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Income Tax Appellate Tribunal, DELHI `G’ BENCH, NEW DELHI
Before: SHRI CHANDRA MOHAN GARG, & SHRI L.P. SAHU
The above captioned cross appeals by the assessee as well as the revenue have been directed against the order of CIT(A)-I, New Delhi dated 2.1.2013 in Appeal No. 73/11-12 for assessment year 2007-08.
Ground no.1 and 4 of the assessee’s appeal i.e. are general in nature, which require no adjudication. Remaining grounds of the assessee read as under:-
“2. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in holding that out of total addition of Rs. 25 crores made in A.Y. 2007-08, the maximum amount chargeable to tax should be Rs. 6.50 crores of which, Rs. 1.50 crores should be brought to tax in A.Y. 2007-08 and remaining amount of Rs. 5 crores in A.Y. 2006-07 despite of findings given in para 4.8 of the appellate order that the evidence and the facts relevant to the issue are overwhelmingly in favour of the appellant.
2.1 That on the basis of findings and conclusion arrived at in para 4.8 of his order, the Ld. CIT(A) should have deleted the entire addition of Rs. 25 crores particularly when the same addition made in the case of Elel Hotels & Investment Ltd stand deleted by the CIT(A) and /ITAT.
3. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in upholding the addition of Rs. 7.5 lacs being cash found/seized during the course of search on 28.02.2007 despite of explaining the source that the same was out of withdrawals made from assessee’s bank account with CITI Bank.”
Ground no. 1 and 3 of the revenue’s appeal in ITA 1911/Del/13 are general in nature which require no adjudication and remaining sole ground of the revenue reads as under:-
“On the facts and circumstances of the case the Ld. CIT(A) has erred in restricting the addition to Rs. 1.50 crores out of total addition of Rs. 25,00,00,000/- made by AO on account of unaccounted income routed through hawala operator without appreciating the fact that Shri Bipin B. Shah & Sh. Anand Shukla employee of Sanjeev Nanda who handled unaccounted transactions for the assessee and his companies accepted receiving cash through hawala in their statement recorded during the course of search proceedings on 28.02.2007.”
4. Briefly stated the facts giving rise to these appeals are that the case of the assessee was centralised by CIT, Delhi-XI, New Delhi vide order u/s 127(2) of the Income-tax Act, 1961 ['the Act' for short] dated 20.11.2007. On 12.12.2007, the assessee had filed return of income declaring income of Rs.54,18,950/-. Subsequently, a notice u/s 143(2) was issued on 30.07.2008 and another notice u/s 142(1) of the Act along with questionnaire was issued on 21.4.09 and another detailed questionnaire was issued on 26.10.09. The Assessing Officer noted that the assessee used to arrange the delivery of cash from Delhi though Shri Vikrant Puri and his trusted aides Shri Bipin B. Shah and Shri Anand Shukla used to pick up this cash and deliver it to the residence of the assessee in Mumbai. The Assessing Officer further noted that as per admission of Shri Bipin B. Shah and Shri Anand Shukla, Rs. 25 crore was received by the assessee in Mumbai through hawala channels which represents the unaccounted income of the assessee. The Assessing Officer added the said amount to the taxable income of the assessee for assessment year 2007-08 relevant to previous year 2006-07. The Assessing Officer also made another addition of Rs.7,25,000/- as unexplained cash found in the possession of the assessee and the same was also added to the taxable income of the assessee, besides, one other addition pertaining to expenditure on air tickets. The assessee carried the matter before the first appellate authority i.e. CIT(A) which was partly allowed. The CIT(A) restricted the addition to Rs. 1.5 crore out of total addition of Rs. 25 crores made by the Assessing Officer on account of unaccounted income alleged to be routed through hawala operator. Now, the assessee is before this Tribunal in the second appeal challenging the confirmed addition of Rs.1.5 crore and the revenue has also filed the appeal challenging the deletion of addition of Rs. 25 crore and restricting the same to Rs.1.5 crore. Since these cross appeals have arisen out of one order of CIT(A), therefore, these have been clubbed and we are deciding the same together by this consolidated order.
Sole ground of the Revenue and Ground no. 2 & 2.1 of the assessee
We have heard the rival submissions and carefully perused the relevant material placed before us, inter alia assessment order, impugned order, assessee’s paper book spread over 299 pages and assessee’s case law, paper book spread over 84 pages. Learned Departmental Representative supported the stand and action of the Assessing Officer and submitted that there was sufficient material and evidence before the Assessing Officer to show that the assessee used to arrange the delivery of cash from Delhi to Mumbai through Shri Vikas Puri alias Vikrant Puri and the trusted aides Shri Bipin B. Shah and Shri Anand Shukla used to pick up this cash and deliver it to Mumbai residence of the assessee. Learned Departmental Representative vehemently contended that as per admission of Shri Bipin B. Shah and Shri Anand Shukla in their statements, Rs. 25 crore was received by the assessee in Mumbai through hawala channels which clearly represent the unaccounted income of the assessee. Therefore, the same was rightly added to the taxable income of the assessee. Learned Departmental Representative further pointed out that the CIT(A) restricted the disallowance to Rs. 1.5 crore without any reasonable and justified basis, therefore, the impugned order may be set aside by restoring that of the Assessing Officer. Replying to the above, learned counsel of the assessee supported part conclusion of the CIT(A) which deleted the addition of Rs.23.5 crore out of total addition of Rs. 25 crore. At the same time, learned counsel of the assessee vehemently contended that when the CIT(A) himself was not satisfied about the correctness of the assessment order and he deleted major part of the addition which was made without any basis, only on the basis of surmises and conjectures, then there was no point to restrict the addition to Rs.1.5 crore on the same set of facts and circumstances and material. Learned counsel of the assessee pointed out that a search and seizure operation u/s 132 of the Act was initiated in Suresh Nanda group of cases on 28.2.2007 and the revenue department could not bring out or unearth any evidence or material to establish that the assessee had actually received any amount at his Mumbai residence through hawala channels. Learned counsel of the assessee further submitted that on the date of search operation i.e. on 28.02.2007, statements of the assessee Shri Sanjeev Nanda, Shri Anand Shukla, Shri Bipin Shah were recorded and subsequently again on 1.3.2007, statement of assessee Shri Sanjeev Nanda and Shri Anand Shukla were also recorded but Shri Anand Shukla submitted an affidavit on 2.3.2007 for retraction of his statement recorded earlier and Shri Bipin B. Shah also submitted his affidavit dated 23.12.08. Learned counsel of the assessee pointed out that the DDIT also recorded statement on oath by Shri Vikrant Puri on 22.3.2007. Learned counsel of the assessee vehemently pointed out that during search operation, no document or jewellery etc. was seized and the assessee was not provided copies of the statement of Shri Anand Shukla, Shri Bipin B. Shad and Shri Vikrant Puri and the assessee was not allowed cross-examination of these witnesses on the basis of which the Assessing Officer proceeded to make baseless additions. Learned counsel of the assessee has also drawn our attention towards statement of Shri Anand Shukla available at pages 62-66 of the assessee’s paper book and his retraction affidavit dated 2.3.2007 available at assessee’s paper book pages 84-89 and submitted that the mental and physical condition of Shri Anand Shukla had totally collapsed as he was awake for continuously 24 years, without any sleep and he was under pressure from the income tax authorities under which he signed the statement wherever they asked him to do so. Learned counsel of the assessee took us through para no. 11, 12 and 13 of the order of the CIT(A) and submitted that Shri Anand Shukla retracted both his statements dated 28.2.2007 and 1.3.2007 without any influence and therefore, the same cannot be taken as basis for making frivolous additions.
