TMI Blog1997 (4) TMI 112X X X X Extracts X X X X X X X X Extracts X X X X ..... is brothers took the stand that moneylending business belonged to their mother Smt. Yashoda Devi. In these circumstances, it was claimed that income from moneylending business is liable to be assessed in the hands of Smt. Yashoda Devi. The AO and on appeal, learned CIT(A) rejected this claim and assessed income from moneylending in the hands of three brothers in their individual capacities. The income was computed on the basis of material seized from premises of each of the brothers. A few entries which discernibly and clearly showed that transaction belonged to a particular brother and, therefore, income pertaining to such transaction was added in the hands of that brother although the document containing the transaction was not seized from that brother. The case has a chequered history and assessments for the asst. yr. 1986-87 made earlier in the hands of Shri Babu Ram was treated null and void. The fresh assessment made was also set aside for making de novo assessment. Those had been made and confirmed on appeal. In some years, the assessee has also challenged validity of assessments and additions made other than from moneylending business. Those would be separately discussed bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. The AO made above observations based on statement of Shri Babu Ram recorded on5th Feb., 1988. The affidavits of some of above creditors and their statements filed before the AO were rejected. 6. The AO further observed that writing made in the Bahi was fresh and not ten years old as claimed. 7. The AO further observed that credits/deposits as on31st March, 1977, have not been proved inspite of his request and opportunity provided to the assessee. It was further held that balance shown in account of Shri Babu Ram was raised to Rs. 62,650 whereas credited deposit in the Bahi as on31st March, 1977, was Rs. 94,510. 8. The AO further held that it was unbelievable that children without any source of income could possess more capital as compared to their fathers having different sources of income. He refused to believe that based on entries in above Bahi, Smt. Yashoda Devi should have assets on more than Rs. 35 lacs as on 31st March, 1986. For holding that books of account and other documents seized at the time of search belonged to the person from whose house these were seized and not to Smt. Yashoda Devi, the AO relied upon the following circumstances: 1. That at the time of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... puted income in the shape of interest income and amount shown as advanced to different persons as out of undisclosed sources and charged them to tax. In reply to show-cause notice, the three brothers maintained that books of accounts related to the business carried by Smt. Yashoda Devi and not to these brothers. The AO rejected these claims and computed income of each of the brothers on the basis of documents seized from his premises. 4. These assessments were challenged in appeal and it was reiterated that moneylending business and its income was wrongly assessed in the hands of three brothers in their individual capacities. The moneylending business belonged to Smt. Yashoda Devi. It was claimed that AO wrongly ignored documentary evidence available on record and illegally held that income from moneylending was assessable in the hands of three brothers. This was in spite of finding that at several places, learned AO amended that moneylending business was jointly carried on by the two brothers. The learned CIT(A) after a very detailed discussion upheld the assessment, though he allowed some relief to assessees under the various Acts. Being still aggrieved, the assessees have come ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entary evidence in the shape of Bahi for Samvat Year 2034 produced before the AO on4th Feb., 1988. As per entries in the above Bahi, there was sufficient cash balance with Smt. Yashoda Devi to explain all the entries found in the subsequent ledgers. This was on account of accumulation of interest on principal amount forming basis of investment in moneylending business. The AO ignored above ledger totally without giving any opportunity to the assessee to explain their (case) as would be evident from the following circumstances. The ledger was produced before the AO on5th Feb., 1988. In the hurriedly completed assessment, the AO rejected above Bahi without giving any notice to the assessee. The above assessment was set aside on appeal. The notice for reassessment was also issued on14th March, 1988, which was followed by another notice under s. 143 for5th April, 1988. The assessment was itself made on15th April, 1988, without any further requirement and without affording any opportunity to the assessee. The aforesaid order was again set aside by the CIT(A) on3rd Jan., 1989, for redoing the assessment after affording proper opportunity of being heard to the assessee. Even in the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It holds brothers to be partners yet does not determine their income from the joint business. It holds them accountable individually on the basis of presumption raised under s. 132(4A). Then