ORDER
M.C. Agarwal, Judicial Member
1. This is a second appeal by the assessee arising out of his assessment for asst. year 1984-85.
2. We have heard the learned counsel for the assessee and the learned Departmental Representative and have perused the material placed before us.
3. The assessee is an individual and carries on business of purchase and sale of silver ornaments, utensils, etc., in the name of M/s Anil Kumar Sheetal Kumar Nahata. A search was held by the Income-tax Department on the residential and business premises of the assessee from 13th December, 1983 to 17th December, 1983! During the search, silver ornaments and utensils were seized and were found to be in excess of the stock as per books. After investigation in the assessment proceedings silver ornaments amounting to 125.44 kgs. were held by the ITO to remain unexplained and he made an addition of Rs. 3,49,225 representing the value of this property describing the addition to be made under Section 69A of the Income-tax Act, 1961. The assessee had explained the said silver to have been purchased from one Rashid & Company of Jabalpur as under:
4. Rashid & Co., Jabalpur
Bill No. 107 dt. 8-12-1983 40.300 kg.
Bill No. 108 dt. 10-12-1983 50.340 kg. 125.440kg.
Bill No. 111 dt. 11-12-1983 34.800 kg.
4. There were following quantities of silver as well, which the assessing officer has initially considered to be in excess but on consideration of the evidence held them to have been properly explained. In the present appeal, therefore, we are not concerned with them:
Dt. of Bill Weight
1. Nihalchad Niraj Kumar
Kandiya 11-11-1983 7.642kg.
2. Mali & Mali Co., Hupri,
Kolhapur, Maharashtra 22-11-1983 30.112 kg.
3. M/s Kishanlal S/o
Sukhandanlal, Agra 12-12-1983 2.707 kg.
Regarding the alleged purchase of silver amounting to 125.44 kg. from Rashid & Co., Jabalpur the assessing officer (IAC Asst.) did not accept the assessee’s contention. The reason was that at the time of search this silver was not found recorded in any books of account, the assessee in his examination under Section 132(4) did not offer any explanation about the source of acquisition, and on inquiry Mohd. Rashid, the alleged proprietor, was found to be a man of very humble means and the assessee did not produce him for examination.
5. The IAC (Asst.) having made an addition of Rs. 3,49,225 the assessee preferred an appeal before the CIT(A), who vide order dated 16th May, has agreed with the findings recorded by the IAC(A). The assessee is, therefore, now in appeal before us. The following grounds have been taken:
1. That the learned CIT(A) erred in law and on facts in sustaining the addition of Rs. 3,49,225 under Section 69A which is a transaction of purchase of silver ornaments from M/s Rashid & Co. duly accounted for in the books of account and stands concluded/cleared before 31-3-1984 relevant to the asst. year 1984-85.
2. That the learned CIT(A) acted wholly contrary to law, under the facts and circumstances of the case:
(i) in not admitting the sales tax evidences/orders of Rashid & Co. confirming the sale to the assessee;
(ii) in not considering the reality of the statement of Mr. Rashid on the basis of human probabilities, circumstantial evidences and other corroborative evidence and subsequent affidavit filed on 31-12-1985 and 1-1-1986;
(iii) in holding, without rebutting the documentary evidences on record, that all the papers filed before the learned IAC were merely “Papers” and no actual sale of silver ornaments took place between the assessee and Mohd. Rashid & Co.
3. That the learned CIT(A) erred in law and facts in holding that the Amanat Bahi is merely in the shape of memorandum book keeping in memory certain transactions but it cannot be said to be regular books of account maintained in the ordinary course of business.
4. That the learned CIT(A)’s finding in respect of the transaction are arbitrary based on conjectures, surmises and suspicions not supported by any evidence on record.
5. That the learned CIT(A) should have adjudicated the grievance of the appellant regarding calculation of closing stock as on 13-12-1983 and consequently the excess closing stock out of the books.
6. That the learned CIT(A) erred on facts in holding that Mr. Rashid merely maintains bill book for the purpose of issuing the same whenever one requires such a paper bill and that the so-called payment by demand drafts/cheques were ‘probably’ returned to the assessee.
7. That the learned CIT(A) erred on facts in holding that the assessee would have asked to the IAC to issue summons under Section 131 for cross-verification of Mohd. Rashid.
8. Under the facts and circumstances of the case and evidences on the records the CIT(A) should have treated the transaction as genuine and that the assessee’s burden of proof stands discharged.
6. As is evident from the grounds reproduced above, the main question is about the sources of possession of silver amounting to 125.44 kgs. by the assessee. The assessee’s specific case is that the silver was delivered to the assessee by Rashid & Co. Admittedly, by the time of search no payment had been made to the said Rashid & Co. and before proceeding further, we may refer to the statements made by the appellant before the authorised officer who recorded the assessee’s statement on 17-12-1983, I.e., on the last day of the search and probably after the search operation had otherwise concluded. A perusal of this statement would show that the assessee has avoided answers to various questions either by pleading ignorance or by saying that he was not well. For example, he was asked about the source of his investment in the business, which he stated, he could not remember because he was not feeling well. The place where the assessee carried on the aforesaid business was said to belong to a firm M/s Siddharth Motors & Tractors. When asked as to when this firm was started, he again stated that since he was not well, he could not tell anything. The ITO then asked him as to who was writing the accounts of his business. To this, he replied that the Munims, etc., write the accounts, whose names he could not recall. When asked about the cause for the difference in the stock, he stated that the difference has been calculated by the Munim. He was specifically asked an explanation about the excess stock amounting to 201.270 kgs. To this he said that some goods might have been purchased or might have gone out of the shop and that his mental condition was not well and therefore, he is unable to reply. Then there was another question to the assessee. We give below the English translation of the said question and the answer thereto:
Question: The search party has closely searched your business and residential premises from 13-12-1983 to 17-12-1983 and no purchase vouchers, approval slip, certificate/voucher of goods entrusted (Amanati), etc., have been found. Do you know if any purchase have been made where are their vouchers kept ? If purchases are correct then produce their bills/vouchers ?
