9911796707
TMI Blog1985 (6) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... ------------------------------------------------------------- 1 2 3 4 5 6 7 8 ----------------------------------------------------------------------------------------- 1597 10-3-1979 Caustic Amarchand Anubhav 11,840 142 10 Agarwal & Traders, Co.,Jodhpur Ahmedabad 1681 28-3-1979 Titanium Amarchand Anubhav 24,544 242 20 Agarwal & Traders, ----- Co.,Jodhpur Ahmedabad 384 ----- 419 29-9-1978 Titanium Sunder & Co., Anubhav 18,408 212 15 Jodhpur Traders, Ahmedabad 420 29-9-1978 Titanium Sunder & Co., Anubhav 18,408 212 15 Jodhpur Traders, Ahmedabad 421 29-9-1978 Titanium Sunder & Co., Anubhav 18,408 212 15 Jodhpur Traders, Ahmedabad 513 26-10-1978 Titanium Sunder & Co., Anubhav 12,272 142 10 Jodhpur Traders, Ahmedabad 544 9-11-1978 Titanium Sunder & Co., Anubhav 36,816 422 30 Jodhpur Traders, Ahmedabad 754 2-1-1979 Titanium Sunder & Co., Anubhav 36,816 422 30 Jodhpur Traders, Ahmedabad ----- 1,622 ---------------------------------------------------------------------------------------- Industrial Chemicals, Jodhpur ----------------------------------------------------------------------------------------- GR Date Descrip- Consignor Consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w the sender or the person who had brought but knew the recipient who was Anubhav Traders as all the charges were to be paid by them. In the second statement Madan Raj Mehta stated that Ratan Lal was the proprietor of Anubhav Traders to whom the goods were sent. He also stated that the weight of each consignment duly packed used to be 25 kg. A third statement was taken from Madan Raj Mehta on 29-12-1980 wherein the details of bills of goods as reproduced above was given. In this statement Madan Raj Mehta again reiterated that he had known only Anubhav Traders and not the three parties. He further stated that goods duly packed were accompanied by proper bills which is the usual practice, as such, no examination was ever done and further the bills were always made to pay, i.e., to be paid by the receiver. Regarding the genuineness of the parties sending the goods, it was stated that the transporter acts as a postman who knows to whom the letter must be delivered. To a query as to why the three firms could not be treated as belonging to him and the profit that arose from the transaction taxed in his hands, the reply given was that he does not carry out any trade relating to titanium d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess was ever done under the banner Industrial Chemicals. 2.3 The department carried on investigation further. Praveen Kumar an employee of Nakoda Transport Co. (who became a partner of that firm later) wrote a letter to the ITO, Jodhpur dated 30-1-1981, followed by an affidavit dated 18-2-1982 and examination and cross-examination by assessee on 18-2-1982. Praveen Kumar stated in his letter dated 30-1-1981 that the goods of the three firms were given by Shyam Sunder Dhoot of Gulabdas Jagannath & Associates to be sent to Ahmedabad. Even the bills were given personally by Shyam Sunder Dhoot. He further stated the goods were delivered to Anubhav Traders of Ahmedabad. This statement was confirmed by an affidavit dated 18-2-1981. Praveen Kumar was cross-examined by assessee's counsel Mr. Mertia on 18-2-1982. The counsel put a specific questions which reads as: Question: Who prompted you to give the affidavit ? Answer : On receipt of a notice from Income-tax Department in connection with my firm's case, I had given the affidavit. Question 19 : Did the notice required you to give any affidavit ? Answer: The notice required me to give information regarding transportation of titanium d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the three firms. He only mentioned that lot of titanium dioxide and caustic soda have to be transported and asked for the charges which was given to him and I also gave him the addresses of our office at Narul and Ahmedabad. The bills were sent by him through a messenger along with the goods. In our business we had come across instances where there are a number of related concerns of the one and the same person. Shyam Sunder Dhoot never mentioned the names of the three firms but since the very same goods which Shyam Sunder Dhoot wanted to be transported had been received, I concluded that the three firms belonged to him only. Cross-examination by Mr. Mertia, counsel for the assessee. Question 53: Did Shyam Sunder Dhoot had a talk with you in connection with all the bills ? Answer : No. He spoke to me for 4-5 bills only and as for the rest he spoke to Sharma my employee. At the start for transportation, it was Shyam Sunder Dhoot who talked to me. Question 54 : Kindly tell the nature of duties and responsibilities of Sharma. Answer : Mr. Sharma was our administrative officer and at present he is no more in our service and it is over one year since he had left us. When he wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations: (a) Seizure of visiting card of Industrial Chemicals and correspondence from Industrial Chemicals; (b) Assessee dealing in similar goods; (c) Assessee stating on 23-8-1979 that he did not know anything about the seized documents and stating that he did not know any concern by the name Industrial Chemicals ; (d) Assessee's letter of 12-9-1979 about the correspondence as was done in 1977 only and