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TMI Blog2001 (6) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... ucted by the Department in the residential premises of Metrani, viz., Ranganatha Nilaya, and during the search, documents were seized and based on the search documents two items were added, viz., Rs. 7,26,810 and Rs. 12,68,307, totalling to Rs. 19,95,117 as earned in business for the assessment year 1981-82. The assessing authority in the order dated September 17, 1984, referred to these additions by relying on PRMs 1 and 13. PRM 1 refers to a net profit of Rs. 7,26,810 from Bombay and Parel transactions and PRM 13 is based on other income, totalling Rs. 12,68,307 (Rs. 8,05,000 + Rs. 4,63,307). The assessing authority ordered a total income to the extent of Rs. 20,32,814 including Rs. 19,95,117. The Commissioner of Income-tax in terms of the power conferred on him under section 263 of the Act interfered with the order dated September 17, 1984. He directed the assessing authority to pass a fresh order after giving an opportunity in the light of the documents seized in terms of the search and seizure carried out by the Department. Pursuant to the direction, the assessing authority issued a notice under the Act to Mr. P. R. Metrani, the karta of the Hindu undivided family in addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the Income-tax Appellate Tribunal was correct in law in holding that the presumption under sub-section (4A) of section 132 of the Income-tax Act, 1961, is only for the limited purpose of passing an order under sub-section (5) of the said section ? (2) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that the documents seized from the residential premises of the assessee-Hindu undivided family were not of the said Hindu undivided family and the entries therein did not pertain to it, particularly when the Income-tax Appellate Tribunal itself has accepted that the entries in the said documents culminating in the addition of Rs. 2,62,100 in the assessment for the assessment year 1982-83 pertained to the assessee-Hindu undivided family and upheld the said addition ?" Facts in I T. R. C. No. 40 of 1996 : I. T. R. C. No. 40 of 1996 is again at the instance of the Revenue in respect of the assessment in the case of P. R. Metrani, a Hindu undivided family (for short "the HUF") for the assessment year 1982-83. The assessment relating to the year 1982-83 is as completed on February 25, 1986, by the assessing author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n holding that the presumption under sub-section (4A) of section 132 of the Income-tax Act, 1961, is only for the limited purpose of passing an order under sub-section (5) of the said section ? (2) Whether, on the facts and in the circumstanced of the case, the Income-tax Appellate Tribunal was right in law in holding that the documents seized from the residential premises of the assessee-Hindu undivided family were not of the said Hindu undivided family and the entries therein did not pertain to it, particularly when the Income-tax Appellate Tribunal itself has accepted that the entries in addition of Rs. 2,62,100 in the assessment for the assessment year 1982-83 pertained to the assessee-Hindu undivided family and upheld the said addition ?" Facts in I. T. R. C. No. 38 of 1996 : I. T. R. C. No. 38 of 1996, is a reference at the instance of the assessee for the assessment year 1982-83 with regard to the assessment in the case of P. R. Metrani, a Hindu undivided family (for short "the HUF"). The assessment for the year 1982-83 was completed on February 25, 1986, by the authorities under section 143(3) read with section 144A of the Income-tax Act' The assessing authority added ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned during the search. Based on this material the assessment was redone in consonance with the documents obtained during the course of seizure. Counsel contends that the very object of the seizure is to see that the unaccounted income of an individual is properly assessed. When the said order was challenged before the Commissioner (Appeals), he after hearing the parties and after meticulously analyzing the material including the documents and evidence came to the conclusion that the assessee is liable for additional tax in terms of his order. When this order was challenged before the Tribunal, according to counsel, the Tribunal has allowed the appeal of the assessee by holding that section 132(4A) is applicable only for the purpose of passing an order under section 132(5). Counsel contends that the limited jurisdiction granted to section 132(4A) is legally unsustainable. It is also contended that the very Tribunal has accepted the case of the Revenue in regard to Durgabail building on the basis of the very material. Counsel concluded by saying that the matter has to be answered in favour of the Revenue. He relies on an unreported judgment of this court in Writ Petitions Nos. 14083- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Metrani HUF(S). Further, admitted facts are a search was made in Ranganatha Nilaya on June 30, 1982, and July 1, 1982, and the Department obtained incriminating material marked as PRM 1, PRM 7, PRM 13 and PRM 14. Based on this material for the assessment year 1981-82 an addition of Rs. 7,26,810 and a sum of Rs. 12,68,307 was added by the assessing authority. Rs. 7,26,810 is based on PRM 1. A sum of Rs. 12,68,307 is based on PRM 13. For the assessment year 1982-83, five additions were made based on PRM 1, 7, 13 and 14. A sum of Rs. 28,67,920 as per PRM 1 and 7 and Rs. 6,66,690 as per PRM 13 and Rs. 9,43,649 as per PRM 13, Rs. 2,62,100 and Rs. 8,33,525 as per PRM 14 were added. The Appellate Commissioner accepted these amounts based on the presumption in terms of section 132(4A) and the evidence available