Income Tax Appellate Tribunal - Cochin
Smt. Sheeba Raphel vs Assistant Commissioner Of Income-Tax on 7 January, 1998
ORDER
T.A. Bukte, J.M.
1. This is an appeal by the assessee against the order of the Asstt. CIT (AO) dt. 19th December, 1996, passed under s. 158BC of the IT Act, 1961, for the block asst. yrs. 1986-87 to 1996-97 on a total undisclosed income of Rs. 10,41,635.
2. We have heard the learned Departmental Representative, Sri Shaji P. Jacob and the assessee's learned counsel, Shri T. M. Sreedharan. Their arguments are taken into consideration.
3. The learned counsel for the assessee submitted that the AO has disbelieved the cash credits in the names of Shri Kochunni alias Scaria, Sri K. C. George and Sri M. D. Thomas. The AO treated the credits in the names of these persons as the undisclosed income of the assessee. Sri Sreedharan further submitted that the AO erred in valuing the society of gold at the rate of Rs. 400 per gram as against Rs. 360 per gram declared by the assessee. According to him, there were no justifiable reasons for enhancing the value per gram of stock of gold. He has also erred and not justified in making the addition on account of deficiency in drawings especially estimating the same by varying it from the amounts mentioned in the pre-assessment notice. According to Sri Sreedharan, the addition on account of deficiency in drawings in unwarranted. He has also submitted that the assessee is not the owner of the building and as such he ought not to have included any income from the property other than that declared by her. Lastly, he submitted to delete the additions made by the AO.
4. The learned Departmental Representative, Sri Shaji P. Jacob submitted that the valuation per gram of stock of gold, the addition on account of deficiency in drawings and the value of the building as also the value of the building in the names of the assessee are proper. Therefore, the learned Departmental Representative argued at length on treating the credits in the names of the abovesaid persons as the undisclosed income of the assessee. The rival submissions will be referred to wherever necessary.
5. So far as the addition of the cash credits in the names of Sri Kochunni alias Scaria, Sri K. C. George and M. D. Thomas are concerned, during the asst. yr. 1992-93 the loan from Sri K. C. George amounting to Rs. 40,000 was introduced. A confirmation letter dt. 4th November, 1996, was filed. The assessee claimed that this amount was paid to her by cheque. However, the assessee did not adduce any evidence regarding the capacity of the creditor to advance the said amount. Though the amount was claimed to have come out of the proceeds of a Kuri, no details regarding Sri George, being a member of the Kuri, was produced. Therefore, the AO held that this credit was not fully explained and treated the same as the undisclosed income of the assessee.
6. During the asst. yr. 1994-95, the loans in the names of Shri M. D. Thomas and Shri Scaria were introduced. Loan of Rs. 7,000 was introduced in the name of Sri M. D. Thomas and loan of Rs. 8,000 was introduced in the name of Sri Scaria. Sri Thomas filed a confirmation letter dt. 4th November, 1996. The AO held that this confirmation letter did not prove the payment of loan to the assessee. Nothing was produced regarding the loan taken from Sri Scaria amounting to Rs. 8,000. Therefore, the AO treated the above two loans as the undisclosed income of the assessee. Thus, he made additions of the said amounts to the income of the assessee.
7. The learned counsel for the assessee, Sri T. M. Sreedharan produced confirmation letters from Sri P. V. Kochunni alias Scaria, Sri K. C. George and Shri M. D. Thomas, which are at pp. 16 to 18 of the paper book. Sri Scaria stated in the confirmation letter (p. 16 of the paper book) that he advanced four amounts on different dates amounting to Rs. 75,765.50 to the assessee by way of Kuri subscriptions to Good Shepherd Chitties. Sri P. V. Kochunni alias Scaria is the father of the assessee. Apart from this, he has further stated in his confirmation letter that he had advanced a sum of Rs. 8,000 during the year ended 31st March, 1994, to the assessee as financial assistance. He has also tried to mention that he owned five acres of coconut and arecanut garden. He was also working as a Srirastdar in the Magistrate Court on a monthly salary of Rs. 3,000 at the relevant time. He further stated that he was staying in his own house with wife and his approximate personal and family expenses during the period was around Rs. 2,000 only per month. He has not, however, specifically mentioned whether the expenses of Rs. 2,000 were per month or per annum though he has mentioned his income was per month. He has mentioned that the above amounts were given to the assessee out of love and affection.
