Daulat Ram vs Assistant Commissioner Of Income ...
1998 Latest Caselaw 296 Del

ORDER

NA THU RAM, A.M.

The appeal, preferred by the assessee, is directed against the order of the CIT(A) for the asst. yr. 1990-91.

2. The first ground raised is against sustaining the addition of Rs. 4,510 out of the cash found at the residence amounting to Rs. 44,510 at the time of search. The facts as borne out from the records are that search and seizure operations were carried out at the business and residential premises of the assessee on 19th Sept., 1989, by the Department and as a result thereof the Revenue recovered cash, jewellery, valuable articles and books of account and documents. The assessee in the return filed on 27th March, 1991 declared an income of Rs. 1,91,370 consisting of the following

(i) income as per P&L a/c 19,609;

(ii) amount surrendered out of cash found amounting to Rs. 1,64,510 during search operations 1,20,000; and

(iii) current income invested in purchase of gold ornaments weighing 200 gms surrendered under s. 132(4) 57,760 1,97,369

2.1. We find that during the course of search cash of Rs. 1,64,510 was found.

Out of that the assessee surrendered cash amount of Rs. 1,20,000 in the statement recorded under s. 132(4) and as a consequence declared the said amount as income in the return filed. During the assessment proceedings it was explained that the assessee sold a house in April, 1989, for a consideration of Rs. 1,60,000. Rs. 40,000 was in fact the apparent consideration and the remaining amount of Rs. 1,20,000 was taken as "on money". According to the assessee Rs. 40,000 was brought in the evening of 16th Sept, 1989, and assessee's cash balance in the books was at Rs. 48,505. 17th September, was Sunday and on account of certain accident in the close relation no business was conducted on 18th Sept., 1989. Though the AO did not accept the explanation with regard to Rs. 40,000 but the CIT(A) accepted the explanation given with regard to Rs. 40,000. For the balance amount of Rs. 4,510, during assessment proceedings it was claimed that the amount belonged to Smt. Shanti Devi, the wife of the assessee. As no such claim was made at the time of search, the AO treated the amount of Rs. 4,510 as income of the assessee from undisclosed source. The addition so made was confirmed by the CIT(A) for the reason that nothing concrete has been produced to show that the amount was out of savings of Smt. Shanti Devi.

2.2 We have heard the learned representatives of the assessee as well as the Revenue and also considered the facts Smt. Shanti Devi is a housewife in a busine3s family and savings made by her out of withdrawals for house hold and presents received on social occasions is not ruled out as customary in the Hindu families. Moreover, the amount involved is only Rs. 4,510 and it is not unreasonable to claim it as saving of the house-lady. Moreover, the assessee at the time of search surrendered an amount of Rs. 1,20,000 received as "on money" on sale of the property and had there been any undisclosed cash available the same could have also been disclosed at the time of search. We, therefore, looking to the amount involved and customs prevailing in Hindu society, accept the said amount of Rs. 4.510 as belonging to the lady out of her savings. The addition made on this count is, therefore, directed to be deleted.

3. The second ground raised is against sustaining the addition of Rs. 5,000 on account of investment in NSC. During the course of search NSCs of Rs. 15,000 were found and seized from assessee's residence and out of that NSCs of Rs. 5,000 related to the current assessment year. According to the AO the assessee failed to furnish any explanation about the source of investments made in NSCs nor he has claimed deduction on this count in the return filed. The AO, therefore, treated this amount as unexplained investment and added the same as income from undisclosed source of the current year. The CIT(A) confirmed the addition so made.

