Rajasthan High Court - Jaipur
Ramjas Nawal vs Commissioner Of Income Tax And Anr. on 29 May, 2003
Equivalent citations: (2003)183CTR(RAJ)144
JUDGMENT Y.R. Meena, J.
1. This appeal is directed against the order of Tribunal in case of Ram Jas Nawal v. Asstt. CIT, Investigation, dt. 4th Jan., 1999.
2. The search proceedings were conducted at the business and residential premises of the assessee on 18th Sept., 1996, and various lockers belonging to the assessee and his members of family were searched. The search proceedings were continued from 18th Sept., 1996, to 25th Sept., 1996. Various items like valuables, assets, documents, jewellery and papers relating to investments were found and seized. The statement of K.G. Nawal and members of his family were recorded at the time of search under Section 132(4) of the IT Act, 1961. The statements were duly signed by the assessee Ram Jas Nawal and members of his family. Huge cash amount to the tune of Rs. 3,00,74,259 was found from various premises. Out of that assessee has explained Rs. 9,64,419 and balance amount of Rs. 2,97,09,940 was surrendered by the assessee for taxation. This amount was bifurcated into three hands i.e., Ram Jas Nawal and his two sons namely, K.G. Nawal and K.K. Maheshwari in equal proportion. Thereafter returns were filed.
Though in the statement recorded during search, the assessee could not explain the profit of M/s Shree Products to the tune of Rs. 23,18,210 and also gifts shown in the papers seized but in the return the assessee retracted from his statement and claimed that Rs. 23,18,210 is income from the firm M/s Shree Products and gifts received were also genuine. Therefore, this amount was not offered from taxation in the income-tax returns. The income pertains to the asst. yrs. 1987-88 to 1991-92 has been assessed.
3. Before joining the business, assessee Ram Jaw Nawal was in service in the railway department. At the time of search, in the statement it was admitted that income of Rs. 23,18,210 shown as export profits of M/s Shree Products represents undisclosed income of Ram Jas Nawal, K.G. Nawal and K.K. Maheshwari-1/3rd share each. During the course of assessment it was enquired whether assessee has any evidence to support that the income of Rs. 23,18,210 from M/s Shree Products is genuine.
4. As per AO, the assessee was unable to submit any documentary evidence at the time of recording of the statement under Section 132(4) of the IT Act, 1961, and after considering the submissions during the course of assessment, he was of the view that when assessee has surrendered the income of Rs. 23,18,210 as undisclosed income and subsequently retracted from his statements showing the entry to purchase export profit which is exempted and by making investment of only Rs. 4,500 in aggregate they arranged to receive export income of Rs. 23,18,210 and has also shown loan to the tune of Rs. 41,00,000 from M/s Alexcon Extrusions. The entries are made in the books which was utilised for payment against the purchase price of land property by the members of the family and the firm for its business purpose. Thus, there was no genuine firm in the name of M/s Shree Products.
He further, found that the statements were given by the assesses Ram Jas Nawal and this sons of their own. No undue and coercive methods have been adopted by the Departmental authorities, therefore, the AO has made addition of Rs. 23,18,210 and apportioned it into three assessees i.e., Ram Jas Nawal and his two sons.
5. The second addition relates to the gifts made to the assessee i.e., Rs. 10,00,000. This amount was also offered for tax in the statement during search but when assessee filed the return, the amount of gift has not been surrendered for tax and the AO taking into account the statements recorded during search and the material available on record held that gift shown by the assessee is not genuine.
6. In appeal before the Tribunal, the Tribunal also found that the addition of Rs. 7,42,726 being one-third share of export profit from M/s Shree Products, the addition made in the asst. yr. 1996-97 is justified. The claim of the assessee that M/s Shree Products claimed that M/s Shree Products has income of Rs. 23,18,210 and that income is from export, therefore, he claimed deduction under Section 80HHC, that was rejected.
The Tribunal has referred the statements of the assessee which are signed by his two sons and wife. Thereafter, retracting from those statements was an afterthought and arranged affairs. The Tribunal also noticed that by making investment of Rs. 4,500, it can't be believed that firm has earned such huge profits to the tune of Rs. 23,18,210 and. he affirmed the view taken by the AO,
7. Heard learned counsel for the parties.
8. In appeal before us, learned counsel for the appellant, Mr. Jhanwar, submits that though assessee has surrendered the income shown from export through M/s Shree Products and also gifts received were surrendered for tax at the time of search and the statements also made to this effect, but when the income from M/s Shree Products and the amount received in gifts which has been shown in the cash book of M/s Shree Products, which was found during search, that amount cannot be taxed under Section 158BB of the IT Act, 1961.
