Income Tax Appellate Tribunal - Ahmedabad
Shivji Manji Amba vs Deputy Commissioner Of Income Tax. on 28 January, 1994
Equivalent citations: (1995)51TTJ(AHD)61
ORDER
R.N. SINGHAL, A.M. :
These nine matters-seven appeals in all and two cross-objections by the assessee only-pertain to the same assessee and involve same/connected points. They were heard together. Hence, they are disposed of by a consolidated order.
2. Assessee has filed appeals for each of the five years involved, viz., asst. yrs. 1980-81 to 1984-85. Department has filed appeals only for two years, viz., asst. yrs. 1981-82 and 1982-83. In the context of those Departmental appeals assessee has filed cross-objections also.
3. On the first date of hearing the learned advocate for the assessee giving the background of the case explained that the assessee basically hailed from India but was a British subject settled in Kenya. He came to India in 1973 and through banking channels brought a total sum of Rs. 53,600. His two sons continued to live in Kenya. The assessee himself and his sons were only labourers and did not have any other activity of business or trading, etc. The sons sent moneys from Kenya sometimes through banking channels and sometimes otherwise. The moneys were deposited in banks and invested in NSCs. etc. For asst. yrs. 1980-81 to 1984-85 assessee was called upon to file the returns of income which were filed. It was submitted on behalf of the assessee that books of accounts were not maintained but on the basis of information available from bank accounts etc., some sort of cash books and ledgers were prepared. It was submitted that cash books and ledgers constituted the basis for the returns filed. Originally assessments for all the five years involved were made by adding back disbelieved items of receipt of cash e.g. alleged sale of gold ornaments, etc. On appeal, the first appellate authority passed a consolidated order dt. 25th July, 1985 holding that various aspects required "deep verification" by the Assessing Officer. He ultimately set aside the assessment orders with certain directions. In the second round of assessments the Assessing Officer changed the very basis of quantification of additions. He picked up the unexplained investments. In other words, against additions made in the first round on the basis of disbelieved credits he made additions in the second round on the basis of unexplained investment (i.e., debits). So, first and foremost contention of the assessee was that in the second round the Assessing Officer was not entitled to consider the items which were not considered in the first round. The learned advocate was specifically told that when the assessee has not maintained the books of account but had merely tried to reconstruct them subsequently, in his own way, the proper course would be to proceed on the basis of unexplained investments rather than on the basis of disbelieved receipts of cash shown on the credit side of the subsequently prepared books. Realising this position, the question that arose was that this would involve drawing up of statements for availability of money with the assessee at the beginning of each year and that in turn would depend upon the acceptance or rejection of assessees explanation for each item of cash shown as received. In this context the learned advocate explained that in the second round of assessments the Assessing Officer has not taken into account even the conclusively proved receipts of money e.g., for interest from banks and on maturity of National Saving Certificates, etc. He at this stage offered to prepare different sets of statements on the basis of different assumptions regarding acceptance or rejection of assessees explanation and claim of receipt of money. Accordingly, on the next date of hearing, viz., 23rd Dec., 1993 he has furnished three sets of statements. First statement is on the basis of assessees own claims, second is by ignoring the receipts of money disbelieved by the Department and the third is basically on the lines of the second statement but by ignoring small deposits, etc., in the bank account which are not specifically questioned by the Department. It is explained that on the basis of second statement, i.e., by ignoring the questioned receipts of money and by considering also the small deposits in the bank, etc., total addition for asst. yrs. 1980-81 to 1982-83 would be Rs. 1,05,175 while as per the third statement, i.e., by ignoring the questioned receipts of money and also ignoring the small deposits in the bank accounts, etc., at different times the total addition in these three years would come to Rs. 97,375. On this aspect, we would agree in principle with the learned advocate for the assessee that for our further discussion statement No. 3 should form the basis. This is so because the difference of total addition is less than Rs. 8,000 (difference between Rs. 1,05,175 and Rs. 97,374) and secondly because apart from the fact that Department has not questioned small deposits made in the banks some benefit of availability of cash of labour charges, etc., should be given to the assessee.
