9911796707
TMI Blog2006 (4) TMI 525X X X X Extracts X X X X X X X X Extracts X X X X ..... sactions of purchase and sale of diamond by VDT and on that basis the AO reopened the case of assessee who had also sold diamonds to DD. The AO, accordingly treated the sale of diamonds by assessee to DD as bogus and in turn added the amount of sale proceeds of diamond jewellery as undisclosed income of assessee. 3. At the very outset, the learned Authorised Representative of assessee has contended that the issue is covered in favour of assessee by the decision of 'C' Bench of Mumbai Tribunal in the case of Mohanlal R. Daga vs. ITO, (ITA No. 7963/Mum/2003 for asst. yr. 1998-99) reported in (2005) 92 TTJ (Mumbai) 1236, and has furnished a copy of the same. He has contended that the facts of present assessee are identical with those of the cited case and Tribunal deleted the addition therein. As against this, the learned Departmental Representative has relied on the orders of the authorities below. 4. We have considered the rival contentions, relevant material on record as also the cited decisions. The facts of the case in hand being undoubtedly identical with those of the cited case, we have no reason to take a view different from that taken by the Tribunal in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the explanation offered by the assessee before the AO was satisfactory or not ? It is well established that the explanation so offered by the assessee should be reasonable and inspire confidence. The explanation, which is fantastic, unsatisfactory or not supported by cogent, reliable and the best evidence available within the reach of the assessee or one which does not inspire confidence or is strenuous on credulity cannot be said to be a satisfactory explanation for the purposes of s. 68. 3. The assessee filed his return of income on 10th Dec., 1998 declaring total income at ₹ 1,07,350. The return was processed under s. 143(1)(a) of the IT Act or 23rd July, 1999. Subsequently, information was received by the AO that one Shri Vishnudutt Trivedi, proprietor of M/s Dhananjay Diamonds and his son Shri Rohit Trivedi, proprietor of M/s Ratnakar Diamonds had been surveyed by the IT Department at Thane and that the Department, during the course of survey and the proceedings following immediately thereafter, detected that the transactions of purchase and sale of diamonds made by the said Shri Vishnudutt Trivedi and his son Shri Rohit Trivedi through their proprietorship concerns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was that Shri Trivedi had subsequently retracted the said statement on 4th April, 2000 though the assessee has filed no evidence before the Tribunal to show that the said statement dt. 31st March, 2000 was retracted by Shri Trivedi on 4th April, 2000 and how it was retracted and which part of the statement was retracted though the assessee has filed a comprehensive paper book containing 53 pages apart from copies of judgments/orders, etc. before us. (v) The assessee relied upon a copy of the affidavit dt. 24th Dec., 2001 of Shri Vishnudutt Trivedi, which was executed after about a year and nine months of survey. A copy of the said affidavit is placed at pp. 27-29 in his paper book filed before the Tribunal. In the said affidavit, Shri Trivedi confirmed the purchase of the diamonds in question from the assessee as also payment in consideration thereof to the assessee by account payee cheque. It was further stated by Shri Trivedi in his affidavit that he was a registered dealer under the BST and CST Act. As regards the statement given by him on 31st March, 2000, it was stated that the statement was given under the state of confusion and as per the direction of the IT authorities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arants and hand over the same to Shri Saxena, mediator. I used to get commission of 0.5 per cent for arranging the transaction. I used to prepare purchase bills in favour of the same and the same were also given to Shri Saxena. I have never come across any party. I have not seen any party or I have not met any party at any time even today. Subsequently on paper only the sales of the diamonds purchased are effected. For these purchases and sales, purchase bills and sale bills got printed in the names of different proprietorship concerns are used. I would like to mention here that the sale proceeds of the said diamonds are invariably received through cheques from the said parties. These cheques are deposited in the banks mentioned above. Q. 6. Try to recollect full name and address of Shri Sanjay Saxena, his office and residential address, telephone number, etc Ans. His name is Sanjay Saxena. Address I do not remember. Telephone number also I do not remember. Q. 16. Then how the balance sheet is tallied? All the assets are owned by you. Please explain. Ans. The closing stock shown at ₹ 5,88,45,980 as on 31st March, 1999 in the case of Ratnakar Diamo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : Shri Vishnudutt Trivedi) A/c No. 102-3475 Date Particulars Debit Amount (Rs.) Credit Amount (Rs.) 21.2.1998 Cheque No. 566982 by 102-3504 15,00,000 21.2.1998 Cheque No. 565442 to 10,35,562 In the light of the above, the statement given by Shri Vishnudutt Trivedi before Survey Authority that all the transactions of purchase and sale of diamonds appearing in the PandL a/c of their proprietary concerns are 'fictitious' transactions is correct and conclusive....... 