[Citation -1986-LL-1231]

Citation 1986-LL-1231
Court ITAT
Relevant Act Income-tax
Date of Order 31/12/1986
Assessment Year 1971-72, 1972-73
Judgment View Judgment
Keyword Tags reassessment proceedings • period of limitation • voluntary disclosure • powers of revision • cross-examination • disclosure scheme • evidentiary value • managing partners • share of profit • issue of notice • raw material • time barred • sales tax • benamidar
Bot Summary: These two appeals are against the consolidated order of the Commissioner under section 263 of the Income-tax Act, 1961 setting aside the assessments made by the ITO under section 147 of the Act and directing him to redo the same afresh. The ex parte assessment was because the assessee had not complied with the some of the requirements of the notices of the ITO. This assessment under section 144 was reopened by the ITO under section 146 of the Act. Taking the assessment year 1971-72, the original assessment was made on 11-11-1971 and the assessments were reopened by issue of notice under section 148 of the Act dated 5-7-1975. Assessment for 1972-73 had been completed on 11-10-1972 and that assessment was also reopened by notice under section 148 on 5-7-1975. The first contention of Shri Satyanarayana is that the assessments under section 147 for both these years were completed on 29-10-1983 and as on that date the assessee was immune from the revision of those assessments as the law stood at that time. Desai J. has rightly pointed out that it is a firmly established principle of income- tax law that once a final assessment is arrived at and the assessment is complete, it cannot be reopened except in the circumstances detailed in sections 34 and 35 of the Act and within the time limited by those sections. Shri Santhanam had also made a point that the assessments were not under section 147 at all but they were assessments under section 146.

These two appeals are against consolidated order of Commissioner under section 263 of Income-tax Act, 1961 ('the Act') setting aside assessments made by ITO under section 147 of Act and directing him to redo same afresh. prejudice caused to revenue was on account of omission of ITO to consider whether two businesses done under names of Pillai Enterprises and Sagar Enterprises were concerns of assessee or not. We are asked to decide in substance one question of law, that is, (1) whether Commissioner had jurisdiction to revise assessment order admittedly made under section 147 and (2) question of fact whether there were materials report that two businesses really belong to assessee. 2. original assessments for these two years had chequered history. assessment for year 1971-72 was made on 11-11-1971. income declared by assessee-firm was accepted as correct. However, this assessment was reopened under section 147 by notice issued on 5-7-1975. reopening was consequence of belief entertained by ITO that assessee-firm had done business in these other names also like Pillai Enterprises, Sagar Enterprises, etc. This assessment was completed on 28-3- 1980 under section 144 of Act. ex parte assessment was because assessee had not complied with some of requirements of notices of ITO. This assessment under section 144 was, however, reopened by ITO under section 146 of Act. order under section 146 passed on 9-7-1980 accepted that assessee had reasonable cause for not complying with notices. Thereafter, assessee was given several opportunities to produce evidence. But again there were, according to ITO, defaults. With result that he made another ex parte assessment on 9-2-1983. This assessment was also reopened under section 146 by his order dated 15-3-1983. Thereafter, ITO gave hearing to assessee and completed assessment by his order dated 26-10-1983. In this order, unlike original ex parte orders, he did not include any income of businesses run under different trade names like Sagar Enterprises, Pillai Enterprises, etc. 3. fate of assessments for year 1972-73 were identical. Here also, original assessment was completed on 11-10-1972. But, it was reopened later and reassessments were made ex parte only to be reopened under section 146. Again there was ex parte assessment followed reopening and final assessment in which income from concerns mentioned above were not included. 