1991-VIL-121-ITAT-DEL

Equivalent Citation: TTJ 039, 544,

Income Tax Appellate Tribunal DELHI

Date: 30.01.1991

M/s RAJ PAL SINGH RAM AUTAR.

Vs

INCOME TAX OFFICER.

BENCH

Member(s)  : J. P. BENGRA., B. M. KOTHARI.

JUDGMENT

This appeal submitted by the assessee arises out of the order passed by the learned Commr. Of Income-tax (Appeals) (hereinafter referred to as "CIT(A)") for the asst yr. 1983-84.

2. The assessee has raised as many as seven grounds which can be summarised as under:

1. The additions of Rs. 1,35,000 and of Rs. 14,645 is wrong.

The aforesaid additions have been made on inadmissible evidence, ignoring relevant material and evidence and has been made on conjectures.

2. The additions of Rs. 8,331 and the application of s. 145 wrong.

3. The additions of Rs. 2,877 under the head "job work receipts" is wrong.

4. It is contended that the provisions of s. 215 are not applicable at all.

3. The appellant is a partnership firm consisting of two partners Shri Raj Pal Singh and Shri Ram Autar. Both of them are partners in their capacity as Karta of their HUFs. The firm derives income from business of pawning. The firm is a registered money lender under the U.P. Money Lending Act, 1976 vide registration No. 414. The partners of the firm Shri Raj Pal Singh and Shri Ram Autar in their individual capacity are also registered money lenders under the U.P. Money Lending Act, 1976 vide registration Nos. 365 and 388 respectively. A return of income declaring an income of Rs. 25,843 was submitted on30th July, 1983. On27th October, 1983search and seizure operations were carried out at the business premises as well as the residential premises of the partners which are situated at the same premises. The ITO completed assessment for the aforesaid year at an income of Rs. 1,88,390 under s. 143(3) on24th Feb., 1986. The assessee preferred further appeal in which the various additions made in the declared income were challenged and the appellate order was passed by the CIT(A) on3rd March, 1987. The assessee has submitted the present appeal against the various additions confirmed by the CIT(A).

3.1 Ground No. 1

Ground No. 1 relates to addition of Rs. 1,35,000 and Rs. 14,645 made on the basis of seized paper marked as Anexure-A-26 pg. 10. During the course of search this paper was found and seized from the debris in the shop premises of the assessee firm. A photocopy of this seized paper is a part of and an Annexure of the assessment order and was also submitted in the paper book at page 13. The said paper records entries as under:

The rate of 10 per cent bear some correction in the photocopy of the aforesaid seized paper and the same looks like 12 per cent. The ITO came to the conclusion the assessee firm advanced loan of Rs. 1,35,000 to some person and had charged interest of Rs. 14,645. He accordingly included a sum of Rs. 1,35,000 as assessee's income on account of unexplained investment and interest thereon at Rs. 14,645. The said addition has been confirmed by the CIT(A).

3.2. The learned counsel for the assessee elaborately reiterated the same arguments as were advanced on behalf of the assessee before the learned departmental authorities. He contended that the aforesaid seized paper found from the debris in the shop does not pertain to the assessee and the entries recorded therein do not, in any way, relate to the assessee. The said paper has been written in English and both the partners of the firm as well as the employees of the said firm do not know English. It was further contended that this paper was not put to the partners at the time when their statements were recorded. This was also not put to the assessee during the course of proceedings under s. 132(5). For the first time, the ITO gave a show cause notice dt.9th Sept., 1985requiring the assessee to explain as to why the aforesaid addition be not made on the basis of aforesaid seized paper. In response to the said notice, the assessee submitted its reply dt.27th Sept. 1985contending that the said paper neither belongs to the firm nor it belongs to the partners of the firm. It is not in the handwriting of any of the partners or any person connected with the business of the firm. This paper seems to have been left by some visitor and the same might have gone in the debris alongwith the dust etc. Which is collected in a corner of the shop premises as it still contains some valuable contents of silver etc. However, it was added that the entries mentioned in the said paper which are written in English do not, in any way, relate to the assessee firm. He further contended that several other papers were found from the business premises as well as the residential premises of the partners and the handwriting of none of the seized papers is similar to that of the seized paper in question, which also supports the assessee's contention that it does not relate to the assessee-firm. The said paper does not contain the name of the firm or the name of the partner or any debtor. It is nowhere mentioned that any money was advanced by the assessee firm or by any other connected person. The fact that this paper does not, in any manner, relate to the assessee firm is also corroborated by the fact that the pawned articles, cash and stocks found during the course of search was fully found to be verifiable from the regular books of accounts and no addition whatsoever was made in the assessments of the assessee in relation to any unaccounted assets found during search. He further relied upon the decision of Tribunal in the case of Chaman Lal Dhingraa and others in ITA Nos. 815/86, and 1564/86 1563/86 dt.24th July, 1989. Our attention was invited towards para 11 and 12 of the said order passed by the Tribunal in which the deletion by the CIT(A) of addition made on the basis of such a seized paper was confirmed by the Tribunal.