8. The AO did not accept the plea of the assessee that Shri Trivedi had successfully retracted his statement made on 31st March, 2000 and hence he ignored the same and took the statement in question as the basis for rejecting the sale transaction as genuine. He treated the impugned sum found credited in the assessee's books of account as not satisfactorily explained and consequently added the same to the income returned by the assessee. Outc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailed modus operandi of his business which was also borne out by the facts found during the course of the survey. She noted that these facts as stated in the statement dt. 31st March, 2000 remained uncontroverted. She also noted that though the letter of retraction addressed by Shri Trivedi was dt. 4th April, 2000, it was actually received in the office of the AO on 18th July, 2000. She rejected the retraction mainly on five grounds: one, statement made on oath on 31st March, 2000 was also supported by the facts found at the time of survey and hence the statement was duly corroborated in material respects; two, the statement made j spontaneously on oath before the AO would carry greater evidentiary value I than the letter of retraction; three, though the letter of retraction was dt. 4th April, 2000, it was actually filed before the AO on 18th July, 2000; four, neither the retraction nor explanation about large cash deposits and absence of stock j was supported by any evidence; and, five, the statement was made on 31st March, 2000 without any coercion as no coercion was alleged by Shri Trivedi at any time except two years later. (v) The learned CIT(A) has also considered the su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... andi given by the assessee as found/stated at the time of survey. (viii) The learned CIT(A) has also rejected the submission of the assessee that there was no nexus of the cash deposits with the cheque issued by Shri Trivedi in consideration of purchase of diamonds from the assessee. She held that the evidence with the Department was available to show that large sums of cash were deposited in the account of Trivedis, which were subsequently circulated in his various bank accounts before the cheques were issued to the VDIS declarants. She also noted that the statement of Shri Trivedi on this point was quite categorical and self-explanatory. She felt that it was well-nigh impossible for the Department to establish the nexus between the cash deposits made in the various accounts of Trivedis with the cheques ultimately issued to the VDIS declarants. She therefore proceeded to consider the totality of circumstances and, having so considered them, held that it was out of the funds so transferred from one bank account to another that payment to the assessee was made. 10. Aggrieved by the order of the learned CIT(A), the assessee is now in appeal before the Tribunal. The appeal ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in a given case cannot be set aside or interfered with by a superior forum just because it is a superior forum unless the superior forum points out howsoever briefly the illegality, irrationality or irregularity in the decision, which is essentially on facts taken by the lower forum. This view is supported by the well-known Wednesbury Principles propounded in Wednesbury case (1947) 2 All ER 680 (CA) which have since been approved by the Hon'ble Supreme Court in Om Kumar vs. Union of India (2001) 2 SCC 386, 399. The reason why I have chosen to extensively refer to the grounds on which the learned CIT(A) has confirmed the assessment order is to highlight the balanced approach which the CIT(A) has painstakingly adopted in carefully analyzing the factual and legal aspects of the case before rendering her decision. The short question is whether the impugned order passed by the learned CIT(A) suffers from any illegality, irrationality or irregularity (any or all of what is called triple Is ) so as to require our interference as proposed by the learned Brother in his order. 15. The facts stated by Shri Trivedi in his statement on oath were sufficient enough to cause a doubt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to show that the statement made spontaneously by Shri Trivedi was factually incorrect though sufficient opportunity was given to him at the assessment as also the appellate stage. In the face of the categorical statement given by Shri Vishnudatt Trivedi on 31st March, 2000, I am quite inclined to hold that the facts of the case as brought on record are notorious enough to draw adverse inference against the assessee while considering his explanation. I also hold that the explanation given and evidence adduced by the assessee were not sufficient enough, on the facts of the case, for discharging the requisite burden of proof that lay upon the assessee under s. 68. In fact, the materials brought on record were sufficient enough to reject the glib explanation tendered by the assessee to explain the nature and source of the impugned cash credit. 16. The assessee wants that mere purchase bill issued by M/s Dhananjay Diamonds and mere receipt of money through account payee cheques should be accepted and construed as sufficient for discharging the burden that lay upon the assessee under s. 68. On the facts of the case placed before us, I am unable to hold so. It has been held in a numbe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when Shri Trivedi himself denies to have physically purchased any diamond from anyone. What is thus required to be proved is the fact in issue before us, i.e., genuineness of sale transaction and not the fact or issue which is not before us, i.e., declaration of income under the VDIS. 18. Following the decisions of the Hon'ble Supreme Court in ITO vs. Ratan Lal and Ors. (1984) 38 CTR (SC) 382 : (1984) 145 ITR 183 (SC) and Jamnaprasad Kanhaiyalal vs. CIT (1981) 23 CTR (SC) 146 : (1981) 130 ITR 244 (SC), the Hon'ble Madhya Pradesh High Court has held in