Brij Mohan Bhatia v. The Income Tax Appellate Tribunal And Another

ITA No. 593 of 2006 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 593 of 2006 Date of Decision: 18.8.2010 Brij Mohan Bhatia ....Appellant. Versus The Income Tax Appellate Tribunal and another ...Respondents. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Avneesh Jhingan, Advocate for the appellant. Mr. Sukant Gupta, Advocate 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”) againstorder dated 25.8.2006 passed by the Income Tax Appellate Tribunal,Amritsar Bench, Amritsar (hereinafter referred to as “the Tribunal”), inI.T. (S.S.) A. No. 29 (ASR)/2003 and Cross Objection No. 12 (ASR)/2003, for the block period 1.4.1989 to 30.3.2000, proposing to raise thefollowing substantial questions of law:- “a)Whether Tribunal has failed to appreciate thatthere was no occasion with the respondents toexercise their power of search and seizureunder the Income Tax Act and the said powersthere was no occasion with the respondents toexercise their power of search and seizureunder the Income Tax Act and the said powers b) c) d) exercised by them are without jurisdiction? Whether the Tribunal has erred in notexcluding the Oral Statements of the parties inthe presence of the Documentary Evidence onthe record in terms of Section 92 of the IndianEvidence Act, 1872, while setting aside thewell reasoned judgment passed by the Hon'bleCommissioner of Income Tax (Appeals)-I,Ludhiana? Once the Commissioner of the Income Tax(Appeals)-I, Ludhiana has returned the findingson the basis of the documentary evidence/thedocuments seized by the Income TaxDepartment, at the time of the raid, can such afinding be upset by the Income Tax AppellateTribunal on the basis of oral evidence? Whether the Hon'ble Tribunal has erred inrejecting the plea of the Petitioner that thepresent case is squarely covered in favour ofthe Petitioner in view of the follow case laws: (i)Union of India Vs. Ajit Jain andAnother, 260 ITR 80 (SC)Another, 260 ITR 80 (SC) (ii)C.I.T. Vs. Vindhya MetalCorporation and Others, 224 ITR614 (SC);Corporation and Others, 224 ITR614 (SC); (iii)Ajit Jain Vs. Union of India and e) f) g) h) Others, 242 ITR 302 (Delhi). Whether the Tribunal has erred in setting asidea well reasoned detailed judgment ofCommissioner of Income Tax (Appeals)Ludhiana dated 28.5.2003 without formulatingand deciding any substantial question of law?Whether the Tribunal has failed to appreciatethat the orders passed by the respondent theAssistant C.I.T., C.C.I. Amritsar in invoking thesearch and seizure power of the cash amountof Rs.10,25,000/- tantamount to violation ofright to freedom and right to privacy from anyreasonable search and seizure or not?Whether the Hon'ble Tribunal has failed toappreciate that the seized amount ofRs.10,25,000/- does not belong to thePetitioner but to the firm R.K. Enterprises andafter passing of the order dated 28.5.2003 byCommissioner of Income Tax (Appeals)Ludhiana in favour of the Petitioner, thePetitioner had already refunded back andhanded over the same amount? Whether the authorities below have erred ininitiating the present proceedings withoutimpleading the firm R.K. Enterprises whosemoney was seized. So all the proceedings regarding seizure are liable to be set aside onaccount of non-impleading of the party i.e. R.K.Enterprises? i) Whether the authorities below have erred ininitiating the present proceedings withoutimpleading the firm R.K. Enterprises whosemoney was seized. So all the proceedings regarding seizure are liable to be set aside onaccount of non-impleading of the party i.e. R.K.Enterprises? i) Whether the Hon'ble Tribunal has failed toappreciate that since the currency in questionamounting to Rs.10,25,000/- was seized by theCentral Excise Department so it was not in thepossession of the Petitioner and accordinglythe proceedings of search and seizure ofIncome Tax Deptt. cannot be initiated againstthe Petitioner in view judgment reported as(1986) 3 Supreme Court Cases 489 –Commissioner of Income Tax, Haryana,Himachal Pradesh and Delhi and others Vs.Tarsem Kumar and another?” 