9. Learned counsel submits that if any entry is made in the books of accounts, that should not be taxed in view of Sub-clause (B) of Clause (c) of Section 158BB. He further submits that M/s Shree Products also filed the return disclosing that income as income of M/s Shree Products. He further submits that if the statements are recorded under threat or duress, the assessee can retract from those statements and can claim that the surrendered income or part thereof should not be taxed in assessment proceedings, under Chapter 'XIV-B' of the Act, if some entry is found to this effect in the books seized during search.
10. Learned counsel for the Department, Mrs. Parinitoo Jain, submits that in the statements under Section 132(4) of the IT Act, 1961, the income in question has been surrendered by the assessee and his two sons, there is no evidence that the statements were taken under threat or duress, no explanation has been given how M/s Shree Products has earned this income. She also drew our attention to the parts of the statements of the assessee recorded during search. She further submits that same is the case regarding amount of gifts.
11. The arguments which have been put forth before us are considered in detail by the Asst. CIT concerned. There is no dispute also on the fact that during the course of search, the assessee Ram Jas Nawal and his two sons have surrendered Rs. 23,18,210 for tax which has been shown the income from M/s Shree Products as well as gift amount of Rs. 10 lacs in the statements of his son under Section 132(4) of the IT Act which has been signed by assessee and his other son. Though, thereafter he has retracted but his retraction has not been accepted by the ITO and he has given the reason which reads as under :
"From the above statement it is seen that it was given in full knowledge, free will and conscious. All other members i.e., Shri Ram Jas Nawal and Shri K.K. Maheshwari also signed the same. As such now the contradictory claim of assessee itself is negatived. The statement recorded stated correct state of affairs, whereas the explanation furnished is an afterthought not based on proper appreciation of facts.
Further, export transaction appeared to be an arranged transaction which is also supported by the fact that in December, 1995, the family members have made an agreement to purchase the landed property at Gangwana for which they badly needed accounted money so they arranged their affairs in such a way to purchase export profit which is exempt and by making investment of only Rs. 4,500 in aggregate they arranged to receive export income of Rs. 23,18,210 and have also raised loans to the extent of Rs. 41 lakh in aggregate from M/s Alexon Extrusions and by making entries in the books of the firm on 20th Feb., 1996, they have distributed the fund available as under :
Rs.(1)
Loan to M/s Rajan Products 25,00,000 (2) Advance/loan to Shri Ram Jas Nawal 3,24,000 (3) Loan to Shri K.G. Nawal 2,68,000 (4) Advance or loan to Shri K.K. Maheshwari 4,45,000 (5) Loan to Smt. Shanta Devi Nawal 3,62,000 (6) Loan to Smt. Manju Devi Nawal 2,88,000 (7) Loan to Smt. Sunita Devi Nawal 2,84,000 The fund was utilised for payments against purchase price of landed property by the members of the family and the firm for its business purpose. Thus, it is clear that the assessee has made the firm M/s Shree Products as a conduit to siphon his undisclosed money in the shape of exempt export income. Nothing has been paid to Shri Rajesh Patel, alleged representative. It is clear that when the actual state of affairs was detected by the Department in course of search, the assessee admitted that it was undisclosed income but now retracts. It may be added that statement on oath was made without any duress or coercion. Now retraction cannot be accepted. It is a settled principle of law that any admission made in ignorance of law or under duress cannot bind the maker of the admission, but in this case there was no coercion or duress. The assessee in full knowledge and full conscious made the admission and agreed to pay the taxes thereon also. In the light of these facts contradictory claim cannot be accepted. In the light of these facts, it is being held that income of Rs. 23,18,210 in the hands of M/s Shree Products is non-genuineness and 1/3rd of the same is i.e., Rs. 7,72,736 liable to be assessed in the hands of the assessee and 1/3rd each in the hands of his sons Shri K.G. Nawal and Shri K.K. Maheshwari as income from undisclosed sources for asst. yr. 1996-97 as has been surrendered under Section 132(4)."
12. The Tribunal has also affirmed that view taken by the AO and concluded in para 25.2 which reads as under :
"We have considered the rival submissions and perused the relevant material. We find that at the time of recording of statement, the son of the assessee has admitted that he is not aware of this profit and is not able to substantiate as he has no information of this profit. The statement of the person was counter-signed by assessee and his other son. We have already sustained the addition on account of NRI gifts which were surrendered by the assessee and his sons. Here also we are of the view that assessee cannot succeed here because all human probabilities are against the assessee. This will prove that assessee has evaded tax. He has already surrendered huge amounts of about Rs. 3 crores and also surrendered the NRI gifts received by assessee's family members. Here also we are of the view that this profit is nothing but an arranged affair. We are in full agreement with the learned Departmental Representative that this profit is nothing but a purchase profit. Investment is only of Rs. 4,500 and the earned profits is shown through agent Rajesh Patel of Bombay. No amount of any kind was paid to this man Shri Rajesh Patel. Therefore, it is not digestible that a man will earn a huge profit for others and will not get anything out of it. All the evidences and circumstances are against the assessee. Therefore, keeping in view all these facts and circumstances, we decide this ground against the assessee and confirm the addition as made by the AO."
