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Judgment
Satish K. Agnihotri, J.—I.T.A.Nos. 16 & 17 of 2004 involve the same question of law and facts, thus, they are being considered and decided by this common order.
The instant appeals i.e. I.T.A.Nos. 16 & 17 of 2004 arise from the orders dated 22.9.2003 & 22.9.2003 passed by the Income Tax Appellate Tribunal (for short "the ITAT") in IT (SS) A No. 47/Nag/2000 (Block period 1.4.1987 to 14.11.1997) & IT (SS) A No. 46/Nag/2000 (Block period 1.4.1987 to 14.11.1997), respectively.
I.T.A. No. 16 & 17 of 2004 were admitted on 23.04.2009 on the following substantial question of law :
O Whether on the facts and in the circumstances of the case, learned Income Tax Appellate Tribunal was justified in upholding CIT(A) order whereby the CIT(A) deleted addition mentioned in the incriminating documents seized during search operations, particularly, disregarding statement of the assessee recorded u/s 132(4) of the Act ?
O Whether, in law, in respect of hundies/promissory notes recovered and seized during the course of search the onus is cast on the Assessment Officer to prove that the amount shown in such hundies/promissory notes was actually advanced by the assessee?
The facts, in brief, in ITA No. 17 of 2004 are relevant for proper adjudication of the appeals, are that the search was conducted at the residential premises of the assessee situated at GE road Rajnandgaon during the period from 11.11.1997 to 14.11.1997. During the course of search, certain incriminating documents including promissory notes/hundies were found in addition to cash and jwellary. Consequent thereupon, a notice u/s 158BC was issued by the Assessing Officer (for short "the AO") to the assessee on 30.12.1998. The assessee filed return, in response, on 22.03.1999 declaring his undisclosed income for the block period 01.04.1987 to 14.11.1997 to the tune of Rs. 11,44,218/-. The total amount involved in the transaction reflected in the promissory notes/hundies papers found during the search was Rs. 41.25 Lakhs. The assessee surrendered an amount of Rs. 37.95 Lakhs, as the undisclosed income of his HUF on account of the said hundies, whereas, the balance of Rs. 3.30 Lakhs was offered in the name of Shri Mangalchand Parakh.
In the income return, the assessee offered only Rs. 3.00 Lakhs for A.Y. 1997-98 and Rs. 5.9 Lakhs for A.Y. 1998-99 in respect of said hundies. The balance amount reflected in the hundi was not offered as his undisclosed income. The assessee offered his explanation before the AO as under :
Sl. No.
Name
Amount
Explanation offered by the assessee
1.
Maruti Automobiles
10,00,000/-
No financial involvement. As per involvement. As per mutual agreement, the
loan given on 03.04.95 vide Ch. No. 17346 drawn on Bank of Maharashtra on renewal basis after every three months. But the Broker brought the promissory
note showing renewal after 6 months. The
mistake was pointed to broker and fresh promissory note was executed which is
forming part of annexure in Page No. 14.
2.
Tarachand Vithaldas
10,00,000/-
Amanti Chitti was executed on account of guarantee for trading transactions with
Dwarika Das & Co., Bangalore, Account extract of Dwarka Das & Co. and Affidavit is enclosed.
3.
Shri Pravin Jain
5,00,000/-
No financial involvement. Amanti Chitti was executed as counter guarantee against old trade outstanding of Rs. 5,99,104.50. Affidavit enclosed.
4.
Shri Sunil Kr. Grover
1,50,000/-
No financial involvement. Promissory note was drawn as counter guarantee against loan of Rs. 75,000/- given to Shri Balvinder Singh Bhatia alias Pinki. Letter of Sunil Grover addressed to ADL, Raipur enclosed
It was submitted before the AO that all the hundies/promissory notes were identical in nature. The assessee had surrendered the investment in promissory notes/hundies to the extent of Rs.8.90 Lakhs, which was actually advanced by the assessee on hundies, whereas, no surrender in respect of the remaining amount reflected in the promissory notes/hundies was made, as according to the assessee, these hundies were obtained either as securities or counter guarantees against the some trade/loan transactions duly appearing in the regular books of account. Affidavits of the concerned persons were also filed in support of the above stated explanation. The AO held that the promissory notes and hundies were not recorded either in the books of the assessee or that in the books of the concerned persons. It was further held that denial by both the parties of having no transactions as stated in the promissory notes/ hundies was done, as per the convenient and, as such, the AO declined to assign any evidentiary value to the affidavits of the concerned parties filed by the assessee.
