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TMI Blog2006 (5) TMI 159X X X X Extracts X X X X X X X X Extracts X X X X ..... declaring gift chargeable to tax at Nil and along with that assessee also furnished a letter dated 27-5-1995 and a note stating that the assessee was filing the return under protest. Assessee also sought for various materials/evidences, which were relied upon by the Assessing Officer for invoking the provisions of section 16 of Gift-tax Act. 4. A letter dated 20-2-1998 along with notice under section 15(2) was issued to the assessee. By this letter the assessee was informed of the reasons for reopening the assessment under Gift-tax Act, though it was known to the assessee already by virtue of assessment order for the assessment year 1992-93 dated 16-4-1996. 5. Assessing Officer records the circumstances leading to the reopening of the assessment under the Gift-tax Act. Assessee, Shri S.K. Jain is the Managing Director of a company known as "M/s. Bhilai Engineering Corporation Ltd., Bhilai". Shri J.K. Jain is one of his employees, Manager. The residential premise of Shri J.K. Jain was searched by CBI on 3-5-1991 in connection with hawala transactions. During the course of search, besides other valuables, some incriminating documents were also seized. Copies of such seized documen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diary altogether. It has been held that they may be used as corroborative evidence. There are scores of such evidences which are strewn all over the seized documents. There are verifiable entries in respect of farm land, investment in construction of immovable properties, acquisition of artifacts, amounts spent on travelling etc. There are on record statements of independent witnesses who have verified such entries. Further particulars regarding the expenses as recorded in the seized documents and the statements of various persons are available in orders of assessment passed in the assessee's own case in reassessment proceedings under the Income-tax and Wealth-tax Act. For the sake of brevity they are not repeated here. Suffice it to say that they are equally relevant to the assessment made under the Gift-tax Act also. As held in the said proceedings, there are reasonable ground to conclude that the assessee has, during the accounting period, made huge disbursements of money to several persons, the reason whereof has not yet been disclosed. The extent of such disbursements is available in several seized documents and more particularly in a Diary marked as MR-71/91. As could be gle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l v. ITO [1969] 176 ITR 352 (Pat.) (6) CIT v. T.R. Rajakumari [1974] 96 ITR 78 (Mad.) (7) Chunnilal Onkarmal (P.) Ltd v. ITO [1983] 139 ITR 380 (MP) (8) Yeshwant Talkies v. CIT [1980] 157 ITR 103 (MP). 10. It was further submitted, the transactions are lacking basic facts required to define it as "gift", as defined under section 2(xii) of the GT Act. Gift is a bilateral transaction, existence of donor and donee is a must, property must be transferred from one person to another voluntarily and without any consideration and the property under transaction must be an existing property. In the instant case of the assessee there is neither any cogent material available to this effect nor the Department has placed any material on record. Assessee again relied upon the decision of the Hon'ble Supreme Court in the case of Goli Eswariah v. CCT [1970] 76 ITR 675 and the decision of the Hon'ble Kerala High Court in the case of CGT v. R. Kesavan Nair [1974] 96 ITR 365. 11. Further, it was contended that the recipients have denied any receipt of such gifts, particularly the recipient, Shri P. Shiv Shankar, on examination by CBI on 10-6-1996 stated as follows:- "I had no dealings with any o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st have changed hands; and (d) there must be acceptance of gift by the donee. 14. Relying upon the decision of the Hon'ble Supreme Court in the case of Goli Eswariah, CGT(A) held that the transaction is not complete under the Gift-tax Act if the act is unilateral. To this act, there must be two or more persons involved. In the instant case of the assessee, the Assessing Officer has not mentioned as to who are the recipients/donees. In the very assessment order, Assessing Officer has not mentioned any person as direct recipient. There should be an identifiable donee. He has calculated the gift on the basis of a diary marked MR-71/91, where names of some persons have been mentioned in the said diary in code language. He has not specified the names of donees with complete names and addresses. Relying upon the decision of the Hon'ble Kerala High Court in the case of R. Keshavan Nair, wherein it was held "it, therefore, follows that there cannot be a gift in law without vesting of the property gifted in the transferee, and such vesting cannot take place without the consent or the concurrence of the donee", CGT(A) held that the consent or concurrence of the