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TMI Blog2013 (11) TMI 1493X X X X Extracts X X X X X X X X Extracts X X X X ..... blish the stand of the Revenue – The CIT(A) has not found that the purchases from Sachdeva Trading Co. and Rave Scans were genuine - Purchases were made in cash from third parties which were rejected and returned by the Hong Kong party - The assessment order does not refer to re-import and rejection of material by the Hong Kong party after export – Tribunal has not decided the ground of appeal that the respondent had not filed certificate as postulated under Section 80HHC(4) - - while deciding the question law in favor of revenue, matter remanded back to ITAT for fresh decision. - ITA Nos. 923/2009 & 1157/2009 - - - Dated:- 25-11-2013 - Sanjiv Khanna And Sanjeev Sachdeva,JJ. For the Appellant : Ms. Suruchi Aggarwal, Sr. Standing Counsel. For the Respondent : Mr. S. Krishnan, Advocate. JUDGMENT Sanjiv Khanna, J. This common order will dispose of the two appeals preferred by the Revenue i.e. Commissioner of Income Tax, Delhi XVI, against Arun Malhotra, respondent assessee. These appeals arise out of the common order of the tribunal dated 5th September, 2008 relating to block assessment period 1st April, 1989 to 14th July, 1999. Two appeals have been preferred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h purchases from M/s Sachdeva Trading Co and M/s Rave Scans as per statements made by Chander Prakash Sachdeva, the sole proprietor that he had not made any sales and that the transactions in question were bogus. Simultaneously, Commissioner (Appeals) accepted the exports and the export proceeds as genuine being fully vouched and supported by shipping bills as well as payments through banking channels. It was held that the company Iram Group International Pvt. Ltd. had filed return for the assessment year 1995-96 along with copy of audited report in prescribed form and it being a case of succession benefit under section 80HHC should not be denied to the respondent-assessee, an individual. At the same time, it was held that expenditure incurred for purchasing the exported goods might have exceeded Rs.10,000/20,000/- and therefore Section 40A(3) might be attracted. The Assessing Officer was directed to recompute the deduction under Section 80HHC and determine if any disallowance under Section 40A(3) was required to be made. Thus, holding that purchases were from unknown parties. 6. It appears that thereafter the Assessing Officer made disallowance of Rs.1,19,881/- under Section 80H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y way of undisclosed income in respect of such transaction. Hon ble Delhi High Court in the case of Ravi Kant Jain (supra) held as under:- Block assessment under Chapter XIV-B of the Income tax Act, 1961, is not intended to be a substitute for regular assessment. Its scope and ambit is limited in that sense to materials unearthed during search. It is in addition to the regular assessment already done or to be done. The assessment for the block period can only be done on the basis of evidence found as a result of search or requisition of books of accounts or documents and such other materials or information as are available with the Assessing Officer. Evidence found as a result of search is clearly relatable to section 132 and 132A. We, therefore, delete the addition made solely on the basis of statement of Shri Sachdeva. Accordingly, the addition of Rs.5,23,78,058/- is required to be deleted. 6. It is also admitted fact that the basis of addition is the statement of Shri Sachdeva. Accordingly Shri Sachdeva is the witness of the Assessing Officer. It is settled law that when an adverse view is to be taken on the basis of statement of third party, the person affected should b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at during the course of search, purchase bills of Iram Group International were seized. As per the said purchase bills, the respondent had procured and purchased graphic art films and brass tips for ball pens from M/s Sachdeva Trading Co. and M/s Rave Scans, operating from 3/67 Subhash Nagar, New Delhi and C B-8, Ring Road, Naraina, New Delhi, respectively. One Chander Prakash Sachdeva was stated to be sole proprietor of the said concerns. During pre-search enquiries, visits were made to the addresses mentioned but it was found that no such concerns were operating. 3/67 Subhash Nagar was residence of Chander Prakash Sachdeva and at the other address no concern in the name of M/s Rave Scans was operating for the last 10 years. Chander Prakash Sachdeva was summoned and his statements were recorded during the post search enquiries. He deposed not having sold the said goods to the respondent assessee, the transactions being bogus, he was made to sign blank papers including blank cheque books etc. He was working as a part time photographer, accountant and gave tuitions for livelihood. His monthly income was Rs.3000/- to Rs.4000/-. He had worked with New Light Plastic from 1985-86 to 199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zed during the search as per annexure A-2 and certified bills furnished by Shri Arun Malhotra are as under:- S. No. Name of the party Bill No. Date Amount Page No./ Remarks 1. M/s Sachdeva Trading Co. 165 25.7.94 39,42,400/- 37 as per annexure A-2 2. -Do- 164 27.7.94 39,42,400/- 38 as per annexure A-2 3. -Do- 163 20.7.94 32,25,600/- 39 as per annexure A-2 4. -Do- 162 19.7.94 32,25,600/- 40 as per annexure A-2 5. -Do- 160 18.7.94 16,53,120/- 41 as per annexure A-2 6. -Do- 159 15.7.94 16,53,120 42 as per annexure A-2 7. -Do- 158 11.7.94 14,58,240/- 43 as per annexure A-2 8. -Do- 157 10.7.94 16,53,120/- 44 as per annexure A-2 9. -Do- 156 9.7.94 14,58,240/- 45 as per annexure A-2 10. -Do- 155 8.7.94 13,91,040/- 46 as per annexure A-2 11 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the block assessment proceedings. 