even this criteria is given a go-bye when income of certain transactions found recorded in books of Babu Ram and recovered from his possession is nonetheless held to belong to Shri Gian Chand. Such contradiction is bound to be there so long eyes are close to facts recorded in the material seized during the search and the evidence gathered in the course of prolonged assessment proceeding. He argued that in the light of contradictions and contradictory findings and in the interest of justice, all assessments should be set aside with directions to lower authorities to consider the matter de novo in the light of material available on record. The assessee further moved application under r. 29 of IT Rules to place on record a copy of family settlement dt.20th Aug., 1981, in terms of which suit in the Court of senior sub-Judge,Faridabadwas instituted on7th Sept., 1982, and decreed on5th Oct., 1982. Copies of the plaint and the Court decree are part of the seized record. The AO also referred to famil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellate proceedings. But the said document was not produced before the lower authorities. The learned Departmental Representative had referred to the decision of Hon ble Bombay High Court in the case of Velji Deoraj Co. vs. CIT (1968) 68 ITR 708 (Bom) and other decision of Hon ble Supreme Court. It has been contended that fresh claim regarding ownership of money through family settlement cannot be permitted to be raised. Likewise application for production of affidavit of Shri Subhash Chand was opposed. It was contended that AO had already held that alleged Bahi for Samvat Year 2034 was a concocted document. We have given careful thought to the above claims of the assessee. In the light of the view which we are taking of the matter in issue, copy of alleged settlement deed and affidavit of Shri Subhash Chand would not advance the case of the assessee. On comparison of copy of settlement deed with copy of plaint, we find that in the plaint, it is stated "in that family partition, the family properties were divided between the plaintiff and defendants by metes and bounds. The suit property described in para No. 1 of the plaint fell to the share of the plaintiff No. 1. The suit pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oted entries made in Bahi and rejected them as fabricated and unreliable. The fact that it was not seized during the course of search, was also noted by the AO and the assessee were fully aware of findings recorded against them, but no attempt was made to file above documents in any proceedings after the above finding. Therefore, at this late stage, copy of settlement deed and affidavit of Shri Subhash Chand cannot be read in evidence. The requests of the assessee for additional evidence and under r. 10 of IT Rules are rejected. 10. The claim of the assessee that documents seized during the course of search and moneylending business do not belong to the assessees but to their mother Smt. Yashoda Devi is only stated to be rejected. The learned AO gave sound reasons for rejecting above claim and we need not repeat all reasons except highlighting that assessees had set up a highly improbable case by claiming that more than 80 years old lady was carrying on such extensive moneylending business. A lady who had an added disadvantage of a weak eye-sight. The case subsequently set up in assessment proceedings was directly opposed to the admission made by Shri Babu Ram and his son Rameshw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere at any time held by common ancestor of the parties and were acquired through survivorship. The four brothers as members of the family could buy property in several manners. In fact Revenue has produced on record copies of sale deed to show that part of the properties were in fact purchased by brothers and not inherited by them from their father. If four Hindu brothers jointly work and acquire property which are subsequently divided, the properties so allotted to each of the brother would not become Hindu undivided property of that brother and his family. In such a property son born to the person would not acquire a right by birth. Such property shall not belong to and held by the concerned person as Karta of his HUF. At any rate the question here pertains to moneylending business where money has been utilised for earning interest. No nucleous of such money has been established. No material is available to show that funds utilised in moneylending business belonged to late Shri Shiv Charan and, thereafter passed on to other family members. In the absence of such an evidence and on the basis of copy of plaint and decree dt.5th Oct., 1982, the claim that moneylending business belon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be raised. 