High Court Of Allahabad
Mohd. Haron & Co. vs. CIT
Section 145, 69A
Asst. Year 1977-78
R.K. Agrawal & K.N. Ojha, JJ.
IT Ref. No. 85 of 1984
10th August, 2004
Counsel Appeared :
Vikram Gulati, for the Assessee : A.N. Mahajan, for the Revenue
JUDGMENT
BY THE COURT :
The Tribunal, Allahabad, has referred the following questions of law under s. 256(2) of the IT Act, 1961 (hereinafter referred to as “the Act”), for the opinion to this Court :
“1. Whether, on the facts and the circumstances of the case, the Tribunal was justified in applying the provisions of s. 145 of the IT Act, 1961, in respect of the assessee’s income in the sale effected by it during the relevant period ?
2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in not considering that the burden lies on the Department to prove that the amount belonged to the assessee, it was moreso when the four partners had admitted that the amount belonged to them and was consequently justified in holding that the sum of Rs. 52,000 from out of Rs. 92,000 found in the assessee’s premises was owned by the assessee ?”
Briefly stated, the facts giving rise to the present reference are as follows. The applicant is a registered firm. It derives income from selling Banarasi sarees, silk ties, ready-made silk kurtas. For the asst. yr. 1977-78, the previous year ending on 2nd Sept., 1976, the applicant disclosed total sales of Rs. 10,29,620 and a gross profit of Rs. 97,336, which was about 10 per cent of the sales. The ITO while framing the assessment, had observed that immediately in the preceding assessment year, the applicant had shown total sales of Rs. 5,10,408 and a gross profit of Rs. 56,630, which was about 12 per cent. He further found that the stock account maintained by the applicant was not correct as it was not maintaining stock details in the course of its day-to-day business. The books of account have also been disbelieved by the STO and the turnover has also been increased. Applying the provisions of s. 145 of the Act, the ITO rejected the trading results and estimated the sales at Rs. 10,75,000. He applied a GP rate of 11 per cent and made an addition of Rs. 20,914. He further found that a survey was conducted by the ITO and the Customs authorities on 5th Nov., 1975, as a result of which an amount of Rs. 1,46,436 was found in two almirahs. In one almirah, Rs. 92,000 was found in a safe, belonging to M/s Abdul Zain Abdul Matin and Co., a sister-concern of the applicant. When asked to show cause as to why the aforesaid amount be not treated as unexplained investment, the applicant stated that a sum of Rs. 40,000 belonged to Maulana Azad Sarkar Hospital, Naseelpara, Bari Bazar, Varanasi, which had been collected by way of donation from various persons by the hospital, which has been accepted by the ITO. The remaining amount of Rs. 52,000 was, however, added to the income of the applicant as the explanation offered that the said amount belonged to the four partners in equal shares of Rs. 13,000 each which the partners have saved from their withdrawals and earnings and have kept apart for the marriage of their daughters was disbelieved. The appeal filed by the applicant did not meet with any success in respect of addition of Rs. 52,000 and determination of income by best judgment assessment. The applicant preferred a second appeal before the Tribunal. The Tribunal while maintaining the invocation of the provisions of s. 145 of the Act, had directed the ITO to determine the gross profit at 11 per cent on the declared turnover in the absence of any suppression having been found. The explanation given by the applicant regarding the amount of Rs. 52,000 has been disbelieved.
We have heard Sri Vikram Gulati, learned counsel for the applicant, and Sri A.N. Mahajan, learned counsel appearing for the Revenue.
Learned counsel for the applicant submitted that in view of the finding recorded by the Tribunal that no suppression has been found, it was not open to the Tribunal to uphold the invocation of s. 145 of the Act. He further submitted that the partners having admitted the amount of Rs. 52,000 having been found in the almirah as their own, it could not have been added to the income of the applicant. He relied upon a decision of the Calcutta High Court in the case of Suganchand Chandanmal vs. ITO & Ors. (1976) 105 ITR 743 (Cal). Sri A.N. Mahajan, learned counsel for the Revenue, has, however, submitted that as the applicant has not maintained the stock register on daily basis, the books of account had not been maintained in a true and correct manner and, therefore, the provisions of s. 145 of the Act were rightly applied. He further, submitted that all the authorities including the Tribunal had disbelieved the explanation of the applicant about Rs. 52,000 and, therefore, the Tribunal was justified in adding it to the income of the applicant.
Having heard learned counsel for the parties, we find that it is not in dispute that the applicant had not maintained the stock details on daily basis. Thus, the stock position was not verifiable. Under s. 145 of the Act, it is open to the ITO if he is satisfied that the books of account have not been correctly maintained or are incomplete, to proceed to make assessment under s. 144 of the Act, i.e., best judgment assessment. As in the present case, the stock register has not been properly maintained, it did not depict the true and correct picture of stock. Thus, the ITO was justified in invoking s. 145 of the Act. No exception can be taken on this ground.
So far as the addition of Rs. 52,000 to the income of the applicant is concerned, the Tribunal which is the last fact finding authority, has held as follows : “We have considered the rival submissions as also the papers filed by the assessee and the decisions relied upon on its behalf. The decision in the case of Addl. CIT vs. Karnail Singh V. Kaleran (1974) 94 ITR 505 (P&H), cited on behalf of the assessee does not help the assessee. In that case, the facts were different. That case dealt with the question of imposition of penalty under s. 271(1)(c) where the Tribunal had found that there was no proof that cash belonged to the assessee. In the present case, the amount of Rs. 92,000 was found from the possession of the assessee and, therefore, there was a natural presumption of its belonging to the assessee. Of course, the presumption was rebuttable for which evidence had to be led and was led by the assessee. It is another matter that the assessee’s explanation was believed only in regard to Rs. 40,000 but was not believed with regard to the remaining amount of Rs. 52,000. Thus, it was a question of proof pure and simple. We have gone through the replies of the assessee as also the various statements of the assessee’s partners where they had accepted that the money belonged to them. According to the partners, they had each contributed Rs. 13,000 towards the accumulation of this aggregate of Rs. 52,000 which was kept apart for meeting the marriage expenses of their children in future. Therefore, it was for the assessee to establish this story to substantiate the contention that it represented the collective savings of the partners. So far as this is concerned, the withdrawals of the partners did not justify the same. There was also no evidence to connect that this amount actually came from out of the said withdrawals. In view of the same and having regard to all the facts and circumstances that the assessee had failed to establish the plea put forward on its behalf in this regard.
Accordingly, we find no justification for any interference with the order of the learned CIT(A). The addition is, therefore, confirmed.”
9. Sec. 69A of the Act deals with unexplained money, etc. It reads as follows : “69A. Unexplained money, etc.— Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the AO, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year.”
10. From a reading of the aforesaid section, it is seen that where an assessee is found to be the owner of any money, which is not recorded in the books of account and the explanation offered by him is not found to be satisfactory, the money is to be deemed the income of the assessee for such financial year. Here the explanation offered by the applicant has been disbelieved. The findings recorded by the Tribunal are based on appreciation of evidence and material on record and do not suffer from any illegal infirmity.
11. The decision in the case of Suganchand Chandanmal (supra), relied upon by learned counsel for the applicant, is not applicable to the facts of the present case inasmuch in the present case, the Tribunal has recorded a categorical finding that the explanation offered by the applicant that it was from the savings/withdrawals of the partners, had not been established. Moreover, the assessment has been made on the partners on the protective basis.
12. In view of the foregoing discussion, we answer both the questions of law in the affirmative, i.e., in favour of the Revenue and against the assessee.
[Citation : 274 ITR 490 ]
