Income Tax Appellate Tribunal - Chandigarh
Jagdish Chand Gupta vs Assistant Commissioner Of Income-Tax on 25 January, 1996
Equivalent citations: [1996]58ITD142(CHD)
ORDER
Bali
1. These two appeals by the assessee relating to assessment year 1989-90 involve common issues and are, therefore, disposed of by a common order for the sake of convenience.
2. I. T. A. No. 31 is the appeal by the assessee against the order dated 19-11-1992 passed by the CIT, Rohtak under section 263 (1). I. T. A. No. 34 is the appeal by the assessee against the order dated 1-10-1993 passed by the CIT (A) wherein the order passed by the Assessing Officer under section 143 (3) on 29-4-1993 giving effect to the directions of the CIT under section 263 (1) vide order dated 19-11-1992 was upheld.
3. In I. T. A. No. 31, the action of the CIT in assuming jurisdiction under section 263 has been challenged by arguing that all the relevant enquiries and investigations were carried on by the Assessing Officer before passing the assessment order which has been cancelled by the CIT 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 playing 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 the enforcement directorate. In the statement recorded by the officials of the enforcement directorate, the assessee admitted having paid a sum of Rs. 48 lacs to one Shri J. M. Paul as illegal gratification for securing Maruti car agency at Ram Darbar, Chandigarh which was not accounted for in the regular books of accounts. The sum of Rs. 21.10 lacs, which was found and seized by the FERA authorities was also (claimed in the statement recorded on 14-5-1989 of the assessee) intended as a further payment to the same Shri J. M. Paul for the purpose of securing the Maruti car agency. The payment of Rs. 48 lacs was claimed to have been made in instalments between the period August, 1988 and January, 1989. In the above referred statement, the assessee also claimed that the sum of Rs. 21.10 lakhs was also to be paid to Shri J. M. Paul and could not be paid as the same was seized by the enforcement officers and it was also not accounted for in the regular books of accounts. The assessee, Shri J. C. Gupta, was accompanied by his son-in-law Dr. Arun Gupta in his trip from Chandigarh to Delhi on 14-5-1989 when the amount of Rs. 21.10 lakhs was seized by the Enforcement Officers from Shri J. C. Gupta at the premises of Shri S. K. Chopra at 14/4, kalkaji, New Delhi. Dr. Arun Gupta also stated in his statement recorded by the Enforcement Officers on 14-5-1989 that his father-in-law (Shri Jagdish Chand Gupta) and paid a sum of Rs. 48 lacs to Shri J. M. Paul during the period August 1988 to January, 1989 and the amount of Rs. 21.10 lacs was also be paid to Shri Paul which could not be paid on account of its seizure by the Enforcement Officers. Shri Arun Gupta also stated that sum of Rs. 48 lakhs was paid by the assessee, Shri Jagdish Chand Gupta, and Shri J. M. Paul for the purpose of securing dealership of Maruti car.
5. On 16-5-1989, the residential premises of the assessee at 163, Sector-38-A, Chandigarh were searched by ADI, Delhi, Shri A. K. Gupta, who also recorded the statement of the assessee wherein again the assessee voluntarily made a surrender of Rs. 48 lakhs paid by him to Shri J. M. Paul but stated that the sum of Rs. 21.10 lacs was fully explainable and was not paid out of undisclosed income. Shri S. K. Mittal, Assistant Director of Intelligence, Chandigarh also recorded the statement of Shri J. M. Paul, R/o 204-A, Sector-11, Chandigarh, on oath on 16-5-1989 wherein Shri J. 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 dealing 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 before the Assessing Officer in the assessment proceedings relating to assessment year 1988-89 was that he never surrendered a sum of Rs. 48 lakhs in a statement either before the Enforcement Directorate (FERA authorities) or before the ADI land he simply signed the statement recorded by the concerned officers to avoid harassment and to go ahead with the Shagan ceremony which was delayed. The amount of Rs. 21.10 lacs seized by the Enforcement Directorate on 14-5-1989 from the assessee was subsequently passed on to the income-tax authorities who took up proceedings under section 132 (5) and after giving a notice to the assessee as contemplated in Rule 112A of the Income-tax Rules, 1962 read with section 132 (5) of the Income-tax Act, the Assessing Officer passed an order under section 132 (5) on 12-9-1989 determining the tax liability of the assessee at Rs. 33,84,666 which was more than the seized amount of Rs. 23,60,000 from the assessee (Rs. 21.10 lacs seized by the Enforcement Directorate and handed over to the Income-tax Department plus Rs. 2,50,000 seized by the ADI on account of search under section 132 on the residential premises of the assessee on 16-5-1989 when cash of Rs. 2,99,500 was found). In the order passed under section 132 (5), the calculation for the purpose of income-tax was made as under :-
Assessment Rs.
