INCOME TAX OFFICER v. BALRAM JAKHAR
[Citation -2005-LL-0627]

Citation 2005-LL-0627
Appellant Name INCOME TAX OFFICER
Respondent Name BALRAM JAKHAR
Court ITAT
Relevant Act Income-tax
Date of Order 27/06/2005
Assessment Year 1988-89
Judgment View Judgment
Keyword Tags income chargeable to tax • corroborative evidence • criminal proceedings • cross-examination • show-cause notice • original return • capital account • loose sheet • hawala
Bot Summary: The assessee in the paper book filed a copy of the reasons recorded by the AO for initiating the proceedings under s. 147/148 of the IT Act in which the sole reason for initiating the proceedings under s. 147 was the assessee alleged to be one of the recipients of monies from Jain Brothers of S.K. Jain Hawala scam. The AO issued show-cause notice against the assessee as to why the amount of Rs. 17 lakhs stated to have been received by the assessee be not added to his income from undisclosed sources. The counsel for the assessee submitted before the AO that the statement of Shri J.K. Jain was recorded at assessee s back and he was not put before the assessee by the DDI for cross-examination. We find from copies of the letters filed by the assessee before the AO in which the assessee has requested for confronting the material collected by the Department and for cross-examination. Though the AO has recorded in the assessment order to have supplied copies of the material collected by the Revenue Department at the back of the assessee but the AO nowhere recorded any finding if any opportunity was given to the assessee to cross-examine any of the persons whose statement was recorded at the back of the assessee. The statement of Shri J.K. Jain was recorded by the DDI, New Delhi, on 2nd March, 1995 and 4th July, 1995, copies of the same are filed in the paper book from whose possession the alleged diary was recovered by the CBI. Shri J.K. Jain has not made any statement against the assessee and whatever statement was recorded by the DDI, Shri J.K. Jain has not named the assessee to be one of the recipients of the amount. The assessee in his reply before the AO specifically requested to produce the persons who have made the statements against the assessee for cross- examination but no person was produced for cross-examination before the AO. Therefore, whatever material was collected at the back of the assessee cannot be read in evidence against the assessee.


BHAVNESH SAINI, J.M. Both appeals by Revenue are directed against different orders of CIT(A), Bhatinda, dt. 20th Dec., 2001, for asst. yr. 1 98 8-89 passed under IT Act and WT Act on same facts. 2 . We have heard learned Representatives of both parties and gone through observations of authorities below and details filed in paper book by learned counsel for assessee. ITA No. 69/Asr/2002 : 3. This appeal is filed by Revenue on following ground : "That learned CIT(A) has erred in holding entries found in Jain Hawala diaries do not pertain to assessee and erred in deleting addition of Rs. 17,00,000 out of total income assessed." assessee filed original return upon which assessment was made vide order dt. 22nd Dec., 1 98 8, at total income of Rs. 41,950 plus agriculture income of Rs. 2,11,820. Subsequently, as per information in possession of Department, sum of Rs. 17 lakhs was found to have been passed on to Shri Balram Jakhar during financial year 1 98 7-88 corresponding to asst. yr. 1 98 8-89 as one of recipients of monies from Jain Brothers in Jain Hawala case. It was, however, noticed that assessee did not disclose this amount in his IT return for asst. yr. 1 98 8-89 filed earlier, therefore, AO proceeded under s. 148 of IT Act by issuing notice and recording reasons. 4. relevant facts leading to addition in this case were that on 3rd May, 1991, CBI, New Delhi, searched premises of Shri J.K. Jain at G-36, Saket, New Delhi, to work out information received while investigating RC case No. 5(S)/91-SIU.(B)/CBI, New Delhi. In course of search, they recovered, besides other documents, two diaries, two small note books and two files containing details of receipts of various amounts from different sources recorded in abbreviate forms of digit and initials and details of payments to various persons recorded in similar fashion. Preliminary investigation taken up by CBI to decode and comprehend those entries revealed payments amounting to Rs. 65.47 crores, out of which 53.5 crores had been illegally transferred from abroad through Hawala channels during years 1 98 8 to 1991 to 115 persons including politicians and others. 