Uttamchand P. JaIn Vs. Income Tax Officer - Court Judgment

Excerpt:
1. this appeal by the assessee for asst, yr. 1998-99 is directed against the order of cit(a)vi, mumbai, dt. 21st oct., 2003. we have heard the arguments of both the sides and have also perused the records.2. ground no. 1 disputes the addition of rs. 10,35,562 on account of alleged unaccounted income from sale of jewellery, which was declared under vdis, 1997. the relevant facts, in brief are that the assessee had declared diamond jewellery weighing 65.75 cts. under vdis, allegedly sold on 20th jan., 1998 to m/s dhananjay diamonds (dd), proprietary concern of shri vishnudutt trivedi (vdt). the it department had conducted a survey on 30th march, 2000 at the business premises of vdt and during the same the statement of vdt was recorded. during the said survey, the it department discovered.....

Judgment:
1. This appeal by the assessee for asst, yr. 1998-99 is directed against the order of CIT(A)VI, Mumbai, dt. 21st Oct., 2003. We have heard the arguments of both the sides and have also perused the records.

2. Ground No. 1 disputes the addition of Rs. 10,35,562 on account of alleged unaccounted income from sale of jewellery, which was declared under VDIS, 1997. The relevant facts, in brief are that the assessee had declared diamond jewellery weighing 65.75 cts. under VDIS, allegedly sold on 20th Jan., 1998 to M/s Dhananjay Diamonds (DD), proprietary concern of Shri Vishnudutt Trivedi (VDT). The IT Department had conducted a survey on 30th March, 2000 at the business premises of VDT and during the same the statement of VDT was recorded. During the said survey, the IT Department discovered that the transactions of purchase and sale of diamond by VDT and on that basis the AO reopened the case of assessee who had also sold diamonds to DD. The AO, accordingly treated the sale of diamonds by assessee to DD as bogus and in turn added the amount of sale proceeds of diamond jewellery as undisclosed income of assessee.

3. At the very outset, the learned Authorised Representative of assessee has contended that the issue is covered in favour of assessee by the decision of 'C Bench of Mumbai Tribunal in the case of Mohanlal R. Daga v. WO ITA No. 7963/Mum/2003 for asst. yr. 1998-99 reported in 2005) 92 TTJ (Mumbai) 1236, and has furnished a copy of the same. He has contended that the facts of present assessee are identical with those of the cited case and Tribunal deleted the addition therein. As against this, the learned Departmental Representative has relied on the orders of the authorities below.

4. We have considered the rival contentions, relevant material on record as also the cited decisions. The facts of the case in hand being undoubtedly identical with those of the cited case, we have no reason to take a view different from that taken by the Tribunal in the aforesaid case, i.e., (2005) 92 TTJ (Mumbai) 1236 (supra). We, therefore, respectfully follow the aforesaid decision of the Tribunal and hold accordingly, i.e., we delete the addition.

5. Ground No. 2 disputes the non-treating of the amount of Rs. 28,679 is taxable under the head long-term capital gain. However, the learned Authorised Representative of the assessee has contended that this ground is consequential and in case of decision of Tribunal on ground No. 1 is in favour of assessee, this ground No. 2 becomes academic/infructuous. The learned Departmental Representative has supported the orders of authorities below. Considering the rival contentions, we hold this ground No. 2 as having become infructuous and so we dismiss the same accordingly.

7. In the result, this appeal of assessee is allowed in part as indicated above.

1. I have carefully perused the order proposed by my learned Brother.

However, I have not been able to persuade myself to concur with the findings recorded, observations made and the conclusions arrived at, by my learned Brother. I, therefore, proceed to humbly place on record my views in the matter.

2. Briefly stated, the facts of the case are that the assessee, an individual had credited a sum of Rs. 10,35,562 in his capital account for the year ended 31st March, 1998. The said cash credit of Rs. 10,35,562 as reflected in the books of account of the assessee represented, according to the narration given in the said capital account, the sale of diamonds declared under the Voluntary Disclosure of Income Scheme, 1997 ('VDIS' in short). Sec, 68 of the IT Act provides that where any sum is found credited in the books of account of an assessee maintained for any previous year and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the AO, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. In the case under consideration, the undisputed position is that a sum of Rs. 10,35,652 was found credited in the books of the assessee for the year ended 31st March, 1998, i.e., the previous year relevant to the assessment year under appeal. The limited issue before us is, therefore, to see as to whether the explanation offered by the assessee before the AO was satisfactory or not It is well established that the explanation so offered by the assessee should be reasonable and inspire confidence. The explanation, which is fantastic, unsatisfactory or not supported by cogent, reliable and the best evidence available within the reach of the assessee or one which does not inspire confidence or is strenuous on credulity cannot be said to be a satisfactory explanation for the purposes of Section 68.

3. The assessee filed his return of income on 10th Dec, 1998 declaring total income at Rs. 1,07,350. The return was processed under Section 143(1)(a) of the IT Act or 23rd July, 1999. Subsequently, information was received by the AO that one Shri Vishnudutt Trivedi, proprietor of M/s Dhananjay Diamonds and his son Shri Rohit Trivedi, proprietor of M/s Ratnakar Diamonds had been surveyed by the IT Department at Thane and that the Department, during the course of survey and the proceedings following immediately thereafter, detected that the transactions of purchase and sale of diamonds made by the said Shri Vishnudutt Trivedi and his son Shri Rohit Trivedi through their proprietorship concerns were fictitious. Based on the information so received by the AO, the case of the assessee was reopened under Section 147/148 as the survey had revealed that the assessee had also reportedly sold diamonds to M/s Dhananjay diamonds. The AO, after making the requisite enquiries and giving sufficient opportunity of hearing to the assessee, completed the assessment under Section 143(3)/147 treating the impugned cash credit of Rs. 10,35,562 as unexplained on the ground that the transaction of sale of diamonds was bogus and fictitious. It is, therefore, required to be seen as to whether the transaction of sale, which purportedly generated cash leading to the cash credit entry in the books of account of the assessee, was genuine as the assessee wants us to believe or bogus and fictitious as the Department contends.

4. Let us first appreciate as to what is the case of the assessee in support of genuineness of the impugned sale transaction. The case of the assessee before the Departmental authorities was as follows: (i) The diamonds which were reportedly sold were declared under the VDIS. In support of his claim, the assessee filed before the Departmental authorities a copy of the valuation report dt. 1st April, 1987 of Shri Vinay Kumar G. Jhaveri (pp. 12-13 of the paper book filed by the assessee before the Tribunal). The assessee has also filed a copy of the certificate issued by the CIT, Mumbai under Section 68(2) of the VDIS, 1997 (p. 14 of his paper book). The assessee contends that the nature and source of acquisition of diamonds in question cannot be enquired into in view of the provisions of the VDIS, (ii) The assessee submitted that the diamonds so declared under the VDIS were sold to M/s Dhananjay Diamonds vide their purchase bill dt. 20th Jan., 1998 (copy of sale bill placed at p. 17 of his paper book). It is this amount which was claimed by the assessee to have been credited in the books of account, He contended that sale of diamonds was duly supported by sale bill.

(iii). The assessee submitted that the consideration for the diamonds so sold was received through account payee cheque from Dhananjay Diamonds which was ultimately credited in the books of account of the assessee.

(iv) As regards the statement given by Shri Vishnudutt Trivedi on 31st March, 2000, the case of the assessee was that Shri Trivedi had subsequently retracted the said statement on 4th April, 2000 though the assessee has filed no evidence before the Tribunal to show that the said statement dt. 31st March, 2000 was retracted by Shri Trivedi on 4th April, 2000 and how it was retracted and which part of the statement was retracted though the assessee has filed a comprehensive paper book containing 53 pages apart from copies of judgments/orders, etc. before us.

(v) The assessee relied upon a copy of the affidavit dt. 24th Dec, 2001 of Shri Vishnudutt Trivedi, which was executed after about a year and nine months of survey. A copy of the said affidavit is placed at pp. 27-29 in his paper book filed before the Tribunal, In the said affidavit, Shri Trivedi confirmed the purchase of the diamonds in question from the assessee as also payment in consideration thereof to the assessee by account payee cheque. It was further stated by Shri Trivedi in his affidavit that he was a registered dealer under the BST and CST Act. As regards the statement given by him on 31st March, 2000, it was stated that the statement was given under the state of confusion and as per the direction of the IT authorities.

(vi) Shri Trivedi had appeared before the AO on 25th Oct., 2002 and confirmed the impugned transaction as also payment of the money through account payee cheque.

5. Based on the above, the assessee submitted before the Departmental authorities that the nature and source of the amount found credited in the books stood fully and satisfactorily explained and contended before the CIT(A) that the AO was therefore not justified in making the impugned addition.

6. In the aforesaid factual backdrop of the case, let us now see as to what is the case of the AO for making the impugned addition. The case of the AO is based upon the statement given by Shri Trivedi during the course of the survey and the proceedings following thereafter. It may, therefore, be useful to reproduce some of the questions put to him and the answers given by him in the said statement dt. 31st March, 2000 to see as to what was stated by Shri Trivedi in the said statement. They are as under: Q. 4. Whenever these transactions of purchase of diamond from the customers took place, whether the sellers had come to you or you had gone to their places And where was the delivery of diamonds taken Ans. In fact, physical transactions of these purchase and sale of diamond never took place. However, fictitious transactions were done on paper only go as to facilitate the VDIS, 1997 declarants. I will get you full details of these transactions made on paper only on Monday, i.e., 3rd April, 2000.

Q. 5. You give all the details on Monday but today at least you get us the modus operandi of your transactions and details of few transactions.

Ans. I may state here that Shri Sanjay Saxena of Kalyan, full address I do not know, used to approach me with cash and name of the party, address of the party, description and weight of the diamond, etc., pretended to be sold. Then sometimes I used to deposit the cash in the bank account of M/s Dhananjay Diamonds or M/s Ratnakar Diamonds. Sometimes, the cash used to be in circulation. The names of the banks in which the cash is deposited are Vasai Janta Sahkari Bank, Bhayander (E) Branch (a/c No. 3475), Global Trust Bank, Evershine Nagar, Vasai, account number, I do not remember, Indian Overseas Bank, Opera House Branch (a/c No. 2891). Subsequent to this, I used to draw cheques in favour of the said VDIS declarants and hand over the same to Shri Saxena, mediator. I used to get commission of 0.5 per cent for arranging the transaction I used to prepare purchase bills in favour of the same and the same were also given to Shri Saxena. I have never come across any party. I have not seen any party or I have not met any party at any time even today.

Subsequently on paper only the sales of the diamonds purchased are effected. For these purchases and sales, purchase bills and sale bills got printed in the names of different proprietorship concerns are used. I would like to mention here that the sale proceeds of the said diamonds are invariably received through cheques from the said parties. These cheques are deposited in the banks mentioned above.

Q. 6. Try to recollect full name and address of Shri Sanjay Saxena, his office and residential address, telephone number, etc Ans. His name is Sanjay Saxena. Address I do not remember. Telephone number also I do not remember.

Q.16. Then how the balance sheet is tallied? All the assets are owned by you. Please explain.

Ans. The closing stock shown at Rs. 5,88,45,980 as on 31st March, 1999 in the case of Ratnakar Diamonds and at Rs. 2,72,89,520 in the case of Dhananjay Diamonds were not at all in existence on the relevant day. This was mere book entry and imaginary closing stock.

If both these factors are considered, the balance sheet will tally.

7. In order to verify the statement given by Shri Vishnudutt Trivedi (Reply to Q. No. 5 as reproduced above) that he used to first deposit the cash collected from intending sellers in the Banks mentioned by him in the statement before issuing the cheque to them, the AO issued summons under Section 131 to the Manager, Vasai Janta Sahkari Bank, Bhayander (E) Branch requesting him to furnish bank statement of a/c No. 102-3504 in the name of Ratnakar Diamonds and a/c No. 102-3475 in the name of M/s Dhananjay Diamonds. He also asked the bank to furnish copies of the pay-in-slips to trace the source of cash deposits made in the said accounts. He examined them and recorded his conclusions as under: Examination of details furnished by the Bank, which are placed on record, revealed that cash deposit was made in the account of Ratnakar Diamond, which is a proprietary concern of Shri Vishnudutt Trivedi's son, on the immediately following day of the sale of diamonds and a cheque was issued on the same day in the name of Dhananjay Diamonds, which is a proprietary concern of Shri Vishnudutt Trivedi. Thereafter, a cheque was issued from the account of Dhananjay Diamonds to the assessee. The extract of the transactions prepared from the bank statements furnished by the bank is given below: Vasai Janta Sahkari Bank Ltd., Bhayander (E) Branch Name of the account-holder : Ratnakar Diamonds (Proprietor: Rohit Trivedi son of Shri Vishnudutt Trivedi) Vasai Janta Sahkari Bank Ltd. Bhayander (E) Branch Name of the account-holder : Dhananjay Diamonds (Proprietor: Shri Vishnudutt Trivedi) In the light of the above, the statement given by Shri Vishnudutt Trivedi before Survey Authority that all the transactions of purchase and sale of diamonds appearing in the P&L a/c of their proprietary concerns are 'fictitious' transactions is correct and conclusive....

