1. This appeal is directed against the order of the AO, dt. 14th November, 1996, under s. 158BC(c) r/w s. 143(3) of the IT Act, 1961, for the block period comprised of financial years 1985-86 to 1994-95 and upto 8th November, 1995.
2. Various grounds are taken. The gist of the objections is that the AO erred in making an addition of Rs. 5,25,90,000 as per the following details :(i) 3,05,50,000 as unexplained investment in the alleged bringing of gold weighing 30 kgs. by 6(ii) 2,17,40,000 from the alleged unexplained investment of Rs. 5,22,90,000 in respect of 105 kgs.(iii) 3,00,000 alleged unexplained investment in the renovation of house.
The appellant has also raised certain additional grounds vide his letter dt. 8th September, 1998 and the additional grounds read as follows : "1. Without prejudice to the other grounds of appeal, the appellants submit that impugned order of block assessment passed under s. 158BC of the IT Act, 1961 is void and illegal as no opportunity of hearing has been granted to the appellants by the CIT before approving the order of assessment made by the Asstt. CIT. 2. Without prejudice to the above, the learned CIT failed to appreciate that the appellant should have been given an appropriate opportunity of being heard before granting the approval. The order passed without granting an opportunity of being heard is bad in law, therefore, the same may be quashed.
3. Without prejudice to the above, the learned CIT failed to appreciate that the approval granted without affording an opportunity of being heard is in violation of principles of natural justice, therefore, the order dt. 14th November, 1996 is bad-in-law and the same may be quashed." 3. As the above additional grounds are only on a legal issue and do not require any enquiry into fresh facts, we have admitted them.
4. The facts of the case lie in a small compass. A search and seizure action was carried out by the Dy. Director of IT (Inv.), Unit-I, Ahmedabad, at Room No. 206 in Hotel Agarwal, Shahibaug, Ahmedabad, on 8th November, 1995 and primary gold weighing 49 kgs. was found in the room occupied by the appellant along with one Shri Salam M. Patel.
Actually, the gold was noticed by the police authorities who intimated the matter to the IT authorities and it is consequent to that information that an authorisation under s. 132 was obtained and a search of the premises was conducted. The version given by the appellant varied in some details at different points of time but the substance of it was that the gold in the form of biscuits was brought by 10 persons (each carrying 42 biscuits of about 116 gms. each) who had arrived from Sharjah. The gold was said to have been sent by one Noorbhai who was staying in Dubai and was also the proprietor of M/s.
New Robinson Tours & Travels, Mumbai, and it was sent through the 10 passengers who were non-residents holding Indian passports and the gold was to be handed over to one Shri Ahmed Bashir, the manager of the said New Robinson Tours & Travels. The appellant was sent along with the co-occupant of Room No. 206 to receive the said passengers and to bring them to Mumbai. The appellant claimed to be employed with M/s. New Robinson Tours & Travels as a ticketing agent for about five years. In other words, the claim was that the appellant had nothing to do with the gold as such, except as the employee of M/s. New Robinson Tours & Travels, and his only job was to fetch the passengers to Mumbai. It was also mentioned that another passenger accompanied the 10 persons from Sharjah to Ahmedabad and he handed over the requisite foreign exchange to pay the customs duty in respect of the gold in question. The bills for the purchase of the gold in Sharjah and the vouchers in respect of the payment of customs duty at Ahmedabad were produced. The AO, however, did not give credence to the version given by the appellant which was largely corroborated by the 10 passengers in question and he added the value of the gold in question of about 49 kgs. which was seized during the search at Rs. 2,44,22,090 as the unexplained investment of the appellant. As the appellant admitted to have been launched on similar trips on earlier occasions to Delhi and Ahmedabad, the AO came to the conclusion that the appellant was engaged in the business of smuggling gold and he made certain further additions as unexplained investment in gold made by the appellant in the earlier consignments. He also made an addition of Rs. 3,00,000 separately as the unexplained investment in the renovation of the house. This is how he has made the impugned total addition of Rs. 5,25,90,000 as per the following details :(a) Addition on account of value of gold 65 kgs.
3,05,50,000(The July consignment at Delhi)(b) Addition on account of November consignment gold105 kgs x Rs. 4,700 = 5,22,90,000Credit for the July consignment = 3,05,50,000 2,17,40,000(c) Addition on account of unexplainedinvestment on the renovation of house.
