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TMI Blog1984 (1) TMI 137X X X X Extracts X X X X X X X X Extracts X X X X ..... nding Diwali 1973 is accounting year for the assessment year 1974-75. 3. The assessee was being assessed in the jurisdiction of ITO A-Ward, Katni. The ITO, C-Ward, Katni was in charge of Survey Operations. One of the inspectors attached to the survey operations was Shri Chakravarty. It appears that an informer told him that the books of account maintained by the assessee were not complete and many transactions were kept outside the books. Shri Chakravarty then informed the ITO on 15-1-1974 about the tip he had. The ITO issued necessary authorisation under section 133A of the Act to survey the assessee's shop. Shri Chakravarty then visited the assessee's shop premises on the same date. He came across 32 loose sheets of paper wherein day to day transactions of the assessee, which were not incorporated in the account books, were found. The other books of account and bills found by him were signed and an inventory prepared. Shri Chakravarty was afraid that the documents found in the course of the survey operations might be snatched away by the assessee. He, therefore, rang up to ITO, C-Ward, Katni and requested him to come to the shop. Shri Dixit, the ITO, came prepared with summons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iscellaneous records pertaining to the assessment year that none of the details regarding survey were made available to the assessing ITO. 9. In March 1979, further proceedings were taken. The ITO issued notice under section 148 for reopening of the assessment under section 147(b). The reasoning given for the reopening, as shown in the assessment order was, that large credits were noticed in loose sheets found in the shop of the assessee at the time of survey conducted under section 133A. A brief summary of the findings of the loose sheets can now be given. It shows entries on various dates from 28-10-1973 to 12-1-1974. An analysis of these entries shows credits as well as debits. The total of the credits amount to Rs. 4,98,774. This includes credits of Rs. 1 lakh each in the name of each of the partners. The debits in the name of various parties amounted to Rs. 1,06,325. 10. After reopening the assessment, the ITO apprised the assessee of the reasons for the reopening of the assessment. He then examined the assessee about the loose sheets. Shri Badri Prasad, the partner, denied that these loose sheets were found in the premises. He denied their very existence. His brother, Ram ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut making any reference to these facts. The miscellaneous records for that year bear out that the ITO was not aware of these facts. Therefore, there is no question of the ITO having these informations prior to the assessment. There is no question of the ITO coming to a different opinion on the same facts. There is no question of any piecemeal assessments. On the other hand, the ITO had received information after the completion of the assessment. This information is very relevant for the assessment. This information prima facie gives the ITO reason to believe that the income had escaped assessment. Therefore, the reopening of the assessment is perfect valid. 14. We would only cite the decision of the Calcutta High Court in the case of ITO v. Panama (P.) Ltd. [1974] 97 ITR 210 wherein, a summary of the requirement of section 147(b) are given. In order to be 'information' in terms of clause (b) of section 147, the conditions required to be fulfilled are : 1. It must be knowledge or instruction regarding facts or particulars or the law relating to the matter bearing on the assessment. 2. Such knowledge or instruction must come into the possession of the ITO after the assessment i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Commissioner on 22-1-1974. Reliance is also placed on the statement given by Shri R.C. Shrivastava, who was associated in the survey operations. 17. As against this, the material with the department to show that the loose sheets existed and are connected with the assessee are the following : 1. The survey operation was conducted at the instance of Shri Chakravarty, inspector, attached to the survey squad. The assessee has not said that Shri Chakravarty bears any grudge against the assessee. 2. It was only at the instance of Shri Chakravarty that he found there were incriminating material in the shop that the ITO was requested to be present in the shop premises. 3. Copies of the loose sheets had been signed voluntarily by the partners. 4. The denial by the partners later, is only a device to save their skin. 5. The conduct of the partners are not consistent. On 15-1-1974, when the inspector was present in the shop premises when the assessee was surrounded by his own people, he had signed the copies of the loose sheets. There could not be any compulsion under these circumstances. The assessee's conduct on 21-1-1974 before the ITO in the office of the ITO that he would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o confront the assessee with it. But what actually happened on 15-1-1974 did not accord with this hypothesis. So, if anyone else had fabricated, it could be only Shri Dixit, the ITO. 21. But this hypothesis Shri Dixit being at the bottom of it---can be accepted only if all the known facts could fit into it. We do not find it to be so. Firstly, the inspector, Mr. Chakravarti, in his report (this is incorporated in the Commissioner (Appeals)'s order at para 6), had stated : "in the course of survey, we came across 32 loose sheets of paper wherein day to day transactions of the assessee which were not incorporated in the account books were found. The other account books and bill books, etc., found by us and signed have been listed in the inventory which is enclosed herewith". Now, the only evidence of transactions outside the books noted in the survey report are those noted in loose sheets. Corroborate evidence was found in blank bills but that only corroborated the finding of transactions outside the books. Now, when we turn to the statement given by Shri Badri Prasad on the date of search, we find admission of dealings outside the books. His statement is in the assessment order at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could be only the loose sheets. 24. Another abnormality is the service of summons under section 131 by the ITO in the assessee's premises. This is also odd. This also shows that Shri Chakravarty found something which was of great evidentiary value. Under section 133A he cannot seize it. The assessee has to be compelled to produce the same only by serving summons. What he found was important enough to require service of summons on that day itself. Taking these facts together, it would be safe to presume that Shri Chakravarti found something valuable as evidence. The submission of coercion has to be considered against this background. 25. We think it is quite possible that the partners would have done something to cause apprehension in Shri Chakravarti's mind. Later, when Shri Dixit arrived, it is also possible that some heated words were exchanged culminating in the serving of the summons under section 131. Those words could have included some threats from the officer. 26. Now, if we are considering an assessment based merely on the statement taken down from the partners after the threat, perhaps the admissions contained in the statement will have no evidentiary value. But wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has already been dealt with in the earlier paragraphs. 29. Now, fourth submission is on a piece of circumstantial evidence---that no questions were put to the partners regarding the transactions recorded in the papers. It is a fact that no direct question has been put to them. But, for this omission, there is an explanation. The explanation is this : first, certain questions regarding dealings outside the books have been put. Such questions could only refer to these papers. Second, detailed question has to be only after the papers are officially in seizure of the department. Since the search was under section 133A, any seizure of the papers was not possible. We find this explanation acceptable. In fact, it is in harmony with the conduct of the ITO in serving summons under section 131 on that date itself requiring the assessee to produce these sheets next day in the office. 30. The other two points made out in para 16 of this order have already been dealt with by us. So, we give a finding that the papers were not fabricated and were genuinely found in the assessee's premises. 31. Now, we come to the third issue. Do these papers show any income earned by the assessee-firm ? Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose of avoiding the tax liabilities. Unless they were genuine entries, there was no point in this subterfuge. The very purpose of making these entries in loose sheets and not in books is to keep away these transactions from the prying eyes of the ITO. So, we must accept that the credit entries are genuine and they do not represent any undisclosed funds. 35. To this rule, however, we will make one exception. That is, the credits in the name of the partners. The partners could be credited with the funds either of their own or what has been generated outside the regular books. We will have to consider both the possibilities before a decision could be given. Now, let us assume that the funds belong to the partners. Then, what has been credited to their names has to be considered in their individual assessment. Now, the department did attempt to tax them in the partner's hands. But the partners successfully appealed and had got the additions deleted. So, it is now not possible to hold that the credits appearing in their names belong to them. It that does not belong to them, then the only other alternative is the firm, i.e., the assessee. There is one further clue to it. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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