1999 (5) TMI 48 - AT - Income Tax

Summary

Issues Involved:
1. Validity of reassessment proceedings under section 147.
2. Disallowance of commission payments claimed by the assessees.
3. Examination of evidence and cross-examination of witnesses.
4. Applicability of judicial precedents to the case.

Detailed Analysis:

1. Validity of Reassessment Proceedings Under Section 147:
The assessees challenged the reassessment proceedings as bad in law, arguing that the original assessments had already examined the commission claims. However, the Tribunal upheld the validity of the reassessment. It was noted that subsequent reliable information, specifically the statement of Shri Suresh Thakkar, indicated that the commission payments were bogus. The Tribunal cited multiple case laws, including Phool Chand Bajrang Lal v. ITO and Assam Forest Products (P.) Ltd. v. CIT, which supported the validity of reopening assessments based on new, specific, and reliable information.

2. Disallowance of Commission Payments:
The Assessing Officer disallowed the commission payments claimed by the assessees, amounting to Rs. 19,91,230 and Rs. 12,01,958, on the grounds that they were not genuine. This conclusion was based on several factors:
- The assessees and M/s. V.A.P. Corporation had no direct business dealings.
- Shri Suresh Thakkar admitted that the commission payments were mere hawala entries.
- The transactions were facilitated by a third party, Shri Ratilal J. Muchala, without any direct interaction between the assessees and M/s. V.A.P. Corporation.
- Documents were backdated to fabricate the transactions, as confirmed by overwriting corrections.

3. Examination of Evidence and Cross-Examination of Witnesses:
The Assessing Officer provided the assessees with the reasons for reopening the assessments and the statement of Shri Suresh Thakkar. During the reassessment proceedings, Shri Suresh Thakkar reiterated that the commission payments were fictitious. Despite cross-examination by the assessees' counsel, Shri Suresh Thakkar maintained his stance. The Tribunal found that the assessees failed to disprove the deposition of Shri Suresh Thakkar, and the onus was on the assessees to prove the genuineness of the commission payments, which they could not.

4. Applicability of Judicial Precedents:
The Tribunal distinguished the present case from CIT v. M.K. Bros., where the disallowance of purchases was deleted due to lack of evidence indicating bogus transactions. In the current case, the issue was the genuineness of commission payments, which was clearly disproved by the sworn statements of Shri Suresh Thakkar. The Tribunal also referred to several other judicial precedents, such as Nawabganj Sugar Mills Co. Ltd v. CIT and Sumati Dayal v. CIT, which supported the disallowance of commission payments when there was no evidence of services rendered or when the transactions were found to be bogus.

Conclusion:
The Tribunal dismissed the appeals, upholding the reassessment proceedings and the disallowance of the commission payments. The decision was based on detailed examination of evidence, cross-examination of witnesses, and application of relevant judicial precedents. The Tribunal concluded that the commission payments claimed by the assessees were not genuine and were part of a scheme to evade taxes.