IN HIGH COURT OF DELHI AT NEW DELHI Reserved on: 02.03.2017 Pronounced on: 13.07.2017 + W.P.(C) 7207/2008 COMMISSIONER OF INCOME TAX CENTRAL-III..... Petitioner Through : Sh. Rahul Chaudhary, Sr. Standing Counsel with Ms. Lakshmi Gurung and Sh. Anurag Vijay, Advocates. versus M/S. RADICO KHAITAN LTD. ..... Respondent Through : Sh. Ajay Vohra, Sr. Advocate with Ms. Kavita Jha, Advocates. CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE NAJMI WAZIRI MR. JUSTICE S. RAVINDRA BHAT 1. This writ petition under Article 226 of Constitution, preferred by Commissioner of Income tax (hereafter referred to as "the revenue") questions and seeks quashing of order of 13.03.2008 made by Income Tax Settlement Commission (hereafter referred to as "the Commission"), under Section 245 D(1) of Income Tax Act, 1961 (hereafter referred to as "the Act"). 2. facts necessary for deciding this case are that second respondent (which is hereafter referred to as "Radico" or "the assessee") is engaged in business of manufacturing and marketing Indian made foreign Liquor or IMFL, country liquor etc. It also generates power for its manufacturing and bottling plants. Radico operates from four locales, Rampur in UP, Reengus, Hyderabad and Bajpur, Uttaranchal. Apart from its units assessee utilizes services of other bottling plants spread over different states. W.P.(C) 7207/2008 Page 1 of 20 3. Radico was subjected to search and seizure operation under section 132(1) of Act by revenue on 14.02.2006 in its business premises. Search was resorted to also in residential premises of its directors; M/s Uttar Pradesh Distiller's Association (hereinafter referred to as UPDA ) and at residence of Sh. R.K. Miglani, Secretary General of UPDA. Also, survey under Section 133A was conducted at business premises of M/s. Saraya Industries Ltd, one of core members of "Managing Committee" of M/s. UPDA. Many incriminating documents pertaining to assessee were found and seized from these premises. Statements of various persons including Sh. R.K. Miglani were recorded under Sections 132(4) and 133A of Act. After collecting all material, Assessing Officer (AO) issued notices under section 153A of Act on 20.09.2006, for assessment years 2000-2001 to 2006-2007, requiring assessee to file returns within 16 days from date of receipt of notice. Radico filed its returns on 29.09.2007 though return for assessment year 2006-2007 was filed in regular course on 30.11.2006, offering amount of `4.5 crores for taxation. Radico thereafter filed application under Section 245C of Act before Commission on 30.05.2007 covering all assessment years covered by block period i.e. 2000-2001 to 2006-2007. assessee declared additional income for relevant period to extent of `23 crores. total income including amount offered for taxation for 2006-07 thus worked out to `27.5 crores. 4. In terms of amended provisions of Section 245D(2D) of Act, tax on additional income disclosed in application filed and interest thereon had to be paid before 31.07.2007. assessee moved writ petition before this court claiming that settlement application may not be held as W.P.(C) 7207/2008 Page 2 of 20 non-maintainable on ground that interest had not been paid before 31.07.2007. court passed order on 26.07.2007 directing Commission to dispose off application before 31.03.2008 as required under Section 245D (4A) of Act in accordance with law so that proceeding would not abate in terms of newly inserted Section 245HA(1) of Act. revenue filed its report, under Rule 9 of Income Tax Settlement Commission Rules, on 04.02.2008, alleging that concealment of income by assessee was `159,82,92,966/- under various heads. This figure was revised at `177,84,16,966/- by filing supplementary report dated 13.02.2008. 5. After hearing parties and considering materials, Commission settled concealed income of assessee for all block years at `30 crores. revenue states that this ignored relevant evidence adduced by petitioner and reasoning offered by her in report filed under Rule 9, without assigning any basis for such determination. revenue states that amount of ` 30 crores determined by Commission included amount of ` 27.50 crores offered by assessee in statement of facts filed with settlement application. Thus Commission made effective addition of ` 2.5 crores only. revenue is further aggrieved by fact that Commission granted immunity to assessee from prosecution and penalties under various provisions of Act. 6. revenue argues that Commission failed to appreciate that assessee did not make full and true disclosure of its income, which had not been disclosed before AO and manner in which, such income had been derived. It is alleged that assessee did not disclose any basis to W.P.