ORDER
Dinesh K. Agarwal, Judicial Member
1. The Division Bench hearing this case had made a reference to the Hon’ble President, Income Tax Appellate Tribunal Under Section 255(3) of the I.T. Act, 1961 (The Act) for constitution of a Special Bench. Accordingly, the Hon’ble President, ITAT was pleased to constitute a Special Bench of three Members to consider the following question : –
Whether, on the facts and in the circumstances of the case, the CIT(A) was justified in deleting the addition on account of introduction in the capital account of Rs. 3.46 crores against the sale proceeds of 5,153.8 Kg. of silver utensils claimed to have been sold by the assesee.
2. The facts in the present case leading to the above issue are as follows :
(i) The assessee is an individual and carries on business of share broker and dealer. The return of income was filed on 14.9.1998 declaring total income at Rs. Nil. During the course of assessment it was found by the Assessing Officer that as per capital account filed, the assessee credited Rs. 84,35,601/- as income disclosed under VDIS, 1997. As per the P & L Account, the assessee credited Rs. 5,04,13,245/- as sale proceeds of diamond, gold jewellery and silver utensils as per details given below :
a) Diamond .... Rs. 2,21,95,200/- b) Gold .... Rs. 30,80,000/- c) Silver utensils .... Rs. 46,83,900/-
(ii)It was stated by the assessee that the assets decided under VDIS,1997 have been sold in FY. 1997-98 relevant to assessment year 1998-99 and such sale proceeds have been credited in the books as above. From the details of sale of silver utensils filed, it was found by the Assessing Officer that silver utensils have been sold to various jewellers at Delhi as-below:
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Name & address of buyer Quantity of Sale Transporter
silver sold proceeds from Calcutta to
Kg. Delhi
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M/s. Shree Shyam & Co. 1157, 560.000 3360000 R.T.C. Calcutta
Kucha Mahajani, Chandni
Chowk, Delhi-110006.
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Shri Tirupati Balaji & Co., 19, 1489.985 10463538 R.T.C. Calcutta
Katra Chouban, Chandni Chowk,
Delhi-110006
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Panna lal Banarasi Das, 419, 640.000 4233600
Katra Chouban, Chandni Chowk,
Delhi-110 006
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Gupta Trading Co., 1166, Kucha 689.850 4680632 R.T.C. Calcutta
Mahajani, Chandni Chowk & J.K. Carriers,
Delhi-110 006 Calcutta.
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Jhunjhunwal & Sons A1/11, 760.000 5130760
Golden Park, Shiv Puri, Delhi-51
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Rajeshwari Jewellers, 1168, 1014.003 6815370 R.T.C. Calcutta
Kucha Mahajani, Chandni
Chowk, Delhi-110 006.
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Total : 5153.838 34683900
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(iii) To verify the genuineness of the above sale transaction of silver, the Investigation Directorate, Calcutta and Investigation Directorate, New Delhi conducted enquiries regarding genuineness of sale of silver utensils and the transportation of silver from Calcutta to Delhi.
(iv) The outcome of the enquiry so conducted revealed the number of discrepancies in the claim made by the assessee which are as follows :
A. Enquiry in the case of Valuer
Sri Raj Kumar Kothari, who issued valuation report for the silver utensils during the statement recorded Under Section 132(4), admitted that he issued the valuation report without actually weighing or seeing all the silver utensils.
He stated that he visited only once at the residence of Sri S.S. Dalmia/N.P. Dalmia with a small weighing machine and weighed a few items of silver and admitted that he did not have the bigger weighing, machine to weigh, such silver utensils. He admitted that he did not visit the Dalmias subsequently on any day and on the instruction of Sri N.P. Dalmia issued the valuation report for the quantity of silver utensils as desired by Sri Dalmia without weighing or seeing the silver utensils. He admitted arranging accommodation entries for bogus sale of jewellery for some other persons in his statement Under Section 132(4). The statement of Sri Kothari was recorded in the presence of Sri V.D. Garg, Chartered Accountant, who happened to be witness in the search proceedings. Sri Kothari is a close associate of the Dalmia family. Sri Raj Kumar Kothari retracted his statement but the retraction was not accepted by the Revenue authorities for various reasons recorded by the A.O. in his assessment order including that the retraction was made after 42 days of admission and is nothing but an after-thought under the influence of the Dalmia family.
B. Enquiries in the case of transporters
The assessee obtained consignment notes from two transporters., namely, \M/s. Road Transport Corporation based at Bangalore and having booking offices at Kolkata and M/s. J.K. Carriers ( proprietor Sri J.K. Sharma). A survey operation in the booking office of M/s. Road Transport \ Corporation, Kolkata reveals that M/s. Road Transport Corporation was under lock-out for the period 1.8.1997 to 28.2.1998, the period during !which the consignment notes were issued to the Dalmias. The Tolly Register that contains consignment notes, place of destination along with lorry No. did not have entries of consignments belonging to Dalmias and the Tolly Register was impounded Under Section 131(3) of the Act. The Booking Registers showing all the booked consignment did not have any entry of the consignment of Dalmias. Sri Trilok Agarwal General Manager of the aforesaid booking office, in his statement Under Section 133A could not state the place of loading operation and admitted having loaded the goods at Dalhousie as well as at Howrah which was held as untrue by the A.O. for the reason that Sri N.P.Dalmia in his statement Under Section 131 has stated in answer to question No. 29 that the loading of silver utensils was carried out at 2/3, Sarat Bose Road and 52E, Ballygunge Circular Road. The A.O. has observed that the partners of M/s. Road Transport Corporation are close relatives of Dalmias and Sri Yashbir Goel is the father-in-law of son of Sri N.P. Dalmia. Sri Trilok Agarwal, General Manager of the booking office of RTC stated that he did not recollect the place where silver utensils were loaded. He could not furnish the address of the sender of New Delhi wherefrom these consignments have been delivered. The survey Under Section 133A in the office of South Eastern Roadways, New Delhi was also conducted since the goods transported from eastern region including Kolkata transported through M/s. Road Transport Corporation are unloaded and delivered by M/s. South Eastern Roadways, Delhi., During the course of survey, statement of Sri Anil Kumar, Assistant Vice-president and Sri Anil Sethi, Accounts Manager and Sri Krishan Kumar Gupta, loading and unloading Supervisor were recorded which shows that silver utensils were never received by them on transportation from Kolkata. These 3 persons denied having delivered from their office the silver utensils or having received the same on transportation from Kolkata to their firm.
Enquiries regarding movement of truck from Kolkata to Delhi were also made. From the seized copies of lorry challans from the premises of RTC at Bangalore for the alleged transportation of silver by the Dalmia family from Kolkata to Delhi, the truck numbers have been obtained. A reference was made to DDIT Inv., Varanasi for verification of these trucks at Naubatpur Check-post near Varanasi and to DDIT Inv. Ghaziabad regarding entries at Ghaziabad Check-post. In accordance with the provisions of U.P. Trade Tax Act, 1948 and the rules made thereunder, the U.P. Tax authorities can seize the goods carried by such trucks which do not comply with the provisions of the Act during the course of transit through U.P. Any truck going from Kolkata to Delhi has to cross through U.P. and has to pass through Naubatpur and Ghaziabad check-posts. As per the reports received from U.P. Trade Tax authorities, these lorry numbers were not found to be appearing in the relevant Registers maintained at Naubatpur check-post near Varanasi and Mohanpur check-post near Ghaziabad.
