Income Tax Appellate Tribunal - Amritsar
Income Tax Officer vs Balram Jakhar [Alongwith Wta No. ... on 27 June, 2005
Equivalent citations: (2005)98TTJ(ASR)924
ORDER
Bhavnesh Saini, J.M.
1. Both the appeals by the Revenue are directed against the different orders of the CIT(A), Bhatinda, dt. 20th Dec, 2001, for the asst. yr. 1988-89 passed under the IT Act and WT Act on the same facts.
2. We have heard the learned Representatives of both the parties and gone through the observations of authorities below and details filed in the paper book by the learned counsel for the assessee.
ITA No. 69/Asr/2002:3. This appeal is filed by the Revenue on the following ground:
"That the learned CIT(A) has erred in holding the entries found in Jain Hawala diaries do not pertain to the assessee and erred in deleting the addition of Rs. 17,00,000 out of the total income assessed."
The assessee filed original return upon which the assessment was made vide order dt. 22nd Dec, 1988, at the total income of Rs. 41,950 plus agriculture income of Rs. 2,11,820. Subsequently, as per information in possession of the Department, a sum of Rs. 17 lakhs was found to have been passed on to Shri Balram Jakhar during the financial year 1987-88 corresponding to the asst. yr. 1988-89 as one of the recipients of monies from Jain Brothers in Jain Hawala case. It was, however, noticed that the assessee did not disclose this amount in his IT return for the asst. yr. 1988-89 filed earlier, therefore, the AO proceeded under Section 148 of the IT Act by issuing notice and recording the reasons.
4. The relevant facts leading to the addition in this case were that on 3rd May, 1991, the CBI, New Delhi, searched the premises of Shri J.K. Jain at G-36, Saket, New Delhi, to work out an information received while investigating the RC case No. 5(S)/91-SIU.(B)/CBI, New Delhi. In the course of search, they recovered, besides other documents, two diaries, two small note books and two files containing details of receipts of various amounts from different sources recorded in abbreviate forms of digit and initials and details of payments to various persons recorded in the similar fashion. Preliminary investigation taken up by the CBI to decode and comprehend those entries revealed the payments amounting to Rs. 65.47 crores, out of which 53.5 crores had been illegally transferred from abroad through Hawala channels during the years 1988 to 1991 to 115 persons including politicians and others.
5. The assessee in compliance to the notice filed the return on 6th Oct., 1991, declaring same income as was declared earlier with the remarks that the proceedings under Section 147 were time-barred and illegal. The assessee in the paper book filed a copy of the reasons recorded by the AO for initiating the proceedings under Section 147/148 of the IT Act in which the sole reason for initiating the proceedings under Section 147 was the assessee alleged to be one of the recipients of monies from Jain Brothers of S.K. Jain Hawala scam. It is also stated that Shri Balram Jakhar is one of the persons against whom the charge-sheet was filed on 23rd Jan., 1996, by the CBI under the Prevention of Corruption Act and it is alleged that the assessee has received a sum of Rs. 17 lakhs during the financial year 1987-88, relevant to the asst. yr. 1989-90, from Jain Brothers and the same has escaped assessment.
6. The AO considered the plea of the assessee as regards initiation of the proceedings under Section 147 of the IT Act and held that the AO was having sufficient material to form the opinion that income escaped assessment and as such, the AO was justified in recording the reasons for initiating the proceedings under Section 147 of the IT Act. The AO relied on the decision of the Hon'ble Delhi High Court in the matter of Mahanagar Telephone Nigam Ltd. v. Chairman, CBDT and Anr. . The AO also was of the view that since the ingredients of Section 147 of the Act are fulfilled, therefore, the AO rightly proceeded under Section 148 of the Act. This point was, therefore, decided against the assessee. The CIT(A) confirmed these findings as regards initiation of proceedings under Section 147 of the IT Act. The AO also observed that the writ petition of the assessee was dismissed challenging the initiation of the proceedings. The assessee is not in appeal before us on these grounds. The Revenue has challenged the deletion of the addition on merits. Therefore, we do not propose to decide the point as regards initiation of proceedings under Section 147 of the IT Act.
7. The assessee explained before the AO that the basis on which the proceedings were initiated in this case has become non-existent by virtue of the judgment passed by the Special Judge, Shri V.B. Gupta, New Delhi, in criminal proceedings under the Prevention of Corruption Act. However, the AO was of the view that the income-tax proceedings are independent proceedings and have nothing to do with the decision of the Special Judge, New Delhi (supra).