3,00,000 ------------- We may mention that the value of the 49 kgs. of gold seized from Room No. 206 of Hotel Agarwal is included in the value of the November consignments of gold added at Rs. 5,25,90,000 in the above computation.
5. Before us, the learned counsel for the appellant pleaded that the assessment order in question deserves to be set aside because the CIT did not grant an opportunity of being heard to the appellant before he granted approval to the assessment order under s. 158BG of the IT Act.
It is pleaded that the principles of natural justice would apply unless the statutory provisions point to the contrary. In this context, reliance is placed upon the following decisions :Institute of Chartered Accountants of India vs. L. K. Ratna (1987) 164 ITR 1 (SC); (5) Shree Singhvi Brothers & Ors. vs. Union of India & Ors. (1991) 187 ITR 219 (Raj); and (6) Kirtilal Kalidas & Co. vs. Dy. CIT (ITAT, Madras Bench 'A' in ITA Nos. 93 to 96/Mad/1997, dt. 17th October, 1997) [reported at (1999) 64 TTJ (Mad) 77].
6. We are, however, of the view that the above decisions of the apex Court and the Rajasthan High Court are distinguishable inasmuch as in the present case the grant of approval under the provisions of s. 158BG of the IT Act by the CIT is entirely an administrative procedure which is intended for the safeguard of the assessee so that excessive or arbitrary additions are not made by the AO. In other words, to our mind, under the provisions of s. 158BG, the CIT cannot propose a fresh addition or enhance an addition proposed by the AO. His role is only for the exercise of restraint and if he declines to grant approval in respect of any addition, it cannot be included. The canons of natural justice have to be observed by the AO while proposing the additions and in the present case no such dispute is raised before us. In other words, it is not the case of the appellant that the AO had not given him a proper opportunity of being heard before he framed the impugned order. The only objection is that the CIT had not given a similar opportunity of being heard before granting his approval under s. 158BG of the IT Act. In the view we have taken of the role of the CIT under s. 158BG, we are of the view that there is no mandatory requirement under this section for the grant of an opportunity of being heard to an assessee before the CIT grants the approval. In the case of Shri Mandir Sita Ramji vs. Governor of Delhi, cited supra, the apex Court observed as follows : "When a procedure is prescribed by the legislature, it is not for the Court to substitute a different one according to its notion of justice. When the legislature has spoken, the Judges cannot afford to be wiser." It appears in that case the statute prescribed a particular procedure which was violated and, accordingly, the relevant declaration was quashed as violative of the canons of natural justice. We do not find any such procedure prescribed in s. 158BG. In the case of The Government of Mysore & Ors. vs. J. V. Bhat, cited supra, the Hon'ble Supreme Court referred approvingly to the following comments made by the apex Court in an earlier decision, i.e., in Kraipak's case AIR 1970 SC 150 : "The concept of natural justice has undergone a great deal of change in recent years. What particular rule of natural justice should apply to a given case must depend to a great extent on the facts and circumstances of that case, the framework of the law under which the enquiry is held and the constitution of the Tribunal or the body of persons appointed for that purpose. Whenever a complaint is made before a Court that some principle of natural justice had been contravened, the Court has to decide whether the observance of that rule was necessary for a just decision on the facts of that case.
The rule that enquiries must be held in good faith and without bias, and not arbitrarily or unreasonably, is now included among the principles of natural justice." From the above remarks it appears that while it is mandatory to observe the principles of natural justice whenever an administrative or quasi-judicial decision is taken to the prejudice of the citizen, it does not follow that an opportunity of being heard has to be allowed even when an administrative authority acts only as a check on the arbitrary exercise of powers by the lower echelons in the administrative hierarchy. Of course, the decision of the Madras Bench of the Tribunal cited by the learned counsel for the appellant has taken a different view in the matter but this decision has been considered by the Bangalore Bench of the Tribunal in the case of Kirloskar Investments & Finance Ltd. vs. Asstt. CIT (1998) 67 ITD 504 (Bang) and the Tribunal held that in terms of s. 158BG of the IT Act, the CIT was not required in law to provide an opportunity of being heard to the assessee before he grants the requisite approval under s.
