9911796707
TMI Blog1992 (12) TMI 82X X X X Extracts X X X X X X X X Extracts X X X X ..... their camp in San Liego on 12th Sept., 1980 and got it signed and sworn before some official of Consulate General of India, San Francisco, California, on 17th Sept., 1980. On this basis assessee's assessments for the above mentioned three years were reopened vide notices under s. 148, all dt. 12th Nov., 1981. It was gathered that on the basis of similar information from John Ashlyn regarding transactions with M/s Salas S.A. of Geneva, income-tax and wealth-tax assessments of several exporters of precious stones from Jaipur and their partners were reopened and substantial additions had been made by the Assessing Officer to their disclosed incomes and wealth. At this stage we may also mention that from the photo copy of the statement of John Ashlyn which has been filed before us, we are unable to gather clearly what was John Ashlyn's relationship with M/s Salas S.A. or a partner or a Director or Managing Director or merely some employee of Salas S.A. and in what capacity he had given that statement and information. 3. So far as the assessee before us is concerned, it is a registered firm which had four partners till asst. yr. 1973-74, out of whom one went out and thus for asst. yrs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... valuation of goods was done by an appraiser of the customs Department to see that they were neither overvalued nor under-valued. Immediately thereafter they had to be handed over to the Foreign Post Office to ensure that the same goods were exported. When they reached abroad, the agent there took delivery of the goods and only the goods found fit for sale were sold and those not found to be saleable were returned. When the unsold goods were received in the Foreign Post Office in India an intimation was received by the assessee to produce the papers and prove that they were the same goods which were exported and only after proper verification they were handed over to the assessee. Further, in respect of those goods which had been found fit for sale abroad, remittances could be sent by the foreign agent only through the bank and after checking of the PP Form. Regarding assessee's method of accounting, he explained that assessee had been treating the goods as sold only when that intimation was received from the foreign agent and then goods account would be credited and bank account debited. In this background, he submitted the common controversy was that the so-called documents or pap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anwar, but that was deleted by the Tribunal vide its order dt. 10th Aug., 1984 for wealth-tax asst. yr. 1977-78. That order has become final and thereafter in her wealth-tax assessment for asst. yr. 1978-79 the WTO himself excluded her share from this amount vide his order dt. 4th July, 1989. According to Shri Ranka this established that while the Revenue had failed to prove that document, the assessee had proved it to be fabricated and Revenue had accepted this. 6. Regarding the "Legalised documents" Shri Ranka submitted that assessee had althrough been claiming that the documents should be shown to the assessee and John Ashlyn and Salas S.A. should be allowed to be cross-examined by assessee or those documents should be excluded from consideration. He pointed out with reference to copies of assessee's letters filed in the paper book that assessee had specifically asked the Revenue as back as in 1986 to allow cross-examination of John Ashlyn and Salas S.A. anywhere convenient to the Revenue but revenue failed to provide that opportunity. He submitted that this request was repeated before the learned CIT(A) but again it was ignored. Thus, according to Shri Ranka whereas the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R.Y. Durlabhji vs. ITO (1989) 76 CTR (Trib) (Jp) 98 which was decided in favour of that assessee because in that case the assessee had pointed out the falsifications and contradictions in the statements of John Ashlyn and documents of Salas S.A. 7. Coming to the merits of the case, Shri Ranka repeated that according to assessee's system of accounting, only when the sale amount was received by assessee it was treated as sale. But in assessee's case additions had been made by enhancing the valuation of the closing stock lying with the agent (Salas S.A.) on consignment basis, for which there was no justification. 8. Similarly regarding the additions made for alleged unrecorded or undervalued sales, he urged that there was no under-invoicing of sales as alleged by Revenue. He also claimed that for asst. yr. 1974-75 there was double addition, first by treating the stock as undervalued in asst. yr. 1973-74 and again on alleged under-invoiced sales in 1974-75. Regarding the allegation of under-invoicing/undervaluation, Shri Ranka submitted that the documents on which Revenue had relied were supposed to have been given by Salas S.A./John Ashlyn and, hence, they should have proved their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eferred to the copy of document on p. 55 of the paper book referred to above on the basis of which addition of Rs. 2,55,318 had been made in asst. yr. 1974-75 and pointed out that it did