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Income Tax Appellate Tribunal, DELHI BENCHES “G”: NEW DELHI
Before: SHRI R.K.PANDA & MS. SUCHITRA KAMBLE
PER SUCHITRA KAMBLE, J.M. This appeal is filed by the Revenue against the order dated 02.12.2011 passed by the CIT(A)-XXII, New Delhi for the A.Y. 2003-04.
The grounds of appeal are as follows:
1. Whether on the facts and circumstances of the case the Ld. CIT(A) has erred in quashing of notice issued u/s 148 of the Income-tax Act, 1961 by the assessing officer on the basis of information received from the DRI, Mumbai.
2. Whether on the facts and circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs.1 crore made by the assessing officer on the basis of the statements made by him before the DRI. 3. Whether on the facts and circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs.5,00,000/-. 4. The appellant craves leave to amend or alter all or any of the aforesaid grounds of appeal.”
ITA 850/Del/2012 A.Y.:2003-04 ITO Vs. Sh.Sajjan Kumar Goel
The assessee is a general commission agent and has shown income under the heads Salary (remuneration from Pvt. Ltd. co.), business, capital gains and other sources. Original return of income was filed on 5/9/2003 declaring an income of Rs.1,73,980/-. Subsequently, information was received from Directorate of Revenue Intelligence, Mumbai vide letter dated 10.06.2009 intimating that assessee had financed a sum of Rs.1 crores in cash in the imports made by one Mr. Shri Bhagwan Tulsian R/o of Faridabad in the name of a non-existent firm M/s Lord Empire International. A perusal of financial statements i.e. capital account and balance sheet of the assessee as on 31.03.2002 and 31.03.2003 as per Assessing Officer revealed that no such investment of Rs. 1 crore was recorded and therefore, the Assessing Officer on the basis of this information initiated proceedings u/s 147 of the I.T Act and issued notice u/s 148 of the I.T Act on 29/3/2010. In response to the said notice, assessee vide letter dated 16.04.2010 filed reply and stated that return filed on 05.09.2003 may be treated as having been filed in response to notice u/s 148 of the Act. Notice u/s 143(2) and 142(1) along with detailed questionnaire was issued and served on the assessee. The Chartered Accountant/Authorised Representative attended from time to time and details were filed before the Assessing Officer. The Assessing Officer recorded that the assessee himself had admitted that he financed an amount of over Rs. 1 crore in cash in respect of imports made by one Mr. Shri Bhagwan Tulsian under the name of a non-existent firm, M/s. Lord Empire International. Out of this amount of Rs. 1 crore, Rs. 8,00,000/- was received by the assessee in the year 2007 and remaining amount of Rs. 20,00,000/- of principal amount plus profits were received by the assessee on the later date as per the Assessing Officer. In reply the assessee denied of having financed any amount of Rs. 1 crore and stated that his name had been taken for the above transaction by one, Mr. Shri Bhagwan Tulsian presumably for the reason that he had failed to arrange finances for him in an earlier year. The assessee also furnished evidence of the retraction of his statement before D.R.I. office given before the competent court. On the basis
ITA 850/Del/2012 A.Y.:2003-04 ITO Vs. Sh.Sajjan Kumar Goel of this statement he was asked to produce Shri Bhagwan Tulsian. But inspite of various opportunities given including summons u/s 131 issued by the Assessing Officer, the complainant i.e. Mr. Shri Bhagwan Tulsian was not produced. No evidence of the identity of Mr. Shri Bhagwan Tulsian confirming that he is the same person who has given the statement or the person was placed before the Assessing Officer. On 11.12.2010, a letter received by the Assessing Officer of Shri Jitendra Tulsian s/o Shri Bhagwan Tulsian stating that Shri Bhagwan Tulsian i.e. his father is still suffering from spinal back pain and could not attend the proceedings. Alongwith the medical certificate of Shri Bhagwan Tulsian, the statement of Shri Bhagwan Tulsian denying that the assessee has made any investment was attached. In the Assessment Order, the Assessing Officer made an addition of Rs.1 crore on account of import financed by the assessee and Rs 5,00,000/- was added on account of profit earned on such financing by recording the following reasons:
“6.3 The above mentioned facts clearly indicate that inspite of assessee’s denial during the course of assessment proceedings here, it is found that he continued to accept his role in financing a sum of Rs.1 crore in the statement recorded with the permission of the hon’ble Court in Mumbai Central Jail n the presence of the Jailor wherein he confirmed of having financing a sum of Rs. 1 crore. It is important to note that he never retracted from his this statement which was recorded before the Jailor and never denied of having not signed or given before the competent authorities. Hence the role of the assessee in having financed the sum of Rs. 1 crore cannot be denied and the above amount is added to the income of the assessee on the following grounds:-
(i) The case filed by the Directorate of Revenue Intelligence (MZU), Mumbai before the Court is still continuing and there is no final verdict (as per the information provided by the Directorate vide its letter dated 22.12.2010 (supra);
ITA 850/Del/2012 A.Y.:2003-04 ITO Vs. Sh.Sajjan Kumar Goel
(ii) The assessee has himself admitted in the presence of the jailor of having conducted the act and has not filed any rebuttal to his final statement before any court; (iii) Mr. Shri Bhagwan Tulsian, as per the annexure provided by the Directorate of Revenue Intelligence (MZU), Mumbai, has never retracted from his statement to the effect that the assessee had financed Rupees One Crore for the imports in the Shri Bhagwan Tulsian to substantiate and to bring out the correct facts indicates a hidden story behind the scene. Neither the assessee nor Mr. Tulsian, the alleged informer, has produced any evidence of the rebuttal of his statement recorded before the DRI(MZU), Mumbai naming the assessee as the alleged financier of Rs. One Crore. Such a dual standard to mislead the various Government Departments and to defraud the Government by illegal practices is not acceptable in the eyes of Law.
Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) allowed the appeal of the assessee by deleting the addition. The CIT (A) also quashed the reassessment proceedings. The CIT(A) while quashing the notice issued u/s 148 after passing a well speaking order, remarked that the belief formed by the Assessing Officer was not bonafide and was based on vague, irrelevant and nonspecific information and there was no nexus between the material on record and the reasons to believe. On merit, the CIT(A) held that the entire theory of the financing of Rs. 1 Crore was based on the statements made before the DRI on 05.04.2008 & 6/4/2008 which was subsequently retracted by the assessee. The CIT(A) also held that there is no independent evidence in the form of documents or other party statement which could conclusively establish that the said transaction was entered into by the assessee.
Aggrieved with such order of the CIT(A) the Revenue is in appeal before the Tribunal.
The Ld. DR submitted that quashing of Section 148 notice by the ITA 850/Del/2012 A.Y.:2003-04 ITO Vs. Sh.Sajjan Kumar Goel CIT(A) was not just and proper as the Assessing Officer issued the said notice on the basis of information received from the DRI, Mumbai. The Ld. DR further submitted that the CIT(A) totally ignored the statements made by the assessee before the DRI on basis of which the addition of Rs. 1 crore was made by the Assessing Officer. The Ld. DR further submitted that the CIT(A) also erred in deleting the addition of Rs. 5,00,000/- on account profit earned on financing. The Ld. DR submitted that M/s Lord Empire International had imported goods through JNPT. Investigations by DRI revealed that the said firm was floated by Shri. Surender Aggarwal along with Shri. Bhagwan Tulsian alias S.K.Gupta and Shri. Suresh Khandelwal. The said firm had applied to the Joint Director, DGFT, Mumbai for obtaining advance licence under DEEC scheme on the basis of fake, fabricated and mis-declared documents. Shri Bhagwan Tulsian stated that scrap imports were financed by Shri Sajjan Kumar Goel and Shri. Rajesh Dua. Shri Sajjan Kumar Goel, in his statements recorded on 05.04.2008 and 06.04.2008 admitted that he was a broker and used to arrange finance for private business for which he would get 0.6% to 1% brokerage mostly in cash and sometimes by cheques. He gave a loan of Rs. 1 cr in cash in 2002 to Shri Bhagwan Tulsian for import activities of M/s Lord Empire International. Shri Tulsian had also taken him to Mumbai for this purpose. Shri Sajjan Kumar Goel filed a retraction letter dated 17.04.2008 of the statements made on 5th & 6th April, 2008 which was received by the CMM Court on 2nd May, 2008. However, the Ld. DR pointed out that the statements of Shri Sajjan Kumar Goel dated 5th & 6th April. 2008 were in his own handwriting. Moreover, statements dated 09.04.2008 & 04.05.2009 have not been retracted by him. Shri Bhagwat Singh, in his statement recorded on 26.04.2008, stated that he knew Shri Sajjan Kumar Goel and identified his photograph. He confirmed that he had met Shri Sajjan Kumar Goel several times at various hotels in Mumbai. Shri Sandeep Kumar Singh, in his statement recorded on 06.05.2008, confirmed his meeting with Shri Sajjan Kumar Goel in connection with clearance of M/s Lord Empire International. Shri Suresh Khandelwal, in his statement recorded on 03.04.2009, admitted that ITA 850/Del/2012 A.Y.:2003-04 ITO Vs. Sh.Sajjan Kumar Goel imports of M/s Lord Empire International were done by Shri Sajjan Kumar Goel and Shri Bhagwan Tulisan. Shri Bhimsen Bhagwat Singh, in his statement recorded on 09.05.2009, confirmed role of Shri Sajjan Kumar Goel. The Ld. DR submitted that Shri Suresh Khandelwal, in his statement recorded on 24.04.2009, confirmed that Shri Sajjan Kumar Goel was the main brain behind the fraud perpetuated through DEEC imports of M/s Lord Empire International. The Ld. DR further submitted that Shri Gulbir Singh Anand, in his statement recorded on 23.04.2009, stated that Shri Sajjan Kumar Goel used to coordinate with him regularly on telephone and used to take delivery of goods at Delhi and make payments to the drivers. The Ld. DR submitted that the CESTAT Mumbai, vide its order dated 08.02.2013 in the case of Shri Sajjan Kumar Goel and Ors. Vs. Commissioner of Customs has held that customs duty sought to be evaded is quite huge of the order of Rs. 3.23 crore and the fraud on the exchequer has been perpetrated in a systematic and well planned manner. Penalty of Rs. 3 crore was imposed on Shri Sajjan Kumar Goel by the CESTAT, Mumbai.
