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2008 DIGILAW 361 (KAR)

Fifth Avenue v. Commissioner of Income Tax

2008-07-10

B.V.NAGARATHNA, K.L.MANJUNATH

body2008
JUDGMENT K.L. Manjunath, J.— Heard the counsel for the parties. 2. This appeal is by the assessee challenging the legality and correctness of the order passed by the Tribunal, Bangalore Bench in ITA No. 860/Bang/1996, dt. 20th Oct., 2003 wherein the appeal filed by the Revenue against the order of CIT(A) has been allowed in part. The facts of the case are as hereunder: The appellant is a registered partnership firm consisting of 15 partners. The firm is being managed by three partners by name, Irfan Razack, K. Rahman Khan and Sri Sadath All Khan. The firm constructed a commercial complex known as 'Fifth Avenue' consisting of ground + three floors. The building is consisting of 82 commercial shops. The building was under construction till the end of January, 1993. Different shops are sold by the firm under different sale deeds to several buyers. On 5th Jan., 1993 exercising the powers under Section 132 of IT Act, M/s India Builders Corporation (which is also a partnership firm) was searched. During the search, document pertaining to the appellant firm was seized. Based on the documents seized during the search conducted in the premises of one of the partners of the appellant firm, the proceedings were initiated. According to the Revenue, while selling different portions of the building apart from the sale consideration shown in the sale deeds, the firm had also received additional sale consideration by cash which has not been accounted and the consideration shown in the sale deeds are received by the firm through cheques. An enquiry was conducted and the AO held that the unaccounted income of the assessee firm has to be brought into tax. Accordingly, the appellant firm was called upon to pay tax Rs. 1,52,49,240 and also ordered for separate penalty proceedings under Section 271(1)(c) of the IT Act. Challenging the order passed by the AO, the appellant-assesses filed an appeal before the CIT(A). The CIT(A) after hearing the parties allowed the appeal on the ground that the document seized was not while conducting a search on the premises of the assessee and there is nothing to show that unaccounted money was received by the firm and that the computer printout cannot be linked with the transaction pertaining to the appellant. Therefore, the appeal filed by the assessee was allowed by the CIT(A). Therefore, the appeal filed by the assessee was allowed by the CIT(A). Against which, the Revenue took up the matter in appeal before the Tribunal, Bangalore Bench. The Tribunal, Bangalore Bench after examining the legality and the correctness of the order passed by the AO and so also the order passed by the CIT(A) came to the conclusion that even though the document was seized from the premises of a partner of the appellant firm-India Builders Corporation, as the document is pertaining to the appellant firm and that the seizure of the document from the premises of India Builders Corporation has not been denied by the appellant firm, considering the provisions of Section 3(18) of the General Clauses Act and also the presumption attached under Section 132(4A) of the IT Act, held that the partners of the appellant firm have received unaccounted money in cash and the same has to be brought into assessment. According to the Tribunal, the statement of Mr. Ziaulla Sheriff discloses that he is a partner of 10 per cent share and his son Yunuz Zia is also a partner of 10 per cent share and Irfan Razack is the main partner managing the affairs of the firm and that Irfan Razack was examined on 24th Feb., 1993. In his evidence he has denied the receipt of cash on behalf of the appellant firm and he admitted the contents of the seized printout material. Relying upon the evidence of Irfan Razack, the Tribunal came to the conclusion that the partners of the firm accepted the contents of the printout taken from the computer in respect of the appellant firm from India Builders Corporation and therefore came to the conclusion that the CIT(A) has committed an error in allowing the appeal. Accordingly the order passed by the CIT(A) was set aside and the order passed by the AO was restored to challenge the same. 3. The present appeal is filed on the following substantial questions of law: (1) Whether on the facts and in the circumstances of case the AO was justified in bringing a sum of Rs. 2,32,28,173 for tax in respect of the asst. yr. 1993-94 in the hands of the appellant firm even though the amount was paid by the purchaser on different dates to the managing partners of the firm ? 2,32,28,173 for tax in respect of the asst. yr. 1993-94 in the hands of the appellant firm even though the amount was paid by the purchaser on different dates to the managing partners of the firm ? (2) Whether the presumption attached to Section 132(4A) of the Act can be imported to the appellant's case even though the search was not conducted on the premises of the appellant ? 4. We have heard the learned Counsel for both the parties at length. 