Answer: Because my mental condition is not well, I cannot say anything.
7. The authorised officer also asked the assessee if he was present in Seoni on 12-12-1983, the day preceding the commencement of the search. The assessee again pleaded lapse of memory. The authorised officer also pointedly asked the assessee to explain why silver amounting to 201.270 kgs. be not considered to be unexplained stock. The assessee gave no explanation and said that he could not remember anything. The authorised officer then asked the assessee that the value of the aforesaid quantity of silver was about Rs. 7 lakhs and asked the assessee to explain the source of this investment. The assessee again gave the same stock reply. Towards the end of the explanation he also stated that as he had been awake continuously for the last 28 hours, his physical and mental condition was not well.
8. We have given the aforesaid copious notes from the assessee’s statement to show that in this statement, which was recorded soon after the search, the assessee had not given any explanation about the possession of the excess silver and what is even more important to note is that though later on it was said that the silver came to the assessee from Rashid & Co. of Jabalpur on credit on sale/approval basis, in this statement the assessee did not make any such claim whatsoever.
9. In proceedings under Section 132(5) of the Income-tax Act, 1961, notice under Rule 112-A was issued and was served on the assessee on 24-12-1983. The assessee was required to submit his explanation in 15 days. In response to this, the assessee moved an application on 7-1-1984 seeking a week’s time alleging that he was still not in a fit state of mind and his counsel had not been able to inspect the record. Then on 22-2-1984 another application was moved on behalf of the assessee. This is placed at page 47 of the record of proceedings under Section 132(5). in this application a very queer request was made as under:
In this connection, no previous notice has been issued and in place of the firm, notice has been issued to the proprietor, Shri Prakash Chand Nahata. Hence, the furnishing of reply be kindly dropped.
A clear indication of avoidance to face the issue. In the case of a proprietary business, there is no firm in the sense in which it is understood in the partnership law. Then no notice can be served on an intangible object like a firm — whether sole, proprietary or partnership. Notice has always to be served on some individual. This was the conduct of the person whose silver weighing 201.270 kgs. had been seized on or about 13-12-1983, i.e., about 2/3 months ago.
10. Thereafter the assessee ultimately filed a very perfunctory reply on 7-3-1984 [at page 70 of the record under Section 132(5)] as under:
To
The Income-tax Officer, Seoni.
M/s Anil Kumar Sheetal Kumar Nahata,
Seoni Proceedings under Rule 112A Replies to queries.
(i) The Bills received from Rashid and Co. for purchase OF SILVER ORNAMENTS which were received on sale on approval basis as evidenced by the entries noted in the books of account seized by you are of different dates as the touch forms of ornaments purity on the basis of which bills are prepared have been received by us on different dates. The copies of (Photocopy) touch forms are enclosed as an evidence in support of different dates of bills. The said fact is also supported by the letter of M/s Rashid & Co. which has already been produced. Also enclosed photocopies of letter dated 11-8-1983 and 16-1-1984 of Mali & Mali and dated 14-2-198-1 are enclosed for evidence.
Seoni;
Dated; For assessee
7-3-1984 Sd/- (initials
illegible, but tally-
ing with those of
assessee's Chartered
Accountant, Counsel
Sri P.C. Berdia)
Thus, the above letter would show, it was not a full-fledged reply to the notice under Rule 112-A. It was merely an answer to some queries. The slip-shod nature thereof is apparent on its face. No other reply was ever filed in these proceedings meaning thereby that, although a fortune of wealth has been seized, in spite of sufficient time lag the assessee did not file any reply giving the details and modus operandi of the transactions and the names of persons who could be witnesses thereof. Though the assessee had set up a damaging conduct in his statement under Section 132(4), yet he till the aforesaid time made no amends, i.e., he neither filed a written reply signed by him and giving the requisite details and explanations for the lapses in his statement under Section 132(4) nor he filed any affidavit of his own, or of his Munim or other connected person nor of any body on behalf of Rashid & Co. A copy of the aforesaid letter dated 7-3-1984 has also been placed by the assessee in his paper book at page 38. Even in the assessment proceedings under Section 143, the assessee never filed any reply whatsoever in writing explaining his case, mentioning the various dates on which transactions took place, the place where the transactions took place and the names of persons concerned, etc., etc.
11. We have given the above history of the assessee’s conduct because that would be very relevant for appreciating the evidence which the learned counsel for the assessee described as voluminous in support of his case.
12. In his investigational powers, the Inspecting Asstt. Commissioner (Assessments) examined Mohd. Rashid the so-called proprietor of M/s Rashid & Co., South Miloni Ganj, Jabalpur who is said to have delivered the silver ornaments weighing 125.44 kgs. to the assessee. This statement was recorded on 29-10-1985 and, without going into details, we may say that he made himself out to be a very small craftsman engaged in repair of old ornaments or manufacturing new ones from old ones. In other words, he did not purchase his own silver, etc., for manufacture of onaments. He told his income to be Us. 400 to Rs. 500 p.m. and specifically denied having sold silver to the assessee as alleged. The assessee purports to have paid the price of silver in question to Rashid & Co. the details of which we would discuss later, by Bank Drafts. About them Mohd. Rashid stated that the money was withdrawn from the bank and returned to the assessee. One Iddu purporting to be a servant of Mohd. Rashid was also examined on 16-10-1985 by the assessing officer and he also corroborated Mohd. Rashid by stating that this firm (M/s Rashid & Co.) did not trade in gold or silver ornaments. Admittedly, these statements were recorded at the back of the assessee and no copy thereof was made available to the assessee during the assessment proceedings.
