For making additions, FIR is contemporaneous evidence and the contents of the same cannot be ignored in the light of self-serving documents

DCIT Vs Mr Sanjeev R Kanwar (ITAT Mumbai)  – For making additions, FIR is contemporaneous evidence and the contents of the same cannot be ignored in the light of self-serving documents. Human conduct and human probabilities are to be given weightage over the self generated evidences.

The  learned  counsel  for  the  assessee  has  cited  the judgement of the Supreme Court in  the case of George  & Others Vs. State of Kerala & Another, cited supra to contend that FIR is not  substantive  evidence  and  cannot  be  relied  upon  and  that  it only  requires the police  officer  to carry out  investigation.   In the present  case,  however,  the  question  is  whether  the  assessee who  has  filed  the  FIR  on  the  basis  that  he  and  his  business associates had  advanced Rs.5 crores   in  cash to  Mr. Amit Singh Gill    can  turn  around  and  say  that  the  amount  advanced  was not  more  than  Rs.1,87,50,000/-.  In  the  aforesaid  judgement,  it has  been  held  that  FIR  is  not  substantive  evidence  unless admitted  under  section  32(1)  of  the  Evidence  Act  and  can  be used  to  corroborate  or  contradict  the  maker  thereof.  What  the departmental  authorities  have  done  in  the  present  case  is  to contradict  the  assessee’s  version  that  he  paid  only Rs.1,87,50,000/-  through the two companies to Mr. Amit Singh Gill  by  relying  on  the  FIR  in  which  he  had  stated  that  he  paid Rs.5 crores   in cash to  Mr.  Amit  Singh Gill.   The  conduct of the Assessing  Officer  is  not  in  any  manner  contrary  to  the judgement cited above.   In  the  result  we  reverse  the  decision  of  the  CIT(A)  and restore  the  addition  of  Rs.3,12,50,000/-.  The  appeal  of  the department is allowed.

IN THE INCOME TAX APPELLATE TRIBUNAL

‘E’ BENCH, MUMBAI.

I.T.A. No.5271/Mum/2009

(Assessment Year : 2002-03)

The Deputy Commissioner of Income Tax Vs.   Sanjeev R.Kanwar,

O R D E R

Per  R.V.Easwar,  President:  The  brief  facts  giving  rise  to  the appeal  are  these.  The  assessee,  an  individual,  lodged  an  FIR with  the  Anti-extortion  cell,  Mumbai  on  7 th  October,  2002 stating  that he  had  given,  along with his  business  associates,  a sum  of  Rs.5  crores  in  cash  to  one  Mr.  Amit  Gill  who  was  his cousin’s  husband  on  the  understanding  that  the  money  will  be used to make super-normal profits by buying chemicals from an insurance company at cheap rates and selling them at very high rates due to demand for the same. The assessee appears to have been  told  by  Mr.  Amit  Gill  that  the  chemicals  were  stored  in  a ship  off  the  seas  of  Mumbai  and  that  the  ship  had  sunk resulting  in  the  insurance  company  taking  over,  the  stock  of chemicals  which  it  was  selling  at  very  cheap  rates.  Due to  his close  familiarity  with  Mr.  Amit  Gill  and  taken  in  by  Gill’s  high    life-style    the  assessee  believed  his  version  and  as  per  the  FIR advanced  the aforesaid amount  with  the expectation that  it  will bring him super-normal profits.  Soon the assessee realized that the  promise  made  by  Mr.  Gill  was  hollow  and  that  no  returns were  forthcoming.  After  persistent  demands,  cheques  for Rs.1,75,50,000/-  were given by  Mr. Gill plus  a profit cheque for Rs.50,00,000/-  (as  a  confidence  measure)  and  predictably  they bounced. The assessee naturally  started pestering  Mr.  Amit  Gill for  the  return  of  the  money  but  nothing  happened.  Instead,  he started  receiving  threat  calls  from  abroad.  He  recorded  those calls  in  which one  Sultan  threatened  to kill him  if  he continued pestering  Mr.  Amit  Gill  or  his  wife  for  the  return  of  the  money. This  was  in  August,  2002.  Fearing for  his  life,  the  assessee lodged the FIR. A copy of the same is at page nos. 266 to 276 of the paper book filed by the assessee.

2.  Acting  on  a  tax  evasion  petition  the  investigation  wing  of the  income-tax  department  issued  notice  u/s.131  to  the assessee  and  recorded  a  statement  from  him  on  22.12.2004.  A copy  of  the  statement  is  placed  at  page  no.257  of  the  paper book.  These  proceedings  were  taken  apparently  on  the  footing that the assessee had  advanced  a sum of Rs.5  crores in cash  to Mr.  Amit  Gill  and  the  purpose  of  the  enquiry  was  to  seek  the source  of  the  same  from  the  assessee.  In  the  statement  the assessee  denied  tha t  he  advanced  Rs.5  crores    to  Mr.  Amit  Gill and  stated  that  sum  of  Rs.1,54,50,000/-  was  advanced  by cheques  (on  various  dates)    by  M/s.  Upasana  Resources  Pvt. Ltd.  and  another  sum  of  Rs.33,00,000/-  was  advanced  by cheques    (on  various  dates)    by  M/s.  Tao  Builders  and Developers  Pvt.  Ltd.    Both  these  are  companies  in  which  the assessee  was  a  director.  It  was  stated  by  the  assessee  that only a sum of Rs.1,87,50,000/- (aggregate of the above)  was  given  to Mr. Amit Singh  Gill  and  that too  by cheques.  When asked  as  to why  he  had  stated in  the FIR that  he  had advanced Rs.5  crores in cash, he explained that Mr. Amit Gill had  only stated that the amount  would  soon  be  worth  Rs.5  crores  and  that  the  FIR mentioned  this  figure  which  included  the  expected  or anticipated  profits  also.  He  stoutly  denied  that  anything  over and  above  the  sum  of  Rs.1,87,50,000/-  was  advanced  to  Mr. Amit  Gill.  We  shall  refer to this statement in some detail a  little later.