3.1. The learned counsel for the assessee has made a submission that assessee's wife Smt. Shanti Devi owned two shops since March 1982, and they were let out @Rs. 600 p.m. The rent was raised from April, 1987 to Rs. 1,000 p.m. Smt. Shanti Devi in an affidavit filed before the AO has deposed that she gifted Rs. 4,000 during the financial year 1987-88; Rs. 6,000 in 1988-89 and Rs. 5,000 in 1989-90 out of the rental income. The Revenue has not questioned the deposition made in the affidavit made by the lady nor she was required to produce any evidence in support of the averments made in the affidavit. The affidavit filed rather stands uncontroverted. He further submitted that in the asst. yr. 1988-89 the assessee had obtained NOC's of Rs. 4,000 out of the rental income of his wife and the addition made on that account was deleted by the Tribunal in para 5.2 of its order, dt. 27th March, 1996, in ITA No. 8424 and 8425/Del/1992 for the asst. yrs, 1988-89 and 1989-90. The learned counsel, therefore, pleaded that there being sufficient evidence about the source of investment in NSCs given and it having covered by the a forecited Tribunal's decision in favour of the assessee, there was no justification for the addition made and sustained on this count.

3.2. The learned Departmental Representative, on the other hand, relied upon the orders of the lower authorities.

4. We have considered the facts and rival submissions. We find that the assessee received Rs. 5,000 during the year from his wife out of the rental income as per affidavit of the lady. The averments made in the affidavit by the lady has neither been questioned nor controverted by the Revenue by bringing on record any material evidence. Moreover, the issue stands covered in favour of the assessee by the Tribunal's order for asst. yr. 1988-89. In this view of the matter we see, no merit in the addition made of Rs. 5,000 in the hands of the assessee on account of unexplained investment and the same is directed to be deleted.

5. The next ground raised by the assessee is against sustaining an addition of Rs. 1,05,502 representing unexplained entries found recorded on loose papers at the time of search. The assessee was engaged in the business of golds mithy .

The assessee was either making gold ornaments out of old gold ornaments received from customers or out of the gold and was charging for making of such gold ornaments. During the course of search certain loose documents were found and seized. The AO has considered the nature of the entries made in each of such documents and based thereon he made addition of Rs. 1,05,502 with the following observation :

"Document No. 20 p. Nos. 189-191

It contains the amount written against the names of various persons. The total of these amounts comes to Rs. 26,500. The assessee was required to explain the nature of these entries along with source of advances made to the various persons, the names of which are given on these papers itself along with the figure of Rs. 10,510 contained in this paper. In reply to this paper no reply whatsoever has been given rather than the assessee omitted this query from his reply. It is thus clear that the amounts have been advanced by the assessee from the sources not disclosed to the Department. I, therefore, hold that the said advances have been made by the assessee outside the books of account, thus an addition of Rs. 35,000 is made.

This paper contains purchase of various items for household amounting to Rs. 4,061. The assessee was requested to intimate where this amount is accounted for in regular books of account. In reply it was stated that no doubt this paper contains household items but it does not belong to him. The explanation of the assessee is not convincing and, therefore, it is treated as assessee's expenditure from undisclosed sources.

On this paper personal expenses of Rs. 1,151 have been noted. The assessee was required to intimate where these expenses are accounted for. In reply, it has been stated that these purchases were made on 18th Sept., 1989 and the amount was taken from shop for personal expenses and these could not be recorded as the shop was closed. This paper does not contain any date as alleged by the assessee. Be that as it may it is treated as assessee's income from undisclosed sources.

It contains accounts of manufacturing the gold ornaments weighing 118.145 gms. Its value has been worked out at Rs. 12,996 out of which Rs. 5,000 has been received. The assessee was asked to explain as to where this amount is accounted for in his regular books of account. In reply it has been stated that in this paper no where word gold ornaments is written and no value and date is given. This explanation of the assessee is not convincing as the value is very much written and the amount in part has also been received as discussed supra. Therefore, it is treated as assessee's income from undisclosed sources.

9.3 P. 98 & 100

It contains expenses of Rs. 1,510, 229 on back of p. 98 and Rs. 496.75 on page 100 aggregates to Rs. 2,235. The assessee was required to explain the source of this expenditure. In reply it has been stated that these expenses might have been met out of withdrawals. No evidence has been produced. Therefore, these expenses are taken as assessee's income from undisclosed sources.