not bear the name of any party much less Salas S.A. It did not bear the signatures of the party to whom it belonged, it did not specify clearly what was the currency mentioned therein, i.e., whether they were US Dollars or Swiss Francs and the dates mentioned in that statement were not in regular and chronological order. For these reasons also this document was not worthy of reliance and could not be the basis of rejecting assessee's books of account and the statement on oath of Shri P.C. Dhadda. He pointed out and filed a statement running into five pages in which it was claimed that there were those documents which were relied upon by Assessing Officer but copies of which were not supplied to the assessee; these documents which were not shown to Shri Dhadda during his statement yet which were referred to in the assessment order and a large number of documents which were referred to by CIT(A) in his order but whose copies were not provided to assessee nor proper opportunity was given to assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gn Post Office, the invoice at p. 8 was submitted at the Geneva Post Office. He further referred to p. 22 with regard to John Ashlyn's statement on p. 2 of Revenue's paper book regarding lot Nos. 81, 91 and 92 for US $ 328, how this amount came was on p. 24 and that p. 10 of the paper book was duplicate of p. 22 (regarding remittances for goods sent by assessee). According to Shri Kundra regarding Lot No. 96 statement was on p. 23 by Salas S.A. and the remaining lots were returned. There was a return note on p. 20 of Department's paper book and the prices were real as found in the Switzerland invoice. He submitted that as per p. 26 the amount was paid to M/s Unigem and debited to assessee's account and two cheques were paid to Shri P.C. Dhadda as per pp. 4-5 of paper book for US $ 961.27 dt. 17th April, 1973 and for US $ 399.35 dt. 18th Oct., 1975. (The bank stamp is dt. 22nd Oct., 1973). Shri Kundra explained that since this photo copy could be obtained only from the bank, it could be only a photo copy of photo copy and that it could not be with John Ashlyn. As for assessee's objection with reference to cheque the learned Departmental Representative explained that the date on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned counsel for assessee that all those documents could have been fabricated by John Ashlyn. Shri Kundra posed questions to the effect as to who could have gained more by these transactions, who needed underinvoicing, who would undertake additional liability in their own books of account. According to Shri Kundra, Foreign Exchange restrictions were in India and not in Switzerland and, hence, it was the assessee who needed the foreign exchange and, hence, Shri P.C. Dhadda personally went to make arrangements regarding what code words could be used and how underinvoicing could be done. He referred to p. 11 of his paper book which is a photo copy of a letter written by Shri P.C. Dhadda from his hotel in Geneva to Salas S.A. asking them to send blank forms of assessee's invoices with them and also the past scrips requesting them to destroy that letter. With reference to the code words "Most selective goods" which according to John Ashlyn and Revenue signified the real price to be double of the invoice price, Shri Kundra referred to p. 29 of his paper book which was copy of assessee's letter dt. 25th May, 1973 and requested us to see it with pp. 20 and 7 of the paper book. He explai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he goods sent through that invoice had been returned to the assessee. 14. Regarding the additions made on the basis of credits appearing in assessee's accounts in the books of Salas S.A. Shri Kundra submitted that the assessee had been provided copy of that account and had been asked to reconcile that account with his books of account. However, since the assessee had failed to explain satisfactorily those investments, they had been added to the income of the assessee under s. 69 of the IT Act. The learned Departmental Representative submitted that the origin of this evidence, namely, the legalised document was identifiable; these were like the books of account of any other assessee and if in the books of another assessee some discrepancies were to be found as compared to the books of account of the assessee before us, it should have been considered as to whose books were more reliable and secondly as to which of the two would gain more by making those false entries. He submitted that here the question involved was not that an Indian was being disbelieved while a foreigner was being believed; it was only a question of evaluation of evidence in the facts and circumstances of the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces in figures in assessee's books of account and foreign party's account, human conduct, etc. He also referred to the decision in the case of Kalwa Deva Duttam & Ors. vs. Union of India (1963) 49 ITR 165 (SC) and submitted that when evidence itself was produced, the burden becomes immaterial and the evidence had to be examined on the basis of whatever it was worth. 