9911796707
TMI Blog1998 (10) TMI 87X X X X Extracts X X X X X X X X Extracts X X X X ..... under:- 1. On the facts and in the circumstances of the case the ld. CIT(A) has erred in deleting the addition made on account of unexplained opening capital of Rs. 4,81,836. 2. It is prayed that the order of the ld. CIT(A) be set aside and that of the AO be restored. 4. I.T.A. No. 1590 is the appeal by the assessee relating to assessment year 1993-94 wherein the grounds taken are as under:- 1. That the ld. CIT(A) was not justified in estimating the profit on sale of gold at Rs. 400 per gold biscuit. 2. That the ld. CIT(A) was not justified in upholding the addition of Rs. 8.00 lacs made on account of surrender made by the assessee under section 132(4) of the Income-tax Act, 1961. 5. Briefly, the facts are that an action under section 132(1) of the Income-tax Act, 1961 was taken in the case of the assessee on 17-4-1993 and the following assets were seized:- Rs. Cash 90.000 gold jewellery 4,30,705 silver jewellery 24,750 six gold biscuits 3,00,931 pawned jewellery 1,18,146 ------------ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the almirah of the assessee at his residence. Having regard to the fact of peak investment for the financial year 1992-93, it appears that the assessee was induced to make a surrender of Rs. 8 lakhs. 7. The case was taken up by the AO, Investigation Circle and notice under section 112A read with section 132(5) of the Income-tax Act, 1961 was issued on 21-7-1993 reply to which was filed by the assessee on 29-7-1993 and in the said reply, the assessee resiled from the statement wherein he is alleged to have made a surrender of Rs. 8 lakhs. An order under section 132(5) was passed by the AO on 10-8-1993 wherein there is no mention of any surrender by the assessee or his subsequent retraction of the surrender made. 8. The case was fixed for regular hearing by issue of notice under sections 142(1) and 143(2) on 7-10-1993 and once again the assessee brought to the notice of the AO that he has already resiled from the statement wherein the assessee is alleged to have surrendered the amount of Rs. 8 lakhs. The AO however, rejected the contentions of the assessee and beside other additions, made an addition of Rs. 8 lakhs in the assessment year 1993-94. The order for the assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons the price paid by the purchaser to the assessee at Rs. 35,000. The assessee is aggrieved against the addition of Rs. 20,000 and has challenged the action of the CIT(A). 11. The ld. counsel for the assessee submitted that since the amount of Rs. 20,000 was shown as the sale price received over and above the price recorded in the sale deed in the note book which was not meant to be shown to the income-tax department but was seized at the time of search, a presumption should be raised regarding the correctness of seized book and the addition of Rs. 20,000 ought not to have been made by the departmental authorities. The ld. D.R., on the other hand, supported the order of CIT(A) and submitted that since as per the sale deed the consideration for the transfer of the assessee's share in the house property at Jalandhar was only Rs. 35,000, the difference (55,000 - 35,000 = 20,000) was obviously the investment of the assessee from undisclosed sources. 12. We have considered the rival submissions. At the time of hearing, Shri K.P. Bajaj, the ld. counsel for the assessee, was specifically asked as to whether the purchaser has also shown the consideration paid for the purchase of assessee' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee on the basis of seized diary/note-book. In the assessment order it is mentioned that the assessee was deriving income mainly from the purchase and sale of gold biscuits. The sales as well as the purchases are totally unvouched and as such the proviso to section 145(1) is applicable. As per the local enquiries stated to have been conducted by the AO, the profit per 100 gm of gold is about Rs. 500. Accordingly, the AO estimated the profit at Rs. 55,000. Before the CIT(A), the assessee gave a chart giving the details of purchase price of gold biscuit and the sale price from 21-4-1992 to 1-3-1993. This chart indicates that the profit on sale of gold biscuit kept on varying on day-to-day basis. After considering the submissions made by the assessee, the ld. first appellate authority has directed that the profit on sale of each gold biscuit be estimated at Rs. 400 per biscuit and the addition worked out accordingly. Since, admittedly, the sales and purchases are not vouched, we are of the opinion that the CIT(A) in the facts and circumstances of the case has rightly directed the AO to estimate the profit on sale of gold biscuit at Rs. 400 per gold biscuit of 10 tolas. Accordingl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssions and have also gone through the order passed by the AO as well as the CIT(A). As per reverse of page 35 of the seized document No. 6, it was found that the assessee had advanced certain amounts to Shri Anil Kumar during the financial year 1990-91 relevant to assessment year 1991-92 on different dates. The peak of these