158BG. A similar view is taken by a different Bench of the Bangalore Tribunal in the case of Microland Ltd. vs. Asstt. CIT (1999) 63 TTJ (Bang) 701 : (1998) 67 ITD 446 (Bang). Respectfully following the two decisions of the Bangalore Bench of the Tribunal we have to reject the contention of the appellant that the assessment order deserves to be set aside on the ground that the CIT had not granted the requisite opportunity of being heard to the appellant. Accordingly, we reject the additional grounds taken by the appellant in this regard.
7. On merits, the thrust of the argument of the learned counsel for the appellant is that the seized gold of 49 kgs. belonged to the non-resident passengers and there is evidence of the purchase of the gold in Dubai and also vouchers in support of the payment of customs duty by them. In the circumstances, it is pleaded that the appellant who is simply an employee of M/s. New Robinson Tours & Travels should not be saddled with the ownership of the gold and the consequent tax liabilities. It is also disputed that the gold was found in his possession or seized from him. It is also pleaded that any presumption under s. 132(4A) is not available for regular assessment and in this context reliance is placed upon the decision of the Allahabad High Court in the case of Pushkar Narayan Saraf vs. CIT (1990) 183 ITR 388 (All). In respect of the additions made by the AO towards the gold of 65 kgs. valued at Rs. 3,05,50,000, being the July consignment at Delhi and the other consignment of 55 kgs. (105-50) in November included is Rs. 5,25,90,000, it is pleaded that these additions were made simply on surmises and the only basis is the statement of the appellant taken during the search and assessment proceedings. It is pleaded that all along the appellant has been pleading that he was only an employee of M/s. New Robinson Tours & Travels and his statement is believed in part and rejected in part so as to suit the purpose of the Revenue. It is pleaded that the Revenue cannot reject his role as employee and saddle him only with the liability arising from his admission of receiving some consignments on behalf of M/s. New Robinson Tours & Travels.
Adverting to the remarks of the AO that M/s. New Robinson Tours & Travels does not exist at least at the address specified by the appellant, it is mentioned that the details or results of such enquiries made by the Department in respect of this concern were never put to the appellant and no adverse inference should be drawn on the basis of such enquiries which were conducted behind the back of the appellant. It is also pleaded that, in the alternative, the appellant can be treated only as carrier of gold and not as the owner of the gold and for this proposition reliance is placed upon the decision of the Tribunal in the case of Miss Rose Ben vs. Asstt. CIT (1998) 65 ITD 57 (Mumbai).
8. The learned Departmental Representative on the other hand countered by taking us through the depositions of the appellant given at the time of the search and thereafter and pleaded that the appellant had all along been evasive in his replies. He has also invited our attention to Annexure 'A' to the assessment order in which the appellant has given different names and addresses of the persons involved at different points of time to frustrate all enquiries. He has also invited our attention to the relevant Panchnama and pleaded that 49 and odd kgs. of gold was seized from the appellant from Room No. 206 of Hotel Agarwal and so it is contended that there is no basis for the contention for the learned counsel that it was not found in his possession. In this context, the learned Departmental Representative invited our attention to the judgment of the Gujarat High Court dt. 5th February, 1997, in Special Civil Appln. No. 10107 of 1995, which is a writ petition filed by one of the non-resident passengers claiming ownership of the gold and its recovery from the custody of the IT Department who had seized it wherein the Hon'ble High Court observed that the clandestine manner in which the gold was brought was sufficient to raise the suspicion of the IT authorities and accordingly upheld the validity of the authorisation issued under s. 132 and also held that the gold was seized from the possession of the appellant, who is respondent No. 5 in that civil application. The relevant observations of the Hon'ble High Court are as follows : "It is disputed by Mr. Shah that the gold was seized from respondent No. 5. He maintains that the gold was seized from the writ petitioners. However, on perusal of the statements recorded by Police Inspector Shri Bawa, in course of investigation by him and the statements recorded by the IT authorities, in course of search carried out by them, it is evident that the gold was handed over to respondent No. 5 at Ahmedabad Airport and that it was seized from respondent No. 5 at Agarwal Hotel. We, therefore, do not believe the contention of the petitioners that the gold was seized from them.
