DCIT 2(3), MUMBAI v. SANJEEV R. KANWAR, MUMBAI

ITA 5271/MUM/2009 | 2002-2003
Pronouncement Date: 31-01-2011 | Result: Allowed

Appeal Details

RSA Number 527119914 RSA 2009
Bench Mumbai
Appeal Number ITA 5271/MUM/2009
Duration Of Justice 1 year(s) 4 month(s) 16 day(s)
Appellant DCIT 2(3), MUMBAI
Respondent SANJEEV R. KANWAR, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 31-01-2011
Appeal Filed By Department
Order Result Allowed
Bench Allotted E
Date Of Final Hearing 08-12-2010
Next Hearing Date 08-12-2010
Assessment Year 2002-2003
Appeal Filed On 14-09-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH MUMBAI. BEFORE SHRI R.V.EASWAR PRESIDENT AND SHRI R.K. PANDA ACCOUNTANT MEMBER I.T.A. NO.5271/MUM/2009 (ASSESSMENT YEAR : 2002-03) THE DEPUTY COMMISSIONER OF INCOME TAX 2(3) R.NO.555 AAYAKAR BHAVAN M.K.ROAD MUMBAI-400 020. VS. MR. SANJEEV R.KANWAR 2202/A CHITANYA TOWERS APPASAHEB MARATHE MARG PRABHADEVI MUMBAI-400 025. PAN:AGAPK8210E (APPELLANT) (RESPONDENT) APPELLANT BY : MR. HEMANT LAL DR RESPONDENT BY : MR. K.SHIVRAM O R D E R PER R.V.EASWAR PRESIDENT: THE BRIEF FACTS GIVING RISE TO THE APPEAL ARE THESE. THE ASSESSEE AN INDIVIDUAL LODG ED AN FIR WITH THE ANTI-EXTORTION CELL MUMBAI ON 7 TH OCTOBER 2002 STATING THAT HE HAD GIVEN ALONG WITH HIS BUSINESS ASSOCIATES A SUM OF RS.5 CRORES IN CASH TO ONE MR. AMIT GILL WHO WAS HIS COUSINS HUSBAND ON THE UNDERSTANDING THAT THE MONE Y WILL BE USED TO MAKE SUPER-NORMAL PROFITS BY BUYING CHEMICA LS FROM AN INSURANCE COMPANY AT CHEAP RATES AND SELLING THEM A T VERY HIGH RATES DUE TO DEMAND FOR THE SAME. THE ASSESSEE APPE ARS TO HAVE BEEN TOLD BY MR. AMIT GILL THAT THE CHEMICALS WERE STORED IN A SHIP OFF THE SEAS OF MUMBAI AND THAT THE SHIP HAD S UNK RESULTING IN THE INSURANCE COMPANY TAKING OVER THE STOCK OF CHEMICALS WHICH IT WAS SELLING AT VERY CHEAP RATES. DUE TO HIS CLOSE FAMILIARITY WITH MR. AMIT GILL AND TAKEN IN B Y GILLS HIGH ITA NO.5271/MUM/09 2 LIFE-STYLE THE ASSESSEE BELIEVED HIS VERSION AND A S PER THE FIR ADVANCED THE AFORESAID AMOUNT WITH THE EXPECTATION THAT IT WILL BRING HIM SUPER-NORMAL PROFITS. SOON THE ASSESSEE REALIZED THAT THE PROMISE MADE BY MR. GILL WAS HOLLOW AND THAT NO RETURNS WERE FORTHCOMING. AFTER PERSISTENT DEMANDS CHEQUES FOR RS.1 75 50 000/- WERE GIVEN BY MR. GILL PLUS A PROF IT CHEQUE FOR RS.50 00 000/- (AS A CONFIDENCE MEASURE) AND PREDIC TABLY THEY BOUNCED. THE ASSESSEE NATURALLY STARTED PESTERING M R. AMIT GILL FOR THE RETURN OF THE MONEY BUT NOTHING HAPPENED. I NSTEAD HE STARTED RECEIVING THREAT CALLS FROM ABROAD. HE RECO RDED THOSE CALLS IN WHICH ONE SULTAN THREATENED TO KILL HIM IF HE CONTINUED PESTERING MR. AMIT GILL OR HIS WIFE FOR THE RETURN OF THE MONEY. THIS WAS IN AUGUST 2002. FEARING FOR HIS LIFE THE ASSESSEE LODGED THE FIR. A COPY OF THE SAME IS AT PAGE NOS.2 66 TO 276 OF THE PAPER BOOK FILED BY THE ASSESSEE. 2. ACTING ON A TAX EVASION PETITION THE INVESTIGATI ON WING OF THE INCOME-TAX DEPARTMENT ISSUED NOTICE U/S.131 TO THE ASSESSEE AND RECORDED A STATEMENT FROM HIM ON 22.12 .2004. A COPY OF THE STATEMENT IS PLACED AT PAGE NO.257 OF T HE PAPER BOOK. THESE PROCEEDINGS WERE TAKEN APPARENTLY ON TH E FOOTING THAT THE ASSESSEE HAD ADVANCED A SUM OF RS.5 CRORES IN CASH TO MR. AMIT GILL AND THE PURPOSE OF THE ENQUIRY WAS TO SEEK THE SOURCE OF THE SAME FROM THE ASSESSEE. IN THE STATEM ENT THE ASSESSEE DENIED THAT HE ADVANCED RS.5 CRORES TO MR . AMIT GILL AND STATED THAT SUM OF RS.1 54 50 000/- WAS ADVANCE D BY ITA NO.5271/MUM/09 3 CHEQUES (ON VARIOUS DATES) BY M/S. UPASANA RESOURC ES PVT. LTD. AND ANOTHER SUM OF RS.33 00 000/- WAS ADVANCED BY CHEQUES (ON VARIOUS DATES) BY M/S. TAO BUILDERS A ND DEVELOPERS PVT. LTD. BOTH THESE ARE COMPANIES IN W HICH THE ASSESSEE WAS A DIRECTOR. IT WAS STATED BY THE ASSES SEE THAT ONLY A SUM OF RS.1 87 50 000/- (AGGREGATE OF THE ABOVE) WAS GIVEN TO MR. AMIT SINGH GILL AND THAT TOO BY CHEQUES. WHEN A SKED AS TO WHY HE HAD STATED IN THE FIR THAT HE HAD ADVANCED R S.5 CRORES IN CASH HE EXPLAINED THAT MR. AMIT GILL HAD ONLY S TATED THAT THE AMOUNT WOULD SOON BE WORTH RS.5 CRORES AND THAT THE FIR MENTIONED THIS FIGURE WHICH INCLUDED THE EXPECTED O R ANTICIPATED PROFITS ALSO. HE STOUTLY DENIED THAT AN YTHING OVER AND ABOVE THE SUM OF RS.1 87 50 000/- WAS ADVANCED TO MR. AMIT GILL. WE SHALL REFER TO THIS STATEMENT IN SOME DETAIL A LITTLE LATER. 