1. On a difference of opinion between the Members Constituting this division, the following question was referred to the Hon'ble President of ITAT as Third Member for his opinion Under Section 255(4) of the Income Tax Act, 1961 "Whether on the facts and circumstances of the case, the ld. Judicial Member is justified to confirm the order of the ld. CIT(A) in confirming the additions made by the Assessing Officer or the ld. Accountant Member is justified to set aside the order of the ld. CIT(A) and restoring the matter again to the file of the Assessing Officer." 2. The Hon'ble President of ITAT as Third Member to set aside of the Ld. CIT(A) and restore the matter to the file of the Assessing Officer.
3. In accordance with the majority view, therefore, the appeal filed by the assessee is allowed for statistical purposes.
1. On account of difference between the two Hon'ble Members of A-Bench, Kolkata of the Tribunal, this matter has come before me Under Section 255(4) of the I.T.Act, 1961. The point of difference is reflected in the following question: "Whether on the facts and circumstances of the case, the ld. Judicial Member is justified to confirm the order of the ld. CIT(A) in confirming the additions made by the Assessing Officer or the ld. Accountant Member is justified to set aside the order of the ld. CIT(A) and restoring the matter again to the file of the Assessing Officer." 2. The facts of the case are that assessee filed return for assessment year 1987-88 on 18.8.1987 disclosing total income of Rs 28.730. The return was accepted Under Section 143(1) of the I.T.Act. Subsequently, the Assistant Director of Income-tax (Inv.), as per his letter V-II(a)/97-98/Cal/842 forwarded cash book, ledger and some loose sheets, alleged to be belonging to the assessee to the A.O. On the basis of above material, the A.O. reopened the assessment by issuing notice Under Section 148 of the I.T.Act. In response to the above notice, the assessee submitted a return declaring the same income.
During the course of these assessment proceedings, the A.O. asked the assessee to show cause as to why profit of Rs. 21,11,392 from "Drugs" and of Rs 1,74,741 from iron and steel besides unexplained capital of Rs 51,61,420 be not brought to tax as income of the assessee. As per her letter dated 12.3.1998, the assessee denied that alleged books of accounts or papers belong to her. She further denied that she had capital of Rs. 51,61,470 or income as alleged in the show cause notice.
Assessee's reply is as under: "With reference to above, it is to state that the alleged books of accounts and loose papers, which are lying with you, do not belong to me. The accountant of the firm M/s Jay Bharat Corporation, who had left our services, had some quarrel with us and he might have fabricated false books of account or loose papers to harass us. Some entries which were correct were also incorporated in the said books.
I had no transactions in cash as shown in the said papers. As such question of capital of Rs. 51,61,420 shown in M/s S.D. Enterprises is not correct and cannot be added with my income. I had no business income as shown in the said papers. As such profit of Rs. 21,11,392 and Rs. 1,74,741 also as shown in the said paper does not belong to me. I totally deny the said books and papers belong to me. If your honour wants to act on the said papers, I humbly request you to call the said person for cross examination. The said papers had no basis as it were written by him and imaginary figures were shown in the said paper." The A.O. held that the assessee had failed to prove that anybody has fabricated books of her accounts and that such claim was not corroborated. He further observed that for tax evasion, assesses maintained duplicate set of accounts. Accordingly a sum of Rs. 74,47,553 was added in the hands of the assessee as income from undisclosed sources in the assessment order dated 31.3.1998 with the following details:3. Profit derived from Iron and steel Rs 1.74.741 account.
------------ Total: Rs 74,47,553 3. The assessee impugned above assessment in appeal before the CIT(Appeals) who after examining facts and circumstances of the case, set aside the assessment with the following observations: "This is objected to by the counsel as unfair and unjust since the assessee was denied the opportunity of cross-examination when it was established that the loose sheet was written by an ex-employee of the assessee and that the loose sheet did not belong to the assessee. Next, in terms of Section 132(4A), it was argued that when the papers were not seized from the assessee, there was no presumption that it belonged to her. Further, it was contended that if such papers were to be acted upon or given credence to, opportunity of cross-examination was a must. Next, it was stated that the appellant opened a bank account with Ezra Street branch of Union Bank of India on 11.2.1980 and copies of accounts are furnished.
