The main grievance projected in this appeal by the assessee is that the learned Commissioner (Appeals) is not justified in confirming the addition of Rs. 92,29,856 in respect of payments/adjustments against the purchase price of silver. It has further been agitated that in this connection, the Commissioner (Appeals) is not justified in holding that the payments were hit by the provisions of section 40A(3) and that the payments were not saved by rule 6DD(e) and/or rule 6DD(J) of the Income Tax Rules.
The assessee is a firm of long standing and it deals in gold and gold Jewellery at Jalgaon. It decided to start dealing in silver on wholesale basis consequent to Government of Indias policy decision on 9-2-1993 regarding liberalisation of import of silver. The assessee thereafter purchased 194.250 KGs. of silver from M/s. Dilipkumar Hirachand of Jalgaon on 9-2-1993. According to the assessee, it further purchased 1713.807 KGs. of silver from 18 NRI passengers on 11-2-1993 and 12-2-1993 through their representatives. The said 18 persons held Custom Baggage Receipts issued by the Customs Department, and that the said receipts delivered by the representatives to the assessee.
The Directorate of Revenue Intelligence (hereinafter referred to as the DRI), on getting information that the silver purchased by the assessee on 11-2-1993 and 12-2-1993 was of foreign origin, raided the business premises of the assessee-firm on 13 and 14-2-1993. During the search operations carried out by the DRI authorities, seizure of 1913.295 Kgs.
of silver was made by them.
A show-cause notice was issued by the Customs Department on 7-8-1993 under section 124 of the Customs Act, 1962. The Collector, Central Excise and Customs, Aurangabad by his order dated 21-9-1994 discharged the said notice on all counts and ordered the release of silver seized by the DRI on 13/14-2-1993. The Customs Department was not satisfied with the order of the Collector and hence, it preferred an appeal against the said order before the Customs, Excise and Gold (Control) Appellate Tribunal (hereinafter referred to as the CEGAT), Western Regional Bench, Mumbai.
The CEGAT reversed the order of the Collector and held that in the adjudication proceedings, under the provisions of the Customs Act, proof beyond all reasonable doubt is not the criteria applicable and the evidence to be judged on preponderance of probability and, accordingly, further held that the seized silver to the extent of 1713.807 Kgs. was not legally imported silver. The Tribunal, however, held that the silver weighing 194.250 Kgs. purchased from M/s.
Dilipkumar Hirachand was not proved to have been of smuggled origin.
The assessing officer noticed that the Directorate of Revenue Intelligence had raided the premises of the assessee-firm on 13th and 14-2-1993 and had seized silver weighing 1913.295 Kgs. The seized silver was found in heavy gunny bags kept in the strong room and were covered by waste paper cardboard pieces. The gunny bags contained 2450 pieces of silver. The assessing officer thereafter noted the contents of the show-cause notice issued by the Collector of Central Excise & Customs, Aurangabad and also the news paper report appearing in Daily Sakal of 27-3-1996 that the CEGAT had held that the seized silver was liable for confiscation. After noting the entire evidence collected by (he Gold Control Authorities/DRI and CEGATs order, the assessing officer held that the entire seized silver was acquired by making payment in cash out of unaccounted income.
During the course of assessment proceedings, the assessee-firm claimed that the payment for impugned purchase of silver was not made at the time of purchase but was made subsequently and had been duly recorded in the books of account; the payments for which were subsequently made are as under : The assessing officer did not accept the contentions of-the assessee.
After considering the various facts involved in this case and arguments advanced on behalf of the assessee and in the light of investigations conducted by DRI, Mumbai and the decision of the CEGAT, the assessing officer held that the payment for the above purchases of silver must have been made by the assessee from sources outside the books and, accordingly. he made an addition of Rs. 92,29,856 for purchase of the alleged silver out of smuggled goods. Alternatively, he further held that the above payment also deserves to be disallowed under section 40A(3) because the same was apparently made in cash.