3. THE ASSESSEE HAD FILED A RETURN DECLARING TOTAL INCOME OF RS.6 59 037/- ON 31.7.2002. THIS CONSISTED OF SALAR Y INCOME AS DIRECTOR AND PROFITS FROM THE BUSINESS AS ALSO INCO ME FROM OTHER SOURCE. THE RETURN SEEMS TO HAVE BEEN PROCESSED. HO WEVER APPARENTLY BASED ON THE TAX EVASION PETITION THE A SSESSMENT WAS REOPENED BY ISSUE OF NOTICE UNDER SECTION 148 O F THE INCOME TAX ACT ON 7.7.2006. IN RESPONSE THERETO THE ASSES SEE REQUESTED THE ASSESSING OFFICER TO TREAT THE RETU RN FILED EARLIER AS A RETURN PURSUANT TO THE NOTICE. IN THE COURSE O F THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER ISSUED NOTICE ITA NO.5271/MUM/09 4 UNDER SECTION 143(2) WHICH INTER-ALIA ASKED THE ASSESSEE ABOUT THE TRANSACTIONS WITH MR. AMIT SINGH GILL. T HE ASSESSEE ACCORDING TO THE ASSESSING OFFICER WAS ONLY ABLE T O PRODUCE DETAILS AND JUSTIFICATION FOR RS.1 87 50 000/- PAID TO MR. AMIT SINGH GILL AND IN RESPECT OF THE BALANCE OF RS.3 1 2 50 000/- HE COULD NOT PRODUCE ANY EVIDENCE FOR THE SOURCE. THE ASSESSING OFFICER THEREUPON CALLED THE ASSESSEE TO PRODUCE MR . AMIT SINGH GILL FOR EXAMINATION. IN FACT THE ASSESSING OFFIC ER SEEMS TO HAVE ISSUED AT LEAST THREE REQUISITIONS FOR PRODUCI NG MR. AMIT SINGH GILL. HOWEVER THE ASSESSEE COULD NOT PRODUCE HIM. HOWEVER A MEMORANDUM OF UNDERSTANDING DATED 20 TH FEBRUARY 2006 (PAGES 72 TO 83 ) SEEMS TO HAVE BEEN FILED BEFORE THE ASSESSING OFFICER. THIS WAS ENTERED INTO BETWE EN TAO BUILDERS AND DEVELOPERS PVT. LTD. THROUGH THE ASSES SEE WHO WAS ITS DIRECTOR AND MR. AMIT SINGH GILL. THE MEMORANDU M OF UNDERSTANDING NARRATED THAT MR. AMIT SINGH GILL HAD MADE VARIOUS PAYMENTS BY CHEQUES TO THE ASSESSEE BY WAY OF RETURN OF THE MONIES TAKEN BY HIM THAT THE CHEQUES HAD BO UNCED AND PROCEEDINGS UNDER SECTION 138 OF THE NEGOTIABLE INS TRUMENTS ACT 1973 WERE PENDING THAT THE ENTIRE MATTER WAS BEING SETTLED BY PAYMENT OF RS.33 LAKHS BY MR. AMIT SINGH GILL TO THE AFORESAID COMPANY AND FURTHER THAT ALL THE CASES PE NDING BEFORE THE MAGISTRATE COURT AT THE INSTANCE OF THE ASSESSE E SHALL BE WITHDRAWN. A SIMILAR MEMORANDUM OF UNDERSTANDING WA S ENTERED INTO BETWEEN UPASANA RESOURCES PVT.LTD. THR OUGH THE ITA NO.5271/MUM/09 5 ASSESSEE WHO WAS ITS DIRECTOR AND MR. AMIT SINGH GI LL ON THE SAME DAY. THE TERMS AND CONDITIONS WERE SIMILAR TO THE OTHER MEMORANDUM OF UNDERSTANDING EXCEPT THAT IN THIS CAS E MR. AMIT SINGH GILL WAS REQUIRED TO PAY RS.1 42 00 000/ - TO THE COMPANY. A THIRD MEMORANDUM OF UNDERSTANDING WAS EN TERED INTO AGAIN ON THE SAME DAY BETWEEN UPASANA RESOURCE S PVT. LTD AND MRS.TANUSHKA AMIT GILL THE WIFE OF MR. AMIT SI NGH GILL FOR RETURN BY HER OF RS.25 LAKHS TO THE COMPANY THE OT HER TERMS AND CONDITIONS BEING THE SAME TO THE OTHER TWO MEMO RANDUM OF UNDERSTANDINGS. 4. THE ASSESSING OFFICER HOWEVER REFUSED TO BELIEVE THAT THE ASSESSEE PAID ANYTHING LESS THAN RS.5 CRORES TO MR. AMIT SINGH GILL. HE DID NOT ACCEPT THE ASSESSEES VERSION THAT HE PAID ONLY RS.1 87 50 000/- TO MR. AMIT SINGH GILL. THE ASSESS EE WOULD APPEAR TO HAVE REQUESTED THE ASSESSING OFFICER TO I SSUE SUMMONS TO AMIT GILL WHICH REQUEST WAS TURNED DOWN AS A PLOY TO DELAY THE FURTHER PROCEEDINGS. THE ASSESSI NG OFFICER HOWEVER DEPUTED HIS INSPECTOR TO VERIFY THE ANTECED ENTS OF MR. AMIT SINGH GILL IN THE ADDRESS FURNISHED BY THE ASS ESSEE. THE INSPECTOR REPORTED THAT HE COULD NOT SERVE THE SUMM ONS ON MR. AMIT SINGH GILL BECAUSE ON ENQUIRY HE FOUND THAT MR . AMIT SINGH GILL WAS NOT STAYING IN THE ADDRESS GIVEN BY THE ASSESSEE. IN THESE CIRCUMSTANCES THE ASSESSING OFFICER HELD THAT THE ASSESSEE COULD NOT ADDUCE SATISFACTORY EXPLANATION FOR THE ITA NO.5271/MUM/09 6 NATURE AND SOURCE OF THE AMOUNT OF RS.3 12 50 000/- . HE ADDED THE SAME TO THE ASSESSEES INCOME UNDER SECTION 69A OF THE ACT. 5. IT WOULD APPEAR THAT REFERENCE TO SECTION 69A IS NOT APPROPRIATE AND THE APPROPRIATE SECTION TO BE REFER RED TO SHOULD BE SECTION 69 WHICH SPEAKS OF INVESTMENTS MADE BY T HE ASSESSEE DURING THE RELEVANT PREVIOUS YEAR WHICH AR E NOT RECORDED IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE AND FOR WHICH THE ASSESSEE OFFERS NO EXPLANATION AB OUT THE NATURE AND SOURCE. 6. THE ASSESSEE APPEALED TO THE CIT(A) AND TOOK UP SEVERAL CONTENTIONS INCLUDING THE VALIDITY OF THE REASSESSM ENT PROCEEDINGS ON THE GROUND OF NON-FURNISHING OF THE REASONS RECORDED FOR REOPENING THE ASSESSMENT. THE CIT(A) U PHELD THE VALIDITY OF THE REASSESSMENT PROCEEDINGS AGAINST WH ICH THERE IS NO APPEAL FILED BY THE ASSESSEE BEFORE US. AS REGAR DS THE MERITS OF THE ADDITION OF RS.3 12 50 000/- THE ASSESSEE A PART FROM REITERATING THE SUBMISSIONS BEFORE THE ASSESSING OF FICER ALSO FILED AN AFFIDAVIT FROM MR. AMIT SINGH GILL AS ADDI TIONAL EVIDENCE UNDER RULE 46A OF THE INCOME TAX RULES. A COPY OF T HE AFFIDAVIT IS PLACED AT PAGES 286 TO 288 OF THE PAPER BOOK. IT IS STYLED AS AFFIDAVIT CUM UNDERTAKING. IN THIS AFFIDAVIT AMI T GILL STATED THAT BETWEEN DECEMBER 2002 AND MARCH 2003 HE HAD TAKEN RS.1 75 50 000/- FROM UPASANA RESOURCES PVT LTD. AN D TAO BUILDERS & DEVELOPERS PVT. LTD. EXCLUDING A SUM OF RS.12 LAKHS ITA NO.5271/MUM/09 7 TAKEN BY HIM EARLIER AS LOAN WHICH WAS ALSO IMMEDIA TELY RETURNED. THE AMOUNT OF RS.1 75 50 000/- WAS DESCR IBED AS BUSINESS LOANS/ADVANCES. MR. AMIT SINGH GILL FURT HER STATED IN THE AFFIDAVIT DUE TO BUSINESS PROBLEMS HE WAS UN ABLE TO REPAY THE AMOUNT AND THE CHEQUES ISSUED BY HIM ALSO BOUNCED. HE THEREAFTER ISSUED FRESH CHEQUES FOR RS.1 75 50 0 00/- AND ANOTHER CHEQUE FOR RS.50 LAKHS AS LUMPSUM PROFIT ON THE TRANSACTION. THESE CHEQUES ALSO BOUNCED. HE FURTHER PROCEEDED TO STATE THAT HE WRONGLY REPRESENTED TO THE ASSESSE E HE HAD INVESTED THE MONEY IN PURCHASING SOME CHEMICALS FRO M CAPSIZED SHIP THROUGH AN INSURANCE COMPANY IN WHICH THE ASSESSEES COMPANIES WOULD STAND TO MAKE SUPER-NORM AL PROFITS SINCE THE CHEMICALS WERE BEING SOLD AT VERY CHEAP R ATES. ACCORDING TO