The AO further found that there was no correlation between the promissory notes / hundies found during the course of search with the corresponding trade/ loan transactions for which the assessee had claimed to have obtained the same as security. It was found that the assessee had fabricated bogus evidence in order to support his explanation and the same was not accepted by the AO. The AO held that the contents of the promissory notes/hundies very clearly denoted money advanced in cash by the assessee to the respective parties and the counter guarantee against outstanding trade/loan transactions were not acceptable in the absence of correlation. The AO treated the amounts of hundies as investment made by the assessee from his undisclosed income and the same was added to the undisclosed income of the assessee for the block period. In the search, cash amounting to Rs.16,16,363/-was also found from the possession of the assessee.
In explanation, the assessee submitted that Rs. 3,00,000/-, Rs.2,50,000/- and Rs.2,00,000/- belonged to Shri Prakashchand, Shri Sultan Ahmed and M/s. Tamaker Transport respectively. There, certain loose papers were found, wherefrom it could be gathered that some purchase of jewellery, diamonds, cloths etc. and assuming that the amount claimed to have been given by Shri Prakash Chand must have been consumed by the asseessee for making the said investment. There was no proper and convincing explanation in respect of other amount. Thus, the explanation was rejected.
The AO accordingly held that the cash found in possession and control of the asseessee during the search was unexplained to the extent of Rs.7.50 lacs and the same was added to the undisclosed income of the assessee for the block period. Accordingly, the assessment order was passed.
Thereagainst, the asseessee preferred an appeal before the Commissioner, Income Tax (Appeals) {for short "the CIT (A)"}. The learned CIT (A) allowed the appeal deleting the entire additions made by the AO. The CIT (A) held that the material placed on record that the concerned parties were having substantial outstanding balance payable to the assessee at the relevant time and the persons executing the promissory notes/ hundies as guarantee/security were closely associated with the said parties and the same was also affirmed by them on oath in the affidavits filed before the AO. It was further held that the AO had neither cross examined the deponents nor given any opportunity to the assessee for producing the said persons.
Thus, the AO was not justified in rejecting the evidence produced by the assessee in the form of affidavits and in drawing adverse inference against the assessee on the basis of surmises and presumptions. In case of M/s Maruti Automobiles, he was examined before the ADI during the course of search wherein the said party had clearly stated that the relevant promissory notes/hundies were executed merely as a security against the loan obtained by cheque and that there were no financial dealings in cash involved on the execution of the said promissory notes/hundies.
The CIT (A) further held that the promissory notes/hundies were guarantee/collateral security for continuing the transactions with the concerned parties, no evidence was found and recorded. In fact, the assessee had given the impugned amounts on the said promissory notes/hundies to the concerned parties and/or received and interest from the said parties on the amount allegedly advanced. Ultimately, the CIT (A) recorded the conclusion that the explanation of the assess of having obtained the relevant promissory notes/hundies as collateral security/guarantee for the trade/loan transactions already recorded in the regular books of account was duly supported and substantiated. The AO without taking steps to revert the same wrongly held that the explanation of the assessee was not correct. Similarly, the addition of Rs.7.50 lacs in respect of the cash found during search was also deleted holding that cash found during the course of search observing that the cash found and seized was fully explained by the assessee to be belonging to others and the said persons have explained in their affidavits filed before the AO. Thus, the CIT (A) vide its order dated 29.2.2000.
Thereagainst, the Department has preferred appeal before the ITAT. In the appeal, six grounds were raised by the department as under :
1) Deleting the addition of Rs.1,62,790/- made by the AO as undisclosed income for A.Y. 1994-95 to 1998-99 with reference to the seized document.
2) Deleting the addition of Rs.21,750/- made by the AO as undisclosed interest income on the advances given to Shri Yusuf Bhai Menon and Shri Satish Jain.
3) Deleting the addition of Rs.16,50,000/- and Rs.1,03,600/- made by the AO treating the amount of promissory note and interest presumed to have earned on accrual basis.
4) Deleting the addition of Rs. 10,58,500/- made by the AO being the amount of promissory notes and interest thereon in the name of Ms. Maruti Automobiles, Raipur.
5) Deleting the addition of Rs. 11,900/ - made by the AO as undisclosed income of the assessee representing the interest calculated on the hundies surrendered by the assessee during the search.