8. Sri K. C. George confirmed the advance of Rs. 40,000 to the assessee in the confirmation letter dt. 4th November, 1996 (p. 17 of the paper book). He has stated that he give financial assistance of Rs. 40,000 to the assessee, who is his sister-in-law. He stated that the payment was by a cheque from him savings bank account with Catholic Syrian Bank Ltd., Thrissur, the cheque No. being 374/89. This payment was during the period ended 31st March, 1992. He has not stated anything about the source of his income to make the advance.
9. Similar is the case with Sr. M. D. Thomas, who had alleged to have advanced a sum of Rs. 7,000 to the assessee by way of financial assistance during the year ended 31st March, 1994. He had only stated that the advance was out of his savings.
10. The AO issued a letter dt. 4th December, 1996 (pp. 1 to 4 of the paper book) to the assessee calling upon her to furnish explanation and source for the amounts in the following assessment years :
Asst. yr. Amount (Rs.)
1986-87 15,253
1987-88 15,217
1988-89 46,495
1989-90 22,800
1990-91 1,11,000
1991-92 4,36,431
1992-93 98,420
1994-95 15,000
1995-96 9,000
1996-97 9,88,965
The AO had mentioned in the above letter that during the course of a search under s. 132 of the IT Act, 1961, on 20th December, 1995, a number of documents were seized and the materials showed concealment of income for the block period as mentioned above. He had also mentioned that during the asst. yr. 1996-97, there was evidence for introducing unaccounted sales of gold which has been confirmed by Sri K. O. Anto, the manager, in his statement. On the basis of the statement and the evidence available, the AO held that the income from business outside the book was to be estimated at Rs. 10,00,000. During the course of search, 2,108.667 grams of gold was found unaccounted lying as stock in the shop. The value of this stock was estimated at Rs. 469 per gram to include the same in the block period assessment at Rs. 9,88,965. The AO has also mentioned that during the course of the search an amount of Rs. 3,65,000 was also found unaccounted. That amount was seized. As the source for this amount was not satisfactorily explained, the AO stated that this sum would also be included as the unaccounted money of the assessee.
11. Regarding the low drawings, the AO mentioned in the letter dt. 4th December, 1996, that the assessee has been leading an ostentatious life which required a lot of money to meet her social and domestic requirements. No separate drawings were reflected in this case or any availability of income was reflected. Therefore, according to the AO the expenditure incurred for the above activities has to be taken out of the concealed income of the assessee. He accordingly estimated such expenditure in order to include the same in the assessment at Rs. 15,000 for each of the asst. yrs. 1986-87 and 1987-88, Rs. 20,000 for each of the asst. yrs. 1988-89, 1989-90 and 1990-91, Rs. 25,000 for each of the asst. yrs. 1991-92, 1992-93, 1993-94 and 1994-95 and at Rs. 30,000 for each of the asst. yrs. 1995-96 and 1996-97.
12. Regarding the receipts and payments of Kuri companies, the AO noticed that from Good Shepherd, Guru Vijaya and Damian Kuries, the assessee received Rs. 3,00,000, Rs. 60,000 and Rs. 79,899 respectively, whereas the payments recorded were only Rs. 68,035, Rs. 24,255 and Rs. 28,035 and the Kuries were seen closed. The AO called upon the assessee to explain the source for the payments of the difference to the Kuri companies. In the absence of proper explanation for this expenditure, the balance of the above amounts totalling Rs. 3,05,974 was proposed to be included as unexplained investment made during the relevant period. He has also called upon the assessee to produce proof regarding the genuineness of the loans or evidence for not including the said loans in her income. He has further called upon the assessee to produce the creditors for his examination.
13. The assessee furnished explanation by her reply dt. 5th December, 1996, (p. 5 of the paper book). According to her, her father, Sri P. V. Kochunni alias Scaria made payments as follows :
Asst. yr. Amount (Rs.)
1986-87 13,253
1987-88 15,217
1988-89 16,495
1989-90 22,800
The above were the alleged payments made by the assessee's father on her behalf towards contributions to Good Shepherd Chits during the years ended 31st March, 1986, 31st March, 1987, 31st March, 1988, 31st March, 1989, and 31st March, 1990. He had filed confirmation letters. According to the assessee, she received loan of Rs. 30,000 from her brother-in-law, Sri P. A. George by a cheque from his savings bank account No. 764 with the United Commercial Bank, Karukutty. Sri P. A. George's confirmation letter is also on record. According to the assessee, she received an amount of Rs. 60,800 from Guru Vijaya Trading Co., towards Kuri contributions to Good Shepherd Chits during the year ended 31st March, 1990, relevant to the asst. yr. 1990-91. She has also mentioned that she filed cash flow statement for Rs. 51,000 shows as Kuri payments made by Sri Rappai alias Raphael on her behalf, during the year ended 31st March, 1990. According to her the actual amount debited in her account in the books of Sri Raphael upto 31st March, 1990 was Rs. 56,291.41 and a confirmation letter from Sri Raphael was also filed. She has also mentioned that she received a sum of Rs. 2,70,000 by cheque as financial assistance from Sri Raphael in the asst. yr. 1991-92. This was also confirmed by Sri Rapheal. In addition to the above sum, an amount of Rs. 52,574 was debited in her account as per the books of account of Sri Raphael towards Kuri payments made by him on behalf of the assessee. He has mentioned that she gave financial assistance to her brother-in-law, Sri Vincent during the year ended 31st March, 1990. According to the assessee, this was shown in the cash flow statement for the year ended 31st March, 1990, as an outgoing. According to her both these transactions are reflected in the cash flow statement by means of crossed cheques only.