A survey operation was also carried out at the office of M/s. J.K. Cariers, Kolkata at the given address but no trace of existence of M/s. J.K. Carriers was found therein. At the given address the business of M/s. M.P. Roadways is carried out and Sri R.C. Prasad, an employee of M/s. M.P. Roadways, Kolkata, in his statement recorded Under Section 133A, stated that no consignment pertaining to M/s. J.K. Carriers is booked from the booking office of M/s. M.P. Roadways, Kolkata and the said M/s. J.K. Carriers is not having any booking office in Kolkata. The statement of one labourer Md. Kashim working in the booking office of M/s. M.P. Roadways was recorded wherein he stated that he did not know anything about M/s. J.K. Carriers and has not heard the name of this concern. The statement of Sri J.K. Sharma, proprietor of J.K. Carriers was recorded Under Section 133A on two different dates and he has stated that he has destroyed all the books of accounts, namely, Consignment Note Register and Cash Book relating to the business of M/s. J.K. Carriers of the relevant period. He stated that he does not remember any party for whom he has worked as transporter Sri J.K. Sharma in his statement Under Section 132(4) on 21.1.2000 admitted that he arranged necessary papers i.e. lorry challan etc. on the request of Sri N.P.Dalmia and has handed over the same to the Dalmias and he was paid Rs. 5/- per Kg. for providing necessary paper work. He has categorically stated that he has never transported silver utensils of Dalmias to Delhi and in order to make the scheme look genuine, be has done elaborate paper work.
C. Enquiries in the case of Dalmia family
Statement of Sri S.S. Dalmia was recorded Under Section 132(4) in Delhi on 31.8.99 wherein he has stated that he did not know the quantum of silver utensils j declared by him or his HUF. He was not knowing the sale proceeds received out of silver sale and was not knowing the name of the valuer. Sri S.S. Dalmia was asked as to when the silver utensils were acquired. He stated that these were acquired 15/20 years back but the year of acquisition shown in VDIS declaration is 1962-63 which is about 36/37 years back, at the time of recording his statement. He stated that he does not know anything about the point of loading or mode of receipt of sale proceeds and his brother Sri N.P.Dalmia can only explain. The statement of Shri N.P.Dalmia was recorded Under Section 131 on 5.10.1999 and when he was asked to tell the names and addresses of the servants, he replied that all his servants left the service in the month of December and January and he is not in a position to give their addresses. He stated that the mode of transport of silver utensils from his old residence to new one was in cars.
D) Enquiries in the case of Jewellers of Delhi
Enquiries were made by the Directorate of Investigation in the case of jewellers of Delhi. It was found that huge amount of cash has been deposited on or just before the date of issue of cheques to the Dalmias. The bank accounts were opened during the operation of VDIS to accommodate the entries. The turnover in the financial year 1997-98 i.e. VDIS period, was found to be abnormally high as compared to the earlier year and succeeding year. The jewellers could not furnish the particulars of the parties to whom the silver was sold and the sale proceeds were received in cash. They could not explain the mode of receipt of silver utensils and the person who carried the silver utensils. How the jewellers having small shop could accommodate so many tons of silver utensils, is not understandable
In these facts, the A.O. was of the view that it has been established beyond doubt that the silver utensils have never been transported from Kolkata to Delhi. Evidence has been gathered to establish that the trucks allegedly carrying silver from Kolkata to Delhi did not move through Varanasi and Ghaziabad check-posts at which all the records of trucks passing through these check-posts are maintained by U.P. Trade Tax Authority. The statement of Shri Raj Kumar Kothari, the valuer, that he did not issue valuation report after physically seeing the entire silver utensils is on record. The statement of Shri T.K. Sharma that he never transported silver utensils to Delhi and has charged Rs. 5/- per Kg. to provide the paper work to the Dalmias. Enquiries made in the case of M/s. Road Trans port Corporation and M/s. South Eastern Roadways do not show any such transportation of goods by their trucks The statement of Shri S.S. Dalmia was recorded in which he stated that silver utensils were acquired 15/20 years back whereas in the VDIS declaration the year of acquisition of silver utensils has been shown as 1962-63, which is about 36/37 years back. He has shown unawareness to the point of loading or mode of receipt of sale proceeds. There is a major discrepancy regarding the period of acquisition as admitted by Shri S. S. Dalmia and the period shown in the VDIS, 1997 declaration. Enquiries made in the case of jewellers of Delhi show that they cannot accommodate and transact so many tons of silver utensils.
v) Accordingly, the Assessing Officer was of the view that the alleged sale proceeds of silver is nothing but unexplained cash credit in the hands of the assessee and, therefore, he added Rs. 3,46,83,900/- in the income of the assessee as income from other sources. Beside this, the Assessing Officer also disallowed interest of Rs. 1,81,889/- as the same is not admissible deduction and accordingly completed the assessment at an income of Rs. 5,78,25,968/- vide order dated 30.03.2001 passed Under Section 143(3) of the I.T. Act.
vi) The assessee preferred first appeal before the Ld. CIT(A). The Ld. CIT(A) while allowing the appeal deleted the addition of Rs. 3,46,83,900/-, disallowance of interest of Rs. 1,81,889/- and directed the Assessing Officer to allow the claim of capital loss as per return of income and accordingly allowed the assessee’s appeal.
vii) Being aggrieved by the order of the Ld. CIT(A), the revenue is in appeal before the Tribunal.
3. Ground No. l reads as under :
The Ld. CIT(A) has erred in deleting the addition on account of introduction in the capital account against the sale proceeds of silver utensils without taking note of the fact of the case as established by the A.O. in the assessment order.
4. However, on the above issue the Hon’ble President ITAT was pleased to constitute a Special Bench to consider the question as referred in para 1 herein above.
5. The Ld. CIT, Departmental Representative Sri B. D. Kaler while strongly relying on the order of the Assessing Officer and the outcome of the enquiry conducted by Investigation Directorate of Calcutta and Delhi submits that the valuer Sri R. K. Kothari during the statement recorded Under Section 132(4) admitted that he issued the valuation report without actually weighing or seeing all the silver utensils. He further submits that Sri R.K. Kothari, valuer has retracted his statement but the retraction was not accepted by the Assessing Officer as the same was made after 42 days of the admission and the same is nothing but an after thought under the influence of Dalmia family. He further submits that on enquiry from the transporters it was found that the silver utensils have never been transported from Calcutta to Delhi. The evidence gathered by the Assessing Officer proved that the trucks allegedly carrying silver from Calcutta to Delhi did not move through Varanasi and Ghaziabad Check Posts where all the records of all trucks passing through these check posts are maintained by UP Trade Tax Authority. The statement of Sri J. K. Sharma, Proprietor of J. K. Carriers shows that he never transported silver utensils to Delhi and the report of U. P. Trade Tax Authority that the trucks engaged by M/s. Road Transport Corporation (RTC) for carrying silver utensils to Delhi never passed through Naubatpur and Ghaziabad check posts, clearly established that the silver utensils never reached to Delhi for sale from Calcutta and, therefore, the silver utensils allegedly sold never existed. He further submits that the statement of Sri S. S. Dalmia, the related assessee was also recorded in which he stated that he did not know the quantum of silver utensils declared by him or HUF. He was not knowing the sale proceeds received out of sale of silver utensils. He does not know even the name of the valuer. When Sri S.S. Dalmia was asked as to when the silver utensils were acquired, he stated that these were acquired 15-20 years back but the year of acquisition shown in VDIS declaration is 1962-63 which is about 36-37 years back. This proves that the VDIS declaration was false and no silver utensils were available with Sri Dalmia and his family members in 60s. The Ld. Departmental Representative further submits that enquiries were also conducted from jewellers of Delhi to whom silver utensils allegedly sold by the assessee. It was found that huge amount of cash has been deposited on or just before the date of issue of cheques. The bank accounts were opened during the operation of VDIS to accommodate the Dalmia Group. The turnover for the F.Y. 1997-98 i.e. VDIS period was found to be unrealistically high as appearing at page 14 of the assessment order. The jewellers could not furnish the particulars of the parties to whom the silver was sold and the sale proceeds received in cash. To block further verification, although they are alleged to have received cash up to 60-70 lacs in a day, no details could be furnished as to the names and addresses of the purchasers. The jewellers could not explain clearly the mode of receipt of silver utensils and the persons who carried the silver utensils. Moreover, since the jewellers have small kiosks which cannot accommodate so many tonnage of silver, so the plea taken that as soon as silver utensils are received they are melted and tons of melted silver are handed over to the buyers on the same day on receipt of the cash cannot be accepted. The Ld. Departmental Representative in the light of the above evidences collected by the Assessing Officer submits that the alleged sale of silver at Delhi is a part of a scheme devised to introduce unaccounted money in the books of account in the garb of sale proceeds of non-existent silver utensils thereby securing maximum tax advantage. Therefore, the alleged sale proceeds of silver is nothing but unexplained credit in the hands of the assessee. The Ld. Departmental Representative further submits that the Ld. CIT(A) without appreciating the evidences found and recorded by the Assessing Officer deleted the addition made by the Assessing Officer on the basis of the remand report and the Tribunal’s orders in other cases of this group. He, therefore, submits that the addition made by the Assessing Officer of Rs. 3,46,83,900/- be restored.