Year 1990-91
Estimated income 50,000
Addition on account of 48,00,000
alleged payment to
Shri J.M. Paul between
August 1988 and January, 1989
Cash seized by the
Enforcement Directorate
on 14-5-1989 21,10,000
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Cash found and seized at 2,50,000
the residence on 16-5-1989
Total 72,10,000
Income-tax payable 31,33,950
Surcharge 2,50,716
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33,84,666
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Regular assessment proceedings for the assessment year 1989-90 were taken up by the Assessing Officer on 5-3-1991 by issue of a notice under section 143 (2) fixing the case for 18-3-1991 when it was adjourned to 21-3-1991 and the Assessing Officer called for certain information with regard to (i) salary certificate (ii) evidence of truck income (iii) evidence of loans and (iv) certificate for claiming deduction under section 80U, and the case was adjourned to 25-3-1991. On 25-3-1991, the assessee filed a detailed reply giving the information required and also explaining that he never surrendered the alleged sum of Rs. 48 lakhs either before 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 not 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 revenue as the Assessing Officer has not included the sum of Rs. 48 lakhs in the assessed income for the assessment year 1989-90 which was surrendered by the assessee in statements made before the FERA authorities on 14-5-1989 and before the ADI, Delhi on 16-5-1978 on account of illegal gratification paid to Shri J. M. Paul for the sole purpose of obtaining Maruti Car dealership. According to the CIT, since the payments were made during the period August, 1988 to January, 1989, the sum of Rs. 48 lakhs was liable to included in the assessment year 1989-90.
8. In response to the notice issued by the CIT under section 263 (1), the assessee furnished detailed reply copies of which have been furnished to us at pages 82 to 88 of the paper book wherein the assessee denied that he ever surrendered a sum of Rs. 48 lacs in his statement before the FERA authorities and before the ADI. In the reply, it was claimed that in the alleged statement before the FERA authorities on 14-5-1989, the assessee was made to state that he has paid illegal gratification of Rs. 48 lakhs for securing Maruti dealership from August 1988 to January, 1989 and it was emphasised that the statement was never given voluntarily and it was written by the concerned officer himself and he was made to sign the same and as such that statement which was never given cannot be said to be made voluntarily in good faith. It was explained to the ld. Commissioner that the assessee could not resist the pressure of FERA officials who threatened him of dire and serious consequences and he simply signed the statement written by them as the assessee was illegally and unjustifiably detained by the FERA authorities. It was pleaded that FERA authorities acted beyond there jurisdiction in restrain in the assessee and were not justified to confiscate the sum of Rs. 20.10 lacs from the person of the assessee as no foreign exchange was recovered from him. It was submitted that the FERA officials did not ask any question from the assessee regarding foreign exchange for which they had restrained the assessee and the entire story revolved around the source of cash of Rs. 21.10 lacs and Rs. 48 lacs allegedly paid by the assessee to Shri J. M. Paul. It was submitted that the assessee was restrained by the FERA officials at the instance of Shri J. M. Paul who was in league with the FERA officials. It was pleaded before the ld. Commissioner 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 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 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 and intendment of the two Acts were entirely different and dissimilar and, therefore, the significance of a statement recorded under the provisions of the Foreign Exchange Regulation Act during the investigation or proceedings under the Act must be examined only qua the provisions of the Act and not with reference to the provisions of any other alien Act such as the Income-tax Act as per the decision of the Hon'ble Supreme Court in the case of K. T. M. S. Mohd. v. Union of India [1992] 197 ITR 196. With regard to the alleged confessional statement given by the assessee before the ADI, Delhi, it was pleaded that the search was carried on at the premises of the assessee on 16-5-1989 when the marriage ceremony of his son Shri Anil was in progress and the assessee simply appended his signatures to whatever statement the staff of the ADI prepared as the assessee wanted the Sehra Bandi ceremony of his son to be solemnised quickly which was delayed by more than four hours. It was submitted that besides the alleged confessional statement of the assessee, there was no evidence available on record to justify the addition of Rs. 48 lakhs in the income for the assessment year 1989-90. Accordingly, it was prayed before the CIT that the proceedings contemplated under section 263 may be dropped.
