Madras High Court
Commissioner Of Income Tax vs V.R. Venkatachalam L/H Of Npv Ramaswamy ... on 17 January, 2006
Author: K. Raviraja Pandian
Bench: K. Raviraja Pandian, P.P.S. Janarthana Raja
JUDGMENT K. Raviraja Pandian, J.
1. The Revenue not satisfied with the order of the Tribunal confirming the order of CIT(A) deleting a sum of Rs. 1,28,27,860 from the taxable income of the assessee, filed the present appeal by framing the following substantial questions of law :
1. Whether, in the facts and circumstances of the case, the Tribunal was right in holding that the assessee had no unexplained investments with the AOP by name M.G. Enterprises to the tune of about 1.29 crores ?
2. Whether, in the facts and circumstances of the case, the Tribunal was right in deleting the addition of unexplained investments of about Rs. 1.29 crores by relying solely on an affidavit of M.G. Enterprises and without appreciating the evidence of the incriminating documents seized at the time of the search ?
3. Whether, in the facts and circumstances of the case, the Tribunal had enough material to conclude that the assessee had no unexplained investments ?
The relevant assessment year is 1985-86.
2. Simultaneous search operations were carried out in the residential and business premises of the assessee as well as his business associates on 29th Jan., 1985 and 18th Dec, 1985. Certain documents were seized from the residence of the assessee and also from the premises of his associates. According to the AO, the seized documents indicated that investments were made by the assessee with an AOP namely, M/s M.G. Enterprises. Upon scrutiny of the materials collected in the course of search, the AO made an addition of Rs. 1,28,27,860 to the income of the assessee as unexplained peak investment with the AOP, viz., M/s M.G. Enterprises. The AO has also made another addition of Rs. 20,00,000 as unexplained advances made by the assessee. That order was taken on appeal to the CIT(A) only to have the addition of the abovesaid amount of Rs. 1,28,27,860 confirmed and in respect of the order addition of Rs. 20,00,000 the CIT(A) deleted the same. Both the assessee and Revenue took up the matter by way of appeal and cross-appeals to the Tribunal. The Tribunal disposed of the appeal and cross-appeals by remitting the matter back to the CIT(A) for fresh hearing and disposal with the direction to examine the AOP viz., M.G. Enterprises in respect of the peak investment in a sum of Rs. 1,28,27,860. On remittal the CIT(A) deleted the abovesaid addition on the ground that it was admitted by the AO himself that the relevant documents had been seized from the premises of M.G. Enterprises or its officers and the M.G. Enterprises has filed solemn affidavit that it has not received the said amount of Rs. 1.28 crores from the assessee. Based on the abovesaid factual matrix, the CIT(A) has held that the AOP viz., M.G. Enterprises alone was liable to explain the source of Rs. 1.28 crore and the addition made in the hands of the assessee has to be deleted. That order was confirmed by the Tribunal.
3. Learned counsel appearing for the Department very strenuously contended that the finding recorded by the Tribunal that the relevant documents were seized not from the residence of the assessee but from the premises of the AOP M/s M.G. Enterprises is not correct. For that purpose he has taken us through the assessment order, particularly para 3.2 so as to convince us that certain materials had been seized on a search from the business premises as well as the residential premises of the assessee and also taken us through the appellate order as well as the Tribunal order.
4. On the entire reading of the order, we are of the view that though certain documents are stated to be seized from the business as well as the residential premises of the assessee, none of the documents so seized has been correlated to the peak investment stated to be made by the assessee. However, before the CIT(A) by way of written submission, the AO without uncertain terms has accepted, which is evident from para 5.3, that the relevant documents had been seized from the premises of M.G. Enterprises or its officers only. That written submission has been taken note of by the CIT(A). The CIT(A) has further considered the sworn affidavit of M.G. Enterprises and had come to the conclusion that M.G. Enterprises alone is liable to explain the source of the said sum of Rs. 1.28 crores and the addition must be deleted at the hands of the assessee. This aspect of the matter has been reaffirmed by the Tribunal by saying that it is the prima facie duty of M/s M.G. Enterprises to explain the exact nature of the entries made in the seized documents and it is the duty of the AO to ascertain from M/s M.G. Enterprises and its officers on the true nature of the entries found in the documents seized from their premises. The Tribunal also found that when the AOP viz., M/s M.G. Enterprises denied the investment made by the assessee, that denial could have been rebutted by the AO on the basis of certain materials. But in the absence of any material worth mentioning the AO was not able to rebut the same and as such the finding of the CIT(A) could only be confirmed. On consideration of the materials and after hearing the learned Counsel for the appellant, though it is stated in the assessment order that certain documents had been seized from the business as well as residential premises of the assessee, the AO has miserably failed to correlate those documents to the amount of addition made at the hands of the assessee in the assessment order. But curiously before the first appellate authority, the CIT(A), the AO has filed written submissions to the effect that the relevant documents which formed basis for making the addition were seized from the business premises of the AOP viz., M/s M.G. Enterprises and its officers which finding has been confirmed by the Tribunal. When the factual findings of the appellate authority and also the statutory authority is against certain observations of the AO, we will have to go by the finding of the appellate authority as well as the Tribunal only. In this case, the amount of Rs. 1.28 crore, though deleted at the hands of the assessee, the AO has been directed to enquire and proceed further against the AOP, who had denied the receipt of the amount from the assessee. Rightly the AOP has to answer the same. In the abovesaid facts and peculiar circumstances of the case, we are of the view that the order of the Tribunal requires no interference in the present appeal and the appeal is liable to be dismissed. Accordingly, the Tax Case (Appeal) is dismissed.