8. The AO did not accept the plea of the assessee that Shri Trivedi had successfully retracted his statement made on 31st March, 2000 and hence he ignored the same and took the statement in question as the basis for rejecting the sale transaction as genuine, He treated the impugned sum found credited in the assessee's books of account as not satisfactorily explained and consequently added the same to the income returned by the assessee.

9. On appeal, the learned CIT(A) confirmed the assessment order on the following, amongst other, grounds: (i) The learned CIT(A) noted that, on the day of survey, neither any stock was found nor claimed to be available by Dhananjay Diamonds and Ratnakar Diamonds. In this connection, the learned CIT(A) referred to the statement recorded on 31st March, 2000 in which Shri Trivedi had categorically stated as follows : "In fact, physical transactions of these purchase and sale of diamond never took place.

However, fictitious transactions were done on paper only so as to facilitate the VDIS, 1997 declarants." Thus, the Appellate Commissioner felt that what was stated by Shri Trivedi in his statement was also corroborated by the complete absence of stock on the ground at the time of survey.

(ii) The CIT(A) also noted that Shri Trivedi had bank accounts in as many as 9 banks as per details given in the appellate order. She, i.e., the CIT(A) referred to the statement given on 31st March, 2000 in which Shri Trivedi had given the modus operand! of the business run by him including the manner in which he used to get cash first from the intending sellers and thereafter issue cheques recording the transaction on paper only without movement of any physical stock. She noted the evidence in the form of pay-in-slips through which cash was first deposited in the bank account of Dhananjay Diamonds or Ratnakar Diamonds before issuing the cheque after recording the fictitious purchase in the books. She held that the statement given by Shri Trivedi on 31st March, 2000 stood corroborated by the cash deposits made in the bank accounts of Trivedis and subsequent payment made by them through account payee cheques.

(iii) Rejecting the submission made on behalf of the assessee that it was not open to the AO to make any enquiry as the diamonds in question had been 'declared under the VDIS, the learned CIT(A) held that the immunity granted under the VDIS was available only with regard to the nature and source of acquisition of the income declared under the VDIS and to nothing else. She held that the said immunity has nothing to do with regard to the genuineness of the impugned sale transaction.

(iv) As regards the retraction of the statement made by Shri Trivedi, the learned GIT(A) noted that Shri Trivedi had given detailed modus opemndi of his business which was also borne out by the facts found during the course of the survey. She noted that these facts as stated in the statement dt. 31st March, 2000 remained uncontroverted. She also noted that though the letter of retraction addressed by Shri Trivedi was dt. 4th April, 2000, it was actually received in the office of the AO on 18th July, 2000. She rejected the retraction mainly on five grounds: one, statement made on oath on 31st March, 2000 was also supported by the facts found at the time of survey and hence the statement was duly corroborated in material respects; two, the statement made spontaneously on oath before the AO would carry greater evidentiary value than the letter of retraction; three, though the letter of retraction was dt. 4th April, 2000, it was actually filed before the AO on 18th July, 2000; four, neither the retraction nor explanation about large cash deposits and absence of stock was supported by any evidence; and, five, the statement was made on 31st March, 2000 without any coercion as no coercion was alleged by Shri Trivedi at any time except two years later.

(v) The learned CIT(A) has also considered the subsequent statement of Shri Trivedi given before the AO on 25th Oct., 2002 confirming the transaction. She has also considered the earlier statement of Shri Trivedi given on 31st March, 2000 in which he stated that he had neither come across any party nor had he seen or met any party at any time. She observes that while Shri Trivedi confirmed in his subsequent statement that the impugned transaction was entered into by him through a "common family friend" but he did not remember the name of the said family friend. The learned CIT(A) observes the curious nature of Shri Trivedi's memory which did not enable him to remember the name of the common family friend through which the impugned transaction was entered into but could remember that the impugned transaction was entered into by him directly with the assessee through 'family friend'.

(vi) For the detailed reasons given in the appellate order, the learned CIT(A) has also rejected the submission of the assessee that coercion was applied to extract the earlier statement recorded on 31st March, 2000.

(vii) The learned CIT(A) has considered both the aforesaid statements and their reliability in her order. She observes that the statement of Shri Trivedi recorded on 31st March, 2000 was used by the Department along with documentary evidence to back the said statement while the subsequent statement of Shri Trivedi dt. 25th Oct., 2002 given almost after two and a half years of the recording of the statement dt. 31st March, 2000 was not supported by any evidence, whether oral or documentary. She also felt that the burden was on the assessee to substantiate and prove with the help of reliable and credible evidence that it was the subsequent statement that was correct and not the earlier statement. Since the assessee failed to do so, the learned CIT(A) held that mere statement made after two and a half years after survey contradicting the earlier statement cannot be accepted as the subsequent statement was not supported by any reliable and credible evidence to show that the statement made earlier was factually incorrect. The CIT(A) held that the earlier statement was more reliable as it was made spontaneously on oath without there being any occasion to tutor Shri Trivedi and also because it was corroborated by the evidence in the form of absence of stock, cash deposits in bank, detailed modus operandi given by the assessee as found/stated at the time of survey.

(viii) The learned CIT(A) has also rejected the submission of the assessee that there was no nexus of the cash deposits with the cheque issued by Shri Trivedi in consideration of purchase of diamonds from the assessee. She held that the evidence with the Department was available to show that large sums of cash were deposited in the account of Trivedis, which were subsequently circulated in his various bank accounts before the cheques were issued to the VDIS declarants. She also noted that the statement of Shri Trivedi on this point was quite categorical and self-explanatory. She felt that it was well-nigh impossible for the Department to establish the nexus between the cash deposits made in the various accounts of Trivedis with the cheques ultimately issued to the VDIS declarants. She therefore proceeded to consider the totality of circumstances and, having so considered them, held that it was out of the funds so transferred from one bank account to another that payment to the assessee was made.

10. Aggrieved by the order of the learned CIT(A), the assessee is now in appeal before the Tribunal. The appeal has come up for priority hearing at the instance of the assessee.

11. In support of the appeal, the assessee has filed a paper book containing 53 pages apart from filing copies of the following two orders of the Tribunal: (i) Order dt. 22nd Sept., 2004 passed by Mumbai "C" Bench of the Tribunal in Mohanlal R. Daga v. ITO which has now been reported in (2005) 92 1TJ (Mumbai) 1236. The submission of the assessee is that the issue in hand is covered by the said order of the Tribunal in his favour. The learned Brother has authored the said order.

(ii) Order dt. 13th July, 2004 passed by the learned Brother sitting as single Member Bench in Laxmilal J. Sanghvi v. ITO, ITA No. 1512/M/2004 for asst. yr. 1999-2000.

12. At the time of hearing before us, the learned Counsel for the assessee relied heavily upon the order in Mohanlal R. Daga (supra) and submitted that the issue was covered by the said order in favour of the assessee. He, however, did not dispute the facts recorded by the learned CIT(A) in her order.

13. In reply, the learned Departmental Representative supported the orders of the Departmental authorities.

14. It is in the aforesaid background that the legality of the order of the learned CIT(A) needs to be examined before her order is confirmed or set aside. As stated above, the facts and the finding recorded by the learned CIT(A) were not even disputed by the assessee at the time of hearing before us. There is no finding in the order proposed by the learned Brother that the facts recorded by the learned CIT(A) are not correct either on facts or in law. No argument was advanced on behalf of the assessee as to how the order passed by the learned CIT(A) or the AO was incorrect or not sustainable in law. The order proposed by the learned Brother also does not indicate as to how the order of the learned CIT(A) or AO is incorrect or not sustainable in law. The question that arises for consideration is whether the (i) facts concurrently recorded by two authorities below can be ignored without indicating as to what is incorrect in the facts so recorded by them; and (ii) decision reached by them can be set aside without pointing out as to what is illegal, irrational or irregular in their decisions. In my humble view, a decision which is based on facts in a given case cannot be set aside or interfered with by a superior forum just because it is a superior forum unless the superior forum points out howsoever briefly the illegality, irrationality or irregularity in the decision, which is essentially on facts taken by the lower forum. This view is supported by the well-known Wednesbury Principles propounded in Wednesbury case (1947) 2 All ER 680 (CA) which have since been approved by the Hon'ble Supreme Court in Om Kumar v. Union of India (2001) 2 SCC 386, 399. The reason why I have chosen to extensively refer to the grounds on which the learned CIT(A) has confirmed the assessment order is to highlight the balanced approach which the CIT(A) has painstakingly adopted in carefully analyzing the factual and legal aspects of the case before rendering her decision. The short question is whether the impugned order passed by the learned CIT(A) suffers from any illegality, irrationality or irregularity (any or all of what is called triple "Is") so as to require our interference as proposed by the learned Brother in his order.

15. The facts stated by Shri Trivedi in his statement on oath were sufficient enough to cause a doubt in the mind of the AO about the genuineness of the explanation offered by the assessee to explain the nature and source of cash credit. The assessee sought to trace the source of the impugned cash credit to the sale proceeds allegedly received by him on sale of diamonds. If the AO was not satisfied that the explanation given by the assessee was genuine and bona fide, it was indeed his duty to call upon the assessee to produce further evidence to establish the identity of the creditor, his creditworthiness as also the genuineness of the transaction in question. It was for the assessee to satisfy the AO by adducing reliable and best possible evidence within his reach. It was also the duty of the assessee to show before the AO and CIT(A) that the materials in their possession were not reliable or were not capable of being acted upon. There was no way that the assessee could have turned his face away from proving the incorrect or erroneous nature of the materials in the possession of the Departmental authorities which they were so keen to use against the assessee. It is also not the case of the assessee that he was not confronted with the materials in the possession of the Department. The assessee cannot say that his obligation stops once he submits the explanation howsoever incomplete or unreliable it may be and that the AO is bound to accept it as it is. It was the assessee who claimed to have sold the diamonds to Shri Trivedi and hence the burden was on him to establish the genuineness of the sale transaction. But he failed to do so. The assessee did not lead any evidence to show that Shri Trivedi was actually carrying on the business of purchase and sale of diamonds and not fictitious purchase and sale of diamonds as stated by him in his statement on 31st March, 2000. He could throw no light to show that Shri Trivedi was a regular and reputed dealer in the purchase and sale of diamonds and not a regular and reputed dealer in accommodating VDIS declarants through fictitious entries as stated by him on oath in the said statement. Though it was stated before the AO that the impugned transaction was entered into through a "common family friend" but the assessee as well as Shri Trivedi were conspicuous in their silence as to which "family friend" had arranged the impugned transaction. The assessee could also not bring, as stated above, any material on record to show that the statement made spontaneously by Shri Trivedi was factually incorrect though sufficient opportunity was given to him at the assessment as also the appellate stage. In the face of the categorical statement given by Shri Vishnudatt Trivedi on 31st March, 2000, I am quite inclined to hold that the facts of the case as brought on record are notorious enough to draw adverse inference against the assessee while considering his explanation. I also hold that the explanation given and evidence adduced by the assessee were not sufficient enough, on the facts of the case, for discharging the requisite burden of proof that lay upon the assessee under Section 68.

In fact, the materials brought on record were sufficient enough to reject the glib explanation tendered by the assessee to explain the nature and source of the impugned cash credit.

16. The assessee wants that mere purchase bill issued by M/s Dhananjay Diamonds and mere receipt of money through account payee cheques should be accepted and construed as sufficient for discharging the burden that lay upon the assessee under Section 68. On the facts of the case placed before us, I am unable to hold so. It has been held in a number of cases, viz., CIT v. United Commercial & Industrial Co. (P) Ltd. and CIT that mere receipt of money by account payee cheque is not sufficient to discharge the requisite burden of proof envisaged by Section 68. I am unable to ignore the decisions of the superior Courts and hold that receipt of money through account payee cheque is sufficient and conclusively establishes the genuineness of the transaction in question. As regards the reliance placed by the assessee on the purchase bills issued by M/s Dhananjey Diamonds, it would be sufficient to observe that the genuineness of the said purchase bill itself was under doubt and hence it was incumbent on the assessee to first establish the genuineness of the sale having been made and it is only then that the Departmental authorities were required to act upon the purchase bill. The glaring facts available on record cannot be ignored.

