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Judgment
The appeal is directed against the judgment and order dated 1st April, 2005 passed by the learned Income-tax Appellate Tribunal, "D" Bench pertaining to the assessment year 1991-92. Aggrieved by the order of the learned Tribunal the assessee has come up in appeal.
At the time of admission, the following questions were formulated : -
(i) Whether in view of the fact that the assessment having been reopened after the expiry of four years from the end of the relevant assessment year, in the absence of any finding or belief stated in the recorded reasons that the Assessing Officer had formed any belief that the alleged income if any has escaped assessment on account of any omission or failure on the part of the appellant to disclose fully and truly all material facts, the condition for the exercise of jurisdiction under Section 147 of the act is satisfied and whether the purported proceedings reopened under section 147 of the act is illegal, invalid and without jurisdiction?
(ii) Whether in view of the fact that the petitioner had disclosed in the balance sheet filed along with the return the material facts that no capital outflow being entailed in import of the aircraft and whether in view of the fact that the appellant having disclosed all the material facts at the time of original assessment in pursuance to the notice under Section 142(1) of the I.T. Act, there was any omission and/or failure on the part of the appellant to disclose fully and truly all material facts necessary for the assessment and as such the condition precedent for the assumption of jurisdiction under Section 147 of the Act has been satisfied?
(iii) Whether in view of the fact that in the investigation which is purported to have been made by the Investigating Agency under FERA no finding on the basis of any adjudication had been as yet arrived at, the Assessing Officer was entitled under the law to rely upon the reports of the Investigating Agency when there is no finding or conclusion on the basis of such report of the Investigating Agency and as such the material relied upon by the Assessing Officer is admissible for the purpose of reopening the proceeding under Section 147 of the I.T. Act and whether reliance on such alleged reports of the Investigating Agency which were not even disclosed in full for the purpose of forming any reasonable belief as to whether there had been any omission or failure on the part of the petitioner to disclose fully and truly all material facts and as such the finding of the Tribunal on the said account is illegal, invalid, unreasonable and perverse?
(iv) Whether the finding of the Tribunal that the aircraft was received by way of a gift was the only explanation offered by the appellant in the course of assessment proceeding is contrary to and inconsistent with the fact that the appellant himself in the course of assessment proceeding had clearly stated that the aircraft was not received by way of a gift but was held on behalf of the foreign collaborator and there was no capital outflow involved in importing it and as such the aforesaid finding of the Tribunal is unreasonable and contrary to the evidences and materials on record and is perverse?
(v) Whether in view of the fact that the Tribunal has restored the matter to the file of the Assessing Officer for decision afresh on merits, the Tribunal was legally justified in making certain observations casting doubts about the genuineness of the evidence and whether any such observation of the Tribunal is unwarranted and unjustified in law as will interfere with and prejudice the Assessing Officer in coming to its own independent decision?
(vi) Whether the Tribunal was justified in law in observing that the Learned Representative for the assessee did not dispute the veracity or correctness of the documents and did not challenge its admissibility as evidence, the aforesaid finding and/or observation of the Tribunal is patently incorrect and contrary to the facts as the Learned Representative for the assessee had from the very beginning raised objection regarding the admissibility of the said evidence at the stage of hearing before the Tribunal and has also stated the aforesaid objection in the written submission filed before the Tribunal?
Mr. Khaitan, learned senior advocate, appearing for the appellant made elaborate submissions on all the questions formulated above. We, however, have not been impressed by the submissions on the point that reopening of the assessment was not justified in law. We, however find some substance in the submission advanced by Mr. Khaitan with respect to question Nos. (v) and (vi).
Insofar as question No. (v) is concerned, it appears that the learned Tribunal expressed the following views : -
"We feel that the letter addressed to FERA Authorities by Mr. James Karigan lacks credibility and raises serious concerns and doubts about correctness of the statements made, e.g. it is noted that Mr. Karigan has mentioned that the payment for the Aircraft was made by Dr. Willy Korf. However no evidence or details of actual payment received by his company were specified."
It is not in dispute that the original statement of Mr. Karigan was obtained behind the back of the assessee and the assessee did not get any opportunity to cross-examine him.
Mr. Karigan wrote a second letter which appears to be in favour of the assessee.
The learned Tribunal opined that the letter addressed by Mr. Karigan lacks credibility and raises serious concerns and doubts about correctness.
