Pipushkumar O. Desai vs Commissioner of Income Tax

A.R. Dave J.

At the instance of the assessee, the following three questions have been referred to this court for its opinion, by the Income Tax Appellate

Tribunal, Ahmedabad Bench ""B"", under the provisions of Section 256(1) of the Income Tax Act, 1961 (hereinafter referred to as ""the Act"").

Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in upholding the addition of Rs. 12,728 as unexplained

investment of the assessee in part value of ornaments appearing at Sl. No. 10 of the panchnama ?

Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the contents of the seized papers at

pages 63 to 70 of the paper book do not in any manner establish that it represents the papers relating to acquisition of the same items of ornaments

which are mentioned at Sl. No. 101 ?

Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the general explanation as to the source

as explainable from the cash flow charts cannot be accepted in the absence of some precise details about the withdrawals made in the proximity of

that period ?

The facts giving rise to the present reference application, in a nutshell, are as under :

A search was conducted at the residence of the assessee on November 22, 1983. During the course of the search, cash and jewellery were found,

out of which part of the jewellery had been seized. The Assessing Officer came to the conclusion that the assessee was found to be the owner of

jewellery worth Rs. 66,432 during the assessment year in question, which was not recorded in the books of account and as the assessee could not

offer any explanation about the nature and source of acquisition of the said jewellery, the value of the said jewellery was deemed to be the income

of the assessee for the said assessment year as per the provisions of Section 69A of the Act.

Being aggrieved by the said finding, the assessee had filed an appeal before the Commissioner of Income Tax (Appeals). The said appeal was

not accepted so far as the question with regard to the said jewellery was concerned.

Being aggrieved by the order of the Commissioner of Income Tax (Appeals), the assessee had approached the Tribunal by filing an appeal. In

the appeal, the Tribunal was pleased to reduce the said amount from Rs. 66,432 to Rs. 12,728. Thus, the said amount was deemed to be the

income of the assessee under the provisions of Section 69A of the Act.

The learned advocate, Shri J.P. Shah, appearing for the assessee, has submitted that, though sufficient explanation was offered to the

Department at the time when the search was carried out and thereafter by producing before the concerned authority details with regard to the

inflow of cash from which the jewellery in question had been purchased by the assessee, the Tribunal did not consider the explanation offered by

the assessee and did not look into the record giving details with regard to the sources and the Tribunal had wrongly added the value of the said

jewellery in the income of the assessee as per the provisions of Section 69A of the Act.

It has been submitted by him that the question revolves around item No. 101 forming part of the panchnama which deals with ""two rai ful, one

pair of butti with jadtar"" which was valued at Rs. 18,500 at the time of the search. It has been submitted by him that though sufficient details with

regard to the source from which the said jewellery was purchased were given, the Tribunal did not consider the same and added the value of the

jewellery worth Rs. 12,728 in the hands of the assessee finder the provisions of Section 69A of the Act. The learned advocate, Shri Shah, has

taken us through several documents giving details with regard to the explanation offered by the assessee. The said documents were not considered

by the Tribunal while deciding the appeal. Shri Shah has drawn our attention to page 124 of the present paper-book stating that in the month of

October, 1983, the assessee had spent the following amounts for the purpose of purchase of the jewellery referred to hereinabove, which was

valued at Rs. 18,500.

Rs. 10,000 paid in cash

Rs. 3,500 paid to Shri Hiralal Soni

Rs. 2,000 paid to Shri Pravinbhai Zaveri

Rs. 200 paid to Shri Rasikbhai Babula

Rs. 6,500 paid to Shri Pravinbhai Zaveri

Rs. 175 paid as per a note

Thus, according to him, a sum of Rs. 22,375 was paid for the purchase of the jewellery in question and therefore by no stretch of imagination, it

could have been said that the source from which the jewellery was purchased was not explained by the assessee. It has been submitted by him that

while discussing the issue with regard to inclusion of the said amount in the income of the assessee, the Tribunal has observed that, from the seized

papers nothing had been found to show that the jewellery referred to hereinabove had been acquired from the sources explained by the assessee.

He has further submitted that the Tribunal had not relied upon the cash flow statement which was submitted by the assessee after the search on the

ground that the said cash statement was prepared afterwards.