14. In the asst. yr. 1992-93, the assessee had allegedly received financial assistance of Rs. 40,000 from Sri K. O. George, her brother-in-law for the period ended 31st March, 1992. A copy of the confirmation letter from Sri George is on record. She received another sum of Rs. 30,000 from her husband, Shri Raphael and a third sum of Rs. 28,420 was paid by him towards the payments of Kuri remittances. She got financial assistance of Rs. 7,000 from Shri M. D. Thomas and Rs. 8,000 from her father Sri Kochunni alias Scaria during the year ended 31st March, 1994, relevant to the asst. yr. 1994-95. She also received alleged financial assistance of Rs. 9,000 from Sri P. A. George in the asst. yr. 1995-96, for the period ended 31st March, 1995.
15. The assessee has stated that no evidence for unaccounted sales of gold was noticed at the time of search. According to her, Sri Anto in his reply to question No. 2 stated his inability to clarify how the difference in account was found at the time of search. There was nothing in the seized records to warrant an estimation of additional income to the extent of Rs. 10,00,000 from business. She mentioned that if any addition is considered to be made on account of unaccounted sales, only the profit thereon can be estimated and added.
16. Regarding the difference in the gold ornaments found at the time of search, it was the contention of the assessee that 2,316.400 grams was the difference and not 2,108.667 grams mentioned in the letter of the AO. According to the assessee, the difference of 2,316.400 grams consisted of 1,609 grams of new ornaments and 707.400 grams of old gold ornaments. The rate of Rs. 469 per gram of gold adopted by the AO, according to the assessee, was the selling price. She had further stated that the amount which can be assessed towards unexplained investment is the cost price of gold only. The gross profit declared by the assessee amounted to Rs. 27,96,727 on total sales of Rs. 1,20,36,237 for the asst. yr. 1996-97, the relevant accounting period ended 31st March, 1996. The gross profit on the sales worked out to 23.24 per cent. Therefore, the assessee requested the AO to adopt the rate of Rs. 360 per gram i.e., 469 x 76.76 per cent. She requested to limit the addition on this account to Rs. 8,33,804, i.e., 360 x 2,316.400 grams.
17. Regarding the difference found in the cash at the time of search, the assessee's statement was that no adverse inference should be drawn on this account.
18. Regarding the low drawings, the assessee's explanation was that she was not leading any ostentatious life requiring lot of money to meet her domestic, social and other obligations. According to her this presumption was without any basis and unjustified. Her explanation was that she was leading a very normal life and this did not require any legal amounts. She also stated that her husband used to withdraw from his business for personal and household expenses. According to her, the proposed addition on account of low drawings ranging between Rs. 15,000 to Rs. 30,000 was not justified as her husband's contribution for household expenses was not considered.
19. Regarding the receipts and payments of Kuri, according to the assessee, the difference in receipts and payments from those Kuri companies was due to the fact that those companies went into liquidation and the letter received from the Official Receiver was enclosed as evidence. The payments to Guru Vijaya Kuries and Damien Kuries were continued and, therefore, according to the assessee, there was no justification to assess the amounts received from them and the amounts paid to them till 1995. The assessee did not produce the creditors and hence requested to consider the confirmation letters.
20. On the basis of the above narrated facts, we have to consider the basic exemption limit for the various assessment years included in the block period. The basic exemption limit for the asst. yr. 1986-87 to 1990-91 is Rs. 18,000 per year.
The assessee was not able to file the return of income atleast for the asst. yrs. 1986-87 and 1987-88 because, according to her, her income was below the taxable limit. The learned counsel for the assessee submitted that the inclusion of income below the taxable limit in the block period is not correct. In support of his contention, the learned counsel relied on Part II of computation of total undisclosed income. In para. 5 of Part II, there is a sentence at the bottom which reads as follows :
"For any year, if the return has not been furnished for the reason that the total income was not above the maximum amount not chargeable to tax, the total income is to be mentioned against that previous year."