5 . assessee in compliance to notice filed return on 6th Oct., 1991, declaring same income as was declared earlier with remarks that proceedings under s. 147 were time-barred and illegal. assessee in paper book filed copy of reasons recorded by AO for initiating proceedings under s. 147/148 of IT Act in which sole reason for initiating proceedings under s. 147 was assessee alleged to be one of recipients of monies from Jain Brothers of S.K. Jain Hawala scam. It is also stated that Shri Balram Jakhar is one of persons against whom charge- sheet was filed on 23rd Jan., 1996, by CBI under Prevention of Corruption Act and it is alleged that assessee has received sum of Rs. 17 lakhs during financial year 1 98 7-88, relevant to asst. yr. 1 98 9-90, from Jain Brothers and same has escaped assessment. 6. AO considered plea of assessee as regards initiation of proceedings under s. 147 of IT Act and held that AO was having sufficient material to form opinion that income escaped assessment and as such, AO was justified in recording reasons for initiating proceedings under s. 147 of IT Act. AO relied on decision of Hon ble Delhi High Court in matter ofMahanagar Telephone Nigam Ltd. vs. Chairman, CBDT & Anr. (2000) 162 CTR (Del) 554 : (2000) 246 ITR 173 (Del). AO also was of view that since ingredients of s. 147 of Act are fulfilled, therefore, AO rightly proceeded under s. 148 of Act. This point was, therefore, decided against assessee. CIT(A) confirmed these findings as regards initiation of proceedings under s. 147 of IT Act. AO also observed that writ petition of assessee was dismissed challenging initiation of proceedings. assessee is not in appeal before us on these grounds. Revenue has challenged deletion of addition on merits. Therefore, we do not propose to decide point as regards initiation of proceedings under s. 147 of IT Act. proceedings under s. 147 of IT Act. 7 . assessee explained before AO that basis on which proceedings were initiated in this case has become non-existent by virtue of judgment passed by Special Judge, Shri V.B. Gupta, New Delhi, in criminal proceedings under Prevention of Corruption Act. However, AO was of view that income-tax proceedings are independent proceedings and have nothing to do with decision of Special Judge, New Delhi (supra). 8 . assessee filed various replies before AO requesting for complete copies of documents available with Department which were supplied by AO, namely, (1) Copies of two diaries seized by CBI and two files from residence of Shri J.K. Jain, New Delhi. (2) Copies of statements of Shri S.K. Jain recorded by CBI on 21st Sept., 1993 and 12th Dec., 1994. (3) Copy of statement of Shri S.K. Jain recorded by CBI on 3rd Jan., 1995. 9. AO confronted statements of Shri S.K. Jain and Shri J.K. Jain at assessment stage with regard to code-words mentioned in diary and AO has taken code-words J.K.H. as Balram Jakhar. AO issued show-cause notice against assessee as to why amount of Rs. 17 lakhs stated to have been received by assessee be not added to his income from undisclosed sources. assessee contended that reasons supplied are not based on documents and details recorded. assessee relied upon order of Shri V.B. Gupta, Special Judge, New Delhi, in case of assessee and others and judgment of Madhya Pradesh High Court in case ofShri Arjun Singh vs. Asstt. Director of IT & Ors. (2000) 159 CTR (MP) 53 : (2000) 246 ITR 363 (MP). AO, however, was of view that proceedings under Prevention of Corruption Act are different from income-tax proceedings and decision in case ofArjun Singh(supra) is quite distinguishable. 10. AO also confronted assessee with statement of Shri J.K. Jain recorded by IT authorities, namely, Shri D.C. Aggarwal, DDI (Inv.), Unit- I, New Delhi, on 2nd March, 1995, and 4th July, 1995. counsel for assessee submitted before AO that statement of Shri J.K. Jain was recorded at assessee s back and he was not put before assessee by DDI for cross-examination. AO further held that no specific request is made before him for cross-examination of any person in course of assessment proceedings. Therefore, case could be completed on basis of material available on record. 