The assessee appealed to the Commissioner (Appeals) and submitted that the assessing officer was not justified in disallowing the amount of Rs. 92,29,856 by applying the provisions of section 40A(3). It was submitted that the adjustment against the amounts due on supply of gold could not be considered to be a payment in the form of gold and that in any case such adjustment was covered by rule 6DD(3). The cash payment in each case was below the amount of Rs. 10,000 and was clearly made to the suppliers of silver or their representatives. The payments by demand draft were in accordance with the requirements of section 40A(3) and were again made to suppliers of silver.
As regards the assessing officers finding that the assessee had paid cash for purchase of gold out of its unaccounted income, it was submitted that the assessing officer was not justified in coming to the said conclusion as there was no evidence to show that cash was paid out of unaccounted income.
After discussing the detailed arguments put before him and after going through the investigations made by DRI and the findings of the CEGAT, the Commissioner (Appeals) held that the stand taken by the assessee-firm that the purchase of alleged silver was on credit basis was not acceptable. He noted that the passengers from whom the silver was purchased had denied categorically any sale transaction with the assessee-firm. In the opinion of the Commissioner (Appeals), when the identity of sellers could not be established by the assessee, the stand that the silver was purchased on credit basis was not acceptable. He held that the CEGAT had ordered confiscation of silver and, therefore, it was deemed to have been acquired through illegal sources for which payments by and large are to be made instantly on the spot. However, in the end, he held that this was not a case under section 40A(3), but a case of investment made to the tune of Rs.92,29,856 in purchase of alleged silver from the illegal transaction out of unaccounted income.
Thus, he sustained the impugned-addition of Rs. 92,29,856. He also held, "As regards, as to whether these payments in DDs, cash and exchange of gold, if at all, accepted are covered under section 40A(3), I am in full agreement with the assessing officers view.
Aggrieved by the orders of the authorities below, the assessee is in appeal before us. Shri N.A. Dalvi, the learned counsel for the assessee-firm, submitted that due to the change in the Government policy regarding import of silver, the assessee-firm wanted to start wholesale business in silver. The silver purchased by it stood duly recorded in the books of account, which were not seized by the customs authorities at the time of seizure of silver, i.e. on 13/14-2-1993. He also submitted that Shri Ishwarlal Lalwani (Jain) alias Babuji, Managing partner of the firm was away from Jalgaon when the DRI authorities raided the business premises of the assessee-firm and seized silver. The Manager of the firm, who, was present dining the course of search operations, was not aware of the transactions in silver entered into on behalf of the assessee-firm, as another firm (sister concern) by the name M/s. Rajmal Lakhichand & Sons was also dealing in silver. The Manager, therefore, informed the search party that trading in silver was carried on by the firm M/s. Rajmal Lakhichand & Sons. The raiding party, therefore, seized record from the said firm. Shri Dalvi submitted that the transaction of purchase of silver, was duly recorded in the books of the assessee-firm; however, the books of the assessee-firm, though seen by the search party, were not seized.
Shri Dalvi further submitted that the assessing officer finalised the assessment on 19-3-1996. However, the order passed by the CEGAT on 19-3-1996 was not before the assessing officer. The assessing officer has referred to a news paper report appearing in Daily Sakal on 24-3-1996 regarding the decision given by the CEGAT. The learned counsel pointed out that the assessing officer has only relied upon the content of the show-cause notice issued by the Customs Department; in fact, the said show-cause notice is the very basis of making addition of Rs. 92,29,856. He drew our attention to the extract from the show-cause notice reproduced in the assessment order as under : "In the light of the aforesaid entire evidence it was held that the deal was finalised on 5-2-1993 with Shri Suresh by Babuji and confirmed him that the payment will be made in cash in 1/15 days after the delivery of silver. The delivery was effected on 7-2-1993 in the presence of Shri Suresh. The policy of the Government was announced only on 9-2-1993. Thereafter, there was conversation between Shri Suresh and Babuji on telephone. There were communication from Shri Babuji to Suresh on 16-2-1993 about the seizure of silver and requested to try to get the custom duty bills from the passengers.
