The Commissioner Of Income Tax, Jalandhar-Ii v. Lekh Raj Dhunna

ITA No. 126 of 2003 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 126 of 2003 Date of Decision: 29.9.2010 The Commissioner of Income Tax, Jalandhar-II ....Appellant. Versus Lekh Raj Dhunna ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Vivek Sethi, Advocate for the appellant. Mr. Akshay Bhan, Advocate for the respondent. AJAY KUMAR MITTAL, J. 1.This order shall dispose of ITA Nos. 126 and 127 of 2003as common question of law and facts are involved therein. For brevity,the facts are being taken from ITA No. 126 of 2003. 2.This appeal was admitted on January 22, 2004 fordetermination of the following substantial question of law:- “Whether the Tribunal was right in law in ignoring thefacts on records as also the provisions of sections132(4) & 132(4A) of the Income Tax Act, 1961 andholding that the addition of Rs.9,00,000/- made bythe Assessing Officer on account of commissionincome and confirmed by the Commissioner of Income-tax (Appeals) was without any basis?” 3.Facts necessary for adjudication of the present appeal, asnarrated therein, are that the search was conducted at the residence ofthe assessee on 15.4.1993. The assessee being individual filed hisreturn on 28.3.1994 declaring an income of Rs.2,00,000/-. Theassessment was completed on 31.3.1999 (Annexure A) by the DeputyCommissioner of Income Tax and the income was assessed atRs.13,02,440/- by making addition of Rs.9,00,000/- on account ofincome from commission on sales. Feeling aggrieved, the assesseewent in appeal and the Commissioner of Income Tax (Appeals) [in short“the CIT (A)”] vide order dated 20.12.1999 upheld the addition ofRs.9,00,000/- made by the Assessing Officer. Still feeling aggrieved,the assessee approached the Tribunal who vide order dated 28.2.2003deleted the addition of Rs.9,00,000/- holding that there was no evidenceto conclude that the assessee had actually earned the commission onsale. Hence, the present appeal by the revenue. 4.We have heard learned counsel for the parties. 5.Learned counsel for the revenue submitted that theassessee during the course of search operation on 15.4.1993 had madea statement under Section 132(4) of the Act admitting that he wasselling agent of M/s P.M.S. Enterprises Phagwara and had been gettingcommission @ 2% on sales effected through him. According to thelearned counsel, in the light of statement of the assessee under Section132(4), the Assessing Officer was justified in making addition ofRs.9,00,000/- on account of commission received from M/s P.M.S.Enterprises calculating by taking 2% of Rs.4,92,03,005/-, i.e. ITA No. 126 of 2003 Rs.9,84,060.10, and giving deduction of Rs.84060.10 on account ofexpenses incurred. He further submitted that the total sales ofRs.4,92,03,005/- is discernible from the documents, details of which areas under:- 7.Controverting the above submission, learned counsel forthe assessee argued that the revenue had failed to bring any materialon record which could have substantiated their plea that the assesseehad earned commission on sales from M/s P.M.S. Enterprises,Phagwara. In the absence of any tangible evidence produced by thedepartment, the addition of Rs.9,00,000/- was not justified. The order ofthe Tribunal was supported by the learned counsel for the assessee. ITA No. 126 of 2003 8.The point for consideration in this appeal is whether theaddition of Rs.9,00,000/- made by the Assessing Officer on account ofcommission income on the basis of admission of the assessee in hisstatement under Section 132(4) of the Act which was confirmed by theCIT (A) on appeal, was sustainable. 9.It would be advantageous to view provisions which arerelevant and Section 132(4) reads thus:- ITA No. 126 of 2003 8.The point for consideration in this appeal is whether theaddition of Rs.9,00,000/- made by the Assessing Officer on account ofcommission income on the basis of admission of the assessee in hisstatement under Section 132(4) of the Act which was confirmed by theCIT (A) on appeal, was sustainable. 9.It would be advantageous to view provisions which arerelevant and Section 132(4) reads thus:- “132(4) The authorised officer may, during thecourse of the search or seizure, examine on oath anyperson who is found to be in possession or control ofany books of account, documents, money, bullion,jewellery or other valuable article or thing and anystatement made by such person during suchexamination may thereafter be used in evidence inany proceeding under the Indian Income-tax Act,1922 (11 of 1922), or under this Act. Explanation.