Delhi High Court
The Commissioner Of Income Tax vs Indair Carriers Pvt. Ltd. on 1 December, 2010
Author: A.K.Sikri
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of Decision: 1st December, 2010
+ ITA No. 421/2009
THE COMMISSIONER OF INCOME TAX ..... Appellant
Through: Ms Rashmi Chopra with
Mr.Chandramani Bhardwaj,
Advocates.
versus
INDAIR CARRIERS PVT. LTD. ..... Respondent
Through: Mr.Anoop Sharma with
Mr.Manu K,Giri, Advocates
CORAM:
HON'BLE MR. JUSTICE A.K.SIKRI
HON'BLE MR. JUSTICE SURESH KAIT
1. Whether the Reporters of local papers may be allowed to see
the judgment?YES
2. To be referred to the Reporter or not?YES
3. Whether the judgment should be reported in the Digest? YES
SURESH KAIT, J. (ORAL)
1. The Revenue has preferred the present appeal against the
order of the Income Tax Appellate Tribunal, Delhi Bench, New Delhi
of dated 30.04.2008 wherein the ITAT has remanded the case back
to the Assessing Officer for deciding the issue afresh after giving an
opportunity to the assessee.
The brief facts of the case are as under:-
2. The search and seizure operation was conducted in the office
premises of M/s Indair Carriers Pvt. Ltd. on 17.01.2002 and at the
residential premises of its Directors, Substantial Shareholders and
Employees. During the course of search following group of premises
were covered under Section 132 of the Income Tax Act, as under:-
"1. Plot No.9-A, Road No.4, NH-8 Mahipalpur
Extension, New Delhi
2. LG-13, Somdutt Chamber-II, Bhikaji Cama Place,
R.K.Puram, New Delhi
3. Marry Villa, Andhri(E), Opp. Sahara Air
Complex, Sutarwa, Mumabi-99
4. J-7, NDSE Part-I, New Delhi
5. Farm House of Shri Virender Khosla at Sonia
Farm Opp. BSF Center, 54/22, Chawwla, Bijwasan,
Delhi
6. G-42, Mansarover Gardens, New Delhi
7. 68, Ring Road, Lajpat Nagar, New Delhi"
3. Notice under Section 158BC of the Income Tax Act, 1961 was
issued on 07.11.2002. The assessee had filed the return of income for
the block assessment. In Form no. 2B the assessee had declared un-
disclosed income of `12 lacs. Accordingly, the notice under Section
143(2) and 142(1) along with questionnaire were issued on
10.10.2003. The same was duly served upon the assessee. The assessee
had filed the written submission and other details during the course of
hearing. During the course of search cash of `2,07,300/- was found
at the business premises of the assessee at Plot No.9-A, NH-8,
Mahipalpur Extension, New Delhi. The business of the assessee
company was an IATA approved rate and forwarding agent, however
they are mainly engaged in the business of booking of export cargo
through various Airlines. The assessee company used to accept the
exports cargo for its clients, get its custom cleared and hand it over to
the respective Airlines. The assessee company on receipt of cargo
issues Airways Bills (AWB) for various Airlines with which it was
dealing, i.e. Lufthansa, Air France, Swiss Air, Saudia and Japan Airlines
etc. The main income of the assessee was IATA commission and
incentives received from various Airlines.
4. The fortnightly statement known as cargo sales report (CSR)
were prepared according to the business done with each Airlines and
the commission due to the assessee was reflected in those CSRs. The
commission due to the assessee was retained while making payments
of rate to various Airlines. In addition to this, the assessee company
used to receive incentives on the basis of business done with such
Airlines.
5. The explanation to the un-explained cash of ` 62,273/- which
was found at the business premises of the assessee company located at
Mahipalpur Extension, was that there was cash balance of
`.1,45,027/- was available as per the cash book of M/s Indair Carriers
Pvt. Ltd.. These facts were cross examined from the cash book and
found correct. For the balance amount of `62,273/-, the assessee
explained that this cash belonged to Mr. V.K.Khosla, Director of the
Company. In the absence of any proof, this amount remains
unexplained and, therefore, included in the undisclosed income of the
assessee.
6. The Assessing Officer has discussed about Annexure-A-59 which
is table diary in which apart from other business appointments
contains cash transactions amount to `35,75,110/-. The transactions
recorded in the table diary are reproduced below:-
Page Date Receipt Payment Income Remarks
No.
