TMI Blog2003 (5) TMI 209X X X X Extracts X X X X X X X X Extracts X X X X ..... h Kumar Agarwal are also appellants before us along with Smt. Santosh Kumari wife of Suresh Kumar Agarwal. There was a firm in the name of M/s Om Prakash Suresh Kumar in which Om Prakash and Suresh Kumar were said to be partners. After the death of Om Prakash, Suresh Kumar became the sole proprietor of that firm and M/s Om Prakash Suresh Kumar is also one of the appellants. Suresh Kumar HUF and Satish Kumar HUF were also partners in a firm Healthways Dairy Products (hereinafter referred to as "HDP"), which was constituted w.e.f.1st April, 1990, and other two partners of the firm were Rajendra Singh HUF and Surendra Singh who were from Paras group. All these four were having equal shares of 25 per cent and deriving income from manufacturing and sale of dairy products in the factory of HDP located at Gulawati and its head office was at Connaught Circus,New Delhi. 3. On14th June, 1996, there was a search operation under s. 132(1) of the Act, carried out by the Department in Om Prakash Suresh Kumar group of cases as well as search was conducted at Connaught Circus office of HDP. From the residence of Suresh Kumar, besides other items/assets, certain papers which were in the nature of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for which an amount of Rs. 85 lakhs had already been offered for taxation in the hands of M/s Om Prakash Suresh Kumar. It was further submitted that entire amount of Rs. 139 lakhs could be substituted for the amount offered as undisclosed income in the return filed by said firm M/s Om Prakash Suresh Kumar and it will not be of much importance as income either can be assessed in the hands of assessee or in the firm M/s Om Prakash Suresh Kumar because rate of tax for both the cases will be 60 per cent and Revenue is not to suffer any loss. 6. To substantiate the plea that amount withdrawn by Suresh Kumar from M/s HDP was utilised for finance business, the assessee submitted fund flow statement drawn on the basis of seized material in respect of income from Annex. A3 and A6 and other annexures and deployment of cash in the finance business. It was also contended that assessee was having Rs. 16.03 lakhs as undisclosed income on 1st April, 1985 prior to block period also and that amount was initially employed by the assessee for finance business as well as for milk product business carried out by this assessee in undisclosed manner without the knowledge of other partners though in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... group was covered by the umbrella being formed on the basis of the papers seized at Annex. A3 and A6 at the assessee s residence. The contention was not found acceptable by the AO on the ground that each entity was a separate assessable person and there was no positive evidence to show the flow of funds generated in M/s HDP, was introduced in the business of M/s Om Prakash Suresh Kumar or Satish Agarwal or Laxmi Agarwal or in the case of assessee. AO also noted that contention of the assessee that Suresh Kumar had withdrawn Rs. 1.29 crores from M/s HDP was not acceptable since entry in the said Annex. A3 and A6 clearly linked with M/s HDP. Secondly, assessee had not shown any undisclosed income for the block period based on the entries of A3 and A6. The AO rejected the contention of the assessee and prepared separate peak of investment and interest account in the case of assessee Suresh Kumar and his brother Satish Kumar Agarwal. 9. AO also noted that Rs. 85.88 lakhs were recovered at 42, Bagh Diwar, Fatehpuri, Delhi-6, and another sum of Rs. 72,700 from the same proprietary concern at 58, Bagh Diwar, Fatehpuri. Another sum of Rs. 82,800 was also found from assessee s residence. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tock 4,54,915 (d) Undisclosed income of JMD 51,738 (e) Undisclosed investment in property in Bulandshahr 5,00,000 (f) Interest income on estimated basis 35,960 (g) Undisclosed investment in stock 11,24,500 (h) Presumed business profits of Healthways Dairy Products on the basis of seized material for items mentioned as a, b c in HDP -- 1,49,44,843 (i) Interest on moneylending business assessed substantively in the hands of Mr. Satish Kumar -- 12,02,500 Sub Total 1,28,77,744 1,61,47,343 11. Satish Kumar Agarwal has also taken the plea that whole of the business belonged to M/s Om Prakash Suresh Kumar but that plea was also rejected. It was concluded by the AO that this assessee was also carrying on separate moneylending business and he worked out the separate peak credit and ultimately an addition