Lachhiram Puranmal and Anr. vs. ITO (1990) 184 ITR 186, (MP), that the ITO is not debarred from examining the genuineness of cash credits in the books of the firm said to be deposited by partners who had declared income under the VDS. In CIT vs. Saligram Prem Nath (1984) 40 CTR (PandH) 325 : (1985) 153 ITR 234 (PandH), it has been held, in the context of VDIS 1965, that the ITO is empowered to enquire about genuineness of the source of the amount found credited in assessee's books and tax that amount in spite of the same having already been made the subject of declaration under s. 24 of the Finance (No. 2) Act, 1965 by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lal R. Daga (supra) in favour of the assessee. However, the learned authorised representative for the assessee preferred not to address us to show as to how the material facts as well as the finding recorded by the learned CIT(A) in the case before us were similar to those recorded by the CIT(A) in Mohanlal R. Daga (supra). In CIT vs. Kulwant Kaur and Ors. (1980) 121 ITR 914 (Del), it has been held that what s. 68 requires is only a factual explanation and not a purely legal argument. Be whatever it may, the learned authorized representative has preferred to submit that the issue in hand was covered by the decision of the Tribunal in Mohanlal R. Daga (supra) instead of making any submission on the merits of the case. I shall, therefore, now turn to the Tribunal's order in Mohanlal R. Daga (supra). Operative part of Tribunal's order in Mohanlal Daga to which the learned Brother is a party reads as under: 15. We have considered the rival contentions, relevant material on record and also the cited decisions. As regards the first and second statements of VDT, the same having been recorded not during the proceedings pertaining to assessee, but during survey in the case of V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee is proved by assessee's declaration under VDIS. As such, considering all the facts and circumstances of the case together with the legal position, we find no justification for holding the sale of loose diamonds by assessee to M/s Dhananjay Diamonds as bogus order as a mere paper transaction and not genuine, and in turn for making/sustaining addition. We therefore, delete the addition. 21. On perusal of the Tribunal's order and more particularly para 15 thereof in Mohanlal Daga, it is seen that decision in that case turned on the following facts : one, copies of the statement of Shri Trivedi were not supplied to the assessee and thus there was a violation of the principle of natural justice and hence the statement of Shri Trivedi which was recorded on the back of the assessee was not capable of being used against the assessee; two, statement given by Shri Trivedi was retracted by him; three, there was no evidence on record that any cash amount was paid back by assessee to VDT and four, the purchase of diamonds by Shri Trivedi was supported by purchase voucher and payment in consideration thereof was supported by account payee cheque. It may be useful to ascertain whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rically opposite conclusion to hold that the earlier statement stood successfully retracted. Shri Trivedi had made the statement on oath and certified its contents to be true and correct at the end of the statement. I am, therefore, not in a position to hold that the facts stated in the said statement were incorrect or that a letter of retraction would carry greater evidentiary value than the statement made spontaneously on oath when there was no occasion with anyone to tutor the person, namely Shri Trivedi when he made the statement on 31st March, 2000. The Departmental authorities had recorded his statement without using any force or coercion or deception of any kind. It is also not the case of the assessee that Shri Trivedi was not aware of the modus operandi of his own business while making the statement on 31st March, 2000. Then there is a decision of the highest Court of the land in Surjit Singh Chhabia AIR 1997 SC 2560 which supports the decision of the CIT(A). It appears that the said decision rendered by the Hon'ble Supreme Court was not cited before the coordinate Bench deciding the matter in Daga's case. I am sure that if the said decision had been cited befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the said statement was retracted by letter dt. 4th April, 2000, which was sent by Regd. Post AD to the ITO and also received by the ITO. A careful perusal of the affidavit shows that what Shri Trivedi stated in the affidavit was capable of being proved by better evidence in the form of documentary evidence which the parties concerned have chosen not to file at any stage of the proceedings and have preferred to state in the affidavit what was capable of being proved by better evidence. It is stated that letter of retraction dt. 4th April, 2000 was sent by Regd. Post AD but the affidavit is silent as to when the said letter was sent by Regd. Post AD. It is stated in the order of the Departmental authorities that letter of retraction was received in the income-tax office on 18th July, 2000, In the Tribunal's order in Mohanlal R. Daga, it is stated that the receipt of letter of retraction shown by the Department on 18th July, 2000 was due to some typographical error. But another CIT(A) in the present case also records a categorical finding that the letter of retraction was received in the Income-tax Office on 18th July, 2000. No evidence was placed before us to rebut the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents. 26. I am well aware that the order passed by a co-ordinate Bench should not be lightly disregarded. In taking this view, I am supported