Sh. Shiv Charan Soni v. The Commissioner Of Income Tax, Central Revenue Building, Cad Circle, Rawatbhata Road, Kota

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 190 / 2008 Sh. Shiv Charan Soni S/o Sh. Laxmichand Soni aged….years approx. by caste Soni, Village Kasba Thana, Tehsil Sahbad, Distt. Baran. ----Appellant Versus 1. The Commissioner of Income Tax, Central Revenue Building, CAD Circle, Rawatbhata Road, Kota. 2. The Assistant Commissioner of Income Tax, Circle-2, Razad Building, CAD Circle, Rawatbhata, Road, Kota. ----Respondent _____________________________________________________For Appellant(s) : Mr. Naresh Gupta For Respondent(s) : Mrs. Parinitoo Jain with Ms. Shiva Goyal _____________________________________________________ HON'BLE MR. JUSTICE K.S.JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS Judgment 14/09/2017 1. By way of this appeal, the appellant has assailed thejudgment and order of the tribunal whereby tribunal has partlyallowed the appeal of the assessee and dismissed the appeal ofthe department. 2.This court while admitting the appeal on 21.10.2008 framedfollowing substantial question of law:- “(i) Whether the learned ITAT in upholdingthe addition u/s 69 & 69A of the Act solelyon the basis of the retracted contents ofthe FIR lodged regarding theft of silver &gold ornaments and cash amounting toRs.11,00,000/- despite the fact that thelearned AO has not brought any evidenceto establish the existence of such stolenthings? (ii) Whether the alternative claim of lossarising out of theft of silver & goldornaments along with cash was anallowable deduction u/s 70(1) of the Actmore so in the facts and in thecircumstances where such stolen valuables& cash have been assessed and added tothe appellant’s total income u/s 69 & 69Aof the Act assuming the value of the sameto have been earned or invested duringyear under consideration? (iii) Whether the finding of the learnedITAT was perverse in sustaining theadditionofRs.3,39,420/-withoutconsidering the uncontroverted affidavits ofthe two independent witnesses presentduring police enquiry who havecategorically denied about the existence ofthe valuables including cash at spot asalleged in police report on the basis ofwhich the addition has been made? 3.The facts of the case as narrated by the assessee in theAppeal memo while setting out the ‘Statement of Facts’ and asnoted by the AO in the body of the assessment order are that theassessee has been engaged in the business of silversmith and alsohaving agricultural income at Village Kasbathana. A Return ofIncome declaring a loss of Rs.9,45,821/- was filed on 27.1.03which was subsequently revised on 21.8.03 reducing to the loss ofRs.1,34,550/-. The reason for revising the return were stated tobe that the statement given by the assessee before DDIT, Kota on18.8.2000. The case was selected for scrutiny by issue of noticeu/s 143(2) and the compliances of which were made byappearance of Sh. Vinod S. Gupta, C.A. & ld. AR from time totime. For the business of manufacturing (Gharai) of silverornaments, no books of accounts were stated to have beenmaintained. 3.1 The AO required the assessee to substantiate the loss bydocumentary evidence as also the agricultural income declaredand the assessee in reply stated that since no books of accountswere maintained, as also no bank account for the purpose ofgharai as also for the agricultural income, the same has beenshown on purely estimate basis. In support of the loss, however,copies of FIR and FR from the Police Deptt. Were filed andexplained that the said loss was on account of theft of valuables,cash etc. 4.Counsel for the appellant has contended that the AssessingOfficer committed serious error in assessing the income only onthe basis of FIR and statement of two witnesses recorded duringthe trial. 4.1He further contended that the CIT(A) has rightly allowed theappeal of the assessee observing as under:- 4.Counsel for the appellant has contended that the AssessingOfficer committed serious error in assessing the income only onthe basis of FIR and statement of two witnesses recorded duringthe trial. 