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Rajasthan High Court · body

2005 DIGILAW 2482 (RAJ)

CIT-II, Jodhpur v. Samaj Ram Soni

2005-09-16

R.S.CHAUHAN

body2005
Judgment Rajesh Balia, J.-We have heard learned Counsel for the parties. 2. The background of the appeal shows the chequered history of the case as different view has been taken by the Appellate Authorities at different times relating to the matter of additions of gold and silver ornaments found in possession of the assessee during search proceedings as income of the assessee as his undisclosed investment. It resulted in initiation of the penalty proceedings under Section 271(1)(c) for the concealment of particulars of income for the assessment year 1992-93. It resulted in the order imposing penalty of Rs. 9,75,000/-on the respondent assessee by the Assessing Officer. 3. A search was conducted at the residential premises of assessee on 21.01.1992 in which certain silver and gold ornaments were found and seized. 4. Firstly the assessee had submitted his return on 27.08.1992 for the assessment year 1992-93 showing his income at Rs. 1,93,273/-. The assessee is by profession goldsmith and is engaged in making gold ornaments. After filing the return on 27.08.1992, the assessee filed a revised return on 011.1993 showing his total income of Rs. 14,93,687/-. 5. In the first instance, the assessment was finalised on 30.11.1993 at Rs. 33,81,467/-under Section 143(3) of the Act of 1961. 6. The assessee preferred an appeal and the CIT (Appeal) vide its order dated 29.03.1994 set aside the assessment by granting relief of Rs. 8,83,040/-in respect of certain additions and directed the Assessing Officer to hold fresh inquiry and pass fresh assessment order. 7. It would be apposite here to notice that the controversy about the additions and the penalty related to additions in declared income of the assessee made in the assessment order by the Assessing Officer and the CIT (Appeals) remainspended unless and until the matter attains finality with the order of the ITAT. 8. The assessee has claimed that apart from the surrender of the gold and silver ornaments found in his possession during the search representing his investment from income, he had submitted that part of the gold ornaments found during search belonging to his mother, since deceased, and the part of gold ornaments belonging to his wife and daughter-in-law. These ornaments were given to the mother and his wife of the assessee by his father. These ornaments were given to the mother and his wife of the assessee by his father. So far the part of gold ornaments and silver claimed to be given to his daughter-in-law, it was claimed to have been given out of his family possessions. In the intimation of the assessment under Section 143(1)(a), the Assessing Officer has accepted part of explanation. It has accepted that the gold ornaments belongings of Ganga Devi and partly accepted the belonging of mother of the assessee and daughter-in-law of the assessee but did not accept the whole of the explanation submitted by the assessee about the possession. 9. The CIT (Appeals) in his order dated 29.03.1994 in appeal against order dated 30.11.1993 has categorically held that no reason has been assigned for not accepting the whole explanation. The Assessing Officer having accepted the part of the explanation submitted by the assessee did not show on which basis the remainder has not been accepted. The CIT (Appeals) also found that assumption of the Assessing Officer that alleged gold and silver ornaments claimed to be belonging of the mother and daughter-in-law of the assessee was part of stock and trade cannot be accepted as founded on no material. 10. As a result of setting aside of the first assessment order dated 30.11.1993; second and regular assessment order was passed in pursuance of the appellate order dated 29.03.1994 on 26.08.1994 and the total income was revised to Rs. 24,98,430/-. 11. The assessee again preferred appeal against second reassessment order which was also allowed by the CIT (Appeals) vide order dated 09.01.1995. In this appeal, similar findings were made about not accepting the whole of the assessees explanation while part of the explanation was found to be valid and against raising presumption that part of the gold and silver ornaments in question about which explanation furnished was not accepted, and which was claimed to be belonging to the mother and daughter-in-law of the assessee to be part of stock and trade. Hence, such additions were not sustained. 12. This led to third assessment by the Assessing Officer on 07.09.1996 and he again assessed the income at Rs. 24,98,430/-making an addition of 9 lacs over the second assessment order. Hence, such additions were not sustained. 12. This led to third assessment by the Assessing Officer on 07.09.1996 and he again assessed the income at Rs. 24,98,430/-making an addition of 9 lacs over the second assessment order. This finding has been challenged and by order dated 20.08.1996, the CIT (Appeals) upheld the additions made in the income of the assessee as they were liable to the additions made on gold ornaments and silver claimed to be belonging to his mother and daughter-in-law of the assessee without noticing the reason for which the additions made on two occasions earlier on the very same material were not sustained by the CIT (Appeals). 