Income Tax Appellate Tribunal - Delhi
Steel Home vs Assistant Commissioner Of Income-Tax on 21 September, 1998
Equivalent citations: [1999]69ITD240(DELHI)
ORDER
Miss Moksh Mahajan Accountant Member
1. These two appeals filed by the assessee relate to the assessment years 1986-87 and 1987-88.
2. Shri C. S. Aggarwal who appeared on behalf of the assessee, submitted that the assessee is a firm consisting of three partners namely Shri Yoginder Kumar, Smt. Usha Juneja and Smt. Amita Dua. It filed returns for assessment years 1986-87 & 1987-88 declaring income at Rs. 62,080 and Rs. 79,890 respectively. It so happened that searches were conducted in the premises of Shri Gulshan Kumar Juneja, husband of Smt. Usha Juneja - partner of the firm. Certain documents were recovered from the premises and on the basis of particular document mainly Annexure P the income was assessed at Rs. 3,50,000 for assessment year 1986-87 and Rs. 2,42,320 for assessment year 1987-88. As per the arguments advanced no material was brought on record to show that the documents pertained to the assessee-firm and that the entries reflected therein related to it. In fact admittedly the aforesaid documents were written by Shri Gulshan Kumar Juneja and not by any partner of the assessee-firm. Apart from the fact that it did not pertain to the firm no cognizance could be taken of the entries reflected therein. The assessee's accounts for both the assessment year have been duly audited and no discrepancy was found therein. There was no material brought on record to justify the rejection of the accounts under section 145 of the Act. The sole reliance placed on the document completely ignoring the audited accounts of the assessee is certainly not in accordance with the provisions of the Act. It was not shown that the aforsaid documents were either complementary or supplementary to the accounts as maintained by the assessee. This a part the income if at all assessable has to be computed under different heads as specified in the Act. While the aforesaid income could not be brought to tax under the head "Business income" no attempt was made to bring it under any other head namely 68, 69A etc. of the Act. Coming to the documents argued the learned AR it would be clear that the entries made therein do not tally with the ones reflected in the balance sheet or for that matter profit & loss account. The aforesaid entries could either relate to the opening balance on the first day of the previous year or at best close of the accounting period. Since the figures do not tally, in absence of any independent enquiry made in this respect the manner in which the assessment was made could not be supported at all. Coming to the document itself it was submitted that the same is reflective of the assets and the liabilities of a person if any which has not been specified. In the circumstances no reliance could be placed on the aforesaid documents much less the income assessed on the strength of the same. This applies for both the assessment years where the facts are identical except for the difference in figures mentioned in the documents and the income assessed. The learned DR on the other hand, vehemently opposed the stand of the learned AR. Reading the order of the Assessing Officer it was pointed out that the Assessing Officer found difference in the sales as shown in the profit & loss account vis-a-vis the ones recorded in the books of account. The explanation that it was a totalling error could not be accepted. On the other hand, the documents seized were from the premises of the assessee which were the registered office of the firm. Shri Gulshan Kumar Juneja is assessee's husband and could as well record the income pertaining to the assessee firm. The fact that the assessee did not cooperate with the department is evident from the queries made and the replies given which were completely evasive and general. The statement recorded under section 132(4A) of the Act was a relevant document which should be allowed to be placed on record to come to the correct conclusion. The reading of the document would clearly show that it is not a dumb document and the figures mentioned are against the specific assets and liabilities recorded by the assessee's husband. The assessee was not only allowed the copies of the documents but also was given adequate opportunity to explain its case. Since no plausible explanation was rendered there was no alternative but to make the assessment on the basis of the entries reflected in the documents.