4. Even at the cost of repetition it may be mentioned that in quantifying the additions in the second round of assessment orders the Assessing Officer has not taken into account even the proved bank withdrawals and moneys available on maturity of NSCs, etc. We agree with the learned advocate for the assessee that for making additions even on the basis of unexplained parts of investment, the availability of money from the bank withdrawals and on maturity of NSC, etc. cannot and should not be ignored.
5. We further note that statement No. 3 on whose basis we have decided to proceed starts with an opening balance of cash of Rs. 5,000 on 1st April, 1979. This is claimed to be inclusive of bank withdrawals of about Rs. 4,700. Otherwise also we would hold that assessees claim of having about Rs. 5,000 cash an on 1st April, 1979 may be accepted.
6. After noting this background we can start with the specific appeals and grounds. The learned advocate has furnished a synopsis giving points involved in each appeal and he has submitted that it would be reasonable to proceed on the basis of points involved rather then dealing with each ground of appeal separately. We accordingly, proceed on the basis of that synopsis furnished by the learned advocate.
7. However, before doing that it would be better to take note of the additions which would be made as per statement No. 3 furnished by the assessee yearwise. They are as follows :
Asst. yr.
Asst. yr. 1980-81 Rs. 8,500 do 1981-82 Rs. 30,800 do 1982-83 Rs. 58,075 Total Rs. 97,375 ITA No. 1633/Ahd/1989 filed by the assessee for asst. yr. 1980-81
8. This is directed against addition of Rs. 22,000. This was the investment made on 23rd Dec., 1979 and the proved withdrawals, etc. from bank are Rs. 8,500 taken along with the opening balance admitted by us hereinabove as on 1st April, 1979 at Rs. 5,000. The total availability of money with the assessee for the said investment of Rs. 22,000 would be Rs. 13,500. Therefore, addition for asst. yr. 1980-81 for unexplained part of investment would be Rs. 8,500. Assessee gets a relief of Rs. 13,500. This addition of Rs. 8,500 is obviously equal to addition as per statement No. 3 furnished by assessee.
9. We may mention that in asst. yr. 1980-81 assessee has claimed receipt of money on sale of gold ornaments (Rs. 16,001) and on sale of building material (Rs. 9,250). We have not accepted this claim of the assessee and the reasons for the same would be recorded by us hereinafter along with the reasons for other similar items occurring in other years.
For asst. yr. 1981-82 assessees appeal being ITA No. 1634/Ahd/1989 and Departments appeal being ITA No. 1821/Ahd/1989
10. For asst. yr. 1981-82 the Assessing Officer made an addition of Rs. 40,000 of which the CIT(A) deleted Rs. 5,600. The assessee is in appeal against addition upheld to the extent of Rs. 34,400 and Department is in appeal against deletion of Rs. 5,600. As per statement No. 3 there is an investment of Rs. 5,000 on 4th June, 1980 and of another Rs. 30,000 on 29th Sept., 1980 giving a total of Rs. 35,000. As per the synopsis given at the end of statement No. 3 the possible addition after setting off the proved withdrawals, etc. would be Rs. 30,800. Subject to verification of figures if considered necessary by the Department, this addition of Rs. 30,800 is required to be upheld and nothing more. The reason is that the CIT(A) has given cogent reasons for deleting the addition of Rs. 5,600 and we agree with him. On this basis Departments appeal for asst. yr. 1981-82 is dismissed and assessees appeal is partly allowed to the extent that against addition upheld by the CIT(A), the addition to be upheld by us and that too subject to verification of figures by the Department would be Rs. 30,800. This is on the basis that the assessees claim for receipt of money from sale of articles and sale of gold ornaments is rejected by us. For this we shall give the reasons subsequently.
