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TMI Blog1997 (3) TMI 610X X X X Extracts X X X X X X X X Extracts X X X X ..... e A.C. The assessee claims to have deducted his personal drawings out of the total profit of the firm to arrive at a figure of ₹ 1,38,412, which is not possible to believe as the assessee is only a partner in the firm, at least officially. Also the story regarding the personal drawings and dates of repayments selected by the assessee on the basis of their auspiciousness is not possible to believe. In any case the CIT (Appeals) did not allow the A.C. an opportunity to cross-examine the assessee on this explanation given at appeal stage before the CIT (Appeals). 2. We have heard the learned D.R., as well as assessee s counsel and before elaborating their respective stands, we would like to extract the facts necessary for the disposal of the issue before us. 3. The facts of the case are that the assessee was a partner in a firm styled as M/s. Gem India Manufacturing Co. having 15% share. The firm s business was that of cutting and polishing of diamonds. The appellant-assessee as well as the firm were maintaining their accounts for the purpose of income-tax on the basis of Samvat Year and therefore, their previous year relevant for the assessment year 1986-87 which is und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot want to give correct fact about that paper and in view of this fact, I hold that the paper contains such transaction which the assessee does not want to disclose. Since that paper contains income of the assessee, I take the relevant income for tax purpose. As discussed above, the papers shows commission of ₹ 1,77,052 for the period from Jan. 85 to Dec. 85. I hold that this income is assessable in the hands of the assessee for the assessment year 1986-87. Besides, the amount of ₹ 1,50,000 on which interest of ₹ 11,100 has been shown, I hold that the amount of ₹ 1,50,000 also represent undisclosed income of the assessee. 5. The assessee agitated the addition before the CIT (Appeals) and explained the various figures on loose paper 44 as per his written reply dated 2-2-1990 filed before the CIT (Appeals) which is in the following form: Shailesh S. Shah, 7, Hill View, 15, Ridge Road, Bombay-400 006. Date: 2-2-1990. The Commissioner of Income-tax (Appeals)-IX, Bombay. Dear Sir, Re: Appeal No. CIT (Appeals) Ward-7/71/89-90 for Assessment year 1986-87 The learned Assistant Commissioner of Income-tax as made additions tota ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evant rough working on Page at serial No. 44 are reproduced by the learned Assistant Commissioner of Income-tax on Page No.2 of the order under appeal. In this connection based on my recollection at this distant time I submit as under: 1. No. of pieces 254086. There appears to be a typographical error as the No. of pieces as per the seized paper at serial No. 44 is 2,54,086. This is the identical production figure of the firm M/s. Gem India Manufacturing Co., of the calendar year 1985. I am enclosing the summary of monthwise production details, labour charges paid, profitability etc. of my firm for the relevant period marked Annexure C . 2. Labour Charges ₹ 44,26,304. This figure represents the actual labour charges paid by the firm during the relevant period as per Annexure B . 3. At 4% -Rs. 1,77,052. This is the working of average profit earned in the industry which is in conformity with the book results of the Firm for the relevant period as can be seen from Annexure C . 4. Less -Withdrawals ₹ 38,640. This is the actual figure of my personal withdrawals for the year 1985 from M/ s. Gem India Manufacturing Co. I am enclosing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the firm for the year 1985 as already mentioned by me earlier. I further respectfully submit that in the course of search carried out by the department under section 132 at my office as well as my residence did not reveal any evidence even to suggest that I have such huge investments to the extent of ₹ 3,38,152 as alleged by the learned Assistant Commissioner of Income-tax in order under appeal. No seizure of any valuable was made from my house. Suspicion however strong cannot take place on proof. The learned Assistant Commissioner did not bring any evidence but for a scrap sheet of paper in order to arrive at conclusion. The figures appearing in this page are mere jointings which were explained to the learned officer that these are working in respect of project in contemplation. It will be observed from records that none of my partners have confirmed any such arrangement of my receiving any income over and above my share of profit much less my earning commission @ 4% as concluded by the learned Assistant Commissioner. From the above I submit that if at all I was entitled to commission as concluded by the Assistant Commissioner of Income-tax it could not be f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on however strong cannot take the place of proof as held by the Supreme Court in the case of Uma Charan Shaw Bros. Co. v. CIT [1959] 37 ITR 271 . Thus, keeping in view the totality of the facts and circumstances of the case, I am of the opinion that the learned Assessing Officer was not justified in making the impugned addition of ₹ 3,38,152 which is directed to be deleted. 