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2001 (6) TMI 51

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..... tment 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 to issuing summons .....

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..... ax 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 authority under s .....

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..... at 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 the amounts based on exhibits seized during the course of search of the premises of the assessee. One such addition related to investment in Durgabail building in Hubli amounting to Rs. 2,62,100. The assessee preferred an appeal before the Commissioner of Income-tax in Appeal No. I. T. A. 3/CC of 1986-87. The assessee challenged the additions made by the assessing authority. The Commissioner (Appeals) vide order dated September 19, 1988, upheld the additions made by the assessing authority. The assessee preferred an appeal against the order in Appeal No. I. T. A. 42/Bang o .....

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..... enged 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. 14083-86 of 1985 and Collector o f Customs v. D. Bhoormull, AIR 1974 SC 859 ; [1974] 2 SCC 544 and Prem Dass v. ITO [1999] 236 ITR 683 [1999] 52 CTR 79 (SC). Per contra Sri Sarangan, learned senior counsel appearing for the assessee, with equal vehemence contended that the Tribunal is right in restricting the scope of section 132(4A). According to counsels the presumption available to section 132(4A) has rightly been restricted to section 132(5) and it cannot be extended furthers He further argued that the material has not been personally possessed by the assessee and th .....

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..... 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, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search, it may be presumed (i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such per son ; (ii) that the contents of such books of account and other documents are true ; and (iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reason .....

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..... 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 proceedings. In that view of the matter, the Tribunal rejected the case of the Department. This finding in cur view is not correct. The entire object of this Chapter is to levy tax with regard to an undisclosed income of an assessee. Search and seizure is one accepted method adopted by the Revenue authority with regard to digging out undisclosed income of an assessee. If the intention of the Legislature is only to give a limited presumption, under section 132(4A) they would have said so in so many words. Even otherwise a reading of the entire Chapt .....

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..... 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, lighten the burden of proof resting on the prosecution. For instance, once it is shown that the accused was travelling without a ticket, a prima facie case against him is proved. If he once had such a ticket and lost it, it will be for him to prove this fact within his special knowledge. Similarly, if a person is proved to be in recent possession of stolen goods, the prosecution will be deemed to have established the charge that he was either the thief or had received those stolen goods knowing them to be stolen. If his possession was innocent an .....

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..... 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 276C is a positive act. The court ruled that in such circumstances mens rea is required to be established by the prosecution. Therefore, the court ruled that the same is not available in a matter arising under sections 276C and 277 of the Act. The said judgment is distinguishable on facts. Therefore, we answer the first question in favour of the Revenue and against the assessee. The second question is with regard to the applicability of PRM 1, 7, 13 and 14 to the facts of this case. Admittedly, all these PRMs have been recovered from the .....

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..... 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 undivided family. The statements on oath have also been recorded in respect of the members of the Hindu undivided family by the Commissioner. The seized documents PRM 1 with red plastic cover was seized from the residence of karta. PRM 13 is again a document seized from the premises in which several transactions were noticed in green ink. The Commissioner notices that no acceptable explanation was given by the assessee as to why he was regularly noting the business details in cigarette packets and keeping them in safe custod .....

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..... 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 there is no evidence in regard to authorship of the entries made in the sheets in PRM 14, but an inference is inescapable that a person who had knowledge of construction work might have written them. It further holds that with regard to other entries a suspicion has arisen and that they may not be substitute for proof. What we cannot understand is that the very Tribunal accepts PRM 14 in respect of one item and the same reasoning must hold good with regard to other PRMs as well, but unfortunately the Tribunal on the ground .....

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..... ers. 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 joint family accounts. The court ruled that that by itself is not sufficient to show that the income was of the joint family income, This case is clearly distinguishable in the light of the seized documents and the rebuttable presumption attached to it. The second judgment is Mangilal Rungta v. CIT [1955] 28 ITR 167 (Patna). That was a case with regard to burden of proof on the Department. That was not a case dealing with the presumption or rebuttable presumption as in the case on band. The third judgment in Jainaray .....

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..... 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 establish affirmatively that the property was acquired without the aid of any such joint family nucleus." In the case on band the Department in the light of the material placed has discharged its burden of joint status. Once that burden is discharged the further burden of self-acquisition gets transferred to those who allege self-acquisition. In the case on band no evidence worthy of consideration is placed with regard to self-acquisition. In the circumstances, this decision is also not available to the petitioner. .....

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..... 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 banks and that these accounts were operated from the head office and that the cashew was purchased for processing by the head office for all the units together. It was also found that there was unity of management and control. Accordingly, the Tribunal said that it was satisfied that all the units were fully interlinked and interlaced so that the inevitable inference was that all these units were one business alone. The Tribunal went on to hold that the facts were sufficient to establish a nexus between the pa .....

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