donee is a must to complete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h operation by the CBI at the residential premises of Shri J.K. Jain situated at G-30, Saket, New Delhi. Shri J.K. Jain is the Manager of Bhilai Engineering Corporation Ltd. ('BEC' for short). Cash, valuable assets and foreign currency of UK, US, Duchmark, France and Hongkong was seized, also two diaries and files. The seized materials were received by the Officer on 24-3-1995 from CBI through DDI New Delhi, consisting of photocopies of diaries, registers, reports, etc. The materials were scrutinized. It belonged to Jain Group, assessed in Special Range, Bhilai, viz. Shri S.K. Jain, Shri B.R. Jain, Shri N.K. Jain, Smt. Poonam Jain and BEC. The assessee group is engaged in the business of manufacturing of engineering structures, steel, fertilizers, processing of foodstuff etc. The firm, viz. M/s. Bharat Industrial Works, Bhilai in which Jain brothers happen to be partners is engaged in executing contracts of construction of boilers for Thermal Power Plants throughout the country. CBI formed the opinion that they were indulged in hawala transactions for transferring money from abroad and were enjoying commission thereof. The seized diary consist information of such transactions of ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... persons of the group on account of hawala transactions since in the diary pertaining to the notings of receipt and payment of money on account of hawala transactions does not separately give the figure of commission. It has to be separately assessed in the hands of S/Shri S.K. Jain, B.R. Jain and N.K. Jain in equal proportion for want of correct bifurcation of it as per their memorandum of understanding, since no note found placed in the seized material and it is chargeable to tax for the assessment year 1991-92. Thus Rs. 64,97,900 is assessable in the hands of each". 23. Then it is recorded that Shri S.K. Jain vide letter dated 31-5-1994 addressed to the Enforcement Directorate explained how the foreign articles were received on behalf of Shri S.K. Jain and customs duties were paid. 24. After giving the details as briefly narrated above, it is concluded as follows: "Financial affairs of this group as seen through the seized material appears to be interwing bringing into fold the three brothers viz. S/Shri B.R. Jain, N.K Jain and S.K Jain and Smt. Poonam Jain, wife of S.K Jain and their company BEC Ltd. So far as the concealment of income wealth is concerned it involves the peri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should have quashed the order as such and deleted the additions (Grounds of Appeal Nos. 17 to 21). 27. The learned counsel for the assessee briefly stated the facts as under:- The assessee, an individual, derived income, inter alia, from salary, business and other sources during the relevant period. A search and seizure operation was carried out by the Central Bureau of Investigation (CBI) on 3-5-1991, at the residential premises of one Shri J.K. Jain at G-36, Saket, New Delhi, an employee of M/s. BEC Impex International Private Limited, a company in which the assessee was a Director. From the residential premises of Shri J.K. Jain, some loose sheets/documents and diaries were found, which were seized by CBI. The diaries so seized from the premises of Shri J.K. Jain included one spiral bound diary, which was in the handwriting of Shri J.K. Jain and the same was marked as MR-71/91 by CBI. 28. Pursuant to warrant of authorization issued under section 132A of the Income-tax Act, 1961, CBI handed over photocopies of the seized documents to the Directorate of Income-tax (Investigation), New Delhi on 7-2-1995. Photocopies of part of the seized documents, out of the documents so recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vide order dated 23-3-2002, Assessing Officer merely repeated the additions made in the original assessment without complying with the specific directions of the CGT(A). The present cross appeals by the assessee and the Department have been filed against the order of the CGT(A) dated 3-8-1999. 33. With regard to Proposition No. (1), i.e. initiation of proceedings on the dictates of higher ups (Ground No.8), the learned counsel for the assessee submitted as under:- Reassessment proceedings were initiated after receipt of part of the seized documents along with letter dated 20-3-1995 from DDIT (In v.), New Delhi by the Assessing Officer on 24-3-1995 at 5.00 p.m. Prior to the receipt of the aforesaid letter by the Assessing Officer, DDIT (Inv.) had sent a letter dated 28-2-1995/1-3-1995 to CIT, Jabalpur which contained, inter alia, the following documents/statements: (i) Report of CBI; (ii) Statements of the assessee before CBI; and (iii) Report sent by DDIT, Unit I to DI appraising about the documents. 