13. Against the above last mentioned order of the CIT (Appeals), the assessee preferred an appeal before ITAT. While the appeal was pending before the ITAT, the penalty order was passed by the Assessing Officer. According to that order, the proceedings were initiated earlier but because of the pendency of the appeal and intervening proceedings, they were not proceeded with. Therefore, after issuing fresh notice on 26.02.1997 in respect of the pending proceedings under Section 271(1)(c), the order imposing penalty of Rs. 9,75,000/-was passed as aforesaid on 08.04.1997. On appeal against the penalty order, the CIT (Appeals) vide his order dated 11.06.2003, partly allowed the appeal taking notice of the fact that on appeal before the ITAT to the extent relief has been granted by the ITAT, the penalty amount need to be reduced and recalculated, the penalty on the additions, in assessed income sustained by the ITAT was levied at the rate of 100% of the additions sustained by the ITAT. 14. This order dated 11.06.2000 of the CIT (Appeals) was passed after the order of the ITAT on the quantum appeal wherein no finding was recorded on the submissions made by the assessee about the genuineness of the explanation offered by the assessee about bona fide nature of the explanation submitted by him. 15. On further appeal, in penalty proceedings the Appellate Tribunal, Jodhpur Bench, Jodhpur vide order under appeal dated 17.02.2004 deleted the penalty levied in respect of gold and silver ornaments but the penalty in respect of cash found on search was sustained after deduction of the amount of Rs. 36,000/-, explanation about which was accepted for the rest of cash found in possession of the assessee was not accepted by the Tribunal. 10.16. 36,000/-, explanation about which was accepted for the rest of cash found in possession of the assessee was not accepted by the Tribunal. 10.16. Thus, the penalty imposed in respect of the alleged concealment of particular of income relating to the additions made on account of gold and silver ornaments found in possession of the assessee at the time of search were deleted in totality on the finding that since part of the explanation was accepted by the Tribunal as to gold ornaments and silver claimed to be the belonging to three female members of the assessees family and part of which has not been accepted on the pre-ponderance of the evidence, but it cannot be said that the explanation furnished by the assessee suffered from wilful fraud on his part or it cannot be said to be an explanation which was not founded on any bona fide on the part of the assessee. 17. In view of this, the Tribunal was of the opinion that it rebutted the presumption of concealment on the part of the assessee and, therefore, penalty was held to be not imposable on that part of the additions sustained by the ITAT. In coming to this conclusion, the Tribunal was fully alive of the fact that penalty proceedings are independent of the assessment proceedings and the material and finding recorded in the assessment proceedings, though are relevant for the purpose of appreciating the explanation furnished by the assessee in the penalty proceedings, but they are not of conclusive character and on the available material on the record, the presumption on account of additions cannot be sustained. Thus, the ITAT fully relied on correct principles of law while recording that explanation furnished by the assessee and may not be accepted as not substantiated by the evidence but the explanation furnished by the Assessing Officer falls within the domain of that explanation furnished by the assessee in respect of the possession of gold and silver ornaments claimed to be belonging to three members of his family and that all the facts relating to material about total income has been disclosed by him, therefore, it remained merely a case of non acceptance of explanation on prepondering of evidence not effecting the bona fide nature of the claim of the assessee and the disposal of the material which was in the possession at the time of filing of the return or during the course of the assessment proceedings. 18. It has been contended by the learned Counsel for the Revenue firstly that since the assessee has not responded to the notice under Section 271(1)(c), hence, it must be presumed that assessee did not furnish any explanation in regard to additions made in regular assessment. It is further submitted that in the absence of any explanation furnished by the assessee Clause (b) of the explanation is not applicable in the present case and the presumption required to be raised under Clause (a) against the assessee was not rebutted. Therefore, the Tribunal has seriously erred in law in giving benefit of explanation to the assessee. 19. Having carefully examined the order passed by the Assessing Officer in the penalty proceedings, and having perused the record, it appears that only fact noticed by the Assessing Officer is that the assessee has not submitted any written submission in response to notice under Section 271(1)(c), but it is nowhere to be found that the assessee has not participated in the penalty proceedings. It is not the requirement of law that notice has to be responded necessarily by filing written submissions. 20. This clearly goes to show that the Assessing Officers attention was invited to the explanation furnished during the assessment proceedings while hearing of penalty proceedings took place. In these circumstances, absence of participation of the assessee in the penalty proceedings cannot be presumed. 21. 20. This clearly goes to show that the Assessing Officers attention was invited to the explanation furnished during the assessment proceedings while hearing of penalty proceedings took place. In these circumstances, absence of participation of the assessee in the penalty proceedings cannot be presumed. 