4. Commissioner called for records of assessee for two years as he was of opinion that assessments finally made were erroneous and prejudicial to interests of revenue. We may mention here that this firm was dissolved as early as 1972 and, therefore, proceedings bad to be taken against those who were partners at time of dissolution. There were during these two years six partners. Commissioner had issued notices to these six partners. Four of partners have represented their case by common chartered accountant. These four partners were Balaraj, Laxmaiah, Sambaiah and Abdul Aziz. Two partners did not respond. They were Sathaiah and Ganesh. After hearing parties, Commissioner gave prima facie finding that there were materials in records which would show that assessee had income other than what was disclosed like two enterprises in name of Pillai Enterprises and Sagar Enterprises and ITO had not property appreciated these evidences. At this stage, it is not necessary to go into detailed reasonings of Commissioner. We will deal with this at later occasion when we go into merits of his findings. It is enough for present that assessments were cancelled and ITO directed to redo same. 5. first contention of Shri Satyanarayana appearing for assessee was that Commissioner has no jurisdiction to revise assessment done under section 147. In order to appreciate this contention some dates may be recalled. Taking assessment year 1971-72, original assessment was made on 11-11-1971 and assessments were reopened by issue of notice under section 148 of Act dated 5-7-1975. Assessment for 1972-73 had been completed on 11-10-1972 and that assessment was also reopened by notice under section 148 on 5-7-1975. These assessments have been finalised after twice being reopened under section 146 on 29-10-1983 for both years. Commissioner had issued notice for revising assessment under section 263 on 7-10-1985. 6. provision enabling Commissioner to revise assessments were amended by Taxation Laws (Amendment) Act, 1984 with effect from 1- 10-1984. Before amendment to sub-section (2) of section 263 read as follows: " (2) No order shall be made under sub-section (1)-- (a) to revise order of reassessment made under section 147, or (b) after expiry of two years from date of order sought to be revised." Now, this provision has been removed from statute from 1-10-1984. Another sub-section which is numbered as sub-section (2) has been substituted but, amended sub-section retains in substance only clause (b) of original sub-section (2). In other words, bar on revision of reassessment under section 147 which existed till 1-10-1984 has been removed. 7. first contention of Shri Satyanarayana is that assessments under section 147 for both these years were completed on 29-10-1983 and as on that date assessee was immune from revision of those assessments as law stood at that time. amendment effected in 1984, according to him, would enable Commissioner to take action only in respect of reassessments made after 1-10-1984. It will not enable Commissioner to pass order under section 263 in any of reassessments passed before 1- 10-1984. Shri Satyanarayana even went further and stated that right of assessee against revision crystallised from date of issue and services of notice under section 148 itself. According to him, it is not even necessary that t h e assessment should have been completed before 1-10-1984. But, it is unnecessary for purpose of those appeals to go into this question because admittedly both issue of notices and completion of assessments were long before 1-10-1984, date of amendment. To support this proposition, he had relied on decision of Bombay High Court in sales tax case--Seimens India Ltd. v. State of Maharashtra [1986] 62 STC 40. Bombay High Court has stated that in order to determine law which applies to suo motu revision proceedings, it is necessary to make distinction between substantive laws and procedural laws. right of Commissioner to initiate revision proceedings in respect of assessment order is similar to right of appeal in that context though it may differ from right of appeal in other regards. At time, when assessment proceedings are initiated assessee has, according to their Lordships, right to have these proceedings finalised in accordance with substantive law then in force. It would include right to apply for revision or liability to have order revised in accordance with substantive law then in force. But, High Court opined that if under law in force at date of initiation of assessment proceedings, time limit is prescribed within which right of revision has to be exercised, that law prescribing period of limitation is procedural rather than substantive. That is, however, subject to one exception. If under existing law of limitation, right to initiate proceeding has already become barred than subsequent enlargement of time by amendment of law cannot be availed of. Thus, on this basis finality achieved as result of proceeding becoming time barred is treated as substantive right which has accrued to party. That right cannot be taken away by subsequent amendment. Strong reliance has been placed on this authority. According to Shri Satyanarayana when assessment was completed on 29-10-1983, assessee had become immune from revision under section 263 as law stood at that time. subsequent amendment of provisions of section 263 enlarging scope of revision by including assessments under section 263 cannot be availed of in respect of reassessments already completed. That is because assessee had already acquired right against such revision. 