSESSEE. WE HAVE ALSO CAREFULLY PERUSED THE AFORESAID VARIOUS JUDICIAL PRONOUNCEMENTS AND WE FIND THAT IT IS SETTLED OPPOSITION OF LAW THAT ANY EVIDENCE/STATEMENT/DECLARATION CANNOT BE USED AGAINST A PERSON OR THE ASSESSEE UNLESS AND UNTIL THE SAME IS CONFRONTED TO THE ASSESSEE AND THE ASSESSEE IS ALLOWED TO CROSS- EXAMINE THE SAID WITNESS OR PERSON. IN THE INSTANT CASE, THE ASSESSEE HAS ASKED THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS TO ALLOW HIM TO CROSS-EXAMINE SHRI. PRAKASH CHANDRA BHUTORIA WHOSE STATEMENT WAS SOUGHT TO BE RELIED ON BY THE ASSESSING OFFICER. INITIALLY THE ASSESSING OFFICER HAS SUMMONED SHRI. PRAKASH CHANDRA BHUTORIA AND ASKED THE ASSESSEE TO CROSS-EXAMINE IN KOLKATA, BUT ON THE DESIGNATED DATE SHRI. PRAKASH CHANDRA BHUTORIA DID NOT APPEAR AND THE ASSESSEE WAS FORCED TO COME WITH EMPTY HANDS. THEREAFTER THOUGH THE ASSESSEE HAS REQUESTED TO AFFORD AN OPPORTUNITY TO CROSS-EXAMINE SHRI. PRAKASH CHANDRA BHUTORIA WITH RESPECT TO THE DOCUMENTS FOUND DURING THE COURSE OF SEARCH, BUT THE ASSESSING OFFICER DID NOT ENFORCE HIS ATTENDANCE FOR CROSS-EXAMINATION AND FINALLY DESPITE REPEATED REQUESTS THE ASSESSEE WAS NOT ALLOWED TO CROSS-EXAMINE SHRI. PRAKASH CHANDRA BHUTORIA. THE ASSESSING OFFICER, HOWEVER, HEAVILY RELIED UPON THE STATEMENT AND THE SEIZED DOCUMENTS FOR MAKING THE ADDITION IN THE HANDS OF THE ASSESSEE ON ACCOUNT OF UNDISCLOSED RECEIPT FROM THE ALLEGED SYNDICATE GROUP. UNDER THESE CIRCUMSTANCES, WE ARE OF THE CONSIDERED OPINION THAT THE ADDITION IN THE HANDS OF THE ASSESSEE CANNOT BE MADE ON THE BASIS OF THIRD PARTYS STATEMENT WHO WAS NOT ALLOWED TO BE CROSS-EXAMINED BY THE ASSESSEE FOR ANY REASON. MORE SO IN THE INSTANT CASE ADDITION IN THE HANDS OF THE ASSESSEE WAS MADE ON PROTECTIVE BASIS WHICH MEANS THE ASSESSING OFFICER HIMSELF WAS NOT :- 26 -: CONFIDENT WITH RESPECT TO THE TAX LIABILITY OF THE ALLEGED INCOME ESTIMATED BY HIM IN THE HANDS OF THE ASSESSEE. IN THE LIGHT OF THESE FACTS, WE ARE OF THE VIEW THAT THE LD. CIT(A) HAS RIGHTLY DELETED THE ADDITIONS AND WE FIND NO INFIRMITY THEREIN. ACCORDINGLY WE CONFIRM HIS ORDER IN THIS REGARD IN I.T.A. NO. 54/LKW/2012 AND I.T.A. NO. 86/LKW/2012.. 17. GROUNDS NO.4 AND 5 IN I.T.A. NO. 54/LKW/2012 AND GROUNDS NO.7 AND 8 IN I.T.A. NO. 86/LKW/2012 RELATE TO THE ADDITION MADE ON ACCOUNT OF INVESTMENT IN COAL BUSINESS WITHOUT APPRECIATING THE FACT THAT THE ADDITION WAS BASED ON THE CONTENTS OF THE SEIZED DOCUMENTS AND STATEMENT OF SHRI. PRAKASH CHANDRA BHUTORIA. 18. THE FACTS IN BRIEF BORNE OUT FROM THE RECORD IN THIS REGARD ARE THAT THE ASSESSING OFFICER IN ASSESSMENT YEAR 2005-06 WAS OF THE VIEW THAT THE ASSESSEE HAS HANDLED THE BUSINESS HIMSELF ALONG WITH HIS ASSOCIATES NAMELY, RAMA VIMIMAY, KAILASH COAL COKE COMPANY, BANSAL COAL COMPANY & OTHERS, CHANDRIKA ENTERPRISES, S.G. PROJECTS, ETC. THE ASSESSING OFFICER HAS ALSO NOTED THAT THERE ARE CERTAIN DEPOSITS MADE BY THE ASSOCIATES WITH M/S NATIONAL COOPERATIVE CONSUMERS FEDERATION OF