Income Tax Appellate Tribunal - Delhi
Ito vs Prakash Chand Lunia on 15 September, 2004
Equivalent citations: [2005]1SOT392(DELHI)
ORDER
P.M. Jagtap, A.M. This appeal is preferred by the revenue against the order of learned CIT (A), XXII, New Delhi dated 28-2-2001 and its grievance is projected in the following solitary ground raised therein :
"Based on facts and circumstances of the case, the learned CIT (A) has erred in directing the assessing officer to add the value of silver and cash to the income of the assessee on protective basis after having reached to the conclusion that the seized silver and cash belong to the assessee."
2. The relevant facts of the case giving rise to this appeal are as follows. The assessee is an individual deriving income from the business of purchase and sale of silver. A search was carried out by the Directorate of Revenue Intelligence, Delhi on 6-1-1992 at factory near Village Surana. During the course of search, cash of Rs. 2,25,000 and silver weighing 5301.84 kgs. valued at Rs. 4,18,80,933 were found besides one register and three note books. During the course of search, statement of Shri Bishan Dayal, Prop. of M/s. Bishan Dayal and Sons, Narnaul, stated to be the occupant of the searched premises was recorded. In his statement so recorded, the said deponent stated, inter alia, of having contacts with Shri Prakash Chand Lunia, i.e., the assessee in the present case. He also stated that Shri Prakash Chand Lunia was offering him silver business on commission. As per the modus operandi of the said business explained by Shri Bishan Dayal in his statement, foreign made silver was being supplied to him by the assessee and he was making pieces of the said silver and selling it to the different parties according to the instructions of the assessee. He also stated that his son Shri Viswanath was assisting him in the said business for which commission of Rs. 70 per kg. was being paid by the assessee. The statement of Shri Bishan Dayal was also recorded by the assessing officer during the course of assessment proceedings in his case wherein he denied any connection with the silver weighing 5301.84 kgs. cash amounting to Rs. 2,25,000 as well as the register and three note books found during the course of search carried out by the Directorate of Revenue Intelligence at factory situated near the village Surana. He alleged that he was taken forcefully to the said factory premises by the DRI staff and was asked to deliver the statement accepting ownership of the aforesaid items. He also stated in the statement that he was arrested due to mistake with a possibility that there might be some other person with a similar name of Shri Bishan Dayal who was actually responsible for the aforesaid silver business. The said submissions made by Shri Bishan Dayal in his statement recorded by the assessing officer during the course of assessment proceedings, however, were not found acceptable by the assessing officer and taking into consideration the material gathered during the course of search by the Directorate of Revenue Intelligence including the statement of Shri Bishan Dayal, he proceeded to hold that the silver worth Rs. 4,18,80,933 as well as cash of Rs. 2,25,000 found during the course of search carried out by the Directorate of Revenue Intelligence belong to Shri Bishan Dayal. Accordingly, the assessing officer added the same in the hands of Shri Bishan Dayal on substantive basis treating it as his unexplained investment under section 69A. The said matter in the case of Shri Bishan Dayal was carried before the learned CIT (A) who, after having found that the assessing officer has made the assessment officer on the basis of information given by the DRI, Delhi and has failed to appreciate the submissions given by the assessee at the time of assessment proceeding, set aside to be made afresh by the assessing officer after giving adequate opportunity of being heard to the assessee and examining all the relevant aspects of the case.
