M/S Baldev Singh & Co v. Commissioner Of Income Tax, Aayakar Bhawan,Rishi Nagar, Ludhiana, Punjab

Income Tax Appeal No.202 of 2013 IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH (1) Income Tax Appeal No.202 of 2013Date of Decision: 30[th] January, 2015 M/s Baldev Singh & Co. Versus ...Appellant Commissioner of Income Tax, Aayakar Bhawan,Rishi Nagar, Ludhiana, Punjab. ...Respondent (2) Income Tax Appeal No.203 of 2013 M/s Baldev Singh & Co. Versus ...Appellant Commissioner of Income Tax, Aayakar Bhawan,Rishi Nagar, Ludhiana, Punjab. ...Respondent CORAM: HON'BLE MR. JUSTICE RAJIVE BHALLA HON'BLE MR. JUSTICE AMIT RAWAL Present:Mr. S.K.Mukhi, Advocate,for the appellant. Ms. Savita Saxena, Advocate,for the respondent. RAJIVE BHALLA, J. By way of this order, we shall decide Income Tax AppealNos.202 and 203 of 2013, as they pertain to the same assessee butto different assessment years. Counsel for the appellant submits that in the absence of anyproof of the existence of a firm known as M/s Baldev Singh & Co.whether in the shape of a partnership deed or otherwise and anyevidence about Baldev Singh's share in the firm, findings recorded on mere presumptions by the Assessing Officer, the CIT(A) and theITAT, that Baldev Singh was a partner of M/s Baldev Singh & Co. areillegal and contrary to the evidence on record. Counsel for theappellant further submits that Section 23 of the Income Tax Act(hereinafter referred to as 'the Act') defines a firm as having thesame meaning as assigned under the Indian Partnership Act, 1932.The revenue was required in the discharge of its onus, to prove theexistence of a partnership of which Baldev Singh was a partner. Aperusal of the record reveals that the revenue has not been able toproduce any partnership deed or document that proves that BaldevSingh was a partner of M/s Baldev Singh & Co.. The mere fact thatBaldev Singh may have signed certain documents during auctionproceedings, on behalf of the firm does not raise inference thatBaldev Singh was a partner. Baldev Singh was an employee ofPritam Singh and signed documents on behalf of Pritam Singh. Itwas for this reason that Pritam Singh made a disclosure of incomefrom the liquor business. The initial order passed by the CIT(A)referring to the modus of excise vend contractors, namely, puttingforward fictitious persons was wrongly reversed by the Tribunal in thefirst round of litigation. The CIT(A) had held that it is well known inthe liquor trade that licences are obtained in benami names and thereal beneficiary remains behind the scenes. As there was noevidence of the role of Baldev Singh as a partner, the ITAT committedan error in setting aside the order passed by the CIT(A). The merefact that Baldev Singh may have signed certain documents pertaining main person was and is Pritam Singh, whose statement that he ispartner to the extent of 25% and that Baldev Singh is a partner to theextent of 75% has been wrongly accepted by the revenue withoutreferring to any partnership deed or any other documents that wouldprove that Pritam Singh was partner to the extent of 25% and BaldevSingh, a partner to the extent of 75%. The entire proceedings arebased upon the statement made by Pritam Singh, who has cleverlyexonerated himself and placed the entire responsibility upon BaldevSingh. The statement by a third person as held inS.R.Batliboi &Co.v. Departemtn of Income Tax(Investigation), Civil WritPetition No.9479 of 2007, decided on 27.05.2009, cannot be readagainst the appellant. main person was and is Pritam Singh, whose statement that he ispartner to the extent of 25% and that Baldev Singh is a partner to theextent of 75% has been wrongly accepted by the revenue withoutreferring to any partnership deed or any other documents that wouldprove that Pritam Singh was partner to the extent of 25% and BaldevSingh, a partner to the extent of 75%. The entire proceedings arebased upon the statement made by Pritam Singh, who has cleverlyexonerated himself and placed the entire responsibility upon BaldevSingh. The statement by a third person as held inS.R.Batliboi &Co.v. Departemtn of Income Tax(Investigation), Civil WritPetition No.9479 of 