Punjab-Haryana High Court
Commissioner Of Income-Tax vs Shri K.D.Bali on 17 February, 2011
Bench: Adarsh Kumar Goel, Ajay Kumar Mittal
Income-tax Appeal No.634 of 2005 -1-
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IN THE HIGH COURT OF PUNJAB AND HARYANA AT
CHANDIGARH
Income-tax Appeal No.634 of 2005
Date of decision: 17.2.2011
Commissioner of Income-Tax, Jalandhar-I, Jalandhar
...Appellant
Versus
Shri K.D.Bali
...Respondent
CORAM: HON'BLE MR.JUSTICE ADARSH KUMAR GOEL
HON'BLE MR.JUSTICE AJAY KUMAR MITTAL
Present: Mr. Vivek Sethi, Senior Standing Counsel for the
appellant.
Mr. Gagneshwar Walia, Advocate for Mr. K.D.Bali
Mr. Avneesh Jhingan, Advocate for Mr. Tarsem Singh.
Mr. M.S.Rakkar, Senior Advocate with
Mr. A.S.Syal, Advocate for Mr. Suram Singh and
Mr. Deep Chand.
Mr. D.D.Sharma, Advocate for Directorate of Enforcement.
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ADARSH KUMAR GOEL, J (Oral).
1. This order will dispose of ITAs No.634 of 2005, 341 of 2009 and Civil Writ Petition No.9610 of 1994 as all the three matters are inter-connected.
2. On 12.9.1993 cash amount of Rs.50 lacs was seized from fiat car bearing registration No.PB-24-2300 at Garhshanker, District Hoshiarpur. Car was being driven by Deep Chand son of Khushi Ram and also occupied by Suram Singh son of Jai Chand. The said Income-tax Appeal No.634 of 2005 -2- *** Suram Singh and Deep Chand are the writ petitioners in Civil Writ Petition No.9610 of 1994. Since the stand of the writ petitioners was that they were employees of K.D.Bali and money as well as car belonged to K.D.Bali, Income Tax Officer, Hoshiarpur after issuing necessary statutory notices passed order of assessment dated 27.3.1997 for assessment year 1994-95 adding the said amount to the income of K.D.Bali. The CIT(A) set aside addition which has been upheld by the Income Tax Appellate Tribunal against which ITA No.634 of 2005 has been filed.
3. Stand of K.D.Bali was that as per affidavit dated 25.7.1994 filed by Deep Chand and Suram Singh with the authorities, the amount was delivered to them by K.D.Kaushal, property dealer of Ropar for being delivered to Tarsem Singh. Tarsem Singh was also one of the petitioners in the writ petition originally filed and had laid claim to the amount on that basis. However, he later withdrew his claim and got his name deleted from the writ petition. The Income Tax Officer, Dasuya vide order of assessment dated 21.3.2002 added the amount to the income of Tarsem Singh. Tarsem Singh took the plea that the amount did not belong to him. He explained that K.D.Kaushal denied having sent the money, his earlier statement was by mistake. The CIT(A) set aside addition in the hands of Tarsem Singh which order had been upheld by the Tribunal against which ITA No.341 of 2009 had been filed by the revenue.
4. Claim in the writ petition of Suram Singh and Deep Chand is that since the amount was seized from them, the amount should Income-tax Appeal No.634 of 2005 -3- *** be returned to them. They were tried for violation of provisions of Foreign Exchange Regulation Act, 1973 (FERA Act) but were exonerated by the Appellate Authority i.e. Foreign Exchange Regulation Appellate Board.