4 10-Jan- 50000 50000 Paid to
01 Mr.Gupta
4 10-Jan- 20000 20000 Outstanding
01 to Mr.Gupta
5 15-Jan- 600000 600000 Received
5 15-Jan- 450000 Paid
01 Chachaji
5 15-Jan- 150000 Paid to
01 Katyal
7 3-Feb-01 750000 750000 Received
7 3-Feb-01 500000 Paid to
Katyal
8 8-Feb-01 450000 450000 Received
9 14-Feb- 30000 Cash paid to
01 Mr.Gupta
12 5-Mar- 550000 Paid for
01 marble
13 13-Mar- 114000 Paid to
01 Directors
24 28-May- 15000 15000 Mr.Gupta
24 28-May- 65000 65000 Received
01 from
inderveer
24 29-May- 177000 177000 Received
01 from
Mr.Wadhwa
24 1-June- 375000 375000 Anil
24 1-June- 13000 13000 V.K.
24 1-June- 35000 35000 Wadhwa
25 8-June- 5000 5000 Received
26 12-June- 6160 6160 Received
01 from
gardner
27 20-June- 65000 Paid to
01 Murli
Kakkar
32 27-June- 31250 31250 Wadhwa
33 30-Aug- 10000 10000 M.Singh
39 11-Sep- 130000 Mr.Gupta
41 24-Sep- 50000 Mr.K.
41 24-Sep- 2000 Paid to
01 Doctor
42 5-Oct-01 200000 Paid to
Mr.magu
51 5-Dec-01 165000 165000 Received
from Katyal
51 5-Dec-01 100000 100000 Satprakash
61 7-Nov- 650000 650000 To be
01 received
from V.M.
61 57700 57700 Received
Total undisclosed income as per annexure A-59 35,75,110/-
7. In response to these transactions recorded in the seized
documents marked as A-59, the assessee submitted that this table
diary was maintained by Mr.V.K.Khosla in his own hand writing
which contains details of business transactions relating to M/s Indair
Carriers P.Ltd. and also his own personal transactions. The assessee
further submitted that during the course of day to day belongings of
the business, he had to record various details with regard to the
business of the assessee company such as his appointments with
various airlines, customers, tonnage done with various airlines, special
rates given by the airlines, and also details with regard to business
transactions. Collection of cheques i.e. from the parties including post
dated cheques which were received from the clients who were in
arrears and details of such like nature.
8. The assessee after scrutinizing the said diary submitted that the
details of business transactions pertaining to the assessee company are
as under:-
Page No. Date Receipt Payment Income Remarks
5 15-Jan-01 600000 600000 Received
5 15-Jan-01 450000 Paid
Chachaji
5 15-Jan-01 150000 Paid to
Katyal
7 3-Feb-01 750000 750000 Received
7 3-Feb-01 500000 Paid to
Katyal
8 8-Feb-01 450000 450000 Received
9 14-Feb-01 30000 Cash paid
to
Mr.Gupta
12 5-Mar-01 550000 Paid for
marble
13 13-Mar- 103000 Paid to
01 Directors
24 1-June-01 375000 375000 Anil
41 24-Sep- 50000 Mr.K.
42 5-Oct-01 200000 Paid to
Mr.Magu
9. The assessee had further explained the aforesaid transactions
recorded in the diary pertains to normal business transactions of the
assessee company which had been duly accounted for in the books of
the assessee company. On this explanation, observation of the
Assessing Officer is as below:-
"The books of accounts of the assessee company was
verified and found that not a single transaction
recorded in annexure A-59 has been accounted for in
the books of accounts for the period mentioned in the
Annexure A-59."
10. The Assessing Officer came to the conclusion that the diary
inventoried as A-59 was found from the premises of the assessee and
all the transactions mentioned therein are business transactions of the
assessee unless otherwise route. Though the assessee had admitted
that the transactions amounting to ` 21,75,000/- as per the details
mentioned in above table were business transactions of the company.
Therefore, in regard to the balance transactions of `14,00,110/-, the
assessee had failed to controvert the presumption of law that these
transactions do not pertain to the assessee‟s business. In view of the
above discussion and after considering the facts that the transactions
of `35,75,110/- has not been recorded in the books of accounts of the
assessee company, although, the assessee admitted that these were its
business transactions. Therefore, all such transactions were
undisclosed income of the assessee company and the same was
included in total undisclosed income of the assessee as under:-
"Undisclosed income `21,75,000/-(included on
substantive basis)
Undisclosed income `14,00,000/-(included on
protective basis)
Total: ` 35,75,110/-"
11. Annexure A-5 of the seizure documents reveals that cash
payment of `20,000/- and `10,000/- were made to Mr.Malhotra and
Mr.Ranjeet respectively. The assessee while replying to the show
cause notice submitted that these two persons were employees of the
customers of the assessee company, who had requested Mr. Ravinder
Katyal to give them some amount as they had to urgently get some
cargo cleared at the customs and they were short of the payment.