3.3. It was further pointed out that the presumption contained in s. 132(4A) of the IT Act 1961 are available only for the limited purpose of proceedings under ss. 132(5) and 132(11) and cannot be relied upon by the Revenue while making such an addition in the regular assessment proceedings under s. 69 of the Act. In support of the contention he relied upon the judgment of Hon'ble Allahabad High Court in the case of Pushkar Narayan Sar raf vs. CIT reported in (1990) 86 CTR (All) 100 : (1990) 183 ITR 388 (All).

34. He further argued that the onus lies upon the Department to prove that the assessee was the owner of the investments recorded in the said seized paper and such one is to be discharged by bringing on records the positive material and evidence. Mere possession of an asset or a seized paper does not automatically establish the ownership of the assessee in relation to such alleged investment. The Department has not discharged such burden, as is apparent from the fact that no such question was put to the assessee in the statement recorded by the ITO and no other evidence has been brought on record to establish the ownership of the assessee for the aforesaid alleged investment. Reliance was placed by him on the following judgments:

(1) Addl. CIT vs. Miss Lata Mangesshkar (1974) 97 ITR 696 (Bom)

(2) Addl. CIT vs.S. Pichaimanicham(1983) 34 CTR (Mad) 139 : (1984) 147 ITR 251 (Mad)

(3) Addl. CIT vs. Karnail Singh V. Kaleran (1974) 94 ITR 505 (P&H)

(4) CIT vs. Lalchand Bhabutmal Jain (1984) 38 CTR (Bom) 183 : (1985) 151 ITR 360 (Bom)

5. Bhagwandas Narayandas vs. CIT (1974) 98 ITR 194 (Guj)

He, therefore, urged that the aforesaid additions confirmed by the CIT(A) should be cancelled.

3.5. Mr. Amitabh Kumar, learned Senior Departmental Representative contended that it is an admitted fact that the said seized paper was found from the business premises of the assessee firm. The statuary presumption contained in s. 132(4A) of the Act clearly provides that any books of accounts, other document, money, bullion, jewellery etc. found in the possession of any person in the case of a search shall be presumed to be belonging to such person and the contents of such books of accounts and other documents shall also be presumed to be true. Such statutory provisions contained in s. 132(4A) are undoubtedly available to the Revenue even during the course of regular assessment proceedings. Similar provisions are also contained in s. 69. He also invited our attention towards the report of the Select Committee published in (1975) 99 ITR (ST) 19 at page 45 in which the Committee had observed that the powers proposed in sec. 132(2) in the Taxation Laws (Amendment) Bill, 1973 are draconian in nature. Despite this report, the Legislature in its wisdom has enacted the aforesaid provisions of s. 132(4A) and the same clearly casts the burden on the assessee to rebut the aforesaid statutory provisions contained in s. 132(4A). Such rebuttal cannot be done merely by denial by the assessee firm but the same has to be rebutted on the basis of the cogent material or other evidence. The assessee has not been able to rebut such a statutory provision and, therefore, the departmental authorities have rightly made the aforesaid additions.

3.6. It was further argued that the contention of the assessee that no undisclosed investment or assets were found during the course of search is incorrect. Undisclosed assets and incriminating documents were found during the course of search. The same have been added in the hands of the partners in their individuals status. The appellant firm is carrying on the money-lending business which includes pawning business. The paper in question contained entries relating to such investments made in money lending business which was not found recorded in the books of accounts and the same clearly constitutes unexplained investment in the hands of the assessee as per the provisions of s. 69.

3.7. He further submitted that it was incorrect on the part of the assessee to contented that the seized paper was not put to the assessee. Our attention was invited towards the show cause notice dt.9th Sept., 1985in which the contents of the aforesaid seized paper were re-produced and the assessee was specifically asked to explain as to why the same could not be treated as unexplained investment. The assessee merely denied that it does not relate to him, but mere denial by the assessee cannot absolve the assessee from the obligation to explain the same. It is an admitted fact that the paper in question was seized from the debris inside the business premises and such debris still contained valuable contents of silver and the assessee deliberately preserved and safeguarded the same as such debris in the business premises of any silver smith or goldsmith are saleable in the market. He further contended that the contention of the assessee's counsel that since no unexplained assets were found from the business premises, the said investment should be treated as not belonging to the assessee cannot be accepted as amount which had been advanced to a debtor on the basis of such seized papers will not be found in the form of cash during the course of search. It is further not necessary that all money-lending advances are necessarily given only on the security of pawned articles. According to him, the paper clearly belonged to the assessee firm.