INDIA LTD. AND HE HAS ALSO WORKED OUT A TURNOVER IN THE SAID BUSINESS AT RS.1,54,13,500/- AT KANPUR. ON CLARIFICATION, THE ASSESSEES CONTENTION WAS THAT THEY RELATE TO THE TRANSACTION BY M/S NATIONAL COOPERATIVE CONSUMERS FEDERATION OF INDIA LTD., WHICH WAS NOT ACCEPTED BY THE ASSESSING OFFICER AND HE ACCORDINGLY FORMED A VIEW THAT THE TRANSACTIONS RECORDED IN LOOSE PAPERS DO NOT FIND PLACE IN THE COPIES OF ACCOUNTS OBTAINED FROM M/S NATIONAL COOPERATIVE CONSUMERS FEDERATION OF INDIA LTD., AS SUCH SIMILAR BUSINESS LIKE KOLKATA WAS CARRIED OUT IN KANPUR. THE ASSESSING OFFICER ACCORDINGLY ESTIMATED THE INVESTMENT AT RS.46,24,050/- AND MADE ADDITION OF THE SAME FOR ASSESSMENT YEAR 2005-06. :- 27 -: 19. FOLLOWING THE VIEW TAKEN BY THE ASSESSING OFFICER IN ASSESSMENT YEAR 2005-06, THE ASSESSING OFFICER HAS ESTIMATED THE UNEXPLAINED INVESTMENT IN ASSESSMENT YEAR 2006-07 AT RS.1,17,93,900/-. 20. AN APPEAL WAS FILED BEFORE THE LD. CIT(A) AGAINST THE SAID ORDER OF THE ASSESSING OFFICER WITH THE SUBMISSION THAT THE ADDITION WAS WORKED OUT ON THE BASIS OF THE COMPUTER SHEETS FOUND IN THE COURSE OF SEARCH FROM SHRI. PRAKASH CHANDRA BHUTORIA AND HIS STATEMENT AND SHRI. PRAKASH CHANDRA BHUTORIA WAS NOT ALLOWED TO BE CROSS-EXAMINED BY THE ASSESSEE. THEREFORE, THE MATERIAL SEIZED FROM HIM CANNOT BE RELIED ON FOR MAKING THE ADDITION. 21. WITH REGARD TO THE SUNDRY DEBTORS AND CREDITORS ACCORDING TO THE SEIZED MATERIAL, IT WAS STATED THAT FOR NCCF BRANCH AT KANPUR, THEY COULD NOT GET PROPER SUB-AGENT. THEREFORE, THE WORK CARRIED ON BY THE SUB-AGENT WAS ALSO HANDLED BY THE ASSESSEE HIMSELF AND THE ENTIRE COMMISSION CALCULATED @ 1% OF THE BASIS VALUE OF COAL WAS EARNED AS COMMISSION BY THE ASSESSEE. THE COAL WAS GIVEN DIRECTLY TO THE CONSUMERS AS WAS TO BE DONE BY THE SUB-AGENT. IF THERE WOULD HAVE BEEN ANY COLLECTION MADE FROM THE CONSUMERS, IT WAS DEPOSITED IN THE BANK ACCOUNT OF NCCF AND ALL THE BILLINGS WERE DONE DIRECTLY BY NCCF AS THEY THEMSELVES WERE THE SELLERS. THE ASSESSEES INTEREST BEING CONFINED ONLY TO EARN COMMISSION @ 1%. 22. THE LD. CIT(A) RE-EXAMINED THIS ISSUE IN THE LIGHT OF ASSESSEES CONTENTIONS AND WAS OF THE VIEW THAT THESE ADDITIONS WERE MADE ON THE BASIS OF MATERIAL SEIZED FROM SHRI. PRAKASH CHANDRA BHUTORIA WHO WAS NOT ALLOWED TO BE CROSS-EXAMINED BY THE ASSESSEE. IT WAS FURTHER HELD BY THE LD. CIT(A) THAT THE PRICE OF COAL WAS FIXED AND DISTRIBUTOR PRICE WAS ALSO FIXED BY NCCF. THE ASSESSEE WAS ONLY ALLOWED TO A FIXED :- 28 -: COMMISSION FOR THE SERVICES RENDERED. THE RELEVANT OBSERVATIONS OF THE LD. CIT(A) FOR ASSESSMENT YEAR 2005-06 ARE EXTRACTED HEREUNDER:- I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND I FIND THAT THE SAID ADDITION HAS BEEN MADE MERELY ON CONJECTURES AND SURMISES WITHOUT POINTING OUT ANY MATERIAL RELATING TO THE ALLEGED TRADING ACTIVITY CARRIED ON BY THE APPELLANT. I ALSO FIND FROM THE RECORDS THAT COMPLETE QUANTITATIVE/VOLUME WISE DETAILS OF LIFTING THE COAL AND ITS DISTRIBUTION