Income Tax Appellate Tribunal - Amritsar
Assistant Commissioner Of Income Tax vs Avinash Chander on 2 March, 2007
Equivalent citations: (2008)116TTJ(ASR)102
ORDER
A.D. Jain, J.M. IT(SS)A No. 22/Asr/2002:
1. This is Department's appeal for the block period 1st April, 1987 to 24th June, 1997 against the order dt. 28th March, 2002 passed by the learned CIT(A), Jalandhar. The following grounds of appeal have been raised:
1. That on the facts and in the circumstances of the case, the learned CIT(A) has erred in law in deleting the addition of Rs. 70,33,060 made on account of undisclosed income of the assessee by bringing to tax the deposits in the saving bank accounts of the four daughters of the assessee.
2. That on the facts and in. the circumstances of the case, the learned CIT(A) has further erred in law in deleting the addition of Rs. 3,23,118 on account of interest income during the block period on bank deposits of the four daughters of the assessee.
3. That on the facts and in the circumstances of the case, the learned CIT(A) has again erred in law in deleting the addition of Rs. 20,43,756 on account of foreign remittance received by the assessee, his wife and four daughters.
4. That while giving relief as per ground Nos. 1, 2 and 3 above, the learned CIT(A) failed to appreciate that the daughters were benamidars of the assessee and the unexplained deposits and interest thereon were rightly treated as income of the assessee and assessed accordingly.
5. That on the facts and in the circumstances of the case, the learned CIT(A) has further erred in law in deleting the addition of Rs. 5,78,100 on account of unexplained marriage expenses of the daughters of the assessee.
6. That on the facts and in the circumstances of the case, the learned CIT(A) has further erred in law in deleting the addition of Rs. 7,00,000 on account of unexplained investment and estimated profit in respect of the benami concern of the assessee styled Surjit Sharma & Co.
2. The first issue raised by the Department is that the learned CIT(A) has erred in deleting the addition of Rs. 70,33,060 made on account of undisclosed income of the assessee by bringing to tax the deposits in the savings bank accounts of four daughters of the assessee. The facts involved are that the assessee was working as a Superintending Engineer in Municipal Corporation, Jalandhar. A search was carried out at his premises on 24th June, 1997. The assessee was earning income from salary, interest on FDRs, interest on NSCs. and interest on savings bank accounts. He was having four daughters as follows:
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Name of the daughter Date of birth Date of Date of
majority marriage
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1. Nisha Sharma 26-11-1969 25-11-1987 16-2-1996
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2. Meenakshi Sharma 25-12-1970 24-12-1988 13-12-1995
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3. Sonia Sharma 10-1-1973 9-1-1991 27-11-1996
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4. Sunaina Sharma 11-9-1977 10-9-1995 Unmarried
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At the time of search, three of the assessee's daughters were married, whereas the fourth stood adopted by his brother, namely, Shri Naresh Sharma, vide adoption deed dt. 6th Aug., 1992. In response to notice under Section 158BC of the Act, the assessee filed a return of income disclosing undisclosed income of Rs. 56,408 on account of error in calculation of interest on FDRs, interest on NSCs, etc. As against this, the block assessment was completed at an income of Rs. 1,09,76,407. Among the additions made by the AO, the first was that of Rs. 70,33,060 on account of cheques and cash deposits in the savings bank accounts of the four daughters of the assessee.
4. As per the assessment order, the daughters of the assessee were not found engaged in any work. However, they were maintaining bank accounts having huge deposits in cash. These bank accounts were found actually not to be maintained by these daughters of the assessee. The AO observed that the four daughters of the assessee were, in fact, his benamidars. This conclusion, according to the AO, was supported by the material seized during the search. This material included Annex. A-l, p. 5, which was a discharge certificate dt. 13th March, 1992, showing that the NSCs were purchased in the name of Miss Sonia on 12th March, 1986, when Sonia was a minor and did not have any source of income. The maturity value (sic-date) of the NSCs was 13th March, 1992, i.e., in asst. yr. 1992-93. Annex. A-l, p. 4, i.e., discharge certificate dt. 13th March, 1992 also showed that some other NSCs had been purchased in the name of Miss Meenakshi on 12th March, 1986, when she was a minor and did not have any source of income. The maturity date was again, 13th March, 1992. Thus all the bank accounts of the three daughters were found lying in the possession of the assessee. The bank accounts were attached and the statements of the daughters were recorded. From these statements, the AO inferred that it was the assessee rather than his daughters, who controlled all these accounts, depositing the cash with a view to build up capital in the names of all his daughters. It was also concluded that the cash deposits came from a source over which none of the daughters of the assessee had any control. The AO further observed that the pattern of deposits in these accounts was identical, i.e., during the period 1992 to 1994 foreign remittances had evenly been deposited in all these accounts. In 1996, very frequent and regular cash deposits of amounts ranging from Rs. 10,000 to Rs. 25,000 were made in these accounts. Then, from March, 1997, the deposits were discontinued and thereafter, all these bank accounts were closed. In May and June, 1997, returns of income in the cases of three of the daughters were filed for the first time. Bank pass books and cheque books of all the daughters were found in the premises of the assessee, even though the daughters had been married.
5. From the above, the AO concluded that the entire above deposits were unexplained income in the hands of the assessee. As such, the addition in question was made. The learned CIT(A), by virtue of the impugned order, having deleted this addition, the Department has raised ground of appeal No. 1 before us.
6. The learned Departmental Representative has submitted that the learned CIT(A) has gone wrong in deleting ,the addition of Rs. 70,33,060 made by the AO. According to the learned Departmental Representative, this amount was clearly proved to be the unexplained income of the assessee. The daughters of the assessee were merely benamidars; that the bank accounts were opened by Shri Jagjit Singh Kanda, the contractor of the Municipal Corporation, Jalandhar; that most of the deposits were made by one Shri Ramesh, who was stated to be a domestic servant; that the identity of Shri Ramesh was not disclosed; that the daughters of the assessee had admittedly no source of income; that only later, it was stated that two of them did have a source of income; that about Meenakshi and Sonia Katyal, no details were given regarding their earnings; that bank pass books were found from the assessee's residence; that the CIT(A) deleted the addition saying that the daughters had filed returns in which this income stood disclosed and so, it was not undisclosed income; and that all the daughters being major, if some income was unexplained, it would be unexplained income in the hands of these daughters.