For asst. yr. 1982-83 assessees appeal being ITA No. 1635/Ahd/1989 and Departments appeal being ITA No. 1822/Ahd/1989
11. As per synopsis given, addition made by the Assessing Officer was Rs. 1,09,000 of which CIT(A) deleted Rs. 50,475. The assessee is challenging the addition to the extent upheld by the CIT(A) in a sum of Rs. 58,525. Department is in appeal against deletion of Rs. 24,095 but has accepted the deletion of the remaining sum of Rs. 26,380. As per the synopsis given at the end of statement No. 3 possible addition for this year would be Rs. 58,075. The investments made are Rs. 4,000 on 20th April, 1981, Rs. 45,000 on 29th Sept., 1981 and Rs. 50,000 on 15th Dec., 1981. The assessee claimed receipt of Rs. 24,095 out of advances claimed to have been given earlier in the year 1973 or so to Jakhu Khimji. The CIT(A) accepted the version and deleted the addition to this extent which is being challenged by the Department. Assessee further claimed receipt of money from Shamji Hira Rs. 12,380 on 10th Dec., 1981 and also Rs. 10,000 for sale of gold of Ratnas wife on 30th Nov., 1981. Assessee also claimed availability of money in a sum of Rs. 15,620 from opening balance.
12. Taking up Departments appeal first, obviously, Department is questioning the deletion of addition in respect of the receipt of money from Jakhu Khimji Rs. 24,095. The learned advocate for the assessee is right in mentioning that the Department has accepted in this very year the order of the CIT(A) in regard to another item of Rs. 12,380 shown as receipt from Shamji Hira under almost similar circumstances. These two persons viz., Jakhu Khimji and Shamji Hira confirmed that they had taken money from the assessee earlier and assessees claim was that the said moneys were given out of the money brought in 1973 through banking channels in a sum of Rs. 53,600. The remittance of that sum of Rs. 53,600 in 1973 is conclusively proved and Department has not brought on record any loophole in the version of the assessee that such money was available to him in 1973. We would accept the assessees version that a part of that money was given to Jakhu Khimji which was returned by him. Even at the cost of repetition we may mention that a part of that very money was given to Shamji Hira and return of corresponding sum of Rs. 12,380 by Shamji Hira has been believed by the CIT(A) which has been accepted by the Department. Therefore, we would first of all dismiss the Departments appeal in regard to the sum of Rs. 24,095 which is for return of money to the assessee by Jakhu Khimji being investment of the money given by the assessee to Jakhu Khimji out of the money brought by the assessee through banking channels in 1973.
13. Coming to the assessees appeal, the further availability of money is shown at Rs. 20,905 on 29th Sept., 1981 and Rs. 15,620 on 15th Dec., 1981 primarily from opening balances of cash. Then there is another alleged receipt of money of Rs. 10,000 on 30th Nov., 1981 from sale of gold of Ratnas wife. These three items have been rightly disbelieved by the Department and the addition envisaged in the synopsis at the end of statement No. 3 of the assessee emerges primarily from these three times. In effect the addition envisaged in the synopsis given at the end of the statement No. 3 of the assessee for asst. yr. 1982-83 in a sum of Rs. 58,075 deserves to be upheld. We do so, but the correctness of the figures would he subject to verification by the Assessing Officer.
For asst. yr. 1983-84 assessees appeal being ITA No. 1636/Ahd/1989
14. This involves only the addition of Rs. 50,000 which was made for the remittances detected by the authorities of the foreign Exchange Regulation Act (FERA) through havala racket. We would agree with the assessees counsel that the receipt of this money has been reasonably proved by the assessee. The point is that the FERA authorities conducted search and seizure proceedings at the premises of the assessee and found substantial parts of the said sum of Rs. 50,000. Further, the search and seizure proceedings at the assessees premises were conducted on the basis of entries as per the records of the havala racket agent at Bombay. The assessee has been penalised by way of levy of penalty by the FERA authorities. All these things conclusively prove that the said sum of Rs. 50,000 was actually received by the assessee. This does not remain an unexplained amount. That addition is deleted. Assessees this appeal is allowed.