2007, decided on 27.05.2009, cannot be readagainst the appellant. Counsel for the appellant also relies uponM.Rajgopalv.K.S.Imam Ali, AIR 1981 Kerala 36and M/s Mensa Ram & Saonsv.M/sJanki Das Om Parkash, AIR 1984, 267to submit that a personwho claims to be a partner cannot apportion liability to anotherwithout reference to any document and mere signatures on certaindocuments would not raise inference of a partnership. Counsel forthe appellant also submits that the evidence on record, the searchconducted on the premises of Pritam Singh, his surrender of incomeetc., prove that Baldev Singh was a mere employee and his namewas used by Pritam Singh. Counsel for the appellant has framed seven questions, inall, which read as follows:- “I).Whether, on the facts and circumstances of thecase, ITAT was justified in reversing a well versed order of CIT(A) in original appeal and therebyholding Mr. Baldev Singh as partner of theappellant firm without appreciating the modusoperandi in the liquor trade as explained by one ofthe Assessing Officer of the same area AnnexureA-8 and thereby defying the judgment of Hon'bleSupreme Court of India in the case of M/s BergerPaints India Ltd. v. CIT, 266 ITR 99 (SC)? II) Whether, on the facts that circumstances of thecase, ITAT was justified in reversing a well versedorder of CIT (A) in original appeal and therebyholding Mr. Baldev Singh as pertner of theappellant firm by simply relying upon the statement of Mr. Pritam Singh who was the actualbeneficiary and owner of the appellant firm withoutconfronting any material or documents relied uponas found from search operations of said Mr. PritamSingh which is against established principles of lawas laid down by this Hon'ble Court in the case ofCIT Patiala v. Radhey Sham Sita Ram 22 I.T Rep667 (P&H) wherein it was held that an additionmade on the basis of a statement of a personwithout allowing opportunity to cross examinecannot be confirmed? III). “Whether, on the facts and circumstances of thecase, ITAT was justified in reversing a well versed order of CIT (A) in original appeal and therebyholding Mr. Baldev Singh as partner of theappellant firm without appreciating the provisionsof law as per Section 184 and 185 of the IncomeTax Act, 1961 and other evidences on record? IV). Whether, on the facts and circumstances of thecase, ITAT was justified in reversing a well versedorder of CIT (A) in original appeal and therebyholding Mr. Baldev Singh as partner of theappellant firm without appreciating the provisionsof law as laid down even under the provisions ofthe Partnership Act, and its binding nature as soheld by Hon'ble Kerala High Court in the case ofM.Rajgopal v. K.S.Imam Ali, AIR 1981 Ker 36and by Hon'ble Allahabad High Court in the case ofMansa Ram and Sons v. M/s Janaki Das OmParkash, AIR 1984 All 267? order of CIT (A) in original appeal and therebyholding Mr. Baldev Singh as partner of theappellant firm without appreciating the provisionsof law as per Section 184 and 185 of the IncomeTax Act, 1961 and other evidences on record? IV). Whether, on the facts and circumstances of thecase, ITAT was justified in reversing a well versedorder of CIT (A) in original appeal and therebyholding Mr. Baldev Singh as partner of theappellant firm without appreciating the provisionsof law as laid down even under the provisions ofthe Partnership Act, and its binding nature as soheld by Hon'ble Kerala High Court in the case ofM.Rajgopal v. K.S.Imam Ali, AIR 1981 Ker 36and by Hon'ble Allahabad High Court in the case ofMansa Ram and Sons v. M/s Janaki Das OmParkash, AIR 1984 All 267? V). Whether, on the facts and circumstances of thecase, ITAT was justified in reversing a well versedorder of CIT (A) in original appeal and therebyholding Mr. Baldev Singh as partner of theappellant firm and thereby confirming the quantumof addition made on the basis of surrender by oneMr. Pritam Singh who was not even partner in theappellant firm?case, ITAT was justified in reversing a well versedorder of CIT (A) in original appeal and therebyholding Mr. Baldev Singh as partner of theappellant firm and thereby confirming the quantumof addition made on the basis of surrender by oneMr. Pritam Singh who was not even partner in theappellant firm? VI). Whether, on the facts and circumstances of the case, the findings of ITAT are perverse and againstthe evidences on record thus unsustainable inlaw? VII). Whether the ITAT has misdirected itself in beinginfluenced by irrelevant factors and applyingerroneous criteria while deciding the issue underIncome Tax Act, 1961?” A perusal of the substantial questions of law reveal thatquestions no.