(C) 7207/2008 Page 3 of 20 arrive at figure of `27.50 crores for concealed income offered in settlement application. assessee had in its application stated that: "The applicant had maintained books of accounts in respect of business carried on by it. business operation of applicant is largely conducted through employees at various places. payment made to these employees are all routed through books of applicant. During course of search, certain papers have been found and seized by Income Tax Department, which may reflect utilization of funds routed through employees in such manner and fashion other than what is reflected in books of accounts. management of applicant company is not in aposition to comprehend veracity of material found during course of search but in any case, to buy peace of mind, applicant company offered sum ofRs.27.50 crores before Income Tax Department in statements U/S 132(4), out of which, Rs.4.5 crores have already been included in regular return of income for assessment year 2006-2007. applicant company begs to submit that figure of wastages shown in books of accounts is as per norms of industry and same has been shown to have been sold to various persons in unorganized sector, thus there may be certain amount of difference between such sales of waste material in books of accounts and in reality, generating certain income outside books. There are no regular records maintained for such transactions/activities and thus it is not possible to actually pin point quantum of income arising out of certain expenses of disallowable nature incurred by employees of company out of funds budgeted by company for some other purpose and income arising out of actual realization of waste material. applicant is not in aposition to identify exact amount arising out of such transactions, which could be much less than income offered in statement u/s 132(4) but with view to buy peace of mind and settle income tax case of applicant, additional income offered ofRs.27.5 crores in statement u/s 132(4) is being offered in various years including Rs.4.5 crores effected in regular return for assessment year W.P.(C) 7207/2008 Page 4 of 20 2006-2007, meaning thereby net amount of additional income offered before Hon'ble Commission would be Rs.23 crores in various years. applicant company has distributed additional income in various years as per its perception, Hon'ble Commission may redistribute same in various years for proper settlement of case as per its perception. " 7. revenue contends that assessee made vague statements in its application. In terms of Section 245C (1) of Act, assessee was required to make full and true disclosure of income including manner in which, such income was earned. 8. revenue questions Commission's findings in treating papers and evidence, regarding illegal payments made by assessee through UPDA to various officials and politicians found from its premises (i.e. of UPDA) and from residence of Sh. R.K. Miglani as third party documents. In this context, it is argued that this reasoning is incorrect and contrary to evidence placed on record by revenue. UPDA is not unrelated third party. In fact, it is association of persons of distillers of UP of which, assessee is one of controlling members of "Core Committee". papers regarding illegal payments and determination of percentage to be paid by assessee, found and seized during simultaneous search are signed by its director, as assessee was one of core members of committee of UPDA, which used to determine quantum of bribes to be paid by various members depending upon level of production of liquor by each member distillery. 9. It is argued on behalf of revenue that Commission's finding with respect to ` 29.95 crores payments made towards illegal gratification and bribes, (on ground that such inference could not be drawn) is entirely W.P.(C) 7207/2008 Page 5 of 20 erroneous. Highlighting that Commission's view with respect to lack of corroboration, learned counsel submitted that unaccounted illegal payments made by assessee to various public servants and politicians were in fact fully corroborated from documents found and seized for from various premises of assessee Company as well as from residence of UPDA and its officers. In this regard learned counsel relied upon Rule 9 report filed by income tax authorities before Commission. Pointing out that these were credible, learned counsel stated that surrender or disclosure made to commission by applicant and with respect to concealed income of ` 25 crores was in fact not specified and details were lacking. It was also urged that assessee incurred expenditure on payment of bribes to officials; amounts were through undisclosed income which was claimed as genuine business expenditure. Evidence was forthcoming to revenue during search, which clearly belied such expenditure. In this regard contents of laptop of assessee s managing director seized during search and details found in form of tables retrieved were disclosed as annexures to Rule 9 report. It was submitted that these documents referred to in detail payments made to Abkari officials, Circle Inspector, constables etc. likewise bribes were paid at Rajasthan to various government officials to tune of ` 8,22,996/- for financial year 2005-06. 