amounts was worked out by the AO at Rs. 28,000 and since the assessee could not give any satisfactory explanation, the same was added by the AO as unexplained investment of the assessee under section 69. On appeal before the CIT(A) also the assessee did not give any satisfactory explanation. Accordingly the addition was confirmed. However, before us an altogether new explanation that the amount advanced represents the sale proceeds of the deceased wife of Shri Anil Kumar has been put forward and no reason has been given as to why this explanation was not given before the lower authorities. As such, we are not inclined to accept this new plea alongwith the affidavit of Shri Anil Kumar which has been furnished before us for the first time. Accordingly, the ground taken by the assessee is dismissed and the action of the departmental authorities is upheld in this r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis of the seized record represents the actual stock with the assessee as on 1-4-1990. The CIT(A) observed that the stock in the form of quantities has been accepted even by the AO who made the addition to the trading account only on account of estimated profit at Rs. 500 per 10 gms of gold bullion as against about Rs. 300 per 10 gms disclosed by the assessee and which has been directed to be computed at Rs. 400 per gold biscuit by the CIT(A). Accordingly, the CIT(A) came to the conclusion that since the AO has accepted the stock in terms of quantity at the close of the accounting year, there was hardly any justification in rejecting the opening stock resulting from the closing stock of the earlier years. Accordingly, the CIT(A) held that since the assessee has given a reasonable explanation which was partly accepted by the AO, there was no justification in rejecting the second part of the explanation. The CIT(A) also noted that the opening balance of Rs. 4,81,836 credited in the capital account consisted of the following items:- Rs. (i) Cash in hand as on 1.4.90 52,147 (ii) Opening stock of gold 1,95,700 (iii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of search, only rough note books/diaries relating to the transactions entered into by the assessee for the assessment years 1991-92, 1992-93 and 1993-94 were found and seized. On the basis of these seized diaries, after taking extracts/photocopies, the assessee prepared memoranda cash-book and ledger for all the three assessment years, namely, 1991-92, 1992-93 and 1993-94 returns were filed on the basis of those memoranda cash books. The opening capital balance as on 1-4-1990 was taken at Rs. 4,81,836 on the basis of entries found in the seized record inasmuch as the cash in hand as on 1-4-1990 was taken at Rs. 52,147 as per the entry in the seized record. Similarly, recoverable debts were also taken at Rs. 1,24,089 on the basis of seized diary/note-book and the figure of opening stock of gold and silver were derived on the basis of gold/silver found at the time of search on 17-4-1993 and after working backward by adjusting the figures of purchases and sales found recorded in the seized books. Thus, the total capital of Rs. 4,81,836 was on the basis of entries made in the rough notebooks/diaries and there is a strong presumption about the correctness of these entries under sub-sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. 23. In the result, appeal filed by the assessee as well as the revenue for the assessment year 1991-92 are both dismissed. 24. I.T.A. No 1590/Chandi/95 is the appeal by the assessee relating to assessment year 1993-94. First ground of appeal is that the ld. CIT(A) was not justified in estimating the profit on sale of gold at Rs. 400 per gold biscuit. This issue has already been adjudicated in assessee's appeal for assessment year 1991-92 being ground No. 2 in I.T.A. No. 1589/Chandi/95. Therefore, for the very same reasons, we will adjudicate this ground against the assessee and uphold the order of the CIT(A) in this regard. 25. The second ground is against the action of the CIT(A) in upholding the addition of Rs. 8 lakhs made on account of surrender made by the assessee under section 132(4) of the Income-tax Act. It was submitted by Shri K.P. Bajaj, the ld. counsel for the assessee, that at the time of search carried out at the premises of the assessee on 17-4-1993, the assessee was admitted in the hospital. The statement of the assessee was recorded in the hospital which is clear from the narration given at the top of the statement before the oath was administered to him ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to A.Y. 1992-93. This income was earned by me from commission and sale/purchase of jewellery." 