Income Tax Appellate Tribunal - Ahmedabad
Income Tax Officer vs Ushakant N. Patel. (Also Ushakant N. ... on 29 April, 1993
Equivalent citations: (1993)47TTJ(AHD)226
ORDER
S. S. MEHRA, J. M. :
These matters are consolidated, for being disposed of by a single order, for the sake of convenience, as the parties, facts and issues are common.
2. First we take up Revenues ITA No. 646/Ahd/1987, for asst. yr. 1983-84. The appellant Revenue therein challenges the correctness of order dt. 29th Dec., 1986, of the learned CIT(A), Ahmedabad, for asst. yr. 1983-84, inter alia, on the following ground :
"The learned CIT(A) has erred in law and on facts in deleting the addition of Rs. 48,14,727 made under S. 69 of the Act."
3. Assessee, by status, is an individual deriving income from various partnership firms, income from house property, commission, interest and dividend. Accounting period was year ending 31st March, 1983. Return was filed on 13th Dec., 1983, showing income of Rs. 35,253. Assessment was framed on 27th March, 1986, on total income of Rs. 48,81,366 under S. 143(3) of the IT Act, 1961.
4. In the present case search and seizure operations, under S. 132 of the Act, were carried out on 3rd June, 1983 at the residence of the assessee, at 14, Nilima Park Society, Navrangpura, Ahmedabad. During the search operation two note books and 5 loose papers were seized. On scrutiny of such seized materials it was noticed by the Revenue authorities that monetary transactions for the period January, February and March had been recorded therein. Such materials consisted of a ledger, a cash book and five sheets containing various entries.
5. The statements of assessee were recorded on various statements (sic). In the said statements the assessee was said to have denied the ownership of those note-books and loose sheets. Assessees case was that those note-books and loose sheets had not been written by him and he did not know who was the owner author of those note-books and loose papers and how the same had come in his house. In fact the assessee pleaded complete ignorance about the contents of the note-books and loose sheets.
6. The Assessing Officer, through a show cause notice of 19th Feb., 1985, required the assessee to explain his position with respect to the said materials found and seized. On behalf of the assessee, a written explanation dt. 1st Oct., 1985, was brought on record stating therein :
"1. The note books and loose papers were lying near the telephone. It is possible that some one (friend or relation) might have used the telephone and later on forgot to take the note book. Later on when he came to know about the search at assessees residence, that person did not come to claim it. It is also argued that these diaries and loose papers were not found from the cup-board or any secured place but found from a place where everybody could notice them.
2. During the search at the residence and business premises, nothing has been found which can establish any kind of relation whatsoever between anything that has been found recorded in note books and loose papers.
3. In the circumstances of the case, it cannot be said that the note books and papers were found in assessees possession or control merely because they were found at his residence.
4. The presumption arising by virtue of the provisions of sub-s. 4A(i) of S. 132 to the effect that they belong to assessee stand rebutted, once the circumstances are considered in their entirety.
5. Merely because the diaries and loose papers were found from assessees residence, cannot entitle the ITO to come to the conclusion that the facts concerning the dairies and loose papers are especially within assessees knowledge.
6. In view of various case laws and commentaries quoted by the assessee, S. 106 of Indian Evidence Act cannot be applied to the case of assessee."
7. The Assessing Officer, after detailed enquiry and investigation and commenting upon the assessees stand, made an addition of Rs. 48,14,727, inter alia, with the following observations :
"The conduct of the person withholding the evidence may be attributed to a supposed consciousness that the evidence, if produced, would operate against him. The assessee Shri U. N. Patel, is deliberately withholding the evidence regarding ownership of these note books and loose papers as well as about their contents and therefore, it can be presumed that the evidence, is produced, would operate against him. The assessee has not divulged any information about the ownership of these notebooks had papers by stating. I do not know. This also amounts to refusal to answer a question and, therefore, it can be inferred that the answer, if given, would be unfavourable to him.