3.  The  assessee  had  filed  a  return  declaring  total  income  of Rs.6,59,037/- on 31.7.2002.  This consisted of salary income  as director and profits from the business as also income from other source.  The  return  seems  to  have  been  processed.  However, apparently  based  on  the  tax  evasion  petition,  the  assessment was reopened by issue of notice under section 148 of the Income Tax  Act  on  7.7.2006.  In  response  thereto    the  assessee requested   the Assessing Officer   to  treat the  return  filed  earlier as  a  return  pursuant  to  the  notice.  In  the  course  of  the assessment  proceedings  the  Assessing  Officer  issued  notice under  section  143(2)    which,  inter-alia,    asked  the  assessee about  the  transactions with Mr. Amit Singh  Gill.   The  assessee, according  to  the  Assessing  Officer,  was  only  able  to  produce details  and  justification  for  Rs.1,87,50,000/-  paid  to  Mr.  Amit Singh Gill  and in respect of the balance of Rs.3,12,50,000/-, he could  not  produce  any  evidence  for  the  source.  The  Assessing Officer thereupon called the assessee  to produce Mr. Amit Singh Gill    for  examination.  In  fact,  the  Assessing  Officer  seems  to have  issued  at  least  three  requisitions  for  producing  Mr.  Amit Singh  Gill.  However,  the  assessee  could  not  produce  him. However,  a  Memorandum  of  Understanding  dated  20 th February, 2006 (pages 72 to 83 ) seems to have been filed before the  Assessing  Officer.    This  was  entered  into  between  Tao Builders and Developers Pvt. Ltd. through the assessee who was its  director  and  Mr.  Amit  Singh  Gill.  The  Memorandum  of Understanding  narrated  that  Mr.  Amit  Singh  Gill  had  made various  payments  by  cheques  to  the  assessee  by  way  of  return of  the  monies taken  by him, that  the  cheques had bounced  and proceedings  under  section  138  of  the  Negotiable  Instruments Act, 1973 were  pending, that the entire matter was  being settled by  payment  of  Rs.33  lakhs  by  Mr.  Amit  Singh  Gill  to  the aforesaid company and further that  all the cases pending before the  Magistrate  court  at  the  instance  of  the  assessee  shall  be withdrawn.  A  similar  Memorandum  of  Understanding  was entered  into  between  Upasana  Resources  Pvt.Ltd.  through  the assessee  who  was  its  director  and  Mr.  Amit  Singh  Gill  on  the same  day.  The  terms  and  conditions  were  similar  to  the  other memorandum  of  understanding  except  that  in  this  case  Mr. Amit  Singh  Gill  was  required  to  pay  Rs.1,42,00,000/-  to  the company.  A  third  Memorandum  of  Understanding  was  entered into again on the same day between Upasana Resources Pvt. Ltd and Mrs.Tanushka Amit  Gill, the  wife of Mr.  Amit Singh Gill for return  by  her  of  Rs.25  lakhs  to  the  company,  the  other  terms and conditions being the same to the  other two memorandum of understandings.

4.  The  Assessing  Officer  however  refused  to  believe  that  the assessee  paid  anything  less  than  Rs.5 crores  to  Mr.  Amit Singh Gill.  He  did  not  accept  the  assessee’s  version  that  he  paid  only Rs.1,87,50,000/-  to  Mr.  Amit  Singh  Gill.  The  assessee  would appear  to  have  requested  the  Assessing  Officer  to  issue summons  to  Amit  Gill  which  request  was  turned  down  as  a ploy  to  delay  the  further  proceedings.    The  Assessing  Officer however  deputed  his  inspector  to  verify  the  antecedents  of  Mr. Amit  Singh  Gill  in  the  address  furnished  by  the  assessee.  The inspector reported  that he could  not serve the summons  on  Mr. Amit  Singh  Gill  because  on  enquiry  he  found  that  Mr.  Amit Singh  Gill was not staying in the address given by  the  assessee. In  these  circumstances,  the  Assessing  Officer  held  that  the assessee  could  not  adduce    satisfactory  explanation  for  the nature and source of the amount of Rs.3,12,50,000/-. He  added the same to the assessee’s income under section 69A of the Act.

5.  It  would  appear  that  reference  to  section  69A  is  not appropriate and the  appropriate  section  to be referred to should be  section  69  which  speaks  of  investments  made  by  the assessee  during  the  relevant  previous  year  which  are  not recorded  in  the  books  of  account  maintained  by  the  assessee and  for  which  the  assessee  offers  no  explanation  about  the nature and source.