We are afraid, we cannot accept the contention raised by Mr. Shah that once the gold was lawfully brought in and proper customs duty was paid, the same should not have been pursued by the IT authorities. Buying gold in foreign country and bringing it in this country after paying customs duty in foreign exchange does not absolve the person, bringing gold from abroad from his liability to satisfy that the gold was purchased from the income lawfully earned by him and the income earned out of sale of such gold would be disclosed for the purpose of the Act. The clandestine manner in which the gold was brought in was sufficient to rouse suspicion of the IT authorities that the income earned from the sale of the gold would not be disclosed for the purposes of the Act. Thus, in our view, the IT authority had sufficient material, before it to form the opinion as envisaged under s. 132 of the Act ....." Respondent No. 5 in the above application is the appellant before us.
The learned Departmental Representative pleaded that as the gold was seized from the possession of the applicant, the onus of proving that he is not the owner of the seized gold lay squarely on him and this onus is hardly discharged. He also supported the otherwise additions, i.e., additions besides the value of 49 and odd kgs. of gold seized, on the ground that those additions are made entirely on the basis of the admission of the appellant himself and it is evident from the statements recorded from him that the appellant has been carrying on business in smuggling of gold.9. The learned counsel for the appellant, in his rejoinder, mentioned that the appellant had never gone abroad and so there is no question of his having bought the gold in Dubai. It is also reiterated that there is no iota of evidence that the appellant was the owner of the gold in respect of any of the consignments brought to tax by the AO. It is pleaded that this is particularly so in respect of the other consignments, i.e., those other than the 49 and odd kgs. of gold which is seized. It is stressed that in all the depositions, the appellant had consistently deposed that Shri Noorbhai is the owner of the gold and so there is no basis at all for making the impugned additions in the hands of the appellant. It is also pleaded that the addition has been made under the provisions of s. 69, which is not applicable in the case of the appellant as the provisions of this section apply only in a case where the investments are not recorded in the books of an assessee and it is not the case of the appellant that he had maintained any books of account. It is of course concealed that the provisions of s.
64A are attracted in the case of the assessee in case it is to be held that he is the owner of the gold.10. We find we have to sustain the addition made by the AO towards the value of the 49 and odd kgs. of gold seized, which is Rs. 2,44,22,090.
It is clearly mentioned in the Panchnama, which may be seen at p. 10 of the appellant's paper book (APB) that they were seized from Room No.206, Agarwal Hotel, Ahmedabad, and this room was under the occupation of the appellant. The Police Inspector, Shri K. C. Bawa, who gave the intimation to the IT authorities about the gold and who was the first authority to visit the appellant in Room No. 206, Agarwal Hotel, Ahmedabad, filed a revised affidavit before the Hon'ble Gujarat High Court, which may be seen at pp. 204 to 209 of the APB, in which he clearly mentioned that the appellant was, "in fact, found in possession with the gold along with five others" but these five others are not the non-resident passengers. He also mentioned that the other passengers were occupying an adjoining room, i.e., Room No. 202 of Hotel Agarwal.
Two depositions were taken by the IT authorities on the date of the search, i.e. on 13th November, 1995 at 12 noon and at 5.30 p.m. and in neither of these two statements the appellant disputed that the gold of 49 and odd kgs. was seized from his possession. Copies of these two statements can be seen at pp. 27 to 36 of the APB. We may also mention that the same position emerges from the affidavits of Shri R. P. Meena, Asstt. Director of IT (Inv.) filed before the Hon'ble Gujarat High Court, and copies of these may be seen at pp. 210 to 231 of the APB.Further, we are of the view that this matter is beyond dispute at this stage in view of the clear finding of the Hon'ble Gujarat High Court, which we have extracted hereinabove, in Special Civil Appln. No. 10107 of 1995 to the effect that the gold in question was seized from the possession of the appellant. So we have to hold that the gold in question of 49 and odd kgs. was seized from the possession of the appellant and he is answerable for the same in view of the decision of the apex Court in the case of Chuharmal vs. CIT (1988) 172 ITR 250 (SC), wherein as per the headnote it has been held as follows : "Held, dismissing the petition and affirming the decision of the High Court, (i) that what was meant by saying that the Evidence Act did not apply to proceedings under the IT Act, 1961, was that the rigour of the rules of evidence contained in the Evidence Act was not applicable; but that did not mean that when the taxing authorities were desirous of invoking the principles of the Evidence Act in proceedings before them, they were prevented from doing so.
