Itta/129/2012 Of Late Sri Bandi Bheemappa (Ind) v. The Commissioner Of Income Tax

HONOURABLE SRI JUSTICE GODA RAGHURAMANDHONOURABLE SRI JUSTICE M.S.RAMACHANDRARAO I.T.T.A.No.129 of 2012 JUDGMENT(per Hon’ble Sri Justice M.S.Ramachandra Rao): This appeal is filed under Section 260-A of theIncome Tax Act, 1961 (for short ‘the Act’) by theassessee’s legal representative challenging the orderdated 05-12-2008 in I.T. (S.S.).A.No.106/Hyd/2004 for theblock period from 01-04-1990 to 17-10-2000. 2.The appellant-assessee was carrying onbusiness as an excise contractor in the State ofKarnataka in his individual capacity. He was also carryingon business in tamarind at Rayadurg, Ananthapur in thestatus of a Hindu Undivided Family of which he was theKartha. 3.It is an admitted fact that no books ofaccounts were maintained by the assessee for his excisecontract business and no returns of income were filedbefore the Income Tax Department for any assessmentyear in respect of income from this business. But as faras his business in tamarind is concerned, books ofaccounts were regularly maintained and returns were also filed for all the assessment years. 4.Search and seizure operations were carriedout under Section 132 of the Act in the business as wellas residential premises of the assessee on 17-10-2000. In the course of the said search operations, demanddrafts and fixed deposits in Corporation Bank, Rayadurgand Ananta Gramina Bank, Rayadurg of the value ofRs.349.10 lakhs were found. Out of these, instruments ofthe value of Rs.261.43 lakhs were seized. 5.Notice under Section 158-B C of the Act wasissued to the assessee calling for return declaring hisundisclosed income. In response to the said notice, theappellant filed a block return in Form No.2-B declaringundisclosed income of Rs.1,73,07,554/-. 6.The assessee contended before the assessing officer that (i)he is having Rs.60.00 lakhs opening balance as on01-04-1990, that this amount does not form the partof the total income of the block period and therefore set off should have be allowed for the said amountby the Assessing Officer. The Assessing Officerheld that the opening balance prior to the date ofsearch is to be taken as Rs.34.60 lakhs only and notas Rs.60.00 lakhs as contended by the assessee. (ii)he had an agricultural income of Rs.52.50 lakhs from the lands owned by him and his family and alsoother lands taken on lease by him, that this incomewas invested in the excise business and therefore,he is entitled to claim for set off Rs.52.50 lakhsagainst the investments found during the course ofsearch. However, the Assessing Officer held thatonly Rs.33,41,000/- would be income from theagricultural lands owned by the assessee includinglease hold lands. (iii) he had borrowed Rs.40.00 lakhs from 11persons/creditors but the Assessing Officer aftermaking enquiries at the addresses given by theassessee of such persons informed the assesseeby a letter dated 04-10-2002 that the registered letters addressed byhim to the addressees/creditors were returnedunserved and in some cases no reply had beenreceived. Only one creditor by name SriThimmappa who was the father-in-law of the son ofthe assessee appeared before the AssessingOfficer on 11-10-2002 and confirmed that headvanced Rs.6.00 lakhs to the assessee. Therefore,the Assessing Officer accepted that only Rs.6.00lakhs was borrowed by the assessee from the said Thimmappa and not Rs.40.00 lakhs as claimed bythe assessee. (iii) he had borrowed Rs.40.00 lakhs from 11persons/creditors but the Assessing Officer aftermaking enquiries at the addresses given by theassessee of such persons informed the assesseeby a letter dated 04-10-2002 that the registered letters addressed byhim to the addressees/creditors were returnedunserved and in some cases no reply had beenreceived. Only one creditor by name SriThimmappa who was the father-in-law of the son ofthe assessee appeared before the AssessingOfficer on 11-10-2002 and confirmed that headvanced Rs.6.00 lakhs to the assessee. Therefore,the Assessing Officer accepted that only Rs.6.00lakhs was borrowed by the assessee from the said Thimmappa and not Rs.40.00 lakhs as claimed bythe assessee. (iv) cash as per HUF books as on the date of searchof Rs.43,72,076/- be allowed as deduction since nocash is found at the business or residential premisesof the assessee. It was also claimed that theassessee had invested this amount in his individualbusiness. The Assessing Officer held that the samecannot be allowed as there is no such entry in theHUF account books. He held that the cashintroduced by the assessee in his individual capacityis noted on various dates in the assessee’s C/A from01-04-2000 till the date of search and that if anycash was withdrawn from HUF business, it wouldhave been noted in the same account. As there wasno such entry in the audited HUF account books,the said deduction cannot be allowed. (v)an amount of Rs.22,83,500/- which was the balance inthe Corporation Bank A/c.8181 of the assesseebelongs to the HUF . In the assessment order, theAssessing Officer held that it was undisclosedincome. As the assessee did not supply anyevidence in support of his claim either in the form ofcopies of bank statements or pass books or anyother documents, the Assessing Officer concluded that this amount has to be added to the undisclosedincome of the assessee. The Assessing Officer by order dated 31-10-2002thus determined the taxable undisclosed income of theassessee at Rs.3,02,16,847/-. He therefore assessed theassessee to tax of Rs.1,81,30,108/-, surcharge andinterest etc. 7.Aggrieved thereby the assessee filed anappeal before the CIT (Appeals), Tirupathi. The CIT(Appeals) agreed with the Assessing Officer on all theadditions of the income but granted relief to the assesseein respect of only levy of surcharge of the tax. 8.The assessee thereafter filed an appeal I.T.