Allahabad H.C : the money is the sale proceeds of the smuggled gold

High Court Of Allahabad

Radha Raman Agrawal vs. ITO

Section 68

Assessment Year : 1987-88

Tarun Agarwala And Dr. Satish Chandra, JJ.

IT Appeal No. 500 Of 2012

February 4, 2015


Dr. Satish Chandra, J. – The present appeal is filed by the assessee against the order dated May 14, 2001, passed by the Income-tax Appellate Tribunal, Delhi, in I.T.A. No. 5645/Del/1994 for the assessment year 1987-88.

2. The assessee has mentioned six substantial questions of law but all are leading to the addition of Rs. 3.90 lakhs, which was upheld by the Tribunal.

3. The brief facts of the case are that on October 16, 1986, the assessee was travelling from Delhi to Bareilly in a Fiat Car No. UTI 2455, when he reached near Rampur octorie post, the car was intercepted by the customs authorities. On the next day, the customs authorities have recorded the statement of the driver and the assessee. In the statement, both have stated that the assessee had gone to Delhi to sell gold and the seized amount is the consideration of the said sale. But it was observed by the customs authority, vide order dated December 18, 1987, that :

“It is not established that the money is the sale proceeds of the smuggled gold. Even the presumption of Radha Raman dealing with gold does not arise any where.”

4. Later, the assessee has taken a different version by stating that he had gone Delhi to purchase a plot but the deal was not finalised so he had to return to Bareilly along with cash which was taken from the family members and the slip of each family member was attached on the bundle of currency notes. But the Assessing Officer was not satisfied so he made the addition of Rs. 3.90 lakhs. However, the first appellate authority has deleted the said addition by observing that the assessee was involved in the gold business, so the profit might have been earned. Finally, the Commissioner of Income-tax (Appeals) has made the addition of Rs. 40,000 by deleting the remaining amount. Being not satisfied both the parties have filed appeals before the Tribunal who has restored the addition of Rs. 3.90 lakhs by setting aside the order passed by the first appellate authority. Being aggrieved the assessee has filed the present appeal.

5. With this background, we have heard the learned counsel for the parties at length and perused the material available on record. Parties have reiterated what they have stated before the lower authorities.

6. From the record, it appears that the assessee has claimed that Rs. 3.90 lakhs was taken from the family members to purchase the plot in Delhi but the deal was not finalised so, the assessee was returning to Bareilly along with cash. The detail of cash taken by the assessee was given which is as under :


1 Smt. Sushila Devi (mother) 54,000

2 Smt. Meera Agarwal (sister) 40,000

3 Km. Kiran Agarwal (sister) 1,04,000

4 Sri Radha Raman Agarwal (individual) 23,000

5 -do-(HUF) 13,000

6 Master Ashish Agarwal (son) 22,000

7 Sri Hari Shankar (father) (individual) 21,000

8 -do-(HUF) 93,000

9 Sri Vinay Kumar (brother) 20,000

Total 3,90,000

7. From the record, it also appears that all the creditors have shown the entries in their books of account, a few of them have given a meagre amount for which no entry was made out. The order of the customs authorities was not before the Commissioner of Income-tax (Appeals), who has wrongly observed that the assessee was engaged in the business of gold, especially when the customs authorities have observed (supra) that the assessee was not involved in the business of gold then the statement given by the assessee as well as the driver cannot be relied upon.

8. Regarding the creditworthiness of the creditors, it appears that either the amount was meagre or the same was shown in the books of account. No attempt was made by the Department to verify/examine the creditors. The identity of the creditors has been established. From the family members, loan for petty amount can be taken in cash. Hence, it appears that the creditors were genuine.

9. It may be mentioned that in the case of CIT v. Orissa Corpn. (P.) Ltd. [1986] 159 ITR 78/25 Taxman 80F (SC), the hon’ble apex court has observed that the Revenue will have to examine the source of income of the alleged creditors to find out whether they were creditworthy. In the instant case, no effort was made by the Department to examine the alleged creditors. The burden lay on the Revenue.

10. The Punjab and Haryana High Court in the case of CIT v. N.P. Garodia [2009] 310 ITR 62 has observed that in such cases summons must be issued to the creditors.

11. In view of the above and by considering the totality of the facts and circumstances of the case, we are of the view that when credit was taken from the family members and amount is petty or has been shown in the books of account then there was no occasion to make the addition. Therefore, we set aside all the orders of the lower authorities and delete the addition of Rs. 3.90 lakhs. The assessee will get the relief, accordingly.

12. The answer to all substantial question is in favour of the assessee.

13. In the result, the appeal is allowed.

[Citation : 371 ITR 435]

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