Income Tax Appellate Tribunal - Chandigarh
Duni Chand Ram Singh And Co. vs Deputy Commissioner Of Income-Tax on 20 September, 1994
Equivalent citations: [1995]52ITD533(CHD)
ORDER
N.K. Agrawal, Member
1. In this appeal by the assessee for assessment year 1980-81, the only substantive ground is against confirmation of penalty by the CIT(A). The Assessing Officer levied penalty of Rs. 28, 800 Under Section 271(1)(c) of the Income-tax Act for concealment of income.
2. Return was filed declaring income at Rs 1, 02, 491. The assessee derived income, as a partnership firm, by dealing in cloth on wholesale basis. The A. O. noticed, on the basis of certain information collected from the Punjab and Sind Bank, that four bank drafts had been sent by the assessee-firm to one Sh. Baljit Singh at Ahmedabad. Each draft was for Rs. 5, 000. One draft was purchased by Amrik Singh, who was the son of the partner, Sh. Ram Singh. The other three drafts were purchased by the partner, Sh. Manmohan Singh. The A. O. made enquiry at Ahmedabad and noted that the four drafts had been deposited/credited in the books of M/s Karamjit Singh Baljit Singh. But these four drafts did not find any mention in the books of account of the assessee-firm. The AO, during the investigation at Amhedabad, recorded the statement of Sh. Pritam Singh, who happened to be available there and who was a partner of the assessee-firm. Sh. Pritam Singh, in the first instance, did not give any incriminating evidence in respect of the four drafts in question. But after two days, Sh. Pritam Singh made a confessional statement in a letter/application dated 27-1-1982. The A. O. proceeded to make an addition on the basis of that confessional statement. Statement of one Sh. Baljit Singh was also recorded at that time. This addition was initially deleted in the assessee's appeal by the CIT(A), but in the revenue's appeal, the Tribunal sustained the addition made at Rs. 20, 000 to the income of the assessee-firm. The A. O. proceeded to initiate penalty for concealment of income. Penalty was imposed at 200 per cent of the amount of tax sought to be evaded.
3. The Id. counsel has argued before us that the addition appears to have been sustained only on the ground of the confessional statement made by the partner, Sh. Pritam Singh. He has pointed out that Sh. Pritam Singh was examined by the A. O. at Ahmedabad on 25-1-1982 but no confession was made. Thereafter, Sh. Pritam Singh is said to have given his confessional statement in a letter dated 27-1-1982. The Id. counsel has contended that a prosecution was also launched against the assessee-firm and its partners in a criminal court and there Sh. Pritam Singh again gave a statement wherein he retracted his confession. The Id. counsel has submitted some additional evidence before us and has filed an application for admitting that additional evidence. The Id. D. R. has opposed that application seeking permission to file additional evidence. Since the statement of Sh. Pritam Singh in criminal court is sought to be referred now by way of additional evidence, we find it appropriate to consider the application of the assessee first and, thereafter, to discuss the merits of the case.
4. The Id. counsel has filed copies of statements recorded by the A. O. during the course of investigation. In paperbook volume 1, copies of statements of S/Sh Pritam Singh, Baljit Singh and Ram Singh have been filed. Copies of assessee's reply to the penalty notice filed before the A. O. as well as written statement presented before the CIT(A) also form part of the paperbook Volume 1. In paperbook Volume II, copies of statements of Sh. K. S. Partap ITO, Sh. Hari Kishan ITO, Sh. Pritam Singh partner of the assessee-firm and Sh. Manmohan Singh another partner of the firm, have been attached. These statements are said to have been given in criminal trial launched against the assessee-firm and its partners under the Income-tax Act for concealment of income. The Id. counsel has stated that the papers contained in the paperbook Vol. 1 are not by way of additional evidence because these are simply statements recorded during investigation by the A. O. So far as the statements given before the criminal court are concerned, these are indeed additional evidence and are sought to be filed on the ground that these came into existence subsequently. The Id. counsel has argued that since the prosecution had been launched for concealment of income, the statements recorded by the court in that prosecution are highly relevant and should be allowed. The Id. D. R. has, in reply, submitted that the additional evidence cannot be allowed on account of delay because the assessee did not file these statements in penalty proceedings.