The learned counsel for the assessee relied on the decision of the Nagpur Bench of the Tribunal in the case of Kasturchand Baid vs. Asstt. CIT (1997) 58 TTJ (Nag) 253. The Nagpur Bench of the Tribunal held that the AO could not treat the assessee's income as undisclosed income under s. 158BB of the IT Act, simply because the assessee had not filed the return of income for the year when the income was below the taxable limit. The contention of the learned counsel has to be considered subject to the assessment made by the AO even after considering no withdrawals or low withdrawals, the income from property and the subscriptions made to Kuries. The total income from these sources, that is investment in Kuries, no withdrawals or low withdrawals and property income may exceed the basic exemption limit, but again we are not concerned with it because the AO has made the assessment of investments in Kuries in some of the assessment years of the block period. Therefore, we need not go beyond the assessment made by the AO. The AO assessed the unaccounted investment in Kuries at Rs. 12,253 and Rs. 15,217 in respect of the asst. yrs. 1986-87 and 1987-88 in the block period. Thus, those incomes are below the taxable limit. He has assessed only the income from property amounting to Rs. 16,000 for the asst. yr. 1990-91, which is also below the taxable limit. Therefore, we direct the AO not to include the income below the taxable limit in whichever assessment year such income has been added.
21. Page 15 of the paper book is a certificate issued by Salim T. Mathews, Chartered Accountant. Shri Salim Mathew has mentioned the withdrawals made by Sri K. O. Raphael, proprietor of M/s Maharani Jewellers, M. O. Road, Trichur, assessed to income-tax.
22. The assessee has denied the fact of leading an ostentatious life. Her denial of this fact is without any basis. It is true that her husband had made considerable withdrawals during the asst. yrs. 1991-92 to 1996-97 but they are below Rs. 4,000 per month except for the asst. yr. 1992-93.
23. From the evidence on record, it can be construed that the assessee herself and her husband are leading a luxurious life with all modern facilities. Therefore, an addition of Rs. 15,000 to Rs. 20,000 per year in the hands of the assessee cannot be said to be on the higher side. The AO made an addition of Rs. 30,000 for the asst. yrs. 1995-96 and 1996-97 which came to Rs. 2,500 per month. For the above two assessment years, the drawings of Rs. 1,500 to Rs. 2,000 and Rs. 2,500 per month cannot be considered to be high. The assessee's husband withdrew sums below Rs. 4,000 per month and has a separate business of his own viz., M/s. Maharani Jewellers, M.O. Road, Trichur and his withdrawals also cannot be considered to be on the higher side. Therefore, no reduction can be allowed while making addition on account of low withdrawals.
24. It is true that the assessee's income for the asst. yrs. 1986-87, 1987-88 & 1990-91 is below the taxable limit and, therefore, the same cannot be included in the block assessment period. But if an addition on account of no withdrawals or low withdrawals is to be added to the subscriptions made to Kuries on behalf of the assessee allegedly by her father and the property income, in that event, the income would exceed the basic exemption limit. Therefore, the income for the abovesaid years becomes taxable, after making addition on account of no withdrawals or low withdrawals. In this view of the matter, the income exceeds the exemption limit for the asst. yrs. 1986-87, 1987-88 and 1990-91. Hence it is taxable. The AO was right in taxing the income of these years also.
25. The assessee purchased a property in Trichur during the year ended 31st March, 1988. The said property consists of shops and rooms let out to different parties. The assessee's husband has occupied one such shop room. He was paying rent to the assessee. The income from this property was Rs. 3,333 for the asst. yr. 1988-89 and Rs. 8,000 for the asst. yrs. 1989-90 and 1990-91. It was alleged that due to some dispute over the title to the said building, the assessee did not get rent after the asst. yr. 1990-91. However, the assessee failed to substantiate her claim regarding the dispute over the title to the property. The assessee is the owner of the building, which is not disputed. It would be incorrect to say that the rental income should not be assessed in her hands because of alleged dispute. The annual rental value is assessed on the basis of rent received from the let out property. The income has been assessed after allowing the outgoings such as municipal tax, vacancy, if any, etc. The estimation of income from this property is not incorrect. Therefore, we are not inclined to accept the contention of the assessee that the rental income need not be added to the income of the assessee because of the alleged dispute over the title to the building.
