2015 (4) TMI 978 - HC - Income Tax

Unexplained investment - Treatment to the bottles of liquor - Tribunal treating the bottles of liquor, a consumable article, as a 'valuable article or thing' - whether Tribunal was right in law by denying the relief of ₹ 2,00,000/- on bottles of liquor granted by the Commissioner of Income Tax (Appeals)? - Held that - The learned Tribunal, according to us, applied wrong standards in the matter of appreciation of facts. The case of the assessee that the bottles of liquor were purchased during the foreign tours undertaken by the assessee and his family members was not even attempted to be countered to demonstrate why such explanation was not, in the opinion of the Assessing Officer, satisfactory. The fact that the assessee got some bottles of liquor by way of gift has been accepted by the assessing officer. It is sheer misapprehension on the part of the learned Tribunal when they observed that the price at ₹ 2000/- per bottle was not disputed by the assessee. Reference in this regard may be made to the judgment of the CIT (A) quoted above. It is not also a fact that the assessee had failed to offer an explanation. The fact on the contrary is that the assessee did offer an explanation and the circumstantial evidence did not militate against the same. A question of fact has to be considered on the touchstone of probability. The relevant question to ask is has the assessee been able to probabilize the defence taken by him? If his defence is a probable defence and the revenue has failed to adduce any evidence to show that the defence is either untrue or is inconsistent with the admitted facts and circumstances of the case that should ordinarily be the end of the matter. The Assessing Officer misdirected himself in holding the assessee liable for an undisclosed income of a sum of ₹ 2,00,000/- purely on the basis of a guess work that each bottle must have been bought at ₹ 2000/- after having accepted the case of the assessee that occasional social as well as official gifts can not be ruled out. Liquor after all is a consumable item and a person of ordinary prudence is not expected to preserve the cash memos in connection therewith. The Commissioner of Income Tax (Appeals) applied the correct standard for appreciation of facts - Decided in favour of assessee.

Summary

Issues:
1. Interpretation of Section 132(1)(c) of the Act regarding treatment of liquor bottles as valuable articles.
2. Assessment of unexplained investment in liquor bottles for block assessment period 1991-92 to 2001-02.

Issue 1: Interpretation of Section 132(1)(c) of the Act

The appellant questioned the Tribunal's treatment of liquor bottles as 'valuable articles or things' under Section 132(1)(c) of the Act, arguing that it should be limited to 'money, bullion, jewellery.' The Court admitted the appeal only on this issue but later found the second question more crucial. The Assessing Officer added Rs. 2,00,000 as unexplained investment based on the appellant's foreign trips and possession of 191 bottles of liquor. The Commissioner of Income Tax (Appeals) reversed this, stating the appellant's explanation of acquiring bottles from duty-free shops and as gifts was reasonable. However, the Tribunal reversed the Commissioner's decision, emphasizing that the appellant failed to prove the source of acquisition for 191 bottles, justifying the addition of Rs. 2,00,000 for 100 bottles.

Issue 2: Assessment of Unexplained Investment in Liquor Bottles

The Assessing Officer's addition of Rs. 2,00,000 was based on the appellant's possession of 191 bottles of liquor, considering each bottle's estimated cost at Rs. 2000. The Commissioner of Income Tax (Appeals) disagreed, highlighting the appellant's explanation of acquiring bottles from duty-free shops and as gifts. However, the Tribunal upheld the Assessing Officer's decision, stating that the appellant failed to prove the source of acquisition for all 191 bottles and justified the addition for 100 bottles. The Court criticized the Tribunal's approach, noting the appellant's plausible defense and the lack of evidence contradicting it. The Court emphasized that the Assessing Officer's estimation solely based on a guesswork of Rs. 2000 per bottle was unjustified, especially considering the nature of liquor as a consumable item.

In conclusion, the Court found the Tribunal's judgment to be perverse and set it aside. The Court ruled in favor of the appellant, emphasizing the importance of considering the reasons behind the lower court's decision before reversing a finding of fact. The judgment highlighted the need for appellate courts to interfere only when a judgment is proven wrong, not merely when it is deemed not right. The Court allowed the appeal, answering the second question in favor of the appellant and setting aside the challenged judgment and order.