Bombay High Court
M/S.T.Lakhamshi Ladha & Co vs The C.I.T.,Mumbai City ... on 7 July, 2016
Bench: M.S. Sanklecha
Itxa-1380-2000
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
INCOME TAX APPEAL NO. 1380 OF 2000
M/s. T. Lakhamshi Ladha & Co., ]
298, Narshi Natha Street, ]
Mumbai 400 009. ] .. Appellant.
v/s.
The Commissioner of Income Tax ]
Mumbai City-II, Mumbai. ] .. Respondent.
Mr. Nitesh Joshi i/b. S. R. Rawell & Co., for the Appellant.
Mr. Suresh Kumar with Ms. Samiksha Kanani, for the Respondent.
CORAM: M.S.SANKLECHA, &
A.K.MENON, JJ.
RESERVED ON: 28th JUNE, 2016.
PRONOUNCED ON: 07th JULY, 2016.
JUDGMENT (Per M. S. Sanklecha, J. ):-
This appeal under Section 260-A of the Income Tax Act, 1961
(the Act), challenges the order dated 31st January, 2000 passed by the
Income Tax Appellate Tribunal (the Tribunal). The impugned order dated
31st January, 2000 is a common order disposing of appeals relatint to the
appellant for the Assessment Years 1989-90, 1990-91, 1991-92, 1992-93
and 1993-94. The present appeal relates to Assessment Year 1990-91.
2 On 26th February, 2002, this appeal was admitted on the
following substantial questions of law:-
"(a) Whether on the facts and in the circumstance of the case
and in law, the Tribunal was right in sustaining the addition of
Rs.1,37,375/- being payment made on account of 'Mehta
Sukhadi'?
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(b) Whether on the facts and in the circumstance of the case
in spite of the fact that the A. O. has admitted that appellant has
maintained proper books of accounts, Tribunal was right in
holding that addition of Rs.4 lacs on account of inflation of
labour charges?
(c) Whether on the facts and in the circumstance of the case,
the Tribunal was justified in holding that the addition of Rs.6
lacs on account of wrong billing was proper?"
Re Question (a):-
3 The appeals relating to Assessment Years 1991-92, 1992-93
and 1993-94 being Income Tax appeal Nos. 1376, 1378 and 1379 of 2000
were also admitted by this Court. However, in the above appeals, only one
substantial question of law reproduced herein above as Question No.(a)
was urged and admitted. This Court by an order dated 4 th May, 2016 has
dismissed the appellant's appeal for the Assessment Years 1991-92, 1992-
93 and 1993-94 on 4th May, 2016.
4 In the above view, it is an agreed position between the parties
that Question No.(a) as framed herein above, stands concluded against
appellant and in favour of the revenue.
5 In view of the above, Question No.(a) as framed for our
consideration is answered in affirmative i.e. against the appellant-assessee
and in favour of the respondent-revenue.
Re: Questions (b) & (c):-
6 The relevant facts giving rise to the substantial questions of
law listed at Serial Nos.(b) and (c) above, are as under:-
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(a) The appellant is a partnership firm, engaged in the business of
trading in tarpaulins, including renting the tarpaulins for hire and
erection of Monsoon Sheds as required by its Customers.
(b) On 15th September, 1989, there was a search action carried out on
the appellant-firm. At that time, a statement of its senior partner -
Mr. T. V. Goshar was recorded on oath by the Officers of the
revenue under Section 132(4) of the Act.
(c) The relevant extract of the statement made on 15 th September,
1989 by Mr. T. V. Goshar and endorsed by one of his partners and
son- Mr. C.T. Goshar, reads as under:-
"Q. Do you want to say anything of your own before
your statement in concluded for the day?
Ans. In order to co-operate with the dependent and to
disclose my real income to this department. I offer
following amounts as additional income of the firm
M/s. T. Lakshamshi Ladha & Co., for the current
year that is Asst.Year 1990-91.
(1) Rs. 63,000.00 - An unaccounted rent received for
letting out the godown in J. B.
Shah Market.