by the decision of the Hon'ble Supreme Court in Union of India vs. Paras Laminates (P) Ltd. (1990) 87 CTR (SC) 180 : (1990) 186 ITR 722 (SC) in which the Hon'ble Court has observed : It is true that a Bench of two members must not lightly disregard the decision of another Bench of the same Tribunal on an identical question. This is particularly true when the earlier decision is rendered by a larger Bench. The rationale of this rule is the need for continuity, certainty and predictability in the administration of justice. Persons affected by decisions of Tribunals or Courts have a right to expect that those exercising judicial functions will follow the reason or ground of the judicial decision in the earlier cases on identical matters. However, it is equally relevant to notice the decision of the Hon'ble Supreme Court in Padmasundara Rao (Decd.) and Ors. vs. State of Tamil Nadu (2002) 176 CTR (SC) 104 : (2002) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (SC), this is what the Hon'ble Court has observed : In our view this story does not, ring true and could not have been accepted by any reasonable person, instructed in law. It is wholly unnatural, because one does not expect hard-nosed businessmen to part with an amount of ₹ 70 lakhs without euen recording an agreement under which it is paid, nor without agreeing upon the precise terms of the lease. The story rings false from beginning to end, and yet, the Tribunal accepted it by saying, as regards the bona fides of the transaction, in our opinion, there is nothing to suspect the same. The Tribunal says, there is a transparency about the entire transaction which nullifies any attempt to make out the transaction as something unusual arid out of the ordinary. That diamonds are not transparent, that they dazzle with a brilliance that blinds the eye, seems to have escaped the notice of the Tribunal. It undiscerningly accepted the glib explanation of the assessee, though teeming with improbabilities and strenuous on credulity. 28. I have given serious consideration to all the facts and circumstances of the case in the light of the materials and arguments placed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee had also reportedly sold the diamonds to Dhananjay. 4. On scrutiny of records of the assessee the AO found that the capital account of the assessee had been credited by a sum of ₹ 10,35,562. The source of this credit was claimed to be the sale of jewellery declared under the Voluntary Disclosure of Income Scheme, 1997 ( VDIS in short). The claim is that the assessee declared diamond jewellery weighing 65.75 ct. under the VDIS and that it was sold on 20th Jan., 1998 to Dhananjay Diamonds of Bhayander (Dhananjay in short), the proprietary concern of VDT. 5. As per the declaration under VDIS, the diamonds were acquired in financial years 1981-82 (39.50 ct.), 1982-83 (13,75 ct.), and 1983-84 (12.50 ct.). The proof of declaration along with the affidavit, the valuation report and the copy of certificate under s. 68(2) of the VDIS were filed along with the return. 6. To verify the veracity of the transactions, the summons under s. 131 of the Act was issued to the Manager, Vasai Janta Sahakari Bank Ltd., Bhayander (E) Branch requesting him to furnish bank statement of account No. 102-3475 in the name of Dhananjay Diamonds and also of another concern Ratnakar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bank accounts of Dhananjay Diamonds and used to be in circulation; that he (VDT) gave the names of the bank accounts in which the cash was deposited; that subsequent to this activity, he used to draw the cheques in favour of the VDIS declarants and handed over the same to Saxena who was the mediator and he used to get a commission of 0.5 per cent for arranging these transactions; that he used to prepare purchase bills in favour of the said parties and give the same also to Saxena; and that on paper alone, was there sales and purchase of diamonds and for these purchase and sales, purchase/sales bills in the names of different proprietary concerns were printed; and that during the course of survey, from the books of account of Dhananjay Diamonds and Ratnakar Diamonds stock at ₹ 2,72,89,520 arid ₹ 5,88,45,980 as on 31st March, 1999 was disclosed but those were not at all in existence on the relevant date and were mere book entries in the closing stock. It was further noted that the evidence of pay-in-slips was also found to be of large amounts of cash deposited in various bank accounts of Dhananjay Diamonds on various dates, which were deposited from the money received fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he cash deposits in his bank accounts, and the lack of closing stock. The CIT(A), therefore concluded that the validity of the statements recorded at the time of survey and on 31st March, 2000 remained. He observed that the statement of VDT recorded by the AO subsequently was not backed by any documentary evidence at all, whereas the statement recorded during the course of survey is backed by evidence of the non-existence of stock and large cash deposits in the bank accounts. He further mentioned that at the time of survey it was not the case of VDT that he was doing some part of his business as genuine and only some part of the business was on paper for facilitating the VDIS declarants. According to him, in the statements which are backed by documentary evidence, that is the one of 30th March, 2000 and 31st March, 2000, he had categorically denied having any genuine business of manufacturing and trading of diamonds at all and, therefore, if he thereafter states that the transaction entered into with the assessee were genuine transaction there is no documentary evidence with either