17. The learned CIT(A) has rightly rejected the argument advanced by the learned Counsel that the assessee had declared the diamonds in question under the VDIS and hence his explanation that he had sold them to Shri Trivedi should be accepted. I am also not impressed by the aforesaid argument. The declaration of income in the form of diamonds by the assessee under the VDIS or the nature and source of the income so declared under the VDIS is not in issue in the present case. What is in issue here is whether the diamonds claimed to have been sold were actually sold and, if so, what is the evidence to establish the genuineness of the sale transaction. Therefore nothing turns on the fact that the diamonds in question were declared under the VDIS. Mere declaration of diamonds under VDIS does not necessarily mean possession of diamonds or sale of diamonds also. The limited implication of declarations under the VDIS was that the Departmental authorities were precluded from examining the nature and source of the income represented by assets declared under the VDIS. Declaration of income under the 'VDIS and de facto possession of diamonds and their sale are altogether different from each other in law. Be whatever it may, mere declaration under the VDIS does not lead us to presume either directly or indirectly that the diamonds in question were subsequently sold to Shri Trivedi when Shri Trivedi himself denies to have physically purchased any diamond from anyone. What is thus required to be proved is the fact in issue before us, i.e., genuineness of sale transaction and not the fact or issue which is not before us, i.e., declaration of income under the VDIS.18. Following the decisions of the Hon'ble Supreme Court in ITO v.Ratan Lal and Ors. and Jamnaprasad Kanhaiyalal v. CIT , the Hon'ble Madhya Pradesh High Court has held in Lachhiram Puranmal and Anr. v. ITO , that the ITO is not debarred from examining the genuineness of cash credits in the books of the firm said to be deposited by partners who had declared income under the VDS. In CIT v. Saligram Prem Nath , it has been held, in the context of VDIS 1965, that the ITO is empowered to enquire about genuineness of the source of the amount found credited in assessee's books and tax that amount in spite of the same having already been made the subject of declaration under Section 24 of the Finance (No. 2) Act, 1965 by the creditors and taxed thereunder. The aforesaid decision has been followed by the Hon'ble Punjab and Haryana High Court in CIT v. Meera & Co. .

It is thus evident that genuineness of sale transaction by which diamonds declared under the VDIS were sold cannot be taken as proved only because the assesseo had declared the said diamonds under the VDIS. In other words, the assessee was under obligation to prove the genuineness of sale transaction notwithstanding the fact that the diamonds in question had been declared under the VDIS.19. The learned G'IT(A) says that the statement dt. 31st March, 2000 made by Shri Trivedi has been correctly relied upon by the AO. It is well-known that the AO exercises the powers of a Civil Court while recording the statement under Section 131 of the IT Act. The statement of Shri Trivedi was recorded spontaneously at the time when the alleged sellers of diamonds had no occasion to tutor Shri Trivedi. Shri Trivedi himself has certified at the end of the statement that whatever was stated in the said statement was true and complete and that the statement was made without any force or coercion and further that he had read the statement and found the same to be correctly recorded. The learned CIT(A) says that the said statement is corroborated in material respects by the evidence that was available on ground at the time of survey, viz., large cash deposits in bank accounts of Trivedis and absence of stock though the stock shown in the books was of a few crores of rupees. She says that the said statement was made on oath before the AO under Section 131. The assessee has given no evidence either before the Departmental authorities or before us to show that the statement dt. 31st March, 2000 was not corroborated in material respects by the facts discovered on the ground at the time of survey.

Besides, the facts of the case were within the special and exclusive knowledge of the assessee or Shri Trivedi. The burden was, therefore, on them to prove that the facts stated in the statement dt. 31st March, 2000 were incorrect, which has not been done. How can it then be said that the said finding of the learned CIT(A) is wrong warranting our interference 20. It was strenuously submitted on behalf of the assessee that the issue in hand was covered by the decision of the Tribunal in Mohanlal R. Daga (supra) in favour of the assessee. However, the learned authorised representative for the assessee preferred not to address us to show as to how the material facts as well as the finding recorded by the learned CIT(A) in the case before us were similar to those recorded by the CIT(A) in Mohanlal R. Daga (supra). In CIT v. Kulwant Kaur and Ors. , it has been held that what Section 68 requires is only a factual explanation and not a purely legal argument. Be whatever it may, the learned authorized representative has preferred to submit that the issue in hand was covered by the decision of the Tribunal in Mohanlal R. Daga (supra) instead of making any submission on the merits of the case. I shall, therefore, now turn to the Tribunal's order in Mohanlal R. Daga (supra). Operative part of Tribunal's order in Mohanlal Daga to which the learned Brother is a party reads as under: 15. We have considered the rival contentions, relevant material on record and also the cited decisions. As regards the first and second statements of VDT, the same having been recorded not during the proceedings pertaining to assessee, but during survey in the case of VDT, the copies of the same having not been supplied to the assessee prior to assessment, and supplied only as attached with the assessment order and opportunity for cross-examining VDT in respect of those statements having not been accorded to the assessee, the same cannot be read/used against assessee. The question of assessee's self asking for cross-examination of VDT in respect of those two statements dt. 30th and 31st March, 2000 does not arise when the copies of the same had not been supplied to the assessee before making assessment. Besides, it is the basic principle of law that without affording opportunity of cross-examination, a statement recorded at the back of assessee will not partake of the nature of evidence against assessee and cannot be read/used against assessee.

Even apart, the said statements have been retracted by VDT vide his letter dt. 4th April, 2000 (p. 55G, paper book) and the same was dispatched by registered post on 11th April, 2000 vide postal receipt placed on p. 55H paper book and was delivered to the Department vide AD receipt dt. 17th April, 2000 as placed on p. 55-I paper book. Its receipt on 18th July, 2000 as mentioned in para 12, p, 8 of his order seems to be due to some typographical error. In the said retraction (p. 55G) VDT has mentioned that those statements were given by him as directed by the Department and he was under the state of total confusion. He has also mentioned in the said retraction letter that he had made the purchases, correctly issued bills, accounted for in his books and also furnished to the sales-tax Department. He has supported the purchase of 71 carats of diamonds from assessee by his affidavit and statement dt. 25th Oct., 2002 recorded by AO when he made his attendance before AO in response to the summons issued to him by AO during assessment proceedings pertaining to present assessee. The sale of diamonds by present assessee to VDT is also supported by VDT's purchase bill (p.

93 paper book), the payments have been made by VDT to assessee by account payee cheques and the same is corroborated by bank statement. This transaction of sale of 71 carats of loose diamonds by assessee to VDT has already been accepted in assessee's original assessment under Section 143(3). There is no evidence on record that any cash amount was paid back by assessee to VDT. The possession of loose diamonds by assessee is proved by assessee's declaration under VDIS. As such, considering all the facts and circumstances of the case together with the legal position, we find no justification for holding the sale of loose diamonds by assessee to M/s Dhananjay Diamonds as bogus order as a mere paper transaction and not genuine, and in turn for making/sustaining addition. We therefore, delete the addition.

21. On perusal of the Tribunal's order and more particularly para 15 thereof in Mohanlal Daga, it is seen that decision in that case turned on the following facts : one, copies of the statement of Shri Trivedi were not supplied to the assessee and thus there was a violation of the principle of natural justice and hence the statement of Shri Trivedi which was recorded on the back of the assessee was not capable of being used against the assessee; two, statement given by Shri Trivedi was retracted by him; three, there was no evidence on record that any cash amount was paid back by assessee to VDT and four, the purchase of diamonds by Shri Trivedi was supported by purchase voucher and payment in consideration thereof was supported by account payee cheque. It may be useful to ascertain whether the facts in the present case also suffer from similar deficiencies as pointed out by the Tribunal in Mohanlal R. Daga.

22. In the present case, there is no whisper that the copy of the statement in question was not supplied to the assessee. In his paper book, the assessee himself has placed the copies of all the relevant statements, namely, statement dt. 31st March, 2000 recorded under Section 131 and subsequent statement recorded by the AO on 25th Oct., 2002 when Shri Trivedi appeared before the AO. The assessee has neither alleged that the copies of the said statements were not supplied to him nor has he pleaded any violation of the principles of natural justice either orally 'or in writing or through the grounds of appeal before us as was done in the case of Mohanlal R. Daga. Can we still say by following the order in Mohanlal R. Daga that the statements in question were not supplied to the assessee and that there was therefore violation in the observance of principles of natural justice so as to make the resultant assessment in the present case invalid The forthright and obvious answer is plain "No". This also makes it clear that the facts of the present case are materially different from those in Mohanlal R. Daga.

23. In Mohanlal R, Daga, the Tribunal has held that the statement given by Shri Trivedi on 31st March, 2000 was subsequently retracted by him.

In that case, letter of retraction might have been filed. However, the assessee has chosen not to the file any letter of retraction before us to support the retraction. This shows that the pieces of evidence have been placed by the assessee before us on selective basis and that relevant pieces of evidence have been withheld from us. However, perusal of order of the Tribunal in Mohanlal R. Daga (supra) shows that the statement made by Shri Trivedi was subsequently sought to be retracted by him. The learned CIT(A) has duly considered, as stated above, this aspect of the matter. I have already stated the grounds on which the learned CIT(A) has rejected the alleged retraction. It was not even argued by the learned authorized representative before us that the grounds given by the CIT(A) for rejection of retraction were not tenable on facts or in law. On the other hand, I find that the grounds given by the CIT(A) for rejection of retraction are quite relevant and cannot be ignored to reach a diametrically opposite conclusion to hold that the earlier statement stood successfully retracted. Shri Trivodi had made the statement on oath and certified its contents to be true and correct at the end of the statement. I am, therefore, not in a position to hold that the facts stated in the said statement were incorrect or that a letter of retraction would carry greater evidentiary value than the statement made spontaneously on oath when there was no occasion with anyone to tutor the person, namely Shri Trivedi when he made the statement on 31st March, 2000. The Departmental authorities had recorded his statement without using any force or coercion or deception of any kind. It is also not the case of the assessee that Shri Trivedi was not aware of the modus operandi of his own business while making the statement on 31st March, 2000. Then there is a decision of the highest Court of the land in Surjit Singh Chhabra AIR 1997 SC 2560 which supports the decision of the CIT(A). It appears that the said decision rendered by the Hon'ble Supreme Court was not cited before the coordinate Bench deciding the matter in Daga's case. I am sure that if the said decision had been cited before the Bench, its decision would have been different. Thus, neither the facts nor the law are on the side of the assessee. How can the statement of Shri Trivedi made on 31st March, 2000 then be ignored notwithstanding its alleged retraction by Shri Trivedi In our view, it is the first statement made on oath, which would carry greater evidentiary value till the facts stated therein are proved to be incorrect. Thus the statement even after its alleged retraction, would continue to have evidentiary value till the assessee established otherwise. I am not in a position to ignore the binding law laid down by the Hon'ble Supreme Court in Surjit Singh Chhabra (supra). In this view of the matter, it is not possible for me to hold that the factual position as explained by Shri Vishnudatt Trivedi in his statement recorded on 31st March, 2000 was factually wrong or incorrect or that the CIT(A) has committed any irregularity by proceeding on that basis.

24. In Mohanlal Daga, the addition made was deleted on the ground that there was no evidence on record that any cash amount was paid back by the assessee to Vishnudutt Trivedi. In the case under consideration, the Departmental authorities have pointed out that there were cash deposits on that very day on which the cheque was issued by Dhananjay Diamonds in favour of the assessee. This is what Shri Trivedi himself had also stated in his statement dt. 31st March, 2000 that cash is received first after which the cheque is issued in favour of the sellers through fictitious entries in the books. This fact is peculiar to the case in hand. There is nothing in the order of the Tribunal in Mohanlal R. Daga to show that this fact existed in Mohanlal R. Daga.

25. The assessee has placed a copy of the affidavit dt. 24th Dec, 2001 of Shri Vishnudutt Trivedi, which was executed after about a year and nine months of survey, at pp. 27-29 in his paper book. In the said affidavit, Shri Trivedi has confirmed the purchase of the diamonds in question from the assessee as also payment in consideration thereof to the assessee by account payee cheque. It is further stated by Shri Trivedi that he is a registered dealer under the BST and CST Act. As regards the statement given by him on 31st March, 2000, it is stated that the statement was given under the state of confusion and as per the direction of the IT authorities. It is also stated that the said statement was retracted by letter dt. 4th April, 2000, which was sent by Regd. Post AD to the ITO and also received by the ITO. A careful perusal of the affidavit shows that what Shri Trivedi stated in the affidavit was capable of being proved by better evidence in the form of documentary evidence which the parties concerned have chosen not to file at any stage of the proceedings and have preferred to state in the affidavit what was capable of being proved by better evidence. It is stated that letter of retraction dt 4th April, 2000 was sent by Regd.