9. The CIT however, for the reasons given in the impugned order dated 19-11-1992 held that the ITO had failed to make enquiries while completing the assessment with regard to the nature and source of Rs. 48 lakhs and accordingly the order of the Assessing Officer was erroneous insofar as it was prejudicial to the interest of the revenue. He accordingly set aside the order of the Assessing Officer dated 27-3-1991 with the direction to complete the assessment afresh, after allowing the assessee reasonable opportunity of being heard and to consider the taxability and inclusion of the amount of Rs. 48 lakhs under section 68/69 of the Act.
10. Pursuant to the order of the CIT under section 263 (1) dated 19-11-1992, the re-assessment proceedings were taken up by the Assessing Officer who issued a notice to the assessee asking him to show cause why the sum of Rs. 48 lacs may not be added to the income of the assessee for the assessment year 1989-90 and the assessee furnished a detailed reply dated 14-12-1992, copy of which has been furnished to us from pages 1 to 15 of the paper-book wherein 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 J. M. Paul who denied having received the same, does not in any way, lead to the conclusion that the assessee had an unexplained income of Rs. 48 lakhs.
3. That the assessee emphatically denies to have given any statement voluntarily paying the amount of Rs. 48 lakhs to one Shri J. M. Paul who never admitted to have received any such amount from the appellant and as such, there is no occasion for any addition by way of income in the hands of the appellant.
4. That no amount had been found in possession of the appellant at the time of search operations on 16-5-1989 which could be surrendered by the appellant and as such, the addition of Rs. 48 lakhs is wholly unwarranted. Section 69C is not at all attracted in the case of the appellant which has been wrongly invoked to make the impugned addition.
5. That the entire assessment upheld by the ld. CIT (A) is based on suspicion, surmises and conjectures there being absolutely no material or evidence on record to justify the same.
6. That in any case, the amount of Rs. 48 lakhs having been lost, is liable to be set off against the amount treated to be income from other sources in view of the judgment of the Hon'ble Supreme Court in the case of CIT v. Piara Singh [1980] 124 ITR 40 and the addition as such, is liable to be deleted.
7. That without prejudice to the above, the loss of Rs. 48 lakhs is liable to be set off under section 71 of the Income-tax Act, 1961 against the income of Rs. 48 lakhs treated to be income from other sources. The section has been misinterpreted to deny the set off of loss admissible to the appellant.
8. That heavy reliance has been placed on the statement of the appellant and his son-in-law, Shri Arun Gupta recorded by the FERA authorities and in view of the same, the amount cannot be held to be belonging to appellant alone and thus, the addition in the hands of the appellant as income from undisclosed sources is wholly unjustified and that too, in one year of the assessment under appeal.
9. That the learned CIT (A) has further erred in upholding an addition of Rs. 94,601 made by the ld. Assessing Officer on account of deemed dividend under section 2 (22)(e) of the Income-tax Act, 1961 which is again arbitrary and unjustified.
10. That the order of the ld. CIT (A) is erroneous, arbitrary, opposed to law and facts of the case and is, thus untenable.