The Ld. DR relied upon the following decisions with regard to reopening of cases u/s 147 of Income Tax Act and regarding the validity of statement recorded during search & survey proceedings:
• PCIT Vs Paramount Communication (P.) Ltd. (2017-TIOL-253-SC-IT) . • PCIT Vs Paramount Communication (P.) Ltd. f20171 79 taxmann.com 409 (Delhi)/2017/392 ITR 444 (Delhi). • Indu Lata Rangwala Vs PCIT 2017180taxmann.com102(Delhi)/r20161 384 ITR 337 (Delhi)/20161 286 CTR 474 (Delhi). • Yoqendrakumar Gupta Vs ITO (51 taxmann.com 383) (SC)/20141 227 Taxman 374 (SC). • Raymond Woollen Mills Ltd. v. ITO And Others T236 ITR 341. • ACIT Vs Raiesh Jhaveri Stock Brokers (P.) Ltd [2007]161 Taxman 316 (SC)/2007] 291 ITR 500 (SC)/r20071 210 CTR 30 (SC). • Yuvraj v. Union of India 315 ITR 841 (SC). • Ankit Financial Services Ltd. Vs DCIT T20171 78 taxmann.com 58 (Gujarat). • Kishore Kumar Vs CIT (62 taxmann.com 215. 234 Taxman 771). • Kishore Kumar Vs CIT (52 taxmann.com 449) Madras High Court Page 6 of 21
ITA 850/Del/2012 A.Y.:2003-04 ITO Vs. Sh.Sajjan Kumar Goel confirmed. • Bhaqirath Aqqarwal Vs CIT (31 taxmann.com 274, 215 Taxman 229, 351 ITR 143) • Smt Dayawanti Vs CIT f20161 75 taxmann.com 308 (Delhi)/[2017] 245 Taxman 293 (Delhi)/r20171 390 ITR 496 (Delhi)/r20161 290 CTR 361 (Delhi). • M/s Pebble Investment and Finance Ltd Vs ITO (2017-TIQL-238- SC-IT). • M/s Pebble Investment and Finance Ltd Vs ITO (2017-TIOL-188-HC- MUM-IT) Bombay High Court confirmed. • Rai Hans Towers (P.) Ltd. Vs CIT (56 taxmann.com 67. 230 Taxman 567. 373 ITR 9). • PCIT Vs Avinash Kumar Setia T20171 81 taxmann.com 476 (Delhi). • Order of CESTAT dated 08.02.2013 in the case of Sajjan Kumar Goel and Ors. Vs. Commissioner of Customs.
The Ld. AR submitted that the assessee filed return of income declaring total income of Rs. 1,73,980/-. The same was assessed u/s 143(1) on 27.10.2003 at an income of Rs. 1,73,980/-. Thereafter, assessment in the case of the assessee was re-opened u/s 147 vide notice dtd. 29.3.2010 by recording reasons on the basis of information received from Directorate of Revenue Intelligence vide letter F.No. DRI/BZU/F/7/06/5087, Mumbai alleging that assessee in his statement recorded by them admitted that in financial year 2002-03 assessee had financed a sum of Rs. 1,00,00,000/- in the imports made by one Mr. Bhagwan Tulsian in the name of a nonexistent firm M/s Lord Empire International. Thereafter, assessee filed his return in compliance to notice under section 148 and submitted all the details as & when required by the Assessing Officer. In the reasons recorded, the Assessing Officer had referred to a statement of the assessee mentioning thereby the words “in his statement”. However, the Assessing Officer has not attached any statement of the assessee to the reasons recorded or to the aforesaid form for approval. Even the same was not provided to the assessee during the assessment proceedings. This shows that even the Assessing Officer was not in the possession of these statements at the time of recording of reasons and reopening of the matter. The Assessee Page 7 of 21
ITA 850/Del/2012 A.Y.:2003-04 ITO Vs. Sh.Sajjan Kumar Goel has during the entire assessment proceeding contended that he has not made any payment to such person named in the reasons recorded by the Assessing Officer. However, the Assessing Officer without having any concrete evidence against the assessee made the addition only on the basis of information received from the DRI. The Assessing Officer then proceeded to make the following additions : i. On account of import financed by the assessee - Rs. 1,00,00,000/- ii. On account of profit earned on such financing - Rs. 5,00,000/-
Against the order of the Assessing Officer, the assessee went into appeal before the CIT(A) and the CIT(A) passed a well reasoned and speaking order adjudicating upon both the legal issues and merits of the case. The CIT(A) while passing the order rightly observed that the proceedings u/s 147 were unlawful to the extent that the Assessing Officer neither attached the letter of DRI dated 10.06.2009 nor any statement of the assessee to support the reasons recorded. Further the content of such information and statement of the assessee have neither been reproduced in the reasons recorded nor made a part of the reasons. The CIT(A) remarked that the Assessing Officer did not even mention in the reasons recorded whether the aforesaid letter received by him was accompanied by the statement of the assessee recorded by the DRI. It was also appreciated by the CIT(A) that the assessee in the statements which were mentioned above nowhere admitted that he had financed Rs. 1 Crore in the FY 2002-03. In the statements recorded on 05.04.2008 and again on 06.04.2008 the assessee only mentioned of meeting Mr. Tulsian in the year 2002 and thus can be seen that from the statements. There is no concrete proof of the date of either the meeting or the so called arrangement of funds. Further statements recorded on 09.04.2008, 1/5/2008 and 04.5.2009 nowhere mentioned that money was arranged by the assessee in F.Y. 2002-03. Thus, the CIT(A) rightly held that the Assessing Officer had substituted the word FY 2002-03 in place of year 2002. This substitution was done without any basis or information in his possession. The CIT(A) also held that the reasons recorded must show that Assessing Officer had prima facie reasons to believe that income for the ITA 850/Del/2012 A.Y.:2003-04 ITO Vs. Sh.Sajjan Kumar Goel FY 2002-03 had in fact escaped assessment and there is no material with the Assessing Officer to justify his prima facie belief that Income of Rs. 1 Crore pertaining to F.Y. 2002-03 has escaped assessment. Thus, the CIT (A) held that formation of the belief by the Assessing Officer that income to the extent of Rs.1,00,00,000/- has escaped assessment was ab initio-void. The CIT(A) while quashing the notice issued u/s 148 after passing a well speaking order remarked that the belief formed by the Assessing Officer was not bonafide and was based on vague, irrelevant and nonspecific information and there was no nexus between the material on record and the reasons to believe. Thus, the order passed by the CIT(A) needs to be upheld.