7. The learned Departmental Representative has argued that this is not a case of simple unexplained deposits and that in the search, documents were found and so, the facts of the present case are distinguishable from that of an ordinary case of unexplained deposits. It has further been submitted that the learned CIT(A) has taken into consideration that the VDIS declaration of the daughters was accepted by the Department, and that no further relief could be given unless it was shown that the income declared under VDIS was the same. The learned Departmental Representative has then argued that since the search was conducted and income was found as the assessee's income only, in keeping with the decision of the Hon'ble Kerala High Court in the case of P.K. Narayanan v. CAT , the income has to be assessed in the correct hands, irrespective of the treatment given to it in the returns of income
8. On the other hand, the learned Counsel for the assessee has argued that the bank deposits are not undisclosed income under Section 158BB of the Act; that all the accounts stood disclosed before the search and the income has to be assessed in regular assessment; that nothing was unearthed as a result of search; that then, the affidavits of the assessee's daughters were never rebutted; that while making the addition, the credit entries were never confronted to the assessee; and that, on quantum, the theory of peak credit and telescoping was not applied.
9. Having considered the rival contentions and having perused the material on record, we find that undisputedly, the four daughters of the assessee are independent assessees. They are having their own separate bank accounts containing the deposits in question. These deposits have, therefore, to be considered in their hands. The theory of these daughters being benamidars of the assessee does not carry any weight. The AO did not record any finding to the effect that the daughters were themselves operating the savings bank accounts. It is also not the ease of the Department that any blank signed cheques were found in the possession of the assessee. The bank accounts are not joint bank accounts and so, the assessee could not have operated them. In fact, the theory of the daughters of the assessee being his benamidars does not at all stand proved. Mere suspicion, howsoever strong, cannot take the place of evidence. There is nothing on record to show that the accounts were not operated by the daughters of the assessee. Also, the affidavits filed by the daughters of the assessee have gone entirely unrebutted. Moreover, even though the AO himself observed that the peak theory was applicable, it was not applied. Too, the income assessed on a protective basis in the hands of the assessee was widely different from that assessed on a substantive basis in the hands of the assessee. The AO propounded that there was a distinct pattern with regard to the deposits in all these bank accounts and from this it was concluded that it was the assessee and not his daughters who held control over these bank accounts. However, this proposition does not carry the case of the Department any further. The fact remains that the accounts in question were declared in the returns of income filed by the daughters and these deposits were depicted therein.
10. It was not disputed by the AO that all the daughters of the assessee were major and that three of them were married at the time the search took place. The AO noted in the assessment order that there was a certain flow of cash deposits in the savings bank accounts of the assessee's daughters from September, 1996 to April, 1997. During this period, three of the daughters of the assessee were major and were married, whereas the fourth was major and had been adopted by a brother of the assessee. Importantly, the Department was already in possession of information with regard to the savings bank accounts of the daughters of the assessee having been closed before the search took place. Even as noted in the assessment order, it was in the months of May and June, 1997 when returns of income were filed for the first time in the case of three daughters of the assessee. By way of filing these returns, these daughters of the assessee had offered a sizeable portion of the unexplained deposits to tax. The interest income was to be taxed in the hands of the assessee. The statement of the assessee was recorded on 24th April, 1997, when the marriages performed by the assessee were being investigated by the Investigation Wing of the Department. The fourth daughter of the assessee, namely, Sunaina Sharma was adopted vide adoption deed dt. 6th Aug., 1992, by the assessee's uncle. The daughters of the assessee having filed their IT returns, all bank accounts stood disclosed therein. The assessment was completed as a protective assessment in the case of two of the assessee's daughters, whereas the returned incomes of the other two daughters were accepted. Declarations under VDIS were filed by the assessee's daughters and these declarations were accepted by the Department. Notices under Section 142(1) of the Act were issued to three daughters of the assessee, namely, Nisha, Meenakshi and Sonia, as independent assessees. Notice dt. 5th Jan., 2000 was issued under Section 271A of the Act to Nisha. The assessment in the case of the daughters of the assessee was completed at the returned income of Rs. 27,71,974. In the block assessment, however, an amount of Rs. 90,56,871 had been included in the hands of the assessee. In the assessments of the daughters of the assessee, all bank accounts were explained. The returned income was accepted. These daughters of the assessee filed affidavits confirming that deposits in their savings bank accounts belonged to them only and that their father, the assessee, had nothing to do with those deposits. These affidavits were never controverted by the Department. Apropos the addition made on account of the deposits in the savings bank accounts, all the credit entries of the pass books, were added. The entries of the pass books were never confronted to the assessee. On 12th Aug., 1997, an FIR has been lodged against the assessee, who was in service of the State Government at the time of the search. The Special Judge, Jalandhar quashed the FIR, since the assessee was not found in possession of any disproportionate asset.
11. Undisclosed income under Section 158B(b) of the Act means income which had not been disclosed or would not have been disclosed. The income in the present case having been duly disclosed, as discussed, the same cannot be treated as undisclosed income of the assessee.
12. In view of the above facts, the grievance of the Department does not hold much force. The order of the learned CIT(A) does not require any interference at our hands. Ground No. 1 is, thus, rejected.
13. Ground No. 2 challenges the deletion of the addition of Rs. 3,23,118 on account of interest income on the bank deposits of the four daughters of the assessee. The AO observed that such interest income was to be taxed in the hands of the assessee, since these deposits were being used to make investments mainly in FDRs. The learned CIT(A), however, deleted this addition".
14. In this regard, we find that as observed by the learned CIT(A), the interest income was on the basis of the returns filed by the daughters and as such, it could not be treated as the undisclosed income of the assessee. This income stood already declared by the daughters of the assessee in their returns of income. Therefore, this ground also does not carry any force. It is rejected.
