M/S United Agencies v. Assistant Commissioner Of Income Tax

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 197 of 2011 (O&M)Date of Decision: 14.7.2011 M/s United Agencies Versus Assistant Commissioner of Income Tax ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL,ACTING CHIEF JUSTICE. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Sandeep Goyal, Advocate for the appellant.. AJAY KUMAR MITTAL, J. 1.This order shall dispose of ITA Nos. 196 and 197 of 2011.For brevity, the facts are being taken from ITA No. 197 of 2011. 2.This appeal has been preferred by the assessee underSection 260A of the Income Tax Act, 1961 (in short “the Act”) againstthe order dated 30.4.2009 passed by the Income Tax AppellateTribunal, Delhi Bench 'I', New Delhi (hereinafter referred to as “theTribunal”) in ITA No. 39/Del/2005, relating to the assessment year1988-89, claiming the following substantial questions of law:- “(i)Whether on the facts and circumstances of the case, the Ld. Tribunal was justified in holding that even thepayments which had not been made as on the datepayments which had not been made as on the date of search would also be treated as unexplainedinvestment? (ii)Whether on the facts and circumstances of the case,the Ld. Tribunal was justified in holding that theadditions with regard to Rs.2,74,616/- was justifiedeven though corresponding entries were found in thedocuments recorded in the account books of theassessee? (iii)Whether on the facts and circumstances of the case,the Ld. Tribunal was justified in sustaining theaddition of a cumulative figure of alleged monthlyinstalment of liquor vend even though it has beennoted that the said vend would earn an income ofabout Rs.2,90,000/- per month, which would besufficient for meeting the liquor vend instalment?” 2.Put shortly, the facts necessary for adjudication as narratedin the appeal are that the assessment for the assessment year 1988-89was completed on 27.3.1991 at an income of Rs.68,01,146/-. Anaddition was made on account of a note book seized from the businesspremises of the assessee during search and seizure operation carriedon 30.10.1987. The Assessing Officer took cognizance of certainentries made in the said note book which related to bid amount for theliquor vend and made an addition of Rs.12,90,000/- on this account.Similarly, an addition of Rs.2,74,616/- was also made based on seizeddocuments. Feeling aggrieved, the assessee took the matter in appealbefore the Commissioner of Income Tax (Appeals) [in short the “CIT (A)”]. After various rounds of remand and re-assessment, the matterwas finally decided by the Assessing Officer on 20.3.2002 by makingcertain additions. On appeal, the CIT(A) vide order dated 10.11.2004deleted some of the additions. However, additions of Rs.12,90,000/-and Rs.2,74,616/- were kept intact. Feeling dissatisfied, the assesseeas well as the revenue filed appeals before the Tribunal. The Tribunalvide order dated 30.4.2009 partly allowed the appeal of the assesseeand dismissed the appeal filed by the revenue. The Tribunal upholdingaddition of Rs.2,74,616/- also recorded that the sum of Rs.10,00,000/-had to be reduced from addition of Rs.12,90,000/- on account ofinvestment towards initial capital and sustained addition ofRs.2,90,000/-. Hence, the present appeal by the assessee. 3.We have heard learned counsel for the assessee. 4.Learned counsel for the assessee had sought to challengethe additions sustained by the Tribunal amounting to Rs.2,74,616/- andRs.2,90,000/-. 5.The Tribunal while upholding the addition of Rs.2,74,616/-on account of unexplained capital introduced in different names, i.e.Ashok Jain-Rs.85,000/-; H.S. Madan-Rs.89,616/- and P.S. Oberoi-Rs.1,00,000/- had recorded as under:- 3.We have heard learned counsel for the assessee. 4.Learned counsel for the assessee had sought to challengethe additions sustained by the Tribunal amounting to Rs.2,74,616/- andRs.2,90,000/-. 