The Ld. AR further submitted that there is mechanical recording of satisfaction by Assessing Officer. In the alternate, the Ld. AR submitted that on perusal of the approval given by the ACIT for sanctioning the reopening of assessment, there was no application of mind on his part while granting such approval and the same has been done in a mechanical manner. The Ld. AR relied upon the judgment of the Hon’ble Jurisdictional High Court in the case of Pr. Commissioner of Income Tax-6 Versus M/s N.C. Cables Ltd.2017 (1) TMI 1036 – (DEL) wherein the Hon’ble High Court held as under:
Approval granted to reopen the assessment under Section 147/148 - Held that:- Section 151 of the Act clearly stipulates that the CIT (A), who is the competent authority to authorize the reassessment notice, has to apply his mind and form an opinion. The mere appending of the expression ‘approved’ says nothing. It is not as if the CIT (A) has to record elaborate reasons for agreeing with the noting put up. At the same time, satisfaction has to be recorded of the given case which can be reflected in the briefest possible manner. In the present case, the exercise appears to have been ritualistic and formal rather than meaningful, which is the rationale for the safeguard of an approval by a higher ranking officer. For these reasons, the Court is satisfied that the findings by the IT AT cannot be disturbed. - Decided in favour of the assessee Page 9 of 21
ITA 850/Del/2012 A.Y.:2003-04 ITO Vs. Sh.Sajjan Kumar Goel The Ld. AR also relied upon the order of the ITAT Delhi in the case of DCIT Vs M/s Dharamapal Satyapal Ltd. wherein the coordinate bench held as under:
We find that on the format which has been reproduced, the Additional CIT and Commissioner has simply written “Yes I am satisfied” on the same day, i.e. which does not in any manner shed any light as to whether there was any application of mind at all by the aforesaid two senior officers, who were duty bound to have looked in to carefully the reasons recorded by the AO and seen the history behind the assessment which was proposed to be reopened by the AO. When a superior authority is given power by the legislature, to grant sanction to do an act by an authority below him, then that power needs to be exercised with due care and circumspection and after due application of mind. Mechanical manner of giving sanction like in this case have not been approved by the Hon’ble Supreme Court in a similar case in Chhugamal Rajpal vs. S. P. Chaliha & Ors. - 79 ITR 603 (SC) and Hon’ble High Court of Madhya Pradesh in Arjun Singh vs Asstt. Director of Income Tax (M.P.) reported in (2000) 246 ITR 363 (MP). Thus, we are not satisfied that AO had any material before him which satisfies the requirements of section 147. Therefore, he could not have issued notice u/s 148. Further, the report submitted by him u/s 151 does not mention any reason and does not mention which facts were not disclosed by the assessee. We are also of the opinion that the commissioner has mechanically accorded permission. If only he had read the report and seen the history of the original assessment, he would not have granted permission. The safeguard against reopening u/s 151 of the Act has been done by both the superior authorities very lightly and as held by the Hon’ble Supreme court in Chugamal Rajpal (supra), the authorities substituted form over substance. Thus, we hold that the sanction granted by the Commissioner u/s 151 is invalid and so, the notice of the AO dated 29/03/2011is bad in law and has to be necessarily struck down.”