14. Initiation of block assessment proceedings under Section 158BC depends upon the facts at the initial stage and not upon the final outcome pursuant to appellate order or even the assessment order. At the beginning or initiation stage, the final outcome was not known and not relevant. In view of what has been stated above, we have to hold that the findings recorded by the tribunal on the first aspect is entirely unjustified, devoid of merits besides being cryptic as it does not refer to the findings and facts found and held by the Assessing Officer and Commissioner (Appeals). The findings recorded by the tribunal are incorrect and legally unacceptable as the tribunal has not disturbed the clear factual matrix/position recorded by the Assessing Officer and Commissioner (Appeals). Incorrect assertion, without material/basis has been made in paragraph 5 to the effect that it was an admitted fact that no evidence was found as a result of search to find that the transactions by the respondent assessee were bogus and no such material revealed any undisclosed income. In view of the aforesaid position, the tribunal has erred in holding that proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held as under:- 25. Section 9-D of the Act stipulates following five circumstances, already taken note of, under which statements previously recorded can be made relevant. These are :- (a) when the person who had given the statement is dead; (b) when he cannot be found; (c) when he is incapable of giving evidence; (d) when he is kept out of the way by the adverse party; and (e) when his presence cannot be obtained without an amount of delay or expense, which the Officer considers unreasonable. 26. Interestingly, the learned senior counsel for the petitioners did not join the issue that the aforesaid circumstances are not exceptional circumstances. They are the circumstances which naturally would be beyond the control of the parties and it would not be possible to produce such a person for cross-examination who had made a statement on earlier occasion. The provisions under Section 9-D of the Act are necessary to ensure that under certain circumstances, as enumerated therein, viz. if the witness has been won over by the adverse party or is avoiding appearance despite several opportunities being given. The rationale is that decision making in a case cannot be allowed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but they cannot and should not be extended beyond limits. Decision by one of us (Sanjiv Khanna, J.) in Central Excise Act Case No. 15/2010 decided on 8 th November, 2011 titled Slotco Steel Porducts Pvt. Ltd. vs. Commissioner of Central Excise, Delhi-I, is not different and proceeded on the same line and ratio. In view of the facts of the said case, an order of remand was passed. 19. Here, we would like to reproduce certain other facts which have been categorically recorded by the Assessing Officer:- (i) Chander Prakash Sachdeva was not a man of means. He had no business and was never engaged in any business activities, except alleged transactions in the present case. He had claimed that he did not even own a cycle. (ii) Vinit Aggarwal, Chartered Accountant was known to Arun Malhotra and had audited accounts of IGI (P) Ltd. Vinit Aggarwal was known to Chander Prakash Sachdeva. (iii) The respondent had purportedly received export proceeds of Rs.5,21,72,843/- on sale of graphic films and brass tips of ball pen to M/s Triwood Ltd., Hong Kong. (iv) Respondent had claimed that he had made purchases of Rs.2,87,03,360/- from Sachdeva Trading Co. and Rave Scans and three bills ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had asserted that he had been threatened and warned that he would be killed. The Commissioner (Appeal), however, disbelieved him as Chander Prakash Sachdeva had made complaint to Custom authorities etc. but had claimed that he did not file a police complaint for fear to his life. The said fact and the assertion that Chander Prakash Sachdeva feared for his life has not been adverted to and mentioned in the order passed by the tribunal. Witness protection to those threatened and terrorized has engaged attention of the courts. Right to cross-examine though an important and valuable right, is not absolute and inalienable. It should not become a cause or a ground to intimidate witnesses and non-appearance or reluctance to stand for cross-examination, an alibi or excuse to escape legal liability. The perpetrator or the culprit, should not be permitted and allowed to take advantage or benefit of execrable situation which is his own creation. Of course, the authorities and tribunal should be satisfied that the witness was being prevented, intimidated or threatened and the said finding must have some basis or foundation. Failure to answer questions or appear as witness is violation of law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er (Appeals) as noticed above is vague, contradictory and not coherent. Commissioner (Appeals) had not agreed that the purchases of the exported goods were made from Sachdeva Trading Co. or Rave Scans and has observed that purchases were made in cash from third parties and, therefore, the Assessing Officer should examine the applicability of Section 40A of the Act. Our attention was also drawn to the fact that the goods were rejected and returned by the Hong Kong party and this had made Chander Prakash Sachdeva unhappy and he backed out. The said finding has been recorded by the Commissioner (Appeals) but without recording on what basis. Tribunal has not given any finding on the said aspect and their order is silent. Submission by the respondent before the Assessing Officer was that three bills totaling to Rs.95,37,920/- were returned and not paid as the material supplied was rejected and returned. The assessment order does not refer to re-import and rejection of material by the Hong Kong party after export. At this stage, we may notice that the decision of the Delhi High Court in the case of CIT vs. SMC Share Brokers Ltd. (2007) 288 ITR 345 was overruled by the Supreme Court with ..... X X X X Extracts X X X X X X X X Extracts X X X X
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