of Rs. 85,91,800 was made in the hands of this assessee as undisclosed income. An amount of Rs. 13,52,000 was found and seized from the custody of Smt. Laxmi Agarwal. Smt. Laxmi Agarwal in her statement deposed tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partners viz., M/s Om Prakash (father) and Suresh Kumar (son). The firm was engaged in the business of milk products as well as in moneylending business. Books of account of M/s Om Prakash Suresh Kumar reveled availability of Rs. 16.03 lakhs as on1st April, 1986, and that firm was carrying on the business of moneylending as well as milk product during the block period. Suresh Kumar was able to procure a licence to manufacture milk products which was a prime commodity as very restricted number of licenses had been issued to different parties. Suresh Kumar came into agreement with Paras Dairy group and formed a firm in the name of M/s HDP in which Suresh Kumar HUF and Satish Kumar HUF were having 25 per cent shares while two members viz., Rajendra Singh and Surendra Singh also became partners of 25 per cent shares each. The contention of the learned counsel was that amount of any premium at the time of sale over and above the printed price would be taken away by Suresh Kumar HUF to the exclusion of members of Paras Dairy Group. The learned counsel pointed out that Suresh Kumar was dealing with the sale of goods of M/s HDP inDelhiand used to collect payment for sale of goods and also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unting purposes. Factually, its entire undisclosed income belonged to the family under control of late Shri Om Prakash. Initially the volume of moneylending was not more than Rs. 16 lakhs which was the amount of capital available to M/s Om Prakash Suresh Kumar, before the block period but later on the volume increased and for this the learned counsel referred to page No. 100 the copy of peak credit balances as per rotational cash book and it is prepared on the basis of seized material recovered at the time of search. Referring to this, the learned counsel submitted that up to financial year 1991-92 the peak was not more than Rs. 15.54 lakhs and it increased to Rs. 45.08 lakhs and it gets corroboration from the amount withdrawn in cash by Suresh Kumar from M/s HDP. Right hand side entries show the amount withdrawn by Suresh Kumar and up to30th Nov., 1992, the same was Rs. 1.29 crores. The amount of peak credit never exceeded this amount but the family members of this group were engaged in the business of moneylending and were getting the amount back. The contention is that as soon as Suresh Kumar withdrew money from M/s HDP, the volume of moneylending business increased substantiall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y somewhere else. Further, there is no material found at the time of search to prove that assessee group was having any other source to generate this income except withdrawal from M/s HDP. The learned counsel also contended that moneylending business was undertaken by Om Prakash in the name of different family members as per his choice by using the family hotchpotch fund and interest in the said business which is Rs. 23.56 lakhs and odd as worked out at page No. 86 of the paper book should be assessed in the hands of M/s Om Prakash Suresh Kumar. The learned counsel also submitted that AO had worked out different peak and investment in the case of Suresh Kumar, Satish Kumar but the fact remains that business was of one family under different names of the family members. To substantiate this fact the learned counsel also referred to the statement of Smt. Laxmi Agarwal who is admittedly wife of Naresh Kumar (deceased son of Om Prakash) who stated in the statement recorded on the date of search that the amount of Rs. 13.52 lakhs recovered from her house, was the same which was given by her father-in-law Om Prakash from time-to-time during his lifetime. Relevant portions of the statemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total fund available 1,93,36,743 Less: Funds not taxable as per C above: 1. Explained cash in hand as on14th June, 1996, in the books of OPSK 7,35,967 2. Funds Available before1st April, 1986as per seized books from1st April, 1985(OPSK) 16,03,000 3.Saleproceeds of declared stock of Ghee (OPSK) 10,000 23,48,967 Net taxable income : 1,69,87,776 19. Learned counsel submitted that whole of the cash found, the amount of jewellery in respect of Suresh Kumar, Bhagwanti Devi and the amount of other stock, etc. stands covered in the above referred to statement of affairs. The amount of capital of OPSK as on1st April, 1985, Rs. 16.03 lakhs is not taxable in the block assessment and the same is the case in respect of Rs. 7,35,967 which was cash balance as on14th June, 1997, as per books of OPSK. The contention is that net taxable income of whole of the group comes to Rs. 1,69,87,776 and the same may be assessed. 