HIM SUCH REPRESENTATIONS WERE MADE TO THE ASSESSEE IN ORDER TO MAINTAIN HIS STANDING AND TO B UY FURTHER TIME. HE HAD ALSO REPRESENTED TO THE ASSESSEE AT VA RIOUS TIMES THAT THE INVESTMENT IN THE CHEMICALS HAD GROWN OR A CCUMULATED TO RS.4 TO 5 CRORES. THE AFFIDAVIT FURTHER STATES THAT THE ASSESSEE FILED AN FIR IN OCTOBER 2003 IN ORDER TO SETTLE THE DISPUTE INCLUDING THE DISPUTE RELATING TO CHEQUE BO UNCING HE SETTLED THE CASES IN 2006 AND REPAID TO UPASANA RES OURCES PVT. LTD. AND TAO BUILDERS A SUM OF RS.2 CRORES IN FULL AND FINAL SETTLEMENT WITH THE CONDITION THAT ALL PROCEEDINGS INCLUDING THOSE UNDER SECTION 138 OF THE NEGOTIABLE INSTRUMEN TS ACT AND ALL CRIMINAL CASES FILED BY THE CRIME BRANCH SHOULD BE ITA NO.5271/MUM/09 8 WITHDRAWN. HE REITERATED THAT ALL THE ALLEGATIONS M ADE BY THE ASSESSEE AGAINST HIM ARE FALSE AND WERE MADE ONLY W ITH A VIEW TO RECOVER THE AMOUNTS ADVANCED BY THE TWO COMPANIE S IN WHICH THE ASSESSEE WAS A DIRECTOR. HE REITERATED TH AT HE DID NOT TAKE ANY AMOUNT OVER AND ABOVE WHAT HAS BEEN STATED IN THE AFFIDAVIT AND THAT ALL THE BALANCE MONEY CLAIMED WAS BASED ON MY PROMISE OF PROFITS THAT WERE NEVER REALLY THERE . HE ALSO SUBMITTED EVIDENCE ALONG WITH AFFIDAVIT REGARDING T HE NATURE AND SOURCE OF THE AMOUNT PAID BY HIM TO THE ASSESSE E. 7. THE AFFIDAVIT WAS RECEIVED IN EVIDENCE BY THE CI T(A). A LETTER DATED 20 TH JANUARY 2009 WAS WRITTEN BY THE CIT(A) TO THE ACIT WHICH IS REPRODUCED BELOW:- DURING THE COURSE OF THE APPELLATE PROCEEDINGS IN THE CASE OF THE ABOVE ASSESSEE FOR THE ASSESSMENT YEAR 2002 -03 THE AUTHORIZED REPRESENTATIVE OF THE APPELLANT HAS FIL ED ADDITIONAL EVIDENCE UNDER RULE 46A. THE WRITTEN SUBMISSIONS ALONG WITH PAPER BOOK ARE FORWARDED TO YOU FOR YOUR COMMENTS/OBJECTIONS IF ANY. YOU ARE THER EFORE REQUESTED TO SEND A REPORT IN THE MATTER BY 10.02. 2009 POSITIVELY. THEREAFTER IN PARA 9.4 OF HIS ORDER THE CIT(A) RE FERS TO THE FACT THAT MR. AMIT SINGH GILL WAS PRODUCED BEFORE THE AS SESSING OFFICER ON 25.02.2009 IN THE COURSE OF THE REMAND P ROCEEDINGS AND HE WAS EXAMINED ON OATH BY THE ASSESSING OFFICE R AND THAT IN THE SAID STATEMENT MR. AMIT SINGH GILL HAS CLEA RLY MENTIONED THAT A SUM OF RS.1 87 50 000/- ALONE HAS BEEN ADVAN CED TO HIM BY THE ASSESSEE. ITA NO.5271/MUM/09 9 8. THE ASSESSING OFFICERS REMAND REPORT HAS ALSO B EEN REFERRED TO BY THE CIT(A) IN PARA 9.5 OF HIS ORDER . ACCORDING TO THIS PARAGRAPH THE ASSESSING OFFICER HAD CONFIRMED THAT AMIT GILL WAS PRODUCED BEFORE HIM FOR EXAMINATION AND TH AT HIS STATEMENT WAS RECORDED IN THE COURSE OF THE REMAND PROCEEDINGS IN WHICH HE HAS CONFIRMED THAT ONLY RS.1 87 50 000/- WAS PAID TO HIM BY THE ASSESSEE. T HE ASSESSING OFFICER ACCORDING TO THE ABOVE PARAGRAPH ALSO APPEARS TO HAVE STATED IN THE REMAND REPORT THAT AC CORDING TO THE MEMORANDUM OF UNDERSTANDING AMIT GILL HAD AGRE ED TO RETURN RS.2.25 LAKHS TO THE ASSESSEE BUT EVENTUALL Y PAID ONLY RS.2 CRORES AND THEREFORE HE WAS LIABLE TO ACCOUNT FOR THE FULL AMOUNT OF RS.2 25 00 000/-. THE ASSESSING OFFICER A LSO STATED THAT INTEREST @ 18% WAS TO BE PAID FOR THE DELAY AN D THEREFORE THIS AMOUNT ALSO NEEDS TO BE ADDED TO THE TOTAL INC OME. HAVING SAID THIS HE STATED THAT THE ISSUE MAY BE DECIDED ON MERITS. 9. AFTER GOING THROUGH THE REMAND REPORT AND THE SUBMISSIONS OF THE ASSESSEE THE CIT(A) HELD THAT AS PER THE STATEMENT RECORDED BY THE ASSESSING OFFICER FROM AM IT GILL IN THE COURSE OF THE REMAND PROCEEDINGS THE ASSESSEE HAD ADVANCED ONLY RS.1 87 50 000/- TO HIM THROUGH TWO C OMPANIES IN WHICH THE ASSESSEE WAS A DIRECTOR. THE CIT(A) FU RTHER OBSERVED THAT THE ASSESSEE HAS BEEN CONTINUOUSLY PR OVIDING THE DETAILS AND THE EXPLANATION BEFORE THE ASSESSING OF FICER. ACCORDING TO HIM AMIT GILL REPAID ABOUT RS.25 LAKH S DURING THE ITA NO.5271/MUM/09 10 FINANCIAL YEAR ENDED 31.03.2002 AND THIS ALONG WI TH THE AMOUNT OF RS.12 LAKHS RETURNED IMMEDIATELY AFTER TA KING THE ADVANCE OF RS.1 87 50 000/- CAME TO RS.37 50 000/- WHICH IF DEDUCTED FROM THE AMOUNT ADVANCED LEFT A BALANCE O F RS.1 50 00 000/- AS OUTSTANDING FROM AMIT GILL. IN THE ASSESSMENT YEAR 2003-04 THE SAID AMOUNT WAS WRITTEN OFF AS BAD DEBTS IN THE BOOKS OF UPASANA RESOURCES PVT. LT D. AND TAO. THE BAD DEBTS CLAIMED HAD BEEN ALLOWED BY THE ASSES SING OFFICER ASSESSING THOSE COMPANIES UNDER SECTION 143 (3) OF THE ACT. THE CIT(A) REFERRED TO THE ORDER OF THE KOLKAT A BENCH OF THE TRIBUNAL DATED 25.05.2007 IN THE CASE OF THE AFORES AID TWO COMPANIES IN WHICH THEIR CLAIM OF BAD DEBT HAS BEEN ACCEPTED BY THE TRIBUNAL. ACCORDING TO THE CIT(A) AMIT GILL JUST GAVE ASSURANCE AND PROMISE THAT THE INVESTMENT OF RS.1 8 7 50 000/- WOULD GROW TO RS.5 CRORES. WHEN HE WAS UNABLE TO RE TURN EVEN THIS AMOUNT AND THE CHEQUES ISSUED BY HIM ALSO BOU NCED HE ENTERED INTO A SETTLEMENT OR UNDERSTANDING WITH UPA SANA RESOURCES PVT. LTD. AND TAO BUILDERS AND ULTIMATELY PAID RS.2 CRORES AS FULL AND FINAL SETTLEMENT SUBJECT TO TH E WITHDRAWAL OF ALL THE CASES AGAINST HIM. APART FROM THESE FACTS THE CIT(A) ALSO REFERRED TO THE REMAND REPORT SUBMITTED BY THE ASSE SSING OFFICER AND HELD THAT THE TOTAL AMOUNT RECEIVED BACK BY THE ASSESSEE WAS RS.2 25 50 000/- BUT ONLY A SUM OF RS.2 CRORES WAS RECEIVED UNDER THE MEMORANDUM OF UNDERSTANDING BECA USE THE BALANCE OF RS.25 50 000/- HAD BEEN RETURNED BY AMIT GILL EVEN ITA NO.5271/MUM/09 11 EARLIER TO ENTERING INTO THE MEMORANDUM OF UNDERSTA NDING. AS REGARDS THE ASSESSING OFFICERS REFERENCE TO THE I NTEREST ON THE AMOUNT IS CONCERNED THE CIT(A) HELD THAT SINCE THE ASSESSEE HAS ALREADY RECEIVED THE SAID AMOUNT AND OFFERED TH E SAME TO TAX THERE IS NO NEED TO LEVY INTEREST ON THE SAME N OR WAS ANY FURTHER INTEREST RECOVERED BY THE ASSESSEE. IN THIS VIEW OF THE MATTER THE CIT(A) DELETED THE ADDITION OF RS.3 12 50 000/- FROM THE ASSESSMENT. 