6.  The  assessee  appealed  to  the  CIT(A)  and  took  up  several contentions  including  the  validity  of  the  reassessment proceedings  on  the  ground  of  non-furnishing  of  the  reasons recorded  for  reopening  the  assessment.  The  CIT(A)  upheld  the validity  of  the  reassessment  proceedings  against  which  there  is no  appeal  filed by  the  assessee before us. As regards  the  merits of  the  addition  of  Rs.3,12,50,000/-  the  assessee,  apart  from reiterating  the  submissions  before  the  Assessing  Officer,  also filed  an  affidavit from Mr. Amit Singh Gill as additional evidence under Rule 46A  of  the  Income Tax Rules.  A copy  of  the  affidavit is  placed  at  pages  286  to  288  of  the  paper  book.  It  is  styled  as “Affidavit  cum  Undertaking”.  In  this  affidavit,  Amit  Gill  stated that  between  December,  2002  and  March,  2003  he  had  taken Rs.1,75,50,000/-  from  Upasana  Resources  Pvt  Ltd.  and  Tao Builders  &  Developers Pvt.  Ltd.  excluding  a sum of  Rs.12  lakhs taken  by  him  earlier  as  loan  which  was  also  immediately returned.    The  amount  of  Rs.1,75,50,000/-  was  described  as “business  loans/advances”.  Mr.  Amit  Singh  Gill  further  stated in  the  affidavit  due  to  business  problems  he  was  unable  to repay the amount and the cheques issued by  him  also bounced. He  thereafter  issued  fresh  cheques  for  Rs.1,75,50,000/-  and another  cheque  for  Rs.50  lakhs  as  lumpsum  profit  on  the transaction.  These  cheques  also  bounced. He  further  proceeded to  state  that  he  wrongly  represented  to  the  assessee  he  had invested  the  money  in  purchasing  some  chemicals  from capsized  ship  through  an  insurance  company  in  which  the assessee’s companies would stand to make super-normal profits since  the  chemicals  were  being  sold  at  very  cheap  rates. According  to  him,  such  representations  were  made  to  the assessee  in  order  to  maintain  his  standing  and  to  buy  further time.  He  had  also  represented  to  the  assessee  at  various  times that the investment in the chemicals had grown or accumulated to  Rs.4  to  5  crores.    The  affidavit  further  states  that  the assessee  filed  an  FIR  in  October,  2003   in  order  to  settle  the dispute  including  the  dispute  relating  to  cheque  bouncing,  he settled  the cases in 2006 and repaid  to Upasana  Resources Pvt. Ltd.  and  Tao  Builders  a  sum  of  Rs.2  crores  in  full  and  final settlement  with  the  condition  that  all  proceedings  including those  under  section  138  of  the  Negotiable  Instruments  Act  and all  criminal  cases  filed  by  the  crime  branch  should  be withdrawn.  He  reiterated  that  all  the  allegations  made  by  the assessee  against  him  are  false  and  were  made  only  with  a  view to  recover  the  amounts  advanced  by  the  two  companies  in which the assessee was a  director. He reiterated that  he did not take  any  amount  over  and  above  what  has  been  stated  in  the affidavit  and that “all  the  balance money claimed was  based on my  promise  of  profits  that  were  never  really  there”.  He  also submitted  evidence  along  with  affidavit  regarding  the  nature  and source of the amount paid by him to the assessee.

7.  The  affidavit  was  received  in  evidence  by  the  CIT(A).    A letter dated 20th January, 2009 was written  by the CIT(A) to the ACIT, which is reproduced below:-

“During  the course  of  the appellate proceedings in  the  case of the above assessee for the assessment year 2002-03 the authorized  representative  of  the  appellant  has  filed additional  evidence  under  Rule  46A.  The  written submissions  along  with  paper  book  are  forwarded  to  you for  your  comments/objections,  if  any.  You  are  therefore requested  to  send  a  report  in  the  matter  by  10.02.2009 positively.”

Thereafter,  in para  9.4  of his  order, the  CIT(A) refers  to  the  fact that  Mr.  Amit  Singh  Gill  was  produced  before  the  Assessing Officer  on  25.02.2009  in  the  course  of  the  remand  proceedings and he was examined  on  oath by  the  Assessing Officer  and that in the said statement Mr. Amit Singh Gill  has clearly mentioned that a sum of Rs.1,87,50,000/- alone has  been advanced to him by the assessee.

8.  The  Assessing  Officer’s  remand  report  has  also  been referred  to  by  the  CIT(A)    in  para  9.5  of  his  order.  According  to this  paragraph  the  Assessing  Officer  had  confirmed  that  Amit Gill  was  produced  before  him  for  examination  and  that  his statement  was  recorded  in  the  course  of  the  remand proceedings  in  which  he  has  confirmed  that  only Rs.1,87,50,000/-  was  paid  to  him  by  the  assessee.  The Assessing  Officer,  according  to  the  above  paragraph,  also appears  to  have  stated  in  the  remand  report  that  according  to the  memorandum  of  understanding  Amit  Gill    had  agreed  to return  Rs.2.25  lakhs  to  the  assessee    but  eventually  paid  only Rs.2  crores  and  therefore  he  was  liable  to  account  for  the  full amount  of  Rs.2,25,00,000/-.  The  Assessing  Officer  also  stated that  interest  @  18%  was  to  be  paid  for  the  delay  and  therefore this amount  also  needs to be  added  to the  total  income. Having said this, he stated that the issue may be decided on merits.