5.The Tribunal while upholding the addition of Rs.2,74,616/-on account of unexplained capital introduced in different names, i.e.Ashok Jain-Rs.85,000/-; H.S. Madan-Rs.89,616/- and P.S. Oberoi-Rs.1,00,000/- had recorded as under:- “6.5. In the course of hearing before us, the learnedcounsel for the assessee has tried to reconcile thefigures shown in the seized document with thefigures recorded in the regular books by attemptingthat capital introduced by Smt. Vanita Jain, Smt.Satnam Kaur Madan and Smt. Satinder Oberoi are to be taken together and are to be consolidated, and ifso consolidated, there would be no differencebetween the figures mentioned in the seized paperand/the figures recorded in the books of account.This explanation of the assessee is not at all found tobe convincing. The seized documents are withregard to the capital introduced in cash by AshokJain, H.S. Madan and Shri P.S. Oberoi. In thepartnership deed, it is not mentioned that Ashok Jainand other partners are representing their respectivefamily, and any amount deposited by any of the othermember shall be consolidated while preparing thecapital account. The other family members of thethree partners are separate and independent legalentity. The assessee's explanation to consolidate allthe accounts is not acceptable, we hold that it is afutile attempt on the part of the assessee to get outfrom incriminating document found during the courseof search. In these facts and circumstances of thecase, we do not find any justification to delete theaddition of Rs.2,74,616/- made by the AssessingOfficer and further confirmed by the CIT(Appeals).Thus, this ground raised by the assessee is rejected.”6.The Tribunal on appreciation of material on record hadconcluded that the amount of Rs.2,74,616/- introduced as unexplainedcapital in the names of Ashok Jain, H.S. Madan and P.S. Oberoi was undisclosed income of the assessee. It was further recorded that nobenefit could be availed by the assessee by pleading that in fact it wascapital introduced by Smt. Vanita Jain, Smt. Satnam Kaur Madan andSmt. Satinder Oberoi which was contrary to the seized documents. Thesaid findings have not been shown to be perverse or illegal in anymanner. 7.Adverting to the addition of Rs.2,90,000/- the Tribunalobserved as under:- “5.10. After considering the totality of facts andcircumstances of the case and after hearing both theparties, we are in agreement with the authoritiesbelow that M/s Singh and Company and M/s HariSingh and Company are the benami business of theassessee, and the document found with theassessee is to be considered as belonging to theassessee and an income arising therefrom is to beassessed in the hands of the assessee firm. It iscommon that on papers these firms were created asa separate entity but in reality the said firms were thebenami business of the assessee. Therefore, merelybecause a licence issued by the department standsin the name of the aforesaid benami concerns wouldnot help the assessee that they are not benamidar ofthe assessee inasmuch as the control andmanagement and the documents belonging to theseconcerns were found with the assessee firm. Further, the CIT(Appeals) has appreciated theconstitution of these firms with that of assessee's firmand found that the documents relating to theaforesaid benami concerns were found in theassessee's premises. The assessee has not givenany satisfactory or cogent reason as to why thepapers relating to the business activities of theaforesaid firms were found with the assessee. Theaffidavit given by the assessee is not supported byany corroborative evidences and they are mere selfserving without explaining as to why the papers ordocuments belonging to the aforesaid firms werefound in the custody and control of the assessee firm.Therefore, the assessee's contention that the seizeddocument marked A-11 cannot be considered inassessee's hands is rejected. Now, the questionarises as to whether any addition on the basis of theaforesaid seized document A-11 can be made. Theextract of the document has already been set outabove. On perusal of it, it is seen that the bid amountin respect of shop at Old Railway Road No.1 wassettled at Rs.13,00,000/-. An advance amount ofRs.65,000/- and security amount of Rs.1,52,000/-were initially paid and thereafter the sum ofRs.10,83,000/- was paid in installments beginningfrom April to December, 1987 and then in January, 1988. It has been contended by the assessee thatthe sum of Rs.65,000/- being 5% advance was paidon 12.3.1987 and thus, it is beyond the financial year1987-88 relevant to the assessment year 1988-89and thus, it cannot be considered in the presentassessment year 1988-89. It was further submittedthat sum of Rs.1,52,000/- was also paid in March,1987. It was further contended by the learnedcounsel for the assessee that installments paid are tobe considered as expenses while determining profitfrom running shop at Old Railway Road No.1. Afterconsidering the facts and circumstances of the caseand hearing both the parties, we are of theconsidered opinion that in case the sum ofRs.65,000/- and Rs.1,52,000/- have actually beenpaid in the month of March, 1987, the same cannotbe added as undisclosed income of the assessee inthe present assessment year 1988-89. We,therefore, restore this aspect of the matter to the fileof the Assessing Officer to examine and verify thesame and decide the matter accordingly. 