(I) to (V) pertain to the earlier order dated 31.03.2009passed by the ITAT, remitting the matter to the Assessing Officer byreversing the order passed by the CIT(A) dated 11.03.2008.Questions No.VI and VII pertain to orders passed after remand butall these questions essentially pertain to and impugn the finding thatBaldev Singh is a partner of M/s Baldev Singh & Co. Counsel for the revenue, however, submits that the questionwhether Baldev Singh was a partner or not is a pure question of fact.The findings recorded by the ITAT are based upon a consideredappraisal of facts on record particularly documents signed by BaldevSingh, before excise authorities and, therefore do not give rise to anysubstantial questions of law much less the questions framed by theappellant. Baldev Singh has not denied his signatures on documentspertaining to M/s Baldev Singh & Co. The partnership deed, was inpossession of partners but as Baldev Singh has not produced thepartnership deed, an adverse inference has to be drawn against him. The inference is fortified by documents received from the excisedepartment bearing Baldev Singh's signatures, on behalf of M/s Baldev Singh & Co., thereby proving that Baldev Singh was a partnerand not an employee has urged. The findings recorded in theimpugned orders are pure questions of fact that do not give rise toany question of law. We have heard counsel for the parties, perused theimpugned orders, as well as orders passed in earlier proceedings. The seminal point that would determine the fate of theseappeals is whether there is any evidence on record that would proveor raise an inference that Baldev Singh was a partner of M/s BaldevSingh & Co.. The Assessing Officer has held that Baldev Singh wasa partner of Baldev Singh & Co. The findings are pure findings of factbut as counsel for the appellant is vehement in his contentions thatBaldev Singh has been illegally held to a partner or that his namehas been misused by Pritam Singh. We have though it fit to appraisethe impugned orders. The CIT(A) has affirmed this finding. The ITAThas affirmed both these findings. of fact recorded by the CIT(A) and . We have heard counsel for the parties, perused theimpugned orders, as well as orders passed in earlier proceedings. The seminal point that would determine the fate of theseappeals is whether there is any evidence on record that would proveor raise an inference that Baldev Singh was a partner of M/s BaldevSingh & Co.. The Assessing Officer has held that Baldev Singh wasa partner of Baldev Singh & Co. The findings are pure findings of factbut as counsel for the appellant is vehement in his contentions thatBaldev Singh has been illegally held to a partner or that his namehas been misused by Pritam Singh. We have though it fit to appraisethe impugned orders. The CIT(A) has affirmed this finding. The ITAThas affirmed both these findings. of fact recorded by the CIT(A) and . The appellant-firm Baldev Singh & Co., is based in Samrala,Punjab. Baldev Singh is also a resident of Samrala. A search wasconducted at the residence of one Pritam Singh, on 25.08.1989,where certain incriminating documents were recovered. Pritam Singhmade a disclosure of Rs.1,90,000/- from liquor business forassessment year 1985-86 and Rs.1,72,000/- for assessment year1986-87, amongst other disclosures. Pritam Singh also made astatement that the liquor vends at Ambala were allotted to M/sBaldev Singh & Co. of which Baldev Singh was 75% share holder, Singh were share holders of the balance 25%. A case was initiatedagainst the Baldev Singh & Co., through Baldev Singh, underSection 148 of the Income Tax Act, 1961, for assessment years1985-86 and 1986-87. Baldev Singh, however, did not put