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TMI Blog1987 (5) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... l and one lady partner contributed Rs. 9,000 each, yet, all the partners share the profits and losses of the business in equal proportion. The assessee maintains its accounts according to mercantile system of accounting. The assessment year under consideration is 1981-82 for which the accounting period ended with S.Y. 2036. 3. The assessee filed the return of its income on 17-7-1981 declaring total income at Rs. 98,200. On scrutiny of relevant books of account, the ITO noted that on the total sales of Rs. 15,84,308 the declared gross profit of Rs. 2,28,442 worked out at 14.4 per cent only. In the opinion of the ITO it was somewhat low in view of the exclusive nature of business of the assessee specially when the clientele of the assessee could only be from upper strata of society. He, therefore, made a lump sum addition of Rs. 5,000 thus thereby raising the G.P. to around 15 per cent. The addition did not find favour with the Commissioner (Appeals) and was deleted, Revenue is not aggrieved in this behalf. 4. On further scrutiny, the ITO noted that the male partner Shri Amritlal Dhanji introduced his share capital of Rs. 50,000 in the following manner : Rs. 20,000 by cheque fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 per cent only of the said amount, he received Rs. 40,000. The rest of the 75 per cent balance amounting to Rs. 1,20,000 was to be received by the outgoing tenant M/s. Mansukh Stores and the same was received by them. He declined to give his statement to that effect in writing but obliged Inspector Vyas by giving him the address of Shri Bhopat Rai Chhothalal Doshi, the husband of Smt. Vidyaben B. Doshi who was previously one of the two partners and subsequently sole proprietor of M/s. Mansukh Stores. Shri Vyas lost no time in contacting Shri Bhopat Rai C. Doshi. 7. Shri Bhopat Rai C. Doshi informed Shri Vyas Inspector that the firm M/s. Mansukh Stores consisted of two partners, viz., Shri Bhagwan Das Tribhuvan and Smt. Vidyaben B. Doshi with equal shares. This firm had been paying Rs. 25 only as monthly rent to Shri Hareshbhai J. Parekh for the last 25 to 30 years. On Posh Sud 10 S.Y. 2035 the partnership was dissolved and Smt. Vidyaben B. Doshi became the sole proprietor who carried the business up to Aso Vad Amas S.Y. 2035. Thereafter, the shop was vacated and possession was handed over to the landlord, Shri Hareshbhai. Faced with the probing and embarassing query with regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s version was not accepted by the authorities concerned in the presence of her husband's testimony on oath which got good support from assessee's own account books. The ITO, therefore, made addition of Rs. 1,40,000 to the total income of the assessee as being investment made out of books from income from undisclosed sources. The ITO thus finalised the assessment u/s 143(3) read with section 144B of the Income-tax Act, 1961 ('the Act') at a total income of Rs. 2,76,000 as against of Rs. 98,200 returned. The assessee-firm took the matter to the Commissioner (Appeals) by way of its appeal. 10. The Commissioner (Appeals) accepted the assessee's contention that the report of the Ward Inspector was based on hearsay evidence and as such was not admissible in evidence. He was further impressed by the argument that the outgoing tenant was Smt. Vidyaben C. Doshi and not her husband Shri Bhopat Rai C. Doshi, and when the tenant herself had denied to have received any amount by way of 'Pagri' the contrary statement of her husband, again based on hearsay evidence, was of no value. The Commissioner (Appeals) thus accepted the position that addition of Rs. 1,40,000 was made on the basis of susp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrectly deleted addition of Rs. 1,40,000. 13. Contrary to the above, Mr. R.R. Raya, the learned counsel for the assessee supported the order under appeal tooth and nail. He led us through the written submissions of the assessee, as filed before the authorities below and the affidavit of Smt. Vidyaben C. Doshi to convince us that the addition made by the ITO was certainly based on suspicion and surmises and had no basis, factual or legal. Mr. Raya pointed out that any landlord getting Rs. 25 P.M. as rent for his property would readily agree to let it out to a tenant offering Rs. 400 P.M. The abnormal hike in the monthly rent, suggested Mr. Raya, totally negatived the theory of any underhead transaction of Pagri. Further, a middle aged lonely lady, worried about the failing health of her life partner, Shri Doshi, would prefer to look after her husband rather than to retain the relics of a broken partnership business. No wonder she parted with possession of the shop on her own. It is probable, it is reasonable, it is acceptable. The order under appeal, claimed Mr. Raya, calls for no interference. 