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TMI Blog2015 (4) TMI 542X X X X Extracts X X X X X X X X Extracts X X X X ..... seized documents coupled with the statements of the noticees, as well as other persons whose names are figuring in the documents seized, from Sh. Niranjan Shah as well as the admissions made by the notices, (other than Sh. Niranjan Shah) it is satisfying that the charges levelled against S/ Sh. Niranjan Shah, J.K. Doshi, Parag Kumar Pal, Nikhil R. Parikh and Sh, Nirish Babulat Shah as alleged in the SCN are proved and find them guilty of the said contraventions. S/Sh. j.k. Doshi, Parag Kumar Pal, Bhavnagari, Nikhil R. Parikh and Nirish Babulal Shah have submitted that they had entered into the transactions alleged in the SCN due to the circumstances beyond their control. While imposing penalties on these noticees, considering the fact that they had no deliberate intention to defy the law, but had undertaken the aforesaid transactions without any malafides, due to the exigency of the circumstance, the penalty of ₹ 4,50,000/- (Rs. Four Lacs and fifty thousand only) Imposed on Sh. Niranjan Shah, ₹ 90,000/- (Rs, Ninety thousand only) imposed on Sh. J.K. Doshi, ₹ 8,500/- (Rs. Eight thousand five hundred only) imposed on Sh. Parag Kumar Pal B, ₹ 1,500/- (Rs. O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellate authorities. 2. The ld. CIT(A) failed to take proper cognizance of the statement of Shri Niranjan Shah recorded during the cross-examination proceedings. That since Shri Niranjan Shah having categorically admitted in the said statement in no uncertain terms that he does not have any financial transactions with the appellant in cash and that such transactions appearing in A/c. No. 36 maintained by him and found from his possession are pertaining to him only and the appellant has nothing to do with the same, the impugned addition in the hands of the appellant based on such material is wholly unjustified and bad in law and accordingly requires to be deleted/quashed. 3. The ld. CIT(A) has further erred in relying upon the statements of the appellant recorded by the FEMA authorities for drawing adverse inference without considering the fact that the said statements in as much as transactions other than FEMA already stood retracted in his statements recorded by the Income Tax Authorities. 4. The ld. CIT(A) also failed to consider the fact that the said addition was based on the material found and seized from a third party and not from the appellant and that such third par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was filed 15,59,530 62,59,530 3.1 A search was conducted in this case on 08.08.1990 which was finally concluded on 17.10.1990. After search, assessee filed a disclosure petition in which following unaccounted income was disclosed for various assessment years: AY 1985-86 Rs.38.10 lac AY 1986-87 ₹ 9.00 lac AY 1988-89 ₹ 5.55 lac AY 1989-90 ₹ 6.50 lac AY 1990-91 ₹ 5.30 lac AY 1991-92 ₹ 39.30 lac Rs.103.75 lac 3.2 The aforesaid disclosure was in respect of share holding in Patwa Investment Finance Ltd., Lyka Leasing Finance Ltd. and Dharnidhar Leasing Finance Ltd. to the extent of ₹ 95.75 lacs and the balance disclosure of ₹ 8 lac was in respect of cash found during course of search. 3.3 Assessments for A.Y.1985-86 to A.Y.1990-91 and 1992-93 were reopened u/s.148 of the Act and were finalized vide asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 43(3) r.w.s. 250] [u/s.143(3) r.w.s. 250] 1988-89 27-03-1998 28,60,850/- [u/s.143(3) r.w.s. 250] [u/s.143(3) r.w.s. 250] 1989-90 27-03-1998 28,95,550/- [u/s.143(3) r.w.s. 250] [u/s.143(3) r.w.s. 250] 1990-91 13-03-1997 8,20,450/- [u/s.143(3) r.w.s. 147] [u/s.143(3) r.w.s. 147] Once again aggrieved by the said orders, appeals were filed before the then CIT(A)-VI, Ahmedabad who vide appellate order dated 31/03/2000 for the above mentioned years i.e. A.Ys.1986-87 to 1992-93 partly confirmed and partly allowed the appeals. 3.5 Aggrieved by the said orders of CIT(A) for A.Ys. 1986-87 to 1992-93, appeals were filed before the ITAT, Ahmedabad, wherein vide its combined appellate order dated 30/11/2006 set-aside the appeals for A.Ys. 1986-87 to 1992-93 (Income Tax) and A.Ys.1985-86 to 1991-92 (Wealth Tax) and A.Ys. 1989-90, 1990-91 and 1992-93 [against CIT(A)'s order dismissing application u/s.154 of the Act] to the file of the Assessing Officer for d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and on his statement, which have vital bearing on the assessee's case and therefore, we, in the interest of justice, are of the opinion that the assessee was rightfully entitled to cross examination of Shri Niranjan Shah, but unfortunately, the Assessing Officer, at the first stage though allowed the assessee to cross examine Shri Niranjan Shah, but made him run to the Assessing Officer at Bombay which was not in conformity with the settled provisions in this respect and