Income Tax Appellate Tribunal - Ahmedabad
Satishbhai Jayantilal Shah vs Assistant Commissioner Of Income-Tax on 25 October, 1996
Equivalent citations: [1997]61ITD307(AHD)
ORDER
Shri B.L. Chhibber (Accountant Member)
1. The first grievance projected in this appeal by the assessee is that the learned CIT(A) is not justified in confirming the action of the Assessing Officer in taxing the sum of Rs. 20 lacs - being cash found from the bedroom of the assessee in the course of search at his residence.
2. The assessee, an individual, is partner in three partnership firms; viz., M/s. Sunish Construction Co., M/s. Shah Builders and M/s. Atlas Builders. The assessee's wife and the assessee in HUF capacity are also partners in different partnership firms. The assessee's brother, brother's wife and assessee's mother are also partners in different partnership firms. The action under section 132(1) was carried out in the case of the assessee group on 23-3-1990. The search was carried out at the business premises of the partnership firms at 201, J.K. Chambers, Panni Phint, Bhaga Talav, Surat, vide search warrant in the name of M/s. Raj Housing Corporation and its associate concerns. The search was also carried out at the residential premises of the assessee at 706, Mahavir Apartments, Athwa Gate, Surat. At the residential premises, the assessee, his family, assessee's brother Shri Rajendra and his family and the assessee's mother were jointly living with the common kitchen. During the course of the search at the residential premises cash amounting to Rs. 20,20,039 was found from the cupboard in the bedroom of the assessee. Out of this cash, cash of Rs. 20 lacs seized. Cash of Rs. 20,839 was claimed to be out of personal savings of family members of the assessee's group which claim was accepted by the Assessing Officer and the remaining cash of Rs. 20 lacs was claimed to be belonging to 9 different partnership firms and his son Shri Sunish in whose hands total disclosure of Rs. 85 lacs was made as additional income for assessment year 1990-91 as follows :
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Name of the Concern Project Constructed Unaccounted
Constructed Area Profit (Rs.)
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1. Sunish Kalpvruksh 45,000 s.f. 8,00,000 Construction Co.
2. Shah & Shah Con. - do - - do - 10,00,000 Co.
3. Rushabh Bld. Mat. - do - - do - 9,00,000 Supp.
4. Shah Builders - do - - do - 3,00,000
5. Raj Housing Galaxy Apt. 45,000 s.f. 7,00,000 Corporation
6. Atlas Builders - do - - do - 10,00,000
7. S.Raj & Co. - do - - do - 3,00,000
8. Siddharth Bldg. - do - - do - 9,00,000 Material
9. Shah Builders Actual Apt. 10,000 s.f. 7,00,000
10. Rahul Bldg. Mat. - do - - do - 2,00,000 Suppl.
11. Raj. Housing Ankita Apt. 20,000 s.f. 6,50,000 Corporation
12. Rahul Bldg. Mat. - do - - do - 3,50,000 Suppl.
13. S.Raj & Co. - do - - do - 2,00,000
14. Sunish Individual - do - 5,00,000 Satishchandra Brokerage & Shah Commission
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Total 85,00,000
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The above disclosure was made by the assessee's brother Shri Rajendra Shah in the course of the statement under section 132(4) in reply to question No. 102. The disclosure made by Shri Rajendra Shah on 23-3-1990 was confirmed by the assessee on 24-3-1990 in his statement recorded under section 132(4) in reply to Nos. 3, 4 and 5 which read as under :
"Q.3. Do you agree with the disclosure made by Shri Rajendra Jayantibhai on behalf of different firms under section 271(1)(c) ?
A.3. Yes, I fully agree with the disclosure made by my brother and wish to pay income-tax.
Q.4. Your brother Shri Rajendra Jayantibhai Shah in preliminary statement stated that all family members would have about Rs. 15,000 to Rs. 20,000 whereas in your house total Rs. 20,839 was found from different cupboards and in your bedroom Rs. 20,00,000 was found so as to make total cash found of Rs. 20,20,839. Please explain the difference ?
