Delhi High Court

Smt. Meera Goyal vs Deputy Commissioner Of Income Tax on 4 January, 1998

Equivalent citations: (1999) 63 TTJ Del 81

ORDER

J.P. Bengra, J.M.

This is an appeal by assessee against block assessment for assessment years 1986-87 to 1996-97 (block period 1-4-1985 to 29-11-1995) under section 158BC of the Income Tax Act, 1961.

2. The assessee is an individual and is director in Goyal Gases ITD., deriving income from salary, house property, interest and dividend, etc. A search and seizure operation was conducted on the assessee on 29-11-1995, along with her husband, Suresh Chand Goyal. A notice under section 158BC dated 16-10-1996 was served on the assessee. In compliance of the same return was filed declaring nil income for the block period mentioned above. The assessing officer issued show cause notice dated 18-10-1996. In compliance to the show-cause notice served on assessee in respect of undisclosed income for assessment purposes for the block period from 1-4-1985, to 29-11-1995 reply was submitted by the assessee vide letters dated 4-11-1995, 14-11-1996, and 15-11-1996. In letter dated 31-10-1996, the assessee informed that since the notice was received only on 30-10-1996, and even full one day was not available for necessary preparation and completion of details, therefore, 15 days time was sought. And in another letter it was informed that the statement of Smt. Meera Goyal and S.C. Goyal reported on 29-11-1995 may be furnished to the assessee. However, the statements of these persons were not supplied to the assessee. The assessing officer on the basis of seized material and statement of assessee observed that during the course of search jewellery worth Rs. 16,79,130 were found at the residence of the assessee; jewellery worth Rs. 2,23,830 was found from locker No. 64 with Bank of India and jewellery worth Rs. 31,195 was found from locker No. 542 with South Delhi Vault, totalling jewellery worth Rs. 19,34,155, out of which jewellery worth Rs. 9,45,011 was seized from the residence and jewellery worth Rs. 2,12,680 was seized from locker No. 64. The assessee was given opportunity to explain the same. However, she could explain the jewellery valuing Rs. 8,54,633 as per valuation reported dated 15-11-1992, belonging to various members of S.C. Goyal, HUF, the details of which are given at pp. 32 and 33 of the paper-book as under :

Name of assessee

Name of valuer

Valuation date as on

Total valuation of jewellery

Smt. Meera Goyal

Rakesh Kumar Gupta, Valuation Report dated 15-11-1992

31-3-1992

1,41,110

S. C. Goyal (HUF)

-do-

31-3-1992

3,51,442

Aditya Goyal

-do-

31-3-1992

1,68,960

Km. Poysha Goyal

-do-

31-3-1992

1,93,121

2.1 Regarding the balance diamond jewellery worth Rs. 10,79,522, it was explained by the assessee that the same belongs to Goyal Gases ITD. In the assessment year 1993-94 diamond of 45.08 ct. plus 32.26 ct. equal to 87.34 ct. worth Rs. 7,11,490 have been disclosed in their return. According to this explanation the value of the above explained jewellery comes to Rs. 19,34,155, therefore, there is no other item left to be explained by her. However, the assessing officer was of the view that the claim of assessee relating to the purchase of diamond jewellery worth Rs. 10,79,522 is not substantiated because a sum of Rs. 10 lakh was paid by a cheque to Sajjan Kumar & Co. by Goyal Gases ITD. on 8-10-1992, out of which a sum of Rs. 2,88,510 was received back on 31-3-1993, the balance amount of Rs. 7,11,490 remained outstanding till 1-4-1996, when an opening balance of Rs. 7,11,490 had been shown. The assessee produced two bills from Sajjan Kumar & Co. dated 3-3-1993 for Rs. 3,64,730 and 15-3-1993, for Rs. 3,46,760, which were debited by Goyal Gases ITD. in its accounts only on 31-3-1996, i.e., much after even the date of search. According to the assessing officer, the accounts of Sajjan Kumar & Co. had been squared up on 31-3-1996, only. No reason for delayed entries of bills dated 3-3-1993, and 15-3-1993, after almost three years, have been given except claiming that the bills have been received in financial year 1996-97. Thus, he came to the conclusion that it is not understood why the assessee should pay Rs. 10 lakh in advance for purchase of diamond. In these circumstances the assessing officer did not accept the ownership of jewellery by Goyal Gases ITD. Hence, it was added in the hands of assessee as income from undisclosed sources for this block period.

