These five appeals by the assessee emanate from the orders passed by the Commissioner (Appeals) on 26-10-2004 in relation to assessment years 1994-95 to 1998-99. Since common issues have been raised in all these appeals, we are, therefore, proceeding to dispose them of by this consolidated order for the sake of convenience.
Briefly stated, the facts of this case are that the assessee, a doctor, furnished his return declaring an income of Rs. 44,130 on 19-9-1995.
Thereafter on 21-11-1995 he filed a revised return showing income of Rs. 79,430. The assessing officer received a detailed report from the DDIT, Bikaner, along with the complaint made against the assessee and his statement recorded by the DDIT. After going through the relevant material, he issued notice under section 148 on 30-3-2001. The assessee furnished reply dated 30-4-2001 requesting the assessing officer to treat the revised return as a return in response to notice under section 148. Books of account were produced during the course of reassessment proceedings. The assessing officer, inter alia, taking assistance from the report and statement of the assessee recorded by the DDIT, computed total income for this year at Rs. 6,02,650. In the first appeal, the assessee challenged the initiation of reassessment proceedings but without any success. The learned Commissioner (Appeals) allowed nominal relief to the assessee by substantially retaining the additions.
First issue raised by the assessee through various grounds is the challenge to the legality of the issuance of notice under section 148 and consequential assessment.
At the outset, it was contended by the learned authorised representative that this case has a chequered history wherein the assessee had to approach the Honble jurisdictional High Court repeatedly. By referring to pp. 1 and 2 of the paper book, it was stated that on challenge to notice under section 148, the Honble High Court allowed the assessing officer to proceed with the assessment but refrained from passing final order. It was stated that the assessing officer totally disregarded the judgment of the Honble jurisdictional High Court and passed the order on 7-3-2002. Against the passing of the order, the assessee again approached the Honble jurisdictional High Court, who in its judgment dated 16-4-2002, took cognizance of passing the assessment order on 7-3-2002 in violation of its direction.
However, the department was restrained to take any coercive steps for recovery and the matter of legality of notice under section 148 was left to be examined by the appellate authorities after providing to the assessee copies of adverse material. The assessee approached the Income Tax Officer to supply adverse material mentioned at p. 12 of the paper book. The learned Commissioner (Appeals), before whom the appeal was pending, was also requested vide assessees letter, placed on p. 13 of the paper book, to direct the assessing officer to supply adverse material. The Asstt. Director of Income Tax supplied four documents vide his letter dated 8-5-2002 placed at p. 15 of the paper book.
However, copies of the Tax Evasion Report and report of the inspector were not supplied, being secret documents. Elaborating the facts further, it was stated by the learned authorised representative that a complaint was allegedly received by the Investigation Wing, pursuant to which the DDIT called the assessee in his office on 18-4-2000 and got signed some blank papers on which the alleged statement of the assessee was prepared, which ultimately constituted the basis for assessment.
The learned authorised representative drew our attention towards the reasons recorded by the assessing officer, copy placed at p. 40 of the paper book and contended that the same were wholly irrelevant for making assessment. He took us through copy of letter written to DDI, Bikaner, on 23-4-2000, i.e., after five days from the date of assessees appearance before him, alleging that the said DDI had got signed about 10 blank papers by exercising coercion. In this letter, request was made to return the said blank papers. It was, contended that similar letters were written to Central Vigilance Officer and Finance Minister of India, intimating about the high-handedness meted out to the assessee. It was stated that on the blank papers got signed from the assessee, an alleged statement of the assessee was prepared in which the assessee was accepted to have undertaken several illegal activities and also earned huge income not disclosed to the revenue. By referring to pp. 41 to 46 of the paper book being the alleged statement supplied to the assessee, it was put forth that this statement comprised of six pages which was un-concluded and since the blank papers got signed from the assessee got exhausted, the statement remained incomplete. The learned Departmental Representative was directed to produce the records and show us the alleged statement of the assessee in entirety. The case was adjourned and on the next date of hearing, the learned Departmental Representative placed on record a copy of the letter dated 18-8-2005 written by the concerned Income Tax Officer, Ward 1, Sriganganagar, intimating that only pages from SI. Nos. 1 to 6 of the assessees statement were available and though at the end of p. 6, it was mentioned as Contd. (7), but no such p. 7 was available. In the light of these facts the learned authorised representative submitted that the assessment order passed by the assessing officer was illegal and deserved to be quashed. Per contra, the learned Departmental Representative strongly relied on the impugned order. Her further submissions were the reiteration of reasoning recorded by the lower authorities in support of their action.