9.4 P. 99

It contains an entry of Rs. 5,000. The assessee was required to intimate as to where it is accounted for. In reply it has been stated that this paper contains entry of Rs. 5,000 and it does not belong to him. In the absence of any satisfactory explanation, it is treated as assessee's income from undisclosed sources.

9.5 P. 101

This paper contains payment of Rs. 2,702 to various parties. The assessee was required to get these payments verified from books of account. In reply it has been stated that this paper is not in the handwriting of the assessee and it does not belong to the assessee. In the absence of any satisfactory explanation, it is treated as assessee's income from undisclosed sources.

9.6 P. 105

It contains account of bangles manufactured weighing 29 gms. The rate is written on this paper at Rs. 2,660 per 10 gms. The value comes to Rs. 7,714. Assessee was requested to get this entry verified from the books of account. In reply it has been stated that some job work might have been done. In the absence of any verification on the part of the assessee the amount of Rs. 7,714 is treated as assessee's income from undisclosed sources as a sum of Rs. 1,000 has been received by the assessee as per narration on the paper itself.

9.7 Page 188 :

As per this paper gold ornaments i.e. ring, etc. has been manufactured. Its weight has been shown at 5.3 gms. The assessee was requested to intimate as to where it is accounted for in the books of account. In reply it has been stated that labour work has been done and labour charges are credited in labour account. No verification has been got done by the assessee and, therefore, its value at Rs. 1,500 is treated as assessee's income from undisclosed sources.

10. Document No. 9 seized from residence

10.1 P. 1 to 3

These contains entry regarding purchase of gold jewellery weighing 34 gms. for Rs. 8,335 from Smt. Raj Dulari. The assessee was required to explain the source of investment apart from the source of Rs. 7,110 and Rs. 520 contained in these papers. In reply it has been stated that no such purchase as alleged, of the gold jewellery weighing 34 gms for Rs. 8,335 from Smt. Raj Dulari was made and no other purchases were made of Rs. 7,110 and Rs. 520 as alleged in the notice. These papers do not belong to assessee's business transaction. Sometimes customers come after selling their old jewellery in the market and come for verification of rates and contents are written by them whether sale voucher/ document are correct or not. These papers might have been left by some customers, this explanation of the assessee does not carry weight and in the absence of satisfactory explanation the total amount of Rs. 15,865 is treated as assessee's income from undisclosed sources.

This paper contains sale/manufacturing of 44.400 gms. and 5.750 gms. The rate is given Rs. 2,925 per 10 gms. on p. 10. P. No. 10 contains total value, of Rs. 1,751 while p. 11 contains value of Rs. 15.541. The assessee was required to explain the source of the said ornaments. In reply it has been stated that these are rough calculations as the assessee is not authorised to deal with gold ornaments and do not pertain to his business activity. This explanation of the assessee is not convincing and in the absence of any verification total amount of Rs. 17,272 is treated to be assessee's income from undisclosed sources.

11. The scrutiny of the balance sheet reveals that assessee has made advances of Rs. 26,100 and Rs. 17,000 to his sons Sh. Pradeep Kumar and Rajinder Kumar respectively, as interest free loan. The interest on these advances taken @ 18 per cent which comes to Rs. 7,608 which is added in the income of the assessee."

5.1. The CIT(A) confirmed the addition so made with the following observations:

7. The ground No. 2(V) of appeal is against addition of Rs. 1,05,502 on account of unexplained entries on some loose papers found during the course of search.

7.1 The ITO has given enough reasons in para 8 to para 10(ii) of his order to make impugned addition on account of various loose papers found during the course of search. Nothing concrete has been argued or produced before me to rebut his finding. However, it has been mentioned that in para 8, the addition of Rs. 35,000 was made instead of Rs. 26,500 because of typographical error as the Asstt. CIT, in the beginning of para has himself mentioned that the total of the amounts on document No. 20 (pp. 180 to 191) was Rs. 26,500. The Asstt. CIT is directed to look into the claim of the appellant and, if found correct, reduce the addition accordingly.