15. Ground No. 3 states that the learned CIT(A) has erred in deleting the addition of Rs. 20,43,756 on account of foreign remittances received by the assessee, his wife and four daughters. In this regard, the AO noticed that the assessee, his wife and daughters had received huge amounts of foreign remittance, amounting to Rs. 22 lacs, during the period September, 1992 to March, 1995. The facts are that some of the drafts/cheques received in respect of foreign remittances were found and seized. The AO observed that a majority of the remittances was received from Shri Gurnam Singh of California, U.S.A. The AO made the addition of Rs. 20,42,153, setting off a sum of Rs. 2 lacs pertaining to M/s Sujeet Sharma & Co., which was held to be a benamidar concern of the assessee, where addition of Rs. 2 lacs was separately made.
16. Before the CIT(A), the stand of the assessee was that the AO had failed to consider the details submitted during the assessment proceedings, wherein it has been explained that certain entries of FDRs/local cheques were included under the head 'Foreign remittances'; that the AO had also not considered the affidavits of the daughters of the assessee, wherein they had stated that the deposits in their accounts had no relation with the assessee; that the AO even did not confront the assessee with the material on the basis of which the foreign remittances were calculated; that the assessee having filed the affidavits of the donors making the gifts, the onus on the assessee stood discharged; that the gifts received by daughters of the assessee could not be added in the hands of the assessee, the daughters being major at the time of the receipt of the gifts; that the foreign remittances of Rs. 1,49,802 were received by the wife of the assessee, in whose case a separate block assessment order had been finalised and in that order, no such addition had been made; that apropos the foreign remittances of Rs. 4,51,524 added in the name of Nisha Sharma, a sum of Rs. 1,75,000, credited on 16th Oct., 1992, was on account of local cheques received from Shri Sujeet Kumar and Rs. 46,741 and Rs. 29,138 were on account of encashment of the FDR; that similarly in the case of Meenakshi Sharma, where Rs. 6,20,946 was added in the name of the foreign remittances, this included a cheque of Rs. 21,000 credited on 16th Sept., 1992 received from Shri Onkar Nath Gupta and Rs. 1,75,000 from Shri Sujeet Kumar of Jalandhar; that in the name of Smt. Sonia Sharma, an amount of Rs. 2,73,520 was added, but the amount credited on 28th May, 1994 was, in fact, Rs. 62,378, which was taken at Rs. 64,738 by the AO; and that as such, by excluding these entries, the foreign remittances calculated at Rs. 20,43,576, in fact, came to Rs. 12,31,398.
17. The CIT(A) deleted the addition and, therefore, ground No. 3 has been taken by the Department before us.
18. Before us, the learned Departmental Representative has submitted that during the search conducted at the premises of the assessee, photocopies of some of the drafts/cheques received in respect of the foreign remittances in question, were found and seized, from which, it was evident that most of the foreign remittances had been received from Shri Gurnam Singh of California; USA; that the stand taken by the assessee was that these remittances were not gifts, but were money kept in trust by the said NRI; that Shri Gurnam Singh belonged to the assessee's native place and the assessee had transferred the money to him to be kept in trust, so as to build up a sufficient amount in order to enable him to purchase land at a later date; that this explanation of the assessee was not at all tenable, since, as observed by the AO, in such a case, the assessee would have deposited his money in NRE account, which would have enabled the assessee to build up the reserve fast, since the interest in an NRE account is of higher rate and is also tax-free; that if the money was for capital build up, it would not have been advanced to all the members of the family of the assessee; that these remittances had been invested by the members of the family of the assessee in fixed deposits and the interest therein has been shown as their income in the respective tax returns filed by the daughters of the assessee; that it has come to light from the ledger and cash book of M/s Sujeet Sharma & Co., i.e., the benami concern of the assessee, that the amount of Rs. 25,000 had been paid to Shri Naval Seth to arrange gifts of Rs. 2 lacs and from this, it was evident that the assessee had been channalising his unexplained money from a hawala channel; that as such, the addition made by the AO was in accordance with law and it had been wrongly deleted by the learned CIT(A).
19. The learned Counsel for the assessee, on the other hand, has supported the order passed of the learned CIT(A) in this regard.
20. In this regard, again, it is seen that the bank accounts in which these foreign remittances were deposited, were duly disclosed by the daughters of the assessee while filing their returns of income before the date of search. Further, as correctly maintained by the assessee, the AO did not take into account the submissions made by the assessee during the block assessment proceedings. The remittances were received by the daughters of the assessee when they were major. The affidavits of the donors were not considered. Also, the local cheques and FDRs stood included in the foreign remittances, though they did not belong to this category. While making the addition regarding foreign remittances, peak theory and telescopic theory were not applied. All credit entries of the pass book were added. Entries of pass book were never confronted to the assessee.
21. In view of the above, the learned CIT(A) is found to have correctly deleted the addition in question. As such, ground No. 3 stands rejected.]
22. Ground No. 4 states that the learned CIT(A) has failed to appreciate that the four daughters of the assessee were his benamidars and the unexplained deposits and the interest thereon were correctly treated by the AO as income of the assessee.
23. In view of our findings on ground Nos. 1 to 3 above, this ground of the Department holds no force. The daughters of the assessee have not been proved to be his benamidars at all. Accordingly, ground No. 4 stands rejected.
24. Ground No. 5 challenges the deletion of the addition of Rs. 5,78,100 on account of unexplained marriage expenses of the daughters of the assessee. In this regard, the AO estimated the expenditure in the marriages of three of the assessee's daughters at Rs. 6 lacs on the marriage of each daughter, on the basis of statement of Smt. Sunaina Sharma, which was recorded at the time of search. The AO (concluded that against total unexplained expenditure of Rs. 18 lacs, after considering the withdrawals of Rs. 12,21,900, the balance amount of Rs. 5,78,100 had been incurred on the marriages out of undisclosed income. This amount of Rs. 5,78,100 was, therefore, added to the income of the assessee. The learned CIT(A) deleted this addition and this has aggrieved the Department.