3. This was challenged by the assessee before the Tribunal. The learned counsel for assessee very vehemently argued that the jewellery found at the time of search and seizure from the residence, lockers is fully explained. It is pointed out that the assessing officer himself treated the jewellery found from the residence standing in the name of various members of Hindu Undivided Family as explained. However, he committed mistake in taking the value of such jewellery on the date of search at Rs. 8,54,633. As per the assessing officer the value of total jewellery found from residence and lockers was Rs. 19,34,155. He accepted the jewellery standing in the names of various members of the Hindu Undivided Family as explained worth Rs. 8,54,633 only. However, it is pointed that the value of this jewellery standing in the names of various members was Rs. 8,54,633 as on 31-3-1992, whereas the value as on the date of search comes to Rs. 15,12,379, as per the valuation report. Instead of taking value 'of jewellery in respect of such items, which were explained and impounded as on 29-11-1995, he has taken the value on 31-3-1992. It is not in dispute that the items of jewellery found and explained by the assessee are same. With regard to the balance diamond jewellery it was explained that Goyal Gases ITD. paid a sum of Rs. 10 lakh by Cheque No. 764065 dated 8-10-1992 towards purchase of loose diamond to Sajjan Kumar & Co., out of which Rs. 2,88,510 had been received back vide Cheque No. 248175, dated 31-3-1993. The amount stands in the name of Sajjan Kumar & Co. since the party had not submitted the bills earlier and since only in the financial year 1996-97 the bills were received, the advance had been adjusted in the books of accounts of the company thereafter. The making charges were paid by assessee's husband S.C. Goyal. Out of the aforesaid items diamond had been duly marked in the reconciliation statement (pp. 34 to 44 of the paper-book). Our attention was invited to the confirmation given by Sajjan Kumar & Co., pp. 49 to 50 and confirmation from Goyal Gases ITD., pp. 76 to 78 of the paper-book. Similar confirmation was also given by assessee dated 14-11-1996.

4. The jewellery which was found at the residence and in the lockers duly disclosed by respective assessees. Confirmation of the same was also enclosed at pp. 79 to 81 of the paper-book, which is duly accepted by the department but it is pointed out that the value of such items of jewellery was accepted as on the date of valuation, i.e., 31-3-1992, instead of the date of search 29-11-1995.

5. The learned counsel submitted that he has produced material to show in what manner the company had depicted the assets in their books of accounts. Our attention was invited to the copy of accounts of Goyal. Gases ITD., in which the adjustment of the same has been shown. It is also pointed out that the assessing officer despite mentioning that the making charges were paid by her husband in order to convert the diamond into jewellery, had not been investigated by the assessing officer. Therefore, it will be presumed that he has accepted the explanation of the assessee. Thus, no addition on account of unexplained income can be made because there is no material found which shows that assessee had earned unaccounted income. It is further pointed out that while giving approval of the Commissioner has looked into all the materials. Therefore, there is no purpose now to give any opportunity to make further enquiry in the matter in order to fill up lacunae. In this connection reliance was placed on CIT v. Smt. P.K Noorjehan (1980) 123 ITR 3 (Ker), R.B. Shreeram Durga Prasad & Fatehchand Nursing Das v. ITSC & Anr. (1989) 176 ITR 169 (SC), S Bhagwati Devi 118 Taxation, Jhaveri bhai & Biharilal & Co. v. CIT (1985) 154 ITR 591 (Pat), Shankarbhai Khodabhai v. Asstt. CIT (1996) 59 ITD 364 (Ahd-Trib), Amar Natwarlal Shah v. Asstt. CIT (1997) 60 ITD 560 (Ahd-Trib), Hindustan Ferodo ITD. v. CCE, Bombay 1997 (89) ELT 16 (SC) for the proposition that where no enquiry has been made by the assessing officer the matter cannot be sent back for further investigation. Reliance was also placed on Sarogi Credit Corporation v. CIT (1976) 103 ITR 34 (Pat).

