Ita/561/2015 Of Pawan Kumar Mehta v. The Deputy Commissioner Of Income Tax

IN THE HIGH COURT OF KARNATAKA AT BENGALURUDATED THIS THE 19 DAY OF JULY 20271 PRESENT| THE HON’BLE MR. JUSTICE ALOK ARADHE AND THE HON’/BLE MR. JUSTICE HEMANT CHANDANGOUDAR BETWEEN: ILT.A. NO.561 OF Z2O1 PAWAN KUMAR MEHTA|NO.5, 2ND FLOOR, MIDDLE SCHOOL ROADV.V.PURAMBANGALORE - 560 004. ... APPELLAN| (BY SRILA.SHANKAR SR. ADV. FOR SRI.ANNAMALAT S. ADV.) AND" THE DEPUTY COMMISSIONER OF INCOME TAXCENTRAL CIRCLE 2(2)C.R.BUILDING, QUEENS ROADBANGALORE - 560 OOQO1 .., RESPONDENT (BY SRI.K.V.ARAVIND, ADV.) THIS I.T.A. IS FILED UNDER SEC. J6O0-A OF INCOME TAXACT 1961, ARISING OUT OF ORDER DATED 08.05.2015 PASSEDIN ITA NO.1761/BANG/2013, FOR THE ASSESSMENT YEAR 2010-11, PRAYING TO: (i) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW AS.STATED ABOVE AND ANSWER THE SAME IN FAVOUR OF THE.APPELLATE. (11) TO ALLOW THE APPEAL AND SET ASIDE THE FINDINGS|TO THE EXTENT AGAINST THE APPELLANT IN THE ORDER PASSED|BY THE ITAT, BENGALURU BENCH IN ITA NO.1761/BANG/2013_ RELATING TO ASSESSMENT YEAR 2010-11 VIDE ITS ORDER.DATED 08.05.2015.THIS I.7T.A. COMING ON FOR’ HEARING, THIS’ DAY, |ALOK ARADHE J.,DELIVERED THE FOLLOWING: | THIS I.7T.A. COMING ON FOR’ HEARING, THIS’ DAY, | JUDGMENT This appeal under Section 260A of the Income TaxAct, 1961 (hereinafter referred to as the Act for short)has been preferred by the assessee against the order|dated 08.05.2015 passed by the Income Tax AppellateTribunal (hereinafter referred to as the tribunal forsnort). Tne subject matter of the appeal pertains to theAssessment year 2010-11. The appeal was admitted bya bench of this Court on the following substantialquestions of law:| (i)Whether the tribunal is Justified in.law.InconfirmingtheadditionofRs.56,32,161/- on account of peak cash.deficit worked out by tne revenue authorities|without considering the actual casn balanceas per the books of account on the date of.search when the same books of account wes|part of the seized material and the same was.also not rejected and s in fact relied upon the. income tax authorities and consequently gaveaperversefindingOf)thefacts|andcircumstances of the case? (11)Whethertheassessment.proceedings under Section 153A of the Act|are)validIn|lawwhen|neitherdhhyincriminating material were found in the|course of search nor any addition has been.added in the assessment on the pbesis_ omaterials seized in the course of search in thecase of the appellant? (iii) Whether the tribunal is Justified inlaw in not holding that the search in the caseof the appellant is not a valid search and the.conditions contemplated under Section 132 of|the Act have not been complied and more so.wnen no addition was made in the case of theappellant based on materials seized in the.course of the search of the search of the|appellant on the facts and circumstances of.the case? (iV) Whether the tribunal Is Justified in-law in presuming absence of existence of cash merely because the same was not locatedduring search and more so when there is no.such legal presumption in law under the|[ncome_Tax.aclOf)thefacts|andcircumstances of the case? 2.|Facts leading to filing of this appeal brieflystated are that the assessee is an individual carrying onbusiness as distributor of R & D Ghutka and Pan Masala.A search was conducted under Section 132 of the Act on10.10.2009. In the course of search, cash amounting to)Rs.45,40,000/- was seized from the assessee andthereafter a statement of the assessee under Section|131 of the Act was recorded on 27.10.7010. The'assessee filed return of income for the Assessment Year|2010-11 on 20.09.2010 and declared total income of|Rs./79,443/-. Thereafter notice under Section 153A ofthe Act was issued. The assessee filed a reply by which.Assessing Officer was requested to treat the return filedon 20.09.2010 as return in response to the notice under.Section 153A of the Act. The Assessing Officer passed an. 2.|Facts leading to filing of this appeal brieflystated are that the assessee is an individual carrying onbusiness as distributor of R & D Ghutka and Pan Masala.A search was conducted under Section 132 of the Act on10.10.2009. In the course of search, cash amounting to)Rs.45,40,000/- was seized from the assessee andthereafter a statement of the assessee under Section|131 of the Act was recorded on 27.10.7010. The'assessee filed return of income for the Assessment Year|2010-11 on 20.09.2010 and declared total income of|Rs./79,443/-. Thereafter notice under Section 153A ofthe Act was issued. The assessee filed a reply by which.Assessing Officer was requested to treat the return filedon 20.09.2010 as return in response to the notice under.Section 153A of the Act. The Assessing Officer passed an. order under Section 143(3) read with Section 153A of.the Act on 26.12.2011 and made an addition otfRs.55,54,521/-, same being peak cash deficit in the|cash book. 3The assessee thereupon filed an appealbefore the Commissioner of Income Tax (Appeals) who.by an order dated 25.09.2013 dismissed the appeal andenhanced the addition to Rs.56,32,132/-. The assesseethereupon filed an appeal before the tribunal. Thetribunal by an order dated 08.05.2015 has dismissed theappeal. In the aforesaid factual background, this appeal|Nas peen filed. 