Income Tax Appellate Tribunal - Chandigarh
R. K. Syal vs Assistant Commissioner Of Income Tax on 16 September, 1998
Equivalent citations: (2000)66TTJ(CHD)641
ORDER
B. S. Saluja, J. M. The department has moved an application for admission of additional evidence (pp.1-36 of paper book) with reference to grounds Nos. 5-7 raised by the assessee relating to various gifts received from NRIs.
2. Learned Departmental Representative, Shri P.S. Punia, referred to the provisions of rule 29 of the Income Tax (Appellate Tribunal) Rules and submitted that the said evidence has been collected after completion of assessment in the case of the assessee. He referred to the statements of Major H.S. Bhangu and Shri Navtej Singh Bains, two donors who had made gifts to the assessee, and submitted that the same were relevant for consideration of the issue of gifts made. He also referred to p. 2 of the assessment order and submitted that gifts of Rs. 26 lakhs had been made by Major Bhangu and of Rs. 45 lakhs by Shri Navtej Singh. He referred to the finding of the assessing officer that Shri R.K. Syal-the assessee-had routed his unaccounted money through the NRI account of Major Bhangu by paying him adequate compensation for giving an entry which on the face of it appears to be a genuine gift. He submitted that certain dealings were going on between the assessee and Major Bhangu. He, therefore, urged that the documents/evidence may have bearings on the issue of gifts in the case of the assessee and the same ought to be admitted. Learned Departmental Representative made detailed submissions, which are summarised as under :
(a) The evidence has a bearing on the finding given by assessing officer and that there have been dealings between the assessee and Major Bhangu and others;
(b) The said evidence does not go to build up a new case by the department or to improve the case of assessing officer; and
(c) The said evidence is to strengthen the conclusion already arrived at by assessing officer.
Learned Departmental Representative submitted that powers of the Tribunal are very wide for admission of additional evidence under rule 29. He submitted that the crucial question is relevancy of documents to the issue to be decided by the Tribunal. In support, learned Departmental Representative relied on the following decisions :
(i) Omar Salay Mohamed Sait v. CIT (1959) 37 ITR 151 (SC). In this case, Income Tax Officer found two cash credits in the books of account produced by the assessee showing an amount of Rs. 1.05 lakhs on 1-3-1948. He asked the assessee to explain the said entry and the statement of the assessee was recorded on 26-1-1949. He explained that the two amounts represented sale proceeds of gold, jewellery and sovereigns which belonged to Yamunabai who was a native of Ranavav near Porbandar in Saurashtra. He submitted that he was living in Ranavav but had come away to Madurai sometime in 1947 and she decided not to return to Ranavav owing to the communal disturbances which broke out in August, 1947, and empowered the assessee to sell the jewellery, gold and sovereigns and bring over the sale proceeds to Madurai and invest the same there. In proof, the assessee produced before assessing officer original invoice relating to sale of jewels and gold furnished by M/s Shariff Hassan & Bros, through whom sales were effected along with a copy of their accounts. After this statement, Income Tax Officer addressed a letter calling upon the assessee to obtain from Yamunabai an affidavit to the effect that she really possessed jewels, gold and sovereigns worth nearly Rs. 1.60 lakhs and that these were given to him by her for being sold and deposited with him. The assessee procured and filed affidavit before assessing officer duly sworn by Yamunabai on 24-2-1949. assessing officer made further enquiries and also pointed out certain infirmities in the affidavit vis-a-vis earlier statement of Yamunabai in which she had stated that she had given all her jewels to the wife of the assessee on the occasion of her marriage in the year 1933 and asked the assessee as to which of the two versions was correct. The assessee gave further replies and in the ultimate analysis Income Tax Officer concluded that the amounts represented cash credits and the interest thereon represented profit earned by the assessee in business. He also initiated penalty proceedings under section 28(1)(c) of the Indian Income Tax Act, 1922. When penalty notice was served, the assessee obtained three affidavits from respectable residents of Ranavav who knew Yamunabai intimately and who could speak about her status and 'wealth. The assessee filed an appeal before the Appellate Assistant Commissioner, who came to the conclusion that after considering the affidavit of Yamunabai, assumption of the Income Tax Officer that she gave away all her jewels and also money and therefore could not have any more jewels available for sale in 1948 could not derive any support from the statement contained in the affidavit. He also referred to the result of subsequent enquiries made by Income Tax Officer and observed that the departmental enquiries made at the other end substantially supported the assessee's claim that Yamunabai was possessed of valuable jewels and such jewels were sold in 1948 by her duly authorised attorney-the assessee-and the same proceeds transferred to Madurai for crediting to her account in the assessee's books. The Appellate Assistant Commissioner held that in the face of overwhelming