Ashok Kumar Goyal v. Commissioner Of Income Tax And Another

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 72 of 2006 Date of Decision: 6.4.2011 Ashok Kumar Goyal Versus Commissioner of Income Tax and another ....Appellant. ...Respondents. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. ----- PRESENT: Mr. Akshay Bhan, Advocate for the appellant. Mr. Rajesh Katoch, Standing Counsel for the respondents. ---- AJAY KUMAR MITTAL, J. 1.This appeal has been preferred by the assessee underSection 260A of the Income Tax Act, 1961 (in short “the Act”) againstthe order dated 20.6.2005 passed by the Income Tax AppellateTribunal, Chandigarh Bench “A”, Chandigarh (hereinafter referred to as“the Tribunal”) in ITA No. 5/Chandi/2004, relating to the assessmentyear 1988-89, claiming the following substantial questions of law:- “i) ii) iii) iv) Whether in the facts and circumstances of thepresent case, the action of the authorities below inframing assessment without providing the appellantan opportunity to cross examine Sh. Rajesh Awasthion the basis of whose statement, such assessmenthas been made, is legally sustainable in the eyes oflaw? Whether in the facts and circumstances of thepresent case, the action of the authorities below inholding the investments to be unexplained in thehands of the appellant when the source with regardto the same had been fully explained by the appellantand the fact that if the source of the investment is notsatisfactorily proved, the same cannot be added tothe income of the appellant is ignored, is legallysustainable in the eyes of law? Whether in the facts and circumstances of thepresent case, the search carried on under Section132(4A) of the Act, when the essential ingredients ofthe provision of Section 132(4A) are not compliedwith, is legally sustainable in the eyes of law? Whether in the facts and circumstances of thepresent case, the action of the authorities in treatingthe investments to be unexplained in the hands of theappellant by acting on its own presumption, is legallysustainable in the eyes of law? v)Whether in the facts and circumstances of thepresent case the impugned orders A-1 to A-3 arelegally sustainable in the eyes of law?” 2.Briefly stated, the facts necessary for adjudication asnarrated in the appeal are that assessee is an individual and he filed hisreturn declaring a total income of Rs.20,220/-. Search and seizureoperation was carried out on 17.1.1995 at the residential premises ofone Rajesh Avasthi and a bundle of share certificates of M/s GuruNanak Solvent and Chemicals (P) Ltd., Patiala was found and seized.However, these share certificates were in the names of differentpersons without any address. On 16.11.1987, the share certificates hadbeen transferred in the name of the assessee, his family members andassociates. On the basis of the statement made by said Rajesh Avasthithat these valuables had been kept by the assessee who is hisemployer, notice under Section 148 of the Act was issued on 22.3.1999.The Assessing Officer vide assessment order dated 26.3.2001 made anaddition of Rs.13,88,000/- under Section 69A of the Act on account ofunexplained investment. Feeling aggrieved, the assessee filed anappeal before the Commissioner of Income Tax (Appeals) [in short “theCIT(A)”]. The CIT(A) vide order dated 6.10.2003 partly allowed theappeal relating to household expenses and granted a relief ofRs.42,000/-. On further appeal by the assessee, the Tribunal vide orderdated 20.6.2005 partly allowed the appeal. The assessee stilldissatisfied has approached this Court by way of instant appeal.3.We have heard learned counsel for the parties and perusedthe record. 4.Learned counsel for the assessee submitted that thesearch and seizure operation was carried out at the premises of ShriRajesh Avasthi where certain documents were found in his possession.The application of the provisions of Section 132(4A) of the Act isrestricted to proceedings under that chapter, no aid could have beentaken therefrom at the time of finalising assessment of the assessee.The liability, thus, could not have been fastened on the assessee onthat basis. According to the learned counsel, without affording anyopportunity to the assessee to cross-examine Shri Rajesh Avasthi, theAssessing Officer, the CIT(A) and the Tribunal had erred in treating theamount as unexplained investment of the assessee under Section 69Aof the Act. 5.Controverting the aforesaid submission and supporting theorders passed by authorities below, learned counsel for the revenueurged that the assessee had never sought permission to cross examineShri Rajesh Avashti and, therefore, no benefit could be derived by himfrom the said fact. It was also submitted that no addition was made byinvoking the provisions of Section 132(4A) of the Act as has beensought to be canvassed by learned counsel for the assessee and,therefore, question No.