Commissioner Of Income-Tax vs Nirmal H. Phopalia
2002 Latest Caselaw 929 Bom

JUDGMENT

S.H. Kapadia, J.

1. Admitted. The respondents waive service. By consent, the appeal is taken up for final hearing.

2. This appeal is preferred under Section 260A of the Income-tax Act, 1961, from and against the order of the Tribunal dated May 4, 2000 vide Appeal No. A 234/Mumbai of 1997 for the block period 1987-88 up to 1997-98.

3. Eight questions have been sought to be raised by the Department, who are the appellants in this appeal.

Question No. 1 :

During the course of the search, cash was detected amounting to Rs. 1,46,700 out of which, an amount of Rs. 1,10,000 was seized. That amount of Rs. 1,10,000 has been shown as undisclosed income for the assessment year 1997-98 in the block period. The assessee was asked to explain the source of the entire amount of Rs. 1,46,700. In his explanation, the assessee submitted that the cash belonged to a company by the name, Sait Purshottam and Co. It was also submitted that part of the cash was out of the savings and the salary income, which the assessee had received for last several years. At this stage, it may be mentioned that assessee, Nirmal, has been a director of some companies and he claims to have received salary as a director of those companies. He has also submitted that certain portion of Rs. 1,46,700 came from his earnings in speculation in shares. The Assessing Officer added the entire amount of Rs. 1,46,700. Being aggrieved, the matter was carried in appeal. It ultimately came before the Tribunal, which came to the conclusion that addition should be restricted to Rs. 1,10,000 for two reasons. Firstly, that the assessee had earned substantial income in the form of salary during the assessment year 1987-88 onwards and there was every possibility of the assessee saving some amount from the salary income. Secondly, the assessee has also conceded that he earned a part of the amount from speculation in shares. In the circumstances, the Tribunal disallowed the addition, only to the extent of Rs. 36,700 and the Tribunal directed adding back of Rs. 1,10,000, which was actually seized. We do not find any substantial question of law on this point. Therefore, we do not wish to frame any question of law on this point.

Questions Nos. 2 and 3 :

Similarly, the Department has sought to raise two questions bearing question No. 2 and question No. 3. Here, the facts are as follows. The assessee used to play cards. Occasionally, he used to gamble. The Assessing Officer has come to the conclusion that his income from gambling was Rs. 1.85 lakhs. This was on the basis of loose sheets (annexure A/2) found during the search. According to annexure A/2, the assessee has appended certain figures and remarks from which the Assessing Officer inferred receipt of Rs. 1,85,000 for the assessment year 1996-97 which he added back to the income for the year 1996-97. However, according to the Tribunal, the amount had accrued during Diwali. According to the Tribunal, the assessee was a Gujarati. That, generally during Diwali, the members of that community play cards. That, high stakes were involved in such games. The Tribunal also considered the notings on annexure A/2 which states "paid to Nirmal on September 18,1995" and which also states "difference to be collected next year." The Tribunal further observed that in view of annexure A/2, the addition be limited to Rs. 1,06,500 instead of Rs. 1,65,000 as done by the Assessing Officer. We do not find any substantial question of law on this point. Therefore, question No. 2 and question No. 3, as proposed by the Department, stand rejected.

Questions Nos. 4, 5 and 6 :

The Department has raised questions Nos. 4, 5 and 6 on the following facts. The assessee had purchased NE-118 car for Rs. 1 lakh. According to the asses-see, he paid Rs. 1 lakh in cash. The Assessing Officer disbelieved the assessee. He was asked to explain the source of Rs. 1 lakh paid in cash. The Assessing Officer, therefore, presumed looking to the loose papers found during the search, that the car was purchased for Rs. 2 lakhs, and accordingly, he did addition of Rs. 1 lakh towards unexplained investment towards purchase of the car. However, the Tribunal found that the car purchased by the assessee was third-hand. In the circumstances, the Tribunal came to the conclusion that the assessee could not have bought the car for Rs. 2 lakhs. The Tribunal also found that the cost of the car (first-hand) was Rs. 1,63,741 and, therefore, the assessee could not have purchased the third-hand car for Rs. 2 lakhs. For this purpose, the Tribunal has relied upon annexure A/3. This is a pure finding of fact. There is no perversity involved. Hence, there is no merit in the proposed questions.