13.20 It will thus be seen that there is enough material to come to the conclusion that the silver found during the course of search at the premises of M/s. Rajmal Lakhichand is the smuggled silver for which payment was promised to be made in cash." The learned counsel further submitted that the provisions of section 69/69C do not apply at all to the facts of the present case as the purchase of silver has been duly recorded in the books of account maintained by the assessee. According to the learned counsel, the allegation of the department that cash must have been paid at the time of purchase of silver out of unaccounted income is not at all borne out by the records. He submitted that no payment out of unaccounted income was made for the purchase of silver. He heavily relied upon paras 4 and 5 (Pages 27 and 28 of paper-book) of the Collectors order to show that the payment of cash as alleged was not made at the time of purchase or at any time later. He pointed out that the said paras were chronological sequence of events noted from the depositions of Shri Suresh Jain alias Seth and Shri Dilip Jain respectively. In this connection, he mentioned that Shri Suresh Jain was the person who had negotiated the deal for purchase of silver. He was dealing in the business of arranging the sale of silver on commission basis. This is very much clear from para 2.7 of the order of the CEGAT which reads as under : "The intelligence gathered indicated that one Suresh Jain (Seth) of Bombay had on 7-2-1993 arranged for delivery of silver bricks to Babuji and hence said Suresh Jain was tracted out and his premises were searched on 17-2-1993 where no incriminating evidence was found but while search was going on, one Jagdish Purohit entered the premises with Rs. 50,000 in cash which he reported to be belonging to Suresh Seth. Several statements of Mr. Suresh Seth were recorded where he reportedly admitted to have been arranging for sale of smuggled silver on commission basis and stated that he had received a phone call from Mr. Haji Bhai of Dubai on 5-2-1993 asking to arrange for sale of silver on commission of Rs. 100 per kg. and on learning from the market sources that Babuji of Jalgaon was dealing in such silver and hence on procuring his telephone numbers, he telephoned to him on 5-2-1993 itself and as the follow up, Babuji also telephoned to him twice on the same day and a deal was struck . . . . . . " The learned counsel further submitted that Shri Dilip Jain was reportedly on record stating that fie had arranged the customs receipts for the assessee for the above purchases of silver. In his statement dated 7-4-1993, Shri Dilip Jain has also stated that Shri Suresh had told him that about 132 slabs of silver were given to the assessee and the assessee had not made the payment for the same. He also further confirmed that he had told Shri Suresh to recover the payment "slowly" from the assessee. Thus, according to the learned counsel, it is seen from the depositions that Shri Suresh Jain met Shri Dilip Jain on 25-2-1993 and informed him that he (Suresh) had delivered 132 bricks of silver to Babuji and admitted the fact before the DRI. Shri Dilip Jain in turn advised Shri Suresh Jain to get the payments.
Shri Dalvi further contended that if the cepartment has based its case on the finding of the customs authorities, then the entire findings of the, CEGAT must be borne in mind by the assessing officer in order to decide the issue. He pointed out from para 14.3 of the CEGAT order wherein it has been observed, "not a single transaction in relation to the purchase of silver, as alleged to be covered by the subject receipts is on spot payment and all the alleged payments have been made after the seizure is effected". The learned counsel read out from the depositions of Shri Dilip Kumar Jain and Shri Suresh Kumar Seth recorded on 22-2-1993 and 7-4-1993 to stress the point that the assessee-firm did not make repayment of purchase of silver at the time of its receipts. He further drew our attention to the observations of the CEGAT in para 14.1 of its order at "it is also available from the records and the plea raised by Babuji himself that for purchase of subject silver, there was no spot payment and payment towards the purchase price commenced only from 18-2-1993 or thereafter". The learned counsel also pointed out that the nature of the transactions was required to be taken into account, the impugned silver having been acquired through a middle man. Shri Dalvi reiterated that the purchase transactions were duly recorded in the purchase book and the melting charges payable to the melters were also recorded in the cash book on the respective dates. The Bardana purchases were also recorded in the cash book on 10-2-1993. All these books were produced before us. Shri Dalvi also submitted that all the accounting/other record for the assessee-firm including melting register/cash book produced before the search parties on the date of search. However, probably under the mistaken belief that the silver business was carried on by the sister concern of the assessee-firm, namely, M/s. Rajmal Lakhichand & Sons and not by the assessee-firm, the DRI Authorities seized the account book/other records pertaining to M/s. Rajmal Lakhichand & Sons. In nutshell, the learned counsel contended that the CEGAT itself has a finding that no money was paid till the search operation by the assessee in regard to these purchases. If that be so, the issue regarding addition of purchase of silver must be decided keeping in mind the above observations of the CEGAT. According to the learned counsel, the department is not justified in basing its decision only on a part of the order of the CEGAT and ignoring the other part. It is always a principle of law that if statement, document, evidence, etc.