13. The IAC (Assessment) appears to have taken up the assessment proceedings towards the end of December 1985 and made the assessment order on 31-12-1985. Whether the conduct of the assessing officer in rushing through the assessment proceedings and completing them within 5-6 days, after sleeping over the matter for about 2 years is commendable or condemnable is for the authorities concerned to ponder. Since nothing hinges on this in the circumstances of this case, we would leave the matter here.
14. The assessing officer issued a letter dated 26-12-1985 to the assessee as under:
Sir,
Sub: Proposal for additions, explanations and evidences, if any, against proposed additions requisitioned.
I propose to make the following additions under Section 69A on the basis of evidences and materials collected by me. The crossvertification and examination of the following parties, the following facts emerged, which show that they are not genuine:
(i) Rashid & Co., Jabalpur: You have claimed to have received total quantity of silver ornaments weighing 125.440 kg. from one M/s Rashid and Co., Jabalpur on 8-12-1983, 40.300 kg. Bill No. 107, on 10-12-1983, 50.340 kg. Bill No. 108 and on 11-12-1983 34.800 kg. vide Bill No. 111.
The proprietor of the above firm M/s Rashid & Co. was summoned and his statement was recorded by examining him. He categorically denied to have any transaction in purchase and sale of silver or silver ornaments with you, in fact, he admitted that he was a very small repairer of old silver ornaments. The scale at which he worked never exceeded 4-5 kg. of silver ornaments given him for repairing, which he got done by one or two karigars (workers) employed by him. He also admitted that the amount paid through demand draft by M/s Anil Kumar Sheetal Kumar Nahata was deposited in his bank account taut was shortly withdrawn and paid back to M/s Anil Kumar Sheetal Kumar Nahata, Seoni. He also admitted that he just accommodated the above party in the hope of some future business he expected to get from the above party (assessee).
You are requested to produce the following three parties on 31-12-1985 for cross-verification and examination. In case you fail to produce them on the date mentioned above, I would arrive at the conclusion that the alleged transactions are bogus ones and equivalent value of silver ornaments claimed to have been received for approval from them will be liable to be added as unexplained investment made by you during the relevant previous year.
(1) Nihalchand Nirajkumar, Kandiya, Sagar.
(2) Mali & Mali and Co., Hupri, Kolhapur.
(3) M/s Rashid & Co., South Mileoniganj, Jabalpur.
Yours faithfully
15. In reply the assessee wrote a letter dated 31-12-1985 as below:
Regarding the proposed additions under Section 69A, the assessee submits as under:
1. Rashid and Co., Jabalpur:
As explained under Section 112(1)(A), while attending to the proceedings under Section 132(5) the assessee claimed that silver weighing 125.440 kg. as in the shape of ornaments could not be entered in the books of account till 13-12-1985. The following evidences were produced before the ITO, Seoni:
(i) Purchase Bills.
(ii) Letter from Rashid & Co. dated 11-2-1984 regarding payment of Rs. 60,000 and request for rest of the payment.
(iii) Letter dated 1-12-1983 regarding reaching of Mohd. Rashid for handing over the sale bills.
(iv) The copy of M/s Rashid and Co. in our books showing all payments made through account payee drafts, enclosed which is now furnished.
Your honour has also examined Mohd. Rashid but his statement recorded by you have not been shown to and instead of that, a letter has been given to us on 26-12-1985 stating the following:
(i) Categorical denial of having any transaction of purchase and sale of silver ornaments with the firm:
The details of Mohd. Rashid of having not done any transaction with the assessee is absolutely wrong. The same is duly proved by abovementioned documentary evidence and entries made in the Amanati Bahi seized by your honour, which your honour has already verified.
(ii) Admitting that he has a very small repairer of old silver ornaments, the scale at which he ever worked not exceeded 4-5 kg. of silver ornaments given him for repairing.
In this respect the photocopy of sales tax demand for Rs. 2,760 for the year 1983 is enclosed of M/s Rashid & Co. which itself shows the statement is wrong.
(iii) He admitted that the payment deposited in bank a/c was shortly withdrawn and paid back to the assessee.
In this respect, the same cannot be relied on unless he gives proof of returning the amount.
Your honour has given the assessee an opportunity to cross-examine him on 31-12-1985, as he is not at Jabalpur, it is not possible to bring him for cross-examination. The assessee has received at Seoni, an affidavit of Mohd. Rashid with a letter that he is repenting for false statement given before your honour regarding M/s Anil Kumar Sheetal Kumar Nahata, Seoni. The photocopy is enclosed for your honour’s perusal.
2. Nihal Chand Niraj Kumar, Kandiya:
The proprietor of the firm Shri Nihal Chand Jain is being produced for examination on oath.
3. M/s Mali & Mali and Co., Hupri, Kolhapur (Maharashtra):
The information collected in respect of the above party and his statement recorded by you has not been shown to us. The copy of account of the assessee in the books of the firm is enclosed which proves the said transaction. He is also income-tax assessee at Ichalkaranji as under:
39-084-FQ
2928/355 FM
C-Ward, Ichalkaranji, Maharashtra
Sd/-For assessee,
Copies of the aforesaid letters are placed at pages 28, 29 and 30 of the assessee’s paper book. Copy of another letter dated 30-12-1985 addressed by the assessee to the TAG (Assessment) is at page 32 of the paper book. This also is in response to IAC(A)’s letter dated 26-12-1985 aforesaid and says that the time allowed for production of the three parties mentioned in IAC(A)’s letter dated 26-12-1985 (received by the assessee on 26-12-1985 itself) is very short, hence, notice under Section 131 be issued to them. In the next letter dated 31-12-1985 (reproduced above) the assessee informed the ITO that Mohd. Rashid was not present at Jabalpur. This means even issuing of a summons under Section 131 would have been of no use.