Since the employees who had demanded the money were serving
with our reputed customers, Mr. Ravinder Katyal. Keeping in view
the business prudence and business relations with the customers, the
amount paid them `20,000/- and `10,000/-respectively on the
instructions of the customers against IOU signed by them and left
with the cashier who then cancelled the IOU slips.
12. The Assessing Officer observed that the assessee had failed to
produce any evidence as to how and when the amount was paid
back by these two persons. Even after verification of the books of
account no such entry/transactions was found recorded. Therefore,
`30,000/- is assessee‟s undisclosed income and accordingly included
in total undisclosed income.
13. As per the Assessing Officer, the total undisclosed income
computed is as under:-
A) Undisclosed cash `62,273/-
B) Undisclosed transaction as per Annexure A-59 `35,75,110/-
C) Undisclosed income as per Annexure A-5 ` 30,000/-
Total Undisclosed income ` 36,67,380/-
14. Accordingly, penalty proceedings under Section 158BFA (20)
have been initiated separately as total undisclosed income determined
`36,67,380/- against income disclosed in block return of `12,00,000/-
15. The assessment order was challenged by the assessee before the
CIT(A) and preferred an appeal on various grounds. Since the assessee
had not pressed the other grounds, therefore, the appeal was
dismissed by the CIT(A) and ground No.3 was taken into
consideration which is reproduced below:-
"This ground is that the A.O. erred in making addition
of `35,75,110/- as undisclosed income of the assessee for
the block period; out of which addition of
Rs.41,75,000/- was made on „substantive basis‟ and
addition of Rs.14,00,100/- was made on „protective
basis‟"
16. During the course of search and seizure operations Annexure A-
59 was seized from the business premises of the assessee company,
certain transactions amounting to `35,75,110/- were found recorded.
The assessee submitted before the Assessing Officer that the table
diary was maintained by Mr. V.K.Khosla, Director of the company, in
his own hand writing which contains details of business transactions
relating to the assessee company but the Assessing Officer has not
accepted the contention of the assessee. The Assessing Officer has
observed in the assessment order that books of accounts of the
assessee company were verified and found that not a single
transaction recorded in AnnexureA-59 had been accounted for in the
books of accounts for the period mentioned in the annexure A-59.
The Assessing Officer has also mentioned the details of the transaction
claimed to be pertaining to the business of the assessee company
which is reproduced below:-
Page No. Date Receipt Payment Income Remarks
5 15-Jan-01 600000 600000 Received
5 15-Jan-01 450000 Paid
Chachaji
5 15-Jan-01 150000 Paid to
Katyal
7 3-Feb-01 750000 750000 Received
7 3-Feb-01 500000 Paid to
Katyal
8 8-Feb-01 450000 450000 Received
9 14-Feb- 30000 Cash paid
01 to
Mr.Gupta
12 5-Mar-01 550000 Paid for
marble
13 13-Mar- 103000 Paid to
01 Directors
24 1-June-01 375000 375000 Anil
41 24-Sep- 50000 Mr.K.
42 5-Oct-01 200000 Paid to
Mr.Magu
Total 21,75,000
17. The Assessing Officer noted that the diary inventoried as
annexure A-59 was found in the business premises of the assessee and,
therefore, all the transactions recorded in the said diary were business
transactions of the assessee unless otherwise proved.
18. The fact remain that the Authorized Representative (in short
AR) submitted in regard to the computation of undisclosed income
on protective basis of `14,00,100/- that the entries pertaining to
transactions of `14,00,100/- belongs to Mr. V.K.Khsola who also had
owned the same in assessment proceedings before the Assessing
Officer. He further submitted that no material has been brought on
record by the Assessing Officer that the transactions of entries
aggregating to `14,00,100/- belongs to the assessee company and not
to Mr. V.K.Khosla in whose hand writing the diary was written and
who has admitted that these transactions belongs to him in personal
capacity. The AR has also furnished a copy of the block assessment
order of Mr. V.K.Khosla and pointed out that the Assessing Officer
has treated the transactions of `14,00,100/- as belonging to Mr.
V.K.Khosla, The Assessing Officer has allowed him to set off to the
extent of `1,31,000/- out of undisclosed income as was disclosed in
the block assessment maintained by his firm and made an addition of
`13,30,110/- in the hand of Mr. V.K.Khsola on substantive basis. The
Airways also allowed credit to the extent of `1,31,000/- being cash
available with him out of income disclosed in the said two firms.
