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Allahabad High Court · body

2015 DIGILAW 463 (ALL)

Commissioner of Income Tax v. Rakesh Goyal

2015-03-11

SATISH CHANDRA, TARUN AGARWALA

body2015
JUDGMENT Dr. Satish Chandra, J. The brief facts of the case are that the assessee during the block period under consideration was carrying the business of manufacturing and sale of calcium carbonate in its factory located at Patni, Chikana Road, Saharanpur. On 17.3.1999, a search and seizure operation was conducted at the business premises of the assessee as well as the residential premises of its Directors. The books of account were found and seized from the office of the company at village Patni and some in premises of M/s. Thirll Hotels Pvt. Ltd.. Sri Rakesh Goyal is one of the Director of the assessee company as well as of the Hotel. On the basis of the seized material, the A.O. has made various additions which were partly allowed by the first appellate authority. Being aggrieved, the cross appeals were filed before the Tribunal, who has deleted the additions. Being aggrieved, the Department has filed the present appeal. Based upon certain observations made by the CIT(A), notice under section 148 was issued by the A.O. for the assessment year 1996-97 for the assessment year 1999-2000 to the company and to its Director. The said notice has been challenged by them in a writ petition. We have heard the learned counsel for the parties and gone through the material available on record. We decide the appeal as well as the writ petitions as under Income Tax Appeal No. 192 of 2004 1. The Income Tax Appeal No. 192 of 2004 is filed by the Department against the impugned order dated 28.11.2003, passed by the Income Tax Appellate Tribunal, Delhi in IT(SS) Appeal Nos. 108 & 233(Del)/2002 for the block period 1.4.1988 to 17.3.1999. 2. On 2.9.2009, a coordinate Bench admitted the Appeal on the following substantial questions of law "1. Whether the I.T.A.T. is justified in deleting the addition of Rs. 48 lacs made by the A.O. merely on the ground that no addition can be made on the basis of diary found from the almirah of Shri Dinesh Kumar, disgruntled employee, as no addition on account of unaccounted purchase was made. The ground was taken in remand report and whether in cases where rate is being applied, it is necessary to do so? 2. Whether the I.T.A.T. is justified in deleting the addition of Rs. The ground was taken in remand report and whether in cases where rate is being applied, it is necessary to do so? 2. Whether the I.T.A.T. is justified in deleting the addition of Rs. 48 lacs despite the fact that the assessee has not been able to prove that these papers do not belong to it and the application of G.P. Rate was based on the past record of the assessee which is the best guide for application of rate? The assessee himself surrendered an amount of Rs. 6,31,200/- on account of income/G.P. 3. Whether the I.T.A.T. is justified in deleting the addition of Rs. 48 lacs despite the fact that the activity of sales outside the books of account is proved from the fact that the debit balance were existing in excess to the balance shown in the return of income filed by the assessee? 4. Whether the I.T.A.T. is justified in deleting the addition of Rs. 48 lacs ignoring the provision of sub-section (4A) of section 132 which provide that anything found in the premises presumed to be belonging the assessee and the assessee has not discharged its onus? 5. Whether the I.T.A.T. is justified in deleting the addition of Rs. 28,73,759/- on the sole ground that no addition can be made on the basis of diary found from the almirah of Shri Dinesh Kumar ignoring the fact that these are the difference of balances of B-29 taken as actual business transaction and the balances shown in the return of income? 6. Whether the I.T.A.T. is justified in deleting the addition of Rs. 42,15,000/- made by the A.O. on account of unexplained deposit in O.B.C. Current A/c No. 4515 in month of March holding that these are covered by the cash sales ignoring the fact that no evidence whatsoever was filed by the assessee? 7. Whether the I.T.A.T. is justified in approving the directions of Ld. CIT(A) that the deposit in bank, as aforesaid can be considered in regular assessment ignoring the decision in the case of Commissioner of Sales Tax v. H.M. Esufali, H.M. Abdul Ali reported in : 90 ITR 271 and the ITAT bench of Pune in the case of Khopade Kisanrao Mnikrao v. Asstt. CIT (Pune) (T) : (2000) 74 ITD 25 (Pune), which permits such addition. The decision of Hon'ble Allahabad High Court relied upon by the Ld. CIT (Pune) (T) : (2000) 74 ITD 25 (Pune), which permits such addition. The decision of Hon'ble Allahabad High Court relied upon by the Ld. CIT(A) is not applicable in as much as the Hon'ble High Court has not distinguished the Principle of Law laid by the Hon'ble Supreme Court. 