10. IT IS AGAINST THE AFORESAID DECISION OF THE CIT (A) THAT THE REVENUE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL . 11. THE CONTENTION OF MR. HEMANT LAL THE LEARNED C IT DR IS THAT IT IS THE ASSESSEE WHO FILED AN FIR BEFORE TH E ANTI-EXTORTION CELL OF THE POLICE DEPARTMENT IN MUMBAI CLAIMING TH AT HE HAD PAID RS.5 CRORES IN CASH TO AMIT GILL AND THAT THE FIR SHOULD BE TAKEN AS CONTEMPORANEOUS EVIDENCE AND THE LATER DEV ELOPMENTS SUCH AS MEMORANDUM OF UNDERSTANDING ETC. SHOULD NOT BE TAKEN INTO ACCOUNT AS THEY WERE ALL THE RESULT OF AFTERTHOUGHT. HE SUBMITTED THAT TAKING ALL THE FACTS INTO CONSID ERATION IT CANNOT BE BELIEVED THAT THE ASSESSEE DID NOT INVEST RS.5 CRORES WITH AMIT GILL AND THAT HE INVESTED ONLY RS.1 87 50 000/- THROUGH THE TWO COMPANIES EXPECTING AMIT GILL TO RE TURN RS.5 CRORES THE DIFFERENCE OF RS.3 12 50 000/- REPRESEN TING SUPER NORMAL PROFITS. ACCORDING TO MR. LAL THE STORY TH AT AMIT GILL ONLY PROMISED RS.5 CRORES IN RETURN FOR RS.1 87 50 000/- IS UNBELIEVABLE. HE SUBMITTED THAT THE CIT(A) HAS MISR EAD AND ITA NO.5271/MUM/09 12 MISAPPRECIATED THE EVIDENCE AND THE CONDUCT OF THE PARTIES AND HAS TAKEN A VIEW WHICH IS WHOLLY UNTENABLE AND CONT RARY TO THE NORMAL COURSE OF HUMAN CONDUCT AND PROBABILITIES. H E STRONGLY RELIED ON THE JUDGEMENT OF THE SUPREME COURT IN THE CASE OF SUMATI DAYAL 214 ITR 801. HE CONTENDED THAT THE AS SESSMENT ORDER SHOULD BE RESTORED. 12. ON THE OTHER HAND THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE MEMORANDUM OF UNDERSTANDING HAD BEEN ENTERED INTO EVEN BEFORE THE ISSUE OF NOTICE UNDER SECTION 148 WHICH MEANS THAT THE MEMORANDUM OF UNDERSTANDING WA S NOT AN AFTERTHOUGHT. HE DREW OUR ATTENTION TO THE ASSES SEES STATEMENT DATED 22.12.2004 MADE ON OATH UNDER SECTI ON 131 IN RESPONSE TO THE SUMMONS DATED 17.12.2004 AND POINTE D OUT THAT IN THIS STATEMENT ITSELF THE ASSESSEE HAS CLEA RLY EXPLAINED IN ANSWER TO QUESTION NO.5 AS TO WHY HE STATED IN THE FIR THAT HE PAID RS.5 CRORES TO AMIT GILL. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER POINTED OUT THAT AMIT GILL APPEARE D BEFORE THE ASSESSING OFFICER FOR THE FIRST TIME DURING THE REM AND PROCEEDINGS AND CONFIRMED THAT HE RECEIVED ONLY RS.1 87 50 000/-. HE HAD ALSO FILED AN AFFIDAVIT EA RLIER BEFORE THE CIT(A) WHICH WAS TAKEN ON RECORD BY THE CIT(A) AS ADDITIONAL EVIDENCE UNDER RULE 46A. ACCORDING TO TH E LEARNED COUNSEL THE STATEMENT MADE BY AMIT GILL IN THE CO URSE OF THE REMAND PROCEEDINGS WHICH CONFIRMS HIS EARLIER AFFID AVIT IS MATERIAL EVIDENCE ON THE BASIS OF WHICH THE CIT(A) HAS COME TO ITA NO.5271/MUM/09 13 THE CONCLUSION THAT NOTHING MORE THAN RS.1 87 50 00 0/- HAD BEEN PAID TO HIM BY THE ASSESSEE. EVEN THE REMAND R EPORT OF THE ASSESSING OFFICER DOES NOT CHALLENGE THE VERACITY O F THE STATEMENT OF AMIT GILL. ACCORDING TO THE LEARNED C OUNSEL FOR THE ASSESSEE THE ASSESSING OFFICER HAS WRONGLY INTERPR ETED THE FIR AND CONCLUDED THAT THE ASSESSEE HAS ADVANCED RS.5 C RORES TO AMIT GILL OVERLOOKING THE ASSESSEES ANSWER TO QUE STION NO.5 IN THE STATEMENT RECORDED UNDER SECTION 131. THE ASSES SING OFFICER ACCORDING TO THE LEARNED COUNSEL MADE THE ADDITION ONLY ON THE GROUND THAT AMIT GILL COULD NOT BE PROD UCED BEFORE HIM AND THAT THE ADDITION WAS NOT BASED ON THE STAT EMENT MADE BY THE ASSESSEE IN THE FIR. WHEN THE ASSESSING OFFI CER WAS ABLE TO EXAMINE AMIT GILL IN THE COURSE OF THE REMAND PR OCEEDINGS AND WHEN AMIT GILL ALSO STATED BEFORE HIM THAT HE RECEIVED ONLY RS.1 87 50 000/- FROM THE TWO COMPANIES THERE IS N O SCOPE FOR FURTHER DOUBT. HE SUBMITTED THAT THE STATEMENT MADE BY THE ASSESSEE UNDER SECTION 131 ON OATH AS ALSO BEFORE T HE ASSESSING OFFICER IN THE COURSE OF THE REMAND PROCEEDINGS HAV E MORE EVIDENTIARY VALUE THAN THE FIR FILED BEFORE THE POL ICE AUTHORITIES BY THE ASSESSEE. HE CITED THE JUDGEMENT OF THE SUPR EME COURT IN GEORGE & OTHERS VS. STATE OF KERALA AND ANOTHER AIR (1998) SC 1376 AND RELYING ON THE OBSERVATIONS AT PARAGRAP H 30 OF THE JUDGEMENT SUBMITTED THAT THE FIR IS LIMITED TO INVE STIGATION BY POLICE AND IS NOT SUBSTANTIVE EVIDENCE. HE ALSO DRE W OUR ATTENTION TO SECTION 154 OF THE CODE OF CRIMINAL PR OCEDURE 1973 ITA NO.5271/MUM/09 14 WHICH SAYS THAT THE FIRST INFORMATION GIVEN BY ANY PERSON IS FOR THE PURPOSE OF CARRYING OUT FURTHER INVESTIGATION B Y THE POLICE OFFICER AND IS NOT CONCLUSIVE. HE ALSO SUBMITTED T HAT IN THE PRESENT CASE THE ASSESSEE FILED FIR ONLY BECAUSE O F THREAT CALLS RECEIVED BY HIM ALLEGEDLY AT THE INSTANCE OF AMIT G ILL. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO DREW OUR ATTE NTION TO THE FACT THAT THE FIR WAS LODGED IN THE NAME OF THE ASS ESSEE AS DIRECTOR OF THE TWO COMPANIES NAMELY UPASANA RESOUR CES PVT. LTD. AND TAO AND NOT IN HIS INDIVIDUAL NAME. HE THU S CONTENDED THAT THE ORDER OF THE CIT(A) REQUIRES NO INTERFEREN CE. 13. IN HIS REPLY THE LEARNED CIT DR PUT FORTH THE FOLLOWING SUBMISSIONS:- (A) THE FIR IS NOT LODGED IN THE NAME OF THE COMPANY. AS SEEN FROM COLUMN 6 OF THE FIR IT HAS BEEN LODGED B Y THE ASSESSEE ONLY. THE REFERENCE TO THE COMPANIES IF T HERE IS SUCH REFERENCE IS ONLY DESCRIPTIVE. (B) LATER STATEMENT OF THE ASSESSEE THAT AMIT GILL HAD ONLY STATED THAT THE INITIAL INVESTMENT HAD SWELLED TO R S.5 CRORES IS ONLY A COVER UP AFFAIR OR AN AFTERTHOUGH T AND SHOULD NOT BE BELIEVED SINCE IT CONTRADICTS THE FIR . (C) THE ASSESSING OFFICER OUGHT NOT TO HAVE EXCEEDED TH E DIRECTIONS OF THE CIT(A) WHICH WERE ONLY TO COMMENT OR OBJECT TO THE ADDITIONAL EVIDENCE ADDUCED BY THE AS SESSEE. HE WAS WRONG IN RECORDING THE STATEMENT FROM AMIT G ILL IN ITA NO.5271/MUM/09 15 THE COURSE OF THE REMAND PROCEEDINGS IN THE ABSENCE OF ANY SUCH DIRECTIONS ISSUED BY THE CIT(A). (D) NO REASONS HAVE BEEN RECORDED BY THE CIT(A) FOR ADM ITTING THE AFFIDAVIT OF AMIT GILL. (E) THERE IS NO EVIDENCE TO SHOW THAT AMIT GILL PROMISE D TO RETURN TO THE ASSESSEE A SUM OF RS.5 CRORES INCLUDI NG SUPER-NORMAL PROFITS ON THE INITIAL INVESTMENTS OF RS.1 87 50 000/-. THIS IS ONLY A LATER THOUGHT TO E XPLAIN AWAY THE CASE MADE OUT BY THE ASSESSING OFFICER. 14. WE HAVE CAREFULLY CONSIDERED THE FACTS AND THE RIVAL CONTENTIONS. WE ARE UNABLE TO UPHOLD THE DECISION O F THE CIT(A). AS THE FACTS SHOW IT IS THE ASSESSEE WHO FILED THE FIR WITH THE ANTI-EXTORTION CELL IN MUMBAI. IT WAS FILED ON 7.10 .2002. AS POINTED OUT ON BEHALF OF THE REVENUE IT WAS NOT FI LED BY THE TWO COMPANIES IN WHICH THE ASSESSEE WAS A DIRECTOR BUT WAS FILED BY THE ASSESSEE HIMSELF AS SEEN FROM COLUMN 6(A) OF THE COPY OF THE FIR PLACED AT PAGE 269 OF THE PAPER BOOK. AN EN GLISH TRANSLATION OF THE FIR HAS ALSO BEEN FILED AT PAGES 266 TO 268. THEREIN THE ASSESSEE HAS STATED THE CIRCUMSTANCES U NDER WHICH HE REPOSED FAITH AND TRUST ON AMIT GILL. AMIT GILL HAD MARRIED THE ASSESSEES COUSIN BY NAME TANUSHKA. THEY WERE L EADING A HIGH LIFESTYLE. THEY HAD REPRESENTED TO THE ASSESSE E THAT HE WAS THE INDIAN REPRESENTATIVE OF A MINISTER OF TRADE AN D FINANCE OF OMAN AND WAS LOOKING AFTER HIS BUSINESS INTERESTS I N INDIA. HE ITA NO.5271/MUM/09 16 HAD ALSO BORROWED RS.12 LAKHS FROM THE ASSESSEE FOR THE PURPOSE OF BUYING PROPERTY FOR RS.2.25 CRORES IN MU MBAI. THE MONEY HAD BEEN RETURNED TO THE ASSESSEE. THIS ALSO ENHANCED THE CONFIDENCE WHICH THE ASSESSEE HAD IN AMIT GILL. THE FIR FURTHER STATES THAT AMIT GILL THEREAFTER CAME TO TH E ASSESSEE WITH THE PROPOSAL FOR MAKING SUPER-NORMAL PROFITS B Y SELLING CHEMICALS TAKEN OUT OF A CAPSIZED SHIP. ACCORDING T O THE FIR BETWEEN JANUARY 2002 AND MARCH 2002 THE ASSESSEE AND BUSINESSMEN KNOWN TO HIM/BUSINESS COLLEAGUES COLLEC TIVELY GAVE RS.5 CRORES IN CASH TO AMIT GILL. THE FIR FURT HER STATES THAT AMIT GILL HAD GIVEN A CONFIRMATION LETTER AS WELL A S GUARANTEE LETTER FOR THE SAME AND HIS WIFE WAS ALSO ASSURING THE ASSESSEE OF GETTING HEAVY PROFITS FROM THE SALE OF CHEMICALS . MORE IMPORTANTLY THE FIR STATES THAT ON 27.04.2002 WHEN THE ASSESSEE FIRST STARTED GETTING DOUBT ABOUT THE CLAI MS OF AMIT GILL AND HIS WIFE AMIT GILL GAVE IT IN WRITING TO THE A SSESSEE THAT HE HAS TAKEN RS.5 CRORES FROM HIM AND SHALL ALSO RETUR N IT TO HIM AND AS A GUARANTEE HE TOLD THAT HE WILL GIVE HIM H IS FLAT VALUING RS.2 CRORES. THUS NOT ONLY HAD AMIT GILL ORALLY A SSURED THE ASSESSEE ABOUT THE RETURN OF THE MONEY HE HAD ALSO GIVEN IN WRITING TO THE ASSESSEE IN WHICH HE HAD MENTIONED T HAT HE HAS TAKEN RS.5 CRORES FROM THE ASSESSEE WHICH HE WILL RETURN. IN THE FIR THE ASSESSEE EVEN STATED THAT HE FOUND LATER TH AT THE LETTERHEADS IN WHICH AMIT GILL GAVE THE CONFIRMATI ON LETTERS BELONG TO NON-EXISTENT COMPANIES. IT IS DIFFICULT T O BELIEVE THAT ITA NO.5271/MUM/09 17 AMIT GILL WOULD HAVE STATED IN WRITING THAT HE RECE IVED RS.5 CRORES FROM THE ASSESSEE UNLESS IT WAS TRUE. IN FAC T WHEN THE FIR WAS LODGED IT WAS A CONTEMPORANEOUS AND FIRST ACT ON THE PART OF THE ASSESSEE AND WHEN HE STATED AMIT GILL HAD EVEN ACKNOWLEDGED IN WRITING ON 27.04.2002 THAT HE HAS TAKEN RS.5 CRORES FROM THE ASSESSEE AND WILL RETURN IT AND HAD FURTHER STATED THAT HE WILL GIVE HIS FLAT AS A GUARANTEE T HAT MUST BE TAKEN TO BE A TRUE STATEMENT. THE ASSESSEE HAS ALSO LATER IN THE FIR CATEGORICALLY STATED THAT AMIT GILL AND TANUSKA GILL WITH THE COMMON INTENTION HAVE CONSPIRED AGAINST HIM AND HAVE CHEATED FOR RS.5 CRORES TO MYSELF AND MY BUSINESS C OLLEAGUES. IT IS NOBODYS CASE THAT APART FROM THE ASSESSEE AN D THE TWO COMPANIES IN WHICH HE WAS DIRECTOR ANYBODY ELSES MONEY WAS INVOLVED IN THE TRANSACTION. IT HAS BEEN ESTABLISHE D ON THE BASIS OF THE ACCOUNTS AS WELL AS THE STATEMENT GIVEN BY T HE ASSESSEE UNDER SECTION 131 OF THE ACT BEFORE