6. As against this the learned Departmental Representative submitted that the assessee came out with an explanation that diamond was purchased by Goyal Gases ITD. from Sajjan Kumar & Co. of Bombay. It was stated that a sum of Rs. 10 lacs: was paid by cheque by Goyal Gases ITD., out of which a sum of Rs. 2,88,510 was received back and the balance of Rs. 7,11,490 remained outstanding. The assessee produced two bills from Sajjan Kumar & Co. mentioned above. These bills were debited by Goyal Gases ITD. in the accounts only on 31-3-1996. No reasons for the delayed entries of the bills were furnished by the assessee and no confirmation was obtained and furnished from Sajjan Kumar & Co. with regard to the entry in the books of the assessee. No explanation regarding delayed entries of bills and confirmation from Sajjan Kumar & Co. have been given for the advance of Rs. 10 lacs for purchase of diamond. The story of the entries made in the books of accounts have not been disputed by the assessing officer. However, it is quite clear that mere book entries did not offer a reasonable explanation regarding the purchase of jewellery from Sajjan Kumar & Co. The assessee has furnished a reconciliation statement of jewellery in course of assessment proceedings, which will reveal that the total weight of diamond, which has been attempted to be explained, comes to 34.28 ct. The two bills of Sajjan Kumar & Co. show a purchase of 77.34 ct. Thus the reconciliation statement and the bills seen together create serious doubt about the genuineness of the bills. It is unbelievable that the bills will be furnished after, three, years and further it does not contain any number. No confirmation was furnished by the assessee in the course of assessment proceedings from Sajjan Kumar & Co. In the course of deposition during search, the assessee in reply to question No. 16, stated that part of the jewellery found was received by her at the time of her marriage. The source of remaining jewellery as stated by her, was to be explained by her husband S.C. Goyal. S.C. Goyal in course of assessment proceedings gave circutor explanation, as discussed above, regarding the ownership of diamond. In view of these facts, the assessee could not explain the diamond jewellery, therefore, the additions were rightly sustained.

7. In reply, the learned counsel for the assessee pointed out that the assessing officer has not drawn any adverse inference from the statement of assessee, therefore, no benefit can be taken by the department. It is further pointed out that there is no difference in items of jewellery and nobody has looked into from this angle, therefore, no adverse inference can be drawn that the jewellery found is not the same as pointed out by the assessee. Reliance was placed on CIT v. M. Ganapathi Mudahar (1964) 53 ITR 623 (SC), Kishanchand Chellaram v. CIT (1980) 125 ITR 713 (SC). He further relied on 124 ITR 727 (sic), CIT v. B. Pandaiah & Co (1983) 143 ITR 464 (AP), Lajwanti Sial v. CIT (1957) 32 ITR 526 (Bom.), Jan Mohammed v. CIT (1953) 23 ITR 15 (All), V. Ramaswamy Iyengar & Anr. v. CIT (1960) 40 ITR 377 (Mad), M.R.M. Periannan Chettiar v. CIT (1960) 39 ITR 159 (Mad) and Sitapur Sugar Works ITD. v. CIT (1963) 49 ITR 160 (SC) for the proposition that where the assessing officer has not drawn any inference, the Tribunal cannot draw an adverse inference against the assessee. Reference was also made to Chaturvedi & Pithisaria, 4th Edn., p. 3510 and it is pointed out that the reliance on Suniti Dayal v. CIT referred in Direct Tax Manual at p. 9.201 is in favour of the assessee.

8. We have considered the rival submissions and have gone through the relevant material available on record. During the course of search and seizure operation jewellery worth Rs. 16,79,130 were found from the residence and jewellery worth Rs. 2,23,830 was found from locker No. 64 and jewellery worth Rs. 31,195 was found from locker with South Delhi vault. The case of assessee was that the jewellery found at the time of the search belongs to S.C. Goyal, Hindu undivided family and as per the latest valuation report available, the value of such jewellery as on 15-11-1992, on the valuation dated 31-3-1993 was Rs. 8,54,633. In support of this contention reconciliation statement of jewellery was given from pp. 34 to 44 and valuation report of Rakesh Kumar Gupta, government approved valuer, was given at pp. 45 to 48. Confirmation from Karta of S.C. Goyal, Hindu undivided family, and different members of the family were also filed, which are given at pp. 79 to 81. Besides this, written submission was also given on 14-11-1996, stating that all these jewelleries belong to the Hindu undivided family, which has been shown in the computation of wealth of S.C. Goyal, Hindu undivided family. The department also got the value of this jewellery computed by Vijender Kumar Jain, in which the articles found from the premises were mentioned jointly owned by S.C. Goyal and Meera Goyal and the items of jewellery is basically the same and there is no dispute between the assessee and the Department that the items found at the time of search and shown in the two valuation reports were in anyway different. On the basis of these reconciliation statement and the evidence filed by the assessee, the to these jewellery worth Rs. 8,54,633 shown by the valuer in his report dated 15-11-1992, as on 31-3-1992. It is pertinent to mention here that search has taken place at the premises of the assessee on 29-11-1995. The valuation taken by the department on the basis of valuer's report of Vijendra Kumar Jain, computed all these jewelleries at Rs. 19,34,155 as on 29-11-1995. However, while taking the value as explained, the revenue has accepted the explanation of the jewellery of Rs. 8,54,633 as on 15-11-1992. According to the assessee's counsel, the value of these items, which is not in dispute, comes to Rs. 15-12,379, if it is valued on 29-11-1995, as per the report. Therefore, out of Rs. 19,34,155 the explanation of the assessee to the extent of Rs. 15,12,379 should be accepted instead of value of this jewellery at Rs. 8,54,633 shown on 15-11-1992, as on 31-3-1992. Therefore, the assessing officer has committed a mistake in taking the value of the jewellery explained by the assessee at Rs. 8,54,633 instead of the present value on the date of search. So the undisclosed income computed by the assessing officer is unjustified and deserves to be deleted.

