9911796707
TMI Blog2002 (4) TMI 217X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to the department, the print out of the computer floppies was the account in the name of Straptex. This account contained some transactions by cheque and some by cash. The transactions by cheque were found recorded in the assessee's books of account, while the cash transactions were not found recorded in the assessee's books of account. Shri Niranjan Shah had offered income of Rs. 5 crores in the statement recorded at the time of search. The above income surrendered at the time of search included the undisclosed investment of Rs. 40 lakhs in the assessee-company. However, Shri Niranjan Shah retracted the above statement. Copy of his letter of retraction is placed at page 44 of the assessee's paper book. Thereafter, again, the statement of Shri Niranjan Shah was recorded under section 131 in which he has stated that no cash transaction between him and Straptex (India) P. Ltd. (the assessee) had actually taken place. He had mentioned these figures in the account of the assessee to impress his associates and to take undue advantage at a later stage. However, the Assessing Officer, relying upon his statement recorded at the time of the search, held that the cash transaction as ment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Statement of Shri Niranjan Shah given at the time of search. (ii) Print-out of computer floppy found from the residence of Shri Niranjan Shah. He contended that the reliance by the Assessing Officer on both the above evidences is misplaced for the following reasons: (a) That Shri Niranjan Shah himself has retracted the statement vide declaration before the Notary dated 23-9-1994. After the above declaration, his statement was again recorded under section 131 of the Income-tax Act (which is also reproduced by the Assessing Officer in the assessment order of the assessee) in which he has clearly denied any cash transactions with the assessee. He has also explained why he has mentioned these cash transactions in the account of the assessee. The Assessing Officer was not at all justified in relying upon the earlier statement ignoring the subsequent retraction and the subsequent statement. Moreover, the statement of Shri Niranjan Shah was recorded behind the back of the assessee and it cannot be used against the assessee unless the assessee is allowed to cross-examine Shri Shah. It is an admitted fact that the assessee was never allowed to cross-examine Shri Shah and, therefore, his s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the assessee borrowed the money in cash and levied penalty therefor. This was not purpose of introduction of section 269SS. In view of the above, he contended that the levy of penalty under section 27 ID was not called for and is liable to be quashed. 5. The ld. Departmental Representative, on the otherhand, submitted that the penalty was validly levied within the period of limitation. He contended that the letter dated 21-2-1994 was only for enquiry during the assessment proceedings. No penalty proceedings were initiated by the above letter. The penalty proceedings were for the first time initiated in the assessment order dated 21-3-1994. He pointed out that at page 8 of the assessment order the Assessing Officer has recorded that "I initiate penalty under sections 271D and 271E". Thus, the penalty proceedings were initiated by the assessment order dated 21-3-1994 and not by the enquiry letter dated 21-2-1994. According to him, the penalties were levied on 28-9-1994 which was within six months from the end of the month in which the penalty proceedings were initiated. Therefore, the penalties were levied within the period of limitation as provided by section 275(1)(c). 5.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the applicability of section 34 of the Evidence Act. That Evidence Act is not applicable to proceedings under the Income-tax Act. Therefore, the above decision of Hon'ble Apex Court in the case of V.C Shukla would not be applicable to the present case. In support of his contention, he relied upon the following decisions: (1) CIT v. East Coast Commercial Co. Ltd [1967] 63 ITR 449 (SC) (2) Mriganka Mohan Sur v. CIT [1979] 120 ITR 529 (Cal.) The ld. Departmental Representative concluded his arguments, stating that the CIT(A) rightly confirmed the penalty levied under section 271D. The same should be sustained. 6. We have carefully considered the arguments of both sides and perused the material placed before us. The first issue to be disposed of is whether the penalty was levied within the time permissible under section 275 of the Income-tax. The relevant portion of the above section, which is applicable to the issue under appeal before us reads as under: "275(1). No order imposing a penalty under this Chapter shall be passed- (a) (b) (c) in any other case, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided under section 275(1)(c). We accordingly hold that the penalty levied by the Assessing Officer under section 271D was not barred by limitation. 7. Coming to the merits of the penalty levied, the main basis for levy of the penalty is the computer floppy found from the residence of Shri Niranjan J. Shah. The print-out of the above computer floppy showed several transactions between Shri Shah and the assessee-company. The above transactions included some transactions by cheque and some by cash. The assessee had admitted the transactions by cheque but had denied the transactions which were in cash. The department, in support of its contention, has heavily relied upon the presumption provided under section 132(4A) of the Income-tax Act, while the assessee disputed the applicability of section 132(4A) to the present proceedings on the following grounds: (i) that the presumption under section 132(4A) is limited only to the proceedings under section 132(5) and not in respect of other proceedings; (ii) that the presumption under section 132(4A) is only against the person from whom the documents was found and not against third parties; (iii) that the presumption under section 132 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sume that the books of account or documents found from his possession are correct. However, while utilising those documents in the case of any other person (i.e. the person other than Mr. Niranjan J. Shah), there cannot be any presumption about the correctness of such books or documents. The Hon'ble Apex Court has considered this matter in the case of V.C. Shukla. In that case, certain diaries, small note book and various loose papers were found and seized from the premises of Mr. S.K. Jain of New Delhi. In those diaries/loose papers, the names of V.C. Shukla and L.K. Advani were found recorded. The CBI chargesheeted those persons, namely, Shri Shukla and Shri Advani under the Prevention of Corruption Act, 1988. The Hon'ble Apex Court held that the entries in those diaries/loose papers cannot be-used against Shri Advani or Shri Shukla but can be used against Shri Jain and may be proved as admission by him. The ld. Departmental Representative had contended that the above decision of Hon'ble Apex Court was not applicable to Income-tax proceedings because the above decision was based upon the interpretation of section 34 of the Evidence Act, 1872. He contended that Evidence Act is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respective of any other factors which may dissuade the court from doing so." Similar view was expressed by Their Lordships of Rajasthan High Court in the case of CIT v. S.M.S. Investment Corpn (P.) Ltd. [1994] 207 ITR 364 where it was held that the presumption under section 132(4A) is rebuttable. In view of above, we hold that the presumption under section 132(4A) is only a rebuttable presumption and not a conclusive one. The ld. Departmental Representative has relied upon various decisions. However, all of them are on altogether different facts. The dispute before the Hon'ble Kerala High Court in the case of K. Mahim and Smt. Sarala Nair was whether the purchase of property was benami or not, while the issue in the case under appeal before us is altogether different. Similarly, the facts in the case of Durga Prasad More are altogether different. There also, the dispute was whether the house property purchased in the name of assessee's wife belonged to her or to the assessee. In view of above, we hold that the various decisions relied upon by the Id. Departmental Representative will not be applicable to the case under appeal before us. 8. Let us examine the facts of this case in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce, you are simply stating that cash payment has not taken place? A. As I stated before I wanted to impress my associates, my friends and wanted to have undue advantage from my associates at a later stage i.e. after a lapse of some more time, I can always tell them that so much amount I have given for this company and I was sure that after a lapse of sometime nobody will argue or dispute with me and since I was the only person who was maintaining the account, this account would have been accepted not to the full extent but to the certain extent by them so I could have made money with this trick." Thus, Shri Shah himself had denied having advanced any money in cash to the assessee. He has also explained the reasons why he has made cash entries in the name of the assessee. It is also not in dispute that the assessee was never given any opportunity to cross examine Shri Shah. It is a settled law that the statement of any person cannot be utilised against the other person unless the other person is given an opportunity to cross examine the witness. In the case before us, not only Shri Shah was not allowed to be cross examined by the assessee but Shri Shah himself in the subsequent s ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