34. It was submitted, the following pertinent observations/directions in the aforesaid letter dated 28-2-1995/1-3-1995 of the DDIT (Inv.) to CIT, Jabalpur supports the contention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the CIT, Jabalpur referring to some letter F.No. CIT/JBP/1/94-95, dated 7-3-1995 informing that he is yet to receive-material from DIT (Inv.), New Delhi. The fact that the Assessing Officer writes the aforesaid letter on 20-3-1995 clearly indicates/establishes that the directions of the Investigations at New Delhi to reopen the assessments, as contained in their letter dated 28-2-1995/1-3-1995, was duly communicated by CIT, Jabalpur to the Assessing Officer, though the Department has, either deliberately or for some other reason, not brought the manner of such communications on record. Under the cover of letter dated 20-31995, the DDIT (Inv.) sent the documents to the Assessing Officer, which was received by the Assessing Officer on 24-3-1995 at 5.30 p.m. In the above letter dated 20-3-1995, DDIT (Inv.) refers to discussions in the matter with CIT, Jabalpur, wherein the Assessing Officer is admittedly absent and requested the Assessing Officer to initiate reassessment proceedings. The Assessing Officer was asked to discuss the case with the DDIT (Inv.), if required. 36. A was further submitted, it is pertinent to note that the aforesaid letter dated 20-3-1995 clearly states tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred to as 'BECO' and states that discussions have been held with Shri P.C. Chhotay, DDI (Inv.) and Shri G.P. Garg, DG on 27-3-1995 and 28-3-1995 and states that necessary action are in full swing. As such, the involvement of DDIT (Inv.) and DG (Inv.) and CIT, Jabalpur is clearly established. 39. Learned counsel further submitted, above all, a critical examination of the reasons recorded (as discussed infra) clearly reveals that there was no application of mind by the Assessing Officer to reopen the gift tax proceedings and the same were reopened merely to comply with the directions of the higher authorities. In the ten pages of the reasons allegedly recorded by the Assessing Officer, valid reason for reopening the gift tax proceedings is conspicuous by its absence. 40. It was further submitted, it is pertinent to mention that the Tribunal in income tax proceedings held, dismissing the contentions of the assessee that there is no material to establish dictates prior to recording of reasons on 30-3-1995. An analysis of the order of the Tribunal in this aspect clearly brings out the following:- (a) Tribunal concurred with the appellant that there can be no quarrel with the legal p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 841 (Guj.). Relying upon the following decisions, learned counsel submitted, initiation of proceedings under section 147 and other sections are clearly illegal and bad in law:- (1) Shea Narain Jaiswal's case (2) Yeshwant Talkies' case (3) T.R. Rajakumari's case (4) Jawahar Lal v. Competent Authority [1982] 137 ITR 605 (Delhi) (5) Rajputana Mining Agencies v. ITO [1979] 118 ITR 585 (Raj.) 43. Learned counsel submitted, the diary is not in the handwriting of the assessee. It is written by Shri J.K Jain. The total gifts treated in the hands of the assessee comes to about Rs. 52 crores; but the persons to whom the payments/gifts made include assessee's own company, assessee's brothers, their wives and children. Can there be a gift to assessee himself? Most of the persons whose names have been deciphered and mentioned by the Assessing Officer in his order have already been acquitted and held as not recipients of money by the High Court/Supreme Court. Inviting our attention to Paper Book Pages 468 to 499, i.e. (1998) 3 Supreme Court Cases 410, at Page 418, which reads as under: "3. The common allegations made in the above two charge sheets (from which these appeals stem) are t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom authorities at Delhi. In this it is further mentioned "in this connection, the CIT, Jabalpur also directed that there is no need in attending the proceedings before the Hon'ble Settlement Commission in Bombay on 3 and 4-4-1996 which was decided to be attended earlier". 45. Replying to the above, the learned standing counsel for the revenue submitted, the same argument was raised in income tax matters before the Tribunal in ITA Nos. 552 to 556/Nag./1997 for the assessment years 1988-89 to 1992-93 and vide its order dated 31-8-2004, the Tribunal dismissed the assessee's contentions, observing as under:- "From the correspondence referred to above as well as the entries in the order-sheet, we do not find any such dictates to reopen as has been alleged on behalf of the assessee" ............................................................... "There is no material available on record to come to a conclusion that there was no independent application of mind by the Assessing Officer before reopening the case and recording reasons for such reopening." 46. Standing counsel submitted, the order for reopening the entire matter, i.e. income tax/wealth tax/gift tax is one and the same. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p; to consider the report sent by CBI and take action under Direct Taxes. Page 2/Para 5 : Accordingly, the Assessing Officer has to initiate proceedings to tax the unexplained investment (or expenditure). Page 2/Para 5: The Director General of I.T. (Inv.) North has desired that action for reopening assessment be taken up at the earliest.... It is requested ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers, the relevancy or irrelevancy desires to be considered. In the income tax proceedings, after considering the issue elaborately, reopening was upheld by the Tribunal. The stand of the assessee now in these proceedings is that the conclusion arrived at by the Tribunal in income tax proceedings cannot be taken note of for the reason that the Tribunal had not considered the importance and consequence of letter dated 29-3-1995 written by the Assessing Officer, referring to discussions he tad with DDIT (Inv.) and DG and the guidelines were given by DDIT (Inv.) how to proceed. Another argument advanced by the learned counsel is that the Tribunal had not also considered the Order Sheet entry of April 1995 (exact date is not clear), which states that "reopening of the cases - reasons to work out" clearly suggest that as on 30-3-1995 the reasons were not actually recorded and it was worked out in April or still later. The notice was handed over to the DDIT (Inv.) for service to the assessee in April 1995. 52. Coming to the Order Sheet entry and the contention that the reopening of the case was done subsequently, we are unable to accept the same for the reasons recorded in Jain Group of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rection from the Commissioner he was satisfied that income had escaped assessment. There is no such recording in the instant case. The assessee is trying to establish that the reasons were recorded by the Assessing Officer without application of mind and on the basis of the directions of the higher authorities. We have already hereinabove noted that there was no such direction. The CIT was requested to direct the Assessing Officer to initiate proceedings. That does not mean that Assessing Officer has lost his independence to decide. 56. Coming to the decision relied upon by the assessee in the case of T.R. Rajakumari, the facts are clearly distinguishable. This was a case wherein the Assessing Officer was directed by the Commissioner under section 33A(2) of 1922 Act, to delete the additions made for the assessment year 1952-53 and to include the same for assessment year 1955-56. The Hon'ble High Court held, Assessing Officer had no reason to do so because there was a clear-cut direction. Hence, with regard to the belief of the assessee that there was a direction from the higher authorities to reopen the assessment, we are of the view that there is no evidence to show that there wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; As per CBI report, Indication towards appellant, hawala transactions Shri J.K. Jain and Sh. B.R. Jain were indulging in 'hawala business' and were enjoying 'commission' income. 71. On some pages Indication towards there is working hawala transactions showing conversion into Indian currency. This therefore represents nothing but foreign currency brought in India. 71. It is stated "I& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that follows ------------------------------------------------ Nature of transactions Transactions were stated by J.K Jain related to some as money generation company and not from sale of Scrap the assessee B.R. Jain stated that black money of group companies. ------------------------------------------------ It was submitted, no part of the reasons recorded reflects any application of mind which will lead to a conclusion and to belief that gift of the assessee had escaped assessment. The allegations/observation in the reason that the payments were without consideration is de hors any material/information recorded to have been found by the Assessing Officer. Reliance placed on the statements before CBI could not, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suspicion, gossip or pretence. 63. Construing the expression 'reason to believe', learned counsel submitted, the Hon'ble Supreme Court in the case of Sheo Nath Singh v. AAC [1971] 82 ITR 147 observed: "There can be no manner of doubt that the words 'reason to believe' suggest that the belief must be that of an honest and reasonable person based upon reasonable grounds and that the ITO may act on direct or circumstantial evidence but not on mere suspicion, gossip or rumour. The ITO would be acting without jurisdiction if the reason for his belief that the conditions are satisfied does not exist or is not material or relevant to the belief required by the section. The Court can always examine this aspect though the declaration or sufficiency of the reasons for the belief cannot be investigated by the Court". 