10. It was also argued on behalf of revenue that findings of Commission with respect to `29 crores, being inadmissible on account of statements being made by third party, i.e. Sh. R.K. Miglani and that he was not subjected to cross-examination, are erroneous. It was submitted that contents of those documents were to certain extent corroborated by W.P.(C) 7207/2008 Page 6 of 20 materials found in assessee s search. Moreover, financial break-up found in laptop of assessee's managing director, corroborated revenue's position that there was substantial concealed income in form of underreported production, distribution and sale of liquor proceeds of which were used to bribe public officials. It was also submitted that revenue was able to demonstrate that sum of ` 91,14,15,451/- was claimed as bogus expenditure for four years, i.e. 2000-01; 2001-2002; 2002-03; 2003-04 and 2004-05.These were in form of alleged payments to M/s. Fair & Square Private Ltd. and M/s. Rimjhim Ispat Pvt. Ltd. [hereafter Rimjhim ]. It was stated that Rajan Jassel was known and notorious entry operator who used to provide accommodation entries by charging Commission. His statement for February 2004, disclosing that his business was to take cash and that in cheques for providing accommodation entries was taken into account by revenue in its submission but wrongly rejected. Likewise it was submitted Rimjhim dealt with steel rolling mills and steel products and therefore could have no knowledge of molasses; assessee s reliance upon payments made under contract for supervision and inspection charges to this entity were questionable. assessee was unable to throw any light much less reasonably explain what kind of services and supervision would be obtained from concern that was unrelated to business carried on by it, i.e. liquor production bottling and distribution. 11. Furthermore, assessee had debited huge amounts in its books without vouchers and supporting bills for sales promotion. These expenses were examined post-investigation and were discovered to be self-serving documents on which no reliance could have been placed. It was lastly urged that there was sufficient documentary evidence in form of annexures W.P.(C) 7207/2008 Page 7 of 20 filed along with Rule 9 report, i.e. material retrieved from assessee 's managing director s laptop to show that there was suppression of profit to extent of ` 32.32 crores. Likewise materials retrieved from laptop also showed working of revised revenue generation for financial year 2004- 05 to tune of ` 33.35 crores through booking bogus expenses in same manner, as was done for previous year. This unaccounted cash was utilized for illegal expenditure which could not be claimed in books of account and were to tune of `17.35 crores. Of this ` 9.7 crores was made was spent to words bribery etc. 12. It was submitted that even though orders of settlement Commission are final, and judicial review is exercisable in limited classes of cases, where findings rendered are so unreasonable or palpably and manifestly contrary to evidence on record, court can exercise its discretion and interfere with such findings. It was therefore argued that in present case Commission's findings fall in such limited category and that this court should exercise its discretion to set them aside. 13. Learned senior counsel for assessee at outset argued that this court has extremely narrow and limited jurisdiction to interfere with findings rendered by Commission. He relied on decisions reported as Jyotendra Sinhji Vs. S.I Tripathi & Ors 201 ITR 621 (SC) to say that discretion can be exercised only when order of Commission is contrary to any of provisions of Act if it has also prejudiced petitioner / appellant. These are apart from grounds of bias, fraud and malice, which constitute separate and independent category. Reliance was also placed on R.B. Shreeram Durga Prasad & Fatechand Nursing Das v. Settlement Commission [1989] 176 ITR 169. It was submitted that even W.P.