25. The learned Departmental Representative has contended before us that the stand of the assessee in this regard has been that no expenses were incurred by him on the marriages of his three daughters and that the expenses were met out of the Shagans, etc., received. The Departmental Representative states that the AO noticed that the marriages took place in Milan Palace, a reputed marriage place and that the AO, accordingly worked out the expenses, referring to the statement of Smt. Sunaina Sharma. It has been argued that the AO's proposition was not disbelieved by the learned CIT(A) but he still gave credit regarding the Shagans, though no evidence has been brought on record with regard to the receipt of such Shagans.
26. On the other hand, the learned Counsel for the assessee, supporting the order of the learned CIT(A), has submitted that no incriminating material in this regard was found by the Department during the search and no post-search enquiry can be made without reference to the material found.
27. The stand of the assessee in this regard has remained that out of the marriages of the three daughters, two were love marriages and the third one was a simple arranged marriage, which was attended by only a few relatives and family friends of the assessee. Even the expenses on food were incurred by the maternal uncles and brother and the miscellaneous expenses were met out of Shagans; and that the AO did not confront the assessee with any evidence with regard to such expenditure. The AO, it is seen, did not take into consideration the submissions made by the assessee in the assessment proceedings. No evidence was brought on record by the AO in the shape of video film/album, bills or alike, to support his findings. Moreover, affidavits of the daughters of the assessee, admitting two love marriages and one arranged marriage, were not even considered. That the AO was not in possession of any material to support the findings recorded in the assessment order, was confirmed by the AO, who attended the appellate proceedings before the learned CIT(A) also. Investigations on marriage expenses were already going on even prior to the search. The marriage expenses were estimated at Rs. 6 lacs per marriage only on the basis of the statement of one of the daughters of the assessee, namely, Sunaina Sharma. Whenever there is an estimate, such estimate has to have some basis.
28. In the present case, the AO estimated the number of invitees at 2,000 'and the expenditure per plate at Rs. 150. No reason or basis for such estimate has been given. Moreover, even the addition of Rs. 2 lacs on account of household items including jewellery was made on an estimate basis, only on the basis of the statement of Sunaina Sharma. The addition of Rs. 1 lac on other functions was also similarly made. It was also not considered that the withdrawals in the case Meenakshi Sharma were deposited in another bank account. Apropos the credit given for Shagans, details were furnished before the AO during the assessment proceedings, supported by confirmation. In these facts, in our considered opinion, the learned CIT(A) correctly estimated the expenditure at Rs. 4.5 lacs on the marriage of Meenakshi Sharma in 1995 and Rs. 5 lacs for the marriages of two other daughters of the assessee in 1996. As such, these findings of the learned CIT(A) did not call for any interference at our hands. Accordingly, ground No. 5 stands rejected.
29. Ground No. 6 states that the learned CIT(A) erred in deleting the addition of Rs. 7 lacs on account of unexplained investment and estimated profit in respect of M/s Sujeet Sharma & Co., a benami concern of the assessee.
30. In the search action, certain books of account of Shri Sujeet Sharma for the period November, 1987 to March, 1992 were found from the assessee's cupboard in his office. From these books, it was seen that the said concern was running an oil tanker and was in business from 1988 to 1992. The AO observed that page No. 1 of the assessee's ledger revealed the assessee's capital account representing a contribution of Rs. 5,40,000 between November, 1987 to February, 1988 along with loan amount of Rs. 10,000 and Rs. 40,000 in April, 1999 and March, 1992, respectively. The AO observed that the said capital of Rs. 5,40,000 was built by deposit in cash amounting to Rs. 1,51,786 by way of loans of Rs. 1,47,539 and the balance by way of capital of Rs. 2 lacs as NRI gift. The AO concluded that the total unexplained investment was of Rs. 5.90 lacs which was made by the assessee in M/s Sujeet Sharma & Co., as representing his benami concern and along with the unexplained investment, a further profit of Rs. 1 lac was estimated by the AO in four years @ Rs. 25,000 for each year and thus the total addition of Rs. 7 lacs was made.
The deletion of this addition by the learned CIT(A) has given rise to ground No. 6.
31. Supporting the assessment order in this regard, the learned Departmental Representative has argued that during the search, the books were found in the assessee's cupboard relating to Shri Sujeet Sharma. Illegal payments were shown therein. There was no explanation by the assessee as to why the capital contribution was found shown by the assessee. The assessee being a Government servant, could not run such a business. As such, the addition made was proper and was wrongly deleted.
32. On the other hand, supporting the impugned order, the learned Counsel for the assessee has drawn our attention to pp. 180 to 198 of the assessee's paper book ("APB", for short). These are affidavits of Shri Sujeet Sharma, the contract of Shri Sujeet Sharma with Indian Oil Company, copy of purchase bill of oil tanker, regarding fabrication and supply of L.P.G. Bullet, debit note regarding its preparation on fabrication drawing approval of L.P.G. Bullet, route permit, permission from Department of Explosives, tax clearance certificate, national permit, bill of Ashok Leyland and affidavit of Shri Sujeet Sharma explaining the capital of Rs. 5.45 lacs. Attention has also been invited to pp. 171 to 173 of the APB, which comprise returns of Shri Sujeet Sharma regarding this business. APB 265 to 273 are copies of the pass books of accounts from where money came to Shri Sujeet Sharma.
