Income-Tax Officer vs Bhairo Prasad Bhagwat Saran.
1985 Latest Caselaw 518 Del

ORDER

Per Shri O. P. Jain, Judicial Member - The revenue is in appeal against the order of the AAC, B Range, Bareilly dated 12-3-1984 whereby the penalty of Rs. 12,500 imposed by the ITO under section 271(1) (c) of the Income-tax Act, 1961 (the Act), was deleted. The matter relates to the assessment year 1977-78.

2. The number of facts giving rise to the present appeal are these : The assessed is a registered firm. On 3-6-1976, the custom authorities had conducted a search in the business premises of the assessed and the residential premises of its managing partner Shri Bhagwat Saran. Besides certain other articles primary gold weighing 133.500 gms. valued at Rs. 6,000, new gold ornaments weighing 262.900 gms. valued at Rs. 10,204, new gold ornaments weighing 298.500 gms. valued at Rs. 11,509 and old ornaments weighing 39.310 gms. valued at Rs. 1,814, total Rs. 29,527 were seized by the custom authorities. The statement of Shri Bhagwat Saran was recorded by such authorities immediately after seizure of the said goods and he had stated that the said goods are meant for commercial purpose. The assessed had failed to explain the nature and source of the acquisition of the said articles and as such, addition under section 69 of the Act, was made to the tune of Rs. 29,527 and the tax was assessed accordingly. The assessed had challenged the assessment in appeal before the AAC but the addition was upheld. The assessed submitted to the addition and did not prefer any second appeal. In the penalty proceedings also, the ITO had held that the assessed could not furnish any satisfactory explanation about the nature and source of the acquisition of the said gold and ornaments. He, therefore, imposed a penalty of Rs. 12,500. Dissatisfied with that order, the assessed went up in appeal before the AAC, who by his order dated 12-3-1984 allowed the appeal and deleted the penalty. Aggrieved by that order, the revenue has come up in appeal before us.

3. The departmental representative has argued that the assessed had failed to discharge the burden which lay on it and the AAC has committed an error in holding otherwise. On the other hand, the learned counsel for the assessed has argued that burden of proof was on the department and the assessed did not conceal any income nor furnished any inaccurate particulars and as such the order imposing the penalty is unsustanable.

4. We have given our anxious consideration to the submissions advanced by both the sides. It is not in dispute that the custom authorities had searched the premises of the assessed and its partners and the gold and ornaments already referred about were seized from those premises. It is also undisputed that immediately after the search, the statement of Shri Bhagwat Saran was recorded by the custom authorities and he had stated before them that the said gold and ornaments are meant for commercial purpose. In those books of account of the assessed there is no mention of the said goldsmiths or the ornaments. As such, a heavy burden lies on the assessed to prove that it did not conceal its income and it was for him to explain the source of acquisition of the said articles. We are unable to accept the contention of the learned counsel for the assessed that burden to prove concealment was on the department. Explanation 2 to section 271 (1) reads as follows :

"Explanation 1 : Where in respect of any facts material to the computation of the total income of any person under this Act, -

(A) such person fail to offer an explanation or offers an explanation which is found by the Income-tax Officer or the Appellate Assistant Commissioner or the Commissioner (Appeals) to be false, or

(B) such person offers an explanation which he is not able to substantiate then, the amount added or disallowed in computing the total income of such person as result thereof shall, for the purposes of clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed :"

5. The aforesaid Explanation makes it clear that it is the assessed who has to offer an explanation and if he offers an explanation and the same is found to be false or if he is unable to substantiate the explanation offered by him then it would be deemed that the amount added or disallowed in computing the total income of that assessed for the purposes of clause (c) of the aforesaid sub-section represents the income in respect of which particulars have been concealed.

6. The department representative has pointed out that immediately after the seizure Shri Bhagawat Saran had stated that the articles in question are kept for commercial purposes and since the assessed has failed to explain its source of acquisition, it has been rightly held by the ITO that the assessed had concealed the material fact relating to the acquisition of the said property. In that connection, the assesseds counsel has urged the the said gold and the ornaments belonged to the members of the family of Shri Bhagwat Saran. According to the assessed, the new gold ornaments weighing 262.900 gms. belonged to the womenfolk of the house of Shri Bhagwat Saran. The family of Shri Bhagwat Saran consisted of his two sons and wives and the wife of Shri Bhagwat Saran and his mother. The explanation of the assessed on the point was not accepted by the ITO and we fell rightly, because at the time of search 1339 gms. of gold ornaments were found in bank locker and they were held to be belonged to the family of Shri Bhagwat Saran. Moreover, at the time of search, Shri Bhagwat Saran did not claim that the said ornaments belonged to the womenfolk of his family.