(2) Rs. 1,77,000.00 - Unaccounted Cash found during
the search over an above the
Cash of Rs. 63,000/- inferred
above received on account from
on account of inflated expenses
(3) Rs. 10,00000.00 (To the extent of about
Rs.4,00,000/-) and balance
on account of discrepancies
which might have occurred
through oversight such as
wrong billing etc.
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I clarify here that this amount of Rs.12,40,000/- is offered
for taxation as income in addition to the Income which will be
declared as per books of accounts.
Whatever stated above is true and correct to the best of my
knowledge and belief. The statement has been made voluntarily
without any coercions or pressure. The contents of the statement
have read to me in Hindi by my partner and son Shri Champshi
T. Goshar and I have understood the contents of the same.
(Deponent)
Shri T. V. Goshar
Before me,
Witness
(Sri Champshi T. Goshar)
I also endorse the above statement made by Sri T. V. Goshar
(Sri Champshi T. Goshar)"
(d) On 19th October, 1989, the appellant-firm addressed a
communication to the Officer of revenue seeking to withdraw/
retract / modify the statement made on oath under Section 132
(4) of the Act by Shri T. V. Goshar on 15th September, 1989. The
relevant extract of the communication dated 19th October, 1989
reads as under:-
" Shri Talakshibhai Goshar offered income of Rs.4,00,000/-
without any idea and knowledge of business. Even his son who
was present did not have idea of monsoon shed business. In fact
there is no inflation of expenses and the offer of income of
Rs.4,00,000/- on account of inflation of expenses of monsoon
shed business is hereby withdrawn.
Similarly, Talakshibhai Goshar has offered income of
Rs.6,00,000/- on account of discrepancy which might have
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accrued through oversight. The admission by itself is self
explanation. Income cannot be offered on probabilities. This
shows how statement has been recorded in hurried manner. This
offer of income of Rs.6,00,000/- on account of probable
discrepancy is also hereby withdrawn.
Shri Talakshibhai Goshar had offered income of Rs.12,40,000/-
including seized cash of Rs.2,40,000/-.The seized cash of
Rs.2,40,000/- includes rent of Rs.63,000/-. The concerned
parties were called and they also confirm these facts.
In short, our offer of income of Rs.12,40,000/- is reduced to
Rs.2,40,000/- u/s. 132(4) for A. Y. 1990-91.
This amount of Rs.2,40,000/- represent cash seized and out of
Rs.2,40,000/-, Rs.63,000/- represents the receipt of rent not
accounted and the balance amount of Rs.1,77,000/- is also
unaccounted and is earned by speculation and other sources.
Our offer of income u/s. 132(4) is Rs.2,40,000/- for A. Y. 1990-
91. Kindly treat this letter as amendment to the statement taken
u/s.132(4) and as part and parcel of statement taken u/s.
132(4) Shri Talakshibhai Goshar on 15th September, 1989 at
office.
I confirm. For T. Lakshamshi Ladha & Co.,
sd/- sd/-
Talakshi Vasanji Goshar Partner."
It would, therefore, be noticed that the above communication is not
signed by T. V. Goshar but by another partner. Mr. T. V. Goshar merely
confirms the view of the partner who authors the letter dated 19 th
October, 1989.
(e) Thereafter, on 30th November, 1990, the appellant-firm filed its
return of income for the Assessment Year 1990-91, declaring loss of
Rs.53,000/-. However, the Assessing Officer while passing an
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Assessment Order under Section 143(3) of the Act did not accept
the retraction dated 19th October, 1989 made by the appellant-firm
of the statement made by the partner - Mr. T. V. Goshar on 15 th
September, 1988. As a consequence, the Assessing Officer, inter
alia made following additions to income of the appellant-firm:-
(i) The addition on account of inflated expenses
on labour charges on monsoon sheds - Rs. 4,00,000/-
(ii) On account of wrong billing in respect of
monsoon sheds - Rs. 6,00,000/-
In the result, the Assessment Order dated 31st March, 1992, after
enhancing certain other income determined the appellant's income at
Rs.11.91 lakhs for Assessment Year 1990-91.