8. Whether the I.T.A.T. is justified in deleting the addition of Rs. 4 lacs on account of unexplained deposit in the form of bid money in the benami name of Shri Umesh Gupta on the ground that the addition either could have been made in the hands of Shri Naresh Kumar or Shri Umesh Gupta, ignoring the fact that the bid money was made on behalf of company and the appellant has not discharged its onus to prove the identity of Shri Umesh Gupta?" 3. The first four questions of law admitted in the appeal are related to the addition of Rs. 48 lacs, pertaining to the profit. During the course of search, documents marked as B-29; LP-18; and B-19 were seized from the premises of M/s. Thrill Hotel Pvt. Ltd.. The document B-29 was not in the handwriting of Shri Rakesh Goyal, Director of the Company. But on the basis of an entry, the A.O. made the addition of Rs. 48 lacs by observing that the transaction recorded on the impugned document was the transaction pertaining to the sale of goods out side the book of account, so, he has estimated the turnover as Rs. 2,10,10,249/- and made the addition of Rs. 48 lacs by adjudicating the n.p. rate @12%. 4. But the Tribunal which is the final fact finding authority, has observed that the A.O. estimated income by applying n.p. @12% and the resultant figure have been treated as income, but the same is not in accordance with the principle of computation of business income. Finally, the Tribunal has estimated the n.p. rate @ 6.5%, which was accepted by the department in the earlier years and shown by the assessee during the assessment year under consideration. 5. By considering the totality of the facts and circumstances of the case and on perusal of the record, it appears that the key of the almirah was provided at the time of search by Sri Rakesh Goyal and the same was seized. Later, the almirah was opened and incriminating material was found therein. 5. By considering the totality of the facts and circumstances of the case and on perusal of the record, it appears that the key of the almirah was provided at the time of search by Sri Rakesh Goyal and the same was seized. Later, the almirah was opened and incriminating material was found therein. The entry made in the seized document was already reflected in the books of account. The said slip can be treated as 'Yaaddast Parcha' i.e. memory slip. There was no sale out side the books so, there was no occasion to estimate the turnover or n.p., hence, the Tribunal has rightly applied the n.p. rate @ 6.5% which was accepted by the Department in the earlier years and the same appears reasonable in the peculiar facts and circumstances of the case. Moreover, estimation of n.p. rate is a question of fact, which was rightly decided by the Tribunal, being a final fact finding authority. The same is hereby sustained along-with the reasons mentioned therein. 6. The substantial question of law No. 5 is related to addition of Rs. 28,73,759/-. The A.O. has made the addition by taking balance on the seized document marked as B-29. But, by picking up balance in the regular books of accounts as on 31 March, 1998, the Tribunal has deleted the addition by holding that the balance shown in the loose papers cannot be taken into consideration in the block assessment, especially when the return was already on record for the Block period Further, the income shown in the return was found to be fully matching with regular books of accounts. Figures on the loose papers were already reflected in the books of accounts as well as in the returns for the relevant period. 7. By considering the rival submissions and on perusal of material available on record, it appears that the CIT(A) has deleted the addition after having the remand report from the A.O. From the record, it is evident that books of account were not rejected by the A.O. under Section 145 of the Act. Hence, there is no question to enhance the income on estimate basis by the A.O. In the circumstances, both the appellate authorities have rightly deleted the addition and the same is hereby sustained along-with the reasons mentioned herein. 8. The substantial questions of law Nos. 6 & 7 are related to addition of Rs. Hence, there is no question to enhance the income on estimate basis by the A.O. In the circumstances, both the appellate authorities have rightly deleted the addition and the same is hereby sustained along-with the reasons mentioned herein. 