4.1He further contended that the CIT(A) has rightly allowed theappeal of the assessee observing as under:- “I have given the careful thought to therival contentions. I find that the additionhas been made by the AO of Rs.8,50,000/-u/s 69 of the Act, on account ofunexplained investment in the jewellerywhich was stated to have been stolen fromhis residential house. Likewise, he made theaddition of Rs.2,50,000/- u/s 69A of the Acton account of unexplained cash which tooyears stlen by the thieves. The aboveaddition has been made by the AO on thebasis of the FIR lodged with the Policewherein the stolen goods were mentionedto be worth Rs.11 lakh, the detail of whichwere found noted in the FIR, a photocopy ofwhich is available on record and in theopening sentence it has been mentionedthat in the hight of 10/05/2000 the thieveshave broke open the house and have stolenapproximately valuables worth Rs.11 to 12lakhs. The details of valuable stolen werealso mentioned therein, the approximate value thereof was worked out at Rs.11 lakh.The DDIT (Inv.) summoned the appellantu/s 131(1A) of the Act and a statement wasrecorded under that Section on 18.8.2000,in which also a question was asked, beingQ.No.8 and in reply thereto the appellanthas stated that value of stolen goods wasaround Rs.7 to Rs.8 lakhs and in reply toQ.No.9 wherein a clarification was soughtfor, about the different between the value ofvaluables stolen given in FIR and so statedin the statement and in reply the appellantclarified that infact the stolen goods wereRs. 7 to 8 lakh only, and what wasmentioned in the FIR were “exaggerated”because of disturbed mental state at thattime. However in reply to Q.No.14 theappellant declared Rs.5 lakh out ofundisclosed income and surrendered thesame for taxation in A.Y. 2001-02. Since admittedly the appellant does notmaintain the regular books of accounts forhis business of manufacturing (Gharai) ofsilver articles/ornaments, adhoc accountswere prepared and filed with the return ofincome for A.Y. 2001-02, in which loss onaccount of theft of gold jewellery wasclaimed at Rs.2,94,400/- (on weighmentbasis), loss on account of silver jewellerywas claimed at Rs.2,93,453/- (onweighment basis). In addition to that, losson account of theft of silver coin was alsoclaimed to the tune of Rs.1,35,754/- andcash of Rs.2,50,000/- is also claimed to bestolen and the total loss on account ofabove valuables has been claimed atRs.9,45,821/-. However, the above return was revised byclaiming the net loss on account of theft ofvaluables of Rs.6,34,550/- and surrenderedthe amount of Rs.5 lakh as income as perdeclaration made before DDIT and claimedthe net loss of Rs.1,34,550/-. But the AOdid not accept the revised return so filed bythe appellant, and made the additions onthe basis of the facts and figures given inFIR, and in doing so the AO has invokedSec. 69 & 69A of I.T. Act, 1961. As per this Report all these valuables andcash were not taken by the thieves andthey have left these items on the spot ofsuch theft. Sheet No.3 mentions the However, the above return was revised byclaiming the net loss on account of theft ofvaluables of Rs.6,34,550/- and surrenderedthe amount of Rs.5 lakh as income as perdeclaration made before DDIT and claimedthe net loss of Rs.1,34,550/-. But the AOdid not accept the revised return so filed bythe appellant, and made the additions onthe basis of the facts and figures given inFIR, and in doing so the AO has invokedSec. 69 & 69A of I.T. Act, 1961. As per this Report all these valuables andcash were not taken by the thieves andthey have left these items on the spot ofsuch theft. Sheet No.3 mentions the location of the house of the appellant andpossible escape route of the thieves as alsothe modus operandi of breaking open thewall of the house. The last sheet beingsheet no.4 mentions the fact that theReport alongwith the map on the spotenquiry was prepared which has been ReadOver & Accepted as Correct (RO &AC) (inHindi language). But surprisingly it does notbear the signature of these two witnesses,and subsequent writing was in absetina ofthese two witnesses and, therefore, notadmissible as evidence for the purpose ofassessment. Moreover, the