5. Civil Misc. No.7459 of 2006 has been filed by the Tax Recovery Officer, Hoshiarpur Range, Hoshiarpur to become party to the writ petition to claim the money seized from the possession of Suram Singh and Deep Chand for appropriation against income tax demand against them. It is, inter-alia, stated that on receiving information from the SHO, Police Station, Garhshanker, District Hoshiapur that the amount of cash was seized from the writ petitioners survey proceedings were conducted under Section 133 & 133A of the Income Tax Act, 1961 and after recording statements of Suram Singh and Deep Chand, order of assessment dated 28.3.2003 was passed against them under Sections 144/148 of the Act assessing Rs.25 lacs each as income of Suram Singh and Deep Chand in respect of the amount seized treating the amount seized as income of the said assesses. The assessment was made on protective basis as assessment on substantive basis had already been made in the hand of K.D.Bali. Since the amount was with the Chief Enforcement Officer, Jalandhar and the Manager of the Allahabad Bank, Civil Lines, Jalandhar, the Income Tax Department was entitled to recover the said amount towards tax dues. The Directorate of Enforcement did not deliver the amount to the Income Tax Department on the ground that writ petition was pending in this Court. The Department had attached the FDR with the Directorate of Income-tax Appeal No.634 of 2005 -4- *** Enforcement. Deep Chand and Suram Singh had not challenged the assessment which had become final. In reply to the said application, the stand of the writ petitioners is that Deep Chand was merely a driver. Their statements that they were employees of K.D.Bali were not voluntary. No order of assessment under Section 144 of the Act was conveyed to them. As per assessment order annexed to the application as Annexure R/1, assessment had been made but the amount being with the Directorate of Enforcement assessment was illegal. The assessment made against K.D.Bali had been set aside. Assessment in the hands of Tarsem Singh was also under challenge. Thus, the different assessment orders against different persons could not have been passed.
6. We have heard learned counsel for the revenue, assessee K.D.Bali and Tarsem Singh, Directorate of Enforcement and the writ petitioners Suram Singh and Deep Chand and perused the record. We are of the view that the money belongs to K.D.Bali which was initial version of Deep Chand and Suram Singh and substantive assessment in the hands of K.D.Bali and protective assessment in the hands of Deep Chand and Suram Singh are fully justified. CWP No.9610 of 1994 is liable to be dismissed while ITA No.634 of 2005 deserves to be allowed. ITA No.341 of 2009 has to be dismissed as not pressed. The reasons follow:-
7. Stand of the revenue is that the substantive assessment in the hands of K.D.Bali was rightly made and the CIT(A) and the Tribunal erred in law in interfering with the same. Substantial question of law as to perversity of finding of the Tribunal was involved Income-tax Appeal No.634 of 2005 -5- *** and was required to be answered in favour of the revenue by setting aside the order of the CIT(A) and the Tribunal and restoring that of the Assessing Officer. If this stand is accepted, appeal filed by the revenue against Tarsem Singh was not required to be pressed. It was further stated the writ petitioners were not entitled to the money as in their hands protective assessment had already been made. Even if assessment in the hands of K.D.Bali was set aside, the writ petitioners would be liable to pay the money to meet the outstanding tax liability with penalty and interest which was in excess of the amount seized and the amount of interest earned thereon. In case the amount does not belong to writ petitioners and belongs to K.D.Bali, the amount cannot be handed over to the writ petitioners.
8. Learned counsel for the writ petitioners only submitted that since they were exonerated in proceedings alleged violation of Foreign Exchange Regulations Act and the amount was handed over by the police to Directorate of Enforcement, the amount having been seized from them, the Directorate of Enforcement was liable to return amount to them under Section 41 of the FERA Act. Learned counsel for the writ petitioners when confronted with the order of assessment did not dispute that no proceedings against the said orders had been taken even though copies of order of assessment were annexed to the application filed in this Court in the year 2006 to which reply was also filed by the petitioners. Learned counsel for the Directorate of Enforcement stated that he had no objection if direction is issued to remit the money to Income Tax Department to recover the outstanding tax liability.
Income-tax Appeal No.634 of 2005 -6-
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9. In view of above, Civil Writ Petition No.9610 of 1994 has to be dismissed with a direction to the Directorate of Enforcement to remit the amount available with it to the Income Tax Department within three months from the date of receipt of a copy of this order.
