Madhya Pradesh High Court
Mansukhlal Ratanlal Jain vs Union Of India (Uoi) on 28 June, 2006
Equivalent citations: [2008]300ITR98(MP)
Author: A.M. Sapre
Bench: A.M. Sapre, J.K. Maheshwari
ORDER A.M. Sapre, J.
1. This is an appeal filed by the assessee under Section 260A of the IT Act against an order dt. 20th Nov., 2003, passed by Tribunal, Indore, in IT(SS)A No. 38/Ind/2002. This appeal was admitted for final hearing on following substantial questions of law:
1. Whether Tribunal was justified in holding that law laid down by the Supreme Court in CIT v. Vindhya Metal Corporation and Union of India v. Ajit Jain may not apply to the facts of this case because they are rendered in the proceedings initiated at the instance of the assessee in a writ petition under Article 226/227 of the Constitution of India whereas present proceedings arise out of assessment proceedings and hence, are not akin to the one taken under Article 226 ibid?
2. Whether Departmental authorities (AO) was justified in placing reliance upon certain materials collected by them from the bankers without granting an opportunity to the assessee to explain the relevancy of the material before it was used against him in the assessment proceedings?
3. Whether in the facts of the case, Tribunal was justified in observing that it was not so necessary to do so for granting that opportunity in view of the facts and evidence already on record?
2. Facts relevant for the disposal of this appeal and which were taken note of by the lower authorities for deciding the case need to be mentioned in brief to appreciate the issue involved.
3. The appellant is an assessee. He is proprietor of one concern by name "Mansukhlal Ratanlal" which is a business concern at Ratlam.
4. On 13th Sept., 1998 assessee was travelling in train from Indore to Ratlam when he was detained in morning of 13th Sept., 1998 at railway station, Ratlam by Railway Police sleuths. It was found that assessee (appellant) was carrying on his body a sum of Rs. 9.70 lacs in cash. It is this incident that led to initiation of proceedings under Section 132A of the IT Act by the IT authorities who are empowered under the Act to initiate proceedings against the assessee. The cash amounting to Rs. 9.70 lacs was seized from the assessee. In consequence whereof, assessment proceedings as provided under Section 158BC ibid were started against the assessee. In these proceedings, the assessee claimed that substantial amount of Rs. 6,25,000 was withdrawn by him from the bank i.e., from his business account just few days before the alleged seizure whereas a sum of Rs. 2,42,992 was taken by him from some persons by way of loan. According to assessee, he having explained the source of the income and its lawful receipt, the AO ought to have accepted the explanation offered by assessee and dropped the proceedings. The AO did not accept the explanation and finding the same to be of no substance, added the same in his total income under Section 158BC and accordingly, taxed the same by order dt. 29th Sept., 2000 (Annex. P-2). The assessee felt aggrieved of the assessment order, filed appeal to CIT(A). By order dt. 15th March, 2002 (Annex. A-4), the CIT(A) allowed the appeal and while accepting the explanation offered by the assessee in part i.e., explanation insofar as it relates to withdrawal of amount from bank is concerned (Rs. 7,46,000), deleted the said addition from his total income. So far as addition of Rs. 2,24,000 was concerned, the assessee in fact surrendered the same as he could not explain its source. It is against this order, the Revenue filed appeal to Tribunal. By impugned order, the Tribunal allowed the appeal filed by the Revenue and while setting aside of the order passed by CIT(A), restored that of AO. It is against this order of the Tribunal, the assessee has filed this appeal which as stated supra, was admitted by this Court on aforementioned substantial questions of law.
5. Heard Shri S.C. Bagadia, learned senior counsel with Shri M. Munshi, learned Counsel for the appellant and Shri R.L. Jain, learned senior counsel with Ku. V. Mandlik, learned Counsel for respondent.