party that it was so. He also rejected the claim of the assessee that VDT was in fact the witness of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dence either before the Departmental authorities or before the tribunal to show that the statement dt. 31st March, 2000 was not corroborated in material respects by the facts discovered at the time of survey. Besides, the facts of the case were within the special and exclusive knowledge of the assessee of VDT. The burden was therefore on him to prove that the facts stated in the statement dt. 31st March, 2000 was incorrect, which has not been done. He also held that the decision of the Tribunal in the case of Mohanlal R. Daga (supra) turned on certain facts, viz., (i) the copies of the statement of VDT were not supplied to the assessee and thus there was a violation of the principle of natural justice and, therefore, the statement of Shri VDT which was recorded on the back of the assessee was not capable of being used against the assessee; (ii) the statement given by VDT was retracted by him; (iii) absence of evidence on record that any cash amount was paid back by the assessee to VDT; (iv) unsupported purchase of diamonds by VDT by purchase voucher; and (v) payment in consideration thereof was supported by account payee cheque. He then examined the case of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n sale of jewellery and diamond is admitted as under: (A) Jewellery and Diamonds Jewellery sold as admitted ₹ 6,75,089 Sale consideration ₹ 4,70,890 - ₹ 2,04,199 (B) Diamond ₹ 8,60,042 Sale consideration ₹ 10,35,562 + ₹ 1,75,520 10.2 He also referred to capital account from the perusal of (which) it could be seen that the tax ₹ 1,98,573 has been paid on capital declared under VDIS, and that is further evident from the certificate of payment. He further submitted that the income declared by VDT for the year under consideration at ₹ 1,27,009 has been accepted. 10.3 The assessee has relied upon the copy of the affidavit dt. 24th Dec., 2001 of VDT, which was executed after about a year and nine months of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 60 : (1980) 125 ITR 713 (SC) and submitted that the burden was on the Department to show that the money belonged to the assessee by bringing proper evidence on record and the assessee could not be expected to call T and N in evidence to help the Department to discharge the burden that lay upon it. That there was no evidence on the basis of which it could come to the finding that the sum credited in capital account of the assessee represented the undisclosed income of the assessee. Cases of Lalchand Bhagat Ambica Ram vs. CIT (1959) 37 ITR 288 (SC) and Orient Trading Co. Ltd. vs. CIT (1963) 49 ITR 723 (Bom) also referred to. 11. The learned Departmental Representative, on the other hand, strongly relied upon the orders of the authorities below and also referred certain questions put to VDT and the answers given by him in the said statement dt. 31st March, 2000. He also relied upon the following decisions in support of his arguments : (i) Mahesh B. Shah vs. Asstt. CIT (1999) 154 CTR (Ker) 391 : (1999) 238 ITR 130 (Ker), (ii) Asstt. CIT vs. Rameshchandra R. Patel (2005) 94 TTJ (Ahd)(TM) 361 : (2004) 8S TTD 203 (Ahd)(TM), (iii) ITO vs. Ashok Kumar (2005) 92 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, 2000 vide postal receipt placed on p. 55K paper book and was delivered to the Department vide AD receipt dt. 17th April, 2000 as placed on p. 551 paper book. Its receipt on 18th July, 2000, as mentioned in para 12 p. 8 of his order seems to be due to some typographical error. In the said retraction (p. 55G) VDT has mentioned that those statements were given by him as directed by the Department and he was under the state of total confusion. He has also mentioned in the said retraction letter that he had made the purchases, correctly issued bills, accounted for in his books and also furnished to the Sales-tax Department. He has supported the purchase of 71 carets of diamonds from assessee by his affidavit and statement dt. 25th Oct., 2002 recorded by AO when he made his attendance before AO in response to the summons issued to him by AO during assessment proceedings pertaining to present assessee. The sale of diamonds by present assessee to VDT is also supported by VDT's purchase bill (p. 93 paper book); the payments have been made by VDT to assessee by account payee cheques and the same is corroborated by bank statement. This transaction of sale of 71 carets of loose diamonds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luence and confused state of mind. 15. Though the CIT(A) referred to both the statements of VDT recorded on 30th March, 2000 and on 31st March, 2000 confirming the transaction in the first statement but denying the same in the second, he gave more credence to the later one because it was more descriptive and on the first day of survey, VDT had merely made the statement regarding maintenance of books of account, bank accounts, the nature of his business, etc. and stated that the bills of purchases and sales would be given the next day and that it was on next day, he gave a detailed statement giving the entire activity of his business as being merely a paper concern. This is not a correct statement of facts as stated by the CIT(A) as is evident from the following appearing in the statement dt. 30th March, 2000 : Q. 2. Please give details of the business activities carried on by you and your family members. A. 2. I am proprietor of Dhananjay Diamonds, Shop No. 6, Oasis Park, Naigaon since 1995. I don't have any other income generating activity. My eldest son Rohit is proprietor of Ratnakar Diamonds, which is also run from the same