5. It is not in dispute that the premises of Ziaulla Sheriff and his son Yunus Zia, the partners, the assessee was searched and a computer printout in respect of the sale transactions of the Fifth Avenue was seized from the premises of the India Builders Corporation. It is also not in dispute that Ziaulla Sherifff, his son Yunus Zia are the partners of the appellant firm. Even though the appellant firm's premises is not searched, when an important document is seized by the authorities from the premises of the partners of the appellant firm, it is for the appellant to show that the appellant or any of its partners did not receive such money by way of cash which had not been disclosed in the return filed by the appellant. When the appellant is contending that it has not received cash from the purchasers and that the sale consideration shown in the sale deeds alone was paid to the appellant, the onus was on the appellant to examine its partners to dispel such contentions. When the appellant has admitted the seizure of the document in question from the premises of its partners Ziaulla Sheriff and Yunus Zia, it is for them to explain that this particular document is not pertaining to the partnership concern of the appellant and it is also for them to show under what circumstances the said document was in possession of its partners and similarly it was for them to show the said document has nothing to do with the business activities of the appellant. For the reasons best known to the partners of the appellant, such an explanation has not been offered by them before the AO. For the reasons best known to the partners of the appellant, such an explanation has not been offered by them before the AO. The AO considering the background of the case and when the appellant is not disputing the document seized by the Department from India Builders Corporation has rightly come to the conclusion that a sum of Rs. 2,32,28,173 was not shown in the return of income filed by the appellant and the same has to be brought into the tax. But the CIT(A) on an erroneous finding has set aside the well considered order passed by the AO. It is no doubt true that the document is seized from India Builders Corporation. As we stated earlier when the seizure of the document is not denied by the partners of the appellant firm, it is for them to explain to show that such a document is not concerning the business of the appellant. But the CIT(A) without assigning any valid reasons had erroneously reversed the findings of the AO. Therefore, we are of the opinion that the Tribunal is justified in reversing the finding of the CIT(A), bringing the amount of Rs. 2,32,28,173 into tax. Our view is also supported by the provisions of Section 292C of the IT Act. 6. At this stage, learned Counsel for the appellant submits that the Tribunal while considering the matter pertaining to penalty proceedings initiated under Section 271(1)(c) of the IT Act has remanded the matter to the AO to ascertain and give a finding whether the entire unaccounted money of Rs. 2,32,28,173 was received in the asst. yr. 1993-34 and whether the same was received by the partners of the appellant firm on different dates and that the amount so received has to be spread over based on the actual receipt of the money in different assessment years. Relying upon the order of the Tribunal rendered in penalty proceedings, the learned Counsel for the appellant submits that even in this case, the matter has to be reconsidered by the AO in order to ascertain whether the amount of Rs. 2,32,28,173 was received by the partners of the firm during asst. yr. 1993-94 or not. Relying upon the order of the Tribunal rendered in penalty proceedings, the learned Counsel for the appellant submits that even in this case, the matter has to be reconsidered by the AO in order to ascertain whether the amount of Rs. 2,32,28,173 was received by the partners of the firm during asst. yr. 1993-94 or not. According to him, the search material would disclose that this amount was not received in any particular assessment year and that assessment has to be reopened and the same has to be brought into tax based on the actual unaccounted money by the partners from time to time by the purchasers in different assessment years. 7. The search material shows that payments were made on different dates. In the instant case, based on the search material, the entire unaccounted money has been brought into tax for the asst. yr. 1993-94, which in fact is not fully correct. Therefore, we are of the view that the order passed by the AO has to be set aside and the matter has to be remanded to the AO to find out whether Rs. 2,32,28,173 was received by the partners of the appellant firm during asst. yr. 1993-94 or not and based on such finding, the assessment has to be completed. Therefore, it is for the appellant and his partners to explain and produce relevant documents before the AO to show that when and how the aforesaid amount of Rs. 2,32,28,173 was received by them. If the partners of the appellant firm are unable to produce any material evidence, then it is for the AO to complete the assessment, treating that the amount has been received by the partners of the appellant firm during asst. yr. 1993-94 only. In view of the assessment made by us, at the request of the assessee, assessee shall not raise any question of limitation and shall treat the schedule on the ground that assessment of the partners of the appellant firm is also completed. 8. With the above direction, the appeal is allowed and the matter is remanded to the AO only to consider the case whether the unaccounted money has to be spread over for different assessment years or for the asst. yr. 1993-94.