9911796707
TMI Blog1996 (1) TMI 154X X X X Extracts X X X X X X X X Extracts X X X X ..... T under section 263. On the other hand, in I.T.A. No. 34, the assessee has challenged on merits the main addition of Rs. 48 lakhs made by the Assessing Officer and confirmed by the CIT(A) on account of alleged payment made by the assessee to one Shri J.M. Paul as illegal gratification for securing dealership of Maruti car. 4. Briefly, the facts are that the assessee is an individual who derives income from salary as a director of M/s. Jagdish Chand Constn. Pvt. Ltd. He also enjoys income by plying of truck and besides that has income from other sources on account of interest on deposits in banks, investment in NSCs etc. The assessee has filed a return declaring income of Rs. 22,110 and the assessment was framed by the Assessing Officer under section 143(3) at a total income of Rs. 42,110 vide order dated 27-3-1991. During the course of assessment proceedings, the Assessing officer found that on 14-5-1989, the assessee was apprehended by the officials of the enforcement directorate at the residential premises of one Shri S.K. Chopra residing at 14/4, Kalkaji, New Delhi, and a sum of Rs. 21.10 lacs in Indian currency was found in his possession and was seized by the officials of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .M. Paul, however, denied having received the sum of Rs. 48 lacs from the assessee. In the statement of Shri J.M. Paul admitted that he knew Shri Jagdish Chand Gupta but had no business dealings with him. He, however, admitted that he had agreed to do liaison work for Mr. Gupta for procuring a dealership of automobile parts of Maruti Udhyog and for that purpose, a company in the name of United Dealers was floated by Shri J.C. Gupta in which Shri J.M. Paul was appointed as a Director and Shri Jagdish Chand Gupta paid him Rs.45,000 in instalments for his work which included expenses for going to Delhi and a part of this amount was returned by Shri J.M. Paul to Shri Jagdish Chand Gupta. 6. The search by the ADI, Delhi was conducted on 16-5-1989 at the residential premises of the assessee when marriage ceremony of Shri Anil s/o Shri Jagdish Chand Gupta, was in progress. In fact, the Shagan ceremony was to be performed at 12 noon on 16-5-1989 and Sehrabandi was to be performed at 7.30 P.M. as per the invitation card at page 32 of the paper-book. The same, however, was delayed because of the search operations and Sehra Bandi was actually performed at 11 P.M. The case of the assessee be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndered the alleged sum of Rs. 48 lakhs either before the Enforcement Officer or before the ADI and the statements were recorded by the concerned officials, namely, the Enforcement Officer and the ADI, Delhi and the assessee was coerced to sign those statements. In the written submission dated 25-3-1991, copies of which were furnished to us at pages 2 to 18 of the paper-book, which were furnished to the Assessing Officer, it was claimed that the alleged surrender of Rs. 48 lakhs was made under coercion and it does not pertain to the assessment year 1989-90. Thereafter, the assessment was framed by the Assessing Officer for the assessment year 1989-90 on 27-3-1991 at an income of Rs. 42,110. Below the above assessment, an office note was given directing the office to fix the case for 1990-91 immediately wherein the income under section 132(5) has been estimated at Rs. 72.10 lakhs. 7. Thereafter, it appears that the CIT, Haryana, Rohtak called for the assessment records of the assessee and issued a notice under section 263(1) on 30-10-1992 intimating that the order passed by the Assessing Officer under section 143(3) on 27-3-1991 was erroneous and prejudicial to the interest of reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner that the statement recorded by the FERA officials was written in an essay form and not in the form of question and answer and a plain reading of the statement will indicate that it is a confession which has been recorded under dictation. I was pleaded that no sane person of sound mind can be presumed to have stated on his own, suo motu, without any question or instigation that he has given a sum of Rs. 48 lakhs as illegal gratification to someone, when it was neither an occasion to tell nor any such question was ever asked. It was pleaded that illegal gratification can be given to a Government official or a public servant whereas Shri J.M. Paul was simply a trader and a businessman and had the assessee actually made the payment of Rs. 48 lacs to Shri J.M. Paul, he could have simply said that he has paid a sum of Rs. 48 lacs as illegal gratification. Accordingly, it was pleaded that the alleged statement before the FERA authorities was a confession recorded under coercion and threat and cannot be relied upon. It was also pleaded that Foreign Exchange Regulation Act and Income-tax Act were two separate and independent Acts operating in two different fields. The motive, scope a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ein the submissions earlier made before the Assessing Officer vide letter dated 25-3-1991 were reiterated. The Assessing Officer, however, after considering the submissions of the assessee dated 14-12-1992, passed an order on 29-4-1993 wherein an addition of Rs. 48 lakhs on account of alleged payment made by the assessee to Shri J.M. Paul during the period August, 1988 to January, 1989 were added under section 69. Besides that, the Assessing Officer made a further addition of Rs. 94,601 on account of deemed dividend under section 2(22)(e) of the Act. 11. The assessee appealed and the ld. CIT(A), vide order dated 1-10-1993, confirmed the order of the Assessing Officer and the assessee has filed a second appeal before the Tribunal against the order of CIT(A) dated 1-10-1993 wherein the following grounds have been taken :--- 1. That the ld. CIT has erred in law as well as on facts in upholding an addition of Rs. 48,00,000 as unexplained income of the appellant which is arbitrary and unjustified. 