For asst. yr. 1984-85 assessees appeal being ITA No. 1637/Ahd/1989
15. There is no dispute about any addition and hence this appeal is treated as dismissed.
16. Assessees cross-objections are admittedly for supporting the decision of the CIT(A) which are in his favour and which are questioned in Departmental appeals. They admittedly do not raise any other points. They are, therefore, rendered redundant in the light of our decisions on Departmental appeals both of which have been dismissed by us.
17. Now, we may give the reasons for our not accepting the assessees version of holding huge cash balances at different times and also for receipt of money by him on sale of ornaments, building materials and the like. The learned Departmental Representative, is right in mentioning that without supporting these versions the assessee primarily felt satisfied by staking claims. For assessees claim of huge cash balances on different dates over long periods is obviously not acceptable and deserves to be rejected as such. As already mentioned the so-called cash books and ledgers are prepared subsequently and cannot constitute basis for assessees claim of huge cash balances. No independent evidence is produced for supporting this claim. The other bank transactions of smaller amounts for deposit as well as withdrawal, prima facie, go to indirectly disprove the assessees claim of existence of huge cash balances.
18. Coming to the assessees claim of receipt of money from sale of gold ornaments or building materials, etc., again the existence or acquisition of the assets in question is not proved. Receipt of money is sought to be proved by filing confirmations. The learned D.R. is however, right that the assessee did not prove the genuineness of those confirmation letters by producing the persons concerned inspite of Assessing Officers specific requirement. The assessee chose not to produce the persons concerned for cross-examination by the Department.
19. This leaves one point in regard to taxability of interest in the hands of the assessee. For all the years, assessee contends that interest on all the investments proved to be out of the sums received from the assessees sons should not be taxed in the hands of the assessee. This is a reasonable request. Therefore, interest attributable to the sums proved to have been received by the assessee from his sons and interest on such interest would not be taxed in the hands of the assessee. This is so because once it is conclusively proved that the money was received from the sons, merely management of that money in India by the assessee does not make the assessee the owner of that money. We are clearly given to understand that such moneys received from the sons have been invested and reinvested always in the names of the senders or their family members. However, we may clarify that the interest on the investments in respect of the items for which assessees version has not been accepted would be taxed in the hands of the assessee because the relevant sums have been treated as income of the assessee from undisclosed sources. Precise quantification would be done by the Assessing Officer after giving the assessee a reasonable opportunity of being heard.
20. Last but not the least and perhaps even at the cost of some repetition we may clarify that the additions for income from undisclosed sources have been indicated by us above for asst. yrs. 1980-81, 1981-82 and 1982-83 on the basis of statement No. 3 furnished by the assessee but those figures mentioned by us may not be treated as final. The reason is that the correctness of the figures has not been verified at our end and the Department should be given an opportunity of verifying the correctness thereof. Mention of different figures by us in this context be regarded only as illustration and crystallisation of the principle involved on which decisions have been taken by us. In other words, figures of addition indicated for asst. yrs. 1980-81, 1981-82 and 1982-83 would be subject to verification by the Assessing Officer and for enabling him to do so we would formally treat the assessees appeal restored to the file of the Assessing Officer for precise quantification of the additions on the basis of principles laid down hereinabove by us. This direction of ours would compel the assessee to co-operate with the Assessing Officer for verification of figures and precise quantification of additions. We have adopted this course because laying down of principles would have been more cumbersome and vague. We have adopted the figures as per the statement No. 3 but as already mentioned they would be subject to verification by the Assessing Officer. If there is any mistake found in the figures of the statement No. 3 the Assessing Officer would be entitled to change the figures of addition in the course of giving effect to our this order.
21. With these remarks the assessees all the appeals Nos. 1633 to 1637/Ahd/1989 are treated as partly allowed. Departments both the appeals Nos. 1821 and 1822/Ahd/1989 are dismissed. Assessees cross-objections are also dismissed.