2006-VIL-469-DEL-DT

Equivalent Citation: [2008] 303 ITR 95, [2007] 207 CTR 115

DELHI HIGH COURT

IT Appeal No. 353 and 610 of 2006

Date: 30.11.2006

COMMISSIONER OF INCOME- TAX

Vs

PRADEEP KUMAR GUPTA AND VIJAY GUPTA

Mrs. P. L. Bansal for the appellant.
Dr. Rakesh Gupta with Jitender Saini for the respondent.

BENCH

VIKRAMAJIT SEN and DR. S. MURALIDHAR JJ.

JUDGMENT

1. The Revenue has filed these appeals against the order of the Income-tax Appellate Tribunal (Tribunal) deleting the agricultural income in the sum of Rs. 4,34,000 declared by Shri Pradeep Kumar Gupta and Rs. 4,55,700 declared by Shri Vijay Gupta, respectively. Both these assessees had also assailed the validity of the assumption of jurisdiction by the Assessing Officer under sections 147 and 148 of the Income-tax Act.

2. The case of the Revenue is that the Assessing Officer had received information from the Deputy Director of Income-tax (Investigation), Faridabad that while carrying out post-search enquiries relating to a third party, Shri Anand Prakash, the sole proprietor of M/s. Jai Trading Co. had deposed that he was providing bogus/false transactions purporting to relate to sale/ purchase of food grain items and that the cash deposits with him were from parties who had approached him for "accommodation entries" in the form of agricultural receipts. The enquiries with the banks on whom cheques were drawn and credited in the account of M/s. Jai Trading Co. showed that the assessees in the present cases were also the beneficiaries of such illegal transactions.

3. Based on the sworn statement of Shri Anand Prakash, reassessment proceedings against the assessees under section 147/148 were initiated. The assessees had stated that they had taken agricultural land on lease from Shri Mool Chand and the rent had been paid in cash. Shri Mool Chand has appeared and affirmed this statement. The assessees have further claimed that this land had been cultivated by them through Shri Kishan Kumar of Hapur. Opportunities were granted by the Assessing Officer to the assessees for production of Shri Kishan Kumar, which have not been availed of by them. Instead, the assessees have put forward a wholly incredulous and incongruent statement that Shri Kishan Kumar could not appear before the Assessing Officer on March 25, 2003, because his brother-in-law, namely, Shri Yogender Pal Singh alias Raju, had been abducted on March 27, 2003. However, what is of great importance is the fact that the assessees had demanded an opportunity to cross-examine Shri Anand Prakash, but this was declined on the ground that the statement of this person had been recorded by the Deputy Director of Income-tax (Investigation), Faridabad. Further, while the assessees do not deny that they have sold produce to M/s. Jai Trading Company and have submitted copies of the bills issued by the latter, they maintain that these sales were genuine.

4. Having heard learned counsel for the parties at great length, we are of the view that the order of the Tribunal is unassailable. In this case, the assessment had not been completed under section 143(3) of the Income-tax Act. There are banking transactions between the assessees and Shri Anand Prakash and, therefore, initiation of reassessment proceedings under section 147/148 may be impregnable even to the charge of legitimacy of invocation of section 147/148. In other words, since there were banking transactions between these persons and Shri Anand Prakash had, in fact, deposed that he had provided bogus transactions to the assessees that would constitute reasons for the Assessing Officer to believe that income chargeable to tax had escaped assessment justifying action under section 147/148. Shri Anand Prakash cannot be seen as a busybody or an informer or a stock witness wholly unconnected with the assessee concerned. Learned counsel for the Revenue had drawn our attention to Phool Chand Bajrang Lal v. ITO  [1993] 203 ITR 456 (SC), where the Income-tax Officer had learnt that the party from whom that assessee had allegedly borrowed Rs. 50,000 in cash had not actually done so. Information pertaining to the false nature of these transactions was exchanged between the respective Income-tax Officers. Their Lordships opined that (headnote) : "Acquiring fresh information, specific in nature and reliable in character, relating to a concluded assessment which went to expose the falsity of the statement made by the assessee at the time of the original assessment was different from drawing a fresh inference from the same facts and material available with the Income-tax Officer at the time of the original assessment proceedings". This decision, however, does not empower the Assessing Officer to rely only on the deposition of a third party in order to upset the return filed by an assessee.

5. This is where the failure of the Revenue to produce Shri Anand Prakash for cross-examination by the assessees, assumes fatal consequences. Reassessment proceedings have been initiated after several years of the acceptance of the return under section 143(1) of the Income-tax Act. The assessees have themselves relied on the banking transactions between themselves and Shri Anand Prakash ; secondly, on bills issued by them to Shri Anand Prakash, and on the unassailed payment of rent to Shri Mool Chand. It is true that the assessees' failure to produce Shri Kishan Chand had the consequence of not proving that the said person was tilling the land on their behalf. This failure cannot inexorably lead to the conclusion that no agricultural income had been generated by the assessees. Such an inference can only be drawn from the statement of Shri Anand Prakash to the effect that the transactions between him and the assessees were bogus. Therefore, it was mandatory for the Revenue to produce Shri Anand Prakash for cross-examination by the assessees on their specific demand in this regard. The facts on which the decision to invoke section 147/148 is predicated may in some cases be sufficient both for decision to carry out a reassessment as well to justify or sustain the fresh assessment. However, there may well be instances where the former said reopening may pass muster in the light of some facts, but those facts by themselves may turn out to be insufficient to preserve the assessment itself. Once sections 147 and 148 are resorted to, the Assessing Officer must first discharge the burden of showing that income has escaped assessment. It is only thereafter that the assessee has to provide all the answers. We find no reason why the initial burden of proof should not rest on the Assessing Officer even where the assessment has gone through under section 143(1) of the Act. The Tribunal has, therefore, arrived at the correct conclusion.

6. Learned counsel for the respondent has also drawn our attention to the fact that in respect of Shri Satish Gupta, also of M/s. Kristo Industries (as are the assessees) the Revenue's appeal in this court, being Income-tax Appeal No. 798 of 2004, was dismissed as not pressed. Since the tax effect in those cases was less than Rs. 2,00,000 and, therefore, the appeal was not maintainable in terms of the Central Board of Direct Taxes Circular dated June 29, 2000. According to Dr. Rakesh Gupta, learned counsel for the assessees, the incidence of tax in the present cases also would be less than Rs. 2,00,000. He has further relied on the Circular dated October 24, 2005, whereby the monetary limit for the purposes of "tax effect" was increased from Rs. 2,00,000 to Rs. 4,00,000, with effect from October 31, 2005. We need not go into the question of the retrospective effect of the said circular since the amount of tax here in any event would be below Rs. 2,00,000. This is yet another reason why we are of the view that no substantial question of law arises in these appeals. The appeals are dismissed with no order as to costs.

 

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