2.Facts necessary for the disposal of the present appeal maybe noticed. On 6.10.1999, a search was conducted by the CentralExcise Department on the business and residential premises of theassessee and unaccounted cash amounting to Rs.10,25,000/- wasfound and recovered. The assessee failed to explain the source orproduce any corroborative evidence on account of the aforesaid cash.The Excise authorities informed the Income Tax Department vide letterdated 16.3.2000 regarding unaccounted cash amounting toRs.10,25,000/- seized from the assessee. The said amount wasconsidered as sale proceeds of excisable goods as the assessee hadnot produced any evidence about the rightful possession of the cash. The Director of Income Tax (Inv.) New Delhi authorized the teamconsisting of two Income Tax Officers, one Deputy Director ofInvestigation and one Additional Director of Investigation, New Delhi on30.3.2000 for requisitioning the cash amount of Rs.10,25,000/- from theCentral Excise Authorities, New Delhi. Proceedings under Section132A of the Act were initiated against the assessee and notice dated25.4.2001 under Section 158BC was served upon him. Return ofincome for block assessment was filed by the assessee on 25.5.2001declaring total undisclosed income as nil. The case of the assesseewas transferred to the office of Assistant Commissioner Income Tax,Central Cirlce-I, Amritsar on 28.1.2002 and the records were checked.The assessee was asked to show cause why the amount ofRs.10,25,000/- be not added to his income of the block period. Theassessee explained before the Assessing Officer that the sum ofRs.10,25,000/- was on account of sales realization collected by ShriRajnish Bhatia, consignee agent of M/s R.K. Enterprises, New Delhiagainst sale bill Nos. 46 to 56 who used to deposit them in its bankaccount after incorporating them in the books of account. TheAssessing Officer held that the cash of Rs.10,25,000/- seized by theCentral Excise Authorities from the residential premises of theassessee on 6.10.1999 represented his income from undisclosedsources and, therefore, assessed the undisclosed income of the blockperiod at Rs.10,25,000/-. Upon appeal, the Commissioner of IncomeTax (Appeals) [in short “the CIT (A)”] deleted the addition made by theAssessing Officer holding that the same was not based on any cogentreason. Feeling aggrieved, the revenue approached the Tribunal, who vide order 25.8.2006 allowed the appeal and dismissed the crossobjection filed by the assessee. Hence, the present appeal by theassessee. 3.We have heard learned counsel for the parties. vide order 25.8.2006 allowed the appeal and dismissed the crossobjection filed by the assessee. Hence, the present appeal by theassessee. 3.We have heard learned counsel for the parties. 4.The Tribunal while allowing the appeal of the departmentand rejecting the cross objection of the assessee had adjudicated thematter against the assessee on two counts; a) The assessee was notentitled to challenge before the appellate authorities the validity of thesearch and seizure and the satisfaction note recorded by thedepartment for initiating search and seizure operation at the premisesof the assessee; and b) there was no valid explanation in respect ofcash of Rs.10,25,000/- which was found from the possession of theassessee and was seized after intimation having been received fromthe Central Excise Authorities. 5.Learned counsel for the assessee very fairly submitted thatthe issue regarding challenging of validity or otherwise of search andseizure under Section 132(1) of the Act is no longer in dispute as aDivision Bench of this Court in Commissioner of Income-Tax v. ParasRice Mills, 323 ITR 182 has decided the issue against the assesseeand in favour of the revenue. It has been held therein as under:- “We are of the view that the Tribunal when hearingan appeal against the order of assessment could notgo into the question of validity or otherwise of anyadministrative decision for conducting the search andseizure. The same may be the subject-matter ofchallenge in independent proceedings where the question of validity or otherwise of administrativeorder could be gone into. The appellate authoritywas concerned with the correctness or otherwise ofthe assessment.” 