TO TINY CONSUMERS HAVE BEEN FILED ON WHICH THE APPELLANT HAS EARNED COMMISSION WHICH HAS BEEN DULY ASSESSED TO TAX. SINCE THE BUSINESS MODEL OF THE APPELLANT WAS TO MAKE ADVANCE PAYMENTS TO NCCF FOR LIFTING THE COAL, IT WAS NATURAL THAT CERTAIN AMOUNT OF INVESTMENT HAD TO BE MADE BY THE APPELLANT AND SINCE HE WAS SUPPLYING THE COAL TO THE TINY CONSUMERS, IT WAS QUITE NATURAL AGAIN THAT THERE WOULD BE DEBTORS/CREDITORS. THEREFORE, I AGREE WITH THE LEARNED A.R.'S CONTENTION THAT MERE PRESENCE OF DEBTORS/CREDITORS AND PAYMENT OF INTEREST CANNOT PROVE THAT THE APPELLANT WAS INDULGING INTO TRADING OF COAL. THE AO HAS NOT PLACED ANY MATERIAL ON RECORDS TO PROVE THAT THE APPELLANT HAD EARNED ANY INCOME IN EXCESS OF THE DUE COMMISSION OR THAT THE PARTIES TREATED AS TRADE DEBTOR/ CREDITORS WERE IN RESPECT OF TRADING ACTIVITIES IN COAL BUSINESS. THE PRICE OF COAL WAS FIXED AND THE DISTRIBUTOR PRICE WAS ALSO FIXED BY NCCF. THE APPELLANT WAS ONLY ALLOWED A FIXED COMMISSION FOR THE SERVICES RENDERED. EVEN ASSUMING THAT THE ACTIVITY OF THE APPELLANT WAS THAT OF TRADING, ON PERUSAL OF THE ORDER, I FIND THAT THE AO HAS NOT POINTED OUT ANY MATERIAL WHICH LEADS TO BELIEVE THAT THE ASSESSEE WAS EARNING ANY INCOME OTHER THAN THE COMMISSION ON SUCH SUPPLIES. I, THEREFORE, HOLD THAT NO ADDITION CAN BE SUSTAINED MERELY ON CONJECTURES AND SURMISES, IN THIS VIEW OF THE MATTER, IN THE ABSENCE OF ANY SUCH MATERIAL, ADDITION MADE BY AO CANNOT SURVIVE AND THE SAME IS, THEREFORE, DELETED. :- 29 -: 23. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL, BUT DURING THE COURSE OF HEARING, THE LD. D.R. COULD NOT POINT OUT ANY DEFECT IN THE ORDER OF THE LD. CIT(A); WHEREAS THE LD. COUNSEL FOR THE ASSESSEE HAS PLACED RELIANCE UPON THE ORDER OF THE LD. CIT(A) WITH THE SUBMISSION THAT THE ASSESSING OFFICER HAS MADE ADDITION ON THE BASIS OF CONJECTURES AND SURMISES, AS NO MATERIAL EVIDENCE WAS AVAILABLE BEFORE HIM. HE TRIED TO PLACE RELIANCE UPON THE EVIDENCE AND STATEMENT OF SHRI. PRAKASH CHANDRA BHUTORIA WHO WAS NEVER ALLOWED TO BE CROSS-EXAMINED BY THE ASSESSEE DESPITE REPEATED REQUESTS BY THE ASSESSEE. THEREFORE, THE EVIDENCE AND STATEMENT OF SHRI. PRAKASH CHANDRA BHUTORIA COLLECTED BY THE ASSESSING OFFICER COULD NOT BE RELIED ON FOR MAKING THE ADDITION. 24. HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWER AUTHORITIES IN THE LIGHT OF THE RIVAL SUBMISSIONS, WE FIND THAT THE ASSESSING OFFICER HAS MADE ADDITION ONLY ON CONJECTURES AND SURMISES. NO EVIDENCE WAS BROUGHT ON RECORD IN ORDER TO ESTABLISH THAT THE ASSESSEE HAS EARNED ANY OTHER INCOME EXCEPT COMMISSION RECEIPTS. MOREOVER, THE ASSESSEE WORKED AS AN AGENT OF NCCF WHO SOLD COAL TO THE CONSUMERS. UNDISPUTEDLY THE COAL WAS BEING SUPPLIED DIRECTLY TO THE CONSUMERS BY NCCF AND ASSESSEE EARNED ONLY COMMISSION THEREON. THEREFORE, ADDITION ON ACCOUNT OF INVESTMENT IS NOT SUSTAINABLE IN THE EYES OF LAW. WE ACCORDINGLY CONFIRM THE ORDER OF THE LD. CIT(A) IN BOTH THE ASSESSMENT YEARS IN THIS REGARD. 