6. Learned counsel for the appellant in the first instance commented upon the manner and in particular some of the observations made by the Tribunal in the impugned order. According to learned Counsel in the first place, one observation made by Tribunal was uncalled for and in the second place, the other finding once recorded in favour of appellant, the appeal of Revenue should have been dismissed. It was also contended that when substantial amount was withdrawn by the assessee from the bank just prior to few days of alleged seizure then in such event, the AO should have accepted the explanation so offered by the assessee in relation to the source of income. It was further contended that the reasoning assigned by the Tribunal in rejecting the explanation of the assessee is perverse and hence, deserves to be rejected by restoring the order of CIT(A). Placing reliance on the decision reported in CIT v. Vindhya Metal Corporation , learned Counsel contended that no case for either invocation of powers conferred under Section 132A was made out and in any event, a case for acceptance of explanation offered by the assessee is made out so as to exclude the said amount from being taxed under Section 158BC ibid. In reply, learned Counsel for Revenue supported the impugned order including its reasoning.
7. Having heard learned Counsel for the parties and having perused record of the case, we are inclined to allow the appeal and while setting aside of the impugned order of Tribunal restore that of CIT(A).
8. In our considered view, the explanation offered by the assessee as to from where he got the seized money (at least part of it) deserves to be accepted. In fact, so far as an amount of Rs. 2,24,000 out of total seizure of Rs. 9.70 lacs is concerned, the same having been surrendered by assessee for being taxed, there is no need to examine its source. In other words, so far as taxing of Rs. 2,24,000 is concerned, the same was rightly taxed as an income from undisclosed sources as defined under Section 158BC because assessee had no explanation to offer for this sum or the so-called explanation was not an explanation which could be accepted by the authorities. It was thus rightly rejected. However, so far as balance sum is concerned, there was an evidence to show that it was withdrawn by assessee on different dates i.e., 6th Aug., 1998, 8th Aug., 1998, 22nd Aug., 1998 and 28th Aug., 1998 from the bank. Since, it was few days prior to the date of seizure (13th Sept., 1998) and hence, one could easily conclude that substantial amount was withdrawn in close proximity with the date of seizure by an assessee. In these circumstances, there was evidence to hold that it is this amount which the assessee had carried with him on the date of seizure or must have carried with him on the date of seizure. When the amount is withdrawn from the bank account and when it is substantial in nature then assessee is entitled to be given the benefit of the same. The case would have been different, if there had been no withdrawals from the bank or that withdrawal would have been of much prior date as compared to the date of seizure. In such situation, the AO was justified in holding that assessee failed to prove the source of the amount seized. Such is not the case here. As observed supra, when the amount is withdrawn from the bank account by the assessee and when it is few days prior to seizure then it cannot be said to be a case of "no explanation" or "inadequate explanation" but it is a case where explanation offered needs to be accepted. It was in our humble view, rightly accepted by the CIT(A).
9. We do not agree to the reasoning of the Tribunal when it commented by saying that since the bundles of notes did not have the name of same bank but had the name of different bank and hence, the alleged withdrawal cannot be said to be bona fide. In the first place, Tribunal having held that no opportunity was given to assessee to prove this fact should have decided the issue in favour of assessee. In other words, when Tribunal held in favour of assessee that assessee should have been given an opportunity to examine the evidence obtained from the banker regarding currency slips, ought to have decided the issue in favour of assessee rather than in favour of Revenue. Secondly, whether the bundle of notes had the name of "A" Bank or "B" Bank, the fact that the amount was withdrawn from the bank was not disputed, the benefit of the same should have been given to assessee and lastly, the reasoning assigned by the Tribunal was too technical so as to deny the benefit to the assessee. In this view of the matter and in the light of what we have held, we do not concur with the reasoning of the Tribunal and hence, reverse the same by preferring to concur with the reasoning of CIT(A).
10. In view of foregoing discussion, once we come to the conclusion that explanation offered by assessee was adequate, sufficient and justifiable on facts and the same should have been accepted insofar as it was confined to the withdrawals made from bank, we do not consider it necessary to answer the question No. 1. In our view, it is not so necessary.
11. Accordingly and in view of foregoing discussion, the appeal succeeds and is hereby allowed. Impugned order is set aside. No costs.