Submissions are, considered. Assessment records examined. It is observed that neither was the inspector sent to examine and verify the records nor opportunity of cross-examination or rebuttal allowed to the assessee in terms of the decision of Gujarat High Court in CIT v. Chandra Vilas Hotel reported in 164 ITR 102. The assessment order is thus based on presumptions and assumptions instead of verification and established facts. It is clear from the foregoing that further investigation was called for to arrive at a conclusion regarding unexplained capital and profits from transactions in the following two grounds.
Likewise estimation of profit from drug a/c. and Iron and Steel a/c without indicating the basis thereof and apparently from the notings in the loose sheets is objected to in the next two grounds.
I find some merit in the contention of the counsel. Neither was proper opportunity nor basis of estimate given by the DCIT in the assessment order. In the interest of justice and fair play, the order is set aside with the direction to do it afresh in the light of the foregoing and in accordance with law." (Underlined by me to emphasis).
4. The aforesaid directions of the learned CIT(Appeals) attained finality as neither party challenged them before the Appellate Tribunal. In uncertain terms, the learned CIT(Appeals) had recorded that assessment order was based on presumptions and assumptions instead of verifiable and established facts. Further investigations were called for and basis of estimate was required to be given. Most importantly the learned CIT(Appeals) had directed that opportunity of cross-examination or rebuttal be allowed to the assessee.
5. The A.O. again took up the assessment in compliance to above direction of the CIT(Appeals) but instead of appreciating and applying or following the directions given by the learned CIT(Appeals), asked the assessee to furnish names and address of the Accountant who had produced fake books of accounts before the Department. He issued notice Under Section 131 to the person but recorded that the above notice was not complied with. As the assessment was going to be time barred by 31.3.2001, it was held that he had "no other alternative but to complete the case on the basis of information and documents in possession of the Department." 6. Again a show cause notice, why addition of Rs. 51,61,420 as capital, Rs. 21,11,392 as profit derived from Drugs and Rs. 1,74,741 as income from Iron and Steel account be not added, was issued to the assessee.
Assessee's letter dated 12.3.1998 was reproduced and above amounts added with the observations that assessee had failed to corroborate that "ex-accountant fabricated books of accounts and other documents in custody of the Revenue". It has been further observed that some of the entries in the hooks in the custody of the revenue tallied with regular books of accounts maintained by the assessee. This point has not been elaborated. This way addition of Rs. 74,47,553 was repeated in the second assessment order made on 30.3.2001.
7. The assessee again challenged above assessment, in appeal before the CIT(Appeals) who having seen that proper investigation was not carried, vide his order dated 4.12.2001 directed the A.O. to do further investigation in the case. The A.O. submitted his report on 9.1.2002.
Nothing worthwhile appears to have been done by the AO in the further opportunity allowed to him by the CIT(Appeals) vide letter dated 4.12.2001. He recorded statement of the assessee and some other persons who in their depositions supported the case of the assessee and entries made in the regular books of account. The alleged unaccounted entries furnishing basis for addition were not accepted by any of the witnesses. The following trial balance was supplied to the CIT(Appeals) by the AO in his remand report: 8. While confirming the addition, the learned CIT(Appeals) made following pertinent observations: "To sum up the appellant has not succeeded in challenging the assessment order. She has failed to address the issues involved and to produce the accountant. The innocence of the appellant can be established by positive actions such as production of the accountant, establishing the bogusness of the Trial Balance and the Books of accounts. Withoug doing so, how can the order of a quasi-judicial authority be tampered with merely based on the version of the appellant. To avail the reliefs prayed for something more positive is required other than the mere denial of the cash book and the ledger. The truth in these circumstances would remain a mystery. Sulking in righteous indignation may have been appropriate in a moral forum but the same is hardly any value in a quasi-judicial forum.
With the removal of power of setting aside the assessments, w.e.f.