(C) 7207/2008 Page 8 of 20 wrong appreciation of facts cannot be ground for interfering with findings of Commission. It was submitted that in Commissioner of Income Tax v. Anjum M. H. Ghaswala & Ors 252 ITR 1, Supreme Court observed that Commission has sufficient elbow room to arrive at settlement which it deems fit so long as such settlement is not in conflict with mandatory provisions of section like in quantum and payment of tax and/or interest. decision of this court in Capital Cable (India) Pvt Ltd vs. Income-tax Settlement Commission 267 ITR 528 too was relied on. court held, in that decision that: "When Act provides that order shall be final and conclusive, final judgment or final decision of Settlement Commission does not lose its force and as such because in different case subsequently view is taken indicating that views expressed are wrong. final decision however wrong is still final and its binding force does not depend upon its correctness. There must be end of litigation. Settlement Commission is provided under Income-tax Act for said purpose. " 14. Learned counsel argued that present case is not one where Settlement Commission has blindly and mechanically accepted application filed by assessee. Commission has increased undisclosed income surrendered by respondent applicant by further amount of `2.5 crores to arrive at final income of `30 crores. This, it was urged, clearly showed application of mind. 15. Counsel argued that revenue alleged that payment of `29.95 crores to UPDA, should have been added as undisclosed income of assessee. In this context is submitted that revenue s averment to effect that alleged payment to UPDA representing assessee s W.P.(C) 7207/2008 Page 9 of 20 undisclosed income is conjectural, premised on surmises. In course of search at premises of respondent, no documents were found evidencing alleged payment nor did search yield any unaccounted cash, bullion, jewellery etc. revenue merely sought to rely on ex- parte bald statement of Sh. R.K. Miglani, General Secretary of UPDA to substantiate allegation that assessee had paid monies outside books of accounts to UPDA. Further no independent/corroborative evidence had been found to support allegation of payment and said allegation was based merely on basis of inferences drawn from certain loose papers, which is not permissible in law. That apart, it was contended that UPDA, who is involved in making illegal payments, has categorically denied same before Tax Authorities vide letter dated 15.11.2007. 16. It was stated that Commission did not find any merit in revenue s case for reason that- (a) papers which were found were in respect of third party, (b) though extensive search had been conducted in case of assessee, directors and employees, no papers were found to show that any payments had been made by it to UPDA, (c) no opportunity had been given to cross-examine Shri R.K. Miglani, (d) there was no independent corroborative evidence led by petitioner- Department to support allegation that assessee paid monies to UPDA outside books of account. Such allegation could not be supported with reference to papers found at premises of UPDA. 17. Similarly, urging court not to interfere with Commission s findings, learned senior counsel stated that argument with respect to bogus expenditure is unfounded; Commission had taken revenue s W.P.(C) 7207/2008 Page 10 of 20 submission into consideration in this regard, in Paras 16 to 20 of impugned order. It was submitted that merely because entry operator allegedly managed one of concerns it did not follow that amounts paid to him could not be genuine. Learned counsel also highlighted that payments made to Rimjhim were justified; he submitted that agreements, which assessee had entered into with, that concern, could not be displaced or discounted. As to nature of expenditure, learned counsel submitted that different nature of business of assessee and Rimjhim ipso facto could not lead to conclusion that latter concern could not provide supervisory and other connected services to assessee, in unrelated business. 18. It was submitted that reliance by revenue on computer material and alleged detailed working out of profits of assessee, from its managing director s laptop, are clearly aspects that were gone into by Commission at revenue s behest. Commission had taken note of revenue s argument as well as stand of assessee that it was very profitable concern and that inchoate nature of material relied on did not in any way establish that they were actual figures or that amounts earned or profits made were of greater magnitude than what was reported to revenue. Analysis and Findings 19. Commission was set-up under Section 245B of Act with objective of settling tax liabilities in complicated cases avoiding endless and prolonged litigation and consequential strain on investigational resources of Income-tax Department. assessee can apply for settlement in respect of assessment year that is pending; no application is permissible once W.P.