evidence there was no justification at all for disputing the assessee's claim that the credits did really represent Yamunabai's monies and on no account could they be treated as profits camouflaged and both the items aggregating to Rs. 1,69,240 were therefore, liable to be deleted. When the matter travelled to the Tribunal, it pointed out various loopholes, as mentioned at p. 161 of the report and held that the aforesaid amounts represented unaccounted money in the hands of the assessee which he managed to remit to Madurai and, therefore, treated the said amounts as unexplained. The order of the Appellate Assistant Commissioner was accordingly vacated to the extent of Rs. 1,59,240. The assessee took up the matter before the High Court, which vide order, dated 9-8-1954, dismissed the petition observing that the finding of the Tribunal was a finding of fact and there was certainly evidence on record to support that finding and the circumstances and the probabilities of the case were strongly in favour of the conclusion of the Tribunal. The assessee then filed a special leave petition before the Supreme Court, which noted the submissions made by learned counsel and one of the submissions was that the Tribunal was not justified in not considering the evidence which was taken subsequently at the instance, of the department itself and any conclusion arrived at by the Tribunal was vitiated by improper rejection of relevant and material evidence. The Apex Court asked learned counsel for the department to satisfy the court in the first instance as to how he could justify the improper rejection of evidence by the Tribunal. It noted that he could point out the passage from the order of the Tribunal wherein it criticised the impropriety of the Appellate Assistant Commissioner's having looked into the evidence partially and arriving at his conclusion, without giving the department an opportunity of leading further evidence by' way of tracing the sale outside, on remand. It observed that the said passage certainly did not show that the Tribunal had applied its mind to the evidence which was there on the file of the assessee in the shape of information gathered subsequently and it merely confirmed that the Tribunal had improperly rejected that evidence.
(ii) CIT v. Babulal Nim (1963) 47 ITR 864 (MP), wherein it was observed that the admissibility of additional evidence under rule 29 depended upon whether or not the Tribunal required the evidence to enable it to pass orders or for any other substantial cause, or if the Income Tax Officer has decided the case without giving a sufficient opportunity to the assessee to adduce evidence on points specified by him or not specified by him. It was also observed that the rule does not enable the assessee or the department to tender fresh evidence to support a new point or to, make out a new case. Learned Departmental Representative cited this case with a view to submit that the aforesaid evidence placed in the paper book does not go to build up a new case or improve the case of assessing officer but only strengthens the conclusions already arrived at by him.
(iii) Moti Ram v. CIT (1958) 34 ITR 646 (SC), wherein it was observed that the Tribunal had full jurisdiction and it is in its discretion to refuse permission to an appellant to raise for the first time before it new questions of fact which cannot be decided without taking further evidence. It was also observed that even if the Tribunal had already given permission to the appellant to produce affidavits and other evidence pertaining to the new questions of fact, it is open to it not to accept them, if it decides not to allow the appellant to raise the new questions of fact. Learned Departmental Representative submitted that on the face of it, it would appear that reliance on this decision contradicted the prayer being made by the department. However, with reference to the facts of the case which were referred to by learned Departmental Representative, he submitted that the assessee took a new plea shifting his stand that the draft for Rs. 5 lakhs was made in Srinagar to make payment to the party from whom the goods were purchased as against the earlier plea that remittance of Rs. 5 lakhs from Srinagar to Amritsar represented profits of business carried on in Srinagar. He submitted that under these circumstances the Apex Court refused permission to the appellant to take this new plea or to introduce evidence in relation thereto. He submitted that in the present case, the aforesaid evidence was only in support of the conclusion already arrived at by assessing officer.
(iv) R. S. S. Shanmugam Pillai & Sons v. CIT (1974) 95 ITR 109 (Mad), wherein it was observed that '..... if the Tribunal finds that the documents filed are quite relevant for the purpose of deciding the issue before it, it would be well within its powers to admit the evidence and consider the same or it may remit the matter to the lower authorities for the purpose of finding out the genuineness of the documents and considering their relevancy. But if the Tribunal finds that the evidence adduced at the stage of the appeal is not quite relevant or that it is not necessary for the proper disposal of the appeal before it, the Tribunal could straightaway reject the evidence which was sought to be produced for the first time at the stage of the appeal. The Tribunal cannot refuse to entertain such evidence and at the same time go into its merits and come to a conclusion one way or the other'.