1.6.2001, under the present circumstances I can either confirm, reduce, enhance or annul the assessment. In the instant case the appellant has not prayed for reduction of the assessment. The appellant's challenge of the assessment order is merely based on a denial and not on any evidence. Based on such assertions the assessment cannot be killed for all times to come. Under such circumstances, hardly any interference is possible by this intermediate appellate forum." 9. The assessee then brought the issue in appeal before the Appellate Tribunal. The learned Members hearing the appeal differed in their approach. The learned Judicial Member was of the view that addition of Rs. 74.47,553 is required to be confirmed as the same was based on books of accounts and loose sheets submitted by the ex-accountant of the assessee. Merely because the ex-accountant was not cross examined by the assessee, the addition could not be deleted. The learned Judicial Member further observed that no action was taken by the assessee against the said accountant by filing any complaint against him if it was a fact that books of accounts were fabricated to harass the assessee. The learned Judicial Member further held that "the bonafide of the assessee could be established by establishing that the trial balance and the books of accounts are bogus by giving some positive evidences and the said entries could not be held to be in genuine merely on the basis of denial by the assessee." With the above observation, the learned Judicial Member confirmed the addition as also validity of re-assessment proceedings challenged before the Tribunal.
10. The learned Accountant Member did not agree with the view taken by the learned Judicial Member on addition of Rs. 74,47,553 on merits. He was of the view that ex-accountant had fabricated the books of accounts for harassment for reasons best known to him. According to the learned Accountant Member, the learned CIT(Appeals) should have dealt with the issue raised before him in a more practical manner by trying to derive balance sheet or profit and loss account from the trial balance prepared by the A.O. The learned Accountant Member did not agree with the learned Judicial Member that the assessee was required to establish her bonafides by giving some positive evidence and that entries could not be held to be in-genuine merely on the basis of denial by the assessee. The learned Accountant Member further observed as under: "I am of the view that when the truth is appearing on the face with respect to the absurdity reached by the lower authorities without any corresponding evidence which otherwise could have been brought on record by themselves on the basis of cross checking the various items in the trial balance the authorities below did not rely simply on the denial for framing such assessment. Therefore, I am of the considered view that books of account and loose papers in the possession of the department should have been brought on surface and co-related with the assessments as against the assessee trying to justify the legitimate income which she had returned by way of past records and the bank statements and the bills and vouchers which should have been placed on record by the learned counsel for the assessee as in the paper book." Inspite of above observations, the learned Accountant Member in the interest of justice set aside the order of CIT(Appeals) and restored the matter to the file of the Assessing Officer.
11. The aforesaid difference has been brought to me for passing an appropriate order in terms of Section 255(4) of I.T. Act, 1961.
12. I have heard both the parties in this matter. It is painful to record that the matter for the period ending 31.3.1987 has dragged on for 16 years and yet remains undecided and inconclusive at first stage of assessment. Even after my order, the proceedings would be carried of the first stage proceedings i.e. at assessment stage. Having regard to the proposed orders, I cannot alter this most unfortunate situation.
The facts involved are not that complicated, yet on account of their in-appreciation, the matter has been dragged on and would remain so, 1 do not know for how many years to conic.
13. The assessment of the assessee on total income of Rs. 28,730 was made on 8.2.1988 Under Section 143(1) of I.T.Act. Later on Assistant Director of Income-tax (ADI) (Inv.) handed over cash book, ledger and loose paper allegedly belonging to the assessee. It is not brought on record as to where from the above referred to books and documents came into possession of the ADI. The name of the informant is not mentioned nor it is stated by the revenue authorities that the ex-accountant handed over the books to the authority and thus these came from a proper custody. No attempt was made in the course of assessments to show that books were authentic and could be relied upon. The first assessment made was rightly set aside by the CIT(Appeals) as per his order dated 12.1.1999 with pertinent observations which attained finality. However, above observations were given a go by in the second assessment. The statement of the assessee in her letter dated 12.3.1998, reproduced above, was misconstrued to shift burden which was clearly on the revenue who were relying on books brought by them from some undisclosed source. It was taken that books of accounts and other documents were fully established to be authentic and reliable, and the assessee was asked to prove that there was interpolation or fabrication in the documents (books of account and loose sheet). A heavy burden was cast on the assessee to prove the negative by producing ex-accountant and show interpolation or fabrication. The assessee was held to have failed to do so. The addition earlier made was repeated.