(S.S.) A.No.1061/Hyd/2004 before the Income TaxAppellate Tribunal, Hyderabad Bench (B), Hyderabad. 9.Before the Tribunal, the assessee reiteratedhis contention that he is having Rs.60.00 lakhs openingbalance as on 01-04-1990, that this amount does not formthe part of the total income of the block period andtherefore set off should have been allowed for the saidamount by the Assessing Officer. The Tribunal held thatthe assessee had not filed any documentary evidence ormaterial to show that he is having Rs.60.00 lakhs asopening balance as on 01-04-1990, that the assessee’s Bank Account No.11 in Corporation Bank (from thematerial furnished by the assessee) did not disclose thathe was having such balance as on 01-04-1990 and onlyon 28-07-1990 there was an opening balance ofRs.65,09,806.63 ps. It relied on a memorandum issued bythe Branch Manager of the said Bank to it’s ManagingCommittee stating that the assessee on 31-03-1990 hadcash in hand and bank of Rs.34.60 lakhs and held thatthe Assessing Officer was fully justified in allowing creditof Rs.34.60 lakhs only to the assessee and not Rs.60.00lakhs as claimed by the assessee. Bank Account No.11 in Corporation Bank (from thematerial furnished by the assessee) did not disclose thathe was having such balance as on 01-04-1990 and onlyon 28-07-1990 there was an opening balance ofRs.65,09,806.63 ps. It relied on a memorandum issued bythe Branch Manager of the said Bank to it’s ManagingCommittee stating that the assessee on 31-03-1990 hadcash in hand and bank of Rs.34.60 lakhs and held thatthe Assessing Officer was fully justified in allowing creditof Rs.34.60 lakhs only to the assessee and not Rs.60.00lakhs as claimed by the assessee. 10.As regards, the agricultural income, theTribunal noted that the Assessing Officer had conductedenquiry and had found that a report issued by the M.R.O.proved that some land claimed to be agricultural landowned or taken on lease by the assessee is either P.W.D.road or waste or belonging to others, that it would notbelong to the assessee and that the assessee had placedno material on record to show that the information givenby the M.R.O. was false or not reliable and that he hadcultivated the said lands. It therefore confirmed the findingof the Assessing Officer and CIT (Appeals) that theagricultural income from the assessee’s ownedagricultural land including lease hold land amounts to only33.41 lakhs and only to the said extent, deduction can be allowed to the assessee from the income . 11. As regards the claim of the assessee that hehad borrowed Rs.40 lakhs from 11 persons/creditors , theTribunal , on appreciation of the evidence held that theassessee had failed to prove the identity, creditworthiness and genuineness of the transactions betweenhimself and the creditors and therefore confirmed thefindings of the Assessing Officer and the CIT (Appeals). 12. As regards the claim for deduction ofRs.43,72,076/- claimed by the assessee to have beeninvested in his individual business from the HUF account,the Tribunal held that non-availability of cash from thedate of search as per books and accounts in the HUF filewould not lead to the conclusion that it was used in theindividual business. It held that the assessee had notplaced any material to show that cash in hand ofRs.43,72,076/- shown in the HUF’s balance sheetprepared as on 17-10-2000 as required by the AssessingOfficer was utilized by the assessee individually for hisbusiness purposes prior to the date of search. It held thatthe assessee also failed to explain the nexus showingthat such cash in hand was available with the assesseefor making corresponding investment in the hands of his“individual” business and it rejected his contention in thisregard also. 13. As regards the addition of Rs.22,83,500/-made by the Assessing Officer , the Tribunal held that theCIT (Appeals) had held that the assessee had notsupplied any evidence for his claim and that there is adispute as to in which bank, the said balance lies. Ittherefore held that on this issue, the matter should goback to the file of the Assessing Officer and it directed himto determine the same afresh after providing a reasonableopportunity of being heard to the assessee. 14.In this appeal, under Section 260-A of theAct, the assessee has raised the following issues: “1. Whether on the facts and in thecircumstances of the case, the Tribunal is correct inlaw in ignoring the wealth of material placed beforeit and rejecting the appellant’s claim for openingcash balance of Rs.60,00,000/- and thus is not thedecision perverse? 2. Whether on the facts and in thecircumstances of the case, in the absence of booksof accounts, the provisions of sec.68 would apply orof sec.69 where, in the later case the burden ofproof would lie on the Department? 3. Whether on the facts and in thecircumstances of the case, the Tribunal is correct inlaw in not giving credit to the cash balance ofRs.43,72,076/- of the HUF business by the merefact of there being no entry made in the individualaccount, when no evidence was found to show thatthe said amount was spent away by the appellantfor any other purpose?” 2. Whether on the facts and in thecircumstances of the case, in the absence of booksof accounts, the provisions of sec.68 would apply orof sec.69 where, in the later case the burden ofproof would lie on the Department? 