9.  After  going  through  the  remand  report  and  the submissions  of  the  assessee,  the  CIT(A)    held  that  as  per  the statement  recorded  by  the  Assessing  Officer  from  Amit  Gill  in the  course  of  the  remand  proceedings,  the  assessee  had advanced  only  Rs.1,87,50,000/-  to  him  through  two companies in  which  the  assessee  was  a  director.  The  CIT(A)  further observed  that the assessee  has been continuously providing the details  and  the  explanation  before  the  Assessing  Officer. According to him, Amit Gill repaid about Rs.25 lakhs during the financial  year  ended  31.03.2002    and  this,  along  with  the amount  of  Rs.12  lakhs  returned  immediately  after  taking  the advance  of  Rs.1,87,50,000/-,  came  to  Rs.37,50,000/-,  which  if deducted  from  the  amount  advanced,  left  a  balance  of Rs.1,50,00,000/-  as  outstanding  from  Amit  Gill.    In  the assessment  year  2003-04  the  said  amount  was  written  off  as bad  debts in the books of Upasana Resources Pvt. Ltd.  and Tao. The  bad  debts  claimed  had  been  allowed  by  the  Assessing Officer  assessing  those  companies  under  section  143(3)  of  the Act.  The  CIT(A)  referred to the  order  of  the  Kolkata Bench of the Tribunal  dated  25.05.2007  in  the  case  of  the  aforesaid  two companies  in  which  their  claim  of  bad  debt  has  been  accepted by  the  Tribunal.  According  to  the  CIT(A)  Amit  Gill    just  gave assurance and  promise that the investment of Rs.1,87,50,000/- would  grow to Rs.5 crores.  When  he was  unable  to  return even this  amount  and  the  cheques    issued  by  him  also  bounced,  he entered  into  a  settlement  or  understanding  with  Upasana Resources  Pvt.  Ltd.  and  Tao  Builders  and  ultimately  paid  Rs.2 crores as  full and final  settlement,   subject  to  the  withdrawal of all the cases against him. Apart from these facts, the CIT(A)  also referred to the remand report submitted by the Assessing Officer and  held  that  the  total  amount  received  back  by  the  assessee was  Rs.2,25,50,000/-  but  only  a  sum  of  Rs.2  crores  was received  under  the  memorandum  of understanding because the balance of Rs.25,50,000/- had  been  returned by Amit Gill  even earlier  to  entering  into  the  memorandum  of  understanding.  As regards    the  Assessing  Officer’s  reference  to  the  interest  on  the amount  is  concerned,  the  CIT(A)  held  that  since  the  assessee has  already  received  the  said  amount  and  offered  the  same  to tax  there  is  no  need  to  levy  interest  on  the  same  nor  was  any further  interest  recovered  by  the  assessee.  In  this  view  of  the matter,  the  CIT(A)  deleted  the  addition of Rs.3,12,50,000/- from the assessment.

10.  It  is  against  the  aforesaid  decision  of  the  CIT(A)  that  the revenue has preferred an appeal before the Tribunal.

11.  The  contention of  Mr.  Hemant  Lal,  the  learned  CIT  DR  is that it is the assessee,  who filed an  FIR before the anti-extortion cell  of  the  police  department  in  Mumbai  claiming  that  he  had paid Rs.5 crores in cash to Amit Gill and that the FIR  should be taken as  contemporaneous  evidence and the later developments such  as  memorandum  of  understanding  etc.  should  not  be taken  into  account  as  they  were  all    the  result  of  afterthought. He  submitted  that  taking  all  the    facts  into  consideration  it cannot  be  believed  that  the  assessee  did  not  invest  Rs.5  crores with  Amit  Gill  and  that  he  invested  only  Rs.1,87,50,000/- through  the  two  companies  expecting  Amit  Gill  to  return  Rs.5  crores,  the  difference  of  Rs.3,12,50,000/-  representing  super normal  profits.    According  to  Mr.  Lal    the  story  that  Amit  Gill only  promised  Rs.5  crores  in  return  for  Rs.1,87,50,000/-  is unbelievable.  He  submitted  tha t  the  CIT(A)  has  misread  and misappreciated  the  evidence  and  the  conduct  of  the  parties  and has taken  a view wh ich  is wholly untenable  and contrary to the normal  course of human conduct and probabilities. He  strongly relied  on  the  judgement  of  the  Supreme  Court  in  the  case  of Sumati  Dayal,  214  ITR  801.  He  contended  that the  assessment order should be restored.

12.  On  the  other  hand,  the  learned  counsel  for  the  assessee submitted  that  the  memorandum  of  understanding  had  been entered  into  even  before  the  issue  of  notice  under  section  148 which  means  that  the  memorandum  of  understanding  was  not an  afterthought.  He  drew  our  attention  to  the  assessee’s statement dated 22.12.2004  made on  oath under section 131 in response  to  the  summons  dated  17.12.2004  and  pointed  out that in this statement itself the assessee has clearly explained in answer to question  no.5  as  to  why  he  stated  in the  FIR  that  he paid  Rs.5  crores  to  Amit  Gill.  The  learned  counsel  for  the assessee  further  pointed  out  that  Amit  Gill  appeared  before the Assessing  Officer  for  the  first  time  during  the  remand proceedings  and  confirmed  that  he  received  only Rs.1,87,50,000/-.  He  had  also  filed  an  affidavit  earlier  before the  CIT(A)  which  was  taken  on  record  by  the  CIT(A)  as additional  evidence  under  Rule  46A.  According  to  the  learned counsel,  the  statement  made  by  Amit  Gill    in  the  course  of  the remand  proceedings  which  confirms  his  earlier  affidavit  is material  evidence  on  the  basis  of  which  the  CIT(A) has come  to the  conclusion  that  nothing  more  than   Rs.1,87,50,000/-  had been paid to him by the assessee. Even the remand report of the Assessing  Officer  does  not  challenge  the  veracity  of  the statement of Amit Gill.   According to the learned counsel for the assessee,  the  Assessing  Officer has  wrongly  interpreted  the  FIR and  concluded  that  the  assessee  has  advanced  Rs.5  crores  to Amit  Gill,  overlooking the assessee’s answer to  question  no.5  in the  statement  recorded  under  section  131.  The  Assessing Officer,  according  to  the  learned  counsel,  made  the  addition only  on the  ground  that Amit Gill  could not be  produced before him and that the addition was not based on the statement made by the  assessee in the FIR. When  the  Assessing Officer was  able to  examine  Amit  Gill  in  the  course  of  the  remand  proceedings and when  Amit Gill  also stated  before him that  he received only Rs.1,87,50,000/-  from  the  two companies, there  is no  scope for further  doubt.  He  submitted  that  the  statement  made  by  the assessee under section 131 on oath as also before the Assessing Officer  in  the  course  of  the  remand  proceedings  have  more evidentiary  value than the FIR filed before  the  police authorities by  the  assessee.  He  cited  the  judgement  of  the  Supreme  Court in  George  &  Others  Vs.  State  of  Kerala and  Another  AIR  (1998) SC  1376  and relying on the observations  at paragraph 30  of the judgement  submitted  that  the  FIR  is  limited  to  investigation  by police  and  is  not  substantive  evidence.  He  also  drew  our attention to section 154 of the Code of Criminal Procedure, 1973 which says  that  the first  information  given  by  any  person  is  for the  purpose  of  carrying  out  further  investigation  by  the  police officer  and  is  not  conclusive.    He  also  submitted  that  in  the present case the  assessee  filed FIR only  because   of threat calls received  by  him  allegedly  at  the  instance  of  Amit  Gill.  The learned  counsel  for  the  assessee  also  drew  our  attention  to  the fact  that  the  FIR  was  lodged  in  the  name  of  the  assessee  as director  of  the  two  companies  namely  Upasana  Resources  Pvt. Ltd. and Tao and not in his individual name. He thus contended that the order of the CIT(A) requires no interference.