Post AD but the affidavit is silent as to when the said letter was sent by Regd. Post AD. It is stated in the order of the Departmental authorities that letter of retraction was received in the income-tax office on 18th July, 2000. In the Tribunal's order in Mohanlal R. Daga, it is stated that the receipt of letter of retraction shown by the Department on 18th July, 2000 was due to somo typographical error. But another CIT(A) in the present case also records a categorical finding that the letter of retraction was received in the Income-tax Office on 18th July, 2000. No evidence was placed before us to rebut the said finding recorded by the CIT(A) in the present case. In the absence of postal receipt and the AD Certificate, it is difficult to believe that the letter in question was sent at the earliest possible opportunity or on 4th April, 2000. Secondly, it is stated in the affidavit that Shri Trivedi was in a confused state of mind and that he had made the statement as per the directions of the income-tax authorities but it is not stated as to which part of the statement was directed to be made by the income-tax authorities. It is also not stated as to which part of the statement was made in a confused state of mind and how that part of the statement was factually incorrect Thirdly, Shri Trivedi stated in the affidavit that the transaction was entered into through a "common family friend" but he avoided in giving the name of the "common family friend" to defeat further enquiry by the Departmental authorities. Thus the affidavit conceals the relevant information more than what it reveals. Shri Trivedi was examined by the AO before his affidavit was rejected. The timing of the affidavit is equally important. It was filed nearly after a year and nine months of survey. It was obviously filed at the instance of the assessee to serve his interest. Such self-serving affidavits hardly achieve any purpose. The correctness of the facts stated in the affidavit has to be assessed in the light of the surrounding circumstances and this is what the Departmental authorities have done while rejecting the explanation of the assessee.

In this connection, the following observations made by the Hon'ble Supreme Court in CIT v. Durga Prasad More may In a case of the present kind a party who relies on a recital in a deed has to establish the truth of those recitals, otherwise it will be very easy to make self-serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour, then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents.

26. I am well aware that the order passed by a co-ordinate Bench should not be lightly disregarded. In taking this view, I am supported by the decision of the Hon'ble Supreme Court in Union of India v. Paras Laminates (P) Ltd. in which the Hon'ble Court has observed : "It is true that a Bench of two members must not lightly disregard the decision of another Bench of the same Tribunal on an identical question. This is particularly true when the earlier decision is rendered by a larger Bench. The rationale of this rule is the need for continuity, certainty and predictability in the administration of justice. Persons affected by decisions of Tribunals or Courts have a right to expect that those exercising judicial functions will follow the reason or ground of the judicial decision in the earlier cases on identical matters." However, it is equally relevant to notice the decision of the Hon'ble Supreme Court in Padmasundara Rao (Decd.) and Ors. v. State of Tamil Nadu in which the Hon'ble Court has held thus : "Courts should not place reliance on decisions without discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed. There is always peril in treating the words of a speech or judgment as though they are words in a legislative enactment, and it is to be remembered that judicial utterances are made in the setting of the facts of a particular case, said Lord Morrin in Herrington v. British Railways Board (1972) 2 WLR 537 (HL). Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases." It is, therefore, clear that mere citation of decision by a party does not necessarily mean that the issue is covered by the decision so cited. It is the duty of the Court to see that the factual situation fits in with the fact situation of the decision on which reliance is placed. The Hon'ble Court further cautions us that circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases. In the present case, the learned Counsel for the assessee did not even make any attempt to show as to how the fact situation in Mohanlal R. Daga (supra) fitted in with the fact situation of the case under consideration. The order proposed by the learned JM is also silent on this aspect upon discussion with him, the learned JM has shown his reservations in touching upon this aspect in his order. Facts stated above show that fact situation in Mohanlal R. Daga was materially different from the one in the case under consideration. It is therefore a case where the said decision in Mohanlal R. Daga is not applicable on the facts of the case as also the settled law governing them.

27. If one looks at the whole sequence of events, it becomes quite clear as to how the things were managed in the present case. The entire story which was so well-written, directed and acted was unearthed by the Department through survey when Shri Vishnudutt Trivedi was caught unawares. It is this element of chance and surprise, which led to the disclosure of startling facts by Shri Trivedi. Such facts cannot be ignored just in order to accept the explanation of the assessee. In Director of IT v. Bharat Diamond Bourse (2003) 179 CTR (SC) 225 : (2003) 259 ITR 280 (SC), this is what the Hon'ble Court has observed: In our view this story does not ring true and could not have been accepted by any reasonable person, instructed in law. It is wholly unnatural, because one does not expect hard-nosed businessmen to part with an amount of Rs. 70 lakhs without even recording an agreement under which it is paid, nor without agreeing upon the precise terms of the lease. The story rings false from beginning to end, and yet, the Tribunal accepted it by saying, "as regards the bona fides of the transaction, in our opinion, there is nothing to suspect the same." The Tribunal says, "there is a transparency about the entire transaction which nullifies any attempt to make out the transaction as something unusual and out of the ordinary." That diamonds are not transparent, that they dazzle with a brilliance that blinds the eye, seems to have escaped the notice of the Tribunal. It undiscerningly accepted the glib explanation of the assessee, though teeming with improbabilities and strenuous on credulity.

28. I have given serious consideration to all the facts and circumstances of the case in the light of the materials and arguments placed before us. As observed by Lord Templeman in R. v. IRC (1994) 1 WLR 334 (HL), every tax avoidance scheme involves a trick and a pretence. It is the task of the Revenue to unravel the trick and the duty of the Court to ignore the pretence. In the case before us, the Revenue has unravelled the trick that was played to accommodate the VDIS declarants through fictitious entries of purchase/sale of diamonds and hence it is our bounden duty to ignore the pretence, namely, the medium of cash credits generated by the impugned sale transaction for introducing unaccounted money in the books. It is not a case of mere rejection of the explanation given by the assessee but a case where the Department has brought positive materials on record, which has not been satisfactorily rebutted by the assessee, to unravel the trick played to accommodate VDIS declarants. Taking into account the totality of all the facts and circumstances of the case, I hold that the learned CIT(A) has correctly exercised his discretion and jurisdiction in dismissing the assessee's appeal. I find no illegality, irregularity or irrationality in her order and hence I confirm the same.

29. In view of the foregoing, the appeal filed by the assessee is dismissed.

1. On a difference of opinion between the Members, the following point of difference has been referred by the Hon'ble President, Tribunal under Section 255(4) of the IT Act, 1961, for my opinion as Third Member: Whether, on the facts and circumstances of the case, the addition of Rs. 10,35,562, credited to the capital account during the year, deserves to be sustained.

2. The assessee declared long-term capital gains on the sale of these diamonds at Rs. 1,75,520 after claiming adjusted indexed cost of acquisition (sale Rs. 10,35,562 -- Indexed cost Rs. 8,60,042). The return was accepted under Section 143(1) of the Act.

3. A survey was conducted in the business premises of Vishnu Dutt Trivedi (VDT in short) on 30th March, 2000, wherein it was noticed that the transactions of purchase and sale of diamonds made by said VDT might not have taken place. Statements of VDT were recorded on 30th March, 2000 and on 31st March, 2000. Based on that information, the assessment of the assessee was reopened under Sections 147/148 of the Act, as the survey had revealed that the assessee had also reportedly sold the diamonds to Dhananjay.

4. On scrutiny of records of the assessee the AO found that the capital account of the assessee had been credited by a sum of Rs. 10,35,562.

The source of this credit was claimed to be the sale of jewellery declared under the Voluntary Disclosure of Income Scheme, 1997 ("VDIS" in short). The claim is that the assessee declared diamond jewellery weighing 65.75 ct. under the VDIS and that it was sold on 20th Jan., 1998 to Dhananjay Diamonds of Bhayander (Dhananjay in short), the proprietary concern of VDT.5. As per the declaration under VDIS, the diamonds were acquired in financial years 1981-82 (39.50 ct.), 1982-83 (13.75 ct.), and 1983-84 (12.50 ct.). The proof of declaration along with the affidavit, the valuation report and the copy of certificate under Section 68(2) of the VDIS were filed along with the return.

6. To verify the veracity of the transactions, the summons under Section 131 of the Act was issued to the Manager, Vasai Janta Sahakari Bank Ltd., Bhayander (E) Branch requesting him to furnish bank statement of account No. 102-3475 in the name of Dhananjay Diamonds and also of another concern Ratnakar Diamonds (Ratnakar in short) along with the pay-in-slips in respect of cash deposits made in the above account. On examination of the details furnished by the bank, it was found that the cash was deposited in the account of Ratnakar Diamonds, which is also a proprietary concern of VDT and on the following day of the sale, a cheque was issued in the name of Dhananjay and on the same day, a cheque was issued by Dhananjay to the assessee. The AO therefore concluded that the statement given by VDT before the survey authority that all the transactions of purchase and sale of diamonds appearing in the P&L a/c of their proprietary concern were "fictitious" transactions is correct and conclusive. He then issued summons under Section 131 to VDT. In the statement recorded, he retracted the statement given by him during the course of survey by stating that the purchases made by him were true and were totally accounted for in the books of account. The AO, however, on a perusal of the order of the ITO, Thane found that the retraction of VDT has not been accepted and it was held there that he was indulging in fake transactions. He, therefore, added the sum of Rs. 10,35,562 to the income of the assessee.

7. The CIT(A) upheld the addition. He referred to the statement of VDT recorded on 30th March, 2000, wherein he stated that he was a proprietor of Dhananjay and that he had a business of trading and manufacture of diamonds and that for the manufacture of diamonds, that various cutters at Bhayander, Surat etc. were working for him, that whereas trading was done directly and diamonds were purchased and sold to various parties and that on the day of survey, there was no closing stock available with any of the cutters and no stock was found at the business premises of Dhananjay Diamonds or Ratnakar Diamonds. He also noted that VDT in his statement recorded on 31st March, 2000, however stated that no physical transaction of purchase and sale of diamonds had taken place but the transactions were done on paper only so as to facilitate the VDIS declarants. In the statement recorded on 31st March, 2000 the exact modus operandi of his business was explained, viz., that one Saxena used to come to him with cash and the name of the party, addresses of the party, description and weight of the diamonds, etc. which were purported to be sold; that the cash used to be deposited in the bank accounts of Dhananjay Diamonds and used to be in circulation; that he (VDT) gave the names of the bank accounts in which the cash was deposited; that subsequent to this activity, he used to draw the cheques in favour of the VDIS declarants and handed over the same to Saxena who was the mediator and he used to get a commission of 0.5 per cent for arranging these transactions; that he used to prepare purchase bills in favour of the said parties and give the same also to Saxena; and that on paper alone, was there sales and purchase of diamonds and for these purchase and sales, purchase/sales bills in the names of different proprietary concerns were printed; and that during the course of survey, from the books of account of Dhananjay Diamonds and Ratnakar Diamonds stock at Rs. 2,72,89,520 and Rs. 5,88,45,980 as on 31st March, 1999 was disclosed but those were not at all in existence on the relevant date and were mere book entries in the closing stock. It was further noted that the evidence of pay-in-slips was also found to be of large amounts of cash deposited in various bank accounts of Dhananjay Diamonds on various dates, which were deposited from the money received from various parties to whom subsequently cheques were issued, that VDT also admitted to the fact that while his son Rohit VDT was the proprietor of Ratnakar Diamonds, he had no experience of the diamonds trade and the business was handled by him and his son was nowhere connected with Ratnakar Diamonds personally.

The CIT(A) did not agree to the assessee's submission that VDIS declaration was not open to subsequent, questioning, as according to him, nowhere in the Scheme is there any prohibition for inquiries to be conducted by the AO, on the sale of the assets that were so declared.

It was merely an immunity granted with regard to the investigation as to the sources of the income, declared under the VDIS. The 'CIT(A) further noted that on the first day of survey, VDT had merely made the statement regarding maintenance of books of account, bank accounts, the nature of his business, etc, and stated that the bills of purchases and sales would be given the next day and that it was on next day, he gave a detailed statement giving the entire activity of his business as being merely a paper concern. He also noted that subsequent letter dt.