8. The assessee filed various replies before the AO requesting for complete copies of the documents available with the Department which were supplied by the AO, namely, (1) Copies of two diaries seized by the CBI and two files from the residence of Shri J.K. Jain, New Delhi.
(2) Copies of the statements of Shri S.K. Jain recorded by the CBI on 21st Sept., 1993 and 12th Dec, 1994.
(3) Copy of the statement of Shri S.K. Jain recorded by the CBI on 3rd Jan., 1995.
9. The AO confronted the statements of Shri S.K. Jain and Shri J.K. Jain at the assessment stage with regard to the code-words mentioned in the diary and the AO has taken the code-words J.K.H. as Balram Jakhar. The AO issued show-cause notice against the assessee as to why the amount of Rs. 17 lakhs stated to have been received by the assessee be not added to his income from undisclosed sources. The assessee contended that the reasons supplied are not based on documents and details recorded. The assessee relied upon the order of Shri V.B. Gupta, Special Judge, New Delhi, in the case of the assessee and others and the judgment of the Madhya Pradesh High Court in the case of Shri Arjun Singh v. Asstt. Director of IT and Ors. . The AO, however, was of the view that the proceedings under the Prevention of Corruption Act are different from the income-tax proceedings and the decision in the case of Arjun Singh (supra) is quite distinguishable.
10. The AO also confronted the assessee with the statement of Shri J.K. Jain recorded by the IT authorities, namely, Shri D.C. Aggarwal, DDI (Inv.), Unit-I, New Delhi, on 2nd March, 1995, and 4th July, 1995. The counsel for the assessee submitted before the AO that the statement of Shri J.K. Jain was recorded at assessee's back and he was not put before the assessee by the DDI for cross-examination. The AO further held that no specific request is made before him for cross-examination of any person in the course of assessment proceedings. Therefore, case could be completed on the basis of material available on record.
11. The AO in view of the above material on record concluded that the diaries and other incriminating material were recovered from the residence of Shri J.K. Jain in which the disbursement of the payment is recorded to various persons including political leaders and Shri J.K. Jain had stated before the IT authorities that all these documents have been recovered from his residence and are in his handwriting recorded at the oral instruction of Shri S.K. Jain. The AO on the basis of his findings was of the view that Shri Balram Jakhar has received Rs. 17 lakhs during the financial year 1987-88, relevant to the asst. yr. 1988-89 under appeal. The AO was of the view that the initial J.K.H. against whom the payment has been shown in the diaries tally with the initials of Shri Balram Jakhar (assessee). The AO further observed that even though the assessee has denied having received the money from Jain Brothers and there is no evidence other than entries recorded in the Jain diary, preponderance of probability in such case has to be taken into account and one has to go by the surrounding circumstances of the circumstantial evidence as held by the Hon'ble Supreme Court in the case of Sumati Dayal v. CIT . The AO ultimately made the addition of Rs. 17 lakhs in the hands of the assessee being income chargeable to tax as undisclosed income. The addition was challenged before the CIT(A) and it was submitted that the addition was made merely on surmises and suspicion on the basis of the report of CBI and without any corroborating evidence. It was also submitted that there was neither supporting documentary evidence to support the case. It was also submitted that the assessee explained all the queries before the AO and denied to have received any amount from Jain Brothers. It was also explained that IT authorities made enquiries from bank directly but no tangible material/unaccounted money came to their notice. It was also explained that only statement recorded by the DDI (Inv.), New Delhi, of Shri J.K. Jain was in connection with the case of Shri S.K. Jain in his personal case in which also he has not made any allegation against the assessee. It was also explained that the statement of Shri S.K. Jain or J.K. Jain has no value in the eyes of law which is illegal and the same has not been relied upon by the Hon'ble Supreme Court in the case of CBI v. V.C. Shukla and Ors. . It was also explained that even none of the witnesses was produced for cross-examination before the AO and that on the same matter in issue, the assessee was not charge-sheeted by the Special Judge, New Delhi, as no charge was framed against the assessee of the amount involved in this case. The CBI filed criminal revision petition before the Delhi High Court in criminal revision No. 473/97 in which the counsel of CBI did not press the petition against the assessee, Shri Balram Jakhar. Therefore, the assessee was discharged of the charges of the alleged cash received from Jain Brothers. It was also explained that as far as other charges are concerned, the assessee was acquitted subsequently by Shri V.B. Gupta, Special Judge, New Delhi, vide judgment dt. 30th July, 1991. The assessee also relied upon the decision of the Hon'ble Supreme Court in the case of Ishai Dass Jain (Decd.) v. Sohan Lal and decision in the case of Kishinchand Chellaram v. CIT as well as the decision of the Hon'ble Calcutta High Court in the case of CIT v. Eastern Commercial Enterprises in which it was held that the evidence collected at the back of the assessee should be confronted to the assessee to give opportunity to rebut the same otherwise, such material cannot be used against the assessee at the assessment stage. Detailed submissions of the assessee were recorded by the CIT(A) in the impugned order.