(v) Lakhmichand Baijnath v. CIT (1959) 35 ITR 416 (SC). In this case, the assessee was an HUF carrying on business as piecegoods merchant- The assessee claimed that there was a partition in the family on 24-4-1945 and the Income Tax Officer passed an order holding that the petition had taken place and that the family had become divided into five groups. assessing officer noted that in the proceedings for assessment of income of the family, in regard to the six sums aggregating to Rs. 2,30,346 shown in the accounts as sale proceeds of ornaments, the explanation given was that at the partition the jewels of the family were sold in six lots and the amounts realised were invested in the business. The Income Tax Officer declined to accept the explanation as he found that the accounts of the purchaser, showed only the sale of gold, that the weight of the ornaments according to the partition agreement was 3,422 tolas whereas the weight of gold actually sold was 3,133 tolas. The assessee explained that the said discrepancy was on account of the fact that jewels had come down to the family through several generations and were not pure. Assessing officer rejected the said explanation on the ground that the weight deducted for impurities in the accounts of the purchaser was negligible. He also found that the sales were in round figures of 500 tolas. On first appeal before the Appellate Assistant Commissioner, the assessee explained that the difference in weight shown in the partition agreement and that appearing in the purchaser's books was due to pearls and stones which had been removed from the jewels. On further appeal, the proceedings book in which were recorded the particulars of the agreement of partition, was produced before the Tribunal in support of the claim, but the Tribunal refused to admit the books as evidence on the ground that it could not have been produced before the Income Tax Officer. The Tribunal held that the amounts did not represent the sale proceeds of the family jewels but secret profits of the business. On a reference, the High Court affirmed the decision of the Tribunal. On appeal to the Apex Court, it was held that the finding of the Tribunal that the sum of Rs, 2,30,346 represented concealed business profits was a finding of fact which could not be interfered with in a reference unless it was shown that there was no evidence to support it or that it was perverse. It was also held that the proceedings book was not relied upon as evidence with reference to the character of the receipts before the Income Tax Officer and that the Tribunal did not act perversely or unreasonably in refusing to admit the proceedings book as evidence.
(vi) In Sumit Engg. & Industrial Corpn. v. ITO (1994) 117 CTR (Asr-Trib)(TM) 263, wherein learned Departmental Representative pointed out that the question of cash credit was considered and subsequent to assessment evidence of third party (creditors) was collected and then the President, acting as a third Member, relied on the aforesaid decision in (1959) 37 ITR 151 (SC) (supra) and held that it is the duty of the Tribunal to take such evidence on record.
In view of the ratio of the aforesaid decisions, learned Departmental Representative urged that the evidence placed in the paper book may be admitted as additional evidence as the same is only in support of the findings of assessing officer and no new case is being built up or improved upon by the department. He also submitted that after admission of the aforesaid additional evidence, the assessee may be allowed opportunity to meet the said evidence as the same has not been confronted to him and that in order to do so the case could be restored to the file of assessing officer on the issue of gifts made to the assessee.
2.1. Learned counsel, Shri P.C. Jain, strongly opposed the prayer of the department for admission of the additional evidence. Learned counsel made detailed submissions, which are summarised as under :
(a) The said evidence is in the case of assessment of third parties which are yet to be completed and is not connected with the proceedings in the case of the assessee and that cause of action therein is different from the case of the assessee. Learned counsel submitted that the attempt of the department is indirectly to reopen the assessment made on this issue.
(b) The prayer by the department for admission of additional evidence is an attempt to use the Tribunal as a conduit to cover up lapse, if any, of assessing officer in adjudicating upon the issue of gifts made to the assessee.
(c) The admission of the said evidence will be against the doctrine of finality of assessment and will give rise to a proliferation of litigation.
Learned counsel referred to the objects of Chapter XIV-B relating to the special procedure for block assessment cases and pointed out that the Tribunal has already dealt with the objects of this Chapter in the case of Smt. Neena Syal v. Assistant Commissioner in ITA No. 1163/96. He submitted that the underlying object is speedy adjustment/assessment and that order is approved by learned Commissioner. He submitted that learned Commissioner did not authorise assessing officer to collect evidence after assessment. He further submitted that there was no provision in the Income Tax Act to collect such evidence after conclusion of assessment proceedings in block assessment. He also submitted that the attempt of the department in getting the aforesaid evidence admitted was only to improve the case of assessing officer.
(d) If such evidence is incidentally collected after completion of assessment, then it is in the nature of circumstantial evidence. Learned counsel submitted that why circumstantial evidence should prevail over direct evidence which has been considered by assessing officer in deciding the issue of gifts made to the assessee.
(e) The prayer of the department is an abuse of the judicial process and is by way of mischief and the same is not permitted by rule 29 of Income Tax (Appellate Tribunal) Rules. He submitted that it is desperate attempt by the department to interfere with the judicial process.
