Punjab-Haryana High Court
Commissioner Of Income-Tax vs Faqir Chand Chaman Lal on 4 April, 2003
Equivalent citations: (2004)186CTR(P&H)621, [2003]262ITR295(P&H)
Author: S.S. Grewal
Bench: S.S. Grewal
JUDGMENT G. S. singhvi, J.
1. In this appeal, the Revenue has prayed for determination of the following questions of law :
"(i) Whether, on the facts and in the circumstances of the case, the learned Income-tax Appellate Tribunal was justified in deleting the addition of Rs. 25,000 made on account of business income of the assessee for the assessment year 1986-87 by holding that there was no partnership firm in existence during that year especially in view of the seized books of account which clearly reveal that the assessee was continuously doing pawning business outside its books of account right from the year 1981 to the date of search ?
(ii) Whether, on the facts and in the circumstances of the case, the learned Income-tax Appellate Tribunal was justified in deleting the addition of Rs. 6,15,000 made on account of undisclosed investment made by the assessee in the pawning business for the assessment year 1986-87 by holding that there was no partnership firm in existence during that year and, as such, no addition could be made in that year especially in view of the seized books of account which clearly reveal that the assessee was doing pawning business outside its books of account continuously from the year 1981 to the date of search ?
(iii) Whether, on the facts and in the circumstances of the case, the learned Income-tax Appellate Tribunal was justified in deleting the addition of Rs. 21,00,000 made on account of interest earned by the assessee from pawning business for the assessment years 1986-87 to 1996-97 by holding that no addition was called for because there was no material on record to justify the action of the Assessing Officer especially in view of the seized books of account and the categorical admission by the partner, Sh. Chaman Lal, during the course of search that the firm was doing pawning business outside its books of account ?"
2. The facts of the case are that a search under Section 132(1) of the Income-tax Act, 1961 (for short, "the Act"), was conducted on October 10, 1995, at the business premises of the respondent-firm and the residential premises of its partner-Shri Chaman Lal and his two sons, namely, Shri Rakesh Kumar and Shri Vinod Kumar. Return of income was filed by the firm on August 23, 1996, for the block period from April 1, 1985, to October 10, 1995. The assessment was completed under Section 158BC(c) of the Act. The Assessing Officer made addition of Rs. 25,000 on account of estimated income for the assessment year 1986-87, Rs. 6,15,000 on account of undisclosed investment in pawning business for the assessment year 1986-87, Rs. 21,00,000 on account of interest earned on the advances of Rs. 14,15,000 in pawning business at the rate of Rs. 2,00,000 each for the assessment years 1986-87 to 1995-96 and Rs. 1,00,000 for the assessment year 1996-97. On appeal, the Income-tax Appellate Tribunal (for short, "the Tribunal') deleted the additions of Rs. 25,000 made by the Assessing Officer for the assessment year 1986-87, Rs. 6, 15,000 in lieu of undisclosed investment made in pawning business for the assessment year 1986-87 and Rs. 21,00,000 on account of interest earned from pawning business for the assessment years 1986-87 to 1996-97. The Tribunal held that the partnership firm came into existence on April 1, 1986, and, therefore, the Assessing Officer was not justified in making an addition of Rs. 25,000 on account of business income for the assessment year 1986-87. On the issue of addition of Rs. 6,15,000 as undisclosed income from pawning business for the assessment year 1986-87, the Tribunal, on a consideration of the facts and arguments of the representatives of the Department and the assessee, held as under :
"After considering the rival submissions, we are of the view that there is merit in this contention of learned counsel for the assessee that the Assessing Officer has not properly afforded a due and reasonable opportunity of being heard to the assessee in the matter. On perusing the questionnaire dated May 6, 1996, it would be clear that the documents confronted to the assessee were marked as annexures A-3, A-6, A-7 and A-8 while the addition has been made on the basis of documents marked as A-2/3 to A-2/6 and A-2/8. It is relevant to point out that A-3, A-6, A-7 and A-8 are the copies of the receipts of gold to the karigars while the documents A-2/3, A-2/6 to A-2/9 are related to the advances given to the different persons. It was the contention of