(iii) as claimed does not arise. 6.After giving our thoughtful consideration to the submissionsmade by learned counsel for the parties, we do not find any substancein the arguments raised by learned counsel for the assessee. 7.It would be expedient to refer to the findings recorded bythe Tribunal while upholding the addition which read thus:- “8.We have given our careful consideration to the rival contentions. In order to appreciate as to whether the additionmade by the Assessing Officer is justified in the case or not, itwould be necessary to consider the contention raised onbehalf of the assessee. The first and foremost objectionraised on behalf of the assessee is that Shri Rajesh Avasthiwas not an employee of the assessee and that the assesseewas not given an opportunity to cross-examine him in regardto his claim that the shares in the name of the assessee andvarious family members had been handed over to him by theappellant. It has been argued on behalf of the assessee in sofar as it is not disputed that Shri Rajesh Avasthi is theemployee of the group concerns and the assessee is Directoror Managing Director of some of the concerns. Regarding theobjection that cross-examination was not allowed in respectof Shri Rajesh Avasthi, it is observed that the assessee hadnever asked for the cross-examination of Shri Rajesh Avasthi.Moreover, there is circumstantial evidence to establish theclaim of Shri Rajesh Avasthi that the share certificates hadbeen handed over to him by the assessee. It is observedfrom the facts described elsewhere in this order that theappellant claimed that the shares had been purchased bymeans of an agreement dated 16.11.1987. If the assesseehad not handed over the shares to Shri Rajesh Avasthi, thenhow did he get the possession of the shares, which belongedto the assessee and his family members and otherassociates. It is also pertinent to mention that the agreement dated 16.11.1987, copy of which is on record, is purported tohave been executed between Shri Prithipal Singh, RachpalSingh, Harminder Singh, Satinder Singh and Daljit Singh asvendors and Shri Madho Lal Goyal, Ashok Kumar Goyal andShri Lalit Goyal described as purchasers. The names of allthe shareholders are not mentioned in the agreement.Moreover the agreement stipulates that whereas the sharecertificates would be transferred in the name of the purchaserimmediately on signing of the agreement, the consideration ofRs.40 lacs would be paid within three months. Theagreement also indicates that in the event of non-complianceof the terms of the agreement, the vendors would be requiredto pay penalty of Rs.5 lacs to the purchasers. The AssessingOfficer has doubted the authenticity of the agreement. Theappellant insisted that the agreement is genuine. We willconsider the consequences of treating the agreement dated16.11.1987 to be a genuine agreement. As already pointedout, as per the said agreement, the purchasers are only three,namely, Madho Lal Goyal appellant's father, Shri AshokKumar Goyal, appellant and Shri Lalit Goyal, cousin of theappellant. As per the details available, the investment inshares in the name of Shri Ashok Kumar Goyal that is theappellant is Rs.79,000/-, Shri Madho Lal Goyal, Rs.81,000/-and Shri Lalit Goyal Rs.1,04,000/-. The total consideration inrespect of the three persons named in the agreement worksout to Rs.2,64,000/-. As per the agreement, the entire lot of shares was agreed to be purchased by the appellant, hisfather and his cousin. It, thus, becomes abundantly clear thatthe other relatives and associates are benamidars and notthe real owners of the shares. Thus, there is no merit in thecontention advanced on behalf of the assessee that theAssessing Officer was wrong in treating the investment inshares in the names of the relatives and associates asbenamidars. We, however, agree with the contention onbehalf of the assessee that the shares in the names of ShriMadho Lal Goyal and Shri Lalit Goyal could not be treated asbenamidars of the appellant if the agreement dated16.11.1987 is treated as genuine. 