9911796707
TMI Blog1988 (1) TMI 96X X X X Extracts X X X X X X X X Extracts X X X X ..... 1961. The assessee had explained the said silver to have been purchased from one Rashid & Company of Jabalpur as under: "4. Rashid & Co., Jabalpur Bill No. 107 dt. 8th Dec., 1983 40.300kg. Bill No.108 dt. 10th Dec., 1983 50.340kg. Bill No. 111 dt. 11th Dec., 1983 34.800kg. 125.440kg.2" 4.There were following quantities of silver as well, which the assessing officer has initially considered to be in excess but on consideration of the evidence held them to have been properly explained. In the present appeal, therefore, we are not concerned with them. Dt. of Bill Weight 1.Nihalchand Niraj Kumar Kandiya. 11th Nov., 1983 7.642 kg. 2. Mali & Mali Co. Hupri, Kolhapur, Maharashtra 22nd Nov., 1983 30.112 kg. 3. M/s Kishanlal S/o Sukhandanlal, Agra. 12th Dec.,1983 2.707 kg. Regarding the alleged purchase of silver amounting to 125.44 kg. from Rashid & Co., Jabalpur, the assessing officer (IAC Asst. yr.) did not accept the assessee's contention. The reason was that at the time of search this silver was not found recorded in any books of account, the assessee in his examination under s. 132(4) did not offer any explanation about the source of acquisition, and on inquiry Mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee would have asked to the IAC to issue summons under s. 131 for cross verification of Mohd. Rashid. 8. Under the facts and circumstances of the case and evidences on the record, the CIT(A) should have treated the transaction as genuine and that the assessee's burden of proof stands discharged." 6. As in evident from the grounds reproduced above, the main question is about the sources of possession of silver amounting to 125.44 kgs, by the assessee. The assessee's specific case is that the silver was delivered to the assessee by Rashid & Co. Admittedly by the time of search no payment had been made to the said Rashid & co. And before proceeding further, we may refer to the statements made by the appellant before the authorised officer who recorded the assessee's statement on 17th Dec., 1973, i.e., on the last day of the search and probably after the search operation had otherwise concluded. A perusal of this statement would show that the assessee has avoided answers to various questions, either by pleading ignorance or by saying that he was not well. For example he was asked about the source of his investment in the business, which he stated, he could not remember because he wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... about the possession of the excess silver and what is even more important to note is that though later on it was said that the silver came to the assessee from Rashid & Co. of Jabalpur on credit on sale/approval basis, in this statement the assessee did not make any such claim whatsoever. 9. In proceedings under s. 132(5) of the IT Act, 1961, notice under r. 112-A was issued and was served on the assessee on 24th Dec.,1983. The assessee was required to submit his explanation in 15 days. In response to this, the assessee moved an application on 7th Jan., 1984 seeking a week's time alleging that he was still not in a fit state of mind and his counsel had not been able to inspect the record. Then on 22nd Feb., 1984 another application was moved on behalf of the assessee. This is placed at page 47 of the record of proceedings under s.132(5). In this application a very queer request was made as under: "In this connection, no previous notice has been issued and in place of the firm, notice has been issued to the Proprietor, Shri Prakash Chand Nahata. Hence the furnishing of reply be kindly dropped." A clear indication of avoidance to face the issue. In the case of a proprietary busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... March, 1984 has also been placed by the assessee in his paper book at page 38. Even in the assessment proceedings under s. 143, the assessee never filed any reply whatsoever in writing explaining his case, mentioning the various dates on which transactions took place the place where the transactions took place and the names of persons concerned etc. 11. We have given the above history of the assessee's conduct because that would be very relevant for appreciating the evidence, which the learned counsel for the assessee described as voluminous in support of his case. 12. In his investigation powers, the IAC (Asst. yr.) examined Mohd. Rashid the so-called proprietor of M/s Rashid & Co., South Miloni Ganj, Jabalpur who is said to have delivered the silver ornaments weighing 125.44 kgs. to the assessee. This statement was recorded on 29th Oct., 1985 and without going into