14. The appellate authority i.e. the learned CIT(Appeals) was cautious of the question he was required to ask viz. whether the second assessment was in conformity with the directions of the CIT(Appeals) dated 12.1.1999. He was also conscious that investigations were not carried and, therefore, vide his order dated 4.12.2001 he directed the A.O. to carry on further investigation. No worthwhile material was obtained by the A.O. inspite of above opportunity. The A.O. was then asked to file trial balance and entire addition is justified on the basis of above trial balance. The matter is then carried before the Appellate Tribunal where the two Hon'ble Members differed and their point of difference recorded in the earlier part of this decision.
15. In my humble opinion, it was necessary for the A.O. to find out where from the material relied upon was obtained by the revenue.
Whether there was any chance of interpolation in the documents? What was connection of the assessee with the person handing over the books of accounts to the ADI (Department). I am not suggesting that all the above information was required to be disclosed to the assessee but it was necessary to keep in mind that a reasonable opportunity of being heard was afforded to the assessee and principle of natural justice were followed. The books of accounts were being relied upon and used by the Revenue against the assessee. It was revenue's evidence. Who wrote the books of accounts was well within knowledge of the revenue. If cross examination of the author or writer of the books was to be carried, it was to be done by the assessee and so called witness was to be produced by the revenue. Above facts which are basic were rightly appreciated by the learned CIT(A) and appropriate directions issued.
Inspite of finality of above directions, these were not properly appreciated nor complied with. Having regard to above facts, appellate authorities should have passed appropriate orders advancing cause of justice. Several opportunities having already been granted to the revenue to prove the case, further opportunity was quite unnecessary.
Yet granted again and again.
16. As a Third Member, my jurisdiction in the case is very limited. I have to agree with one of the proposed order of the Members so that there is a majority to dispose of the case in accordance with law in terms of Section 255(4) of the I.T.Act. In the circumstances narrated above, I agree with the course adopted by the learned Accountant Member. There is absolutely no question of holding that addition of Rs. 74,47,553 in this case made without establishing that assessee was carrying on drugs business or that it had business of such a high magnitude, it is not possible to confirm the addition. The remand of the matter to the A.O. has to be accepted in the circumstances stated above.
17. The matter will now go before the regular Bench for an appropriate decision in accordance with law.
Since there is a difference of opinion between the Members of the Bench, we state following point of difference and refer the same to the Hon'ble President of the Income-tax Appellate Tribunal in accordance with the provisions of Sub-section (4) of Section 255 of the Income-tax Act. The point of difference is as under : "Whether on the facts and circumstances of the case the Ld. Judicial Member is justified to confirm the order of the Ld. C1T(A) in confirming the additions made by the Assessing Officer or the Ld.
Accountant Member is justified to set aside the order of Ld. CIT(A) and restoring the matter again to the file of the Assessing Officer.
1. The assessee has filed this appeal for the asstt. year 1987-88 against the order of Ld. CIT(A) dated 12^th February, 2002 on the following grounds : "1. That the Learned Commissioner of Income Tax (A) was not justified in holding that the proceeding initiated Under Section 147 was rightly initiated.
2. That the Learned Commissioner of Income Tax (A) was not justified in holding that the fresh assessment without allowing Cross Examination, which was directed by the Predecessor Commissioner of Income Tax (A), was correctly made, 3. That the Learned Commissioner of Income Tax (A) was erred in confirming the addition of Rs. 51,61,420/- as unaccounted capital 4. That the Learned Commissioner of Income Tax (A) was erred in confirming the addition of Rs.21,11,392/- as profit from Drug Account.
5. That the Learned Commissioner of Income Tax (A) was erred in confirming the addition of Rs. 1,74,741/- as profit from iron & Steel Company.
6. that the Learned Commissioner of Income Tax (A) was not justified in confirming the interest charged Under Section 139(8) and 217(1)(a), as the assessment was not regular assessment." 2. The relevant facts giving rise to this appeal are that the assessee filed the return on 18^th August, 1987 showed total income of Rs. 28,730/-. The assessment was completed Under Section 143(1) on 8^th February, 1988.