(C) 7207/2008 Page 11 of 20 proceedings are pending under Section 153A. assessee s application should make full and true disclosure of income that was originally not revealed in return (Section 245C). Under Section 245-D(1A) revenue could object to continuance of settlement proceedings; proviso enables Commission to proceed, after hearing objections and ruling on it. 20. Section 245D outlines procedure which Commission has to follow after receipt of application (for settlement). Section 245D (1) stipulates that on receipt of application (under Section 245C) , Commission should, within seven days from date of its receipt, issue notice to applicant requiring him to explain as to why application should be allowed to be proceeded with. After hearing applicant, Commission has to, within period of 14 days (from date of application), by order in writing, reject application or allow application to be proceeded with. Proviso to Section 245D (1) stipulates that where no order is passed within above mentioned period by Settlement Commission, either allowing application or rejecting application, application shall be deemed to have been allowed to be proceeded with. Section 245D (2B) obliges Commission to call for report from Commissioner; that official has to furnish said report within 30 days of receipt of communication from Commission. Under Section 245D (2C) where report of Commissioner, is furnished within specified period, Commission has discretion to, (within 15 days of receipt of report) and by order in writing, declare application in question as invalid. In such case, Commission has to send copy of such order to applicant and revenue (i.e. Commissioner). first proviso W.P.(C) 7207/2008 Page 12 of 20 to Section 245D (2C) ensures that application shall not be declared invalid by Settlement Commission unless opportunity has been given to applicant of being heard. second proviso says that where Commissioner has not furnished report within specified period, Settlement Commission should proceed further in matter without report. 21. Commission, under Section 245D (3) inter alia, in respect of valid application may call for records from revenue and after their examination, if it is of opinion that any further enquiry or investigation in matter is necessary, it may direct revenue to enquire or so investigate and furnish report on matters covered by application and any other matter relating to case. Commissioner (revenue) has to furnish report within period of 90 days of receipt of communication from Commission. If revenue does not furnish report within said period of 90 days, Commission may proceed to pass order under Section 245D (4) without such report. latter provision authorizes commission to pass orders as it thinks in accordance with Act, after examining records and report of revenue, under Section 245D (2B) as well. Section 245D (6) states that every order passed under Section 245D (4) should provide for terms of settlement including any demand by way of tax, penalty or interest, manner in which any sum due under settlement is to be paid and all other matters to make settlement effective. It specifically enacts that terms of settlement are to indicate that settlement would be void if it was subsequently found by Commission that it had been obtained by fraud or misrepresentation of facts. Section W.P.(C) 7207/2008 Page 13 of 20 245D (7) provides that where settlement becomes void under sub-section (6), proceedings in respect of matters covered by settlement shall be deemed to have been revived from stage at which application was allowed to be proceeded with by Commission and income tax authority concerned, may, notwithstanding anything contained in any other provision of said Act, complete such proceedings at any time before expiry of two years from end of financial year in which settlement became void. Section 245F enacts that in addition to powers conferred on Settlement Commission under said Act, it would also have all powers which are vested in income tax authority under said Act. Section 245F (2) also stipulates that where application has been allowed to be proceeded with under Section 245D , Commission shall, until order is passed under Section 245D (4), have, (subject to Section 245D (3)), exclusive jurisdiction to exercise powers and perform functions of income tax authority under said Act in relation to case. 22. What triggered assessee s settlement application in this case was search and seizure operations conducted by revenue in its premises, premises of its directors and offices of UPDA as well as that of Sh. Miglani, functionary of UPDA. main thrust of revenue s grievance in these proceedings is with respect to amounts said to have been clandestinely given to UPDA as assessee s contribution towards slush funds to be used as pay-offs to politicians and public officers in return for favourable treatment. In short, revenue s case is that materials seized from UPDA and statements made by Sh. Miglani to assessee to W.P.