details, we may say that he made himself out to be a very small craftsman engaged in repair of old ornaments or manufacturing new ones from old ones. In other words he did not purchase his own silver etc. For manufacture of ornaments. He told his income to be Rs. 400 Rs. 500 p.m. and specifically denied having sold s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , in fact, he admitted that he was a very small repairer of old silver ornaments. The scale at which he worked never exceeded 4-5 kg. of silver ornaments given him for repairing, which he got done by one or two karigars (workers) employed by him. He also admitted that the amount paid through demand draft by M/s Anil Kumar Sital Kumar Nahata was deposited in his bank account but was shortly withdrawn and paid back to M/s Anil Kumar Sital Kumar Nahata, Seoni. He also admitted that he just accommodated the above party in the hope of some future business he expected to get from the above party (assessee). You are requested to produce the following three parties on 31st Dec., 1985 for cross verification and examination. In case you fail to produce them on the date mentioned above, I would arrive at the conclusion that the alleged transactions are bogus ones and equivalent value of silver ornaments claimed to have been received for approval from them will be liable to be added as unexplained investment made by you during the relevant previous year : (1) Nihalchand Nirajkumar Kandiya, Sagar. (2) Mali & Mali & Co. Hupri, Kolhapur. (3) M/s Rashid & Co. South Mileoniganj, Jabalpur. Yours ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Chand Niraj Kumar Kandiya : The proprietor of the firm Shri Nihal Chand Jain is being produced for examination on oath. 3. M/s Mali & Mali & Co., Hupari, Kolhapur (Maharashtra) : The information collected in respect of the above party and his statement recorded by you has not been shown to us. The copy of account of the assessee in the books of the firm is enclosed which proves the said transaction. He is also income-tax assessee at Ichalkaranji as under : 39-084-FQ 2928/355 FM C-Ward, Ichalkaranji, Maharashtra Sd/- For assessee". Copies of the aforesaid letters are placed at pages 28, 29 and 30 of the assessee's paper book. Copy of another letter dt. 30th Dec., 1985, addressed by the assessee to the IAC (Asst.) is at page 32 of the paper book. This also is in response to IAC(A)'s letter dt. 26th Dec., 1985 aforesaid and says that the time allowed for production of the three parties mentioned in IAC(A)'s letter dt. 26th Dec., 1985 (received by the assessee on 26th Dec., 1985 itself) is very short, hence notice under s. 131 be issued to them. In the next letter dt. 31st Dec.,1985 (reproduced above), the assessee informed the ITO that Mohd. Rashid was not present at Jabal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shid for presentation to the IAC(A), Jabalpur and also the photocopy of a forwarding letter addressed to the ITO. The originals of these papers were allegedly sent by Mohd. Rashid to the assessee by post and copies were directly sent to the ITO. The learned Departmental Representative stated that no such papers were received in the office of the IAC(A). Any way, the letter says that a mistake somehow occurred while making statement (must be referring to statement recorded on 29th Oct., 1985) for which he was sorry, and therefore he was sending a clarification, the original copy of which has been sent to Seth Prakash Chand Nahata. In the affidavit he stated that a mistake occurred in the statement under s. 131 because at that time he was shocked (Ghabda gaya tha) and he has been coerced by the income tax people to make a statement and was under undue influence (sammohit to gaya tha). Mohd. Rashid goes on to state that he had given superdgi of silver goods earlier (does not state to whom, how much, at what date, place etc.) and had, on 1st Dec., 1983, written a letter to the said firm (the assessee) for accounts. He further says that on 12th Dec., 1983 he reached Seoni (where the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after, i.e. on the 16th. The second payment of Rs. 50,000 by the assessee came in this a/c on 22nd Feb., 1984 and went out the next day in two withdrawals of Rs. 45,000 and Rs. 5,000 each. The third payment of Rs. 50,000 by the assessee went in this a/c on 27th March, 1984. Out of this Rs. 40,000 was withdrawn the same day. The balance of Rs. 10,000 stood adjusted against a withdrawal of Rs. 10,000 on 26th March, 1984 which appears to have been permitted by the bank on account of a deposit of a cheque or draft of Rs. 50,000 which bounced back and was re debited to the assessee's a/c on 26th