High Court Of Allahabad
CIT vs. Raj Pal Singh Ram Avtar
Sections 69, 132(4A)
Asst. Year 1983-84
R.K. Agrawal & Prakash Krishna, JJ.
IT Ref. No. 150 of 1993
29th March, 2005
Shambhoo Chopra, for the Revenue : V.K. Agrawal, for the Assessee
By the court :
The Tribunal, New Delhi has referred the following two questions of law under s. 256(2) of the IT Act, 1961, hereinafter referred to as “the Act” for opinion to this Court :
“1. Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct to cancel the additions of Rs. 1,35,000 and Rs. 14,645 ?
2. Whether, on the facts and in the circumstances of the case, the Tribunal is legally correct to hold that the assessee has successfully discharged its initial onus to prove that the paper found and seized from its premises does not belong to it and the contents thereof do not relate to the assessee in any way ?”
2. The present reference relates to the asst. yr. 1983-84. Briefly stated the facts giving rise to the present reference are as follows :
The respondent-assessee has been assessed to income-tax in the status of a registered firm. It is engaged in the money-lending business on pawn broking and pledges. It had declared the income at Rs. 25,843. Its premises were searched on 27th Oct., 1983, when a paper was found and seized from the debris in the shop premises. The said paper contained the entries as under : “12/7 48,000 10% 4,800 15/7 42,000 10% 4,200 25,000 12% 3,000 20,000 2% 2,400 1 35,000 14,000 12-7-82 to 12-9-82 48,000 2% 148 42,000 1.5% 45 3,000 2,000 20 14,645”
The ITO was of the view that the above entries in the paper denoted a principal sum of Rs. 1,35,000 as advance to some person during the financial year 1982-83 on which an interest of Rs. 14,645 was earned. Accordingly, both these amounts were added to the income of the respondentassessee under s. 69 of the Act. He completed the assessment under s. 143(2) of the Act on 24th Feb., 1986 and added Rs. 1,88,390 in the income of the respondent- assessee. Feeling aggrieved, the respondent-assessee filed an appeal before the CIT(A), who had confirmed the order of the AO. Still feeling aggrieved, the respondent preferred second appeal before the Tribunal. The Tribunal has deleted additions of Rs. 1,35,000 and Rs. 14,645 on the following grounds : “4.4. Now, in the light of the aforesaid principles of law, let us examine the seized paper in question. The aforesaid seized paper merely contained certain figures, rate and consequent calculation. It does not bear the name of the assessee or anyone else. It is not in the handwriting of any of the partners or employees of the assessee as per replies submitted by the assessee in response to the show cause dt. 9th Sept., 1985 issued by the ITO. In relation to the aforesaid seized paper, the assessee clearly stated that the said paper does not belong to the assessee-firm or its partners or any connected person. He also explained that this is written in English and none of the partners or employees of the firm know English. The assessee further submitted that no unaccounted assets belonging to the assessee-firm were found during the course of search. It was stated that the said seized paper neither belonged to him nor the entries recorded therein pertained to the assessee-firm. It is true that where a person is found in possession of anything, the onus of proving that he was not its owner was on that person but such a presumption is a rebuttable presumption and the same can be dislodged or rebutted by such person. In the present case the assessee has categorically stated that the paper does not belong to him, the entries recorded therein do not relate to him and the same is not in the handwriting of any of the partners or employees or any connected person. Such a denial coupled with the surrounding circumstances that the seized paper is not in the handwriting of the partners or employees, it does not contain the name of the assessee clearly supports the assesseeâs contention that the initial onus lying upon the assessee was successfully dislodged by them. The officers of the Department found this paper during the course of search conducted on 27th Oct., 1983. No statements of the partners were recorded during the course of search on that date in relation to the aforesaid seized document. If any such statement had been recorded, the same has not been brought to our notice nor it finds place in the order passed by the learned Departmental authorities. This paper was also not put to the assessee during the course of proceedings under s. 132(5). The statements of the partners S/Sh. Raj Pal Singh and Ram Avtar were recorded on 18th Jan., 1984. The ITO did not put any question relating to the aforesaid seized paper during the course of aforesaid statements recorded in the year 1984. Even after receiving the assesseeâs entries dt. 27th Sept., 1985 and 3rd March, 1987, the ITO did not choose to examine the partners or the employees of the assessee-firm in relation to the aforesaid seized paper. The paper found and seized from the premises of the assessee nowhere contains any description that this represents the amount of loan given by the assessee to any person. After receiving the reply from the assessee in response to the show-cause notice dt. 9th Sept., 1985, the minimum effort which was expected of the learned assessing authority was to record the statements of the partners and the employees and thereafter conclusively prove that the said seized paper belonged to the assessee and the entries recorded therein represent assesseeâs unexplained investments. No such efforts whatsoever were made by the assessing authority. We are, therefore, of the considered view that the Department has completely failed to establish that the assessee had made any such unexplained investment during the relevant financial year.