13. Shri Anand Prakash laid considerable stress on observation of AO in order dt.15th April, 1988, in case of Shri Babu Ram for asst. yr. 1986-87 wherein it is claimed to have been held that brothers constituted members of joint Hindu family and carried on the business earlier carried on by assessee s father. The above referred to observations were made to refute the claim that moneylending business belonged to Smt. Yashoda Devi. There is no clear finding. At any rate no material has been produced before us to establish nucleous fund of the HUF headed by Shri Shiv Charan which devolved on his sons and constituted funds of HUF comprised of four sons and their families. We have already considered in detail and referred to documentary evidence to show that property referred to in the plaint was acquired by assessees from the sources contributed by them. In the above circumstances and in the light of evidence available on record, the moneylending business cannot be held to belong to any HUF. 14. Shri Anand Prakash also referred to observation of CIT(A) in order for asst. yr. 1983-84 in the case of Shri Babu Ram where he observed that moneylending business was jointl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds raised in appeal of each of the brothers. In appeals for asst. yrs. 1978-79 to 1983-84 in case of Shri Babu Ram, the only ground pressed at the time of argument was addition on account of income from moneylending business. The learned CIT(A) sustained addition of Rs. 20,000 in re-assessment proceedings under s. 148 of the IT Act. 16. Shri Anand Prakash, learned counsel for the assessee drew our attention to the reasons recorded by the AO on17th March, 1987, at the time of issuance of notice under s. 148 of the IT Act. He submitted that reasons recorded were wrong, against facts on record and had no nexus with formation of belief that income had escaped assessment. Therefore, the reassessment proceedings initiated in this case were bad in law. The above plea was raised through an additional ground of appeal. 17. After considering rival submissions of parties we are of view that legal ground sought to be raised should be permitted to be raised. We agree with Shri Anand Prakash that it is wrongly recorded by the AO that no return under s. 139(1) or 139(2) was filed by the assessee. The return was filed and original order of assessment is also available at p. 216 of the paper-bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of material available on record. In the above background, we do not find any force in the submissions of the assessee. As already submitted, the quantum assessment was not disputed. 18. In asst. yr. 1979-80, the assessee has challenged addition of Rs. 9,475 on account of moneylending business. No separate arguments were advanced in support of this claim. The ground is accordingly rejected. 19. In asst. yr. 1980-81, assessee has challenged addition of Rs. 30,228 on account of income from moneylending business. No separate arguments were advanced in support of this claim. The ground is accordingly rejected. 20. In asst. yr. 1981-82, assessee has challenged addition of Rs. 53,424 on account of income from moneylending business. No separate arguments were advanced in support of this claim also. The ground is accordingly rejected. 21. In asst. yr. 1982-83, the assessee has challenged addition of Rs. 6,741 as interest and Rs. 2,25,354 on account of unexplained investment in moneylending business. The assessee has further challenged chargeability of interest under s. 217 of IT Act. In ground No. 1, the assessment has been challenged as illegal, unjustified and having been made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed in years earlier to 1983-84 has to be taken into consideration. The Revenue authorities must work out the funds which could be available with the assessee as on the opening day of the accounting period. They should allow set off of above funds and then compute income and investment from undisclosed sources. Subject to above directions, other arguments of the assessee are rejected. 1984-85 25. In the asst. yr. 1984-85, assessee has challenged addition of Rs. 98,343 as interest, Rs. 6,53,253, as unexplained investment in the moneylending business. The arguments in respect of above grounds were the same as taken in the other assessment years. Our directions given for the asst. yr. 1983-84 would also apply to this assessment year regarding addition on account of interest income and unexplained investment in moneylending business. 26. There is one more point in appeal for 1984-85 and for two subsequent years regarding investment in construction of house at Ballabgarh. It has been contended that above house was constructed on plot which was allotted to the assessee in the family settlement. Reliance has been placed on Court decree referred to above. As the plot is claimed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dence of two persons, it is natural and necessary to ascertain as to whom the said document really belongs. No presumption under s. 132A or in terms of s. 110 of Evidence Act can be raised to hold that it belonged to one person of AO s choice. No investigation in this regard was carried by AO and, therefore, entire approach of AO was wrong, erroneous and biased. 