We have heard the rival submissions and perused the relevant material on record in the light of precedents cited at the Bar.
Before proceeding further, we express our displeasure in the way in which this case has progressed at the hands of the revenue, disregarding specific directions given by the Honble High Court.
Firstly, the assessing officer completed the assessments, which were clearly prohibited by the Honble High Court. Pursuant to the assessments, when the assessee again approached the Honble High Court, it directed that copies of adverse material be provided to the petitioner, so that he may put up his case in the right perspective before the appellate authorities. The assessee requested the assessing officer as well as the learned Commissioner (Appeals), who was seized with the matter, to supply necessary documents including the copy of tax evasion petition on the basis of which proceedings were started.
Pat came the reply from the ADI that copies of the TEP and report of the inspector could not be supplied, as they were secret documents.
However, the learned authorised representative has placed before us a copy of TEP in another case, which was duly supplied to the affected party, namely. Dr. Sahibramgiri. This is available at p. 18 of the paper book. Interestingly, the abovereferred TEP was issued by the Income Tax Officer, Ward 3, Sriganganagar. This shows the manner in which the authorities below have taken the judgment of the Honble jurisdictional High Court. This approach deserves to be deprecated.
The first issue raised before us is to decide the legality of the reassessment proceedings. It is obvious that the reassessment proceedings were initiated on the basis of the report of the DDIT, who, in turn, summoned the assessee on the basis of some tax evasion petition (TEP, for short), which has not so far been placed before us.
First contention raised before us on behalf of the assessee is that the reassessment proceedings initiated on the basis of borrowed satisfaction from the DDITs report is invalid. The decision of the Honble jurisdictional High Court in the case of Purushottam Das Bangur v. ITO & Anr. (1980) 126 ITR 580 (Raj) supports the view that on the basis of letter written by Dy. Director to Income Tax Officer, informing him about certain facts, it could not be stated that the Income Tax Officer had in his possession information in consequence of which he could have reason to believe that income chargeable to tax has escaped assessment. However, we find that this is no more a good law as having been reversed by the Honble Supreme Court in the case of ITO v.Purushottam Das Bangur & Anr. (1997) 224 ITR 362 (SC) holding that the Income Tax Officer was justified in reopening assessment under section 147(b) on the basis of letter written by the DDI (Inv.) to the jurisdictional Inspecting Assistant Commissioner containing relevant facts of information without any further investigation. We find that apart from it, the Honble Supreme Court in the case of ITO v. Selected Dalurband Coal Co. (P) Ltd. (1996) 217 ITR 597 (SC) considered a situation in which a report was made by the government department and notice issued under section 148 on the basis of such report was held to be validly issued. On the same line is another decision by the Honble Delhi High Court in the case of Rattan Gupta v. Union of India & Ors.
(1994) 234 ITR 220 (Del) in which reassessment proceedings were initiated on receipt of a letter from Assistant Commissioner (Inv.). It was held that initiation of reassessment proceedings on the basis of such letter was valid. All these decisions are authorities for the proposition that a report made available, by a government officer or a letter from any investigating authority, informing the assessing officer about the escapement of income of a particular assessee, constitutes reason to believe on the part of the assessing officer that income chargeable to tax has escaped assessment, provided the other necessary ingredients of reassessment are complied with.
Coming back to the point on merits, the learned authorised representative has challenged the initiation of reassessment proceedings. In order to evaluate the viewpoint of learned authorised representative with reference to the validity of reassessment, it would be apt to take notice of the reasons recorded by the assessing officer before issuing notice under section 148 which are as under : "Reasons for the brief (belief) that income has escaped assessment in the case of Dr. Devendra Gupta, Sriganganagar-assessment year 1994-95 In the assessees case there was a TEP categorized as BDC by the Director of IT (Inv.) containing the following allegations : (i) Dr. Devender Gupta owns a big business in the name of M/s. Tuhi Ram Gupta Clinic and Gupta X-ray Clinic and selling unaccountable films, smuggled goods like gold and intoxicating medicines. His estimated income from business alone is in 6 figure-P.M.(ii) He invested a lot of money in shares under the cover of his brother-in-laws name who is dealing in shares business. He has earned about a crore of rupees from share business.