16. The result is that Rashid from whom the assessee claims to have purchased/procured on approval the aforesaid silver was never produced at any stage from the date of seizure till the date of completion of assessment. It is also important to remember that even in the appeal before the CIT(A) the assessee never offered to produce Mohd. Rashid for examination nor ever requested for compelling his attendance by recourse to process under Section 131. It is also important to note that the assessee has never complained that Mohd. Rashid has become recalcitrant and is not willing to attend on assessee’s oral request. As a matter of fact the learned counsel for the assessee while arguing the appeal before us stated that Mohd. Rashid was doing all to help the assessee so much so that he (Mohd. Rashid) even handed over his sales tax and income-tax files to the assessee. The learned counsel displayed those files in the Court. If Mohd. Rashid is such a helpful man, the omission to produce him for examination speaks volumes against the assessee and this cannot be explained by the lame argument that the time given by the IAC(A) was not sufficient.
17. It is also to be remembered that Mohd. Rashid was not the only person in the world to prove the genuineness of the alleged transaction. The persons who dealt with Mohd. Rashid could be equally good witnesses. But unfortunately for him, the assessee is not even willing to speak who are the other persons who knew of these transactions. So much so that the assessee never claimed that he had any personal knowledge or even derivative knowledge of the alleged transaction. He does not say that he dealt with Mohd. Rashid personally, nor does he say that anyone else on his behalf made any transactions which brought the silver to the assessee’s house or business premises, as the case may be. As a matter of fact, as explained above, no such explanation was ever filed. The omission to give details is not probably innocent. The more the details given, the more the enquiry and the more chance of exposure. What appears to have been the psychology of the assessee.
18. Along with the letter dated 31-12-1985 referred to above the assessee submitted to the assessing officer photostat copy of an affidavit dated 19-12-1985 purporting to have been made by Mohd. Rashid for presentation to the IAC(A), Jabalpur and also the photocopy of a forwarding letter addressed to the ITO. The originals of these papers were allegedly sent by Mohd. Rashid to the assessee by post and copies were directly sent to the ITO. The learned Departmental Representative stated that no such papers were received in the office of the IAC(A). Any way, the letter says that a mistake somehow occurred while making statement (must be referring to statement recorded on. 29-10-1985 for which he was sorry), and therefore he was sending a clarification, the original copy of which has been sent to Seth Prakash Chand Nahata (a photocopy of this letter is at page 25 of the paper book). In the affidavit (copy at pages 26 & 27) he stated that a mistake occurred in the statement under Section 131 because at that time he was shocked (ghabda gaya tha) and he has been coerced by the income-tax people to make a statement and was under undue influence (sammohit ho gaya tha). Mohd. Rashid goes on to state that he had given superdgi of silver goods earlier (does not state to whom, how much, at what date, place, etc.) and had on 1-12-1983 written a letter to the said firm, (the assessee) for accounts. He further says that on 12-12-1983 he reached Seoni (where the assessee resides and carries on business) at about 8 p.m. and since at that time Seth Prakash Chand (the assessee) was not there, he delivered three bills along with trench forms (purity certificates) to assessee’s Munim Badri Prasad who was present below the shop and instructed him to deliver these papers to Prakash Chandji. The affidavit further states that on 13th immediately (means very early in the morning) the income-tax people raided Prakash Chand’s places and he (Mohd. Rashid) immediately returned to Jabalpur. He further states in the affidavit that after the raid he wrote a letter to the assessee to pay his dues. Then he states that on 24-3-1984 the assessee paid him Rs. 60,000 by a/c payee draft, which he deposited in his bank a/c and they made further payments by a/c payee draft. He stated that he has no other evidence about the transactions except that whenever he delivered the goods in superdgi, they were entered in a Bahi.
Whose Bahi ? He does not clarify.