4Learneq Senior counsel for tne assesseeSuDmitted tnat the nature of DbusiIness In whicn tnassessee engaged itself such that huge collections are|made in cash from vendors / hawkers and are depositedin the bank. It Is further submitted that that books of.accounts of tne assessee are audited under Section| 44AB of the Act for the years ending on 31.03.2009 and31.03.2010. It is also submitted that Assessing Officerdid not reject the books of accounts of the assessee andhas used the same cash book for calculating the peak|deficit in cash. It is also submitted that the Assessing|Officer chose to disbelieve only cash balance as per.books of accounts and accepted books of accountsincluding the cash book for all other purposes. It is also|pointed out tnat in response to the show cause notice,the assessee vide Communication dated 13.17.2011 hadclarified that balance cash was in the house but the'Same was not found by officers who carried out thesearch. It is also urged that when running cash balanceas per the books has been accepted in subsequentyears, there appears to be no reason to assess the peakcredit for Assessment Year alone in question. It is also.argued that alleged difference in cash balance neitherfalls under Section 68 nor under Section 69 of the Act.It is also submitted that there is a presumption about the books of accounts, which may be found inpossession of control of any person during the course ofsearch that such books of accounts belong to him, the|contents of books of accounts are true and signature inparts of books of accounts, documents which purport to.the handwriting of any particular person are in.handwriting of that person. It is submitted that there is no presumption in law that what has not been founddoes not exist. It is also pointed out that cash on Nand is.not an incriminating material as the same was not foundin books of accounts and there is no material on record.to indicate the incriminating material, which was relied|to make addition. It is also urged that books of accounts.nave not been rejected by the Assessing Officer. It isfurther submitted tnat assessee does not intend to raise|any contention with regard to validity of the proceedingunder Section 132 of the Act. In support of aforesaidsubmissions, reliance has been placed on decisions in.‘MEHTA PARIKH & CO. VS. CIT, (1956) 30 ITR 181. (SC), ‘LAKSHMI RICE MILLS VS. CIT’, (1974) 97ITR 258 (PATNA), ‘CIT VS. MR P FIRM, (1965) 56.ITR 67 (SC) and ‘PULLONGODE RUBBER VS. STATE.OF KERALA’, (1973) 91 ITR 18 (SC). (SC), ‘LAKSHMI RICE MILLS VS. CIT’, (1974) 97ITR 258 (PATNA), ‘CIT VS. MR P FIRM, (1965) 56.ITR 67 (SC) and ‘PULLONGODE RUBBER VS. STATE.OF KERALA’, (1973) 91 ITR 18 (SC). 5.|On the other hand, learned counsel for therevenue submitted that the assessee despite being.afforded an opportunity to offer the explanation was.unable|tO|explainthecash.differenceOf Rs.1,06,26,309/-. It is further submitted that cogent|reasons have been assigned to assess the peak cash.deficit in the cash book and the aforesaid order has beenaffirmed by Commissioner of Income Tax (Appeals) and.the tribunal. The orders passed by the authorities under.the Act do not suffer from any infirmity and the findings.cannot be said to be perverse. 6.|We have considered the rival submissions.made on both sides and have perused the record.Admittedly, during the course of the search at the residential premises of the assessee on 09.10.2009,cash of Rs.45,40,000/- was found and was seized. The.assessee was unable to explain the source of cash and.cash book was updated only upto 30.09.2009. The cash.balance as per the cash book on the date of search i.e.,09.1.2009 reflects the cash balance of Rs.1,51,66,209/-..The assessee was asked to explain the cash difference ofRs.1,06,26,309/-. The assessee was unable to offer any.explanation and in nis statement admitted that casn—balance of Rs.45,40,000/- was seized from his residence|and was available at his residence. The assessee was/unable to explain the cash difference to the extent of.Rs.1,06,26,309/- and could not explain where theDalance case of Rs.1,06,26,309/- was kept. TneAssessing Officer tnerefore, assessed the peak casn.deficit in the cash book at Rs.55,54,521/- and assessedthe aforesaid amount to tax for 2010-11. The said order|was affirmed in appeal by the Commissioner of Income.Tax (Appeals) and it was neld that the casn shown by. the assessee in his books is not the real figure. The|tribunal has held that despite opportunity being affordedto the assessee, the assessee did not explain thedifference between the cash and of Rs.45,40,000/-.found and seized at the premises and the cash.mentioned in the cash book. Thus, it was held that the)Commissioner of Income Tax (Appeals) has rightly held|that the addition of Rs.56,32,161/- has been made in.respect of peak cash deficit subsequent to search andthe cash balance after seizure of Rs.45,40,000/- is ‘NIL’.It was further held that the addition has rightly been|made for cash payments’ received in excess of cashreceipts after the date of search and the amount of.Rs.56,32,161/- was rightly Drought to tax in the nands—of the assessee, 7The aforesaid findings are findings of factrecorded by the authorities under the Act and the same.cannot be said to be perverse as the findings of fact arebased on meticulous appreciation of evidence on record. In the result, the substantial question of law Nos.1, 2.and 4 are answered against the assessee and in favour.of the revenue. In the result, we do not find any merit in this|appeal, the same fails and is hereby dismissed. Sd/-—JUDGE. SS| Sd/-—JUDGE.