(iii) He has parked his money in number of accounts in various banks like Syndicate Bank, Punjab National Bank, Bank of Rajasthan and State Bank of India, Sriganganagar.
(iv) He owns a number of palatial buildings in Sriganganagar, Ahmedabad, Jaipur.
(v) He also runs a school Saraswati Shishu Mandir, 12 Vinoba Basti, Sriganganagar, from which he has monthly income of Rs. 1 lakh. He also receives donation and receives money from teachers in lieu of their appointments in his school. Teachers are made to sign on higher monthly salary but paid much less. He is also having income from hotels.
2. The investigation was made into the various allegations made against the assessee by the DDIT, Bikaner, and the allegations were found more or less correct. From the detailed report of the DDIT, Bikaner-Range, Bikaner, it is seen that the complainee made huge deposits in his bank account. In his statement recorded in the course of investigation, he admitted income more than that declared in the return of income furnished. The details of income returned admitted in his statement and deposits found in his bank accounts are as below : 3. The assessee failed to explain the source of bank deposit. Having considered the entire facts brought on record as a result of investigation, the income chargeable to tax of Rs. 3,08,420 escaped assessment within the meaning of section 147 of the Income Tax Act for the assessment year 1994-95. Notice under section 148 of Income Tax Act is issued. " It is an undisputed position that the very foundation of the issuance of notice under section 148 is the reason to believe by the assessing officer that the income chargeable to tax has escaped assessment.
Hence, the edifice of the order passed under section 148 stands on the validity of the reasons to believe that income has escaped assessment vis-a-vis its nexus with the escaped income. Now we would examine the reasons recorded by the assessing officer, which have been emphatically assailed on behalf of the assessee. First para of the reasons refers to the TEP containing the allegation that the assessee owned a big business and was selling smuggled goods from which he was earning minimum monthly income of Rs. 1 lakh. We have gone through the assessment order and have not found any addition having been made on account of alleged smuggled goods. The learned Departmental Representative also fairly conceded the factual position. On a further query, he candidly, accepted that no evidence was available with regard to these allegations levelled against the assessee. The second allegation is the investment of huge money by the assessee in the share business and earning of about a crore of rupees from such business. The learned Departmental Representative on going through the impugned assessment order fairly admitted that no addition on account of shares income was made in the assessment. The third allegation is the placing of money by the assessee in various banks of Sriganganagar. In this regard, it was stated by the learned Departmental Representative that the assessee had deposited a sum of Rs. 2,56,000 in his bank account as was evident from para 2 of the reasons for reassessment. As against this, the learned counsel for the assessee categorically stated that this was a wrong statement in the reasons recorded by the assessing officer and even no such addition was made on this score. The learned Departmental Representative was requested to place before us copies of bank pass book in which the assessee had allegedly deposited money which were admittedly with the revenue. From the abovereferred letter dated 18-8-2005 written by the Income Tax Officer, Ward-1, Sriganganagar, placed by the learned Departmental Representative on record today, it is clearly borne out that no such pass books are available with the revenue. The fact that no addition has been made by the assessing officer with regard to the deposits in the bank to the tune of Rs. 2,66,000 manifests that it was a wild allegation upon the assessee, devoid of any supporting material. An addition of Rs. 50,000 made by the assessing officer for unexplained deposits in bank is not germane to the reasons for reassessment because the assessee had explained the source of deposit as the receipt of repayment of earlier loan from Smt. Ganga Devi w/o Shri Brij Mohan Agarwal. Next aspersion cast upon the assessee is that he owned palatial buildings in Sriganganagar and Jaipur, etc. The assessment order is again mute on this aspect and no addition on this score has been made, which fact has been admitted by the learned Departmental Representative also. Last allegation in the TEP is that the assessee was running school from which he had monthly income of Rs. 1 lakh. Position is similar on this count as well. Neither any addition has been made nor there is any evidence to show that the assessee was earning monthly income of Rs. 1 lakh from running of schools.
