Itxa/1951/2011 Of Nagurao Malku Gadge v. Income Tax Officer

sas IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.1951 OF 2011 Nagurao Malku Gade ..Appellant. V/s. Income Tax Officer ..Respondent. Mr. R.V. Desai, Senior Advocate with R. Pardeshi and Rahul Hakani for the appellant. Mr. Suresh Kumar for the respondent. CORAM : J.P. DEVADHAR AND M.S. SANKLECHA, JJ. DATED : 4TH MARCH, 2013 P.C. :- 1.In this appeal by the revenue for the assessment year 2002-03, following refamed questions of law are proposed for our consideration:- (a)Whether on the facts and circumstances of the case and in law, the Tribunal was justified in ignoring the order of acquittal of metropolitan magistrate court which was on merits and not on technical point ?the Tribunal was justified in ignoring the order of acquittal of metropolitan magistrate court which was on merits and not on technical point ? (b)Whether on the facts and circumstances of the case and in law, the order of the Tribunal is perverse in light of the the hon'ble acquittal of the appellant in criminal proceedings and being contrary to facts on records and against the provisions of the Act ?the order of the Tribunal is perverse in light of the the hon'ble acquittal of the appellant in criminal proceedings and being contrary to facts on records and against the provisions of the Act ? (c) Whether on the facts and circumstances of the case and in law, the Tribunal was justified in confirming addition of said amount Rs.80.57,680/- u/s.69A of the Act ?the Tribunal was justified in confirming addition of said amount Rs.80.57,680/- u/s.69A of the Act ? 2.The basic dispute in the present appeal is, whether the Tribunal was right in upholding the order of the assessing officer and the CIT(A) in confirming that Rs.80.57 lakhs belong to the respondent-assessee as unexplained cash found in his possession under Section 69A of the Income Tax Act, 1961 (the Act). 3.The respondent-assessee is a class IV employee of the Bombay Municipal Corporation. On 19[th] May, 2001, the respondent-assessee was raided by the police on information that he was in possession of fake currency. During the course of search, an amount of Rs.80.57 lakhs in cash and gold ornaments worth Rs.2.19 lakhs were found in his possession and seized. The respondent-assessee was charge-sheeted under Section 124 of the Bombay Police Act. section 124 of the Bombay police Act was to determine whether the cash found in the possession of the respondent-assessee was stolen propery or fraudulently obtained property. The Additional Chief Metropolitan Magistrate by an order dated 7[th] May, 2004 acquitted that the respondent-assessee of offence under section 124 of the Bombay Police Act by holding that the cash in possession of the respondent-assessee was not stolen property. Consequently, the cash of Rs.80.57 lakhs seized from was returned to him by the order of the Additional Chief Metropolitan Magistrate. section 124 of the Bombay police Act was to determine whether the cash found in the possession of the respondent-assessee was stolen propery or fraudulently obtained property. The Additional Chief Metropolitan Magistrate by an order dated 7[th] May, 2004 acquitted that the respondent-assessee of offence under section 124 of the Bombay Police Act by holding that the cash in possession of the respondent-assessee was not stolen property. Consequently, the cash of Rs.80.57 lakhs seized from was returned to him by the order of the Additional Chief Metropolitan Magistrate. 5.The assessing officer by an order passed on 18[th] March, 2005 held that the cash seized from the assessee is to be treated as undisclosed income under Section 69A of the Income Tax Act as according to the assessing officer, the same was not properly explained. The respondent-assessee on the other hand relied upon the order of the Additional Chief Metropolitan Magistrate dated 7[th] May, 2004 to contend that they had satisfactorily explained the possession of cash found with him. The matter went up in appeal and the Tribunal by its order did not accept the plea of the respondent-assessee that in view of the order of the Additional Chief Metropolitan Magistrate dated 7[th] May, 2004, the cash in his possession was explained for the purpose of Section 69A of the Act. The Tribunal in its order held that Section 69A of the Act and Section 124 of the Bombay Police Act operate in different fields and a finding recorded under Section 124 of the Bombay Police Act would not impact the proceedings under Section 69A of the Act in the present facts. However, the Tribunal remanded the matter to the assessing officer to enable the respondent-assessee to produce the evidence of 34 persons to explain the cash found in his possession. 6.During fresh assessment proceedings, the respondent-assessee produced 32 of the 34 persons before the assessing officer. This was so as two of them had died. All the 32 persons produced gave identical explanation regarding their source of their income namely, they were agriculturist who received their income in cash. The explanation given were identical and thus, the assessing officer concluded that the statement were not credit worthy. None of the 32 persons gave any evidence with regard to the agricultural income earned by them with supporting accounts. This resulted in the assessing officer concluding that the respondent-assessee was unable to explain the source of cash satisfactorily for purposes of Section 69A of the Act. Further, it was found that though all the 32 persons have bank account but none of them contributed money by cheque though according to all them all the amounts were contributed in cash ranging from Rs.1.50 lakhs to Rs.3 lakhs only with a view to building a Community Hall at Kurla. Further, the assessing officer also has recorded a finding of fact that the respondent-assessee was engaged in the business of money lending. 