13.  In  his  reply,  the  learned  CIT  DR  put  forth  the  following submissions:-

(a) The  FIR    is  not  lodged  in  the  name  of  the  company.  As seen  from  column  6  of  the  FIR,  it  has been  lodged  by the assessee  only.  The  reference  to  the  companies,  if  there  is such reference, is only descriptive.

(b) Later  statement  of  the  assessee  that  Amit  Gill  had  only stated  that  the  initial  investment  had  swelled  to  Rs.5 crores  is  only  a  cover  up  affair  or  an    afterthought  and should not be believed since it contradicts the FIR.

(c)  The  Assessing  Officer  ought  not  to  have  exceeded  the directions  of  the  CIT(A)  which  were  only  to  comment  or object to the additional  evidence adduced by the  assessee.  He was wrong in recording the statement from Amit Gill in the  course  of  the  remand  proceedings  in  the  absence  of any such directions issued by the CIT(A).

(d) No reasons have been recorded by the CIT(A) for admitting the affidavit of Amit Gill.

(e)  There  is  no  evidence  to  show  that  Amit  Gill  promised  to return  to  the  assessee  a  sum  of  Rs.5  crores  including super-normal  profits  on  the  initial  investments  of Rs.1,87,50,000/-.  This  is  only  a  later  thought  to  explain away the case made out by the Assessing Officer.

14.  We  have  carefully  considered  the  facts  and  the  rival contentions. We are unable  to uphold  the  decision of  the CIT(A). As  the  facts  show,  it  is  the  assessee  who  filed  the  FIR  with the Anti-Extortion  Cell  in  Mumbai.  It  was  filed  on  7.10.2002.  As pointed out  on  behalf of the  revenue, it  was not  filed  by the two companies  in  which  the  assessee  was  a  director,  but  was  filed by the assessee  himself  as seen  from column  6(a)  of  the copy  of the  FIR  placed  at  page  269  of  the  paper  book.  An  English translation  of  the  FIR  has  also  been  filed  at  pages  266  to  268. Therein the assessee  has stated the circumstances  under which he  reposed  faith  and  trust  on  Amit  Gill.  Amit  Gill  had  married the  assessee’s  cousin  by  name  Tanushka.  They  were  leading  a high lifestyle.  They had  represented to the assessee that  he was the  Indian  representative  of  a  Minister  of  Trade  and  Finance  of Oman  and  was  looking  after his  business  interests in  India. He had  also  borrowed  Rs.12  lakhs  from  the  assessee  for  the purpose  of  buying  property  for  Rs.2.25  crores  in  Mumbai.  The money  had  been  returned  to  the  assessee.  This  also  enhanced the  confidence  which  the  assessee  had  in  Amit  Gill.  The  FIR further  states  that  Amit  Gill  thereafter  came  to  the  assessee with  the  proposal  for  making  super-normal  profits  by  selling chemicals  taken  out  of  a  capsized  ship.  According  to  the  FIR between  January,  2002  and  March,  2002,  the  assessee  and businessmen  known  to  him/business  colleagues  collectively  gave Rs.5 crores in cash to Amit Gill. The FIR further states that Amit  Gill  had  given  a  confirmation  letter  as  well  as  guarantee letter  for  the  same  and  his  wife  was also  assuring  the  assessee of  getting  heavy  profits  from  the  sale  of  chemicals.  More importantly  the  FIR  states  that  on  27.04.2002,  when  the assessee first started getting doubt about  the claims of Amit Gill and his wife, Amit Gill  gave it in writing to the assessee “that he has  taken  Rs.5  crores  from  him  and  shall  also  return  it  to  him and as  a  guarantee,  he told that  he will give him his flat valuing Rs.2  crores”.    Thus  not  only  had  Amit  Gill  orally  assured  the assessee  about  the  return  of  the  money,  he  had  also  given  in writing  to  the  assessee  in  which  he  had  mentioned  that  he  has taken Rs.5 crores from the assessee  which he will return. In the FIR  the  assessee  even  stated  that  he  found  later  that  the letterheads  in  which  Amit  Gill    gave  the  confirmation  letters belong  to  non-existent  companies.  It  is  difficult  to  believe  that Amit  Gill  would  have  stated  in  writing  that  he  received  Rs.5 crores  from  the  assessee  unless  it  was  true.  In  fact  when  the FIR  was  lodged,  it  was  a  contemporaneous  and  first  act  on  the part  of  the  assessee  and  when  he  stated  Amit  Gill    had  even acknowledged in writing on   27.04.2002  that he  has taken  Rs.5 crores  from  the  assessee  and  will  return  it  and  had  further stated  that  he  will  give  his  flat  as  a  guarantee,  that  must  be taken to be a  true  statement. The assessee  has also later in  the FIR  categorically  stated  that  Amit  Gill  and  Tanuska  Gill  “with the  common  intention  have  conspired  against  him  and  have cheated  for  Rs.5  crores  to  myself  and  my  business  colleagues”.