33. With regard to this issue, it is seen that the tanker was in the name of Shri Sujeet Singh. It was Shri Sujeet Sharma, who got the contract of the transport in his name from IOC Delhi, after getting fabrication work completed and after getting approval from the Department of Explosives, Nagpur. The national permit from the Regional Transport Authority, Jalandhar was also obtained by Shri Sujeet Sharma. Shri Sujeet Sharma filed the return of income declaring this business. Income-tax clearance certificate was issued on 3rd Aug., 1990. In his affidavit, Shri Sujeet Sharma gave all the details of money received from various parties, relatives and close friends. The AO did not take all this, into consideration. The conclusion of the AO that this concern was the benami concern of the assessee, was based on the name of the assessee appearing against the capital account and on the basis that the documents/books were found in his possession along with the details of the expenditure. However, it was not considered that the amounts were contributed by persons other than the assessee and that there was no corresponding debit in the assessee's savings account, due to which, no addition in the capital account remains. Moreover, Shri Sujeet Sharma had already reflected the income from the operation of the tanker by filing returns of income. Statement of Shri Sujeet Sharma was recorded on 29th Aug., 1997. He had confirmed the ownership of the business. He has also admitted having filed income return of his business. The assessee, who vide letter dt. 15th March, 1999, explained that he had nothing to do with this business. Vide letter dt. 17th June, 1999, the assessee filed an affidavit of Shri Sujeet Sharma, confirming that he was the owner of the tanker. Copies of bills, national permit and transportation contract letter from the Department of Explosives, Nagpur and income-tax clearance certificate were filed. All these documents were in the name of Shri Sujeet Sharma. Vide letter dt. 22nd June, 1999, the assessee filed another affidavit of Shri Sujeet Sharma wherein he had explained entries with regard to Government account with source and vide copy of IT returns furnished with the Department.
34. The assessee further explained that the entries recorded in the alleged capital account had not come from any of the savings bank accounts of the assessee. Shri Sujeet Sharma further filed copies of bank accounts of relatives from whom tax {sic) had been received and the pass books where these cheques stood credited. These documents showed that the money had come from accounts of Shri Sujeet Sharma. The documents filed were not considered by the AO. These documents clearly brought out that it was Shri Sujeet Sharma rather than the assessee who was the owner. The affidavits of Shri Sujeet Sharma were not rebutted by the AO. Also, the AO nowhere found that the entries through cheques in the alleged capital account had come from any savings bank account of the assessee. The books of accounts were not in the handwriting of the assessee and were not signed. Therefore, no adverse inference could be drawn against the assessee. The explanation of the assessee that the wealth discovered belonged to his wife stood substantiated by the evidence of the assessee's wife, which was not being questioned or rebutted. Therefore, the assessee could not be held guilty.
35. In view of the above, the learned CIT(A) correctly observed that the income from operation of tanker could not be treated as income of the assessee. The addition of Rs. 7 lacs has, therefore, rightly been deleted. Accordingly, ground No. 6 is rejected.
36. In the result, IT(SS)A No. 22/Asr/2002 is dismissed.
IT(SS)A No. 19/Asr/2004:
37. This is assessee's appeal for the block period 1st April, 1987 to 24th June, 1997 against the order dt. 28th March, 2002 passed by the learned CIT(A), Jalandhar. The following grounds have been taken:
1. That on the facts and circumstances of the case, learned CIT(A) has grossly erred in confirming addition of Rs. 1,16,310 being deposits during the block period in savings bank account No. 810 with Bank of Baroda, whereas this amount has been duly declared in the block assessment of Smt. Sudesh Sharma, wife of the assessee. Addition confirmed is illegal and bad in law.
2. That on the facts and circumstances of the case, learned CIT(A) has grossly erred in confirming addition of Rs. 1,32,158 on account of deposits of Rs. 1,32,158 during block period in the name of Smt. Sita Rani. Addition confirmed is illegal and bad in law.
3. That on the facts and circumstances of the case, learned CIT(A) has grossly erred in confirming addition of Rs. 40,000 out of addition of Rs. 50,000 on account of household items made by the AO. Addition confirmed is illegal and bad in law.
38. Apropos ground No. 1, the AO observed that a perusal of bank account No. 810 in Bank of Baroda, Dilkusha Market, Jalandhar, which was in the name of the assessee, showed that deposits in cash ranging from Rs. 5,000 to Rs. 10,000 had been made regularly, but these deposits were neither relatable to any of the sources of income of the assessee, nor was there any nexus with the withdrawal made by the assessee from his disclosed bank account. It was found that there was cash deposit entry totalling upto Rs. 1,32,810; that this account had been abruptly closed at the time when enquiries had been initiated in the case of the assessee. The assessee explained to the AO that the said account was opened by him in 1987 and the balance therein increased balance of interest application; that the amount was withdrawn in 1990; that the wife of the assessee started depositing her pin money and other savings in this account without the knowledge of the assessee; and that since the deposits were made by her, the same was offered for taxation by her in her block assessment return. The AO, however, disbelieved the version of the assessee, observing that the assessee had himself made withdrawals from this account on 8th March, 1990 and 19th Nov., 1993 and so, this account was in the knowledge of the assessee; that it was not understood as to why the assessee's wife would make deposits in the assessee's bank account, when she was herself having her own bank account; that the account being in the name of the assessee, the onus was on him to explain it and in the absence of a proper explanation, addition was to be made to the income of the assessee only; that the cheques presented for withdrawal from this account were not in favour of Smt. Sudesh, i.e., the assessee's wife, to whom even the deposits were stated to belong and had the amount been that of Smt. Sudesh, the assessee would have returned the amount to her rather than issuing cheques in the names of third persons; that the assessee was giving this explanation, since he could not, being a Government servant, be in possession of unexplained cash deposits in his bank account. In this manner, the AO made the addition of Rs. 16,310 to the income of the assessee, as his unexplained income!]
39. Before the learned CIT(A), the assessee submitted that the amount deposited in the account in question was surrendered by the wife of the assessee and so, it could not be taxed again in the hands of the assessee; that the account was opened in 1990 and the balance in the account increased because of interest application; that in 1990 and 1993, amounts of Rs. 1,000 each were withdrawn by the assessee and from the year 1993-94, the assessee's wife started depositing her pin money and other savings in this account without his knowledge and the same was offered for taxation in her block return; that the assessee did not have any other source of income; that during the assessment proceedings, the assessee's wife had filed her affidavit in this regard, which had not been rebutted by the AO; that the AO had taken contradictory stands inasmuch as while making addition of the deposits in the savings bank accounts of the assessee's daughters, he had held that the deposits belonged to the assessee, though they were in the names of somebody else and while making the addition in question, it was held that the addition was being made in the hands of the assessee, since the account was in his name; and that no cheques were issued in the names of any third party, as only interest amount was withdrawn and after 1993, no such withdrawal was made.