7.The CIT(A) upheld the order of the assessing officer that the possession of Rs.80.57 lacs cash has not been satisfactorily explained. On further appeal, the Tribunal held that the only issue for consideration before it 7.The CIT(A) upheld the order of the assessing officer that the possession of Rs.80.57 lacs cash has not been satisfactorily explained. On further appeal, the Tribunal held that the only issue for consideration before it was, whether or not the respondent-assessee had satisfactorily explained the cash found in his possession. The Tribunal held that the other issue which were urged before it, namely, that cash found in the possession of the respondent-assessee has been properly explained by virtue of an acquittal under Section 124 of the Bombay Police Act was no longer open to be considered. This is for the reason that the Tribunal in its earlier order had clearly held that Section 124 of the Bombay Police Act deals with the issue of finding out whether the property is stolen propery or fraudulently obtained property and does not impact in any manner the working of Section 69A of the Act. The respondent-assessee accepted this position in law as no appeal against the earlier order of the Tribunal was filed. Therefore, the order of the Tribunal was final in respect of the issue of the evidentiary value of acquittal was under Section 124 of the Bombay Police Act. So far as the evidence produced in the form of statements of 32 persons and additional evidence in the form of affidavit cum receipt of all the 32 persons who claimed to have received the money back with interest in cash from the respondent-assessee is concerned, the Tribunal held that none of these affidavits generate any confidence as all of them are identically worded. Besides most of them have stated that the source of their cash was from agricultural acitivity but give no particulars or any other evidence regarding their earnings from agricultural income or produced any evidence of ownership of the agricultural lands before the authorities. Further, all the 32 persons produced had bank accounts and yet they contributed the amounts in cash (Rs.1.50 lakhs to Rs.3 lacs) and also received back the amounts in cash from the respondent-assessee. The Tribunal further held that statements of 32 persons were identical, the stamp papers purchased from the said vendor on the same date and the affidavits being notarized on the same date, on application of test of probability lead to the conclusion that the cash of Rs.80.57 lakhs found in the possession of the respondent-assessee do not belong to the 32 persons from whom it is claimed to have been received. In view of the aforesaid facts, the Tribunal dismissed the respondent-assessee's appeal. 8.In appeal, Mr. Desai, the learned Senior Counsel in support of the submissions submitted that this Court should admit this appeal to determine what would be the effect of acquittal in criminal proceedings under the Bombay Police Act to the Inome Tax poceedings. In support, he relied upon the decision of this Court in the matter of Shrirang Ramratan Chandak & Ors. V/s. Uion of India reported in 2007 (207) E.L.T. 217 (Bom) and the Apex Court in the matter of Gopaldas Udhavdas Ahuja & Anr. V/s. Union of india (UOI) & Ors. reported in 2004 (176) ELT 3 (SC) to contend that an acquittal in a criminal proceeding would require the Tribunal to advert to the finding of the Criminal Court before disposing of the appeal before it. In the above cases, the Criminal proceedings were taken against the assessee therein under the Gold Control Act, 1968 and the adjudication proceedings were also taken under the Gold Control Act. The basic charge in the adjudication proceedings and the Civil proceedings was the same viz. whether the accused was in conscious possession of gold. In the present case, the Criminal proceedings were under the Bombay Police Act to determine whether or not it is stolen property and in the income tax proceedings the cash found in his possession in the absence of explanation to the satisfaction of the assessing officer would be deemed to be his income. The difference between the two proceedings is akin to chalk and cheese. Therefore, in the earlier round, the Tribunal held that the result of criminal proceedings under Section 124 of the Bombay Police Act will have no impact in quasi judicial proceedings before the authorities under the Section 69A of the Act. This conclusion of the Tribunal in the earlier round of litigation was accepted by the respondent-assessee. Further, in this case, the Tribunal did advert to the findings of the Criminal Court under Section 124 of the Bombay Police Act and concluded that the same would have no application for the purpose of Income Tax Act. In view of the above, the decision of this Court in the matter of Shrirang Ramratan Chandak & Ors. (supra) and of the Apex Court in the matter of Gopaldas Uhdhavdas Ahuja (supra) would have no application to the present facts. In view of the above, we do not see any merits in the submissions made by Mr. Desai. 9.All the authorities under the Act have concurrently given a finding that the amount of Rs.80.57 lakhs found in cash in possession of the respondent-assessee has not been satisfactorily explained and the same becomes income of the respondent-assessee in terms of Section 69A of the Act. So far as questions (a) & (b) are concerned, they do not arise from the impugned order of the Tribunal. These issues are no longer open to debate as it was concluded by an order of the Tribunal in the earlier round of litigation and the same was accepted by the respondent-assessee. In view of the above, no occasion to entertain questions (a) & (b) can arise. 10.So far as question (c) is concerned, since the decision of the Tribunal is based on finding of fact, we see no reason to entertain the proposed questions (c). 11. Accordingly, the appeal is dismissed with no order as to costs. (M.S. SANKLECHA, J.) (J.P. DEVADHAR, J.)