11. AO in view of above material on record concluded that diaries and other incriminating material were recovered from residence of Shri J.K. Jain in which disbursement of payment is recorded to various persons including political leaders and Shri J.K. Jain had stated before IT authorities that all these documents have been recovered from his residence and are in his handwriting recorded at oral instruction of Shri S.K. Jain. AO on basis of his findings was of view that Shri Balram Jakhar has received Rs. 17 lakhs during financial year 1 98 7-88, relevant to asst. yr. 1 98 8- 89 under appeal. AO was of view that initial J.K.H. against whom payment has been shown in diaries tally with initials of Shri Balram Jakhar (assessee). AO further observed that even though assessee has denied having received money from Jain Brothers and there is no evidence other than entries recorded in Jain diary, preponderance of probability in such case has to be taken into account and one has to go by surrounding circumstances of circumstantial evidence as held by Hon ble Supreme Court in case ofSumati Dayal vs. CIT (1995) 125 CTR (SC) 124 : (1995) 214 ITR 801 (SC). AO ultimately made addition of Rs. 17 lakhs in hands of assessee being income chargeable to tax as undisclosed income. addition was challenged before CIT(A) and it was submitted that addition was made merely on surmises and suspicion on basis of report of CBI and without any corroborating evidence. It was also submitted that there was neither supporting documentary evidence to support case. It was also submitted that assessee explained all queries before AO and denied to have received any amount from Jain Brothers. It was also explained that IT authorities made enquiries from bank directly but no tangible material/unaccounted money came to their notice. It was also explained that only statement recorded by DDI (Inv.), New Delhi, of Shri J.K. Jain was in connection with case of Shri S.K. Jain in his personal case in which also he has not made any allegation against assessee. It was also explained that statement of Shri S.K. Jain or J.K. Jain has no value in eyes of law which is illegal and same has not been relied upon by Hon ble Supreme Court in case ofCBI vs. V.C. Shukla & Ors. AIR 19 98 SC 1121. It was also explained that even none of witnesses was produced for cross-examination before AO and that on same matter in issue, assessee was not charge-sheeted by Special Judge, New Delhi, as no charge was framed against assessee of amount involved in this case. CBI filed criminal revision petition before Delhi High Court in criminal revision No. 473/97 in which counsel of CBI did not press petition against assessee, Shri Balram Jakhar. Therefore, assessee was discharged of charges of alleged cash received from Jain Brothers. It was also explained that as far as other charges are concerned, assessee was acquitted subsequently by Shri V.B. Gupta, Special Judge, New Delhi, vide judgment dt. 30th July, 1991. assessee also relied upon decision of Hon ble Supreme Court in case ofIshar Dass Jain (Decd.) vs. Sohan Lal AIR 2000 SC 426and decision in case ofKishinchand Chellaram vs. CIT (1 98 ) 19 CTR (SC) 360 : (1 98 ) 125 ITR 713 (SC)as well as decision of Hon ble Calcutta High Court in case ofCIT vs. Eastern Commercial Enterprises (1995) 123 CTR (Cal) 217 : (1994) 210 ITR 103 (Cal)in which it was held that evidence collected at back of assessee should be confronted to assessee to give opportunity to rebut same otherwise, such material cannot be used against assessee at assessment stage. Detailed submissions of assessee were recorded by CIT(A) in impugned order. 12. CIT(A), considering totality of facts and circumstances of case, was of view that addition of Rs. 17 lakhs was made on basis of entries found in Jain diary found by CBI in possession of Jain Brothers. He has further observed that assessee was charge-sheeted by CBI for receiving gratification from Jain Brothers of which Rs. 17 lakhs were received during financial year, relevant to assessment year under appeal. CIT(A) also observed that charge-sheet of CBI was quashed and assessee was discharged and acquitted by Shri V.B. Gupta, Special Judge, New Delhi. CIT(A) also observed that order of Hon ble Delhi High Court in criminal revision No. 473/97 was basis of order of Special Judge, New Delhi. It is also fact that Hon ble Delhi High Court in case ofV.C. Shukla & Ors.