17. With reference to assessee's argument that the debit preceded credits, Shri Kundra pointed out that it was not a case of cash credits but it was a case of assessee's investment outside the books of account and, hence, the assessee had to prove the sources of those investment and if he could not explain it, it had to be treated as assessee's income. He submitted that alternatively it amounted to an admission to the effect that they were assessee's withdrawals from secreted funds kept outside India. 18. In his reply Shri Ranka very vehemently objected to the filing of a large number of fresh papers before us by the Revenue. He referred to page 46 of assessee's paper book and pointed out that the assessee was supplied with only 9 photocopies of statements and documents which had bearing on assessee's case. He submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... copies of photocopied documents and these showed that the original was not available with him but it was some photocopy from which another photocopy was taken. He submitted that if it was obtained from the bank, certified copy should have been taken from the bank. These facts show that obviously this document had not come from the bank. He pointed out that even the attestations by the Indian Consulate made it clear that it was obtained from the bank, a certified copy should have been taken from the bank. These facts show that obviously this document had not come from the bank. He pointed out that even the attestations by the Indian Consulate made it clear that it was photocopy of a photocopy and not of original document. Shri Ranka submitted that Salas S.A. might have obtained a copy from the bank and given it to the investigating team. There was nothing to show that it was procured by the investigating team from the bank. Moreover, it was not proved to be a genuine document. He asserted that even experts could not give opinion on the basis of a photocopy. He further pointed out two photocopies given on page 4 of Revenue's paper book which showed that something had been pasted on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Page 10 was neither referred not relied by any of the two lower authorities, page 11 was neither provided nor shown to the assessee at any level. Page 13 was shown to the assessee but copy was not provided and Shri P.C. Dhadda in his reply had specifically stated that he disowned the photocopies of invoice for US $ 10518 each because they were neither signed by him nor any partner of the firm nor were they on his proforma invoice which was used by the firm. He had also explained in detail the procedure involved in the export of his goods which involved several Government agencies and how the documents which were shown to him were forged documents. Regarding page 15, assessee's reply is in column Nos. 6 and 7 of the chart and on page 65 of assessee's paper book Shri P.C. Dhadda had disowned this account and had requested for seeing the original and for cross-examining John Ashlyn. Referring to the question on page 69 of assessee's paper book and P.C. Dhadda's reply on page 70, Shri Ranka pointed out that even the suppliers had not signed or attested those documents and it could not be known to whom those documents belonged (the document which shows credits in the name of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e whatever emerges from the documents is somthing which is to be seen and examined. He submitted that in the instant case John Ashlyn could state only whatever energed from the documents. He further pointed out that what was John Ashlyn's relationship with Salas S.A. has not been spelt out anywhere. Shri Ranka further pointed out to para 3 of the statement from where it emerged that he had falsified the accounts of Salas S.A. Moreover, according to Shri Ranka, he appears to be an educated person and yet he had first stated that the assessee had been sending correct invoices until 1972 and then at the end of 1972 the assessee allegedly started falsfying its invoices. According to Shri Ranka this would mean that the alleged falsification should have started somewhere in November or December. But the relevant record on page 38 of assessee's paper book showed that the first 4 PP Forms were up to 23rd June, 1972 or earlier period. Thus according to the statement of John Ashlyn himself there should have been no underinvoicing in respect of these four PP Forms and if othere was no entry regarding them in the books of Salas S.A., it would obviously mean that those accounts books had been f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Ranka claimed that if the Investigating Officers had not done this, they had not acted judiciously or as quasi-judicial authorities. Shri Ranka further pointed out that on page 38 of assessee's paper book he had given a list of PP Forms and item No. 5 was regarding PP Form dt. 5th March, 1973 which is alleged to be referred in assessee's above mentioned letter. Shri Ranka pointed out that from the language--it was obvious that the last three shipments and not the first would be at the same price and hence PP Form dt. 28th Jan., 1972 was not underinvoiced. If this were so how had Salas S.A. credited items pertaining to PP Form dt. 28th Jan., 1972 at double the invoice price which is added by the Assessing Officer as discussed above on page 5 of the