3.8. It was also pointed out that the facts of the case of Chaman Lal Dhingra decided by the Tribunal, which has been relied upon by the assessee, are entirely different and does not, in any manner, support the assessee's contention.

3.9. The learned Senior Departmental Representative, relied upon the following judgments:

He invited our attention towards the judgement of the Hon'ble Supreme Court in the case of Chuharmal vs. CIT (1988) 70 CTR (SC) 88 : (1988) 172 ITR 250 (SC) in which it was held that all that s. 110 of the Evidence Act, 1872 did was to embody a salutary principle of common law jurisprudence, viz. Where a person is found in possession of anything, the onus of proving that he was not its owner was on the person. This clearly supports the Revenue's contention that such onus lies upon the assessee that he was not the owner of the seized paper found from their possession. He also relied upon the following other judgments to support the aforesaid contentions:

(1) CIT vs. Sait Khubchand Perumal (1987) 65 CTR (AP) 225 : (1988) 169 ITR 278 (AP)

(2) CIT vs Bala I.M. Rao (1989) 177 ITR 114 (Mad)

(3) CIT vs. Bimal Prakarh Gupta (1990) 81 CTR (P&H) 332 : (1989) 179 ITR 613 (P&H)

(4) CIT vs. Soorajmal Nazarmal (1989) 79 CTR (Cal) 24 : (1990) 181 ITR 340 (Cal)

(5) CIT vs. Tribunal (1988) 72 CTR (MP) 134 : (1988) 40 Taxmann 59 (MP)

3.10. As regards the judgment of Hon'ble Allahabad High Court reported in Pushkar Narayan Sarraf vs. CIT relied upon by the learned counsel for the assessee, it was contended by the learned Senior Departmental Representative that the facts of that case are clearly distinguishable. In that case, it was argued on behalf of the assessee that a presumption in favour of the assessee should be made as to the correctness of the contents of assessee's books of accounts and confirmations of the creditors found during the course of search. It was held by the Hon'ble Allahabad High Court that this presumption cannot have the effect of excluding s. 68 when regular assessment is made in regard to the income of the person.

3.11. Pursuant to a query from the Bench as to how on the basis of aforesaid seized paper it can be said that the investment was made during the financial year 1982-83 pertaining to asst. yr. 1983-84, it was contended by him that the only dates mentioned in the seized paper are 12th July, 1982 to 12th Sept., 1982 which fall within the financial year 1982-83 and accordingly the amount has rightly been added in the asst. yr. 1983-84. It was also pointed out from the fact that the assessee took an alternative plea that according to the aforesaid seized paper, the alleged investment pertained to asst. yr. 1982-83 clearly supports the Revenue's contention that the said seized paper related to the assessee firm and the entire recorded therein represents unexplained investment made by the assessee firm. He, therefore, strongly urged that the order passed by the CIT(A) in this regard, should be confirmed.

4. We have carefully considered the rival submissions made by the learned representatives and have also gone through the orders passed by the learned Departmental authorities. We have also perused the various judgments relied upon by the learned representatives.

4.1 We will now consider the various points raised during the course of hearing. The first point required our consideration is whether the presumption in s. 132(4A) applies in relation to the proceedings for invoking the provisions of s. 69 of the Act. In our view, such presumption arising out of sub-s. (4A) of s. 132 of the Act is available to the Revenue only for the limited purpose of search and seizure and the proceedings under s. 132(5) and 132(11). The aforesaid provision provides that the books of accounts, other documents, money, bullion, jewellery or other valuable articles seized from the possession of the assessee shall be presumed to belong to the assessee if they are found in the possession or control of the assessee in the course of search. A similar presumption may also be made as to the correctness of the contents of the books of accounts so seized. Such presumptions are available only for the limited purpose of estimating the undisclosed income and the estimated tax liability for the purposes of deciding whether the seized assets should be seized or retained. This presumption cannot have the effect of excluding or overriding the provisions of s. 69 during the course of regular assessment proceedings. The view is fortified by the judgment of Hon'ble Allahabad High Court in the case of Pushkar Narayan Saraf vs. CIT

4.2 However, even without the availability of such statutory presumption as contained in s. 132(4A) during the course of regular assessment proceedings, the initial onus of proving that the assessee was not its owner was on the assessee, as it is an admitted fact that the said paper was found and seized from the debris in the shop premises belonging to the assessee firm. Th Hon'ble Supreme Court in the case of Chuharmal has clearly held that it is a salutary principle of common law jurisprudence that where a person was found in possession of anything, the onus of proving that he was not its owner was on that person.