Learned counsel of the assessee further took us through the statement of Shri Bipin B. Shah available at pages 67 to 79 of the assessee’s paper book and specially took us through page no. 77 and 78 question no. 13, 14 and 15 and submitted that Mr. Shah could not exactly recollect the period in which alleged transfer of cash was undertaken and period stated by him was based on merely guess work which cannot be regarded as true factual position and Mr. Shah was not able to explain and narrate the quantum of cash transaction and, therefore, even if his statement is explained as gospel truth, the same cannot be made the basis for making addition. Learned counsel of the assessee further drew our attention and reiterated its earlier submissions and submitted that even Shri Shah has retracted his statement by way of affidavit dated 23.12.08 and the assessee was not provided copy of the statement and opportunity to cross examine Shri Shah, therefore, this statement cannot be used against the assessee for making frivolous additions. Learned counsel of the assessee has specially drawn our attention towards para 4 of affidavit of Shri Shah available at pages 91 and 92 of the assessee’s paper book wherein he stated that he was forced and had no option but to state that the statement recorded was voluntary, even though it was not. Learned counsel of the assessee also pointed out that in para 6, Mr. Shah clearly stated that his statement regarding handling of cash for and on behalf of the assessee is factually incorrect and he denied the contents of the statement taken during the search and confirmed that the alleged cash transaction and movement of cash from Mr. Vikas Puri alias Vikrant Puri or any other person is not true. Learned counsel of the assessee also pointed out that Shri Shah specifically denied knowledge of cash transaction to the tune of Rs. 20-25 crore as falsely recorded in his statement dated 28.8.07.
7. Learned counsel of the assessee submitted that the addition for unexplained income or unaccounted income cannot be made on the basis of third party which have been retracted subsequently and that too, the assessee was not provided copies of the said statement and the assessee was also not provided opportunity to cross-examine these witnesses. Learned counsel of the assessee vehemently pointed out that the Assessing Officer did nothing but accepted the retracted statement of Shri Anand Shukla and Shri Bipin B. Shah as gospel truth and proceeded to make huge addition of Rs. 25 crore out of which substantial amount was deleted by the CIT(A) and on the basis of same material and evidence, addition of Rs.1.5 crore cannot be held as valid and sustainable. Learned counsel of the assessee submitted that no paper, evidence or document was found during the search operation and there was no evidence to establish hawala of Rs.25 crore or any other amount during the relevant financial period and Shri Vikrant Puri was not examined on the issue of hawala transaction of Rs. 25 crore or any other amount. Learned counsel of the assessee pointed out that Shri Anand Shukla and Shri Vikrant Puri are the employees of M/s Elel Hotels and Investments Ltd. and are not working for the assessee and there is no corroborating evidence to show that these persons are related in any manner to the assessee either as employees or aides of the assessee. Learned counsel of the assessee has further drawn our attention towards the conclusion of the CIT(A) at page 40 of the impugned order and submitted that the copies of the statements of the said persons were not given to the assessee and the assessee was not allowed opportunity to cross-examine these witnesses, therefore, in view of the judgement of Hon’ble Supreme Court in the case of M/s Anand Timber Industries vs Commissioner of Central Excise in Civil Appeal No. 4228/2006 and the judgment of Hon’ble Supreme Court in the case of Kishan Chand Chellaram Vs. CIT, (1980) 125 ITR 713 (SC), it was also submitted that when the assessee disputed the correctness of the statement and wanted to cross examine and the adjudicating authority did not grant this opportunity to the assessee, then no addition can be made on the basis of retracted statements. Learned counsel of the assessee also submitted that it was for the revenue to rule out this possibility by bringing proper evidence on record for the burden of showing that the amount was remitted by the assessee and in the present case, the revenue has not discharged its burden to show that alleged hawala transaction was undertaken by the assessee and the assessee received Rs.25 crore or any other amount by way of remittance through hawala transaction with the aid of Shri Anand Shukla, Shri Bipin B. Shah and one Shri Vikrant Puri. Learned counsel of the assessee also took us through the judgment of Hon’ble Andhra Pradesh High Court in the case of CIT vs Naresh Kumar Agrawal 369 ITR 171 (A.P.) and submitted that the department itself took note of the indiscriminate use of statements recorded u/s 132(4) of the Act and issued a note of advice dated 11.3.03 wherein it was clearly directed to the tax authorities that while recording statement during the course of search and seizure operation, no attempt should be made to obtain a confession as to the undisclosed income and any action on the contrary to the advice note shall be viewed adversely.
Learned counsel of the assessee parted with the argument with the last submission that while the CIT(A) has concluded that the amount of Rs.25 crore is hearsay without any basis and is to be ignored, then there was no basis for making addition of Rs.1.5 crore for assessment year 2007-08 again on the basis of surmises and conjectures based on guesswork without any other material or evidence to support the allegation of hawala transaction, and the confirmed addition of Rs.1.5 crore should be deleted.
Replying to the above, ld. DR took us through relevant paras of assessment order and submitted that the Assessing Officer was quite correct and justified in making addition because there was sufficient and reliable evidence to show that the assessee received Rs. 25 crore at his Mumbai residence from Delhi to one Shri Vikas Puri alias Vikrant Puri and the trusted staff/members aides of the assessee. Shri Bipin B. Shan and Anand Shukla used to take this cash and deliver to the residence of the assessee situated at Mumbai, therefore, the allegation levelled by the assessee in his submission was baseless and was wrongly considered by the CIT(A) while restricting the addition to Rs.1.5 crore. Ld. DR in his rejoinder vehemently pointed out that the assessee was inextricably linked with M/s Elel Hotels Ltd., therefore, even if Shri Bipin B. Shah and Shri Anand Shukla were employees with M/s Elel Hotels Ltd., then it can safely be presumed that they were working on the directions and on behalf of the assessee and therefore, the transfer of money through hawala should be held as undertaken by the assessee. Learned Departmental Representative vehemently pointed out that at the first instance, the person states truth only and statement recorded by the tax authorities through search operation on 28.2.07 and subsequently on 1.3.07 of the assessee Shri Sanjeev Nanda, Shri Anand Shukla and Shri Bipin P. Shah cannot held as concocted and made under undue pressure of the tax authorities. Ld. DR also pointed out that the purpose and context of the statement has to been as if the same is retracted subsequently, then also retraction cannot be accepted if it is preceded by the assessee or indirectly by other interested persons and there was no complaint either by the assessee or other witnesses to allege that their statements had been recorded by tax authorities under undue influence and pressure. Therefore, retraction by way of affidavit prepared on legal advice cannot straightway throw away the statements recorded u/s 132(4) of the Act.