March, 1984. The last payment of Rs. 17,115 went into this a/c on 28th March, 1984 and out of this Rs. 17,000 was withdrawn the next day leaving a balance of Rs. 615 only in this a/c. thereafter till the 23rd Dec., 1985 (upto which this copy is made out), there was no transaction in this account. Only service charges were debited by the bank periodically. This is the position of the bank account of this person who is alleged to have thrown goods worth about Rs. 1,77,115 (according to the Revenue Rs. 3,49,225) in the assessee's lap for approval. Does this a/c not indicate that Mohd. Rashid is a m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll. If the story was true and the goods were received on approval basis only, then in law Rashid remained the owner of the goods. The assessee could inform Mohd. Rashid that goods belonging to him have been seized by the IT Department. Then Mohd. Rashid would have been running around ITO offering not only himself as a witness but the also producing all corroborative evidence. But that was not to be so. 22. The bank a/c of Rashid & Co. shows that this party has no financial standing whatsoever. How could this man arrange silver ornaments worth Rs. 1,77,115. No evidence has been let on this aspect of the matter. Even Mohd. Rashid in his affidavit does not say how he could arrange such a large quantity of silver. He did not utter a word about his financial status. In spite of the fact that this is said to be a trading transaction, no interest has been paid to Mohd. Rashid although a huge quantity of goods is said to have been supplied and the money was not paid for more than three months. As a matter of fact, the poorer person pretends to being unduly charitable to the assessee who is evidently fabulously rich. 23. Mohd. Rashid is said to have written a letter dt. 1st Dec., 1983 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ree tunch certificates/purity certificates have been filed before the authorities below and are in the paper book as well before us. They are as under: No. 3525 dt. 4th Dec., 1983 purity 35.40 No. 3529 dt. 3rd Dec., 1983 purity 34.00 No. 2537 dt. 4th Dec., 1983 purity 35 these certificates have been issued by private refinery of Indore. The learned counsel for the assessee informed us that entries of these goods were not made in the regular books of accounts as the goods were on approval and the question of approving or disapproving the goods depended on verification of the purity. He also told us that Mohd. Rashid delivered these certificates to Badri Prasad on 12th Dec., 1983 alongwith the sale bills. We have already stated how Badri Prasad has been kept back. We asked Sri Berdia as to why the purity certificates were obtained from Indore, a far off place. He explained that this was done to ensure in impartiality of the test because Mohd. Rashid belonged to Jabalpur, hence certificate of a refiner at Jabalpur would not have been acceptable. If this was so, then it is funny enough that instead of getting the purity tested himself the assessee entrusted this job to Mohd. Rashid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecessary in this trade because of various reasons one of which is that in case any goods are stolen property and alleged to be stolen property and there is a police search etc., the identity of the person who delivered the goods may be satisfactorily proved. The three deliveries allegedly made by Mohd. Rashid are recorded on 15th Nov., 1983, 17th Nov., 1983, and 19th Nov., 1983 which shows that Mohd. Rashid was dumping goods on the assessee in a very unnatural quick succession, without any payment whatsoever and without having ever before dealt with the assessee. On none of the entries the signatures of Mohd. Rashid have been obtained. Similarly Mohd. Rashid does not claim to have been sandwiched in a column meant for recording for a/c of Nathu Lalji Manchand of Indore. Then on the page on which these entries appear, the author who has written the title of the various accounts has added the words "hisab Chandi Ka" before the name of every party but these words are missing as a prefix from the name of Rashid & Co. Then in his affidavit or letter, Mohd. Rashid does not mention any date on which the goods were delivered. His affidavit dt. 19th Dec., 1985 which is the foundation of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the IAC(A) did not give sufficient opportunity to the assessee to produce evidence. This contention in view is only skin deep and the injury caused to the assessee is only superficial. No doubt the IAC(A) rushed through the proceedings but the conduct of the assessee as detailed above clearly shows that