Delhi High Court
S.K.Bahadur vs Union Of India on 31 January, 2011
Author: Indermeet Kaur
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment Reserved on: 14.01.2011
Judgment Delivered on: 31.01.2011
+ ITA No.1604/2006
S.K.BAHADUR ...........Appellant
Through: Appellant in person.
Versus
UNION OF INDIA ..........Respondent
Through: Mr.Sanjeev Sabharwal, Advocate
ITA No.1691/2006
S.K.BAHADUR ...........Appellant
Through: Appellant in person.
Versus
UNION OF INDIA ..........Respondent
Through: Mr.Sanjeev Sabharwal, Advocate
ITA No.1692/2006
S.K.BAHADUR ...........Appellant
Through: Appellant in person.
Versus
UNION OF INDIA ..........Respondent
Through: Mr.Sanjeev Sabharwal, Advocate
ITA Nos.1604,1691,1692,1693/2006, 363,532,533 & 534/2009 Page 1 of 20
ITA No.1693/2006
S.K.BAHADUR ...........Appellant
Through: Appellant in person.
Versus
UNION OF INDIA ..........Respondent
Through: Mr.Sanjeev Sabharwal, Advocate
ITA No.363/2009 & CM No.1201/2010
S.K.BAHADUR ...........Appellant
Through: Appellant in person.
Versus
UNION OF INDIA THROUGH C.I.T. ..........Respondent
Through: Mr.Sanjeev Sabharwal, Advocate
ITA No.532/2009
S.K.BAHADUR ...........Appellant
Through: Appellant in person.
Versus
UNION OF INDIA THROUGH C.I.T. ..........Respondent
Through: Mr.Sanjeev Sabharwal, Advocate
ITA No.533/2009
S.K.BAHADUR ...........Appellant
Through: Appellant in person.
Versus
UNION OF INDIA THROUGH C.I.T. ..........Respondent
Through: Mr.Sanjeev Sabharwal, Advocate
ITA Nos.1604,1691,1692,1693/2006, 363,532,533 & 534/2009 Page 2 of 20
AND
ITA No.534/2009
S.K.BAHADUR ...........Appellant
Through: Appellant in person.
Versus
UNION OF INDIA THROUGH C.I.T. ..........Respondent
Through: Mr.Sanjeev Sabharwal, Advocate
CORAM:
HON'BLE MR. JUSTICE A.K.SIKRI
HON'BLE MS. JUSTICE INDERMEET KAUR
1. Whether the Reporters of local papers may be allowed to
see the judgment?
2. To be referred to the Reporter or not?
3. Whether the judgment should be reported in the Digest?
(Per se) INDERMEET KAUR, J.
1. These appeals filed by the appellant Mr.S.K. Bahadur have
impugned the orders of the ITAT dated 28.07.2006 and
thereafter the subsequent order dated 27.02.2009. ITA Nos.
363/2009, 532/2009, 533/2009 & 534/2009 have impugned the
later order i.e. order dated 27.02.2009. The other appeals have
impugned the order dated 28.07.2006.
2. On 04.12.1984 the Anti-Corruption Wing of the Central
Bureau of Investigation (CBI) conducted a house search of the
appellant. Incriminating documents were seized.
3. Since the assessment filed by the appellant for the
assessment year 1985-1986 was pending, the Assessing Officer
took into consideration the documents forwarded to him by the
CBI and on that basis added certain incomes as unaccounted
income of the appellant. The appellant preferred appeal before
the Commissioner of Income Tax (Appeals) CIT (A) as also
before the Income Tax Tribunal ITAT but was unsuccessful.
Appeals impugning the order of the ITAT were registered as ITA
Nos. 1604/2006, 1691/2006, 1692/2006 & 1693/2006. The order
of the ITAT was questioned on merits. The alternative argument
was the challenge to the jurisdiction on the ground that since a
criminal case was pending under the Prevention of Corruption
Act, 1988, the income tax authorities had no jurisdiction to pass
assessment orders.
