Tasadduq Hussain Bohra v. Additional Commissioner Income Tax Central-2, Udaipur

HIGH COURT OF JUDICATURE FOR RAJASTHAN ATJODHPUR D.B. Income Tax Appeal No. 27 / 2008 Tasadduq Hussain Bohra S/o Late Shri Abbas Ali Bohra, aged 51years, Resident of Ward No.12, Opposite Patel Stadium, FatehNagar, Udaipur. ----Appellant Versus Additional Commissioner Income Tax Central-2, Udaipur. ----Respondent _____________________________________________________ For Appellant : Mr.Sharad KothariFor Respondent : Mr.K.K.Bissa _____________________________________________________ HON'BLE MR. JUSTICE SANGEET LODHA HON'BLE MR. JUSTICE RAMCHANDRA SINGH JHALAJudgment 30th October, 2017 BY THE COURT (Per Hon’ble Mr.Sangeet Lodha,J.) 1.This appeal preferred by the petitioner assessee underSection 260A of the Income Tax Act, 1961 (for short ‘the Act of1961’) arises out of order dated 19.1.07 passed by the IncomeTax Appellate Tribunal (ITAT), Jodhpur Bench, Jodhpur in appealsITA No.40/JDPR/2006 and ITA No.43/JDPR/2006, for the blockperiod comprising of Assessment Years 1997-98 to 2002-03. 2.The relevant facts are that the search was carried out atresidential and business premises of the assessee on 23.10.02 inwhich various incriminating documents were found, which interalia indicated investment made by the assessee towards purchaseof various assets, the total whereof was worked out by the assessee himself at Rs.12,87,794/-. The assessee admitted thedetails of investment made as representing his undisclosed incomeduring the block period. The assessee claimed an amount ofRs.10,56,991/- as set off against the above undisclosed incomebeing realisation from debtors falling outside block period. TheAssessing Officer (“A.O.”) rejected the claim observing that thesedebtors never suffered any taxation and the claim of set off in theform of income of Rs.10,56,991/- earned prior to block period isnot admissible because the same was never disclosed in I.T.Returns nor suffered taxation. That apart, an addition ofRs.75,000/- in the Assessment Year 1997-98 was made by theAssessing Officer on account of unaccounted lending ofRs.75,000/- to Shri D.P.Agarwal and Rs.11,250/- interest thereon,which was not included in the undisclosed income by the assessee,while rejecting his contention that the promissory note was signedon the first day of block period in lieu of renewal of old advancesmade by the assessee’s father who had expired on 9.2.95. 3.Aggrieved by the additions made by the Assessing Officer asaforesaid, the assessee preferred an appeal before Commissionerof Income Tax (Appeals) [CIT(Appeals)], Jaipur. The AppellateAuthority observed that if there are sundry debtors, there shouldbe sundry creditors also and accordingly, making reasonableestimation of unexplained sundry creditors prior to 1.4.97 keepingin view the disclosure made by the assessee as aforesaid treated25% of sundry debtors covered by the unexplained sundrycreditors prior to block period and treated balance 75% i.e.Rs.7,92,743/- as outstanding sundry debtors prior to 1.4.97 and accordingly, given the credit of Rs.7,92,743/- to the assessee fromthe undisclosed income of Rs.10,56,991/-. The addition made bythe A.O. on account of unaccounted lending of Rs.75,000/- to ShriD.P.Agarwal and Rs.11,250/- interest thereon was upheld by theCIT (Appeals). Other additions made and relief given are notreferred to inasmuch as, no controversy is raised in respectthereof in the present appeal. accordingly, given the credit of Rs.7,92,743/- to the assessee fromthe undisclosed income of Rs.10,56,991/-. The addition made bythe A.O. on account of unaccounted lending of Rs.75,000/- to ShriD.P.Agarwal and Rs.11,250/- interest thereon was upheld by theCIT (Appeals). Other additions made and relief given are notreferred to inasmuch as, no controversy is raised in respectthereof in the present appeal. 4.Aggrieved by the order passed by the CIT (Appeals) asaforesaid, the Revenue as also the assessee preferred appealsbefore the ITAT. The ITAT arrived at the finding that the calculationmade by the CIT (Appeals) has no logic and opined that the ratioof unexplained debtors and creditors as at the beginning of theblock period can be better determined by the ratio of discloseddebtors and creditors as per the books of account as on 31.3.96being the beginning of the block period and accordingly, whilesetting aside the order passed by the A.O. in this regard,remanded the matter with the directions to A.O. to determine theamount available at the beginning of the block period from theundisclosed opening debtors, clarifying that the balance sheet ofthe assessee as on 31.3.96 should be considered for finding outthe proportion of disclosed debtors to the disclosed creditors andthat ratio be applied to determine undisclosed creditors for thepurpose of deduction from undisclosed debtors claimed by theassessee at Rs.10,56,991/-. The additions towards unaccountedlending to Shri D.P.Agarwal sustained by the CIT (Appeals) wasupheld by the ITAT. Hence, this appeal by the assessee. 