3. As a result of search especially the statement of Shri Bishan Dayal recorded by the DRI authorities implicating the assessee, a show cause notice was issued to the assessee by the Customs Authorities on 9-7-1992. in reply to the said notice, the assessee denied of having any connection either with the person searched or with the contraband silver and cash found during the course of search conducted by the DRI authorities. He also stated before the Customs Authorities that he has no objection to the confiscation of the said silver and Indian currency seized by the DRI authorities during the course of search. However, after taking into consideration all the facts of the case as well as the findings of the search conducted by the DRI authorities, the Collector of Customs held in paragraph No. 18 of his appellate order dated 19-3-1993 passed in the proceedings under the Customs Act that the assessee, i.e., Shri Prakash Chand Lunia is the main person who organized the entire smuggling of silver and is knowingly concerned not only with the seized silver but also with F/M silver already disposed of at his direction. He, therefore, held the assessee to be liable for penal action and imposed penalty of Rs. 25 lakhs under section 112(a) of the Customs Act, 1962 besides confiscating the silver and cash found and seized by the DRI authorities under section 111(a) of the Customs Act, 1962. Keeping in view all these facts including the specific finding recorded by the Collector of Customs in his appellate order, a notice under section 148 was issued by the assessing officer to the assessee in order to tax the transactions relating to silver and cash found and seized by the DRI authorities. In response to the said notice, a return of income was filed by the assessee for the year under consideration showing a total income of Rs. 1,00,780. During the course of reassessment proceedings, it was submitted on behalf of the assessee that the silver and cash in question having not been found from his possession but from the possession of Shri Bishan Dayal and the same having been already considered in the hands of the said person on substantive basis by the concerned assessing officer, there was no case to consider the same again in his hands for the purpose of income-tax. The assessing officer, however, found from enquiry made with the concerned assessing officer that the assessment made on substantive basis in the hands of Shri Bishan Dayal has already been set aside by the learned CIT (A), Rohtak with a direction to the assessing officer to do the same afresh and since the assessment in the set aside proceedings in the case of Shri Bishan Dayal was still pending whereas the assessment in the case of the assessee was getting time-barred on 31-3-1997, he proceeded to complete assessment by his order dated 17-3-1997 adding the value of silver amounting to Rs. 4,18,80,933 and cash of Rs. 2,25,000 seized by the DRI authorities in the hands of the assessee on protective basis. Aggrieved by the said additions made by the assessing officer on protective basis, the assessee preferred an appeal before the learned CIT (A) and after noticing the fact that substantive assessment made on account of silver and cash in the case of Shri Bishan Dayal has already been set aside by the learned CIT (A), Rohtak restoring the matter to the file of the assessing officer, Narnaul for fresh orders, the learned CIT (A) found it just and proper to set aside the protective assessment impugned before him in the assessees appeal also for re-examination and fresh orders to the assessing officer depending on the outcome of the assessment to be completed by the assessing officer in the set aside proceedings in the case of Shri Bishan Dayal which was pending at the relevant time.
4. The assessment in the set aside proceedings in the case of the assessee was completed by the assessing officer vide his order dated 29-3-2000 assessing the value of silver amounting to Rs. 4,18,80,933 and cash of Rs. 2,25,000 seized by the DRI authorities on substantive basis mainly relying on the appellate order passed by the Collector of Customs holding the assessee as the main person who organized the entire smuggling of silver as well as on the audit report filed by the assessee alongwith his return of income wherein it was mentioned in the notes on accounts that "the stock of silver and cash lying with the DRI authorities requires suitable adjustment".
5. Meanwhile, as per the directions given by the learned CIT (A), Rohtak in the case of Shri Bishan Dayal, the assessing officer proceeded with his assessment in the set aside proceedings giving opportunity to the assessee of being heard. Availing the said opportunity, various objections/contentions were raised on behalf of Shri Bishan Dayal in the set aside proceedings. The assessing officer, however, found the same to be unacceptable for the various reasons/findings given in his order and holding that the silver valued at Rs. 4,18,80,933 as well as cash of Rs. 2,25,000 found and seized by the DRI authorities belong to Shri Bishan Dayal, the assessing officer added the same in his hands under section 69A.