6.Following the aforesaid judgment, it is held that theTribunal had rightly held that the validity of search and seizureoperation could not be gone into by the Tribunal in the appealproceedings. 7.Adverting to the second submission, learned counsel forthe assessee submitted that the CIT (A) while adjudicating the matteron merits had recorded in para 2.1 as under:- “2.1. I have considered the matter carefully, and Ifind force in the contentions of the Learned Counselfor the following reasons: i)That the Central Excise authorities vide theirletter C. No. IV (HQRS.PREV) 15/65/99/882 dated28.3.2000, had informed Sh. Brij Mohan Bhatia that,“I have been directed to convey that theCommissioner, Central Excise Delhi-I, New Delhi hasvacated the seizure of Currency amounting toRs.10.25 lacs seized on 6.10.99 from your residentialpremises at F-8/15, Krishna Nagar, Delhi. You areadvised to collect the said currency from this officeon any working day between 11.00 A.M. to 01.00P.M. You are also requested to give prior intimationof date and time of your visit to this office so that necessary arrangements may be made to withdrawalof the amount from the bank well in advance.” Thisgoes to validate the Ld. Counsel's plea that theCentral Excise authorities were satisfied with theexplanations of the appellant. ii)That the Deputy Commissioner in the office ofthe Commissioner of Central Excise, Delhi hadreleased goods amounting to Rs.2,51,045/- vide aletter C. No. IV (Hqrs. Prev.)/15/65/99/4018dated14/15/12/1999. iii)That vide another letter C. No. CE13/Preve/MOD-IV/21/99/269 dated 27.1.2000, the office of theAssistant Commissioner Central Excise Delhi furtherreleased goods amounting to Rs.7,59,900/-. Thisvindicates the Ld. Counsel's averments that theExcise authorities were satisfied with the appellant'ssubmissions. iv)That the goods seized by the Excisedepartment came to be released except the cashamount of Rs.10,25,000/- which was handed over tothe Income Tax Department, despite a letter dated28.3.2000 from the Central Excise authoritiesconveying the vacation of the seizure of the currencyof Rs.10,25,000/- as per the directions of theCommissioner Central Excise, Delhi-I. This amountof Rs.10.25 lacs was the only addition made vide the iii)That vide another letter C. No. CE13/Preve/MOD-IV/21/99/269 dated 27.1.2000, the office of theAssistant Commissioner Central Excise Delhi furtherreleased goods amounting to Rs.7,59,900/-. Thisvindicates the Ld. Counsel's averments that theExcise authorities were satisfied with the appellant'ssubmissions. iv)That the goods seized by the Excisedepartment came to be released except the cashamount of Rs.10,25,000/- which was handed over tothe Income Tax Department, despite a letter dated28.3.2000 from the Central Excise authoritiesconveying the vacation of the seizure of the currencyof Rs.10,25,000/- as per the directions of theCommissioner Central Excise, Delhi-I. This amountof Rs.10.25 lacs was the only addition made vide the above assessment order. No other infirmity or discrepancy was found. v)That vide letter F. No. Asstt. CIT/CC-I/Astr/41dated 12.4.2002 the Assistant Commissioner, CentralCircle-I, Amritsar has clearly written that, “Thechallan book and three challans on the letter headwere kept in this office by you on your own accountand were not impounded by this office. You may takethe challan book and three challans on letter headsat any time during office hours.” This clearly provesthat no infirmity or specific defect was noticed in thebooks of accounts and it validates further theLearned Counsel's averments that Shri Raj KumarBhatia had been pointed as a consignee agent forthe electronic components and he is an existingassessee. In the balance sheet of M/s R.K.Enterises for the assessment year 2000-01 a sum ofRs.10,25,000/- appearing in the name of RajnishBhatia clearly proves that he was a