6. On the other hand, Ld. Senior Advocate Sri R. N. Bajoria appearing for the assessee submits that the assessee under the Voluntary Disclosure Scheme, 1997 made disclosure of undisclosed income amounting to Rs. 1,02,25,288/- and paid a sum of Rs. 30,67.,556/- as tax thereon. The undisclosed income so declared was represented by silver utensils (5155.700 kgs.), diamonds (1261,75 Cts.), gold bars(7.585 kgs.) and household goods, appliances, watches etc. The said voluntary disclosure was duly accepted and a certificate relating to the same was issued. It may be stated that more or less similar disclosures under the said Voluntary Disclosure Scheme were made by the three related assessees also namely Shri Shyamsunder Dalmia H.U.F., Shri Narain Prasad Dalmia H.U.F. and Shri Madhusudan Dalmia, H.U.F. In the said three cases also apart from diamonds, gold bars etc. silver utensils were disclosed and such disclosures were also accepted in those three cases. In those three cases about Rs. 85,55,000/- was paid on account of tax on such undisclosed income.
6.1, He further submits that on diverse occasions during the relevant financial year the assessee so also the other three connected assessees as aforesaid sold the undisclosed silver utensils, diamonds and gold bars and sale proceeds thereof were disclosed in his return for the assessment year 1998-99 and the capital gain or loss arising from sale of such undisclosed assets was claimed. He further submits that there is no controversy as to the voluntary disclosure made by the assessee and the others. Such voluntary disclosure has been duly accepted. Tax paid on the basis thereof and sales of all other assets like diamonds and gold bars during the said assessment year have been accepted in all the assessments and there is no controversy with regard thereto. The correctness and or legality and/or validity of such voluntary disclosure made by the assessee was not and is not disputed by the department.
6.2. The case of the assessee is that after having paid the tax on the undisclosed income which was lying blocked in unproductive investments he disposed of such investments and brought the money in the productive business. It may not be out of place to mention that the object of the Voluntary Disclosure Scheme was also to encourage people to bring in such undisclosed income for productive purposes for the general good of the economy. The assessee and so also the other associate assessees on diverse occasions during the relevant financial year sold the silver utensils to different parties at Delhi who remitted by cheques and or bank drafts the sale proceeds thereof to the assessee and the others. The silver utensils were sent by the assessee by road transport from Kolkata and the merchant buyers at Delhi after melting such silver utensils realised the bullion value and made over the contracted price to the assessee. The assessee claimed that since such silver utensils were not personal effects and were kept as investment of its undisclosed income, the loss suffered on sale of such silver utensils is allowable as capital loss.
6.3. The Assessing Officer rejected the claim of the assessee that the silver utensils disclosed by the assessee had been sold at Delhi and held that the amount credited in his accounts as sale proceeds of the silver utensils was in fact the undisclosed income of the assessee which found its way through Delhi silver merchants. The department made extensive searches at the premises of the assessee and his other connected relatives, transporters who had transported the silver utensils, the places of the silver merchant who had sold the silver utensils and paid the proceeds thereof to the assessee. Search was also made at the premises of the Valuer who had made valuation of the silver utensils before the disclosure was made by the assessee. According to the department the Valuers never saw the silver utensils and only obliged the assessee by giving the valuation report ; the goods were never transported to Delhi as records of one of the check posts did not show passage of the truck carrying the silver utensils ; the shops of the silver merchants were too small to accommodate such huge quantity of the silver utensils; the quantity of such utensils was huge. The AO and the search officials at time of the several searches had examined the valuer, transporters and the silver merchants. The AO contrary to results of such investigation held that the assesee had sent his undisclosed cash to the Delhi merchants who had obliged him by paying by cheques and drafts as alleged sale proceeds of the silver utensils, which according to the AO neither existed nor transported nor sold.
6.4. The Ld. Counsel for the assessee further submits that at the stage of the hearing of appeal before the Ld. Commissioner of Income Tax (Appeals) in the case of the others so also in the case of the assessee detailed submissions were made on behalf of the assessee bringing on record numerous substantial facts and evidences to controvert the allegations of the AO. The Ld. CIT(A) sent all such evidences, documents, facts and submissions of the assessee to the AO for his comments and the AO submitted a detailed remand report through the Additional CIT dealing with each of aspect of the case. Such remand report is at pages 164 to 170 of the paper book in the case of the assessee. It may be stated that the remand report and the assessment orders in all the three other cases are identical as in the case of the assessee except for the amount realized on sale of silver utensils.
6.5. As to the alleged statement of the Valuer that he had not seen the silver utensils, the assessee pointed out that such statement from one of the proprietor brother of the Valuer firm Mr Rajkumar Kothari was obtained under duress and threat and that he had disowned such statement shortly thereafter and that the other proprietor brother of the Valuer firm namely Mr Rain Prakash Kothari on the very day of search had stated I hat such silver utensils were valued by them on a weighing scale provided by the assessee. The AO in his order of assessment had ignored the subsequent retraction by the Valuer Mr Raj Kumar Kothari and the statement given by the other proprietor brother of the Valuer. This fact has been accepted in the remand report at pages 164-165 of the assessee’s paper book.
6.6. He further submits that the Ld. Departmental Representative placed reliance on the observations made by the AO in the order of assessment. It was further urged by the Ld. Departmental Representative that the statement of Shri Kothari had been retracted after about 42 days and that such retraction should not be accepted. However, the fact that such statement was retracted by Shri Kothari within 6 days and not 42 days and that his brother Ram Prakash Kothari at the time of the search itself under Section 132(4) had asserted that the silver utensils were physically seen and valued by them were not controverted. Furthermore the remand report itself which was sent by the Assessing Officer through the Additional CIT to the Ld. CIT (A) accepted that the retraction of the statement by Shri R.K. Kothari was within 6 days and appears to be acceptable. Furthermore the valuer had no role to play in the subsequent transportation of the disclosed silver utensils to Delhi or their sale at Delhi. The role of the valuer was confined only to the valuation made for making the declaration under the Voluntary Disclosure Scheme. As stated earlier the correctness of such disclosure has not been disputed and accordingly apart from the fact that in the remand report the retraction statement of Shri Kothari is taken as acceptable there is nothing turns wrong on the valuation aspect as such.
6.7. He further submits that it would further appear from the computation filed by the assessee appearing at page 4 in the paper book submitted by the department that substantial capital gain of over a crore of rupees was disclosed by the assessee on disposal of other disclosed item under the Voluntary Disclosure Scheme namely diamonds. The loss suffered on disposal of the gold disclosed under the Voluntary Disclosure Scheme was also shown in such computation. Such profits or gains had been computed by indexing the cost of acquisition as disclosed in the Voluntary Disclosure Scheme. The AO has accepted the capital gains made after indexation and the loss suffered on disposal of the diamonds and gold disclosed under the Voluntary. Disclosure Scheme. It is only the transactions relating to the silver utensils which has been disputed which after indexation resulted in loss. The total quantity of the silver utensils disclosed under the Voluntary Disclosure Scheme was 5154 kgs. As would appear from page 2 of the order of assessment itself and other documents filed in the paper book that the said quantity had been sold over a period of more than a month in several consignments to six parties. The quantities transported and sold to such parties in the several consignments range between 600 to 1000 kgs., which are not large considering the average quantity of the goods carried by the trucks in the roadways. Silver is not a light metal and 1 cubic feet in bullion would weigh about 300 kgs.. It can acquire large volume only in very thin gauges to make ornamental articles. In the case of utensils and more so when it is sought to be converted in that form by way of investment such silver would not be in thinner gauges as that would affect their utility and durability itself. Such utensils are not ornamental art pieces. Furthermore a person who is more interested to invest undisclosed income in the form of silver would be concerned more with the higher effective weight of such items. There is no basis for drawing any adverse inference with reference to the quantity of the silver utensils disclosed by the assessee under the VDIS Scheme which is claimed to have been sold. The quantity involved herein of the utensils even if it takes 10 time of space required for storing the same quantity of bullion can easily be stored in about 170 cubic feet i.e. an area of 6′ x 6’x5′.