the assessee in fact did not want to produce any witness whatsoever. We have indicated above how the assessee conducted himself in proceedings under s. 132(5) and avoided giving any definite and detailed account of the possession of silver. Neither in those proceedings nor in the assessment proceedings the assessee furnished such a statement of facts. The assessee did not require any notice from the assessing officer for furnishing the affidavits of Mohd. Rashid, of Badri Prasad Munim and of himself. He could have done so at any time after the filing of the return for 1984-85. But he never did so. The letter dt. 26th Dec., 1985 by the IAC(A) was served on the assessee on the same day at Jabalpur. This shows that the assessee was at Jabalpur in connection with the assessment proceedings from before. After receiving that letter, the assessee did not react promptly to seek adjournments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used against the assessee and that opportunity to controvert should have been given to the assessee. In the case before the Allahabad High Court, the ITO wanted to use certain information furnished to him by certain persons against the assessee. The ITO neither allowed the assessee inspection of record nor disclosed the names of the persons and the nature of statements made or information given by them. The assessee had repeatedly asked for opportunity to cross examine such persons which was not allowed. It was held on the aforesaid facts and circumstances that the principles of natural justice had been violated. 33. None of these rulings help the assessee in any manner whatsoever. It is well settled that ITO is the investigator, the prosecutor as well as the judge of the cause. It was in his role as an investigator that the IAC(A) summoned the aforesaid persons and examined them on oath. At that stage there was no need to allow the assessee any opportunity of cross examination etc. etc. After examining these persons he felt that the assessee should produce M/s Rashid & Co. for cross examination. He, therefore, issued the letter dt. 26th Dec., 1985 to the assessee directing him to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r witness. The burden was on him to produce him before the IAC(A) and to examine him as his (assessee's) witness and to enable IAC(A) to cross examine Mohd. Rashid. Simply because by way of precautions and in his powers and duty as an investigator, the assessing officer recorded the statement of Mohd. Rashid, the later does not become the assessing officer's witness whom the assessee could claim a right to cross examine. 35A. Though the assessing officer has made copies mentioned of the statements of Mohd. Rashid and Iddu in his assessment order but that does not vitiate his findings. Firstly, because there is at the most a technical flaw in the non-supply of copy of statements to the assessee. The assessee knew fully well what Mohd. Rashid had stated. Secondly, the assessing officer's finding is based on the lack of evidence and the unreliability of the material produced by the assessee. The assessing officer's finding is very well sustained by the other material and circumstances on record and the fact that the assessee did not produce the material witnesses including himself and Mohd. Rashid enabling the assessing officer to raise an adverse presumption against the assessee. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udice whatsoever has been caused to the assessee. Lastly, we hold that the findings recorded by the authorities below are well sustainable even if these two statements are excluded from consideration altogether. That is why in this judgment we have placed no reliance on them and have relied on the other facts, circumstances and evidence already discussed in detail. 39. Lastly it was argued before us that the value of silver has been treated as assessee's income under s. 69-A of the IT Act, 1961 which had no application because the silver was entered in the accounts books of the assessee, i.e. in the Amanat Bahi. This contention in our view cannot stand. We have already held that the relevant entries in the Amanat Bahi did not exist at the time of seizure of the silver in question and the Amanat Bahi itself. Therefore it is not permissible to accept that the silver was recorded in the books. Then the Amanat Bahi in our view is not a book of account maintained by the assessee for any source of income. It is a subsidiary book kept as a memory and evidence book for receipt and delivery of goods the entries of which for the time being were not required to be made in account book, prope ..... 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