3. The Assessing Officer issued notice Under Section 148 of the Act on 13^th February, 1996 based on certain information in his possession and stated that the Assessing Officer had reason to believe that there was escapement of income within the meaning of Section 147 of the Act The case was re-opened on the basis of a cash book ledger and loose sheets containing the details of transactions pertaining to the assessee. The said material was shown to the assessee's representative and he was asked to show cause why the material should not be used against the assessee. Since the assessee could not give satisfactory explanation., the Assessing Officer completed the assessment Under Section 143(3)/147 of the Act on 31st March, 1998 adding the following income to the returned income :(a) Capital as per loose sheet Rs. 51,61,420/-(b) Profit derived from Drug account Rs. 21,11,392/-(c) Profit derived from Iron & Steel account Rs. 1,74,741/- ------------- Being aggrieved, the assessee filed appeal before the first Appellate Authority.
4. The Ld. CIT(A) vide order dated 12^th January, 1999 set aside the assessment with a direction to do the assessment afresh in the interest of justice and fair play.
5. Pursuant to the aforesaid order of the Ld. CIT(A), the Assessing Officer issued a notice to the assessee u/s. 143(2) of the Act. The assessee contended that an ex-employee of the assessee had written the loose sheets and the same did not belong to the assessee. The assessee also contended that she had not made any transaction outside the regular books of account. The Assessing Officer asked the assessee to furnish the whereabouts of the person alleged to be responsible for presenting the case before the department. The assessee furnished the name and address of the person. The Assessing Officer issued summon Under Section 131 to the said person for examining him with reference to the assessee's claim but no compliance was made. Since the proceedings were getting barred by limitation, the Assessing Officer completed the assessment on the basis of the information and documents available with him.
6. The assessee contended before the Assessing Officer that the accountant of the firm had left the service as he had some quarrel and might have fabricated false books of account and loose sheets to harass. However, it was admitted that some entries in the books tallied with the regular books of account of the assessee. The Assessing Officer has stated that the assessee had not denied that the account books had been written by the ex-accountant. The Assessing Officer has further stated that the assessee had not been able to corroborate her contention that the ex-accountant fabricated the accounts of the firm M/s. Jay Bharat Corporation. The Assessing Officer stated that the assesee was maintaining duplicate set of books of account and as a result of some quarrel with the concerned accountant, he had given the same to the department. In view of the above, the Assessing Officer completed the assessment at Rs.74,76,280/- by making the following additions :(a) Capital as per loose sheet Rs. 51,61,420/-(b) Profit derived from Drug account Rs. 21,11,392/-(c) Profit derived from Iron & Steel account Rs. 1,74,741/- -------------- Being aggrieved, the assessee filed appeal before the first Appellate Authority.
7. The Ld. CTT(A) while confirming the action of the Assessing Officer for initiating the proceedings Under Section 147 of the Act also confirmed the action of the Assessing Officer in making the aforesaid additions.
8. The Ld. CIT(A) has slated that the assessee had not adduced any evidence and merely denied the entries in the said books and the loose sheets. The Ld. CIT(A) has further stated that the revenue has established the existence of secret income based on valuable evidence received from the informant. That the assessee had not come up with any evidence other than repeating the facts that the books did not belong to her and praying for deletion of the additions made by the Assessing Officer. The Ld. CIT(A) has stated that if the story of the assessee that the accountant who had quarreled with the assessee fabricated the books of account, the assessee should have taken action against the said accountant but neither the assesee had filed any police complaint nor initiated any criminal proceedings against the accountant. The Ld.
CIT(A) has stated that the assessee has not succeeded in challenging the assessment order. The Ld. CIT(A) has stated that the innocence of the assessee could be established by positive action such as production of the accountant, establishing the bogusness of the Trial Balance and the books of accounts. Considering the above facts, the Ld. CIT(A) has confirmed the aforesaid additions aggregating Rs. 74,47,553/-. Hence, the assessee is in further appeal before the Tribunal.