concerned twowitnesses during course of appellateproceedings have appeared at the instanceof the appellant on 11.02.2005, and haveconfirmed the contents of the affidavits filedwith the AO, but were not considered, sinceassessment order was passed prior to dateof submission of such affidavits. In the saidaffidavits both the witnesses have statedthat there were no ornaments sprawling inthe room, and also there was no such lyingin the cash box. Therefore the additionmade by the AO on the basis ofpresumptions relying upon so calledInvestigation Report of the police, andwithout confronting the witnesses is legallynot in order. Thus there is no merit in what has beenobserved by the AO in the order whilemaking the addition of Rs.3,09,420/-. Even otherwise, for the legal positionbrought out while deciding ground No.3 & 4on the applicability of Sec.69 & 69A of theAct, this addition is not exigible for want ofmaintenance of books of accounts for anysource of income by the appellant.Therefore, the addition made ofRs.3,09,420/- which is found devoid of anymerit, both on facts as well as on law, alsostands deleted and appellate gets a furtherrelief to that extent while allowing thisground of appeal.” 5.Taking into consideration he contended that tribunal hascommitted serious error in dismissing the appeal, reversing findingarrived by CIT(A) holding as under:- “We have perused the facts of the case. Onthe basis of the investigation report of thePolice, the assessee was having the silverornaments and cash in total amounting toRs.3,39,420/- i.e. silver ornaments atRs.3,09,420/- and cash at Rs.30,000/-.There is no dispute that the assessee wasnot having the silver ornaments amountingto Rs.3,09,420/-. The assessee did notmake any cogent explanation to thesources of the said silver ornaments andcash before the authorities below or evenbefore us. The deletion of the addition bythe ld. CIT(A) that the sheet of theinvestigating report of the police does notbear the signature of the witnessess willnot change the facts of the case. Theassessee was having in his possessionornaments amount to Rs.3,09,420 andcash amounting to Rs.30,000/- for whichno satisfactory explanation was offeredbefore the authorities below or even beforeus and therefore, the deletion by theld.CIT(A) is without any basis and theorder of the ld. CIT(A) is reversed and theorder of the AO is upheld. Thus GroundNo.4 of the Revenue is allowed. We have heard the parties. The brief factsof the case as mentioned hereinbefore,there was a theft at the residentialpremises of the assessee on 10.5.2000where gold and silver ornaments and cashwas stolen by the thieves. The DDIT (Inv.)Kota for enquiring about the source ofacquisition recorded the statement of theassessee on 18.8.2000. On the basis of thesaid information, the AO recorded reasonswhere the assessee surrendered a sum ofRs.5.00 lacs for taxation for the A.Y. 2000-01 in his statement dt. 18.8.2000 and asno return has been furnished by theassessee, the surrendered amount ofRs.5.00 lacs and the annual income ofRs.30,000/- as per the documentsavailable to the department the income ofthe assessee represents undisclosedincome and he has reason to believe thatRs.5.30 lacs has escaped assessment andaccordingly notice u/s 148 was issued. TheAO after considering the submissions of theassessee made an addition of Rs.7.20 lacson protective basis and estimated thebusiness income at Rs.70,000/-. The ld. CIT(A)quashed the very initiation of noticeu/s 14/8 and treated the assessment u/s147 of the Act as null and void for thereasons mentioned in his order.” 6.Counsel for the appellant has taken us to the FIR producedalongwith paper book on page no.94 which reads as under:- “lsok esa Jheku~ FkkukizHkkjh egksn; iqfyl LVs’ku dLCkk Fkkukfo"k; esjs ?kj esa vkKkr cnek’k }kjk ihNs dh nhokj rksMdj pksjhds ØeA ekU;oj] mi;qDr fuosnu gS fd vkt jkf= ds yxHkx ,dcts ds ckn esjs ?kj esa dqN vKkr cnek’k esjs ?kj dks ihNs dhfnokj [kqydj tsojkr dh pksjh dj ys x;s ;s tojkr dqN vkMZjds Fks dqN esjs fuft FksA eksds ij jde j[kus dh fMfc;ksa IykfLVdds jde j[kus ds ckDl o lcy ftls nhokj [kqyh ogha Hkh iMkgqvk gSA firkth ?kj ij ekstwn Ik ugha tsojkr o uxnh dh lqphfirkth ds vkus ij is’k dj nh tk;sxhA mfpr dk;Zokgh gsrqfjiksVZ Ñ".kdqekj lksuh s/o f’kopj.k lksuh vk;q 25 o"kZ fuoklhdLck Fkkuk fnukad 10/5/2000.” 