7. As regards the gold ornaments weighing 298.500 gms. and 39.300 gms., it was urged on behalf of the assessed that the same belonged to the family of Shri Bhagwat Saran. These ornaments were found at the shop of the assessed. It has been contended that the son of Shri Bhagwat Saran was to be married and therefore, ladies of the house gave those ornaments to a goldsmith for cleaning and polishing, that after polishing and cleaning the said ornaments had been received a day earlier before the seizure. It was also urged that entry about such ornaments finds place in the books of Shri Ram Swarup, who is a registered goldsmith. This contention of the assessed also fails to inspire the least degree of confidence. As already observed, Shri Bhagwat Saran had stated immediately after search of the premises that the ornaments are kept for commercial purposes. That apart the record shows that the son of Shri Bhagwat Saran was married on 16-2-1981, i.e., about 5 years after the search was conducted by the custom authorities. In the circumstances, it is not possible to believe that ladies of the family would have sent their ornaments for cleaning and polishing about 5 years in advance in anticipation of the marriage of the son of Shri Bhagwat Saran.

8. The learned counsel for the assessed has also argued that entry about the said ornaments finds place in the register of the registered goldsmith, Shri Ram Swarup. Entry in such register has been relied upon in support of the contention that the said ornaments were actually given to the goldsmith for polishing and cleaning. The entry in that register, in our opinion, has little evidentiary value and much significance cannot be attached to it, because the same has not been certified or countersigned by any competent authority.

9. The explanation of the assessed as regards primary gold weighing 133.500 gms. that the wife of Shri Bhagwat Saran gave her ornaments to the goldsmith Shri Satya Prakash for manufacturing new ornaments because a son of Shri Bhagwat Saran was going to be married shortly and thereafter Shri Satya Prakash had melted the old ornaments. It was also contended that all of a sudden Shri Satya Prakash had to go out and therefore, he had left the melted gold with the wife of Shri Bhagwat Saran. This contention also does not appear to be sound. As already observed above, the son of Shri Bhagwat Saran was not married shortly after the search operations were conducted. Moreover, there was no reason for Shri Satya Prakash to deliver the melted gold to the wife of Shri Bhagwat Saran ever if he was going out of such gold. It also appears that Shri Satya Prakash had his own arrangements for safe custody. Besides this, the register of Shri Satya Prakash, who is said to be a registered goldsmith, was not attested by any competent authority and for that reason no reliance could be placed on the entries made by him in that register.

10. In view of the foregoing reasons, we find ourselves in agreement with the contention of the departmental representative that the assessed had failed to discharge the burden which lay on it and the AAC has wrongly held that he had succeeded in discharging the onus by showing the entries in the accounts of goldsmiths and as such, the penalty could not be imposed. As already held above, no reliance can be placed on the entries of the said goldsmiths. Thus, the AAC has committed an error in deleting the penalty.

11. The learned counsel for the assessed has argued that assessment proceedings and proceedings before the custom authorities stand at a different footing and orders passed in such proceedings cannot form the basis for imposition of penalty by the ITO. The proposition of law is undoubtedly sound but we find that the same is of no assistance to the assessed. In the instant case, the order imposing the penalty passed by the ITO is not based on the orders passed by the customs authorities or on the order passed in the assessment proceedings. His order is based on his independent findings.

Reference to the orders of the custom authorities and the assessment proceedings has been made only incidentally. It would be appropriate to mention here that order passed in such proceedings have a probative value and they can be looked into for incidental purposes.

12. It was also argued on behalf of the assessed that Shri Bhagwat Saran had made his statement before the custom authorities under duress and coercion and, therefore, the ITO should not have placed any reliance on the same. We are not impressed by these arguments as well. There is nothing on record to substantiate the allegation that the said statement was made under duress or had been obtained under coercion. Paper No. 21 of the assesseds paper book is the copy of the order of the Deputy Collector of Central Excise whereby penalty was imposed on Shri Bhagwat Saran for possessing said gold and ornaments. A perusal of that order goes to suggest that in such proceedings Shri Bhagwat Saran had been claiming that the said articles had kept by him for commercial purposes and he did also did not claim that the said articles belonged to the members of his family. He also did not claim that his statement was obtained under duress or coercion. Paper No. 29 of the assesseds paper book is the copy of the order passed in appeal by the Collector of Central Excise. It shows that the plea to the effect that the statement of Shri Bhagwat Saran was recorded under duress at the time of the seizure was raised for the first time at the appellate stage. The fact that such plea was not raised before the Deputy Collector is suggestive of the fact that it is the result of an afterthought and is without any substance. It may also be mentioned that it is the settled principle of jurisprudence that an admission is the best evidence that an opposing party can rely upon and, though not conclusive, is decisive of the matter, unless successfully withdrawn or proved erroneous. In the instance case, the assessed has failed to withdraw the said admission successfully and from the circumstances available on record it could not be proved that the same is erroneous.

13. It was also contended on behalf of the assessed that other partners of the firm are not bound by the statement made by Shri Bhagwat Saran. We find no force in this argument as well. It is not in dispute that Shri Bhagwat Saran was a partner of the assessed-firm. It is well settled that a partner is an agent of the firm and the acts of a partner are binding on the firm.

14. The learned counsel for the assessed has also argued that the ITO did not examine the assessed or any of the goldsmiths and without examining them he was not entitled to reject the written submissions which had been submitted by the assessed. We are unable to accept that argument as well. Nothing could be pointed out which may suggest that it was incumbent on the ITO to examine the assessed or the goldsmiths.

15. For the reasons discussed above, we allow the appeal. The order of the AAC is set aside and that of the ITO is restored.