Question No. 7 :

During the search, a loose paper was found (annexure A/1). It contained details of shares. It also contained the names of the scrips, the quantity, the rate and the amount. The assessee was asked to explain the sources of investment in the above shares. In response, the assessee contended that his son was a share broker. That annexure A/1 was in the son's handwriting. That the chit belonged to the assessee's son. The assessee also relied on the word "Papa" on top of the chit to show that the chit belonged to the son, who was a share broker. The Assessing Officer disbelieved the assessee and added back Rs. 3,33,070 to the income of the assessee for the assessment year 1997-98. However, the Tribunal in appeal, came to the conclusion that the shares were not found in the possession of the assessee during the search. That, the asses-see's son was a share broker. That there was no evidence to show that the assessee was the investor. That, the assessee's son had admitted that the chit belonged to him. That, the word "Papa" was mentioned on the chit to show the commission (tip), which was paid to Papa for dealing in shares done by the son. This view is possible. It cannot be called as perverse. Therefore, on this point also, we do not wish to entertain the appeal.

Question No. 8 ;

The assessee had purchased an office admeasuring 222.27 square feet at Belapur for Rs. 1,55,589. This consideration was arrived at the rate of Rs. 700 per square foot. Besides the office, the assessee's wife had purchased a shop. During the course of the search, loose sheets were found, which are part of annexure A/20, which indicated that the booking was done at the rate of Rs. 700 per square foot. The Assessing Officer found that the actual rate was Rs. 1,900 per square foot. The Assessing Officer further concluded that Rs. 1,200 per square foot was paid in cash. The assessee denied the payment in cash. The builder was examined. He denied receipt in cash. The Assessing Officer disbelieved the assessee. According to the Assessing Officer, annexure A/20 shows that a portion of the amount was paid in cash at the rate of Rs. 1,200 per square foot. The Assessing Officer, therefore added back Rs. 2,66,724 to the income of the assessee for the assessment year 1995-96. The Tribunal, however, came to the conclusion that in a block assessment, an addition can be made only on the basis of the material available on record. That, in the present case, an addition was made on the basis of conjecture. That, there was no proof of payment by the assessee in cash over and above the agreed price. Therefore, the Tribunal deleted the addition of Rs. 2,66,724. There was no enquiry made by the Assessing Officer as to what was the prevailing rate in the market during the relevant year. There is no basis for coming to the conclusion that the assessee had paid Rs. 2,66,724 in cash to the builder. There is no substantial question of law arising in this case on the above point.

Conclusion :

For the above reasons, the appeal stands dismissed. No order as to costs.

4. Before concluding, we would like to make a suggestion to the Chief Com missioner of Income-tax. Large number of appeals, arising from block assess ments, are pending before the court. In most cases, the court finds that the paper-book does not contain the annexures, which are very relevant because the Assessing Officer and the Tribunal get the opportunity to look at the evidence on record, which the High Court does not get. In the paper-book filed by the Department in the High Court, exhibits and annexures are not annexed and in such appeals, unless the court has access to the R and P before the lower court, the court may not be in a position to appreciate the documents on record. Therefore, we are directing the Chief Commissioner of Income-tax as well as the office of the original side of the High Court to call for R and P in all appeals arising from block assessments. Similarly, we are directing the Chief Commissioner of Income-tax to circulate a supplementary along with the memo of appeal, which should contain all the relevant annexures. We are directing that a copy of this order should be sent to the prothonotary and senior master as also to the Chief Commissioner of Income-tax to do the need ful.

5. These directions will also apply to all the assessees if they are the appellants. Accordingly, the prothonotary and senior master is directed to publish a notice containing the above directions so that the advocates and parties appearing in the matter can take note of such directions and act accordingly.