THE INVESTIGATI ON WING OF THE DEPARTMENT THAT UPASANA RESOURCES PVT.LTD. AND TAO HAD GIVEN RS.1 87 50 000/- TO AMIT GILL BY CHEQUES. SINCE THE TOTAL AMOUNT MENTIONED IN THE FIR IS RS.5 CRORES IT IS A VERY FAIR AND REASONABLE INFERENCE THAT THE BALANCE OF RS.3 12 50 000/- HAS COME FROM THE ASSESSEE AND THAT TOO IN CASH. 15. THE ARGUMENT OF THE LEARNED COUNSEL FOR THE ASS ESSEE HOWEVER IS THAT FIR DOES NOT HAVE ANY EVIDENTIARY V ALUE AND IT HAS BEEN CLARIFIED BY THE ASSESSEE IN THE STATEMENT GIVEN BEFORE ITA NO.5271/MUM/09 18 THE ASSESSING OFFICER UNDER SECTION 131 OF THE ACT ON 22.12.2004 (PAGE 257 OF THE PAPER BOOK). WE HAVE CA REFULLY GONE THROUGH THIS STATEMENT TO WHICH WE HAVE EARLIE R ALSO REFERRED TO WHILE NARRATING THE ARGUMENTS OF THE AS SESSEE. IT MUST BE REMEMBERED THAT THIS STATEMENT WAS GIVEN BY THE ASSESSEE IN DECEMBER 2004 MORE THAN TWO YEARS AFT ER THE FIR WAS LODGED. THE ASSESSEE WAS QUITE AWARE THAT HE HA S BEEN SUMMONED UNDER SECTION 131 OF THE ACT ONLY FOR THE PURPOSE OF EXPLAINING THE TRANSACTIONS WITH AMIT GILL. THIS IS CONFIRMED BY THE NOTICE DATED 27.10.2004 ISSUED BY THE ASSISTANT DIRECTOR OF INCOME TAX(INVESTIGATION) UNIT II(3) MUMBAI COPY OF WHICH IS PLACED AT PAGES 255 & 256 OF THE PAPER BOOK. IN THI S LETTER THE ASSESSEE INTER-ALIA HAS BEEN CALLED UPON TO EXPLA IN THE MODE AND SOURCE OF THE PAYMENTS AGGREGATING TO RS.5 CROR ES MADE TO AMIT GILL BETWEEN JANUARY AND MARCH 2002 AND ALSO TO FURNISH THE COPIES OF THE BANK STATEMENTS REFLECTING THESE PAYMENTS. APPARENTLY IT WAS INCONVENIENT FOR THE ASSESSEE TO EXPLAIN THE NATURE AND SOURCE OF THE AMOUNT OF RS.5 CRORES WHI CH ACCORDING TO THE FIR ALLEGED BY HIM WAS PAID BY HIM TO AMIT GILL. SINCE RS.1 87 50 000/- OUT OF THE SUM OF RS.5 CRORES HAD BEEN PAID BY THE TWO COMPANIES IN WHICH HE WAS A D IRECTOR BY CHEQUES HE HAD TO OWN UP TO THE SAME BUT IT WAS CONVENIENT NAY NECESSARY FOR HIM TO DENY THAT ANY THING MORE WAS PAID TO AMIT GILL. BUT THEN HE HAD TO FIND AN A NSWER TO QUESTION NO.5 POSED BY THE ASSISTANT DIRECTOR OF IN COME TAX BY ITA NO.5271/MUM/09 19 WHICH HE WAS CONFRONTED WITH THE FIR IN WHICH HE H AD STATED THAT HE PAID RS.5 CRORES TO AMIT GILL. IT IS NOT AS IF HE WAS SURPRISED BY THIS QUESTION BECAUSE EVEN IN THE LETT ER HE HAD BEEN INFORMED THAT HE SHOULD EXPLAIN THE MODE AND S OURCE OF THE PAYMENT OF RS.5 CRORES. THE ASSESSEE THEREFORE CAME UP WITH THE STORY THAT NOTHING MORE THAN THE CHEQUE AM OUNT WAS PAID TO AMIT GILL AND TO SUPPORT THE SAME HE WAS CO MPELLED TO TOUT THE THEORY OF SUPER-NORMAL PROFITS BEING PROM ISED TO BE PAID BY AMIT GILL ON THE INVESTMENT OF RS.1 87 50 000/-. THE ASSESSEE THEREFORE HAD TO ANSWER THAT AMIT GILL KE PT PROMISING HIM THAT ALL THE CHEMICALS WERE WITH HIM AND I HAD NOTHING TO WORRY ABOUT AS MY INVESTMENTS WERE WORTH MUCH MOR E THAN RS.5 CRORES. HE HAS ALWAYS CONTINUOUSLY REITERATED THAT I HAD NOTHING TO WORRY AND HE WOULD RETURN HIM RS.5 CRORE S AS ALL THE GOODS WERE IN HIS POSSESSION. HE FURTHER STATED TH AT SINCE AMIT GILL HAD PROMISED HIM THAT HIS ORIGINAL INVESTMENT HAD GROWN TO RS.5 CRORES HE HAD LODGED THE FIR FOR THE SAID AMOU NT. THIS IS A FACILE EXPLANATION WHICH CANNOT BE BELIEVED. WE M AY RECALL THAT EVEN IN THE FIR THE ASSESSEE HAD STATED THAT A MIT GILL HAD GIVEN IT TO HIM IN WRITING ON 27.04.2002 THAT HE HA S TAKEN RS.5 CRORES FROM THE ASSESSEE AND SHALL RETURN IT TO HIM . THERE WAS NOTHING WHICH COULD HAVE PREVENTED THE ASSESSEE FRO M MENTIONING IN THE FIR THAT HE HAD ADVANCED RS.1 87 50 000/- THROUGH TWO COMPANIES IN WHICH HE WAS DIRECTOR TO MR. AMIT SINGH GILL. HE COULD HAVE ALSO MENTIONED THEREIN TH AT AMIT GILL ITA NO.5271/MUM/09 20 HAD PROMISED THAT HE WOULD RETURN RS.5 CRORES TO TH E ASSESSEE INCLUDING SUPER-NORMAL PROFITS ON THE INITIAL INVES TMENT OF RS.1 87 50 000/- BUT THAT WAS NOT THE CASE. THERE IS ALSO NO GOOD REASON WHY MR. AMIT SINGH GILL COULD HAVE GI VEN IT IN WRITING THAT HE HAS TAKEN RS.5 CRORES FROM THE ASSE SSEE AND SHALL RETURN IT TO HIM. THERE IS NO DIRECT OR CONTE MPORANEOUS EVIDENCE OF AMIT GILL HAVING STATED THAT HE HAD TAK EN ONLY RS.1 87 50 000/- FROM THE ASSESSEE WHICH WILL GROW TO RS.5 CRORES INCLUDING SUPER-NORMAL PROFITS WHICH AMOUN T WOULD BE PAID BACK TO THE ASSESSEE. 16. MR. SHIVRAM LEARNED COUNSEL FOR THE ASSESSEE H OWEVER CONTENDS THAT THERE IS EVIDENCE TO SHOW THAT THE AS SESSEE ADVANCED ONLY RS.1 87 50 000/- IN THE FORM OF AFFID AVIT OF AMIT GILL AND THE STATEMENT RECORDED FROM HIM ON 25.02.2 009 IN THE COURSE OF THE REMAND PROCEEDINGS. A COPY OF THE AF FIDAVIT IS AT PAGE 286 OF THE PAPER BOOK AND WE HAVE ALREADY REFE RRED TO THE CONTENTS THEREOF IN BRIEF. THIS AFFIDAVIT IS SWORN TO ON 29.12.2008 MORE THAN SIX YEARS AFTER THE ASSESSEE FILED THE FIR AND ALMOST FOUR YEARS AFTER THE ASSESSEE GAVE THE S TATEMENT UNDER SECTION 131 BEFORE THE INVESTIGATION WING OF THE INCOME TAX DEPARTMENT. THE EVIDENTIARY VALUE OF THE AFFIDA VIT GIVEN AT SUCH A LATE STAGE IS OPEN TO DOUBT. IT MUST BE REME MBERED THAT THE ASSESSMENT ORDER WAS PASSED ON 14.12.2007 AND R IGHT FROM SEPTEMBER 2007 THE ASSESSING OFFICER HAS BEEN REQU ESTING THE ASSESSEE TO