26. The unaccounted cash of Rs. 3,65,000 has been added to the income of the assessee. This amount was found during the course of the search. The assessee's manager, Sri K. O. Anto, was present at the time of the search. He stated that he was not able to explain the seized cash of Rs. 3,65,000 found in excess of the account in the business premises. He further stated that this amount represented the income of the assessee for the last one week before the date of search. At the time of making the assessment, the assessee stated that the difference in cash was mainly due to some clerical mistakes in the day book on 3rd April, 1995, and 20th December, 1995. Except stating this, the assessee was not in a position to explain the difference found in the cash book and the unaccounted cash. She further explained that this cash found at the time of search represented withdrawals of Rs. 4,00,000 on 20th December, 1995. If the withdrawals were made on 20th December, 1995, in that event, to have a clerical error in the day book on 3rd April, 1995, and 20th December, 1995 would in all probability is incorrect. According to the assessee these withdrawals were made by one Gixon P. George, nephew of the assessee. The assessee could not produce any evidence for the presence of the cash remained unaccounted in the business premises. The assessee also could not furnish the details of withdrawals of Rs. 4,00,000, bank account and the name and address of the bank of Shri Gixon P. George, Shri Gixon P. George was not produced for explanation and examination in spite of offering several opportunities to the assessee. Therefore, the AO rejected the explanation of the assessee and made an addition of the sum of Rs. 3,65,000 as the undisclosed income of the assessee. The AO also mentioned that the assessee did not have serious objection in taking this amount as her undisclosed income for the asst. yr. 1996-97.
27. After examining the facts and considering the rival submissions, we are of the opinion that the addition of Rs. 3,65,000 to the assessee's income as her undisclosed income is quite correct and it does not require any interference in respect of the asst. yr. 1996-97.
28. What remains to be considered now is whether the addition made on account of undisclosed stock of gold and the rate per gram of the said gold stock is justified or not. It is not in dispute that during the search unaccounted gold stock of 2,316.400 grams had been seized. It can be safely inferred that this unaccounted gold represented valuables acquired from the undisclosed income of the assessee. The assessee's manager, Sri K. O. Anto was present at the time of search, but he had utterly failed to explain the ownership and presence of this gold in the business premises of the assessee. The said manager stated that he was not able to explain the difference in the stock of gold. This gold was found in the pocket of Sri Anto and was attached from his possession. If accounted gold would have been there, the manager, Sri Anto would not have kept the gold hidden in his pocket. The only inference that can be drawn is that this stock of gold was unaccounted in the books and hence the value of which is to be included in the income of the assessee.
29. The assessee valued this gold at the alleged cost price of Rs. 360 per gram. This stock of gold is considered as having been purchased from the undisclosed income of the assessee in the asst. yr. 1996-97. During the relevant accounting period for the asst. yr. 1996-97, the rate per gram of gold was near about Rs. 400. Valuing the unaccounted gold at the rate of Rs. 360 per gram, by the assessee, seems to be incorrect. The assessee has also not furnished the rate per gram of gold in the few months prior to the date of search. The gold was purchased outside the books of account. If the rates are not established that the cost price was Rs. 360 per gram before one or two months of the date of search, then the said cost price cannot be accepted. The valuation made at the rate of Rs. 400 per gram of gold appears to be correct. The total value of the unaccounted gold of 2,316.400 grams comes to Rs. 9,26,560. This addition cannot be said to be either incorrect or on the higher side. In this view of the matter, the assessee fails in challenging the addition of the value of the unaccounted gold and the rate per gram of gold.
30. We examined the facts and evidence pertaining to each and every item of income in dispute. We have also considered the rival submissions of the parties. We have considered why an addition on account of no withdrawal on low withdrawal by the assessee for her personal and domestic expenses is to be upheld. We have also considered the unaccounted gold and estimation of its value at the rate of Rs. 400 per gram during the relevant accounting period included in the block assessment. We have considered the evidence of Shri K. O. Anto, the manager, who was present at the time of search and seizure. We have considered the contributions of Kuries made by the assessee's father on her behalf. The assessee herself is well to do. Her husband is already owning a jewellery shop at Trichur and the assessee is also conducting a jewellery shop. When her financial position is so sound, in that event, there are no good reasons for the assessee's father to make contributions to Kuries on her behalf. Filing of confirmation letters does not establish that the contributions to Kuries have been made by the assessee's father himself for the assessee. The same is the position with regards to the cash credits in question. Thus, the material and evidence on record and the non-acceptance of the alleged stories in respect of the above items cannot allow us to give any relief to the assessee even including the cash credits. We are unable to accept the explanation in respect of the cash credits also.
31. In the result, the assessee fails on all counts and the appeal is dismissed.