8. We think there is considerable substance in this submission. law on this point seems to be well settled and we need only to refer one or two Supreme Court decisions. We will first refer to decision of Supreme Court in case of S.C. Prashar v. Vasantsen Dwarkadas [1963] 49 ITR 1. This is land mark judgment which trenches on several issues. One of issues considered was identical point. matter related to amendment to section 34 of Indian Income-tax Act, 1922 ('the 1922 Act'). This amendment enlarged power of reassessment by ITO at any time to give effect to findings of appellate authority. In case before Supreme Court this amendment was utilised in reassessing certain earlier assessment years. relevant assessments were 1942-43. As law stood at that time, assessment could b e reopened for period of four years or eight years and either way limitation would have stepped in by 31-3-1951. amendment enlarging field came into effect on 1-4-1952 proceedings for reassessments were taken up thereafter. majority judgment of Supreme Court observed as follows: " I now take up second facet of same question. On this aspect of t h e case both learned single Judge (Desai J.) and appellate court (Chagla C.J. and Tendolkar J.) were agreed. relevant assessment year was 1942-43 and it ended on March 31, 1943. period of four years therefrom would end on March 31, 1947, and period of eight years would end on March 31, 1951. Now second proviso to sub-section (3) came into effect, as I have stated earlier, on April 1, 1952. In other words, time limit fixed by sub-section (1) had expired some time before amended second proviso came into effect. Desai J. has rightly pointed out that it is firmly established principle of income- tax law that once final assessment is arrived at and assessment is complete, it cannot be reopened except in circumstances detailed in sections 34 and 35 of Act and within time limited by those sections. Is there anything in proviso in question which would give it retrospective effect beyond April 1, 1952? In my opinion there is none. second proviso came into force on April 1, 1952, and before that date period of eight years from March 31, 1943, had already expired. legislation which provided that from April 1, 1952, there would be no limitation in respect of certain cases could not revive remedy which was already lost to Income-tax Officer. It seems to me that proposition of law is settled beyond any doubt that although limitation is procedural law and although it is open to Legislature to extend period of limitation, important right accrues to party when remedy against him is barred by existing law of limitation and vested right cannot be affected except by express terms used by statute or clearest implication flowing therefrom. . . ." According to Supreme Court although limitation is procedural law and although Legislature can extend period of limitation important right accrues to assessee when remedy against him is barred by existing accrues to assessee when remedy against him is barred by existing law of limitation. assessee gets vested right. This vested right cannot be affected by amendment except by express terms used by statute or clearest implication flowing from them. So we have to see whether amendment made under section 263 has by express terms had applied those provisions to reassessment proceedings which had already become final and whether there is necessary implication to that effect. We do not find any such express terms and neither do we find any necessary implication to hold in favour of conferring jurisdiction to Commissioner. 9. Shri Santhanam appearing for department had submitted that amendment made on 1-10-1984 was only procedural amendment. According to him, revisionary powers contained in section 263 are merely procedural and this is on authority of observation of Supreme Court in case of CIT v. National Taj Traders [1980] 121 ITR 535. He referred to Chaturvedi and Pithisaria's Income-tax Law, Third edn., Vol. 1, p. 195 for proposition that there were no vested rights regarding procedural law. He submitted that procedure is only machinery of ground. In dealing with procedural matters all that is necessary in some cases is only whether on date on which Commissioner seeks to exercise his jurisdiction, whether statute gave him such jurisdiction. In other words, all that is to be seen is whether on date of passing of order by Commissioner, statute enables him to do so. On plain reading of section it certainly