6.8. With regard to one of the alleged statement of the transporter on which reliance was placed in the order of assessment and also at the hearing of the matter by the Learned Departmental Representative it was pointed out by the Ld. Counsel for the assessee that the transporter never stated in his statement that the goods were not transported and further the statement itself was obtained in course of search under threat and coercion to him and his family members. At the hearing reliance was sought to be placed about retraction of the statement by one of the transporter namely Mr. Sharma. In the order of assessment the AO had observed that Mr. Suanna had stated that he did not transport the silver utensils. However Mr. Sharma denied having made such a statement and that fact was found to be correct by the AO in the remand report. The further fact that in the order of assessment the AO has not dealt with or referred to the statements which supported the case of the assessee is very much evident from the remand report. It was further pointed out that the money receipts given to the transporters on receipt of the consignments by the firms at Delhi had totally been ignored which on verification were found to be correct. These facts were accepted in the remand report, appearing at pages 164 to 170 of the paper book and the relevant extracts of which are at internal pages 3-4 of the said remand report.
6.9. Further the fact that the trucks carrying the silver utensils were weighed at the Dharamkanta at Delhi and weighment slips were issued which were after investigation found to be correct was also altogether ignored by the AO and even not referred to. This fact has also been accepted in the remand report vide 5th new para appearing at internal page 4 of the remand report, appearing at page 167 of the paper book. Copies of the various statements and other documents in respect of transportation like delivery charges receipts, dharmkanta weighment slips are also filed in the paper book of the assessee and appearing at pages 35 – 43, 55 – 70, 90-103, 125 – 126, 129-130, 132, 135 – 136 and 145 – 146 of the assessee’s paper book. One of the comments made by the AO was that the transporter was distantly related to the assessee. There can be nothing improper in it since valuable articles to be transported could not be entrusted to a total stranger.
6.10. He further submits that the fact that there are several check posts through which the goods passes and records are not maintained at all the check posts except few. In respect of some consignments at one check post verification was sought to be made with reference to the date of dispatch itself which is not possible.. As such the allegation about non transport of the silver utensils on that basis is wholly unsustainable. It was pointed out that the goods could not reach from Kolkala to check post in U.P. on the very date of despatch and that there were several other check posts where records are. not maintained. These facts were also accepted vide 6 new para appearing at internal page 6 of the remand report appearing at page 169 of the assessee’s Paper Book. He further submits that in course of investigation the department had impounded the Dharamkanta weighment slips and delivery challans but the same were not considered by the AO and on subsequent investigation and verification the same were found to be correct vide 5th new para appearing at internal page 4 of the remand report at page 167 of the assessee’s paper book reproduced in para 8 of this order.
6.11. He further submits that the silver merchants were also examined, their places were searched, no incriminating document was found, they confirmed the purchase, the fact that they were not retailers having showrooms selling the silver utensils as such but were dealing in old silver utensils as bullion after melting has all been accepted in the remand report. Vide eight new para of page 6 of the remand report appearing at page 169 of the paper book it has also been accepted that there was nothing on record to show that any cash was paid by the assessee to the silver dealers. All the purchasers are income tax assesses and their records were verified. Such transactions of purchase and sale were disclosed by such purchasers in their sales-tax assessments. Payments were made by them by bank drafts/cheques to the assessee. Since they are not retailers they do not have showrooms or big places for storing the articles and they deal in them as bullion after melting are on record and have not been controverted by the department. Transactions of sale of silver bullion are effected in cash has been confirmed by the Bullion Merchants Association and comment by AO in the order of assessment on that score has no relevance. It has been accepted that in spite of searches conducted at different places no incriminating document was found. The silver utensils were also not found with the assessee at the time of search made prior to the assessment. The transactions were affirmed by the purchasers, transportation of the goods to Delhi were established by the money receipts of the consignees, weighments at Dharamkanta and other documents. The silver merchants had paid sales tax and are income tax assessees. Therefore, the identity of the payees is established, payees have confirmed the transactions, there is no evidence to show any cash being paid by the assessee, the silver utensils were accepted in the disclosure and the factmn of disclosure, or the contents thereof has not been and cannot be disputed. The only surmise sought to be indulged is the quantity of such silver utensils. The quantity is not so large. It has been transported in several consignments. It is common knowledge that the weights of utensils vary according to their nature and even each piece of utensil like that weigh over three kgs. and apart from those other utensils like water pitcher, tiffin carriers, feeding bowls, buckets etc. are even much heavier. Further, and in any event even if there was no sale of any silver utensils there can be no question of treating the amounts received from the silver merchants as unexplained cash credit liable to be assessed as undisclosed income of the assessee. The identity of the payees, their capacity to pay and genuineness of the transactions have been established and the payees are not disowning the transactions.
6.12. He further submits that the Ld. Departmental representative referred to the decision of Hon’ble Supreme Court in the case of Sumati Dayal v. C.I.T. reported in 214 ITR 801 in support of the addition made in the assessment. The principals laid down in the said case are unexceptionable. The said case lays down that the burden of proof in the case of a cash credit credited in the accounts of the assessee is on it. The question, however, to be considered in the present case is whether the assessee has proved the source of such cash credit and substantiated the same by adequate evidence. As would appear from the facts already submitted that the assessee has substantiated his claim and it has also been so accepted in the remand report sent by A.O. through Addl. C.I.T. In the circumstances the mere reliance on the aforesaid decision bereft of the facts on record is entirely misplaced.
6.13. He, therefore, submits that the order passed by the Ld. CIT(A) relying on the remand report and the ITAT decisions in other group cases be upheld.
7. In the rejoinder, the Ld. Departmental Representative while relying on his earlier plea further submits that he does not want to say anything on the remand report and he still relying on the impugned assessment order and the additions made therein.
8. We have carefully Considered the rival submissions of the parties and perused the material available on record. We find that, at the outset, it is necessary to mention that the Ld. CIT(A) while hearing the appeal has directed the Assessing Officer to submit the remand report on the written submissions filed by the assessee before the Ld. CIT(A). The Assessing Officer in pursuant to the Ld. CIT(A)’s letter dated 1-10-2001 has submitted the remand report dated 09.11.2001 through Addl. CIT(C) which reads as under : (Para No. supplied)
OFFICE OF THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE –
XXVIII, 18 RABINDRA SARANI. CACUTTA - 700 001
No. CC-XXVIII/RQ-4134-CAL/2001-02/585 Dated: 09-11-2001
To,
The Commissioner of Income Tax (Appeals)
Central -1
Calcutta
Madam,
Through Addl. C.I.T. (C), P-II, Calcutta
Sub: Suryakant Dalmia. Appeal No. 10
CC-XXVIII CIT (A), C-1 01 -02 A.Y. 1998-99
Ref: Your letter No. CIT (A) C-l 2001-02/KOL 264
dt. 1-10-2001 and this office memo No. 536 dated 09-10-2001
Kindly refer to the above.
2. The assessee was requested to file a written submission particularly on the documents contained in the paper book filed before the CIT (A) and accordingly interim short notes were filed on 11-10-2001.
3. Comments on the assessee's submission contained in the interim short notes are given as under:
4. Page -1 and upper portion of page 2; These are facts as per records.
5. Page - 2 lower portion, page 3 and first two paragraphs of page 4: These are already contained in the assessment order.
6. Paragraph – 3 & 4 of page – 4; The assessee has raised the point of not allowing the assessee adequate opportunity of being heard and not providing with the required documents, evidence and statements. It is apparent from the records that the time allowed to the assessee was not adequate. This is procedural in nature and the assessee has since been provided with the copies of the required papers and documents and also to make his submissions.