It  is  nobody’s  case  that  apart  from  the  assessee  and  the  two companies  in  which  he  was  director,  anybody  else’s  money was involved in  the transaction.  It  has been established  on  the basis of  the  accounts  as  well  as  the  statement  given  by  the  assessee under section  131 of the Act before the investigation wing of the department that Upasana Resources  Pvt.Ltd. and  Tao had  given Rs.1,87,50,000/-  to  Amit  Gill  by  cheques.  Since  the  total amount mentioned  in the FIR is Rs.5 crores, it is  a  very fair and reasonable  inference  that  the  balance  of  Rs.3,12,50,000/-  has come from the assessee and that too in cash.

15.  The  argument  of  the  learned  counsel  for  the  assessee however  is  that  FIR  does  not  have  any  evidentiary  value  and  it has been  clarified  by  the  assessee  in the statement given before the  Assessing  Officer  under  section  131  of  the  Act  on 22.12.2004  (page  257  of  the  paper  book).  We  have  carefully gone  through  this  statement  to  which  we  have  earlier  also referred  to  while  narrating  the  arguments  of  the  assessee.  It must  be  remembered  that  this  statement  was  given  by  the assessee  in  December, 2004, more  than  two  years  after the  FIR was  lodged.  The  assessee  was  quite  aware  that  he  has  been summoned under  section  131  of  the Act  only  for the  purpose of explaining  the  transactions  with  Amit Gill. This  is  confirmed  by the  notice  dated 27.10.2004 issued  by the  Assistant  Director of Income  Tax(Investigation)  Unit  II(3),  Mumbai,  copy  of  which  is placed at  pages  255  &  256  of  the  paper  book.  In  this  letter the assessee,  inter-alia,  has  been  called  upon  to  explain  the  mode and  source of  the  payments  aggregating to Rs.5 crores  made  to Amit Gill between January and March, 2002 and also to furnish the  copies  of  the  bank  statements  reflecting  these  payments. Apparently  it  was  inconvenient  for  the  assessee  to  explain  the nature  and  source  of  the  amount  of  Rs.5  crores    which according  to  the  FIR  alleged  by  him  was  paid  by  him  to  Amit Gill.  Since  Rs.1,87,50,000/-  out  of  the  sum  of Rs.5  crores    had been  paid by  the two  companies  in  which  he  was    a director by cheques,  he  had  to  own  up    to  the  same,  but  it  was convenient,  nay,  necessary  for  him  to  deny  that  anything  more was  paid  to  Amit  Gill.  But  then  he  had  to  find  an  answer  to question  no.5 posed  by  the  Assistant  Director  of Income Tax  by which  he  was  confronted  with  the  FIR    in  which  he  had  stated that  he  paid  Rs.5  crores  to  Amit  Gill.  It  is  not  as  if  he  was surprised  by  this  question  because  even  in  the  letter  he  had been  informed  that  he  should  explain  the  mode  and  source  of the  payment  of  Rs.5  crores.  The  assessee  therefore  came  up with  the  story  that  nothing  more  than  the  cheque  amount  was paid  to  Amit  Gill  and  to support  the  same  he  was  compelled  to tout    the  theory  of  super-normal  profits  being  promised  to  be paid  by  Amit  Gill    on  the  investment  of  Rs.1,87,50,000/-.  The assessee  therefore had to  answer that  Amit  Gill  “kept  promising him  that  all  the  chemicals  were  with  him  and  I  had  nothing  to worry    about,  as  my  investments  were  worth  much  more  than Rs.5  crores.  He  has  always  continuously  reiterated  that  I  had nothing to worry and he would return him Rs.5 crores as all the goods were in his possession”. He further stated  that since Amit Gill had promised him that his original investment had grown to Rs.5 crores  he  had  lodged the  FIR  for the  said  amount.   This is a  facile  explanation  which  cannot  be  believed.  We  may  recall that even  in  the FIR the  assessee  had  stated  that Amit  Gill  had given  it to him in  writing  on  27.04.2002  that he  has  taken Rs.5 crores  from  the  assessee  and  shall  return  it  to  him.  There  was nothing  which  could  have  prevented  the  assessee  from mentioning  in  the  FIR  that  he  had  advanced  Rs.1,87,50,000/- through  two  companies    in  which  he  was  director,  to  Mr.  Amit Singh  Gill.  He  could have also  mentioned therein  that Amit  Gill had  promised  that  he  would  return  Rs.5  crores  to  the  assessee including  super-normal  profits  on  the  initial  investment  of Rs.1,87,50,000/-  but  that  was  not  the  case.    There  is  also  no good    reason  why  Mr.  Amit  Singh  Gill    could  have  given  it  in writing  that  he  has  taken  Rs.5  crores  from  the  assessee  and shall  return  it  to  him.  There  is  no  direct  or  contemporaneous evidence  of  Amit  Gill  having  stated  that  he  had  taken   only Rs.1,87,50,000/-  from  the  assessee    which  will  grow  to  Rs.5 crores   including  super-normal profits, which  amount would be paid back to the assessee.

