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High Court of Judicature at Allahabad Lucknow Bench Lucknow
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A.F.R.
Court No. - 27
Case :- INCOME TAX APPEAL No. - 218 of 2005
Appellant :- The Commissioner Of sIncome Tax, Faizabad
Respondent :- Shri Ram Pher,Prop. M/S Bhagwati Steels, Ambedkarnagar
Petitioner Counsel :- Dd Chopra
Hon'ble Devi Prasad Singh,J.
Hon’ble Ritu Raj Awasthi,J.
[Delivered by Hon’ble Mr. Justice Devi Prasad Singh]
1. Heard Sri D. D. Chopra learned counsel for the appellant and perused
record. None appears for the respondent.
2. In the present appeal, filed under Section 260-A of Income Tax Act
(In short the Act), the Division Bench of this Court, vide order dated
24.1.2008, framed the following substantial questions of law:
“(1) Whether the learned Income Tax Appellate Tribunal
was justified in allowing relief in appeal preferred by
the assessee while overlooking the appeal before it
preferred the Revenue on the same addition thereby
rendering the Revenue’s appeal ineffective and otiose.
(2) Whether the learned Income Tax Appellate Tribunal
was justified in law and on the facts of the case in
allowing a relief of Rs.10,21,000/-
(3) Whether the learned Income Tax Appellate Tribunal
was justified in estimating the value of unexplained
stock at Rs.5.00 Lacs as against Rs.20,21,095.00 valued
by the Assessing Officer assessed on the basis of
physical verification of stock during the course of
survey of the assessee’s premises u/s 133A of the
Income Tax Act.”
3. The brief matrix of the controversy involved, relates to assessment
year 1998-99 based on survey of the business establishment of the
assessee in pursuance of powers conferred under Section 133A of the
Act. The assessee is a iron and hardware merchant carrying on
business in town area of Shahjadpur Tehsil Akbarpur, District
Ambedkarnagar. On 9.8.1998, survey was conducted under Section
133A of the Act. Statement of assessee was recorded by the Income
Tax Inspector wherein, the assessee stated that he was having total
stock of Rs.2 lacs to Rs.2.5 lacs. It was noted by the Assessing Officer
that total stock was based on inventories A and B prepared on the spot
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which was to the tune of Rs.22,71,091.00. The difference between the
stock found by the Revenue and in the assessee, comes to
Rs.20,21,092.00. The assessee was called on to file objection. After
considering objection filed by the assessee, the Assessing Officer
made addition of Rs.20,21,095.00.
4. At the appellate stage, the assessee filed an affidavit and stated that
records were interpolated and the stock shown by the Income Tax
Inspector while doing survey, is based on incorrect facts. In the
affidavit, the assessee specifically given reference to various items
which were not found in the stock but have been shown by the
interpolation of record. The Tribunal has discussed this aspect in para-
3 of its order.
5. The Commissioner of Income Tax (Appeals)-III, Lucknow (CIT)
recorded a finding that the testimony of Revenue, was not credible
and lacks confidence. It has been noted by the CIT (Appeals) that
Revenue has not acted fairly while making addition as above.
Accordingly, the CIT (Appeals) further observed that even for two
items, the amount comes to Rs.9,60,000.00. Though, the CIT
(Appeals) disbelieved the version of the assessee to some extent as
well as the Revenue and recorded finding that the department has not
acted fairly but after considering the difference of two items namely,
strips and round bar of Rs.9,60,000.00, relief of Rs.5,00,000.00 was
given to the assessee.
6. It may be noted that though the list given by the assessee, relates to
several items marked from A to J but CIT (Appeals) has considered
the interpolation with regard to the two items only (supra). Once the
assessee has filed affidavit with specific plea that Revenue has acted
unfairly and has incorrectly shown certain items in its list while
calculating stock, then it was incumbent on the appellate authority to
consider each and every item with regard to which the assessee raised
objection. Deciding the matter by the appellate authority after
considering the difference of only two items that too, against the
finding of Revenue, seems to be not correct. The appellate authority
has failed to exercise jurisdiction vested in it.
7. On appeal though, the Tribunal has noted that an affidavit was filed
by the assessee pointing out several items marked from A to J
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(Annexure No.3 of the order) but has not dealt with individually.
However, the Tribunal arrived at the conclusion that there was
interpolation in the list of inventories prepared at the time of survey as
alleged by the assessee. The Tribunal also observed that affidavit
filed by the assessee, has neither been discussed nor rebutted. The
Tribunal held that the increase of escaped bearing from 18 pcs. to 418
pcs. and increase of round bar from 65 to 265 qtls., with similar
instance with regard to other items, renders the case of the Revenue
untrustworthy. The Tribunal declined to place reliance on the
inventories and the amount of stock arrived at by the Assessing
Officer. Virtually, the finding recorded by the CIT (Appeals) and
Tribunal, seems to be correct though, entire record has not been taken
into account.
8. No material has been pointed out by the learned counsel for the
appellant which may falsify the factual observations made by the CIT
(Appeals) as well as the Tribunal. Once the finding recorded by the
two authorities with regard to interpolation of record is not disputed,
then no finding can be recorded by this Court contrary to the
observations made by the two appellate authorities.