3. We have carefully considered the rival submissions and perused the material to which our attention was drawn. At the outset it may be mentioned that while number of documents as mentioned in the 'Panchnama' were seized, reliance was placed mainly on two documents namely Annexure P for both the assessment years 1986-87 and 1987-88. The alleged discrepancies in sales were however made the basis for rejecting the books of account of the assessee. The facts as stated given rise to the questions - (a) whether the document styled as Annexure P not written by any of the partners or authorised person of the firm could be considered in the hands of the assessee, and if so, could the same be made the sole basis for estimating the income completely ignoring the books of account as maintained by the assessee. Annexure P as referred to above read as under -
ANNEXURE P FOR ASSESSMENT YEAR 1986-87
1-4-85 to 31-3-86
Cash in hand 5,71,742 Investment 8,52,200
Stock 2,38,981 Payment 1,21,310
Bank 55,900 ----------
Credit 2,26,198 9,73,510
---------- ----------
10,92,821
9,73,510
----------
1,19,311 Clean Profit
----------
10,800 Pigmi Saving
----------
1,30,111
----------
Actual profit Previous investment 8,52,200
1,19,311 Clean Profit 1,19,311
10,800 Saving Pigmi
----------
1,20,000 Drawing 97,15,11
----------
65,300 Rent deposit
---------
3,15,411
---------
Insurance
Taxes
ANNEXURE P FOR ASSESSMENT YEAR 1987-88
1-4-86 to 31-3-87.
Stock 4,14,000
Cash in hand 1,34,400 Investment 9,71,511
Bank 30,690 Payment 1,30,060
-----------
Credit including ST 7,43,000 11,01,571
---------- -----------
13,22,090
11,01,571
2,20,519
----------
Previous investment 9,71,511
Clean Profit 2,20,179
-----------
11,91,690
-----------
Actual Profit
22,01,179
20,000 Insurance'
30,000 Expenditure about Plot 8 Sector 18
9,900 Saving Pigmi
20,000 Shop Repair
At first glance it is clear that the Annexure reflects the statement of financial affairs of a person for the year as mentioned therein. The aforesaid document mentions not only the year to which it pertains but also records the amount as well against the items relating to assets/liabilities mentioned therein. The entries are made on both sides and the transactions have been taken to their logical end resulting in 'Clean profit' as indicated therein. Close look at the document also shows that there is indication of utilisation of a part of the profits termed as 'Clean profits'. While for assessment year 1986-87 the house-hold withdrawals have been shown at Rs. 1,20,000 for assessment year 1987-88 the amount has been reflected against the plot mentioned as 8, Sector-18. From the preciseness of the figures relating to the amounts against unambiguous description of assets/liabilities (payment), the document cannot be dubbed as dumb one.
4. This brings us to the relevancy and admissibility of the documents under the law. It is true that any document, valuable article or thing found in the possession or control of any person during the course of search is limited in its scope and is restricted to proceedings under section 132 of the Act but it cannot be said that the aforesaid document is not relevant and cannot be used in the regular assessment proceedings if the facts so warrant. The document or piece of evidence as found have to be examined like any other document and all the rules of procedure would apply in this regard.
5. From the copy of order of Shri Gulshan Kumar Juneja filed by the assessee it is found that searches were stated to have been conducted in the premises of M/s. Steel Traders, M/s. Steel Home and M/s, Steel Agencies. The 'assessee denied the contention in regard to searches at M/s. Steel Home. The document was found in the premises which were admitted to be the registered office of the firm. The residential premises were occupied by one of the partners namely Smt. Usha Juneja W/o Shri Gulshan Kumar Juneja. There is no material to indicate positively that particular document was found in the possession of Shri Gulshan Kumar Juneja or for that matter his wife. As per 'Panchnama' however all the documents were stated to have been found in the possession of Shri Gulshan Kumar Juneja. The fact that the document was written by Shri Gulshan Kumar Juneja had not been denied at any stage. It is only the partners of the firm M/s. Steel Home who had denied having any connection with the document. This is evident from the letter dated 31st May, 1990. In the circumstances, it was the person who had written the documents who could have explained the nature and source of entries as reflected in the document in absence of which some evidence or material had to be brought by the Assessing Officer to link entries with the party in whose hands the aforesaid document is being made use of. As regards former, the statement of Shri Gulshan Kumar recorded under section 132 (4A) of the Act has neither been referred to by the assessing officer nor has been produced by the assessee on the plea that it was not made available to him. The learned DR was also not aware whether any clarification was sought from Shri Gulshan Kumar Juneja on the document at the time of search. Further no serious attempt was made by the ITO to examine Shri Gulshan Kumar Juneja during the course of search proceedings. The assessee also did not seem to have extended any cooperation in this regard.