26. From the above, Shri Bajaj submitted that it is clear that the statement of surrender was clearly an induced one on the basis of certain factual details which were projected by the ADI and was not a voluntary statement made after knowing the correct legal implication and the facts of his case as well as the material which was found during the search. It was submitted that the case was taken by the AO in proceedings under section 132(5) and a notice under Rule 112A read with section 132 was issued on 21-7-1993 reply to which was filed on 29-7-1993 and in this very reply, which was the first communication before the AO, the assessee resiled from the statement. It was submitted that the case was fixed for regular hearing by issue of notice under section 142(1)/143 on 7-10-1993 and hear again at the first opportune time of start of assessment proceedings, the assessee brought to the notice of the AO that the so-called surrender was made in ignorance of legal rights and factual position and the assessee has already resiled from that statement. It was submitted that there is not even a w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Jagdish Chand Gupta. Shri Bajaj made pointed reference to the point No. 4 the question put by the ADI while recording the statement wherein the ADI has, mentioned that there was peak investment in the purchase of gold and cash to the tune of Rs. 8.5 lacs and pleaded that this part of the facts narrated by the ADI to the assessee is incorrect as it is not borne out from the record and, in fact, in the assessment order itself the AO could not make out a case of unexplained investment as no addition was made on this point. Accordingly, it was, submitted that the AO as well as the CIT(A) have erred in making the addition of Rs. 8 lacs, on the basis of alleged surrender by the assessee which was subsequently resiled and which is otherwise not justified in the facts and circumstances of the case. 27. The ld. D.R. on the other hand, strongly relied on the orders of the authorities below. It was submitted that it is true that the statement was recorded in the hospital but the assessee was in proper frame of mind and he had made a categorical surrender of Rs. 8.5 lacs subject to no penal action. In the statement, the assessee has stated that this income was earned by him fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 8.5 lacs appears in the seized record for the financial year 1992-93 and the above statement was subsequently resiled. In almost similar circumstances, Chandigarh Bench of the Tribunal in the case of Jagdish Chand Gupta, in which one of us was a party, has deleted the addition of Rs. 48 lacs made by the AO solely on the basis of an admission/confessional statement which was subsequently denied. Therefore, keeping in view the totality of the facts and circumstances of the case and the decision of the Hon'ble Supreme Court, Hon'ble Punjab Haryana High Court and the decision of Tribunal in the case of Jagdish Chand Gupta, we are of the opinion that the departmental authorities were not justified in making the addition of Rs. 8 lacs which is directed to the deleted. 29. In the result, appeal for the assessment year 1993-94 is partly allowed. Per Bedi - I have gone through the proposed order of learned Accountant Member but unable to persuade myself to the findings and conclusions arrived at by him in I.T.A. No. 1590/Chandi/95, relating to assessment year 1993-94, for the reasons given hereinafter. So far as ITA Nos. 1589 and 1614/95 is concerned, I do concur with the reasoni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned representative of the assessee cannot be applied in this case because the same is distinguishable on facts. It is also worth mentioning that statement was duly witnessed by two independent witnesses and also the assessee made surrender of Rs. 8 lakhs subject to no penal action which fortifies the claim of the Revenue that assessee was in perfect state of mind while making statement as he was fully conscious of penal consequences. So this plea of the assessee that he was not in a perfect stable mental condition at the time of making the statement is also not acceptable. 4. In view of the facts and circumstances of this case, I am of the considered view that CIT(A) while confirming the addition of Rs. 8 lakhs made by the Assessing Officer on the basis of surrender made during the search operation, is fully justified and his action is hereby confirmed. The appeal of the assessee is accordingly dismissed. ORDER UNDER SECTION 255(4) OF THE INCOME-TAX ACT, 1961 On a difference of opinion between the Members who heard this appeal, the following point of difference is referred to the Hon'ble President for the opinion of the Third Member:- "Whether, the addition of Rs. 8,00,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating Rs. 9,64,532 were found and seized. I need not concern myself with the various additions made by the Assessing Officer to the assessee's returned income of Rs. 69,700 but would straightaway refer to the addition of Rs. 8 lacs which is purported to have been surrendered by the assessee during the course of recording of his statement at the time of the search. It was noted by the Assessing Officer that the income so surrendered was not included in the return of income for the assessment year 1993-94 and this had apparently been done on the grounds that assessee was admitted in the hospital when his statement was recorded and further the doctor's permission had not been obtained before recording the statement. The viewpoint canvassed, in other words, was to the effect that the statement was not recorded in accordance with the