4th April, 2000 retracting his statement was of no value whatsoever as it was not given on oath, and that between these contradictory statements, those made under oath will have a greater value. He stated further that VDT has merely retracted his statement given on 31st March, 2000, without offering any explanation on the large cash deposits, and the absence of stock. He further noted that in the subsequent statement on oath recorded by the AO, VDT has claimed that while he knew Saxena, the transactions entered into by him with the assessee were not through him, but through family friends whose names he did not remember; that the transaction with the assessee of purchase of diamonds worth Rs. 10,35,562 was genuine and not covered by the transaction to which reference was made as Hawala transaction in the statement given to the IT Department. According to CIT(A), the acknowledgement of Saxena as a business associate and then to delink the present transaction from those transactions showed that he had accepted the validity of the statement and could not immediately be claimed that the statement was given under coercion. He held that since he was denying the explanation given at the time of survey, it was upon him to explain the cash deposits in his bank accounts, and the lack of closing stock. The GIT(A), therefore concluded that the validity of the statements recorded at the time of survey and on 31st March, 2000 remained. He observed that the statement of VDT recorded by the AO subsequently was not backed by any documentary evidence at all, whereas the statement recorded during the course of survey is backed by evidence of the non existence of stock and large cash deposits in the bank accounts. He further mentioned that at the time of survey it was not the case of VDT that he was doing some part of his business as genuine and only some part of the business was on paper for facilitating the VDIS declarants. According to him, in the statements which are backed by documentary evidence, that is the one of 30th March, 2000 and 31st March, 2000, he had categorically denied' having any genuine business of manufacturing and trading of diamonds at all and, therefore, if he thereafter states that the transaction entered into with the assessee were genuine transaction there is no documentary evidence with either party that it was so. He also rejected the claim of the assessee that VDT was in fact the witness of the Department and the onus of proof shifted from him to the Department. According to him the bank deposits of the dealer would have a bearing if the dealer was conducting any genuine business at all, which is contrary to the fact proved at the time of survey that in fact no business at all has been done by VDT. He finally concluded that the AO has pointed out in his order that the cheque payments to the assessee were made out of transfer entries and cash deposits in the bank account on immediately preceding dates or on the same dates; that evidence with the Department is available to show that large sums of cash were deposited in bank account of VDT, circulated in his various bank accounts and cheques to VD1S declarants were issued from there; and that in these circumstances, to prove direct nexus would be well-nigh impossible and the totality of circumstances has to be taken into account; that it is clear that the modus operandi of VDT, as explained in his statement recorded on 31st March, 2000, is borne out by the documents. Large cash deposits, that remained unexplained, were made in one or the other of the bank accounts, were transferred through banking channels to other accounts and cheques were issued from these accounts to VDIS declarants; and that these facts which remained uncontroverted that out of the funds so transferred from one bank account to another the payment to the assessee has been made. Looking to the totality of the circumstances, he held that the nexus between the cash deposited and the cheque drawn is satisfactorily explained. He also upheld the validity of reopening in view of the information received from the survey authorities regarding the bogus nature of the sale of diamonds, which information was from the books of account of Shri VDT. This was specific and not general information.

8. In the second appeal, the JM opined to delete the addition by stating that the facts were undoubtedly identical with those of Mohanlal R. Daga v. ITO (2005) 92 TTJ (Mumbai) 1236 and there was no reason to take a different view. The AM discussed the matter in detail and held that the facts stated by VDT and statement on oath were sufficient enough to cause doubt in the mind of the AO about the genuineness of the explanation offered by the assessee to explain the nature and source of cash credit. He opined that the assessee has given no evidence either before the Departmental authorities or before the Tribunal to show that the statement dt. 31st March, 2000 was not corroborated in material respects by the facts discovered at the time of survey. Besides, the facts of the case were within the special, and exclusive knowledge of the assessee or VDT. The burden was therefore on him to prove that the facts stated in the statement dt. 31st March, 2000 was incorrect, which has not been done. He also held that the decision of the Tribunal in the case of Mohanlal R. Daga (supra) turned on certain facts, viz., (i) the copies of the statement of VDT were not supplied to the assessee and thus there was a violation of the principle of natural justice and, therefore, the statement of Shri VDT which was recorded on the back of the assessee was not capable of being used against the assessee; (ii) the statement given by VDT was retracted by him; (iii) absence of evidence on record that any cash amount was paid back by the assessee to VDT; (iv) unsupported purchase of diamonds by VDT by purchase voucher; and (v) payment in consideration thereof was supported by account payee cheque. He then examined the case of the assessee in the light of the aforesaid four differences and held that the said decision in the case of Mohanlal R.Daga (supra) was not applicable on the facts of the case as also the settled law governing them. He accordingly held that a look at the whole sequence of events, it was quite clear as to how the things were managed in the present case. The entire story which was so well-written, directed and acted was unearthed by the Department through survey when VDT was caught unaware. It is this element of chance and surprise, which led to the disclosure of startling facts by VDT. Such facts cannot be ignored just in order to accept the explanation of the assessee. According to him, the Revenue has unraveled the trick that was played to accommodate the VDIS declarants.

According to him, therefore, the order of the CIT(A) is to be upheld.9. On this difference, the matter was referred to me as Third Member on the point of difference as stated in para 1 above. The parties are heard and rival contentions considered.

10. The learned Counsel for the assessee at the outset reiterated that the issue is covered in favour of the assessee by the decision of Tribunal, Mumbai Bench in the case of Mohanlal R. Daga v. ITO (supra).

He further submitted that the nature and source of acquisition of diamonds in question could not be enquired into in view of the provisions of the VDIS. He further stated that the diamonds sold to Dhananjay vide their purchase bill dt. 20th Jan., 1998 (copy of bill is placed on record) had been declared under the VDIS and in support thereof, valuation report dt. 1st April, 1987 is filed. It is this amount that was claimed by the assessee to have been credited in the books of account, He also submitted that the sale consideration for the diamonds was received through account payee cheque that was ultimately credited in the books of account of the assessee. The assessee has filed a copy of the certificate issued by the CIT, Mumbai under Section 68(2). As regards the statement given by VDT, it was submitted by the learned Counsel that the purchaser had retracted his statement given by him at the time of survey action at his business premises vide letter dt. 4th April, 2000. Certain questions and answers are referred to.

10.1 The learned Counsel also referred to the computation of income, P&L a/c and balance sheet for the asst. yr. 1998-99, wherein sale of jewellery and diamond is admitted as under: 10.2 He also referred to capital account from the perusal of (which) it could be seen that the tax Rs. 1,98,573 has been paid on capital declared under VDIS, and that is further evident from the certificate of payment. He further submitted that the income declared by VDT for the year under consideration at Rs. 1,27,009 has been accepted.

10.3 The assessee has relied upon the copy of the affidavit dt. 24th Dec, 2001 of VDT, which was executed after about a year and nine months of survey. In the said affidavit VDT confirmed the purchase of the diamonds in question from the assessee as also payment in consideration thereof to the assessee by account payee cheque. It was further stated by VDT in his affidavit that he was a registered dealer under the BST and CST Act. As regards the statement given by him on 31st March, 2000, it was stated that the statement was given under the state of confusion and as per the direction of the IT Department. It was also contended that VDT had appeared before the AO on 25th Oct., 2002 and confirmed the impugned transaction as also payment of the money through account payee cheque. It was submitted that the nature and source of the amount found credited in the books stood fully and satisfactorily explained and therefore the AO was not justified in making the impugned addition.

In support of his various arguments, the learned Counsel relied upon the decisions of Chiranji Lal Steel Rolling Mills v. CIT , Dy. CIT v. Rohini Builders , Addl.

CIT v. Miss Lata Mangeshkar , CIT v. Pragati Co-op.

Bank Ltd. and CIT v. Onssa Corporation (P) Ltd. 10.4 Relying upon the decision in Dy. CIT v. Mangalam Cement Ltd. (2005) 92 TTJ (Jp)(TM) 1, the learned Counsel submitted that : "Principle of consistency is applicable to income-tax proceedings; even otherwise a decision of a coordinate Bench of "same strength is required to be accepted by Bench of same strength."CIT v. Smt. P.K. Noorjahan and circumstances in which the assessee was placed the investments could not be treated as income of the assessee.Pullangode Rubber Produce Co.

Ltd. v. State of Kerala and Anr. and submitted that it is open to the assessee who made the admission to show that it is incorrect and the assessee should be given a proper opportunity to show that the books of account do not disclose the correct state of facts.

He also referred to Supreme Court decision in Kishinchand Chellaram v.CIT and submitted that the burden was on the Department to show that the money belonged to the assessee by bringing proper evidence on record and the assessee could not be expected to call T and N in evidence to help the Department to discharge the burden that lay upon it. That there was no evidence on the basis of which it could come to the finding that the sum credited in capital account of the assessee represented the undisclosed income of the assessee. Cases of Lalchand Bhagat Ambica Ram v. CIT and Orient 11. The learned Departmental Representative, on the other hand, strongl relied upon the orders of the authorities below and also referred certain questions put to VDT and the answers given by him in the said statement dt. 31st March, 2000. He also relied upon the following decisions in support of his arguments : (i) Mahesh B. Shah v. Asstt.

CIT , (ii) Asstt. CIT v. Rameshchandra R. Patel (2005) 94 TTJ (Ahd)(TM) 361 : (2004) 89 ITD 203 (Ahd)(TM), (iii) ITO v. Ashok Kumar (2005) 92 TTJ (Chd) 467, (iv) Ramesh T. Salve v. Asstt. CIT (2001) 71 TTJ (Mumbai) 111 : (2000) 75 ITD 75 (Mumbai), (v) Ramjas Nawal v. CIT (2003) 183 CTR (Raj) 144, (vi) Amritlal Bhagwandas Soni v.Asstt. CIT (1997) 59 TTJ (Ahd) 418, (vii) Dr. S.C. Gupta v. CIT (2001) 170 CTR (All) 421 : (2001) 248 ITR 782 (All), (viii) Smt. Vasanti Sethi v. Asstt. CIT (1993) 45 TTJ (Del) 503, (ix) K.P. Davis v. ITO (1995) 52 TTJ (Coch) 362 : (1995) 53 ITD 79 (Coch), (x) Amal Kumar Chakraborty v.CIT , (xi) Hiralal Maganlal & Co. v. Dy. CIT [(IT(SS)A 117/Mum/1996, reported at (2005) 97 TTJ (Mumbai) 377-- Ed.], (xii) Smt.

Gunwantibai Ratilal v. CIT .

11.1 On natural justice the learned Departmental Representative relied upon various paragraphs of GTC Industries Ltd. v. Asstt. CIT (1998) 60 TTJ (Bom) 308.

12. The parties are heard and their rival contentions considered. The facts in decision by which it is claimed that the issue is covered in favour of the assessee in the case of Mohanlal P. Daga (supra) are: 15. We have considered the rival contentions, relevant material on record as also the cited decisions. As regards the 1st and 2nd statements of VDT, the same having been recorded not during the proceedings pertaining to assessee, but during survey in the case of VDT, the copies of the same having not been supplied to the assessee prior to assessment and supplied only as attached with the assessment order and opportunity for cross-examining VDT in respect of those statements having not been accorded to the assessee the same cannot be read/used against assessee. The question of assessee's self asking for cross-examination of VDT in respect of those two statements dt. 30th and 31st March, 2000 does not arise when the copies of the same had not been supplied to the assessee before making assessment. Besides it is the basic principle of law that without affording opportunity of cross-examination, a statement recorded at the back of assessee will not partake of the nature of evidence against assessee and cannot be read/used against assessee.

Even apart, the said statements have beem retracted by VDT vide his letter dt, 4th April, 2000 (p. 55 G, paper book) and the same was despatched by registered post on 11th April, 2000 vide postal receipt placed on p. 55K paper book and was delivered to the Department vide AD receipt dt. 17th April, 2000 as placed on p. 551 paper book. Its receipt on 18th July, 2000, as mentioned in para 12 p. 8 of his order seems to be due to some typographical error. In the said retraction (p. 55G) VDT has mentioned that those statements were given by him as directed by the Department and he was under the state of total confusion. He has also mentioned in the said retraction letter that he had made the purchases, correctly issued bills, accounted for in his books and also furnished to the Sales-tax Department. He has supported the purchase of 71 carets of diamonds from assessee by his affidavit and statement dt. 25th Oct., 2002 recorded by AO when he made his attendance before AO in response to the summons issued to him by AO during assessment proceedings pertaining to present assessee, The sale of diamonds by present assessee to VDT is also supported by VDT's purchase bill (p.

93 paper book); the payments have been made by VDT to assessee by account payee cheques and the same is corroborated by bank statement. This transaction of sale of 71 carets of loose diamonds by assessee to VDT has already been accepted in assessee's original assessment under Section 143(3). There is no evidence on record that any cash amount was paid back by assessee to VDT. The possession of loose diamonds by assessee is proved by assessee's declaration under VDIS. As such, considering all the facts and circumstances of the case together with the legal position, we find no justification for holding the sale of loose diamonds by assessee to M/s Dhananjay Diamonds as bogus order as a mere paper transaction and not genuine, and in turn for making/sustaining addition. We, therefore, delete the addition.