40. The learned CIT(A) upheld the addition, agreeing with the AO that the assessee had made withdrawals from this account and so maintenance of this account was within his knowledge; that the wife of the assessee having her own bank accounts, it was incomprehensible as to why she would make deposits in the account of the assessee; that there was no direct evidence that deposits were not made by the assessee but by his wife; that the deposits being in an account owned by the assessee, it was his onus to explain the same; and that this onus was not discharged by the assessee.
41. Before us, impugning the order of the learned CIT(A), the learned Counsel for the assessee has argued that the only case made out by the Department is that the assessee being a Government servant, he found it difficult to explain the bank account in question and so, he declared it in the hands of his wife. It has been argued that the addition is illegal, since the assessee explained that the account was opened in 1987, the money was withdrawn in 1990 and that the assessee's wife was depositing her pin money, etc. in this bank account from 1993-94. It has been argued that during the assessment proceedings, the assessee's wife had furnished her affidavit confirming deposits made by her in this account out of her pin money, but this affidavit was not at all considered by the taxing authorities. It has been further argued that the assessee was having only fixed salary income and no other income, whereas the assessee's wife was having rental income and interest income. It has also been argued that once the assessee owns an asset, ownership of such asset, no addition can be made in the hands of a person from whose possession the asset is required.
42. On the other hand, the learned Departmental Representative has, relying on the order passed by the learned CIT(A), stated that the CIT(A) has rightly confirmed the addition observing that the bank account in question was in the name of the assessee only and that there was no evidence that the assessee's wife deposited her pin money in this account and that too, when she herself was having more than one bank account in her name.
43. In this regard, it is seen that the assessee has maintained that the deposits amounting to Rs. 1,16,310, being the deposits in the savings bank account in question, had already been declared by the assessee's wife in her block assessment. The grievance of the assessee is that by adding this amount in the assessee's hand, a double addition had been made. This, however, is not correct. As is evident from the assessment order, the amount was added on a substantive basis in the name of the assessee whereas in the case of the block assessment of the assessee's wife, the addition was made on a protective basis. This does not amount to a double addition. The concept of substantive and protective assessment itself is an either/or situation. In case the addition is confirmed in one hand, it would automatically stand deleted in the other hand.
44. The next submission of the assessee is that from 1993-94, the assessee's wife started depositing her pin money in this account without the knowledge of the assessee. This, however, has not been believed, since there is no direct evidence of any such deposit of pin money by the assessee's wife. Moreover, it is also a circumstance going against the assessee that undisputedly, the assessee's wife was having more than one bank account in her own name and so, there was no reason why she would have made the deposits of her pin money in the bank account of her husband.
45. The next contention of the assessee has been that the affidavit of the assessee's wife confirming such deposits, which affidavit was filed during the assessment proceedings, was not rebutted by the taxing authorities and so, this affidavit was good evidence, in the face of which, the addition could not have been made. Here, it is seen, that the affidavit in question is merely a self-serving document and it does not further the case of the assessee in the absence of any direct evidence of the deposits having been made by the wife of the assessee, as alleged. This affidavit, at best, is secondary evidence, which cannot substitute primary or direct evidence. The learned Counsel for the assessee has placed reliance on the following case law. However, it has not been shown as to how these case law are applicable to the facts of the present case. So much so, not even the names of the cases have been cited:
(1) Mehta Parikh & Co. v. CAT (1956) 30 ITR 181 (SC);
(2) L. Sohan Lal Gupta v. CAT ;
(3) Krishan Lal Shiv Chand Rai v. CIT ;
(4) Sri Krishna v. CAT .
For the proposition that where a person owning an asset admits to such ownership, no addition can be made in the hands of the person possessing such assets, the following case law have been relied on (1) Asstt. CIT v. Karodilal Agrawal :
(2) ITO v. Mathuradas Motichand ;
(3) Dy. CIT v. Vinod Kamra (2006) 102 TTJ (Jd) 152.
46. The facts in Karodilal Agrawal (supra) are entirely different. In that case, the CIT(A) pointed out that it would be wild imagination to presume that an illiterate widow of 70 years could come to the rescue of the assessee, when she had no relation with the assessee. (para 6 of the Report). In the present case, however, the whole case of the Department is that the assessee being a Government servant, could not explain the bank deposits in his name and so he chose to state that the deposits belonged to his wife. It was his wife, who, by way of the affidavit, admitted the ownership of the deposited amounts. However, there was no direct evidence of such deposits having been made by her. Moreover, the taxing authorities have concluded that the deposits in fact belonged to the assessee, since it was unacceptable that the assessee's wife, who was having more then one account in her own name, would make such deposit in the account owned by her husband.
47. The facts in Mathuradas Motichand (supra) are also at variance with those attending the present case. In that case, the AO was held not justified in disbelieving a part of the assessee's explanation, because in that case, the assessee, besides explaining that the ornaments belonged to his wife, daughters-in-law and daughters, had also produced all the evidence required, besides affidavits. In the present case, however, the very bone of contention between the parties is that the self-serving affidavit of his wife has not been accepted as gosple truth, even though had the deposit been made by the assessee's wife, he could have produced direct evidence showing such deposits to have been actually made by her, which was not done.