provisions of law. The AO, however, rejected the aforesaid plea on the ground that the statement recorded u/s 132(4) during the course of search was binding on the assessee and the same could be used as an evidence in proceedings under the Income-tax Act, 1961. The AO further observed that the permission of the doctor to record the statement could be presum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observed by the AO that the seized documents could at the best explain the acquisition of gold biscuits but the source of other assets found/seized remained unexplained and the surrender of Rs. 8 lakhs was enough to cover the unexplained investment in such assets for the assessment year 1993-94. He accordingly added the amount in question while computing the taxable income at Rs. 9,35,985. 3. Being aggrieved the assessee came up in appeal before the CIT(A) who upheld the view taken by the AO on the ground that the assessee was in a proper frame of mind when his statement was recorded at the hospital since he categorically stated that the amount of Rs. 8 lakhs was being surrendered subject to no penal action. The CIT(A) further observed that the assessee categorically stated that he had earned income from commission and sale and purchase of jewellery and in conclusion the first appellate authority held that the statement was properly recorded as per the provisions of section 132(4) and it was a voluntary one and the surrender so made was binding on the assessee. On further appeal the assessee's appeals for the assessment years 1991-92 and 1993-94 as also cross appeal of the depar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rlier to the date of the hearing. It was also pointed out to the AO that in the order passed by the AO u/s 132(5) on 10-8-1993 there was no mention of the statement recorded whereas in the course of the regular assessment u/s 143(3), the AO had made an addition of Rs. 8 lakhs on the basis of the surrender made u/s 132(4) alongwith other additions. The assessee's counsel took exception to the view expressed by the CIT(A) agreeing with the AO with regard to the addition of Rs. 8 lakhs. According to the ld. counsel, the orders of the authorities below i.e. the AO and the CIT(A), were based only on the statement of the assessee recorded u/s 132(4) but resiled subsequently by the assessee. As regards the legality of the statement, it was submitted that the non-objection on the part of a doctor of the hospital about recording of the statement was not borne out from the record or from the statement itself and in this view of the matter it was pleaded that the statement was not binding although the ld. counsel accepted that a legal and proper statement recorded u/s 132(4) could be used as evidence in proceedings under the Income-tax Act. The argument however was to the effect that if it co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arried out on 17-4-1993 which date fell in the accounting year 1993-94 relevant to assessment year 1994-95 whereas the ADI in the question posed to the assessee at the time of recording his statement suggested that as per the documents found a peak investment of Rs. 8.5 lakhs appeared for the financial year 1992-93 relevant to assessment year 1993-94 which was obviously incorrect. (2) The answer of the assessee in response to question put by the ADI at the time of recording of the statement was conditioned by the question put and it was under these circumstances that the alleged surrender of Rs. 8 lakhs was made by the assessee from which he subsequently resiled while giving reply to the very first notice issued under rule 112A read with section 132(5) on 29-7-1993. (3) The only basis of making the addition of Rs. 8 lakhs was the statement of the assessee induced by the wrong factual information given by the ADI and it was subsequently resiled by the assessee. In support of the aforesaid grounds and line of reasoning for deleting the addition, the ld. Accountant Member relied heavily on the decisions cited by the assessee's counsel; the ratio being that admission made in ignora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... add that no such amount had been taxed in assessment year 1994-95. The ld. counsel also pointed out to the fact that the statement was recorded on 17-4-1993 and at the first given opportunity i.e. on 29.7.1993, the assessee resiled prior to the start of the assessment proceedings which were completed on 28-11-1994. The ld. counsel further pointed out that the statement had been recorded without taking permission from any doctor of the hospital in which the assessee was admitted and his statement also having been recorded in the said hospital about which there was no dispute. The ld. counsel also pointed out to the absence of any addition in assessment year 1993-94 on account of unexplained investments. The authorities cited before the Division Bench were relied upon by the ld. counsel during the course of present hearing before me alongwith a judgment of the Ahmedabad Bench of the Tribunal in the case of Asstt. CIT v. Mrs. Sushiladevi S. Agarwal [1994] 50 ITD 524. 