7.2 In the result, addition of Rs. 1,05,502 is confirmed subject to relief, if any, arising out of verification of the appellant's claim regarding addition of Rs. 26,500 instead of Rs. 35,000 on the basis of document No. 20."

5.2. The learned counsel has made a submission that the loose documents found and seized at the time of search neither belonged to nor related to the assessee. These are undated and bear no name of any person, party or concern

to whom they belong. There is no narration made in respect of various figures recorded therein. Possibly some customer left them at the premises of the assessee. The seized documents are totally dump papers. He said so while referring to the documents at pp. 189 to 191 of document No. 20. Page 85 contained details of purchases of household goods like ghee, cigarette, etc. but it does not bear the name of any person. This document does not belong to the assessee as none of the members of the family is in the habit of smoking. He further submitted that paper No. 88 represents cost of some clothes and the expenditure incurred was made out of the cash balance in the books of the assessee which could not be posted in the account books on 18th Sept., 1989.

The shortage in cash found at the time of search established such claim. According to learned counsel, page No. 96 gives 118.45 weight but it does not indicate the nature of the item. The AO has taken it as representing the weight of gold ornaments but that is based on surmises and conjectures. The assessee does not deal in gold ornaments but simply carries on the vocation of golds mithy . Without prejudice to the above contention it has been submitted that the AO was not right in not accounting for the amount of Rs. 5,000 out of Rs. 12,996 as mentioned in the paper-book. The addition, if any, could be of Rs. 7,996. Paper Nos. 98 to 100, according to the learned counsel, are undated and do not bear the name of any person. These also contain entries of certain house-hold items of petty nature and the expenditure might have been incurred out of the withdrawals from the capital account. Page No. 99 is a dump document and does not contain any narration in respect of the figure of Rs. 5,000 mentioned therein. Similar was the position in respect of page No. 101. Page No. 105 indicates that the assessee might have done job work of manufacturing of two bangles and one ring for which he received labour charges. It does not, in any case involve any investment by the assessee. The addition made of Rs. 7,714 representing the cost of Rs. 29 gms. of gold is unjustified. Page No. 188 indicated some job work for manufacture of ring weighing 5.3 gms. This is also undated and does not bear the name of any person. This also does not prove investment of Rs. 1,500 in purchase of gold by the assessee. Further, making submissions, the learned counsel stated that p. 1 to 3 of document No. 9 do not belong to the assessee. Smt. Raj Dulari whose name is mentioned might have come to the shop after selling her ornaments to some other person, for verification of the rates and contents of the gold in the goods sold and ca/culation of sale price. The assessee never dealt in purchase and sale of gold ornaments as he had no licence for carrying on such business. The addition made on sale price of Rs. 15,865 is, therefore, uncalled for. Page Nos. 10 & 11 also refer to sale of 44.400 gms. and 5.550 gms. of gold ornaments. No such sale was made by the assessee as he had no licence for purchase and sale of gold ornaments.

5.3. The learned counsel has, therefore, submitted that no addition in the income of the assessee was called for based on such documents which were without narration and dumb and which did not belong to or related to the assessee. He, therefore, placing reliance on the decision of the Tribunal in the case of Ash wani Kumar vs. ITO (1992) 42 M (Del) 644 : (1991) 39 ITD 183 (Del) submitted that the addition made on this count was totally unjustified and the same deserves to be deleted. He further sought support from the decision Asstt. CIT vs. Shailesh S. Shah (1997) 59 M (Mum) 574: (1997) 63 ITD 153 (Mum). He also referring to the decision in the case of Pushkar Narain Saraf vs. CIT (1990) 86 CTR (All) 110 : (1990) 183 ITR 388 (All), submitted that the presumption arising under s. 132(4A) applies only in relation to provisional assessment under s. 132(5) but it is not available in regular assessment. He further submitted that the presumption available under s. 132(4A) is rebuttable and there is sufficient material on record to rebut such presumption. He, therefore, pleaded that neither the said documents belonged to the assessee nor the entries recorded therein in the absence of narration indicate the income earned by the assessee during the year and the position being so, the addition made is totally unjustified and the same deserves to be deleted.