In respect of Ground No. 2 regarding addition on account of import financed by the assessee amounting to Rs.1,00,00,000/-, the Ld. AR Page 10 of 21
ITA 850/Del/2012 A.Y.:2003-04 ITO Vs. Sh.Sajjan Kumar Goel submits that on Merits also the CIT(A) has deleted the addition by giving a cogent findings. The CIT(A) held that the entire theory of the financing of Rs. 1 Crore was based on the statements made before the DRI on 05.04.2008 & 6/4/2008 which was subsequently retracted by the assessee. He also held that there is no independent evidence in the form of documents or other party statement which could conclusively establish that the said transaction was entered into by the assessee. Further he relied upon the fact that AO independently recorded statements on oath of the assessee during the assessment proceedings in which assessee denied to have entered into any transaction with Mr. Tulsian. The CIT(A) during the appellate proceedings has directed the AO to examine Mr. Shree Bhagwan Tulsian by issuing summon. During remand proceedings Mr. Tulsian appeared before the AO and recorded his statement and denied occurrence of any business dealings with each other. There is no iota of evidence that can support that any transaction took place between the two and nothing was found by the A.O apart from the allegation in the entire proceedings that the assessee has earned and paid such amount to such person. Thus the addition made in this regard is totally on surmises and was rightly deleted by the CIT(A) as the AO was not able to get anything on record to prove that any such transaction even transpired and the allegations made by him could not be substantiated by concrete proof.
As regards to Ground 3 relating to addition on estimate basis on account of profit earned on such finance amounting to Rs. 5,00,000/-, the Ld. AR submitted that the addition of Rs. 5 Lac has been made without any basis and has been arbitrarily made considering a hypothetical situation that the assessee must have earned a profit on the alleged amount of Rs. 1,00,00,000. The Ld. AR submitted that CIT(A) has rightly deleted the addition on the ground that since the amount of Rs. 1,00,00,000/- has not been financed by the assessee there is no question of making any addition of interest in this regard. Thus, the addition of Rs. 1,00,00,000/- is unsustainable.
We have heard both the parties and perused all the relevant records. Page 11 of 21
ITA 850/Del/2012 A.Y.:2003-04 ITO Vs. Sh.Sajjan Kumar Goel The CIT(A) has given a finding regarding Section 147 proceedings that the proceedings u/s 147 were unlawful as the Assessing Officer neither attached the letter of DRI dated 10/6/2009 nor any statement of the assessee to support the reasons were recorded by the Assessing Officer. The CIT(A) held as under:
“5.3. Decision
I have considered the reasons recorded by AO which are placed at page 14 of the paper book filed by the appellant, observation of the assessing officer, statement recorded by the DRI and submission filed by the appellant during the course of appellate proceedings. It is seen that on the basis of information received from DRI assessing officer recorded reasons for reopening the assessment for A.Y. 2003-04 which are as under:- “Reasons for the belief that income has escaped assessment
In this case return declaring income of Rs.1,73,980/- was filed on 05.09.2003. This was processed U/S 143(1) on 27.10.2003 at the returned amount. The asses see has shown income under the head “other sources ” only.
An information vide letter F.N. DRJ/BZU/F77/06/5087 dated 10/06/2009 has been received from Assistant Director, DRI MZU, Mumbai that the assessee in his statement recorded by them had admitted that in financial year 2002-03, he had financed a sum of Rs. 1,00,00,000/- in the imports made by one, Shri Bhagwan Tulsian S/o late Shri Murari Lai Tulsian R/o House No. 4, Sector-37, Faridabad-3, Haryana, under the name of a non-existent firm, M/s Lord International, Bristo Building Complex, House No. 12, II Floor, Hauz Khas Village, New Delhi - 110 016.
A perusal of financial statements i.e. capital account and Balance sheet of the assessee as on 31.03.2002 and 31.03.2003 reveals that no investment of the above amount of Rs. 1 crore has been shown.
In view of these facts, I have reason to believe that income to the extent of Rs. 1,00,00,000/- chargeable to tax has escaped assessment in terms of Section 147 of the Income Tax Act, 1961. ”
Sd./-23.03.2010 (Rajinder Singh Arora) Income Tax Officer, Ward 19(2), New Delhi. ”
ITA 850/Del/2012 A.Y.:2003-04 ITO Vs. Sh.Sajjan Kumar Goel
In the reasons recorded and reproduced above, it has been mentioned by the assessing officer that appellant had admitted in his statement recorded by the DRI, MZU, Mumbai that in the F.Y. 2002-03 appellant had financed a sum of Rs.l crore to one Shree Bhagwan Tulsian, S/o late Sh. Murari Lai Tulsian, R/o House No. 4, Sector-37, Faridabad-3 for import in the name of a nonexistent firm M/s Lord Empire International, Bristo Building Complex, House No. 12, Second Floor, Hauz Khas Village, New Delhi. On going through the reasons, it is seen that the AO has neither attached letter of DRI dated 10/6/2009 nor any statement of the appellant to support the reasons recorded. Even the contents of such information and statement of the appellant have neither been reproduced in the reasons recorded nor made a part of the reasons.
The AO has not even mentioned in the reasons recorded whether the aforesaid letter dated 10.06.2009 received by him was accompanied by the statement of the appellant recorded by DRI.
On going through the statements recorded by the DRI, it is seen that DRI has recorded statement of the appellant on following dates:-
05-04-2008, 06-04-2008, 09-04-2008, 01-05-2008 and 04-05-2009
On going through the statement of dated 05-04-2008, it is seen that appellant in this statement at page-3 has stated that he met Mr. Shree Bhagwan Tulsian in the year 2002 at Hotel Surya Sofitel, Ashram Chowk, Delhi. In this meeting, Mr. Shree Bhagwan Tulsian told him that he was engaged in the business of import and he was in need of money for his import business. He asked Mr. Shree Bhagwan Tulsian as how much money he needs for his business. Mr. Shree Bhagwan Tulsian told him that he needs about Rs.l crore. The appellant assured him of arranging money within next 15-20 days which was arranged in next 20 days.