10. We now deal with ITA No.634 of 2005 filed by the department against K.D.Bali. If the said appeal is allowed, ITA No.341 of 2009 filed by the revenue against Tarsem Singh shall stand dismissed as not pressed as already noted.
11. Learned counsel for the revenue submitted that the assessee is partner of M/s Mahilpur Oil Store and declared total income of Rs.1,04,829/- for the assessment year in question. On receiving information from S.H.O., Police Station, Garhshanker on 12.9.93 that a sum of Rs.50 lacs was seized from Deep Chand, driver and Suram Singh travelling in car No.PB-24-2300, statements of Deep Chand and Suram Singh were recorded by Income Tax Inspector. The said statements have been annexed as Annexures R/4 and R/5 to the application filed by the Income Tax Department in the writ petition. The same have been referred to in the order of assessment. Suram Singh stated that he was a Salesman at the petrol pump of K.D.Bali and was getting salary of Rs.750/- per month. Deep Chand stated that he was driver of father of K.D.Bali at a salary of Rs.1400/- per month. They went to Delhi to collect Rs.50 lacs from J.P.Gupta on behalf of K.D.Bali. K.D.Bali was also detained under the provisions of Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 in pursuance of order of detention dated 6.5.1994 on the basis of the said Income-tax Appeal No.634 of 2005 -7- *** transaction. Though K.D.Bali in his statement recorded on 13.9.93 denied any link with the amount, his stand was that Suram Singh was his employee earlier and had left in the year 1991. He knew J.P.Gupta who was doing work of sale and purchase of cars in Delhi. He, however, denied owning the car in question and knowing the person in whose name the car was registered though his address was mentioned for registration. The assessee was asked to explain why the amount be not added to his income to which his stand was that the amount did not belong to him. Deep Chand and Suram Singh had given an affidavit dated 25.7.1994 before the Enforcement authorities that the amount belonged to Tarsem Singh and was given to them by K.D.Kaushal for being handed over to Tarsem Singh. Tarsem Singh had also claimed the said amount in the writ petition but later he resiled from the said version and got his name deleted from the writ petition. The assessing officer drew an inference that amount belonged to K.D.Bali from the fact that Suram Singh and Deep Chand were his employees and address in the registration certificate of the car was of K.D.Bali who was benami owner of the car. Relevant observations are :-
"8. From the statements of S/Sh. Suram Singh, Deep Chand, K.D.Bali and Tarsem Singh it reveals that the money was to be delivered to Sh.K.D.Bali C/o Mahilpur Oil Store, Mahilpur. This is also confirmed from the fact that Sh. Suram Singh and Sh. Rajinder Singh were employees of Sh. Kapil Datt and Sh. Deep Chand was employee of Sh. Shiv Datt Bali father of Sh. Kapil Datt Income-tax Appeal No.634 of 2005 -8- *** Bali. Thus the persons from whom the said amount of Rs.50 lakhs was seized are associates of Sh. Kapil Datt Bali and the fiat car the registration of which shows that the car was owned by Sh. K.D.Bali in Benami name or his associate. The statements recorded at the time of an just after the incident reveals the absolute truth. Thereafter, the entire story is after thought, baseless and has no legs to stand.
9. On the basis of information on record and the analysis of the foregoing facts, I am of the opinion that the said amount of Rs.50 lakhs seized from the associates of Sh. K.D.Bali is nothing but the income of the assessee. Sh. Kapil Datt Bali from undisclosed sources and is, therefore, added in his total income for the asstt. Year 1994-95, for which he is also treated to have concealed as also furnished inaccurate particulars of his income."
