Karnataka High Court
Shri H. Nabhiraja vs The Dy. Commissioner Of Income Tax on 23 February, 2007
Equivalent citations: (2007)210CTR(KAR)55, [2008]296ITR119(KAR), [2008]296ITR119(KARN)
Bench: R. Gururajan, N. Ananda
JUDGMENT
1. Sri. Nabhiraja, Proprietor Premier Service Station is before us aggrieved by the order of the Income Tax Appellate Tribunal (for short 'the Tribunal') in IT(SS)A No. 184/Bang/2002 dated 31.1.2005 and in M.P. 77/Bang/2005 in the case on hand.
2. Facts in brief are as under:
The assessee is the Proprietor of M/s. Premier Service Station and Malai Mahadeswara Auto Agency. On 12.11.1999, the Department conducted search and seizure operation Under Section 132 of the Income Tax Act, 1961 at the residential and business premises of the appellant. Documents were recovered. Thereafter, the appellant was asked to file its returns for the block period 1990 to 1999. The appellant declared a total undisclosed income of Rs. 2,01,091/-. The assessing officer concluded the block assessment dated 28.11.2001. He concluded a sum of Rs. 1,02,28,563/- as undisclosed income. He imposed a tax of Rs. 61,37,137/-. Interest was imposed Under Section 158BC. Aggrieved by the same, an appeal was filed before the Commissioner of Income Tax (Appeals). The Commissioner rejected the appeal in terms of an order dated 31.10.2002. A further appeal was filed before the Tribunal. Tribunal allowed the appeal filed by the appellant. Thereafter, a Miscellaneous Petition was filed by the appellant to rectify certain mistakes and also to adjudicate the issues which were left undisposed of. The Tribunal passed an order in M.P. No. 77/Bang/2005 directing the registry to fix the said miscellaneous petition for hearing on 13.5.2005 to dispose of the grounds of appeal No. 11 and to rectify the mistakes. Thereafter the Tribunal passed an order on 20.1.2006 allowing the miscellaneous petition. One more miscellaneous petition is said to be pending in I.T(SS)A No. 184/Bang/2002. The appellant has raised the following four questions of law:
a) Whether the Tribunal was justified in holding that the Assessing officer was right in law in rejecting the evidence produced by the appellant in relation to hand loans of Rs. 44,83,250/- and further whether the seized records itself creates a presumption that the loans were genuine?
b) Whether the authorities below were justified in holding that an amount of Rs. 23,25,000/- as loan taken from Krishnappa as income of the appellant. Without prejudice was the Tribunal justified in holding that the Assessing Officer was right in not telescoping the amount relating to hand loans with the amount of payment made by Sri. Krishnappa relating to the sale of petrol.
c) Whether the Tribunal was justified in law in holding that there are no mistakes in their order liable for rectification.
d) Whether the charging of interest Under Section 158 BF is in order?
3. We have heard Sri. Shankar, learned Counsel appearing for the appellant. He took us through to the material on record to contend that the Tribunal is wrong in the case on hand. He would say that without there being any evidence, an adverse order has been passed against the appellant. He therefore says that the orders impugned are perverse as understood in law. In so far as the merits of the matter is concerned, he says that the Tribunal is wrong with regard to an addition of Rs. 44,83,250/- termed as hand loan from various parties. He also finds fault with an addition of Rs. 23,25,000/- in the name of one Krishnappa. He relies on 251 ITR 244 and 72 ITR 291. Ultimately, he says that justice requires re-consideration of his case by this Court.
4. After hearing, we have carefully perused the material on record. We have considered IA-II, a delay application along with the merits of the matter. In our view, in' the event of the appeal having no merit, no useful purpose would be served by issuing notice on IA. Hence, we have heard the learned Counsel both on merits as well as on IA. The appellant in this appeal is challenging the order at Annexure 'A1' passed by the Tribunal, dated 31.1.2005, the order dated 26.4.2005, Annexure 'A2' and Annexure 'A3' dated 20.1.2006.
