PARESH DAYASHANKAR MADEKA,RAJKOT vs. THE INCOME TAX OFFICER, WARD-2(2)(3), RAJKOT

Ld. DR has submitted that reopening of assessment was according to law. That the Ld. DR has relied on the order of the Ld. CIT(A). Ld. DR has also filed written statement: 2. in the context of Section 143(3) of the IT Act, 1961, the word “evidence” ahs been intentionally used, indicating the while income tax proceedings are not bound by the strict technical ruled of the Indian Evidence Act, 1872, the application of such ruled is not entirely excluded. The judicial precedents consistently establish that the rigors of the law of evidence may not strictly apply to income tax proceedings, but whatever necessary, the principles of the Evidence Act can and should be applied to ensure fairness and justice in the process. 3. courts have repeatedly observed that although income tax authorities are not courts and are not bound by the strict ruled of evidence, they must follow the principles of natural justice. Therefore, the law of evidence is applicable in situations where it serves to elucidate facts or establish the veracity of material submitted before the tax authorities. Case law has supported this application of the Evidence Act in income tax proceedings to ensure that the decisions are based on concrete and reliable facts.

For instance, when statements are recorded under section 131 of the IT Act, which grants the income tax authorities powers similar to those of a civil court, such proceedings constitute judicial proceedings. This was clearly established by the supreme court in the land mark case of Suraj Mall Mohta and Co. v. A. V. Visanatha Sastri and another (1954 AIR 545). In this judgement, the court held that statements recorded under section 37 of 1922 Income tax act are judicial proceedings, the same powers come in Income tax act section 131 in 1961 act, and a result, the law of evidence is fully applicable to those proceedings which are held judicia; by Supreme Court because the section 1 of the Indian evidence act clearly mention Extent. It extend to the whole of India and applies to all judicial proceedings in or before any court, including courts – martial. [ other than courts – martial conveyed under the army act ( 44 $ 45 Vict. C. 580)] [ the Naval Discipline Act [ 29 & 30 Vict. 109]; or the Indian Navy (Discipline) Act, 1934 ( 34 of 1934).] [ or the Air Force Act ( 7 Geo. 5, c. 51)] but not to affidavit presented to any court or officer, nor to proceedings before an arbitrator; The Supreme Court decisively settled in 1954 that proceedings under section 37 of the IT Act become judicial proceedings, therefore by the power of article 141 of the Indian Constitution it become mandatory to held that statement recording work under section 131 of the IT Act are judicial proceedings and therefore Evidences act become fully applicable on the.

Thus, in cases where statements are recorded under section 131, as judicial proceedings, the full application of the law of evidence is required. Any evidence or material gathered through these proceedings must be evaluated with the same scrutiny as in a judicial forum, ensuring that the principles of justice and fairness are maintained.

In this immediate case of today revenue had relied upon the provision of section 32 of the Indian evidence act 1872 which is reproduced for ready reference:- “ 32. Cases in which statements of relevant fact by person who is dead or cannot be found, etc. is relevant – statements, writer or verbal, of relevant facts made by a person who is dead, or who cannot be procured without an amount of delay or expense which under the circumstances of the case appears to the court unreasonable, are themselves relevant facts in the following cases:- 1) When it related to cause of death – when the statements is made by a person as to the cause of his death, or as to any the circumstances of the transaction which resulted in his death, in cases in which the case of that person’s death comes into question. Such statements are relevant whether the person who made them was or was not, at the time when they were made, under expectation of death, and whatever may be the nature of the proceeding in which the cause of his death comes into question. 2) Or is made in course of business – when the statement was made by such person in the ordinary course of business, and in particular when it consists of any entry or memorandum made by him in books kept in the ordinary course of business, or in the discharge of professional duty; or of an acknowledgment written or singed by him of the receipt of money, goods, securities or property of any kind; or of a documents used in commerce written or signed by him; or, of the date of a letter or other documents usually dated, written or singed by him 3) Or against interest of maker – when the statement against the pecuniary or proprietary interest of the person making it, or when, if true, it would expose him or would have exposed him to a criminal prosecution or to a suit for damages.” 7. the statement given by Mr. Prakash Bagrecha was squarely covered by sub section 2 and 3 of section 32 of the Indian evidences act, 1872. 8. furthermore the evidence act section 106 comes for recue of revenue; the facts mentioned in statement of Mr. Prakash Bagrecha was facts which come to his specific knowledge only as he was operating the business at that them, statement given by later director based on books of account would not have the same force as of Mr. Prakash Bagrecha. 9. therefore, the argument given by the learned Authorized representative need to be rejected and the order of the Ld. Additional/joint Commissioner of Appeal need to be upheld.

That the Ld. AR argued on the basis of documents already submitted by the Ld. AO & Ld. CIT(A).