when the assessee came back, denied the opportunity of cross examine Shri Niranjan Shah, which in our opinion, has caused a gross violation of principles of natural justice. In view of above facts and circumstances of the case and to meet the ends of justice, we set aside the assessments for all these seven assessment years and restore the issue relating to Various additions as well as consequential levy of interest under any of the sections, such as, 234A, 234B and 234C of the Act back to the file of the Assessing Officer for De novo purpose after allowing the assessee a proper opportunity of cross-examining the said Shri Niranjan Shah, Bombay. Subsequently, orders were passed by concern Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at detail, including dates and places of physical transaction, and the person who were involved in carrying out the same. He had explained that his account no.36 was debited by sums of ₹ 1,20,000/- and ₹ 14,100/- against US Dollars 8000 and Pound Sterling 660 arranged by Shri Niranjan J. Shah in London for Shri Paragkumar Pal Bhavnagari, his (the appellant's) employee. The aforesaid account was debited by a sum of ₹ 2,05,000/- against US Dollars 10000 provided by Shri Niranjan J. Shah to him at Singapore in May, 1989. His aforesaid account was also debited by a sum of ₹ 26,100/- against US Dollars 1500 provided by Shri Niranjan J. Shah in Hong Kong to Shri Nikhil R. Parikh in July, 1988. He further stated than the sum of ₹ 26,100/- had been reimbursed to him by Shri Nikhil R. Parikh. The appellant had further stated that his aforesaid account was debited by a sum of ₹ 5,85,000/- against US Dollars 25000 provided by Shri Niranjan J. Shah to one Shri Kartik in March, 1991. He clarified that the aforesaid sum of ₹ 5,85,000/- was reimbursed to him by Shri Kartik of USA through a person sent by Shri Kartik. He stated that his account was deb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ah, in his statement under section 131 of the Income-tax Act recorded by his Assessing Officer on 27-10-1993, with regard to account no.36 had stated that this account was of Shri J.K.Doshi, as per the index. He further stated that this account represented transactions between him and Shri J.K..Doshi of Ahmedabad in Indian rupees. He also stated that most of the figures mentioned in this account were in code and to read those; the decimal point was to be ignored. However, at certain places, figures were written in full also. He had given details of such figures in the aforesaid statement. He had further stated that such discrepancies occurred in this account due to the fact that this account was never settled and checked between him and Shri J.K. Doshi. He stated that this account also reflected the transactions between concerns of his group and concerns of Shri Doshi's group. As regards entries of transactions through banking channel, these were reflected in the accounts of respective assessees of the two groups. He stated that the entries of cash transactions in the aforesaid account were between him and Shri J.K.Doshi He further stated that the source of the sums advanced in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to a particular year. The counsel of the appellant had filed before my the then CIT(A) an elaborate version of this account in the form of a chart and in this chart; against each transaction dates had been mentioned. The first date mentioned was 31-5-1985. The counsel stated that this detailed account with dates had been filed by Shri Niranjan J. Shah in his income-tax proceedings at Bombay and that the same had been verified by the income-tax authorities at Bombay on the basis of evidence and materials. The counsel had further contended that if these dates were taken to be correct, there could be no credit balance on any of the dates and, therefore, no addition could be made to the total income of the appellant It was also argued that several transactions which were mentioned in this account as having been made in cash, were actually by means of cheques and, therefore, the, same could be very easily verified with regard to the exact date and the parties who were involved in these transactions. It was stated that the very first transaction of debit of ₹ 3,50,000/- in the aforesaid account was by cheque no.31585 on 31-5-1985. If this date was established, then it had to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts which were spent away by the appellant and, therefore, the same were not available for advancing further amounts. My predecessor observed that for determining the peak credit, all the dates must be established beyond any doubt. Further, the claim that several transactions which were by means of cheques could be established as not pertaining to the appellant, but to various other parties, had to be considered on the basis of whatever evidence or material which could be produced by the appellant or