(f) Being aggrieved by the Assessment order dated 31st March, 1992
under Section 143 (3) of the Act, the appellant filed an
appeal before the Commissioner of Income Tax (appeals) [CIT(A)].
By an order dated 28th February, 1993, the CIT(A) held that the
statement of Mr. T. V. Goshar made under Section 132(4) of the Act
cannot be accepted in respect of labour charges as well as wrong
billing as there was no other corroborative evidence to support the
statement. However, the CIT(A) while completely deleting the
addition of Rs.6,00,000/- on account of wrong billing, restricted
the addition to 10% of the labour charges of Rs.10.97 lakhs i.e.
Rs.1.09 lakhs and deleted the balance.
(g) Being aggrieved, the revenue filed an appeal to the Tribunal. The
Tribunal by the impugned order dated 31st January, 2000 allowed
the revenue's appeal on two issues which arise for consideration
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before us. It held that the statement dated 15 th September, 1999
was correctly relied upon by Assessing Officer and that the
subsequent retraction on 19th October, 1989 of the statement made
by the senior partner was an after thought. Thus, the retraction
dated 19th October, 1989 could not be accepted. In the result, the
addition of Rs.10,00,000/- made on account of labour charges and
wrong billing by the Assessing Officer, was restored.
7 Being aggrieved by the order of the Tribunal, the appellant is
in appeal before us.
Mr. Nitesh Joshi, learned Counsel appearing for the appellant
submits as under:-
(a) The statement of Mr. T. V. Goshar dated 15th September, 1988
made under Section 132(4) of the Act cannot be relied upon to
make any addition as the same stood retracted by communication
dated 19th October, 1988;
(b) The statement of Mr. T. V. Goshar made on 15 th September, 1988 is
not supported by any corroborative evidence. Thus, the addition
made on account of labour charges and wrong billing is not
sustainable;
(c) The accounts were verified and no defect was found in respect
thereof with regard to purchase, sales etc., Thus, no basis to make
addition of income merely on the basis of the statement made by
Mr. T. V. Goshar on 19th September,1998; and
(d) The statement of Mr. T. V. Goshar on 15th September, 1988 itself
indicates that the labour charges are inflated to the extent of 5%
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to 10% only. Therefore, only the amount of Rs.1.09 lakhs being
10% of Rs.10.97 lakhs could alone be sustained out of Rs.4 lakhs.
So far as wrong billing is concerned, no evidence even partially
supporting the case of the Revenue.
9 Mr. Suresh Kumar, learned Counsel appearing for the
revenue places reliance upon the impugned order of the Tribunal. It is
further submitted that both issues arise out of a factual determination.
Therefore, no interference is called for, by this Court.
10 We have considered the rival submissions. We shall first deal
with the common submissions in respect of both the questions - (b) and
(c) above.
(i) It was the contention of the appellant that the additions on account
of labour charges and wrong billing, was on the statement dated
15th September, 1988 of Mr. T. V. Goshar. However, same stood
retracted on 19th October, 1989. Thus, the statement dated 15th
September, 1988 could not be relied upon to make the additions.
(ii) We note that the retraction of the statement made on 15 th
September, 1989 by communication dated 19th October, 1989 has
not been made by the original deponent i.e. Mr.T. V. Goshar but has
been made by another partner of the firm and Mr. T. V. Goshar has
merely confirmed it. The alleged retraction dated 19 th October,
1988, in fact, does not allege any pressure and/or coercion by the
revenue to make the statement dated 15 th September, 1988 as
made. It only seeks to amend the statement made on 15 th
September, 1988. We note that on the date of search, it is un
disputed that Mr. T. V. Goshar was a partner of the firm and
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voluntarily made statement in respect of the business of the firm
Nothing prevented him from stating that he is not aware of the
business of the firm rather than proceed and make statement
which suggest that he is a person in the know of the business of
the firm and the manner in which it is conducted. In fact, his
statement was made in the context of signed blank vouchers and
loose papers found during the search. These loose papers found
during search, were explained as record of payments made out side
the books of account and so far as blank signed vouchers are
concerned, it was stated that the figures are filled in later so as to
enable inflating the expenses actually incurred. The above details in
the statement is indicative of a person in the knowledge of the
manner in which the business activities of the firm is being
conducted. Besides, when the statement was made, another
partner of the firm - one Mr. C. T. Goshar endorsed the statement
made by Shri T. V. Goshar. Thus, approving the same. In case the
aforesaid statement was not correct, the other partner would have
certainly protested and not endorsed the statement made by Shri
T. V. Goshar. In the above view, the finding by the Tribunal that
the statement recorded on 15th September, 1988 is not effectively
retracted on 19th October, 1988, cannot be said to be perverse
and/or arbitrary. It is a possible view on the facts.