12. A perusal of the above grounds 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 (supra). 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 on 27-3-1991 was made after due and proper enquiry and the entire information in the form of confessional statement of the assessee before the FERA authorities, ADI, Delhi, statement of Shri J. M. Paul recorded by the ADI, Chandigarh on 16-5-1989 were duly considered as the same were referred in detail in written submission filed by the assessee on 25-3-1991 and after considering all this, the Assessing Officer was of the view that no addition was called for on account of the alleged payment of Rs. 48 lakhs by the assessee to Shri J. M. Paul during the period August, 1988 to January, 1989, as presumably the assessee was of the opinion that if at all, the sum of Rs. 48 lakhs was taxable in the assessment year 1990-91 because the search and seizure operation by the FERA authorities as well as the ADI, Delhi took place on 14-5-1989/16-5-1989 which date falls in the accounting year 1-4-1989 to 31-3-1990 which is relevant to the assessment year 1990-91. Accordingly, Shri Sudhir Sehgal submitted that since the Assessing Officer has duly examined all the material available on record and has consciously framed the assessment for 1989-90 on 27-3-1991 under section 143 (3) by passing a speaking order after due enquiry, the ld. CIT was not justified in cancelling the same by acting under section 263 (1). It was submitted that even while passing the order under section 263, the CIT was not sure as to in which year the alleged sum of Rs. 48 lakhs was to be added as the income of the assessee because in para 6 of the impugned order, he has directed the Assessing Officer to consider the taxability and inclusion of this amount under section 68/69. It was submitted that the observations and finding of the CIT in para 5 that the ITO had failed to make enquiries is factually incorrect as the detailed submissions of assessee made vide letter dated 25-3-1991 were duly considered by the Assessing Officer while passing the order under section 143 (3) accordingly. It was submitted that the order of the CIT under section 263 is required to be cancelled. Reliance was placed on the decision of the Hon'ble Punjab and Haryana High Court in the case of CIT v. Kanda Rice Mills [1989] 178 ITR 446 for the proposition that the Commissioner had to come to a firm decision that the order of the Assessing Officer was erroneous and was prejudicial to the interest of the revenue. Reliance 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 (supra), the Tribunal observed that setting aside an assessment under section 163 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 Commissioner under section 263 was held to be impropered by the Tribunal as the Commissioner had left the enquiries to be made to the Assessing Officer without reaching a firm conclusion that the order passed was, in fact, erroneous. Shri Sehgal further relied on the decision of the Tribunal in the case of Smt. Veena Jindal [IT Appeal Nos. 500 to 502 (Chd.) of 1989 dated 28-2-1994] as in that case also the Assessing Officer had made the assessment after proper enquiries and the CIT was held to be not justified in assuming jurisdiction under section 263. Reliance was also placed on the decision of the Chandigarh Bench in the case of Rockman Cycle Industries (P) Ltd. [IT Appeal No. 562 (Chd.) of 1989 dated 13-5-1994.] Reliance was also placed on the judgment of the Appellate Tribunal, Jaipur Bench in the case of Balwant Singh v. ITO [1995] 55 ITD 363.
15. On merits, while arguing ITA No. 34/Chandi/94, it was submitted that the departmental authorities were not justified in making the addition of Rs. 48 lakhs solely on the basis of the alleged confessional statement of the assessee before the FERA authorities as well as the ADI, Delhi which was subsequently retracted by the assessee. It was submitted that during the course of proceedings under section 132 (5), in response to the notice issued by the Assessing Officer under section 132 (5) under rule 112A, the assessee had furnished detailed reply on 11-9-1989 copies of which were furnished to us also at pages 26 to 45 of the paper-book wherein he completely denied having paid the sum of Rs. 48 lakhs in cash to Shri J. M. Paul being illegal gratification for the allotment of Maruti dealership as alleged by the Enforcement Directorate authorities and the ADI in the statements recorded by them on 14-5-1989 and 16-5-1989. It was submitted that the sole basis of the addition was the uncorroborated statement of the assessee which was recorded by the authorities under threat and coercion and the assessee had simply penned his signatures to the written statement recorded by the aforesaid officials to avoid harassment. It was submitted that there was no evidence whatsoever to justify the addition of Rs. 48 lakhs as no document, papers etc. were found during search of the residential premises of the assessee. It was submitted that Shri J. M. Paul whose statement was recorded by the ADI, Chandigarh on 16-5-1989 had specifically denied 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 reliance was placed on the decision of Hon'ble Supreme Court in the case of Piara Singh (supra).