- For the removal of doubts, it ishereby declared that the examination of any personunder this sub-section may be not merely in respectof any books of account, other documents or assetsfound as a result of the search, but also in respect ofall matters relevant for the purposes of anyinvestigation connected with any proceeding underthe Indian Income-tax Act, 1922 (11 of 1922) orunder this Act. Sub-section (4) of Section 132 enables the authorized officer to record on oath the statement of the persons who are found tobe in possession or control of article or thing at the time of search.Under this provision, the Assessing Officer is empowered to use suchstatement against the assessee and base the assessment thereon.However, where the assessee is able to establish that the statement somade was not voluntary but was a result of coercion or inducement, thesame may not be acted upon. The onus lies very heavy upon theassessee in such circumstances to prove such coercion or inducement.Further, the assessee can produce evidence to rebut the statementrecorded under Section 132(4) of the Act. Explanation inserted byDirect Tax Laws (Amendment) Act, 1987, w.e.f. 1.4.1989 permits theexamination of the persons under sub-section (4) not only in relation tothe books of account, other documents or assets found as a result ofsearch but also on any other matter relevant for any proceedings underthis Act or the Income Tax Act, 1922. 11.Sub-section (4A) of Section 132 raises certainpresumptions. It reads as under:- 4(A)Where any books of account, otherdocuments, money, bullion, jewellery, or othervaluable article or thing are or is found in thepossession or control of any person in the course ofa search, it may be presumed- (i)that such books of account, other documents,money, bullion, jewellery or other valuablearticle or thing belong or belongs to suchperson;money, bullion, jewellery or other valuablearticle or thing belong or belongs to suchperson; (ii)that the contents of such books of account andother documents are true; and other documents are true; and (iii)that the signature and every other part of suchbooks of account and other documents whichpurport to be in the handwriting of anyparticular person or which may reasonably beassumed to have been signed by, or to be inthe handwriting of, any particular person, are inthat person's handwriting, and in the case of adocument stamped, executed or attested, thatit was duly stamped and executed or attestedby the person by whom it purports to havebeen so executed or attested.”books of account and other documents whichpurport to be in the handwriting of anyparticular person or which may reasonably beassumed to have been signed by, or to be inthe handwriting of, any particular person, are inthat person's handwriting, and in the case of adocument stamped, executed or attested, thatit was duly stamped and executed or attestedby the person by whom it purports to havebeen so executed or attested.” 12.Sub-section (4A) was introduced by the Taxation Laws(Amendment) Act, 1975 w.e.f. 1.10.1975 and it enacts certainpresumptions. According to it, the books of account, other documents,money, bullion, jewellery or other valuable articles seized from thepossession of a person, shall be presumed to belong to such person inwhose possession or control they are found during the search. Asimilar presumption is raised regarding the truthfulness of the contentsof the books of accounts which are found. Presumption also arises inrespect of signatures and every other part of the books of account to bein the handwriting of the person by whom it is purported to have beenwritten. Similarly, if they are stamped, executed or attested, apresumption may be made to be duly stamped and executed or attestedby the persons by whom it purports to have been executed or attested. The aforesaid presumptions are rebuttable in nature and their strengthis dependent upon the circumstances of each case. Further, the wordsused in this sub-section are “may be presumed” which are incontradistinction to the words “shall presume” or “conclusive proof”. 13.Now, the question that would require an answer would bewhether the presumption under Section 132(4A) can be used forframing regular assessment. 