(ii) That all that s. 110 of the Evidence Act, 1872, did was to embody a salutary principle of common law jurisprudence, viz., where a person was found in possession of anything, the onus of proving that he was not its owner was on that person. This principle could be attracted to a set of circumstances that satisfy its conditions and was applicable to taxation proceedings." 11. We are of the view that the appellant has not discharged the onus of proving that he was not the owner of the gold found in his possession. The gold was bought in Dubai but it does not automatically follow that the appellant has nothing to do with that gold. As the AO observed, money could be sent in foreign exchange through the havala channels. There is also a contradiction, inasmuch as before the Hon'ble Gujarat High Court, in the context of the abovementioned special civil application, the appellant gave it in writing that the gold could be released to the writ petitioners who were the non-resident passengers, as he had nothing to do with the gold. But in the depositions given by the appellant before the IT authorities, he had been claiming that the gold belonged to one Shri Noorbhai who was staying in Dubai and it was to be handed over to Shri Ahmed Bashir of New Robinson Tours & Travels.
If the gold belonged to the non-resident passengers it is not clear why they could not keep it with themselves and why it was handed over to the appellant for being kept in Room No. 206 of Hotel Agarwal on that fateful night when it was noticed by the police authorities in the hotel. If, on the other hand, it belonged to Shri Ahmed Bashir, as claimed in the depositions, it is not clear how the appellant could state before the Hon'ble Gujarat High Court that it could be released to the non-resident passengers as it was obviously his responsibility to hand it over to either Shri Noorbhai at Dubai or to Shri Ahmed Bashir at Mumbai as he received the gold on their behalf and it was seized from his possession. Apart from this, there are a number of discrepancies in the depositions of the appellant. At one stage, he mentioned that it belonged to one Shri Ahmed Bashir of Dubai.
Subsequently, he mentioned that it belonged to one Shri Mohd. Ali and still later, to one Shri Vali Mohd. Different addresses were also given of the said Shri Ahmed Bashir. In the deposition taken at 8th November 1995 at 11.40 a.m., which may be seen at pp. 13 to 26 of the APB, in reply to question No. 1, he replied regarding himself as follows : "My name is Mohmed Rafiq Abdul Hamid Konkani. My age is 33 years. I can read and write Hindi very well. I am conducting travel agency from the year 1991-92 named as M/s. New Robinson Tours & Travels at ground floor, Shop No. 9, Mohmedali Road, Rukhia Manjil, Mumbai-3 Tel No. 3769489. My residence is at National Mansion, 2nd Floor, R. No. 4, Bhuleshwar, Pyodhonie, Mumbai 3. I reside there along with my wife Sairabano, Mohd. Rafiq and with two children named Mohd Hussain and Md. Rafiq." In the deposition taken from him at 6 p.m. on the same day, i.e. 8th November, 1995, which may be seen at pp. 27 to 30 of the APB, he gave his office and residential address as follows : Ans. My office address is 91, Samuel Street, 1st floor, near Masijid Bandar, Dongri, Mumbai 9. Tel No. 3739406 and 3747000.
Ans. Address of my residential premises is R. No. 42nd floor, Katija Manzil, opp. Mum. Urdu School, Nagpada, Mumbai 8." In this deposition, he gave his name as "Mohd. Rafiq Abdul Hamid". As already mentioned in the first deposition taken at 11.40 a.m., he mentioned that he was sent by Shri Ahmed Bashir, the Manager of M/s.
New Robinson Tours & Travels. In the second deposition, it is mentioned as follows : Ans. Myself, Abdul Salim Patel, Mohd. Alim, Javed Shaikh among us Mohmed Ali is the boss. Noor Mohmed who resides at Dubai he works on behalf of our owner, and take work from us.
Q. 6. Previous statement given by you in that you have stated that Bhasir Mohd is your manager, now states as Mohmed Ali like that whose name is correct Ans. It is Mohmed Ali. I have written wrong name of Bashir Ahmed.
Kindly pardon me.
Q. 7 One more chance is given to you. If you have stated any false facts in previous statement, if so tell now Ans. Due to mistake I had stated false facts, for the same I may be excused.