enables him to do so. Referring decision of Gujarat High Court in case of CIT v. Ochhavlal Laljibhai Dharia [1980] 125 ITR 301, he referred to passage which reads as follows: " Buckley L.J., in his concurring opinion, observed as under: ' To my mind word 'retrospective' is inappropriate, and question is not whether section is retrospective. Retrospective operation is one matter. Interference with existing rights is another. If Act provides that as at past date law shall be taken to have been that which it was not, that Act I understand to be retrospective. That is not this case. question here is whether certain provision as to contents of leases is addressed to case of all leases or only of some, namely, leases executed after passing of Act. question is as to ambit and scope of Act, and not as to date as from which new law, as enacted by Act, is to be taken to have been law '." He, therefore, submitted that question of retrospective operations do not at all arise. 10. He alternatively submitted that even if it were to be considered as substantive law, still jurisdiction of Commissioner would be unaffected. He referred decision of Supreme Court in case of J.P. Jani, ITO v. Induprasad Devshanker Bhatt [1969] 72 ITR 595 where same legal proposition as laid down by Supreme Court in S.C. Prashar's case has been repeated. At first blush, it would appear to support assessee's case but he submitted that this decision has been explained by Calcutta High Court in case of CIT v. B.R. Vasa [1979] 116 ITR 940. He referred to passage occurring at P. 945 where it was stated that Supreme Court in J.P. Jani's case proceeded on concession of revenue that right of ITO to reopen assessment had become barred before later time has come into force. Supreme Court had not, therefore, considered ambit of section and decision given on concession cannot have binding force. He then pointed out that assessment under section 147 need not have been completed on 29-10-1983. It could have been completed even after 1-10-1984. It was mere accident that assessment was completed before 1-10-1984. If that is so, i.e., if assessment could have been completed after later date then submissions of assessee could not have been acceptable to out- jurisdiction. assessment was completed earlier. Shri Santhanam had also made point that assessments were not under section 147 at all but they were assessments under section 146. Even under section 146, ITO could have completed assessment by 31-3-1985 since order under section 146 was passed on 15-3-1983. Finally, Shri Santhanam submitted that it would not be correct to consider section 263 to be materially similar to section 147. There are lots of differences between reopening of assessment under section 147 and revision under section 263. 11. We are unable to accept these submissions. question is not whether omission under sub-section (2) of section 263 as it stood before 1- 10-1984 effected procedure or affected substantive rights of assessee. We have already quoted Supreme Court's decision in S.C. Prashar's case to show that assessee had substantive right in not reopening assessment which has reached finality. It is true that there are lot of differences between reopening of assessment and revision under section 263 but both are similar in this one aspect that they affect finality of assessment. Viewed from narrow point of view of finality of assessment, we cannot accept any inroad into this right unless statute clearly says so. We do not find anything which has laid down contrary proposition in case of National Taj Traders. 12. With regard to submission, that there are no vested rights in procedural law, there could be no quarrel at all about this proposition. But question before us not which of procedural laws was to be applied but whether assessee has acquired any right by virtue of assessment. That such right exists is now well settled by Supreme Court's decision in S.C. Prashar's case. In this case, we are dealing with interference with existing rights. 13. We must also state that proposition laid down by Supreme Court in J.P. Jani's case is same proposition laid down by them earlier in S.C. Prashar's case. No doubt, Calcutta High Court had found that part of decision rested on concession. It may be that on facts of case, there was no question of affecting existing rights and amendment would have enabled department to have validly reopened assessment. This aspect might have been omitted to be considered by Court. But, we are not, in this case before us, dealing with 1922 Act or section 34 and its amendments. We are dealing with existing rights which accrues to assessee on account of finality of assessment having been reached before date of amendment. What is crucial is date on which order has been passed. It is immaterial that ITO would have passed order on later date which may fall after 1- 10-1984. But on date of passing of order right has already accrued and if that right has accrued because of accident of date falling before 1-10-1984, it is no use stating that ITO would have completed assessment on 1-10-1984 also. assessment on 1-10-1984 also. 14. We are also not accepting this submission that assessment has b e e n done under section 143(3) of Act only. ITO has assumed jurisdiction by issuing notice under section 147 only. Therefore, it is assessment made under section 147 and as law stood at that time could have not been reached Commissioner under section 263. 