PRODUCE MR. AMIT SINGH GILL BEFORE HIM. THE ITA NO.5271/MUM/09 21 ASSESSEE WAS NOT ABLE TO DO SO BUT SURPRISINGLY IN THE COURSE OF THE APPEAL BEFORE THE CIT(A) MR. AMIT SINGH GILL PO PS UP FROM NOWHERE AND FILES AN AFFIDAVIT WHICH IS ADDUCED BEF ORE HIM AS ADDITIONAL EVIDENCE. AS ALREADY STATED AT THIS LATE R STAGE IT WAS CONVENIENT FOR BOTH THE ASSESSEE AS WELL AS MR. AM IT SINGH GILL TO CONFIRM THAT ONLY RS.1 87 50 000/- WAS PAID AND NOT RS.5 CRORES. IN OUR VIEW HAVING REGARD TO THE NORMAL C OURSE OF HUMAN CONDUCT AND PROBABILITIES LITTLE EVIDENTIARY VALUE CAN BE PLACED ON THE AFFIDAVIT OF MR. AMIT SINGH GILL. IF AT ALL IT IS THE FIR ON WHICH MUCH EVIDENTIARY VALUE HAS TO BE PLACE D SINCE IT WAS THE FIRST DOCUMENT AND A CONTEMPORANEOUS DOCUME NT IN THE FILING OF WHICH THE ASSESSEE WAS UNDER NO PRESS URE OR COMPULSION. 17. MR. SHIVRAM HAS ALSO DRAWN OUR ATTENTION TO THE MEMORANDUM OF UNDERSTANDING ENTERED INTO ON 20 TH FEBRUARY 2006 TO WHICH ALSO WE HAVE ALREADY REFERRED. THEY ARE STATED TO HAVE BEEN FILED BEFORE THE ASSESSING OFFICER AND TH E ASSESSMENT ORDER CONTAINS REFERENCE TO THEM. AGAIN IT IS SURPR ISING THAT IN THE YEAR 2006 THE ASSESSEE WAS ABLE TO ENTER INTO A MEMORANDUM OF UNDERSTANDING WITH MR. AMIT SINGH GIL L BUT WAS UNABLE TO PRODUCE HIM IN THE COURSE OF THE ASSE SSMENT PROCEEDINGS BETWEEN SEPTEMBER AND DECEMBER 2007. B E THAT AS IT MAY THE SAME REASONS WHICH HAVE PROMPTED US NOT TO PLACE ANY RELIANCE ON THE AFFIDAVIT OF MR. AMIT SIN GH GILL ALSO APPLY IN THE CASE OF MEMORANDUM OF UNDERSTANDING ITA NO.5271/MUM/09 22 PERSUADING US NOT TO PLACE RELIANCE ON THEM IN SUPP ORT OF THE ASSESSEES PLEA. THE MEMORANDUM OF UNDERSTANDING A RE NO DOUBT GOOD FOR THE PURPOSE OF SHOWING THAT THERE WA S A SETTLEMENT BETWEEN THE TWO COMPANIES AND MR. AMIT S INGH GILL . OBVIOUSLY THE COMPANIES AND MR. AMIT SINGH GILL CO ULD COME ON RECORD TO HAVE THE MOUS PUT THROUGH BECAUSE THE COMPANY HAD ADVANCED THE AMOUNTS TO MR. AMIT SINGH GILL THR OUGH CHEQUES. THERE WAS NO APPARENT DIFFICULTY OR COMP LICATION IN BRINGING THOSE AMOUNTS ON RECORD AS THEY HAVE BEEN GIVEN THROUGH CHEQUES. THE DIFFICULTY IS ONLY WITH REGAR D TO THE AMOUNT WHICH HAS BEEN ADVANCED TO MR. AMIT SINGH GI LL OVER AND ABOVE THE CHEQUE AMOUNTS. THE MEMORANDUM OF UNDERSTANDING ONLY SHOW THAT THE ADVANCES MADE THRO UGH CHEQUES HAVE BEEN SETTLED BUT THEN THOSE AMOUNTS HA VE NOT BEEN ADDED IN THE ASSESSMENT. THERE IS NO DISPUTE W ITH REGARD TO THE CHEQUE AMOUNTS AND THE MOUS THEREFORE DO NO T TAKE THE ASSESSEES CASE FURTHER. THEY ARE ACTUALLY NEUTRAL EVIDENCE . 18. WE NOW COME TO THE STATEMENT MADE BY MR. AMIT S INGH GILL BEFORE THE ASSESSING OFFICER IN THE COURSE OF THE REMAND PROCEEDINGS. WE SEE FORCE IN THE ARGUMENT OF MR. HE MANT LAL LEARNED CIT DR THAT THE ASSESSING OFFICER WAS NOT R EQUIRED TO RECORD ANY STATEMENT FROM MR. AMIT SINGH GILL IN TH E COURSE OF REMAND PROCEEDINGS. IN FACT IN HIS LETTER DATED 20 TH JANUARY 2009 THE CIT(A) HAS REQUIRED THE ASSESSING OFFICER TO FORWARD HIS COMMENTS OR OBJECTIONS IF ANY TO THE ADDITION AL EVIDENCE ITA NO.5271/MUM/09 23 ADDUCED BY THE ASSESSEE UNDER RULE 46A. HOWEVER TH E ASSESSING OFFICER TOOK IT UPON HIMSELF ALSO TO EXAM INE MR. AMIT SINGH GILL WHO HAD NO DIFFICULTY IN APPEARING BEFO RE THE ASSESSING OFFICER IN THE COURSE OF REMAND PROCEEDIN GS THOUGH HE HAD MANY DIFFICULTIES IN APPEARING BEFORE THE AS SESSING OFFICER AT THE TIME OF THE ASSESSMENT PROCEEDINGS. BE THAT AS IT MAY THE ASSESSING OFFICER APPEARS TO HAVE THOUGHT THAT HE SHOULD CROSS EXAMINE MR. AMIT SINGH GILL ON THE CON TENTS OF THE AFFIDAVIT. ASSUMING THAT THIS ACTION IS WITHIN THE SCOPE OF THE DIRECTIONS OF THE CIT(A) LET US TURN TO THE STATEM ENT OF MR. AMIT SINGH GILL MADE BEFORE THE ASSESSING OFFICER ON 25. 02.2009 A COPY THEREOF IS AT PAGES 307 TO 309 OF THE PAPER BO OK. IT IS A STATEMENT RECORDED UNDER SECTION 131 ON OATH. IN TH IS STATEMENT HE HAS STATED THAT HE COULD NOT REPAY TH E AMOUNT OF RS.1 87 50 000/- TO THE ASSESSEE ON THE PROMISED DA TES AND THE CHEQUES ISSUED BY HIM HAD ALSO BOUNCED. HE HAS ALSO STATED THAT HE HAD PROMISED HUGE RETURNS TO THE TUNE OF R S.4/5 CRORES. AGAIN WE HAVE TO REITERATE THAT AT THIS LA TE JUNCTURE NO CREDENCE OR CREDIBILITY CAN BE ATTACHED TO THE VERS ION OF MR. AMIT SINGH GILL THAT HE ONLY PROMISED TO RETURN RS. 4 OR 5 CRORES TO THE ASSESSEE ON THE INITIAL INVESTMENT OF RS.1 8 7 50 000/-. HE WAS ONLY ADOPTING THE SAME LINE WHICH THE ASSESSEE HAD TAKEN IN HIS STATEMENT GIVEN UNDER SECTION 131 OF THE ACT FIVE YEARS EARLIER BEFORE THE INVESTIGATION WING. THE WHOLE P ICTURE WE GET IS THAT BY MAKING SUCH AVERMENTS AT A LATE STAGE OF TH E ITA NO.5271/MUM/09 24 PROCEEDINGS ONE CORROBORATING THE OTHER BOTH THE ASSESSEE AND MR. AMIT SINGH GILL WERE IN A WIN-WIN SITUATION. MO REOVER MR. AMIT SINGH GILL WOULD HAVE BEEN HARD PUT TO COME ON RECORD TO SAY HOW HE RETURNED THE CASH AMOUNT OF RS.3 12 50 0 00/- TO THE ASSESSEE BY WAY OF SETTLEMENT. THEREFORE BOTH THE PARTIES HAVE CONVENIENTLY LEFT OUT THE CASH PORTION OF THE AMOUNT AND TOOK THE COMMON STAND THAT THE AMOUNT ADVANCED WAS NOTHING MORE THAN RS.1 87 50 