19. The copy of bank a/c of Mohd, Rashid & Co. from 29-6-1980 to December 23, 1985 is at page 34 of the paper book. The account appears to have been opened on 29-6-1980 with each deposit of Rs. 500. The next transaction was on February 2, 1981 of a deposit by Telegraphic transfer of Rs. 65,000 which was withdrawn by Rashid & Co. on the same day. There was another deposit of Rs. 9,251.89 paise on February 28, and on the same day a withdrawal of Rs. 9,000 was made. The only other transaction in 1981 was issue of a cheque for Rs. 204 to the Life Insurance Corporation, of India. In the years 1982 and 1983 there were no transactions in this a/c whatsoever. Only some service charges were debited towards the close of the year. On December 22, 1983 the bank treated this account as dormant and transferred the balance of Rs. 500 to the dormant ledger. It was on February 6, 1984 that the account was revived with the transfer of the sum of Rs. 500 from dormant ledger to this a/c and it is here that the drafts delivered by the assessee came in. On February 7, a sum of Rs. 60,000 is credited to this a/c “By Clg.”. It was admitted that it was in respect of a draft delivered by the assessee. It shows the whole amount of Rs. 60,000 was withdrawn the same day. Deposits of Rs. 22,000 and Rs. 20,000 “By Clg.” were made on 13th and 15th February, 1984. The first deposit was withdrawn the same day and the other day after, i.e., on the 16th. The second payment of Rs. 50,000 by the assessee came in this a/c on 22-2-1984 and went out the next day in two withdrawals of Rs. 45,000 and Rs. 5,000 each. The third payment of Rs. 50,000 by the assessee went in this a/c on 27-3-1984. Out of this Rs. 40.000 was withdrawn the same day. The balance of Rs. 10,000 stood adjusted against a withdrawal of Rs. 10,000 on 26-3-1984 which appears to have been permitted by the bank on account of a deposit of a cheque or draft of Rs. 50,000 which bounced back and was re-debited to the assessee’s a/c on 26-3-1984. The last payment of Rs. 17,115 went into this a/c on March 28, 1984 and out of this Rs. 17,000 was withdrawn the next day leaving a balance of Rs. 615 only in this a/c. Thereafter till the 23rd December, 1985 (up to which this copy is made out) there was no transaction in this account. Only service charges were debited by the bank periodically. This is the position of the bank account of this person who is alleged to have thrown goods worth about Rs. 1,77,115 (according to the revenue Rs. 3,49,225) in the assessee’s lap for approval. Does this a/c not indicate that Mohd. Rashid is a man of no means and cannot be expected to undertake such large business ? In our view it indicates only this and nothing else. It also indicates that the payments made in this a/c were not genuine and the money in all probability travelled back to the parties like the assessee.
20. It is quite unnatural that the assessee should pay this man by bank drafts and not by cheques, and also that he should be paid before securing Ms evidence to prove the genuineness of the transaction. A perusal of the account of Rashid & Co. in the books of the assessee (copy placed at page 33) would show some unnatural haste in making payments. Admittedly, this account was written after the search operations. The entries of three lots of purchases purport to have been made on 26-12-1983. The payments are recorded as under:
2-2-1984 Rs. 60,000 by Draft of Union Bank of India, Jabalpur 21-2-1984 Rs, 50,000 - do - - do - 25-3-1984 Rs. 50,000 by Draft of State Bank of India, Jabalpur 27-3-1984 Rs. 17,115 - do - - do - Total Rs. 1,77,115
Seoul, the place where the assessee carries on his business, we were told by the assessee’s counsel at the hearing of the appeal, is about 180 kms. away from Jabalpur. This means that some one on behalf of the assessee came to Jabalpur on each occasion carrying substantial cash. The assessee could have sent the money by cheque drawn on a bank at Seoni with a covering letter. But that same procedure would not suit people who just want to put up false show, Clearance of a cheque would take at last a fortnight. The assessee would not know when the amount has actually been credited to the account of Mohd. Rashid. Allowing the money to remain in the a/c of Mohd. Rashid of Rashid & Co. to be precise, would be risking money. Mohd. Rashid is not a man whom the assessee could rely on for that.
21. The assessee’s hurry in clearing the account of Mohd. Rashid is not that of a prudent worldly wise man. If it had been true that the goods were received on sale/approval basis from Rashid & Co. the assessee would have not made payment of the whole or a substantial part of the price till Rashid acknowledges the fact before the income-tax authorities in an acceptable manner and also produces other corroborative evidence to make this story acceptable. The conduct may not be legally upright but there would have been nothing illegal or immoral as well. If the story was true and the goods were received on approval basis only, then in law Rashid remained the owner of the goods. The assessee could inform Mohd. Rashid that goods belonging to him have been seized by the Income-tax Department. Then Mohd. Rashid would have been running around the Income-tax Officer offering not only himself as a witness but also producing all corroborative evidence. But that was not to be so.
22. The bank a/c of Rashid & Co. shows that this party has no financial standing whatsoever. How could this man arrange silver ornaments worth Rs. 1,77,115. No evidence have been led on this aspect of the matter. Even Mohd. Rashid in his affidavit does not say how he could arrange such a large quantity of silver. He did not utter a word about his financial status. In spite of the fact that this is said to be a trading transaction, no interest has been paid to Mohd. Rashid although a huge quantity of goods is said to have been supplied and the money was not paid for more than three months. As a matter of fact, the poorer person pretends to being unduly charitable to the assessee who is evidently fabulously rich.
23. Mohd. Rashid is said to have written a letter dated 1-12-1983 to the assessee. A copy of this letter written on a postal inland letter is at page 35 of the paper book. The postal date seals are unduly clear and show that this letter was delivered on 9-12-1983 in the 9.30 hrs. delivery. We are of the view that this letter is a later manipulation. In this country where University Degrees can be forged, Supreme Court Bail Order can. be forged obtaining postal seals on a letter should be comparatively easier. Our reasons for this suspicion are: —
(i) The letter says that Mohd. Rashid will be reaching Seoni on 12-12-1983 to see the assessee along with bills and that payment should be made that day. We have already stated that Seoni is 180 kms. from Jabalpur. Yet this person plans his visit so that he reaches Seoni at 8.00 in the night (see his affidavit). Yet the assessee was not available. Prakash Chand Nahata in his statement under Section 132(4) does not say that he had gone out and was not in town. Rashid’s affidavit states that he stayed at Seoni in the night and he returned to Jabalpur next morning after learning that the income-tax people are raiding the assessee’s premises. He did not pick up courage to see the assessee or the income-tax people and tell that his goods worth aforesaid are with the assessee on approval and should be returned to him. According to the Sale of Goods Act the property in the goods has not passed to the assessee as the goods have not been approved and appropriated. Then this letter was not recovered duing search and as already stated the assessee did not mention Rashid & Co. in his statement.