He pointed out that in the first instance the department invoked the concept of the group as a whole in the cases of Smt. Neena Syal/Pamila Syal and now the department, which is expected to dispense natural justice to the assessee, is asking for natural justice and thereby allowing assessing officer a second inning by collecting evidence after completion of assessment and seeking its admission as additional evidence. Learned counsel submitted that the process of law is laid down through proceedings before the Tribunal and that the said mandatory process through procedure has to prevail and nobody can travel beyond that learned counsel submitted that learned Departmental Representative has relied on decisions rendered under the Indian Income Tax Act, 1922 and they were not relevant. Learned counsel submitted that the cause of action in the present case has acquired finality and direct evidence has been examined by assessing officer. He submitted that the evidence now sought to be adduced as additional evidence is only a circumstantial evidence and appreciation thereof would result in building up a new case/improving upon the case of assessing officer. He further submitted that under rule 29, the parties are not entitled for admission of additional evidence. He, therefore, submitted that learned Departmental Representative has to show the basis upon which the department seeks to adduce additional evidence. He submitted that the words 'for any other substantial cause in rule 29 have been used to uphold the rule of law by the Tribunal and in case the prayer of the department is granted, it would amount to reading of rule 29 in reverse in favour of the department. He further submitted that the department was not entitled to seeking natural justice/further opportunity, more so when the evidence has been collected after completion of assessment in the case. He submitted that admission of additional evidence may be possible in certain contingencies, like assessment getting 'time-barred', document being in transit during assessment proceedings or certain legal situations intervening during assessment. He urged that when learned Departmental Representative is stating that the evidence is meant to strengthen the conclusion of assessing officer, it is definitely an attempt to improve upon the case of assessing officer and that it will impliedly amount to reassessment and thereby substantiating the conclusion already arrived at by assessing officer. In support, learned counsel relied on the following decisions :
(i) CIT v. Sun Engineering Works (P) Ltd. (1992) 198 ITR 297 (SC), wherein it has been observed that '..... It is neither desirable nor permissible to pick out a word or a sentence from the judgment of the Supreme Court divorced from the context of the question under consideration and treat it to be the complete law declared by the court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before the court. A decision of the Supreme Court takes its colour from the questions involved in the case in which it is rendered and, while applying the decision to a later case, courts must carefully try to ascertain the true principle laid down by the decision'.
(ii) (1998) 148 CTR (Queries/Opinion/News) 47, where Tribunal rulings have been mentioned. It is mentioned that the Mumbai Bench in its order dated 12-8-1998, has held that `......... no value can be attached to the entries in the diary in the absence of any corroborative evidence and that no addition can be made in the hands of the assessee on the basis of entries in the said evidence'. It is further mentioned at p. 48 that '.....The diaries do not go beyond the point of suspicion and no addition can be sustained merely on the basis of suspicion'. It is also observed that `......... It is a settled matter in the law that merely on the basis of some writing in the diaries, that too hand-written by outsider, cannot become a basis for making any addition, till some corroborative independent evidence to support the entries is brought out on record.'
(iii) Gemini Leather Stores v. ITO (1975) 100 ITR 1 (SC), wherein it was held that after discovery of primary facts relating to the transactions evidenced by the drafts it was for the officer to make the necessary enquiries and draw proper inference as to whether the amounts represented by the drafts could be treated as part of the total income of the assessee. It was observed that the officer did not do so and it was plainly a case of oversight and it could not be said that income chargeable to tax had escaped assessment by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts.
(iv) Sujir Ganesh Nayak & Co. v. ITO (1976) 104 ITR 524 (Ker), wherein the issue of reopening of assessment on the ground that subsequent information received by the Income Tax Officer showed that certain loans disclosed by the assessee prior to original assessment and which were treated at that time as true, were bogus. The High Court observed that while it was the duty of the assessee to disclose fully and truly all material facts, the assessee had no duty to state the inferences or conclusions which the officer had to draw from the primary facts. It also observed that...... in this case, the assessee had prior to the original assessment disclosed the amounts alleged to be covered by the loans and the Income Tax Officer had really made some enquiry regarding the genuineness of the loans before making the assessment and the original assessment was made finding the loans to be true. Later on, if he changed his opinion on second thoughts about the genuineness of the loans, section 147(a) could not be used for the purpose of reopening the assessment'. The notices issued by Income Tax Officer under section 148 were accordingly quashed.
