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TMI Blog2011 (2) TMI 1525X X X X Extracts X X X X X X X X Extracts X X X X ..... d 24/7/2006, explained himself to be an employee of M/s. Prakash Gold Palace Pvt. Ltd., Chennai ( PGPL for short), carrying the gold ornaments for procuring orders. The said gold ornaments were brought by him to Ernakulam from Chennai on 18.7.2006. Thereafter, after staying for two days at the Cochin Office of PGPL, he travelled to Palakkad and Trichur to procure orders, and was apprehended by the Police while returning from Trichur. That he was not carrying any voucher or other document explaining the source of the valuables with him, as he was carrying the same only as samples, not meant for sales (PB pgs. 2 to 4) . A survey u/s. 133A of the Act was carried out by the Revenue at the Chennai office of PGPL (also referred to hereinafter as the company or the employer-firm ) on 25.7.2006. During the survey, Shri Abhilash Kumar Jain, Director, per his sworn statement on oath u/s. 133A, stated that no ornaments stood given to the assessee, an employee of the Cochin Office, by the Chennai Office/s. Further, as no books of accounts of the out-station branches are maintained by the Head Office (Chennai), there is no record with it of any jewellery issued to the assessee. He confirme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the gold ornaments, as per the transfer voucher, were issued only to the Cochin office , and which (document) also contradicted the assessee s statement of having brought the same to Cochin from Chennai, and on 18.7.2006 itself. On the other hand, as per the version being now advanced, the gold ornaments would reach Chennai only on or after 19/7/2006 . The assessee, in the course of the assessment proceedings, submitted an affidavit vide his letter dated 21/9/2007 to the effect that he was employed as a salesman with PGPL, Chennai, since February, 2005. The gold ornaments seized from him belonged to the employer-firm, against whom proceedings u/s. 153C of the Act may be taken up. An affidavit from the Managing Director of the said employer-firm, namely, Shri D.B. Prakash Chand Jain, was also furnished, wherein gold ornaments, as found and seized from the assessee on 22.7.2006, were owned-up as forming part of its trading stock, and which was explained to have been handed over to the assessee for taking the same to various jewellery shops in Kerala for approval and concomitant procurement of orders. The AO did not find the same acceptable in view of the various inconsistencies ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ads as under: Unexplained money, etc. 69A. Where in any financial year the assessee is found to be the owner of any bullion, jewellery or valuable article and such money, bullion, jewellery or valuable article is 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 acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year. The rule of evidence enshrined in section 69A, as would be readily seen, essentially provides for a statutory presumption as to the valuables possessed being considered or deemed as the assessee s income for the relevant year, i.e., unless the nature and source of its acquisition is satisfactorily explained. The assessee is thus deemed to be owner of the impugned goods, i.e., on the basis of their possession by him. This is as income in law could only be deemed of the owner. Section 110 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it. CIT v. Ashok Textiles (P) Ltd ., 141 ITR 785 (Ker.) Held that in view of the pledging of goods and the categorical admission involved in the declaration of the assessee to the bank that all the stocks in the godown were the assessee s own bona fide property, in the absence of any evidence to show that the pledge was of goods belonging to someone else , the ITO was right in assuming that the goods belonged to the assessee. [emphasis supplied] [SLP to the Supreme Court against this decision stands dismissed; reported at (1982) 138 ITR (St.) 1] CIT vs. K.I.Pavunny , 232 ITR 837 (Ker.) (at pg. 841) The aforesaid authority squarely applies to the facts of the case at hand. When the gold article were recovered from the compound of the assessee, unless cogent evidence is adduced by the assessee, it would have to be presumed that the articles belonged to him and they were owned by the assessee himself. Not only this, unless the assessee sets up a clear case and leads cogent evidence to show that the gold articles were acquired in some different year, there would be a further presumption that the articles were acquired in the year in question, and they represen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Manager dated 26.7.2006 to the DIT (Inv.), Kochi ( PB pg.11 ); f) Stock Register of Cochin Branch of PGPL for the period 1.4.2006 to 19.7.2006 along with the transfer vouchers (PB pg. 15 to 19) ; g) Approval/Delivery Challan dtd. 20/7/2006 issued in favour of the assessee (PB pg. 20); h) Reply dated 28.7.2006 by PGPL to notice u/s. 62(1) of the KVAT Act, 2003 dated 25.7.2006 (PB pg. 23 to 25) ; i) Assessment orders under the Act in the assessee s case for AY 2001-02 to AY 2006-07 (PB pgs. 30 to 41) . j) Letter dated 21.9.2007 of the assessee to the AO along with the affidavit by Shri D.B.Prakash Chand Jain, MD, PGPL, averring that the impugned goods belong to the company, PGPL (incorporated in the assessment order). 