The ld. counsel of the assessee also placed rejoinder to above contentions of the Revenue and submitted that even if the deficiency of not allowing cross examination is kept aside and the statements of Shri Anand Shukla and Shri Bipin B. Shah are taken as gospel truth, even then if there is nothing in the incomplete statement of Shri Vikrant Puri to show that alleged amount of the unaccounted income from abroad was actually transferred from Delhi to Mumbai. The ld. Counsel, placing reliance on the order of the Hon’ble Apex Court in the case of Andaman Timber Industries Vs. CIT [Excise] in Civil Appal No. 4228 of 2006 submitted that the order of addition become null and void ab initio if the basis is merely on the statements of witnesses without allowing opportunity to cross examine them. The ld. AR vehemently pointed out that the Hon’ble Supreme Court in the case of Kishanchand Chellaram reported in 125 ITR 713 [SC] held that in the cases of alleged hawala transaction it was for the Revenue to rule out this possibility by brining proper evidence on record, for the burden of showing that the amounts in question was actually remitted by or on behalf of the assessee and in the absence of this, no addition can be sustained.
The ld. Counsel for the assessee also pointed out that the assessee’s submissions before the ld. CIT(A) dated 05.12.2012 and submitted that except retracted statements of Shri Anand Shukla and Shri Bipin B. Shah, there is nothing and no other documentary, oral or circumstantial evidence on record to show that the alleged amounts were unaccounted income from abroad and the same was transferred from Delhi to Mumbai through hawala operation by Shri Vikrant Puri and in the statement of Shri Vikrant Puri, there was no such allegation or fact which could support the alleged hawala transaction of Rs. 25 crores or any other transaction of any other amount. The ld. Counsel pointed out that while the ld. CIT(A) was not agreed to the stand and action of the AO and he deleted major part of the impugned addition then part confirmation and uphold the addition on similar set of facts and circumstances is perverse and infirm which cannot be held as valid and sustainable as per the provisions of the Act.
On careful consideration of above rival submissions of both the sides, at the very outset, let us note some undisputed and admitted facts of the instant case viz. (i) statements of Shri Anand Shukla and Shri Bipin B. Shah was recorded on 28.2.2007 and 1.3.2007 which were subsequently retracted way of filing respective affidavits on 2.3.2007 and 23.12.2008 (ii) statement of Shri Vikrant Puri was also recorded on 22.3.2007 which remained incomplete and the Revenue authorities never made any effort to complete his statement (iii) despite of several requests of the assessee the Revenue authorities denied and rejected the request of the assessee to cross examine the aforementioned three witnesses and (iv) except statements of these three witnesses, there was no any other material or evidence before the authorities below to support this allegation that the assessee transferred his own unaccounted income from abroad - from Delhi to Mumbai - by hawala channels operated by Shri Vikrant Puri.
Firstly, we find it appropriate to consider the main basis and allegation of the AO and we observe that the AO in para 2.1 noted some allegations about hawala operators and transaction. In para 2.2 the AO noted that the assessee was actively involved in structuring foreign direct investment and external commercial borrowings of Nanda Group companies as it is evident from the seized documents. In para 2.3 the AO reproduced selected questions and answers from the statements of Shri Bipin B. Shah and Shri Anand Shukla. In para 2.4 the AO mentions about his questionnaire and assessee’s reply was consider but there is no deliberations and queries raised by him and assessee’s response thereto. In para 2.5 the AO picked question No. 10 asked from Shri Bipin B. Shah and his reply pertaining to receipt of cash towards sale of scrap of Hotel Sea Rock. Thereafter, in para 2.6 the AO proceeded to make addition with the following conclusion:
“Based on the above, it is clear that the assessee used to arrange the delivery of cash from Delhi through one Shri Vicky Puri. His trusted aides Shri Bipin B. Shah and Shri Anand Shukla used to pick up this cash and deliver it to the residence of the assessee in Mumbai. As per the admission of Shri Bipin B. Shah and Shri Anand Shukla, Rs. 25 lakhs received by the assessee in Mumbai through hawala channels. This represents the unaccounted income of the assessee. Hence it is added to the taxable income of the assessee for the previous year 2006-07. Hence it is added to the taxable income of the assessee for the previous year 2006- 07. Penalty proceedings u/s 27(1)(c) of the Act are being initiated separately.”
From the first appellate order of the ld. CIT(A) we observe that firstly he noted some facts relevant to addition in question which read as under:
The fourth ground of appeal is against addition of Rs. 25 crores. The facts are that the Assessing Officer, relying on statements, on oath, of one Sh. Anand S Shukla, an employee of ELEL Hotels & Investment Ltd. (hereinafter ELEL), and one Sh.
Bipin B Shah, chartered accountant and director of ELEL, recorded during the course of survey u/s 133 A or search and seizure u/s 132(4) on 28.2.2007 and 1.3.2007 (the next day wherein the search & seizure operation continued), came to the conclusion that the aforesaid amount represented undisclosed income of the appellant, the managing director of ELEL, as cash received and transported by Sh. Shukla and delivered to the appellant, or to Sh. Shah on behalf of the appellant. Sh. Shukla claimed in his statement that he had transported cash 7-8 times for two months in January-February 2006, and declined to do so the next 4-5 times. He claimed that the amount transported was about Rs.50 lakh in each transaction. Sh. Shah, while confirming that the amount was about Rs.50,00,000/- in each transaction, claimed that the entire transportation was carried out by Sh. Shukla in the period January to April 2006 and coordinated by one Sh. Vikrant Puri from Delhi and the total amount may have been about Rs.20 crore to Rs.25 crore. However, the appellant in his statement u/s 132(4) recorded in Delhi on 28.2.2007 denied any financial transactions with Sh. Vikrant Puri and in his statement recorded u/s 132(4) in Mumbai on 1.3.2007 denied the statement of Sh. Bipin B Shah. On 2.3.2007 (that is the next day after search had been temporarily concluded) Sh. Anand Shukla swore an affidavit stating that he had made the statements under section 132(4) under duress and deteriorating health. The retraction was filed before the Investigation wing of the Income Tax department. Sh. Bipin Shah did not immediately retract from his statement u/s 132(4), but did so later during the course of assessment proceedings. During the assessment proceedings, the relevant extracts of the statements were provided to the appellant but not the entire statements. Opportunity to cross- examination was sought by the appellant but refused by the revenue on the ground that the witnesses were not revenue’s witness. The said cash was never found or seized. No documentary evidence to corroborate the statements was seized. The legal matter in issue here is whether the statements / admissions of representative in interest, which are retracted later can be used against the appellant when entire material relied upon, and the opportunity to cross-examine, were denied to the appellant. I will decide this J legal issue first before analyzing the factual matrix of the case. /
The Hon'ble Supreme Court in Narayan Bhagwantrao Gosavi Balajiwale v. Gopal Vinayak Gosavi [AIR 1960 SC 100] held that an admission is the best evidence that an opposite party' can rely upon and. though not conclusive, yet could be decisive of the matter unless successfully withdrawn or proved erroneous. In Pullangode Rubber Produce Co. Ltd. v. State of Kerala [(1973) 91 ITR 18 (SC)J, while observing that admission is an extremely important piece of evidence, the Apex Court held that it cannot be said to be conclusive and the maker can show that it was incorrect. In Satinder Kumar (HUF) v. CIT [(1977) 106 ITR 64 (SC)] it was held that while an admission made by an assessee constitutes a relevant piece of evidence but if the assessee contends that in making the admission he had proceeded on a mistaken understanding or on misconception of facts or on untrue facts such an admission cannot be relied upon w ithout first considering the aforesaid contention. The Supreme Court in the case of Avadh Kishore Das v. Ram Gopal [AIR 1979 SC 861] held that admission are not conclusive proof of the facts admitted and may be explained or shown to be wrong, but they do raise an estoppel and shift the burden of proof on to the person making them. The 1 Hon'ble Court further held that unless shown or explained to be wrong, such admissions are efficacious proof of the facts admitted. However, the Supreme Court in the case of Mehta Parikh & Co. v. CIT 1(1956) 30 ITR 181 (SC)( held that it will not be open to the revenue to challenge the statements made by the deponent in their affidavits later on, if no cross examination with reference to (lie statements made in the affidavits is done. In the present ease, the statement / admission was not made by the appellant but by other persons connected with his business and financial affairs. There are several judicial rulings to establish the principle that a statement / admission cannot be held against a third person without giving opportunity to that person to rebut it, and in this regard several cases have been cited in the submissions tiled on behalf of the appellant reproduced later in this Paragraph.