15. We may now consider other submissions. Shri Satyanarayana for assessee had submitted that Commissioner's powers of revision under section 263 will not extend to revise assessment made by ITO after applying his mind. He agreed that in cases where ITO has not applied his mind at all, it may be open for Commissioner to revise that order. But in case where ITO has applied his mind and has given finding, it cannot be said that order is erroneous merely because Commissioner on appraising same evidence draws different inference. We are unable to accept this submission. This point has already come before Andhra Pradesh High Court in unreported decision in case of Kanikacherla Ananta Kotaiah & Sons [Reference Case No. 70 of 1971 dated 1-3-1973]. They have stated in course of judgment as follows: " In order to find out whether ITO was erred in concluding three loans which Commissioner had considered, he had to necessarily consider t h e material on record. We do not agree with Judicial Member that Commissioner was not entitled to reappraise evidence nor is it possible to agree with his view that if Commissioner comes to contrary conclusion, that will amount to imposing his will upon ITO. In his revisionary authority under said provision, he is entitled to revise order and while doing that if it is necessary he has to reappreciate evidence." above paragraph is answer to contentions raised by Shri Satyanarayana. 16. Although we have already held that amendment of section 263 will n o t clothe Commissioner with jurisdiction in this case. We will nevertheless, go into merits of finding of Commissioner. That will dispose of all points raised in appeal. 17. assessee-firm has mentioned earlier, consisted of six partners. firm was dissolved on 31-3-1972. After dissolution of firm, some investigation of firm was started by department towards end of 1973. enquiry under section 131 of Act was conducted at premises occupied by Sathaiah and his son Ganesh. In course of enquiries certain papers and documents relating to clandestine dealings were found. It is not k n o w n whether any of these documents were taken possession by department. It is also not known whether any statement was taken from Sathaiah and Ganesh at time of these enquiries. 18. In course of further enquiries, department found that one of employees of firm L. S. Vaidyanathan had opened account in Canara Bank, Secunderabad Branch. This account contained large number of transactions. department had also got in their possession cheques signed b y Vaidyanathan but which were not presented to bank for encashment. Xerox copies of these cheques have been furnished at time of hearing before us and they are found in page 147 of paper book of assessee. These cheques are self cheques and amounts are also mentioned in them. For instance, one of cheques is for Rs. 15,000. other for Rs. 10,000. On reverse of these cheques, Shri P. Ganesh partner had signed for receipt of amount from bank. 19. department had also got details of accounts maintained in name of Vaidyanathan. Since they reflected large transactions, they started enquiry as to person responsible for these transactions. first person obviously to be examined is Vaidyanathan because account was in his name. other partners were also examined. partners Balraj, Laxmaiah and Sathaiah were examined on 19-8-1974. Shri Ganesh was examined on 20- 8-1974 and Sambaiah had been examined on 23-8-1974. 