9. During the course of hearing of the appeal, the Ld. Authorised Representative of the assessee made his submissions on the lines of the submissions made before the authorities below as mentioned hereinabove.
He further submitted that no opportunity to cross examine the said accountant was given by the department and the Assessing Officer made the additions merely on presumptions that the books of account belonged to the assessee. He submitted that no documents were furnished by the Assessing Officer to establish that the assessee had the transactions in respect of those entered in the books of account. He submitted that the additions confirmed by the Ld. CIT(A) should be deleted. On the other hand, the Ld. Departmental Representative relied on the orders of the authorities below.
10. We have carefully considered the submissions of the Ld.
Representatives of the parties and have perused the orders of the authorities below. We have also gone through the relevant pages of the paper book filed before us.
11. In regard to the validity of initiation of proceedings Under Section 147 of the Act on the basis of the books of account and the other information received by the department from an ex accountant of the assessee, we are of the considered view that the action of the Assessing Officer to re-open the assessment and to initiate the proceedings Under Section 147/148 of the Act is in accordance with law as the Assessing Officer had prima facie reason to believe that there was an escapement of income Therefore, we do not find any reason to interfere with the orders of the authorities below by confirming the action of the Assessing Officer to initiate proceedings Under Section 147/148 of the Act.
12. In respect of the additions aggregating Rs. 74,47,553/-, the break up of which is mentioned hereinabove, we observe that the Assessing Officer has made the aforesaid additions on the basis of the books of account and the loose sheets submitted by an ex accountant of the assessee. We do observe that the said accountant could not be cross examined by the assessee as the said person was not traceable after furnishing the books of accounts to the department, but the said ground could not be a ground to delete the additions made by the department which are based on the basis of the books of accounts and the loose papers in possession of the department. The assessee has not made any attempts to establish that the entries mentioned in those books of accounts are not correct. However, some entries were found in the said books which were admittedly found to be correct. We agree with the observation of the Ld. C1T(A) that in a taxation case, the preponderance of probabilities backed by the circumstantial evidence would be enough to decide an issue. We observe that the assessee had not taken any action against the said accountant by filing any complaint against him if it is a fact that the accountant had fabricated the books of account just for harassment to the assessee. We observe that the assessee has merely questioned the legality of the proceedings and has not made any attempt by leading any positive evidence that the entries contained in those books of account are not factually correct. We agree with the Ld. CIT(A) that the bonafide of the assessee could be established by establishing that the trial balance and the books of accounts are bogus by giving some positive evidences and the said entries could not be held to be in genuine merely on the basis of denial by the assessee. In view of the above, and considering the fact that the assessment year involved is 1987-88 and also considering the material on record that the assessee is not in a position to furnish any material to controvert the facts before the department, we do not find any reason to interfere with the order of the Ld. CIT(A). Therefore, ground Nos. 1 to 5 of the appeal are rejected.
13. In regard to ground No. 6 of the appeal the assessee has not made any submissions. Therefore, the said ground is rejected as not pressed for.
1. I have gone through the order of my learned Judicial Member. I am unable to convince myself that the assessment framed Under Section 143(3)/147/251 at Rs. 74,76,280 as against the original return filed by the assessee at Rs. 28,730 has been confirmed by the lower authorities on the basis of certain facts and figures not confirmed from any source whatsoever becoming one-sided at the cost of pranks played by the ex-accountant of the assessee leading to absurdity and no justification.
2. A brief history of the case would lead to understand the issue in hand as follows. The return of income declaring total income of Rs. 28,730 was filed on 18.8.87. An order Under Section 143(1) was passed on 8.2.88. However, the assessment was re-opened Under Section 147 and notice Under Section 148 was issued on 13.2.96 which was received on 15.2.96. This case was re-opened on the basis of a cash book-ledger and one loose sheet containing the details of transactions pertaining to the assessee forwarded by the Assistant Director of Income-tax (Inv.)V-II(a)/97-98/Cal/842. The said materials were shown to the Authorised Representative of the assessee Mr. Nagesh Kumar together with the relative of the assessee Mr. Sajjan Kr. Kajaria. The assessee was asked to show-cause as to why action as per the capital account as recorded in the loose sheet which shows that ant. Sarita Devi has a capital of Rs. 5161470/- should not be taken.