(supra) had stated that Jain diary do not contain any debits and credits and accordingly, cannot be termed as books of account. CIT(A) also observed that Hon ble High Court formed view that such evidences are of such nature which cannot be converted into legal evidence against petitioner as there is no finding in regard to disbursement of amount and said order was affirmed by Hon ble Supreme Court in case ofCBI vs. V.C. Shukla & Ors.(supra). Similar view is taken by Hon ble Madhya Pradesh High Court in case ofArjun Singh vs. Asstt. Director of IT & Ors.(supra). CIT(A) further observed that AO was present at appellate stage and conceded through his written arguments dt. 19th Nov., 2001, that there appears to be no findings other than recorded in Jain diary/file and there is no corresponding entry in books of account or in firm of accretion in assets were proved on record by AO. CIT(A) further observed that CIT(A)-I, New Delhi deleted entire addition in case ofPrem Parkashon same facts. CIT(A) accordingly set aside findings of AO and deleted addition of Rs. 17 lakhs. CIT(A) also relied upon decision of Punjab & Haryana High Court in case ofChiranji Lal Steel Rolling Mills vs. CIT (1972) 84 ITR 222 (P&H). appeal of assessee was accordingly allowed on merits. 13. Revenue is in appeal on ground mentioned above. 14. learned Departmental Representative relied upon order of AO and submitted that entire material was confronted to assessee which was recovered by CBI. learned Departmental Representative further argued that evidence required in criminal case is much more higher as compared to income-tax proceedings. learned Departmental Representative, therefore, argued that IT authorities are entitled to judge evidence before them by applying test of human probabilities and by considering surrounding circumstances. learned Departmental considering surrounding circumstances. learned Departmental Representative further argued that income-tax proceedings are different from criminal proceedings and as such CIT(A) was not justified in deleting entire addition. 15. On other hand, learned counsel for assessee reiterated submissions made before authorities below and submitted that on identical facts, assessee was discharged and acquitted by Special Judge, New Delhi, under criminal proceedings in Prevention of Corruption Act. He has further submitted that AO has conceded before CIT(A) that there is no material available on record except Jain diary against assessee. learned counsel for assessee further submitted that since decision of Delhi High Court in case ofV.C. Shukla(supra) is affirmed by Hon ble Supreme Court rejecting evidence collected by CBI, therefore, there is no basis for AO to make addition. He has further submitted that CBI has made statement in favour of assessee before Hon ble Delhi High Court in criminal revision No. 437/97 and as such, proceedings were dropped against assessee with regard to payment of Rs. 51,24,800. learned counsel for assessee further argued that Hon ble Madhya Pradesh High Court in case ofArjun Singh(supra) also deleted similar addition in IT Act which is reported in(2000) 159 CTR (MP) 53 : (2000) 246 ITR 363 (MP)(supra). learned counsel for assessee submitted that only statement of Shri J.K. Jain was recorded in income-tax proceedings by DDI (Inv.) and same was not confronted to assessee. Therefore, such statement cannot be read against assessee. He has referred to letters filed before AO, copies of same are filed in paper book at pp. 174 to 182 to show that assessee made specific request to allow cross-examination of persons whose statements have been recorded at back of assessee. learned counsel for assessee submitted that CIT(A) rightly deleted addition in matter. 16. We have considered rival submissions and material available on record. Copies of reasons initiating proceedings under s. 147/148 have been filed in paper book in which it was recorded by AO that assessee allegedly received monies from Jain Brothers of Shri S.K. Jain Hawala scam and Shri Balram Jakhar is one of persons against whom CBI filed charge- sheet under Prevention of Corruption Act. AO on that basis had reasons to believe that income escaped assessment in sum of Rs. 17 lakhs. Therefore, very basis for initiating proceedings under s. 148 of IT Act was criminal proceedings filed against assessee on basis of Jain diary and other incriminating material which were recovered from residence of Shri J.K. Jain. Once prosecution against assessee has gone, very foundation of initiating proceedings under s. 147 would disappear and would not exist. Therefore, such reasonsquathe addition would not be