64. Relying upon the decision of the Hon'ble Supreme Court in the case of Ganga Saran & Sons (P.) Ltd. v. ITO [1981] 130 ITR 1, learned counsel submitted, their Lordships observed as under:- "The important words under section 147(a) are 'has reason to believe' and these words are stronger than the words 'is satisfied'. The belief entertained by the ITO must not be arbitrary or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Assessing Officer must disclose by what process of reasoning he holds such a belief that excessive loss or depreciation allowance has been computed in the original assessment. Merely saying that excessive loss or depreciation allowance has been computed without disclosing the reasons which lead the assessing authority to hold such a belief, in our opinion, does not confer jurisdiction on the Assessing Officer to take action under sections 147 and 148 of the Act." 66. Relying upon the decision of the jurisdictional High Court in the case of Hindus tan Lever Ltd. v. Wadkar R.B., Asstt. CIT [2004] 268 ITR 332 (Bom.), learned counsel submitted that the reasons should not be vague and should be dear and unambiguous and should not suffer from any vagueness. The reasons are manifestation of the mind of the Assessing Officer. The reasons recorded must disclose mind of Assessing Officer. The opinion of the Assessing Officer must be in black and white. Relying upon the decision of the Hon'ble Patna High Court in the case of Shambhu Nath Sheo Prasad v. CIT [1993] 113 CTR (Pat.) 166, learned counsel submitted, it is well settled that reasons must disclose prima facie facts which wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icient material before the Assessing Officer for him to have a 'reason to believe' that there were gifts which were chargeable to tax but which had escaped assessment. 68. Learned standing counsel further submitted, it is the contention of the assessee that the main focus was on hawala transactions and, therefore, it was not possible to conclude that the payments reflected in the diary were taxable as gifts. It was submitted, the conclusions drawn by CBI are not binding on the Assessing Officer. Assessing Officer is performing a statutory duty on which he is entitled to reach to an independent conclusion, Such a conclusion has been clearly reached by him on the basis of material available on record that there were certain payments which were made to politicians and bureaucrats which were without considerations and thus amounted to gifts chargeable to gift tax. It cannot be said that a reasonable person could not have, in the circumstances, reached a conclusion that these transactions were not gifts but were hawala transactions only. Assessing Officer had reached a belief that there were gifts which had escaped assessment and had rightly exercised the jurisdiction under section 16 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the Bench. The said observation could not be regarded as the prima facie belief of the Assessing Officer since the same is vague and ambiguous. The said observation of the Assessing Officer does not reflect any process of reasoning and the application of mind by the Assessing Officer before reopening the gift tax proceedings. There was no prima facie belief entertained by the Assessing Officer prior to reopening the gift tax proceedings and therefore the initiation of reassessment proceedings is bad in law. 71. Learned counsel submitted, the revenue is blowing hot and cold at the same breath by relying upon the statements purportedly recorded by CBI but distancing itself with the conclusions drawn by CBI based on such statement. The contention of the revenue that the Assessing Officer, in the gift tax proceedings, was not bound by the conclusions drawn by CBI is misplaced for further reason that the said conclusions were actually adopted by the Assessing Officer in the reasons recorded. In the reasons recorded, the Assessing Officer had time and again referred to the transactions recorded in the seized diary indicating towards hawala transactions. Therefore it is incorrect t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as evidence is to be rejected. On merit, as we have noted above, we may come to a different conclusion, but for the purpose of reopening this is definitely information available with the revenue. From the diary seized from the possession of one of the employees of the assessee, revenue noticed that the assessee made certain payments to some politicians/bureaucrats etc., apparently without any consideration. Even the assessee has admitted to certain extent these facts. Now the assessee is objecting the reopening on the ground that revenue itself is not certain whether the amounts said to be gifted to politicians/bureaucrats etc. were either coming from abroad through hawala transactions or the income generated from assessee's factory; as such, according to the assessee, no prudent man will come to a conclusion that taxable gift has been escaped. It is also the case of the assessee that apparently none of the recipients had admitted the receipt. On the contrary, subsequent to the reopening in income tax proceedings, it is proved that all the recipients either denied the receipt or in the case of some like Shri Buta Singh, the revenue itself has treated the amount said to be receive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tertained by the ITO must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The Court, of course, cannot investigate into the adequacy of sufficiency of the reasons which have weighed with the ITO in coming to the belief, but the Court can certainly examine whether the reasons are relevant and have a hearing on the matters in regard to which he is required to entertain the belief before he can issue notice under section 147(a)". Precisely, assessee is now seeking the same from the Bench. 