is to be made use of by the assessing, officer against the assessee, the same has to be considered in entirety by the assessing officer and not in parts. Keeping this principle in view, the learned counsel, assuming without admitting, stated that if the Commissioner (Appeals) is justified in holding that the silver purchased by the assessee was contraband as per the order of the CEGAT, in that, he ought to have given due weightage to the finding of the CEGAT that no payment was made by the assessee for the acquisition of such silver till the date of search and therefore, if no payment is made, the question of making any addition under section 69 does not arise at all. According to the learned counsel, the department cannot take only a convenient portion of the decision of the CEGAT and make use of it against the assessee and ignore the portion of the decision which is in favour of the assessee.
Shri Dalvi further submitted that the payment was not made at the time of purchase of silver is further borne out by the contents of paras 13.19 and 13.20 of the assessment order itself. Shri Dalvi also read out paras 16.1 to 16.7 of the CEGAT order to support his contention that no payment whatsoever was made at the time of acquiring the impugned silver. He further pointed out that it has never been the case of the DRI authorities that the assessee had made any cash payment when the impugned silver was acquired. The learned counsel further submitted that the Income Tax Department did not make any independent inquiry, but relied on the findings of the Customs Department and the news paper report regarding the CEGAT order. Out of the 18 persons who held Custom Baggage Receipts, only three persons were examined by the investigating agency, namely, DRI/Customs. This would show that the assessing officer did not apply his mind while making the addition of Rs. 92,29,856.
As regards the applicability of section 69/69C, the burden to prove that the investment/expenditure was incurred out of unaccounted income lies heavily on the department. For this proposition, the learned counsel placed reliance on the following decisions : The learned counsel further submitted that it was worthwhile to note that the genuineness of the purchase transactions, the fact that they had been duly recorded on the basis of original customs duty paid receipts in the accounts of the assessee-firm on the date of purchase itself, i.e. before the date of action by the DRI authorities, has not been disputed either by the DRI or income-tax authorities. He further submitted that the DRI authorities have checked and verified the cash balances of both the firms and found the same in order. This proves the fact that accounts of both the firms, the assessee M/s. Rajmal Lakhichand and its sister concern M/s. Rajmal Lakhichand & Sons, were complete and even seen by the DRI authorities, on the date of search itself. Referring to the extracts from the books of account, copies of which have been placed on record, the learned counsel tried to prove that the assessee before the search and thereafter had sufficient stock of gold and cash to make the alleged payments to the suppliers of silver. Even the DRI authorities who made detailed enquiry, and recorded the statements of accountant later after the search could not come to the conclusion that the payment in cash was made at the time of purchase. Indeed, according to the learned counsel, it has never been the case of DRI authorities that the assessee had made any cash payment when the impugned silver was acquired. The learned counsel further submitted that the Income Tax Department also did not make any independent enquiry, but relied on the findings of the Customs Department and the news paper report regarding the CEGAT order. It is to be noted that out of 18 persons, only three were examined by the investigating agency, namely, DRI/Customs. The term expenditure incurred means expenditure paid out. To support this contention, the learned counsel relied upon the following decisions: The learned counsel accordingly concluded that the department has not established that the assessee has paid for the purchases before the search. On the contrary, the findings of the Customs authority clearly indicated that the assessee had not paid for the material and, therefore, the assessing officer is not justified in concluding that the payment for acquisition of silver was made by the assessee before the search out of unaccounted cash. Thus, in view of the factual and legal position, the impugned addition made by the assessing officer and sustained by the learned Commissioner (Appeals) deserves to be deleted.