7. Page 5 upper portion; The assessee has given the facts uncontrovertible and uncontroverted facts according to him and these are the basic points against the addition on the issue of sale of silver utensils as cash credit Under Section 68. Comments on these specific points are being given after the discussion on the submissions of the assessee as made in the interim short notes (vide Pages 6 & 7).
8. Lower portion of page – 5 to upper portion of page – 7
9. Allegations in respect of Raj Kumar Kothari, valuer: In his statement Under Section 132(4) recorded during the course of search on 18-1-2000. Sri R.K. Kothari had admitted that he weighed only one ton of silver utensils on one day and gave the valuation report for the balance without actually weighing or seeing the same. Shri Kothari filed a letter of retraction dated 29-2-2000 before the DDIT and the DDIT recorded his statement Under Section 131 on 14-3-2000 in which Shri Kothari stated that the earlier statement recorded on 18-01-2000 was under duress and coercion and that he had actually seen and weighed the entire silver utensils of about 30 tonnes. The A.O. discussed this retraction before D.D.I.T. and came to the conclusion that the same was not acceptable because (i) Shri Kothari was closely associated with Dalmias, (ii) his statement Under Section 132(4) was recorded on oath in presence of Shri V.P. Garg C.A. and (iii) that the retraction was made after 42 days of the original statement.
10. The assessee has now pointed out that Shri Kothari retracted his statement by an affidavit affirmed before the Metropolitan Magistrate on 24-02-2000 i.e. only six days after the original statement and that the copy of the same was filed before the A.O. at the time of another deposition Under Section 131 taken by the Assessing Officer on 8-2-2001 i.e. before the date of passing of the assessment order. It is apparent from the assessment order that there is no discussion about this affidavit and also the statement Under Section 131 dated 8-2-2001 in the assessment order. In the said statement before A.O. Shri Kothari referred to his retraction before DDIT on 14-3-2000 and stated that he saw the entire silver utensils and articles valued by him and asserted that his statement recorded on 18-1-2000 was under pressure and he disclaimed the same. He also stated that valuation reports were given after personal inspection of the relevant items.
11. The assessee also pointed out that the statement of Ram Prakash Kothari, brother of Shri R.K. Kothari recorded Under Section 132(4) on 18-1-2000 (the date of search) in which he stated interalia (Answer to Q.No. 5 & 6) that he was involved during the valuation period which was over many days was not considered by the A.O. while disbelieving the retraction of Shri R.K. Kothari.
12. The claims of the assessee as discussed above are apparent from the records and the relevant statements. In view of the relevance of the statement Under Section 132(4) of Shri Ram Prakash Kothari recorded during the search and also the affidavit of Shri R.K. Kothari within six days of the recording of his statement Under Section 132(4), the retraction statement of Shri R.K. Kothari appears to be acceptable.
13. Page-7 to page -9, enquiries in respect of transporters :
14. A. ROAD TRANSPORT CORPORATION (RTC) :
14.1. In the assessment order it has been mentioned that a survey was conducted in the booking office of RTC at Calcutta on 23-8-99, which revealed that RTC was under lock-out during the period in which the consignment notes were issued to the Dalmias and also that there was no entries in the Tolly Register and the booking registers in respect of the consignments. It Was further mentioned that Shri Trilok Agarwal, General Manager of the Booking Office in his statementalso found that the partners of RTC were close relatives of the Dalmias and as such they helped them by issuing fake consignment notes and thus creating false evidence. Furthermore, Shri Trilok Agarwal could not say exactly from which center (out of 19 centers) in Delhi the consignment had been delivered.
15. The assessee has now claimed that Mr. Trilok Agarwal did not state that the silver utensils were not transported by RTC. The assessee has also referred to the affidavits dated 2-2-2000 affirmed by Shri Trilok Agarwal and his wife Smt. Reena Agarwal before the Metropolitan Magistrate, which were filed with the A.O. on 22-2-2001 and claimed that the affidavits would show the manner in which the statement were obtained, enquiries were conducted and searches were made by the Investigation Wing. The assessee has also claimed that in its reply dated 9-3-2001 to notice Under Section 133(6) RTC confirmed having transported assessee’s silver utensils in Delhi and that delivery charges receipts for Rs. 10 will conclusively prove that the silver utensils were delivered to the consignees. Copies of the delivery charges receipts have been filed in the paper book.
16. It is apparent from the assessment order that there is no discussion regarding these affidavits. Shri Trilok Agarwal in his affidavit stated that his reply was not properly recorded in the statement Under Section 132(4). However, it is apparent from that statement that Shri Trilok Agarwal did not state that the silver utensils had not been transported by RTC. On examination of the records it is seen that the assessee filed copy of one-delivery charges receipt for Rs. 10 with the A.O. before the completion of assessment but no cross verification was made before assessment. As the assessee has filed copies of all the delivery charges in the paper book and as no verification was made earlier, cross verification was made from South-Eastern Roadways and they have since confirmed vide reply dated 23-10-2001 the veracity of the money receipts and also delivery to the parties indicated. Xerox copies of the delivery abstracts have been seen by them. They have also mentioned that the delivery transactions were recorded at Ramnagai Branch. They have furthermore pointed out that three money receipts do not pertain to this assessee but to the other three assessee of the Dalmia Group. The result of this cross verification goes in favour of the assessee’s claim of transport and delivery of the goods.
17. As regards the statements of Shri Anil Kumar, Shri Anil Sethi and Shri Krishna Kumai Gupta recorded during the course of survey in the office of South Eastern Roadways, Delhi same have already been considered in the Assessment Order. However, as stated here-in-above the result of cross verification for transportation of goods goes against the statements : aforesaid persons.
18. B J.K. CARRIERS
18.1. As regard the finding of A.O. regarding non-existence of J.K. Carriers at the giver address the assessee has relied on the statement of Shri J.K. Sharma, Proprietor of M/s. J.K Carriers, recorded Under Section 132(4) on 21-01-2000. It is found from the statement against question no 4 that Shri Sharma clearly stated as under:
I purchased one lorry in 1996 (WB-19-4060) & another one in 1997 (WB -25 7552). These lorries were financed by M/s. Usha Martin Finance Corporation However, both these lorries were seized by the financer for non – payment of installments. Lorry No. WB-25-7552 was seized in February, 1999 and lorry No. WB 19-4060 was seized on 23rd December, 1999
18.2. Therefore, the carrying of transport business by Shri Sharma during the relevant period can not be ruled out.
19. The assessee has now claimed that the Statement of Shri Sharma recorded on 21-01 2000 was Liken under duress, coercion and threat. This fact was communicated by him to DJ (Investigation) in his letter dated 22-01-2000 i.e. the next day of search. The assessee has also referred to the replies of Shri Sharma against Question No. 10 & 11 of the statement Under Section 132(4) dated 21-01-2000 in support of claim of recording the statement under pressure. The assessee has also claimed that the statement was wrong and written by the officer himself. The assessee has further claimed that another statement of Shri Sharma was recorded on 15-02-2001 by the Assessing Officer himself and in that Statement he confirmed that he transported the Silver Utensils for the Dalmia Family and also that his earlier statement dated 21-01-2000 was wrong.
20. It is seen from the records that another statement of Shri Sharma was recorded on 15-02-2001 Under Section 131 by the A.O. and in reply to question No. 5, Mr. Sharma confirmed having transported the silver utensils. He also stated that in his earlier statements dated 06-09-1999 and 09-09-1999 recorded Under Section 131, he confirmed the transportation and also stated that his statement on 21-01-2000 was taken after grilling and forcing him to sign the statement. It is also apparent from the Assessment Order that the matter of letter written to D.I. (Investigation) by Shri Sharma and his statement Under Section 131 dated 15-02-2001 were not discussed or considered by the A.O.
21. The assessee has filed a copy of reply dated 12-02-2001 of Shri Sharma to notice Under Section 133(6) dated 17-01-2001 issued by A.O. (Page No. 107 & 108 of Paper Book) in which he confirmed having transported goods for Dalmias from Calcutta to Delhi by road and explained the relevant matters. This matter has not been discussed or considered in the Assessment Order.