It is elementary that if evidence of any witness is sought to be relied upon, the adversary has to be given an opportunity to cross-examine him. The disbelief directed to the letter written by Mr. Karigan is obviously based on the earlier statement made by him. If a person has made two contradictory statements at two different stages, what is the value to be attached to the evidence of such a person may fall for consideration before the authority who is yet to decide the matter even according to the order passed by the learned Tribunal.
We are, as such, of the opinion that the Tribunal should have refrained from making those observations as regards credibility or discredibility of the evidence adduced by Mr. Karigan either orally or in writing. Therefore, the Question No. 5 is answered by finding that the restoration of the matter to the file of the Assessing Officer for decision afresh on merits is a justified order but the observations casting doubts about the genuineness of the evidence is not approved by us for the aforesaid reasons and to that extent our answer is in the negative.
With respect to the Question No. 6 the learned Tribunal has expressed its views as follows: -
"At the time of hearing before us the learned AR did not dispute the veracity or correctness of these documents nor challenged its admissibility as evidence. The learned Senior Counsel for the assessee did not bring on record any positive material or evidence to disprove these documents nor produced any material, which would suggest that contents of these documents were false. We find neither before the CIT(A) nor before us the assessee has challenged or alleged that these documents were untrue or were inadmissible as evidence."
The aforesaid finding recorded by the learned Tribunal appears to be contrary to the written submissions filed by the assessee before the Tribunal which reads as follows : -
"The statements which have been made by Mr. Kerrigan before the FBI has been recorded by him as having been made as desired and as recommended (Paper Book : Pg. 9). In the summons issued he stated that the aircraft has been sold to Dr. Willy Korf of Korf KG, Germany in 1990 and the payment in respect to the aircraft was received from him in full. The letters (in addition to what has been relied upon by the Assessing Officer) relied by CIT(A) was neither shown nor discussed with assessee at any stage. A statement which was made before the FBI as desired or as recommended cannot be relied upon as evidence. It is well settled that any statement or evidence taken ex parte cannot be relied upon unless the assessee has been given a right of controverting the same by cross examination.
125 ITR 713 (SC) at page 720
210 ITR 103 (Cal) at page 110".
The learned Tribunal, in Paragraph 11 of its judgment, made the following observations : -
"In the above factual circumstances we feel that the addition on account of purchase cost of the Aircraft needs to be restored to the file of the A.O. to bring on record all the correct and true facts relating to purchase of the Aircraft. If on detailed enquires and investigation; the A.O. finds that the investment in acquisition of the Aircraft was actually made by the assessee, only then he should make the addition to the assessee�s total income. However before proceeding in the matter of assessment the A.O. shall give adequate opportunity of being heard to the assessee. Considering the fact that the investigation into actual state of affairs shall require enquiries to be made in India and abroad, the A.O. is advised to conduct the enquiries expeditiously so that the assessment for A.Y. 1992-93 is concluded expeditiously and assessee is not made to suffer due to delays in concluding investigations. The A.O. is also advised to make available to the assessee the materials that may be gathered by him in the course of investigation so that the assessee is given fair opportunity of explaining and for rebutting the results of the enquiry. Accordingly the addition of Rs. 5,68,03,130/- is set aside and restored to the file of the A.O. for a decision afresh."
The learned Tribunal while remanding the matter to the Assessing Officer for a retrial ought to have kept at the back of its mind the wholesome advice rendered by the Supreme Court in the case of Logendranath Jha and Ors. v. Shri Polailal Biswas reported in AIR 1951 SC 316, wherein the following views were expressed :
"No doubt, the learned Judge formally complied with sub-section (4) by directing only a retrial of the appellants without convicting them, and warned that the court retrying the case should not be influenced by any expression of opinion contained in his judgment. But there can be little doubt that he loaded the dice against the appellants, and it might prove difficult for any subordinate judicial officer dealing with the case to put aside altogether the strong views expressed in the judgment as to the credibility of the prosecution witnesses and the circumstances of the case in general."
For the aforesaid reasons, the Question No. 6 is answered by stating that the learned Tribunal was not justified in law in making the observations quoted above. The order of remand is, however, approved by us. The Question No. 6 is, thus, disposed of.
Since we are satisfied that the reopening was proper, in the facts and circumstances of this case, Question Nos. 1, 2, 3 and 4 are decided against the assessee. The appeal is, thus, partly allowed.
Parties shall bear their own costs.