Para 2 of the reasons recorded by the assessing officer states that various allegations made against the assessee were found by the DDIT, Bikaner, to be more or less correct. We are unable to trace out any basis for this statement in the reasons. That apart, we have analyzed each and every allegation made against the assessee separately but are helpless to find any addition having been made even on a single score.
These facts indicate that neither the TEP nor the report of the DDIT could have led the assessing officer to believe that income chargeable to tax has escaped assessment. It is true that there is no bar on issuing notice under section 148 on the basis of DDIs report, but the condition is that such report should contain some solid basis indicating the escapement of income. It is not every and any suspicion that can justify the reassessment. If such a situation is allowed, it would open the floodgates of controversies and irregular exercise of jurisdiction, unsettling the otherwise completed assessments without any reasonable basis. The report of other government authority, indicating the escapement of income, constituting the basis of reassessment should be specific, reliable and relevant based on concrete finding and not mere ipse dixit of the concerned authority. It should contain solid material to justify the initiation of reassessment and not merely bringing the case of the assessee in the realm of doubt.
Adverting to the facts of the instant case, we notice that all the evils of the world have been put in the lap of the assessee without having even an iota of evidence to substantiate any of them, much less all such allegations. This shows that the assessing officer had no basis for forming belief that any income chargeable to tax had escaped assessment.
At this juncture, we are reminded of the celebrated decision rendered by the Honble Punjab and Haryana High Court in the case of CIT v. Atlas Cycle Industries (1989) 180 ITR 319 (P&H) in which notice of reassessment was given on two grounds and both of them were not found to exist. In these circumstances, it was held that the reassessment proceedings cannot continue. In reaching this conclusion, assistance was taken from the Supreme Court decisions in CIT v. A. Raman & Co.
(1968) 67 ITR 11 (SC) and Bankipur Club Ltd. v. CIT (1971) 82 ITR 831 (SC). The same view was found to have been adopted in this case by the Honble jurisdictional High Court in the case of Addl. CIT v. Ganeshilal Lalchand (1985) 154 ITR 274 (Raj). We are conscious of the elongation of the scope of reassessment by Direct Tax laws (Amendment) Act, 1987, with effect from 1-4-1989. However, we find that section 147 mandates the basic condition that "if the assessing officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section A bare perusal of this section reveals that there is no bar on the powers of the assessing officer to put to tax any other income chargeable to tax which has escaped assessment and which subsequently comes to his notice in the course of proceedings. However, the important words prefixing are "and also" which succeed to "any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income". On a plain reading of the section, it becomes abundantly clear that existence of income for which the assessing officer formed belief to have escaped assessment is precondition for including any other income chargeable to tax escaping assessment and coming to the notice of the assessing officer subsequently in the course of proceedings. Unless and until "such income" as giving reasons to form belief for escaping assessment continues to exist and constitutes the subject-matter of assessment under section 147, no "other income" coming to the notice of the assessing officer during the course of proceedings can be roped in. The obvious reason is the distinction in the ambit of regular assessment under section 143(3) and reassessment under section 147. Whereas the former section empowers the assessing officer to make assessment when the return is filed under section 139 or in response to notice under section 142(1) if he considers it necessary or expedient to ensure that the assessee had not understated income or has not computed excess loss or has not underpaid the tax in any manner, section 147 envisages the prima facie belief of the assessing officer that income chargeable to tax has escaped assessment. In order to invoke the power under section 147 he has to form reason to believe for escapement of income. Unless such reasons positively exist, no cognizance can be taken of the provisions enshrined in later sections, as they create the foundation for assuming jurisdiction under section 147. Coming back to the point in issue, we find that all the reasons recorded by the assessing officer for issuance of notice under section 148 were non-existent. In such circumstances, the passing of order under section 143(3) read with section 147 assessing the "other incomes", based on the assessees alleged statement before the DDI, not forming part of reasons to believe for issuance of notice under section 148, cannot be allowed to sustain.
