Income Tax Appellate Tribunal - Ahmedabad
Praduman Ranchhodbhai Patel vs Inspecting Assistant Commissioner. on 3 January, 1995
Equivalent citations: (1995)52TTJ(AHD)549
ORDER
--Assessee assessed on substantive basis in respect of cash seized from him and revenue precluded from initiating proceeding against employer firm.
Ratio:
Order of assessing officer was erroneous and prejudicial to the interest of revenue where assessee was assessed on substantive basis in respect of cash seized from him, precluding revenue to initiate proceedings against employer firm.
Facts:
The assessee was an employee of the firm M/s N. Angadia, Surat, drawing a salary of Rs. 500 per month. His main duty was to carry articles/packets/parcels, etc., containing goods including valuables from one place to another at the directions of the Angadia firm. It was during the course of such duties that he was carrying black plastic bag containing currency notes of Rs. 7,15,000 and that when he was intercepted by the Railway Police, Baroda, he gave a statement before the police inspector that the said bag was given to him by the firm M/s N. Angadia, Baroda Branch Office. He made similar admission before the ADI, on the same date. Later on, he retracted from his two statements made sponteneously before the two authorities stated supra and came forward with a concocted story that he was doing business in rough and polished diamonds and had earned the sums tabulated in chart during the assessment years 1981-82 to 1985-86.
Held:
It cannot be believed that a person who was working as an employee at a meagre salary of Rs. 500 per month carrying packets/parcels from one place to another, would carry on business and that too of diamonds which requires not only great expertise but lot of investments. His story that he started the business with the amount of Rs. 8,000 which was received as `Candla' and `Paithan'amounts at the time of his marriage in 1981, is only to be stated to be disbelieved. In fact, the totality of the circumstances leads to the conclusion that the story was concocted to help the firm M/s N. R. Nagardas Angadia of which he was a faithful employee. The order passed by the Inspecting Assistant Commissioner(Asst.) was thus erroneous because it was not in accordance with the provisions of law and the facts of the case was prejudicial because it had caused loss to the revenue by pre-empting the revenue from proceeding against M/s N. The words "prejudicial to the interests of revenue" have not been defined but they just mean that the orders of assessment challenged are such as are not in accordance with law and facts in consequence whereof the lawful revenue has not been realised and/or cannot be realised. That the Commissioner is justified in invoking his jurisdiction under section 263.
Application:
Also to current assessment years.
A. Y.:
1985-86 Dt. Ord.:
3-1-1995 Income Tax Act 1961 s.263 ORDER B. L. CHHIBBER, A. M. :
This appeal by the assessee is directed against the order of the learned CIT, Baroda, under S. 263 of the IT Act, 1961.
2. The assessee, an individual, is an employee of M/s. N. Rajaram Nagardas Angadia, Surat. He was intercepted at Baroda railway station at about 6.30 a.m. on 29th Jan., 1985, and was found carrying cash of Rs. 7,15,000 in a black plastic bag which was carried by him. According to the police report the assessee could not satisfactorily explain the source of the cash of Rs. 7,15,000. It was, therefore, taken possession by the police for further inquiries according to the provisions of S. 41(3) of the CrPC. Subsequently, on receipt of the information from Railway Police, Baroda, the case of Rs. 7,15,000 was taken in possession by the IT Department in pursuance of the authorisation under S. 132A of the IT Act, 1961.