4. Simultaneously, the appellant had also filed a writ petition
being W.P.(C) No. 9262/2006 raising the issue of want of
jurisdiction on the part of the Income Tax Department to
proceed with the matter. Vide order dated 26.05.2006, the
petitioner was permitted to withdraw the writ petition with
liberty to raise all these issues before the Tribunal. On
12.06.2006, an application was filed by the appellant before the
Tribunal for deciding the issue of jurisdiction which was raised
as a preliminary issue. This was on the strength of the order of
this Court dated 26.05.2006. On 02.07.2008, this Court
permitted the appellant to withdraw the pending ITA Nos.
1604/2006, 1691/2006, 1692/2006 & 1693/2006 and again
granted liberty to him to approach the Tribunal by filing an
application under Section 254(ii) of the Income Tax Act. This
application was accordingly filed by the appellant before the
Tribunal. The Tribunal dismissed his application vide its order
dated 27.02.2009.
5. On 03.12.2009 while dealing with ITA Nos.363/2009,
532/2009, 533/2009 & 534/2009 had taken note of the
aforenoted facts and was of the opinion that the order of the
Tribunal was prima-facie not correct in view of the specific
directions issued to it vide orders dated 26.05.2006 and
02.07.2008; the Tribunal had not decided the case on merits.
The orders dated 02.07.2008 passed in ITA Nos. 1604/2006,
1691/2006, 1692/2006 & 1693/2006 were accordingly recalled
which have now been heard on merits.
6. The substantial question of law was formulated in ITA
Nos.532/2009, 533/2009, 534/2009 & 363/2009 which inter-alia
reads as under:-
"Whether it is within the jurisdiction of Income Tax
Department to frame assessment under the Income Tax Act,
1961, during the pendency of trial under the Prevention of
Corruption Act?"
7. On 14.01.2011 it was noted that proper question of law
has not been framed. The following substantial question of law
was accordingly formulated:-
"Whether the order of the learned ITAT is perverse in so
far as it takes into consideration irrelevant facts in determining
undisclosed income in the hands of the assessee?"
8. Appellant S.K. Bahadur was a Member of the Indian Legal
Services and was working as Joint Secretary and Legal Advisor
in the Department of Legal Affairs, Ministry of Law, New Delhi.
On 04.12.1984, the CBI made a search in his house i.e. house
No. D1/153, Satya Marg, Chanakyapuri, New Delhi. His office
was also searched on 05.12.1986. In the course of search, CBI
recovered incriminating documents relating to immoveable and
moveable properties; unaccounted sets were found and seized.
Lockers in the joint names of the appellant and his wife Smt.
Asha Bhatnagar were also seized. The search list was prepared
on the same day i.e. on 04.12.1984.
9. The assets which were seized pursuant to this house
search were divided into the following three groups:-
GROUP-I
(1) Cash of `14 lac seized from the assessee‟s residence;
(2) Foreign Exchange of US$ 2596 seized from the
residence of the assessee and
(3) cash amounting to ` 12,78,900/- seized from lockers
held jointly by Sh. S.K. Bahadur and Smt. Asha Bhatnagar
as per details given below:-
a) Locker No. 63-B, PNB Gurgaon `6,44,200/-
b) Locker No.38-C, PNB Gurgaon `3,84,700/-
c) Locker No. 369, Allahabad Bank,
Parliament Street, New Delhi ` 2,50,000/-
Total ` 12,78,900/-
GROUP-II
(1) Expenses concerning foreign tour to Japan and Hong Kong
undertaken by the assessee and his wife in May, 1984 and the various
purchases made by them
(2) Jewellery as per following details seized from the assessee‟s
residence/lockers.
Place Weight Value (`)
a) Jewellery seized from residence 1122.95 Grs 2,88,405
b) Jewellery seized from locker No.
38-C, PNB Gurgaon 457.8 " 84,675
c) Jewellery seized from locker No.
369, Allahabad Bank, Parl. St.
New Delhi 704.85" 1,57,650
d) Jewellery seized from locker No.