7.He further placed reliance on the statement which was made on page no.96-97 which reads as under:- lsok esa]Jheku Fkkukf/kdkjh egksn;] iqfyl LVs’ku dLck Fkkukfo"k;%& pkjh dh fjiksVZ ntZ djus ckcr~ ekU;oj] fuosnu gS fd izkFkhZ dh vkt jkf= dks edku esa lsa/k yxkdj pkjhgks xbZ gS ftlesa izkFkhZ dh jde pkjh pyh xbZ gSA bldk C;kSjk fUkEukuqlkj gSA VwVh QwVh pkanh 5 1@2 Kgdynkj pkanh flDdk200out yxHkx 8 dheru 6000 dh cjkenxh djkus dh Ñik djsaA vfr n;k gksxhA ,l0Mh0@& izkFkhZ] f’kopj.k lksuh S/o y[keh pan lksuh dLck Fkkuk mDr fjiksVZ rgjhjh Jh f’kopj.k S/o y{eh pan dkSe lqukjAge o"kZ R/o dLck Fkkuk is’kk lksuk pkanh dk dk;Z djuk usmifLFkr gksdj is’k dh mijksDr lEcU/k esa eq0 uEcj 26@2000/kkjk 457 ] 280 Fkkuk gktk ij ntZ gqvk gSA lkeku dh lwph'kkfey i=koyh dh xbZA ,l0Mh0 f’kopj.k ,l0Mh0 SHO 10.05.2000 Jheku Fkkukf/kdkjh egksn;]iqfyl LVs’ku dLck Fkkukftyk ckajk ¼jkt0½fo"k;%& pkjh dh okLrfod fjiksVZ ntZ djus ckcr~ekU;oj]fuosnu gS fd izkFkhZ dh fn- 10-05-200 jkf= esa edku esa lsa/kyxkdj 11&12 ykbo ds djhc pkjh gks pqdh gS ftldh vkt rdfjiksVZ ntZ ugha gSA vr,o okLrfod fjiksVZ btZ djus dh Ñik djsaA pkjh dk C;kSjk fuEukuqlkj gS sslku dh1- dj/kuh125 g2- dj/kuh 135 g3- gkj] gFkdMh] nLrs 150 g4- dj/kuh o pwMh lsV 200 g5- gkj 1] pwMhlSV 1150g760 g dheru 3]50]000@&Pkkanh dh 1- ik;ysa5 k2- [kaxokjh5k3- dfM;ka5k4- VwVh QwVh pkanh30k5- flDdk 200023Kg68Kg5,00,000/-&blds lkFk gh djhc uxnh :i;s2]50]000@11]00]000@& bl rjg yxHkx 11&12 yk[k dh pksjh dh fjiksVZ ntZ dj tkap dk;Z izkjEHk djsaA vU;Fkk izkFkhZ ,oa mldk ifjokjvkRenkg djsxk ftldh ftEesnkjh iz’kklu dh gksxhA thounku dh vk’kk esaA izkFkhZ] ,l0Mh@& f’kopj.k f’kopj.k S/o y[keh pan lksuh dLck Fkkuk 8. He also taken us to statement recorded on 18.8.2000especially question no.11 which reads as under:- “iz’u 11 D;k mDr pksjh x;k leku recovery gks x;k gS ovkidks fey x;k gS\ mRrj ;g pksjh [kqy xbZ gS vkSj lkjk lkeku Fkkuk dLCkk esafey x;k gS tks vHkh Fkkuk dLck Fkkuk esa gh j[kk gqvk gSaA” 9.He also pointed out the two affidavits filed by the witnesses. bl rjg yxHkx 11&12 yk[k dh pksjh dh fjiksVZ ntZ dj tkap dk;Z izkjEHk djsaA vU;Fkk izkFkhZ ,oa mldk ifjokjvkRenkg djsxk ftldh ftEesnkjh iz’kklu dh gksxhA thounku dh vk’kk esaA izkFkhZ] ,l0Mh@& f’kopj.k f’kopj.k S/o y[keh pan lksuh dLck Fkkuk 8. He also taken us to statement recorded on 18.8.2000especially question no.11 which reads as under:- “iz’u 11 D;k mDr pksjh x;k leku recovery gks x;k gS ovkidks fey x;k gS\ mRrj ;g pksjh [kqy xbZ gS vkSj lkjk lkeku Fkkuk dLCkk esafey x;k gS tks vHkh Fkkuk dLck Fkkuk esa gh j[kk gqvk gSaA” 9.He also pointed out the two affidavits filed by the witnesses. 10.Counsel for the appellant has also relied on Section 24 & 25of the Evidence Act, 1872 which reads as under:- “24. Confession caused by inducement,threat or promise, when irrelevant in criminalproceeding.—A confession made by anaccused person is irrelevant in a criminalproceeding, if the making of the confessionappears to the Court to have been caused byany inducement, threat or promise,1 havingreference to the charge against the accusedperson, proceeding from a person inauthority and sufficient, in the opinion of theCourt, to give the accused person grounds,which would appear to him reasonable, forsupposing that by making it he would gainany advantage or avoid any evil of atemporal nature in reference to theproceedings against him.—A confession madeby an accused person is irrelevant in acriminal proceeding, if the making of theconfession appears to the Court to have beencaused by any inducement, threat orpromise, having reference to the chargeagainst the accused person, proceeding froma person in authority and sufficient, in theopinion of the Court, to give the accusedperson grounds, which would appear to himreasonable, for supposing that by making ithe would gain any advantage or avoid anyevil of a temporal nature in reference to theproceedings against him." 25. Confession to police officer not to beproved.