000/-. IT SUITED THE INTEREST OF BOTH THE ASSESSEE AND MR. AMIT SINGH GILL TO SAY SO. HOWEVER THEY COULD NOT GIVE SATISFACTORY EXPLANATION FOR THE STATEMENT IN THE FIR THAT THE AMOUNT ADVANCED WAS RS.5 CRORES. THE ASSE SSING OFFICER IN OUR OPINION SHOULD HAVE STUCK TO THE A SSESSMENT ORDER IN THE REMAND REPORT DATED 26.02.2009 A COPY OF WHICH IS PLACED AT PAGE 310 OF THE PAPER BOOK. HE SEEMS TO H AVE VACILLATED A BIT AFTER RECORDING THE STATEMENT OF M R. AMIT SINGH GILL WHICH IS PERCEPTIBLE FROM HIS STATEMENT THAT A S PER THE MOU AND THE OUT OF COURT SETTLEMENT THE AMOUNT AGREED TO BE PAID WAS RS.2.25 CRORES BUT ONLY RS.2 CRORES WAS ACTUALL Y PAID AND THEREFORE INTEREST @ 18% WAS TO BE PAID FOR THE DEL AY WHICH SHOULD BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE . AFTER SAYING THIS HE HAS REQUESTED THE CIT(A) TO DECIDE THE ISSU E ON MERITS. WE ARE NOT PREPARED TO COUNTENANCE THE VIEW TAKEN B Y THE ASSESSING OFFICER. WHILE MAKING SUCH OBSERVATIONS I N THE REMAND REPORT THE ASSESSING OFFICER SEEMS TO HAVE O VERLOOKED THAT NO EVIDENTIARY VALUE CAN BE PLACED ON THE AFFI DAVIT OF MR. ITA NO.5271/MUM/09 25 AMIT SINGH GILL OR ON THE STATEMENT RECORDED FROM HIM BY WAY OF CROSS EXAMINATION ON THE CONTENTS OF THE AFFIDAV IT. THE CIT(A) WITH GREAT RESPECT SHOULD NOT HAVE GONE BY THE LA TER VERSION OF THE ASSESSEE AND MR. AMIT SINGH GILL BOTH OF WHOM T OED A COMMON LINE WHICH WOULD BE FOR THE BENEFIT OF BOTH. THE CIT(A) AGAIN WITH RESPECT SEEMS TO HAVE OVERLOOKED THE NO RMAL COURSE OF HUMAN CONDUCT AND HUMAN PROBABILITIES AND APPEAR S TO HAVE BEEN SWAYED BY THE DOCUMENTARY EVIDENCE. IT IS WELL SETTLED LAW AND THE LEGAL POSITION IN THIS REGARD HAS BEEN CLEA RLY ADUMBRATED BY THE SUPREME COURT IN AT LEAST THREE J UDGEMENTS. (I) CIT VS. DURGA PRASAD MORE (1971) 82 ITR 540 (II) SUMATI DAYAL VS. CIT. (1995) 214 ITR 801 (III)CIT VS. P.MOHANAKALA (2007) 291 ITR 278. THE GIST OF THESE JUDGEMENTS IS THAT WHILE EXAMINI NG THE EVIDENCE INCLUDING DOCUMENTARY EVIDENCE THE TAXING AUTHORITIES ARE NOT REQUIRED TO PUT ON BLINKERS. THEY HAVE TO PROBE THE MATTER IN ORDER TO FIND OUT WHETHER THE APPARENT IS THE REAL STATE OF AFFAIRS AND THEY ARE ENTITLED TO LOOK INTO THE S URROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY OF THE RECIT ALS MADE IN THE DOCUMENTS. IN THE CASE OF DURGA PRASAD MORE (SUPRA) THE SUPREME COURT HAS CAUTIONED THAT THOUGH IT IS TRUE THAT THE APPARENT MUST BE CONSIDERED REAL UNTIL IT IS SHOWN THAT THERE ARE REASONS TO BELIEVE THAT THE APPARENT IS NOT REA L IT IS NECESSARY FOR THE DEPARTMENT IN SOME CASES TO REQU IRE THAT THE PARTY WHO RELIES ON RECITAL IN A DOCUMENT HAS TO E STABLISH THE ITA NO.5271/MUM/09 26 TRUTH OF THOSE RECITALS AS OTHERWISE IT WILL BE VER Y EASY TO MAKE SELF-SERVING STATEMENTS IN THE DOCUMENTS AND EVADE TAX. THE SUPREME COURT ALSO REMARKED THAT COURTS AND TRIBUNA LS HAVE TO JUDGE THE EVIDENCE BEFORE THEM BY APPLYING THE T EST OF HUMAN PROBABILITIES. IN THE CASE OF SUMATI DAYAL CITED S UPRA THIS PRINCIPLE WAS REITERATED AND A CAUTION WAS ADMINIST ERED THAT A SUPERFICIAL APPROACH TO THE EVIDENCE SHOULD BE AVOI DED AND IT HAS TO BE CONSIDERED IN THE LIGHT OF THE HUMAN PROB ABILITIES. IN THE CASE OF CIT VS. MOHANAKALA CITED SUPRA THESE P RINCIPLES WERE REITERATED. IN THE PRESENT CASE THE APPRECIAT ION OF THE EVIDENCE BY THE CIT(A) IS NOT IN THE MANNER IN WHIC H IT HAS TO BE APPRECIATED IN THE LIGHT OF THE AFORESAID JUDGEMENT S. 19. THE LEARNED COUNSEL FOR THE ASSESSEE HAS CITED THE JUDGEMENT OF THE SUPREME COURT IN THE CASE OF GEORG E & OTHERS VS. STATE OF KERALA & ANOTHER CITED SUPRA TO CONTE ND THAT FIR IS NOT SUBSTANTIVE EVIDENCE AND CANNOT BE RELIED UPON AND THAT IT ONLY REQUIRES THE POLICE OFFICER TO CARRY OUT INVES TIGATION. IN THE PRESENT CASE HOWEVER THE QUESTION IS WHETHER THE ASSESSEE WHO HAS FILED THE FIR ON THE BASIS THAT HE AND HIS BUSINESS ASSOCIATES HAD ADVANCED RS.5 CRORES IN CASH TO MR. AMIT SINGH GILL CAN TURN AROUND AND SAY THAT THE AMOUNT ADVAN CED WAS NOT MORE THAN RS.1 87 50 000/-. IN THE AFORESAID JU DGEMENT IT HAS BEEN HELD THAT FIR IS NOT SUBSTANTIVE EVIDENCE UNLESS ADMITTED UNDER SECTION 32(1) OF THE EVIDENCE ACT AN D CAN BE USED TO CORROBORATE OR CONTRADICT THE MAKER THEREOF . WHAT THE ITA NO.5271/MUM/09 27 DEPARTMENTAL AUTHORITIES HAVE DONE IN THE PRESENT C ASE IS TO CONTRADICT THE ASSESSEES VERSION THAT HE PAID ONLY RS.1 87 50 000/- THROUGH THE TWO COMPANIES TO MR. AMIT SINGH GILL BY RELYING ON THE FIR IN WHICH HE HAD STATED T HAT HE PAID RS.5 CRORES IN CASH TO MR. AMIT SINGH GILL. THE C ONDUCT OF THE ASSESSING OFFICER IS NOT IN ANY MANNER CONTRARY TO THE JUDGEMENT CITED ABOVE. 20. IN THE RESULT WE REVERSE THE DECISION OF THE CI T(A) AND RESTORE THE ADDITION OF RS.3 12 50 000/-. THE APPEA L OF THE DEPARTMENT IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 31 ST DAY OF JANUARY 2011. SD/- ( R.K. PANDA ) SD/- ( R.V.EASWAR ) ACCOUNTANT MEMBER PRESIDENT MUMBAI DATED 31 ST JANUARY 2011. SOMU COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-2 MUMBAI. 4. THE CIT(A)-XXX MUMBAI 5. THE DR E BENCH /TRUE COPY/ BY ORDE R ASSTT. REGISTRAR I.T.A.T MUMBAI