6. Aggrieved by the order of the assessing officer assessing the value of aforesaid silver in his hands on substantive basis, the assessee in the present case preferred an appeal before the learned CIT (A) and after taking into consideration all the relevant aspects of the case, the learned CIT (A) directed the assessing officer to add the value of cash and silver seized by DRI authorities in the hands of the assessee only on protective basis for the following reasons given in his impugned order:
"9. On going through the assessment order of the assessing officer I find that this assessment has been made on the appellant on substantive basis. However, in the first assessment order dated 17-3-1997 the addition on account of silver and cash seized in the DRI search were made on protective basis. In course of re-assessment proceedings no other material was brought on record by the assessing officer to substantiate the substantive assessment except the fact that in the notes on account given by the CA on 15-9-1992 in case of M/s. Lunia & Company where Sh. P.C. Lunia is proprietor, it was mentioned that stock of silver and cash lying with DRI requires suitable adjustment. When this remark was pointed out to the assessees authorised representative in course of appeal hearing, it was explained before me that this remark relates to stock of silver and cash seized in earlier raids by the DRI. However, this explanation of the authorised representative of the assessee is not acceptable by me because the DRI search took place on 6-1-1992 and the auditors remarks was dated 15-9-1992. So the stock of silver and cash, as mentioned in the auditors report are nothing but the silver and cash seized during the DRI search taken up on 6-1-1992. Moreover, the Customs Collector had already held in this order dated 19-3-1993 that Sh. P.C. Lunia, the appellant, is the main person, who organized the entire smuggling of silver. He not only confiscated the silver seized but imposed a penalty under section 112(d) of the Customs Act, 1962 amounting to Rs. 25 lakhs in the case of Shri P.C. Lunia. The assessing officer mentioned in his order that the appellant had preferred an appeal before the Customs, Excise & Gold (Control) Appellate Tribunal and the matter is subjudice. Therefore, I cannot accept the contention of the appellant that the assessment in the hands of Shri P.C. Lunia needs to be vacated. However, keeping the f act that assessing officer, Narnaul has already completed the substantive assessment in the hands of Shri Bishan Dayal and sons for this assessment year and added the silver and cash found in course of DRI search in their hands, I deem it proper to direct the assessing officer to add the value of silver and cash to the income of the appellant on protective basis till the finalisation of appeal filed by the appellant before the Customs, Excise & Gold (Control) Appellate Tribunal. The assessing officer must pursue the matterwith the Custom Department. In case Shri P.C. Lunia looses the appeal, then assessment made in case of Shri P.C. Lunia should become a substantive assessment."
7. Aggrieved by the aforesaid relief allowed by the learned CIT (A), the revenue has preferred the present appeal before us.
8. We have heard the arguments of both the sides and also perused the relevant material on record. At the outset, it is worthwhile to mention that the substantive assessment made on account of silver and cash seized by the DRI authorities in the hands of Shri Bishan Dayal was also challenged by the said assessee in an appeal filed before the learned CIT (A) and after having failed to succeed therein, he also preferred an appeal before the Tribunal. The said appeal was also heard alongwith the present appeal by us and in the order dated 10-9-2004 passed in the said case in ITA No. 1006/Delhi/2000, we have deleted the addition made on account of silver and cash in question on substantive basis in the case of Shri Bishan Dayal for the following reasons given in para Nos. 11 and 12 of the said order "11. We have considered the rival submissions and also perused the relevant material on record. It is observed that the silver valued at Rs. 4,18,80,933 and cash of Rs. 2,25,000 besides a register and three note books were found and seized by the DRI authorities in a search operation carried out at the premises situated near Village Surana. Although the said premises was not owned by the assessee, the findings given by the assessing officer in his assessment order as well as by the Chief Judicial Magistrate, Narnaul and the Collector of Customs in their respective orders are sufficient to show that the same was occupied by the assessee. Obvious as it is, the silvervalued at Rs. 4,18,80,933 and cash of Rs. 2,25,000 were found from the control and possession of the assessee and presumption about the ownership of the same was available to be drawn against the assessee. It is true that the said presumption is rebuttable and it is necessary to ascertain as to whether the assessee has been able to rebut the same successfully and satisfactorily by showing that the aforesaid silver and cash seized from his possession did not belong to him but belonged to someone else. In this regard, it is observed that a similar issue was in dispute even in the proceedings under the Customs Act wherein the search was actually conducted and it is pertinent to note that the Collector of Customs, New Delhi in para No. 18 of his appellate order dated 19-3-1993 (copy at pages 108 to 116 of assessees paper book) held that Shri Prakash Chand Lunia was the main person who organized the entire smuggling of silver and was knowingly concerned not only with the seized silver but also with F/M silver already disposed of at his direction and thus liable to penal action. Further in Para No. 19 of the said order, the Collector of Customs observed that Shri Bishan Dayal, i.e., the assessee and his son Viswanath have themselves admitted in their voluntary statements under section 108 of the Customs Act, 1962 of having knowledge about the dealings in smuggled silver delivered to them by Shri Prakash Chand Lunia through one Chhoggan Bhai on a commission of Rs. 70 per kg. It was further observed in the said para that these two persons had rented a godown at Village Surana for storage of smuggled silver bars where they used to melt and convert the contraband silver into 15 kg. slabs. Further, criminal proceedings were also initiated against the related persons including the assessee as well as Prakash Chand Lunia and in his order passed in the said proceedings on 24-12-2002, the Chief Judicial Magistrate, Narnaul held both of them guilty and convicted them for commission of offence punishable under section 135(b)(ii) of the Customs Act observing that the contraband silver seized by the DRI authorities during the intervening night of 5th & 6-1-1992 was possessed by accused Shri Bishan Dayal, i.e., the assessee and was owned by Shri Prakash Chand Lunia. Further on page 41 of its order, the Chief Judicial Magistrate, Narnaul recorded his findings to the effect that the contraband silver was seized from the possession of accused Shri Bishan Dayal, i.e., the assessee in the present case, which was brought to him by accused Prakash Chand Lunia who was instrumental in bringing the silver to the godown from which it was seized.