9.In respect of other ostensible shareholders, thetreatment given by the Assessing Officer on the basis ofstatement of Shri Rajesh Avasthi and on the the basis ofagreement and other circumstantial evidence have beenbenamidar of the appellant, is justified. As already pointedout Shri Rajesh Avasthi is in the employment of the groupconcerns of which the assessee was a prominent member.The assessee never produced Shri Rajesh Avasthi or hisstatement/affidavit to the contrary so as to rebut thestatement made by Shri Rajesh Avasthi. It is not disputedbefore us that Shri Rajesh Avasthi continues to be in theemployment of the assessee group. Therefore, no prejudicehas been caused to the assessee by not cross-examiningShri Rajesh Avasthi, particularly, when no such request was made to the Assessing Officer. The purpose of cross-examination is to rebut the statement which may be againstthe assessee. Since Shri Rajesh Avasthi was under thecontrol of the assessee group. The cross-examination of ShriRajesh Avasthi would have been if no consequence in so faras the assessee was in a position to give any evidence tocontrovert and rebut the claim made by Shri Rajesh Avasthithat the share certificates had been handed over to him bythe appellant for safe custody. made to the Assessing Officer. The purpose of cross-examination is to rebut the statement which may be againstthe assessee. Since Shri Rajesh Avasthi was under thecontrol of the assessee group. The cross-examination of ShriRajesh Avasthi would have been if no consequence in so faras the assessee was in a position to give any evidence tocontrovert and rebut the claim made by Shri Rajesh Avasthithat the share certificates had been handed over to him bythe appellant for safe custody. 10.The investment in the names of Shri Madho Lal Goyaland Shri Lalit Goyal is bound to be excluded on the basis ofthe agreement as there is neither evidence on record toestablish that the said persons who are party to theagreement dated 16.11.1987 are not the real owners of theshares which are in their respective names. Since theinvestment in the name of Shri Madho Lal Goyal is ofRs.81,000/- and in the name of Shri Lalit Goyal is ofRs.1,04,000/- the addition on account of unexplainedinvestment could be made in their respective hands. Theaddition of Rs.1,04,000/- plus Rs.81,000/- (Rs.1,85,000/-)relating to these two persons being not warranted, isaccordingly, deleted.” 8.The onus was on the assessee to establish his case aspleaded before the Assessing Officer. The Tribunal had concluded thatShri Rajesh Avasthi was an employee of the assessee group. It hadfurther been recorded that the assessee neither produced Shri Rajesh Avasthi before the Assessing Officer nor made any request to theAssessing Officer to have an opportunity to cross-examine him. It wasupon the assessee to have produced Shri Rajesh Avasthi in support ofhis version as the onus was upon him to prove the genuineness of theagreement dated 16.11.1987 and also to show that the persons namedin the share certificates were the real owners of the shares. But in thepresent case, the assessee had failed to discharge the same. TheTribunal had concluded that the investment in shares in the names ofthe relatives and associates of the assessee was benami. However,benefit of investment in the name of Shri Madho Lal Goyal amounting toRs. 81,000/- and in the name of Shri Lalit Goyal of Rs.1,04,000/- wasallowed in the case of the assessee on the ground that the addition onaccount of unexplained investment of Rs. 1,85,000/- (i.e. Rs. 1,04,000/-+ Rs. 81,000/- ) could be made in their respective hands. 9..In view of the aforesaid finding of fact recorded by theTribunal while affirming the finding of fact recorded by the CIT(A) andthe Assessing Officer on this issue, wherein no perversity could beshown by the learned counsel for the appellant-assessee, we do notfind any merit in the appeal. 10.Accordingly, the appeal is dismissed. (AJAY KUMAR MITTAL) JUDGE April 6, 2011gbs (ADARSH KUMAR GOEL) JUDGE