that no business was ever done is only an afterthought and is quite contrary to what he had stated on 23-8-1979; (e) Statement of Praveen Kumar which was found to be iron clad against the assessee; (f) Ratan Lal's statement combined with his recognising Ram Lal Garg from a photograph which was the photograph of Shri Shyam Sunder Dhoot ; and (g) Assessee's refusal to cross-examine Ratan Lal on 6-3-1982 and assessee's action of absenting from appearance on 6-3-1982 was out of fear of being recognised as Ram Lal Garg. The ITO, thus, very much convinced that it was the assessee who represented himself as Ram Lal Garg had carried on transaction which were not accounted for, proceeded ahead to make the assessment on him. He considered serial numbers of the bills and then observed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. (i) Amarchand Agarwal & Co. 1,839 (ii) Sunder & Co. 3,314 (iii) Industrial Chemicals 2,525 ------- Total 7,678 ------- But keeping in view the various contingencies of business, which might have occurred, I take total number of effective bills at 5,000. Thus, sales through 5,000 bills on the estimate average of Rs. 15,000 per bill comes out to Rs. 7,50,00,000 and to this figure I add again on estimate basis Rs. 5 lakhs on account of bills which have been issued for higher amount. Looking to the facts and circumstances of the case, I apply a gross profit rate of 4 per cent which gives a total gross profit of Rs. 30,20,000. Out of this, a deduction to the extent of 25 per cent is allowed to the assessee for the items of profit and loss account. Thus, the net profit earned through these concerns is taken at Rs. 22,65,000. It may also be mentioned that the source of investment in purchase and sale of the goods is also not known and, therefore, on estimate basis I take the initial investment for carrying on the business through the above concerns at Rs. 1,50,000. Therefore, the total concealed income on account of business carried on in the name of fictitious conce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see and his authorised representative had taken equal trouble in giving the true particulars to the department, so that the facts in the matter could have been easily established without the botheration of their estimation. (viii) The ITO's estimation of initial investment in the business of three concerns Rs. 1,50,000 is very reasonable and, therefore, no interference in the matter is being made'." 3. Aggrieved by this order the assessee preferred appeals to Commissioner (Appeals). The observation of the Commissioner (Appeals) was: (a) Regarding seizure of visiting cards and correspondence of Industrial Chemicals, assessee stating that he does not know anything about them, later correcting it by a letter and the address in the bills which were found to be bogus, adverse inference could be taken against the assessee: (b) The ITO should have given the assessee another opportunity to cross-examine Ratan Lal of Anubhav Traders; (c) Though all goods have been sent to Anubhav Traders only the following were found entered in the books of Anubhav Traders: Sent Entered in books of Anubhav Traders (i) Amarchand Agarwal & Co. 1000 kg. of Yes Bleaching Powder. 2000 kg. of Titani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, if Ram Lal Garg was in fact Shyam Sunder Dhoot he would have stated so. Mr. G.D. Gargieya further submitted that some photograph purported to be of Ram Lal Garg was shown to Ratan Lal which he had recognised but he was made to sign on the back of photograph of Shyam Sunder Dhoot. It is assessee's misfortune that he had to go to Ahmedabad on 6-3-1982, as otherwise on that day itself Ratan Lal would have clarified that Ram Lal Garg and Shyam Sunder Dhoot are two different persons. He made a reference to page 102 where the affidavit of the Branch Manager at Jodhpur Office of Anubhav Traders is provided wherein he has stated that Ratan Lal had known Shyam Sunder Dhoot for quite sometime as Shyam Sunder Dhoot used to come to their office. ITO waited almost over 20 days before he had made the assessment. He could have easily afforded another opportunity to the assessee. Even the IAC refused the opportunity to the assessee. 4.3 Mr. G.D. Gargieya then submitted out of 13 bills, the department had provided only six bills. He then by referring to the serial numbers of the bills submitted that Sunder & Co. issued bill No. 1048 on 30-9-1978 and is said to have issued bill No. 1013 on 26-10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly incorrect. According to Mr. G.D. Gargieya the department has no positive evidence and let alone any circumstantial evidence at all against the assessee. He then referred to pages 81-92 where the statement of various transporters are attached none of them had transported any goods of the three firms in the year under consideration. This point was made in connection with the observation of the ITO in estimating the sales at Rs. 7.5 crores. The department had carried out the search for over six days and could not point out any defect with the books of the firms of the assessee nor they had found any unaccounted stocks or any other evidence which could lead to the conclusion that assessee had done any dealings outside the books. Further, he submitted by reference to the copy of balance sheet of Travancore Titanium Products Ltd., a Government of India Enterprise (page 137), the only concern in India manufacturing the product titanium dioxide, its total sales all over India is about Rs. 8 crores, the estimate of ITO that the assessee had dealt in goods of a value of over Rs. 7.5 crores is thus clearly established to be totally baseless. Apart from the assessee the concern had dealers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ragraphs 18 to 21 he had found that the assessee has impersonated as Ram Lal Garg but wants ITO to examine the issue and again in paragraph 22 he mentions that the statement of Parveen Kumar clearly establishes that it was Shyam Sunder Dhoot who had sent the goods to Ahmedabad. But with all that he sets aside the orders of ITO. He, therefore, pleaded that order of ITO needed to be restored. 