inappearance during assessment proceedings and, therefore, an orderdated 05.03.1998, was passed under Section 143(3)/144 of the Actassessing an income of Rs.1,90,000/-. The Assessing Officer,thereafter, attached two acres of agricultural land and standing crops,belonging to Baldev Singh. Baldev Singh filed a writ petition whereinafter passing certain interim orders, the writ petition was dismissed toenable the appellant to avail his remedy under the Act. Baldev Singhfiled an appeal before the CIT(Appeals), which was allowed, videorder dated 11.03.2008, by holding that Baldev Singh is not to betreated as a partner of M/s Baldev Singh & Co., as no partnershipdeed is forthcoming and this fact should have been disclosed in theinitial statement made by Pritam Singh during search on 25.08.1989.The revenue filed an appeal before the Income Tax AppellateTribunal. The Tribunal set aside the order passed by the CIT(A) andremanded the matter to the Assessing Officer by holding that as onusto establish whether Baldev Singh was a partner in M/s BaldevSingh & Co., lies upon the revenue, it is necessary that the record ofthe auction of liquor vends conducted by the Excise and TaxationDepartment, Haryana, be requisitioned, as neither party hasproduced the partnership deed. Baldev Singh did not file any further appeal. The Assessing Officer requisitioned the relevant record from the Excise and Taxation Department, Ambala and after perusing therecord held that as all relevant documents pertaining to the auctionand the allotment of liquor vends are signed by Baldev Singh, he is apartner of M/s Baldev Singh & Co. The appellant filed an appealbefore the Commissioner of Income Tax(A), which was dismissed on22.08.2012. The appellant, thereafter, filed an appeal before theIncome Tax Appellate Tribunal, Chandigarh, which was dismissed on14.01.2013. appeal. The Assessing Officer requisitioned the relevant record from the Excise and Taxation Department, Ambala and after perusing therecord held that as all relevant documents pertaining to the auctionand the allotment of liquor vends are signed by Baldev Singh, he is apartner of M/s Baldev Singh & Co. The appellant filed an appealbefore the Commissioner of Income Tax(A), which was dismissed on22.08.2012. The appellant, thereafter, filed an appeal before theIncome Tax Appellate Tribunal, Chandigarh, which was dismissed on14.01.2013. Baldev Singh does not deny his involvement in theaforesaid firm but asserts that he was a mere employee, who wasreceiving a salary but his name was used by Pritam Singh, at thetime of bidding and allotment of liquor vends. A perusal of the factsreveals that after remand by the ITAT, the Assessing Officerrequisitioned the record from the Excise and Taxation Department,Haryana. A thorough examination of the record revealed thatdocuments relating to the auction and the allotment of liquor vendsbear the name of Baldev Singh son of Kashmira Singh, resident ofSamrala, as the successful bidder and are signed by Baldev Singh.The Assessing Officer noticed that Form no.M-14 contains the nameof Baldev Singh, the certificate issued by the Presiding Officer,records that the vends have been sold to Baldev Singh, for a licensefee of Rs.10,25,00/- and the certificate recording announcementrelating to the auction also bears the names of Baldev Singh andthese documents aresigned by Baldev Singh. A relevant extractfrom this order reads as follows:- “11. It is pertinent to mention here that as per attested copies of auction and allotment records suppliedby the concerned competent authorities of Exciseand Taxation Department, Sh. Baldev Singh s/oSh. Kashmira Singh, Resident of Samrala is one ofthe successful bidder along with others. Thedocuments supplied by the Excise and TaxationDeptt. Contain the signatures of Sh. Baldev Singh(the assessee) along with others at that timebefore the Excise Authorities. The attesteddocuments received from Excise & Taxationdepartment are self explanatory to establish thatSh. Baldev Singh is one of the partner in M/sBaldev Singh & Co., Liquor Contractor, AmbalaCantt, H.O. Samrala during the F.Ys 1984-85 &1985-86. The documents received from the