4.3 However, it is also settled law that strict rules of evidence are not applicable to tax proceedings {CTT v East Coast Commercial Co. Ltd. (1967) 63 ITR 449} and an income tax officer (ITO) can act on material which may not be accepted as evidence in a court of law [Dhakeswari Cotton Mills Ltd. v. CIT [1954] 26 ITR 775; Dhakeswari Cotton Mills Ltd. v. C1T [1955] 27 ITR 126 (SC)]. The Hon'ble Supreme Court held that the provisions of Evidence Act are not applicable to the income tax proceedings {Chuharmal VS. CIT (1988) 172 ITR 250}, meaning that the rules of evidence contained in Indian Evidence Act. 1872 are not rigorously applicable. It is open to the ITO to collect materials to facilitate assessment even by private enquiry. But if he desires to use the material so collected, the assessee must be informed of the material and must be given an adequate opportunity of explaining it [C. Vasantlal & Co. v. CIT [1962] 45 ITR 206 (SC)}. Thus, although the rules of evidence are not rigorously or strictly applicable to tax proceedings, nonetheless it may be useful to refer to the relevant provisions of law of evidence and judicially settled rules to clarify the matter in issue. Section 17 of the Indian Evidence Act, 1872 defines admission as a statement, oral or documentary or contained in electronic form, which suggests any inference as to any fact in issue or relevant fact, and is made by any of the persons and under the circumstances mentioned in section 18 to 23 of the Indian Evidence Act. Section 18 provides that statements made by a party to a proceeding, or by an agent whom the court regards as expressly or impliedly to be authorized, are admissions. Admissions, though not conclusive proof of matters admitted, arc relevant under section 21 and may be proved against the person who makes them or his representative in interest, but cannot ordinarily be proved by or on behalf of the person who makes them. Another form of admission, in criminal proceedings, is confession. Sections 24 to 30 of the Indian Evidence Act contain the relevant provisions. Section 24 invalidates any confession caused by inducement, threat or promise. Section 25 prohibits proof of any confession made before a police officer. Section 26 provides that no confession made while in police custody be proved against the person making it except in the presence of a magistrate (u/s 164 Cr PC). Sections 27 to 29 provide exceptional circumstances when confessions may be relevant. Section 30 provides for situations dealing with confession of a co- accused. While confessions and admissions are considered good evidence, Courts have been highly circumspect about their validity. In Bharat vs. State of U.P. [1971 (3) SCC 950) Hon’ble Hidayatullah, C.J., speaking for a three-Judge Bench observed thus:
"Confessions can be acted upon if the court is satisfied that they are voluntary and that they are true. The voluntary nature of the confession depends upon whether there was any threat, inducement or promise and its truth is judged in the context of the entire prosecution case. The confession must fit into the proved facts and not run counter to them. When the voluntary character of the confession and its truth are accepted, it is safe to rely on it. Indeed a confession, if it is voluntary and true and not made under any inducement or threat or promise, is the most patent piece of evidence against the maker. Retracted confession, however, stands on a slightly different footing. As the Privy Council once stated, in India it is the rule to find a confession and to find it retracted later. A court may take into account the retracted confession, but it must look for the reasons for the making of the confession as well as for its retraction, and must weigh the two to determine whether the retraction affects the voluntary nature of the confession or not. If the court is satisfied that it was retracted because of an after- thought or advice, the retraction may not weigh with the court if the general facts proved in the case and the tenor of the confession as made and the circumstances of its making and withdrawal warrant its user. All the same, the courts do not act upon the retracted confession without finding assurance from some other sources as to the guilt of the accused. Therefore, it can be stated that a true confession made voluntarily may be acted upon with slight evidence to corroborate it, but a retracted confession requires the general assurance that the retraction was an after-thought and that the earlier statement was true."
Dealing with retracted confession, a four-Judge Bench of the Supreme Court in Pyare Lai v. State of Assam (AIR 1957 SC 216), clarified the legal position through Hon’ble Justice Subba Rao thus;
"A retracted confession may form the legal basis of a conviction if the court is satisfied that it was true and was voluntarily made. But it has been held that a court shall not base a conviction on such a confession without corroboration. It is not a rule of law, but is only rule of prudence. It cannot even be laid down as an inflexible rule of practice or prudence that under no circumstances such a conviction can be made without, corroboration, for a court may, in a particular case, be convicted of the absolute truth of a confession and prepared to act upon it without corroboration; but it may be laid down as a general rule of practice that it is unsafe to rely upon a confession, much less on a retracted confession, unless the court is satisfied that the retracted confession is true and voluntarily made and has been corroborated in material particulars."
As to the extent of corroboration required, it was observed by the Apex Court in Subramania Gounden's case (1958 SCR 428) that each and every circumstance mentioned in the retracted confession regarding the complicity of the maker need not be separately and independently corroborated. The learned Judges observed;
"It would be sufficient in our opinion that the general trend of the confession is substantiated by some evidence which would tally with what is contained in the confession". In the case of Shankoriu v. State of Rajasthan [1978 (3) SCO 435] decided by a three-Judge Bench Hon'ble Justice Sarkaria noted the twin tests to be applied to evaluate a confession: (I} whether the confession was perfectly voluntary and (2) if so, whether it is true and trustworthy. The learned Judge pointed out that if the first lest is not satisfied the question of applying the second test does not arise. Then the Court indicated one broad method by which a confession can be evaluated. It was said:
"The Court should carefully examine the confession and compare it with the rest of the evidence, in the light of the surrounding circumstances and probabilities of the case. If on such examination and comparison, the confession appears to be a probable catalogue of events and naturally fits in with the rest of the evidence and the surrounding circumstances, it may be taken to have satisfied the second test." In Parmanand Pegu v. State of Assam [2004 (7) SCO 779] the Apex Court, while adverting to the expression "corroboration of material particulars" used in Pyare Lai Bhargava's case, clarified the position thus:
"By the use of the expression ’corroboration of material particulars’, the Court has not laid down any proposition contrary to what has been clarified in Subramania Goundan case as regards the extent of corroboration required. The above expression does not imply that there should be meticulous examination of the entire material particulars. It is enough that there is broad corroboration in conformity with the general trend of the confession, as pointed out in Subramania Goundan case."