6. We have heard the parties and considered all the materials that have been placed on record. The fact remains that the survey was conducted on the assessee on the basis of information collected at the time of similar operations on transport operators. From Nakoda Transport Co. the department had collected information that the three firms Sunder & Co., Amarchand Agarwal & Co. and Industrial Chemicals had sent goods vide 13 bills through them to Anubhav Traders, Ahmedabad. Anubhav Traders, accepted having received some goods through Nakoda Transport Co. from the three parties. Nowhere they had mentioned how and to whom the payment was made, i.e., by cash, cheque or banker's draft while they had mentioned that for the sales made to Gulabdas Jagannath on 19-10-1978, the price was paid by banker's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es that he only presumed that the same person had sent the goods who enquired of him about the transportation charges and this presumption he had based on the basis of time, i.e., within about two hours of the enquiry goods came to him for despatches. The presumption is also based in the similar nature of goods. Praveen Kumar admits that Shyam Sunder Dhoot never mentioned the names of the three firms but he concluded it to be belonging to him as the said firms dealt with similar goods whose goods were transported by his trucks. Another reason given by him for his conclusion that Shyam Sunder Dhoot was the owner of the three firms was that he was aware of a number of sister concerns of one firm. The department on the basis of this statement which is entirely a presumption and opinion or feeling of a person had held the assessee to be the owner of the three firms. Praveen Kumar's statement clearly reveals that his conclusions are not based on any facts or evidence and the department have not placed any evidence to lead us to conclusion that the statement is reliable to sustain any addition on the assessee. 6.3 Ratan Lal's statement on 6-3-1982 again cannot be held against the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e three firms were found in the assessee's premises. No cash or other investment has been found. The only two aspects that are existing are : the similarity of name Industrial Chemicals and similar type of goods traded in. Are these sufficient to indict a person ? In our opinion, these are clearly not at all sufficient. 6.6 The department provided the assessee copies of only six bills out of the total 13. Even here, by referring to the serial numbers of these bills we find as pointed out by the assessee's counsel that in the ease of Sunder & Co. bill No. 1048 is dated 30-9-1978 while bill No. 1013 is dated 26-10-1978 and similar is the case with bills of Industrial Chemicals. Bill No. 1875 is dated 19-11-1978 while bill No. 1539 is dated 7-2-1979. Latter serial number of bills appears as issued earlier, while earlier serial numbers of bills are issued subsequently. When taking action under section 132, the ITO has a right to make all kinds of presumptions but while making an assessment additions, if any, or best judgment must be based on some reasonable evidence. As already pointed out, the department has not found any cash or investment of whatever sort which the assessee could n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent without reference to any evidence or any material at all. There must be something more than bare suspicion to support the assessment. They have further observed if the ITO's findings were based on mere guess and could not be supported, the same cannot be said to be material to sustain the findings. 6.7 The Supreme Court in the case of Kishinchand Chellaram have observed making an addition based on hearsay is not permitted. In that case there were telegraphic transfer by the employee of the assessee from one office to another. The ITO wrote two letters to the manager of the bank. The said letters were not provided to the assessee. The manager confirmed that the telegraphic transfer sent from Madras was received by Bombay office and the amount was paid to the employee of the assessee on the same date at Bombay. On the basis of the letters the Tribunal concluded that the amounts were transferred by the assessee and, therefore, was undisclosed income of the assessee. The Supreme Court observed that the two letters from the bank manager do not constitute any material evidence which the Tribunal could take into account for the purpose of arriving at the finding that the sum was remi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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