8. The substantial questions of law Nos. 6 & 7 are related to addition of Rs. 42,15,000/- made on account of unexplained deposit on various dates in the current account No. 4515 in the Oriental Bank of Commerce. The A.O. picked up the entries relating to deposits in cash in the month of March, 1998-99 (search year) and made the addition on the short ground that the explanation for deposit of Rs. 42,15,000/- did not appear to be reasonable. 9. But the Tribunal has deleted the addition by observing that the said entry pertaining to the deposit were duly reflected in the books of account. The books of account were seized during the course of search and entries were duly reflected at that time. The entries were also reflected in the excise record pertaining to the sale in-cash and the availability of cash with the assessee on the date of cash deposit in the bank. When it is so, then we find no reason to interfere with the impugned order passed by the Tribunal and the same is hereby sustained along-with the reasons mentioned therein. 10. The substantial question of law No. 8 is related to addition of Rs. 4 lacs on account of unexplained deposit in the form of bid money. From the impugned order, it appears that the addition of Rs. 4 lacs was made by the A.O. pertaining to the payment through Shri Umesh Gupta. The Tribunal has confirmed the addition of Rs. 4 lacs. When it is so, then there is no occasion for the department to have any grievance by taking this ground in the appeal. The ground was decided by the Tribunal in favour of the Department and it shows that the substantial questions of law have been framed in a casual manner by the department. Therefore, this question neither adjudicated nor any answer is provided. 11. The answer to all the substantial questions of law is in favour of the assessee and against the Department. In the result the appeal filed by the Department is dismissed. Income Tax Appeal No. 189 of 2004 12. Therefore, this question neither adjudicated nor any answer is provided. 11. The answer to all the substantial questions of law is in favour of the assessee and against the Department. In the result the appeal filed by the Department is dismissed. Income Tax Appeal No. 189 of 2004 12. This Appeal is filed by the Department against the impugned order dated 9.12.2003, passed by the Income Tax Appellate Tribunal, Delhi in IT(SS) Appeal No. 109 and 232(Del)/2002 for the block period 1.4.1988 to 17.3.1999. 13. On 2.9.2009, a coordinate Bench has admitted the Appeal on the following substantial questions of law "1. Whether the I.T.A.T. is justified in deleting the entire addition of Rs. 23,75,000/- made by the A.O. as unexplained investment in Saharanpur Associates u/s. 69, holding that no material was brought on record on the basis of which addition has been made and that whatever adverse inference was to be drawn, it could have be drawn in the case of M/s. Saharanpur Associates, despite the fact that the nexus has duly been proved and further the finding of the I.T.A.T. is not contrary to the finding recorded in the case of M/s. Patni Chemicals (A Company controlled by the assessee) and the provision of the Section 69 has not been violated." 2. Whether the I.T.A.T. is justified in approving the order of Ld. C.I.T. (Appeal) deleting the addition of Rs. 20 lacs on a/c of gift with the finding that such additions should be considered in the regular assessment despite the fact that fresh facts came to light during the course of statement u/s. 132 and the assessee could not even give family composition of the donor and in the block assessment proceedings, no evidence was find and even the signature on the gift deed was found fabricated as the assessee could not prove the visit of donor Shri Mhendra Singh in India and whether the finding is not contrary to the retrospective amendment in the computation of undisclosed income as contain in section 158 BB of the Act? 3. Whether the I.T.A.T. is justified in approving the order of Ld. C.I.T.(Appeal) deleting addition of Rs. 3. Whether the I.T.A.T. is justified in approving the order of Ld. C.I.T.