In the statement recorded on 06-04-2008 at page-1, again appellant stated that he met Mr. Shree Bhagwan Tulsian in 2002 and gave him Rs.l crore in 2002.
On going through the contents of the statements which have been mentioned above, it is seen that appellant has nowhere admitted that he had financed Rs. 1 crore to Mr. Shree Bhagwan Tulsian in the F.Y. 2002- 03. In the statement recorded on 05-04-2008 and again on 06-04-2008 he has mentioned that he met Mr. Shree Bhagwan Tulsian in year 2002 and after his meeting money was arranged within next 20 days of the said meeting. In these statements, there is no concrete date of either the meeting or the arrangement of funds that it was given in the F.Y. 2002-03.
ITA 850/Del/2012 A.Y.:2003-04 ITO Vs. Sh.Sajjan Kumar Goel
The appellant’s admission that money was arranged in the year 2002 is quite vague and leads to the conclusion that it could be F.Y. 2001-02 or 2002-03. Further statements recorded on 09.04.2008, 01.05.2008 & 04.05.2009 nowhere mentioned that the money was arranged by the appellant in Financial Year 2002-03.
The assessing officer has own his own substituted the words F.Y. 2002- 03 in place of year 2002. This substitution done by the assessing officer was without any basis or without having any information in his possession. He has not pointed out or reproduced any other document or information from where the admission of the assessee regarding finance in the Financial Year 2002-03 is discernible.
It is settled law that conclusive proof of escapement of income need not be evidenced by AO to initiate valid proceedings u/s 147. However, the reasons recorded must show that he had prima facie reason to believe that the income of the F.Y. 2002-03 had escapement assessment. It is seen that there was no material in the possession of the assessing officer to support his prima facie belief that income of Rs.l crore pertaining to F.Y. 2002-03 had escaped assessment. It is also settled law that the reasons recorded by AO before initiating proceedings u/s 147 can neither be substituted nor supplemented by further material.
The above stated facts shows that formation of belief by the assessing officer that income to the extent of Rs. 1 crore for F.Y. 2002- 03 has escaped assessment was ab initio void. The courts have held that sufficiency of reason is not a matter which is to be decided by the writ court, but existence of belief is a subject matter of the scrutiny. A notice u/s 148 can be quashed if the belief is not bonafide, or one based on vague, irrelevant and non-specific information. The basis of belief should be discernible from the material on record which was available with the assessing officer when he recorded the reasons. There should be a link between the reasons and evidence available with the assessing officer. (Signature Hotels Pvt. Ltd. vs. Income Tax Officer & Others 338 ITR 51 (Del.).
In the instant case, the belief formed by the assessing officer was not bonafide and it was based on vague, irrelevant and non-specific information. From the statements received from DRI, it was not discernible that appellant had admitted to have arranged Rs.l crore to Mr. Shree Bhagwan Tulsian in the F.Y. 2002-03. In the statement the appellant has only stated that in the year 2002 he arranged Rs. 1 crore for Mr. Shree Bhagwan Tulsian. The mentioning of year 2002 cannot Page 14 of 21
ITA 850/Del/2012 A.Y.:2003-04 ITO Vs. Sh.Sajjan Kumar Goel lead to presume that it was F.Y. 2002-03. Therefore, the reasons recorded by the assessing officer were based on vague and irrelevant information and there was no live link between the material in possession of the assessing officer and formation of belief.
In view of the above, the notice issued for initiating the proceedings for F.Y. 2002-03 relevant to the A.Y. 2003-04 was issued on the basis of nonexistent information and therefore the notice issued u/s 148 is held to be I invalid for A.Y. 2003-04 and same is quashed.”
Thus, the reasons recorded by the Assessing Officer was only based on the statement recorded by DRI stating that the assessee has financed a sum of Rs.1 Crore in the imports made by one Shri Bhagwan Tulsian which was later on retracted by both Shri Bhagwan Tulsian as well as by the assessee. The Assessing Officer while recording the reasons stated that the financial statements of the assessee reveals that no investment of the above amount of Rs. 1 crore has been shown as per the statements before the CIT(A). The assessee has not admitted that he had financed Rs. 1 Crore in Financial Year 2002-03 in-fact, the statement produced by the Ld. AR does not reveal at any point of time that the assessee has financed 1 Crore Rs to Shri Bhagwan Tulsian. The Assessing Officer has not allowed the assessee to make cross-examination at the time of assessment proceedings to verify the statements of Mr. Bhagwan Tulsian at any point of time. The CIT(A) has after taking due diligence has come to the conclusion that the notice issued u/s 148 is not proper and is void ab initio. The case laws relied upon by the Ld. DR are distinguishable and not applicable to the facts of the present case as there is factual difference in each case. Thus, Ground No. 1 of the Revenue’s appeal is dismissed.
As regards Ground No. 2, of the Revenue’s appeal, challenging the deletion of Rs. 1 crore, we find that the CIT(A) has given a detailed finding as to why the said addition has to be deleted. The relevant observation of CIT(A) are as under:-
“6.3. Decision.
