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TMI Blog2005 (5) TMI 575X X X X Extracts X X X X X X X X Extracts X X X X ..... 25,91,105 and Rs. 10,00,000. 2. Whether on the facts and admitted findings that the loose documents on the basis of which the Assessing Officer made the addition pertained to the erstwhile partnership firm wherein the period had also not been indicated and having regard to the subsistence of partnership from 15th April, 1982 to 1st April, 1992 can it be said that the learned JM is correct in holding that : ( i )these documents gave rise to income of the block period from assessment years 1986-87 to 1996-97. ( ii )The appellant was liable to be taxed for the transaction of the erstwhile partnership as undisclosed income of the assessee." 2. The issue which the above questions try to raise can be simplified as follows : "( a )Do the seized loose papers on the basis of which additions were made belong to the erstwhile partnership firm? ( b )Do the above loose papers give rise to any income for the block period? ( c )Can it be said that income, if any, arising from the above loose papers belong to the assessee?" There is no dispute over the facts between the two members as is evident from the opening sentence in para 5 of the learned JM s order. The most important a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... papers belong which were found from the premises of A.K. Arora. It was contended that when the assessee denies that the papers do not belong to him, it is for the revenue to find out as to whom it belongs. If this is impossible for the revenue, then it is equally impossible for the assessee as well. Referring to the discussion relating to "third party" in the learned JM s order, the learned counsel contended that a third party is one who is not a party to an agreement or to a transaction. Therefore, A.K. Arora from whose premises the papers were seized, was a third party vis-a-vis the assessee, though he was a related person. He also strongly assailed the legal proposition put forth by the learned JM that since the assessee had taken over the business of the erstwhile firm with all its assets and liabilities, this tax liability also devolved on him. Further, it was contended that since no person was mentioned in the seized papers, it could not be said with certainty that the transactions fell within the block period and accordingly, the charge itself failed. Thus, the learned counsel summed up his arguments by stating that despite the fact that the papers were found from the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it is not discernible, either from the abbreviation itself or from the entries, whether the transactions pertain to the erstwhile partnership or to the present proprietorship. In fact, the ascertainment of this fact is not necessary because, as observed in para 2 above, both the learned members have almost agreed that the entries relate to the erstwhile partnership. Whatever it may be, the revenue has taxed the amount in the hands of the assessee merely on probability by relying on the judgment in the case of CIT v. Durga Prasad More [1971] 82 ITR 545 (SC). There cannot be any quarrel over the proposition of human probabilities laid down by the Supreme Court. However, what the revenue authorities have forgotten is that the Supreme Court is talking about human probabilities which has to be distinguished from mere probabilities. By human probabilities is meant that in a natural course, one cannot think of certain situations - like a person consistently winning races [ Sumati Dayal v. CIT [1995] 214 ITR 801 (SC)] or a person living princely life with a meagre income and so on. Where does such human probability comes into the present case - that "MLA" may stand for Mohan Lal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are strangers. Equity, again as explained by the same Law Lexicon referred to above, is the correction of that wherein the law, by reason of its universality, is deficient. The question is, who can make this correction. In my considered view, it is only the court of law which can make such correction as was done by the Hon ble Andhra Pradesh High Court in the case of A. Sanyasi Rao v. Government of AP [1989] 178 ITR 31 and upheld by the Supreme Court in Union of India v. A. Sanyasi Rao [1996] 219 ITR 330. Neither the tax authorities nor the Tribunal which is the creature of the statute can do so. They have to apply the law as it is. Hence, perhaps, it does not appear to be appropriate for the learned JM to observe that "it would be stretching the settled principles of law too far in coming to the conclusion that the entries are recorded by third parties, as such, addition is not warranted here." To which settled principles of law she is referring to is not known. Thus, the conclusion is that the papers were seized from the premises of a third party, they were in the hand of a third party, they contained entries pertaining to the firm for which the assessee cannot be ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer shall make an assessment of the total income of the firm as if no such discontinuance or dissolution and taken place. Further, section 189(3) provides that every person who was at the time of such discontinuance or dissolution a partner of the firm, and the legal representative of any such person who is deceased, shall be jointly and severally liable for the amount of tax, penalty or other such payable, and all the provisions of the Act, so far as may be, shall apply to any such assessment or imposition of penalty or other sum. Contrary to these legal provisions of the Act, in para 21 of her order, the learned JM has stated that ". . . everyone in a partnership firm merely by dissolving it cannot just walk away from it blithely." Again in para 22 of her order it has been stated that "the liabilities incurred by the said concern has to be honoured by someone and unless something contrary is stated in the Dissolution Deed the one on whom the assets devolve the liabilities have to be honoured by him." What has been stated by the learned JM is contrary not only to the provisions of the Income-tax Act, but also contrary to the general law. 11. In the present case, as ment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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