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TMI Blog2015 (4) TMI 269X X X X Extracts X X X X X X X X Extracts X X X X ..... explanation is not sufficient and it can be termed as deemed income of HUFs remains, it is not necessary for us to further examine the aspect as to whether there was any income earned by the Company and as to whether there was diversion of money to the HUFs or not? If it is found on facts that the income was as that of the Company, such question may be required to be examined as to whose liability would be to pay tax. Under these circumstances, we find that the decision upon which reliance has been placed by the learned Counsel for the Assessee(s) on the point of taxable liability would be of no help to the appellant(s). The contention raised by the Assessee(s) on the quantification of the agricultural income of the HUFs as assessed by the A.O., and upheld by the Tribunal, in our view, could again be in the arena of appreciation and reappreciation of evidences on record. After considering the material on record, once the ultimate fact-finding Authority has arrived at the reasonable assessment of the income, we do not find that the same should be upset by undertaking the process of re-appreciation of the evidence. At the level of A.O., earlier assessment returns filed by the Assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred to as Pravinkumar); 4. Bhagwandas D. Vachhani (appellant of Tax Appeal No.324 of 2002) (hereinafter referred to as Bhagvandas) and; 5. Vallabhdas D. Vachhani (appellant of Tax Appeal No.329 of 2002) (hereinafter referred to as Vallabhdas)." 5. These HUFs were filing their income-tax and wealth-tax returns at the Income Tax Office, Junagadh. During the course of search operations, it came to light that substantial agricultural income shown by the HUFs by way of cash deposits in their respective bank accounts in Bank of Baroda, Sayaji Gunj, Baroda were non-genuine. The cash deposits were made in the bank accounts of HUFs on day to day basis and subsequently, withdrawals were made for investments in the various group concerns as well as for advancing loans to the family members. Over the entire block period, total such agricultural income introduced by all the five HUFs was aggregating to ₹ 8,54,53,808/- and the details are as under:- Asstt. Year Krishnadas Rs. Maganlal Rs Pravin Kumar Rs. Bhagwandas Rs. Vallabhdas Rs. 87-88 374603 48828 599449 268719 373630 88-89 275205 194379 285349 403687 318200 89-90 392741 2522549 285125 434112 535973 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elow: Q.7. Your brother Shri M D Vachhani has stated u/s 132(4) on 27-6-96 that you are earning unaccounted income by way of a. Under Invoicing b. Inflation of expenses c. Over building of capital expenses. Please give the details break-up of unaccounted income under the above heads. A.7. I have consulted my brother Shri M D Vachhani, Shri V D Vachhani, Shri P D Vachhani and my CA Shri B N Gandhi and Shri J R Attarwala all of whom are present here and after due consultation, I state the followings: We are not in a position to give detailed break-up of unaccounted income earned under the above heads by our group concern. However, we have approximately shown ₹ 6 crores (Six crores) as agricultural income in respective HUFs and individuals of our family during last few years. Out of which, ₹ 3 crores (three crores) is our unaccounted income earned through the above mentioned three methods in our group concerns. The remaining ₹ 3 crores (Three crores) is our genuine agricultural income. We accept this ₹ 3 crores (Three crores) as out unaccounted income and we are prepared to pay taxes on this. 8. This statement has been further affirmed by his two brothe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the alleged lease could be produced on behalf of the assesses. The Income - tax authorities, on the other hand, made detailed inquiries and recorded the statements of Presidents of Co-operative Societies in the two villages as well as the statements of Talati and Sarpanch etc. From these statements it was revealed that no lands have been leased out by the Co-operative Societies in these villages to the Vachhani HUFs. It was further revealed that Vachhani family has merely procured their signatures on blank papers possibly for fabricating evidence of lease. The evidence so collected by the Income-tax authorities was confronted to Shri K D Vachhani on 4-7-96. Shri Vachhani admitted that no such lands have been leased by the family. His answer to question No.7, as per page 102 of the paper book Volume II reads as under: A.3 The total agricultural shown by our HUFs (FIVE) basically belongs to places, one at Nagvadar, Upleta and others at Chokari, Kharkhadi, etc. Out of the above 2 agricultural income approximately 80% of the income pertains to our two lease lands at Chokari, Karkhadi etc. I have partially produced some records before you and I am also trying to find out the complet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The learned counsel for the appellant had contended before the Tribunal that the agricultural income shown by the HUFs of Vachhani family were admittedly inflated and even if it is considered that the claim based on the so called agricultural income taken by the family on lease basis at Chokari and Karkhadi villages of Taluka: Padra as well as lease lands at Upleta found to be non-genuine, yet a reasonable estimate of the agricultural income from the own land of the family would be required to be undertaken. The claim made on behalf of the appellant was considered and it appears that the A.O. worked out the average agricultural income of each of the Assessee - HUFs over seven assessment years i.e. A.Ys. 1980-1981 to 1986-1987 and the same was considered as net agricultural income for the F.Y. 1985-1986. Thereafter, on the basis of the rates of wholesale price of the agricultural products published by the Government of India and proceeding on the basis that the Index for the F.Y. 1985-1986 is 129.1, the A.O. proceeded to work out the agricultural income of the Assessee from own land at Upleta and worked out the inflation of the agricultural income in respect of the HUFs over the Blo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n companies, during the course of hearing, the learned Counsel appearing for the companies, who was also appearing for HUFs, except for one of the companies viz. Western India Ceramic Pvt. Ltd., made belated offer that the protective additions in the cases of the companies may be confirmed but such was objected by another learned Counsel appearing for Western India Ceramic Pvt. Ltd. 12. Whereas on behalf the revenue, it was contended that since HUFs have not discharged onus under Section 69 of the Act, substantive additions made in the case of HUFs be upheld and, as necessary corollary the protective additions in Companies' cases may be deleted. 