Shri Naresh Kumar, the learned senior Departmental Representative strongly relied upon the orders of the authorities below. He relied heavily on the order of the CEGAT. He pointed out that under the relevant provisions of the Customs and Central Excise and Gold Control Act, the CEGAT is the final fact finding authority like the Income Tax Appellate Tribunal. The assessing officer had gone through the order of the Customs, the DRI authorities, the news paper report and after having applied his mind had issued show-cause notice to the assessee, Therefore, according to the learned senior Departmental Representative., it cannot be said that the assessing officer did not apply his mind. It was for the assessee to produce necessary evidence before the assessing officer to prove that the facts found out by the Customs authorities and DRI Officers and CEGAT are either irrelevant or factually incorrect or have no bearing on the proceedings under the Income Tax Act. However, nothing of this kind has been done by the assessee. Therefore, in view of the finding of facts of the CEGAT, the assessing officer was justified in arriving at the conclusion he has arrived at. He brought to our notice that the ITAT, Pune Bench, has been following the orders of the Customs Authorities and courts. In this regard, he pointed to the decision of this Tribunal in (ITA No.866/PN of 1988) in the case of ITO v. N.D. Dandekar, where the Tribunal had followed the narration of the events made by the Customs Department in the customs proceedings as well as in criminal proceedings before the Judicial Magistrate. He submitted that at page-57 of the said order, it has been observed, "The narration of the events made by the Customs Department in customs proceedings as well as in criminal proceedings before the Judicial Magistrate lends credence to the plea of the assessee to the effect that he had fished out the silver slabs from the sea bed." Similarly in the case of Sandvik Asia. DCIT in IT Appeal No. 705 (PN) of 1992 the Tribunal has followed the orders passed by the civil court and the Appellate Court. On page 4, para 6 of the said order, it had been observed that the perusal of the orders passed by the civil court and the Appellate court reveals that the assessee had encroached upon land.
Reliance was also placed by the learned senior Departmental Representative on the judgment of the Honble Allahabad High Court in the case of Gangadhar Baijnath v. CIT (1976) 102 ITR 382 (All) where the Income Tax Officer while making a best judgment assessment relied upon, inter alia, material collected by the Income Tax Investigation Commission. It was held by the Honble High Court that the reliance by the Income Tax Officer on the material collected by the Income Tax Investigation Commission was correct, even though the Act under which the Income Tax Investigation Commission was constituted was declared ultra vires by the Supreme Court. Drawing analogy, the learned senior Departmental Representative submitted that in the present case, the assessing officer had relied upon the facts collected by the Customs/DRI official and upheld by the CEGAT He further relied upon the judgment of the Kerala High Court in CIT v. Bharat Plywood & Timber Products (P) Ltd. 137 CTR 520 (Ker).
Shri Naresh Kumar further argued that the ITAT, Pune should follo the finding of fact arrived at by the CEGAT, unless the assessee proves to the contrary. It was argued by him that it was not necessary for the wheel to be reinvented by every user at every stage. The facts found by one fact finding authority must be accepted by the other fact finding authority, unless proved to the contrary. Facts will remain facts, whatsoever the authority may find them. Not following the facts found by one fact finding authority would lead to chaos with every agency making independent enquiries regarding the same set of facts. It is not the case of the assessee that Shri Suresh Kumar did not make the statement dated 17-2-1993 before the Customs/DRI Authorities. It is not the case of the assessee that the facts as recorded by the CEGAT were not there. It is not the case of the assessee that the silver with foreign markings wrapped in gunny bags was not found by the DRI Authorities. All these facts, according to the learned senior Departmental Representative, have been taken into consideration by CEGAT.Shri Naresh Kumar further submitted that the assessing officer has applied his mind and pointed out that the assessees argument that the assessee-firm decided to enter into the business in silver in wholesale, after the Government of India liberalised the import of silver from 1992-93, is found to be factually incorrect by the CEGAT in its order in para 14.6 