(C) 7207/2008 Page 14 of 20 extent that it concealed over ` 35 crores in payments into fund, and for payments to police, state excise and other officials. 23. revenue s argument mainly hinges upon clandestine payments to UPDA and statements of its Secretary General. These include various tables and charts mentioning names of distilleries (members of association) and expected payment from such distilleries. These documents were signed by Sh. Miglani and on behalf of different distilleries. revenue had prepared chart for each assessment year and payment made by assessee to fund, according to it, worked out to ` 29.95 crores. This was allegedly used to bribe public officials and politicians. reasoning of Commission was that these documents were in possession of UPDA and statements of Sh. Miglani were made not in course of its search (i.e. of assessee's premises) and therefore corroboration of statements as well as documents with materials seized from assessee s premises in this regard was necessary. question here is whether this reasoning is sound. 24. Section 132 no doubt mandates presumption in respect of search and seizure operations; yet textually presumption relates to material documents and books of account seized of from assessee's premises and presumption that can be made from it, not from materials seized and statement recorded, of third parties. Only if materials that are sought to be relied upon emanate from premises of party subject to assessment, that presumption can be drawn. This is evident from Sections 132 (4) and (4A) of Act, which read as follows: W.P.(C) 7207/2008 Page 15 of 20 Section 132 . (4) authorised officer may, during course of search or seizure, examine on oath any person who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under Indian Income- tax Act, 1922 (11 of 1922 ), or under this Act. 1 Explanation.- For removal of doubts, it is hereby declared that examination of any person under this sub- section may be not merely in respect of any books of account, other documents or assets found as result of search, but also in respect of all matters relevant for purposes of any investigation connected with any proceeding under Indian Income- tax Act, 1922 (11 of 1922 ), or under this Act.] (4A) Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in possession or control of any person in course of search, it may be presumed- (i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person; (ii) that contents of such books of account and other documents are true; and (iii) that signature and every other part of such books of account and other documents which purport to be in handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in handwriting of, any particular person, are in that person' s handwriting, and in case of document stamped, executed or attested, that it was duly stamped and executed or attested by person by whom it purports to have been so executed or attested. W.P.(C) 7207/2008 Page 16 of 20 It is evident that in absence of these foundational facts, revenue is under obligation to establish through materials relatable to assessee, what it alleged against it. What were best pointers for further investigation were discovery of material and evidence, which revenue claim pointed to assessee's failure to disclose full facts and income, should have resulted in further investigation and unearthing of material in form of seized documents from assessee's premises. Unfortunately linkage between material seized from assessee's premises and those from UPDA's premises as well as statement of Sh. Miglani was not established through any objective material. It is now settled law that block assessments are concerned with fresh material and fresh documents, which emerge in course of search and seizure proceedings; revenue has no authority to delve into material that was already before it and regular assessments were made having regard to deposition, inability of revenue to establish as it were, that assessee s expenditure claim was bogus, or it had underreported income and that it resorted to over invoicing and diversion of funds into funds allegedly maintained by UPDA, was not established. findings of Commission therefore cannot be faulted as contrary to law. 25. As far as suppression of profits for various financial years, alleged by revenue, Commission was of opinion that documents relied upon were work estimates and projections that revealed tentative profitability in respect of assessee s activities towards sale of country liquor i.e. that documents did not reflect actual figures. documents reflected profit methods for both years which left Commission to infer they were in fact not based upon actuals but alternative projections. Here again view taken W.P.