(ii) In the affidavit Mohd. Rashid has stated that he delivered the bills to Badri Prasad, the assessee’s Munim. It appears that this Munitn was present daring the search, though unfortunately he was not examined by the search party. The assessee in his statement under Section 132(4) has stated that before the search party, the Munim gave the account/details of the stock. That Munim must, in our view, have been Badri Prasad and yet the Bills and Purity Certificates said to have been delivered by Mohd. Rashid to Badri Prasad never saw the light of the day during the search. Badri Prasad did not himself tell the search party that anything had been received from Bashid & Co. by purchase on approval. The assessee never tried to produce Badri Prasad personally or through affidavit at any stage of the proceedings.
24. Copies of three tunch certificates/purity certificates have been filed before the authorities below and are in the paper book as well before us. They are as under:
No. 3525 dated 4-12-1983 purity 35.40
No. 3529 dated 3-12-1983 purity 34.00
No. 2537 dated 4-12-1983 purity 35
These certificates have been issued by private refinery of Indore. The learned counsel for the assessee informed us that entries of these goods were not made in the regular books of account as the goods were on approval and the question of approving or disapproving the goods depended on verification of the purity. He also told us that Mohd. Rashid delivered these certificates to Badri Prasad. on 12-12-1983 along with the sale bills. We have already stated how Badri Prasad has been kept back. We asked Sri Badri as to why the purity certificates were obtained from Indore, a far off place. He explained that this was done to ensure impartiality of the test because Mohd. Rashid belonged to Jabalpur, hence, certificate of a refiner at Seoni would not have been acceptable. If this was so, then it is funny enough that instead of getting the purity tested himself the assessee entrusted this job to Mohd. Rashid who could take samples of his choice to Indore and obtain any certificate whatsoever. Then the three certificates are of different dates. Can it be believed that Mohd. Rashid, who claims to have already delivered the ornaments to the assessee would go to Indore thrice (about 550 kms. away from Jabalpur) to get the three certificates. Or is it natural to expect that the refiner whom Mohd. Rashid approached and delivered all the three samples at one and the same time, would test the three samples on different dates. All these unnatural things point to the zeal of a manipulator.
25. A purity certificate could be obtained only by getting the necessary test conducted on a sample drawn out from the lot. That sample should be out of the goods proposed to be sold or purchased. Therefore, in this case three samples should at least have been drawn, sealed and delivered to the refiner. The refiner should then again seal them and those sealed samples should, have been delivered to Badri Prasad, along with the purity certificates. Mohd. Rashid does not say that along with the certificates he delivered any sealed or unsealed samples as well.
26. It was contended that one of the documents seized by the search party was an Amanat Bahi in which goods received and delivered on Amanat are noted and that the entries of these three transactions are entered therein which proves that the goods came from Rashid and Co. The entries do exist now but we have many reasons to think that they were not there when this book was seized by the authorised officer. We have already mentioned that the assessee gave no indication of the source of this silver either during the search operations or in his examination under Section 132(4) in spite of repeated and sustained interrogation or even till 22-2-1984 when a queer application referred to above was moved In proceedings under Section 132(5). He even did not refer to the Amanat Bahi. He could have told the search party that Amanat Bahi may be seen or be shown to him. After all it was a search by an Income-tax party and not a decoity. Then never in the proceedings the assessee referred to these alleged entries in the Amanat Bahi and it was never disclosed who made these entries and when.
27. A perusal of the Amanat Bahi shows that whenever any goods were received or delivered, the signatures of the person concerned were obtained in this Bahi. This is quite necessary in this trade because of various reasons one of which is that in case any goods are stolen property and alleged to be stolen property and there is a police search, etc., the identity of the person who delivered the goods may be satisfactorily proved. The three deliveries allegedly made by Mohd. Rashid are recorded on 15-11-1983, 17-11-1983 and 19-11-1983 which shows that Mohd. Rashid was dumping goods on the assessee in a very unnatural quick succession, without any payment whatsoever and without having ever before dealt with the assessee. On none of the entries the signatures of Mohd. Rashid have been obtained. Similarly Mohd. Rashid does not claim to have been sandwiched in a column meant for recording the a/c of Nathu Lalji Manchand of Indore. Then on the page on which these entries appear, the author who has written the title of the various accounts has added the words “Hisab Chandi Ka” before the name of every party but these words are missing as a prefix from the name of Rashid and Co. Then in his affidavit or letter Mohd. Rashid does not mention any date on which the goods were delivered. His affidavit dated 19-12-1985 which is the foundation of the asses-see’s defence is delightfully vague. We are, therefore, of the view that the alleged entries in the Amanat Bahi were not in existence when the same was seized and they must have been interpolated some times later. Had these entries been in the Amanat Bahi and if Rashid had delivered the bills to Badri Prasad as alleged in the evening preceding the raid, this story would have told Itself ex tempore spontaneously and would not have taken too long to emerge and that too warped, in improbabilities of all sorts.
28. Then there are Eashid’s letters dated 11-2-1984 and 16-2-1984 to the assessee,, the three bills dated 8-12-1983, 10-12-1983 and 11-12-1983, the Sales Tax Asst. Order of Rashid & Co. (all photocopies — pages 36, 37, 42, 43, 44 and 10 of the paper book). They are all of equally suspicious nature and we do not want to say much about them. It is all a one way affair. Mohd. Rashid is said to have written, many letters to the as.sessee but; not even one is shown to have been responded, to. The goods purport to have been delivered earlier, then where was the need to prepare three sale bills/credit memos and that too on three different dates. A single bill In one date would, have been natural. The forms on which these bills are prepared make out Mohd. Rashid. a dealer of repute. Should he not have appropriate printed vouchers for goods delivered on approval as well ? Why could on the same forms an approval voucher be not made with necessary modifications ?
