Income Tax Appellate Tribunal - Mumbai
Nagurao Malku Gadge vs Income Tax Officer on 30 May, 2006
ORDER
Rajpal Yadav, J.M.
1. The assessee is in appeal before us against the order of learned Commissioner (Appeals) dated 6-10-2005 passed for assessment year 2002-03. The grounds of appeal taken by the assessee are not in consonance with rule 8 of ITAT Rules. They are descriptive in nature. In brief the grievance of assessee as projected in ground No. I relates to confirmation of an addition of Rs. 80,57,680 being unexplained cash found in the possession of the assessee. In the second ground the assessee has pleaded that sufficient and adequate opportunity was not granted to the assessee. Therefore, the impugned orders are deserves to be quashed, alternatively, they deserve to be set aside. In the last ground assessee is disputing levy of interest under sections 234A, 234B and 234C of the Act.
2. We have heard Shri S.M. Lala, learned Counsel for the assessee and Shri R.N. Parbat, learned Departmental Representative for the revenue.
3. The brief facts of the case are that assessee is a Class-IV employee in the Bombay Municipal Corporation. The Bombay Police got an information that assessee belong to Chhota Shakeel Gang and possessing a fake currency of Rs. 16 to Rs. 17 lakhs, having denomination of Rs. 500, which is going to be transferred from his residence of some other place. Therefore, the search was conducted at his residence on 19-5-2001 by the Police. During the course of search cash of Rs. 80,57,650 and gold ornaments worth Rs. 2.90 lakhs were found and seized from his house. The assessee was charge sheeted under Section 124 of the Bombay Police Act for possessing stolen property or property fraudulently obtained. A charge sheet under Section 124 of the Bombay Police Act was filed in the court of Additional Chief Metropolitan Magistrate, Explanade. A trial was started in the case bearing No. 272/P/03. In order to explain the possession over the cash it was contended by the assessee that it belong to 35 persons including assessee for constructing community hall at Kurla in the name of Shahpur Sadan and most of the people who have contributed for construction of such community hall belong to the assessee's native district. The assessee had given the list of all 34 persons along with details of contribution before the Additional Chief Metropolitan Magistrate and also produced all those 34 persons as a defence witness. Their statement were recorded and they were also subjected to cross examination by the learned Public Prosecutor. After going through all these evidences the learned Magistrate acquitted the assessee on the ground that assessee has explained his possession over the money and the court has no concern as to the source of income of the defence witnesses. This observation is duly discernible at page 13 of the Magistrate's Order, which is available at pages 223 to 237 of the paper book.
4. Since an exhorbitant cash was found at the premises of a Class IV employee, the assessing officer took cognizance and directed the assessee to explain the source of the cash found at his residence. The assessee reiterated his contention as were raised before the Additional Chief Metropolitan Magistrate Court. In order to explain the cash he submitted the judgment of the Court, statement of the 3 4 persons given before the Courts as well as their affidavit, however, when the assessing officer issued notice under Section 133(6) of the Act none of those persons had turn up. The assessing officer rejected the contention of the assessee on the ground that assessee failed to discharge the onus put upon him. Specific opportunities were given to the assessee on 2-12-2004 and 17-1-2005 with a direction to produce these 34 persons but assessee failed to produce these persons and due to the failure of assessee the assessing officer could not verify the alleged affidavit given by those persons, wherein they have owned up the money. The assessing officer further observed that assessee did not make any request for summoning these 34 persons under Section 131 of the Act. Under these circumstances the assessing officer concluded that assessee failed to explain the source of money and accordingly he made an addition of Rs. 80,57,650,
5. On appeal assessee has reiterated his contention as were raised before the assessing officer. The learned Commissioner (Appeals) has examined the issue in detail and confirmed the addition.
