Shri Rajendra B. Agrawal,, GANDHIDHAM v. The Income Tax Officer (OSD),, GANDHIDHAM

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH RAJKOT BEFORE SHRI A.L. GEHLOT (AM) AND SHRI N.R.S. GANESA N (JM) I.T.A. NO.1052/RJT/2009 (ASSESSMENT YEAR 2003-04) SHRI RAJENDRA B AGRAWAL VS ITO (OSD) PLOT NO.195 GANDHIDHAM SECTOR 1/A GANDHIDHAM PAN : ABIPA6421G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MP SARDA RESPONDENT BY : SHRI AVINASH KUMAR O R D E R PER N.R.S. GANESAN JM BEING AGGRIEVED BY THE ORDER OF THE CIT(A) DATED 0 5-09-2009 CONFIRMING THE ADDITION OF RS. 3 06 060 THE ASSESSEE FILED THE APPEAL BEFORE THIS TRIBUNAL FOR THE ASSESSMENT YEAR 2003-04. 2. SHRI M.P. SARDA THE LEARNED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER REOPENED THE ASSESSMENT U/S 147 ON THE BASIS OF THE STATEMENT RECORDED BY DIRECTORATE OF REVENUE INTELL IGENCE (DRI). ACCORDING TO THE LEARNED REPRESENTATIVE FOR THE ASSESSEE AFTER RECORDING OF THE STATEMENT THE DRI HAS DROPPED ALL THE PROCEEDINGS. THEREFORE TH E REOPENING OF THE ASSESSMENT U/S 147 CANNOT BE SUSTAINED. THE LEARNE D REPRESENTATIVE FOR THE ASSESSEE FURTHER SUBMITTED THAT APART FROM THE STAT EMENT RECORDED FROM THE ASSESSEE BY THE DRI NO OTHER MATERIAL IS AVAILABLE ON RECORD TO SUGGEST THAT THERE WAS ANY ESCAPEMENT OF INCOME. 3. THE LEARNED REPRESENTATIVE FOR THE ASSESSEE FURT HER SUBMITTED THAT THE ASSESSEE WAS ARRESTED AND PUT BEHIND BARS. WHEN TH E ASSESSEE WAS IN THE JUDICIAL CUSTODY IMMEDIATELY AFTER TWO DAYS FROM TH E DATE OF RECORDING OF THE ITA NO.1052/RJT/2009 2 STATEMENT BY DRI THE ASSESSEE RETRACTED THE STATEME NT BY WRITING A LETTER DATED 05-12-2003 TO THE JURISDICTIONAL CHIEF JUDICIAL MAG ISTRATE. THIS LETTER OF THE ASSESSEE ADDRESSED TO THE CHIEF JUDICIAL MAGISTRATE WAS FORWARDED TO THE CONCERNED JAIL AUTHORITIES ALSO. THEREFORE ACCORD ING TO THE LEARNED REPRESENTATIVE THE STATEMENT SAID TO BE RECORDED B Y DRI CANNOT BE THE BASIS FOR MAKING ANY ADDITION SINCE IT WAS RETRACTED BY WRITI NG LETTER TO THE CHIEF JUDICIAL MAGISTRATE WITHIN TWO DAYS. THE LEARNED REPRESENTA TIVE FOR ASSESSEE HAS PLACED HIS RELIANCE ON THE JUDGMENT OF THE APEX COURT IN V INOD SOLANKI VS UOI CIVIL APPEAL NO.7407 OF 2008 THE COPY OF WHICH IS AVAILA BLE AT PAGE 36 OF THE PAPER BOOK. THE LEARNED REPRESENTATIVE AGAIN PLACED HIS RELIANCE ON THE JUDGEMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF KAILA SHBEN MANHARLAL CHOKSI VS CIT 220 CTR 138 AND ALSO THE DECISION OF THE AHMEDABAD BENCH OF THE TRIBUNAL IN ACIT VS JORAWARSINGH M RATHOD 94 TTJ 867 & DCIT VS PRAMUKH BUILDERS 115 TTJ 330 (TM). THE LEARNED REPRESENTATIVE AGAIN PLA CED HIS RELIANCE ON THE DECISION OF THE DELHI BENCH OF THIS TRIBUNAL IN SMT . SUJATA GROVER VS ACIT 99 TTJ 837. HE HAS ALSO RELIED UPON THE JUDGMENT OF TH E MADRAS HIGH COURT IN THE CASE OF CTI VS K BHUVANENDRAN & ORS 303 ITR 235. 