on record, but the Tribunal has rejected all the additions except the addition of Rs. 2,62,100 in its order. Broadly the questions framed in these cases are with regard to the presumptive value attached to section 132(4A) of the Act. To appreciate the contention we would like to quote section 132(4A) of the Act : "Where any books of account, other documents, money, bullion, jewel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceeding. Sub-section (4A) with which we are concerned in the case on band provides for presumption with regard to accounts, documents, money, bullion, jewellery, etc., if found in the control and possession of any person. It also provides for a legal presumption with regard to the truthfulness of documents, books of account and the signature, etc. Sub-section (5) provides for an order being passed, under the Act. In the case on band admittedly a search and seizure has taken place in terms of the said provision. Both the Assessing Officer and the appellate authority relied on these documents seized during the search and came to a positive conclusion with regard to the veracity of the documents and signature part of the documents in their order. The Tribunal, however, holds that the presumptive value of section 132(4A) is applicable only for the purpose of an order under section 132(5) of the Act. The Tribunal holds that looking to the scheme it appears that the presumption of subsection (4A) is only for the limited purpose of passing an order under sub-section (5). According to the Tribunal the assessing authority was wrong in drawing an inference under section 132(4A) in the proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1974 SC 859 ; [1974] 2 SCC 544. There the court was considering with regard to section 167(8) of the Customs Act. While considering the various provisions of the Act, the Supreme Court holds that in terms of section 106 of the Evidence Act the Department is deemed to have discharged its burden if it adduces only so much evidences circumstantial and direct as is sufficient to raise a presumption in its favour with regard to existence of the facts sought to be proved. The Supreme Court in the said case rules as under "43. If we may say so with great respect, it is not proper to read into the above observations more than what the context and the peculiar facts of that case demanded. While it is true that in criminal trials to which the Evidence Act, in terms, applies, this section is not intended to relieve the prosecution of the initial burden which lies on it to prove the positive facts of its own case, it can be said by way of generalisation that the effect of the material facts being exclusively or especially within the knowledge of the accused, is, that it may, proportionately with the gravity or the relative triviality of the issues at stake, in some special type of cases, ligh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal. It is a "non-rebuttable presumption" under section 132(5) of the Act and in other cases it is a "rebuttable presumption". Mr. G. Sarangan, further has placed before us a judgment of the Allahabad High Court in the case of Pushkar Narain Sarraf v. CIT [1990] 183 ITR 388 . With respect we are unable to subscribe to the view of the decision of the Allahabad High Court. We have carefully gone through the said judgment. We find in the said case that no reasons are forthcoming as to why the said presumption is to be restricted to section 132(5) only. In fact that judgment on the other hand states that section 68 cannot said to have been excluded for regular assessments. We must also take notice of the latest judgment of the Supreme Court in Prem Dass v. ITO [1999] 236 ITR 683. That is a case of prosecution initiated against an assessee. The apex court noticed the application of section 132(4A) with regard to criminal proceedings. The court ruled that the presumption in terms of section 132(4A) is not available in view of the language used in sections 276C and 277 of the Act to those proceedings. The court noticed that the wilful attempt to evade any tax under section 276 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m your premises in PRM 14. In page 2 an amount of Rs. 5,000 is mentioned against the name Nagendrasa. Do you deny that it is not the name of your son N. P. Metrani ? Answer: My son's name is Nagendrasa Parusharamasa Metrani but I cannot say that a mention made in the document as Nagendrasa is my son's name." With regard to the property in Durgabail he answered the questions in the following manner. Question : Do you have a building at Durgabail, Hubli, under construction? Answer : I have got one building at Durgabail under construction. Question : I am showing you a page in the document PRM 14 under the head (Durgabail) where expenditure on steel and cement and amounts against initials RJB, PRM, MPM, DPM are shown. Do you deny that these do not represent the expenditure incurred in respect of the building under construction at Durgabail, Hubli ? Answer : I do not know." In the light of these answers and the presumptive value available to the records the Assessing Officer has passed an order against the assessee. An appeal has been filed in Appeal No. 123/CC of 1984-85. We see from the proceedings that an advocate, represented the assessee along with the karta of the Hindu un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... When the matter went to the Tribunal, the Tribunal as mentioned earlier rejected the case for want of presumption under section 132(4A) in the impugned order. Having noticed the same, the Tribunal in several places has ruled that the final position with regard to profit itself is a basic question for which no answer can be found. According to the Tribunal the question arises whether this profit is that of P. R. Metrani, Hindu undivided