6. Before us while impugning the order of learned Commissioner (Appeals), Shri Lala, learned Counsel for the assessee took us through Section 124 of the Bombay Police Act, 1951. He also took us through the order of the Additional Chief Metropolitan Magistrate, wherein assessee has been acquitted from the charges. He pointed out that addition is made on the basis of the Police raid, therefore, it should be deleted in view of the finding given by Additional Chief Metropolitan Magistrate, wherein learned Magistrate accepted that the cash found at the premises of the assessee belong to the 34 persons and not to the assessee. In support of his contention he cited 11 judgments placed in the paper book. He further submitted that apart from the Magistrate's order assessee has filed affidavit of 34 persons as well as their statement recorded before the DDI and, therefore, it should not be construed that assessee is the owner of money found from his residence under the deeming provisions of Section 69A. He also contended that applicability of Section 69A as well as Section 68 operate in different fields and certain presumptions propounded in Section 68 would not be made applicable while invoking Section 69A of the Act, because under section-68 of the Act assessee is supposed to explain creditworthiness of the creditor apart from demonstrating genuineness of transactions as well as identifying the creditor, whereas under Section 69A assessee is not supposed to demonstrate the creditworthiness of the creditor. According to him learned Commissioner (Appeals) imported this condition from Section 68 while confirming the addition in the hands of the assessee. He submitted that assessee cannot be asked to prove the source of source as well as the addition cannot be made merely because the persons who have contributed the money did not turn up for giving statement before the assessing officer. Lastly he pointed out that expression "may" has been employed in sections 69 and 69A which suggest that it is not mandatory to make an addition in case if a person is found to be in possession of certain money, bullion or jewellery. The assessee is a Class - IV employee, it cannot be presumed that he had earned this much money out of unexplained sources. Therefore, his capacity to generate such huge asset would be a relevant factor before construing that the money belong to the assessee. In support of his contention he relied upon the judgment of Hon'ble Supreme Court rendered in the case of CIT v. Smt. P.K. Noorjahan . The learned Counsel for the assessee in order to substantiate as to how his arguments required to be appreciated relied upon 48 judgments and placed copies of these judgments in the paper book running into 400 pages.
7. On the other hand learned Departmental Representative relied upon the orders of the revenue authorities below and submitted that in response to the query of assessing officer, assessee failed to produce all the persons who have been alleged to be owner of the cash. In the absence of those persons it is difficult for the assessing officer to verify the credence of deposition made in their affidavits. He emphasized on the point that Section 124 of the Bombay Police Act vis-a-vis Section 69 of the Income Tax Act operate into two different fields. The acquittal of assessee in the criminal proceedings ipso facto would not absolve him from explaining the possession over the cash found at his residence. The yardstick or degree of evidence under both the proceedings for explaining the position of assessee are different, therefore, merely on account of assessee's acquittal by the Additional Chief Metropolitan Magistrate would not denude the assessing officer from its power for investigating the possession of assessee over the cash within the scope of Section 69A of the Income Tax Act.
8. We have duly considered the rival contention and gone through the record carefully. The first argument of learned Counsel for the assessee is that Police has conducted a search and recovered the cash from his residence. He has been charge sheeted under Section 124 of the Bombay Police Act. The learned ACMM but learned Court has acquitted him and therefore, in view of the ACMM's order the cash found at the premises of the assessee should be treated of 34 persons and no additions should be made. On due consideration of this argument we do not find any substance in it because Section 124 of the Bombay Police Act and Section 69A of the Income Tax Act operate in different fields. Let us take note of both the provisions.
Section 124 of Bombay Police Act : Possession of property of which no satisfactory account can be given.
Whoever has in his possession or conveys in any manner, or offers for sale or pawn, anything which there is reason to believe is stolen property or property fraudulently obtained, shall, if he failed to account for such possession or to act to the satisfaction of the Magistrate, on conviction, be punished with imprisonment for a term (which may extend to one year but shall not, except for reasons to be recorded in writing, be less than one month) and also liable to fine which may extend to (five thousand rupees).
Section 69A of Income Tax Act Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the assessing officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year.
9. On perusal of these provisions we find that while dealing with the charges framed against a person under Section 124 of the Bombay Police Act, the prosecution has to prove that a person is possessing stolen property or any property fraudulently obtained by him. It is for the prosecuting authority to prove the case. In rebuttal the accused has to just explain his possession over the property. The scope of enquiry on the part of learned Magistrate is to see whether the accused is having possession over the stolen property or property fraudulently obtained by him. The learned Magistrate is not required to consider the other sources of the property, whether such property had came into possession of an accused is accrued after payment of taxes under the income-tax Act or not. That is why the learned Magistrate in his order at page -13 has observed that the court is not concerned as to the source of income of the defence witnesses. The learned Magistrate's court has only examined whether such persons had contribution towards the Community Hall and such contribution landed in the hand of the assessee so that it can be construed that such cash was not a stolen property or a property fraudulently obtained by the accused. Therefore, the assessing officer cannot be denuded his powers for enquiring the possession of assessee over the cash within the meaning of Section 69A of the Act. The acquittal of assessee in any way will not affect the scope of enquiry required to be made by the assessing officer. No doubt the acquittal order as well as the statement of alleged 34 persons before the court can be good piece of corroborative evidence for explaining the possession over the cash.