ITA 850/Del/2012 A.Y.:2003-04 ITO Vs. Sh.Sajjan Kumar Goel
I have carefully considered the observations of the AO made in the assessment order, submissions of the appellant and remand report alongwith the statement of Mr. Shree Bhagwan Tulsian recorded by the assessing officer in the remand proceedings. The appellant was taken into custody by the DRI on 05-04-2008 and his statement was recorded on 05- 04-2008, 06-04-2008 while in custody of DRI. Appellant’s statement was again recorded on 09-04-2008 when he was in judicial custody at Bombay. In these statements, the appellant admitted that he had arranged Rs.l crore to Mr. Shree Bhagwan Tulsian for import of scrap. The appellant was released from jail on 16-04-2008 at Bombay and immediately after his release, he made a retraction of his statements before the Addl. Chief Metropolitan Magistrate, 3rd Court at Explanade, Mumbai. In this retraction statement, he has described the events of his arrest and statements recorded by the DRI and had stated that he was made to write that he had financed Rs. 1 crore to Mr. Shree Bhagwan Tulsian for his import business.
After his release on 16-04-2008, the appellant was directed by the court to give daily attendance before DRI, Mumbai from 21-04-2008 for next 20 working days. On 01-05-2008, DRI again recorded appellant’s statement wherein the appellant admitted that he had given Rs. 1 crore to Mr. Shree Bhagwan Tulsian out of which he had received Rs.80 lacs in 2007. On the basis of above information, assessing officer issued a s*how cause notice to the appellant as to why Rs.l crore should not be added as his undisclosed income to the returned income for A.Y. 2003-04.
The appellant submitted his reply vide his letter dated 03-09-2010 and denied of having financed any amount to Mr. Shree Bhagwan Tulsian. The appellant also filed an affidavit dated 06-09-2010 before the assessing officer wherein he again denied of having made any financial dealing with Mr. Shree Bhagwan Tulsian. On 18-10-2010 statement of the appellant was recorded by the assessing officer and in this statement the appellant in reply to question no. 2 had stated that he was engaged in arranging of finance business on brokerage and not carried out any other business from 01-04-2002 to till date. His attention was drawn to his statement recorded by the DRI in April 2008 at Mumbai wherein he had admitted of financing Rs.l crore to Mr. Shree Bhagwan Tulsian for import in the name of non-existence firm M/s Lord Empire International. In reply to the question no. 5, he has stated that he had not given any money and his statement was recorded by DRI by applying coercion or threat. It was stated by the appellant that he was tortured and forced to give Statement as per their desire. Appellant has also stated that after his release from jail, he retracted from his statement on 17-04-2008 before the Addl. Chie: Metropolitan Magistrate, 3rd Court at Explanade, Mumbai. Page 16 of 21
ITA 850/Del/2012 A.Y.:2003-04 ITO Vs. Sh.Sajjan Kumar Goel
After recording of the appellant’s statement, appellant was asked to produce Mr. Shree Bhagwan Tulsian. Summons were also issued by the assessing officer for appearance before him and examination. However, Mr. Shree Bhagwan Tulsian did not appear before him but filed an affidavit of dated 10/11/2010 on 12.11.2010 wherein he has stated that whatever statement he had given against Sh. Sajjan Kumar Goel before the DRI that was taken by pressure. He further stated that he never had any business dealings with the appellant and had never taken any money either in business or on interest. He further stated that he had never gone to Bombay alongwith to Sh. Sajjan Kumar Goel in connection with any business. Mr. Shree Bhagwan Tulsian also filed a letter dated 03.12.2010 before assessing officer wherein he reaffirmed the contents of his affidavit of dated 10.11.2010. He shown his inability to appear before assessing officer as he was suffering from spinal pain.
Since Mr. Shree Bhagwan Tulsian did not appear before the assessing officer during the course of assessment proceedings, the assessing officer did not givd credence to the contents of the affidavit and his application dated 03.12.2010.
On the basis of information received from DRI Mumbai and on the basis of statements again recorded on 01.05.2008 by the DRI, the assessing officer made addition of Rs.l,00,00,000/- on account of arranging finance to Mr. Shree Bhagwan Tulsian in cash.
During the course of appellate proceedings, the AR of the appellant appeared before me on 01.09.2011 and filed written submission and relied upon the statements made by the appellant before assessing officer and his retraction before ACMM Mumbai on 17.04.2008. The AR also filed copy of affidavit of Mr. Shree Bhagwan Tulsian, his retraction before ACMM Mumbai and prescription papers related to his medical treatment. The AR of the appellant has also relied upon the affidavit filed by the appellant on 06.09.2010 before assessing officer and his statements recorded by the assessing officer on 18/10/2010 In the assessment, the assessing officer did not give credence to the affidavit and application of Mr. Shree Bhagwan Tulsian and made addition in the case of appellant. The contents of affidavit cannot be brushed aside unless same is controverted. Therefore, keeping the principle of natural justice in mind, the assessing officer was directed to examine Mr. Shree Bhagwan Tulsiar by issuing summons u/s 131 of the I.T. Act and submit his report before undersigned. In response to the above directions, assessing officer examined Mr. Shree Bhagwan Tulsian on 20.09.2011 and his statements was recorded.