which was available in the income-tax records of Shri Niranjan J. Shah with the Income-tax authorities at Bombay. Therefore, even though there was a strong presumption that the account no.36 in the computer floppy was the appellant's account and the transactions recorded therein belonged to the appellant, my predecessor observed that unless various claims made by the appellant's counsel were properly enquired into and decided having regard to the relevant material and evidence, it would be impossible to work out the quantum of addition which could be made in the case of the appellant for various assessment years. With the aforesaid observations, my predecessor restored this iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut the peak credit, each transaction was considered as a separate transaction and running peak was worked out for the whole year on the basis of each transaction. The benefit of debit entries for set off against credit entries was not given where the time gap between the debit entries and the subsequent credit entries was more than two months, based on his belief that the debit amount could not be available with the appellant for making a credit after a period of two months. Similarly, the benefit of debit entries representing withdrawal of sums which were used for the purchase of foreign exchange (as admitted by the appellant before the FERA authorities) was not given as the said amounts had been spent by the appellant On the basis of the above, the Assessing Officer made an addition of ₹ 1,63,45,500/- in Ass Year 1986-87 (and different additions similarly for other years) to the total income of the appellant representing peak credit of the amounts advanced in cash by the appellant to Shri Niranjan J. Shah, his family members and his concerns reflected in account no.36. 8.1.7 The matter was taken to the CIT (Appeals) and the contention of the appellant have been discussed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as correct. (e) The cash brought in/taken out subsequently is entered thereafter. Thus, the cash withdrawn by a later entry cannot be considered to have been used for making deposits which appeared prior to the withdrawal. He agreed with the Assessing Officer has observed that in an account maintained on computer, the sequence of transactions does not alter. (f) Therefore, the addition, equal to the amount of the peak credit, on account of entries in respect of cash transactions in account no.36, has been correctly made by the Assessing Officer in the hands of the appellant for the assessment year under consideration. 8.18 Subsequently, the Hon ble ITAT, Ahmedabad Bench vide its combined appellate order dated 30/11/2006 setaside the appellant s appeals for A.Y. 1986-87 to 1992-93 (Income Tax) and A.Y. 1985-86 to 1991-92 (Wealth Tax) and A.Y. 1989-90, 1990-91 and 1992-93 [against CIT(A) s order dismissing application u/s.154 of the Act] to the file of the A.O. for denovo assessment with observations as reproduced earlier in para 4.3 of this order. 3.6 Matter was carried before the First Appellate Authority, wherein various contentions were raised on behalf of assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under coercion. The reliance of the appellant on the decision of Hon'ble Supreme Court in the case of K.T.M.S. Mohammed and Another vs. Union of India (1992) 197 ITR 196 (SC) is totally misplaced. In that case, even retraction before the Custom or FERA Authorities was not accepted as being automatic proof of coercion. The facts prove otherwise. e) With regard to the entries appearing in account no.36, relating to transactions affected through cheques/demand drafts, the appellant in his statement recorded by the Assessing Officer of Shri Niranjan J. Shah on 7-2-1994 had stated that these must have been accounted for in the respective books. The Assessing Officer, who made the earlier order of assessment on 25-3-1994 under section 143(3) read with section 147 of the Income-tax Act in the case of the appellant for A.Y.1986-87, stated therein that various debit and credit entries appearing in account no,36 made by means of cheques/demand drafts were also appearing in the books of account of seized during the course of a search at the premises of the appellant in August 1990. Examples of such entries are given on pages 14 and 15 of the aforesaid assessment order. f) The Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It is also possible that some cash might have been exchanged for safe keeping only. This clearly proves that Shri Niranjan Shah was accepting the fact that transactions have actually taken place. Otherwise, how the question of source comes into play. i) The fact that Shri Niranjan Shah has accepted the peak of the sources of these transactions recorded in this account, in his own assessment proceedings (relied and admitted by the appellant in its submissions as referred earlier) shows that he has