10. On reading of Section 69A it revealed that if a person is found to be the owner of any money, bullion, jewellery or other valuable articles and such money is not recorded in the books of account, if any maintained by him for any source of income and he failed to explain about the nature and source of acquisition of such money, bullion, etc. or the explanation offered by him is not in the opinion of the assessing officer satisfactory the money would be deemed to be the income of the assessee for such financial year. No doubt assessee was found to be in possession of money. He has not denied the possession over the money. Therefore, it is the assessee who has to explain his position with regard to the possession over the cash, whether he can be considered as owner of the money or not. Section 110 of the Evidence Act provide that where a person is found in possession of anything the burden of proving that he is not the owner is on the person who affirms that he is not the owner. Thus it is burden upon the assessee to prove that he is not the owner of the cash. The Hon'ble Bombay High Court in the case of J.S. Parkar v. V.B. Palekar has held that on the basis of Section 110 of Evidence Act the assessing officer can infer that a person found to be in possession of valuable would be considered as owner of the valuables unless proved otherwise. This judgment though relied upon by the assessee but it goes against him.
11. Now the next question arises for our consideration is whether assessee has discharged his burden from explaining that lie is not the owner of the cash found from his residence. In order to explain his position the assessee has produced copy of the decision of learned ACMM vide which assessee has been acquitted from the charges framed under Section 124 of the Bombay Police Act. He has further filed the statement of the persons who appeared before the court and deposed on behalf of the assessee. He has also filed affidavit of such persons, wherein they have owned up the cash. In our opinion no doubt assessee has tried his best and produced the evidence but on the basis of these evidences it cannot be concluded that assessee has discharged the burden put upon him by virtue of Section 69A of the Income Tax Act. As observed earlier the acquittal order will not help the assessee to explain his position with regard to the liability put under the Income Tax Act provisions. Under Section 69A assessee has not only to disclose the persons to whom such cash is belonging to rather, the assessing officer is authorised to examine the source of such cash and Trial court in the criminal case has never examined the source of the cash. The next documentary evidence is alleged statement of 34 persons who appeared as defence witness in the Court. These persons have appeared on behalf of the assessee and deposed in his favour. Though they have been crossexamined by the learned Public Prosecutor but not with the angle of Income Tax proceedings. As we have observed earlier that Section 124 of the Bombay Police Act and Section 69A of the Income Tax Act operate in different fields, it is not worthy of credence to put implicitly reliance on such statement while considering the issue regarding explaining the source of the cash because in the Income-tax proceedings if assessee is able to explain the possession over the cash by demonstrating that it belongs to other persons then assessing officer can examine the other persons and whether they had explained the source of such money, if not then tax can be levied from those persons, wherein the criminal proceedings in the Bombay Police Act, there was no such scope of enquiry. The next evidence produced by the assessee is the affidavit of alleged 34 persons. But the assessing officer emphasized to produce all those 34 persons before him so that he can contradict them on the deposition made in the affidavit by cross examining them. In the absence of those persons and in the absence of cross examination the affidavit simply cannot be accepted as gospel truth. So in our opinion learned assessing officer has rightly directed the assessee to produce all 34 persons before him. The next argument advanced by learned Counsel for the assessee was that the statement of those 34 persons were recorded by the DDI. In this connection we find that learned Revenue authorities below have recorded a finding that enquiry at the level of DDI is at initial stage, whereas the assessment is going to be time-barred and that enquiry would in itself not make an addition because the income can be taxed only by virtue of an assessment order. Therefore, in our opinion the assessee failed to produce clinching material for discharging the onus put upon him for explaining the possession over the cash as well as source of the cash to the satisfaction of the learned assessing officer, within the meaning of Section 69A of the Income Tax Act.
12. The assessee had raised an alternative ground of appeal and pleaded that sufficient opportunity was not granted to him for producing the 34 persons or explaining his position with regard to the cash found from the residence. On perusal of the assessment order it revealed that exercise to, examine the 34 persons started somewhere in January 2005 and the assessment order has been passed in March 2005. According to the assessee all the persons are residing for away places and it was difficult to produce all such persons within such short spell of time and therefore, sufficient opportunity was not granted to the assessee. On due consideration of the arguments of assessee we find considerable force in it. Though prima facie assessee has taken certain steps for explaining his position with regard to the cash. He made his endeavour to explain his position by filing the acquittal order of the Trial Court, affidavit of 34 persons, statement of such persons given before the Court. All these circumstances indicate that assessee had bona fidely taken certain steps in explaining the position but due to paucity of time he could not produce all those persons. Therefore, we allow this ground of appeal and set aside the order of assessing officer and restore the issue before the assessing officer for fresh examination.
13. We have gone through the following judgments along with other relied before us and whose copies are available in the paper book.