17. Shri K. S. Minhas, the ld. Departmental representative, while arguing I. T. A. No. 31/Chandi/93, relied on the order of the CIT and submitted that since the ITO failed to include the sum of Rs. 48 lakhs in the original assessment while passing the order under section 143 (3) on 27-3-1991 which was taxable as per the confessional statement of the assessee, the CIT was perfectly justified in assuming jurisdiction under section 263. Reliance was placed on the decision of the Hon'ble Supreme Court in the case of CIT v. Electro House [1971] 182 ITR 824 and the Delhi High Court in the case of 26 ITR 40 (sic). Reliance was also placed on the decision reported in 182 ITR (Statutes) 146 wherein the Hon'ble Supreme Court has dismissed the assessee's SLP against order of the Allahabad High Court in the case of Nathmal Pishorimal v. CIT [IT Reference No. 232 of 1988 dated 11-1-1989.]
18. While arguing I. T. A. No. 34/Chandi/94, the learned Departmental representative relied on the confessional statement given by the assessee before the FERA authorities as well as before the ADI, Delhi, wherein the assessee has admitted having paid sum of Rs. 48 lakhs to Shri J. M. Paul for getting the dealership of Maruti Car. It was submitted that the statement recorded by the ADI under section 132 (4) can be utilised for the purpose of making the disputed addition and as such the departmental authorities were perfectly justified in making the addition of Rs. 48 lakhs to the income of the assessee for the assessment year 1989-90 as according to the assessee's own admission, a sum of Rs. 48 lakhs was paid to Shri J. M. Paul for getting the dealership of Maruti Car. It was submitted that the statement recorded by the ADI under section 132 (4) can be utilised for the purpose of making the disputed addition and as such the departmental authorities were perfectly justified in making the addition of Rs. 48 lakhs was paid by him to Shri J. M. Paul during the period August, 1988 to January, 1989 instalments and that money was not reflected anywhere in the books of the assessee or of any concern in which the assessee was interested. He accordingly supported the order of the Assessing Officer 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 (supra) 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 :-
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Dates Sequence of events
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14-5-1989 : The assessee along with his son-in-law Dr. Arun Gupta were apprehended by the FERA authorities (Directorate of Enforcement) at the residence of Shri S.K. Chopra at 14/4, Kalkaji, New Delhi and a sum of Rs. 21.10 lakhs was found with the assessee and was seized by the FERA authorities and statements of the assessee was recorded by the enforcement authorities wherein the assessee is claimed to have paid a sum of Rs. 48 lakhs as illegal gratification to one Shri J.M. Paul for securing the dealership of Maruti Car.
16-5-1989 : The residential premises of the assessee at 163/38-A, Chandigarh, were searched by the ADI, Shri A.K. Gupta of Intelligence Unit, Delhi, who also recorded the statement of the assessee wherein the assessee is claimed to have surrendered a sum of Rs. 48 lakhs which was paid by the assessee to Shri J.M. Paul till February, 1989. However, in this statement, the assessee stated before the ADI that the sum of Rs. 21.10 lakhs found and seized from the assessee by the FERA authorities (which was subsequently passed on to the Income-tax Department) was fully explainable as the same was withdrawn from state bank of Patiala, Sector-38, Chandigarh on 13-5-1989 (Rs. 14.50 lakhs), withdrawn from Punjab National Bank, Sector 16, Chandigarh (Rs.
1.55 lakhs), Rs. 2 lakhs belonged to Dr. Arun Gupta R/o H. No. 638, Sector-7, Panchkula and Rs. 2 lakhs belonged to Shri Rajinder Mohan R/o House No. 1064, Sector-18B, Chandigarh and Rs. 1,45,000 was withdrawn from the branch office at Paonta Saheb.
16-5-1989 : Statement of Shri J.M. Paul was recorded by the ADI, Chandigarh, Shri S.K. Mittal, wherein Shri J.M. Paul has denied having received the alleged sum of Rs.
48 lakhs.
16-5-1989 : The Sehra Bandi/ceremony of Shri Anil (S/o the assessee) with Mamta was to be performed at 7.30 P.M. but was delayed and performed at 11.00 P.M. on account of the action under section 132 at the residence of the assessee.