Considering the totality of circumstances and reference to various persons in the note books it can be presumed that (1) the assessee is the owner of the note books and loose papers, (2) the note book and papers have been written by him (3) the contents of the note book are true, (4) the note books contain the record of undisclosed financial transactions of the assessee.
The amount of Rs. 48,14,327 being the closing credit balances appearing in ledger are, therefore, treated as assessees unexplained investments, source of which has not been explained satisfactorily by assessee and, therefore, same is deemed to be the income of the assessee."
8. Such action the Assessing Officer was contested by the assessee, and before the learned CIT(A) detailed arguments and submissions are seen to have been made as is clear from pages 1 to 20 of the appellate order. It was denied that such documents were collected from the assessees residence. Further contention was that the assessee or any of his associates had nothing to do with those documents and the contents thereof. Assessee thus exhibited total ignorance about such seized documents and certain provisions of IT Act. Evidence Act, etc., were also highlighted. Reliance was also placed on certain ratios. The learned CIT(A), being convinced by the arguments made on behalf of the assessee, deleted the addition of Rs. 48,14,727 with the following observations :
"Upon a very careful consideration of the record, the arguments of the ITO as contained in the assessment order and her written submissions and those made by her during the hearing and the arguments on behalf of the appellant as enumerated above, I have arrived at the conclusion that in the facts and the circumstances of this case, the ITO was not justified in concluding that the impugned record actually belonged to the appellant, that he had written it and that he knew the contents thereof. In fact, the ITO has satisfied herself, after due investigation, that it was not written by the appellant. She has also shown that the record supports to be in the handwriting of any particular persons. I am also satisfied that in the totality of the facts and circumstances of this case, the ITO erred in placing the burden upon the appellant of showing to whom the record belonged, who had written it and what were its contents, by invoking the provisions of Ss. 106, 110 and 114 of the Evidence Act. I am further satisfied that there was no basis for the ITO to conclude that the impugned record showed that the appellant had made investments of Rs. 48,14,727 and that these were made in the financial year corresponding to asst. yr. 1983-84. In the result, she could not have invoked S. 69 and assessed the amount in asst. yr. 1983-84. I accordingly order that the addition of Rs. 48,14,727 be deleted."
9. Hence the present appeal by the Revenue; before us against the said deletion, inter alia, on the ground mentioned hereinabove.
10. The learned Departmental Representative, Shri K. P. Mandal, supported the assessment order and argued further that the relief had unjustifiably been allowed by the learned first appellate authority. He invited our attention to the provisions of S. 132(4A) of the Act, to point out that the documents so seized from the assessees residence, during the search operation, belonged to the assessee and it was for him only to explain the transaction and entries made therein. It was also for the assessee only, if he denies the ownership of those documents, to show with reference to tangible evidence that indeed such materials did not belong to the assessee or that it was existing in his residence without his knowledge. It was the contention of the learned Departmental Representative before us that there is no iota of evidence brought on record on behalf of the assessee to establish his disconnection with the materials seized. Shri Mandal argued that the impugned finding was incomplete as was said to have not dealt with all the facts and aspects of the case. According to the learned Departmental Representative the finding under challenge was required to be vacated and that of the Assessing Officer restored.
11. On behalf of the assessee the learned counsel Shri K. H. Kaji supported the finding under challenge and invited our attention to paragraph 18 at page 14 of the impugned order to point that the Assessing Officer had satisfied and observed that the handwriting in the seized record was not of the assessee or any of those persons connected with the assessee. It was submitted by the learned counsel that the said material was not from inside the house and that the same were found and seized from the passage of the house. It was further denied that writings in the documents were in the assessees hands. Further contention of the learned counsel was that the seized papers did not mention any dates to ascertain the relevant financial year. Further argument by Shri K. H. Kaji was that in the present case provisions of S. 69 of the Act do not apply. Endeavour by the learned counsel was also made to project that the house was jointly owned by the assessee and his wife and that the possession of the documents was not conscious. It was also submitted that S. 132(4A) of the Act did not apply and that the said provisions applied only to sub-s. (5) of the Act and not to assessees case. The learned counsel also placed reliance on the following ratios and findings.