29. The aforesaid is the entire evidence produced, by the assessee. It is important to mention that originals of all important documents, the affidavit of Mohd. Rashid, his letters, etc., have been retained by the assessee and only photocopies were filed during the proceedings. When asked, why the assessee did not produce the relevant witnesses, the learned counsel for the assessee replied that the IAC(A) never asked the assessee to produce anyone except Rashid & Co. The burden of proof was on the assessee and the learned. IAC(A) had unequivocally informed the assessee that he is not believing the assessee’s explanation and proposes to add the value of silver under Section 69A. After this it was for the assessee to put his best foot forward and volunteer all the best a,nd relevant evidence. It was not the function of the IAC(A) to advise the assessee about the nature of evidence to be produced.
30. It was contended by the learned counsel for the assessee that the IAC(A) did not give sufficient opportunity to the assesaee to produce evidence. This contention in our view is only skin deep and the injury caused to the assessee is only superficial. No doubt, the IAC(A) rushed through the proceedings but the conduct of the assessee as detailed above clearly shows that the assessee in fact did not want to produce any witness whatsoever. We have indicated above how the assessee conducted himself in proceedings under Section 132(5) and avoided giving any definite and detailed account of the possession of silver. Neither in those proceedings nor in the assessment proceedings the assessee furnished such a statement of facts. The assessee did not require any notice from the assessing officer for furnishing the affidavits of Mohd. Rashid, of Badri Prasad Munim and of himself. He could have done so at any time after the filing of the return for 1984-85. But he never did so. The letter dated 26-12-1985 by the TAC(A) was served on the assessee on the same day at Jabalpur. This shows that the assessee was at Jabalpur in connection with the assessment proceedings from before (sic). After receiving that letter, the assessee did not react promptly to seek adjournments to enable Mm to produce the three parties mentioned in the letter dated 26-12-1985. He filed a letter dated 30-12-1985 before the IAC praying that since the time lag was short, summons under Section 131 be issued. In spite of this he produced Nihal Chand Jain of the firm Nihal Chand Niraj Kumar, Kandiya, Distt. Sagar on 31-12-1985 and regarding Rashid & Co. stated that he was out of station. Only a day before he requested the assessing officer to issue summons for him.
31. Although in the appeal before the CIT(A) the assessee set up a ground that the IAC(A) erred in not issuing summons to Rashid and Iddu under Section 131 in spite of request made by the assessee, it was not alleged in any of the grounds that due to paucity of time the assessee could not produce the necessary evidence. Then in. the appeal the assessee had an opportunity to request the CIT(A) to permit the assessee to produce the aforesaid persons as they could not be produced before the IAC(A) for the aforesaid reasons. No such effort was even attempted before the learned CIT(A) and we may mention that even before us no such request was made. We have mentioned above how the said Mohd. Rashid. has been helping the assessee. Therefore, if ever Mohd. Rashid was intended to be produced, there would have been no difficulty for the assessee. We are, therefore, not impressed by the crocodile tears of the assessee in the submission that adequate opportunity was not allowed.
32. The next contention of the learned counsel for the assessee was that the assessing officer examined Mohd. Rashid and Iddu at the back of the assessee and used their statements against the assessee without allowing the assessee an opportunity to cross-examine them. This, according to the assessee, is against the principles of natural justice. Reliance was placed on Kishinchand Chellaram v. CIT [1980] 125 ITR 713 (SC) and Gargi Din Jwala Prasad v. CIT [1974] 96 ITR 97 (All.). In the case before the Hon’ble Supreme Court the question was whether certain money transferred by telephonic transfer through a certain bank by an employee of one office of the assessee to another employee of the assessee’s other office belonged to the assessee. The Income-tax Officer had certain correspondence with the concerned bank. The said letters were not shown to the assessee and the Hon’ble Supreme Court held that they could not be used against the assessee and that opportunity to controvert should have been given to the assessee. In the case before the Allahabad High Court, the Income-tax Officer wanted to use certain information furnished to him by certain persons against the assessee. The Income-tax Officer neither allowed the assessee inspection of record nor disclosed the names of the persons and the nature of statements made or information given by them. The assessee had repeatedly asked for opportunity to cross-examine such persons which was not allowed. It was held on the aforesaid facts and circumstances that the principles of natural justice had been violated.
33. None of these rulings help the assessee in any manner whatsoever. It is well settled that Income-tax Officer is the investigator, the prosecutor as well as the Judge of the cause. It was in his role as an investigator that the IAC(A) summoned the aforesaid persons and examined them on oath. At that stage there was no need to allow the assessee any opportunity of cross-examination, etc., etc. After examining these persons he felt that the assessee should produce M/s. Rashid & Co. for cross-examination. He, therefore, issued the letter dated 26-12-1985 to the assessee directing him to produce M/s. Rashid & Co. for cross-examination and examination. He could validly do so without informing the assessee what had been stated by Mohd. Rashid. The IAC(A) was, however, fair enough to inform the assessee that he has already examined the owner of the firm Rashid and Co. and that he (Mohd. Rashid) had denied having has any transaction with the assessee and further that he was a man of very small means meaning thereby that he was financially incapable of making such a large transaction. Thus, whatever was material in the statement of Mohd. Rashid, was fairly communicated to the assessee. Even otherwise it is not the case of the assessee that he did not know what Mohd. Rashid had stated. According to the assessee’s own case, Mohd. Rashid sent a copy of affidavit dated 19-12-1985 referred to above to the assessee by post. If this story is correct, then the affidavit must have reached the assessee before 26th of December and from that also he could know that the statement made by Mohd. Rashid before the IAC(A) was unfavourable to him.