12. The CIT(A), considering the totality of the facts and the circumstances of the case, was of the view that the addition of Rs. 17 lakhs was made on the basis of entries found in the Jain diary found by the CBI in possession of the Jain Brothers. He has further observed that the assessee was charge-sheeted by the CBI for receiving the gratification from Jain Brothers of which Rs. 17 lakhs were received during the financial year, relevant to the assessment year under appeal. The CIT(A) also observed that charge-sheet of the CBI was quashed and the assessee was discharged and acquitted by Shri V.B. Gupta, Special Judge, New Delhi. The CIT(A) also observed that the order of Hon'ble Delhi High Court in criminal revision No. 473/97 was basis of order of Special Judge, New Delhi. It is also a fact that the Hon'ble Delhi High Court in the case of V.C. Shukla and Ors. (supra) had stated that the Jain diary do not contain any debits and credits and accordingly, cannot be termed as books of account. The CIT(A) also observed that the Hon'ble High Court formed the view that such evidences are of such a nature which cannot be converted into legal evidence against the petitioner as there is no finding in regard to the disbursement of the amount and the said order was affirmed by the Hon'ble Supreme Court in the case of CBI v. V.C. Shukla and Ors. (supra). Similar view is taken by the Hon'ble Madhya Pradesh High Court in the case of Arjun Singh v. Asstt. Director of IT and Ors. (supra). The CIT(A) further observed that the AO was present at the appellate stage and conceded through his written arguments dt. 19th Nov., 2001, that there appears to be no findings other than recorded in the Jain diary/file and there is no corresponding entry in the books of account or in the firm of accretion in assets were proved on record by the AO. The CIT(A) further observed that the CIT(A)-I, New Delhi deleted the entire addition in the case of Prem Parkash on the same facts. The CIT(A) accordingly set aside the findings of the AO and deleted the addition of Rs. 17 lakhs. The CIT(A) also relied upon the decision of the Punjab & Haryana High Court in the case of Chiranji Lal Steel Rolling Mills v. CIT . The appeal of the assessee was accordingly allowed on merits.
13. The Revenue is in appeal on the ground mentioned above.
14. The learned Departmental Representative relied upon the order of the AO and submitted that the entire material was confronted to the assessee which was recovered by the CBI. The learned Departmental Representative further argued that the evidence required in criminal case is much more higher as compared to the income-tax proceedings. The learned Departmental Representative, therefore, argued that the IT authorities are entitled to judge the evidence before them by applying the test of human probabilities and by considering the surrounding circumstances. The learned Departmental Representative further argued that the income-tax proceedings are different from the criminal proceedings and as such the CIT(A) was not justified in deleting the entire addition.
15. On the other hand, the learned counsel for the assessee reiterated the submissions made before the authorities below and submitted that on the identical facts, the assessee was discharged and acquitted by the Special Judge, New Delhi, under the criminal proceedings in Prevention of Corruption Act. He has further submitted that the AO has conceded before the CIT(A) that there is no material available on record except Jain diary against the assessee. The learned counsel for the assessee further submitted that since the decision of the Delhi High Court in the case of V.C. Shukla (supra) is affirmed by the Hon'ble Supreme Court rejecting the evidence collected by the CBI, therefore, there is no basis for the AO to make the addition. He has further submitted that the CBI has made a statement in favour of the assessee before the Hon'ble Delhi High Court in the criminal revision No. 437/97 and as such, the proceedings were dropped against the assessee with regard to the payment of Rs. 51,24,800. The learned counsel for the assessee further argued that the Hon'ble Madhya Pradesh High Court in the case of Arjun Singh (supra) also deleted the similar addition in the IT Act which is (supra). The learned counsel for the assessee submitted that only statement of Shri J.K. Jain was recorded in the income-tax proceedings by the DDI (Inv.) and the same was not confronted to the assessee. Therefore, such statement cannot be read against the assessee. He has referred to letters filed before the AO, copies of same are filed in the paper book at pp. 174 to 182 to show that the assessee made specific request to allow cross-examination of persons whose statements have been recorded at the back of the assessee. The learned counsel for the assessee submitted that the CIT(A) rightly deleted the addition in the matter.