13. In my opinion the facts are substantially identical to those appearing in the case of Mohanlal R. Daga v. WO (supra) and there is no reason to take a different view. Here also the diamonds were sold to Dhananjay vide their purchase bill dt. 20th Jan:, 1998. The sale consideration for the diamonds was received through account payee cheque and that was credited in the capital account of the assessee. In that case the facts and the distinction as appearing from the Tribunal order is that the copies of the statement of VDT were not supplied to the assessee and thus there was a violation of the principle of natural justice and, therefore, the statement of Shri VDT recorded on the back of the assessee was held not capable of being used against the assessee. But the fact remains that as in that case, here in this case also VDT gave a favourable statement at the first instance on 30th March, 2000, that is a more positive statement and that the statement of VDT taken at the office of the IT Department on 31st March, 2000 was retracted by him. As in that case, there is no evidence on record, here also to the effect that any cash amount was paid by the assessee to VDT.14. The facts stated by VDT and second statement on oath dt. 31st March, 2000 could raise a doubt in the mind of the AO about the genuineness of the explanation offered by the assessee to explain the nature and source of credit in the capital account of the assessee, but there is no evidence on record before the Departmental Authorities to show that the statement dt. 30th March, 2000 was not correct and that the facts stated in the statement dt. 31st March, 2000 were only the correct one, more so in view of his retraction stating that the later statement was given under influence and confused state of mind.

15. Though the CIT(A) referred to both the statements of VDT recorded on 30th March, 2000 and on 31st March, 2000 confirming the transaction in the first statement but denying the same in the second, he gave more credence to the later one because it was more descriptive and on the first day of survey, VDT had merely made the statement regarding maintenance of books of account, bank accounts, the nature of his business, etc. and stated that the bills of purchases and sales would be given the next day and that it was on next day, he gave a detailed statement giving the entire activity of his business as being merely a paper concern. This is not a correct statement of facts as stated by the CIT(A) as is evident from the following appearing in the statement dt. 30th March, 2000: Q. 2. Please give details of the business activities carried on by you and your family members.

A. 2. I am proprietor of Dhananjay Diamonds, Shop No. 6, Oasis Park, Naigaon since 1995. I don't have any other income generating activity.

My eldest son Rohit is proprietor of Ratnakar Diamonds, which is also run from the same address. This business has started in 1997.

There are no branches of the above two concerns. There is no other business activity in my family.

Q. 3. Do you maintain books of account and if yes, till what date they have been written. Also please produce the books of account for both the concerns.

A.3. Books upto 31st March, 1999 have been written and audited and the same are herewith produced. Books of account for the current year are not available. The same are with my accountant Mr. Hitesh Patel, c/o Vora Traders, Trikam House, Opp. R.N. High School, Opera House, Mumbai-4.

Q. 6. What is the nature of the business carried out by you A. 6 It is trading and manufacturing of diamonds.

A. 7. For manufacturing the diamonds are given to various cutters in Bhayander, Malad and Surat. Trading is done directly. Diamonds are purchased and sold to various parties.

Q. 8 Please give the addresses and names of various cutters to whom you give diamonds for manufacturing.

(iv) Mr. Vishwanath Acharya, Shantiganga Aptt. Nr. Station Bhayander (E) Q. 11 Please give the names and full address of the creditors appearing in the balance sheet filed by you for asst. yr. 1999-2000 for both the concerns. The creditors of Ratnakar Diamonds are Rs. 7,03,44,010 and for Dhananjay Diamonds are Rs. 3,21,61,567. You have given names of such creditors. You are requested to give full address of these.

A. 13 Bills for sales/purchases upto the year ending 31st March, 1999 are produced herewith. Current bills are with the accountant.

Q. 14 Please state where the closing stocks of Dhananjay Diamonds of the value of Rs. 2.72 crore. And for Ratnakar Diamonds (Rs. 5.88 crores) was lying on 31st March, 1999 A. 14 The stock was lying at my Trikam House office, whose address has been given above.

Q. 15 Please give the addresses of sundry debtors for both the concerns.

No enquiry was made by the AO whether any stock was lying at Trikam House of VDT.16. The statement recorded on 31st March, 2000 which is given more credence is extracted in extenso as under: Ans. Mv name is Vishnudatta VDT, aged 43 years. I am residing at F-3, at Oasis Park, Dias Pareira Naigaon (W) Distt. Thane.

Q. 2 What is your experience in diamond business Please explain full details of your employment with diamond merchants special experience in diamond trade.

Q. 3 What is Rohit's experience in diamond trade and when his proprietary concern M/s Ratnakar Diamonds was started.

Ans. My son Mr. Rohit has no experience in diamond trading. M/s Ratnakar Diamond was started in 1998. Though the business was started in his name as proprietary concern, the business was handled by me only. He is nowhere connected with M/s Ratnakar Diamonds, personally.

Q. 4 Whenever these transaction of purchase of diamond from the customers took place, whether the sellers had come to you or you had been to their place? And where the delivery of diamonds taken Ans. In fact, physical transactions of these purchase of sale of diamond never took place. However, fictitious transactions were done on paper only so as to facilitate the VDIS-97 declarants. I will get you full details of these transaction made on paper only on Monday i.e. 3rd April, 2000.

Q. 5 You give all the details on Monday, but today at least you get us, the modus operandi of your transaction and details of few transactions.

Ans. I may state here that Shri Sanjay Saxena of Kalyan, full address, I don't know, used to approach me with cash and name of the party, address of the party, description and weight of the diamond, etc. pretended to be sold. Then sometimes, I used to deposit the cash in the bank accounts of M/s Dhananjay Diamonds or M/s Ratnakar Diamonds. Sometimes the cash used to be in circulation. The names of the banks in which the cash is deposited are Vasai Janta Sahakari Bank, Bhayander (E), Branch (account No. 3475), Global Trust Bank, Evershin Nagar, Vasai (E), Account I don't remember, Indian Overseas Bank, Opera House Branch, C/A No. 2891. Subsequent to this, I used to draw cheques in favour of the said VDIS declarants and hand over the same to Shri Saxena, mediator. I used to get commission of 0.5 per cent for arranging this transaction. I use to prepare purchase bills in favour of the said parties and the same are also given to Shri Saxena. I have never came across any party. I have not seen any party or I have not met any party at any time even today.

Subsequently, on paper only the sales of the diamonds purchased are effected. For these purchases and sales, purchase bills/sale bills got printed in the names of different proprietorship concerns are used. I would like to mention here that the sale proceeds of the said diamond are invariably received through cheques from the said party. These cheques are deposited in the banks mentioned above.

Q. 6 Try to recollect full name and address of Shri Sanjay Saxena, his office/residential address, tel. No. etc.

Ans. His name is Sanjay Saxena, address I am not remembering.

Telephone No. also, I don't remember.

Q. 7 Whether Mr. Sanjay Saxena was the only agent or there were some other persons. If so, please give their name and address.

Ans. Mainly Shri Saxena was the person who used to bring clients from Ulhasnagar area. There were hardly any person.

Ans. Mr. Sanjay Saxena was introduced to me in diamond market, Opera House, Mumbai. I don't remember the name.

Q. 9 Please furnish the details of all the transactions done by you in the following format, (1) Name of the concern (2) Party from whom cash received (3) Description of the diamond, (4) Name of bank account in which the cash deposited (5) To whom the particular diamond jewellery sold name and address of the party (6) Amount and date of cheque received (7) Bank and account No. where cheques deposited.

Ans. I cannot give the details today. I will take out the details and will furnish the details on Monday i.e. on 3rd April, 2000.

Ans. The books of account maintained are cash book, ledger, purchase/sale register. Basically, I am an accountant and I use to write my books myself.

Ans. Yes. I am assessed to tax and I am filing my returns regularly with ITO, Ward 2(3), Thane.

Q. 12 Have you got your accounts audited by the chartered accountant in view of the Section 44AB of the IT Act Ans. Yes, For the asst. yrs. 1997-98 and 1998-99 Shri Soni Agarwal & Co., chartered accountant of Bhayander and for asst. yr. 1999-2000 Shri Lalwani, chartered accountant, Bhayander have audited my books of accounts.

Q. 13 Why the chartered accountant was changed for asst. yr.

199S-2000 Ans. Chartered accountant was changed as Mr. Soni Agarwal & Co. were busy by the workload.

Q. 14 Whether Mr. Soni Agarwal & Co. and Mr. Lalwani were of the fact that the business transactions are merely on paper and whether the books of account were produced for audit purposes.

Ans. The books were? given physically for audit purpose. They were orally informed that these are all genuine transactions.

Q. 15 Whether the creditors shown at Rs. 3,27,61,567 as on 31st Match, 1999 in the case of Dhananjay Diamonds and at Rs. 7,03,44,010 as on 31st March, 1999 in the case of Ratnakar Diamonds were genuine creditors or they are fictitious creditors and shown on paper only.

Ans. These are not genuine creditors. As on today out of these two proprietorship nobody has got business of personal liability.

Q. 16 Then how the balance sheet is tallying All the assets are owned by you? Please explain.

Ans, The closing stock shown at Rs. 5,88,45,980 as on 31st March, 1999 in the case of Ratnakar Diamonds and at Rs. 2,72,89,520 in the case of Dhananjay Diamonds were not at all in existence on the relevant day. This was mere book entry and imaginary closing stock.

If both these factors are considered, the balance sheet will tally.

Since it is too late today, the statement is temporarily concluded and will be continued a;. 10.00 AM on Monday on 3rd April, 2000.

17. There is nothing in this statement that implicates the assessee as such or to say that the transaction with the assessee was not genuine.

This also is a general statement without specifying any particular transaction or the person. On the contrary when asked vide Q, 9 to give such details, he said he would give it on Monday, the 3rd April, 2000 but he did not turn up on that day, The transactions through Saxena are stated to have been in the nature of hawala. If seen with reference to the later statement recorded under Section 131 on 25th Oct., 2002 Saxena was not involved in transactions with the assessee and three other persons named therein. The transactions with the assessee and those three persons were through some common family friend who was though not named.

18. VDT retracted his statement given by him on 31st March, 2000 at the office of the AO, vide letter dt. 4th April, 2000 which reads: At the time of recording of statement at your office, I stated as per your direction and I was in total state of confusion. The purchases made by me is totally accounted one and have correctly issued the bills to the respective party from whom I made purchases.

I have accounted all these purchases in books of account along with the sales. The sales and purchases are also shown to the sales-tax Department. I request you to supply the copy of statement recorded by your goodself at the office premises. On receipt of the statement I will be able to clarify further to your goodself. I once again state that the statement was not given by me voluntarily and I was not in proper shape to give this statement.

19. VDT had also filed an affidavit dt. 24th Dec, 2001 which was executed after about a year and nine months of survey, the relevant portion thereof, reads as under: I hereby confirm that during the financial year 1997-98 (asst. yr.

1998-99) I have purchased cut and polished loose diamonds weighing 65.75 carats for Rs. 10,35,562 from Shri Uttamchand Pukhraj Jam of 21/588, Nehru Nagar, Kurla (East), Mumbai-400 024 vide my purchase bill dt. 20th Jan., 1998.

I further confirm that I had taken the delivery of above said cut and polished loose diamonds from the above said purchaser's address at the time of making the payment to seller.

20. It is evident from this affidavit that VDT had confirmed the purchase of the diamonds in question from the assessee as also payment in consideration thereof to the assessee by account payee cheque. It is further evident that he was a registered dealer under the BST and CST Act.

21. Again on 25th Oct., 2002 VDT confirmed in a more specific way that the transactions with the assessee and three others were genuine and true. Certain questions and answers as are referred to in this letter are: Ans. I am doing trading in rough and polished diamond since 1996, The business I carried out as a proprietor of M/s Dhananjay Diamonds.

Q. 7 Do you know and seen Smt. Varadhidevi G. Choudhari, Smt. Urmila S, Dubey, Smt. Sampatdevi M. Daga and Shri Uttam P. Jain Ans. Yes, I know the above-mentioned four parties. These parties were introduced to me by our family friend but not through Mr.

Sanjay Saxena. I have seen these parties two-three times at their addresses for the purpose of transaction of my purchase, delivery and payment.

Q. 9 What type of transactions you have done with abovesaid parties and when Ans. I have purchased cut and polished diamond from the abovesaid four parties during the period for financial year 1997-98.

Ans. These all four parties introduced to me by some common family friends as stated above. I had visited to all four parties two-three times for purchase of cut and polished diamond and after finalising the rate 1 had purchased cut and polished diamond from abovesaid parties in financial year 1997-98 and taken the physical delivery of cut and polished diamond from all four parties address and made the payment through account payee cheques and I had given them my purchase memo.

Q. 13 During the course of survey under Section 133A of the IT Act, 1961, was carried out in your case by ITO, Ward-2(3), Thane on 31st March, 2000 at that time your statement recorded under Section 131 and you have stated in Answer to Q. No. 4 as under: In fact, physical transactions of these purchase and also of diamonds never took place. However, fictitious transactions were done on papers only, so as to facilitate VDIS'97 declarants. I get you full details of transactions made on paper only on Monday i.e.