(a) In the case of Pushkar Narain Sarraf vs. CIT (1990) 183 ITR 388 (All).
(b) In the case of Girdhari Lal Nannelal vs. CST, AIR 1977 SC 298.
(c) In the case of Ashwani Kumar vs. ITO (1991) 39 ITD 183 (Del) (paras 18 & 23)
(d) In the case of Second ITO vs. Maharashtra State Finance Corpn. Ltd. (1987) 28 TTJ 386 (Bom).
(e) In the case of ITO vs. Ghanshyamdas Hassanand (1986) 24 TTJ (Bom) 68.
(f) In the case of Biswanath Parasari vs. ITO (1992) 41 ITD 6 (Cal) (para 25).
On the basis of above submissions, ratios, and findings, the contention of the learned Counsel Shri Kaji was the the Assessing Officer erroneously fastened the case on the assessee and that the addition was unjustified and as such had correctly been knocked down by the learned CIT(A). The submission of the learned counsel was that there was no justification for any interference.
12. In reply, the learned Departmental Representative Shri Mandal refuted the submissions made on behalf of the assessee and confirmed the application of provisions of S. 132(4A) of the Act. His contention was that it was for the assessee to establish his case to get out of the relevant provisions and the consequences of application thereof. It was also pointed out that the ratios and findings made mention on behalf of the assessee were inapplicable because of the distinction in facts and circumstances. He also reiterated S. 69 of the Act was clearly applicable, that he, in conclusion, contended that Assessing Officer correct finding had unjustifiably been disturbed.
13. Submissions made on behalf of the contesting parties have been heard and records carefully perused. A careful scrutiny of paragraph 23 of the impugned order reveals that the learned CIT(A) made four points before allowing relief to the assessee. The first issue raised is that the Assessing Officer was not justified in concluding that the relevant seized record actually belonged to the assessee. His further finding is that the Assessing Officer had not proved that the assessee had made writing in those documents and that he knew the contents thereof. In this connections provisions of S. 132(4A) is clear. For the sake of clarification and understanding, the same is being reproduced as under :
"132(4A) : Where any books of account, other documents, money, bullion, jewellery or other valuable articles or things are or is found in the possession or control of any person in the course of search, it may be presumed -
(i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person;
(ii) that the contents of such books of account and other documents are true; and
(iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may be reasonably be assumed to have been signed by, or to be in the handwriting of any particular person, are in that persons handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested."
14. From the perusal of the above, it is seen that all the insinuations and inferences drawn by the learned first appellate authority are clearly seen to have been answered by the above proviso. There was no scope for any doubt or deviation as the position, in the circumstances of the assessees case, had been made abundantly clear by the legislature. In terms of the said proviso, the seized documents belonged to the assessee, the writing therein was of his and the transactions recorded therein were undertaken by him alone. In fact, after such seizure and such provision it was for the assessee to establish, with reference to the dependable evidence, that the seized material did not belong to him or he had not made the writing, and had not attempted the transactions mentioned therein. The assessee, as discussed earlier, is seen to have not done anything or brought any material to get out of the predicament he was placed in after the search, seizure and application of the provisions. The learned CIT(A) was thus clearly in error to point out that it was for the Assessing Officer to discharge the burden cast on the assessee in terms of the provisions of S. 132(4A). In fact, the burden was on the assessee to make attempt to get out of the situation. The approach and conclusion of the learned CIT(A) are patently erroneous in this respect. In fact the learned CIT(A) wholly misunderstood the facts and provisions and consequently arrived at an erroneous conclusion. This was, to say the least, indeed some sort of a perfunctory manner of discharging a quasi-judicial duty and deciding the issue involving stake of such magnitude we are concerned with.