6. As regard entries in the document as stated earlier, they depict the financial affairs. On comparison of figures with that of assessee's balance sheet we find that not a single entry tallies. In the circumstances, it was incumbent on the ITO to have established link between the entries, i.e., with those recorded in the paper specifically when the assessee furnished no explanation in this regard. In view of these facts the reliability of document in question and the admissibility of the same becomes doubtful.
7. Coming to the second aspect of the issue, under the scheme of Act it is the income which is assessable. Different heads are prescribed under which income falling is to be brought to tax. Profit and gains of business are to be taxed under section 28 of the Act. The income is to be computed as per the provisions contained in sections 30 to 43C of the Act. The income charged under the head 'profits and gains' is to be computed in accordance with the method of accounting regularly employed if the assessee has maintained accounts. The method employed however should disclose true profits and it is also the duty of the Assessing Officer to consider whether income can be properly deduced from the method so followed. The accounts maintained have to be accepted as correct unless there are reasons to hold that they are unreliable. In case of latter it is not open to the Assessing Officer to discard the books of account all together. As per provisions of section 145 of the Act what is to be discarded is the method of accounting. Transactions which are not supported with material can be rejected and that too for the reasons given.
8. Examined in the above light we find that for assessment years 1986-87 and 1987-88 the Assessing Officer found certain discrepancies in sales and purchases as mentioned in the order. For assessment year 1986-87 as mentioned in the assessment order certain discrepancies were noted in the sales by the Assessing Officer. This was stated to be on account of totalling in calculation made. According to the Assessing Officer the sales totalled up to Rs. 40,21,755. The explanation furnished by the assessee was not accepted. For assessment year 1987-88 reference was made to Annexure A-6 and certain challans as per which the purchases to the extent of Rs. 73,000 were not accounted for. Similar was the position in regard to the sales which totalled up to Rs. 40,01,182. The latter as per the bills checked by the Assessing Officer. On the aforesaid discrepancies while the argument of the learned AR was that there was no mistake as alleged and the totalling mistake was on the part of the office of the Assessing Officer, the learned DR emphasised that it was on the part of the assessee. Before us no material was placed to verify the contention of either side. In the circumstances, the aforesaid fact needs to be verified before any addition on the aforesaid account could be made in the case of the assessee. In case there is difference in sales as alleged by the Assessing Officer, the same had to be taken into consideration while estimating the profits for both the assessment years. In case it is not so in absence of any other defects pointed out no addition could be made in the hands of the assessee.
9. As discussed earlier since the documents found in the form of Annexure-P could not be related to the assessee, no addition could be made on the basis of the aforesaid documents. Even though there are specific assets mentioned in the aforesaid documents, Before any addition could be made for low withdrawals, purchase of plot as well the stock as mentioned in the documents, it was necessary to have proved that the same related to the assessee. Since this exercise was not done the documents could not be considered for both the assessment years much less being made the basis for estimating income in the hands of the assessee.
10. In the light of above discussion, we are of the considered view that the income estimated on the basis of the documents cannot be sustained. The same has to be computed as per books of account maintained by the assessee. Since the discrepancy in sales as pointed out for both the assessment years has not been reconciled before us, on the limited issue the matter is restored back to the file of the Assessing Officer for examining the same and making addition if any called for on this account.
11. In the result, both the appeals are allowed in the light of above.