4. ON THE CONTRARY SHRI AVINASH KUMAR THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEES POWER OF ATTORNEY HOLDER MADE A CATEGORICAL STATEMENT ABOUT THE RECEIPT OF PREMIUM IN THE STATEMENT RECORDED BY THE OFFICERS OF DRI. THIS RETRACTION SAID TO BE MA DE BY THE ASSESSEE WHEN HE WAS IN THE CUSTODY. ACCORDING TO THE LD.DR THE ASS ESSEE WAS ARRESTED AND HE WAS PUT BEHIND BARS. THEREFORE HE LOST ALL HIS HO NOUR. IN THAT STAGE OF FRUSTRATION A LETTER WAS WRITTEN TO THE CHIEF JUDIC IAL MAGISTRATE RETRACTING THE CONFESSION. THEREFORE THE RETRACTION MADE BY THE ASSESSEE CANNOT BE TAKEN INTO ACCOUNT. SINCE THE RECEIPT OF PREMIUM WAS ESTABLIS HED BY THE STATEMENT RECORDED BY DRI THE CIT(A) HAS RIGHTLY CONFIRMED T HE ADDITION MADE BY THE ASSESSING OFFICER. ITA NO.1052/RJT/2009 3 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND HAVE ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD INCLUDING THE JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE LEARNED REPRESENTATIVE FOR THE A SSESSEE. IN THIS CASE ONE ASHWIN AGRAWAL CATEGORICALLY APPEARS TO HAVE ADMITT ED THAT THE FABRIC WAS DIVERTED TO OPEN MARKET AND HE USED TO GET PREMIUM OF RS.0.50 PER METRE. THE TOTAL QUANTITY OF FABRICS SOLD IN THE OPEN MARKET W AS 6 12 059.39 MTRS. ACCORDINGLY THE ASSESSING OFFICER FOUND THAT A SUM OF RS.3 06 030 WAS ESCAPED FROM ASSESSMENT. SINCE THE INFORMATION WAS RECEIVE D BY THE ASSESSING OFFICER REGARDING THE ESCAPEMENT OF INCOME ON THE BASIS OF RECEIPT OF PREMIUM IN OUR OPINION THE ASSESSING OFFICER HAS RIGHTLY REOPENED THE ASSESSMENT. MERELY BECAUSE THE DRI DROPPED FURTHER PROCEEDINGS THAT C ANNOT BE A REASON FOR NOT ASSESSING THE INCOME IF ANY TAXABLE UNDER THE INC OME-TAX ACT. INCOME-TAX ACT BEING A SEPARATE ENACTMENT FOR ASSESSMENT OF INCOME LEVY OF TAX AND COLLECTION OF TAXES THE ASSESSING AUTHORITY HAS TO INDEPENDEN TLY ASSESS INCOME ACCRUED / RECEIVED BY THE ASSESSEE. THEREFORE WE DO NOT FIN D ANY INFIRMITY IN THE ORDER OF LOWER AUTHORITY IN REOPENING THE ASSESSMENT. 6. NOW COMING TO THE MERIT OF THE ADDITION OF RS.3 06 060 THE ASSESSING OFFICER MADE THE ADDITION ONLY ON THE BASIS OF THE STATEMENT SAID TO BE RECORDED BY DRI AND THE CUSTOMS AUTHORITIES. NO OTHER FURTH ER MATERIAL IS AVAILABLE ON RECORD TO SUGGEST THAT THE ASSESSEE HAS IN FACT EAR NED THAT INCOME. IT IS WELL SETTLED PRINCIPLE OF LAW THAT THE STATEMENT RECORDE D BY DRI IS UNDER THE FERA. THE CUSTOMS AUTHORITIES