12. On appeal the CIT(A) set aside the order of assessment and remanded the matter for fresh decision on the ground that statements of Suram Singh and Deep Chand could not have been taken into account in absence of opportunity of cross examination being given to the assessee. Relevant observations are:-
"I have considered the arguments of the appellant. The A.O. Has relied on the statement of Sh.Suram Singh and Sh. Deep Chand recorded by the Inspector on 13.3.93 and no opportunity was allowed by him to the appellant to cross-examine these witnesses and whose statements he Income-tax Appeal No.634 of 2005 -9- *** had relied on. The AO has also not made proper investigation regarding the ownership of the car and he has also not investigated as to why the money of Rs.50 lacs was being sent by Sh. J.P.Gupta as per AO's version. There is nothing on record to show as to why the claim of Sh. Tarsem Singh should be discarded. There are too many loose ends and proper enquiries are required to be made in this case. In view of this, it is fair to set aside this issue and restore, it to he file of the AO for making proper examination and for passing a fresh order after making necessary enquiries and reasonable opportunity of being heard to the assessee. Accordingly, this issue is set aside and restored to the file of the AO for re-examination and passing a fresh order on this issue."
13. After remand, the assessing officer issued a fresh notice to the assessee and also issued summons to Suram Singh, Deep Chand and J.P.Gupta. The assessing officer held that inspite of repeated efforts on account of non-cooperative attitude of the assessee, Suram Singh, Deep Chand and J.P.Gupta who were his associates and were interested in non appearance to benefit him did not deliberately appear. Relevant observations are in paras 10 to 12 and 17 of the order dated 31.12.1999. Accordingly, the assessing officer analyzed the material on record and held that initial stand of Deep Chand and Suram Singh coupled with stand of K.D.Bali and other circumstances showed that the money belonged to K.D.Bali Income-tax Appeal No.634 of 2005 -10- *** and stand that the money belonged to Tarsem Singh and was given at the instance of K.D.Kaushal was not acceptable. Reasons for having accepted version of Suram Singh and Deep Chand in their original statements were as under:-
"i) These were recorded by the Inspector without any threat/pressure/torture. What ever facts were stated by Sh. Suram Singh and Sh. Deep Chand, the same were recorded by the Inspector who did not know either Sh. J.P.Gupta of Sh. K.D.Bali and all others, named by them in their statements.
Therefore, how the Inspector could have mention these names at his own accord.
Moreover the statements on which the department is relying were not recorded by the police or the officials of the Enforcement department but these were recorded by the Inspector of this office, without any kind of pressure.
ii) The statement of both them were recorded separately and the facts stated by them are in conformity and similar to each other. There is no any sign of contradiction.
iii) Their statements are self explanatory and showing the sequence of events.
iv) They clearly disclosed and admitted that they brought the cash of Rs.50 lacks from Shri J.P.Gupta which was to be delivered to Sh. K.D.Bali as per the Income-tax Appeal No.634 of 2005 -11- *** directions of Sh. Bali.
v) Sh. Suram Singh and Rajinder Singh were the employees of Sh. K.D.Bali whereas Sh. Deep Chand was the driver of Sh. Shiv Datt Bali father of Shg. K.D.Bali. Therefore, their association with Sh. K.D.Bali stands established.
vi) As per their statements the money was brought from Sh. J.P.Gupta on the instructions of Sh. K.D.Bali, because Sh. Bali had some links with Sh. J.P.Gupta as admitted by him in this statement dated 13.9.93. Sh. Bali admitted that Sh. J.P.Gupta used to make telephonic calls to him as and when he required his services. This shows that some activities existed between him and Sh. Gupta.
vii) The later version of Sh. K.D.Bali that he does not know anything about Sh. J.P.Gupta and he has no link with him cannot be believed to be correct in view of his statement dated 13.9.93.
viii) The claim over the cash of Rs.50 lacs put forth by Sh. Tarsem Singh and the retraction of Sh. Suram Singh and Sh. Deep Chand is nothing but an after thought and based on the false story. This has been proved by Sh. K.D.Kaushal beyond doubt, though his statement as mentioned above in details.
ix) Sh. K.D.Bali failed of offer any comments upon the statement of Sh. K.D.Kaushal.