(v) CIT v. Sham Lal (1981) 127 ITR 816 (P&H). In the said case, the Income Tax Officer had included certain amounts in the income of the assessee on the basis that he was a partner in a firm. On appeal, the Appellate Assistant Commissioner annulled the assessments because he found that the assessee was not a partner in the firm and the Income Tax Officer had relied on certain material, which had not been put to the assessee, for coming to the conclusion that he was a partner. On further appeal, the Tribunal found that the amounts assessed in the hands of the assessee as his share of income from the firm was based on material placed on record in violation of the principles of natural justice and in fact there was no evidence to come to the conclusion that the assessee was a partner in the firm, and dismissed the appeals. On a reference, the High Court held that the only correct course open to the Tribunal was to annul the assessment orders passed by the Income Tax Officer.
(vi) Maharaja Gajendrapal Singh of Jhabua v. CIT (1982) 137 ITR 151 (MP). In the said case, the adoptive father of the assessee, who was a jagirdar. died in 1945. The jagir was resumed by the State of Madhya Bharat under the Madhya Bharat Abolition of Jagirs Act, 1951, and compensation amounting to Rs. 1,84,723 was payable to the assessee, and the Jagir Commissioner fixed the amount of maintenance payable to the widows of the father of the assessee (adoptive mothers of the assessee). For the relevant assessment years, the assessee claimed deduction of the amount of maintenance paid to his adoptive mothers, which was disallowed by the Income Tax Officer. On first appeal, the assessee contended that there was a legal obligation on his part to pay maintenance out of the jagir property to his adoptive mothers, who were widows, and he was entitled to claim a deduction of the same. The Appellate Assistant Commissioner rejected the contention and dismissed the appeal. On further appeal to the Tribunal, the assessee relied upon the judgment of Addl. District Judge, who upheld the overriding title of one of the adoptive mothers in a suit filed by her. The Tribunal held that the assessee's liability for payment of maintenance to his adoptive mothers was his personal liability and it was not a charge upon the property from which the assessee derived income. On a reference, the High Court held that the adoptive mothers had a right of maintenance out of the property of their late husband not only under the Hindu law but under the Abolition of Jagirs Act and the assessee was statutorily bound to pay the amount of maintenance. It also observed that the decree of the court did not create a right of maintenance but only recognised the pre-existing right and, therefore, it was an overriding legal obligation. The High Court then observed that the Tribunal was not right in holding that the amount of maintenance paid to the adoptive mothers by the assessee consequently to the judgment of the Addl. District Judge was only the application of income and not diversion thereof by any overriding title under a legal obligation.
Learned counsel pointed out that here the department is not the litigant and at the assessee is seeking justice with reference to gifts received by him and that the department is only asking for justifying its conclusion by evidence which was not before assessing officer. He, therefore, urged that learned Departmental Representative is trying to bring in new facts/arguments by means of a subsidiary evidence. He further submitted that three elements have to be examined before admission of additional evidence, i.e., whether the evidence is relevant, reliable and ought to be admitted. He submitted that certain evidence may be relevant but may not be admissible and similarly certain evidence may be admissible but not relevant. He, therefore, urged that learned Departmental Representative has not been able to make out a case for admission of additional evidence since it was not on file of the assessee. He also submitted that the substantial cause, as mentioned in rule 29, should be in the interest of general public and it should not be served at the cost of the assessee. He submitted that admission of additional evidence collected after assessment of block assessment will give the department a long rope to go on collecting such evidence and bring new facts/new arguments to be taken into account. He submitted that the decision in (1958) 34 ITR 646 (SC), as relied upon by learned Departmental Representative, actually goes in favour of the assessee as new facts cannot be taken on record. He submitted that the new question put to third parties amount to bringing new facts on record to support the conclusion of assessing officer and that attempt is to polish/improve upon the finding of assessing officer. He further submitted that even decision in (1959) 35 ITR 416 (SC) relates to evidence sought to be adduced by the assessee. He also referred to the application filed by the department for admission of additional evidence and submitted that the statements of third parties are circumstantial evidence to prove a fact as it amounts to affirmation of averments and, if admitted, would lead to frustration of rule of law and reopening of assessment and denial of natural justice to the assessee. He referred to the decision Indian Steel & Wire Products Ltd. v. CIT (1994) 121 CTR (Cal) 335 and submitted that the Tribunal shall be placed in the role of assessing officer by admission of the aforesaid additional evidence, which would change the colour of assessment as the evidence is not on record in the case and it has not been seen by assessing officer or the assessee. He referred to the decision in the case of Addl. CIT v. Gujargravures (P) Ltd. (1978) 111 ITR 1 (SC), wherein it was held that neither any claim was made before the Income Tax Officer regarding the relief under section 84 nor there was any material on record in support thereof, and from the mere fact that such a claim had been allowed in subsequent years it could not be assumed that the prescribed conditions justifying a claim for exemption under section 84 were also fulfilled, and that the Tribunal was not competent to hold that the Appellate Assistant Commissioner should have entertained the question of relief under section 84 or to direct the assessing officer to allow the relief.