3. Further the assessee was asked to show-cause as to why the profit derived from the "drug" account of Rs. 21,11,392 and that of Iron and Steel a/c of Rs. 174741/- should not be brought to tax. The assessee vide her letter dated 12.3.98 as stated as under : "With reference to above, it is to state that the alleged books of accounts and loose papers, which are lying with you, do not belong to me. The accountant of the firm M/s Jay Bharat Corporation, who had left our services, had some quarrel with us and he might have fabricated false books of account or loose papers to harass us. Some entries which were correct were also incorporated in the said books.
I had no transactions in cash as shown in the said papers. As such question of capital of Rs. 51,61,420/- shown in M/s S.D. Enterprises is not correct "and cannot be added with my income. I had no business income as shown in the said papers. As such Profit of 2111392/- and Rs. 174741/- also as shown in the said paper does not belong to me. I totally deny the said books and papers belong to me.
If your honour wants to act on the said papers, I humbly request you to call the said person for cross examination. . The said papers had no basis as it were written by him and imaginary figures were shown in the said paper." 4. The AO considered the above submission of the assessee. The assessee has not denied that the account books has been written by the ex-accountant. It has been stated by the assessee that it might have been fabricated by the accountant of the firm M/s Jay Bharat Corporation who had some dispute with the assessees group who had left the services. However, the assessee has not been able to corroborate her above contention.
5. Secondly, there are some entries in the above book which tally with the regular books of accounts of the assesses. In fact for tax evasion more often than not the assessee maintains duplicate set of books of accounts which is generally maintained by the accountant of the assessee or some other cloae relations or persons, which even if as a result of some quarrel, the concerned accountant gives it to the department for necessary action, that will not diminish the correctness of the accounting entries recorded therein. In view of these facts proposed make the following additions to the income of the assessee.
Since capital as per loose sheet is Rs. 5161420/- and the same as per the original return of income was Rs. 28,730/-. The balance amount is unaccounted capital and the same is added to the total income of the assessee.
6. On similar ground the A.O. also brought to tax a sum of Rs. 21,11,392 from drug account and Rs. 1,74,741 from Iron & Steel a/c. and added it to the total income of the assessee.
7. The learned CIT(A) proceeded to confirm the said assessment by observing the following : "The A.O. has been directed to prepare a Trial Balance based on the Cash Book and the Ledger available in his possession. The following is the Trial Balance prepared by the A.O : 7.S.T (Sales Tax) (Collected butnot Paid) (Heroin snaK Jai Bharat Corpn.) 7.S.T (Sales Tax) (Collected butnot Paid) (Heroin snaK Jai Bharat Corpn.) The AO has recorded the statement of the appellant on 24.12.2001 on this Trial Balance. The appellant has merely denied the entries. The Trial Balance clearly shows the Capital of the appellant, the income earned by her during the year and the application of such income.
This kind of evidence cannot be thrown out of the window merely based on the denial of the appellant.
To sum up the appellant has not succeeded in challenging the assessment order. She has failed to address the issues involved and to produce the accountant. The innocence of the appellant can be established by positive actions such as production of the accountant, establishing the bogusness of the Trial Balance and the Books of accounts. Without doing so, how can the order of a quasi-judicial authority be tempered with merely based on the version of the appellant. To avail the reliefs prayed for something more positive is required other than the mere denial of the Cash Book and the Ledger. The truth in these circumstances would remain a mystery. Sulking in righteous Indignation may have been appropriate in a moral forum but the same is hardly any value in a quasi-judicial forum.
With the removal of power of setting aside the assessments, w.e.f.