13. The facts and circumstances in case of addition on account of gift are almost similar as that of the case of the profit shown of M/s Shree Products. The amount of gift received by the assessee and shown in the books has been surrendered in the statement under Section 132(4) of the Act, but when returns are filed, that income has not been offered for tax. The ITO has considered the submissions is detail and given reason for not accepting the genuineness of the gifts. The reasons given by the AO reads as under :
"(1) On the similar evidence in possession of the assessee, in course of statement he admitted that gifts were made out of the undisclosed income of male members of family now he contradicts but no new evidence has been adduced.
(2) It is settled principle of law that burden to prove lies on the assessee to substantiate the identity of the donor or creditor, their capacity to possess the amount as on the date of advance and genuineness of transaction. But the assessee has failed to do so.
(3) Neither the assessee nor his wife knew anything about the donors namely, Shri Gurnomal Purwani, Usha Paraswani, Saroj Vijay Vargiya. or 0,P. Vijayvargia, when questioned at the time of statement recorded.
(4) Neither the assessee nor his wife have given any gift to anyone.
(5) The date of receipt of gift as per bank account is 19th Aug., 1995, in case of Shri Gurnomal but as per confirmation it is 21st Aug., 1995. Hence, deposit is earlier to the date of receipt, this only is sufficient to treat the gift as non-genuine.
(6) There is no address of the donors in respect of inland gifts on the affidavits or gift deeds filed in support of gifts by residence.
All such gifts are by drafts, and not by cheques. It shows that the Indian donors, if at all there were any, were men of no means, as they did not possess even bank account. So their capacity is not proved.
In spite of specific requirements none of the donors were also produced. Even the alleged resident donors were also not produced which leads the obvious conclusion that gifts were not produced which leads the obvious conclusion that gifts were not genuine.
Since neither the address is given nor they were capable to possess the amount as on the date of advance, it is evident that the assessee has failed to prove genuineness of Indian donors also.
As for non-residents, their Indian address were found not to be ascertainable. Photocopy of passport could not be authenticated as original not produced. Moreso while bringing funds in India, the non-residents must have made declaration before the competent authority but no such information was furnished. Whether any fund was received by the NRIs through legal channels also could not be established. It may be pointed out that its claim that the gifts were received by the assessee and his wife from India or nonresident donors out of natural love and affection. This contention of the assessee is quite incorrect as the assessee or his wife even do not know them. As it is clear from the statement on oath recorded on 18th Sept., 1996, so the question of love and affection does not arise. In the light of these facts all the gifts received from NRIs or local persons are held to be non-genuine and the same is treated as undisclosed income of the assessee which he has already offered for taxation while recording of the statement under Section 132(4).
In the light of above reasons, all the gifts are treated as non-genuine and will be assessed in the hands of the assessee. It is also being held that the income computed in the hands of the wife will also be assessed in his hands as it actually belongs to assessee."
14. In appeal before the Tribunal, the Tribunal has also considered the material on record and also the reasons given by the assessee. The Tribunal also not found that gifts in question are genuine, therefore, the addition made by the AO has been sustained.
15. Mr. Jhanwar, learned counsel for the appellant, submits that if any statements are given the assessee can retract from his statements given under threat or duress during search. We agree with Mr. Jhanwar that if statements are given under threat or duress, the assessee can retract from his statements given under threat or duress during search. But the material on fact shows otherwise. When the statements are taken, the assessee has admitted that he is disclosing undisclosed income at his free-will and are given without any threat. The relevant part of the statement reads as under :
^^mijksDr vk; dh ?kks"k.kk gekjs ifjokj ds rhuksa esy esaEcjlZ ;kfu esjs firkth rFkk esjs HkkbZ dey dkUr dk cjkcj&cjkcj ¼1@3@]1@3]1@3½ vk; ekurs gq, djrs gSa A ftl ij vk;dj pqdkus dh LosPNk ls ?kks"k.kk djrs gSa A mijksDr c;ku eSaus i<+ fy;s gSaa] ;s esjs dFkukuqlkj gS rFkk iw.kZr;k lgh gS rFkk dqN Hkh Nqik;k ugh x;k gS A mijksDr c;ku o vk; fd ?kks"k.kk LosPNk ls fcuk fdlh ncko ls dh xbZ gS A bZ'oj esjk lk{kh gS A mijksDr c;ku lgh gS A** Not only that when the assessee retracted from his statements given during search, the ITO has given the specific finding that during the course of search, the search party has given opportunity to submit any documentary evidence whether he has genuine income from M/s Shree Products. He expressed his inability to submit any documentary evidence in support of the genuineness of income from M/s Shree Products. The assessee has not offered the income from M/s Shree Products to be taxed in their hands and retracted from their statements given during search and claimed that income from M/s Shree Products is genuine is an after-thought.