(iii) It was next submitted by the appellant that in the absence of any
corroborative evidence found during the course of search or
otherwise to support the statement made on 15th September, 1988,
it cannot be relied upon. In support, reliance was placed upon the
decision of variousCourts and we deal with each of them as under:-
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(a) The decision of the Chhatisgarh High Court in ITO v/s. Vijay
Kumar Kesar - 327 ITR 497- to submit that the confession made
by the assessee during the survey proceedings is not conclusive.
However, in the aforesaid case, the statement made during the
survey proceedings were retracted by a subsequent communication
along with documentary evidence i.e. entries in books of accounts,
vouchers etc., to establish that the statement made earlier were
not true and correct. In the present facts, no documentary evidence
has been filed to establish that the statement made by Mr. T. V.
Goshar on 15th September,1 988 was not correct. Moreover, the
onus is on the deponent of the statement on oath who seeks to
retract, to establish that the earlier statement was not correct.
(b) The decision of the Gujarat High Court in Kailashben M.
Chokshi v/s. CIT - 328 ITR 411 - wherein the statement made
under Section 132 (4) of the Act was subsequently retracted
giving proper explanation with documents in support of the
retraction. Further, the statement therein was recorded at
midnight, which was considered to be in voluntary in view of the
subsequent retraction with documentary evidence. In the present
facts, it is not the case of the appellant that the statement made
under Section 132(4) of the Act was recorded in the midnight or
that any pressure or coercion was put upon the appellant to make a
statement contrary to the facts. In the present facts, the statement
dated 15th September, 1988 was made at 9.30 p.m. This is not an
odd hour. Moreover, the retraction was bereft of any supporting
evidence to establish that the original statement made on oath is
incorrect. Thus, the aforesaid decision does not assist the
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appellant. Here again, the onus to establish by corroborative
evidence is upon the assessee that the statement made on oath
earlier is not correct while retracting it.
(c) The decision of Telangana and Andhra Pradesh High Court in
Gajjam Chinna Yellapa & Others v/s. ITO 370 ITR 671 wherein it
held that the retracted statement cannot be the sole basis to fasten
the liability. This, however, was in context of the fact that the
assessee's contention was that the statement was recorded by
applying pressure till midnight. In the present case, it is not the
appellant's case nor the case of Mr. T. V. Goshar that any
pressure was put upon him to make statement which does not
reflect the truth. Thus, the above decision also does not assist the
appellant.