Dy.Excise & Taxation Commissioner (Excise) Deptt.,Ambala are annexed to this order as part of theorder. (Nine Pages). The relevant contents of thedocuments received from the Excise & TaxationDepartment are discussed here under:- -F.Y. 198485 i) Form No.M-14: Contained name, percentage & address of the persons to whom the vend soldwhom the vend sold As per this Form, Sh. Baldev Singh S/o Sh. KashmiraSingh, V & P.O. Samrala, Ludhiana is one of the person towhom the vend sold. Income Tax Appeal No.202 of 2013 ii) Certificate by Presiding Officer of the Excise &Taxation Department for the sale of Liquor Shop in-favour of the persons: As per this certificate Sh. Baldev Singh is one of the personto whom the vend sold. On the same certificate, Sh. Baldev Singh as one of thesuccessful bidder (duly signed by Sh. Baldev Singh), it hasbeen certified that-I/we do hereby undertake to license feeof Rs.10,25,000/- (in words) (Ten Lacs Twenty FiveThousand only) fixed for the Auction on 16.03.1984 for theC.L. Liquor Vend B.C. Bazar & R.A. BazarAmbala Cantt forthe year 1984-85 in accordance with the announcementmade at the time of auction. iii) Certificate regarding announcement relating to theauction:- Name of the vend (1) B.C.Bazar, Ambala Cantt (2)R.A.Bazar, Ambala Cantt. Certified that the announcement relating to the auction ofCountry Liquor vend for the year 1984-85 in Ambala Districthave been read over to us before thecommencement ofauction today the 16[th] March, 1984. On the same certificate, Sh. Baldev Singh as one of thesuccessful bidder (duly signed by Sh. Baldev Singh), it hasbeen certified that-I/we do hereby undertake to license feeof Rs.10,25,000/- (in words) (Ten Lacs Twenty FiveThousand only) fixed for the Auction on 16.03.1984 for theC.L. Liquor Vend B.C. Bazar & R.A. BazarAmbala Cantt forthe year 1984-85 in accordance with the announcementmade at the time of auction. iii) Certificate regarding announcement relating to theauction:- Name of the vend (1) B.C.Bazar, Ambala Cantt (2)R.A.Bazar, Ambala Cantt. Certified that the announcement relating to the auction ofCountry Liquor vend for the year 1984-85 in Ambala Districthave been read over to us before thecommencement ofauction today the 16[th] March, 1984. Sd/-(Baldev Singh) Signature of the successful bidder Sd/- (Harjit Singh)F.Y. 1985-86 As discussed above, for the F.Y. 1985-86 also Sh. BaldevSingh has been declared as one of the successful bidderalong with others and the relevant papers have beensigned by him before the Excise & Taxation Departmentauthorities at the time of auction and allotment of vends, inthe same manner and similar type of certificates. Keeping in view of all the facts, evidence in theshape of auction and allotment records supplied bythe Excise and Taxation Department, it is evidentthat Sh. Baldev Singh is partner in M/s BaldevSingh & Co., Liquor contractor, Ambala Cantt, H.OSamrala during the F.Y 1984-85 and 1985-86. Theobjection raised by the counsels of the assesseethat the assessee Sh. Baldev Singh neverparticipated in Excise proceedings is not accepted,in view of the concrete evidence in the shape ofrecord of auction and allotment of liquor vendsconducted by the Excise and Taxation Departmentin Ambala District during the F.Y. 1984-85 and1985-86 as discussed above. In view of thesefacts and evidences, it is held that Sh. BaldevSingh is a partner in M/s Baldev Singh & Co.,Liquor contractor, Ambala Cantt. H.O.Samraladuring the F.Y. 1984-85 & 1985-86." The Commissioner of Income Tax (A), examined the matter in its entirety and held that the Assessing Officer was justified inplacing reliance upon the record of the auction of liquor vends, the status of Baldev Singh as a partner of M/s Baldev Singh and Co..The ITAT also examined the entire record, considered thesubmissions made by the appellant and after recording that evencounsel for the assessee has conceded that documents requisitionedfrom the Excise and Taxation Department bear the signatures of theappellant went on to hold that the assessee's plea that he hadmerely lent his name to obtain the license, cannot be accepted asthe assessee himself acted as a contractor, signed all