4.5 Coming to the assessee s explanation, two things need to be satisfactorily shown, before he could be said to have successfully explained the possession of the goods with him. Firstly, that he is the employee of PGPL and, secondly, of the transfer/issue of the goods to him by his employer. Coming to the first part, we find that the assessee has exhibited the same. That, firstly, has been his consistent stand throughout (duly furnishing the name ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an employee of the Chennai (Head Office (HO)), and nowhere mentions of his being assigned to or associated with a particular Branch (as the Cochin Branch). In fact, the said Authorization would not be required if the employee was not required to work in Tamil Nadu, i.e., was not an employee of the Chennai Office. In his statement, the assessee also refers only to the Head Office when he speaks of his employment. As such, the only reasonable inference that can be drawn is that he was later either shifted to the Ernakulam Branch (though the Director does not speak of any such transfer, and which would require a similar intimation to the Kerala Govt., apart from withdrawal of the said D3) or, considering the nature and volume of activity at the Branch, was working at both the places, i.e., as required, commuting between Chennai and Kerala in the course of his duties, staying at the Branch office while at Cochin. Either way, the Director s statement, as apparent, does not reveal the true and full picture. 4.6 Next, we examine his case qua the issue of the impugned goods to him. This is as his being an employee would not automatically prove the impugned goods as being his employer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... having been deposited at the Branch office, with the jewellery therefrom being handed over the salesman on the basis thereof for booking of orders within the State. In this regard, we find the assessee to have adduced a document titled Approval/Delivery Challan dated 20/7/2006 issued to him by the Cochin Branch for 6572.620 gms. of 22 ct. gold ornaments ( PB pg. 20 ). This is strange, contradict as it does the clear findings on his apprehension and the following deposition ( PB pg. 2 to 4 ). Why was, then, the assessee not carrying this voucher, purportedly issued only to him, having been not found with him ? Or, did he lie, and why ? This is also apparent from the fact of absence of any question qua the said voucher on his examination dated 24/7/2006, which would otherwise follow. Even assuming that he held the challan, why was it not disclosed to the authorities on being questioned in the matter, with him, rather, justifying the absence of any such. Further, he deposes in contradiction to the said voucher, stating that the jewellery stands brought by him to Cochin from Chennai on 18/7/2006 . Which of the two is the true version? Would a person depose in contradicti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons and maintenance of records, etc.; the Revenue having come to its premises only to investigate the facts and know the truth of the source of the impounded jewellery. The office copy of the issue voucher, or its forming part of the Branch record, would provide credibility to it as an authentic, reliable document. The survey by the Sales Tax Department also yields a blank: no records, no books, no explanation. Even ignoring the same for a moment, we find unexplained differences. While the assessee is admittedly found with gold jewellery weighing 7191.700 gms (net wt.), which he states to have brought from Chennai on 18/7/2006, the issue voucher is issued by the Cochin Office on 20/7/2006 for 6572.620 gms . When, where, and what quantity (of the impugned jewellery) is issued to the assessee ? No definite answer to this vital question of fact emanates. Surely, only one of them, if at all, could be the true version. In any case, he could not possibly go for canvassing orders without an order-book, which was not found with him on his apprehension . 4.7 Continuing further, we proceed to examine if the employer could be said to be in possession of the jewellery. This is of pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even if there was only one version, and which we find him to have abysmally failed in. We have already observed the absence of any permits/sales-tax declarations (even as the impugned goods arrive from across the border and only in the course of inter-state trade commerce), transfer vouchers, challans, sales bills/invoices, order-books, etc. at the Branch. Mr. Kailash Sharma would have travelled only by air (considering that the goods, going per the stock register, reach Cochin the same day of their issue from Kolkata) and/or train (possibly) - and only on firm expense - so that a proof of his travel would exhibit the time and place where the jewellery from Kolkatta was delivered by him. It is not as much the question as to which of the two opposite versions is true, but of the assessee s claim of the jewellery belonging to his employer as established with reference to some contemporaneous and credible materials, particularly in view of the contradictory stands emanating in explanation. There is nothing on record to exhibit the movement of jewellery from Kolkatta either to Chennai (and then to Kochi) or to Kochi directly . The factual findings by the Revenue during visit to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the possession of the jewellery with the assessee s employer at the relevant time and place is established; it even failing to clarify, as afore-noted, the contradictions arising of its own evidences, i.e., on which it places reliance, and explanations. 