3. In his statement dt. 29th Jan., 1985, recorded by the Railway Police, Baroda, the assessee stated that he was an employee of M/s. N. Rajaram Nagardas Angadia of Ahmedabad-Baroda (head office of which is at Surat) from the last eight years. He further stated that the plastic bag containing the currency notes of Rs. 7,15,000 was given to him by Shri N. C. Patel, the manager of Baroda branch of the Angadia firm on 29th Jan., 1985, with the directions to deliver the same to Shri Mangalbhai, an Accountant of the head office at Surat. According to the statement dt. 29th Jan., 1985, recorded by the ADI, Baroda, at the railway station, Baroda, the assessee stated that he had come to Baroda from Ahmedabad via Nadiad at about 7.30 p.m. on 28th Jan., 1985. He stayed overnight at the Baroda office of M/s. N. Rajaram Nagardas Angadia at Baroda. At that time he had a small rexin bag containing his cloths and that no cash or valuables were with him. At about 10.00 p.m. on 28th Jan., 1985, Shri N. C. Patel, the local manager, who also stayed on the first floor of the branch office, came to him and told that a parcel was to be delivered to head office of Angadia firm at Surat. For that purpose Shri P. R. Patel (the assessee) was asked to go to Surat office the next day morning. The next day in the morning at about 5.45 a.m., i.e., on 29th Jan., 1985 Shri N. C. Patel, local manager, of the Baroda branch of the firm handed over the black plastic bag to Shri P. R. Patel (the assessee). It was containing seven bundles of currency notes, out of which, six contained currency notes of Rs. 1,00,000 each. Remaining one bundle contained currency notes of Rs. 1,05,000 together with loose currency notes of value of Rs. 7,15,000. The assessee was asked to proceed to Surat and to deliver the bag to Shri Mangalbhai, accountant of head office, Surat.
4. The statement of Shri N. C. Patel, local manager of Angadia firm, Baroda branch was also recorded in which he stated that a black plastic bag was given to Shri P. R. Patel (the assessee) containing only one bundle of denomination of Rs. 100 of the value of Rs. 1 lakh and loose unwrapped currency notes of the value of Rs. 10,000. i.e., in all total Rs. 1,10,000, he directed to Shri P. R. Patel (the assessee) to hand over the black plastic bag to the head office, at Surat on 29th Jan., 1985. Further, Shri N. C. Patel categorically denied to have given anything more than Rs. 1,10,000 to Shri P. R. Patel (the assessee). As regards the source of Rs. 1,10,000 Shri N. C. Patel admitted that the amount of Rs. 1,10,000 was given to him for the safe custody before some five days back by Shri Narendrabhai, the son of the main partner Shri Narayanbhai Patel who had come to Baroda from Surat. He was instructed on phone from Surat office on 28th Jan., 1985, to return the cash of Rs. 1,10,000 back to Surat through Shri Praduman R. Patel (that assessee). According to the instruction Shri N. C. Patel handed over the cash of Rs. 1,10,000 to Shri P. R. Patel (the assessee) on 29th Jan., 1985, to deliver it to Surat head office.
5. Later on during the proceedings under S. 132(5), the assessee on 13th May, 1985, retracted from his statements made before the police inspector and the ADI on 29th Jan., 1985. He submitted that his statement recorded by the ADI, Baroda, at railway station, Baroda on 29th Jan., 1985, was given by him under pressure and terror of police and it did not contain facts in connection with the currency notes of Rs. 7,15,000 seized from him on 29 Jan., 1985, by the railway police. He further submitted that out of the amount of Rs. 7,15,000 seized from him on 29th Jan., 1985, by the railway police. He further submitted that out of the amount of Rs. 7,15,000 seized from him on 29th Jan., 1985 by the railway police an amount of Rs. 1,10,000 belonged to Shri Narendra Narayandas Patel who had confirmed it by his letter dt. 11th May, 1985, and the balance of amount of Rs. 6,05,000 represented his income from business over a period of five years as follows :
Year ended Business income Salary income Total Rs.
Rs.
Rs.
31st March, 1981 70,000 4,200 74,200 31st March, 1982 85,000 4,800 89,800 31st March, 1983 1,00,000 5,400 1,05,000 31st March, 1984 1,50,000 6,000 1,56,000 31st March, 1985 2,00,000 6,000 2,06,000 6,65,000 26,400 6,31,000 He further submitted that he was carrying on business in rough and polished diamonds which was started with the aid of amount of Rs. 8,000 which was received as "Candla" and "Paithan" amounts at the time of his marriage in 1981. He also made a disclosure petition under S. 273A to the CIT surrendering an amount of Rs. 6,05,000.