sustainable in law. We find from judgment dt. 30th July, 1999, in case of Shri Balram Jakhar and others passed by Shri V.B. Gupta, Special Judge, New Delhi, that assessee was charged for offences related to payment of Rs. 89,928 from Jain Brothers as gratification in form of air journey fare showing in names of his wife and her friends. It appears that though there were more allegations against assessee as regards receipt of huge amount from Jain Brothers but learned Trial Court did not frame charge against assessee of that amount on which CBI has gone in criminal revision No. 473/97 before Delhi High Court against assessee and others. We find from order of Delhi High Court dt. 5th May, 19 98 , in above criminal revision that learned counsel for CBI stated before Delhi High Court that CBI at present does not have corroborative evidence against Shri Balram Jakhar in respect of those payments, i.e., Rs. 51,24,800 for which charges have not been framed against him. criminal revision was, therefore, not pressed against Shri Balram Jakhar (assessee). This would lead to conclusion that learned Trial Court did not frame charge against assessee, Shri Balram Jakhar, with regard to receipt of Rs. 51,24,800 and findings become final, moment criminal revision by CBI was not pressed against assessee, Shri Balram Jakhar. Trial Court also acquitted assessee on remaining charges vide its judgment dt. 30th July, 1999. 17. AO in assessment order at p. 6 mentioned payment of Rs. 51,24,800 as under : Amount (Rs.) Financial year Asst. yr. 17,00,000 1 98 7-88 1 98 8-89. 12,64,500 1 98 8-89 1 98 9-90. 21,66,300 1 98 9-90 1990-91. It would show that assessee though charge-sheeted on allegation of receipt of Rs. 17 lakhs but prosecution resulted into futility and assessee was discharged of offences. Therefore, very basis of addition does not survive. There is no recovery made at instance or possession of assessee. Revenue Department relied upon only on diary and charge-sheet framed by CBI. whole case of Revenue would collapse, moment assessee is discharged of sole allegation of receipt of Rs. 17 lakhs. 18. abbreviated form allegedly recorded in diaries is not explained by any material. It could resemble to name of other person also who is having similarity in name. Unless it is proved through corroborative evidence that entries are having any nexus with assessee, addition cannot be made in hands of assessee. Material on record was not enough to conclude findings against assessee. It, therefore, appears that findings of AO are based on suspicion which cannot take place of legal proof. 19. Hon ble Supreme Court also in case of V.C. Shukla(supra) held that in present case there is no evidence against petitioner except diary, note book and loose sheet with regard to payment. said evidence is of such nature, which cannot be converted into legal evidence against petitioners. It was further held that there is no evidence in instant case with regard to monies which are alleged to have been received by Jain Brothers for purpose of disbursement. All decisions referred to above clearly proved that alleged charge against assessee with regard to receipt of money from Jain Brothers was not proved at all and entries recorded in seized diary were not found to have any evidentiary value. AO admitted before CIT(A) that Revenue Department has no other evidence except these diaries. Therefore, it is case of no evidence against assessee as whatever evidence was available was not considered by Hon ble Delhi High Court and Supreme Court to have any evidentiary value. Hon ble Madhya Pradesh High Court also held so in favour ofArjun Singh(supra) in his case referred to above. No corresponding entries in books of account or in form of accretion in assets were found or proved by AO. 20. We find from copies of letters filed by assessee before AO in which assessee has requested for confronting material collected by Department and for cross-examination. Though AO has recorded in assessment order to have supplied copies of material collected by Revenue Department at back of assessee but AO nowhere recorded any finding if any opportunity was given to assessee to cross-examine any of persons whose statement was recorded at back of assessee. We find from assessment order that copies of seized diaries were supplied along with statement of Shri S.K. Jain recorded by CBI but AO nowhere mentioned to have provided opportunity to assessee to cross- examine