2.2. Learned Departmental Representative, in reply, submitted that the purpose of the prayer for admission of additional evidence is to see that justice is done. He further submitted that rule 29 does not rule out perusal of additional evidence. He also submitted that the documents which are sought to be admitted as additional evidence would come within the ambit of 'substantial cause', as they throw light on the transactions of gift. He further submitted that the cause of justice would suffer if the said documents are not admitted. He emphasised that the documents have been collected in the course of assessments proceedings of the donors of the gifts and they are the connected parties with the assessee and stand on the same footing as creditors. He urged that there will be a miscarriage of justice, if facts as required by the said documents are not perused. He submitted that the provisions akin to rule 29 existed even in the Income-tax (Appellate Tribunal) Rules, 1946, which have been replaced by the 1963 rules. He also submitted that the department was not praying for natural justice for itself but for the assessee who has not been confronted with the said documents. He submitted that there is a fine distinction between strengthening of the case of assessing officer and improving his cases. He pointed out that assessing officer in the case of donors and in the case of the assessee is the same, though the proceedings are different. The Bench referred to the provisions of section 158BC, where under no notice under section 148 is required to be issued for the purpose of proceedings under Chapter XIV-B and the assessee being debarred from filing a revised return and asked learned Departmental Representative to offer his comments in view of the said provisions, learned Departmental Representative submitted that he had no comments. Learned Departmental Representative submitted that the cases relied upon by learned counsel relate to reopening of assessments and that the same are not relevant. He referred to the case of CIT v. Saligram Prem Math (1989) 179 ITR 239 (P&H), wherein it is observed that the Tribunal is vested with the requisite authority and jurisdiction to admit additional evidence and material in order to do substantial. Justice to the parties. In the said case, the Income Tax Officer made additions to the income of the assessee on account of excessive shortage relying on the data available with regard to other persons doing similar business. The assessee was not given any opportunity of being heard. The Appellate Assistant Commissioner sustained the addition. On second appeal, the Tribunal deleted the addition on the ground that the assessee had not been given opportunity of being heard. On a reference, it was held that when the matter came up before the Tribunal it was not only open to it but, on the facts of the case, the Tribunal was bound to give an opportunity to the assessee to rebut this material by giving the assessee an opportunity to do so either before it or by remitting the case to the authorities below and that the Tribunal was not justified in law in deleting the addition to the gross profit without making a proper investigation into the evidence placed by the revenue before it.
2.3. Learned counsel, in reply, with reference to decision in (1989) 179 ITR 239 (P&H) submitted that the documents pertain to independent proceedings taken in the case of Shri Navtej Bains and others and that such proceedings are not in pursuance of the gifts made to the assessee and that may be incidental findings which are not related to ascertainment of undisclosed income of the assessee. He further referred to p. 242 of the said decision, wherein it is mentioned that a reference to the record would show that both the Income Tax Officer and the Appellate Assistant Commissioner relied upon the documents referred to earlier with a view to sustain their order, though no opportunity had been granted to the assessee to rebut them. He, therefore, submitted that the case is clearly distinguishable.
3. We have carefully considered the submissions made by both the parties with reference to admission of aforesaid evidence placed at pp. 1-36 of the paper book of the revenue. We have also seen the case law relied upon by both the parties. 'The provisions of rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963, read as under :
"29. The parties to the appeal shall not be entitled to produce additional evidence either oral or documentary before the Tribunal, but if the Tribunal requires any document to be produced or any witness to be examined or any affidavit to be filed to enable it to pass orders or for any other substantial cause, or, if the income-tax authorities have decided the case without giving sufficient opportunity to the assessee to adduce evidence either on points specified by them or not specified by them, the Tribunal, for reasons to be recorded, may allow such document to be produced or witness to be examined or affidavit to be filed or may allow such evidence to be adduced."