A.4. Out of the cash found, Rs. 20,00,000 relates to the income of different firms which have not been shown in the account. This sum of Rs. twenty lakhs is included in my total disclosure of Rs. 85,00,000.
Q.5. In what manner the above unaccounted income was derived and where it is invested ?
A.5. The above income was derived in the business of construction of different firms. The brokerage and commission income belongs to Sunish Shah. This income is invested in bogus creditors, unaccounted advance and cash."
The assessee's Tax Consultant vide his letter dated 26-3-1990 requested the Commissioner of Income-tax, Surat to adjust that cash seized of Rs. 20 lacs against the advance tax payment of ten declarants and their partners. The CIT, Surat vide his letter dated 29-3-1990 allowed adjustment of the said cash against tax payments.
2.1 In the course of the assessment proceedings the Assessing Officer vide his letter dated 22-12-1992 addressed to M/s. Raj Housing Corporation asked for evidence in support of the assessee's claim that cash of Rs. 20 lacs pertained to various firms and also asked to product the detailed break-up of disclosure of this cash of Rs. 20 lacs in the hands of various firms. The assessee vide his letter dated 24-12-1992 gave a detailed explanation which has been reproduced by the Assessing Officer verbatim in his order. It was stated by the assessee that presumption under section 132(4A) was a rebuttable presumption which had been rebutted in the course of the statement under section 132(4) itself as complete bifurcation of disclosure made under section 132(4) was furnished in the course of such statement. It was also submitted that the cash seized had been adjusted again the advance tax payments in whose hands the income was declared and their partners. It was further submitted that the assessee did not have any other income except share from partnership firms, etc., and he lived in joint family under one roof in the premises owned by different owners. It was also submitted that the declaration was made by 9 partnership firms in which the assessee and his wife were interested as partners. Out of these 9 firms, the assessee was partner in three firms in individual capacity and in two firms in HUF capacity. The assessee's wife was partner in rest of the four firms. The tenth person was assessee's son Shri Sunish. So the assessee and his family members were also interested in Rs. 20 lacs seized in one way of the other. It was also submitted that no tax planning had been involved as in the case of the partnership firms, there was double taxation. So in effect taxes were paid. The above explanation did not find favour with the Assessing Officer and he held that the assessee had not given explanation regarding the basis on which the split up had been done. The Assessing Officer also held that no evidence had been led by the assessee in support of his contention. It was finally observed by him that there was no reasoning in bifurcation of cash of Rs. 20 lacs in ten different hands as the cash represented unaccounted income for which no records were maintained. The Assessing Officer therefore taxed the sum of Rs. 20 lacs on substantive basis in the assessee's hands and on protective basis in the hands of other ten person in keeping with the provisions of section 132(4A). However, in computation of assessed income, this addition of Rs. 20 lacs was remained to be made. The Assessing Officer, therefore, passed an order under section 154 adding Rs. 20 lacs on 4-5-1993.
3. The assessee appealed to the CIT(A). Before the CIT(A), the assessee relied on the arguments advanced at the time of assessment proceedings. It was also submitted that the assessee in the statement under section 132(4) clearly stated that Rs. 20 lacs belonged to various firms beings business income not shown in the accounts. It was also stated in the statement under section 132(4) that Rs. 20 lacs was included in the total disclosure of Rs. 85 lacs. After hearing the assessee, the CIT(A) confirmed the addition of Rs. 20 lacs on the same lines as narrated by the Assessing Officer. It was observed by him that if was not possible that cash balances of Rs. 20 lacs be kept in the bedroom of the assessee and belonged to ten persons. It was also observed by him that the assessee raised the ground of appeal without any addition made in the assessment order and the appeal ought to have been preferred against the order under section 154.
4. Aggrieved by the order of the CIT(A), the assessee is in appeal before us. Shri R.B. Shah, the learned counsel for the assessee submitted that the observation of the CIT(A) that as no addition had been made in the order under section 143(3) in the computation the appeal should have been preferred against the order under section 154, is not correct, because the addition was made but it was not taken into account in the computation of total income originally while passing the order under section 143(3). This mistake was corrected by way of passing order under section 154. According to the learned counsel the order under section 154 is therefore valid once it is held that addition was made under section 143(3) but was not considered in computation. If the addition of Rs. 20 lacs is not made in the order under section 143(3), the order under section 154 should have been cancelled by passing another order under section 154.