76. The decision relied upon by the assessee in the case of Hindustan Lever Ltd., cannot be applied in the instant case of the assessee. In this case the Hon'ble Bombay High Court held that unless any income chargeable to tax has escaped assessment for any assessment year by reason of assessee's failure to disclose material facts necessary for his assessment of that year, reopening cannot be done. The reasons recorded must be, the Hon'ble High Court held, based on evidence and the Assessing Officer must be able to justify the same from the material available on record. The Hon'ble High Court in this case found that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o so. . In conference held in New Delhi on 22-12-1995, proceedings whereof are borne out by the letter dated 30-1-1996 of the Assessing Officer to CIT, Jabalpur, directions were issued to the Assessing Officer with regard to the manner in which assessment has to be completed. In that letter dated 30-1-1996, Assessing Officer clearly stated that he is acting on directions of the seniors. . Statutory notices were approved by the DDIT (Inv.) though there is no legal requirement to do so. . In letter dated 10-3-1996, Assessing Officer informed DDIT (Inv.) that the assessee is seeking cross-examination and adjournment. Assessing Officer opined that the assessee should be allowed one month as requested. DDIT (Inv.), New Delhi, however directed the Assessing Officer not to allow further time to the assessee. As directed, Assessing Officer declined further opportunity to the assessee on 25-3-1996. Further, despite resistance, Assessing Officer, on the directions of CIT, Jabalpur, proceeded to Delhi to complete the assessment. These sequences of events clearly establish that Assessing Officer did not act independently. . Assessment orders were similar to notices issued by DDIT (Inv.). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer refers to and rely upon the findings in the assessment order dated 16-4-1996. (b) In the impugned order dated 30-3-1998, Assessing Officer clearly and categorically stated that the findings/conclusions arrived in the income tax assessment order dated 16-4-1996 for the assessment year 1992-93 are being relied upon as under: - Page 2/Para 3 refers to show-cause notice issued to the assessee duly informing that facts and circumstances are similar to income tax proceedings. - Page 3/Para 5.2 Assessing Officer relies upon statements recorded and referred in the assessment order, particulars of expenses recorded and discussed therein and thereafter observes: ".... Suffice it to say that they are equally relevant to the assessment made under the Gift-tax Act also. As held in the said proceedings, there are reasonable grounds to conclude that the assessee has....". Learned counsel submitted, it is pertinent to mention that the Assessing Officer, thus, relied upon the statements and enquiries conducted by DDIT (Inv.), who was held to be incompetent to do so and it is clearly noted in the gift tax assessment order that the findings in the income tax order are being followed. 80. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance was placed upon the following decisions:- (1) CIT v. Somani Pilkington's Ltd. [2004] 266 ITR 388 (Punj. & Har.) (2) Farrukhabad Gramin Bank v. ITO [2005] 273 ITR 113 (All.) (3) Assam Co. Ltd. v. Union at India [2005] 275 ITR 609 (Gauhati) (4) Sagar Enterprises v. Asstt. CIT [2002] 257 ITR 335 (Guj.) 82. Replying to the above, learned standing counsel submitted, the assessee has contended that the assessment is invalid as the Assessing Officer has not reached an independent finding but has merely followed the conclusions in the income tax assessment order, which has now been nullified by the Tribunal. Standing counsel submitted, this proposition is not correct. If the wordings of the assessment order are read, it will be clear that what has been relied upon by the Assessing Officer are statements of independent witnesses and the particulars regarding the expenses recorded in the seized documents and statements of various persons. The assessee is trying to give a picture that the Assessing Officer has merely followed the assessment in the income tax proceedings. This is not correct. What has been relied upon by the Assessing Officer is the material, which was available befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned counsel submitted, the gift tax assessment order was also passed on the dictates of the higher authorities. To buttress this proposition, learned counsel submitted, the sequence of events and the recordings in the impugned gift tax assessment order clearly establish that the Assessing Officer had simply followed the findings/enquiries illegally conducted by the authorities, who had no jurisdiction in the matter, as were followed in the income tax order. In the gift tax assessment, the Assessing Officer merely followed the findings/conclusions arrived at in the income tax assessment order, without any independent finding/conclusion in the impugned assessment. The findings/conclusions in the income tax assessment have been held to be that of higher authorities by the Tribunal in the income tax proceedings since the entire assessment was completed on dictates. Learned counsel submitted, the reason for delay in completing the impugned gift tax assessment, which is sought to be relied upon by the revenue, is also borne out from the record. The records clearly establish that even the delay in completing the impugned gift tax assessment was on account of directions to do so by the hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f direction was also given in the gift tax proceedings. We are aware that the opportunity for cross-examination to be given or not to be given, and adjournment etc. is at the discretion of the Officer and it cannot be done on the basis of the direction of the higher authorities. But this plea at least is not available to the assessee in the gift tax proceedings. 87. Coming to assessee's contention that DDIT (Inv.) confronted the assessee with various enquiries/investigations illegally conducted by him and relied on the income tax assessment, this is not sufficient to hold that the reopening itself is bad in law. Whether the enquiries conducted illegally or not, that will not affect the proceedings as such. To our mind, even if information is gathered illegally but if the information is correct, such information can always be used. It is the truth of the affair and not the manner of getting the materials that is to be taken note of. 88. Coming to assessee's next contention that even the delay in finalising the gift tax assessment was well planned strategy of higher authorities, so as not to weaken CBI case before the Hon'ble Supreme Court, we are afraid, cannot go against the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gricultural ITO [1997] 226 ITR 622 (Gauhati), there was no clear finding that cess was allowable only on 60 per cent of income from tea and precisely on this reason the proceedings were initiated by the revenue. Hon'ble High Court held that there was no failure on the part of the assessee to disclose any material facts necessary for assessment. Again, this decision has no applicability in instant case of the assessee. 93. Again, the decision relied upon by the assessee in the case of Sagar Enterprises has no applicability in the case of the assessee. This was a case wherein the reopening was done on the ground that assessee had not filed the return and also on the ground that some of the income has not been disclosed. Hon'ble High Court found that material on record show that the return had been in fact filed by the assessee and also the revenue was not certain whether any income taxable has escaped assessment for the year under consideration. The Hon'ble High Court particularly noted an observation "to cover up that probability, protective addition was made in the assessment year 1992-93". The Hon'ble High Court held that the Assessing Officer was not certain whether the income t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted, in the impugned gift tax assessment order there is no finding that the diary seized from Shri J.K Jain was of the assessee. The Assessing Officer clearly ignored the fact that the diary found/seized from Shri J.K Jain was in his handwriting and not the assessee and the assessee denied the ownership of the diary in the statement recorded by the Assessing Officer on 7-2-2003. It was further submitted, in the income tax assessment order, the diary marked MR 71/91 was held to be of the assessee on the basis of the statements of the following persons:- Shri J.K Jain recorded by DDIT (Inv.) and CBI; Shri B.R. Jain recorded by CBI and the Assessing Officer; and Shri Daniel P. Rambal/Shri P. Ghoshal & Shri H.P. Guha Roy recorded by DDIT (Inv.). Learned counsel submitted, reliance placed on the aforesaid statements to hold that the entries in the diary relate to the assessee is not correct and proper since - (a) the statements were recorded by DDIT (Inv.), an authority not competent to do so; (b) the ex parte statements were relied upon without allowing opportunity of cross examination to the assessee and therefore be excluded from consideration; (c) the statements do not co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tances/allegations