It has been submitted by the learned advocate, Shri Shah, that the cash flow statement, which was submitted by the assessee to the Revenue,

was prepared subsequently because at the given point of time the assessee was not maintaining regular books of account pertaining to his

household expenditure. In the circumstances, with the help of books of account pertaining to the business and from the vouchers which were

available with the assessee, the assessee had prepared a statement giving details with regard to inflow of cash and expenditure incurred by the

assessee and his family members for the period commencing from October 21, 1979, till the date of the search and in the said statement he had

referred to all the entries whereby cash was withdrawn from the bank or from the business by all his family members for the purpose of incurring

household expenditure and purchasing jewellery, etc. He has submitted that the statement denoted that the assessee was having sufficient funds at

the time when the assessee''s daughter, Mamta, was to marry and from the funds available, the jewellery in question had been purchased.

According to learned advocate, Shri J.P. Shah, the Tribunal had committed serious jurisdictional error by not looking at the documents which were

absolutely relevant for the purpose of determining the issue before the Tribunal.

It has been further submitted by him that by not looking at the relevant documents the Tribunal had seriously erred in exercise of its jurisdiction

and had materially erred in coming to the conclusion that a sum of Rs. 12,728 should be added to the income of the assessee as per the provisions

of Section 69A of the Act.

On the other hand, the learned advocate, Shri Naik, has tried to support the order passed by the Tribunal and has submitted that the assessee

had not given specific details with regard to the amount spent by the assessee during the period commencing from October 21, 1979. According

to him, the assessee had not withdrawn substantial amount at the time when the marriage of the assessee''s daughter was to take place. According

to him, the Tribunal had rightly not considered the statement giving details with regard to cash inflow for the reason that the said statement was

prepared after the search operations were concluded.

We have heard the learned advocates and have duly considered the facts and circumstances in which the Tribunal had added a sum of Rs.

12,728 in the income of the assessee as per the provisions of Section 69A of the Act.

Upon a perusal of the relevant record, copies of which have been annexed to the paper book supplied to this court, it is very clear that the

assessee had given sufficient details with regard to the sources from which he had purchased the jewellery in question. Upon a perusal of the

statement giving details with regard to cash inflow, it is very clear that in the beginning of October, 1983, the family of the assessee was having cash

balance of Rs. 39,939 and even during the month of October, 1983, approximately Rs. 20,000 were received by the family members either from

the bank or from the business ; and from other sources, the family members had received approximately Rs. 13,000. As the family was having

sufficient cash at its disposal, the assessee or the family members did not think it proper to withdraw further cash from the business or from the

bank for the purpose of purchase of the jewellery in question. It also appears to be a fact that the assessee and his family had sufficient funds so as

to enable the family to purchase the jewellery in question, the estimated cost of which is Rs. 18,000.

Upon a perusal of the order passed by the Tribunal, it is very clear that the statement and documents referred to hereinabove were not taken

into account by the Tribunal at the time of deciding the appeal. By not taking into account the relevant documents in the nature of receipts issued by

the persons who had done labour work or had supplied gold for the purpose of purchase of the jewellery in question, the Tribunal had erroneously

exercised its jurisdiction. We are of the view that the Tribunal ought not to have disregarded the statement giving details of cash inflow by

observing that the said statement was prepared after the search proceedings had been concluded. Such a statement could have been prepared only

after the conclusion of the search because at the relevant time the assessee was not having complete details with regard to the receipts and his

household expenditure as he was not maintaining books of account for his household expenses. Had the Tribunal looked into the statement

submitted by the assessee, the Tribunal could have surely found that the family was having sufficient cash and there was a possibility that the

assessee could have very well purchased the jewellery in question, which was valued at Rs. 18,500 at the time of search, from the cash which was

available with the assessee and his family members at the relevant time. In our opinion, the Tribunal ought to have considered the said statement. It

was open to the Tribunal not to agree with the said statement if the statement was found to be incorrect or unreasonable, but, in the instant case,

without making any comment on the genuineness or otherwise of the statement, the Tribunal simply ignored the said statement.

In view of the fact that all the three questions are interconnected and they mainly depend upon the reading of the documents, in our opinion, the

Tribunal ought not to have added Rs. 12,728 in the income of the assessee by ignoring the contents of the statement submitted by the assessee.

In the circumstances, we answer the questions in the negative, i.e., in favour of the assessee and against the Revenue. The reference stands

disposed of accordingly with no order as to costs.