—No confession made to a policeofficer, shall be proved as against a personaccused of any offence. 11.He also drew our attention to Section 162(2) of the Cr.P.C.and Article 20(1) of the Constitution of India which reads as under:- 162. Statements to police not to be signed:Use of statements in evidence. (1)…………………. (2)Nothing in this section shall be deemed toapply to any statement falling within theprovisions of clause (1) of section 32 of theIndian Evidence Act, 1872 (1 of 1872 ), or toaffect the provisions of section 27 of that Act. 20. Protection in respect of conviction for offences-. (1) No person shall be convicted of anyoffence except for violation of the law in forceat the time of the commission of the actcharged as an offence, nor be subjected to apenalty greater than that which might havebeen inflicted under the law in force at thetime of the commission of the offence. 12.He also relied upon the judgment of this court in Commissioner of Income Tax vs. Hiranand (2005) 272 ITR 626wherein it has been held as under:- “We have given our thoughtful and anxiousconsideration to the rival contentions raised bythe learned counsel for the parties. It is undisputed fact that ITO, D Ward, Ajmer,while making the assessment of the income ofthe assessee for the asst. yr. 1979-80 addedthe value of seized gold of Rs. 1,32,500 andtreated it to be income from other sourcesunder Section 69of the Act, 1961. It wastaken to be the income from other sources onaccount of unexplained investment, notrecorded in the books of accounts of assessee.The learned Tribunal has recorded a finding offact that from various documents of thecustoms authorities it is established that theassessee was carrying on illegal business of smuggling of the gold. The gold wasconfiscated from him. “We have given our thoughtful and anxiousconsideration to the rival contentions raised bythe learned counsel for the parties. It is undisputed fact that ITO, D Ward, Ajmer,while making the assessment of the income ofthe assessee for the asst. yr. 1979-80 addedthe value of seized gold of Rs. 1,32,500 andtreated it to be income from other sourcesunder Section 69of the Act, 1961. It wastaken to be the income from other sources onaccount of unexplained investment, notrecorded in the books of accounts of assessee.The learned Tribunal has recorded a finding offact that from various documents of thecustoms authorities it is established that theassessee was carrying on illegal business of smuggling of the gold. The gold wasconfiscated from him. The Revenue added the value of the seizedgold of Rs. 1,32,500 as income of theassessee under Section69of the Act, 1961 onaccount of unexplained investment for thepurpose of charging tax but when the questionconies for the claim made by the assessee ofloss suffered in a business i.e., on account ofconfiscation of the gold the defence has beentaken that the smuggling was not the businessof the assessee. This approach of theDepartment, leaving apart that it is settledposition of law on the point by their Lordshipsof the Hon'ble Supreme Court in CIT v. PiaraSingh's case (supra), is unfair, unreasonable,unnatural and uncalled for. It is difficult toappreciate what to say to accept this approachof the Revenue Officers only to concern withthe augmenting of the revenue by all meansand seldom to bother the rightful claims madeof the deduction from the gross income as aresult of the business loss. The ITOs are firstalso the citizens of the country. They areequally concerned to see and look into thatwhatever legally permissible deductionsavailable are to be given to the assessee. Thisone-side approach of the Revenue officers ofthe IT Department only concerns with theRevenue and not to bother for the assessee'slegal rights, rightful deductions and otherclaims, is not befitting to their position. Theyare the officers of the welfare State and haveduty and obligation to see that assessees arebeing given their legal rightful and legitimateclaims of deductions and other benefits.Whatever may be reason or ground it is notunknown that the assessees have fear and areafraid of entering in the IT Department. The facts of this case speak how one-sidedapproach