16.  Mr.  Shivram,  learned  counsel  for  the  assessee  however contends  that  there  is  evidence  to  show  that  the  assessee advanced  only  Rs.1,87,50,000/-  in  the  form  of  affidavit  of  Amit Gill  and  the  statement recorded  from  him  on 25.02.2009  in the course  of  the  remand  proceedings.    A  copy  of  the  affidavit  is  at page 286 of the  paper  book and we  have  already referred to the contents  thereof  in  brief.    This  affidavit  is  sworn  to  on 29.12.2008 more than  six  years  after  the  assessee  filed  the  FIR and  almost  four  years  after  the  assessee  gave  the  statement under  section  131  before  the  investigation  wing  of  the  income tax  department.  The  evidentiary  value  of  the  affidavit  given  at such  a late stage is  open  to doubt. It must be  remembered  that the  assessment order  was passed on 14.12.2007 and  right  from September,  2007  the  Assessing  Officer  has  been  requesting the assessee  to  produce  Mr.  Amit  Singh  Gill  before  him.  The assessee was not  able to do so but surprisingly   in  the  course of the  appeal  before  the  CIT(A)  Mr.  Amit  Singh  Gill  pops  up  from nowhere  and  files  an  affidavit  which  is  adduced  before  him  as additional  evidence.  As  already  stated  at  this  later  stage  it  was convenient   for both the assessee  as well as Mr.  Amit  Singh  Gill to  confirm  that  only  Rs.1,87,50,000/-  was  paid  and  not  Rs.5 crores.    In  our  view,  having  regard  to  the  normal  course  of human conduct  and probabilities, little  evidentiary  value can be placed  on  the  affidavit  of  Mr.  Amit  Singh  Gill.  If  at  all,  it  is  the FIR  on  which  much  evidentiary  value  has  to  be  placed  since  it was  the  first  document  and  a  contemporaneous  document  in the  filing  of  which  the  assessee  was  under  no  pressure  or compulsion.

17.  Mr.  Shivram  has  also  drawn  our  attention  to  the memorandum  of  understanding  entered  into  on  20th February, 2006  to which also we have already referred. They  are stated to have been  filed  before the Assessing Officer and  the assessment order  contains  reference  to  them.  Again  it  is  surprising  that  in the  year  2006  the  assessee  was  able  to  enter  into  a memorandum  of  understanding  with  Mr.  Amit  Singh  Gill  but was  unable  to  produce  him  in  the  course  of  the  assessment proceedings  between  September  and  December,  2007.  Be  that as  it  may,  the  same  reasons  which  have  prompted  us  not  to place  any  reliance  on  the  affidavit  of  Mr.  Amit  Singh  Gill  also apply    in  the  case  of  Memorandum  of  Understanding, persuading  us  not  to  place  reliance  on  them  in  support  of  the assessee’s  plea.    The  Memorandum  of  Understanding  are  no doubt  good  for  the  purpose  of  showing  that  there  was  a settlement between the two companies and Mr. Amit Singh Gill . Obviously  the  companies  and  Mr.  Amit  Singh  Gill    could  come on  record  to  have  the  MoUs  put  through  because  the  company had  advanced  the  amounts  to  Mr.  Amit  Singh  Gill  through cheques.      There  was  no  apparent  difficulty  or  complication  in bringing    those  amounts  on  record  as  they  have  been  given through  cheques.    The  difficulty  is  only  with  regard  to  the amount  which  has  been  advanced  to  Mr.  Amit  Singh  Gill  over and  above  the  cheque  amounts.  The  Memorandum  of Understanding  only  show  that  the  advances  made  through cheques  have  been  settled  but  then  those  amounts  have  not been  added  in  the  assessment.  There  is  no  dispute  with  regard to the cheque amounts and the MoUs  therefore  do not  take the assessee’s case further. They are actually neutral evidence .