2. That merely because the assessee in his statement said before the FERA authorities who recorded his statement under threat and coercion that he paid a sum of Rs. 48 lakhs to one Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounds indicates that grounds Nos. 1 to 5 are relating to action of the departmental authorities in making the addition of Rs. 48 lakhs on account of alleged payments made by the assessee to Shri J.M. Paul during the period August, 1988 to January, 1989. Ground Nos. 6 to 8 are the alternative plea of the assessee that in case the addition of Rs. 48 lakhs is made on account of expenditure, then the same having been lost should be set off under section 71 of the Income-tax Act in view of the judgment of the Supreme Court in the case of Piara Singh. Ground of appeal No. 9 is with regard to the addition of Rs. 94,601 as deemed dividend under section 2(22)(e) of the Income-tax Act. 13. At the time of hearing, Shri Sudhir Sehgal, Advocate, the ld. counsel for the assessee, submitted that he did not want to press ground No. 9 in I.T.A. No. 34/Chandi/94 which is against the order of CIT(A) dated 1-10-1993. Accordingly, this ground is dismissed as not pressed. 14. While arguing I.T.A. No. 31, which is against the order passed by the CIT under section 263 on 19-11-1992, Shri Sudhir Sehgal, Advocate, the ld. counsel for the assessee, submitted that the order passed by the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was also placed on the decision of the Hon'ble Allahabad High Court in the case of CIT v. Goyal Private Family Specific Trust [1988] 171 ITR 698 at 701 for the proposition that the order of the ITO may be brief and cryptic but that by itself is not sufficient to brand the assessment order as erroneous and prejudicial to the interest of the revenue. It was submitted that the Chandigarh Bench of the Tribunal in the case of N. S. Ichhopani I.T. Appeal No. 1984 (Chd.) of 1992 dated 29-5-1995 for the assessment year 1985-86, has cancelled the order passed by the Commissioner under section 263 in identical circumstances. Shri Sudhir Sehgal, the ld. counsel for the assessee, specifically referred to the observation and the findings of the Tribunal in para 10 wherein relying on the decision of Hon'ble Punjab and Haryana High Court in the case of Kanda Rice Mills, the Tribunal observed that setting aside an assessment under section 263 is not an ordinary matter and the assessment cannot be set aside unless the Commissioner comes to a firm conclusion as to whether the Assessing Officer had committed an error in framing an assessment. The setting aside of the assessment order by the Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d having received any such amount of Rs. 48 lakhs from the assessee and no action whatsoever was taken by the income-tax department in the hands of Shri J.M. Paul who is alleged to have received the sum of Rs. 48 lakhs from the assessee. Accordingly, it was submitted that the addition made only on the basis of alleged confessional statement of the assessee which was subsequently retracted cannot be sustained in law. Reliance was placed on the decision of the Hon'ble Supreme Court in the case of Krishan v. Kurukshetra University AIR 1976 SC 376, as well as the decision of the Hon'ble Punjab and Haryana High Court in the case of Krishan Lal Shiv Chand Rai v. CIT [1973] 88 ITR 293. Reliance was also placed on the decision of Supreme Court in R.B. Jodha Mal Kuthiala v. CIT [1971] 82 ITR 570 and CIT v. Simon Carves Ltd. [1976] 105 ITR 212. 16. Alternative, the ld. counsel for the assessee pleaded that even if it is held that the assessee has actually paid the amount of Rs. 48 lakhs to Shri J.M. Paul, then the same has been a complete loss to the assessee as the assessee has not got any dealership of Maruti Car and the amount should be allowed to be set off under section 71 and relianc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r as well as the CIT(A) in this regard. 19. As regards alternative plea of Shri Sudhir Sehgal for set off of Rs. 48 lakhs, the ld. D.R. submitted that the decision in the case of Piara Singh is not applicable as the assessee was not indulging in illegal business activity. In fact, the addition of Rs. 48 lakhs was being made by the departmental authorities by invoking the provisions of section 69(c) as the assessee admittedly incurred expenditure of Rs. 48 lakhs the source of which could not be explained by the assessee. Accordingly, it was pleaded that the alternative plea of the assessee has no merit. 