20. About other grounds of Rs. 5 lakhs in the case of Suresh Kumar as envisaged in third ground of his appeal, the learned counsel mentioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... moneylending business was the amount withdrawn by Suresh Kumar from M/s HDP or that the family members of Om Prakash were working under any umbrella and for any interest of the family. The learned Departmental Representative pointed out that Mr. Satish Kumar was examined on the date of search and he was specifically asked to give out the source of investment in the moneylending. Page No. 53 contained the reply of Satish Kumar in which he stated that he had given Rs. 13 lakhs to India Dairy Allied Products Ltd., after taking loan from the market and same was returned after receiving back the amount. Not only this, on p. 54 Satish Kumar again stated that he was collecting money from the market and did not give the names of those persons for the safety of their interest. He further stated that he was earning 10 per cent to 20 per cent of the interest. Learned Departmental Representative also pointed out that other copy of statement of Satish Kumar is appearing at page No. 23 onwards of the paper book filed by the Department. Satish Kumar was specifically put, to question about the amount recovered from the premises of M/s OPSK. He could not say anything about the same and specifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ointed out that assessee, right from first day, contended that the undisclosed business of milk products belonged to M/s OPSK and not to M/s HDP. The moment return of M/s OPSK filed undisclosed income was shown. It is also pointed out by the learned counsel that M/s OPSK was engaged in the business of milk products and moneylending. Out of the amount of Rs. 16.03 lakhs a sum of Rs. 8.26 lakhs was invested for short period as capital investment in M/s HDP and also for undisclosed milk products business in the very beginning and as soon as Suresh Kumar started withdrawing heavy amount, volume of moneylending business increased. 28. About the statement of Satish Kumar, the learned counsel submitted that statement recorded at the time of search are not conclusive and assessee has all rights to prove that statement so made was not correct on the basis of material as well as facts and circumstances. For this, the learned counsel pointed out to the decision of Pullangode Rubber Produce Co. Ltd. vs. State of Kerala 1972 CTR (SC) 253 : (1973) 91 ITR 18 (SC), wherein it was observed by Their Lordships that admission is an extremely best piece of evidence but it cannot be said that it is co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tworthiness and capacity to return. The remaining amount remained with the group in cash. 31. About presumption under s. 132(4A), the learned counsel pointed out that presumption is rebuttable as laid down in the case of Sondhi Transport Co. vs. State of U.P. AIR 1986 SC 1099 and in the case reported as Mansukhlal Nanjibhai Patel vs. Dy. CIT (2001) 170 CTR (Guj) 25 : (2001) 251 ITR 341 (Guj) and other case law referred in the reply filed by the learned counsel for the assessee. The contention is that this plea was fully rebutted as assessee had been able to prove that Suresh Kumar has withdrawn the amount from M/s HDP and utilised it in moneylending business. The statement of Smt. Laxmi Aggarwal is specific that she was given the amount by her father in law Om Prakash and that is more than sufficient evidence to conclude that amount was actually that of Suresh Kumar and his father. The contention is that whole of the additions are to be deleted. 32. We have heard the learned representatives of both the parties and also perused the material to which our attention was drawn during the course of hearing by them. 33. At the very beginning, it is to be pointed out that M/s OPSK wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies in the said Annex. A3 and A6 are in any way not believable because addition of undisclosed income is based on the entries of these seized material. It is well settled principle that in case any addition is going to be made on the basis of any document, then due credit is to be given to the entries of both the sides viz., debit and credit. If we apply this analogy to read these seized Annex. A3 and A6 then Rs. 1,29,00,847 had already been shown as withdrawn by Suresh Kumar. Full credit to all these entries, which are mentioned in seized material is to be given. It is not in dispute that Suresh Kumar has not been shown to have withdrawn Rs. 1,29,00,847 out of the undisclosed income. 