15. The further inference of the learned CIT(A) is that the Assessing Officer had satisfied himself that it was not the assessees writing in the seized documents. We wanted to understand from the learned counsel, the basis for such inferences and finding. The learned counsel in this connection invited our attention to para 18 of the impugned order. We had the occasion of perusing the said para, and savonly submissions made on behalf of the assessee before the learned CIT(A). In the said submission it is seen to have been recorded that the Assessing Officer had satisfied herself that the handwriting in the seized records was not of the assessee or any of his persons. We thus naturally required the learned counsel to show us the basis for the assessees said submission. Naturally the learned counsel very meticulously went through the assessment order but could not show therefrom that the Assessing Officer had made any such observation anywhere. From the above narration it is clear that the learned CIT(A)s observation about the Assessing Officers satisfaction about the writing, was found to be baseless and the said finding to that extent again is erroneous. The learned CIT(A) thus was unjustified to draw such like inferences. In this respect also the learned CIT(A) is not seen to have properly arrived at a fair conclusion, on the basis of material placed on record and the relevant provisions. Impugned finding is not to have been properly recorded because of the above erroneous understanding of the factual position by the learned CIT(A). To this extent also the work completed by the learned CIT(A) is not proper and in accordance with law. This action again is an error in the order.
16. The learned CIT(A) also found fault with the Assessing Officers action on account of the difficulty of financial year. Such difficulty was to be visualised in accordance with the provisions and the date of search and seizure. The observation in this respect of the learned CIT(A) has again misled him to arrive at a wrong conclusion.
16A. These are the comments attempted by us in respect of the learned CIT(A)s reasons and finding for deleting the additions made by the Assessing Officer. In our considered view, all the reasons employed by the learned first appellate authority are baseless and useless. In fact the matter should have been decided on the basis of the material placed on record and the relevant provisions and the facts established on behalf of the parties. This exactly is seen not to have been done.
The learned CIT(A) thus is seen to have done her work in that fashion and manner which according to us has resulted in a wrong conclusion. In fact, these are the things the first appellate authority did while deciding the issue.
16B. We now will attempt to say as to what was not done by the learned first appellate authority.
17. It is seen on careful perusal and consideration of the order under challenge that the learned first appellate authority has not cared to comment upon the Assessing Officers reasons for arriving at the conclusion. In fact it was the primary duty of the learned first appellate authority to find fault with the reasons mentioned by the Assessing Officer in support of the finding. In the impugned order, the contribution of the learned CIT(A) is in paragraph 23 thereof and therein it is not seen that the Assessing Officers reasons have either been enumerated or commented upon. This is the first omission according to us on the part of the learned CIT(A).
18. The learned CIT(A) has also not commented upon the Assessing Officers comments on the contents of the cash book, ledger and five loose sheets. No conclusion of any manner is possible without commenting upon the Assessing Officers comments on the entries and transaction mentioned in the seized materials. This is a patent error and a further omission on the part of the learned first appellate authority.
19. The learned CIT(A) has also not discussed the assessees submissions made during the hearing of the first appeal, with reference to the Assessing Officers discussion in the assessment order. It means that while taking note of the assessees submissions, discussions of the Assessing Officer in the assessment order should have been kept in mind. This is also not seen to have been done. This is another error. Last but not the least is seen to be the omission in the form that the learned CIT(A) not at all commented upon the applicability and otherwise of provisions of Ss. 132(4A) and 69 of the Act. In the whole order we could not locate the finding wherein these provisions were discussed by the learned CIT(A). This also is an error, going to the root of the matter.
