ORDER
Bhavnesh Saini, J.M.
1. This appeal by the assessee is directed against the order of the CIT(A), Jammu, with headquarters at, Amritsar, dt. 22nd March, 2002, for the asst. yr. 1998-99 on the following grounds :
“1. (a) That the learned CIT(A), Amritsar, has wrongly confirmed the addition of Rs. 7,66,519 under Section 68 while considering the sale of VDIS jewellery to M/s Bishan Chand Mukesh Kumar Saraf as bogus.
1. (b) That the learned CIT(A), Amritsar, has wrongly confirmed the addition made on the basis of information collected on the back of the assessee and not confronted to the assessee.
2. That the learned CIT(A) has wrongly confirmed the action of learned AO for reducing the long-term capital loss from Rs. 2,13,512 to Rs. 31,696.”
2. We have heard the learned representatives of both the parties and gone through the observations of the authorities below.
3. Briefly the facts are that the assessee filed return of income and is stated to be in the business of trading in shoes. The GP rate was better as compared to the preceding assessment years. The AO on perusal of the computation of income filed by the assessee found that the assessee inter alia, is claiming a carry forward of capital loss of Rs. 2,13,512 on account of sale of jewellery claimed to have been disclosed in the VDIS Scheme. The assessee has sold 98 gold coins of Rs. 3,52,800, sold gold jewellery of Rs. 4,13,719 and sold 14 kgs. of silver for a sum of Rs. 1,05,007. After applying indexation to the cost of acquisition, the assessee claimed loss carry forward in a sum of Rs. 2,13,512. It was submitted before the AO that silver was sold to M/s Bhagwan Dass Vinod Kumar Saraf at Amritsar who has also confirmed the purchase of the silver from the assessee in response to the query letter issued by the AO It was also submitted that gold coins and gold jewellery was sold to M/s Bishan Chand Mukesh Kumar Saraf at Delhi. The AO further observed that the other family members of the assessee have also sold jewellery to M/s Bishan Chand Mukesh Kumar Saraf at Delhi. The registered letter was issued to that party on 8th Nov., 2000 whereby it was required to confirm the purchase of jewellery. Since no reply was received, reminder was issued by speed-post on 24th Nov., 2000. Again a letter through speed-post was issued on 11th Dec., 2000 and in alternative, commission under Section 131 of the IT Act was issued to the office of the DDI, Delhi, to make enquiry and after verifying the books of the parties give findings of the genuineness of the purchase of jewellery from the assessee. However, subsequently the confirmation was received by the AO from M/s Bishan Chand Mukesh Kumar Saraf on 22nd Feb., 2001. However, the commission filed report that the said party is not co-operating. The AO found that the signature of Shri Bishan Chand on the vouchers and the confirmatory letter do not tally. The AO finding time limitation decided the issue on the basis . of material on record. The AO held that the sale is bogus as the party is not traceable at Delhi even though confirmation has been received by him. The AO accordingly was of the view that the assessee has introduced his own money and made the addition of Rs. 7,66,519 in respect of gold coins and jewellery under Section 68 of the IT Act. The loss of Rs. 2,13,512 as claimed by the assessee was also reduced to Rs. 31,696 only on account of sale of silver. The addition was challenged before the CIT(A) and it was briefly submitted that the gold jewellery and gold coins were shown in the returns earlier which were disclosed in VDIS Scheme which is accepted by the CIT(A). Copies of the same are also filed. It was also explained that gold jewellery and gold coins were sold to M/s Bishan Chand Mukesh Kumar Saraf at Delhi, the payment was received through the cheque drawn on PNB. Sale vouchers were also filed before the AO. It was further submitted that the AO only asked for examination of the assessee and his son and their statements have been recorded in which they have confirmed to have sold the jewellery to the aforesaid Delhi party. It was further submitted that no other query was raised by the AO. It was further submitted that the AO made certain inquiries at the back of the assessee which was not confronted to the assessee and moreover in this case the purchaser have confirmed the transaction with the assessee and filed confirmation report directly in the office of the AO. It was further submitted that the report of the DDI, Delhi, was never confronted to the assessee. It was further submitted that the AO made the addition mainly on the reasons that the signatures on the vouchers and confirmatory letter did not tally and the parties were not traceable, but such grounds would not exist as the party has confirmed the transaction with the assessee. The CIT(A), considering the submissions of the assessee and material on record was, of the view that the AO has not raised any enquiries regarding the existence of M/s Bishan Chand Mukesh Kumar Saraf at the assessment stage and has made enquiries directly from the concerned party by issuing letter and commission. The CIT(A) on the basis of material on record also found that the purchasers M/s Bishan Chand Mukesh Kumar is assessed to tax at Delhi with the ITO, Ward-10(2), New Delhi, and even perusal of Inspector’s report reveals that the purchaser existed at the relevant premises and on the basis of enquiry conducted by the Inspector, the purchaser was still functioning from the premises where the letters were sent by the AO. The CIT(A) also observed that the letters issued by the AO did not return back undelivered to show that the purchaser was served with the letter issued by the AO. The CIT(A) on the basis of these material on record was of the considered view that these facts strongly indicate the existence of the purchaser to whom the assessee claimed to have sold the jewellery. The CIT(A) was also of the view that the assessee received the payment through cheque. The CIT(A), however, observed that the purchaser further has failed to appear before the Investigation Wing to confirm the purchases. The purchasers had not confirmed the purchases made by them to the AO. The CIT(A), therefore, was of the opinion that the case of the assessee is not free from doubt. The CIT(A) also observed that even upto the appellate proceedings, no confirmation has been received by the AO. The CIT(A) in this view of the matter dismissed the appeal of the assessee.