ITA 850/Del/2012 A.Y.:2003-04 ITO Vs. Sh.Sajjan Kumar Goel
In the statements, in reply to question no. 9 Mr. Shree Bhagwan Tulsian has stated that he had never entered into any business or financial transaction with Sh. Sajjan Kumar Goel (appellant). In reply to question no. 10, he has stated that he never had any fianancial dealing or business with Sh. Sajjan Kumar Goel. Vide question no. 11, a pointed question was asked to Mr. Shree Bhagwan Tulsian whether he had taken Rs. 1 crore or any other amount during F.Y. 2002-03. In reply to the said question he has stated that he never took any finance from appellant neither in F.Y. 2002-03 nor in earlier or later years. When he was asked about the statements made by him before DRI of having received finance of Rs.l crore from Sh. Sajjan Kumar Goel. In reply to this, he has stated that he was forcibly made to sign on the written statements at Lodhi Road, New Delhi. He further stated that statements was taken under coercion and pressure. In reply to question no. 13, he has stated that he had made an application before ACMM-Court on 12.05.2008 informing that officers of DRI had wrongly framed him in this case and he had no connection with the firm M/s Lford Empire International, which has allegedly imported some goods. He further confirmed the contents of the affidavit filed by him of dated 10.11.2010 which was filed before assessing officer on 12.11.2010.
On analysis of the aforesaid events it is revealed that entire theory of financing of Rs.l crore to Mr. Shree Bhagwan Tulsian is based on the statements made before DRI on 05.04.2008 and 06.04.2008 which was subsequently retracted by the appellant. There is no independent evidence in the form of documents or other party statements which can establish that appellant had a meeting with Mr. Shree Bhagwan Tulsian in hotel Surya Sofitel or had financed Rs. 1 crore in cash to Mr. Shree Bhagwan Tulsian. The entire assessment is based on the statements of Mr. Shree Bhagwan Tulsian and appellant which has been retracted by them before the Court. The assessing officer independently recorded statements on oath of the appellant during the course of assessment proceedings and also of Mr. Shree Bhagwan Tulsian on oath in the remand proceedings. In these statements, both the persons have denied of having any business dealings with each other and financing of money. There is no evidence which can link the statements made before the DRI and establish that financing transaction of Rs.l crore had taken place between them. There is no iota of evidence which can support that transaction of Rs.l crore took place between appellant and Mr. Shree Bhagwan Tulsian. I am therefore of the considered view that no addition can be made on the basis of mere statements without having any corroborative evidence to support such statements which have been subsequently retracted before the Court. Page 18 of 21
ITA 850/Del/2012 A.Y.:2003-04 ITO Vs. Sh.Sajjan Kumar Goel
Hence, the addition made by the assessing officer on the basis of information and statements received from the DRI cannot survive and the same is deleted.”
We find that the CIT(A) held that there is no iota of findings that can support that any transaction to place between the two parties and nothing was found by the Assessing Officer, apart from the allegation in the entire proceedings that the assessee earned and paid such amount to such person. From the perusal of the Assessment order, it can be seen that the entire theory of financing of Rs. l crore to Shri Bhagwan Tulsian is based on the statements made before DRI on 05.04.2008 and 06.04.2008 which was subsequently retracted by the assessee. There is no independent evidence in the form of documents or other party statements which can establish that assessee had a meeting with Shri Bhagwan Tulsian in hotel Surya Sofitel or had financed Rs. 1 crore in cash to Shri Bhagwan Tulsian. The entire assessment is based on the statements of Shri Bhagwan Tulsian and the statement of the assessee which were retracted by them before the Court. Though the Assessing Officer independently recorded statements on oath of the assessee during the course of assessment proceedings and also of Shri Bhagwan Tulsian on oath in the remand proceedings, in these statements, both the persons have denied of having any business dealings with each other and financing of money. There is no evidence which can link the statements made before the DRI and establish that financing transaction of Rs.l crore had taken place between them. There is no evidence at all which can support that the transaction of Rs. l crore took place between assessee and Shri Bhagwan Tulsian. In our opinion, the order of the CIT(A) is a well reasoned order and does not call for any interference. Therefore, Ground No. 2 of the Revenue’s appeal is dismissed.
As regards Ground No. 3 relating to addition of estimated basis on account of profit earn on such finance. The CIT(A) held as under:
“7.3. Decision
I have considered the observation of the assessing officer and submission of the appellant on this issue. Vide ground no. 2 of this order I have held Page 19 of 21
ITA 850/Del/2012 A.Y.:2003-04 ITO Vs. Sh.Sajjan Kumar Goel that no transaction took place between the appellant and Mr. Shree Bhagwan Tulsian of Rs.l crore and has deleted the addition of Rs.'l crore. Since there was no transaction of finance of Rs.l crore, there was no question of earning any income of Rs.5 lakhs on such transaction. Hence, the addition is deleted.”
The CIT(A) has rightly deleted the addition on the ground that since the amount of Rs. 1,00,00,000/- has not been financed by the assessee there is no question of making any addition of interest in this regard. Therefore, Ground No. 3 of Revenue’s appeal is dismissed.
In the result, appeal filed by Revenue is dismissed. Order pronounced in the Open Court 02nd August, 2018.