It will be observed from the above that as a rule the parties to the appeal are not entitled to produce additional evidence unless the Tribunal requires any document to be produced, etc. to enable it to pass order or for any other substantial cause. The further stipulation is that the Income Tax Authorities have decided the case without giving sufficient opportunity to the assessee to adduce evidence on points specified by the authorities or on points not specified by them. Obviously, the rule is loaded in favour of the assessee. Having regard to the provisions of rule 29, we have examined the case law as relied upon by learned Departmental Representative. It is observed that in the case in (1959) 37 ITR 151 (SC), the department had collected certain evidence on the basis of which the Appellate Assistant Commissioner allowed relief to the assessee, who held that in the face of such overwhelming evidence there was no justification at all for disputing the appellant's claim that the credits did really represent Yamunabai's monies and on no account could they be treated as profits camouflaged and both the items aggregating to Rs. 1,59,240 were therefore, liable to be deleted. On second appeal, the Tribunal decided the issue against the assessee and in the process the evidence collected by the department was not taken into account. It is observed at p. 161 of the report that although it was agreed by the parties before the Appellate Assistant Commissioner that the material which has been collected by the Income Tax Officer be treated as evidence in assessment proceedings, it was not considered by the Tribunal. Under these circumstances, the Apex Court held that the Tribunal was not justified in not considering the evidence which was taken subsequently at that end at the instance of the department itself and any conclusion arrived at by the Tribunal was vitiated by improper rejection of relevant material evidence. It was further observed that the Tribunal had not applied its mind to the evidence which was there on file of the appellant in the shape of information gathered subsequently and it merely confirmed that the Tribunal had improperly rejected that evidence. We feel that the facts of the said case are clearly distinguishable, as in the first instance the evidence which was collected by the department was in relation to the proceedings of the assessee and secondly the evidence which was duly considered by the first appellate authority was not considered by the Tribunal which resulted in set aside of the case to the Tribunal by the Apex Court. Learned Departmental Representative also relied on the decision in the case in Sunil Engineering & Industrial Corporation (1994) 117 CTR (Asr-Trib)(TM) 263 in which evidence was produced by the assessee in the form of paper book and the department did not object to the admission/consideration of the said evidence. The said evidence ultimately went against the assessee. Hon'ble third Member observed that "when this evidence was produced by the assessee before the Tribunal and when the revenue has not objected to its consideration and when the Tribunal considered it, it became evidence filed before and admitted by the Tribunal in a proper form and was considered by the Tribunal duly. Therefore, it cannot be said that any injustice was caused to any party by the Tribunal by consideration of this evidence nor can it be said that there was miscarriage of justice by considering these statements. When the statement was properly referred to by the assessee in the course of arguments, the Tribunal has to give its opinion thereon when admission/consideration of this evidence was not objected to by the revenue and the revenue also sought to rely upon the very same evidence. There is, therefore, no ground to hold that the order of the Tribunal was vitiated by the consideration of this evidence." It is obvious that the said case is distinguishable on facts. The next case relied upon by learned Departmental Representative is (1958) 34 ITR 646 (SC) (supra) which relates to raising for the first time before the Tribunal new questions of fact which cannot be decided without taking further evidence. The Tribunal had come to the conclusion that sufficient opportunity, had not been given to the appellant to establish that the profits sought to be taxed were mixed up in the working funds in Srinagar. The Tribunal, therefore, remanded the case to the Income Tax Officer for a proper enquiry. When the matter again came back to the Income Tax Officer for inquiry, the assessee admitted that the profits in Srinagar were mixed up with the working funds and it was not possible for him to work out from his accounts to what extent the moneys sent to British India were the profits of the preceding year and to what extent they were the working funds of the current year. In view of the said admission, the only material available with the Income Tax Officer for further enquiry were those material which had been produced at the time of first assessment. The Income Tax Officer, therefore, reported that the Appellate Assistant Commissioner's view that profits transmitted to British India amounted to Rs. 1.20 lakhs was justified. When the Tribunal took up the case again on the basis of the said report, it held that the assessee had failed to show that remittances to the British India had not been out of profits and that, therefore, the burden which lay on the appellant of rebutting the presumption had not been discharged. The appellant for the first time sought to argue that there was no remittance to British India at all. He submitted that the remittances had been made on account of price of goods purchased by the appellant in British India and that the remittances had been made by TMO dispatched from Srinagar post offices and by bank drafts sent by post from Srinagar. The Tribunal felt that this contention of the appellant is new question of fact which could not be decided without taking further evidence and it did not allow the appellant to raise the said contention. The assessee urged the Tribunal to make a reference but the said application was rejected. Thereafter, the assessee did not make any application to the High Court for an order to the Tribunal to refer the question. In those circumstances, the assessee applied to the Supreme Court for special leave to appeal and such leave was granted. The Apex Court held that there was no valid objection to the Tribunal judgment and dismissed the appeal with costs. It would be clear that the facts of the said case are distinguishable with reference to the present prayer of the