was there of the assessing authorityand the CIT(A), Rajasthan-I, Jaipur, in thematter. In the case of Vishnu Kumar Soni v.CIT (supra), (Court) held that the Tribunalfound that the assessee was in possession ofgold bars which were seized and confiscatedby the customs authorities and that was thebasis for observation of the Tribunal that itwas not and improbable for the assessee tohave indulged in the activities of dealing insmuggling gold. The Tribunal has alsoaccepted the decision of the customsdepartment that the assessee was caught in the process of smuggling. Therefore,confiscation of the gold was a loss incurred inthe course of business and the Tribunal wasnot right in not allowing Rs. 40,000 loss in thebusiness.” the process of smuggling. Therefore,confiscation of the gold was a loss incurred inthe course of business and the Tribunal wasnot right in not allowing Rs. 40,000 loss in thebusiness.” We find from the statement of case that theTribunal accepted that the Central ExciseDepartment, Jaipur, on 24th of Jan., 1979,seized the gold weighing 1,479 gms. valued atRs. 1,32,500 from the assessee. A finding offact has also been recorded that the said goldwas confiscated by the authorities. Theassessee has admitted before the Centralexcise authorities that he had carried the goldthough on behalf of other persons. It is truethat before the Central Excise Department theplea of the assessee was that the gold neverbelonged to him and the customs authoritieshad forcibly recorded his statement and got itsigned by him. The learned Tribunal hasaccepted as a fact that the assessee wasunder MISA and sentence was confirmed bythis Court as well. On this fact the learnedTribunal held that the ITO has treated Rs.1,32,500 as income of the assessee fromundisclosed sources. Before the ITO theassessee did claim deduction of amount asbusiness loss by placing reliance on thejudgment of the Hon'ble Supreme Court in CITv. Piara Singh's case (supra). The claim wasrejected on the ground that assessee neveradmitted of having carried on any smugglingbusiness activities. The Revenue cannot beheard to say that it will bring the loss to tax. Itcan only tax profits of a trade or business andthat cannot be done without deducting thelosses and the legitimate expenses of thebusiness. The finding of fact recorded by theTribunal is that the entire facts of the case goto show that the assessee had been carryingon illegal business of smuggling. Theconsequences of this finding recorded areinevitable. The confiscation of the gold of theassessee is a loss therefrom which has to bededucted from the amount included asunexplained investment. As a result of theaforesaid discussion all the three questionsreferred to the Court for its opinion arereturned answered against the Revenue and infavour of the assessee. There shall be no orderas to costs.” 13.Counsel for the respondent contended that tribunal hastaken into consideration the evidence on record and the viewtaken by the tribunal is just and proper. It is contended that thegoods which was stolen was recovered by the police in view of theprovision of Sec. 452 Cr.P.C. from the appellant and mudamalwhich was recovered by the police against alleged theft. 13.1 Taking into consideration merely because he has not beentaken into custody, the mudamal was recovered by police bygiving advantage of the Section 70, he has proved that he has notbeen taken into custody by police. In that view of the matter,unless he has proved that he has not been taken into custody thebenefit cannot be granted. 13.2 The other contention of the counsel for the appellant is thathe should be given benefit in the year in which he has been takeninto custody, since, he has not come with bona fide, therefore, inour considered opinion, the tribunal has not committed any erroron facts and the judgment cited by him will not apply in view ofthe fact that the appellant has not come before the authority withclean hands. 14.In that view of the matter, the issue is required to beanswered in favour of the department and against the assessee. 15.The appeal stands dismissed. (VIJAY KUMAR VYAS)J. (K.S.JHAVERI)J. Brijesh 86.