5. The Id. counsel has, in support of his application for permission of additional evidence, has invited our attention to the decision of the Gujarat High Court in the case of CIT v. Motilal Hirdbhai Spg. & Wvg. Co. Ltd. [1978] 113 ITR 173. It was held that the Tribunal had the power to admit additional evidence. Reliance is also placed on the decision of the Madras High Court in the case of Anaikar Trades & Estates (P.) Ltd. (No. 2) v. CIT [1990] 186 ITR 313. There also, it was observed that the Tribunal had the discretion to allow production of additional evidence u/r 29. Similar view was expressed by the Karnataka High Court in the case of Sri Shankar Khandasari Sugar Mills v. CIT [1992] 193 ITR 669. The Id. D. R. has, on the other hand, placed reliance on the decision of the Kerala High Court in the case of CAIT v. Amalgamated Tea Estates Co. Ltd. [1970] 77 ITR 455. It was held in that case that the Appellate Tribunal hearing an appeal had jurisdiction to admit additional evidence regarding a subsequent event. The Id. D. R. has submitted that the prosecution had already been launched and it did not constitute a subsequent event and copies of statements recorded by the criminal court were not the result of any subsequent event. Reliance is also placed on the decision of the Madhya Pradesh High Court in the case of CIT v. Kum. Satya Setia [1983] 143 ITR 486.
6. We have considered the rival contentions and we are of the view that the statements given in court are indeed relevant to the question in issue before us because it is the confessional statement of Sh. Pritam Singh, which is said to be contained in his letter dated 27-1-1982 which is the basis for the addition. Therefore, on the ground of relevancy as well as subsequent event, we find it appropriate to allow the assessee to file copies of statement recorded by criminal court. Thus the request for submission of additional evidence is accepted.
7. Now, we shall revert back to the confessional statement of Sh. Prttam Singh, which is said to be the sole basis for the addition made to the tune of Rs. 20, 000. The Id. counsel has pointed out that now there are three statements of Sh. Pritam Singh, two of which are not incriminating and the only one contained in the letter is said to be in the nature of a confessional statement. Our attention has been drawn to the first statement of Sh. Pritam Singh recorded by the A. O. on 25-1-1982. In that statement, the A. O. recorded explanation of Sh. Pritam Singh in respect of a draft of Rs. 20, 000 sent by Sh. Harbhajan Singh of Punjab Medical Hall. Therefore, query relating to this draft appears to be a totally different matter. Thereafter, we notice that certain enquiry was made from Pritam Singh with regard to drafts for Rs 11, 000 and Rs. 9, 000 and explanation was obtained. Here again, we find that the A. O. referred to certain other drafts for Rs 20, 000 and secured explanation from Sh. Pritam Singh. It may be stated here that Sh. Pritam Singh was also a partner in a firm M/s Ram Singh Pritam Singh at Ahmedabad. Therefore, the initial statement recorded by the A. O. on 25-1 -1982 does not relate to any of the four drafts in question on which the present matter is based. The confessional statement contained in the letter dated 27-1-1982 does contain an admission by Sh. Pritam Singh that the sum of Rs. 20, 000 had been sent by the assessee-firm in which he was a partner. The Id. counsel has pointed out that Sh. Pritam Singh retracted this statement in court and the earlier statement loses its significance and evidentiary value. Our attention has also been invited to the reply filed by the assessee-firm to the penalty notice before the A. O. as well as written submission/statements presented before the CIT(A). In these replies also, it was denied that the money was sent in the form of drafts by the assessee-firm. The Id. counsel has contended that, as per the facts, the drafts had never been obtained by the assessee-firm but by one Sh. Amrik Singh, who had no concern with the firm, and by Sh. Manmohan Singh in his individual capacity. No statement of Sh. Manmohan Singh is said to have been recorded, though three drafts for Rs. 5, 000 each are said to have been obtained by him. There is no statement from Sh. Amrik Singh either. The Id. counsel has stated that in these circumstances, statement of Sh. Pritam Singh becomes very clear when he retracted his confessional statement and denied that the firm had sent money to Ahmedabad. When the facts do not establish that the firm had any role in obtaining the bank drafts, the retracted statement of Sh. Pritam Singh must be held to be acceptable and reliable. It is argued by the Id. counsel that the letter dated 27-1-1982 containing confessional statement was actually dictated by