accepted the genuineness of the transaction having actually taken place. j) The fact that Shri Niranjan Shah has given certain incoherent and contradictory statements in the cross examination has to be seen in the light of the facts that the two i.e. the appellant and Shri Niranian Shah are closely related and have been admittedly been engaged in clandestine transactions even in violation of FERA laws. Even this statement shows that he is going hot and cold at the same time. At one hand he says that he does not have any financial transaction with Shri Jayendra K. Doshi in cash and on the other hand he says that the same transactions in cash belong to him only. It is not the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tailed accounts would mix fictitious entries with genuine transactions as is being tried to be made out by the appellant. I am of the considered opinion that it is not merely a case where transactions found recorded by/in the possession of third party are held against the assessee without any corroborating evidences. In this particular case there are irrefutable evidences that not only the two parties were connected but admittedly entered into out of book transaction which even infringed against stringent laws like FERA. The transactions recorded in this account are held to be genuine and the appellant has failed to explain the same. The additions made by the AO on this issue, which are basically those confirmed by the then CIT(A) in the year 2000 on the issue. I agree and confirm the decisions made by him on the issue of the date and the sequence of the transactions and the working of required additions. The additions are therefore, confirmed in all the appeals. The grounds of appeal 4 and 5 in all the appeals are therefore, dismissed. 3.7 Learned Authorized Representative of assessee submitted before us that CIT(A) was not justified in confirming addition of ₹ 1,83,37,91 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 57 22.7.88 -Ref. 15.00 at HK 261.00 5 57 20.5.89 US $100.00 2050.00 6 58 5.6.90 -At Singapore 1075.00 7 58 5.9.90 To Ashokbhai A/c. H. Mehta 2100.00 8 58 29.12.90 To Nirubhai A/c. Anil USA - Date may not be correct 200.00 9 29.12.91 To Nanda Ref. Anil Las Palmas 1150.00 10 58 28.1.91 To N. Parikh. Ref. Atul Patil reed. 20.00 at Anil 450 11 58 9.3.91 Ref. US $ 250.00 to Kartik 5850.00 12 58 31.5.91 Order by Vipul for Anil USA on 5.6.91 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 2,05,000 against US $ 10,000 provided by Sh. Niranjan Shah to him at Singapore in May 1989; that his account was debited by ₹ 26,100 against US $ 1500 provided by Sh. Niranjan Shah in Hongkong to Nikil R. Parikh in July 1988; that he received the reimbursement of ₹ 26,100 from Nikhil R. Parikh; that his account was debited by ₹ 15,100 against equivalent foreign exchange provided by Sh. Niranjan Shah in Hong Kong to various persons from whom he (Doshi) had received reimbursement and that his account was debited by ₹ 1,07,500 against Singapore Dollars 10,0007- provided by Sh. Niranjan Shall to Nirish Babulal Shah in Singapore in June 1990. Sh. J.K. Doshi further explained that he had paid ₹ 20,000 to Nirubhai on 29.12.1990, ₹ 1,15,000/-. to Nanda, ₹ 45,000/- to Parikh, ₹ 10,000 to somebody on 13.5.91, ₹ 40,000 to Churchill on 1.7.91 and ₹ 5,00,000/- to Pradip Shah on 5.10.91 under instructions of Sh. Niranjan Shah on behalf of Anil of USA. Sh. Parag Kumar Pal Bhavnagari had also admitted in his affidavit dated 6.10.92 that he received in London foreign exchange of US $ 8000 and Pounds 660. Sh. Nikhil Parikh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stands for RJ Finance and Consultancy Ltd., Ahmedabad; Deepakbhai Vadhani on 55/F1 is the brother of Nilesh J. Vadhani; Vipul is Vipul R. Shah; Lyka on 58/Fl is Lyka Leasing Ltd., Ahmedabad. In his statement dtd. 13.12.93 lie had stated that M/s. Ojas Leasing Ltd. have current account with bank of Baroda, Vile Parle. He was one of the Directors of the said company till 1989. In his statement dtd. 23.2.94 Sh. Niranjan Shah had stated that on page 58/Fl, the account of J.K. Doshi has been debited for ₹ 5,85,000/- for US $ 25,000 made to Kartik Thakkar in USA @ ₹ 23.40 per dollar. On page 56/F-l, the account of Sh. J.K. Doshi has been debited for ₹ 1,20,000 against US $ 8000 in London. The account of Sh. J.K. Doshi has been debited on 20.5.89 byRs. 2,05,000 on page 57 ofF-1 against US $ 10,000/-. Page No. 57 of Fl showed that Account of Sh. J.K. Doshi has been debited by ₹ 26,100 against US $ 1500/- in Hongkong. The names of the notices i.e. S/ Sh. J.K. Doshi, Parag Kumar Pal Bhavnagri, Nikhii R. Parikh and Sh. Nirish Babulal Shah are not the only names appearing in the documents seized from Sh. Niranjan Shah. There are various other people, whose names are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Niranjan Shah and that Dr. Sharik thereafter met Sh. Vipul Shah and made