5.The appeal was admitted by a coordinate Bench of this court on 2.2.08 on the following substantial question of law: (1) Whether in the facts & circumstances of the case,learned Income Tax Appellate Tribunals, Jodhpur Bench,Jodhpur was legally justified in partly allowing the appealfiled by the non-petitioner-Assessing Officer directing him todeduct from the undisclosed income, estimated amount ofundisclosed creditors; determined on the basis of ratio ofdisclosed debtors and disclosed creditors as per Books ofAccounts as on 31.3.96? (2)Whether in the facts & circumstances of the case, thelearned Tribunal was legally justified in upholding theaddition of Rs.75,000/- on account of loan given to DwarkaPrasad Agarwal, which was reflected in the diary even onopening day of block period?” 6.Learned counsel appearing for the petitioner contended that the A.O. has applied Expenditure-Investment Theory for arrivingat the figures of undisclosed income and therefore, while applyingthe said theory, the A.O. must calculate the figures of increase ininvestment or assets during the block period and for this purpose,the A.O. is expected to give due credit or reduction of investmentstanding on the opening day of the block period and thus, the A.O.and the ITAT have seriously erred in not reducing the amountbeing opening debtors of Rs.10,56,991/- as on 1.4.96. Learnedcounsel contended that the ITAT has erred in partly allowing theappeal preferred by the Revenue and setting aside the order of theCIT (Appeals) allowing rebate of Rs.7,92,743/- on account ofestimated debtors as on 1.4.96. Learned counsel contended thatthe ITAT has erred in upholding the addition of Rs.75,000/- loangiven to Shri D.P.Agarwal on 1.4.96. Learned counsel wouldcontend that the said amount being pending balance of loanshould have been reduced from undisclosed income. It is submitted as on first day of the year i.e. 1.4.96, the assesseecannot be presumed to have earned Rs.75,000/- which he hadapplied or utilised for providing loan to Shri D.P.Agarwal and thus,the loan advanced to him pertinent to period prior to block periodcould not have been brought to tax net for the block period. submitted as on first day of the year i.e. 1.4.96, the assesseecannot be presumed to have earned Rs.75,000/- which he hadapplied or utilised for providing loan to Shri D.P.Agarwal and thus,the loan advanced to him pertinent to period prior to block periodcould not have been brought to tax net for the block period. 7.On the other hand, learned counsel appearing for theRevenue while supporting the order passed by the ITAT, submittedthat the ratio of the unexplained debtors and creditors at thebeginning of block period can be better determined by ratio of thedisclosed debtors and disclosed creditors as per the books ofaccount as on 31.3.96 being the beginning of the block period, assuggested by the ITAT and thus, the order impugned does notsuffer from any infirmity or illegality so as to warrant interferenceby this court. Learned counsel submitted that addition ofRs.75,000/- made by the A.O. disclosed as loan given to Shri D.P.Agarwal on 1.4.96, affirmed by the CIT(A) and ITAT also does notsuffer from any infirmity and illegality and does not give rise toany question of law, requiring determination by this court. 8.I have considered the rival submissions and perused thematerial on record. 9.Indisputably, the assessee has admitted undisclosed incomefor the block period at Rs.12.87 lacs. The deduction was claimedby the assessee of Rs.10,56,991/- against the above undisclosedincome as set off being the realization from the debtors prior toblock period. Obviously, the onus was on assessee to lead directevidence to show that he had the said amount of undisclosedincome available at the beginning of the block period. Apparently, the calculation made by the CIT (Appeals) while treating 25% ofthe total sundry debtors covered by unexplained sundry debtorsprior to the block period thereby treating 75% of the debtors asoutstanding, has no logical basis. We are of the considered opinionthat having regard to the facts and circumstances of the case, theview taken by the ITAT that the ratio of unexplained debtors andcreditors as at the beginning of the block period can be betterdetermined by the ratio of disclosed debtors and creditors as perthe books of account as on 31.3.96 being the beginning of theblock period is logical and justified and thus, the same does notwarrant any interference by this court in exercise of its appellatejurisdiction. 10.Coming to the question of addition of Rs.75,000/- towardsthe loan given to Shri D.P.Agarwal as on 1.4.96 being the first dayof the block period, it is noticed that sum of Rs.75,000/- wastaken by Shri D.P. Agarwal from the assessee in cash and it is alsospecifically mentioned that no amount was outstanding prior tothe said transaction. There was no evidence furnished showingthat the amount was advanced by the late father of the assesseeand therefore, the bald assertion of the assessee in this regardhas rightly been not accepted by the A.O. and thus, the additionmade by the A.O. sustained by the CIT (Appeals) and ITAT isabsolutely justified. As a matter of fact, the concurrent findingarrived at as aforesaid by the A.O., CIT (Appeals) and ITAT afterdue consideration of the material on record, remains a finding offact, which cannot be said to be capricious or perverse so as to Aditya/ give rise to a substantial question of law to be determined by this court. 11.The questions framed are answered accordingly. 12.In the result, the appeal fails, it is hereby dismissed. Noorder as to costs. (RAMCHANDRA SINGH JHALA)J. (SANGEET LODHA)J.