sundry debtor.The details of the amounts received from theconsignee agent as well as the date of deposit intheir bank have also been made available. A copy ofthe bank account has also been furnished before theundersigned. vi)That the partnership firm, M/s R.K. Enterprises,is also an existing assessee, and they had appointed Sh. Rajnish Bhatia as a consignee agent w.e.f.15.5.1999 vide an agreement of even date (a copy ofthe said agreement lying in the house was alsoseized by the Excise authorities). This goes to provethat the agreement was not an afterthought. Theappellant has given bill wise details of theconsignment sales effected by Sh. Rajnish Bhatia onbehalf of the consignor and Sh. Rajnish Bhatiareimbursed the sale proceeds collected on behalf ofM/s R.K. Enterprises periodically to his principalswho in-turn deposited the same in their bank account(a copy of the bank account has been furnished insupport of the above contention). It is pertinent topoint out that all these facts were confirmed by theconcerned parties including M/s. R.K. Enterprisesand Sh. Rajnish Bhatia before the Central Exciseauthorities also. vii)That from the copies of the returns, and theprofit and loss account and balance sheet of M/s R.K.Enterprises, it becomes clear that a sum of Rs.10.25lacs was due from Sh. Rajnish Bhatia. Letter C. No.IV (HQRS. PREV) 15/65/99/882 dated 28.3.2000issued by the Central Excise Authorities, Delhi alsoconfirms the position that the Excise Authorities weresatisfied with the explanations of the appellant withregard to the said amount. viii)That Sh. Rajnish Bhatia, Sh. Brij Mohan Bhatiaand Sh. Rishi Bhatia had all confirmed the aboveposition vide their statements and depositions madebefore the Central Excise and Income TaxAuthorities.” vii)That from the copies of the returns, and theprofit and loss account and balance sheet of M/s R.K.Enterprises, it becomes clear that a sum of Rs.10.25lacs was due from Sh. Rajnish Bhatia. Letter C. No.IV (HQRS. PREV) 15/65/99/882 dated 28.3.2000issued by the Central Excise Authorities, Delhi alsoconfirms the position that the Excise Authorities weresatisfied with the explanations of the appellant withregard to the said amount. viii)That Sh. Rajnish Bhatia, Sh. Brij Mohan Bhatiaand Sh. Rishi Bhatia had all confirmed the aboveposition vide their statements and depositions madebefore the Central Excise and Income TaxAuthorities.” 8.Learned counsel for the assessee drew the attention of thisCourt to the order of the CIT (A) wherein the assessee had given detailsof sale bills No. 46 to 56 which explained and justified the stand of theassessee that cash found amounting to Rs.10,25,000/- was on accountof the cash sales made by the son of the assessee. He, however,submitted that the Tribunal while reversing the finding and holding thatRs.10,25,000/- was a cock and bull story and was not explained by theassessee has not dealt with any of the grounds referred to by the CIT(A) while deleting the addition and also the material produced in theform of sale bills. 9.Learned counsel for the revenue, on the other hand,supported the order passed by the Tribunal. 10.We have given our thoughtful consideration to the rivalsubmissions of learned counsel for the parties and find that the Tribunalwhile arriving at the conclusion that Rs.10,25,000/- cash seized was onaccount of concealed income of the assessee has merely relied uponthe order of the Assessing Officer and has not given any basis orreasons for reversing the finding recorded by the CIT (A). Further, theplausibility of the explanation submitted by the assessee on the basis ofsales bill no. 46 to 56 produced by him also requires to be consideredby the Tribunal. Accordingly, we are of the view that the matter requires to be remanded to the Tribunal for re-adjudication. 11. In view of the above, the case is remanded to the Tribunal for fresh decision in accordance with law. 12.The parties may appear before the Tribunal on 20.12.2010 for further proceedings in accordance with law. . (AJAY KUMAR MITTAL) JUDGE August 18, 2010(ADARSH KUMAR GOEL)gbsJUDGE