The analysis of the legal position in paragraphs 18 & 19 of the above judgement is also relevant:
"Having thus reached a finding as to the voluntary nature of a confession, the truth of the confession should then be tested by the court. The fact that the confession has been made voluntarily, free from threat and inducement, can be regarded as presumptive evidence of its truth. Still, there may be circumstances to indicate that the confession cannot be true wholly or partly in which case it loses much of its evidentiary' value. In order to he assured of the truth of confession, this Court, in a series of decisions, has evolved a rule of prudence that the court should look to corroboration from other evidence.
However, there need not be corroboration in respect of each and every material particular. Broadly, there should be corroboration so that the confession taken as a whole fits into the facts proved by other evidence. In substance, the court should have assurance from all angles that the retracted confession was, in fact, voluntary and it must have been true."
14. Further, the ld. CIT(A), in operative paras 4.6 to 4.12 decided the issue and deleted the major part of the addition and confirmed the part addition. These operative parts of the impugned order read as under:
“ 4.6 I have examined the assessment order, other relevant orders, relevant statements and submissions made on behalf of the appellant. 'The legal matrix has already been set out in Paragraphs-4.2, 4.3 and 4.5 above. There are essentially three issues to be decided, (i) What is the evidence to establish that there were 'hawala' transactions as alleged, and if there was cash transported what was the amount? (ii) What is the impact of not giving the evidence to the appellant or not allowing him the opportunity of cross-examination? (iii) Where does the balance of evidence lie?
4.7 Fact Further fact Conclusion 1 Statement of Sh Anand Retraction by Sh. Retraction was Shukla vide affidavit immediate, goes in Shukla dated 28.2.2007 and favour of dated 2.3.2007 1.3.2007 appellant 2 Retraction by Sh. Retraction was Statement of Sh. Bipin B Shah vide affidavit delayed, goes in Shah, CA dated 28.2.2007 dated 23.12.2008 favour of revenue and 1.3.2007 3 Appellant Goes in favour of Statement of Sh. Sanjeev categorically denied Nanda (appellant) dated appellant any cash generation 28.2.2007 or transportation
4 Other documents / evidence No other document / Goes in favour of evidence seized appellant 5 No question posed Goes in favour of Statement of Sh. Vikrant regarding cash appellant Puri dated 22.3.2007 transportation 6 Addition deleted in Goes in favour of Addition of same amount in appeal by C1T( A), appellant the case of ELEL Hotels confirmed by 1TAT 7 Appellant not Goes in favour of Copies of statements not confronted appellant given to appellant 8 Neutral fact Cross-examination Opportunity to cross- examine persons whose not relevant after statements were relied upon retraction 4.9 A perusal of the above table suggests that facts relevant to the matter in issue are in overwhelmingly favour of the appellant. There is no evidence, barring statements of Sh. Anand Shukla, employee of ELEL Hotels, and statement of Sh. Bipin B Shah, CA. Both these statements stand retracted. Appellant has denied the alleged transactions from the very beginning. For retraction of statements given on oath, remedy lies in proceeding against the witnesses under the Income Tax Act and / or under Cr PC, However, law permits the courts or the authorities to distinguish relevant facts and come to the truth of the matter. While it is correct that the same addition was deleted by the CIT (A) in the case of ELEL Hotels & Investments Ltd. (ELEL), and IT AT confirmed the deletion, it was only qua ELEL and not qua the appellant. Thus, although the balance of evidence, facts and mitigating circumstances are in favour of the appellant^ shall proceed to assume that some part of the statement given by Sh. Anand Shukla and confirmed by Sh. Bipin Shah was reflective of the financial affairs of the appellant.
4.10 As regards the first issue, the only evidence is oral evidence, which is a statement of Sh. Anand Shukla recorded under oath u/s 133A on 28.2.2007 at Hotel Sea Rock, Mumbai. There is no primary or documentary evidence. The relevant questions and answers in the statement of Sh. Shukla are reproduced below:
Q. 6. Please explain whether you have received any other cash on behalf of the company or on behalf of the promoters of the company.
Ans. Yes, 1 have received a lot of cash on behalf of the company / promoters (i.e. the Nanda family).
Q. 7. Please explain in detail the modus operandi of receiving cash. Ans. Mr. Bipin B. Shah, a Chartered Accountant, having his office at I Of Rqjguru Appt, Baburao Parulekar Road, Near
Portuguese church, Prabha Devi, Mumbai used to call me on my mobile phone no. 9821053721 from either his mobile no. 9820053417 or his office landline member and ask me to collect cash from unknown persons and handover the cash to him. Twice / have handed over the cash at the residence of Shri Sanjiv Nanda at Kublisque, 9"' floor. Pali Hill, Bandra (w), Mumbai. Cash was handed over to the residence of Shri Nanda only when Sh. B.B. Shah was not available.
Q.8. Please state how many times you have collected cash and what is the quantum.
Ans. In the month of probably January or February 2006, over a period of about two months cash was collected by me. I collected the cash about 7-8 times. The cash was handed over in a black colour Airbag. I handed over the cash to Shri B.B. Shah or Shri Nanda's house. I never counted the cash in detail. However it was about 50 Lakh in each transaction.
Q.9. Please explain who is the person who handed you the cash and how he recognized you or you recognized him.
Ans. For the first time Shri B.B. Shah Called me up and told me that I will get a call from a person who will ask my name and ask for a number on the ten rupee note in my possession. After that he told me to give a note number and go to Pancharatna building where by seeing the note cash will be handed over to me. I accordingly went to the Pancharatna building. I was in front of the main gate of the Pancharatna building. After about 10 minutes I again got a call from the same person who asked me the note number. I informed him about my exact location and dress. He came, saw the number on the ten rupee note and handed over a bagful of cash to me which was on the same day handed over to Shri B. B. Shah.
Subsequently I used to get calls from Shri B.B. Shah to collect the cash and he used to direct me to go to the Pancharatna building. Every lime the same procedure was fallowed. However each time a different person used to come and give me the cash. After 1 did it for 7-8 limes, I felt guilty and was afraid. Hence for the next 4-5 times. I refused to go to collect the cash. Since then I don’t know who collects the cash of the company.
Q. 10. Have you ever met Shri B. B. Shah after the transaction of cash was done by you and after you refused to go and collect the cash. Ans. Yes, I have met Shri B.B. Shah many times. He is the chartered accountant of the company and also the business director of the company. So I regularly meet him even now.