34. It was not controverted before us that copy of the statements was not delivered to the assessee by the IAC(A) during the assessment proceedings. Copies thereof were supplied shortly after the assessment was completed. But at the same time, it is also a fact that the assessee neither insisted for supply of copies nor for inspection. None of his letters dated 30-12-1985 and 31-12-1985 makes such request. As a matter of fact the statements being against the assessee, he did not need their copies. No formal application for copy or inspection of this statement was shown to have been ever made during the assessment proceedings.
35. It is also to be remembered that the IAC(A) had no need of using the statement of Mohd. Rashid and Iddu against the assessee. What he had to use against the assessee was the recovery of silver in question from the possession of the assessee. The recovery was made in the presence of the assessee and the assessee has been admitting right from the beginning that the silver in question was in his possession. Therefrom there was no burden on the IAC(A) to prove anything else. The burden was squarely on the assessee to prove how he came into possession of the silver and if it was acquired by any investment, what was the source. On the case set up by the assessee, Mohd. Rashid was the assessee’s star witness. The burden was on him to produce him before the IAC(A) and to examine him as his (assessee’s) witness and to enable him IAC(A) to cross-examine Mohd. Rashid. Simply because by way of precautions and in his powers and duty as an investigator, the assessing officer recorded the statement of Mohd. Rashid, the later does not become the assessing officer’s witness whom the assessee could claim a right to cross-examine.
36. Though the assessing officer has made copious mention of the statement of Mohd. Rashid and Iddu in his assessment order but that does not vitiate his findings. Firstly, because there is at the most a technical flaw in the non-supply of copy of statements to the assessee, the assessee knew fully well what Mohd. Rashid had stated. Secondly, the assessing officer’s finding is based on the lack of evidence and the unreliability of the material produced by the assessee. The assessing officer’s finding is very well sustained by the other material and circumstances on record and the fact that the assessee did not produce the material witnesses, including himself and Mohd. Rashid enabling the assessing officer to raise an adverse presumption against the assessee.
37. As mentioned above, copies of statements of Mohd. Rashid and Iddu were supplied to the assessee after the completion of the assessment. Before the CIT(A) the assessee filed a copy of the statement of Mohd. Rashid in a tabulated form wherein the assessee noted the question put to Mohd. Rashid and then, in front of the question the answer given by Mohd. Rashid is noted and then the assessee’s comments are noted against each answer. A similar tabulated copy has been filed before us also (pages 13 to 16). The assessee even after obtaining formally the copy of the statement of Mohd. Rashid never asked the CIT(A) for permission to examine or cross-examine Mohd. Rashid. Therefore, the irregularity or technical flaw, if any, in the assessment proceedings stands washed off completely and the assessee can no longer make any grievance on that account.
38. It is important to bear in mind that in the two cases cited by the learned counsel for the assessee, the burden of proof was on the ITO and, therefore, he was bound to disclose to the assessee the evidence collected, and to grant opportunity to get the ITO’s witness examined in his presence and to cross-examine them. In the present case the burden, was on the assessee and it was the ITO who was entitled to see that the assessee’s witnesses are examined before him and he has the opportunity to cross-examine such witnesses. It is this right that the assessing officer wanted to exercise and intimated the assessee accordingly vide letter dated 26-12-1985.
39. Rules of natural justice are not meant for nullifying proceedings on small technicalities. They are also not meant to help those who adopt a very evasive attitude. They are meant to advance the cause of justice and to help a person who really wants to avail the right of defending himself. They also do not need any literal compliance in each case. In most of the cases it is enough if there is substantial compliance and no prejudice is caused to the other party. In case before us even if for some reason it is viewed, though we do not subscribe to that view, that copies of statement of Mohd. Rashid and Iddu should have been supplied to the assessee even though he never asked for them, even then in view of the letter dated 26-12-1985 and in view of the other circumstances of the case, there was substantial compliance of the principles of natural justice in this case and no prejudice whatsoever has been caused to the assessee. Lastly, we hold that the findings recorded by the authorities below are well sustainable even if these two statements are excluded from consideration altogether. That is why in this judgment we have placed no reliance on them and have relied on the other facts, circumstances and evidence already discussed in detail.
40. Lastly it was argued before us that the value of silver has been treated as assessee’s income under Section 69A of the Income-tax Act, 1961 which had no application because the silver was entered in the account books of the assessee, i.e., in the Amanat Bahi. This contention in our view cannot stand. We have already held that the relevant entries in the Amanat Bahi did not exist at the time of seizure of the silver in question and the Amanat Bahi itself. Therefore, it is not permissible to accept that the silver was recorded in the books. Then the Amanat Bahi in our view is not a book of accounts maintained by the assessee for any source of income. It is a subsidiary book kept as a memory and evidence book for receipt and delivery of goods the entries of which for the time being were not required to be made in account books proper. In the present case, according to the assessee, the goods were received on approval only. They were entered in the books on 26-12-1985 only after the assessee allegedly accepted them as having purchased. Therefore the entry in the Amanat Bahi is not an entry in a book of accounts. Then even if Section 69A or Section 69 does not for any reason apply, then the unexplained possession of silver can be treated as the assessee’s investment from undisclosed income and can be brought to tax under the general law as well as Section 69C. It has to be taxed in any case.
41. No other point was pressed before us. In the result we confirm the findings of the authorities below that the possession of the silver aforesaid had not been satisfactorily explained by the assessee and hold that the IAC(A) has rightly treated its value as the assessee’s income for the assessment year in question. The assessee’s appeal is accordingly dismissed.
42. The Stay Application No. 5(Jab.)/87 becomes infructuous and is also dismissed.