learned counsel for the assessee that a few of the entries were repeated, our attention was drawn towards pages Nos. 283 to 318 of the paper book and it was stated that the dates mentioned therein were August 7, 1982, to November 14, 1994 (refer to page 284) and June 26, 1984, to January 21, 1993 (refer to page 286). Similarly, on the pages, the dates mentioned are beyond the period March 31, 1986, although certain amounts are reflected against the names of the persons mentioned in these documents. Therefore, it seems that the aforesaid documents were related to the pawning business but it was the main grievance of the assessee that these documents were not confronted to the assessee on the basis of which addition was made. In that view of the matter, we are of the opinion that no proper opportunity of being heard to the assessee was granted by the Assessing Officer. On this score alone, addition of Rs. 6, 15,000 was uncalled for and deserves to be deleted. At the same time, we have already decided the additional ground (supra) and in view of the detailed findings given therein, we are of the opinion that no addition can be made for the assessment year 1986-87 on account of pawning business in the hands of the assessee-firm since there was no business conducted by the assessee in that year, because no partnership firm was in existence. On this score also, the addition is unwarranted, uncalled for, and bad in law. In view of the above, we delete the addition of Rs. 6, 15,000 made by the Assessing Officer."
3. The Tribunal also ordered deletion of the addition of Rs. 21,00,000 made on account of interest allegedly earned by the assessee from pawning business for the assessment years 1986-87 to 1996-97 by assigning the following reasons:
"After considering the abovementioned submissions of learned counsel for both the parties, we are of the view that the Assessing Officer, while making the addition was not sure regarding the amount invested by the assessee in pawning business. On the one hand, he calculated the amount of interest at Rs. 3,40,000 per annum and, on the other hand, the addition has been estimated at Rs. 2,00,000 per annum. In other words, the entire exercise done by the Assessing Officer was merely based on conjectures and surmises. However, he had no basis to estimate the interest income. As regards the addition for the assessment year 1986-87 is concerned, the same is not tenable in view of our findings given in respect of grounds Nos. 2 and 3 and additional ground (supra), as we have already held that there was no partnership firm in existence in that year. In that view of the matter, no addition was called for in the assessment year 1986-87.
At this stage, we may also add that as regards the other years also, no addition is called for because there is no material on record for the basis on which it could be said that the Assessing Officer was justified in his action. It is well settled that the provisions relating to search and seizure are intended to unearth the hidden or undisclosed income or property and bring it to taxation net. It is also not in dispute that the objective of Chapter XIV-B is to get hold of evidence having bearing on the tax liability of a person which the said person is seeking to withhold from the Assessing Officer but the scheme of Chapter XIV-B does not give power to the Revenue to draw presumption in regard to the undisclosed income. It is also a well settled proposition that the presumption howsoever strong cannot substitute evidence and if there is no direct nexus on the point, no addition in block assessment can be made. In the instant case also, there was no evidence with the Assessing Officer in support of his contention that the assessee, in fact, earned the income by way of interest amounting to Rs. 2 lakhs each year from the assessment years 1986-87 to 1995-96 and Rs. 1 lakh in the assessment year 1996-97. In instant case, it is not in dispute that the undisclosed income was worked out by the Assessing Officer on an estimated basis but in a block assessment generally estimated additions cannot be justified. In that view of the matter, we are of the view that the Assessing Officer was not justified in making the addition on the basis of estimate only. We, therefore, delete the same."
4. Dr. N.L. Sharda could not point out any infirmity in the appreciation of evidence made by the Tribunal or the reasons assigned by it for deleting the additions made by the Assessing Officer. Therefore, none of the questions, of which determination has been sought by the Revenue, can be treated as a substantial question of law.
5. Hence, the appeal is dismissed.