address. This business has started in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... office, whose address has been given above. Q. 15 Please give the addresses of sundry debtors for both the concerns. A. 15 I shall furnish the same tomorrow. No enquiry was made by the AO whether any stock was lying at Trikam House of VDT. 16. The statement recorded on 31st March, 2000 which is given more credence is extracted in extenso as under: Q. 1 Please identify yourself. Ans. My name is Vishnudatta VDT, aged 43 years. I am residing at F-3, at Oasis Park, Dias Pareira Naigaon (W) Distt. Thane. Q. 2 What is your experience in diamond business? Please explain full details of your employment with diamond merchants special experience in diamond trade. Q. 3 What is Rohit's experience in diamond trade and when his proprietary concern M/s Ratnakar Diamonds was started. Ans. My son Mr. Rohit has no experience in diamond trading. M/s Ratnakar Diamond was started in 1998. Though the business was started in his name as proprietary concern, the business was handled by me only. He is nowhere connected with M/s Ratnakar Diamonds, personally. Q. 4 Whenever these transaction of purchase of diamond from the customers took place, whether the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly Shri Saxena was the person who used to bring clients from Ulhasnagar area. There were hardly any person. Q. 8 Who introduced Mr. Sanjay Saxena to you ? Ans. Mr. Sanjay Saxena was introduced to me in diamond market, Opera House, Mumbai. I don't remember the name. Q. 9 Please furnish the details of all the transactions done by you in the following format. (1) Name of the concern (2) Party from whom cash received (3) Description of the diamond, (4) Name of bank account in which the cash deposited (5) To whom the particular diamond jewellery sold name and address of the party (6) Amount and date of cheque received (7) Bank and account No. where cheques deposited. Ans. I cannot give the details today. I will take out the details and will furnish the details on Monday i.e. on 3rd April, 2000. Q. 10 What are the books of account maintained for these business. Ans. The books of account maintained are cash book, ledger, purchase/sale register. Basically, I am an accountant and I use to write my books myself. A. 11 Are you assessed to tax ? Ans. Yes. I am assessed to tax and I am filing my returns regularly wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31 on 25th Oct., 2002 Saxena was not involved in transactions with the assessee and three other persons named therein. The transactions with the assessee and those three persons were through some common family friend who was though not named. 18. VDT retracted his statement given by him on 31st March, 2000 at the office of the AO, vide letter dt. 4th April, 2000 which reads : At the time of recording of statement at your office, I stated as per your direction and I was in total state of confusion. The purchases made by me is totally accounted one and have correctly issued the bills to the respective party from whom I made purchases. I have accounted all these purchases in books of account along with the sales. The sales and purchases are also shown to the sales-tax Department. I request you to supply the copy of statement recorded by your goodself at the office premises. On receipt of the statement I will be able to clarify further to your goodself. I once again state that the statement was not given by me voluntarily and I was not in proper shape to give this statement. 19. VDT had also filed an affidavit dt. 24th Dec., 2001 which was executed after about a year and n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cheques and I had given them my purchase memo. Q. 13 During the course of survey under s. 133A of the IT Act, 1961, was carried out in your case by ITO, Ward-2(3), Thane on 31st March, 2000 at that time your statement recorded under s. 131 and you have stated in Answer to Q. No. 4 as under: In fact, physical transactions of these purchase and also of diamonds never took place. However, fictitious transactions were done on papers only, so as to facilitate VDIS 97 declarants. I get you full details of transactions made on paper only on Monday i.e. 3rd April, 2000. Ans. I had retracted the statement given at the time of survey on 31st March, 2000; the said statement at the time of survey was given under influence. I confirm that I had taken physical delivery of cut and polished diamond from all four above, parties and my transactions with these four parties is genuine and duly recorded in my books of account. Q. 14 Please produce the books of account for financial year 1997-98, Ans. As stated above, my all books of account are still with (Old) ITO, Ward-2(3), Thane and applied for xerox of these books of account and statements and also applied for return of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T for the sale on 20th Jan., 1998 and were produced with the Department. 25. The income based on the books of account of VDT was accepted in his case under IT Act which included the said transaction. 26. Similarly VDT being the registered dealer under BST and CST Act had filed the returns under those Acts duly disclosing the said transaction with the assessee much before the date of survey. 