5.4. The learned Departmental Representative, on the other hand, submitted that the assessee is engaged in the business of golds mithy , thereby dealing in gold ornaments. The documents found and seized contained narration and also names of various persons involved. Receipt and delivery of gold ornaments, receipt of making charges, purchase of clothes and other household articles, though the assessee has denied these documents, but he has not produced any evidence to rebut the presumption available under s. 132(4A) that these documents belonged to certain other person who has claimed it as such and the transactions recorded therein do not relate to him. The entries, however, recorded in the seized documents speak otherwise. Looking to the nature of entries made and the documents having been found and seized from the premises of the assessee, it is established that these belonged to the assessee and none else. He further submitted that the addition made based on these documents in the hands of the assessee is fully justified and the CIT(A) has rightly sustained it. The learned Departmental Representative, therefore, pleaded that the findings given by the CIT(A) requires no interference at the hands of the Tribunal.

5.5. We have carefully considered the facts and rival submissions. The assessee admittedly was engaged in the business of golds mithy i.e., making of gold ornaments. Admittedly search operations were carried out at the business as well as residential premises of the assessee on 19th Sept., 1989, and during the course of search the Department seized cash, gold ornaments and certain loose documents. As mentioned above the assessee surrendered cash of Rs. 1,20,000 and Rs. 57,760 on account of unexplained investment in purchase of gold ornaments. The present addition made is based on the various documents found and seized during search. The documents seized contained entries of the following nature :

(a) pages 11 and 12 of the paper book gives the detail of amounts receivable of Rs. 26,500 from various parties named therein belonging to Jind, Patiala and certain villages around them. The amount mentioned against each ranges from Rs. 160 to Rs. 6,180 receivable from twenty parties. We also found that some of the entries have been crossed to indicate the amount receivable from them had already been received and the balance amount outstanding was to about Rs. 10,500;

(b) page 13 of the paper-book gives details of household goods purchased, such as, ghee, parshad, flower, paper, cigarette of Rs. 4,061;

(c) page 15 of the paper-book gives details of purchase of three sarees, 3 peticots, 3 falls, fall lagai, etc. from Mittal, Sari 13handar, Jind. The cost of these sarees comes to about Rs. 1,150;

(d) page 17 of the paper-book also gives details of household items purchased, such as, mitha soda, sul . i, maida, sugar, ilaichi, magaj, edible oil, etc. of Rs. 1,510;

(e) pages 18, 19 and 20 also give the details of purchase of household items of Rs. 496.70;

(f) page 22 also gives names of certain parties against which certain amounts have been noted of receivable nature. The total amount involved is Rs. 2,850;

(g) Document at pp. 23 to 29 of the paper-book gives details of certain transactions of gold ornaments wherein necessary narration of the items, weight and labour charges have been given.

5.6. The assessee has denied the ownership of these documents and the plea taken is that these documents might have been left by certain customers at their shop. The question that arises is whether such documents found and seized belonged to the assessee and whether the same could be utilised against the assessee. There is presumption in s. 132(4A) and also in the Evidence Act that material recovered from a person is presumed to be belonging to him but such presumption is rebuttable. It would be seen from above that most of the documents found relate to the gold ornaments transactions and purchase of household goods. Admittedly the assessee was carrying on business of golds mithy i.e. manufacturing of ornaments out of gold for customers. Naturally the transactions recorded in the said documents recovered and seized from the premises of the assessee presumed to be belonging to him unless he proves otherwise. The assessee has merely denied the ownership of such documents but he failed to produce any evidence to prove that these documents did not belong to him but belonged to some other person. The onus, therefore, was on the assessee to rebut the presumption available under the law but he failed to do so. Moreover, the assessee himself has admitted that the sarees were purchased from cash balance but necessary entry in that behalf could not be made on account of search conducted the following day. Further, it is not denied that the assessee was purchasing house-hold goods. He has denied having purchased only cigarette and biri claiming that none of their family members are in the habit of smoking. The claim so made is not supported by any evidence. Moreover, even if the assessee was not smoking, biri and cigarette may have to be kept at the business premises for offering to the clients. We also note that the assessee was doing gold smithy in a small town i.e., Jind of Haryana and in certain cases he has to accommodate the clients in the matter of payments and certain dues are left to be recovered later on. The twenty parties listed at pp. 11 and 12 of the paper-book seem to be such debtors. The assessee has not produced any evidence to show that nothing was due for recovery from them. Having regard to all the facts and circumstances discussed we are of the view that the a forecited documents found and seized belonged to the assessee.