which he read before us. According to him, the books of account of M/s. Rajmal Lakhichand, i.e., the assessee-firm also did not reflect the impugned transactions. He submitted that the CEGAT had given a finding that the impugned silver was of foreign origin and was not licitly imported He further submitted that the observations of the CEGAT would lead to the only possible conclusion that the payment for the purchase of silver has been made in cash. He also submitted that the subsequent payment made by the assessee-firm were in violation of the provisions of section 40A(3) and submitted that the provisions of the said section are applicable to the businesses carried out illegally. For this proposition, he relied upon the following decisions: In rejoinder, Shri A.K. Khaladkar, who also appeared with Shri N.A.Dalvi, submitted that the Commissioner (Appeals) has held that the provisions of section 40A(3) are not applicable because he has confirmed the addition only on the ground that the investment was made for the purchase of alleged silver out of unaccounted income. Shri Khaladkar reiterated that the assessing officer has not applied his mind at all and has only relied on the points in the show-cause notice issued by the Collector, Central Excise and Customs and Daily Sakals report about the CEGAT order. He submitted that the order of the CEGAT covered a different, aspect and does not have any bearing on the income-tax proceedings. He further informed that the assessee-firm has filed an appeal to the High Court at Mumbai against the said order which has been admitted and the matter has not reached any finality Shri Khaladkar further submitted that the assessing officers find that provisions of section 40A(3) are applicable cuts the root of his other finding that cash was paid for the purchase of silver at the time of delivery out of unaccounted income. The assessee-firm, according to the learned counsel, was doing perfectly legal business in gold and silver.
The impugned transactions of purchase silver from M/s. Dilipkumar Hirachand of Jalgaon and from 18 representatives who brought imported silver were perfectly legal.
He vehemently submitted that there was no case for any addition and, therefore, the addition made deserves to be deleted.
Shri Khaladkars insistence, as that of Shri Dalvi was on the point that if the assessing officer has based his assessment on the findings of the Customs Authorities, the show-cause notice which is the starting point and the CEGAT order which is the final decision so far from the customs authorities, indicate clearly that no payment was made by the assessee till the date of search for the purchases of alleged contraband of silver. If that be so, the assessing officer is not justified in presuming on his own that the assessee made the payment in cash for the above purchases and hence addition made under section 69/69C is not justified. Shri Khaladkar countered the contention of the learned Departmental Representative that the CEGAT order states that the payments were made in cash. He relied again on paras 14.1 and 14.3 of the CEGAT order and the show-cause notice to support the case that no payment was made by the assessee till the search and hence the question of making any addition under section 69/69C does not arise at all. In a nutshell, the learned counsel submitted that even if the contention of the learned Departmental Representative is accepted that the silver was contraband, it is not proved by the department that money was paid out of the books for acquiring the same and hence no addition is warranted at all. The learned counsel also distinguished the case laws cited by the learned Departmental Representative and submitted that the decisions are not applicable to the facts of the present case.
We have considered the rival submissions and perused the facts on record and find considerable force in the contentions of the learned counsel of the assessee. The vital question before us is whether the assessee purchased the subject silver, recorded it in its books of account and made payments for the purchase of subject silver from known/explained sources. The controversy whether the subject silver is of foreign origin or whether or not it was licitly imported has no relevance for deciding this appeal. From the perusal of statements which were produced before the assessing officer; before the customs authorities and before us, one thing is crystal clear that the assessee did purchase the subject silver; did enter it into its books of account, the purchase of Bardana for storing the silver and melting charges also stand recorded in the books of account of the assessee-firm; though seen by the search party were not seized by them.