9. Now we come to the addition made by the assessing officer with regard to diamond jewellery worth Rs. 10,79,522. The case of assessee is that this diamond jewellery belongs to Goyal Gases ITD., Goyal Gases ITD. paid a sum of Rs. 10 lakh by Cheque dated 8-10-1992, No. 764065 towards purchase of loose diamond to Sajjan Kumar & Co., out of which Rs. 2,88,510 was received back on 31-3-1993. The balance amount of Rs. 7,11,490 remained outstanding as on 31-3-1996. In support of this contention assessee had produced two bills from Sajjan Kumar & Co. dated 3-3-1993 and 15-3-1993 for Rs. 3,64,730 each, which were found debited in the books of Goyal Gases ITD. on 31-3-1996. The objection of the department is that these bills were debited much after even the date of search and accounts of Sajjan. Kumar & Co. had been squared up on 31-3-1996 only. No reason for delayed entries of bills were furnished by the assessee and no confirmations were obtained from Sajan. Kumar & Co. and why advance of Rs. 10 lacs for the purchase of diamond was given. Further, in the bills the total carat as per paper-book pp. 49-50, comes to 73.34 ct., whereas the diamond jewellery found contained weight 34.28 ct. Therefore, there is a difference in the weight of these items. Further these bills were of cut diamond and no evidence has been given for conversion of diamond into jewellery. The case of assessee is that Rs. 10 lacs was given in advance to Sajjan Kumar & Co. by Goyal Gases ITD. for purchase of diamond. Since the party had not submitted the bills earlier and they have submitted the same in financial year 1996-97, the advance was adjusted in the books of accounts of the company after receipt of the bills. It was also clarified that the making charges were paid by assessee's husband S.C. Goyal for aforesaid items of diamond, which is duly marked in the reconciliation statement. In support of this contention assessee produced confirmation from Goyal Gases ITD. explaining that the jewellery found from assessee's possession during the search and seizure operation belonged to the company. It was also explained that this jewellery was purchased by the company from Sajjan Kumar & Co. during the financial year 1992-93. Statement of accounts of Sajjan Kumar & Co. in the books of Goyal Gases ITD. were produced before the assessing officer. These documents found place at paper-book pp. 76 to 78. These documents clearly establishes that the diamond found in search and seizure operation belongs to Goyal Gases ITD. However, the assessing officer on the basis of belated entries of these bills and in the absence of confirmation from Sajan Kumar & Co. added this sum as undisclosed income of the assessee. It is pertinent to mention here that no opportunity was given by the assessing officer to the assessee before making such addition, to examine Sajjan Kumar & Co., despite the fact that the company Goyal Gases ITD. has given an advance of Rs. 10 lacs to Sajjan Kumar & Co. for the purchase of diamond and the copy of accounts in the books of assessee- company clearly establishes the same. Further, it is also found that the assessee has produced copy of accounts of Goyal Gases ITD. in the books of Sajjan Kumar & Co. certifying purchase of diamond by Goyal Gases ITD., which is given at pp. 49-50. In view of this evidence if the assessing officer was not satisfied with the explanation of the assessee that the diamond jewellery belongs to the company Goyal Gases ITD., he should have examined Sajjan Kumar & Co. before coming to the conclusion that it is unexplained investment of the assessee. It is also pertinent to mention here that when the assessing officer sought explanation, he had not given sufficient time to explain the same. However, on representation he gave 15 days time. The assessee also made a request to furnish the statement of assessee recorded at the time of search on 29-11-1995 and that of the statement of S.C. Goyal. However, the same were not provided to the assessee before making such addition. This also shows bent up mind of the assessing officer that he was in a hurry to complete the assessment. The assessing officer has pointed out that the purchase bills of Sajjan Kumar & Co. show the description of cut diamond and the weight is given as 73.34 ct., whereas in the search diamond jewellery was found with a weight of 34.28 ct. The difference in the carat and the nature of the articles found is quite different. So far as this contention is concerned, it will be clear from the bills produced by the assessee that no doubt these bills pertain to purchase of cut diamond. However, if we read these bills along with the plea of the assessee that after these diamonds were purchased, the making charges were paid by her husband, S.C. Goyal, which clarifies that after purchase of the cut diamond, it was converted into jewellery. No efforts were made by the assessing officer to examine Sajjan Kumar & Co. or no efforts were made to put this question to S.C. Goyal, whose statement was recorded by the assessing officer. Therefore, if the assessing officer had failed to make investigation, it is not the job of the Tribunal to fill up the lacunae of the assessee, especially when the assessee had produced all the material before the assessing officer to show that the diamonds were purchased by Goyal Gases ITD. It was the job of the assessing officer to examine these parties before making any addition.