1.6.2001, under the present circumstances I can either confirm, reduce, enhance or annul the assessment. In the instant case the appellant has not prayed for reduction of the assessment. The appellant's challenge of the assessment order is merely based on a denial and not on any evidence. Based on such assertions the assessment cannot be killed for all times to come. Under such circumstances, hardly any interference is possible by this intermediate appellate forum." 8. In view of the above facts it clearly emerges that the taxing authorities had knowledge of interpolation made by the accountant inasmuch as, it is admitted fact that the return as shown by the assessee originally did contain those entries which formed part of the ledger cash book and loose sheets as were available to the ADIT who seized the material.. The learned counsel for the assessee filed a paper book in which the capital account and the trading resulting in earning of some income has been filed from the assessment year 1981-82 onwards till the assessment year 1989-90. Therefore, simply because the accountant who had interpolated the trial balance leading to absurd profit and loss a/c and the balance sheet could not have confirmed the addition on the capital a/c, drug a/c., and iron & steel a/c. It is a simple case where the capital account could have been verified by verifying the same in the hands of the debtors, namely Jay Bharat Corporation, Bishesharlal Agarwal, Shanti Kumar Kejriwal. Any businessman would like to keep this capital for running the business either in the form of stock or bank balance which does not appear to have been made by the assessee as appears in the trial balance prepared by the A. O. All these clearly Indicate that mere interpolation by the accountant led to such absurd figures in the trial balance so much so that sales-tax has been collected but not paid amounting to Rs. 30,47,223 on account of heroine and smack which sales had not been shown in the alleged trial balance. The officers of the investigation wing and the A.O. relied on the materials supplied during the course of their purposes of their duties. Nothing of this sort had been brought on record by the authorities below, in stead the paper book as supplied by the learned counsel for the assessee from pages 39 to 49 indicate depositions wade by the various persons before the ITO, Ward 466(3), Kolkata. The very perusal of the depositions would lead much to be desired for satisfaction as to the high-pitched assessment framed by the A. O. without any corresponding corroborative evidence, justification leading to a business transaction into holding income as assessed. Not having been able to cross-examine the ex-accountant who left after having done is worse than letting the taxing authorities to grope in the dark for finding a black cat which is not there. It is apparent that the accountant had fabricated the books of account for harassment for reasons best known to him only. The learned CIT(A) showed his inability to set aside the matter in spite of clearly appreciating that the assessee's challenge of the assessment order is merely based on a denial. It is strange to observe that mere interpolation leading to absurdity was confirmed by the learned CIT(A) on the basis of his power of setting aside the order having been removed with effect from 1.6.01. He should have dealt with the issue on hand in a more practical manner by trying to derive a balance sheet or on profit & loss account from the trial balance prepared by the A.O.Assessing income of dealing in contrabands could not be the way out. I am unable to agree with the finding as held by my learned brother that the bonafides of the assessee could be established by establishing that the trial balance of the books of account are bogus by giving some positive evidences and the said entries could not be held ingenuine merely on the basis of the denial by the assessee. I am of the view that when the truth is appearing on the face with respect to the absurdit/ reached by the lower authorities without any corresponding evidence which otherwise could have been brought on record by themselves on the basis of cross checking the various items in the trial balance the authorities below did not rely simply on the denial for framing such assessment. Therefore I am of the considered view that books of account and loose papers in the possession of the department should have been brought on surface and co-related with the assessments as against the assessee trying to justify the legitimate income which she had returned by way of past records and the bank statements and the bills and vouchers which should have been placed on record by the learned counsel for the assessee as in the paper book. In the Interest of justice, therefore, the CIT(A) who was absolved of a duty of setting aside the order by amendment effective from 1.6.01 who in the interest of justice should verify the basis of holding and bringing to tax capital and not disallowing sales-tax paid Under Section 43B to justify the framing of assessment as per the provisions of the Income-tax Act.
He should have filed the FIR with police for earning income from "Drugs". Needless to say an opportunity of being heard be given to the assessee who should proceed to bring evidences in the form of confirmations of debtors against the capital held by the assessee sought to be taxed by the A.O. and in similar situation should be able to bring out the interpolation made by the accountant inasmuch as the regular books of account and the fabricated ones have been made by an accountant who has simply turned thousands into lakhs and lakhs into crores. Therefore, I set aside the order of the CIT(A) and restore the matter to the file of the A.O.9. In the result, the appeal filed by the assessee shall be treated as allowed for statistical purposes as indicated above.