6. On the basis of the aforesaid facts, the learned D.R. first of all, objected against the CIT (Appeals) s decision to consider the fresh explanation without giving the Assessing Officer an opportunity of being heard. This objection was further supported by the submission that during the assessment proceedings, the assessee had not submitted the explanation which was submitted before the CIT (Appeals) and the same being on quite different footing amounted to fresh material and the CIT (Appeals) should not have considered the same without giving the Assessing Officer an opportunity of being heard. On merits, the learned D.R. submitted that the ownership of the paper having been accepted by the assessee, it was his onus to explain the contents fully and truly and to the satisfaction of the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion receivable by the assessee then also, no addition can be made in this year, i.e., in assessment year 1986-87 because assessee having no source of income from business; was declaring his income on cash system of accounting though of course, share from the firm was to be declared on the basis of accrual. He, therefore, submitted that there is no evidence either on this paper or in the assessment order which may show that this amount was actually received by the assessee during the previous year relevant to assessment year 1986-87 and, therefore, the amount, even if is considered as commission, cannot be added in this assessment year. Coming to the figure of 1,50,000, the assessee s counsel submitted that the entry against this figure and the entry showing balance of 40,000 can lead to two presumptions; namely, either the amount of ₹ 1,50,000 represents the loan or advance given by the assessee against which 1,10,000 might have received back and that is why 40,000 has been shown as balance or the figure of 1,50,000 might represent loan or advance taken by the assessee but in both the cases, the amount of ₹ 1,50,000 cannot be assessed as assessee s income and that is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee and the contents of which have been reproduced by us in the foregoing paragraphs, that- (a) The word commission did not find mention any where on this loose paper. What to say of against the figure of 1,77,052, (b) Similarly, there is no mention of any word or terminology against the figure of 1,50,000, (c) The word interest of course has been mentioned at the top of figure of 1,12,500. (d) There is no terminology as Rupees against any of these figures. 9. In view of the above facts and circumstances and the fact that the Assessing Officer has not given any reasoning or finding or has not mentioned any evidence or material, as to how or on what basis the figures referred to above were considered as assessee s income, we are of the opinion that the Assessing Officer has not invoked any of the deeming provisions of sections 69 to 69D and therefore, it is clear that these figures have been considered as assessee s income under the substantative provision of the Income-tax Act. Under the substantative provision of Income-tax Act, it is now settled law that every receipt is not necessarily or cannot necessarily be income in the hands of the recipient and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll the figures appearing on this loose paper could be considered as assessee s income and therefore, we told that there is no evidence on record which may support the finding of the Assessing Officer or the submissions of the learned D.R. As the Revenue has not discharged its primary onus, we are of the opinion that the addition in question cannot be sustained. 12. If we go by probabilities and assumptions, as has been argued by the learned. D.R. then the case can be interpreted both ways i.e., against the assessee as well as against the Revenue as will be clear from the following possible interpretations of the figures:- 12.1 If the figure of 1,77,052 is taken as commission, as has been impressed upon by the Revenue, then also, according to us, this figure cannot be assessed as assessee s income for the assessment year 1986-87 because, (a) there is no evidence as to how this figure is commission and not anything else, (b) there is no evidence as to whether the assessee had received the amount during this period and if read, then when. On the other hand, the inclusion of the balance out of the figure of 1,77,052, i.e., of a figure of 1,38,412 (1,77,052 -38,640) at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee then also, in the absence of date, it cannot be taxed in this year as we have already given a finding that Revenue has not invoked the deeming provisions of sections 69 to 69D. So, even if it is assumed that this figure of 1,50,000 represents giving or taking of loan by the assessee during the period Jan. 1985 to Dec. 1985 then also, it cannot be taxed act; assessee s income for assessment year 1986-87. 12.3 Similarly, figure of 11,100, in absence of evidence as to whether the assessee has paid or received interest, cannot be taxed as assessee s income. 13. In the ultimate analysis of the aforesaid probabilities, one thing has become clear that except suspicion, there is no evidence in favour of the conclusion arrived at by the Assessing Officer or the one canvassed by the learned D.R. and, as it is settled law that if the decision of the Tribunal is based on suspicions, conjectures and surmises or on no material or partly on evidence and partly en suspicion; same is likely to be set aside by the higher courts. We are therefore, of the opinion that the findings of the Assessing Officer are based only on suspicion and suspicion however strong it may, cannot ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed a violation of the fundamental rules of justice and called for exercise of the powers under article 136 of the Constitution. (iii) Similarly, our conclusion that suspicion cannot take the place of proof is supported by the finding of the Hon ble Supreme Court in the case of Umacharan Shaw Bros. v. CIT [1959] 37 ITR 271, where on the facts and circumstances of the case, the Hon ble Supreme Court set aside the order of the Tribunal holding at page 277 as under: Taking into consideration the entire circumstances of the case, we are satisfied that there was no material on which the Income-tax Officer could come to the conclusion that the firm was not genuine. There are many surmises and conjectures and the conclusion is the result of suspicion which cannot take the place of proof in these matters. 14. In view of the above discussions, facts and circumstances of the case as well as the settled principles of law, we are of the opinion that the conclusion arrived at by the Assessing Officer was based purely on suspicions and the CIT (Appeals) was justified in deleting the additions having been made only on suspicions. The order of the CIT (Appeals) is upheld and the Rev ..... X X X X Extracts X X X X X X X X Extracts X X X X
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