10. In the case of Sarogi Credit Corpn. v. CIT (supra), the Patna High Court has observed that once the identity of the third party is established before the Income Tax Officer and other such evidence are prima facie placed before him pointing to the fact that the entry is not fictitious, the initial burden lying on the assessee can be said to have been duly discharged by him. It will not, therefore, be for the assessee to explain further as to how or in what circumstances the third party obtained the money or how or why he came to make an advance of money. Once identity is established, the burden immediately shifts on the department to show as to why the assessee's case should not be accepted. In the case of Smt. Bhagwati Devi (supra) the Hon'ble Calcutta High Court has observed that the powers of the Tribunal is to resprise the grievance of affected parties and not to improve the case of the lower authorities to the disadvantage of the assessee.

11. In the case of Hindustan Ferodo ITD. v. CCE (supra) the Hon'ble Supreme Court has laid down that it is not the function of the Tribunal to enter into the arena and make suppositions that are tantamount to the evidence that a party before it has failed to lead. Therefore, it is clear that without any material and evidence on record, the Tribunal is not supposed to infer facts which are not supported by any material or evidence on record. Therefore, we being conscious of the dispassionate judicial function take adverse view of the lack of enquiry against the department.

12. So far as the contention that there is a difference in carat is concerned, it is true that in the bills the weight of diamond purchased is mentioned as 73.34 ct. in the jewellery the diamond studded was found as 34.28 ct. It will not lead to the conclusion that there is a difference in carat unless it is established that the jewellery found does not contain diamond or the items of jewellery are different in nature from what is found and seized by the department. This could be verified by Goyal Gases ITD. or by Sajjan Kumar & Co. No adverse view of this fact can be taken against the assessee when this jewellery has been owned by the company Goyal Gases ITD. The assessee has produced bills showing purchase of diamond and also stated that these diamonds were converted into jewellery by paying making charges by her husband. The bills were produced to prove this contention. The assessee also produced copy of accounts to show how the assets have been depicted and in what manner the company has shown. The burden which lay upon the assessee stands discharged. If the bills were entered later on, it will not lead to the conclusion that the diamond jewellery found belongs to the assessee unless there is material to show and establish the same. Presumption cannot be drawn against the assessee.

13. In the case of Amar Natwarlal Shah v . Asstt. CIT (supra), it was found at the time of search that the books of accounts of the firm were not written upto date and even cash balances were not struck. This exercise was done subsequently by the assessee. The question arose whether the books of accounts can be believable. The Tribunal has taken the view that the mere fact that cash was found at various places at house could not be a ground for rejecting the explanation, particularly in view of the fact that the books of accounts of various concerns were not written for a period for more than 3 months in some cases. Therefore, no adverse view can be drawn for late entry in the absence of further enquiry by the assessing officer in the matter.

14. Taking into consideration the totality of the facts and circumstances, we are of the opinion that no additions can be made in the hands of the assessee as unexplained investment in jewellery worth Rs. 10,79,522 from undisclosed sources of income. We, therefore, set aside the order of the first appellate authority and delete the addition accordingly.

15. In the result, the appeal of the assessee is hereby allowed.