Q.11. Please state what transpired by you and Mr. B.B. Shah regarding the cash collected by you and given to Shri B. B. Shah.
Ans. We never discussed this issue again. He once told me that about 20-25 crore of cash in total was received by him for the Nanda Group.
Q. 12. Please state whether you know anything about the source of cash. Ans. 1 don't know much about the source of cash probably it was arranged from someone in Delhi and delivered in Mumbai. This statement was put to Sh. Bipin B. Shah, and corroborated by him, in his statement recorded under oath u/s 132(4) on 28.2.2007 at Antariksha Apartment, Dadar, Mumbai as under:
Q.
In his statement under oath Shri Anand Sukla manager of ELEL Hotels and Investment Limited has stated that on your directions he collected cash from Pancharatna Building from some hawala operator and has handed over the same cash to you in your office. Please confirm and also state on whose directions cash was collected and whether the same was retained by you or was subsequently handed over to some other person. I am showing you the statement of Shri Anand Shukla dt. 28/02/2007. Please go through the same and then give your answer.
Ans. Yes I have gone through the relevant part of the statement of Shri Anand Shukla which has been shown to me. Yes I confirm having coordinated the collection of cash by Mr. Anand Shukla and as stated correctly by him the cash used to be delivered to me, when Mr. Sanjeev Nanda was not available in town. Whenever he used to be in town then 1 was not involved for the captioned cash transaction. Also whenever cash was received by my office the same used to be delivered to Mr. Sanjeev Nanda either at his residence or at his instance to any other person. This cash transaction used to be coordinated by one Mr. Vicky (Vicky Puri) from Delhi through his mobile No- 9810400009 and Mr. Vicky is a friend of Mr. Sanjeev Nanda. Shri Vicky used to give me a call to get the cash collected. Therefore on his specific direction. I used to send Shri Anand Shukla to coordinate the collection of such cash. I once again reiterate that 1 was never a beneficiary> of such cash transaction and whatever cash was received in my office was further handed over. No part of cash was ever retained by me.
Please state what was the quantum of cash delivered by Shri Anand Shukla to your office and when it was delivered.
Ans. I do not exactly recollect the period in which the abovementioned transaction of cash was pursued, however it. may have been probably between Jan 2006 to April 2006. With regard to quantum of cash transaction 1 state that I do not recollect the exact amount as the transaction took place in quick succession and I personally never counted the cash however I can say from my recollection that it was in the range of Rs. 20 crores to 25 crores.
The above statement of Sh. Shah was re-confirmed by Sh. Shukla in his statement recorded u/s 132(4) at Hotel Sea Rock, Bandra, Mumbai on 1.3.2007, although he subsequently swore an affidavit to the effect that he had given the statement under duress and denied parts of his statement, as under:
Q.9 When and where usually the above mentioned transaction take place.
Ans. As regards scrap, the cash is received in the hotel and then handed over to Sh. Bipin Shah in his residence or office. As regards, the other cash collected from Pancharatna building, I stand by what I have stated in my statement during the course of survey on 28.02.2007. I am sure Sh. Bipin B. Shah must have confirmed what I have stated. I once again confirm receiving about 20-25 crore cash from hawala dealers in Pancharatna building and handing over the same to Sh. Bipin B. Shah and Sh. Sanjiv Nanda.
The statement of Sh. Bipin B Shah was put to Sh. Sanjeev Nanda, the appellant, during his statement recorded u/s 132(4) at Hotel Sea Rock, Bandra, Mumbai on 1.3.2007 and he replied as under:
Q.3. I am showing you the statement under oath of Shri Bipin B Shah a Chartered Accountant by profession recorded at the time of search U/S 132(4) of the IT Act. Please go through the same and state whether the same is correct or not in respect of collection n of cash on your behalf and delivering the same to you or to anyone on your instruction. Ans. I have gone through the statement and I stale that I have not taken , any cash from Shri Bipin B Shah and I have not instructed him to collect any cash on my behalf from anyone. I have also confirmed that no cash has been delivered on my behalf to anyone on my instructions. All the transactions are recorded in the books of accounts of the company and other companies of group concern. There are no transactions which are not recorded in the books of accounts that. 1 am aware of I have already rendered my statement on oath on 28.02.2007 and J confirm that whatever stated in that statement is truly and fully correct.
4.11 I shall now distinguish the relevant and undisputed facts. Sh. Anand Shukla, in his statement dated 28.2.2007, admitted to have carried an amount of about Rs.50 lakh each 7-8 times for two months during commencing January or February 2006. He further stated to have declined to do the activity 4-5 times. That would have happened after the period of two months he carried the cash, e March and April, 2007. Thus, the maximum number of times this activity was carried out or could have been carried out was 13 times, involving a total amount of Rs.6,50,00,000/-. Sh. Bipin B Shah, on the other hand, stated that the cash was transported in the period January to April, 2006 and the total amount so transported would he in the range of Rs.20 crore to Rs.25 crore. He further stated that transportation of the entire amount was carried out by Sh. Anand Shukla. He, however, confirmed that each time the amount was about Rs.50 lakh. Although the period of transportation of cash as stated by Sh. Anand Shukla and Sh. Bipin Shah arc different, with the former saying it was January and February, 2006 and the latter saying it was January to April, 2006, the total period of January to April 2006 tallies. As to the maximum period involved, we shall take the version of Sh. Shah as he, being CA, was better versed with the financial affairs of the appellant, and as per statement of Sh. Shukla he carried out the activity 7-8 times at the instruction of Sh. Shah.
As to the number of times the cash was ferried, we shall take the version of Sh. Shukla, as he coordinated the transactions at the ground level. The number of times cash was ferried will be taken to be 13 times (i.e. 8 times carried out by Sh. Shukla and 5 times declined by him). There is no consistency in the statements of these two persons that each installment was about Rs.50,00,000/-. Thus, the total cash transaction shall be taken to be Rs.6,50,00,000/- (i.e. Rs.50 lakh x 13 times). Thus, in my considered opinion, is the maximum amount that could have been transported for and on behalf of the appellant. The amount of Rs.20 crore to Rs.25 crore is estimate or heresay, without any basis and is to be ignored. If the frequency of the transactions is evenly spread over the period January 2006 to April 2006, the number of transactions and the amounts would be as under: Frequency Amount (Rs. Crore) January, 2006 3-4 times 1.50 to 2.00 February, 2006 3-4 times 1.50 to 2.00 March, 2006 3-4 times 1.50 to 2.00 April, 2006 2-3 times 1.00 to 1.50
4.12 In view of the aforesaid legal and factual position of the matter, I hold that the maximum amount chargeable to tax shall be Rs.6,50,00,000/- of which Rs. 1,50,00,000/- shall be brought to tax during this AY 2007-08 and the remaining amount of Rs.5,00,00,000/-, relating to the previous year 2005-06, shall be chargeable to tax during the earlier AY 2006-
This ground of the appellant is partly allowed as above. AO is directed to restrict the disallowance to Rs. 1,50,00,000/- and, consequently, appellant gets relief of Rs.23,50,00,000/- for the current AY 2007-08.”