48. The facts in Vinod Kamra (supra) are also totally different from those of the case in hand. In that case, in the search, jewellery was found in the residential premises and locker held in the joint name of the wife of the assessee and the brother of the said wife, in Allahabad Bank, Srinagar. Besides, jewellery was found on the person of the assessee's wife. The assessee explained the source of investment in gold jewellery as belonging to his wife, which was received by her at the time of marriage from her parents and parents-in-law and also at the time of ceremony of birth of son, etc. It was also submitted that part of jewellery was belonging to the wife of the brother of the assessee. The reason for keeping the jewellery in the locker by the wife of the brother of the assessee's wife was also explained. The AO treated part of the jewellery as explained and the balance was treated as acquired out of undisclosed income of the assessee and an addition was made. The CIT{A) deleted the addition after considering that the locker was in the name of the assessee's wife, who was separately assessed to tax and she had stated in her statement that the jewellery belonged to her and her Bhabhi, and that her husband had nothing to with her jewellery. It was in these facts that the Tribunal upheld the order of the learned CIT(A). In the present case, however, the facts are entirely different. Here, it is a case where the assessee's wife was stated to have made deposits in the bank account exclusively owned by her husband, despite the fact that she was herself owning, maintaining and operating more than one bank account. In the circumstances, it is hard to comprehend as to how the decision in Vinod Kamra (supra) would apply
49. Apropos the plea that in the absence of rebuttal of the affidavit filed by the assessee's wife, no adverse inference can be drawn therefrom against the assessee, in our considered opinion, it is not so. The affidavit in question is, at best, a self-serving document, the credence whereof is belied by the actual attending circumstances of the assessee's wife making deposits in an account owned exclusively by her husband, and that too without his knowledge, in the face of the fact that she was herself owning and operating more than one independent bank account in her name.
50. Otherwise too, in such cases, the preponderance of probability of human behaviour plays an important role and in the absence of any evidence to the contrary, the authorities below have rightly arrived at the conclusion that the assessee was merely trying to cover up the bank account in question as belonging to his wife, since being a Government servant, he could not co-rrelate the deposits in question as out of his known sources of income.
51. Therefore also, it cannot be said that the addition had been made on the basis of mere assumptions and presumptions.
52. In the above view of the matter, finding no force in the same, ground No. 1 raised by the assessee is rejected.
53. Coming to ground No. 2, the assessee is aggrieved of the confirmation of the addition of Rs. 1,32,158 on account of deposits made during the block period in the name of Smt. Sita Rani.
54. The facts in this regard are that Smt. Sita Rani, wife of late Shri Ram Lubhaya, is the mother-in-law of the assessee. She is a resident of Mohalla Kallowali, Jalandhar. During the search, again, a bank account was found as being in the joint name of Bawa Sharma and Sita Rani. This was account No. 5973 with Bank of Baroda, Dilkusha Market, Jalandhar. Bawa Sharma, also known as Sunaina, is an unmarried daughter of the assessee, stated to have been adopted by the assessee's brother in 1992, vide an adoption deed. The assessee maintained that the deposits in this bank account had been made by Smt. Sita Rani. However, as per the AO, enquiries from the bank revealed that this bank account had been operated by the family members of the assessee, rather than by any of the family members of Smt. Sita Rani, who looked after her and with whom she was living. The AO observed that Smt. Sita Rani was an old lady having no source of income, as had been stated by her in her statement recorded in the presence of her daughter-in-law, who was well educated. The AO observed that pp. 31 and 32 of the Annex. A-4 seized from the residence of the assessee, were photocopies of Kamdhenu Deposit Receipts ("KDRs", for short), of Rs. 25,000 each. It appeared interesting to the AO that these photocopies had been seized from the residence of the assessee. Interesting, because firstly, it was not understandable as to why these photocopies were lying in the assessee's premises and secondly, on this paper, there was also a copy of form on which nominations had been done by Smt. Sita Rani. These nominations were in the names of the daughters of the assessee. One KDR was nominated in favour of Meenakshi Sharma and other was in the name of Nisha Sharma. The date of issue of both KDRs was 16th March, 1990 and both were due on 16th March, 1992, for the maturity value of Rs. 30,460 each. On the references of these pages, the AO observed the thumb impression of Smt. Sita Rani, whereas the particulars of encashment of these KDRs had not been filled in. From this, the AO gathered, that even before the encashment of the KDRs, the thumb impressions of the old lady had been obtained and that she being the mother-in-law of the assessee, was extending her name to facilitate the assessee to declare the money in his name. Then, these KDRs were noticed to have been reinvested in further KDRs for Rs. 30,460. Nominations continued in the names of Nisha and Meenakshi Sharma, aggregating to a maturity value as on 16th March, 1993, of Rs. 38,213 each amounting to Rs. 76,426. Two other similar KDRs of Rs. 25,000 each were observed by the AO, having a maturity value of Rs. 27,866 each, amounting to Rs. 55,732, as on 26th March, 1994. The AO observed that Smt. Sita Rani was a benamidar of the assessee and even the assessee's daughters did not have any source of income. The entire maturity value of the KDRs was added by the AO in the hands of the assessee, total amounting to Rs. 1,32,158, in the asst. yr. 1994-95.
55. Before the learned CIT(A), the assessee contended that the AO had never confronted the assessee with the documents on the basis of which the addition in question had been made. It was submitted that if the KDRs were taken to be belonging to the daughters of the assessee and ultimately belonging to the assessee himself, no addition for the encashment therefore could be made, since the cash deposits in the savings bank accounts of the daughters had been added. The assessee further submitted before the CIT(A) that Smt. Sita Rani had opened the account with Bank of Baroda in her individual capacity and since she was suffering from paralysis, she added the name of Bawa Sharma as a precautionary measure; that the deposits in the account of Smt. Sita Rani had no relation with the assessee; that Smt. Sita Rani had declared Rs. 3 lacs in VDIS and her declaration had already been accepted, proving that she was an independent assessee. Confirming the addition made, the learned CIT(A) observed that Smt. Sita Rani had not been found to have any source of income; that the investment made in KDRs had been tried to be explained vis-a-vis the VDIS declaration in the hands of Smt. Sita Rani, but it was not acceptable because under the VDIS declaration, Smt. Sita Rani had declared Rs. 3 lacs pertaining to the asst. yr. 1994-95, as cash, whereas the investment in the KDRs was in the prior period, when Smt. Sita Rani was not found to be having any source of income; that further, she was having her own relatives, but for these KDRs, nominations were in the names of the daughters of the assessee, rather than her own sons and daughters; that it was also not acceptable that no addition for the encashment of KDRs was required to be made in the hands of the assessee, the proceeds of the KDRs having been deposited in the accounts of the daughters, which were separately added; that in fact, the AO had taxed the unaccounted income of the period in which the investment in the KDRs was made and it had nothing to do with the encashment of the KDRs and its subsequent credits in the accounts of the daughters of the assessee.