6. The Assessing Officer completed the assessments relating to asst. yrs. 1981-82, 1982-83, 1983-84 and 1984-85 on protective basis. However, for asst. yr. 1985-86 the assessment was completed on substantive basis by making an addition of S. 6,05,000 as according to the Assessing Officer the assessee failed to furnish the relevant details and evidence in support of his claim that the amount of Rs. 6,05,000 was out of the business income. The following facts were further noticed by the Assessing Officer in his order :
(i) the assessee did not maintain any books of account relating to his alleged business in diamonds;
(ii) he did not have any bank account and was not in a position to produce any books of account or bank pass book;
(iii) he could not produce any other evidence in support of his claim of business income shown in the returns for asst. yrs. 1981-82 to 1985-86;
(iv) the income returned was stated to be on the basis of fair estimate of business transactions during the relevant accounting periods;
(v) no suitable details or documentary evidence were furnished regarding availability of cash of Rs. 6,05,000 on 29th Jan., 1985 with Shri P. R. Patel;
(vi) the only evidence in support in support of his claim of business of purchase and sale of diamonds were letters from three different parties which did not prove that he could earn the income returned by him by a nominal investment of Rs. 8,000 claimed by him as his initial capital investment;
(vii) despite specific opportunity he failed to disclose any information as to the parties with whom business transactions were made;
(viii) the entire business stock was claimed to have been liquidated before seizure of cash.
7. The learned CIT called for the records of the assessee and on perusal of the same noticed that the assessment made under S. 143(3) on 24th March, 1986, for the asst. yr. 1985-86 was erroneous and prejudicial to the interests of Revenue inasmuch as it was finalised as "substantive" order instead of on "protective measures". He accordingly issued a show-cause notice under S. 263 of the Act and after giving an opportunity of being heard to the assessee, passed the impugned order with the following remarks :
"He (the Assessing Officer) also found that no corroborative evidence was furnished showing nexus between business of diamonds claimed to have been done by the assessee, income earned therefrom and availability of seized cash of Rs. 6,05,000 with him on 29th Jan., 1985. In view of the aforesaid facts, the IAC(Asst.) should have assessed the assessee for the asst. yr. 1985-86 treating Rs. 6,05,000 on account of seized cash as his income from undisclosed sources on protective basis and without prejudice to any action in the case of the firm M/s. N. Rajaram Nagardas & Co.
The materials on records, prima facie, show that the assessees only source of income is "salary" from the firm. His duty was to deliver the parcels received by the branch office. It is, therefore, clear that the assessee could not or did not earn the impugned amount of Rs. 6,05,000 which the volunteered himself for assessment. This is only to assist his employer firm, which has as many as eleven branches at various places. Considering all these facts, I have no hesitation in converting the assessment for the asst. yr. 1985-86 as a "protective" assessment. The assessment is modified to this extent."
8. Shri K. C. Patel, the learned counsel for the assessee, submitted that the impugned order of the CIT is bad in law and ab initio void. According to the learned counsel for the assessee, the order of the CIT is bad being passed without jurisdiction as she ought to have appreciated that the order passed by the IAC(Asst.) was not prejudicial to the interests of Revenue nor was erroneous on any issue. The learned counsel for the assessee submitted that the CIT should have appreciated that there is nothing like "protective assessment" and having held that the assessment was for any reason protective, she erred in not drawing the logical conclusions therefrom. According to the learned counsel, she should have, after holding that the assessment was protective, since according to her the income did not belong to the assessee, should have held that the assessment and demand was bad in law. The learned counsel for the assessee further submitted that she (the CIT) erred in not quashing the order of the IAC as illegal and non est, upon the inferences and conclusions drawn by her. The learned counsel for the assessee drew our attention to the order of the CIT passed under S. 132(12) of the Act (placed at page 21 of the paper book) and submitted that he has ignored it. He further submitted that the learned CIT had further ignored the petition of the assessee under S. 273A of the Act.