Be that as it may, we will now examine and evaluate the veracity of the so-called statement made by the assessee before the DDIT. This statement was allegedly recorded on 18-4-2000 by the DDIT, Bikaner, wherein the assessee admitted the factual details regarding his income from X-ray, clinic, laboratory and number of patients, etc. Ordinarily, a statement given by the assessee cannot be allowed to be retracted and every admission is evidence against the person by whom it is made. Mere retraction is not sufficient to render it inadmissible. Such "admissions" falls within "may presume" category as defined by section 4 of the Indian Evidence Act, 1872. According to this section, whenever it is proved that the court may presume a fact, it may either regard such fact as proved unless and until it is disproved or court calls for proof before it. Hence, the admission by a person may be presumed to be true against him. Section 31 of the Indian Evidence Act stipulates that admissions are not conclusive proofs of the matters admitted but they may operate as estoppels under the provisions of that Act. Hence, an "admission" is presumed to be proved and operates against the assessee unless it is disproved. The burden to disprove is very heavy on the person who claims so. A mere assertion that an admission was extracted by the exercise of undue influence or coercion does not support the standpoint of the person retracting. The burden to disprove the admission has to be discharged by placing cogent material and evidence on record, which leads the court to positively believe the latter version in preference to the original admission. The Honble Andhra Pradesh High Court in (1953) Cri LJ 951 has held that the court has to determine in the first instance whether a retracted confession is voluntary or has been improperly induced. If upon weighing of the circumstances, the prisoners denial and probabilities it appears to the judge that the confession had been improperly induced, no matter how true it may be, he is bound to exclude it.
Adverting to the facts of the instant case, it is found that the DDIT, Bikaner, sent his report in which the assessee had allegedly accepted having earned income from X-ray, clinic, lab tests, etc., which was not fully disclosed. It is the case of the assessee that the said DDIT got signed blank papers from him on which he himself recorded facts at the back of the assessee, which were totally incorrect. If it had been a mere assertion by the assessee, we would have not taken a minute to reject this contention. However, we find that within five days of appearance of the assessee before the DDIT, the assessee wrote a registered letter pleading for the return of the blank papers which were forcefully got signed from him. Copies of letter written to the Finance Minister of India, Central Vigilance Officer, New Delhi, complaining about the conduct of the officer and the manner in which he was compelled to sign the blank papers, are available in second paper book along with proof of despatch of such letters by registered post.
No material is brought on record by the learned Departmental Representative that the said DDIT took any steps to negate the allegation made by the assessee. The stand of the assessee regarding forcefully signing certain blank papers in this regard gets corroborated from the fact that copy of the allegedly signed statement, which was supplied to the assessee at the instance of the Honble High Court consisted of only six pages and was incomplete due to exhaustion of blank signed papers before it could be concluded. Even the learned Departmental Representative has placed on record a copy of letter of the concerned Income Tax Officer stating that there were only pp. 1 to 6 and no p. 7 was available despite the fact that page No. 6 mentions as continued on p. T. Non-availability of p. 7 of the statement, which is admittedly a continued statement upto p. 6, coincides with the assessees version that few blank papers were got signed from the assessee by the DDIT and the assessee had not given any statement before him. In such circumstances, we are not inclined to give any weightage to the alleged statement of the assessee, on the basis of which the assessing officer has estimated the income. If this so-called statement is excluded from the evidence, there remains nothing to indicate that the assessee had earned any income, which was not properly disclosed in his return. In such circumstances, we are of the considered opinion that the learned Commissioner (Appeals) was not justified in both, upholding the initiation of reassessment proceedings and sustaining the addition so made to a large extent. By overturning the impugned order, we quash the reassessment and consequential additions made therein.
In the assessment year 1995-96 the assessee furnished his return declaring income of Rs. 76,020. The assessing officer reopened the assessment on similar pattern as in the preceding year and computed total income at Rs. 6,34,510. Similarly, in the assessment years 1996-97 to 1998-99, the assessee filed returns with income of Rs. 81,020, Rs. 2,13,570 and Rs. 2,48,859 and the assessing officer determined total incomes at Rs. 7,95,634, Rs. 8,78,530 and Rs. 7,48,859 respectively.
Both the sides are in agreement that the assessing officer initiated reassessment proceedings in the same manner as in assessment year 1994-95 and the resultant additions made were confirmed by the learned first appellate authority accordingly. Following the view taken above, we annul the reassessment orders and accordingly order for the deletion of all the additions made and sustained in these years.