8. The ld. D.R., on the other hand, strongly supported the view expressed by the ld. Judicial Member and subsequent arguments advanced by her were a reiteration of the reasons recorded by the tax authorities in making ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal showed a peak of Rs. 3.7 lakhs and odd only. The aforesaid documents which were produced by the ld. D.R. bore the heading "purchase of gold in cash". The ld. counsel on being shown the documents in question replied that these were not confronted to the assessee either at the time of search or subsequently during the course of the assessment proceedings. This factual submission was also not rebutted by the ld. D.R. by stating anything to the contrary. 9. After hearing both the parties I am of the opinion that the view expressed by the ld. Accountant Member is the correct one as he has taken into account all the relevant facts and circumstances of the case and applied the appropriate case law thereto. It was not disputed either before the Division Bench or now before me that the statement of the assessee was recorded at the hospital where he was admitted on 17-4-1993 and as observed from the copies of the hospital documents at 6 p.m. in the evening. The whereabouts of the assessee during the course of the day when the raid was in progress at his residence is a grey area on which nobody has advanced any argument either before the Division Bench or before me. Then again, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed before me and nor were these documents shown to the assessee at the time when his statement was being recorded nor confronted to him during the course of the proceedings as contended by the assessee's counsel before me and not rebutted by the ld. D.R. I have already observed that whatever documents were shown to me partly pertained to some earlier assessment years and in so far as the period under consideration is involved, the peak was of a much lesser amount. During the course of the hearing, I had specifically asked the ld. D.R. to show me those documents where the peak of Rs. 8.5 lakhs had been worked out but no such document was produced and as rightly noted by the ld. Accountant Member the only basis for making the addition is the statement made at the time of search but as noted not recorded at the residence or business premises but in the hospital. It may be appreciated that a person who is admitted in the hospital may not be in his normal frame of mind so as to understand the implications to what he is stating, more so when he is not guided by any legal advice and does not know its legal effect. The ld. Accountant Member has appropriately relied on the decision of the H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was getting married and the assessee simply penned his signature on the statement recorded by the officials of the search party with a view to complete the formalities and conclusion of the search so as to go ahead with the Sehra Bandi ceremony of his son which was delayed by four hours on account of search. These statements were subsequently retracted by the assessee by filing detailed submissions during the course of proceedings under section 132(5) as well as under section 143(3). Except the alleged confessional statement of the assessee, there is no evidence available on record to support the alleged payment by the assessee to P. No papers indicating the payment were seized from the residence of the assessee and P in his statement recorded by the ADI, also denied having received any such payment from the assessee and the Departmental authorities have not taken any action in the hands of P with regard to the payment of Rs. 48 lakhs which is allegedly received by P. In this view of the matter, the Departmental authorities were not justified in making the addition of Rs. 48 lakhs to the income of the assessee which addition is directed to be deleted." In taking the aforesaid v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly on the date of the raid but even for a few subsequent days i.e. upto 21-4-1993. It is not the case of the department that the assessee feigned illness and the ld. counsel categorically argued before the Division Bench as also before me to the effect that the permission of the doctor was not obtained before recording the statement and other than stating that the permission could be presumed the department has not effectively rebutted this factual statement. I would in fact go to the extent of saying that the surrender has been obtained not only by misrepresenting the facts but has been obtained on no facts as no material was produced before me wherein there appeared a calculation of the peak amount of Rs. 8.5 lakhs. Even if one were to go by the observations of the ld. Judicial Member that the statement was witnessed by two independent witnesses and the assessee was mentally alert, even then a statement induced by misrepresentation of facts or without confronting the assessee with those documents which formed the subject matter of surrender cannot be treated as valid and legal and an assessee is within his rights to resile from the same subsequently. In the present case the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