30. We have given careful thought to the above submissions and in that light examined relevant material. We are of view that learned AO was right in holding that the documents seized from the premises belonged to Shri Babu Ram and not to his mother. There is plethora of evidence for reaching above conclusion including admission of Shri Babu Ram. We have already held that moneylending business did not belong to Smt. Yashoda Devi and she had no funds to carry on marriage of assessee s daughter. There is no material on record to accept that expenditure on marriages were carried by Smt. Yashoda Devi and not by the assessee. The addition made for unexplained investment on marriage of assessee s daughter is fully justified in his assessment. We confirm the same. 31. In the next ground addition of Rs. 4,437 for unexplained exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of funds which is to be recomputed as directed above. 34. In the next ground of appeal, assessee has challenged addition of Rs. 1,000 towards unexplained investment in purchase of plot. Having regard to the income which has been assessed in the hands of the assessee, this petty addition is deleted.1986-87 35. In this year, there are three appeals, by the assessee against different orders of CIT(A). In ITA No. 6310, the assessee has challenged assessment order dt.4th March, 1991, as modified by learned CIT(A). In ITA No. 5533, the assessee has challenged order of CIT(A), dt.20th June, 1994, which was based upon order dt.17th June, 1994of CIT(A) in the case of Shri Prabhu Dayal. The third appeal No. 2094 is against order of CIT(A), dt.22nd Nov., 1994, in which certain additions have been discussed. The facts as emerged from record are that assessee had filed return declaring income of Rs. 17,850. On10th July, 1986, in search operation under s. 132(1), certain documents were seized. On the basis of seized record, AO completed assessment on10th Feb., 1988, on total income of Rs. 9,53,850. Subsequently, AO initiated proceedings under s. 147(a) on the ground that return filed origina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of house, Rs. 79,000 on account of unexplained investment in immovable property and Rs. 39,983 on account of unexplained expenditure on assessee s daughter s marriage were confirmed. The learned CIT(A) deleted addition of Rs. 23,910 on account of pawning of jewellery. He confirmed assessment of Rs. 7,000 as short-term capital gain on sale of plot but set aside addition of Rs. 36,550 for unexplained expenses on loose documents. On chargeability of interest under s. 217 and 139(8) of IT Act, the matter was remitted back to the AO. The additional ground sought to be raised by the assessee was also rejected. The said order of CIT(A) dt.25th June, 1991, is subject-matter of appeal in ITA No. 6310/D/91. The AO again took up the issues remanded to him by the CIT(A) vide order dt.25th June, 1991, and passed a fresh order on28th July, 1993. On question of addition of Rs. 51,550 for unexplained investment in mortgage, the AO accepted that investment in these mortgages already stood included in separate addition of Rs. 3,19,035 and, therefore, no more addition is called for on this account. On next issue regarding addition of Rs. 36,550, based on entries in loose documents, the AO accept ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the assessee further challenged action taken under s. 147(a) and submitted that income had escaped assessment on 15th March, 1988 even before the assessee had filed appeal. It is reiterated that income stood assessed by a good order which was not a nullity. Thus, initiation of proceeding under s. 147 is claimed to be bad. The assessee in this connection had relied upon the following decisions: 1. Sant Baba Mohan Singh vs. CIT (1973) 90 ITR 197 (All); 2. P. Dasa Munshi Reddy vs. P. Appa Rao AIR 1974 SC 2089; 2091 3. P.V. Doshi vs. CIT 1977 CTR (Guj) 683 : (1978) 113 ITR 22 (Guj) and 4. Delhi Cloth Gen. Mills Ltd. vs. R.R. Gupta AIR 1977 SC 2086; 2089. We have given careful thought to the aforesaid submissions and examined impugned order in their light. In our considered opinion, the AO and the learned CIT(A) had elaborately discussed this issue to justify action under s. 147(a) of IT Act. They have referred to the relevant provision to demonstratively show that return filed below the taxable limit was to be treated as an invalid return and proceeding taken on the basis of above return has to be treated as null and void. The decision cited by the learned counsel for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 79,000. It is claimed that addition based on several presumptions have no legal basis. Exercise note-book was not discovered from the personal possession of Shri Babu Ram. It was found from common residence and there is no automatic presumption that said note-book belonged to the assessee. Now when assessee had denied any unexplained investment in construction, the onus lay on the Revenue to establish its case. But nothing of that sort has been done and addition made is wholly unsupported by facts and evidence and is based on presumptions and assumptions. 