department. In the case (1959) 35 ITR 416 (SC) (supra), the assessee sought to produce the proceedings book in which particulars of the agreement of partition were recorded before the Tribunal in support of its claim, but the Tribunal refused to admit the proceedings book as evidence on the ground that it could not be produced before the Income Tax Officer. The Tribunal held that the amounts did not represent the sale proceeds of the family jewels but secret profits of the business. On a reference, the High Court affirmed the decision of the Tribunal. The Apex Court held that the Tribunal did not act perversely or unreasonably in refusing to admit the proceedings book as evidence as the same was not relied upon as an evidence before the Income Tax Officer. It is obvious that this case does not help the plea of the department for admission of additional evidence. In the case (1963) 47 ITR 864 (MP) (supra), it was observed that the admissibility of additional evidence under rule 29 depends upon whether or not the Tribunal requires the evidence to enable it to pass order or for any other substantial cause or if the Income Tax Officer has decided the case without giving a sufficient opportunity to the assessee to adduce evidence on points specified by him or not specified by him. It is further observed that the rule does not enable the assessee or the department to tender fresh evidence to support a new point or to make a new case. We feel that even this decision is of no help to the department. In the case in (1974) 95 ITR 109 (Mad) (supra), the Tribunal rejected the admission of additional evidence but went into merits of the evidence. In that context, the High Court held that the Tribunal cannot refuse to entertain the evidence and at the same time go into its merit and come to a conclusion one way or the other. The said case is also distinguishable on facts. In the case in (1989) 179 ITR 239 (P&H) (supra), it is observed that the High Court have clearly mentioned at p. 242 that both the Income Tax Officer and the Appellate Assistant Commissioner relied upon the documents with a view to sustain their orders, though no opportunity had been granted to the assessee to rebut them. The High Court observed that the approach of the Tribunal to simply brush aside the material on the ground that the assessee had not been given an opportunity to be heard with regard to the documents in question was clearly unwarranted. It further observed that the Tribunal was bound to give an opportunity to the assessee to rebut the said material either before it or before the lower authorities. It is quite clear that in the said case the material was already before the lower authorities and thus the case is distinguishable on facts.
3.1. It would be clear from the above that the decisions relied upon by learned Departmental Representative deal with situations where either the assessee was adducing additional evidence and it was admitted or rejected or where the evidence was collected by the department, considered by the first appellate authority but ignored by the Tribunal. None of the said cases deal with a situation where the department sought admission of additional evidence and the same was admitted/rejected.
3.2. It is further observed that the proposed additional evidence collected by the department after completion of assessment in the case of the assessee pertains to assessment of third parties, which are yet to be completed. The said evidence is, therefore, yet to be evaluated by the assessing officer. We feel that it will not be desirable for the Tribunal to admit the said evidence and evaluate the same so as to pre-empt the function of assessing officer and thereby assume his role.
3.3. We also feel that the plea of learned Departmental Representative that the said evidence is only to strengthen the case of assessing officer looks attractive on the face of it, but if seen closely it is nothing but an attempt to improve upon the case of assessing officer by bringing on record further evidence which assessing officer could not collect and examine within the period of limitation specified for block assessment.
3.4. We may also make a reference here to the provisions of section 158BC of the Act relating to block assessment, whereunder the issue of notice under section 148 is dispensed with for the purpose of proceedings under Chapter XIV-B and the assessee is also prevented from filing a revised return. Further, under the provisions of section 158BF, penalties for concealment under the provisions of section 2 71(1)(c) cannot be imposed in respect of undisclosed income determined in assessment. Having regard to the said provisions, in case of admission of proposed evidence, the Tribunal will have to restore the matter to assessing officer, for the reasons mentioned by learned Departmental Representative i.e., to enable the assessee to meet the new facts as now found by assessing officer. Such a course of action will thus enable the department to consider the material collected in the case of third parties assessments, after completion of block assessment in the case of the assessee, which could normally have been done by the department by reopening assessment under the normal provisions of the Income Tax Act, after issue of proper legal notice under section 148. As already mentioned, recourse to the provisions of section 148 is not contemplated under Chapter XIV-B relating to block assessments. Thus, it will be an attempt to bypass the existing provisions of Chapter XIV-B and achieve something indirectly which cannot be done directly under the existing provisions relating to block assessments. Such an attempt will be a colourable device to defeat the provisions enacted by the legislature and the Tribunal obviously cannot subscribe or accede to the plea urged by learned Departmental Representative to admit the said evidence. We do appreciate the constraint placed on the department by the existing provisions of Chapter XIV-B to complete assessment hurriedly within the specified period on the basis of whatever evidence is available within that period with the assessing officer and at the same time not being in a position to reopen the assessment, as provided in that Chapter so as to consider any further evidence collected against the assessee in his case or connected cases. However, the Tribunal is bound by the existing provisions of law and it cannot act in a way so as to supplement law or remove the lacunae, if any, therein.
3.5. In view of the foregoing position, the prayer of the department to admit the aforesaid evidence as additional evidence is turned down.