27. The observation of the CIT(A) that since VDT was denying the explanation given at the time of survey, it was upon him to explain the cash deposits in his bank accounts and the lack of closing stock is not convincing. The assessee had received the payment by account payee cheque from VDT and it was Department's case that the cash might have been given by the assessee and deposited in the bank account of Ratnakar/Dhananjay which was the ultimate source of the payment of cheque. CIT(A) therefore cannot be said to be right in concluding that the statement given at the time of survey remained. The two statements are conflicting and as to for which statement he says remained is not known. It would be more logical, if they were so for the first statement given on 30th March, 2000 which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceived from the assessee to whom subsequently cheques were issued. Looking to the totality of the circumstances, there is no nexus between the cash deposited and the cheque drawn. It may be true that the facts remained uncontroverted that out of the funds so transferred from one bank account to another the payment to the assessee has been made but how the assessee is responsible for that. Nothing is on record that money was given by the assessee. 33. The diamonds were declared by the assessee under VDIS, they were sold to Dhananjay. Payment was received by account payee cheques. In these circumstances how it can be a cash credit the source of which could be said to be unexplained. The person who paid it is identified, he confirmed it, the source of payment is the bank account of the payer, it is stated to be consideration for sale of diamond, there is no material on record that source of that money is the assessee or it was given for any services rendered by him, or the source of income thereof was that of the assessee. In these circumstances it cannot be said to be the income of the assessee by any circumstance much less under the deeming provisions of s. 68 of the Act as appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee supported by valuers certificate, the AO had made enquiry from the registered valuer about the valuation done by him and observed that the conduct of the valuer showed that he had given bogus valuation report in respect of silver utensils without actually examining said silver articles. Under the VDIS, it had been provided that such disclosure, when accepted, would offer complete immunity to the declarant in respect of the income so disclosed. In the absence of any material to show that such certificate had been cancelled or withdrawn or amended by the CIT under the VDIS, 1997, the AO had grossly erred in holding that such silver utensils allegedly sold never existed. Such finding of the AO was beyond his jurisdiction and against the scheme of the VDIS, 1997. Even otherwise the finding of the AO that valuer did not issue valuation report after physically seeing the entire silver utensils, was not sustainable in view of the remand report of the AO. 35. It is true that in that case the AO had given the remand report after examining the matter afresh in detail and nothing adverse was found against the assessee but here in this case before AO itself VDT appeared and ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rms of the words 'shall be charged to income-tax as the income of the assessee of that previous year'. The Supreme Court while interpreting similar phraseology used in s. 69 has held that in creating the legal fiction the phraseology employs the word 'may' and not 'shall'. Thus the unsatisfactoriness of the explanation does not and need not automatically result in deeming the amount credited in the books as the income of the assessee as held by the Supreme Court in the case of CIT vs. Smt. P.K. Noorjahan (1999) 155 CTR (SC) 509 : (1999) 237 ITR 570 (SC). (ii) Again in Pragati Co-op. Bank Ltd. (supra) Gujarat High Court held : ..it was apparent that the assessee had furnished the details which would discharge the onus which lay on the assessee considering the fact that the deposits were made by third parties, viz., customers of the bank. It was nobody's case that the deposits were made either by the directors of the assessee-bank or any of the relatives of the directors. The activities of the assessee-bank were regulated by the provisions of the Banking Regulation Act, 1949, and the guidelines issued by the RBI. This was apart from the fact th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inate Bench of same strength is required to be accepted by Bench of same strength. cannot be found fault with but it is equally true that when the facts are not at par or the earlier decision is per incurium a contrary decision in accordance with law can be taken. (vi) In view of the decision of Supreme Court in CIT vs. Smt. P.K. Noorjahan (supra) by taking into account the circumstances in which the assessee was placed the investments could not be treated as income of the assessee. (vii) As held by the Supreme Court in the case of Pullangode Rubber Produce Co. Ltd. vs. State of Kerala and Anr. (supra) it is open to the assessee who made the admission to show that it is incorrect and the assessee should be given a proper opportunity to show that the books of account do not disclose the correct state of facts. (viii) Again the Supreme Court decision in Kishinchand Chellaram vs. CIT (supra) the burden is on the Department to show that the money belonged to the assessee by bringing proper evidence on record and the assessee could not be expected to put in the evidence to help the Department to discharge the burden that lay upon it: That there was no evidence on the bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tification marks on the ledger produced by the assessee and that was taken to mean that after the assessee made disclosure, the survey team stopped further survey operations and that the assessee was indirectly benefited from this disclosure because the survey team, thereafter, was deprived from detecting further unrecorded transactions by the assessee. (d) In Ramesh T. Salve (supra) the Mumbai Bench of the Tribunal observed that There is nothing in support of the plea that the assessee had given the statement under coercion or threat. The statement giving details of various items of expenses does not give the impression of a statement given by a person in a confused state of mind. It took nearly one month for the assessee to make the plea for the first time that the earlier statements given by him on 7th Sept., 1990, at the time of the search were not correct statements. It is difficult to believe that only after the assessee received the legal advice that he came to realise his mistake and that as soon as he received the advice he gave the letter to withdraw the earlier statements. It may be noted that there were two statements given by him under oath on 7th Sept., 1990. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterial on record. An affidavit is certainly entitled to utmost consideration but if it contained only bare assertions without even citing the nature of the transaction or purpose for which the impugned amounts were made available with the appellant, and if the assertions are not supported by any material on record, the affidavit is not worth the paper on which it is written. (j) In Amal Kumar Chakraborty (supra) the Calcutta High Court held that The mere ipse dixit of the assessee or of counsel cannot be taken as a fact. (k) In Hiralal Maganlal and Co. (supra) observed that We are aware of the principle laid down in several cases that the Evidence Act does not apply to proceedings under the IT Act and further that the artificial or technical rules of evidence are not applicable to income-tax proceedings. This aspect of the matter has received careful consideration of the Hon'ble Supreme Court in Chuharmal vs. CIT (1988) 70 CTR (SC) 88 : (1988) 172 ITR 250, 255 (SC). The Hon'ble Court has held that what is meant by saying that the Evidence Act does not apply to income-tax proceedings under the IT Act is that the rigour of the rules of evidence contained in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e books of VDT which were all through with the Department much before the survey in the case of VDT. The assessee has given the reasons and in any case the statement dt. 31st March, 2000 was not specific to the transaction with the assessee and transaction with the assessee was stated to be true in subsequent statements and supported by books and bills issued for the sale of diamonds. Here the contradictory statements are all sworn statements and therefore the statement which accords with the other facts on record like existence of diamond as declared and accepted under VDIS, bills of sales, entries in books, payment by account payee cheque should be accepted. In Smt. Gunwantibai Ratilal (supra) the Madhya Pradesh High Court observed that If the veracity of statements in the affidavits was, according to the Tribunal, disproved by the material on record, the finding of the Tribunal cannot be said to be vitiated merely because the Tribunal arrived at its finding by not placing reliance on the affidavits. 43. The case of Chiranji Lal Steel Rolling Mills vs. CIT (supra) observed that the ITO has power to collect evidence from any source but it is his duty to put it to the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lue and in case the Department is compelled to give the name or to produce such intending importers for cross-examination in Departmental proceedings, it will well nigh be impossible'to gather any material in future. Therefore, it cannot be said that there was violation of natural justice specially when the name of the exporter sending the quotations, was disclosed to the petitioner. 46. Though the two rules of natural justice, namely, nemo judex in causa sua and audi alteram partem, have now a definite meaning and connotation in law and their content and implications are well understood and firmly established, they are nonetheless not statutory rules. Each of these rules yields to and changes with the exigencies of different situations. They do not apply in the same manner to situations which are not alike. These rules are not cast in a rigid mould nor can they be put in a legal strait-jacket. They are not immutable but flexible. These rules can be adapted and modified by statutes and statutory rules and also by the constitution of the Tribunal which has to decide a particular matter and the rules by which such Tribunal is governed. There is no difference in this respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gree to that proposition. As there was a difference of opinion, the point of difference was placed before the Hon'ble President for nominating a Third Member to decide the dispute. The Hon'ble President appointed Hon'ble Vice President, Ahmedabad as the Third Member to decide the point of different extracted below : Whether, on the facts and circumstances of the case, the addition of ₹ 10,35,562, credited to the Capital Account during the year, deserves to be sustained. The learned Third Member agreed with the finding of the learned Judicial Member through his order dated 26-4-2006. Accordingly the order proposed by the learned Judicial Member at the first instance has become the order of the Bench and the appeal is disposed of with the following consequential orders. 4. In view of the majority opinion, the addition of ₹ 10,35,562 made on account of alleged unaccounted income from sale of jewellery, which are declared under the VDIS, 1997 is deleted. The first ground is, accordingly, allowed and decided in favour of the assessee. The second ground regarding the addition of ₹ 28,679 taxable as long-term capital gains is dismissed as not pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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