4. The learned counsel for the assessee reiterated the submissions made before the authorities below and submitted that the purchaser has confirmed the purchase of the gold jewellery and coins directly to the AO which is also confirmed by the AO in the assessment order and other enquiries were conducted by the AO at the back of the assessee and, therefore; such material cannot be read in evidence against the assessee. He has further submitted that the report of the Inspector revealed that the purchaser existed at the given address and is also assessed to income-tax. He has further submitted that the AO without any basis compared the signature which has no evidentiary value. The learned counsel for the assessee relied upon the following decisions :
(1) Kishinchand Chellaram v. CIT
(2) Sona Electric Co. v. CIT
(3) Chiranji Lal Steel Rolling Mills v. CIT
(4 ) Jay Frozen Foods and Ors. v. ITO .
The learned counsel for the assessee further submitted that the CIT(A) has given a contradictory finding.
5. On the other hand, the learned Departmental Representative relied upon the orders of the authorities below and submitted that the authorities below were justified in making the addition against the assessee.
6. We have considered the rival submissions and material available on record. There is no dispute that the assessee owned and possessed gold coins and gold jewellery and silver which were disclosed under the VDIS Scheme. The assessee sold silver, which is not in dispute as is confirmed by the purchaser. The statements of the assessee and his son were recorded in which they have confirmed to have sold gold jewellery with coins to M/s Bishan Chand Mukesh Kumar. The assessee claimed that the AO did not make any other query from the assessee. The CIT(A) affirmed the statement of the assessee by perusing the record that the AO during the assessment proceedings has not raised any enquiry regarding the existence of the purchaser and made the enquiries directly from the purchaser by issuing letters. The AO issued the letters to the purchaser party of Delhi to confirm the purchase/sale of gold jewellery and coins. M/s Bishan Chand Mukesh Kumar Saraf, Delhi, confirmed the transaction with the assessee by sending confirmatory report to the AO directly and this fact is admitted by the AO in the assessment order. However, the CIT(A) gave contradictory finding in the appellate order by observing that even upto the date of appellate proceedings, no confirmation has been received by the AO. It is admitted fact that the report of the Inspector indicates that the purchaser existed at the given address and that the same is also assessed to income-tax, as is observed by the CIT(A) in the appellate order. The assessee filed sale bill before the AO and showed that payment of the sale consideration is received through cheque. Therefore, this evidence on record clearly establish that the assessee has sold gold jewellery and coins to M/s Bishan Chand Mukesh Kumar, who has also confirmed this fact to the AO in the confirmatory letter. The assessee has, therefore, discharged the onus of proving that he has sold the gold jewellery and gold coins to the purchaser. On the other hand, the AO has not brought any evidence on record to contradict the evidence led by the assessee. The AO has made certain queries directly from the concerned party through issue of letters as well as through DDI, Delhi. The letters of the AO did not return unserved as (sic-which) indicated that the party existed at the given address. The purchaser also confirmed directly purchase of gold to the AO. Only the DDI, submitted in the report that the party is not co-operating. The AO also observed that signature did not tally. However, those materials on record were never confronted to the assessee. Therefore, these circumstances considered by the AO against the assessee cannot be read as evidence against the assessee. There is no other evidence available on record to justify the findings of the authorities below.
7. The Hon’ble Supreme Court in the matter of Kishinchand Chellaram v. CIT (supra) held that the letter from manager of the bank through which money remitted was not shown to the assessee and, therefore, such evidence is not admissible and cannot be used against the assessee. The Hon’ble Punjab & Haryana High Court in the matter of Chiranji Lal Steel Rolling Mills (supra) held that if the evidence is collected by the ITO then it is his duty to disclose such evidence to the assessee and afford him a reasonable opportunity of rebutting it.
8. The Hon’ble Delhi High Court in the matter of Sona Electric Co. (supra) held that the credit entry in the assessee’s books of account can be rejected by the ITO on cogent grounds. When such grounds are themselves based on no evidence, the question of raising a presumption against the assessee does not arise.
9. The Hon’ble Madras High Court in the matter of Jay Frozen Foods & Ors. (supra) held that “It is settled law that the evidence of a handwriting expert is a very weak piece of evidence. It is not evidence, but it is only an opinion. Unlike the opinion of a fingerprint expert, the opinion of a handwriting expert cannot be taken with certainty.”
10. Considering the above discussion and the case laws referred to above, we are of the view that there was sufficient material available on record to prove that the assessee sold the jewellery to M/s Bishan Chand Mukesh Kumar Saraf, Delhi. Whatever enquiry was conducted by the AO was conducted at the back of the assessee and even observation with regard to the handwriting of the assessee also done at the back of the assessee without giving any opportunity to the assessee to explain the point, therefore, such evidence is not legally admissible against the assessee. Even the AO has not made out a case that gold jewellery and silver were available with the assessee. The Hon’ble Madras High Court even did not take into consideration the report of the handwriting expert as it would not lead to certainty but in the present case, the AO conducted the enquiry at the back of the assessee (and) merely compared the, handwriting and made the addition against the assessee. Therefore, we do not find any justification to sustain the addition against the assessee. We accordingly set aside the orders of the authorities below. As a result, the addition of Rs. 7,66,519 is deleted. The ground No. 1 is, therefore, allowed.
11. Ground No. 2 is consequential in nature and the AO is directed to give necessary relief to the assessee as per our findings above in respect of ground No. 1.
12. As a result, the appeal of the assessee is allowed.