5. The appellant premises was subjected to search and seizure Under Section 132 of the Act. It was conducted on 12.11.1999 at the residential premises at No. 27, 'Ashirwad', MIG, KHB Colony, Koramangala, Bangalore occupied by Sri. Nabhiraja and Smt. N. Jayalalitha. Similarly, search and seizure was also conducted at M/s. Premier Service Station Under Section 133A of the Act. Thereafter, the appellant-assessee filed a return of block assessment. The assessing officer noticed the seized documents and the seized materials. The seized documents included various documents, books, written cheques, small petty bills etc. It was observed that most of the documents were related to purchase of petrol/diesel/oil, various hand loans taken/repaid for different periods, work in progress details, dishonored cheques, some chit details, personal expenditure and receipts etc. After noticing the seized material, the assessee was asked to give explanation as to why the gross receipts of oil sale should be treated as undisclosed receipts. The assessee produced some of the purchase bills. Noticing the same, the assessing officer proposed to estimate 40% profit upon undisclosed oil sale, which has been worked out to Rs. 9,85,958/-. The assessing officer also noticed that the assessee withdraws an average amount from the collection of the petrol bunk and deposits the same into the Private Chit Fund. The amount works out to Rs. 2,72,050/-. He was provided an opportunity in the matter. Thereafter, he has stated that these chits are made over years from the amounts drawn out of the agricultural income. This is an 'income received and this is an income used in the investment of chit'. This was treated as undisclosed income for the block period 1990-99. It was further seen that the assessee undertook frequent personal traveling by air. He maintained an account with Pushpak Air Travel Agency Pvt. Ltd. It was noticed that a sum of Rs. 61,000/-was not reflected in the books as it is being met out of the share from agricultural income in the matter. Noticing the same, an opportunity was given and thereafter, it was treated as undisclosed treatment for the block period. The assessing officer also notices certain amount as election expenses. The sum arrived at was Rs. 7,33,558/- and the same was treated as undisclosed treatment for the block period. Similarly, noticing the hand loan and cash etc., the assessing officer included a sum of Rs. 44,83,250/- being the cash transaction in the matter. The assessing officer also noticed the accounts of Malai Mahadeshwara Auto Dealers and noticing the same, he added Rs. 6,86,890/- as undisclosed income. Similarly he added Rs. 1,80,857/- as cash found in terms of the search proceedings. The assessing officer also notices the diary maintained for the amount received from Krishnappa. He had chosen to add Rs. 23.25 lakhs as un-disclosed amount in the case on hand. There were house hold withdrawals and the same was added. Ultimately, he passed an adverse order. On appeal, the Appellate Commissioner dismissed the appeal. A second appeal was filed before the Tribunal. The Tribunal notices the material facts and thereafter the Tribunal adopted the profit percentage at 25% instead of 40% in so far as income from un-disclosed oil sale of Rs. 9,85,958/- is concerned. The Tribunal also confirmed un-disclosed income from chits of Rs. 2,72,050/- and un-disclosed income of Rs. 61,000/- on account of Air travels in the matter. In so far as election expenses is concerned, the Tribunal accepted the case of the assessee by holding that the assessee might be functionary in the political party and it is quite common that he could have managed certain receipts and payments on behalf of the political party. Addition was deleted. In so far as loans are concerned, the Tribunal confirmed the order of the Commissioner. While considering income from Malai Mahadeshwara Auto Dealers, the Tribunal deleted income from Malai Mahadeshwara Auto Dealers of Rs. 6,86,890/-. Un-explained cash was treated as income Rs. 1,80,857/- in its order. The Tribunal however did not accept the contention with regard to amount taken from Sri. Krishnappa of Rs. 23,25,000/- lakhs. The Tribunal deleted unaccounted household expenditure of Rs. 5 lakhs. Thus the Tribunal partly allowed the appeal of the assessee. The Tribunal, while considering miscellaneous application directed the matter for disposal of grounds of appeal No. 11 in the matter. Thereafter, the Tribunal disposed of the appeal in terms of the order dated 20.1.2006.