5.7. The assessee has placed reliance on the Tribunal's decision in the case of Ashwani Kumar (supra) and Shailesh S. Shah (supra). But we find that the facts in these cases are distinguishable from that of the assessee inasmuch as in those cases loose papers seized did not carry any narration or definite information about the transactions and the seized documents were dump whereas in the present case the documents seized contain necessary details of the transactions along with the name and addresses of the par-ties from whom amount is due; details of household items purchased; details of gold ornaments' transactions giving weight, rate for 10 gms. total amount, adjustment of amount already received; labour charges, etc. the aforesaid decisions relied upon by the assessee are, therefore, of no assistance. The learned counsel has also placed reliance on the decision of the Hon'ble Allahabad High Court in the case of Pushkar Narain Sarraf (supra). In that case certain documents were found showing details of cash credits, the assessee claimed the benefit of presumption under s. 132(4A) for their treatment as genuine. But the Hon'ble High Court held that these provisions did not override the provisions of s. 68 and their genuineness has to be considered under that section. The facts of this case are obviously distinguishable and it does not support the cause of the assessee.

5.8. Having held that the said documents belonged to the assessee, the question that now arises for our consideration is the question of computation of undisclosed income based on such documents. We find that as per the debtors list on pp. 11 and 12 of the paper-book total amount of debt is shown at Rs. 26,500 but we find that several entries have been scored therein and that amount of only Rs. 10,500 was due to be recovered when the said documents were seized by the Department. Such documents might have accumulated over a period of time and as on the date of search during the current accounting year the amount left to be recovered was of Rs. 10,500. It would, therefore, be appropriate if unexplained investment on this count is adopted at Rs. 10,500 against that adopted by the lower authorities at Rs. 26,500, Rs. 35,000, the same being unrecorded and source not explained.

5.9. We also find that pp. 85, 88, 98, 100 and 101 of documents No. 20 showed expenditure on household good, i.e. purchases of sarees, etc. totalling to about Rs. 10,000. This in fact is the outgoing amount from undisclosed income, the same having not been accounted for in the books of account.

5.10. Pages 96, 105, 188 of document No. 20 and pp. 10 and 11 of document No. 9 showed manufacturing of gold ornaments and their sale to customers to the extent of about 40,000. The assessee admittedly was engaged in the profession of golds mithy and was manufacturing gold ornaments out of the old gold ornaments received from the customers or gold taken from market and was charging therefor the labour or making charges. His income, therefore, apart from labour charges might have included an element of profit. We also note that pp. 1 to 3 of document no. 9 contained record of purchases of gold ornaments to the extent of about Rs. 15,865. Such purchases are also not found recorded nor the investment made therein has been duly explained. We, therefore, on account of unexplained investment in gold ornaments and income from manufacturing of ornaments not disclosed to the Department sustain an addition of Rs. 20,000 and it is out of such income that unexplained expenses of Rs. 10,000 were incurred. In this view of the matter we sustain a total addition of Rs. 20,000 plus Rs. 10,500 totalling to Rs. 30,500. The addition made of balance amount is directed to be deleted.

6. In the result, appeal is partly allowed.