25. GROUNDS NO. 4 TO 6 IN I.T.A. NO. 86/LKW/2012 RELATE TO THE ADDITION MADE BY THE ASSESSING OFFICER UNDER DIFFERENT HEADS AS PROFIT EARNED BY THE ASSESSEE. 26. WITH REGARD TO THESE ADDITIONS, THE ASSESSING OFFICER HAS ESTIMATED THE PROFIT HAVING TREATED CERTAIN DEPOSITS WITH NCCF AS THE :- 30 -: INVESTMENT MADE FOR PURCHASE AND SALE OF COAL BY THE ASSESSEE. THE ASSESSING OFFICER ACCORDINGLY MADE THE FOLLOWING ADDITIONS:- 1) RS.1,17,93,900/- FOR PROFIT IN TRADING OF COAL AT KANPUR. 2) RS.12,82,850/- FOR PROFIT IN TRADING OF COAL AT KOLKATA. 3) RS.18,17,200/- FOR PROFIT IN TRADING OF COAL AT BHUBANESWAR. 27. BEFORE THE LD. CIT(A), IT WAS CONTENDED THAT THE ASSESSEE WAS A HANDLING AND DISTRIBUTION AGENT OF NCCF FOR LIFTING, TRANSPORTATION AND DISTRIBUTION OF ANY WEIGHT OF COAL LOCATED AT COAL COMPANIES ON ALL INDIA BASIS. THEREFORE, HE HAS TO MAKE PAYMENTS TO NCCF FOR LIFTING COAL AND WHATEVER PAYMENTS WERE MADE, IT WAS DULY RECORDED IN THE BOOKS OF ACCOUNT. THE ASSESSEE WAS SIMPLY CONCERNED WITH THE COMMISSION AND NO TRANSACTION WAS UNDERTAKEN OUTSIDE THE BOOKS OF ACCOUNT. THE ASSESSING OFFICER HAS FORMED A VIEW, HAVING TAKEN COGNIZANCE OF THE DOCUMENTS SEIZED FROM SHRI. PRAKASH CHANDRA BHUTORIA AND HIS STATEMENT. SINCE SHRI. PRAKASH CHANDRA BHUTORIA WAS NOT ALLOWED TO BE CROSS-EXAMINED BY THE ASSESSEE, THE STATEMENT RECORDED BY THE ASSESSING OFFICER CANNOT BE RELIED ON FOR MAKING THE ADDITION IN THE HANDS OF THE ASSESSEE. 28. FINDING FORCE IN THE CONTENTIONS OF THE ASSESSEE, THE LD. CIT(A) HAS DELETED THE ADDITION HAVING OBSERVED THAT THESE ADDITIONS WERE MADE ON SURMISES AND CONJECTURES AND WITHOUT ANY BASIS. 29. AGGRIEVED, THE REVENUE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL AND HAS PLACED RELIANCE UPON THE ORDER OF THE ASSESSING OFFICER WHEREAS THE LD. COUNSEL FOR THE ASSESSEE BESIDES PLACING RELIANCE UPON THE ORDER OF THE LD. CIT(A), HAS SUBMITTED THAT WHATEVER PAYMENTS WERE MADE BY THE ASSESSEE TO NCCF, IT WAS FOR LIFTING OF COAL AND WAS DULY RECORDED IN THE BOOKS OF ACCOUNT. THE ADDITIONS WERE MADE SIMPLY ON THE BASIS OF CONJECTURES AND SURMISES. :- 31 -: 30. HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWER AUTHORITIES IN THE LIGHT OF THE RIVAL SUBMISSIONS, WE FIND THAT THE BASIS FOR THESE ADDITIONS WAS ONLY THE MATERIAL SEIZED DURING THE COURSE OF SEARCH FROM SHRI. PRAKASH CHANDRA BHUTORIA AND HIS STATEMENT. SHRI. PRAKASH CHANDRA BHUTORIA WAS NOT ALLOWED TO BE CROSS-EXAMINED BY THE ASSESSEE, THEREFORE, HIS STATEMENT CANNOT BE RELIED ON FOR MAKING THE ADDITION AGAINST THE ASSESSEE. ACCORDINGLY, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) AND WE CONFIRM THE SAME. 31. IN THE RESULT, APPEALS OF THE REVENUE ARE DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTIONED PAGE. SD/- SD/- [A. K. GARODIA] [SUNIL KUMAR YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED:20 TH AUGUST, 2015 JJ:05-1708 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR ASSISTANT REGISTRAR