4.3 Let us also examine the ingredients of s. 69 dealing with unexplained investments. Before invoking the provisions of s. 69 it will be necessary to ensure the fulfilment of all the conditions precedents as to the existence of such unexplained investment. The provisions can be invoked only if it is factually found that the assessee has made investment in the money-lending business and the assessee and none else was the owner of such unexplained investment. It will have to be further established that the amount has not been recorded or is in excess of the amount recorded in the books of accounts and the assessee offers no explanation about such amount or the explanation offered by him is not satisfactory. The amount of such unexplained investments may be deemed to be the income of the assessee for such financial year in which the assessee made such unexplained investments. The facts must be found to clearly bring a case within the aforesaid deeming provision and it will have to be established that all the above circumstances do factually exist.

4.4. Now, in the light of the aforesaid principles of law, let us examine the seized paper in question. The aforesaid seized paper merely contained certain figures, rate and the consequent calculation. It does not bear the name of the assessee or any one else. It is not in the hand writing of any of the partners or employees of the assessee as per replies submitted by the assessee in response to the show cause notice issued by the assessing authority. The said seized paper is not like pronote or a receipt from a debtor or any other form of an acknowledgement of loan taken by any person from the assessee. In response to the show cause notice dt.9th Sept., 1985issued by the ITO in relation to the aforesaid seized paper, the assessee clearly stated that the said paper does not belong to the assessee firm or its partners or any connected person. He also explained that this is written in English and none of the partners or employees of the firm know English. The assessee further submitted that no unaccounted assets belonging to the assessee firm were found during the course of search. It was stated that the said seized paper neither belonged to him nor the entries recorded therein pertained to the assessee firm. It is true that where a person is found in possession of anything, the onus of proving that he was not its owner was on that person but such a presumption is a rebuttable presumption and the same can be dislodged or rebutted by such person. In the present case the assessee has categorically stated that the paper does not belong to him, the entries recorded therein do not relate to him and the same is not in the hand writing of any of the partners or employees, on any connected person. Such a denial coupled with the surrounding circumstances that the seized paper is not in the hand writing of any of the partners or employees, it does not contain the name of the assessee clearly supports the assessee's contention that the initial onus lying upon the assessee was successfully dislodged by them. The officers of the Department found this paper during the course of search conducted on27th Oct., 1983, no statement of the partners were recorded during the course of search on that date in relation to the aforesaid seized document. If any such statement had been recorded, the same has not been brought to our notice nor it finds place in the order passed by the learned departmental authorities. This paper was also not put to the assessee during the course of proceedings under s. 132(5). The statements of the partners S/Sh. Rajpal Singh and Ram Autar were recorded on18th Jan., 1984. The ITO did not put any question relating to the aforesaid seized paper during the course of aforesaid statements recorded in the year 1984. Even after receiving the assessee's replies dt.27th Sept., 1985and3rd March, 1987, the ITO did not choose to examine the partners or the employees of the assessee firm in relation to the aforesaid seized paper. The paper found and seized from the premises of the assessee nowhere contains any description that this represents the amount of loan given by the assessee to any person. After receiving the reply from the assessee in response to the show cause notice dt. 9th Sept., 1985 the minimum effort which was expected of the learned assessing authority was to record the statement of the partners and the employees and thereafter, he could have conducted the detailed investigation to conclusively prove that the said seized paper belonged to the assessee and the entries recorded therein represents assessee's unexplained investments. No such efforts whatsoever were made by the assessing authority. We are, therefore of the considered view that the Department has completely failed to establish that the assessee made any such unexplained investment during the relevant financial year

4.5 It will be worthwhile to reproduce the contents of the seized paper once again hereunder:

The aforesaid figures, dates and calculations clearly reveal that the amount of investment Rs. 1,35,000 cannot be treated as having been made during the financial year 1982-83. Even if it is assumed that the aforesaid amount of Rs. 1,35,000 represents principal amount on which interest at the aforesaid rates has been calculated totalling of Rs. 14,400 it would be interest for one full year. This necessarily implies that the investment, if any, was made by any person as recorded in the aforesaid seized paper, it must have been made in the month of July 1981 as interest for one full year has been calculated and thereafter interest of the remaining period 12th July, 1982 to 12th Sept. 1982 has been worked out. This indicates that the figure of Rs. 1,35,000 recorded in the seized paper cannot be said to represent an unexplained investment made in the financial year 1982-83. On this account also, the addition made by the Assessing Officer and confirmed by the CIT(A) deserves to be cancelled.

