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1994 (12) TMI 130

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..... liored/undrilled against the goods exported by it. According to the Import Policy for Registered Exporters the assessee-firm could have become eligible for import replenishment of a specified percentage of the licence value (REP entitlement) of the material of import. As per provisions of the Import Export (Central) Act, 1947 and the Import (Central) Order, 1955 issued thereunder the REP licence were transferable. 4. For the year under consideration, ending on Diwali 1985, the assesseefirm returned an income of Rs. 1,37,623 which included business income of Rs. 2,69,278 only against which deductions amounting to Rs. 1,31,655 were claimed. Of the total turn-over of Rs. 87,47,649 inclusive of sale of shares at Rs. 1,19,500, 98.77% pertained to counter sales in foreign exchange to foreign tourists and direct sales to foreign countries against which the assessee-firm duly received REP licenses. The assessee sold such import licences to various parties of Bombay, Delhi and Jaipur. 5. On examining the Profit Loss A/c of the assessee-firm the Assessing Officer (AO) noted that premium (sale consideration) on sale of the REP licences during the year under consideration was shown at .....

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..... Prop. M/s. Duggar Exim Linkers, Jaipur for being examined. In his statement recorded on 27-3-1989 Sri Duggar admitted of having paid a sum of Rs. 2,46,397 in cash in addition of Rs. 14,546 by cheques to the assessee on account of the sale consideration of the three transactions described above. 8. On study of the accounts of the assessee in the books of M/s. Duggar Exim Linkers, Jaipur, the AO further noted that REP licences worth Rs. 7,83,500 were sold by the assessee to that concern during the months from January 1985 to March 1985 at premiums ranging between 2.5% to 7.5% and the receipt of sale consideration by cheque at those rates only had been reflected in assessee's books. The AO formed the opinion that REP licences might have been sold in those months @ 37% premium, a part of which, i.e., Rs. 31,089 only was reflected in the books. The AO thus concluded that a sum of Rs. 2,89,895 charged in cash in respect of sales made during that period was not reflected in the books of the assessee. He, therefore, made addition of Rs. 5,09,792 in the following manner :-- Particulars Value of Premium as Premium Additions Licence per books as per AO made Transactions Rs. 7,27,300 Rs. .....

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..... y incriminating evidence was found in its possession. Regarding the worth and value of the entries at page 33 of the diary seized from the possession of Sri K.K. Duggar, Prop. M/s. Duggar Exim Linkers, Jaipur, Mr. Vaish submitted that such evidence cannot be relied upon for fastening any pecuniary liability upon the assessee. It was submitted that the entries were not only made by some unknown person in a stray diary but also that Sri Duggar himself denied to have charged premium @ 37% of the value of the REP licences pertaining to other transactions not found entered in the diary. Mr. Vaish thus contended that the addition in question was made on very infirm basis and was required to be deleted as being quite immaterial and unjustified. 12. The ld. D/R, on the other hand, heavily relied upon the order of the I.T. authorities and further submitted that whatever might have been the history of assessments made in the case of assessee in earlier years, the assessee is proved to have received huge unaccounted money in cash on the sale of REP licences to/through Sri K.K. Duggar and the addition made was fully justified. The ld. D/R further submitted that in appreciating the facts of t .....

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..... ere is no dispute that an amount of Rs. 14,546 was received by the assessee from Sri K.K. Duggar through A/c payee cheques in respect to the transactions of transfer of REP licences to or through him. The case of Revenue is that the balance of Rs. 2,50,876 was received in cash by the assessee but that was not reflected in the books. In support of such assertion the statement of Sri Duggar as recorded by the AO on 27-3-1989 and corroborated by the entries in the blue diary seized from his possession on 19-6-1986 has been relied upon. 16. Sri K.K. Duggar is a 39 years aged Proprietor of M/s. Duggar Exim Linkers, Jaipur. In the course of a-search conducted on 19-6-1986 at his business/residential premises a blue diary was seized. This diary contained the account of certain transactions. On being examined on oath on 27-3-1989 under sec. 131 of the Act in the course of present proceedings Sri Duggar stated that the transactions related to the purchases and sales of REP licences of various parties and that on page 33 of the said diary there was the account of the purchase of REP licences from the assessee-firm. He further stated that on the credit side of the page of the three entries .....

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..... nst a person which such person has had an opportunity to meet and explain. In other words, only that evidence can be used against him which has been put to him at the trial of the case and which he has had an opportunity to explain, oppose and rebut. Evidence collected behind the back of a party cannot be used against him, unless it has been put to him and he has had an opportunity of meeting such evidence. When such evidence is sought to be tendered against him through the oral testimony of some person then the party against whom such testimony is intended to be read and used in evidence must be given an opportunity to cross-examine such person and if the party so chooses he must be allowed to tender oral or documentary evidence in rebuttal to that of such person. 19. In the administration of tax justice evidence may well be collected by the Tax Officer behind the back of the taxpayer. But if the Tax Officer intends to use and rely upon such evidence against the tax-payer in the assessment proceedings then the taxpayer must be confronted with such evidence and he must be given proper opportunity to meet and explain the evidence collected behind his back but intended to be used a .....

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..... ement of Sri Duggar that makes substantive evidence in this case and the entries at page 33 of the seized diary simply makes corroborative evidence in the sense that such entries were utilised for refreshing Sri Duggar's memory on a particular fact. The value of the statement of Sri Duggar against the assessee assumes much importance due to the very fact that such statement not only goes against his own interest but may also expose him to other sorts of liabilities, civil or criminal. Since Sri Duggar clearly admitted the ownership of the diary to him and the entries therein as having been made by some of his employees it matters not that the entries were not made in his own handwriting. The purpose of the entries made in the diary was in their use for refreshing the memory and that was done by Sri Duggar. He did not state a fact which was not supported by the entries in the diary. His testimony on the point on hand can therefore be successfully relied upon against the assessee. 22. On going through the orders of the Assessing Authorities we find that assessee's counsel was very much present when Sri Duggar was examined on 27-3-1989 by the AO and when asked to cross-examine Sri D .....

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