9. Needless to say that in case, finding recorded by the two appellate
authorities with regard to interpolation or fabrication of record or
incorrect entry made in the inventories by the Assessing Officer and
the same is not disputed, then there appears to be no doubt that the
Assessing Officer, Income Tax Inspector or the Officer who has done
the survey in the establishment in question, has committed fraud.
10. “Fraud” means an intention to deceive. The expression “fraud”
involves two elements, deceit and injury to the person deceived. Even
if in some cases there is not benefit to the deceiver, in appropriate
case, the second condition shall be deemed to be satisfied. (Vide
Vimla (Dr.) Vs. Delhi Administration, 1963 Supp (2) SCR 585 :
(1963) 2 Cri LJ 434; and Indian Bank Vs. Satyam Fibres (India)
(P) Ltd., (1996) 5 SCC 550).
11. The collusion or conspiracy to deprive the right of others in relation to
a property shall render transaction ab initio void. Fraud and deception
are synonymous. Fraud is anathema to all equitable principles and any
affair tainted with fraud cannot be perpetuated or saved by the
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application of any equitable doctrine including res judicata. (Vide
Ram Chandra Singh Vs. Savitri Devi, (2003) 8 SCC 319). Fraud
is proved when it is shown that a false representation has been made
knowingly, or in disbelief in its truth, or recklessly and carelessly
whether it is true or false. Fraud avoids all judicial acts ecclesiastical
or temporal. (Vide S.P. Chengalvaraya Naidu (dead) by L.Rs. Vs.
Jagannath (dead) by L.Rs. & Ors., AIR 1994 SC 853. In Lazarus
Estate Ltd. Vs. Besalay, 1956 All.E.R. 349, the Court observed
without equivocation that no judgment of a Court, no order of a
Minister can be allowed to stand if it has been obtained by fraud, for
fraud unravels everything.
12. Their lordships of Hon’ble Supreme Court in the case reported in AIR
1994 SC 2151: Andhra Pradesh State Financial Corporation Vs.
M/s. GAR Re-Rolling Mills & Anr.; and (1994) 2 SCC :State of
Maharashtra & Ors. Vs. Prabhu, has observed that a writ Court,
while exercising its equitable jurisdiction, should not act as to prevent
perpetration of a legal fraud as the Courts are obliged to do justice by
promotion of good faith. Equity is also known to prevent the law from
the crafty evasions and sub-letties invented to evade law.
13. In (2000) 3 SCC 581: United India Insurance Co. Ltd. Vs.
Rajendra Singh & ors., their lordships of Hon’ble Supreme Court
observed to quote:-
“Fraud and justice never dwell together” (fraus et jus
nunquam cohabitant) and it is a pristine maxim which
has never lost its temper over all these centuries.”
14. In the case reported in AIR 1992 SC 1555: Smt. Shrisht Dhawan
Vs. Shaw Brothers, Hon’ble Supreme Court observed as under:
“Fraud and collusion vitiate even the most solemn
proceedings in any civilized system of jurisprudence. It
is a concept descriptive of human conduct.”
15. In a recent judgment of Hon’ble Supreme Court reported in 2010 AIR
SCW 50: Dalip Singh. Vs. State of U.P. and others, their lordships
after considering earlier judgment, has deprecated the conduct of such
litigants who approach the Court by concealing material facts.
16. It has been vehemently argued by Sri D. D. Chopra that the
departmental appeal was also pending before the Tribunal which was
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dismissed at later stage. In case the department was having any
grievance against the order of the Tribunal, then the Revenue could
have filed another appeal raising substantial question of law in
pursuance of power conferred under Section 260A of the Act. Since
no appeal was preferred by the appellant against the order passed by
the Tribunal, in other connected appeal, it cannot be looked into by
this Court in the present appeal.
17. Thus, in the event of commission of fraud in the form of manipulation
or interpolation of record, even solemn act of the authorities while
discharging their duties, vitiates. The Tribunal is the last authority to
record finding of fact. Keeping in view the finding of fact recorded
by the two forums, the conclusive finding recorded with regard to
commission of fraud in the form of interpolation of record, seems to
be well established fact. While exercising jurisdiction conferred under
Section 260A of the Act, it is not open by this Court to disturb the
finding of fact recorded by the two forums with regard to commission
of fraud. Accordingly, the present appeal preferred by the Revenue,
lacks merit.
18. Before parting with the case, we would like to observe that the
allegation raised by the assessee is serious. It appears that the
Revenue by hook or crook tried to persecute the assessee for some
unforeseen reason while interpolating record by increasing the stock
of various items including strips and round bar. Such action on the
part of Revenue, erodes people’s faith in the system. Disciplinary
proceeding should have been conducted against the officers, who tried
to impose tax by interpolating records with major penalty.
19. In view of the above, we answer the question framed in the appeal as
under:
(i) Since the Revenue has not preferred any appeal against
the Tribunal order, it cannot be taken into account while
deciding the present controversy.
(ii) The Tribunal’s order is well considered and justified in
allowing the relief since there is concurrent finding of
fact with regard to commission of fraud in the form of
interpolation of record.
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(iii) Since the Income Tax Inspector while preparing the
stock list, has interpolated the record and enhanced the
quantity of stock, the Tribunal’s order seems to be
justified and is decided against the Revenue.
20. In view of the above, we dismiss the appeal and the questions framed
therein, are answered against the Revenue appellant.
[Justice Devi Prasad Singh]
Order Date :- 1.7.2010
Rajneesh) [Justice Ritu Raj Awasthi]