21. Once it is accepted that the assessee has responded by appearing in person before the Assessing Officer and put his case as he has submitted in assessment proceedings, the case falls under Clause (b) of the Explanation 1. However, the authority found that the explanation furnished by the assessee was bona fide though may not have been accepted by the Assessing Officer, the penalty cannot be levied. 22. We have noticed above the different findings reached by the Appellate Authorities at different stages of the assessment proceedings. At least two times, the CIT (Appeals) has reached the same conclusion as the ITAT has ultimately reached in the penalty proceedings, which goes to suggest that the view taken by the Tribunal was plausible. At the cost of repetition, we may notice that in appeal against the order of assessment while the Tribunal found that in respect of belongings of the gold and silver ornaments to the female members of the family, explanation furnished by the assessee was accepted in part, there is nothing to suggest that another part of explanation, which was not accepted to be satisfactory by the Assessing Officer during assessment proceedings was false or baseless. Moreover in the penalty order, we find that another baseless presumption has been raised by the Assessing Officer to discard the explanation submitted about bona fide; namely while it finally admitted that certain amount referred to belongings to the daughter-in-law, one does not find any material to support this presumption which has come from the material that the belonging of the gold and silver ornament relates to the lady members of family of assessee. .23. The another aspect which needs notice in the totality of the circumstances, is that firstly, the Assessing Officer and the other authorities have found that part of the gold found in possession of the assessee at the time of search and one belonging to wife of assessee which was claimed to be given to wife by her father-in-law, the father of assessee. However, when the assessee claimed that gold and silver ornaments were given to the daughter-in-law of the assessee also at the time of marriage by his father and that the father of the assessee has given certain ornaments to the assessees mother and wife of the assessee, the Assessing Officer has found that there was no family possession of gold and silver ornaments which could have been given by the father of the assessee to his mother and daughter-in-law. That is quite incongruous of first finding. If father of assessee had gold and silver to give it to his sons wife, how could it .be presumed that he had none to give some gold and silver to his own wife and his grand sons wife. Secondly while in the assessment proceedings presumption has been raised by him that all these belongings are part of the stock in trade of the assessee, in the penalty proceedings about the holdings alleged to be of daughter-in-law, the same has been held to be the holdings of assessees wife. Both the presumptions raised by the Assessing Officer about ornaments belonged to the father of the assessee are as if belonging of the family and could have been given to the mother and daughter-in-law of the assessee and that gold ornaments belonging to daughter-in-law came from the gold belonging to her mother-in-law or the wife of the assessee are not founded on any material. The Assessing Officer has noticed that the assessee during the course of assessment stated that his late father Shri Narayan Dass had made gifts to Smt. Ganga Bai, wife of assessee and Shri Moolchand, son of the assessee. He further stated that his Will was executed before his death. The assessee has also contended that the investment in the valuables was made out of the amount of gifts and the amount received as per will of his late father, Narayan Das. The belonging of Ganga Bai was accepted to be coming from the father of the assessee late Shri Narayan Dass through Will. The fact that Ganga Bai received gold ornaments from his father-in-law and the presumption that the family was not possessing of any gold ornaments are incongruous. The belonging of Ganga Bai was accepted to be coming from the father of the assessee late Shri Narayan Dass through Will. The fact that Ganga Bai received gold ornaments from his father-in-law and the presumption that the family was not possessing of any gold ornaments are incongruous. If the father-in-law could give gift of substantial amount of gold to daughter-in-law, it does not stand to reason that he could not have given the like substantial amount of gold to his wife also before giving it to his daughter-in-law. The acceptance of Will amounts to acceptance of genuineness of the disposable interest in existing ornaments which could be given in gift or Will. Once this presumption stand accepted and part of explanation furnished by the assessee about the belonging of gold ornaments to his daughter-in-law Pinku is accepted then the explanation furnished by the assessee that entire amount was given to him out of the family belonging at the time of his marriage also cannot be said to be false or not bona fide. .24. Thus the inference drawn by the ITAT about the bona fide nature of the assessees explanation submitted during the time of assessment proceedings being substantiated by evidence cannot be faulted. No question of law can be said to arise out of appellate order of Tribunal. The findings reached by the Tribunal are findings of fact, the same cannot be termed as perverse which could give rise to substantial question of law. Thus, the order does not call for any interference. 25. The appeal, therefore, fails and is hereby dismissed. 26. No costs.