16. We also noticed the fact that assessee and his two sons have shown just investment of Rs. 4,500 in the firm M/s Shree Products and has shown the profit from that firm of Rs, 23,18,210. That was nothing but an attempt to evade the tax of an undisclosed income, as, export income which has been shown in case of firm is exempted from the tax under Section 80HHC of the Act.
17. The loans of Rs. 41 lacs have been shown in the names of the family members obtained from one M/s Alexcon Extrusions are also not genuine and finding also has been given that statements recorded during search were not taken under coercion or duress.
18. We agree with Mr. Jhanwar that if any income has been disclosed in the regular books of accounts which can be assessed under regular assessment under Section 143(3), that should not be assessed and taxed under Chapter 'XIV-B' of the Act. But if the entries made in the books seized which are found Benami or the books which relates to the firm which is not genuine, the income shown from such bogus firm is income of the assessee. In that case even if such type of books are seized and some entries are made in these books, and on the basis of such entries, no income can be assessed in the hands of such firm. That type of income should be taxed under Chapter XIV-B in the hands of the assessee to whom such income belongs.
19. As per material on record. M/s Shree Products was not found genuine firm. Even the assessee and his two sons have offered the income shown in the name of M/s Shree Products as income of assessee and his two sons. If any books of account in the name of M/s Shree Products were seized and some entries were found, that does not affect the character of the income which is assessable in the hands of assessee and his two sons. Therefore, we do not agree with Mr. Jhanwar that in the facts and circumstances of the case the income shown in the name of M/s Shree Products, which is not genuine firm, cannot be assessed in the hands of assessee and his two sons on the basis that some entries were made in some books, found in the name of M/s Shree Products, a firm which is not genuine.
20. It is also brought to our notice that the returns of M/s Shree Products are filed on 18th Sept., 1996, when the search was conducted at the premises of the assessee and income shown from the firm M/s Shree Products was assessed. We agree with Mr. Jhanwar that one income cannot be taxed twice in two hands but as assessee-firm itself has filed the returns, the ITO can assess such type of income on protective basis. In the case in hand though the income from M/s Shree Products has been shown and that has been shown as income from export and claimed the total exemption of that income under Section 80HHC. That can be a planning to evade the tax which is not permissible under the provisions of the Act.
21. When the assessee-firm has filed the appeal before the CIT(A), it has been claimed that the income which has been shown in the name of firm M/s Shree Products that has already been taxed in the hands of Ram Jas Nawal and his two sons. Therefore, that has become final. That cannot be taxed again in the case of the firm M/s Shree Products. That was accepted by the CIT(A) and CIT(A) set aside the assessment order whereby the income in question has been taxed in the case of the firm M/s Shree Products.
22. No doubt we agree with Mr. Jhanwar that the same income cannot be taxed twice or cannot be taxed in two hands but once the finding is there that this income belongs to Ram Jas Nawal and his two sons and that has been affirmed till Tribunal which is final fact-finding final body for tax purposes, M/s Shree Products is before us and amount has been taxed in the hands of the assessee Ram Jas Nawal and his two sons. As and when the matter of taxing the same income in the case of firm M/s Shree Products will come before us, we will pass the appropriate order.
23. Considering the facts on record, we are of the view that once it is found that income shown in the name of M/s Shree Products, which is not genuine firm and that income is of assessee and his two sons and has been taxed in their hands, if some books are maintained in the name of M/s Shree Products which is not genuine, the entry made in such books does not prevent the authorities to tax that income shown in the name of the firm M/s Shree Products, in the hands of the assessee Ram Jas Nawal and his two sons under Chapter XIV-B of the Act.
24. In the case in hand, the AO as well as the Tribunal have given the concurrent finding of fact that the income shown in the name of M/s Shree Products is income of assessee Ram Jas Nawal and his two sons. M/s Shree Products is not genuine firm. Considering the material on record and concurrent finding of fact, we agree with the view taken by the authorities below that firm M/s Shree Products is not genuine and the Tribunal was fully justified in assessing and taxing the income of Rs. 23,18,210 in the hands of the assessee Ram Jas Nawal and his two sons in equal shares. No interference is called for.
25. The second issue relates to addition on account of gifts. Considering the concurrent finding of AO and Tribunal that the gifts shown are not genuine, no interference is called for on the findings of the fact that the gifts in question are not genuine. So far the case of the assesses that gifts are shown in the regular books is concerned, when the gifts could not be assessed and also found non-genuine and offered for tax by the assessee, now there is no question of deleting that addition which has been made by the AO and confirmed by the Tribunal.
26. Considering the aforesaid facts, no case is made out for any interference in the appeal. The appeal stands dismissed.