16-5-1989 : Besides Rs. 21.10 lakhs seized on 14-5-1989 by the FERA authorities, a further sum of Rs. 2,50,000 was seized out of the total cash of Rs. 2,99,500 found from the residential premises of the assessee at the time of the search.
25-5-1989 : Notice under section 112A read with Rule 132(5) was served on the assessee requiring him to explain the source alongwith evidence of Rs. 2,99,500 out of Rs.
2,50,000 was seized alongwith the cash of Rs. 21,100 which was 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 reply was filed denying any payment of Rs. 48 lakhs to Shri J.M. Paul as alleged by the departmental authorities in the statements recorded of the assessee by the Enforcement Officer and by the ADI.
12-9-1989 : Order under section 132(5) passed and the tax liability for the assessment year 1990-91 determined at Rs. 33,84,666 in relation to income of Rs. 72,10,000 for the assessment year 1990-91.
5-3-1991 : Notice under section 143(2) issued for assessment year 1989-90 fixing the case for 18-3-1991.
18-3-1991 : Shri Sudershan Kumar, Advocate, on behalf of the assessee, attended and asked to furnish evidence regarding (a) loans from State Bank of Patiala, Punjab National Bank and United automobile (b) salary certificate
(c) evidence of truck income (d) 80U certificate case was adjourned to 25-3-1991.
25/26-3-1991 : Present : Shri Sudershan Kumar, Advocate, detailed reply filed and submitted that surrender of Rs.
48 lakhs was made under coercion and does not pertain to this year.
27-3-1991 : Order passed under section 143(3) making the assessment at an income of Rs. 42,110 against returned income of Rs. 22,110 and on office note is left directing the case for 1990-91 to be fixed immediately wherein the income under section 132(5) had been estimated at Rs.
72,10,000, 15-11-1991 : Order of the DCIT(A) for the assessment year 1989-90 wherein the estimation of income from truck and deduction under section 80U were the subject matter of appeal was passed.
30-11-1992 : Notice under section 263(1) issued by the CIT, Haryana, Rohtak.
12-11-1992 : Written reply filed questioning the assumption of jurisdiction by the CIT denying the alleged payment of Rs. 48 lakhs by the assessee to Shri J.M. Paul.
19-11-1992 : Order under section 263(1) passed by the CIT Haryana, Rohtak setting aside the order of the Assessing Officer under section 143(3) passed on 27-3-1991 which is the subject matter of appeal before us in I.T.A. No. 31/Chandi/93.
14-12-1992 : Written reply submitted to the Assessing Officer under section 143(3) after the order of the CIT passed under section 263.
29-4-1993 : Fresh order passed by the Assessing Officer under
section 143(3) making addition of Rs. 48 lakhs on account of
alleged payment by the assessee to Shri J.M. Paul and
Rs. 94,601 as dividend under section 2(22)(e).
1-10-1993 : Order of the CIT(A) upholding order 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 below the order for assessment year 1989-90 wherein he has directed that the case for the assessment year 1990-91 should be fixed where the income estimated under section 132 (5) is indicated at Rs. 72,10,000. Thus, it cannot be said that while framing the assessment under section 143 (3) on 27-3-1991, the Assessing Officer had not made any enquiry with regard to the alleged payment of Rs. 48 lakhs by the assessee to Shri J. M. Paul for the purpose of securing the Maruti Car dealership. On the other hand, it is very much clear that the statement of the assessee recorded by the Enforcement Officer on 14-5-1989 as well as the statement of the assessee recorded by the ADI, Delhi, was very much before the Assessing Officer wherein the assessee is alleged to have confessed of making a payment of Rs. 48 lakhs to Shri J. M. Paul for securing dealership of Maruti Car and which is also alleged to have been subsequently retracted by the assessee by filing a detailed written explanation on 11-9-1989 and these were very much before the Assessing Officer when he passed the order under section 143 (3) on 27-3-1991. In this view of the matter, it cannot be said that the Assessing Officer has framed the assessment in haste without proper application of mind. The scope of interference by the ld. Commissioner under section 263 is not to set aside merely unfavourable orders but the assumption of jurisdiction under section 263 is dependent upon the existence of certain objective factors which must be shown to exist before the order passed by the Assessing Officer is considered to be erroneous as well as prejudicial to the interest of the revenue. It has been held by the Hon'ble Punjab and Haryana