4.1 Coming to the specific addition of Rs. 20 lacs, the learned counsel for the assessee submitted that the learned Assessing Officer has put much predominance on the fact that the cash discovered was in possession of the assessee and so it was his personal undisclosed income. The learned counsel for the assessee submitted that the primary purpose for cash being held by the assessee was that such huge cash belonging to the business could not be kept or put at business premises (which remained locked in night) and the partnership firms did not have any lockers in the bank where they could have kept their undisclosed cash. There has to be a safer place to keep the cash other office of the partnership firms. Moreover, it was cash representing undisclosed income and so also the cash could not be kept at office.
4.2 Coming to the presumption under section 132(4A), the learned counsel for the assessee submitted that it was true that by virtue of presumption under section 132(4A) the amount of Rs. 20 lacs may be presumed to be belonging to the assessee; but the presumption envisaged under section 132(4A) can be rebutted. In support of this proposition the learned counsel relied upon the judgment of the Kerala High Court in the case of ITO v. T. Abdul Majeed [1987] 34 Taxman 357/[1988] 169 ITR 44. According to the learned counsel for the assessee the presumption under section 132(4A) has been rebutted in the course of statement under section 132(4) itself as complete bifurcation of disclosure was furnished in such statement by the assessee's brother. The assessee's counsel also stated that the assessee had also mentioned in the statement that Rs. 20 lacs related to the disclosure made by different firms which had not been shown in the account. The manner of deriving the unaccounted income was given by both the assessee and his brother Shri Rajendra. The learned counsel further submitted that the assessee's main source of income is only share from registered firms. He had not got any income from personal business on big scale. According to the learned counsel it is true that the assessee has got the proprietary business in the name of Sunish Enterprises but it is the business of bill discounting in the cloth trade. The sales in this business were only Rs. 30,138 and in this business the assessee incurred the loss of Rs. 9,231. The learned counsel for the assessee reiterated that Rs. 20 lacs is part of total disclosure of Rs. 85 lacs. The balance amount of Rs. 65 lacs represented cash with custodian which was also brought in the books of the firms and total tax on disclosed income was therefore paid by utilising this cash. In the statement under section 132(4), there is specific mention of name of project, name of the firm, the area constructed in each project, etc., while giving bifurcation of disclosure. According to the learned counsel when declaration of Rs. 65 lacs was admittedly assessed treating it as income of the respective concerns without any demur or protest on the part of the department, the assessee finds no satisfactory reason as to why cash to the tune of Rs. 20 lacs which is part of Rs. 85 lacs declared be assessed as his personal income. The learned counsel further submitted that the Assessing Officer did not doubt about the bifurcation of Rs. 85 lacs in the hands of different persons which was done according to the area constructed in each project. When the Assessing Officer is satisfied about bifurcation of Rs. 85 lacs which is evidenced by the fact that no addition had been made in the case of firms, he should have been satisfied about the bifurcation of Rs. 20 lacs which is part of Rs. 85 lacs.
5. Shri M.K. Meerani, the learned DR Strongly supported the order of the authorities below. He submitted that no basis for bifurcation of Rs. 20 lacs in the hands of ten different persons was given by the assessee. The learned DR further submitted that the amount of Rs. 20 lacs was found from the cupboard in the bedroom of the assessee, and as per the provisions of section 132(4A) the same should be deemed to belong to the assessee. He therefore submitted that the action of the authorities below was in accordance with the provisions of law and deserved to be confirmed.
We have considered the rival submissions and perused the facts on record. At the outset we must state that the observations of the CIT(A) that as no addition had been in the order under section 143(3) in the computation, the appeal should have been preferred against the order under section 154, is not tenable. This is because the impugned addition of Rs. 20 lacs was discussed in the body of assessment order but by inadvertence it was not taken into account in the computation of total income originally while passing the order under section 143(3). Later on this obvious mistake was corrected by way of passing order under section 154.