20. In chronology, we would take up first statement given by Sathaiah. He stated before assistant director that there were businesses run by firm in name of Sagar Enterprises and Pillai Enterprises. This is what he stated: " business run in name of Sagar Enterprises and Pillai Enterprises was being shown in books of Srinivasa Metal Works. Sagar Enterprises was run in name of L. S. Vaidyanathan who is residing at Praga Tools--I do not remember whether sales tax licence was obtained in his name. Pillai Enterprises was run by Sri D. Shanmugham who is now sick and staying at Lalapet Road, Secunderabad. entire accounts are with Sri G. Sambiah, Vidyanagar, opposite Community Hall, Hyderabad." Thus, one of partners had admitted that assessee-firm was doing business in benami names. His son Ganesh was examined on 20-8-1974. He did not refer to two concerns named by Sathaiah but stated: " In firm we were also dealing with permits of others. business was being run by K. Laxmaiah, P. Sathaiah and M.A. Aziz and accounts were written by G. Sambaiah. I was only taken and giving delivery of goods. I was in receipt of profits amounting to Rs. 25,000 in cash which were not recorded in books towards my share of profit from 1969 to 1972 in firm. cash was being distributed by K. Laxmaiah who was finance partner along with K. Balaraj from out of above amounts I invested Rs. 6,000 in Nagarjuna Industries and Rs. 6,000 in Mahesh Steel Traders. balance was spent either for house expenses. sum of Rs. 2,000 was given on loans to others." third partner Balaraj was examined on 19-8-1974. He said that he had n o knowledge of any business being conducted under name Sagar Enterprises and Pillai Enterprises. Mr. K. Laxmaiah also gave similar statement pleading ignorance about these two additional businesses of firm. 21. Shri Sambaiah, another partner had given statement on 23-8-1974 which dissented from statements of Sathaiah and Ganesh. He stated as follows: " firm was also purchasing iron from permit holders and selling same. We were recording in books such transactions of permit purchases and sales. There was no business done by firm in names of Sagar Enterprises and Pillai Enterprises." Thus some of partners had admitted that firm was doing business outside books of accounts while others expressed ignorance about them. Shri Sambaiah had stated that no business was done in name of Sagar Enterprises and Pillai Enterprises but he had stated that firm was purchasing iron from permit holders and selling same. Since this amounted to trafficking in permits, it would be against rules but nevertheless he had stated that these transactions were recorded in books of accounts. Thus, we are faced with conflicting statements given by partners of assessee-firm. We have to decide which of these versions are correct. For this purpose, we have to naturally look into other surrounding circumstances and seek corroborative material evidence. 22. next material is evidence of Vaidyanathan who was examined on 17-2-1975. He stated as follows: " During period of my employment in Srinivasa Metal Works account w s opened in my name in Canara Bank, R.P. Road, Secunderabad. This account was opened in year 1970. This was opened with introduction either P. Sathiah or K. Lakshmaiah, who are partners in Srinivasa Metal Works. Though transactions are in my name they did not relate to me. transactions related to only Srinivasa Metal Works. transactions related to amounts remitted from places outside state towards sales of iron. In order to supress real turnover firm of Srinivasa Metal Works have introduced account in my name. extent of transactions is about Rs. 3 lakhs to 4 lakhs. During that period I am only employee of Srinivasa Metal Works and I acted according to their instructions." Shri Vaidyanathan was examined in presence of partners Abdul Aziz, Sathaiah, Sambaiah, Ganesh, Laxmaiah and Balaraj. No question was asked to Vaidyanathan by Aziz Sathaiah, Sambaiah and Ganesh. Shri Laxmaiah wanted to consult his auditor before putting any questions. Only Balaraj wanted statement of Vaidyanathan to be given to him so that he can cross-examine him. We are not aware whether cross- examination was allowed. At any rate, copy of such cross-examination has not been furnished to us. It will be remembered that Sambaiah had stated that there was no business done in benami names but he did not put any questions to Vaidyanathan when Vaidyanathan averred that he was merely benamidar of assessee-firm. We may, however, take it for present that Laxmaiah and Balaraj had not accepted Vaidyanathan's statement. 23. Shri Sambaiah was also examined on same date. He stated as follows: " I used to maintain duplicate accounts are which is submitted to department and another for accounting purposes. duplicate books maintained were destroyed after settlement of accounts between partners. original books introduced for department may be available at Srinivasa Metal Works which is not run by K. Balaraj and K. Laxmaiah or in Sattaiah custody. I have received Rs. 60,000 approximately towards my share in firm for period 1968 to 1972 including bogus firms by names Sagar Enterprises, Pillai Enterprises, Nagarjuna Industries. other partners also received their d u e shares of profit from firm. I have shown certain account copies of partners and asked to state to whom they actually belong and who has written them. I state as under: Account page 2 in name of Karika Balarajiah showing credits for period 23-9-1968 to 22-5-1969 at Rs. 1,06,236.10 and debits amounting to Rs. 37,343. There are credits for interest at Rs. 9,435.60 and debit for interest at Rs. 5,126. There is credit towards profit at Rs. 26,700 on 31-8- 1969. This is page torn from duplicate books and is in my handwriting. statement also bears handwriting of K. Laxmaiah in pencil showing total of interest and profit at Rs. 36,135.60." It will be seen from above that Sambaiah's version supports department's case and statement of Sathaiah and Ganesh that they were clandestine transactions in benami names. 