Commissioner of Income Tax-III vs Shitaldas Bachomal Ramchandani

Bhaskar Bhattacharya, Actg. C.J.

This Appeal u/s 260A of the Income Tax Act is at the instance of the Revenue and is directed against an order dated 19th August 2010 passed by the Income Tax Appellate Tribunal, Rajkot Bench, Rajkot in I.T. (SS) A. No. 92/RJT/2003, by which the Tribunal dismissed the Appeal preferred by the Revenue against the order of the Commissioner of Income Tax (Appeals). Being dissatisfied, the Revenue has come up with the present Appeal.

Before this Court, the point taken by the Revenue is that the Commissioner of Income Tax (Appeals) as well as the Tribunal below committed substantial error of law in deleting the following additions made by the Assessing Officer:

Addition of Rs. 1,21,720=00 made by the Assessing Officer as unexplained cash found from the business premises;

Addition of Rs. 1,24,416=00 made by the Assessing Officer as unexplained cash found from the residential premises;

Addition of Rs. 3,24,377=00 made by the Assessing Officer on the ground of excess stock found during the search action;

Addition of Rs. 19,47,000=00 made by the Assessing Officer on account of unexplained investment in ''Surya Sadan'' property in the name of the assessee''s wife Smt. Valiben Shitaldas Ramchandani;

Addition of Rs. 11,71,244=00 and Rs. 4,57,440=00 (Total Rs. 16,28,694=00) made by the Assessing Officer on account of unaccounted profit as also unaccounted investment in purchases respectively;

Addition of Rs. 21,685=00 and Rs. 1,19,050=00 (Total Rs. 1,40,375=00) made by the Assessing Officer on account of unaccounted investment in purchases and profit derived on purchases respectively;

Addition of Rs. 70,524=00 and Rs. 35,262=00 (Total Rs. 1,05,786=00) made by the Assessing Officer on account of unaccounted profit from the sale of crackers and unaccounted purchases of crackers respectively;

Addition of Rs. 90,000=00 made by the Assessing Officer on account of investment and profit on sale of house property in Vinayak Apartment;

Disallowance made by the Assessing Officer of Rs. 76,759=00 u/s 40A(3) on the ground of cash payment made to certain parties exceeding Rs. 10,000=00 in each case;

Addition of Rs. 1,33,317=00 made by the Assessing Officer on account of amounts received from six parties as a sales consideration or receivables;

Reduced granted by C.I.T.(A), to the extent of Rs. 1,50,000=00 from an addition made by the Assessing Officer of Rs. 2,50,000=00 on the ground of unexplained marriage expenses of son of the assessee;

Addition of Rs. 19,035=00 made by the Assessing Officer as unexplained cash payment to M/s. Vinayak Trading Company.

The following facts are not in dispute:

The assessee in the status of individual was assessed to tax and was engaged in trading/repairing of watches under the name and style of M/s. Vinayak Watch Company. There was a search u/s 132 of the Income Tax Act at the residential and business premises of the assessee on 3rd September 1998. The assessee, in response to the notice served on 21st December 1999 u/s 158BC of the Act, filed his return of income for the Block Year on 25th February 2000, declaring the undisclosed income of Rs. 2 lac. The Assessing Officer has finalized the block assessment, determining the undisclosed income of Rs. 58,46,837=00.

Being dissatisfied, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). It appears from the record that reasons were assigned by the assessee showing that he was maintaining regular books of account and assessed to tax since long. Due to ill health, the books of account for the period from 1st April 1998 to 3rd September 1998 could not be prepared. However, the books of account for the said period were prepared on the basis of prime record, wherein the Assessing Officer has not found any mistake. According to the assessee, the Assessing Officer had misread the provisions contained in Section 158BA(3) of the Act. According to the assessee, the scope of the said section has to be understood harmoniously with Section 158BB(1)(d) dealing with computation of income.

The Commissioner of Income Tax (Appeals), after taking into consideration the materials on record, came to the conclusion that the books of account for the financial year 1998-99 were not written till the date of search, and for that reason only, the Assessing Officer had not accepted the cash found as explained. The Commissioner of Income Tax (Appeals) pointed out that the prime records from which the books of account were prepared were produced before the Assessing Officer during the course of assessment proceedings. The Commissioner of Income Tax (Appeals) pointed out the fact that the books were written after the search but, this fact does not obviate the necessity of examining the books by the Assessing Officer, thoroughly and critically. The Commissioner of Income Tax (Appeals) further pointed out that the Assessing Officer did not find any discrepancy in the books and, therefore, considering the extract of Section 158BA(3), it was clear that the transactions upto the date of search were recorded in the books on the basis of prime records, that is to say, other documents maintained in the normal course of business, and in such circumstances, there was no justification for treating the cash as unexplained if as per the books produced before the Assessing Officer the cash found tallied with the books. The additions were thus deleted.

Being dissatisfied, the Revenue preferred an appeal and the Tribunal below has maintained the above reasons given by the Commissioner of Income Tax (Appeals) in the order impugned in this Appeal.

Mrs. Bhatt, the learned counsel appearing on behalf of the Revenue, however, tried to convince us that even if the Assessing Officer committed mistake in straightway making the addition of the aforesaid amount when the addition was under the wrong impression that the amount was not disclosed in the books of account which were not prepared till the date of search, the authority below should have remanded the matter back to the Assessing Officer for verification. In other words, according to Mrs. Bhatt, in this case there has been actually no verification of those documents to verify the amount of cash that was found at the time of search.

After hearing Mrs. Bhatt, we are, however, unable to accept the aforesaid contention as tenable. It appears that neither before the Commissioner of Income Tax (Appeals) nor before the Tribunal below where the Revenue was the appellant, any such point was taken that opportunity should be given to verify the prime records. Such being the position, we do not find any substance in the aforesaid contention of Mrs. Bhatt that the prime documents really were not verified in spite of the specific finding recorded by the Commissioner of Income Tax (Appeals) that the Assessing Officer did not find any discrepancy. Such facts not having been challenged by the Assessing Officer before the Tribunal, they are precluded from taking such point before this Court. Even the above point strenuously argued by Mrs. Bhatt is not reflected in the memorandum of appeal presented before this Court.

We, therefore, find no reason to entertain such a question at this stage within the narrow scope of Section 260A of the Act. This Appeal is, thus, devoid of any substance and is consequently dismissed. Since the subject matter of the next appeal being Tax Appeal No. 40 of 2011 is similar to the present one with only a difference that in this case the assessee is the wife of the assessee in the earlier case and the addition was made on the selfsame ground, we dismiss this Appeal also on the same ground as recorded above.