2243, SBI, main Branch, New Delhi 579.65 75,615
e) Silver found at residence, 2.5 kg. 8,500
but not seized
TOTAL 6,14,847
(3) House at KD-63, Kavi Nagar, Ghaziabad in the name of Smt.
Asha Bhatnagar, wife of the assessee
(4) Flat No. 402, DDA (Multi-storeyed), East of Kailash, New Delhi
in the name of Sh. S.K. Bahadur.
(5) Valuables s per items No. 3 of search list dated 04.12.1984,
found at the assessee‟s residence.
GROUP-III
(i) FDRs in various banks of total face value of ` 1,94,000/- in the
name of the assessee, his wife and three daughters.
(ii) Deposits of `15,000/- each in the names of the assessee‟s
daughters, Km. Taral Bahadur and Viral Bahadur in June, 82 for
booking of DDA flats.
(iii) Deposits of `10,000/- made in the names of Km. Taral Bahadur
and Km. Viral Bahadur for the booking of two Maruti Cars in May,
1983.
(iv) Flat No. 93, Block „B‟, Sector 27, Noida, purchased in the name
of Smt. Asha Bhatnagar on 27.04.1983.
10. The Assessing Officer on the basis of the oral and
documentary evidence led before it vide its order dated
30.03.1988 repelled the contentions raised by the assessee that
the items in Group II & Group III belonged to his wife and
treated it as income in the hands of the assessee S.K. Bahadur;
CIT (Appeals) had confirmed the findings of the Assessing
Officer; additions made in the income of the assessee were re-
affirmed.
11. This order was impugned before the ITAT who vide the
impugned order dated 28.07.2006 dismissed the appeals of the
assessee. The cross-appeal filed by the Revenue also stood
dismissed.
12. The items in Group I have not been challenged. The items
in Group III pertained to earlier years and were not directly
relevant to the assessment year under consideration. This has
been noted by the Assessing Officer in his order dated
30.03.1988. It has been urged by the assessee that his wife Asha
Bhatnagar had her independent sources of income; there was
sufficient evidence led before the Assessing Officer to establish
her plea that besides her prior marriage savings, she had
income from tuitions; she had also been bequeathed substantial
sums of money by her father in law Ram Bahadur in terms of his
Will which had enabled her to purchase the properties which
were owned by her in her name on which she had also paid
wealth tax.
13. It is an admitted fact that Smt. Asha Bhatnagar had filed
her wealth tax return on 30.10.1984 which order had been
upheld by the ITAT. It is also relevant to point out that this
assessment order of the Wealth Tax Officer is dated 30.10.1984
which was prior in time to the raid which had been conducted by
the CBI on the house of the appellant which was on 04.12.1984.
14. The contention of the appellant before this Court is that
the assets for which wealth tax already stood paid by his wife
Smt. Asha Bhatnagar could not be the subject matter of the
additions which have been upheld by the ITAT in the impugned
order.
15. It is not in dispute that wealth tax on items mentioned in
Group II and Group III (as aforenoted) had been paid by Asha
Bhatnagar for the assessment year 1984-1985 (except for DDA
flat No. 402, East of Kailash which is in the name of S.K.
Bahadur); this return was filed on 30.10.1984 which was more
than one month and four days prior to the search by the CBI in
the house of her husband.
16. On the date when this wealth tax return was filed, there
was no conceivable reason to apprehend or suspect that the
assessee could have information that a search in her house
would be conducted more than one month later i.e. on
04.12.1984. The wealth tax returns in these circumstances,
cannot be a suspect document; these returns cannot now be
reopened which had been affirmed thereafter in appeal on
30.03.1989 by the Commissioner of Income Tax (Appeals) and
thereafter reaffirmed by the ITAT. The same property which had
been the subject matter of the wealth tax returns filed by Smt.
Asha Bhatnagar cannot become the subject matter of the
additions made by the ITAT in the impugned order. The same
property cannot be assessed twice for tax. It is also not the case
of the Revenue that the assets which were the subject matter of
the wealth tax returns had earned any income for which it was
incumbent upon Smt. Asha Bhatnagar to file income tax returns.