42. The assessee further challenges addition of Rs. 39,983 on account of unexplained expenditure incurred on assessee s daughter s marriage. These expenses are also claimed to have been met by Smt. Yashoda Devi who was claimed to have overall control. It is submitted that no attempt was made by the AO to ascertain facts and addition on surmises and conjectures has been made. We have gone through above claim. As discussed in detail in earlier para, exercise book, belongs to the assessee. It is little too late in the day to claim that immovable properties belonged to Smt. Yashoda Devi particularly when all along the relian ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. On further appeal, CIT(A) allowed relief of Rs. 11,000 and now only Rs. 15,550 has been sustained. This transaction is claimed to be related to moneylending business, about which detailed submission made by the assessee has been separately considered. It is not possible for us to accept that this moneylending business does not belong to the assessee. We, therefore, reject this claim of the assessee, subject to our earlier observations relating to moneylending business. 1987-88 46. In appeal for the aforesaid assessment year, the objection relating to addition on account of interest and advances in respect of moneylending business has been challenged. It has been further claimed that estimate made by the AO is highly excessive and ignored the fact that all the advances are not allowable and do not produce income in the form of interest. For the reasons already discussed, we have no hesitation in holding that income from moneylending and unexplained advances has rightly been assessed in the hands of the assessee. The question of quantum of income be reconsidered as directed in earlier assessment years. 47. In the next ground of appeal, assessee has challenged AO s estimat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The quantum of income assessed has not been disputed and need not be adjudicated upon. Accordingly, assessments for asst. yrs. 1978-79 to 1981-82 and 1983-84 to 1987-88 are confirmed. 51. In the grounds of appeal, the assessee has taken a ground challenging re-assessment proceedings initiated under s. 147/148 and it was claimed that assessment order was illegal and invalid. But no arguments were addressed on these grounds and accordingly these are rejected. In the case of Shri Babu Ram in appeal for asst. yr. 1983-84 onwards, we have given direction that the question of income from moneylending (interest and unexplained investment) business should be considered and as it was a continued business, the income assessed in earlier year should be taken into consideration to work out funds which could be available with the assessee as on the opening day of the accounting period. The question of allowing of set off of above funds has also been directed to be reconsidered. The above directions will equally apply in the case of Shri Prabhu Dayal also. 52. In the case for asst. yr. 1987-88, the learned AO enhanced income from kirana business from Rs. 17,000 to Rs. 25,000 on the short g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther hand relied upon order of Dy. CIT(A), Rohtak. He argued that document on the basis of which addition had been made were not recovered from the residence of assessee nor are they in his handwriting. The Departmental Representative had placed no evidence on record to connect the said documents with the assessee. He also referred to affidavit filed by the assessee and statement on oath of Shri Babu Ram. 58. We have considered photostat copy of p. No. 89 and 90 of the document No. 35. These documents contain certain scribbles but on that basis, no inference can be drawn that Shri Gian Chand assessee made investment of Rs. 24,000 from undisclosed sources. Therefore, we uphold action of CIT(A). In the result, this appeal of the Revenue is dismissed. 1982-83 59. The Revenue has similarly challenged deletion of addition of Rs. 68,600 made in asst. yr. 1982-83 on account of entries on documents seized from the premises of Shri Babu Ram. The facts were admitted to be identical in this year in written submissions filed by the Revenue. Having regard to the reasons given by us in Revenue s appeal for 1981-82, this appeal of the Revenue is also dismissed. 60. The assessee in his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... file of the AO. It was stated that in the set aside assessment, learned AO has again made the addition and that the matter was pending before the CIT(A). It was conceded that this ground has become academic. In the above circumstances, the request not to adjudicate this ground is accepted and appeal is filed. It may be treated as dismissed for statistical purposes. 1984-85 63. No submissions were made on ground No. 1. It is accordingly rejected. 64. On ground Nos. 2 and 3, the assessee challenged restoration of matter to the AO who had made fresh addition and the matter is pending adjudication, before the CIT(A) in the reassessment proceedings. This ground is also not adjudicated and is dismissed as not pressed with the observation that nothing here would prejudice the case of the assessee in proceedings pending before the CIT(A). 65. In the third ground of appeal, assessee has challenged addition on account of construction made by the assessee on plot. It is contended that the above plot belongs to the HUF having been received through family settlement as confirmed by the Court s decree. The contention for reasons discussed in detail in the case of Babu Ram is rejected. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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