5.11 This leaves an amount of Rs.10,83,000/- nowto be considered by us. It is not in dispute that on thebasis of seized document, sum of Rs.10,83,000/- hasbeen paid towards bid money during the year underconsideration. No source thereof has been explained by the assessee. The first installment ofRs.1,18,500/- was paid in the month of April, 1987.The subsequent installments were paid in each andevery month. In order to run the business, theassessee would require initial capital, the source ofwhich has not been explained by the assessee. TheAssessing Officer has worked out the investment atRs.10,00,000/-. The Assessing Officer has alsoadded the sum of Rs.2,90,000/- as profit from thesaid activity. The installment of money has not beenmade at a single point of time but it has been madefrom month to month. Therefore, the profit earned bythe assessee from month to month would certainly beavailable to the assessee for the purpose of makingpayment of installment every month. The profit hasbeen estimated by the Assessing Officer atRs.2,90,000/- which, in our considered opinion, isconsidered to be reasonable and justified. However,the investment towards initial capital taken by theAssessing Officer at Rs.10,00,000/- is to be reducedby the aforesaid amount to Rs.2,90,000/- availablewith the assessee. We, therefore reduce the additionby Rs.10,00,000/- to Rs.2,90,000/-. In other words,the total addition made by the Assessing Officer ofRs.12,90,000/- shall be reduced to an amount ofRs.2,90,000/-, and further Rs.2,17,000/- (Rs.65,000/- + Rs. 1,52,000/-), if it is found that sum ofRs.2,17,000/- is actually paid in the month of March,1987, otherwise the addition of Rs.2,17,000/- shall beadded in the present year under consideration. TheAssessing Officer shall modify the assessment orderaccordingly.” 8.The Tribunal noticed that M/s Singh and Company and M/sHari Singh and Company were benami concerns of the assessee andincome arising in their hands had to be assessed as belonging to theassessee. The profit of Rs.2,90,000/- estimated by the AssessingOfficer was considered to be reasonable and justified. The finding ofthe Tribunal could not be held to be perverse in the absence of anyground made out by the learned counsel for the assessee. 9.No substantial question of law, thus, arises in this appealwhich may require any adjudication by this Court. 10.It may be noticed that ITA No. 196 of 2011 has been filedchallenging the order of the Tribunal whereby application for rectificationof order dated 30.4.2009 was dismissed by the Tribunal. Since theorder dated 30.4.2009 is found to be in conformity with law and no errorapparent on the face of the record was found which may warrantinterference in the impugned order, this Court is of the opinion that theTribunal had rightly rejected the rectification application. Learnedcounsel was unable to substantiate his plea that an error had occurredin the order dated 30.4.2009 passed by the Tribunal which required tobe rectified. 11.Learned counsel for the appellant having failed to show that the findings recorded by the Tribunal in both the appeals are perversein any manner giving rise to any substantial question of law to beconsidered by this Court. We find no merit in these appeals and thesame are hereby dismissed. 12.Both the appeals are time barred and respectiveapplications for condonation of delay have been filed along with theappeals. Since the appeals have been dismissed on merits, no furtherorders are required to be passed in the said applications and the sameare disposed of as such. (AJAY KUMAR MITTAL) JUDGE July 14, 2011gbs (ADARSH KUMAR GOEL)ACTING CHIEF JUSTICE IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 196 of 2011 (O&M) Date of Decision: 14.7.2011 M/s United Agencies ....Appellant. Versus Assistant Commissioner of Income Tax, Gurgaon Circle, Gurgaon...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL,ACTING CHIEF JUSTICE. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Sandeep Goyal, Advocate for the appellant. AJAY KUMAR MITTAL, J. For orders, see ITA No. 197 of 2011 (M/s UnitedAgencies v. Assistant Commissioner of Income Tax). (AJAY KUMAR MITTAL) JUDGE (ADARSH KUMAR GOEL) ACTING CHIEF JUSTICE