It is also noted that the genuineness of the purchase transactions, the fact that these had been duly recorded on the basis of original customs duty paid receipts in the accounts of the assessee-firm on the date of purchase itself, i.e., before the date of action by the DRI authorities has not been disputed either by the DRI or by the income-tax authorities. It is further noted that the DRI authorities have checked and verified the cash balances of both the assessee-firm and the sister concern and found the same in order. This proves the fact that the accounts of both the firms, i.e., the assessee M/s. Rajmal Lakhichand and its sister concern M/s. Rajmal Lakhichand & Sons, were complete and even seen by the DRI authorities on the date of search itself. As regards the payment for the subject silver, the payments to various parties were made partly in cash and partly in the form of sale of gold. This fact is clear from the details given by the assessee which have been placed on record from which it is clear that the assessee before the search and thereafter had sufficient stock of gold and cash to make the payments to the suppliers of silver. Even the DRI authorities who made detailed enquiry and recorded the statements of the accountant later after the search could not come to the conclusion that the payment in cash was made at the time of purchase. Indeed, it has never been the case of the DRI authorities that the assessee had made any cash payment when the impugned silver was acquired. From the details placed on record, it is noticed that against the purchase of silver, the assessee has shown in the books the payments in the form of cash and sale of gold on 19th and 20-2-1993, apart from a few payments on 23rd to 26-2-1993 by demand drafts. It is noted that the revenue has not made any investigation to show that the payments by demand drafts were "withdrawn by the assessee or his own men. In view of this fact, the assessee had discharged the onus of proving the fact that it had paid for the purchase of silver and the department has not controverted the assessees claim that all the payments were made to the parties concerned. In fact, as the assessing officer has made an addition under section 69/69C, it was incumbent upon him to show that the assessee had made payment before the date of search or alternatively to prove that the alleged payments shown by the assessee were bogus. As none of the above burdens is discharged by the assessing officer, we are inclined to accept that the assessee had made payments for the purchase of silver as shown in its books of account and, therefore, no addition is possible under section 69/69C of the Act, We agree with the contention of the learned counsel that the department on its own has not made any enquiries and based its entire case on the facts found by the customs authorities. Even if we agree with the contention of the learned senior Departmental Representative that the department need not make its own enquiries but can base the entire case on the findings of the customs authorities, according to us, it is imperative that in that event the assessing officer/Commissioner (Appeals) follow the entire findings of the customs authorities. It is a well-settled principle of law that if the statement/deposition/evidence/ judgment is to be relied upon by any authority, reliance must be placed on such documents entirely. In the case of Chander Mohan Mehta v. Assistant CIT (1999) 71 ITD 245 (Pune-Trib), this Bench has held that a paper found during the search has to be read as whole. In our opinion, the assessing officer is not justified in picking a convenient portion of such judgment which is only in his favour and ignoring the portion which is in favour of the assessee. In this case, there is no doubt that the department on its own has not made any enquiries to prove that the assessee had purchased the contraband silver and it is also not proved that the assessee had made payments for the same in cash at the time of delivery. The Department has based the entire addition on the findings of the customs authorities, but it has not given due weightage to the finding of the CEGAT that no payment was made by the assessee for the acquisition of the subject silver till the date of search and, therefore, if no payment is made, the question of making any addition under section 69/69C does arise at all. Paras 16.1 to 16.7 of the CEGATs order support the contention that no payment whatsoever was made at the time of acquiring the subject silver. Further, it has never been the case of the DRI authorities that the assessee had made any such cash payment when the subject silver was acquired. We do agree with the contention of the learned senior Departmental Representative that the findings given by the CEGAT can be used in the income-tax assessment, but, in our opinion, the order of the CEGAT should be followed in letter and spirit and not in the way the assessing, officer has done by choosing those portions of the order of the CEGAT which are convenient to the department and ignoring the rest. As regards the contention of the learned senior Departmental Representative that provisions of section 40A(3) are applicable in this case, we find that the learned Commissioner (Appeals) has clearly held that provisions of section 40A(3) are not applicable and the department is not in appeal against this finding of the Commissioner (Appeals). Even otherwise, we are of the opinion that the question of invoking this provision does not arise at all. The provision is to be invoked when the department has evidence with itself that the assessee has made payments in cash exceeding the limits prescribed in the section. Disallowance cannot be made merely on a presumption that the assessee must have made payments in cash and that too exceeding the limits prescribed under the section. This proposition finds support from the decision of the ITAT, Pune Bench in the case of Sharma Associates (1996) 217 ITR 1 ITAT (Pune-Trib). Thus, we do not agree with the learned senior Departmental Representative that the above disallowance can be sustained under section 40A(3) because the Department has not proved that the assessee has made payments in cash.
In view of the above factual and legal position, the impugned addition made by the assessing officer and sustained by the learned Commissioner (Appeals) is deleted.