Therefore, it was argued that there was no justification to make
addition of `14,00,100/- in the case of the assessee on „protective
basis‟.
19. After going through all the records, the CIT(A) had observed
that Mr. Khosla, had taken this ground in the appeal filed by him
against the block assessment order. In his case, has taken the ground
that the Assessing Officer had not appreciated the fact of cash
availability with the assessee out of undisclosed income of his firm
while determining `13,30,110/- and undisclosed income for the block
period. Thus, even in the ground of appeal taken before CIT(A), Mr.
Khosla had not contested the fact that the entries of `14,00,100/-
pertains to his personal transactions. The Assessing Officer has not
brought out any material on record to established that the
transactions entered in this table diary amounting to `14,00,100/-
does not belong to personal transactions of Mr. V.K.Khsola.
Moreover, in the block assessment order undisclosed income cannot
be determined on protective basis.
20. Therefore, keeping in view the facts and circumstances of the
case the CIT(A) was of the view that the Assessing Officer was not
justified in determining `14,00,100/- as undisclosed income for the
block period of the assessee company on protective basis. Hence,
addition of `14,00,100/- made in the undisclosed income on
protective basis was deleted by the CIT(A).
21. With regard to the undisclosed income of `21,75,000/-, the AR
reiterated the arguments which were taken before the Assessing
Officer that the noting jotted in this diary primarily pertains to
collection of actual cheques, whether received by the company
currently or at times as post dated cheques received from the parties
who were in arrears and handing over of these cheques to other
directors of the company so that as promised by the parties the
cheques can be encashed on due dates or pressure be built up on
them for the encashment of the same. He further submitted that the
assessee company was always under heavy pressure to make the
payments to the airlines which, irrespective of the fact that whether
the corresponding recoveries were made from the customer or not,
had to be paid to the airlines, in order to remain as an approved
IATA agent. Many a times it also happens that when the parties are
contacted and asked to make payment, they reply that certain cheque
have already been paid by them against their dues to the other
directors of the company which Mr. V.K.Khosla notes entries in his
diary for the purposes of the confirmation from the Accounts
Department. Therefore, the transactions which belongs to the
assessee company aggregating to `.21,75,000/- had been duly
accounted for in the books of the assessee company. He has
vehemently argued that in the diary none of his transactions the
word „cash‟ was mentioned and all the entries pertained to receipt
and payments were of cheques and were duly recorded in the
account books. Thus, it was contended that all the transactions were
made by cheque and no cash transaction was recorded in the table
diary. (annexure A-59).
22. The AR has also furnished explanation of each entry of page-5
of the diary dated 15.01.2001 that amount of `6 lacs received out of
that `4.50 lacs was paid to chachaji and Rs.1.50 lacs was paid to Mr.
Katyal and other entries have also been explained.
23. After going through the submission and record, the CIT(A)
found that the submission of the AR that the transaction recorded in
this table diary had been duly accounted for in the books of account
of the assessee company, is not tenable. The assessee company had
picked up certain transactions recorded in the bank book on a
particular day in order to match the quantum. For example, on page
No.5 of the table diary dated 15.01.2001, receipt of `6 lacs and
payment of `4.50 lacs to chacahji and `1.5 lacs to Mr. Katyal had
been recorded. The assessee had tried to explained that the receipt of
`6 lacs pertains to the receipts of two cheques; one from M/s Mals
Cargo Pvt. Ltd. of Rs.4 lacs and from M/s Sheriff Travel & Cargo of `2
lacs. The CIT(A) has also noticed from the bank book of the assessee
that many other cheques from various parties on that date had been
recorded in the bank book , such as cheque of `5,08,045/- from M/s
HTL Logestick India Pvt. Ltd., `1 lac from Continental Cargo Movers
etc. It is worth mentioning that in the table diary it had been noted
that out of `.6 lacs were paid to chachaji and `1.5 lacs to Mr. Katyal.
However, in the bank book, no such entry regarding payments of
`4.5 lacs and `1.5 lacs were found recorded. The assessee
unsuccessfully tried to explain that these entries were recorded as M/s
Mals Cargo Pvt. Ltd. that they would pay a cheque of `4.5 lacs and
M/s Sheriff Travel & Cargo would pay a cheque of `1.5 lacs but no
such actual payments were made to chachaji and to Mr. Katyal. As
noted by the CIT(A) that on an another date i.e. 03.02.2001 in table
diary on page-7, it is recorded that a payment of `5 lacs was made to
Mr. Katyal and the assessee tried to explain that the entry represents
payment of `5 lacs by cheques to M/s. Kuber Co. Sales(P) Ltd.