3rd April, 2000.

Ans. I had retracted the statement given at the time of survey on 31st March, 2000; the said statement at the time of survey was given under influence. I confirm that I had taken physical delivery of cut and polished diamond from all four above parties and my transactions with these four parties is genuine and duly recorded in my books of account.

Q. 14 Please produce the books of account for financial year 1997-98.

Ans. As stated above, my all books of account are still with (Old) ITO, Ward- 2(3), Thane and applied for xerox of these books of account and statements and also applied for return of books but till date same is lying with ITO, Ward-2(3), Thane.

Q. 21 How do you say, the statement given during the course of survey under Section 133A was under influence.

Ans. Yes, at the time of survey I was totally state of confusion in a however under mental pressure the statement was recorded which was retracted by me.

Q. 22 In the light of the fact that Mr. Sanjay Saxena is known to you in your business dealing as indicated by you in earlier statement at the time of survey as well as above answer to Q. 5.

Ans. Yes, however these four parties are not introduced by Mr.

Sanjay Saxena.

Q. 23 Do you say that there is influence for taking your statement today Ans. As stated above I had collected the delivery of diamond from these parties addresses.

Q. 26 Whether you are assessed under Sales-tax Act and filed the return Whether the above transactions are disclosed in your sales-tax return or not Ans. I am duly registered under BST and CST Act and filed my all returns and above transactions are duly disclosed in my sales-tax returns. Copy of the sales-tax papers will be produced before you within a week.

Q. 27 When statement on survey you have correctly mentioned your bank account and today also you have correctly mentioned bank account. How do you say that your statement was taken at that time under influence Ans. Statement recorded after survey was under influence as per my answer to Q. No. 21.

22. As regards the statement given by VDT on 31st March, 2000, it seems that the statement was given under the state of duress and under the fear of IT authorities as would be evident from his affirmation when he again appeared before the AO on 25th Oct., 2002 and re-confirmed the impugned transaction to be genuine as also payment of the money through account payee cheque. In these circumstances it is evident that the nature and source of the amount found credited in the books stood explained and therefore, the AO was not justified in making the addition.

23. The transaction of sale with the assessee was recorded in books of account of VDT which were written upto 31st March, 1999, produced on the date of survey and remained with the Department.

24. Sales bills were also issued by VDT for the sale on 20th Jan., 1998 and were produced with the Department.

25. The income based on the books of account of VDT was accepted in his case under IT Act which included the said transaction.

26. Similarly VDT being the registered dealer under BST and CST Act had filed the returns under those Acts duly disclosing the said transaction with the assessee much before the date of survey.

27. The observation of the CIT(A) that since VDT was denying the explanation given at the time of survey, it was upon him to explain the cash deposits in his bank accounts and the lack of closing stock is not convincing. The assessee had received the payment by account payee cheque from VDT and it was Department's case that the cash might have been given by the assessee and deposited in the bank account of Ratnakar/Dhananjay which was the ultimate source of the payment of cheque. CIT(A) therefore cannot be said to be right in concluding that the statement given at the time of survey remained. The two statements are conflicting and as to for which statement he says remained is not known. It would be more logical, if they were so for the first statement given on 30th March, 2000 which is confirmed by him vide letter dt 4th April, 2000 and his affidavit thereafter and also on oath when he appeared before the AO under Section 131 on 25th Oct., 2002.

28. The fact that the letter dt. 4th April, 2000 retracting his statement was not given on oath is of no consequence as it is supporting to earlier statements dt. 30th March, 2000 and as affirmed in the statement recorded under Section 131 subsequently on 25th Oct., 2002 though we agree that between these contradictory statements, those made under oath will have greater value. It is a fact that VDT has retracted his statement given on 31st March, 2000. The fact that it is without offering any explanation as to the large cash deposits and the absence of stock has nothing to do with that, because it is the Department who claims that the money had been given by the assessee.

29. The fact that in the subsequent statement on oath recorded by the AO, VDT claiming that while he knew Saxena, the transactions entered into by him with the assessee were not through him but through family friends whose names he did not remember, cannot raise doubt as to the genuineness of the transaction with the assessee of purchase of diamonds worth Rs. 10,35,562 or that it was covered by the transaction to which reference was made as Hawala transaction in the statement given to the IT Department. The acknowledgement of Saxena as a business associate and then to de-link the present transaction from those transactions does not show any contradiction in the statement, later being supplementary one.

30. The claim of the assessee that VDT was in fact the witness of the Department cannot be accepted as it is the Department who is relying upon his statement to allege that what is apparent is not real and therefore the onus of proof remains with the Department and does not shift to the assessee.

31. It is true that at the time of survey it was not the case of VDT that he was doing some part of his business as genuine and only some part of the business was on paper for facilitating the VDIS declarants but the fact remains that he affirmed the transaction as genuine insofar as the assessee is concerned throughout.

32. Large amounts of cash deposited in various bank accounts of Dhananjay Diamonds on various dates by Ratnakar, but there is no evidence on record to establish that those were deposited by or from the money received from the assessee to whom subsequently cheques were issued. Looking to the totality of the circumstances, there is no nexus between the cash deposited and the cheque drawn. It may be true that the facts remained uncontroverted that out of the funds so transferred from one bank account to another the payment to the assessee has been made but how the assessee is responsible for that. Nothing is on record that money was given by the assessee.

33. The diamonds were declared by the assessee under VDIS, they were sold to Dhananjay. Payment was received by account payee cheques. In these circumstances how it can be a cash credit the source of which could be said to be unexplained. The person who paid it is identified, he confirmed it, the source of payment is the bank account of the payer, it is stated to be consideration for sale of diamond, there is no material on record that source of that money is the assessee or it was given for any services rendered by him, or the source of income thereof was that of the assessee. In these circumstances it cannot be said to be the income of the assessee by any circumstance much less under the deeming provisions of Section 68 of the Act as applied by the Revenue authorities. In my opinion the source is satisfactorily explained by the assessee.

34. The assessee had filed a copy of the certificate issued by the CIT, Mumbai under Section 68(2) along with valuation report. The contention that nature and source of acquisition of diamonds in question cannot be enquired into in view of the provisions of the VDIS, is supported by the Special Bench decision in the case of Asstt. CIT v. Surya Kanta Dalmia (2006) 99 TTJ (Cal)(SB) 1. In that (case) also under the Voluntary Disclosure Scheme, 1997, the assessee made disclosure of undisclosed income which was represented by diamonds, silver utensils, gold bars, etc. The said voluntary disclosure was duly accepted and a certificate relating to the same was issued. The assets declared under VDIS, 1997, had been sold in relevant assessment year and such sale proceeds had been credited in the books. As regards the sale of silver utensils, the AO made enquiries with the valuer, who issued valuation report for the said utensils; the transporters, who issued consignment notes for transportation of the same from Calcutta to Delhi; the jewellers of Delhi who purchased the said goods. On the basis of the said enquiries, the AO came to the conclusion that the alleged sale proceeds of silver utensils was nothing but unexplained cash credit in the assessee's hands and added the said amount in his hands (as) income from other sources. On appeal, the CIT(A) deleted the impugned addition and, thus, allowed the assessee's appeal. On Revenue's appeal, the Special Bench held: There was no dispute that the assessee had made a disclosure under VDIS, 1997, which was accepted by the CIT vide certificate issued under Section 68(2) of the VDIS, 1997. Vide Circular No. 754, dt.

10th June, 1997 [(1997) 140 CTR (St) 15 : (1997) 226 ITR (St) 8} it was clarified by the CBDT that in respect of jewellery if it was acquired prior to 1st April, 1987, the value would be taken as on 1st April, 1987, as certified by valuer. Accordingly, the assessee got the valuation of jewellery from the registered valuer and filed the valuation report along with the VDIS declaration. The CIT after verifying the same had issued the certificate under Section 68(2) of the VDIS, 1997. Despite the fact that the CIT had issued certificate under Section 68(2) of the VDIS, 1997 on the basis of the disclosure made by the assessee supported by valuers certificate, the AO had made enquiry from the registered valuer about the valuation done by him and observed that the conduct of the valuer showed that he had given bogus valuation report in respect of silver utensils without actually examining said silver articles. Under the VDIS, it had been provided that such disclosure, when accepted, would offer complete immunity to the declarant in respect of the income so disclosed. In the absence of any material to show that such certificate had been cancelled or withdrawn or amended by the CIT under the VDIS, 1997, the AO had grossly erred in holding that such silver utensils allegedly sold never existed. Such finding of the AO was beyond his jurisdiction and against the scheme of the VDIS, 1997. Even otherwise the finding of the AO that valuer did not issue valuation report after physically seeing the entire silver utensils, was not sustainable in view of the remand report of the AO.35. It is true that in that case the AO had given the remand report after examining the matter afresh in detail and nothing adverse was found against the assessee but here in this case before AO itself VDT appeared and explained everything to be genuine Therefore nothing much turns on this fact by itself.

36. In that also the valuer and transporters after giving the statements had retracted their statements through affidavits and had furnished necessary supporting evidence in support of their fresh statements/affidavits which was not found to be false by the Revenue at any stage, the AO was held grossly erred in not accepting the retraction and statements of other persons made during the course of assessment proceedings. Here also retraction is based on the books of account, copies of sale bill, disclosure of transaction in income-tax and sales-tax proceedings and therefore cannot be brushed aside.

37. Since the addition had been made as unexplained cash credit, the case was examined in the light of the provisions of Section 68. Under Section 68, if the explanation with regard to nature and source of deposit is found unsatisfactory, only then the amount so credited may be added as income. The Revenue had failed to substantiate its claim and there was no direct evidence to show that the jewellers of Delhi had given accommodation entries to the assessee. Here also there is no evidence of any hawala accommodation.

38. The fact that VDT admitted that his son Rohit VDT was the proprietor of Ratnakar Diamonds and that he had no experience of the diamonds trade and the business was handled by him and his son was nowhere connected with Ratnakar Diamonds personally is not a determinative factor of the issue that the transaction by the assessee with VDT or Dhananjay was not genuine.

39. In view of the conflicting statements of VDT, and the absence of any material on record justifying the alleged hawala in one of his statement contrary to his first statement on the day of survey itself accepting the transaction to be true even the validity of reopening cannot be upheld.40. Certain decisions have been cited at the time of hearing which supports the case of the assessee. These arc discussed hereunder in subsequent paragraphs.

(i) In Dy. CIT v. Rohini Builders (supra) Gujarat High Court observed : "The phraseology of Section 68 is clear The legislature has laid down that in the absence of a satisfactory explanation, the unexplained cash credit may be charged to income-tax as the income of the assessee of that previous year. In this case the legislative mandate is not in terms of the words 'shall be charged to income-tax as the income of the assessee of that previous year'. The Supreme Court while interpreting similar phraseology used in Section 69 has held that in creating the legal fiction the phraseology employs the word 'may' and not, 'shall'. Thus the unsatisfactoriness of the explanation does not and need not automatically result in deeming the amount credited in the books as the income of the assessee as held by the Supreme Court in the case of CIT v. Smt. P.K. Noorjahan (1999) 155 CTR (SC) 509 : (1999) 23 ITR 570 (SC).

(ii) Again in Pragati Co-op. Bank Ltd. (supra) Gujarat High Court held: ...it was apparent that the assessee had furnished the details which would discharge the onus which lay on the assessee considering the fact that the deposits were made by third parties, viz., customers of the bank. It was nobody's case that the deposits were made either by the directors of the assessee-bank or any of the relatives of the directors. The activities of the assessee-bank were regulated by the provisions of the Banking Regulation Act, 1949, and the guidelines issued by the RBI. This was apart from the fact that under the provisions of Section 80P of the Act the entire income from banking activities is exempt in the hands of the assessee, a co-operative bank. Thus there could exist no reason for the assessee-bank to indulge in any activity which would yield undisclosed income. The Tribunal was right in deleting the addition of Rs. 1,80,95,811 in respect of fixed deposits and Rs. 2,17,71,500 in respect of the interest.