22. In the paper book the assessee has also filed the copies of weighing slips issued by Purana Dharmakanta Committee, Delhi in support of weighing the silver utensils before purchase by the jewellers at Delhi. These slips were also impounded by the D.D.I.T. (Investigation). However, there is no discussion in Assessment Order in this respect and no cross verification was made. Therefore, letters were written to the Dharmakanta Committee, Delhi and they have since confirmed the weighing and realization of the weighing charges. In view of this, the existence of silver utensils at Delhi before the sale cannot be ruled out.
23. (C) ENQUIRY AT CHECK-POST UTTAR PRADESH
23.1. The result of enquiry in this respect has already been discussed and considered by the A.O. in the Assessment Order.
24. (D) ENQUIRIES IN THE CASE OF PURCHASER OF SILVER UTENSILS
24.1. The assessee has claimed that the sale of Silver Utensils extends over the period of 2 months and therefore the assumptions of the A.O. that the goods were sold by the assessee on one single day was not the fact. That the sale took place over a period of 3 months is apparent from the details and documents on record.
25. The assessee has also claimed that all the purchasers has filed their sales tax return including the relevant transactions and also deposited the sales tax which according to the assessee proves the purchase of silver utensils. The assessee has filed the copies of Sales Tax Return and challans and also copies of Income Tax Assessment Order in the case of Sri Shri Prakash Kabra, proprietor of M/s. Shree Enterprises one of the purchasers at Delhi (Paper Book Pages 110 to 128). It is seen from the order Under Section 143(3) for the Assessment Year 1998-99, that the A.O. concerned verified the purchase and sale bills but no adverse inference was drawn.
26. The assessee has further claimed that the purchase vouchers and receipts of Dharmakantas for weighing of silver at Delhi before sale vide paper book pages No. 129 to 159 clearly prove that the silver utensils were in fact transported to Delhi and were received by the J purchasers. It is seen from the records that Shri N.P. Dalmia in reply to question No. 9 (page 52 of Paper Book) in statement Under Section 131 dated 13-03-2001 before A.O. stated as under:
Yes. The goods were received by the silver dealers in Delhi who make the payment of delivery charges to transporter against each consignment. Some of the Xerox copies of money receipt are produced for your perusal. Further the silver utensils in Delhi were also weighed in “Dharmakanta” for which they issued receipt which has been impounded by our D.D.I.T. and might have reached you. Thereafter the silver utensils were sold and payments were made to us by cheque Demand Draft which are credited in our account
27. It is apparent that no cross verification was made in respect of Dharmakanta receipts which were impounded by A.O. Shri N.P. Dalmia’s statement in this regard was also not considered in the Assessment Order. Therefore, cross verification was made with Purana Dharmakanta Committee, Delhi and they have since confirmed the weighing the silver utensils and receiving the weighing charges. So the existence of silver utensils at Delhi before sale cannot be ruled out.
28. 1st Para at Page 11 of the Interim Short Notes:
28.1. In this paragraph the Assessee has stated the following:
1. The A.O. suppressed various statements and depositions which were in favour of the Assessee:
2. The enquiries made at the check-post was on wrong facts in respect of wrong dates and the same was not made at all check-post in U.P. The enquiries also revealed that at some check-posts no entries were kept in respect of trucks passing through the check-post:
3. No incriminating evidence was found in course of search either at the residence or in the office of the Assessee:
4. The assets disclosed under VDIS’97 were not found at the time of search
5. There is no evidence to show that the cash deposited by the jewellers at Delhi in their Bank Accounts belongs to the Assessee.
6. There is no evidence to show that the cash deposited was not their sale proceeds of silver utensils.
29. As discussed in earlier paragraphs some of the statements and evidence were not considered in the Assessment Order. Comments thereon have already been given.
30. It is apparent from records that enquiries were not made at all the check-posts. The letter issued by the Ghaziabad Check Posts shows that there was another entry point at Koshikalan and that records are not maintained by any other check-posts except Naubatpur and Gltaziabad Check-posts. It is also apparent from the records that enquiries wore made in respect of the same date as the date of consignment and the trucks cannot reach from Calcutta to UP on the same day. However, no further verification has been made because in some of the check posts no records arc maintained.
31. The claim of the Assessee that the assets disclosed under VDIS were not found during the course of search is correct.
32. As regards evidence regarding deposit of Cash by the Assessee in the Bank Account of the Jewellers at Delhi, the A.O. came to the conclusion that the Assessee gave cash to Delhi jewellers to obtain the accommodation entries on the basis of observations made by him in the Assessment Order. The records were verified and no direct evidence in this respect is found. It may be mentioned in this connection that searches were also conducted in the cases of jewellers and no direct evidence in this regards was found. It is therefore, apparent that the A.O. came to the conclusion on the basis of some statements and enquiries which have been mentioned in the Assessment Order itself. Regarding the Assessee’s claim that there was no direct evidence to show that the cash deposited was not the sale proceeds of silver utensils purchased by the jewellers from the assessee, there is nothing on records to show that their sales have been disproved. As mentioned above the assessee has already filed the copy of Assessment Order of Sri Shri Prakash Kabra, Proprietor of M/s. Shree Enterprises one of the purchaser and there is no adverse finding by the A.O. concerned in this respect.
33. FACTS UNCONTROVERTIBLE AND UNCONTROVERTED (Page 5 of the Assessee’s Interim Short Notes:
33.1. The assessee has claimed 7 facts to be uncontrovertible and uncontroverted. Those facts and comments against them are given below:
a) The silver utensils were properly disclosed under VDIS’97 and accepted by the Income Tax Department.
Accepted fact.
b) The silver utensils were handed over to Road Transport Corporation and J.K. Carriers in Calcutta
Evidenced by consignment notes.
c) Both the said Road Transport Corporation and J.K. Carriers are “Common Carriers” within the meaning the meaning of “The Carrier Act, 1865.”
No comments
d) The silver was delivered by the said common carrier to the consignee at the destination at Delhi. Results of verification have already been discussed in the earlier paragraphs.
e) The consignee has confirmed having received the silver utensils through the said common carrier.
Yes
f) On search no silver utensils as disclosed in VDIS’97 were found with the Appellant.
This is a fact
g) The appellant was not confronted with any evidence to establish that the cash deposited by the jewellers at Delhi in their Bank Account belonged to Dalmias and in fact there is no evidence to show that the cash deposited was not IMC sale proceeds of the silver utensils.
As already staled ‘here is no direct evidence in this regard.
34. On the second issue of Long Term Capital Loss on the sale of Silver utensils
The assessee has stated that the huge quantity of Silver Utensils itself shows that the same could not be personal effects and the same were in the form of Investment made by the Assessee for Capital Appreciation.
35. This claim of loss is consequential in nature. The disclosure of silver utensils was in tones. No evidence has been furnished in support of the claim that those were in form of Investments except assessee’s letter dated 17-08-1998 by which he intimated the entries made in respect of assets disclosed in VDIS including “Investment in Silver Utensils” Account.
36. Submitted for kind perusal and consideration.
Yours faithfully,
Sd/- (P.C. Nayak)
D.C.I.T.,CC-XXVIII,
Calcutta.