4.8 The assessee stands allowed relief by the ld. CIT(A) on the basis of the stock register. That the same was not maintained in the regular course of business, even as observed by the AO, stands admitted by the senior manager of the company, who produced the same before the Revenue for the first time on 26/7/2006, also explaining the circumstances under which it was prepared. Could it, therefore, be said to be reliable ? Put differently, could the AO s treating it as not so, having been prepared only some time ago and non-existent a day earlier, and consequently, his inference of it as having been prepared only to explain the jewellery found, be challenged? We think not. Section 34 of the Evidence Act treats books of accounts, where these are maintained in the regular course of business, as admissible evidence, while here this is admittedly not the case; the Revenue s finding as to it, based on it finding no stock register du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... some order-book, etc. with him, which is also not the case. Put differently, when the goods delivered to the salesmen are admittedly not recorded in the stock register, how does the same explain the goods with them ? This gets further supported by the observation that the jewellery received from Kolkatta in the past stands delivered to the customers, indicating that the jewellery received there-from is not patterns, but only that which is for ready delivery to the customers, i.e., against their orders. On the other hand, the jewellery issued to the assessee, being only for canvassing orders, is decidedly and admittedly patterns , being the consistent stand of the assessee and his employer, and as also borne out of the issue voucher dated 20/7/2006 purportedly issued to him; the same bearing the remarks on approval, not for sale on it. If patterns , being not a part of the ready stock for sale, are not entered in the stock register on its issue (to the salesmen), it would similarly not be entered on its receipt, i.e., on the receipt side of its stock register. It cannot be otherwise if the stock register is to show the correct stock position. It is, thus, in considerable doubt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e., to that by the State Revenue Authorities. Firstly, their conclusions, though relevant, are not binding on it. The matter, as clarified earlier, is purely one of fact. The action initiated by the State Department is on the basis of the relevant provisions, the scope and application of which is vastly different. In fact, even as the fate of the said proceedings has not been brought to our notice, and which would only lead to an adverse inference in the matter, even if the said Department found the assessee s case admissible in view of the impugned jewellery being patterns , not meant for sale, but given to him as the salesman only for procuring orders (though he did not bear any order-book), so that no case of out-of-books sales and, thus, sales-tax evasion is made out, this would have no bearing on the instant case; the assessee being still unable to explain the nature and source of the jewellery with him, and which he seeks to with reference to the stock with its employer at the relevant time place. This is as the scope of the proceedings under the Sales-tax Act is with reference to any unaccounted sales/turnover. Also, as stated earlier, the goods being patterns only im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich stand approved by the hon ble apex court). The same does not obviate the necessity to establish by independent evidence(s) the genuineness of the cash credit(s) u/s. 68 of the Act, i.e., does not have the effect of excluding the regular provisions of the Act. The law in the matter, which has not witnessed any change since, stands, as afore-stated, duly explained by the apex court in the case of Chuharmal vs. CIT (supra). In fact, section 292C, co-opted on the statute by the Finance Act, 2007, w.r.e.f. 1.10.75, would settle the matter conclusively and answer the argument/s raised by the assessee against it. Continuing further, even though not argued before us, we may advert to the decision in the case of CIT vs. Noorjahan (P.K.) (1999) 237 ITR 570 (SC). This is as it may well be argued that the assessee s status as an employee, and thus a man of limited means, being accepted, section 69A could not be invoked and tax in respect of goods valuing over ₹ 63 lakhs levied. We are afraid to say, the argument would not hold. Firstly, the said decision is with reference to s. 69 of the Act, which is differently worded. The same allows scope for the consideration of the assee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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