14. Before we proceed to make a re-appraisal of the evidence or material on record in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. All the facts and circumstances of the case are to be taken into consideration. The cumulative effect of the entire material is to be considered. Of the whole lot of evidence or material on record the acceptable is to be relied upon. The unacceptable is to be rejected. And acceptability is to be judged at the altar of preponderance of probabilities. Probability is to be considered by the test of reasonableness. It should be the reasonableness of a prudent mind. It must appeal to the reasons of a normal human being. It must fit in the facts and circumstances of the given case. It must be judged in the light of conditions prevailing in the society. It must get approval from the normal human conduct. It must be in accordance with the behavioural pattern of persons engaged in that particular field of activity. 16. The test of reasonableness assumes all the more importance in the administration of tax-justice for the obvious reason that technical rules of law of evidence are not applicable hereto. Herein evidence or material for consideration--oral or documentary--is received or admitted to without the necessity of formal proof and without undergoing the rigours of ardous procedure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suspicion and surmises'. Is that really so ? Let us examine. 18. As is evident from the detailed narration of facts, made hereinabove, the disputed addition of Rs. 1,40,000 had its origin in the information with the department. Such information would have certainly not risen above the level of 'rumour', 'suspicion' or 'surmise', by whatever name it be called but for certain facts attending on it and the test of verification given by the ITO to it. In order to appreciate the basis of this information we shall have to keep in our minds that the shop in question situated in one of the busiest business locality of the City of Rajkot, the assessee had started its business therein only recently and the ITO also stationed at Rajkot. For all these facts the department could have been in possession of an information to the effect that the assessee had obtained the possession of the shop by making payment of certain amount by way of 'Pagri' to the outgoing tenant and/or the landlord. Thus the information had a sound footing prompting the ITO to make enquiries into the matter. And that he did. He instructed his Ward Inspector Shri Vyos to do the needful. He must observe that in so conductin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been in possession of Mansukh Stores for the last 25 or 30 years at a monthly rent of Rs 25 only. Shri Doshi himself was a man of business. Mansukh Stores was being run as a partnership business. The partnership was dissolved on Posh Sud 10 S.Y. 2035 and thereafter the sale proprietorship in the name of Smt. Vidyaben B. Doshi was carried on upto Aso Vad Amas S.Y. 2035 only. It is a thing of common knowledge and experience that more often than not businessman carry on more than one business in the names of their women folk and minor or major kiths and kins, though in reality such businessmen are themselves the sole supervisors of such business activities. In fact Shri Doshi has stated on oath that he used to look after the affairs of the business of Mansukh Stores. In our social and family set up that is not at all abnormal. Rather it is most natural and according to normal human conduct and behaviour. Judge thus there is no escape from the conclusion that Shri Parekh and Shri Doshi were the best persons to be directly affected by any change in possession of the premises in question. As such they were the best persons to be in possession of all the relevant informations. 21. Now i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. The probability of truth in this statement has already been judged above. Moreover, when Shri Doshi was subjected to cross examination by Shri Raya Advocate, his testimony on this point was not at all challenged. There is no reason to discard the version of Shri Doshi in that behalf. 23. The so-called affidavit of Smt. Vidyaben C. Doshi should not detain us from arriving at the truth. We must state at the very outset that whereas the two reports of Shri Vyas Inspector and the statement on oath of Shri Parekh inspire confidence for their spontaneity and detailed account of the transactions, the affidavit of Smt. Vidyaben Doshi lacks such spontaneity and suffers from inordinate delay robbing it of its truthfulness. Shri Parekh, landlord was contacted by Shri Vyas, Inspector on 23-3-1984 and the same day or on the following day Shri Doshi was also questioned. Both spoke almost in the same language at that point of time. Shri Doshi was examined on oath on 26-3-1984 and he endorsed the version given on 23/24-3-1984 to Shri Vyas. Shri Parekh did not. It was only on 14-9-1984 that Shri Doshi was cross-examined. On that day some variations were tried to be brought in his testimony. He ..... X X X X Extracts X X X X X X X X Extracts X X X X
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