(d) The decision of the Jharkhand High Court in Shree Ganesh
Trading Co., v/s. CIT 214 Taxman- 262 - wherein the Court held
that reliance upon a statement made under Section 132(4) of the
Act without any corroborative evidence is not acceptable
particularly when the same had been retracted. In the aforesaid
case, none of the authorities under the Act had considered
and /or given reason for rejecting the retraction made by assessee
of the statement made under Section 132(4) of the Act. In the
present facts, we find that the authorities have examined the
statement made under Section 132(4) of the Act as well as the
retraction dated 19th October, 1989. It is after consideration of the
retraction that the Tribunal concluded that the alleged retraction
does not make the statement made on oath unbelievable. In this
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view, the above decision will not apply as it itself observes that the
acceptance/ withdrawal of the statement made under Section
132(4) of the Act depends upon the facts and circumstance of the
each case. Thus, the decision rendered in that case would have
no universal application. In the present facts, we are of the view
that the above decision would have no application; and
(e) The decision of the Delhi Court in CIT v/s. Sunil Aggarwal - 379
ITR 367 wherein the assessee was assessed to tax on the basis of
the statement made by him during the course of search under
Section 132(4) of the Act. This without having considered the
subsequent retraction with an explanation for retraction. This
particularly when the explanation offered in the retraction was
supported by evidence in the form of books of account maintained
by the assessee. Further, reliance was placed upon the statement
by a third party without having given an opportunity of cross
examination to the assessee therein. It was in the aforesaid
context that the Court held that the additions made in the hands of
the assessee could not be justified. Facts in the present case
are entirely different. The retraction is no retraction at all but
merely a request to treat the retraction as amended to admit to a
lower quantum of unstated income. Moreover, the contention that
the subject letter amounted to a retraction is misconceived. It was
in any event not supported by any evidence whatsoever and the
same was subject matter of examination by the authorities and the
retraction was not found to be acceptable. Thus, the aforesaid
decision would also have no application in the present facts.
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(iv) It must be pointed out that in the present facts, though the CIT(A)
had disregarded the statement made on oath under Section 132(4)
of the Act, it was on the basis that the statement made by a partner
of the firm cannot bind the firm in the absence of it being
confronted to all the other partners. This goes against the basic
principle of partnership law.
In the above view, reliance upon the statement dated 15 th
September, 1989 given by Mr. T. V. Goshar to the authorities under
Section 132(4) of the Act cannot be found fault with.
So far as the additional submissions in respect of question (b)
viz: labour charges is concerned, Mr. Joshi submitted to the effect that the
accounts of the firm were examined by the Assessing Officer during the
assessment proceedings, while passing the Assessment Order dated 31 st
March, 1992 and no discrepancies in the Accounts were found. Therefore,
no basis to make any addition on account of labour charges. We notice
that in the statement dated 15 th September, 1988, Mr. T. V. Goshar has
stated that labour expenses are inflated. It is pertinent to note that the
order of the CIT(A) which partly deleted additions made on account of
labour charges and restricted it up to 10% of Rs.10.97 lakh, had itself
rendered a finding that there was a shortcoming in the accounts of the
labour charges till the date of search. In the above context, reliance by the
Tribunal upon the statement made under Section 132(4) of the Act after
considering the retracted statement, could not be faulted with. The view
taken by the impugned order of the Tribunal is a possible view in the facts
and circumstance of the present case. Thus, substantial question (b) as
framed is answered in the affirmative i.e. in favour of the revenue and
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against the appellant-assessee.
12 So far as the additional submissions in respect of question (c)
viz: wrong billing is concerned, Mr. Joshi submitted that in the absence of
any error/ discrepancy being noted in the accounts, no amount could be
added on account of non-billing. It is pertinent to note that the impugned
order does record that the Assessing Officer had rendered a finding that
the appellant has not entered bills for hiring charges in its books of
account in day-to-day running of the business. Thus, the contention of the
appellant is not sustainable. Further, our attention is drawn to para 20 of
the impugned order where reliance is placed upon the decision of Gujarat
High Court in N. K. Paper Board v/s. DCIT 234 ITR 733 to hold against
the appellant. We find that the citation is incorrect and does not assist the
revenue. However, the impugned order of the Tribunal even in the
absence of the above decision cannot be held to be bad in law. In the
above circumstance, the view of the Tribunal in upholding the order of
the Assessing Officer to add an amount of Rs.6 lakhs to the appellant's
income cannot be faulted. This is a possible view on facts found. Thus,
the substantial question (c) as framed is also answered in the affirmative
i.e. against the appellant-assessee and in favour of the Respondent-
revenue.
13 In view of the above, the questions (a), (b) and (c) are all
answered in affirmative i.e. in favour of the respondent-revenue and
against the appellant-assessee.
14 Accordingly, appeal dismissed. No order as to costs.
(A.K.MENON,J.) (M.S.SANKLECHA,J.)
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