1988 (1) TMI 96 - AT - Income Tax

Summary

Issues Involved:

1. Legitimacy of the addition of Rs. 3,49,225 under Section 69A of the IT Act, 1961.
2. Assessment of the evidence provided by the assessee regarding the purchase of silver.
3. Procedural fairness and adherence to principles of natural justice.
4. Validity of the entries in the Amanat Bahi as books of account.
5. Burden of proof and the role of the assessing officer.

Issue-wise Detailed Analysis:

1. Legitimacy of the Addition under Section 69A:
The primary issue revolves around the addition of Rs. 3,49,225 made by the ITO under Section 69A of the IT Act, 1961, which pertains to unexplained money, investments, etc. The assessee argued that the silver ornaments amounting to 125.44 kgs were purchased from Rashid & Co., Jabalpur. However, the assessing officer did not accept this explanation due to the absence of recorded entries in the books of account at the time of the search, the lack of explanation under Section 132(4), and the humble means of the alleged proprietor, Mohd. Rashid. The Tribunal upheld the addition, stating that the possession of the silver was not satisfactorily explained by the assessee.

2. Assessment of Evidence Provided by the Assessee:
The assessee presented various documents, including purchase bills, letters from Rashid & Co., and entries in the Amanat Bahi, to substantiate the purchase of silver. However, the Tribunal found several inconsistencies and improbabilities in the evidence. For instance, the bank account of Rashid & Co. showed that Mohd. Rashid was a man of no means, and the payments made to him were withdrawn immediately, indicating that the transactions were not genuine. Furthermore, the Tribunal noted that the purity certificates and the entries in the Amanat Bahi appeared to be manipulated and not credible.

3. Procedural Fairness and Principles of Natural Justice:
The assessee contended that the statements of Mohd. Rashid and Iddu were recorded at the back of the assessee and used against him without allowing cross-examination, violating the principles of natural justice. The Tribunal held that the ITO, in his role as an investigator, was not required to allow cross-examination at that stage. The ITO had informed the assessee about the material aspects of Mohd. Rashid's statement and had given an opportunity to produce Rashid for cross-examination, which the assessee failed to do. The Tribunal concluded that there was substantial compliance with the principles of natural justice and no prejudice was caused to the assessee.

4. Validity of Entries in the Amanat Bahi:
The Tribunal examined the entries in the Amanat Bahi and found that they were likely interpolated after the seizure of the silver. The Tribunal noted that the assessee did not refer to the Amanat Bahi during the search or in his initial statements. The Tribunal also observed that the Amanat Bahi was not a regular book of account but a subsidiary book kept for memory and evidence purposes. Therefore, the entries in the Amanat Bahi did not constitute proper books of account, and the silver was not recorded in the books as claimed by the assessee.

5. Burden of Proof and Role of the Assessing Officer:
The Tribunal emphasized that the burden of proof was on the assessee to explain the possession of the silver and its source. The assessee failed to produce credible evidence or witnesses, including Mohd. Rashid, to substantiate his claim. The Tribunal found that the assessing officer was justified in making the addition under Section 69A based on the lack of satisfactory explanation and the unreliability of the evidence provided by the assessee.

Conclusion:
The Tribunal upheld the addition of Rs. 3,49,225 under Section 69A, concluding that the assessee failed to satisfactorily explain the possession of the silver. The appeal was dismissed, and the Tribunal confirmed that the unexplained possession of the silver could be taxed under the general law as well as Section 69C. The stay application was also dismissed as infructuous.