6. Sri. Shankar, learned Counsel challenges the addition of Rs. 44,83,250/- and also additional amount of Rs. 23,25,000/- in the case on hand. He has also placed before us, certain documents in support of his submissions. From the material on record, it is seen that there are several cash transactions in the case on hand. In so far as hand loan in cash of Rs. 44,83,250/-is concerned, the Tribunal has given cogent findings at page 31 of the paper book. In the course of search, certain rough cash books were found and the assessee has made entries for the sales made in cash. It is noticed that there were entries as regards hand loans taken in cash on some of the dates. Assessee's explanation was that of cash loans. However, the assessee was unable to satisfy all the three fact finding authorities with regard to hand loan transactions in the case on hand. Loans were supposed to have taken place in the year 1977. The same is not repaid even till 2001. Search has taken place in the year 1999. Some of the letters on which reliance was placed are of the year 2001. A reading of the material on record as a whole would indicate that all the three fact finding authorities have chosen to hold against the assessee on facts. We are not inclined to interfere with an order based on facts in the case on hand. In terms of the provisions of law the Tribunal rightly, in our view, has chosen to reject the Miscellaneous Petition. We do not find any infirmity in the rejection of the Miscellaneous Petition on this aspect of the matter. We have noticed the argument with regard to the transaction with Sri. Krishnappa in the case on hand. A sum of Rs. 23.25 lakhs was added in terms of the orders of the authorities. According to the appellant, one Sri. Krishnappa was interested in running the petrol bank on lease. Payment shown would indicate payments made over to Sri. Krishnappa against the loan transactions. From the material on record, we see that he was having liquor vending shop in front of Malai Mahadeshwara Auto Dealers. No acceptable material was placed before the assessing officer for acceptance of the explanation of the assessee. The Commissioner has accepted. The Tribunal has confirmed. The Tribunal, as a matter of fact, notices the factual aspects of the matter including the business of Sri. Krishnappa in its order in para 32 and thereafter, the Tribunal holds that there is no acceptable material on record with regard to the acceptance of the case of the assessee. Despite the strong arguments of Sri. Shankar, learned Counsel, we do not find any justifiable grounds to interfere with the order of the Tribunal. In our view, all the three orders are baaed on facts. All the three authorities, in our view, are justified in holding against the appellant. In so far as interest is concerned, all that we would say is that a right is available in terms of Section 138 in the matter of levy of interest. The same has been followed by the department. We therefore do not find any acceptable grounds with regard to reconsideration of this aspect of the matter.
7. Before concluding, we are disturbed to note the findings of the Tribunal with regard to election expenses in para 16 of the order. The assessing authority in its order dated 28.11.2000 has ruled that the assessee has stated "that these entries are related to 1998 election expenses and these funds were utilised through me for the purpose of hiring vehicle for Janathadal Party during that time." He therefore ruled that he did not accept the explanation. He ruled the difference between the receipts and payments which works out to Rs. 7,33,558/- and the same was treated as undisclosed income for the block period. The same was accepted by the Commissioner of Appeals. The Tribunal, while reversing the same would hold in para 16 that the assessed led reasonable evidence to the effect that the expenses did not pertain to the assessee. The Tribunal further ruled that the assessee might be a functionary in the political party and it is quite common that he could have managed certain receipts and payments on behalf of the political party. There is nothing strange about the assessee's explanation. These findings of the Tribunal troubled us a lot. Such explanation cannot be accepted. There must be acceptable material with regard to acceptable explanation and no Tribunal can accept an explanation on the basis of certain assumption and presumption. Such course is not permissible in any Judicial forum that too in tax matters. The so called acceptance of managing certain receipts and payments could not be a ground for setting aside an order based on facts passed by the assessing authority confirmed in appeal. Any acceptance of such explanation by the Court of law would result in assessee's mis-using the politics for the purpose of accounting the income. Courts have to discourage such unethical aspects in the matter of money by way of political affiliations. Unfortunately, the department has not chosen to file any appeal on this aspect of the matter. We therefore, do not want to disturb the findings except expressing our dis-pleasure in the matter of election expenses.
8. In the result, the following orders are passed:
Appeal stands rejected. Questions of law are answered against the assessee. No costs.