14.Karnataka High Court in CIT v. P.R. Metrani (HUF), [2001]251 ITR 244 had laid down in clear terms that the presumption undersub-section (4A) of Section 132 cannot be restricted for passing anorder under Section 132(5) only. It further recorded that thepresumptive value is total in so far as Section 132(5) is concerned, butin respect of other proceedings, the presumption is rebuttable.However, the Delhi High Court in Daya Chand v. Commissioner ofIncome-Tax, [2001] 250 ITR 327 and Allahabad High Court in PushkarNarain Sarraf v. Commissioner of Income-Tax, [1990] 183 ITR 388have subscribed a different view. We are in respectful agreement withthe view expressed by Karnataka High Court as to accord any othermeaning to the aforesaid provision would be against the legislativeintent as sub-section (5) of Section 132 had been omitted by FinanceAct, 2002 w.e.f. 1.6.2002 whereas sub-section (4A) of Section 132 stillcontinues on the statute book. 15.Having crystalized legal position, it is now apt to delve onthe factual situation of the present case. It is not in dispute that theassessee had made a statement under Section 132(4) of the Actwhereby a surrender of Rs.2,00,000/- was made. Besides this, the ITA No. 126 of 2003 assessee had admitted that he had earned commission from M/s PMSEnterprises, Phagwara which was not disclosed in the return filed byhim. The relevant portion of the statement reads as follows:- “I am selling agent of M/S PMS Enterprises, RailwayRoad, Phagwara and get commission at the rate of2% on the sales effected through me. I have noother source of income except interest from firm ondeposit with the firm. My wife is a housewife anddoes tailoring work on a very small scale.” 16.Further, during search, certain sale documents were seizedwhich bore the signatures of the assessee as well. The said documentsdepicted total sales of Rs.4,92,03,005/- as noticed earlier. ITA No. 126 of 2003 assessee had admitted that he had earned commission from M/s PMSEnterprises, Phagwara which was not disclosed in the return filed byhim. The relevant portion of the statement reads as follows:- “I am selling agent of M/S PMS Enterprises, RailwayRoad, Phagwara and get commission at the rate of2% on the sales effected through me. I have noother source of income except interest from firm ondeposit with the firm. My wife is a housewife anddoes tailoring work on a very small scale.” 16.Further, during search, certain sale documents were seizedwhich bore the signatures of the assessee as well. The said documentsdepicted total sales of Rs.4,92,03,005/- as noticed earlier. 17.Thus, in view of sub-sections (4) and (4A) of Section 132 ofthe Act, the Assessing Officer was justified in drawing presumptionagainst the assessee and had made addition of Rs.9,00,000/- in hisincome under Section 68 of the Act. The onus was upon the assesseeto have produced cogent material to rebut the aforesaid presumptionwhich he had failed to displace. The assessee retracted from the saidstatement vide letters dated 24.11.1998 and 11.3.1999 during thecourse of assessment proceedings. However, no value could beattached thereto in the present case. In case the statement which wasmade by the assessee at the time of search and seizure was underpressure or due to coercion, the assessee could have retracted from thesame at the earliest. No plausible explanation has been furnished as towhy the said statement could not be withdrawn earlier. In such asituation, the authenticity of the statement by virtue of which surrender ITA No. 126 of 2003 had been made at the time of search cannot be held to be bad. TheTribunal, thus, erred in concluding otherwise. The Tribunal, therefore,was not justified in reversing the order of the Assessing Officer whichwas affirmed by the CIT(A) also. 18.In view of the above, the substantial question of law isanswered in favour of the revenue and against the assessee. 19.The appeal stands allowed. (AJAY KUMAR MITTAL) JUDGE September 29, 2010gbs (ADARSH KUMAR GOEL)JUDGE ITA No. 126 of 2003 -10- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 127 of 2003 Date of Decision: 29.9.2010 The Commissioner of Income Tax, Jalandhar-II ....Appellant. Versus Lekh Raj Dhunna ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Vivek Sethi, Advocate for the appellant. Mr. Akshay Bhan, Advocate for the respondent. AJAY KUMAR MITTAL, J. For orders, see ITA No. 126 of 2003 (The Commissioner of Income Tax, Jalandhar-II v. Lekh Raj Dhunna). (AJAY KUMAR MITTAL) JUDGE September 29, 2010gbs (ADARSH KUMAR GOEL)JUDGE