assessment order lot No. 25 alleged to be credited on 28th July. Further according to Shri Ranka, for this item the Revenue had not found the other invoice in the possession of Salas S.A. which would show its double value. Similarly on page 55 of assessee's paper book the alleged credit of 9,016.75 included lot No. 35 which was sl. No. 35 of PP Form No. 568649 dt. 28th Jan., 1972 and his arguments regarding this were similar to those ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rded on 12th Sept., 1980. Shri Ranka further argued that this deposition could not be said to be a statement on oath because it was supposed to be recorded by two officers and then carried to Consulate General who has certified it as signed and sworn "Before me". He further pointed out that normally in FERA and income-tax matters the statements are recorded in question and answer form rather than in the form of straight statements. But this statement was not in that form. He submitted that if it was taken as an affidavit then it was not stamped. Further up to the first part i.e. 12th Sept., 1980 it is not an affidavit. Moreover, at least identification of the person making this statement is required which is not there. Shri Ranka stated that all this showed that this was a very casual statement which was false and whether it was a statement or an affidavit, it could not be relied upon. Shri Ranka stated that in the case of an affidavit or a statement even if a single sentence was found to be false, the entire affidavit or statement had to be ignored in totality and could not be utilised in piece-meal against any other person. Shri Ranka repeated that the assessee had been demanding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the date "5.3" which is clear on page 8 appears to have disappeared on page 13 along with the printed words "so that in case of return they may" which are there on page 8 have disappeared on page 13 and yet page 13 has been attested as "attested true copy of original document". Regarding p. 20 of Revenue's paper book, Shri Ranka again stated that the attestation done by Consulate official was mechanical. On this page it is certified "Attested true copy of original document." Shri Ranka argued that since it was supposed to be the return note by Salas S.A. to assessee, dt. 18th Sept., 1973, the normal state of affairs would be that the original document would reach the assessee and only its copy would be with the sender. But if the original was with the sender, the question would be how the original was with the sender. In any case its value given were same as given by assessee in his invoices and hence Salas had correctly recorded their values. pp. 6, 8, 12 and 13 of Revenue's paper book were photocopies which were unsigned by any body though they were supposed to be assessee's invoices. Regarding p. 11 which is alleged to be a letter from Shri P.C. Dhadda requesting Salas S.A. to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... portunity to cross-examine was given before the AAC and he had cross-examined that persons. Finally that case was regarding s. 66(2) now s. 256(2) in IT Act, 1961. He submitted that none of those elements existed in assessee's case and, hence, that case was not relevant for assessee's case. Regarding the case of Vimal Chand Golecha on which the learned CIT(A) and learned Departmental Representative heavily relied, Shri Ranka clarified that case was a writ petition challenging vires of ss. 147/148 of IT Act. He submitted that s. 147/148 were held to be constitutionally valid. But on p. 130 of the report it was observed that s. 3 does not dispense with the proof of a document. 23. Shri Ranka conceded that in the "legalised documents" from the Consulate General, the seal and signatures had not to be proved, yet the genuineness of the document had to be proved. In this context he referred to the decision of Jaipur Tribunal in the case of H.C. Bader where on p. 112 this was discussed and in which case Tribunal had also referred to the observations of Hon'ble Supreme Court regarding judgment of Rajasthan High Court in the case of Vimal Chand Golecha, viz., that while Special Leave Petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f underinvoicing. There were double additions for same allegation once in asst. yr. 1973-74 and again in 1974-75. Regarding valuation of closing stock, as per assessee's method of account it was at cost and there was no evidence that the assessee had purchased the goods at higher price. There was nothing in John Ashlyn's statement why credit was given to assessee after first debiting assessee's account on the basis of which additions have been made. He claimed that even Revenue does not know what those entries are and yet assessee is required to explain those entries. 