(iii) In the case of Addl. CIT v. Miss Lata Mangeshkar (supra) the Tribunal examined the statements made by the two persons and found that the evidence tendered by them suffered from serious infirmities. It held that mere entry in the accounts regarding payments to the assessee was not sufficient as there was no guarantee that the entries were genuine. The Tribunal, therefore, held that there was no proof that the amounts in question represented income from undisclosed sources belonging to the assessee. The High Court upheld the finding of the Tribunal and held- that the conclusion of the Tribunal had been reached by it on a proper appreciation of the evidence. This was a finding of fact by the Tribunal and no question of law arose and no reference would lie from the decision of the Tribunal.In CIT v. Orissa Corporation (P) Ltd. (supra) the Supreme Court held : "that in this case the respondent had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessees. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notices under Section 131 at the instance of the respondent, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the respondent could not do anything further. In the premises, if the Tribunal came to the conclusion that the respondent had discharged the burden that lay on it, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence." (v) The contention of the assessee based on the Third Member decision in Dy. CIT v. Mangalam Cement Ltd. (supra) that : "Principle of consistency is applicable to income-tax proceedings; even otherwise a decision of a Coordinate Bench of same strength is required to be accepted by Bench of same strength." cannot be found fault with but it is equally true that when the facts are not at par or the earlier decision is per incurium a contrary decision in accordance with law can be taken.CIT v. Smt. P.K. Noorjahan (supra) by taking into account the circumstances in which the assessee was placed the investments could not be treated as income of the assessee.Pullangode Rubber Produce Co. Lid. v. State of Kerala and Anr. (supra) it is open to the assessee who made the admission to show that it is incorrect and the assessee should be given a proper opportunity to show that the books of account do not disclose the correct state of facts.

(viii) Again the Supreme Court decision in Kishinchand Chellaram v. CIT (supra) the burden is on the Department to show that the money belonged to the assessee by bringing proper evidence on record and the assessee could not be expected to put in the evidence to help the Department to discharge the burden that lay upon it. That there was no evidence on the basis of which it could come to the finding that the sum credited in capital account of the assessee represented the undisclosed income of the assessee.

41. Certain decisions were cited by the learned Departmental Representative which according to (him) support the case of the Revenue. These are discussed hereunder: (a) In Mahesh B. Shah (supra) the Kerala High Court observed that the assessee has agreed to treat the expenditure as a capital expenditure both before the Asstt. CIT as well as before revisional authority. No evidence or material is furnished to show that the assessee was coerced to make a statement. On the contrary the Court stated that nothing prevented the assessee to retract the same. The allegation of compulsion or coercion was not accepted on mere statement. It is held too late on this day to claim of any compulsion. The stand taken by the assessee was held nothing but an afterthought, self-serving and had been made to suit the convenience. The assessee himself has signed the statement on 13th March, 1995 and therefore, it was held not permissible to allow the assessee to go back on his own stand before the Departmental authorities below.

(b) In the case of Romesh R. Patel (supra) the Tribunal held that "it is true that an assessee has a right to retract but that has to be based on evidence brought on record to the contrary and there must be justifiable reason and material accepting retraction. The cogent and sufficient material has to be placed on record for acceptance or retraction. It is not a case of pressure or coercion having been applied against the assessee. It was a statement in the presence of two witnesses and not an extraction from the assessee." (c) In ITO v. Ashok Kumar (supra) the Chandigarh Bench of the Tribunal held that the assessee has also not given any reason as to why the lady ADI forced him to make a surrender of Rs. 5 lakhs. It was also found to be not a case where immediately at the beginning of a survey, the assessee was forced to make a surrender of Rs. 5 lakhs whereas, on the other hand, when the survey party cornered the assessee regarding unrecorded purchases on the basis of papers seized from the premises, he came out with a disclosure. It was also felt important to note that the ADI concluded the operation immediately after the surrender made by the assessee and even did not make identification marks on the ledger produced by the assessee and that was taken to mean that after the assessee made disclosure, the survey team stopped further survey operations and that the assessee was indirectly benefited from this disclosure because the survey team, thereafter, was deprived from detecting further unrecorded transactions by the assessee.

(d) In Ramesh T. Salve (supra) the Mumbai Bench of the Tribunal observed that "There is nothing in support of the plea that the assessee had given the statement under coercion or threat. The statement giving details of various items of expenses does not give the impression of a statement given by a person in a confused state of mind. It took nearly one month for the assessee to make the plea for the first time that the earlier statements given by him on 7th Sept., 1990, at the time of the search were not correct statements.

It is difficult to believe that only after the assessee received the legal advice that he came to realise his mistake and that as soon as he received the advice he gave the letter to withdraw the earlier statements, It may be noted that there were two statements given by him under oath on 7th Sept., 1990. It cannot be said that his solemn affirmations had no evidentiary value. The admission by the assessee is definitely a substantive evidence. There is no need for corroborative evidence, in view of the evidentiary value the statement of that person is bestowed with under Section 132(4)." (e) In Ramjas Nawal (supra) the Rajasthan High Court held that "if statements are given under threat or duress, the assessee can retract from his statements given under threat or duress during search. But the material on fact shows otherwise. When the statements were taken, the assessee has admitted that he is disclosing undisclosed income at his free will and without any threat. Not only that when the assessee retracted from his statements given during search the ITO has given the specific finding that during the course of search, the search party has given opportunity to submit any documentary evidence whether he has genuine income from SP." (f) In Amritlal B. Soni (supra) the Ahmedabad Bench of the Tribunal observed that "It is well settled in law that admission by a party is the best evidence of a point in issue and though not conclusive, is decisive of the matter unless successfully withdrawn or proved erroneous. What is admitted by a party to be true must be presumed to be true unless a contrary is shown." (g) In Dr. S.C. Gupta (supra) the Allahabad High Court held that "The mere fact that the assessee retracted the statement could not make the statement unacceptable. The burden lay on the assessee to establish that the admission made in the statement at the time of survey was wrong and in fact there was no additional income." (h) In Smt. Vasanti Sethi (supra) the Delhi Bench of the Tribunal observed that "Initial admission of ownership is an evidence in proceedings for assessment-subsequent retraction cannot be called a statement made during such examination". This case helps the assessee as initial statement of VDT was in fact supporting the transaction with his three other statements as against the one and that too the influenced statement in the office of the AO. (i) In K.P. Dans (supra) the Cochin Bench of the Tribunal held following the decision of the Supreme Court in the case of Mehta Parikh & Co. v. CIT (1956) 30 ITR 181 (SC), held as under: The assertions in the affidavit are as vague as vagueness can be. It is unsupported by any material on record, An affidavit is certainly entitled to utmost consideration but if it contained only bare assertions without even citing the nature of the transaction or purpose for which the impugned amounts were made available with the appellant, and if the assertions are not supported by any material on record, the affidavit is not worth the paper on which it is written.

(j) In Amal Kumar Chakraborty (supra) the Calcutta High Court held that "The mere ipse dixit of the assessee or of counsel cannot be taken as a fact." (k) In Hiralal Maganlal & Co. (supra) observed that "We are aware of the principle laid down in several cases that the Evidence Act does not apply to proceedings under the IT Act and further that the artificial or technical rules of evidence are not applicable to income-tax proceedings. This aspect of the matter has received careful consideration of the Hon'ble Supreme Court in Chuharmal v. CIT . The Hon'ble Court has held that what is meant by saying that the Evidence Act does not apply to income-tax proceedings under the IT Act is that the rigour of the rules of evidence contained in the Evidence Act is not applicable but that does not mean that when the taxing authorities are desirous of invoking the principles of the Evidence Act in proceedings before them, they are prevented from doing so. Besides, Section 115 of the Evidence Act incorporates a salutary principle of common law based on the maxim allegans contraria non est audiendns (a person alleging contradictory facts should not be heard) and hence the said principle is fully applicable to proceedings under the IT Act. The provisions of Section 115 of the Evidence Act provide statutory recognition to the said principle which is otherwise also applicable to all the judicial and quasi-judicial proceedings. The underlying philosophy behind the said principle being to ensure, in the words of Sir Wade in his Administrative Law (supra), that justice prevails over truth....

25. In our view, the retraction sought to be made by the assessee several months after making the declaration under Section 132(4) was nothing but a well planned device to frustrate the efforts of the Department to unearth unaccounted income. The attempt of the assessee to retract from the said declaration is not only against the well-settled principles of common law and against the letter and sprit of Section 115 of the Evidence Act but also against the principles of equity, justice and good conscience. The declaration made by Shri Prataprai Sanghvi under Section 132(4) clearly fell under Section 115 of the Evidence Act and hence it was not open to the assessee to retract from the said declaration after the Departmental authorities had accepted the same and altered their position by closing the search. Further, declarations falling under Section 115 of the Evidence Act do not require any corroboration.

Retraction from declaration or acts under Section 115 of the Evidence Act is also not possible at all. The retraction filed by the assessee in the case before us is hit by Section 115 and hence the AO was justified in rejecting the same. We see no infirmity in his action.

42. In the present case the assessee himself (has) given a statement of genuine business transaction initially and three more times thereafter by way of letter, affidavit and a subsequent statement under Section 131 explaining the circumstance for giving a contrary statement on 31st March, 2000. Therefore, these cases do not support the case of the Department. The transaction is recorded in the books of VDT which were all through, with the Department much before the survey in the case of VDT. The assessee has given the reasons and in any case the statement dt. 31st March, 2000 was not specific to the transaction with the assessee and transaction with the assessee was stated to be true in subsequent statements and supported by books and bills issued for the sale of diamonds. Here the contradictory statements are all sworn statements and therefore the statement which accords with the other facts on record like existence of diamond as declared and accepted under VDIS, bills of sales, entries in books, payment by account payee cheque should be accepted. In Smt. Gunwantibai Ratilal (supra) the Madhya Pradesh High Court observed that "If the veracity of statements in the affidavits was, according to the Tribunal, disproved by the material on record, the finding of the Tribunal cannot be said to be vitiated merely because the Tribunal arrived at its finding by not placing reliance on the affidavits." 43. The case of Chiranji Lal Steel Rolling Mills v. OFF (supra) observed that "the ITO has power to collect evidence from any source but it is his duty to put it to the assessee before making it the basis of his assessment. If the assessee denies the information collected by the ITO, it is the duty of the ITO to satisfy himself by making independent enquiry from sources considered reliable by him and decide whether the information passed on to him is true or not. If as a result of his own independent enquiry he comes to the conclusion that the information received by him is true, he is at liberty to act thereon after disclosing it to the assessee and affording him a reasonable opportunity of rebutting it. The copy of entries from the accounts of another firm supplied to the ITO by the Sales-tax Department was held not legal and admissible evidence on which the ITO could act for imposing extra burden of income-tax on the assessee when the original accounts were missing and could not be verified and when the assessee denied the entries therein." 44. GTC Industries Ltd. v. Asstt. CIT (supra) deals with certain aspects of making available the material collected and used against the assessee. In that case the assessee's request was that nothing really much turns in this case on the observations in that case --(a) Statement of witnesses, copies of which were not even given to the appellant prior to the passing of the assessment order; (b) In fact, some of the statements relied upon by the Department have not been furnished even as of now; (c) Statement of witnesses which were not offered for cross-examination though asked for by the appellant; (d) Materials which were not intimated to the appellant prior to passing of the assessment order but copiously used in support of the conclusion reached in the order. In fact, some of these materials have not, been communicated to the appellant till this date; (e) Where the cross-examination asked for is meaningless, as for example, where the assessee does not dispute the fact deposed to by the witness.

45. The Tribunal observed ; "It is true that the Department must disclose every information to the petitioner in which the Department intend to rely in the Departmental proceedings. If the copies of the letters containing the price offered were handed over to the petitioner with a slip pasted on the name of the intended importer. From this material, it was for the petitioners to establish that the value quoted in these quotations was not the proper value and in case the Department is compelled to give the name or to produce such intending importers for cross-examination in Departmental proceedings, it will well nigh be impossible to gather any material in future. Therefore, it cannot be said that there was violation of natural justice specially when the name of the exporter sending the quotations was disclosed to the petitioner." 46. Though the two rules of natural justice, namely, nemo judex in causa sua and audi alteram partem, have now a definite meaning and connotation in law and their content and implications are well understood and firmly established, they are nonetheless not statutory rules. Each of these rules yields to and changes with the exigencies of different situations. They do not apply in the same manner to situations which are not alike. These rules are not cast in a rigid mould nor can they be put in a legal strait-jacket. They are not immutable but flexible. These rules can be adapted and modified by statutes and statutory rules and also by the constitution of the Tribunal which has to decide a particular matter and the rules by which such Tribunal is governed. There is no difference in this respect between the law in England and in India. It is unnecessary to refer to various English decisions which have held so. What particular rule of natural justice should apply to a given case must depend to a great extent on the facts and circumstances of that case, the framework of the law under which the enquiry is held and the constitution of the Tribunal or body of persons appointed for that purpose. Whenever a complaint is made before a Court that some principle of natural justice had been contravened the Court has to decide whether the observance of that rule was necessary for a just decision on the facts of that case.Union of India and Anr. v. Tulsiram Patel and Satellite Engineering Ltd. v. Union of India and Ors. before the Bombay High Court is also a case of opportunity and nothing much turns on this case as well.

48. On these facts and circumstances of this case in my opinion therefore the appeal of the assessee is to be allowed.