Income-tax Appeal No.634 of 2005 -12-
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x) The retraction of Sh. Suram Singh and Sh. Deep Chand has also been proved to be untrue by the facts stated by Sh. K.,D. Kaushal in his statements dt. 19.11.99 and 30.11.99.
xi) Enquiries were also made regarding the ownership of car bearing No.PB-24-2300 as per the directions of the ld. CIT(A) a request was made to the SDMN Garshanker vide this office letter dt. 25.10.99 to furnish the following information in respect of Fiat Car No. PB-24-2300:-
a) Full particulars of car as per R.C.
b) Name and address of the person in whose favour it was originally registered and the data of registration.
c) Name and address of all persons, if any, in whose favour the registration was transferred afterwards and the data of such transfer.
d) The name of the person who was the owner of this car as on 12.9.93.
The SDM cum Registration authority Garshanker vide his office letter No.2608 dt. 15.11.99 informed that the car was registered in the name of Sh. Baldev Sharma, of Purani Sabji Mandi, Ropar C/o Kapil Datt Bali, resident of Mahilpur. It was purchased on 19.7.93 and registration was made on 23.7.93. It was not transferred in any other name uptil now, it stands in the name of the above said Income-tax Appeal No.634 of 2005 -13- *** persons uptill now. The ownership of the car in the name of a person whose address in the records of the Registration Authority is given as c/o Sh. Kapil Datt Bali resident of Mahilpur established the relation of the car with the assessee. Sh. Kapil Datt Bali and it also leads to the conclusion that it was held by Sh. K.D.Bali in the benami name of Baldev Sharma."
xxx xxxx xxx "21. All the facts narrated above reveal that the money was brought by Sh. Suram Singh, Deep Chand and Rajinder Singh alias Gorkha on the instruction of Sh. K.D.Bali and they being the employees of Sh. Bali and his father, were the associates of the assessee and the associate of the assessee. The retraction of Sh. Suram Singh and Sh. Deep Chand from their original statements and the claim of Sh. Tarsem Singh are based on the after thoughts which cannot be relied upon. Keeping in view the material and information placed on records and the facts and circumstances of the case. I am of the opinion that provision of Section 69A are applicable in this case. The amount of Rs.50 lacs seized from the associates of Sh. Kapil Datt Bali on 12.9.93 is therefore, treated as the income of the assessee from undisclosed sources and added to his total income for the A.Y. 1994-95. The assessee is also treated to have concealed and furnished inaccurate particulars of his income.
Income-tax Appeal No.634 of 2005 -14-
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14. In the next round of litigation, the appeal of the assessee was accepted by the CIT(A) again, inter-alia, on the ground that car was taken on superdari by Sukhdev Singh and Suram Singh and Deep Chand being not available for cross examination, there was no material to connect K.D.Bali with the amount. Relevant observations are:-
"As mentioned earlier the money was found in possession of three persons who were in the car and who are no more traceable. The car is registered in the name of Sh. Baldev Sharma but has been handed over to Sh. Sukhdev Singh by the Court and no efforts has been made by any authority to dispute this order of superdari which was based on the claim of Sh. Sukhdev Singh that the car belonged to him thus even the connection of car with Sh. K.D.Bali has become remote. Only other things that connects the amount of Rs.50 lacs to Sh. K.D.Bali are the statements of Sh. Suram Singh and Sh. Deep Chand who are not available for cross-examination. In these circumstances, it is difficult to hold that Sh. K.D.Bali is the owner of Rs.50 lacs. In these circumstances, I am unable to hold that Rs.50 lacs represented income of the assessee u/s 69A of the I.T.Act and therefore the addition of Rs.50 lacs made by the A.O. Is deleted."
