Saturday, April 14, 2012

affidavit necessary ingredients in case of alleged entry operator statement; bogus share application money Ass Fav detailed LDK's case, little evidentiary value on non examined party's statement & other important judgements


M/S Ldk Shares And Securities (P) Ltd. Case :- INCOME TAX APPEAL No. - 487 of 2012 M/S Ldk Builders (P) Ltd Hon'ble Ashok Bhushan,J.
Hon'ble Prakash Krishna,J. Allahabad High Court (affidavit necessary ingredients in case of alleged entry operator statement; bogus share application money Ass Fav detailed LDK's case; little evidentiary value on non examined party's statement)

To begin with, it may be noted that the Assessing Authority has proceeded
on the footing that the writing given by Sri Anil Kumar Gupta is an affidavit. A bare perusal of the said document which has been filed as Annexure-2 would show that it is in the form of a letter written by Shri Anil Kumar Gupta claiming himself as former Director of Welcome Coir Industries Ltd. to the Deputy Commissioner of Income-tax, Central Circle, Agra. The said document is in the form of a letter and it cannot be treated as an affidavit. It was not sworn before any authority such as notary/oath commissioner. There is no verification clause. Nor Shri Anil Kumar Gupta has been identified by any person. It is true that it bears a seal of notary, Government of India and is on a non judicial stamp paper of Rs.20/- but is not an affidavit in the eyes of law. It has come on record that the contents of aforesaid letter/affidavit were
very much disputed by the assessee who applied for cross-examination of Sri Anil Kumar Gupta. Multiple opportunities were given to Shri Anil Kumar Gupta but he did not appear. He failed to offer himself for cross examination. This being so, the letter of Sri Anil Kumar Gupta is of little evidenciary value and no reliance on such document can be placed. The other aspect of the case is that the finding that the Welcome Coir Industries Ltd. is an income tax assessee and is a public limited company, has been returned. It is maintaining its account books. Under section 68 of the Income-tax Tax, the assessee in whose account books any sum is found credited is required to explain about the nature and the source of the said cash credit. The
two authorities below have found that the assessee has been able to prove the identity of the depositors namely M/s. Welcome Coir Industries Ltd. The said company is assessed to income-tax and is filing its return of income, a fact which could not be disputed by the learned standing counsel for the department It has come on record that the contents of aforesaid letter/affidavit were very much disputed by the assessee who applied for cross-examination of Sri Anil Kumar Gupta. Multiple opportunities were given to Shri Anil Kumar Gupta but he did not appear. He failed to offer himself for cross examination. This being so, the letter of Sri Anil Kumar Gupta is of little evidenciary value and no reliance on such document can be placed. The other aspect of the case is that the finding that the Welcome Coir Industries Ltd. is an income tax assessee and is a public limited company, has been returned. It is maintaining its account books. Under section 68 of the Income-tax Tax, the assessee in whose account books any sum is found credited is required to explain about the nature and the source of the said cash credit. The
two authorities below have found that the assessee has been able to prove the identity of the depositors namely M/s. Welcome Coir Industries Ltd. The said company is assessed to income-tax and is filing its return of income, a fact which could not be disputed by the learned standing counsel for the department

Hemendra Ranchhoddas Merchant, WRIT PETITION NO. 47 OF 2011 IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION The allegation is that whereas the Group enters into an agreement with the DRT for providing a stipulated number of guards, in actuality only a fraction of the number of guards contracted for is engaged. For instance payments are received for 60 guards whereas expenditure is
incurred only for 10 to 12 guards. The profits which are reflected in the books of account are therefore, not a correct estimate of what is
actually realized. To deflate the profits, bogus expenses (wages to non existent security guards) are entered in the books of account. The money so siphoned off is reintroduced as advances from the employees. The money is withdrawn form the bank in cash for bogus expenses. But the same is transfered to the personal account of the petitioner or is used for taking fixed deposits from various banks located in Mumbai, Palghar, Panvel, Lonavala, Pune etc. The fixed deposits, the satisfaction note states, have not been disclosed to the Income Tax Department. Such fixed deposits would be kept either in the individual names of the petitioner and his spouse or in the joint names. A Trust had been created by the petitioner. It was alleged that the fixed deposits were to the tune of Rs.25 to Rs.35 Crores. The satisfaction note records a reference to the banks in which the Group maintains accounts, fixed deposits and lockers. The places where incriminating documents may be found and the persons whose custody they are likely to be are mentioned.