RECORDED HIS STATEMENT UNDE R THE CUSTOMS ACT. FERA AND CUSTOMS ACT ARE SPECIAL ACTS IN THEIR RESPECTIV E FIELD AND THEY OPERATE IN SEPARATE FIELD. LIKE THAT INCOME-TAX ACT ALSO IS A SPECIAL ENACTMENT WHICH OPERATES IN SEPARATE FIELD. THEREFORE THE ASSESSI NG OFFICER MAY NOT BE JUSTIFIED IN ASSESSING THE INCOME ON THE BASIS OF THE STATEME NT SAID TO HAVE BEEN RECORDED BY DRI AUTHORITIES. THE ASSESSING OFFICER OUGHT TO HAVE EXAMINED THE ISSUE INDEPENDENTLY INSTEAD OF PLACING RELIANCE ON THE STATEMENT RECORDED BY DRI. WE FIND THAT THE APEX COURT IN THE CASE OF K. T.M.S. MOHAMMED & ANR (1002) 197 ITR 196 HAD AN OCCASION TO EXAMINE THE I SSUE ELABORATELY AND IT WAS ITA NO.1052/RJT/2009 4 HELD THAT FOREIGN EXCHANGE AND INCOME-TAX ACT ARE T WO SEPARATE AND INDEPENDENT SPECIAL ACTS OPERATION IN TWO DIFFERENT FIELDS. IN VIEW OF THIS CATEGORICAL FINDING OF THE APEX COURT THE STATEMENT RECORDED BY DRI OFFICER UNDER FERA CANNOT BE THE BASIS FOR THE PURPOSE OF ASSESSI NG THE INCOME UNDER THE INCOME-TAX ACT. THE INCOME-TAX AUTHORITIES ARE EXP ECTED TO COLLECT INDEPENDENT MATERIAL APART FROM THE STATEMENT RECORDED BY THE D RI. UNFORTUNATELY IN THIS CASE ASSESSING OFFICER HAS NOT TAKEN ANY PAIN TO CO LLECT INDEPENDENT MATERIAL ABOUT THE RECEIPT OF THE SO-CALLED PREMIUM BY THE A SSESSEE. 7. THE RETRACTION SAID TO BE MADE BY THE ASSESSEE E VEN THOUGH DURING THE PERIOD OF CUSTODY NEEDS TO BE EXAMINED BY THE ASSES SING OFFICER AND HAS TO BE FOUND OUT WHETHER SUCH RETRACTION WOULD HAVE ANY IM PACT IN THE PROCEEDINGS UNDER THE INCOME-TAX ACT. MERELY BECAUSE THE STATE MENT WAS MADE WHEN THE ASSESSEE WAS IN JAIL THAT CANNOT BE A REASON TO BR USH ASIDE THE RETRACTION AS SUCH. SINCE THE INCOME-TAX AUTHORITIES HAVE NOT EX AMINED THE ISSUE INDEPENDENTLY IN OUR OPINION THE ASSESSING OFFICE R NEEDS TO EXAMINE AFRESH THE ISSUE IN THE LIGHT OF THE CONTENTIONS RAISED BY THE ASSESSEE. ACCORDINGLY THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND T HE ISSUE RELATING TO ADDITION OF RS. 3 06 060 IS REMANDED BACK TO THE FILE OF THE AS SESSING OFFICER. THE ASSESSING OFFICER SHALL EXAMINE THE ISSUE AFRESH AS INDICATED ABOVE AND THEREAFTER DECIDE THE SAME IN ACCORDANCE WITH LAW AFTER GIVING A REAS ONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 7. IN THE RESULT APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 25-02-2011. SD/- SD/- (A.L. GEHLOT) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER RAJKOT DT : 25 TH FEBRUARY 2011 PK/- ITA NO.1052/RJT/2009 5 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)-II RAJKOT 4. THE CIT-I RAJKOT 5. THE DR (TRUE COPY) BY ORDER ASSTT.REGISTRAR ITAT RAJKOT