(Appeal) deleting addition of Rs. 10,11,885/- on a/c of capital gain with the finding that such additions should be considered in regular assessment despite the fresh fact came to light and the assessee could not furnish complete details and the broker Blue Chips Investment Ltd. expressed his inability to trace the record and whether the finding is not contrary to the retrospective amendment in the computation of undisclosed income as contain in section 158 BB of the Act? 4. Whether the I.T.A.T. is justified in approving the order of Ld. CIT (Appeal) deleting the addition of Rs. 18,57,038/- made by the A.O. on a/c of bogus declaration in VDIS, with the observations that the finding of Ld. CIT (Appeal) neither could be controverted nor any material was brought on record, how the jewellery disclosed in VDIS was bogus, ignoring the recorded statement of the wife of the assessee with regard to categorical denial of having ever sold the jewellery which is sufficient and valid reason for disbelieving the declaration in VDIS? 5. Whether the I.T.A.T. is justified in upholding the finding of Ld. CIT (appeal) in granting relief of Rs. 1,47,000/- on a/c of seven gift received in the name of minor children on the ground that gift tax returns were filed, ignoring the fact that this was a device of capital formation in as much as the copies of seven gifts tax returns were found in the possession of assessee during the course of search? 6. Whether the I.T.A.T. is justified in upholding the order of Ld. CIT (Appeal) allowing the relief of Rs. 2,75,000/- on a/c of investment and income from the money landing business on the ground that it was a deaf and dumb document as no description of complete transaction was there, ignoring the fact that onus to prove the entries of papers found in the search, lies on the assessee and which onus has not been discharged by the assessee? 7. Whether the I.T.A.T. is justified in upholding the finding of Ld. CIT(Appeal) deleting the addition of Rs. 67,50,000/- being 45% share in Thrill Hotel Pvt. Ltd. Without appreciating the full facts of the case and the documents by way of contents of written letter and value of land taken for stamp purposes? 8. 7. Whether the I.T.A.T. is justified in upholding the finding of Ld. CIT(Appeal) deleting the addition of Rs. 67,50,000/- being 45% share in Thrill Hotel Pvt. Ltd. Without appreciating the full facts of the case and the documents by way of contents of written letter and value of land taken for stamp purposes? 8. Whether the I.T.A.T. is justified in confirming the order of Ltd. CIT (Appeal) granting relief of Rs. 4,37,569/- on account of diversion of income in the name of smt. Parul Goel, ignoring the fact that Smt. Parul Goel, wife of the assessee has categorically denied of having earned any income from tuition and cooking classes during the course of search and all the observation made by the I.T.A.T. is against the facts of the case?" 14. The first two substantial questions law raised by the department is pertaining to the addition of Rs. 23,75,000/-. The assessee is the Director in the M/s. Patni Chemicals Ltd. during the course of search on 17.3.1999, the A.O. has made addition of Rs. 25,75,000/- on account of investment made by the assessee in M/s. Saharanpur Associates. The first appellate authority has made the addition of Rs. 15,25,000/- by giving relief to the assessee of Rs. 8,50,000/-. However, the Tribunal has given the entire relief to the assessee of Rs. 23,75,000/-. 15. After hearing the submissions of the learned counsel for the parties, it appears that during the course of search, a diary was found in which at page 78, some details were mentioned pertaining to the contract of river bed mining by M/s. Saharanpur Associates. On the basis of the entries, the addition was made for Rs. 26.75 lacs, in the hands of the assessee namely Shri Rakesh Goyal. From the record, it also appears that the details of drafts prepared in the balance sheet of M/s. Saharanpur Associates shows that Rs. 13.5 lacs has been returned to Shri Rakesh Goyal i.e. the assessee, one of the partner of M/s. Saharanpur Associates Group. After examining the document, the CIT(A) has found that the Rs. 15,25,000/- was recorded in the hands of assessee. 16. 13.5 lacs has been returned to Shri Rakesh Goyal i.e. the assessee, one of the partner of M/s. Saharanpur Associates Group. After examining the document, the CIT(A) has found that the Rs. 15,25,000/- was recorded in the hands of assessee. 16. During the course of arguments the representative of the department has relied upon the A.O. order and he has stated that the assessee was the partner of M/s. Saharanpur Associates, neither any proper explanation was given nor any documentary evidence was submitted by the assessee pertaining to the transaction, so the addition was rightly made under Section 69 of the I.T. Act. 17. On the other hand, learned counsel for the assessee submitted that search was also conducted in the case of M/s. Saharanpur Associates and it was noted that the credit entry of Rs. 26,75,000/- was in the name of assessee. Out of this credit entry of Rs. 26,75,000/-, a sum of Rs. 3 lacs has been explained by the assessee, as the same was made after withdrawal from Ms/Patni Chemicals Ltd. The CIT(A) has further noted that the assessee had paid further amount of Rs. 8.5 lacs out of saving bank account No. 14718 with the Oriental Bank of Commerce, Saharanpur and the same was duly disclosed in the income tax return year after year. It is the submission of the learned counsel that the during the search at M/s. Saharanpur Associates, the entry was found in the name of company's account, but the name of the assessee was not mentioned. 