17. In (1992) 4 SCC 45 titled M. Krishna Reddy Vs. State
Deputy Superintendent of Police, Hyderabad on the question of
benami transaction alleged by the CBI and where there was
evidence of income tax and wealth tax returns submitted by the
accused prior in time to the search conducted by the Anti-
Corruption Branch in his house, it was held that the burden of
proof in disproving the claim of the accused had to be
discharged by the prosecution. The Apex Court had returned a
finding that the wealth tax and the income tax returns which
had been filed prior in time to the search conducted had become
unimpeachable documents, they could not have been
manipulated or concocted prior in time anticipating a
prosecution which was subsequent in time.
18. In the instant case as well when the wealth tax return was
filed on 30.10.1984 by Smt. Asha Bhatnagar, there was no
conceivable reason to entertain even a suspicion or surmise that
one month and four days later, the Anti-Corruption Branch
would make a house search of the husband of the assessee.
These wealth tax returns having attained a finality and which
wealth tax having being paid for the assets mentioned in groups
II & III, the same could not have been the subject matter of
additions made by the ITAT in the impugned order. This is an
illegality and liable to be set aside.
19. The evidence which has been led before the Revenue
shows that the wife of the assessee Smt. Asha Bhatnagar had
been subjected to a detailed examination. Her statement was
recorded under Section 131 of the Income Tax Act, 1961 on
25.02.1988 and on subsequent dates thereafter. Admittedly the
parties had been married in the year 1959. The questions and
queries put to her all related to her savings in her name prior to
the marriage period as also in the period thereafter. The witness
gave explanation for the savings made by her prior to her
marriage period and which amount stood deposited by her in
her bank account i.e. a sum of ` 10,500/-; she candidly admitted
that she had no documentary proof of the said savings and
rightly so as it is difficult to conceive that for a saving effected
prior to 1959, the party would retain documents evidencing such
a saving on a notion that proof for such a transaction would be
required more than two decades later. She had explained that
she was working as a teacher in this period at a salary of ` 200/-
per month and thereafter at ` 300/- per month.
20. She had produced the Will of her father in law Mr. Ram
Bahadur dated 15.06.1980 to substantiate the submission that
she had received ` 26,000/- from him for the purchase of the
plot at Ghaziabad, cash of `1,77,000/- for the purchase of FDRs
in the name of herself and her daughters, cash of `3,47,150 as
also ancestral jewellery weighing 1200 gms. To support this
stand, she had also filed affidavits of Smt. Suraj Bhatnagar
dated 22.11.1985 (sister of her husband), affidavit of Smt. Rani
Bhatnagar dated 03.06.1985 (another sister of her husband) as
also the details annexed along with the Will of her father-in-law
i.e. Annexure „A‟ which had bequeathed the aforenoted
properties to her. It is also not in dispute that in the wealth tax
returns filed by Asha Bhatnagar for the assessment year 1984-
85, the same aforenoted assets have been detailed on which she
has paid wealth tax; net taxable wealth was `7,11,000/- It is also
relevant to point out that the details as aforenoted and given by
Asha Bhatnagar before the Income Tax authorities on
25.02.1988 were the same details which had been given by her
on 07.01.1985 when her statement was recorded by the
Enforcement Directorate and thereafter in her statement before
the CBI on 07.05.1985; in her affidavit dated 09.05.1985 and her
subsequent statement dated 04.11.1985. If the story was
concocted and sham as has been concluded by the Assessing
Officer, the same narration would not have been found in her
statement which was recorded on 07.05.1985 which was less
than six months after the search conducted in the house of her
husband. It is difficult to believe that a lady in that emotional
turmoil of mind could have fabricated a story which is not only
reflected in the wealth tax returns which have been filed prior in
time but the same story is affirmed and re-affirmed in
subsequent years. She had further explained that out of the
amount of `13.5 lacs which had been given by Sq. Leader R.K.