16. We have considered the rival submissions and material available on record. Copies of the reasons initiating proceedings under Section 147/148 have been filed in the paper book in which it was recorded by the AO that the assessee allegedly received monies from Jain Brothers of Shri S.K. Jain Hawala scam and Shri Balram Jakhar is one of the persons against whom the CBI filed charge-sheet under the Prevention of Corruption Act. The AO on that basis had reasons to believe that income escaped assessment in a sum of Rs. 17 lakhs. Therefore, the very basis for initiating proceedings under Section 148 of the IT Act was criminal proceedings filed against the assessee on the basis of Jain diary and other incriminating material which were recovered from the residence of Shri J.K. Jain. Once the prosecution against the assessee has gone, the very foundation of initiating the proceedings under Section 147 would disappear and would not exist. Therefore, such reasons qua the addition would not be sustainable in law. We find from the judgment dt. 30th July, 1999, in the case of Shri Balram Jakhar and others passed by the Shri V.B. Gupta, Special Judge, New Delhi, that assessee was charged for the offences related to the payment of Rs. 89,928 from Jain Brothers as gratification in the form of air journey fare showing in the names of his wife and her friends. It appears that though there were more allegations against the assessee as regards receipt of the huge amount from Jain Brothers but the learned Trial Court did not frame charge against the assessee of that amount on which the CBI has gone in criminal revision No. 473/97 before the Delhi High Court against the assessee and others. We find from the order of the Delhi High Court dt. 5th May, 1998, in above criminal revision that the learned counsel for the CBI stated before the Delhi High Court that the CBI at the present does not have corroborative evidence against Shri Balram Jakhar in respect of those payments, i.e., Rs. 51,24,800 for which charges have not been framed against him. The criminal revision was, therefore, not pressed against Shri Balram Jakhar (assessee). This would lead to the conclusion that the learned Trial Court did not frame charge against the assessee, Shri Balram Jakhar, with regard to the receipt of Rs. 51,24,800 and the findings become final, the moment the criminal revision by the CBI was not pressed against the assessee, Shri Balram Jakhar. The Trial Court also acguitted the assessee on remaining charges vide its judgment dt. 30th July, 1999.
17. The AO in the assessment order at p. 6 mentioned the payment of Rs. 51,24,800 asunder:
Amount (Rs.) Financial year Asst. yr. 17,00,000 1987-88 1988-89. 12,64,500 1988-89 1989-90. 21,66,300 1989-90 1990-91.
It would show that the assessee though charge-sheeted on allegation of receipt of Rs. 17 lakhs but prosecution resulted into futility and assessee was discharged of offences. Therefore, very basis of addition does not survive. There is no recovery made at the instance or possession of the assessee. The Revenue Department relied upon only on diary and charge-sheet framed by the CBI. The whole case of Revenue would collapse, the moment assessee is discharged of the sole allegation of receipt of Rs. 17 lakhs.
18. The abbreviated form allegedly recorded in diaries is not explained by any material. It could resemble to name of other person also who is having similarity in name. Unless it is proved through corroborative evidence that entries are having any nexus with the assessee, addition cannot be made in the hands of the assessee. Material on record was not enough to conclude findings against the assessee. It, therefore, appears that findings of AO are based on suspicion which cannot take place of legal proof.
19. The Hon'ble Supreme Court also in the case of V.C. Shukla (supra) held that in the present case there is no evidence against the petitioner except diary, note book and loose sheet with regard to payment. The said evidence is of such a nature, which cannot be converted into legal evidence against the petitioners. It was further held that there is no evidence in the instant case with regard to the monies which are alleged to have been received by Jain Brothers for the purpose of disbursement. All the decisions referred to above clearly proved that the alleged charge against the assessee with regard to the receipt of the money from Jain Brothers was not proved at all and entries recorded in the seized diary were not found to have any evidentiary value. The AO admitted before the CIT(A) that the Revenue Department has no other evidence except these diaries. Therefore, it is a case of no evidence against the assessee as whatever evidence was available was not considered, by the Hon'ble Delhi High Court and the Supreme Court to have any evidentiary value. The Hon'ble Madhya Pradesh High Court also held so in favour of Arjun Singh (supra) in his case referred to above. No corresponding entries in the books of account or in the form of accretion in assets were found or proved by the AO.