12. Having regard to the aforesaid specific findings recorded by the Collector of Central Excise in the customs proceedings as well as by the Chief Judicial Magistrate, Narnaul in the criminal proceedings, it is quite evident that even though the silver and cash in dispute were seized from the control and possession of the assessee, the actual owner of the same was found to be Shri Prakash Chand Lunia and since the finding to this effect were recorded by the Collector of Central Excise as well as Chief Judicial Magistrate after examining the entire evidence available before them in detail, the onus lay on the assessee was sufficiently and satisfactorily discharge showing that silver and cash found and seized from his possession did not belong to him but belonged to Shri Prakash Chand Lunia was the actual owner of the same. As rightly pointed out by the learned counsel for the assessee, the addition under section 69A could be made only if the assessee in any financial year is found to be the owner of any money, bullion, jewellery or other valuable articles and since the assessee in the present case was not found to be the owner of the silver and cash found and seized during the course of search conducted by the DRI authorities, there was no case to make addition in respect of the said silver and cash under section 69A in his hands. As such, considering all the facts and circumstances of the case, we are of the view that the learned CIT (A) was not justified in confirming the addition made by the assessing officer in respect of the said jewellery and cash in the hands of the assessee under section 69A and reversing his impugned order, we direct the assessing officer to delete the same."
9. Before us, the learned Departmental Representative has strongly relied on the appellate order of Collector of Customs as well as the order of Chief Judicial Magistrate passed in the criminal proceedings holding the assessee as an absolute owner of silver and cash found and seized by the DRI authorities. He has submitted that both these judicial authorities have found on examination of the relevant evidence that the assessee in the present case i.e., Shri Prakash Chand Lunia is the owner of the silver and cash seized by the DRI authorities and not Shri Bishan Dayal and, therefore, the addition under section 69A has to be consequently considered in the hands of the assessee on substantive basis.
10. The learned counsel for the assessee, on the other hand, has submitted that the addition on account of silver and cash found and seized by the DRI authorities was initially made by the assessing officer in the hands of the assessee on protective basis just because the similar addition made on substantive basis in the hands of Shri Bishan Dayal was set aside by the learned CIT (A). He has also submitted that the said silver and cash were undisputedly found and seized from the control and possession of Shri Bishan Dayal and in the search operation conducted by DRI authorities in the case of the assessee, nothing incriminating was found to link hirn with the said contraband silver or even the cash stated to be realization of sale of contraband silver. He has further submitted that the presumption under section 132(4A) was available to be drawn against Shri Bishan Daval about the ownership of the said cash and silver and there was nothing the implicate the assessee in the said transactions. He has also submitted that Income Tax Act, 1961 is a self-contained code and the chargeability of any amount under the said Act has to be decided independently without referring to any findings recorded in the proceedings under any other Act. He has contended that the revenue, therefore, is wrong in relying on the appellate order of Collector of Customs passed in the proceedings under the Customs Act and even on the order of Chief Judicial Magistrate passed in the criminal proceedings for the purpose of considering the silver and cash seized by the DRI authorities in the hands of the assessee under section 69A of the Income Tax Act. According to him, much credence cannot be given to the findings recorded in the said orders which are passed in the separate proceedings not connected with the income-tax proceedings. He has, therefore, contended that there being no evidence either found during the course of search conducted by the DRI authorities or even brought on record subsequently during the course of assessment proceedings to implicate the assessee with the transactions of contraband silver or to prove that he was the owner of the cash and silver seized by the DRI authorities, there is no case to make the addition in respect of the same in his hands by invoking the provisions of section 69A. Alternatively, he has also contended that the contraband silver having been confiscated, the resultant loss suffered has to be allowed in view of the judgment of the Honble Punjab and Haryana High Court (Jurisdictional High Court) in the case of Parkash Chand Sushil Kumar v. CIT (1989) 179 ITR 27 (P&H) which followed the judgment of the Honble Supreme Court in the case of CIT v. Piara Singh (1980) 124 ITR 40 (SC).