6) Deleting the addition of Rs. 7,50,000/- made by the AO as unexplained cash found and seized from the assessee''s premises during the search. are unjustified, as the AO has rightly considered all the facts and came to the conclusion that the abovestated amounts were not properly explained and, as such, they were added to the undisclosed income of the asseessee.
We have heard learned counsel appearing for the parties, perused the pleadings and the documents appended thereto.
Shri Rajeev Shrivastava, learned counsel with Shri Sameer Shrivastava, learned Advocate appearing for the appellant/ Department, would submit that the authorities below laid strong emphasis on the fact that the AO did not examine the concerned party again and did not bring any evidence on record to show that the statement made by the said party was incorrect, and that even after extensive search operation, nothing incriminating was found or seized to establish that the amount reflected in hundies were actually advanced in cash to the concerned parties, or had received interest thereon as presumed by the AO and the CIT (A)''s order has been upheld by the ITAT. The ITAT has not at all given any cognizance to the human probabilities and to the controversies in the averments in affidavits.
Shri Shrivastava would further submit that no addition can be made u/s 158BC without any documentary evidences related to the search and seizure proceedings and in the same time no deduction or benefits can also be given to the asseessee without any supporting documents related to the search and seizure proceedings. The cash was not satisfactorily explained by the asseessee during the assessment proceedings. The affidavits submitted by the asseessee were doubtful and, as such, the same were rightly rejected. The ITAT committed error in accepting the affidavits as true. The ITAT has placed an impossible burden on the AO to examine each case and to produce proper & cogent evidence to disprove and discredit the affidavit. If the proposition is accepted as it is, the asseessees would succeed in all cases by filing affidavits. The AO was rightly made the assessment following common practice prevailing in the money lending business.
Shri Shrivastava in support of his contention placed reliance upon the decisions of this Court rendered in Assistant Commissioner of Income Tax v. Hukum Chand Jain & Ors.1 and M/s Dhanush General Stores v. The Commissioner of Income Tax, Raipur2.
On the other hand, Shri Harsh Wardhan, Advocate for the respondents, would submit that since the question of law starts with `whether under the facts and circumstances of the case'' that means the facts and circumstances of the case have been accepted as it is and in the light of the said facts, the question has to be decided. Statement u/s 132 (4-A) during search raises a rebutable presumption and the CIT (A) and the ITAT have elaborately considered the evidence led in rebuttal and by detailed order set aside the findings and order passed by the AO. Shri Harsh would further submit that the burden of rebuttal u/s 132(4-A) that lay on the assessee has been duly discharged. Thus, no interference is warranted.
In support of his contention, Shri Harsh placed
reliance upon the decisions rendered in Sardar Machhisingh v. Commissioner of Income Tax3, P.R. Metrani v. Commissioner of Income Tax4, Commissioner of Income Tax v. Mukundray K. Shah5, Commissioner of Income Tax v. P. Mohanakala6, Commissioner of Income Tax v. P.V. Kalyanasundaram7, Commissioner of Income Tax v. Micro Melt (P) Ltd.8 and income tax Officer v. Vijay Kumar Kesar9.
In Hukum Chand Jain (supra), this Court, in facts of that case, observed that it was open to the asseessee who made admission to establish that confession was involuntary and the same was extracted under duress and coercion. Learned Division Bench of this Court found that the assessee voluntarily surrendered the undisclosed income during the course of search in the statement recorded u/s 132(4) when he could not explain the seizure of cash and jewellery. The onus of proving that confession made by him u/s 132(4) was as a result of intimidation, duress and coercion was on the assessee. In view of that, it was held that the AO was justified in assessing the income of the assessee on the basis of surrender of undisclosed income made by the assessee u/s 132(4). It was also held as under :
From the principles of law laid down in the aforesaid judgments, it may be deducted that, admission is one important piece of evidence but it cannot be said that it is conclusive. It is rebuttable. It is open to the assessee who made admission to establish that confession was involuntary and the same was extracted under duress and coercion. The burden of proving that the statement was obtained by coercion or intimidation lies upon the assessee. Where the assessee claims that he made the statement under the mistaken belief of fact or law, he should have applied for rectification to the authority who passed the order based upon his statement. The retraction should be made at the earliest opportunity and the same should be established by producing any contemporaneous record or evidence, oral or documentary, to substantiate the allegation that he was forced to make the statement in question involuntarily.