4.5. It will be worthwhile to reproduce the contents of the seized paper once again hereunder : 12/7 48,000 10% 4,800 15/7 42,000 10% 4,200 25,000 12% 3,000 20,000 2% 2,400 1,35,000 14,000 12-7-82 to 12-9-82 48,000 2% 148 42,000 1.5% 45 3,000 2,000 20 14,645
The aforesaid figures, dates and calculations clearly reveal that the amount of investment of Rs. 1,35,000 cannot be treated as having been made during the financial year 1982-83. Even if it is assumed that the aforesaid amount of Rs. 1,35,000 represents principal amount on which interest at the aforesaid rates has been calculated totalling to Rs. 14,400, it would be interest for one full year. This necessarily implies that the investment, if any, was made by any person as recorded in the aforesaid seized paper, it must have been made in the month of July, 1981 as interest for one full year has been calculated and thereafter interest for the remaining period 12th July, 1982 to 12th Sept.,1982 has been worked out. This indicates that the figure of Rs. 1,35,000 recorded in the seized paper cannot be said to represent an unexplained investment made in the financial year 1982-83. On this account also, the addition made by the AO and confirmed by the CIT(A) deserves to be cancelled.
4.6. Taking an overall view of the facts and circumstances of the case, we are of the view that the additions of Rs. 1,35,000 and Rs. 14,645 should be cancelled, and the additions, therefore, deleted.” We have heard Sri Shambhoo Chopra, learned standing counsel for the Revenue and Sri V.K. Agrawal, learned counsel for the respondent- assessee.
Learned standing counsel submitted that the paper was seized from the respondentâs business premises on 27th Oct., 1983, which contained details of the amount advanced to various persons and the interest earned thereon. It also contained the dates and the amounts and thus, the AO had rightly added the principal amount as also the interest as income from undisclosed sources. He submitted that under s. 132(4A) of the Act, the presumption is drawn when the 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 belongs to such person and the contents of such books of account and other documents are true. According to him as the paper was seized from the premises of the respondent, it belonged to the said respondent and contents are also presumed to be true.
The Tribunal has taken note of the presumption deemed under s. 132(4A) of the Act and has held that the respondent has rebutted the presumption by giving plausible explanation that neither the partners nor their employees knew English and they do not read or write in English and further the said paper was found from the debris in the shop premises and might have been left by someone and it did not belong to them. The Tribunal has further found that when the partners and the employees had made a statement that they did not know English, no attempt was made by the AO to cross-examine the partners or their employees to extract the truth and, therefore, the explanation offered by them was to be believed. The approach of the Tribunal is in accordance with law and calls for no interference. The Tribunal has further held that aforesaid Rs. 1,35,000 in any event represented principal amount, could not have been earned during the assessment year in question even if it is assumed that the investment belonged to the respondent, it might have been made in the earlier assessment year because the interest for one full year appears to have been calculated on the seized paper. This finding also does not suffer from any legal infirmity.
We, accordingly, answer both the questions referred to us in the affirmative i.e., in favour of the assessee and against the Revenue. However, there shall be no order as to costs.
[Citation : 288 ITR 498]