18. By considering the rival submissions and on perusal of material available on record, it appears that neither the copies of the documents on which basis the addition was made for Rs. 15,25,000/- confronted to the assessee nor any other material was brought on record, which will justify the addition. So, no adverse inference can be drawn with regard to entry of Rs. 15,25,000/- wrongly shown pertaining to the assessee. It is a finding of fact that no name of the assessee was mentioned in the documents on which basis the addition was made. Moreover, it is a question of fact and in the absence of material evidence, we find no reason to interfere with the impugned order and the same is hereby sustained along-with the reasons mentioned herein. 19. The substantial question of law No. 3 is pertaining to addition of Rs. Moreover, it is a question of fact and in the absence of material evidence, we find no reason to interfere with the impugned order and the same is hereby sustained along-with the reasons mentioned herein. 19. The substantial question of law No. 3 is pertaining to addition of Rs. 10,11,885 on account of capital gain. The A.O. has made the addition of Rs. 10,11,885/- on account of capital gain on sale of share. The CIT(A) as well as the Tribunal have deleted the addition by holding that the capital gain arising out of sale of share was duly shown during the year 1992-93, while filing regular return. 20. After hearing the learned counsel for the parties and on perusal of material available on record, it appears that when the capital gain on sale of share was duly shown in the assessment year 1992-93, then there is no question to make addition, hence the order passed by the Tribunal is hereby sustained along-with the reasons mentioned herein. 21. The substantial question of law No. 4 relates to addition on Rs. 18,57,038/-. The A.O. has made this addition on account of bogus declaration in VDIS in the name of assessee's wife namely Smt. Parul Goyal. 22. After hearing both the parties and on perusal of material available on record, it appears that wife of the assessee namely Smt. Parul Goyal had availed the benefit of VDIS Scheme, 1997 and disclosed jewellery of Rs. 18,57,384/-. The A.O. observed that the declaration of VDIS was not genuine. But the CIT(A) as well as the Tribunal held that the VDIS declared in the name of the wife of the assessee was duly accepted by the department. When it is so, then there is no question for making the addition again. When the amount was bogus in the VDIS then there is no occasion to make any addition, specially when declaration was accepted by the Department. Considering the facts and circumstances of the case we find no reason to interfere with the order passed by the appellate authorities. So this question has no merit. 23. The substantial question of law No. 5 is pertaining to addition of Rs. 1,47,000/- on account of seven gifts received in the name of minor children of the assessee. Considering the facts and circumstances of the case we find no reason to interfere with the order passed by the appellate authorities. So this question has no merit. 23. The substantial question of law No. 5 is pertaining to addition of Rs. 1,47,000/- on account of seven gifts received in the name of minor children of the assessee. Various gifts were received by the minor son of the assessee and the gift tax returns were filed during the relevant period of time. So, the CIT(A) has deleted the addition by accepting the gifts as genuine. The Tribunal has rightly observed that when the gift tax return and regular return were duly filed at the relevant time, then there is no question for making the addition again. We agree with it. 24. The substantial question of law No. 6 is pertaining to addition of Rs. 2,75,000/- on account of investment and income from the money lending business. The A.O. has made the addition on Rs. 2,75,000/- on the basis of loose papers marked as pages 22 and 25 found during the course of search. These parchas were numbered as 25 to 32 of Annexure-26. These