15. The same view was taken by the Tribunal.
16. Learned counsel for the revenue submitted that mere fact that Sukhdev Singh got the car released on superdari could not be Income-tax Appeal No.634 of 2005 -15- *** conclusive of K.D.Bali having no connection with the car. It is an acknowledged fact that address in the registration certificate of car is of K.D.Bali. This circumstance had been totally ignored by the CIT (A). The mention of address of K.D.Bali required explanation and the assessing officer rightly drew inference against K.D.Bali from the said circumstance. It was also admitted fact that K.D.Bali had himself admitted that Suram Singh was his employee earlier. The money did not belong to Suram Singh from whom it was recovered nor Tarsem Singh who was implicated in a later version. There was no motive for Suram Singh and Deep Chand to name K.D.Bali being owner of the money. Their version was also probablised by the fact that K.D.Bali knew J.P.Gupta who is said to have given the money. No doubt the fact that Suram Singh and Deep Chand were not available for cross examination could be a consideration in favour of K.D.Bali but the Assessing Officer has given detailed reasons for holding that K.D.Bali himself was responsible for their non appearance. In the circumstances, K.D.Bali could not take advantage of his own wrong. The circumstances taken together clearly proved that amount belonged to K.D.Bali. The CIT(A) ignored and failed to discuss the material evidence namely address of K.D.Bali in the registration certificate , K.D. Bali being acquainted to J.P.Gupta and Suram Singh being his employee. Though K.D.Bali took the plea that Suram Singh had left him it was for K.D.Bali to prove that Suram Singh has ceased to be his employee when admittedly at one time he was his employee. His mere statement that Suram Singh had left him was a self serving denial to avoid his liability. Version of money Income-tax Appeal No.634 of 2005 -16- *** being meant for Tarsem Singh was not found to be true. These facts having not been taken into account by the CIT(A) as well as the Tribunal, the view taken by the CIT(A) and the Tribunal being perverse cannot be sustained. Conclusion drawn by the Assessing Officer in the circumstances was fully justified. No doubt any quasi judicial authority has to follow principles of natural justice which include opportunity to cross examine the witness whose statement is relied upon but the principles of natural justice are not fixed principles. The same can vary depending upon the nature of enquiry. In the context of tax assessment it was observed in State of Kerala V. K.T.Shaduli Grocery Dealer (1977) 2 SCC 777:-
"It is, therefore, not possible to say that in every case the rule of audi alteram partem requires that a particular specified procedure is to be followed. It may be that in a given case the rule of audi alteram partem may import a requirement that witnesses whose statements are sought to be relied upon by the authority holding the inquiry should be permitted to be cross-examined by the party affected while in some other case it may not. The procedure required to be adopted for giving an opportunity to a person to be heard must necessarily depend on the facts and circumstances of each case."
17. In the present case the persons from whom the amount was recovered initially stated that the amount belonged to the assessee. They are not shown to be having any extraneous reason Income-tax Appeal No.634 of 2005 -17- *** to give such a version. Thereafter though they gave statement that the amount belonged to Tarsem Singh but the said statement was not proved to be correct and the said statement was given after a long time. The improved version could not be preferred to the original version. The first statement was also supported by other circumstances of the car being registered at the address of the assessee, the assessee admitting that earlier Suram Singh was his employee and that he knew J.P.Gupta who was said to have sent the amount. These could not be ignored by the CIT(A) and the Tribunal for setting aside of the assessment order on the ground that said witnesses were not produced for cross examination or that the car was later taken by some third person on superdari.
18. In view of the above, we answer the question in favour of the revenue and hold that order of assessment against respondent- assessee K.D.Bali was justified and finding of the CIT(A) as well as the Tribunal in setting aside thereof is perverse.
19. According ITA No.634 of 2005 is allowed whereas ITA No.341 of 2009 is dismissed as not pressed.
20. A copy of this order be placed on the file of each connected case.
(Adarsh Kumar Goel)
Judge
February 17, 2011 (Ajay Kumar Mittal)
Pka Judge