relevantpapers before the Excise Department, took a contract and, therefore,has to be held liable as a partner. The ITAT, the CIT(A) and theAssessing Officer, in our considered opinion, have rightly placedreliance upon this unrebutted documents to record findings of factthat Baldev Singh was a partner of Baldev Singh & Co. A finding offact can only be set aside if it is perverse or arbitrary, is contrary tolaw or has been recorded by ignoring relevant evidence. A perusalof the impugned orders and the material on record does notpersuade us to hold that the findings that Baldev Singh is a partnerare in any manner, perverse or arbitrary, contrary to record or inviolation of any legal principle. We are conscious of the fact that in the liquor trade vendsare taken on benami names but in the absence of any evidence thatBaldev Singh was a mere employee, whose name was used or anyevidence that Baldev Singh was an employee of Pritam Singh,cannot discard the record pertaining to auction of liquor vendsparticularly as it is signed by Baldev Singh. Baldev Singh's primaryNARESH KUMARplea is that he was an employee of Pritam Singh or that Pritam Singh2015.02.16 12:06I attest to the accuracy andauthenticity of this documentChandigarh misused the former's name. The plea, however, remainsunsubstantiated by reference to any relevant record. The onus toprove his status as an employee lay upon Baldev Singh, to rebutt thepresumption that arises against him from his signatures appearing onall relevant documents pertaining to the allotment of vends. Apartfrom his bald statement that he was a mere employee or theassertion that he lent his name to Pritam Singh, there is no evidenceto support these assertions. The absence of a partnership deedrecording the appellant as a partner, is irrelevant, as the firm bearsBaldev Singh's name and is based in Samrala. Baldev Singh is aresident of Samrala. All relevant documents pertaining to the auctionof liquor vends are signed by the appellant. Baldev Singh has,admittedly, participated in the auction, was allotted liquor vends, hassigned all relevant documents and does not deny that he participatedin the business, though, allegedly as an employee. The onus toprove this fact having not been discharged, we cannot speculatemerely on the basis of malpractices is the liquor business to accepthis submissions. The fact that Pritam Singh may not have beencalled as a witness or examined or did not make this allegation in hisinitial statement, is also irrelevant as Baldev Singh has admitted hissignatures on all relevant documents executed at the time ofallotment of the vends and has failed to adduce evidence in supportof his plea that he was a mere employee and also renders irrelevantthe principle that statement of one cannot be read against another toprove a partnership. earlier order passed by the CIT(A) which was reversed by the ITAT,by remanding the matter to the Assessing Officer. Baldev Singhaccepted this order, participated in proceedings before the AssessingOfficer and filed a response to queries raised after the record of theExcise and Taxation Department after was summoned and, therefore,cannot turn the clock back by challenging this order. It would also beappropriate to point out that the earlier order passed by the CIT(A)was set aside as relevant record pertaining to liquor vends had notbeen requisitioned. The Assessing Officer requisitioned the recordof the Excise Department and upon finding that all relevantdocuments were signed by Baldev Singh, held that Baldev Singh wasa partner of Baldev Singh & Co. The first five questions are,therefore, answered against the appellant. The other two questions are general in nature and asinference drawn against Baldev Singh is based upon recordrequisitioned record from the Excise and Taxation Department, theITAT was fully justified in holding that Baldev Singh was a partner ofBaldev Singh & co.. The finding of fact does not suffer from any legalflaw. The questions of law, in our considered opinion, are merequestions of fact, The appeals are consequently dismissed with noorder as to costs. (RAJIVE BHALLA) JUDGE 30[th] January, 2015 nt (AMIT RAWAL) JUDGE