15. In the light of the stand and allegation of the AO as well as the first appellate authority, we note that when a search and seizure operation was conducted on Nanda group on 28.2.2007, statements of Shri Bipin B. Shah and Shri Anand Shukla were recorded on the same date 28.2.2007 and subsequently, on 1.3.2007, statement of Shri Bipin B. Shah and Shri Anand Shukla were again recorded and on 22.3.2007, statement of Shri Vikrant Puri were also recorded by DDIT, Delhi. It is pertinent to note that Shri Anand Shukla retracted his statement immediately on 2.3.2007 by way of filing an affidavit and Shri Bipin B. Shah also retracted his statement by way of filing an affidavit on 23.12.2008, after approximately 19-20 months. It is also pertinent to note that undisputedly admittedly, observed by the ld. CIT(A) in para 4.1, as are reproduced herein above, opportunity to cross examine the witnesses, Shri Bipin B. Shah, Shri Anand Shukla and Shri Vikram Puri was sought by the assessee but was refused by the Revenue on the ground that the witnesses were not Revenue’s witnesses. In this para, the ld. CIT(A) also noted that pertaining to impugned addition under adjudication, the said alleged cash was never found or seized and no other documentary evidence to corroborate the said statements were seized during search and seizure operation, or subsequent thereto. On the basis of above noted facts, we proceed to safely presume that except the statements of Shri Bipin B. Shah and Shri Anand Shukla, there was no other evidence, document or any other facts before the authorities below regarding alleged transfer of cash from Delhi to Mumbai through hawala transactions. At this juncture, it is also relevant to note that the ld. CIT(A), in para 4.8 of the impugned order, as drawn a conclusion that the statement of Shri Anand Shukla on 28.2.2007 and 1.3.2007 which were retracted on 2.3.2007 by way of filing affidavits, then immediate retraction goes in favour of the assessee whereas the statement of Shri Bipin B. Shah was retracted by way of an affidavit dated 23.12.2008 and thus the retraction was delayed and delayed retraction goes in favour of the Revenue. The ld. CIT(A) has also noted that in the statement of Shri Sanjeev, the assessee has categorically denied any cash generation or transportation. Therefore, this statement goes in favour of the assessee-appellant. The ld. CIT(A) also noted that there was no document or evidence seized during the course of search operation or thereafter. Therefore, this fact goes in favour of the assessee. It is pertinent to note that in the incomplete statement of Shri Vikrant Puri on 22.3.2007 no question was raised regarding cash transportation through Shri Bipin B. Shah and Shri Anand Shukla. Therefore, the statement of Shri Vikrant Puri goes in favour of the assessee whereas addition of the said amount has been made in the case of Elel Hotels & Investment Ltd [supra], which was deleted by the ld. CIT(A) and order of the first appellate authority was confirmed by the ITAT. This fact also goes in favour of the assessee. Stand of the assessee gets supported therefrom. In para 4.8, the ld. CIT(A) also records that copies of the statements not given to the assessee and the assessee was not confronted to the same and opportunity to cross examine the persons /witnesses whose statements were relied upon by the AO for making addition and for upholding part addition by the ld. CIT(A) was not given to the assessee. The ld. CIT(A) on this issue noted that retraction of the statement, cross examination is not relevant and this fact become a neutral fact. On careful consideration of the statements of Shri Bipin B. Shah and Shri Anand Shukla, in totality, firstly we note that Shri Anand Shukla, replying to Question No. 11, stating that Shri Bipin B. Shah whereas told him that about 20-25 crores of rupees, in cash, in total, was received by him for Nanda Group and as per para 2.1 of the assessement order, it transpires that it was the case and allegation of the AO that the assessee and his father Shri Suresh Nanda have been taking the services of hawala operators by name of Shri Vikrant Puri to bring in unaccounted income from abroad and to transfer the same from Delhi to Mumbai. From para 2.2 to 2.6 of the assessment order, we observe that firstly, statement of Shri Anand Shukla was recorded on 28.2.2007 and on the very same dated, subsequently, the statement of Shri Bipin B. Shah was recorded and prior to recording of statement of Shri Bipin B. Shah, the statement of Shri Anand Shukla was also shown to him but there was no question to Shri Bipin B. Shah about the total amount of hawala transfer alleged to be transferred from Delhi to Mumbai through the so called hawala operator Shri Vikrant Puri, specially there was no question about the answer to question No. 2 to Shri Anand Shukla wherein he stated that Shri Bipin. B. Shah told that 20-25 crores of cash was received in total by him for Nanda group. We further observe that replying to question 8 and 9, Shri Anand Shukla stated that he did transfer of cash for 7-8 times and it was about Rs. 50 lakhs cash in each transaction. It is pertinent to note that the AO has discussed parts of his choice in the statement of Shri Bipin B. Shah and Shri Anand Shukla but he has not discussed and considered the statement of the so called hawala operator Shri Vikrant Puri recorded on 22.3.2007 available at assessee’s paper book page 90 and the statement of Shri Sanjeev Nanda recorded on this issue on 1.3.2007 at Hotel Sea Rock Mumbai available at assessee’s paper book page 80 wherein replying to question No. 3, the assessee, after perusing the statement of Shri Bipin B. Shah stated that he has not taken any cash from Shri Bipin B. Shah and he had not instructed him to collect any cash on his behalf from anyone. At this stage, it is also relevant to note that the so called hawala operator Shri Vikrant Puri on 22.3.2007 but no question was asked to him regarding the facts emerged from Shri Bipin B. Shah and Shri Anand Shukla recorded twice first on 28.2.2007 and second time on 1.3.2007. The onus was on the Revenue authorities to bring and establish this fact by way of questioning Shri Vikrant Puri so called hawala operator posing and showing him statements of Shri Bipin B. Shah and Shri Anand Shukla. But this exercise has not been undertaken by the revenue authority who administered the oath and recorded the statement of Shri Vikrant Puri.