36. The case of the assessee group is that Suresh Kumar alone was dealing with the sale of milk products which was having a premium on it and all operations were being conducted by him alone fromDelhioffice of M/s HDP to the exclusion of all the three other partners of M/s HDP. This fact gets corroboration from the admission of Rajendra Singh another partner and who was from Paras group. His statement was recorded by AO on19th June, 1997, and copy thereof is appearing at pp. 87 to 89 of the paper bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 207 31-11-1992 1,29,00,847 38. The plea of the assessee stands corroborated from the abovereferred to monthly peak credit for financial year 1992-93. The maximumpeakofRs.45,08,832 was in the month of November, 1992 and admittedly by that time the assessee Suresh Kumar had withdrawn Rs. 1.29 crores. The contention of the learned Departmental Representative that the amount withdrawn by Suresh Kumar was not the same which was seized during search operation, cannot be allowed to sustain as it is to be noted that Department had made extensive search in the case of Suresh Kumar and his family members as well as in the case of M/s HDP. Not a single document or any sort of evidence has come in the possession of the Department to show that Suresh Kumar or his family members were having any other source to generate the funds. Secondly, the circumstances indicate that as soon as Suresh Kumar was withdrawing cash from M/s HDP there was corresponding substantial increase in the quantum of moneylending business and admittedly the business of earning undisclosed income in M/s HDP came to an end by the month of November, 1992, as after that the Government of India delicense ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... open to the assessee who made the admission to show that it is incorrect. The contention of the learned counsel about the statement of Satish Kumar appears to be reasonable as at the time of search it is normally the tendency of the person, being searched, to give vague answer to avoid payment of income-tax. However, after the search and receipt of photocopies of seized material, it is quite evident that money which was being withdrawn by Suresh Kumar from M/s HDP to the exclusion of other partners of that firm, was being utilised in the moneylending business as per finding recorded above. Apart from it, if Satish Kumar stated that he was borrowing the funds from market then M/s OPSK was also another entity available in the market and in case he has taken money from M/s OPSK for investment in the moneylending business then statement of Satish Kumar cannot be taken as totally incorrect. Under these circumstances where there is lot of evidence, circumstantial as well as factual, that Suresh Kumar was having sufficient amount withdrawn from M/s HDP and admittedly no family member was having another source to generate funds then statement of Satish Kumar that he was borrowing funds fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit in the business being carried out by M/s HDP as on30th Nov., 1992, which is based on Annexs. A3 and A6 and out of that Rs. 1.29 crore approximately had been siphoned off by Suresh Kumar. The gross profit of Rs. 2,09,890 is included as earned by M/s HDP on sale of stock. The assessee group, particularly Suresh Kumar has shown profit of Rs. 51,738 from M/s JMD, a Benami firm and Rs. 4.50 lakhs as income from loose papers. So far as utilisation of the amount is concerned, the said chart reveals that the available cash in hand recovered at the time of search. All the heads under which different additions have been made are compiled by the assessee and Department is not in a position to challenge the same. The amount of Rs. 23,48,967 are not taxable as Rs. 16.03 lakhs was capital in M/s OPSK as on1st April, 1985, Rs. 7,35,967 was the cash balance in M/s OPSK as on the date of search. Rs. 10,000 was sale proceeds of some 95 kg. ghee. So this amount of Rs. 23,48,967 is to be excluded and assessee group had worked out the net taxable income of Rs. 1,69,87,786 and the same is to be taxed in the hands of M/s OPSK as that firm alone was dealing in all the moneylending business. That firm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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