20. We have considered the rival submissions and have gone through the order passed by the Assessing Officer on 27-3-1991, order of the CIT under section 263(1) dated 19-11-1992 as well as the order passed by the Assessing Officer dated 29-4-1993 giving effect to the order of the CIT under section 263 and CIT(A) in order dated 1-10-1993. We have also taken note of the paper-book running into 88 pages in respect of I.T.A. No. 31 and paper-book running into 38 pages in respect of I.T.A. No. 34. The sequence of events is as under :--- Dates Sequence of events 14-5-1989 : The ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requisitioned from the officers of the FERA on 16-5-1989. 4-7-1989 : The assessee filed a detailed reply stating therein that out of Rs. 21.10 lakhs seized from him on 14-5-1989, Rs. 2 lakhs belong to his son-in-law Dr. Arun Gupta and Rs. 19.10 lakhs belong to himself which was taken by him to Delhi to make certain purchases. The details of Rs. 19,10,000 were claimed to be as under :--- (i) Rs. 14,40,000 withdrawn from State Bank of Patiala, Sector-38, Chandigarh; (ii) Rs. 1,65,000 withdrawn from Punjab National Bank, Sector-18, Chandigarh. (iii) Rs. 1,45,000 withdrawn from State Bank of India, Paonta Saheb, H.P. (iv) Rs. 1,60,000 cash with self. 30-8-1989 : A detailed notice issued to the assessee under Rule 112A read with section 132(5) after the receipt of the appraisal report of DDI Unit-II, Mayur Bhawan, New Delhi was issued and served on the assessee to explain the various documents seized at the time of search and in particular the explanation with regard to the seized amount of Rs.21.10 lakhs and the alleged payment of Rs. 48 lakhs made by the assessee to Shri J.M. Paul as illegal gratification for securing the Maruti Car dealership. 11-9-1989 : A written rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder of the Assessing Officer passed under section 143(3) on 29-4-1993. 21. From the sequence of events narrated above, it is clear that when the ITO passed the original order under section 143(3) on 27-3-1991, he has all the necessary information with regard to the alleged payment of Rs. 48 lakhs by the assessee to Shri J.M. Paul. The search and seizure operation by the Enforcement Officer as well as the ADI, Delhi had taken place on 14-5-1989 and 16-5-1989 respectively and these statements were duly considered by the Assessing Officer while passing order under section 132(5) of the Act on 12-9-1989 and as such, these were parts of the assessment record which were duly considered by the Assessing Officer while framing the assessment under section 143(3). It appears that after considering the evidence available on record, the Assessing Officer was of the opinion that since the search and seizure operation were carried on 14-5-1989 and 16-5-1989 which date fell in the accounting year relevant to the assessment year 1990-91, the addition on account of alleged payment of Rs. 48 lakhs has to be considered in the assessment year 1990-91 which finds support from the office note given b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 68/69 of the Income-tax Act, 1961. Similarly, in para 5, he has held that the ITO had failed to make enquiries while completing the assessment with respect to the nature and source of Rs. 48 lakhs which is apparently incorrect because all the information relating to the alleged confessional statement of the assessee before the FERA authorities as well as before the ADI, Delhi was before the Assessing Officer and the assessee has also given detailed reply in which the alleged confessional statement of Rs. 48 lakhs as illegal gratification to Shri J.M. Paul was denied. 22. The Chandigarh Bench of the Tribunal in the case of N.S. Ichhopani and in the case of Smt. Veena Jindal in the case of Rockman Cycle Industries (P) Ltd. (to which one of us was a party), in almost similar circumstances, relying on the decision of the Hon'ble jurisdictional High Court in the case of Kanda Rice Mills as well as the decision of Hon'ble Allahabad High Court in the case of Goyal Private Family Specific Trust, has held that the jurisdiction assumed by the ld. Commissioner was not proper. Applying the ratio of the above decisions to the facts of present case, we are of the opinion that the ld. Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion Act. Similarly, the statement recorded by the ADI, Delhi, was at the time of search of the assessee's premises on the day when his son was getting married and the assessee simply penned his signature on the statement recorded by the officials of the search party with a view to complete the formalities and conclusion of the search so as to go ahead with the Sehra Bandi ceremony of his son which was delayed by four hours on account of search. These statements were subsequently retracted by the assessee by filing detailed submissions during the course of proceedings under section 132(5) as well as under section 143(3) which culminated into passing of the order on 27-3-1991 wherein no addition of Rs. 48 lakhs was made, may be on the presumption that the same was assessable in the assessment year 1990-91 on which we express no opinion. It is also undisputed that except the alleged confessional statement of the assessee, there is no evidence available on record to support the alleged payment of Rs. 48 lakhs by the assessee to Shri J.M. Paul. No papers indicating the payment were seized from the residence of the assessee and Shri J.M. Paul in his statement recorded by the ADI, Chandi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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