11. After considering the rival submissions and perusing the relevant material on record, it is observed that the basic question which requires our consideration in the matter of addition under section 69A involved in the present case is who actually was found to be the owner of the contraband silver and cash found and seized by the DRI authorities in the search operation carried out at the premises situated near Village Surana and this question being purely of facts, we find it difficult to agree with the contention of the learned counsel for the assessee that the orders of the Collector of Customs and Chief Judicial Magistrate are not relevant for deciding the same. It is pertinent to note here that the said search was conducted by the DRI authorities in the proceedings under the Customs Act and when a similar question had arisen even in the said proceedings as regards the ownership of the silver and cash seized during the course of the search, the Collector of Customs, New Delhi vide paragraph No. 18 of his appellate order dated 19-3-1993 categorically held that Shri Prakash Chand Lunia was the main person who organized the entire smuggling of the entire silver and was knowingly concerned not only with the seized silver but also with F/M silver already disposed of at his direction by Shri Bishan Dayal. Further, criminal proceedings were also initiated against all the concerned persons including the assessee as well as Shri Bishan Dayal and in his order passed in the said proceedings on 24-12-2002, the Chief Judicial Magistrate, Narnaul held both of them guilty and convicted them for commission of offence punishable under section 135(b)(ii) of the Customs Act observing that the contraband silver seized by the DRI authorities was possessed by accused Shri Bishan Dayal and was owned by Shri Prakash Chand Lunia i.e., the assessee in the present case. Further, on page 41 of his order, the Chief Judicial Magistrate, Narnaul recorded his finding to the effect that the contraband silver was seized from the possession of accused Shri Bishan Dayal which was brought to him by accused Shri Prakash Chand Lunia i.e., the assessee in the present case who was instrumental in bringing the silver to the godown from which it was seized. In our opinion, these findings of fact recorded by both these authorities on examination of entire evidence available before them in detail are sufficient to show that the silver and cash found and seized from the possession of Shri Bishan Dayal were belonged to Shri Prakash Chand Lunia i.e., the assessee in the present case who was the actual owner of the same and these findings having greater persuasive value in the facts and circumstances of the present case, are very much relevant for deciding the issue relating to the ownership of silver and cash in question even in the proceedings under the Income Tax Act for the purpose of making addition under section 69A. We, therefore, have no hesitation to hold that the assessee in the present case was found to be the owner of the silver and cash seized by DRI authorities and accordingly the addition under section 69A in respect of the same is liable to be considered in his hands on substantive basis as rightly contended by the learned Departmental Representative before us.
12. As already observed, the actual ownership of the silver and cash seized by the DRI authorities was in question in the present case as well as in the case of Shri Bishan Dayal and depending on the findings recorded in both these cases at the relevant time, the addition under section 69A was sought to be made either on substantive basis or on protective basis. However, having come to a final conclusion that the actual owner of the said silver and cash is found to be the assessee and not Shri Bishan Dayal and the addition under section 69A, is liable to be considered in his hands, it would be just and proper to give one more opportunity to the assessee to explain the said investment before any addition is made by invoking the provisions of section 69A. We, therefore, deem it appropriate to restore this matter to the file of the assessing officer for considering the addition on this count under section 69A in the hands of the assessee after giving him an opportunity to explain the source of the said investment found to be owned by him. While doing so, the assessing officer shall also take into consideration the alternative argument raised by the learned counsel for the assessee keeping in view the decision of Honble Punjab & Haryana High Court in the case of Parkash Chand Sushil Kumar (supra) as well as the provisions of Explanation to section 37(1) inserted by the Finance (No. 2) Act, 1998 with retrospective effect from 1-4-1962.
13. In the result, the appeal of the revenue is treated as allowed.