(C) 7207/2008 Page 17 of 20 by Commission cannot be said to be unreasonable as to warrant interference. Likewise, so far as suppression of profits for financial year 2004-05 is concerned revenue in its Rule 9 report stated that extra money generated was ` 33.35 crores and expenditure incurred was ` 17.35 crores [of this substantial bribe amount were paid]. According to revenue major expenditure out of this ` 17.35 cores was illegal and could not be allowed. assessee's stand was that internal indications in document itself showed that figures were tentative calculations as evidenced from expression expected and that it did not have anything to do with actual state of affairs. assessee s managing director prepared these estimates. Commission accepted this contention and concluded that revenue s arguments were based upon surmise; Commission also felt that documents did not disclose that any payments made were illegal. Furthermore it relied upon document observing that it contained no writings highlighting that in case means was made in further expenses would have been incurred in respect of various divisions of assessee. Here too interpretation of documentary evidence by Commission which is to be viewed with caution, does not appear to be contrary to law or unreasonable. In circumstances revenue s contentions on this aspect too cannot be accepted. 26. last aspect is with his with respect to alleged bogus expenditure claimed by assessee to tune of ` 9,11,41,457/-.This expenditure was claimed in original assessments as payments made to Fair N Square Pvt. Ltd and Rimjhim. revenue alleged that first Company (Fair N Square) was involved in entry operations and that expenditure claimed by assessee was bogus and entirely fictitious. To say so it relied upon W.P.(C) 7207/2008 Page 18 of 20 statement of one Rajan Jassel. assessee counters to this by saying that Jassel s statement was recorded on 4th February 2004 long before date of search in its case. Furthermore, assessee states that there was nothing in statement of Jassel that he had received amounts from assessee which were bogus; that he provided it some accommodation entries to others could not have been sole basis for discrediting expenditure claimed by assessee, Radico for relevant assessment year. 27. assessee had relied upon written agreement between it and Fair N Square Pvt Ltd dated 31st March 2001; likewise in case of Rimjhim, agreement of 1st June 2002 describing terms and conditions and various services rendered by that company was relied upon. asseessee had relied upon it in earlier income tax proceedings. It is quite clear that assessee, in original returns disclosed this expenditure as well as expenditure in respect of services rendered by Rimjhim. In case revenue wished to discredit that material, it should have relied upon fresh material. It relied upon statement of employee of Rimjhim who claimed that there was no written agreement with assessee nor were any such documents available. statement however does not mention about any written agreement of 1st June 2002.This statement was recorded after search and not during regular assessment proceedings. As to why expenditure claimed by assessee at relevant time was suspect, and whether it was on account of any fresh material is not clear. In any event Commission concluded that agreement of 01.06.2002 envisions supervision services by Rimjhim. 28. In this regard, court is of opinion that while expenditure claimed by itself might be suspect, revenue had further obligation to W.P.(C) 7207/2008 Page 19 of 20 investigate further and more deeply into matter having regard to fact that agreement between assessee and Rimjhim was disclosed earlier. mere statement of one employee of Rimjhim would not have discredited agreement itself. It was incumbent upon revenue-had it suspected expenditure, (in over four-month period given to it to furnish its report under Rule 9), to elicit particulars from concerned AO having jurisdiction over Rimjhim as to whether that concern in fact had received amounts towards assessee's claim. omission in this regard and lack of any particulars to discredit services and expenditure claimed by assessee, justified Commission s conclusion that addition of `9.11 crores demanded by revenue or other arguments on basis that assessee did not disclose such amount, was not warranted. Commission's findings are not contrary to law or unreasonable. 29. On overall assessment of materials that Commission was confronted and had to deal with, its findings are neither unreasonable nor contrary to law. findings are based on proper appreciation of facts, which this court affirms. For these reasons, writ petition has to fail; it is accordingly dismissed, without order on costs. S. RAVINDRA BHAT (JUDGE) NAJMI WAZIRI (JUDGE) JULY13, 2017 W.P.(C) 7207/2008 Page 20 of 20 W.P.(C) 7207/2008 Page 21 of 20 Commissioner of Income-tax Central-III v. Radico Khaitan Ltd