High Court in the case of Kanda Rice Mills (supra) that for making a valid order under section 263 (1), it is essential that the Commissioner has to record an express finding to the effect that the order sought to be revised is erroneous as well as prejudicial to the interest of the revenue. In the present case, the finding recorded by the ld. CIT in para 6 of the order passed under section 263 indicates that the ld. CIT himself is not sure as to under which section the amount of Rs. 48 lakhs is assessable as he has directed the Assessing Officer to consider the taxability and inclusion of the amount of Rs. 48 lakhs under section 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 (supra) and in the case of Smt. Veena Jindal (supra) in the case of Rockman Cycle Industries (P) Ltd. (supra) (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 (supra) as well as the decision of Hon'ble Allahabad High Court in the case of Goyal Private Family Specific Trust (supra), 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. Commissioner was not justified in setting aside the order of the Assessing Officer passed under section 143 (3) on 27-3-1991 without holding as to under which section the amount of Rs. 48 lakhs was assessable. His finding in para 5 that the ITO had failed to make enquiries with respect to the nature and source of Rs. 48 lakhs while completing the assessment is clearly wrong in the face of evidence available on record. Accordingly, the impugned order passed by the ld. CIT under section 263 is cancelled and the original order of the Assessing Officer passed under section 143 (3) on 27-3-1991 stands restored.
23. In the result, the appeal filed by the assessee in I. T. A. No. 31/Chandi/93 is allowed.
24. Coming to I. T. A. No. 34/Chandi/94, the exercise is more or less academic since we have cancelled the order of the ld. CIT passed under section 263. However, since to appeal was argued by the assessee as well as the revenue, we will adjudicate the issue of addition of Rs. 48 lakhs on merits as well.
25. The sequence of events and earlier discussions relating to the alleged payment of Rs. 48 lakhs by the assessee to Shri J. M. Paul indicates that the addition has been made by the Assessing Officer solely on the basis of confessional statement of the assessee before the Enforcement Officers on 14-5-1989 and the ADI, Delhi on 16-5-1989 which statements were subsequently retracted by the assessee. The Hon'ble Supreme Court in the case of Krishan (supra) has held that any admission made in ignorance of legal rights or under duress cannot bind the maker of the admission. Similar is the view of the Hon'ble Punjab and Haryana High Court in the case of Krishan Lal Shiv Chand Rai (supra) at pg. 294, it is held that it is an established principle of law that a party is entitled to show and prove that an admission made by him previously was in fact not correct and true. In the present case, the alleged admission/confessional statement of the assessee having admitted paying Rs. 48 lakhs to Shri J. M. Paul was subsequently denied and the circumstantial evidence supports the case of the assessee as the Enforcement Officers are mainly concerned with the offence committed by a person under the Foreign Exchange Regulation Act and not with regard to the payment made by a person to another Indian citizen in Indian currency which is not in violation of any of the provisions of the Foreign Exchange Regulation 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 on 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 payments were seized from the residence of the assessee and Shri. J. M. Paul in his statement recorded by the ADI, Chandigarh, Shri S. K. Mittal, on 16-5-1989 also denied having received any such payment of Rs. 48 lakhs from the assessee and the departmental authorities have not taken any action in the hands of Shri J. M. Paul with the regard to the payment of Rs. 48 lakhs which is allegedly received by Shri J. M. Paul. In this view of the matter, we are of the opinion that the departmental authorities were not justified in making the addition of Rs. 48 lakhs to the income of the assessee which addition is directed to be deleted.
26. Coming to the alternative plea of the assessee, we do not find any merit in the same as the ratio of the decision of the Hon'ble Supreme Court in the case of Piara Singh (supra) is not applicable to the facts of the case. Even otherwise, this plea is meaningless since we have already held on merits that the addition of Rs. 48 lakhs is not called for.
27. In the result, I. T. A. No. 34/Chandi/94 is allowed in the above terms.