24. Before we finally appreciate evidentiary value of his statement, we may refer to some of objections of Shri Satyanarayana, learned counsel for assessee. According to him, statement given by Sambaiah was under coercion from Sathaiah and Ganesh. This submission is based on letter written by Sambaiah on 19-3-1975 to ITO. Shri Sambaiah has also filed affidavit in which he had stated that statement was given under threat from Sathaiah. He had also filed complaint before Deputy Commissioner of Police, Hyderabad. It is on basis of this material, which are certainly contemporaneous, that it is submitted that it cannot be taken at its face value. 25. statement given under coercion cannot, of course, have much evidentiary value. However, if that statement is corroborated by other documents then submission that they were given under coercion cannot be accepted and its evidentiary value cannot be minimised. From extract of statement given, it would be seen that Sambaiah was referring to certain entries which were shown to him in certain books of accounts. These accounts were in possession of department and these evidenced some of clandestine transactions which department could lay their hands on. In fact, Shri Sambaiah had recognised that one of sheets was torn from duplicate book and was in his own handwriting. When this is so it is very difficult to understand how its evidentiary value could be nil and how it could be said to be statement given under coercion. He also, recognised entries made by another partners Laxmaiah. He has not doubted that genuineness of books and entries shown to him by department. No such statement is made in any of affidavits or in later submissions. If accounts shown to him were genuine accounts and if they reflected clandestine dealings, then, fact that some part of statement given by Sambaiah was under coercion is of no significance. 26. We may also at this stage dispose of another submission of Shri Satyanarayana. He submitted that order under section 263 is only for treating business in name of Pillai Enterprises and Sagar Enterprises as benami businesses of assessee-firm. He submitted that evidence of department must prove this. It may be that firm has certain other dealings not accounted for in regular books. If they had made income outside books, it will not be sufficient to support finding that assessee was doing business in benami names. We are unable to accept this submission. firm can do business outside books either in benami names or without such benami names. As far as partners are concerned and as far as department is concerned, these are transactions outside books and department is concerned, these are transactions outside books and income arising therefrom are unaccounted for income. statement of Sambaiah clearly shows that there were unaccounted for income earned by firm, Therefore, it could be also from benami business. In face of statement of two other partners and Sambaiah himself presumption can arise that unaccounted for profits referred in detail by Sambaiah in his statement on 17-2-1975 refers to profits from benami firms. We, therefore, do not see any reason why statement of Sambaiah on 17-2-1975 cannot be given its due weight. 27. We may refer to another statement given by Sambaiah on 16-4-1982. One of questions asked in course of examination and answer given by Sambaiah are reproduced below: " Question: From torn out papers shown to you it is clear that you were writing not only regular accounts intended for Income-tax Department but also duplicate sets of books maintained for sharing secret profits earned by firm? Answer: Yes. I have written two sets of account books. One for showing to Income-tax Department and another duplicate set of books for sharing real profits among partners." It will be noteworthy that he accepts that he had written two sets of accounts, one for showing Income-tax Department and other showing real profits. This statement is certainly not claimed to be given under coercion. It does support department's case. 28. As we stated earlier, partners Sathaiah and Ganesh had admitted d o in g business outside books in benami names. Shri Satyanarayana, learned counsel for assessee submitted that their statements cannot