20. In the light of the preceding paragraph we are satisfied that the matter is not seen to have been discussed and decided by the learned first appellate authority in the manner it should have been. We have described hereinabove what the learned first appellate authority did which is considered to be erroneous by us and what was not done which is considered to be warranted by us. In nutshell the issue is not seen to have been decided properly. In absence of the proper application of mind, discussion and decision by the learned first appellate authority, we are also at a loss to understand as to what to do with the issue at hand. Proper course of action to us appears to be that the finding under challenge be vacated and the matter thereafter restored to the file of the learned first appellate authority for fresh decision in accordance with law and, of course, after taking note of our observations. We do the same.
21. Since the matter is being restored to the learned first appellate authority, we do not consider it necessary and advisable to comment upon the ratios and findings pointed out before us on behalf of the assessee. We, however, observe that the learned first appellate authority will be at liberty to look into the same if the circumstances so warrant. We leave it at that.
22. Relevant pages of the paper book have been gone through.
23. In the result appeal is allowed for the purpose of statistics.
24. Next we will take up the assessees C. O. No. 44/Ahd/87 arising out of ITA No. 646/Ahd/1987 for income-tax asst. yr. 1983-84. First issue raised in the C. O under consideration is against the confirmation of the estimate of Rs. 45,000 on account of household expenses. According to the assessee the actual household expenses were of the order of Rs. 26,185 and not of Rs. 22,251 as understood by the Assessing Officer. It was also explained that for preceding asst. yr. 1982-83, SMC Bench of Tribunal, Ahmedabad, vide order dt. 26th July, 1990 had confirmed the confirmation of the assessees household expenses at Rs. 25,010 only and that the Assessing Officer was not justified to estimate or confirm such expenses at Rs. 45,000.
24A. After hearing the submissions and taking note of the assessees status, standard, earnings, the inflation rate and the finding of the Tribunal, we are satisfied that, to meet ends of justice the assessees household expenses are confirmed at Rs. 30,000 in place of shown by the assessee and confirmed by the CIT(A). Order under challenge be modified to the above extent. Another issue raised by the assessee before us is that the learned CIT(A) was unjustified in upholding A. L. V. of half portion of self-occupied house property of the assessee at Rs. 24,000. According to the assessee such valuation should be determined on the basis of the A. L. V. determined by the Municipal Corporation.
24B. After hearing the submissions and perusing the records it is seen that this ground of the assessee is required to be allowed in view of the Tribunals order (supra) wherein a similar issue for that year i.e., 1982-83 was decided accordingly. A. L. V. of the assessees portion will thus be determined on the basis of the Municipal Corporation rates.
25. The C. O. is allowed in part.
26. In the end we take the Revenues Appeal No. 2715/Ahd/1988 for asst. yr. 1984-85. The first issue raised before us is against the deletion of the addition of Rs. 32,000 made under S. 69A of the Act.
27. On perusal of records it is seen that the addition was made by the Assessing Officer on the basis of such addition for immediately preceding year i.e., 1983-84. Such addition was vacated also for the reasons of learned CIT(A) for that year. We had the occasion of deciding the Revenues appeal on similar issue for that year i.e., had the occasion of deciding the Revenues appeal on similar issue for that year i.e., 1983-84. After detailed discussions we have restored the matter to the file of the learned first appellate authority for fresh decision in the light of our observation made therein. Keeping that finding in focus, we vacate the finding under challenge and restore the matter to the file of the learned CIT(A) for fresh decision keeping our observation in view made for asst. yr. 1983-84. We direct accordingly.
28. Another issue raised on behalf of the Revenue is against the confirmation of the withdrawal of Rs. 33,000 considering sufficient for assessees household expenses.
29. After hearing the submissions and perusing the record and keeping our findings on this issue for asst. yr. 1983-84 in the assessees case in view, we confirm the estimate of household expenses for the year under consideration at Rs. 36,000. Order under challenge is modified to the above extent.
30. In the result the Revenues appeal is allowed in part.
31. ITA No. 646/Ahd/1987 is allowed for statistical purposes whereas C. O. No. 44/Ahd/87 and ITA No. 2715/Ahd/1988 are allowed in part.