In M/s Dhanush General Stores (supra), the issue involved was asto whether the income offered in return of income as business can be assessed as deemed income u/s 69B, without holding that under which head of income it is assessable. This Court held that since the income surrendered was shown in the trading account, but not in computation of income for the purpose of taxation.
In Sardar Machhisingh (supra), the learned Division Bench of the High Court of Madhya Pradesh held that the finding of facts as recorded by the AO, CIT (A) and ITAT cannot be examined by the High Court in an appeal u/s 260A.
The Supreme Court in P.R. Metrani (supra), while considering the statement u/s 132 held as under :
A presumption is an inference of fact drawn from other known or proved facts. It is a rule of law under which courts are authorized to draw a particular inference from a particular fact. It is of three types, (i) "may presume", (ii) "shall presume" and (iii) "conclusive proof". "May presume" leaves it to the discretion of the court to make the presumption according to the circumstances of the case. "Shall presume" leaves no option with the court not to make the presumption. The court is bound to take the fact as proved until evidence is given to disprove it. In this sense such presumption is also rebuttable. "Conclusive proof" gives an artificial probative effect by the law to certain facts. No evidence is allowed to be produced with a view to combating that effect. In this sense, this is an irrebuttable presumption.
In Mukundray K. Shah (supra), the Supreme Court observed as under :
The above two judgments indicate that the question as to whether payment made by the company is for the benefit of the assessee is a question of fact. In this case, the Tribunal has concluded that the payment routed through MKF and MKI was for the benefit of the assessee. This was a finding of fact. It was not perverse. Therefore, the High Court should not have interfered with the said finding. Further, the above two judgments lay down that the concept of deemed dividend u/s 2(22)(e) of the Act postulates two factors, namely, whether payment is a loan and whether on the date of payment there existed "accumulated profits". These two factors have to be correlated. This correlation has been done by the Tribunal coupled with the fact that all withdrawals were debited in the capital account of the firm leading to the debit balance of Rs.8.18 crores. The High Court has erred in disturbing the findings of fact.
In P. Mohanakala (supra), the Supreme Court observed as under :
The findings of fact arrived at by the authorities below are based on proper appreciation of the facts and the material available on record and surrounding circumstances. The doubtful nature of the transaction and the manner in which the sums were found credited in the books of accounts maintained by the assessee have been duly taken into consideration by the authorities below. The transactions though apparent were held to be not real ones. May be the money came by way of bank cheques and was paid through the process of banking transaction but that itself is of no consequence.
No question of law much less any substantial question of law had arisen for consideration of the High Court. The High Court misdirected itself and committed error in disturbing the concurrent findings of facts.
In P.V. Kalyanasundaram (supra), the Supreme Court observed as under :
The fact as to the actual sale price of the property, the implication of the contradictory statements made by Rajarathinam or whether reliance could be placed on the loose sheets recovered in the course of the raid are all questions of fact. We therefore find no infirmity in the order of the High Court.
In Micro Melt (P) Ltd. (supra), the Gujrat High Court observed as under :
Thus it is apparent that the genuineness of the transactions and the identity of the depositors have been established and nothing has been brought on record to contradict the findings of fact recorded by the Commissioner (Appeals) as noted by the Tribunal. In the circumstances, the issue being a pure issue of facts and appreciation of evidence, no question of law, much less a substantial question of law, as proposed or otherwise, arises out of the impugned order of the Tribunal.
This Court in Vijay Kumar Keser (supra) held that the findings of fact recorded by the Commissioner (Appeals) and subsequently confirmed by the Tribunal in appeal were concurrent findings of fact and were not perverse.
The ITAT in its judgment and order has considered each and every grounds raised by the Department at length and thereafter, affirmed the findings in respect of all the additions of Rs.1,62,790/-, Rs.21,750/-, Rs.17,53,600/-, Rs.10,58,500/-, Rs.11,900/- and Rs.7,50,000/-. The ITAT has affirmed the findings recorded by the CIT (A) without any modification. The CIT (A) has examined each and every transaction, which were related to the hundies and came to the conclusion that the finding recorded by the AO was mainly on the basis of surmises and conjectures.
In view of foregoing, we are of the considered opinion that the findings recorded by the CIT (A) and affirmed by the ITAT are based on proper appreciation of facts and are not perverse, being correlated with each and every transaction. Thus, the issue is purely question of facts. No question of law, more so substantial questions of law, as aforestated, arise in the facts of the case.
As an upshot, both the appeals, being bereft of merit, are liable to be and are hereby dismissed.
There shall be no order asto costs.