We submit that the statement of Mr. Marshal Kotadia is more reliable as he had produced books of accounts etc. when his statement was recorded. The evidence provided while recording statement is: i. Ledger Accounts ii. Cash Book iii. Bank Statements

It is proposed to enhance my assessment. The appeal is against the addition of 12.1. Rs. 18,67,000/- as unexplained cash credit u/s. 68 12.2. Rs. 28,005/- as unexplained expenditure u/s. 69C 13 The appellant vide letter dated 07.12.2017 again requested the Assessing Officer to allow him to cross examine the Directors of M\s Bhumidev Credit Corporation Ltd. The Appellant was allowed to cross examine the Directors of M\s Bhumidev Credit Corporation Ltd. A copy of the statement recorded is enclosed. The Director confirmed that they have given a loan to me and also produced their accounts and bank statements to support the same. This fact has been ignored by the Assessing Officer while framing the assessment. Reference is invited to the following question that were specifically put to the Directors of M\s Bhumidev Credit Corporation Ltd. The assessee has produced the following details of Bhumidev Corporation Ltd. Ma] Copy of account [b] Copy of contra account [c] Bank statement of Bhumidev Corporation Ltd. [d] Books of accounts of Bhumidev Corporation Ltd. He has therefore proved [a] identity of Bhumidev Corporation Ltd. [b] Capacity of Bhumidev Corporation Ltd. [c] genuineness of loan from Bhumidev Corporation Ltd.

We further note that the appellant has obtained copy of statement recorded by the department, in the case of Bhumidev Credit Corporation Ltd. and also cross examined the director of the company Mr. Prakash S. Bagrecha. According to the statement recorded and directed the books of account and bank statement. In the statement recorded in reply to Question No. 3. and in cross examined the Question No. 6 the director has accepted that interest of Rs. 96285, in the respective loan has issued and shown in Income Tax Return as income, statement of the director is placed on record.

The reply to Question No. 08 the director submitted the according to the books of account. I have not received any commission from Prakash D. Madeka and transaction have taken place with through account payee cheques. The same is reflected in our company’s book of account.

We further note that the assessee has submitted Balance-Sheet and Audit Report of the company, showing schedule 6 of the Balance Sheet, wherein loan was given to Paresh D. Madekha was shown at S. No. 24.

The AO has not brought any material or other evidence on record on the basis of which inference can be drawn that the transactions are not genuine. None of the evidences furnished by the appellant company have been disproved. In any case, the appellant having established the identity creditworthiness and genuineness of the transactions and this transaction being prior to A.Y.2013-14, the appellant is under no obligation to explain the source of source and origin of origin all these deposits. Reliance is placed in the case of recent decision in the case of CIT v Gagandeep Infrastructure Pvt. Ltd. of 2014. wherein the Mumbai High Court held that the proviso to section 68 is effective from A.Y.2013-14 and not earlier years. Furthermore, the 3 essential tests confirming the pre proviso section 68 of the Act laid down by the various Courts namely the genuineness of the transaction, identity and capacity of the investor have been examined and no defect have been pointed therein. It further held that even if the amounts have been received from bogus share holders then it was for the income tax officer to proceed by reopening the assessment of such share holders and that the ratio laid down by the Supreme Court in the case of CIT v Lovely Exports (P) Ltd. 317 ITR 218 is a good law with respect to pre proviso section 68. Copy of the order is also enclosed for your Honours reference

It has been notices from the ledger account of copy of M/s. BCCL in the books of account of the appellant. The appellant has given the inter- corporate loans to M/s. BCCL and subsequently those loans were repaid by m/s. BCCL to the appellant with the same amount or with some excessive amounts. Further, the interest of Rs. 481/- has also been paid by the appellant on the excessive inter corporate deposits taken from M/s. BCCL. the assessee has submitted various details to support the identity, genuineness and creditworthiness of the aforesaid party which clearly establish the discharging of onus by the appellant. The Ld. AR also relied on the below judgements; i. Deputy Commissioner of Income Tax Vs. Rohini Builders [2003] 127 Taxman 523 (GUJ.) (High Court of Gujarat) - (2002) 256 ITR 360 (GUJ) Section 68 of the Income-tax Act, 1961 - Cash credits - Assessing Officer made addition of Rs. 12,85,000 as unexplained cash credits in respect of loans taken by assessee from 21 parties Assessee had discharged initial onus by providing identity of all creditors by giving their complete addresses. GIR numbers /permanent account numbers and copies of assessment orders wherever readily available - Assessee had also proved capacity of creditors by showing that amounts were received by account payee cheques drawn from bank accounts of creditors - Repayment of loans and interest thereon was also made by account payee cheques by assessee and tax also had been deducted at source on interest payments and remitted Whether assessee was not expected to prove genuineness of cash deposited in bank accounts of creditors. because under law, assessee can be asked to prove source of credits in its books of account but not source of source Held, yes Whether merely because summons issued to some of creditors Page | 8

In view of the above, that in addition in the income of the assessee are stand deleted. We are not adjudicating the other grounds for reopening of the case by Ld. AO.