18.  We  now  come  to  the  statement  made  by  Mr.  Amit  Singh  Gill  before  the  Assessing  Officer  in  the  course  of  the  remand proceedings.  We  see  force  in  the  argument  of  Mr.  Hemant  Lal, learned  CIT  DR  that  the  Assessing  Officer  was  not  required  to record  any  statement  from  Mr. Amit  Singh  Gill  in  the  course of remand  proceedings.  In  fact  in  his  letter  dated  20th January, 2009  the  CIT(A)  has  required  the  Assessing  Officer  to  forward his  comments  or  objections,  if  any,  to  the  additional  evidence adduced  by  the  assessee  under  Rule  46A.  However,  the Assessing  Officer  took  it upon himself  also  to examine  Mr. Amit Singh  Gill,  who  had  no  difficulty  in  appearing  before  the Assessing  Officer  in  the  course  of  remand  proceedings,  though he  had  many  difficulties  in  appearing  before  the  Assessing Officer  at the  time  of  the  assessment proceedings.  Be  that  as  it may,  the  Assessing  Officer  appears  to  have  thought  that  he should cross  examine Mr. Amit  Singh Gill on  the contents of the affidavit.    Assuming  that  this  action  is  within  the  scope  of  the directions  of  the  CIT(A), let us turn to  the  statement of Mr.  Amit  Singh  Gill  made  before  the  Assessing  Officer  on  25.02.2009,  a copy  thereof  is  at  pages  307  to  309  of  the  paper  book.  It is a statement  recorded  under  section  131  on  oath.  In  this statement  he has  stated that  he could  not repay   the  amount  of Rs.1,87,50,000/- to the assessee on the promised dates and the cheques  issued  by  him  had  also  bounced.  He  has  also  stated that  he  had  promised  “huge  returns  to  the  tune  of  Rs.4/5 crores”.  Again  we  have  to  reiterate  that  at  this  late  juncture  no credence  or  credibility  can  be  attached  to  the  version   of  Mr. Amit Singh Gill that he only promised to return Rs.4 or 5 crores to the assessee on the initial investment of Rs.1,87,50,000/-. He was  only  adopting  the  same  line  which  the  assessee  had  taken in  his  statement  given  under  section  131  of  the  Act  five  years earlier before the investigation wing.  The whole picture we get is that  by  making  such  averments  at  a  late  stage  of  the proceedings, one  corroborating the other, both the assessee  and Mr.  Amit  Singh  Gill  were  in  a  win-win  situation.  Moreover,  Mr. Amit  Singh Gill would  have  been hard put to  come  on record  to say  how  he  returned  the  cash  amount  of  Rs.3,12,50,000/-  to the  assessee  by  way  of  settlement.    Therefore  both  the  parties have  conveniently  left  out  the  cash  portion  of  the  amount  and took  the  common  stand that  the  amount  advanced  was nothing more  than  Rs.1,87,50,000/-.  It  suited  the  interest  of  both  the assessee and Mr. Amit Singh Gill  to say so. However,  they could not  give  satisfactory  explanation  for  the  statement  in  the  FIR that  the  amount  advanced  was  Rs.5  crores.    The  Assessing Officer,  in  our  opinion,  should  have  stuck  to  the  assessment order in the remand report dated 26.02.2009,  a copy  of which is placed  at  page  310  of  the  paper  book.  He  seems  to  have vacillated  a  bit  after  recording  the  statement  of  Mr.  Amit  Singh Gill which is perceptible from his statement that as per the MoU and  the  out  of  court  settlement,  the  amount  agreed  to  be  paid was  Rs.2.25  crores  but  only  Rs.2  crores  was  actually  paid  and therefore  interest  @  18%  was  to  be  paid  for  the  delay,  which should be added to the total income of the assessee. After saying this  he  has  requested  the  CIT(A)  to  decide  the  issue  on  merits. We  are  not  prepared  to  countenance  the  view  taken  by  the Assessing  Officer.  While  making  such  observations  in  the remand  report  the  Assessing  Officer  seems  to  have  overlooked that  no  evidentiary  value  can  be  placed  on  the  affidavit  of  Mr. Amit  Singh Gill   or  on  the  statement  recorded from him  by way of cross examination on the contents of the affidavit. The CIT(A), with great respect,   should not have  gone by  the  later  version of the  assessee  and  Mr.  Amit  Singh  Gill  both  of  whom  toed  a common line  which would  be  for the benefit of both.  The CIT(A), again with  respect, seems  to have overlooked the normal course of human conduct and human probabilities and appears to have been  swayed by the  documentary  evidence. It is  well  settled law and  the  legal  position  in  this  regard  has  been  clearly adumbrated by the Supreme Court in at least three judgements.

(i) CIT Vs. Durga Prasad More (1971) 82 ITR 540

(ii) Sumati Dayal Vs. CIT., (1995) 214 ITR 801

(iii)CIT Vs. P.Mohanakala (2007) 291 ITR 278.

The  gist    of  these  judgements  is  that  while  examining  the evidence including documentary evidence the taxing  authorities are    not  required  to  put  on  blinkers.  They  have  to  probe  thematter in order to find out whether the apparent is the real state of  affairs  and  they  are  entitled  to  look  into  the  surrounding circumstances  to find out  the reality  of  the  recitals  made in the documents.  In  the  case  of  Durga  Prasad  More  (supra)  the Supreme  Court  has  cautioned  that  though  it  is  true  that  the apparent  must  be  considered  real  until  it  is  shown  that  there are  reasons  to  believe  that  the  apparent  is  not  real,  it  is necessary  for the department  in  some  cases   to require  that the party    who  relies  on  recital  in  a  document  has  to  establish  the truth  of those  recitals  as  otherwise  it  will  be  very  easy  to  make self-serving  statements  in  the  documents  and  evade  tax.    The Supreme  Court  also  remarked  that  courts  and  tribunals    have to judge the evidence before them by applying the test of human probabilities.  In  the  case  of  Sumati  Dayal,  cited  supra  this principle  was  reiterated  and  a  caution  was  administered  that  a superficial  approach  to  the  evidence  should  be  avoided  and  it has  to  be considered  in  the  light  of  the  human  probabilities.  In the  case  of  CIT  Vs.  Mohanakala  cited  supra,  these  principles were  reiterated.  In  the  present  case,  the  appreciation  of  the evidence by the CIT(A) is not in the manner in which it has to be appreciated in the light of the aforesaid judgements.

19.  The  learned  counsel  for  the  assessee  has  cited  the judgement of the Supreme Court in  the case of George  & Others Vs. State of Kerala & Another, cited supra to contend that FIR is not  substantive  evidence  and  cannot  be  relied  upon  and  that  it only  requires the police  officer  to carry out  investigation.   In the present  case,  however,  the  question  is  whether  the  assessee who  has  filed  the  FIR  on  the  basis  that  he  and  his  business associates had  advanced Rs.5 crores   in  cash to  Mr. Amit Singh Gill    can  turn  around  and  say  that  the  amount  advanced  was not  more  than  Rs.1,87,50,000/-.  In  the  aforesaid  judgement,  it has  been  held  that  FIR  is  not  substantive  evidence  unless admitted  under  section  32(1)  of  the  Evidence  Act  and  can  be used  to  corroborate  or  contradict  the  maker  thereof.  What  the departmental  authorities  have  done  in  the  present  case  is  to contradict  the  assessee’s  version  that  he  paid  only Rs.1,87,50,000/-  through the two companies to Mr. Amit Singh Gill  by  relying  on  the  FIR  in  which  he  had  stated  that  he  paid Rs.5 crores   in cash to  Mr.  Amit  Singh Gill.   The  conduct of the Assessing  Officer  is  not  in  any  manner  contrary  to  the judgement cited above.

20.  In  the  result  we  reverse  the  decision  of  the  CIT(A)  and restore  the  addition  of  Rs.3,12,50,000/-.  The  appeal  of  the department is allowed.

Order pronounced  in the open court on this  31 day of   January, 2011.

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