2011 (2) TMI 955 - HC - Income Tax

Cash amount of Rs.50 lacs seized from fiat car - Violation of provisions of Foreign Exchange Regulation Act 1973 (FERA Act) - Concealment of income - Held that - The persons from whom the amount was recovered initially stated that the amount belonged to the assessee. They are not shown to be having any extraneous reason to give such a version. Thereafter though they gave statement that the amount belonged to Tarsem Singh but the said statement was not proved to be correct and the said statement was given after a long time. The improved version could not be preferred to the original version. The first statement was also supported by other circumstances of the car being registered at the address of the assessee the assessee admitting that earlier Suram Singh was his employee and that he knew J.P.Gupta who was said to have sent the amount. These could not be ignored by the CIT(A) and the Tribunal for setting aside of the assessment order on the ground that said witnesses were not produced for cross examination or that the car was later taken by some third person on superdari. Thus answer the question in favour of the revenue and hold that order of assessment against respondentassessee K.D.Bali was justified and finding of the CIT(A) as well as the Tribunal in setting aside thereof is perverse.

Summary

Issues Involved:
1. Seizure of cash amounting to Rs.50 lacs and its ownership.
2. Validity of assessment orders against K.D.Bali, Suram Singh, Deep Chand, and Tarsem Singh.
3. Entitlement of the writ petitioners, Suram Singh and Deep Chand, to the seized amount.
4. Protective versus substantive assessment of the seized amount.
5. Application of principles of natural justice in tax assessments.

Detailed Analysis:

1. Seizure of Cash Amounting to Rs.50 Lacs and Its Ownership:
On 12.9.1993, Rs.50 lacs was seized from a car driven by Deep Chand and occupied by Suram Singh. Both claimed the money and car belonged to K.D.Bali. The Income Tax Officer added the amount to K.D.Bali's income, but the CIT(A) set aside the addition, which was upheld by the Tribunal. The High Court found that the initial statements of Deep Chand and Suram Singh indicated the money belonged to K.D.Bali and upheld the substantive assessment against him.

2. Validity of Assessment Orders Against K.D.Bali, Suram Singh, Deep Chand, and Tarsem Singh:
The Income Tax Officer added the amount to Tarsem Singh's income after he initially claimed it but later retracted. The CIT(A) and Tribunal set aside this addition. The High Court dismissed the appeal against Tarsem Singh as not pressed, focusing on the substantive assessment against K.D.Bali. Protective assessments were made against Suram Singh and Deep Chand but were not challenged by them.

3. Entitlement of the Writ Petitioners, Suram Singh and Deep Chand, to the Seized Amount:
Suram Singh and Deep Chand claimed the amount should be returned to them as it was seized from their possession. They were exonerated under the FERA Act. However, the High Court dismissed their writ petition, directing the Directorate of Enforcement to remit the amount to the Income Tax Department for tax dues.

4. Protective Versus Substantive Assessment of the Seized Amount:
The High Court upheld the substantive assessment against K.D.Bali, finding it justified based on the initial statements and circumstances. Protective assessments against Suram Singh and Deep Chand were also deemed justified, as they did not challenge these assessments, which had become final.

5. Application of Principles of Natural Justice in Tax Assessments:
The CIT(A) initially set aside the assessment against K.D.Bali for lack of cross-examination opportunity. However, the High Court held that the principles of natural justice are flexible and context-dependent. The High Court found that the initial statements of Deep Chand and Suram Singh, corroborated by other evidence, justified the assessment against K.D.Bali despite the lack of cross-examination.

Conclusion:
The High Court concluded that the money belonged to K.D.Bali, upholding the substantive assessment against him and dismissing the writ petition by Suram Singh and Deep Chand. The appeal against Tarsem Singh was dismissed as not pressed. The Directorate of Enforcement was directed to remit the seized amount to the Income Tax Department. The High Court emphasized the flexibility of natural justice principles in tax assessments, supporting the Assessing Officer's conclusions based on initial statements and corroborative evidence.