The ld. Counsel for the assessee has placed reliance on plethora of orders and judgments of the Hon'ble Supreme Court and Hon'ble High Courts and co-ordinate Bench of the Tribunal including the judgment of the Hon'ble Apex Court in the case of Kailash Chand [supra] wherein their Lordships held that it was for the Revenue to rule out this possibility to bring out proper evidence on record for the burden of showing that the amount was remitted by the assessee. In the case of Andaman Timber [supra] the Hon'ble Supreme Court also held that when opportunity to cross examine the witnesses was sought by the assessee and no such opportunity was granted and request of the assessee was rejected, then testimony of such witnesses cannot be recorded and should be discredited and there was no other material with the department on the basis of which it could be justify its action. Therefore, the action of the Revenue cannot be held as justified in making addition on the basis of such witnesses. On the basis of the foregoing discussion, we reach to a logical conclusion that before the AO and ld.CIT(A), except the retracted statements of Shri Bipin B. Shah and Sh Anand Shukla, there was no other statement, document or any other material to establish and substantiate this fact that the assessee and his father received their unaccounted income from abroad and the same was transferred from Delhi to Mumbai through hawala operator Sh Vikrant Puri. At the cost of repetition, it is pertinent to mention that the statement of Sh Anand Shukla is based on hearsay facts, stated to him by Sh Vikrant Puri that Sh Shah told him that approximate 20-25 crores of rupees was transferred for Nanda Group, but this question was not posed to Shri Bipin B. Shah during his statement, which was recorded after recording the statement of Shri Anand Shukla. The case of the Revenue becomes baseless when we notice that after the statements of Shri Bipin B. Shah and Shri Anand Shukla, statement of Shri Vikram Puri, the so called hawala operator was recorded but no question was posed to him about the facts emerging from the statements of Shri Bipin B. Shah and Shri Anand Shukla and we cannot ignore that in the statement of the assessee, recorded on 1.3.2007, the assessee specifically and categorically denied any kind of cash transaction or transfer through hawala operator Shri Vikram Puri with the aid of Shri Bipin B. Shah and Shri Anand Shukla and this statement of the assessee and Shri Vikram Puri cannot be ignored and addition made by the AO and partly upheld by the ld. CIT(A) based on retracted statement of Shri Bipin B. Shah and Shri Anand Shukla cannot be held as valid and sustainable. It is also pertinent to note that the ld. DR could not assist us to show any contrary fact about the allegation of the ld. AR that addition of similar amount was also made in the case of Elel Hotels & Investment Ltd [supra], which was deleted by the ld. CIT(A) and the order of the ld. CIT(A) was further upheld by the Tribunal and the issue attained finality in the case of Elel Hotels & Investment Ltd [supra]. On the basis of the foregoing discussion, we have no hesitation to hold that the AO made addition only on the basis of retracted statement of Elel Hotels & Investment Ltd [supra], and the ld. CIT(A) deleted the major part of the addition to uphold the addition of Rs. 1.5 crore on the basis of guess work, surmises and conjectures on the similar set of facts and circumstances which cannot be held in accordance with the provisions of the Act and sustainable and therefore, we finally hold that addition made by the AO and its part confirmation by the first appellate authority was not on correct premise and justified reasoning and addition was made and party upheld without any cogent and valid reasons. We, therefore, set aside the entire addition made by the AO. Accordingly, Ground Nos. 2 and 2.1 of the assessee are allowed and sole ground of the Revenue being devoid of merits is dismissed.
Ground No. 3 of the assessee.
The ld. Counsel for the assessee pointed out that the ld. CIT(A) has erred in upholding the addition of Rs. 7.5 lakhs being cash found/seized during the courses of search on 28.2.2007 despite of explaining the source that the same was out of withdrawals made from assessee’s bank account with CITI Bank. The ld. Counsel took us through the relevant operative part of para 4.1 of the assessment order and submitted that the AO noted factually incorrect facts that there was no significant withdrawal by the assessee to justify the presence of such huge cash in his possession and cash withdrawals by the parents of the assessee were not sufficient to even explain the cash found in their possession. The ld. Counsel vehemently pointed out that the AO wrongly treated the cash as unexplained income of the assessee. The ld. Counsel for the assessee also took us through the relevant operative part of his appellate order at para 5.1 to 6.3 and submitted that Rs. 6,25,500/- was found from the chamber of the assessee in Claridges Hotel and another amount of Rs. 1,28,000/- in the office of Shri Malik Kapoor, an employee of the assessee and these amount were lying out of withdrawals made by the assessee from his bank account with CITI Bank. The ld. Counsel vehemently pointed out that the ld. CIT(A) has noted that the withdrawals from the bank were not made immediately before the search but they were spread over July 2006 to February 2007 and total withdrawals from the said account of Rs. 8,41,000/-. The ld. Counsel strenuously contended that despite of undisputed fact that the assessee withdrew Rs. 84,100/- during July 2006 to February 2007, the ld. CIT(A) was not justified in confirming the addition by holding that no cash flow statement was furnished by the assessee to establish the claim that the cash found was the same as withdrawn from the CITI Bank from time to time prior to search and seizure operation.
Replying to the above, the ld. DR supported the action and stand of the AO and submitted that the ld. CIT(A) was quite justified and reasonable in upholding the addition. On careful consideration of above rival submissions of both the sides from para 4.1 of the assessment order, we note that the CITI Bank statement shows that only small amounts in the range of Rs. 30,000/- to Rs. 40,000/- have been withdrawn in cash and there was no sufficient withdrawal to justify such huge cash in hand in the possession of the assessee. From the first appellate order para 6.3, we note that the ld. CIT(A), on the same statement account with CITI Bank noted that there was withdrawal of Rs. 5 lakhs on 17.10.2006 [4 months before search]; withdrawal of Rs. 1 lakh on 17.6.2007 [7 months before search] and withdrawal of Rs. 30,000/-. The ld. CIT(A) has also noted that the total withdrawals amounting to Rs. 8,41,000/- was from the same account with the CITI Bank. Second part of para 6.3 ld. CIT(A) dismissed the explanation of the assessee by holding that the withdrawals are different, mostly small and the same are spread over considerable period of time and the small amounts appeared to be withdrawals in the nature of out of pocket and personal expenditure. The ld. CIT(A) also noted that the assessee being an individual does not require to maintain cash book but not cash flow statement was filed to establish that the cash found was same as withdrawn from the CITI Bank from time to time prior to search and seizure. The ld. CIT(A) also alleged that there is no evidence to link the cash found with the withdrawals. The onus was on the assessee to establish his claim only in view of the above. We note that the ld. CIT(A) noted the withdrawal of Rs. 8,41,000/- during July 2006 to February 2007 from the bank account of the assessee with CITI Bank from where withdrawals of Rs. 5 lakhs, Rs. 1 lakh, Rs. 60,000/- and other small amount was made which was spread over 7-8 months prior to search and seizure operation.
On the other hand, the ld. CIT(A) noted that the withdrawals are different and mostly small amounts spread over considerable period of time which appeared to be withdrawals in the nature of out of pocket. These findings are contradictory to the earlier findings of the first appellate authority. On the basis of facts noted by the ld. CIT(A) himself, it is amply clear that the assessee has withdrawn Rs. 8,41,000/- from the account with the CITI Bank during the period 7-8 months prior to search and seizure operations and the amount of withdrawal is more than the cash found and seized from the assessee’s office and his staff. At this juncture, on the basis of above noted facts, we have no hesitation to hold that the assessee has discharged his onus to prove the source of cash found in his possession during search and seizure operation and onus was shifted on the Revenue authorities to establish that the assessee used the withdrawal amounts for other purpose and the cash amount seized from him was his unaccounted and unexplained income. The AO and the ld. CIT(A) have noted contradictory and incorrect facts to make and uphold this addition and conclusion of the authorities below cannot be held as sustainable and reasonable. Thus, we set aside the same and accordingly the AO is directed to delete the impugned addition pertaining to cash seized from the assessee and hence Ground No. 3 of the assessee is allowed.
In the result, the appeal of the Revenue is dismissed and that of the assessee is allowed.
The decision is pronounced in the open court on 16.12.2015.