9. We further find that there is no dispute that the assessee has made a disclosure under VDIS, 1997 as under :
——————————————————————————–
SI. Assessment Description of assets Amount
No. Year(s) to
which the
income relates
--------------------------------------------------------------------------------
1. 1972-73 Silver utensils 5155.700 Kgs. Rs. 23,40,688/-
2. 1987-88 Diamonds(775.60+454.45+31.70. Rs. 55,85,255/-
3. 1987-88 Cts) Rs. 19,49,345/-
4. 1994-95 Gold Bars 24 Cts. 7.585 Kgs. Rs. 3,50,000/-
Household goods, appliances,
watches, cosmetics
Total Rs. 1,02,25.288/-
Tax Paid Rs. 30,67,586/-
--------------------------------------------------------------------------------
The above declaration was accepted by the Ld. CIT vide certificate dated 18.8.1997 issued Under Section 68(2) of the VDIS, 1997. We further find that vide Circular No. 754 dated 10th June, 1997 reported in (1997) 226 ITR 8 (Statutes) in answer to question No. 16 it has been clarified by the C R.D.T. that in respect of jewellery if it has been acquired prior to 1 ‘I..1987, the value will be taken as on 1.4.1987, as certified by valuer. Accordingly, the assessee got the valuation of jewellery from registered valuer Sri R, K. Kothari and filed the valuation report along with the VDIS declaration. The Ld. Commissioner after verifying the same has issued the certificate Under Section 68(2) of the VDIS, 1997. We further find that despite the fact that the Ld. CIT has issued certificate Under Section 68(2) of the VDIS, 1997 on the basis of the disclosure made by the assessee, supported by valuer certificate, the Assessing Officer has made enquiry from the registered valuer Sri R. K. Kothari about the valuation done by him and has observed that the conduct of the valuer Sri R. K. Kothari shows that he has given bogus valuation report for silver utensils weighing 5153.838 Kgs. without actually examining the said silver articles. Since under the VDIS Scheme it has been provided that such disclosure when accepted offers complete immunity to the declarant in respect of the income so disclosed, therefore, in the absence of any material to show that such certificate has been cancelled or withdrawn or amended by the Ld. CIT under the VDIS, 1997, we are of the view that the Assessing Officer has grossly erred in holding that such silver utensils allegedly sold never existed. Such finding of the Assessing Officer is beyond his jurisdiction and against the scheme of the VDIS, 1997. We further find that even otherwise the finding of the Assessing Officer that Sri Raj Kumar Kothari, the valuer did not issue valuation report after physically seeing the entire silver utensils is not sustainable in view of paras 9 to 12 of the remand report of the Assessing Officer dated 9.11.2001 reproduced in para 8 of this order.
10. As regards, the Assessing Officer’s observation that silver utensils have never been transported from Calcutta to Delhi, we find that these observations were made by the Assessing Officer without considering the affidavit/statements of Sri Trilok Agarwal and Sri J. K. Sharma, proprietor of J. K. Carriers. However, in the remand report the Assessing Officer has considered the same and has observed that the result of the cross verification goes in favour of the assesee’s claim of transport and delivery of the goods. The existence of silver utensils at Delhi before the sale cannot be ruled out vide paras 14 to 21 of the remand report reproduced in para 8 of this order.
11. Besides this, it has also been observed by the Assessing Officer in the above remand report that the tracks carrying the silver utensils were weighed at the Dharamkanta at Delhi and weighment slips were issued which after investigation young to be correct inasmuch as the Dharmakanta Committee, Delhi confirmed the weighing and realization of the weighing charges vide para 22 of the remand report reproduced in para 8 of this order.
12. As regards the observations of the A. O. that the trucks carrying silver from Calcutta to Delhi did not move through Varanasi and Ghaziabad check posts as there is no such record to show that such trucks were actually passed through these check posts, we find that in the remand report the Assessing Officer has examined the matter again and observed that the trucks cannot reach from Calcutta to U.P. on the same day vide para 30 of the remand report reproduced in para 8 of this order.
13. With regard to the Assessing Officer’s observations that the enquiries from the jewellers of Delhi to whom the alleged goods were stated to be sold revealed that they have given the accommodation entries to Dalmia group by showing fictitious purchases of silver utensils as huge amount of cash has been deposited on or just before the date of issue of the cheque, bank accounts were opened during the operation of VDIS to accommodate the Dalmia group, the turnover during the period was found to be unrealistically high, the jewellers could not furnish the particulars of parties to whom the silver were sold and the sale proceeds were received in cash and no details could be furnished as to the names and addresses of the purchasers of such silver utensils, the jewellers could not explain the mode of receipt of silver utensils and the persons who carried the silver utensils and the jewellers have small kiosk which cannot accommodate such large quantity of silver/utensils, we find that this was again examined by the Assessing Officer while giving remand report and found that there is nothing contrary on record to show that their sales have been disproved vide his finding recorded in para 32 of the remand report reproduced in para 8 of this order.
14. We further find that the Assessing Officer has given the remand report after examining the matter afresh in detail and nothing adverse was found against the assessee. Here it is important to mention that it is not the case of the revenue that the remand report furnished by the Assessing Officer is not a valid report or not reliable or the view taken by the Assessing Officer in the remand report is not a possible view permissible under the law. It is also not the case of the revenue that the revenue should be provided one more opportunity to furnish a revised remand report, therefore, in the absence thereof, we are of the view that the remand report furnished by the Assessing Officer is a valid report in the eye of law and in the absence of any other contrary material brought on record by the revenue, we do not find any infirmity in the order of the Ld. CIT(A) in relying on the remand report furnished by the Assessing Officer and in accepting the claim of the assessee.
15. Before the Ld. CIT(A) the assessee has also filed copies of the Tribunal orders in the case of Shyam Sundar Dalmia, HUF v. DCIT in ITA No. 2414/Kol/2002 dated 10.7.2003 for the assessment year 1998-99, Narain Prasad Dalmia v. DCIT in ITA No. 50/Kol/2003 dated 23.9.2003 for the assessment year 1998-99 and Madhusudan Dalmia v. DCIT in ITA No. 320/Kol/2003 dated 2.12.2003 for the assessment year 1998-99. The Ld. CIT(A) on the basis of the observations of the Assessing Officer as mentioned in the remand report and following the orders of the Tribunal in other cases (supra) deleted the addition of Rs. 3,46,83,900/- made by the Assessing Officer.
16. In Shyam Sundar Dalmia (HUF) v. DCIT in ITA No. 2414/Kol/2002 dated 10th July, 2003 for the assessment year 1998-99 it has been observed at para 14 appearing at page 26 of the order of the Tribunal that:
In view of the above discussions, the following points emerged in favour of the assessee.
a) The silver utensils were properly disclosed under VDIS, 1997 and accepted by the Income Tax Department.
b) The silver utensils were handed over to Road Transport Corporation and J. K. Carriers in Calcutta.
c) Both the said Road Transport Corporation and J. K. Carriers are “Common Carrier” within the meaning of “The Carrier Act, 1865”.
d) The silver was delivered by the said common carrier to the consignee at the destination in Delhi.
e) The consignee has confirmed having received the silver utensils through the said common cairier.
f) On search no silver utensils as disclosed in VDIS’97 were found with the appellant.
g) The appellant was not confronted with any evidence to establish that the cash deposited by jewellers at Delhi in their Bank, Accounts belonged to Dalmia and in fact there is no evidence to show that the cash deposited was not the sale proceeds of the silver utensils.
16.1. The above order of the Tribunal has been followed in other two cases of this group as referred in para 15 of this order hereinabove.
17. As regards the retraction of statement by the persons, we find that the Hon’ble Supreme Court in the case of Pullangode Rubber Produce Co. Ltd. v. State of Kerala and Anr. has observed at page 20 as under :
…An admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It is opened to the person who made the admission to show that it is incorrect.
17.1. Since in this case the valuer and transporters after giving the statements have retracted their statements through affidavits and have furnished necessary supporting evidence in support of their fresh statements/affidavits which was not found to be false by the revenue at any stage, we are of the view that the Assessing Officer has grossly erred in not accepting the retraction and statements of other persons made during the course of assessment proceedings.
18. On a query raised by the Bench as to show the outcome of the enquiries made in the case of jewellers of Delhi to whom the assessee has sold the silver utensils, the Ld. Departmental Representative has shown his inability to furnish the copy of such enquiry report or any other supporting material in this regard. At this stage, the Ld. Counsel for the assessee has also submitted that no such enquiry report was provided to the assessee. The Hon’ble Supreme Court in Kishinchand Chellaram v. CIT has held at page 720 as under :
…It was true that the proceedings under the income tax law are not governed by the strict rules of evidence and, therefore, it might be said that even without calling the manager of the bank in evidence to prove this letter, it could be taken into account as evidence. But before the Income-Tax authorities could rely upon it, they were bound to produce it before the assessee so that the assessee could controvert the statements contained in it by asking for an opportunity to cross examine the manager of the bank with reference to the statements made by him….