the A. O. under coercion and on this account also this statement had no significance. The Id. counsel has drawn our attention to the statement of Sh. Baljit Singh who was Manager in the Ahmedabad firm and who had received the four drafts in question. The Id. counsel has stated that the statement of Sh. Baljit Singh was never confronted to the assessee and no opportunity for cross-examination was given. The Id. counsel has also submitted that the statement of Sh. Pritam Singh was also not allowed to be confronted by the other partners and it was a denial of natural justice to the assessee-firm. Reliance has been placed on the decision of the Kerala High Court in the case of Ponkunnam Traders v. Addl ITO [1972] 83 ITR 508 and on the Allahabad High Court decision in the case of Gargi Din Jwala Prasad v. CIT [1974] 96 ITR 97. The decision of the Gujarat High Court in the case of CIT v. Smt. Vimlaben Bhagwandas Patel [1979] 118 ITR 134 has also been referred to. Our attention has also been drawn to a decision of the Punjab and Haryana High Court in the case of CIT v. Sham Lal [1981] 127 ITR 816, wherein it was held that the material relied upon by the AO/ITO must be communicated to the assessee. Reliance is also placed on the decision of the Supreme Court in the case of R. B. Shreeram Durga Prasad & Fatechand Nursing Das v. Settlement Commission [1989] 176 ITR 169 to establish the proposition that the order passed violating principles of natural justice is a nullity. The Id. D. R. has, in reply, drawn our attention to a Supreme Court decision in the case of CIT v. Durga Prasad More [1971 ] 82 ITR 540. It was held in that case that an apparent statement must be considered real until it was shown that there were reasons to believe that the apparent was not the real, in a case where a party relied on self-serving recitals in documents. The Id. D. R. has submitted that the assessee cannot take the benefit of a statement given by its partner in a criminal trial.
8. We have considered the rival contentions and we are of the view that the statement of Sh. Baljit Singh does not help the revenue for drawing any adverse conclusion because the assessee was not given an opportunity to cross-examine Sh. Baljit Singh. As regards cross-examination of Sh. Pritam Singh, we find that Sh. Pritam Singh was also a partner in Ahmedabad firm and it is not clear if the statement of Sh. Pritam Singh was recorded by the A. O. in his status as a partner of the Ahmedabad firm or as a partner of the assessee-firm. As already seen, in the statement recorded on 25-1-1982 by the A. O. at Ahmedabad, questions were asked to Sh. Pritam Singh regarding different cheques and drafts received by the Ahmedabad firm, in which Sh. Pritam Singh happened to be a partner. It would, therefore, appear that investigation was primarily made from Sh. Pritam Singh regarding different cheques and drafts received by his firm at Ahmedabad. No question was asked regarding the four drafts, which are under consideration here. Therefore, the letter submitted by Sh. Pritam Singh after two days proceeded to relate to the matter concerning Ahmedabad firm. Though in that letter, he also alleged that despatch of drafts by the assesee-firm was made but that statement loses its significance in view of dual status of Sh. Pritam Singh - one as a partner of the assessee-firm and the other as a partner of the Ahmadabad firm. It is to be noted that Sh. Pritam Singh had received the amount of Rs 20, 000 from M/s Karam Singh Baljit Singh after the four drafts had been credited by the said firm in its books of account. In this context, Sh. Pritam Singh found himself to be in trouble and he wanted to shift the burden on the assessee-firm. As already seen, Sh. Pritam Singh subsequently denied before the criminal court that the assessee-firm had sent any draft to Ahmedabad. In this light, statement of Sh. Pritam Singh contained in his letter dated 27-1-1982 does not form a sound basis to conclude that it was a confession of concealment of income. Statement of Sh. Ram Singh was also recorded by the A. O. but he had totally denied that the money was sent by the assessee-firm. He has, on the other hand, stated that the money was lying with his wife and it was sent to Sh. Baljit Singh of Ahmedabad. He has categorically denied that the amount was withdrawn by the assessee-firm for despatch of the drafts. The sum of Rs. 20, 000 is said to have been sent for being handed over to Sh. Pritam Singh for meeting household expenses. This, read with reference to the statement of Sh. Ram Singh, does not help the revenue at all to conclude that it was a case of concealment of income. As already seen, statements of Sh. Manmohan Singh and Sh. Amrik Singh on the purchase of drafts from the bank, were not recorded.
