K.S.JHAVERI,J. - (1.) By way of this appeal, the appellant has assailed the judgment and order of the Tribunal whereby the Tribunal has disposed of the appeal.
(2.) This Court while admitting the matter framed the following substantial questions of law:- "(i) Whether on the facts and in totality of the circumstances of the case and in law, the entire search and seizure proceeding was illegal and unauthorised for want of compliance of the mandatory provisions contained in Section 82 of the Act of 1994? (ii) Whether on the facts and in totality of the circumstances of the case, the income/fees of the partners earned individually with their own individual skill and expertise could have been added in the income of the partnership firm though there was no dispute among the partners about individual income/fees? (iii) Whether on the facts and totality of the circumstances of the case and in law, the CESTAT was correct in sustaining the levy and recovery of service tax on the amount of Rs. 10,59,000/- due to be received overlooking the provisions contained in Rule 6(1) of the Service Tax Rules, 1994? (iv) Whether on the facts and in totality of the circumstances of the case and in law, the finding of the ld. CESTAT in sustaining the disallowance of the discount is based on total misconception of law in overlooking the provisions contained in Rule 5(1) of the Service Tax Rules, 1994 moreso where the books of account, maintained by the appellant following the Accounting Standards issued by the ICAI, have been accepted by the Income Tax Authorities? (v) Whether on the facts and in totality of the circumstances of the case and in law, the sustenance of penalty under sections 76 and 78 of Act of 1994 was justified for the additions made on the basis of inferences and preponderance of probabilities moreso ignoring the mandate enshrined in Section 80 of the Act of 1994? (vi) Whether on the facts and in totality of the circumstances of the case, the income-tax authorities having scrutinized and accepted the total income/gross receipts of the assessee firm, it was just and proper for the CESTAT to have taken a different view without assigning any reason? (vii) Whether on the facts and in totality of the circumstances of the case and in law, the CESTAT was right in sustaining the additions in gross receipts made by AO merely on inferences, implications, analogy, consequently the levy and recovery of the service tax thereon is permissible in law?"
(3.) Mr. Naresh Gupta has raised contention that in view of the decision of this Court and Supreme Court even if the search and seizure is held to be illegal, the same documents can be relied upon. However, Mr. Gupta has relied upon the decision of this Court in case of Commissioner of Income Tax v. Smt. Umlesh Goel and Ors. reported in (2016) 387 ITR 575 (Raj.) wherein it has been held as under:- "16.3 Since by the exercise of the power a serious invasion is made upon the rights, privacy and freedom of the taxpayer, the power must be exercised strictly in accordance with law and only for the purposes for which the law authorises it to be exercised. If the action of the officer issuing the authorisation or of the designated officer is challenged, the officer concerned must satisfy the court about the correctness of his action. Therefore, in our considered view a search under Section 132(1) has to be "person specific". The Authority authorising search has to have information in his possession in respect of a person and such a person should be specifically named in search warrant and since names of the assessees having not figured in the authorisation of warrant as having been proved on the basis of Form 45 which has been reproduced by us in para 16 hereinbefore, the AO has exceeded its jurisdiction in issuing the notice under Section 158BC and initiation of the proceedings being invalid, all subsequent action of AO including order of assessment is not sustainable in law." 3.1 Another decision of this Court in case of Khanna Electric Stores v. The State of Rajasthan and Ors. (Civil Writ Petition No. 910/1988), decided on 24th September, 1992 wherein it has been held as under:- "13. The next question is that as to what is the effect of such illegal search and seizure? 14. Mr. Garg, learned Counsel for the petitioner submitted that once it is held that the search is illegal then those seized material cannot be used for assessing the tax liability of the petitioner. 15. We are afraid this contention of the petitioner cannot be sustained. It is true that the search and seizure both were illegal but still if it is found that the assessee has evaded the sales tax then the same can be used by the authorities for assessing his tax liability. 16. Mr. Mehta, learned Counsel for the respondents has invited our attention to S.G. Nadakattinavar v. Commercial Taxes Officer II Circle, Hubli (1975) 35 S.T.C. 484. 17. In that case, it was held that the courts should examine in each case whether the petitioner has been really prejudiced by the seizure of account books by the assessing authority or not. Each case has to be decided on its own merits. 18. Similarly, in the case of Agrawal Engineering Stores and Ors. v. The State of Uttar Pradesh and Ors. (1972) 29 S.T.C. 446, it was held that there is no constitutional impediment in the way of using the evidence obtained through illegal search and the common law permits the user of such evidence with certain exceptions. Therefore, such evidence need not be excluded from consideration in assessment proceedings under the Act. Therefore, each case has to be decided as to whether by seizure of the account books the other party has been prejudicated or not. But there is no prohibition if it is found from the books of account belonging to the assessee that the assessee has evaded the payment of sales tax, then the same can be used for assessing the liability of the incumbent after due notice to the assessee. After all a deliberate evasion of the sales tax is a public wrong and if the public wrong is brought to the notice of the assessing authority the authorities cannot ignore such public wrong. Therefore, simply because the account books which show the evasion of sales tax were seized in an illegal manner then too the same can be used for assessing the tax liability of the assessee after due notice to him. Thus, in our opinion, there is no prohibition for the taxing authorities to use these account books and registers seized from the premises of the incumbent for assessing the tax liability of the petitioner after due notice to the, assessee to account for the evasion on the basis of these account books and other incriminating documents. Thus, this contention of Mr. Garg is overruled." 3.2 He has relied upon the decision of the Supreme Court in case of R.M. Malkani v. State of Maharashtra reported in (1973) 1 SCC 471 wherein it has been held as under:- "24. It was said by counsel for the appellant that the tape recorded conversation was obtained by illegal means. The illegality was said to be contravention of Section 25 of the Indian Telegraph Act. There is no violation of Section 25 of the Telegraph Act in the facts and circumstances of the present case. There is warrant for proposition that even if evidence is illegally obtained it is admissible. Over a century ago it was said in an English case where a constable searched the appellant illegally and found a quantity of offending article in his pocket that it would be a dangerous obstacle to the administration of justice if it were held, because evidence was obtained by illegal means, it could not be used against a party charged with an offence. See Jones v. Owens (1870) 34 J.P. 759. The Judicial Committee in Kuruma, Son of Kanju v. R. (1955) A.C. 197 dealt with the conviction of an accused of being in unlawful possession of ammunition which had been discovered in consequence of a search of his person by a police officer below the rank of those who were permitted to make such searches. The Judicial Committee held that the evidence was rightly admitted. The reason given was that if evidence was admissible it matters not how it was obtained. There is of course always a word of caution. It is that the Judge has a discretion to disallow evidence in a criminal case if the strict rules of admissibility would operate unfairly against the accused. That caution is the golden rule in criminal jurisprudence. 25. This Court in Magraj Patodia v. R.K. Birla and Ors. (1971) 2 SCR 118 dealt with the admissibility in evidence of two files containing numerous documents produced on behalf of the election petitioner. Those files contained correspondence relating to the election of respondent No. 1. The correspondence was between respondent No. 1 the elected candidate and various other persons. The witness who produced the file said that respondent No. 1 handed over the file to him for safe custody. The candidate had apprehended raid at his residence in connection with the evasion of taxes or duties. The version of the witness as to how he came to know about the file was not believed by this Court. This Court said that a document which was procured by improper or even by illegal means could not bar its admissibility provided its relevance and genuineness were proved.";