1. CIT v. Mohd. Massoom (2001) 252 ITR 5961 (Del).
2. CITv. K.S. Bliatia (2001) 119 Taxman 857 (P&H).
3. CIT v. Somani Pilkington Ltd. (2004) 266 ITR 3881 (P&H).
4. A. Yonus Kunju v. CIT (1997) 92 Taxman 411 (Ker).
5. ITO v. T.K.Achuthan & Sons (1994) 49 TTJ (Coch) 551.
6. Rajmal Lakhichand v. Asstt. CIT (2001) 79 ITD 84 (Pune).
7. Shivji Manji Amba v. Dy. CIT (1995) 51 TTJ (Ahd) 61.
8. P.V. Basheer Ahammed v. ITO (1993) 44 ITD 604 (Coch).
9. Asstt. CIT v. Harsukh1al Dhirajlal Doshi (1999) 102 Taxman 297 (Raj) (Mag).
10. J.S. Parkars case (supra).
11. Mohan B. Samtani v. CIT .
12. CIT v. K.A. Abdul Kareem (1996) 88 Taxman 323 (Ker).
13. CIT v. C.P. Sarathy Mudaliar .
14. CIT v. Khimji Nenshi ( 1992) 194 ITR 1923 (Bom).
15. Jawahar Lal Oswal v. Asstt. CIT (1999) 71 ITD 324 (Chd).
16. Bafakyh Export House v. ITO ( 1995) 53 TTJ (Coch) 293.
17. ITO v. Nagardas Jashraj (1989) 28 ITD 386 (Ahd).
18. Sitaram Somani v. Asstt. CIT (1991) 39 TTJ (Jp) 609.
19. Hanutram Ramprasad v. CIT (1978) 114 ITR 19 (Gau).
20. CIT v. Sardar Gurudev Singh Gill (1995) 212 ITR 85 (Ori).
However on facts none of the judgment is applicable in the case of assessee such as Mohd. Massoom's case (supra). In this case on the basis of the orders of Customs Authorities it emerges out that assessee was not the owner of the gold ornaments. It is purely the conclusion arrived on appreciation of the facts that case and it does not lay down any proposition of law, Similarly J.S. Parkars case (supra) goes against the assessee, wherein the Hon'ble Bombay High Court has observed that under Section 110 of the Evidence Act revenue authorities can draw an inference of ownership against a person who found to be in possession of valuables. In K.S. Bhatia's case (supra) no ratio of law has been laid out. On the basis of the Sales Tax Authority's order addition has been made but the Joint Commissioner of Excise and Taxation set aside the finding of Sales Tax Authorities, therefore, it was construed that assessee in that case was not owner. It is again purely a conclusion on facts. Likewise assessee cannot draw any benefit from other cases.
14. The learned Counsel for the assessee raised one more argument wherein he submitted that Section 69A as well as Section 68 operate in different fields and certain presumption propounded in Section 68 would not be made applicable while invoking Section 69A of the Act. Because under Section 68 of the Act assessee is supposed to explain the creditworthiness of the creditor apart from demonstrating genuineness of the transaction as well as identity of the creditor, whereas under Section 69A assessee is not supposed to demonstrate the creditworthiness of the persons to whom money, bullion or jewellery alleged to be belonged to. Because under Section 69A if a person explains his position and proved that it belonged to someone else then the person who is possessing the valuable would not be required to explain the source. For buttressing his contention on this proposition he relied on the judgment of ITAT, Ahmedabad reported in Nagardas Jashraj's case (supra). On due consideration of this argument we do not find any force in the contention of learned Counsel for the assessee because in the judgment relied upon by the assessee the Tribunal has recorded a finding that assessee has not only explained the source of money found in his possession but also creditworthiness of the persons to whom such money was stated to be belonged. Therefore, as a matter of fact assessee has duly explained the creditworthiness of the person to whom such money belonged to in that case. The assessee cannot draw any benefit from this decision also. So he has to fulfil the requirement under Section 69A, which assessee miserably failed to fulfil as observed earlier. One of the contention raised by the assessee is that being a IV Class employee it was not possible for him to earn such huge cash and for this he has relied upon the judgment of Hon'ble Supreme Court rendered in the case of Smt. P.K. Noorjha (supra). We do not find force in this contention of the assessee because during the search by the Police Authorities money lending licence in the name of his wife was found. Certain rubber stamps indicating that assessee is attorney for his wife was found. Thus these materials indicate that apart from working as IV Class employee assessee is doing other activities. He is not a pardanaseen lady like Smt. P.K. Noorjha. Rather, he is an able bodied person who can earn money. Therefore, on the basis of Expression "may" employed in Section 69A, prima facie, assessee is precluded to raise the presumption of his inability to earn this much of money. This argument is also rejected. Thus on the basis of our findings recorded in para 12 be set aside all the issues to the file of assessing officer for fresh examination.
15. As regards the ground relating to charging of interest under Sections 234A, 234B and 234C, this is consequential to the main issue and therefore, it is also. set aside to the file of assessing officer.
16. In the result, the appeal of the assessee is allowed for statistical purpose.