9. The Id. counsel has contended that the drafts were sent by a partner and that would not implicate the firm because the partner might have sent the drafts in his individual capacity. Reliance has been placed on the decision of the Supreme Court in the case of CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349 and also no another decision of the same Court in the case of Kishinchand Chellaram v. CIT [1980] 125 ITR 713. It is contended by the Id. counsel that the onus was solely on the department in penalty proceedings to show that it was a wilful act of concealment of income. The Id. D. R. has, on the other hand, placed reliance on the decision of the Punjab and Haryana High Court in the case of Shiv Narain Khanna v. CIT [1977] 107 ITR 542. It was held in that case that no additional material was required for the levy of penalty in addition to the material on which the assessment was based. Our attention has also been drawn to another decision of the jurisdictional High Court in the case of Kedar Nath Sanwal Dass v. CIT [1978] 111 ITR 440 (Punj. & Har.). There also, it was held that where the losses were falsely claimed by the assessee to set off the profits made by the assessee, the finding that the losses put forward were false is sufficient to hold that there was a scheme on the part of the assessee to defeat the revenue. The Id. D. R. has, on the strength of the said decision, contended that in the present case the assessee sent certain drafts through the partner and wanted to conceal the income. Reliance is o placed on another Full Bench decision of the Punjab and Haryana High Court in the case of Vishwakarma Industries v. CIT [1982] 135 ITR 652. In that case, it has been held that the burden of proof had shifted from the revenue to the assessee after the Explanation was inserted in Section 271(1)(c) by the Finance Act, 1964.
10. We have considered the case law cited by the Id. counsel as well as the Id. D. R. and we are of the view that there is no evidence to prove that the drafts in question had been purchased by the assessee-firm or had been recorded in the books of the Ahmedabad firm as having been received from the assessee-firm. The statements of S/Sh Pritam Singh, Baljit Singh and Ram Singh do not conclusively prove that the assessee-firm was guilty of concealment of income. It is correct that the addition stands sustained by the Tribunal in quantum matter but that alone could not prove the charge of concealment of income in the absence of any definite material on record. The assessee has denied the charge in its reply to the show-cause notice before the A. O. as well as the CIT(A). Statements of Sh. Pritam Singh are found to be self-contradictory because, out of three statements, he had denied the case of revenue in two statements and in one, contained in his letter dated 27-1-1982, there is found to be a confessional statement. We have already examined the circumstances in which Sh. Pritam Singh was placed while investigation was being carried on by the A. O. at Ahmedabad. Looking to these circumstances, we are of the view that the confessional statements of Sh. Pritam Singh was not sufficient to prove that the assessee-firm was liable for concealment of income. The A. O. during penalty proceedings did not make any attempt to examine Sh. Manmohan Singh and Sh. Amrik Singh who had purchased the drafts. Therefore, the penalty proceedings are solely based on the confessional statement of Sh. Pritam Singh and no more. The confessional statement, as already seen, suffers from serious defects and is not sufficient for the purpose of sustaining the penalty.
11. In the result, we accept the appeal and delete the penalty.