4.6 Taking an overall view of the facts and circumstances of the case, we are of the view that the addition of Rs. 1,35,000 and Rs. 14,645 should be cancelled, and the same are therefore, deleted.

5. The next ground relates to an addition of Rs. 8,331 in the declared trading results. The learned counsel for the assessee. Invited our attention towards the gross profit chart the contended that in the preceding year the addition made in the declared gross profit was deleted. He further contended that addition made in the declared gross profit for the asst. yr. 1984-85 has also been deleted by the AAC vide order dt.25th Aug., 1988. It was pointed out that reliance placed on the sales tax assessment order does not support Revenue’s case as according to the U.P. Sales Tax Act an assessee having turnover of Rs. 50,000 is not liable to sales-tax. The sales tax order merely indicates that the assessee's turnover at Rs. 50,000 as wrongly interpreted by the assessing authority. No incriminating documents evidencing any extra gross profit was found during the course of search. He, therefore, submitted that the addition ought to have been deleted by the learned CIT(A).

5.1. The learned Departmental Representative contended that during the course of search various documents in the form of laboratory testing reports etc. Were found purchases and sales are not supported by the vouchers. Hence proviso to s. 145(1) is clearly applicable. The estimates of sales and gross profit rate adopted by the ITO and confirmed by the CIT(A) are most reasonable and should be confirmed.

5.2. In the preceding year, the assessee had declared g.p. of 22.4 per cent on turnover of Rs. 19,455. The ITO estimated the sales at Rs. 50,000 and applied a g.p. rate of 25 per cent. The DC(A) deleted the aforesaid addition vide order dt.25th Aug., 1988. Thus, the declared g.p. rate of 22.4 per cent had been accepted in the immediately preceding year. Similarly, in the asst. yr. 1984-85, the assessee had declared a g.p. rate of 22.55 per cent on turnover of Rs. 15,722. The ITO applied a g.p. rate of 25 per cent on estimated sale of Rs. 60,000. The said addition made in the declared g.p. have been deleted by the AAC vide his order dt.25th Aug., 1988. While making the assessment for the assessment year under consideration, the ITO has given reference of the assessment order for the asst. yr. 1982-83 which indicates that the fact found in relation to asst. yr. 1982-83 are almost the same as it existed during the year under consideration. Since the assessee has declared g.p. of 22.5 per cent at a turnover of Rs. 19,619, which is slightly better as compared to the immediately preceding year, we do not find any justification for sustaining the addition. The addition of Rs. 8,331 made in the declared trading result, is, therefore, cancelled.

6. The next ground relates to an addition of Rs. 2,877 under the head "job work 'receipts". The arguments advanced by the learned representatives of both the sides were same as were made in relation to addition in the declared trading results. The learned counsel for the assessee. Contended that the additions made in the declared job receipts in the asst. yrs. 1982-83 and 1983-84 have been deleted. Job receipts declared by the assessee at Rs. 7,132 in the assessment year under consideration is better as compared to job receipts of Rs. 6,623 declared and accepted in the appeal for the asst. yr. 1982-83. The learned Senior Departmental Representative supported the order passed by the Departmental authorities and urged that the addition should be confirmed.

6.1. We have heard the parties and have perused the relevant chart and the orders passed by the departmental authorities. The facts relating to this item are the same as has been discussed in the assessment order for the asst. yrs. 1982-83 to 1983-84. It will be worthwhile to add that the search was made in the month of October, 1983 and assessment for asst. yr. 1982-83 and 1984-85 were completed on24th Feb., 1986after taking into consideration, the material found during the course of search. Since the facts relating the assessment year under consideration appear to be the same and no distinguishing features have been pointed out by the learned Senior Departmental Representative and the job receipts declared by the assessee is better as compared to be immediately preceding year, the addition of Rs. 2,868 made in the declared job work receipts is deleted.

7. The next ground relates to levy the interest under s. 215. The learned counsel of the assessee submitted that consequential relief may be granted. The ITO is directed to grant consequential relief.

8. In the result, the appeal is partly allowed.

 

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