18.1. Since in the case before us, no such material nor any opportunity to cross examine the parties have been provided to the assessee, therefore, in the light of the ratio of the above decision of Hon’ble Supreme Court, the reliance placed by the Assessing Officer on such evidence has no evidenciary value in the eye of law.
19. In Sumati Dayal v. CIT relied on by the Ld. Departmental Representative it has been held at page 808 as under :
…Having regard to the conduct of the appellant as disclosed in her sworn statement as well as other material on record an inference could reasonably be drawn that the winning tickets were purchased by the appellant after the event. We are, therefore, unable to agree with the view of the Chairman in his dissenting opinion. In our opinion, the majority opinion after considering the surrounding circumstances and applying the test of human probabilities has rightly concluded that the appellant’s claim about the amount being her winnings from races is not genuine. It cannot be said that the explanation offered by the appellant in respect of the said amounts has been rejected unreasonably and that the finding that the said amounts are income of the appellant from other sources is not based on evidence.
19.1. Whereas in the case of the assessee no contrary material was brought on record by the revenue to show that the silver utensils were not existed or the certificate issued by the Ld. CIT Under Section 68(2) was cancelled or withdrawn or the findings given in the remand report by the Assessing Officer himself accepting the claim of the assessee in respect of all the objections raised in the assessment order do not exist or the view taken by me Assessing Officer in the remand report is not a permissible view under the law, therefore, the decision relied on by the Ld. Departmental Representative is distinguishable and not applicable to the facts of the present case.
20. In Union of India and Anr. v. Azadi Bachao Andolan and Anr. (2003) 263 ITR 706, their Lordships at page 758 have observed as under :
With respect, therefore, we are unable to agree with the view that Duke of Westminister’s case (1936) AC 1(HL) : 19 TC 490 is dead, or that its ghost has been exorcised in England. The House of Lords does not seem to think so, and we agree, with respect. In our view, the principle in Duke of Westminister’s case (1936) ACI(HL) : 19 TC 490 is very much alive and kicking in the country of its birth. And as far as this country is concerned, the observation of Shah J. in CIT v. Raman are very much relevant even today.
We may in this connection usefully refer to the judgment of the Madras High Court in M.V. Valliappan v. ITO , which has rightly concluded that the decision in McDowell cannot be read as laying down that every attempt at tax planning is illegitimate and must be ignored, or that every transaction or arrangement which is perfectly permissible under law, which has the effect of reducing the tax burden of the assessee, must be looked upon with disfavour. Though the Madras High Court had occasion to refer to the judgment of the Privy Council in IRC v. Challenge Corporation Ltd. (1987) 2 WLR 24, and did not have the benefit of the House of Lords’ pronouncement in Craven’s case (1988) 3 All ER 495 (HL); (1990) 183 ITR 216 (HL), the view taken by the Madras High Court appears to be correct and we are inclined to agree with it.
We may also refer to the judgment of the Gujarat High Court in Banyan and Berry v. Commissioner of Income-tax referring to Mc.Dowell’s case , the court observed :
The court nowhere said that every action or inaction on the part of the taxpayer which results in reduction of tax liability to which he may be subjected in future, is to be viewed with suspicion and be treated as a device for avoidance of tax irrespective of legitimacy or genuineness of the act; an inference which unfortunately, in our opinion, the Tribunal apparently appears to have drawn from the enunciation made in McDowell’s case (1958)154 ITR 148 (SC). The ratio of any decision has to be understood in the context it has been made. The facts and circumstances which lead to Mc.Dowell’s decision leave us in no doubt that the principle enunciated in the above case has not affected the freedom of the citizen to act in a manner according to his requirements, his wishes in the manner of doing any trade, activity or planning his affairs with circumspection, within the framework of law, unless the same fall in the category of colourable device which may properly be called a device or a dubious method or a subterfuge clothed with apparent dignity.
Their Lordships have further observed at page 762 as under :
If the court finds that notwithstanding a series of legal steps taken by an assessee, the intended legal result has not been achieved, the court might be justified in overlooking the intermediate steps, but it would not be permissible for the court to treat the intervening legal steps as non est based upon some hypothetical assessment of the “real motive” of the assessee. In our view, the court must deal with what is tangible in an objective manner and cannot afford to chase a will-o-the-wisp.
21. Since the addition has been made as unexplained cash credit, therefore, we consider it necessary to examine the case in the light of the provisions of Section 68 of the I.T. Act which reads as follows :
68. Cash credits – Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous years.
22. Under Section 68 of the Act if any sum is found credited in the books of account of the assesee and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. Therefore, what has to be enquired into by the Assessing Authority is about the nature and source of the deposit. If the explanation with regard to nature and source is found unsatisfactory only then the amount so credited may be treated as income.
23. Section 68 came up for consideration before various High Courts and it has been held that the assesee has to prove three conditions : (1) identity of the creditor, (2) capacity of such creditor to advance money; and (3) genuineness of the transactions.
24. If all the aforesaid three conditions are proved the burden shifts on the revenue to prove that the amount belong to the assessee.
25. It has been held by the various High Courts that the assessee cannot be asked to prove source of source or the origin of origin vide S. Hastimal v. CIT (1963) 49 ITR 273 (Mad), Tolaram Daga v. CIT (1966) 59 ITR 632(Assam), Sarogi Credit Corporation v. CIT .
26. This view finds support from the recent decision of Hon’ble Allahabad High Court in the case of CIT v. Jauharimal Goel (2005) 147 Taxman 448 (All), wherein it has been held at page 449 (short notes) as under :
Various courts have held that the assessee has to prove three conditions : (1) identity of the creditor, (2) capacity of such creditor to advance money, and (3) genuineness of the transactions. If all the aforesaid three conditions are proved, the burden would, shift on the revenue to prove that the amount belonged to the assessee. It has been held by the various High Courts that the assessee cannot be asked to prove the source of source or the origin of origin of deposit.
27. In the case of CIT v. Orrisa Corporation P. Ltd. (1986) 159 ITR 78, the Hon’ble Apex Court observed as follows :
In this case, the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessee. Their index numbers were in the file of the revenue. The revenue, apart from issuing notices under Section 131 at the instance of the assessee, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy or were such who could advance the alleged loans. There was no effort made to pursue the so called alleged creditors. In those circumstances, the assessee could not do any thing further. In the premises, if the Tribunal came to the conclusion that the assessee has discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence….(p.84)
28. In the light of the above discussion and the decisions cited hereinabove, we are of the view that the revenue has failed to substantiate its claim that the silver utensils do not exist, neither transported from Kolkata to Delhi and nor sold to Delhi merchants and the alleged sale proceeds is nothing but an accommodation entry. As a matter of fact, the Assessing Officer in the remand report has finally accepted that the silver utensils were properly disclosed, it was transported by trucks as evidenced by consignment notes, the same was delivered at Delhi which was also confirmed by the consignees and there is no direct evidence to show that the jewellers of Delhi have given accommodation entries to the assessee. Besides this, the Assessing Officer while disallowing the long term capital loss on sale of such silver utensils has accepted that such loss is loss on sale of personal effects. Under these circumstances, we are of the view that assessee has discharged his burden that the silver utensils which were disclosed under VDIS, 1997, transported by trucks and sold at Delhi, the sale proceeds were, obtained through banking channels and disclosed in the books of accounts, therefore, the assessee has proved the identity, creditworthiness and genuineness of the transactions in terms of Section 68 of the I.T. Act and, therefore, the addition made by the Assessing Officer at Rs. 3,46,83,900/- is not sustainable in law and accordingly, we are inclined to uphold the finding of the Ld. CIT(A) in deleting the same. We, therefore, answer the question referred to this Special Bench in favour of the assesee and against the revenue.
29. The matter will now go to the regular Bench for disposing of the appeal of on other issues revenue another issues Keeping in view the decision of Special Bench rendered hereinabove.
30. In the above manner, the reference stands disposed of.