against the assessee do not in any way point to taxable gift, as is evident from the following:- Proceedings were initiated by the CBI and other authorities against various recipients alleging "bribes", which necessarily involves an element of quid pro quo/consideration. If that be so, the payments cannot be regarded as 'gift'. In the reasons recorded, the Assessing Officer recorded at various places that the entries in the diary pertained to hawala transactions. Again, if that is assumed to be correct, then payments cannot be regarded as 'gift'. In the only show-cause notice dated 20-2-1998 issued by the Assessing Officer, the allegation of the Assessing Officer was that payments were made to politicians and bureaucrats to further business interest. If the payments were assumed for furthering business interest, then since consideration was involved, the payments cannot be regarded as 'gift'. In the hands of the various persons who allegedly received money, the amount so received was treated as income on account of work done/services rendered. In the assessments of Shri Buta Singh, Shri Ravi Chand Arya, Shri Motilal Vohra, Shri Vidya Charan Shukla, Shri Balra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not belong to the assessee is totally incorrect. Shri J.K. Jain stated in his deposition before the CBI as under:- "Today, I have been shown two note books and two files marked as (MR-208), 209, 325 & 326/93. The note book and the files mentioned above have been impugned from the search of my house conducted by the CBI/SIC-II, New Delhi on 3-51991. In the note book marked as (M-209/93), the details of credit/ debit have been mentioned from the month of February 1988 to April 1991. This bears my writing. The entry relates to receipt of various amount and their disposal month-wise and this has been written on the instruction/direction of Shri S.K Jain, the Managing Director of Bhilai Engineering Corporation, the same were being shown to him regularly from time to time. The details as mentioned in coded words in abbreviated forms, have been written as per the instruction of Shri S.K Jain, aforesaid." Standing counsel further submitted, so also the assessee has in his statement before the CBI on 17-9-1993 stated as under:- "Today I have been shown two note books bearing Malkhana Nos. 208 and 209, 03 reported to have been impugned from the house of Shri J.K Jain. These note books h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e correct. All these aspects are extensively discussed in the order of the Tribunal in income tax proceedings and it is clear from the discussion therein that the contention of the assessee that the diary did not belong to him is not accepted. A perusal of Paragraph 87 of the order of the Tribunal makes this position very clear. It was further submitted, the last contention of the assessee that the ingredients of the gift have not been satisfied is also without any basis. The ingredients of the gift have been made out and the assessment order is correct. Assuming, though not admitting that certain details are required for this purpose, if the Tribunal reaches such a conclusion, then the order of the CIT(A) in remanding the matter for reconsideration would also take care of the matter; as such no prejudice would be caused to the assessee in any case. 103. In his rejoinder, learned counsel submitted, it is incorrect to contend that no prejudice is caused to the assessee since the CGT(A) merely remanded the matter to the Assessing Officer for fresh consideration. The remand by CGT(A) proceeds on the basis that the diary and the entries recorded therein belonged to the assessee. The s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jurisdiction cannot be utilised in these gift tax proceedings, is to be rejected for the same reasons mentioned hereinabove. Further, the ex parte statements were used against the assessee; all this has to be considered on merit, on an appeal against the decision of the CGT(A) on that point. 106. Coming to the contention of the assessee that no findings were given anywhere in the assessment order that the diary belongs to the assessee and the allegation of the revenue that the diary was written by Shri J.K. Jain at the instance of the assessee was always been denied, as evidenced at Pages 11.5 to 118 and also Pages 238 to 240 of the Paper Book; and also the contention that the statements recorded by Officers [DDIT (Inv.) and CBI] cannot be used against the assessee since they were outside the jurisdiction of the Assessing Officer and no matter was pending before them and no opportunity was extended to the assessee to cross-examine the persons who had given statements against the assessee, such as Shri J.K. Jain, Shri B.R. Jain, Shri Daniel P. Rambal, Shri P. Ghoshal, Shri H.P. Ghua Roy etc., we are of the view that it is not necessary for us now, to decide the issue, at this junc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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