26. We have carefully considered the very learned and forceful arguments advanced from both the sides and have also perused the evidence and material on record and the case law on the subject cited from both the sides. In our view the situation which has emerged in these appeals is that whereas the Revenue had collected a lot of evidence on which it relied and on the basis of which it had, perhaps with best of intentions and bona fides made additions to the originally assessed income of the assessee for the three years under consideration, the assessee has a case that it has not only maintained regular books of accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n our opinion, Shri Ranka has succeeded in demolishing the reliability of the evidences on the basis of which the Revenue has made the impugned additions. Without repeating in detail, since his arguments have already been given in great detail in the earlier part of this order, we may briefly mention that we find that it is true that the documents, photocopies of which or those documents which are photocopies of photocopies which have been filed before us in almost all the cases do not indicate as to how they were obtained or by whom they were supplied. The entries in the purported accounts of Salas S.A., copies of which have been filed on pages 15, 16, 17 and 18 of Revenue's paper book and on the basis of which additions for alleged undisclosed investments under s. 69 have been made in all the three years under consideration do not bear the name of any party to whom those accounts books are supposed to belong much less Salas S.A. Even the official attesting those documents has not mentioned what were those original documents and to whom they belonged. There is nothing to indicate that even if they belong to Salas SA, any attempt was made by the Investigating Officers to obtain any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lower authorities have made a mention that the account of Salas S.A. were audited by reputed auditors and they were assessed to income-tax yet in the first instance we do not know if at all the accounts were audited and if the accounts were audited who are those auditors and even if the auditors were there how they are supposed to be reputed auditors when they are supposed to have passed the vouchers/invoices which are alleged to have been issued by the assessee-firm without signatures of any party, without stamp of the customs authorities of Switzerland and not in the case of one or two vouchers but in the cases of a large number of vouchers and invoices. We are unable to agree with the submissions of learned Departmental Representative that in Switzerland the assessee should have been more bothered about the auditors than whether the invoices or vouchers were signed by anyone or not. Another important factor which strikes us is as to why John Ashlyn was traced out and his statement was recorded in San Diego, California in 1980 when the transactions pertain to the years 1972-73 onwards and why no question was asked from him whether he had come there temporarily or why he had left ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when he said that he had sent a gift of US $870 which in fact was not gift and when he admitted that he was passing entries for double the price in his accounts when the assessee was sending the goods according to him invoices prepared in India at exactly half the price. We have further taken note of the fact that as per the procedure explained by Shri P.C. Dhadda in his statements so also by Shri Ranka in his arguments, if we believe the statement of John Ashlyn, Shri P.C. Dhadda had to dupe and deceive every time not only the officials at the Foreign Post Office, the Customs Department, the official appraiser and the bank officials in respect of each consignment which he sent, this would mean that if we believe John Ashlyn the inference would be that so many official agencies were hands-in-glove with not only Shri P.C. Dhadda but so many other jewellers of Jaipur to whom we have referred in this order whereas John Ashlyn was not required even to get any clearance from any customs officials at Switzerland. We are unable to agree with the learned Departmental Representative that there should have been no interest or benefit to Salas S.A. or John Ashlyn or it should have been less t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be different from admitted signatures of Shri P.C. Dhadda, who has shown that his dealings had got to be through Government offices and nationalised banks. In our opinion, when all these factors are compared with each other, the weight of evidence goes very far in favour of the assessee rather than in favour of the Revenue. In this view of the matter we would not indulge in going into the technicalities regarding admission of fresh papers or evidence which has been objected to by Shri Ranka very seriously in his arguments, which we have already referred to in this order. 27. At this state we may further mention that authenticity and truthfulness of the material collected in respect of Salas S.A., Geneva and the statement of John Ashlyn, which had been the basis of proceedings against several jewellers of Jaipur both by IT and FERA authorities, have not been accepted by other authorities also. In this context we would refer to the decision of the Jaipur Bench of the Tribunal (in which none of us was a party) in the case of R.Y. Durlabhji in which after detailed discussions the evidence and version given by John Ashlyn was not accepted to be correct. We may also refer to the decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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