9911796707
TMI Blog1998 (11) TMI 145X X X X Extracts X X X X X X X X Extracts X X X X ..... nd out of this cash Rs. 90,000 was seized. The assessee had declared the concealed income of Rs. 3,50,000 in the case of the firm, M/s Kamal Auto Consultant including the cash found at the time of search. Further it was also ascertained from the State Bank of India that the assessee had purchased travellers cheques as under: Rs. 12-5-1981 30,000 9-5-1981 30,000 13-6-1981 29,000 6-7-1981 30,000 21-7-1981 30,000 -------- Total 1,49,000 -------- The AO noted that during the course of assessment proceedings the assessee filed letter dt. 22nd March, 1991, regarding the addition made to his total income for asst. yr. 1981-82 to 1988-89 vide order dt. 9th Nov., 1987, under s. 132(5) of the Act. The assessee's reply relevant to present controversy was as under: "Alleged investment in term of traveller's cheques totalling Rs. 1,49,000. In making this assessment, the ITO appears to have relied on some information collected behind the back of your applicant and that the ITO has not at all given any opportunity for rebutting the same as provided for in the opening part of sub-s. (5) of s. 132 of the Act and sub-r. (4) of r. 112(A) of the IT Rules, 1962. In the circumstances the entire a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee in his individual capacity and further he failed to explain the source of amount investment in these travellers cheques. According to the CIT(A), the AO was justified in treating the amount of Rs. 1,49,000 as unexplained and added the same to total income of the assessee. Consequently, the addition was confirmed by the CIT(A). 5. Before us, Shri P.F. Jain, C.A. the learned counsel for the assessee reiterated the submissions made before the authorities below. His further contention was that the travellers cheques of different dates were purchased in the regular course of business dates were purchased in the regular course of business of M/s Kamal Auto Consultant, wherein the assessee is a partner. According to Shri P.F. Jain the travellers cheques were not purchased by the assessee in his individual capacity as it has been alleged by the IT authorities. Shri P.F. Jain submitted that there was a search at the residential premises of the assessee as well as the business premises of M/s Kamal Auto Consultant (hereinafter referred to as M/s KAC) on 14th July, 1987. During the course of search proceedings the authorised officer had recorded the statement of the assessee und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the said letter, it was submitted by the assessee that he had not done any personal business, all the transactions done pertained to the firm only. Accordingly to Shri Jain in the assessment order dt. 25th March, 1991, the AO has simply reproduced the objections raised by the assessee under s. 132(11) of the Act. He also submitted that the addition made by the AO is without any basis. 8. The next contention of the learned counsel for the assessee was that for the assessment year under consideration the AO issued a notice under s. 148 of the Act on 28th March, 1989, which was served upon the assessee on 30th March, 1989. The assessee filed his return on 20th March, 1990, and the assessment order was passed on 25th March, 1991. According to the learned counsel for the assessee, the opening para of the assessment order shows that the AO while bringing out the charge about the proposed addition of Rs. 1,49,000 made no mention of the reasons recorded, if any, about the escapement of the income. He, therefore, submitted that it can safely be assumed that no such reasons were recorded and thus the condition precedent for issue of notice under s. 148 not being fulfilled, the entire pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that the travellers cheques were never purchased by the firm, M/s KAC but these cheques were purchased by the assessee out of his own unexplained source of income and, therefore, the addition in the hands of the assessee was justified. 10. We have considered the rival submissions and have also perused the entire material available on record. It is relevant to point out that the decisions cited at the Bar were also duly considered by us. It is an undisputed fact that the assessee is a partner in firm M/s KAC. The Department conducted a search at the residential premises of the assessee on 14th July, 1987. During the course of search proceedings, the authorised officer had recorded the statement of the assessee under s. 132(4) of the Act. The following questions and answers are worth noticing: Q. No. 1. Give your name, address and details of your business and source of income? Ans: My name is Sachumal Jagumal Chethnani, age 52 years. My business is of auto consult and of selling scooters, rikshaws on commission. I am carrying on business in the name of 'Kamal Auto Consult', opp. K.T. Desai High School, Shahpur Road. My two sons viz. (1) Rensi Sachumal, and (2) Chandra Sachum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of profits from M/s KAC. There is no dispute that the said firm came into existence in the year, 1980 and the business of the firm was that of selling scooters, rickshaws on commission basis. It is also an admitted fact that during the course of search a disclosure of Rs. 3,50,000 was made in the case of the firm for calendar years viz. 1984-1985, 1986 and 1987. The said disclosure has been accepted by the Department in the hands of firm after verification of seized materials. The copies of the assessment orders of the firm relating to asst. yr. 1985-86 to 1988-89 are available at pp. 52-65 of the paper book. 11. At this point of time, we find it convenient to reproduce the following findings of the CIT(A) from para 8 of the impugned order: "All the business is done through the firm M/s Kamal Auto Consultant in which he along with his two sons is a partner. Even the disclosure was made in the case of the firm and not in his individual capacity. I have further found that the assessments of the firm have been completed and the amount disclosed at Rs. 3,50,000 has been included in the assessment of the firm. On the other hand, the AO has not brought any material on record to prove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere reflected in the books of accounts of M/s KAC. The assessee categorically stated before the authorities below that these cheques were drawn out of the funds of customers and on behalf of them at the relevant time and to the best of his knowledge the commission income earned was also recorded in the books of the said firm. 12. As we have already noted that the findings of the CIT(A) are also self-contradictory. Vide para 8 of the impugned order the CIT(A) has stated that "on the other hand, the AO has not brought any material on record to prove or even to indicate that the appellant is carrying on business besides being a partner in M/s KAC in individual capacity and earning income out of such business." In asst. yr. 1988-89, in assessee's own case, the CIT(A) has held that in view of assessee's statement made during the course of search proceedings it will be proper and reasonable to hold that cash found belonged to the firm, M/s KAC and not to the assessee. In this view of the matter, the CIT(A) was not justified in holding that no evidence had been adduced by the assessee to show that these travellers cheques were purchased out of funds of customers. The entire case of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. In our view there is substantial force in the above contention of the learned counsel for the assessee that the above addition in the hands of the assessee was not proper and justified. Further, more, there is no material on record to suggest that the assessee had purchased the travellers cheques in question out of his individual income. Admittedly, the assessee is a partner in M/s KAC and the business of the said firm, M/s KAC is auto consultant and selling scooters, auto-rickshaws on commission basis. It is evident from the record that the assessee's only source of income was from share of profit from the said firm. There is not an iota of evidence on record to show that the assessee was deriving income from another source. It is also an admitted fact that these travellers cheques were not purchased in a single day, therefore, the addition of lump sum amount of Rs. 1,49,000 is not justified. Why the IT authorities have not verified the facts from the books of the firm of M/s KAC is also not understandable. On the other hand, the Department had accepted a disclosure of Rs. 3,50,000 in the hands of the said firm. Even in the appellate order dt. 30th March, 1992 for asst. yr. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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