13. In view of the aforesaid fact situation, the Tribunal in exercise of the appellate jurisdiction did consider the aspect of discharge of burden by the HUFs of undisclosed income to the extent of ₹ 7,16,52,533/- and after examining the record and the material, formed opinion that the onus cast under Section 69 of the Act is not discharged by the statement of Kartas of these HUFs that these amounts have been received on account of under-invoicing of sales, inflation of expenses by the group Companies. It was also found by the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the income has been earned by the HUFs and it has accordingly reached the corpus of HUFs. 14. The Tribunal further observed that if the funds invested by the Directors and family members with the Companies were out of concealed income of the Companies and belong to the Companies, why necessary entries changing the ownership of such funds have not been made in the books of the Companies in consonance with the sworn testimony of the Directors. The Tribunal in the ultimate conclusion maintained the substantive assessment in the hands of HUFs and deleted the protective assessment of the aforesaid amounts in the cases of respective companies. Under these circumstances, all the appeals have been preferred by the HUFs before this Court. 15. We have heard Mr.S. N. Soparkar, learned Sr. Counsel appearing with Mrs.Swati Soparkar, learned Counsel for the appellant(s) in Tax Appeal Nos.324, 327 and 329 of 2002, Mr.Manish R. Bhatt, learned Sr. Counsel appearing with Mrs.Mauna Bhatt, learned Counsel for the respondent(s) in Tax Appeal Nos.324, 326, 327, 328 and 329 of 2002, Mr.Manish J. Shah, learned Counsel for the appellant(s) in Tax Appeal Nos.326, 328 of 2002. 16. Mr.Soparkar as well a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount is irrelevant. In order to show that the income was found to be as that of the company, learned counsel for the Assessee relied upon the order passed by the A.O. for protective assessment wherein, the A.O. found that there was some evidence found of under invoicing of sales of the products and over invoicing of the capital goods. He, therefore, submitted that the said aspect is totally lost sight by the Tribunal and the Tribunal has wrongly confirmed the substantive assessment made by the A.O. in cases of all the appellants - HUFs. and has wrongly set aside the protective assessment made in case of the companies. 17. Whereas, Mr.Manish Bhatt, learned counsel appearing for the Revenue contended that once the undisclosed money is found, Sections 68 and 69 of the Act would have role to play. The burden would be upon the Assessee from whose possession, the amount is found either in cash or by way of investment in any account to sufficiently explain. If the Assessee fails to give sufficient explanation, such amount so found can be treated as income of the Assessee from whose possession or in whose record, the investment is found. He submitted that the present appeals are having li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year." 69. Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year." 20. The aforesaid provisions show that as per Section 68, if any sum is found credited in the books of accounts of the Assessee, and if the Assessee offers no explanation about nature and the source thereof, or explanation offered is not in the opinion of the Assessing Officer, is not satisfactory, the sum so credited may be charged to income tax as the income of the Assessee. Section 69 of the Act provides that when the Assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee before the A.O. Mere statement of the partners is too vague and too general that the money credited in the respective bank accounts of the HUFs. is earned out of under invoicing of the sales and over invoicing of the expenses and over invoicing of the capital goods of the companies. In absence of any sufficient satisfactorily material produced by co-relating to the credit in the bank accounts of the HUFs. and transactions in the company, if not treated as the sufficient explanation by the A.O. or by the Tribunal, it could not be said that the officers while appreciating the evidence have over acted unreasonably or have not applied reasonable prudence for forming opinion about non-acceptance of the explanation. In our view, as observed earlier, the burden is upon the Assessee to give sufficient explanation for the source of the amount. Moreover, after considering all the materials, namely, statement or the record, if any, produced or when no record of books of account is produced or when no transactions by showing co-relation are demonstrated, the opinion is to be formulated by the A.O. as to whether the explanation can be considered as sufficient or not? It is true that while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... formed for no sufficient explanation by the H.U.F. - Assessees in respect of the amount in question cannot be said as perverse to the record. As such, formation of such opinion appears to be after consideration of the material on record and once the reasonable prudence is applied, it is not open for this Court to substitute the opinion by confirming with the findings of fact in exercise of powers of this Court, which is limited to substantial question of law. 26. The attempt made by the learned counsel for the appellant - HUFs. to contend that in the protective assessment made by the A.O. in cases of the companies, there are reasons recorded by the A.O. that evidence was found for under invoicing of the sales and over invoicing of the expenses etc. and thereby, to contend that such finding of fact cannot be said to be by applying reasonable prudence or that such finding of fact is perverse, cannot be countenance for the reason that even if such position existed, it cannot be said that the very amount of the so called under invoice or so called over invoice had gone to HUFs.' account unless co-relating material by the respective company is produced or satisfactorily produced. Hence ..... X X X X Extracts X X X X X X X X Extracts X X X X
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