family(s) or P. R. Metrani, individual. The Tribunal in para. 21 deleted the addition of Rs. 7,26,810 and Rs. 12,68,307 based on PRM 1 and 13 by allowing I. T. A. No. 41 of 1989. For the assessment year 1982-83 on similar grounds the Tribunal allowed the appeal in I. T. A. No. 42 of 1989 in part. The Tribunal holds that an addition of Rs. 8,33,525 is added as an unexplained expenditure, the same is based on PRM 14. The Tribunal sustains expenditure of Rs. 4,60,000 towards Durgabail property. With regard to the addition it, deletes the same. Again in the case on hand the Tribunal accepts that entries with regard to construction activity is doubtful as to PRM Hindu undivided family(s) and PRM, Hindu undivided family. It also states that even though the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed from the possession of the assessee. It is his further case that there is no nexus with this assessment to that of the Hindu undivided family income. He also relied on several cases. We make it clear in this order that the assessment based on search and seizure stands on a different footing in other proceedings. In the matter of search and seizure circumstantial evidences inference and the seized material play a vital role. There cannot be any direct evidence and no direct evidence would be forthcoming in these matters. In the case on band admittedly an inference is drawn against the Hindu undivided family in his carrying on certain undesirable activities like Matka, illegal possession of gold biscuits, etc. In such transactions we have to draw an inference based on circumstances where no direct evidence is forthcoming. Sri Sarangan elaborated his argument by contending that there is no presumption in Hindu law that any business carried on by a member of the joint Hindu family is itself a joint family business. He relies on D. D. Kapoor v. CIT [1955] 27 ITR 348 (Patna). That was a case where the court was concerned with regard to the income of the eldest brother being shown in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt case cannot be said to be a case of no evidence as in the cage cited supra. The next case is of Satinder Kumar (HUF) v. CIT [1977] 106, ITR 64 (HP). That was a case in which a karta becoming a partner in another firm doing some business. The question in the case was need of the circumstances before a case can be considered. In that case also the court noticed that there was no evidence. This case also is clearly distinguishable on facts. Mr. Sarangan also placed reliance on the judginent of this court reported in Ramesh Srinivasa Jannu v. Srinivas Vittoba Jannu (Decd. by Lrs.) [2001] ILR 51 Kar 12 15. On going through the judgment, we find that the said case deals with a presumption with regard to an existence of joint family on the facts of this case. In the said case this court has said as under (headnote) : "The burden to prove that any item of property is joint rests on the person making such an assertion. Where however it is established that the joint family possess some property, which from its nature and relative value may have formed the nucleus, from which the property in question may have been acquired, the burden shifts to the party alleging self-acquisition to esta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that non-appreciation of evidence may give rise to a question of law. In the case on band we have held in our earlier paragraphs, that the Tribunal had failed to appreciate properly the evidentiary presumptive value of PRMs 7, 14 and 13 and it is a perverse finding and therefore a question of la@ would certainty arise in the case on hand. Mr. Sarangan, relies on a latest judgment reported in K. Ravindranathan Nair v. CIT [2001] 247 ITR 178 (SC) to contend that the Tribunal is the final authority on finding of fact. The Supreme Court at page 180 reads as under : "As we read the judgment of the Tribunal, it extensively analysed the documents placed before it and came to the conclusion that the ten units run by the assessee constituted a single business, that the four units in Kerala did not constitute a separate business and that, therefore, the payment that was made was not on account of closure of business, which would not be allowable under section 37. The Tribunal found, on the basis of the accounts placed before it, that only one set of accounts were maintained for all the ten units. It found that there was one central financing system, that all the units were financed by ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ably have been arrived at on the material placed before the Tribunal. In this case, there was no such question before the High Court. Unless and until a finding of fact reached by the Tribunal is canvassed before the High Court in the manner set out above, the High Court is obliged to proceed upon the findings of fact reached by the Tribunal and to give an answer in law to the question of law t-hat is before it. The only jurisdiction of the High Court in a reference application is to answer the questions of law that are placed before it. It is only when a finding of the Tribunal on fact is challenged as being perverse, in the sense set out above, that a question of law can be said to arise." This judgment on the other hand supports the Revenue. The Supreme Court ruled that when a finding of fact of the Tribunal is perverse, then a question of law can be said to have arisen. In the case on hand the Tribunal's finding according to us is nothing but a perverse finding based on no evidence. Before concluding we must also take notice of the fact that this very assessee in a writ petition filed by him sought for return of these documents in his capacity as the Hindu undivided family. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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