Bhatnagar (her nephew) for keeping in safe custody, she had
taken a loan of `71,000/- from the said amount. She had further
explained that since her father had not given her any
immoveable property, she was, however, compensated on
various occasions with monetary gifts which included cash and
jewellery which had become a part of her savings.
21. The Assessing Officer had cursorily and illegally ignored
this statement of Asha Bhatnagar. His finding that she did not
have any documentary proof to evidence her savings which were
in the prior marriage period was obviously for the reason that
for a saving which was affected almost three decades ago, it
would be difficult to conceive that a party would retain
documents of such a saving on the premise that almost 30 years
later, she would require proof of the same.
22. The Will of her father in law Mr. Ram Bahadur was also
rejected without any cogent reason. The affidavits of Smt. Rani
Bhatnagar and Smt. Suraj Bhatnagar who had supported the
version of Asha Bhatnagar were not adverted to. The attesting
witnesses of the Will could not be produced as one of them
namely Mr. Chandi Prasad had died. The second attesting
witness Inderjit Bahadur had reportedly refused service. The
other attesting witness Mr. Krishan Swaroop Bhatnagar could
not be produced because of cataract surgery. The Assessing
Officer had proceeded on the premise that Mr. Krishan Swaroop
Bhatnagar is a resident of Hardoi and cataract is not a major
surgery which would unable the person to undertake a journey
to Delhi; on this ground the conclusion was drawn that the Will
is not a genuine document. The attesting witnesses namely
Krishan Swaroop Bhatnagar & Inderjit Bhatnagar had in fact
given their statements under Section 161 of the Cr. PC to the
Investigating Officer in the anti-corruption proceedings wherein
both had admitted their signatures as attesting witnesses on the
Will of S.K. Bahadur. These documents are not disputed. The
Assessing Officer‟s conclusion that the Will did not bequeath
anything to the second son Mr. Inderjeet Bahadur or his wife
Smt. Suraj Bhatnagar or to Kumari Rani Bhatnagar was the
other another reason to reaffirm this conclusion that this
document was fabricated. This was a perversity. The Assessing
Officer could not have ignored the affidavits of facts which had
been filed by Rani Bhatnagar & Suraj Bhatnagar who were
admittedly closely related to the deceased being his daughters;
yet they had chosen to support the stand of Asha Bhatnagar. The
Will had stipulated that the marriage expenses of `50,000/- for
his unmarried daughter Kumari Renu Bhatnagar would be borne
by Asha Bhatnagar and she would also give her a part of the
jewellery. The interest of his only unwed child had been taken
care of. Yet this document was rejected. The lengthy discussion
on the Will is clearly based on surmises and conjectures.
23. The further conclusion drawn was that the income
received by Asha Bhatnagar from tuitions must have been
consumed as it was only a pocket money. This source of income
of Asha Bhatnagar had been rejected for the reason that there
was no documentary evidence. Smt. Bharti Bhatnagar wife of
Sq. Leader R.K. Bhatnagar i.e. (nephew‟s wife) had also come
into the witness box. She had affirmed on oath that her jewellary
(which was recovered from the house of Mr. S.K. Bahadur on
04.12.1984) had been given by her to Asha Bhatnagar for safe
custody because her husband was in the Air Force and had to be
transferred from time to time and she did not wish to carry her
jewellery as she had to travel along with her husband; for
convenience she had kept her jewellery weighing 50 tolas with
Asha Bhatnagar. This same statement and details of the
jewellery given in safe custody to Asha Bhatnagar had been
given by Bharti Bhatnagar to the CBI as early as 09.05.1985.
She had come before the Revenue in the year 1988 when this
stand was again reiterated. This version was however rejected
summarily on the ground that Smt. Bharti Bhatnagar had not
adduced any documentary proof of handing over this jewellery
to Asha Bhatnagar. To say the least, this conclusion is not only
strange but perverse. While handing over or taking articles,
even if they are valuable, no document in the normal course is
prepared between close relatives. Rejection of this statement of
Smt. Bharti Bhatnagar on this sole ground is nothing short of an
illegality.