24. In regard to entry No.5, the assessee submitted that the notings
„`4.50 lacs paid to chachaji and `1.50 lacs paid to Mr. Katyal‟ only
represents promise to pay by two parties and no actual payments
were made to these persons, whereas, regarding noting on page-7 of
table diary „`5 lacs paid to Mr. Katyal‟, the assessee tried to explain
that this entry represents actual payment to M/s Kuber Co. Sales (P)
Ltd.. Thus there was no inconsistency in the explanation given by the
assessee. Moreover, in the books of accounts the entries of page 5 of
the table diary were stated to be recorded on 16.01.2001 and not on
the date on which these were noted in the diary i.e. 15.01.2001.
Similar is the situation on the other dates where the assessee had just
taken some of the entries from bank book recorded on a particular
day, the total of which works out at a figure which has been noted in
the table diary on that day and unsuccessfully tried to explain that the
transactions noted in the table diary were accounted for in the regular
books of account. On some of the dates even the date of entry in the
diary does not match with the date of entry in the books of accounts.
25. As regard the entry on page 8 of the table diary dated
08.202.2001, receipt of `4.5 lacs had been recorded. The assessee
tried to explain that this receipt of `4.5 lacs represents receipts of
cheques from two parties i.e. from Valentinus Garments of `4 lacs
and from M/s Sheriff Travel & Cargo of `0.58 lacs. As noted by the
CIT(A) that the total of these cheques received from these two parties
as stated by the assessee worked out at `4.58 lacs and not `4.50 lacs
as noted in the table diary (annexure A-59).
26. After considering the submission of the assessee company, the
CIT(A) came to the conclusion that the assessee had failed to prove
that the cash payment of `20,000/- and `10,000/- were made out
disclosed source of income, therefore, the CIT(A) affirmed the
addition of `30,000/-.
27. The ITAT had relied upon the order passed by the CIT(A)( as
was observed by the CIT(A) that all the amounts in question were
received through cheques from its customers and the same were duly
explained and entered in the regular books of account on the dates
mentioned in the explanation. Since on some of the occasions, the
assessee was under the pressure for making payment to the airlines
company, in order to collect payment from their customers, pressure
was built on customers through telephonic talk and by sending the
persons, and if on telephone the customers assure for making the
payment, the same was noted in the name of customer, the same
cannot be made the reasons for alleging that assessee was not in
receipt of the cheque. Whenever, any notings regarding receipt of
cheque is found, the department has all the powers to verify the
cheques either from the bank account of the assessee or from the
bank account of issuing parties, and if any discrepancy is found or the
other party refuses for making any such payment or assessee could
not explain the source of such cheque, definitely addition can be
made, but merely on the plea that cheques were found entered in the
diary, which was actually not received or recorded in regular book on
subsequent date, cannot be made the basis for making the addition,
unless some contrary material is found by the department.
28. The ITAT had also observed that each cheque number, date of
clearing and the name of the party from whom cheque was received
was noted in the diary were duly found to be entered in regular
books. Merely because there was some difference in the date of actual
realization of cheques or actual sending cheques by the customers as
compared to the date on which customers have assured for sending
such payment, cannot be made the reason for treating the same as
unaccounted income of the assessee. We are of the considered
opinion that the ITAT has rightly remanded back to Assessing Officer
for deciding the issue afresh after giving due opportunity to the
assessee. Facts remain that the assessee was engaged in the business of
cargo and while doing so, he used to get commission and there was
no other business. Therefore, the addition made by the Assessing
Officer of `21.75 lacs in respect of the noting of the seized Annexure
A-59 was not confirmed by the ITAT.
29. The ITAT after considering the rival contentions came to the
conclusion that with regard to the temporary advances of `20,000/-
to Mr.Malhotra and `10,000/- to Mr. Ranjeet who were
representatives of the customers, the advance so given was a
temporary accommodation to help the customers for enabling them
to make payment on account of custom duty and other expenses.
The ITAT has also observed that without recording the statement of
Mr. Malhotra and Mr. Ranjeet or without bringing any contrary
material on record, there was no good reason for adding the same in
the income of the assessee.
30. Therefore, we are not inclined to interfere with the order
passed by the Tribunal, accordingly, we confirm the same.
31. No substantial question of law arises for consideration.
32. Dismissed.
33. No order as to costs.
SURESH KAIT,J
A.K. SIKRI, J.
DECEMBER 01, 2010
„hk/mr‟