56. Before us, the learned Counsel for the assessee has submitted that the addition is illegal, firstly, because the photocopies of the documents were never confronted to the assessee by either of the taxing authorities. In this regard, the assessee had placed reliance on the following decisions, though no applicability thereof to the present case had been made out, inasmuch as not even titles of the cases have been cited:
(1) C.B. Gautam v. Union of India ;
(2) Sona Builders v. Union of India ;
(3) Appropriate Authority v. Vijay Kumar Sharma (2001) 168 CTR (SC) 611 : (2001) 249 1TR 554 (SC).
57. It has been further submitted that the only case of the Department is the recovery of the photocopies of the KDRs, wherein the nominations were in favour of the daughter of the assessee and based on the photocopies of the KDRs., Smt. Sita Rani was treated as benamidar of the assessee. It has been submitted that the observations of the AO were merely assumptions and presumptions and that the recovery of the photocopies of the KDRs from the residence of the assessee does not lead to the conclusion that Smt. Sita Rani was the benamidar of the assessee. According to the learned Counsel for the assessee, it was possible that Smt. Sita Rani had handed over these KDRs for encashment to the assessee's wife, being her mother, with the intention to keep the KDRs secret from her sons and their family members. It has further been contended that Smt. Sita Rani had filed a declaration tinder VDIS for the asst. yr. 1994-95, declaring a sum of Rs. 3 lacs, which was accepted, which, in turn, meant that she was an independent assessee, due to which she could not be treated as a benamidar of the assessee. It has been further contended that the maturity value of the KDRs was declared under the VDIS and so, no addition was called for. In this regard, reliance has been placed on Kamal Narayan Jaiswal v. Dy. CAT . The learned Counsel for the assessee has further submitted that the KDRs were made in 1990-91 and no addition could be made in the asst. yr. 1994-95. Lastly, it has been submitted that no addition could be made, since the KDRs stood encashed prior to the search.
58. The learned Departmental Representative, on the other hand, supporting the order passed by the learned CIT(A), has submitted that the learned CIT(A) has fully noted that Smt. Sita Rani was found to have no source of income and that the amount was declared by her under VDIS pertains to the cash in the asst. yr. 1994-95, whereas the investment in question was made during the prior period.
59. With regard to this issue, we find that, as correctly submitted by the learned Counsel for the assessee, the material on the basis of which the addition was made, i.e., the photocopies of the KDRs obtained during the course of search, were never confronted to the assessee. It is the first and foremost principle of natural justice, that nobody can be condemned unheard. The assessee ought to have been afforded adequate opportunity to rebut the evidence set up against him. Therefore, in the interest of justice, this issue is remitted to the file of the AO, to be decided afresh in accordance with law, on affording an adequate opportunity to the assessee in this regard.
60. The last issue involved in this appeal is the confirmation of the addition of Rs. 40,000 out of the addition of Rs. 50,000 made by the AO on account of household items. As per the assessment order, the assessee was confronted with the list of inventory of household items prepared at the time of search, bearing the signature of the assessee. The AO observed that the assessee could not satisfactorily explain the following items:
(1) A.C. National 1987-88 (2) A.C. local made 1988-89 (3) Dish antenna
The AO observed that the value of two ACs with reference to their year of manufacture, amounting to Rs. 12,000 and Rs. 13,000, respectively, was being added for the asst. yrs. 1987-88 and 1988-89 respectively. Apropos the dish antenna, the AO observed that the assessee had been denying the existence thereof, whereas the factual position was otherwise, i.e., even the list of inventory consisted of the item "receiver of dish antenna". The AO thus concluded that this item had been acknowledged by the assessee on the date of search, he having signed the list of inventory; and that without dish antenna, there was no need to instal the receiver of dish antenna. The AO, accordingly, made the addition of Rs. 25,000 on estimate basis, which included the cost of receiver of dish antenna for the asst. yr. 1994-95.
61. The stand of the assessee before the learned CIT(A) was that the AC of National make was gifted by two brothers-in-law of the assessee on the assessee's marriage anniversary in the year 1988 and that the AC of local make was purchased in the year 1996 for Rs. 7,000, out of the savings of the daughter of the assessee. Apropos the dish antenna, the assessee submitted that there was no dish antenna in the residential premises of the assessee and only a booster was installed, and that otherwise too, the cost of dish antenna was about Rs. 5,000 which was wrongly taken as Rs. 25.000 by the AO.
62. The learned CIT(A) while giving a relief of Rs. 10,000 to the assessee, observed as follows:
7.4 On the issue of household items, neither the fact of gift of AC National make by the brothers-in-law was substantiated nor source of purchase of local made AC of Rs. 7,000 was explained. Further, no such plea was taken at the time of search proceedings, I also do not find any merits in the submissions of the appellant that in the list of assets TV booster was noted as receiver of dish antenna, when the inventory of the household items was signed by the appellant. But since the addition of Rs. 25,000 was estimated addition made by the AO and considering the submissions of the learned Authorised Representative that cost of dish antenna is about Rs. 5,000, its cost is taken at Rs. 15,000 with relief of Rs. 10,000 to the appellant against additions of Rs. 50,000 on account of household items. The appellant gets relief of Rs. 10,000.
63. Before us, the assessee has not been able to controvert the observations recorded by the learned CIT(A) to the effect that apropos the National AC, the stand of the assessee was not substantiated and apropos the local made AC, the source of purchase was not explained and further, that no such plea was taken at the time of the search proceedings. The assessee has also not been able to controvert the findings with regard to the dish antenna, as recorded by the learned CIT(A). Moreover, apropos this dish antenna, a relief of Rs. 10,000 has already been granted by the learned CIT(A) to the assessee. In these facts, we do not find any error with the order of the learned CIT(A), which we hereby sustain.
64. In view of the above discussion, the appeal of the assessee is entitled to be partly accepted as indicated. It is so ordered.
65. In the result, IT(SS)A No. 22/Asr/2002, filed by the Department is dismissed whereas IT(SS)A No. 19/Asr/2002, the appeal of the assessee, is partly allowed.