Q. 8 Now tell me gold which are caught from you to whom and where you giving Ans. The same are given to Mohmedali at Mumbai. On the address of Mohmedali we conduct our work, and instructions are received from Dubai to Mohd. Ali." We are driven to the conclusion that the appellant had all along been evasive. As argued by the learned Departmental Representative, the gold of 49 and odd kgs. which was seized must belong to some person and in the depositions given by the appellant before the Revenue authorities, it was not his case that it belonged to the non-resident passengers.
The claim has been that it belonged to somebody else, whether Noorbhai or Mohd. Ali or Vali Mohd. or Ahmed Bashir. It is of course true that the appellant never admitted that it belonged to him, nor was it his contention that it belonged to the non-resident passengers. Even the non-resident passengers themselves deposed on the date of the search that it did not belong to them and that they were only carriers on behalf of somebody else at Dubai. They clearly mentioned that they were given the necessary funds not only for the purpose of the gold but also for the payment of the customs duty. They also mentioned that their reward was air ticket to and fro from India and some extra money. It is only before the Hon'ble Gujarat High Court that they claimed ownership of the gold which was rejected by the said Court. The claim of the appellant that the results of the enquiries made by the Department about the whereabouts of M/s. New Robinson Tours & Travels or about the meagre resources of the non-resident passengers to prove that they could not have purchased the gold is not correct, is, to our mind, not really tenable, simply because the onus of proving that it did not belong to him squarely lay on the appellant as the gold was found in his possession and nobody creditworthy came forward claiming the ownership of the gold before the Revenue authorities and the appellant also did not produce anybody as the owner of the gold. The only claim made was by the non-resident ten passengers involved who in the initial stages themselves denied the ownership and admitted that they were only carriers. At any rate, the writ petition filed by them has been rejected by the Hon'ble Gujarat High Court, as mentioned earlier. In the circumstances, we are obliged to conclude that the appellant had not discharged the onus of proving that he is not the real owner of the gold seized from him and as there are no ostensible sources explaining this acquisition of gold, the AO was, to our mind, justified in bringing the same to tax under the provisions of the IT Act. His failure to mention the correct section, i.e. 69A, does not make the addition of Rs. 2,44,22,090 in the hands of the appellant invalid. The lapse, if any on the part of the AO in this context, has to be condoned in view of the provisions of s. 292B of the IT Act. We have also to reject the alternative contention advanced on behalf of the appellant that he is only a carrier. The case of the appellant is not on par with that of Miss Rose Ben vs. ITO, cited supra, by the learned counsel for the appellant in this context. Firstly, Miss Rose Ben was a solo actor, whereas the appellant is part of an organised activity. She was a regular airhostess who, by virtue of her job can conveniently be used as a carrier, whereas the appellant is the destination of the errorts of ten non-resident passengers who serve as carriers. After the gold reached the appellant, there is no clue and way to the path the gold was to take. Further, Miss Rose Ben returned commission income in her regular returns from a concern called "Wonderworld", which was not identified, giving rise to a plausible suggestion that she was returning her income from underworld as a carrier. Because of these distinguishing features, we are of the view that the decision in the case of Miss Rose Ben cannot be pressed into service by the appellant and he cannot be treated simply as a carrier.
12. While we sustain, as mentioned above, the addition of Rs. 2,44,22,090, we cannot say the same thing about the rest of the additions made by the AO. There is no evidence in support of those additions, except the admission by the appellant in the course of the depositions that he was involved in the receipt of some consignments of gold. He has only admitted that he was only an employee. The admission of the appellant cannot be accepted in part and rejected in part to the prejudice to the appellant without any other additional evidence connecting him with the possession of gold. The appellant has of course admitted that he handed over certain bills of the gold ornaments to different parties at Mumbai but no enquiries have been made with those parties by the AO and no material has been brought on record connecting the appellant with those alleged sales to the parties. In the circumstances, we are of the view that no other addition, except towards the value of the seized gold of 49 and odd kgs. can be made in the hands of the appellant. We accordingly delete all the other additions.
13. The AO has made a separate addition of Rs. 3,00,000 towards unexplained investment in the renovation of house by the appellant.
Compared to the addition of Rs. 2,44,22,090 which we have sustained, the unexplained investment is a pittance. We must hold that the investment is explained from the undisclosed income brought to tax. We accordingly delete the addition of Rs. 3,00,000 also.
14. In view of the above, the addition of Rs. 2,44,22,090 is sustained.
The rest of the additions made by the AO are deleted.