parchas were containing some jointing which give an aggregate figure of Rs. 5.42 lacs and Rs. 2,50,000/-. The A.O. considered that it was an investment from the undisclosed source, so he observed that the assessee was dealing in the business of money lending and accordingly, he estimated the investment in money lending at Rs. 10 lacs and likewise the figure of Rs. 2,50,000/- was altered by Rs. 2,75,000/-. The CIT(A) has deleted the addition by observing that the said papers were deaf and dumb documents as no details were mentioned except amount and also no name was mentioned. The Tribunal upheld the same. The Tribunal observed that these documents are simple deaf and dumb documents, which cannot be considered for making any addition, specially, when no incriminating evidence was produced. When it is so, then we find no reason to interfere with the order passed by the Tribunal and the same is hereby sustained along-with the reasons mentioned herein. 25. The Tribunal observed that these documents are simple deaf and dumb documents, which cannot be considered for making any addition, specially, when no incriminating evidence was produced. When it is so, then we find no reason to interfere with the order passed by the Tribunal and the same is hereby sustained along-with the reasons mentioned herein. 25. The substantial question of law No. 7 is pertaining to addition of 67,50,000/- being 45% in Thrill Hotel Pvt. Ltd. The A.O. has observed that this amount was invested by the assessee for purchasing the property in the name of Thrill Hotel Pvt. Ltd., the property was purchased in the year 1997 for which an agreement was executed on 12.5.1989. The A.O. has made the addition by observing that a paper was found from the possession and control of Shri Nand Kishore Goyal, father of the assessee, who was living upstairs in the same residential premises and recovery was made from him was inventorised separately and block assessment order was passed in his case. The addition, if any, i.e. in the hands of Shri Nand Kishore Goyal and certainly not in the hands of the assessee. When it is so, then the Tribunal has rightly deleted the addition and the same is hereby sustained along-with the reasons mentioned herein. 26. The substantial question of law No. 8 pertaining to grant of relief of Rs. 4,37,569/-. The A.O. has made the addition on account of diversion of income in the name of wife of the assessee. The A.O. observed that Smt. Parul Goyal i.e. wife of the assessee is not filing any separate return on her behalf and came to the conclusion that her income is the income of the assessee. The CIT(A) has deleted the said addition by observing that Smt. Parul Goyal had filed regular return since long, therefore, she is independent. 27. By considering the rival submission, we are of the opinion that the assessee and Smt. Payal Goyal are the husband and wife in the bedroom, but for the purpose of income tax they are separate and they have filed their separate return since long, which were accepted by the department. When it is so, then there is no justification to make addition. 28. When it is so, then there is no justification to make addition. 28. In the light of the above discussion and by considering the totality of the fact and circumstances of the case, we find no reason to interfere with the impugned order passed by the Tribunal the same is hereby sustained along-with the reasons mentioned herein. 29. The answer to all the substantial questions of law is in favour of the assessee and against the Department. 30. In the result the appeal filed by the department is dismissed. WRIT TAX No. - 473 of 2003 and 474 of 2003 31. By these writ petitions the assessee has made a request that the notice dated 18.6.2002 and 13.9.2002 may kindly be quashed. 32. In the appeal filed by the department the Tribunal has deleted the addition of Rs. 42,15,000/- and Rs. 20,00,000/- respectively by observing that "however, the A.O. is free to consider this view in the regular assessment proceedings." pursuant to observation the A.O. has issued notice under sections 148/147 for the assessment year 1996-97 in the hands of the each assessee. 33. After hearing both the parties and on perusal of record, it appears that when the addition is deleted on merit and we uphold the same, then there is no question to issue any further notice for re-opening of the assessment under section 148/147. Therefore, we expunge the above mentioned directions and quash the impugned notice for the assessment year under consideration. The assessee will get the relief, accordingly. 34. Consequently, both the writ petitions are allowed.