3. Whether on the facts and in thecircumstances of the case, the Tribunal is correct inlaw in not giving credit to the cash balance ofRs.43,72,076/- of the HUF business by the merefact of there being no entry made in the individualaccount, when no evidence was found to show thatthe said amount was spent away by the appellantfor any other purpose?” 15.Heard Smt. K.Neeraja, learned counsel forthe appellant and Sri B.Narasimha Sarma, learnedStanding Counsel for the Income Tax Department. 16.The learned counsel for the appellant contended that the Tribunal erred in rejecting theassessee’s claim as regards opening cash balance ofRs.60.00 lakhs and also in not giving credit to cashbalance of Rs.43,72,076/- on HUF business. She alsocontended that the Tribunal erred in applying Section 68of the Act and should have applied Section 69 instead,and if Section 69 applies, the burden of proof would lie onthe Department. 17.Sri B.Narasimha Sarma, learned StandingCounsel for the Revenue however supported the order ofthe Tribunal and contended that no case has been madeout by the assessee for interference with the findings offact recorded by the Tribunal. 18.We have considered the submissions of boththe parties. 19.In respect of issue no.1 mentioned above,we are of the view that the Assessing Authority, the CIT(Appeals) and the Tribunal have concurrently held onappreciation of the evidence on record that the assesseefailed to show that he was having an opening balance of Rs.60.00 lakhs as on 01-04-1990 and that only Rs.34.60lakhs is to be considered to be the opening balance priorto the block period on the basis of the memorandumsubmitted by the Corporation Bank, Rayadurg to itsmanaging committee. This finding of fact is supported byvalid reasons and is based on appreciation of evidenceand cannot therefore be interfered with in the limitedjurisdiction vested in this Court u/s.260-A of the Act. 20.On issue no.2 also we are of the view thatburden of proof is on the assessee whether S.68 or S.69of the Act is applied to the facts of the case. Section 68 of the Act states as follows: “S.68.Cash credits: Where any sum is foundcredited in the books of an assessee maintained forany previous year, and the assessee offers noexplanation about the nature and source thereof orthe explanation offered by him is not, in the opinionof the 1[ Assessing] Officer, satisfactory, the sum socredited may be charged to income- tax as theincome of the assessee of that previous year.” Section 69 of the Act states as follows: “S. 69. Unexplained investments:Where in the financial year immediately preceding theassessment year the assessee has madeinvestments which are not recorded in the booksof account, if any, maintained by him for anysource of income, and the assessee offers noexplanation about the nature and source of theinvestments or the explanation offered by him is not, in the opinion of the 2[ Assessing] Officer,satisfactory, the value of the investments maybe deemed to be the income of the assessee ofsuch financial year.” Section 69 of the Act states as follows: “S. 69. Unexplained investments:Where in the financial year immediately preceding theassessment year the assessee has madeinvestments which are not recorded in the booksof account, if any, maintained by him for anysource of income, and the assessee offers noexplanation about the nature and source of theinvestments or the explanation offered by him is not, in the opinion of the 2[ Assessing] Officer,satisfactory, the value of the investments maybe deemed to be the income of the assessee ofsuch financial year.” In the present case, it is admitted that the assessee hadnot maintained any books of account as far as the excisecontract business is concerned. Therefore, Section 69would apply and not Section 68 as was applied by theTribunal at para 22 of this order. However, this would notmake any difference to the result of this appeal becauseeven if Section 69 applied, if the Assessing Officer is ofthe opinion that the assessee’s explanation about thenature and source of investments is unsatisfactory, thevalue of the investments made by the assessee would bedeemed to be the income of the assessee for suchfinancial year. Thus even if S.69 applied, the assesseehas to let in evidence to prove the nature and source ofinvestments and the burden of proof thus continues to bewith the assessee. Therefore, the assessee is not right incontending that the burden of proof, in the absence ofbooks of accounts ,would lie on the department and noton him. 21. On issue no.3 also, we are of the view thatthe Tribunal did not commit any error in law in denyingcredit of cash balance of Rs.43,72,076/- to the assessee.If that amount of cash was actually withdrawn from the assessee’s HUF business, it could have been noted inthe account books of the assessee and admittedly therewas no such entry. Merely because there was no suchcash found on the date of search, the assessee cannotclaim it as a deduction and contend that he has used thesaid amount in his individual business. We are of the viewthat the Tribunal has correctly appreciated the evidenceon record and its findings are supported by valid reasons. 22.Therefore, its order is not liable to beinterfered with in exercise of jurisdiction vested in thisCourt under Section 260-A of the Act. 23.The appeal is without any merit and noquestion of law, much les a substantial question of lawarises for our consideration in it. It is therefore dismissed. No costs. ____________________________ JUSTICE GODA RAGHURAM __________________________________ JUSTICE M.S.RAMACHANDRA RAO Date:23-11-2012Kvr