9. The learned Departmental Representative heavily relied upon the order of the CIT and further submitted that the IAC(Asst.) had made the assessments for earlier years on productive basis and in all fairness he ought to have made the assessment for the assessment year under appeal also on productive basis so that substantive action could have been taken in the case of the firm M/s. N. Rajaram Nagardas Angadia, Surat, because the assessee was carrying money handed over to him by the Angadia firm. He further submitted that the statements made before the police inspector and the ADI on 29th Jan., 1985, were without any pressure and terror and coercion brought on the assessee and the assessee retracted from the same later on to help the firm of M/s. N. Rajaram Nagardas Angadia, Surat. In support of his contention the learned Departmental Representative relied upon the decision of the Honble Delhi High Court in the case of Sohan Singh vs. CIT (1986) 158 ITR 174 (Del).
10. We have considered the rival submissions and pursued the facts on record. From the facts stated above it is evident that the assessee was an employee of the firm M/s. N. Rajaram Nagardas Angadia, Surat drawing at a salary of Rs. 500 per month. His main duty was to carry articles/packets/parcels, etc., containing goods including valuables from one place to another at the directions of the Angadia firm. It was during the course of such duties that he was carrying black plastic bag containing currency notes of Rs. 7,15,000 and that when he was intercepted by the railway police, Baroda, he gave a statement before the police inspector that the said bag was given to him by the firm M/s. N. Rajaram Nagardas Angadia, Baroda branch office. He made a similar admission before the ADI, on the same date. Later on, he retracted from his two statements made spontaneously before the two authorities stated supra and came forward with a concocted story that he was doing business in rough and polished diamonds and had earned the sums tabulated in chart at page 5 of the paper book during the asst. yrs. 1981-82 to 1985-86. It cannot believed that a person who was working as an employee at a meagre salary of Rs. 500 per month and carrying packets/parcels from one place to another, would carry on business and that too of diamonds which requires not only great expertise but lot of investments. His story that he started the business with the amount of Rs. 8,000 which was received as Candla and Paithan amounts at the time of his marriage in 1981, is only to be stated to be disbelieved. In fact, the totality of the circumstance leads to the conclusion that the story was concocted to help the firm M/s. N. Rajaram Nagardas Angadia of which he was a faithful employee. We wish to say that on account of search operations which is an invasion on the Privacy of a citizen a searched person is put to suffer inconvenience and harassment and on account of that there can be mental turmoil, uneasiness and tension. This Tribunal has taken a similar view in the case of Asst. CIT vs. Mrs. Sushiladevi S. Agarwal to which one of us (Accountant Member) was a party and which has since been reported as (1994) 49 TTJ (Ahd) 663. But we do not find in the case of the assessee that any pressure or coercion was put on the assessee to get the two statements at the Baroda railway station before the police inspector and the ADI and by retracting from the statements given in spontaneity without any pressure or coercion the assessee has rendered himself untrustworthy and unreliable in the eyes of law. Under the circumstances it cannot be said that the amount of Rs. 6,05,000 belonged to the assessee and the learned IAC(Asst.) erred in assessing the same in the hands of the assessee on substantive basis. But since the assessee had offered this amount as his income, to help the firm M/s. N. Rajaram Nagardas Angadia, the IAC(Asst.) ought to have assessed the same on protective basis so that an appropriate action could have been taken in the hands of the firm M/s. N. Rajaram Nagardas Angadia. It was all the more necessary because in the earlier assessment years the IAC(Asst.) had assessed the income from the business on protective basis. The order passed by the IAC(Asst.) was thus erroneous because it was not in accordance with the provisions of law and the facts of the case and it was prejudicial because it had caused loss to the Revenue by pre-empting the Revenue from proceeding against M/s. N. Rajaram Nagardas & Co. the words "prejudicial to the interests Revenue" have not been defined but they just mean that the orders of assessment challenged are such as are not in accordance with law and facts in consequence whereof the lawful revenue due to the State has not been realised and/or cannot be realised. We, therefore, hold that the CIT is justified in invoking his jurisdiction under S. 263 and in modifying the assessment order of the IAC(Asst.) by making it protective assessment.
11. In the result, the appeal is dismissed.