In the present proceedings, the ambit and jurisdiction of this Court is
limited to a determination of whether the Director of Income Tax
(Investigation) had a reason to believe within the meaning of Section
132(1). In our view, the circumstances which are set out in the
satisfaction note provided adequate material on the basis of which  the Director of Income Tax (Investigation) has formed a reason to believe within the meaning of Section 132(1)(b). Applying the test, that was laid down by the Supreme Court in Seth Brothers and in Pooran Mal (supra) the power in the present case has been exercised in furtherance of the statutory duties cast upon the Director of Income Tax. The Director of Income Tax (Investigation) has entertained the requisite belief for bona fide reasons which fall within the ambit and purview of Section 132(1)(b). The sufficiency of these reasons cannot be questioned by this Court in exercise of the writ jurisdiction under Article 226 of the Constitution. The satisfaction has been arrived at on the basis of relevant and material circumstances which are recorded.

Petitioner :- K.M. Sugar Mills Case :- WRIT TAX No. - 282 of 2012 By means of the present writ petition which arises out of the proceedings under the Income Tax Act, the petitioner has questioned the legality and validity of the approval order dated 28th December, 2011 (Annexure-2 to the writ petition) passed by the Commissioner of Income Tax (Central), respondent no.1 herein, under section 142 (2A) of the Income Tax Act. Report of the special auditor is not at all required as there is no complexity of the accounts of assessee. The submission in short is that there is no complexity in the account books maintained by the assessee and if for any reason account books are not reliable, it is open to the Revenue to reject the same as provided for under section 144 of the Act. The Assessing Officer first tried to clear the doubts by calling replies and he resorted to Section 142 (2A) thereafter, he found that it is difficult to work out the real income of the assessee due to complex nature of the entries in the account books. It is one thing to say that the account books may be rejected and the best judgment assessment may be resorted to under section 144 of the Act. But even then, best judgment cannot be arbitrary or whimsical. There has to be some basis for it.

Petitioner :- Commissioner Of Income Tax
Respondent :- Shri. Bhim Sen Case :- INCOME TAX APPEAL No. - 479 of 2008 The present appeal arises out of the order 11.1.2008 passed by the
appellate tribunal by which the penalty imposed under section 271 (1)(c)
of the Act has been deleted. We are of the view that the tribunal has recorded finding of fact that the gift amount of Rs. 2.00 lacs was surrendered by the assessee just to
buy peace for himself. The explanation given by the assessee that the
donor refused to appear in the proceeding and therefore to buy peace
for himself and to avoid litigation has voluntarily filed the revised return
on 2.8.2004. The explanation given by the assessee has been accepted
by the Tribunal. We find that the order of tribunal is concluded by finding
of facts. No substantial question of law arises. The Tribunal has not
committed any error in dismissing the appeal of the department.

Petitioner :- The Commissioner Of Income Tax & Another
Respondent :- M/S U.P. Metal Traders C/O M/S Uniq Metal Alloys Co Case :- INCOME TAX APPEAL No. - 14 of 2003 This is an appeal under Section 260-A of the Income Tax Act against the order of the Tribunal dated 16th July, 2002.
The ground giving rise to this appeal relates to penalty under Section 271- E
of the Act which was imposed by order dated 25th January, 1993 on alleged
contravention of provisions of Section 269-T of the Act against which order
the appeal was filed before the CIT (Appeals) which was dismissed by the
CIT (Appeals) by order dated 6th June, 1994. Against the order of the CIT
(Appeals), appeal was filed by the assessee before the Tribunal. The Tribunal
has allowed the appeal of the assessee and set aside the order of penalty under
Section 271 D and 271 E of the Act. From the materials brought on record it is clear that four persons namely Shri Karunesh Kumar, Shri Vinod Kumar, Shri Rakesh Kumar, Shri Ram Kripal were the agriculturists from whom various deposits in cash were accepted amounting to Rs. 10,000/- or lesser amount. The Tribunal came to the conclusion that those agriculturists had no bank account and the amounts were paid in cash. Section 273- B of the Act provides that no penalty shall be imposable on the persons or the assessee, as the case may be, for any failure referred to in the said provisions if he proves that there was reasonable cause for the said failure. The Tribunal having found reasonable cause for non compliance of the provision by relation which was alleged, was fully justified in invoking Section 273-B of the Act and holding that penalty was not imposable in the facts of the present case. The appeal is concluded by the finding of fact which we do not find perverse on based on no material. The Tribunal was fully justified in canceling the penalty under Sections 271-D and 271-E of the Act

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