arrangements for Pounds 3.870/-. In his statement dtd. 29.6.92, Paresh C. Gheewala had admitted having paid ₹ 52,000 in India against payment of Fr. Fr. 11,7527-to one of his buyers in France. Shri Churchil R. Shah whose account No, 35 in US $ figuring on page 51 of Fl has admitted that he had received US $ 4500 in Singapore as arranged by Shri Niranjan Shah. Jayantilal Limbachia whose name is figuring in said Churchil's Account explained that he arranged through Shri Churchil R. Shah US $ 3000 for the visit of one Mrs. Santokben Vaid to London and Nairobi. Shri Chandrakant N. Ghelani, who is the co-brother of Shri Harshad Mehta vide his statement dd. 16.7.92 had admitted that he had received US S 1000 from Shri Niranjan Shah through Shri Harshad Mehta during his tour to Australia; in 1989; that he had received US $ 1500 and Sterling Pnd. 3000 from Shri Niranjan Shah-through Shri Harshad Mehta during his foreign visit in 1990; that he returned unspent Stg. Pnd. 3000 to a person who was with Shri Niranjan Shah in Hong Kong and the same is figuring in account No. 2 of Mr. CDC (i.e. Mr. Chan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be used as evidence in these proceedings Shri Niranjan Shah has also disowned certain documents out of the seized files marked A-2 seized from his residence by the I. Tax authorities and has contended that those documents might have been planted by the officers of the search party of the I.Tax Department. Shri Niranjan Shah has raised this contention in the past, either in his various retraction letters to the Department or in his applications filed before the Hon ble Spl. Court (Trial of offences relating to transactions in Securities) at Bombay or for that matter, even before I.Tax authorities or otherwise. Moreover, I find no reason why the officers of the Income Tax deptt. should resort to such an action and I fail to understand in what way they were to be benefited by such alleged action. The print out marked F-l and F-2 of the computer floppies seized from Sh. Niranjan Shah are available in the seized file marked A-2, seized by the Income Tax Department. As already explained, entries corroborating the above transactions are appearing in the desk diary marked A-ll which has not been disowned by Sh. Niranjan Shah. Therefore, it is proved that even though Shri Shah has disown ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Shah that his statements recorded during the period from 3.9.93 to 23.2.94 could not be used as evidence in these proceedings. Shri Shah has retracted the said statements on the ground that it was recorded by use of force, coercion etc. However, no evidence to that effect has been brought on record. No medical report evidencing the use of any force on Sh. Shah has been produced before me in these proceedings. Whenever a statement is challenged as having been recorded by use of unfair means, it must be shown to have been recorded by such means as alleged which Sh. Shah has failed to do. Then only the contents of such statements can have no value as held by Hon'ble Kerala High Court in P.S. Barkatali Vs. DE (AIR 1981 KER. 81). Apart from submitting copies of certain letters written by Shri Niranjan Shah's advocate to the Department and his petition before the Special Court (which was rejected). Shri Niranjan Shah has not placed any evidence before me to indicate that his statements were recorded in the manner alleged by him. On going through the statements, I have no hesitation in my mind to come to a conclusion that the statements of Shri Niranjan Shah were voluntari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers, 2nd Floor, Nariman Point, Mumbai 21 either by Demand Draft or Pay Order drawn in favour of the Drawing Disbursing Officer within forty five days from the date of receipt of this order. While depositing penalty, this Adjudication Order number and date should be quoted clearly. In this background, learned Authorized Representative pointed out that CIT(A) at relevant point of time was not having advantage of developments such as FEMA proceeding. Action is claimed to be taken in case of Niranjan Shah and others including assessee under relevant provision of FEMA and matter has to be reviewed in light of same. However, learned Authorized Representative is not in position to tell latest position in this regard. Even learned Departmental Representative is not in position to tell latest position in this regard. According to us, FEMA proceeding has a bearing on the issue and latest position of same should be known. So, in view of submission of both parties and in the interest of justice, we restore whole issue to Assessing Officer with direction to decide the issue at hand as per fact and law and in light of subsequent development as discussed above, of course, after providing due ..... X X X X Extracts X X X X X X X X Extracts X X X X
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