20. We find from copies of the letters filed by the assessee before the AO in which the assessee has requested for confronting the material collected by the Department and for cross-examination. Though the AO has recorded in the assessment order to have supplied copies of the material collected by the Revenue Department at the back of the assessee but the AO nowhere recorded any finding if any opportunity was given to the assessee to cross-examine any of the persons whose statement was recorded at the back of the assessee. We find from the assessment order that the copies of the seized diaries were supplied along with the statement of Shri S.K. Jain recorded by the CBI but the AO nowhere mentioned to have provided opportunity to the assessee to cross-examine Shri S.K. Jain. Similarly, the statement of Shri J.K. Jain was recorded by the DDI (Inv.), New Delhi, on 2nd March, 1995 and 4th July, 1995, copies of the same are filed in the paper book from whose possession the alleged diary was recovered by the CBI. Shri J.K. Jain has not made any statement against the assessee and whatever statement was recorded by the DDI, Shri J.K. Jain has not named the assessee to be one of the recipients of the amount. He also refused to sign whatever statement was recorded by the DDI. Moreover, the AO never produced Shri J.K. Jain before the assessee for cross-examination. The assessee in his reply before the AO specifically requested to produce the persons who have made the statements against the assessee for cross-examination but no person was produced for cross-examination before the AO. Therefore, whatever material was collected at the back of the assessee cannot be read in evidence against the assessee. It is settled law that if any material is collected by the IT authorities at the back of the assessee then opportunity to controvert the same should have been given to the assessee. We are fortified in our view by the decision of the Hon'ble Supreme Court in the case of Kishan Chand Chellaram (supra) and the decision of the Hon'ble Punjab & Haryana High Court in the case of Chiranji Lal Steel Rolling Mills v. CIT (supra). Therefore, in the present case, whatever material was collected by the AO cannot be read in evidence against the assessee. The fact was conceded by the AO before the CIT(A) that except the copies of the documents recovered by the CBI there is no other material found against the assessee.
21. The Hon'ble Supreme Court in the matter of CIT v. Durga Prasad More held that "the Courts and the Tribunal have to judge the evidence before them by applying the test of human probabilities." Similarly, the Hon'ble Supreme Court in the case of Sumati Dayal v. CIT (supra) held that "the surrounding circumstances should be considered by applying the test of human probabilities." In the case of Sumati Dayal (supra) the facts were that the assessee received the amount by way of race winnings in jackpots and treble events in the races at Turf Clubs in Bangalore, Madras and Hyderabad. The said amount was shown in the capital account in the books of the assessee. The ITO held that the assessee has not won the amount in race and treated the said receipts as income from undisclosed sources and made the addition. In this context, it was observed that the assessee's knowledge of racing was very meagre and that jackpot is a stake of five events in a single day and one can believe a regular and experienced hunter clearing a jackpot occasionally, but the claim of the assessee of having won a number of jackpots in three or four seasons not merely at one place but at three different centres, prima facie, to be wild and contrary to statistical theories and experience of frequencies and probabilities. In this view of the facts, it was held that the evidence is to be judged by considering the surrounding circumstances and by applying the test of human probabilities.
22. However, in the facts of the present case, only diaries were recovered which was having only abbreviated forms without further explaining or mentioning anything. Therefore, it was not considered evidence by the Hon'ble Delhi High Court and the Supreme Court. If we apply the test of human probabilities in favour of the assessee then it could be inferred that Jain Brothers might have recorded the entries in abbreviated forms in diary without the knowledge of the assessee. Therefore, under such circumstances, the Revenue would not be justified in making any addition against the assessee.
23. Considering the above discussion, we are of the considered view that Revenue has no cogent or sufficient material evidence on record to support the findings of the AO, therefore, we do not find any justification to interfere in the order of the CIT(A). The appeal of the Revenue has no merits. We accordingly confirm the impugned order of the CIT(A) and dismiss the Departmental appeal.
24. No other ground is argued or pressed.
25. As a result, the appeal of the Revenue is dismissed.
26. WTA No. 1/Asr/2002:
The Revenue authority made the similar addition against the assessee under the WT Act on the basis of findings given in the income-tax assessment order. The CWT(A) deleted the addition on the same facts because addition has been deleted in the income-tax matter. The facts are identical and rather the wealth-tax matter is consequential to the matter of the income-tax in which we have dismissed the Departmental appeal. By following the same order; we dismiss the wealth-tax appeal also.
27. As a result, the appeal of the Revenue is dismissed.
28. As a result, both the appeals of the Revenue are dismissed.