6.1 A search was conducted at the business premises of the firms in which the assessee and his family members are partners as also at the residential premises of the assessee and his family members. The assessee's brother Shri Rajendra and his family members and assessee's mother were jointly living in the same house with common kitchen. A sum of Rs. 20,20,839 was found from the cupboard in the bedroom of the assessee. It is true that by virtue of presumption under section 132(4A) the amount of Rs. 20 lacs may be presumed to be belonging to the assessee but the presumption envisaged under section 132(4A) may be rebutted as held by the Kerala High Court in the case of T. Abdul Majeed (supra). It will be worthwhile to reproduce the following paragraph from the said judgment :-
"The provisions of sections 278D and 132(4A) enable a criminal court to presume the truth of the contents of books seized from a person. However, it is a presumption which can be rebutted. Moreover, the presumption envisaged there is only a factual presumption. It is in the discretion of the court, depending upon other factors, to decide whether the presumption must be drawn. The expression used in sub-section (4A) of section 132 is 'may be presumed' as in section 114 of the Evidence Act, 1872. It is not mandate that whenever the books of account are seized, the court shall necessarily draw such a presumption irrespective of any other factors which may dissuade the court from doing so."
In Addl. CIT v. Thahrayamal Balchand [1980] 124 ITR 111, the Hon'ble Rajasthan High Court has explained the rebuttal of a legal presumption in the following words :-
"What quantum of evidence would rebut a legal presumption in a given set of facts does not admit of any rigid rule. The evidence may be direct or circumstantial or both and a mere statement of the assessee may be enough in some cases. It does not raise a question of law."
6.2 Against the cash of Rs. 20,20,839, found during the course of search the assessee's brother Shri Rajendra made a disclosure of Rs. 85 lacs as per the details given in para 2 above. The assessee's main source of income is only share from their registered firms. He is partner in five declarant firms (three in individual capacity and two in HUF capacity). His wife is also partner in remaining four declarant firms. His brother Shri Rajendra and his wife as also his mother are partners in some of the declarant firms. During the course of search Shri Rajendra (the assessee's brother) made a spontaneous statement under section 132(4) and declared a sum of Rs. 85 lacs in the names of 13 firms in which the family members were partners and in the name of Shri S.S. Shah, the son of the assessee who had individual income from brokerage and commission. At the same time, the statement of the assessee was also recorded under section 132(4A) and he "fully agreed" with the disclosure made by his brother. The assessee also stated that the cash of Rs. 20 lacs related to unaccounted income of different firms and was included in the total disclosure of Rs. 85 lacs. It was also stated by the assessee in reply to question No. 4 that the declared income was earned in the business of construction of different firms and through business of brokerage and commissions by Shri S.S. Shah. In the statement under section 132(4A), there is specific mention of nature of project, name of the firm, the area constructed in each project, etc., while giving bifurcation of disclosure.
6.3 With these two spontaneous statements recorded during the search coupled with the surrounding circumstances that all the family members were living under the same roof and were partners in the declarant firms, the presumption under section 132(4A) stands rebutted - and it cannot be said that the cash of Rs. 20 lacs belonged exclusively to the assessee and not to the declarant firms OR that it was not part of the total disclosure of Rs. 85 lacs.
6.4 There is another aspect - in a case like this one has to see whether there was any motive to avoid or evade tax in making disclosure in the hands of the firms and not in the hands of the assessee. From the facts of the case, it is noted that there was no such motive. If the cash of Rs. 20 lacs had not been included in the hands of the firms but assessed in the hands of the assessee the tax effect would be less by Rs. 1.85 lacs because the total tax payable by the firms and partners works out to Rs. 12,42,086 and the total tax payable by the assessee works out to Rs. 10,57,212. The above working is supported by the calculation given by the assessee at page 7 of paper book to which the attention of the DR was invited and the DR could not dispute the veracity of these figures.
6.5 In the light of the above discussion, we hold that there is no justification for the impugned addition of Rs. 20 lacs in the hands of the assessee. The same is accordingly deleted. This ground accordingly succeeds.
7 to 16 [These paras are not reproduced hare as they involved minor issues]