be accepted and for this purpose, he referred to certain other documents like voluntary disclosure made by Sathaiah and Ganesh and pointed out that these documents do not support Sathaiah's statement that benami concerns belong to assessee-firm. According to Shri Satyanarayana they might be benami concerns of Sathaiah and Ganesh and other partners have nothing to do with them. copy of declaration given by Sathaiah under section 31 of Voluntary Disclosure Scheme had been furnished before us. We have perused same. They had disclosed income from Pillai Enterprises and Sagar Enterprises on estimated basis in round figures. There is note that these two benami concerns and assessee-firm are considered as one group and it is also stated that Pillai Enterprises and Sagar Enterprises are subsidiary of assessee-company. Much was made of word 'subsidiary' used in disclosure scheme and it was sought to be made that it refers to different concern which may have common partners but which was not assessee concern. We are unable to accept these submissions. voluntary disclosure declaration clearly mentions them as one group which means that income arises to that group. This narration in declaration along with other facts of case only go to show that they were business concerns of assessee. Similarly, Shri Ganesh had also made voluntary disclosure which also discloses interest from these benami concerns. We are unable to discard these materials as irrelevant. They are relevant and they support case of Sathaiah. 29. We may briefly mention statements given by other partners. Mr. Abdul Aziz was examined on 19-4-1982: Question No. 2 put to him by ITO has some relevance. Now that is " Question 2: Have your services been utilised by firm of Srinivasa Metal Works for purchasing material from raw materials servicing centre like Cuddappah, Warrangal, Vizag or in any benami concerns of Srinivasa Metal Works? Answer: I used to take money from managing partners of firm of Srinivasa Metal Works mostly from late Shri P. Sathaiah to various centres like Warangal, Cuddappah, Vizag and purchase unused permits from small traders. I used to purchase CR sheets, BP sheets, HR sheets and GP sheets from raw material servicing centres located in above places and dispatched same through lorries to Hyderabad firm." In our opinion, this answer more or less supports department's case. As we have stated earlier benami business is practically trafficking in permits and Aziz used to purchase unused permits from small traders. 30. Shri K. Balaraj and K. Laxmaiah were examined on 22-4-1982 and 23- 4-1982, respectively. It may be remembered that when Vaidyanathan was first examined in 1975, these two partners reserved their rights to cross-examine him. Whether such cross-examination was allowed, it is not clear. In statements given in 1982, they have stuck to their position that concerns Pillai Enterprises and Sagar Enterprises have nothing to do with them. They had repeatedly denied his knowledge about these concerns. Shri Laxmaiah had also denied any connection with alleged benami concerns. It is necessary to see whether their denial has to be accepted as correct in preference to statements of other partners. We are of opinion that statements of other partners should be accepted in this matter. As we have pointed out that statements of two of partners Sathaiah and Ganesh clearly admit such benami concerns. Sambaiah has admitted maintenance of duplicate books of accounts and has been confronted with entries in those books of accounts. Aziz has accepted that he was purchasing permits from other traders which is one of businesses of benami concerns. Shri Vaidyanathan in his deposition has stated that he is only employee and his name was being used in carrying on benami concerns. His statement is supported by cheque leaves which shows endorsement on reverse by Shri Ganesh who is partner of firm. cumulative effect of these evidences taken together make us believe that department has case that these two concerns are benami concerns. 31. However, it is not necessary for us to give final finding whether they are benami concerns. Commissioner in his order in paragraph 24 had only set aside assessment with direction to ITO to redo same afresh after giving full opportunity of hearing to all parties concerned. assessee is also at liberty to adduce any other evidence at time of assessment. Under these circumstances, we do not see how order of Commissioner on merits could be said to be unreasonable. 32. Although, we have given finding in favour of department on merits of case, since we have held that Commissioner has no jurisdiction to revise order under section 263, appeals are allowed. *** SRINIVASA METAL WORKS v. INCOME TAX OFFICER
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