24. A perusal of the assessment order shows that it is surely
based on surmises and conjectures. Presumptions have been
made; statement on oath of Smt. Asha Bhatnagar has been
repelled cursorily although she had in detail explained the
circumstances under which she had made her savings; her
earning earned by tuition; amounts received by her in terms of
the Will of her father in law enabling her to purchase the
aforenoted properties as noted in Group II in her own name. The
findings on this score by the ITAT upholding the findings of the
Assessing Officer are based on surmises and being perverse are
liable to be set aside.
25. In 2005 X AD (SC) 368 titled D.S.P. Chennai Vs. K.
Inbasagaran where pursuant to a raid by the Income Tax
Department in the house of the accused, huge amounts of cash
amounting to Rs.30 lacs and seven gold biscuits as also other
incriminating documents had been recovered, the Court had
held that where the wife fully owned this money and other
wealth owned by her by reflecting it in her income tax returns,
in such a case it would be difficult to hold that this money
belonged to her husband; where the evidence had substantiated
that this money had in fact belonged to the wife, it has to be
treated as money in the hands of the wife especially keeping in
view the fact that this money had been reflected by her in her
income tax returns. This was not withstanding of the fact that
husband and wife were admittedly living together in the same
house.
26. In Vol. XXVI ITR 74 Dhirajlal Girdharilal Vs. Commissioner
of Income Tax, the Supreme Court has held that a finding by
the ITAT which is based on mere surmises and conjectures is
perverse and is liable to be set aside. In the said case, it had
been conceded by the Attorney General that the Tribunal had
drawn upon its own imagination and had made use of a number
of surmises and conjectures.
27. In Vol. XXXVII ITR 288 Lalchand Bhagat Ambica Ram Vs.
Commissioner of Income Tax, Bihar and Orissa, the Supreme
Court in this context had held as under:-
"When a court of fact arrives of its decision by considering
material which is irrelevant to the enquiry or acts on material,
partly relevant and partly irrelevant, and it is impossible to say
to what extent the mind of the court was affected by the
irrelevant material used by it in arriving at its decision, a
question of law arises; whether the finding of the court of fact is
not vitiated by reason of its having relied upon conjectures,
surmises and suspicious not supported by any evidence on
record or partly upon evidence and partly upon inadmissible
material.
Whereas, however, the fact finding authority has acted
without any evidence or upon a view of the facts which could not
reasonably be entertained or the facts found are such that no
person acting judiciously and properly instructed as to the
relevant law could have found, the court is entitled to interfere.
A finding on a question of fact is open to attack under
section 66(I) as erroneous in law when there is no evidence to
support it or if it is perverse.
The income-tax Appellate Tribunal is a fact finding
tribunal and if it arrives at its own conclusions of fact after due
consideration of the evidence before it thecourt will not
interfere. It is necessary, however, the every fact for and
against the assessee must have been considered with due care
and the Tribunal must have given its finding in a manner which
would clearly indicate what were the questions which arose for
determination, what was the evidence pro and contra in regard
to each one of them and what were the findings reached on the
evidence before it. The conclusions reached by the Tribunal
should not be coloured by any irrelevant considerations or
matters of prejudice and if there are any circumstances which
required to be explained by the assessee, the assessee should be
given an opportunity of doing so. On no account whatever
should the Tribunal base its, finding on suspicious, conjectures
or surmises, nor should it act on no evidence at all or on
improper rejection of material and relevant evidence or partly
on evidence and partly on suspicious, conjectures and surmises,
and if it does anything of the sort, its findings even though on
questions of fact will be liable to be set aside by the court."
28. The instant is one such case. The Tribunal has indulged in
suspicion, conjectures and surmises and acted contrary to the
evidence which position is judicially un-sustainable amounting to
a perversity and liable to be set aside.
29. Appeals are allowed.
A.K.SIKRI, J.
INDERMEET KAUR, J.
JANUARY 31, 2011
A