Shri S.K. Jain. Similarly, statement of Shri J.K. Jain was recorded by DDI (Inv.), New Delhi, on 2nd March, 1995 and 4th July, 1995, copies of same are filed in paper book from whose possession alleged diary was recovered by CBI. Shri J.K. Jain has not made any statement against assessee and whatever statement was recorded by DDI, Shri J.K. Jain has not named assessee to be one of recipients of amount. He also refused to sign whatever statement was recorded by DDI. Moreover, AO never produced Shri J.K. Jain before assessee for cross-examination. assessee in his reply before AO specifically requested to produce persons who have made statements against assessee for cross- examination but no person was produced for cross-examination before AO. Therefore, whatever material was collected at back of assessee cannot be read in evidence against assessee. It is settled law that if any material is collected by IT authorities at back of assessee then opportunity to controvert same should have been given to assessee. We are fortified in our view by decision of Hon ble Supreme Court in case ofKishan Chand Chellaram(supra) and decision of Hon ble Punjab & Haryana High Court in case ofChiranji Lal Steel Rolling Mills vs. CIT(supra). Therefore, in present case, whatever material was collected by AO cannot be read in evidence against assessee. fact was conceded by AO before CIT(A) that except copies of documents recovered by CBI there is no other material found against assessee. 2 1 . Hon ble Supreme Court in matter ofCIT vs. Durga Prasad More 1973 CTR (SC) 500 : (1971) 82 ITR 540 (SC)held that "the Courts and Tribunal have to judge evidence before them by applying test of human probabilities." Similarly, Hon ble Supreme Court in case ofSumati Dayal vs. CIT(supra) held that "the surrounding circumstances should be considered by applying test of human probabilities." In case ofSumati Dayal(supra) facts were that assessee received amount by way of race winnings in jackpots and treble events in races at Turf Clubs in Bangalore, Madras and Hyderabad. said amount was shown in capital account in books of assessee. ITO held that assessee has not won amount in race and treated said receipts as income from undisclosed sources and made addition. In this context, it was observed that assessee s knowledge of racing was very meagre and that jackpot is stake of five events in single day and one can believe regular and experienced hunter clearing jackpot occasionally, but claim of assessee of having won number of jackpots in three or four seasons not merely at one place but at three different centres,prima facie, to be wild and contrary to statistical theories and experience of frequencies and probabilities. In this view of facts, it was held that evidence is to be judged by considering surrounding circumstances and by applying test of human probabilities. 22. However, in facts of present case, only diaries were recovered which was having only abbreviated forms without further explaining or mentioning anything. Therefore, it was not considered evidence by Hon ble Delhi High Court and Supreme Court. If we apply test of human probabilities in favour of assessee then it could be inferred that Jain Brothers might have recorded entries in abbreviated forms in diary without knowledge of assessee. Therefore, under such circumstances, Revenue would not be justified in making any addition against assessee. 23. Considering above discussion, we are of considered view that Revenue has no cogent or sufficient material evidence on record to support findings of AO, therefore, we do not find any justification to interfere in order of CIT(A). appeal of Revenue has no merits. We accordingly confirm impugned order of CIT(A) and dismiss Departmental appeal. 24. No other ground is argued or pressed. 25. As result, appeal of Revenue is dismissed. 26. WTA No. 1/Asr/2002 : Revenue authority made similar addition against assessee under WT Act on basis of findings given in income-tax assessment order. CWT(A) deleted addition on same facts because addition has been deleted in income-tax matter. facts are identical and rather wealth-tax matter is consequential to matter of income-tax in which we have dismissed Departmental appeal. By following same order, we dismiss wealth-tax appeal also. 27. As result, appeal of Revenue is dismissed. 28. As result, both appeals of Revenue are dismissed. *** INCOME TAX OFFICER v. BALRAM JAKHAR
Report Error