TMI Blog1991 (11) TMI 123X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 10,89,439 on 28-3-1988. That assessment was, however, annulled by the CIT (Appeals) on 23-1-1989 because notice under section 143(2) had not been served on the assessee. Department did not challenge that order but initiated fresh proceedings under section 147/148 in response to which the assessee filed a return showing income at Rs. 72,753 on 30-5-1989. This time the Assessing Officer completed the assessment on a total income of Rs. 20,76,920 vide his orders dated 29-6-1989. In the appeal filed by the assessee against that order the CIT(A) allowed only some relief to the assessee and hence the assessee is in appeal before us. 2. The first objection of the assessee is regarding an addition of Rs. 4,60,290 made on the basis of a"Sahi Bahi" or Signatures Book marked as Annexure C-28 in the seized documents and referred to as such in the assessment order and the appellate order. According to the Revenue, this document was seized from the business premises of the assessee firm and was written in three parts. Entries relevant for year under consideration are as under : 1. Pages 1 - 5 Advances totalling to Rs. 1,71,672 made between 15-2-1985 to 31-3-1985 2. Pages 15 -27 Paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the money had been coming back from the persons to whom it was being advanced, the statement prepared by the assessee to explain the rotation of this money, could not be accepted. The CIT(A) agreed with the findings of the Assessing Officer and confirmed the additions. 4. In this background Shri Aggrawal vehemently argued that C-28 (sahi bahi) contained advances made as truck freight and loans by partner Kishanchand in his individual capacity and not by the firm. He submitted that even at the time of search Shri Kishanchand had stated this fact. Shri Aggrawal stated that since the copies of statements recorded at the time of search had not been supplied to the assessee, he was not in a position to file their copies but requested that they may be supplied by the Revenue. We have, however, not been supplied copies of those statement's from either side. He submitted in spite of all the explanations and evidence given by the assessee, the CIT(A) sustained this addition, both in the case of assessee-firm and also on protective basis in the case of Kishanchand partner, Shri Aggrawal claimed, on the basis of decision of Allahabad High Court in the case of Smt. Hemlata Agarwal v. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that, at best it could be argued for the assessee that Kishanchand might not be disclosing this business to his partner but in no case could it be accepted that it was not the business of assessee firm. He strongly relied on orders of Assessing Officer and CIT (Appeals). 7. We have carefully considered the arguments from both the sides and have perused the material on record. We, however, find no force in the case of the Revenue. According to section 132(4A) of the Income-tax Act 'it may be presumed' that books of account and other documents found during the search 'in the possession or control of any person' belong to such person and that 'the contents of such books of account or other documents are true'. These provisions would show that, in the first instance, the presumption raised under section 132(4A) is a rebuttable presumption and, secondly, the contents of such books are true and it would not be open to the Revenue to partly accept the contents and to refuse to accept the other part. Applying these tests to the facts of this case we find that even if these documents were found at the business premises of the assessee firm, it would be naive to presume and accept that a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the money advanced earlier. In these circumstances, we accept the arguments of Shri Aggrawal and hold that the documents marked as Annexure C-28, on the basis of which addition of Rs. 4,60,290 was made, did not belong to the assessee and hence the addition of Rs. 4,60,290 is deleted. 8. The second Ground of Appeal is regarding additions of Rs. 24,000 sustained by the CIT (Appeals) out of additions of Rs. 68,597 made by the Assessing Officer. The case of the Revenue was that during the course of search another "Sahi Bahi" or "signatures book" marked as C-26 had been found at the business premises of the assessee. According to the Assessing Officer, the transactions recorded in this "Sahi Bahi" were verifiable from the "regular books of account maintained by the assessee", but the transactions recorded on pages 13 and 14 which relate to 26-2-1985 were not verifiable from the regular books maintained by the firm. He required the assessee to explain these entries. The assessee, in its written submissions, accepted that the Bahi C-26 belonged to the firm. All the transactions recorded in that Bahi were got verified and the few transactions which could not be verified with the regular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if any, maintained by him". Secondly, section 69 deals with a situation where the assessee has made any investments. In the instant case, we find that the situation is converse, i.e., in this case there is no evidence before us to show that the assessee had made any investments which could be identified in the form of tangible assets. No evidence has been collected, discussed or brought before us by the Revenue to show that the assessee had given money as advances to those persons other than in the normal course of business and "which are not recorded in the books of account". It is a known business practice that Arhatias maintain " Sahi Bahi " as one of the books of account. In the first instance there is no word or expression like "regular books of account" mentioned in section 69 of the Income-tax Act. Secondly, even if it were to be assumed that the books of account mentioned in section 69 referred to only "regular books of account", it cannot be denied that the Sahi Bahi was a regular book of account maintained by the assessee and which was found along with other books of account in the business premises of the assessee. Hence, it cannot be said that the entries pertaining to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been given back the books of account and the papers in spite of the orders of the Hon'ble High Court, as alleged by it in its written submissions before the Assessing Officer which have been quoted by him at the end of para 4 of his order. We, therefore, order that the additions of Rs. 24,000 sustained by the CIT(A) be deleted. 10. Next objection of the assessee is regarding additions of Rs. 6,87,240 which have been substituted by the CIT(A) in place of additions of Rs. 3,72,217 plus Rs. 9,59,290 = Rs. 13,31,507 made by the Assessing Officer u/s 69 of the IT Act. The case of the revenue was that it had discovered a large number of papers during the course of search which were marked as annexure C-1/46. Those papers contained entries showing truck freight and Majoori advance to the tune of Rs. 3,72,217 made by the assessee which were not recorded in its regular books of account. The Assessing Officer had also inferred that the potato bags mentioned in those papers which, according to him, at the first stage totalled to 12,047 bags (including 1640 bags found noted in C-26), belonged to the assessee, which it had sold and its investment along with profits was not recorded in the bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as C-1/46 were found from the business premises of the assessee firm. He submitted that in fact these documents were found from the business premises of the Sister-concern M/s Shobhraj Cold Storage and Ice Factory. He urged that a copy of the Panchnama prepared after the search may be summoned from the Revenue to prove that these documents were discovered from the premises of the assessee. He submitted that the copy of the Panchnama, which should have been given to the assessee according to the procedure as well as according to principles of natural justice, had not been given to the assessee and hence he was unable to file a copy of that Panchnama to show that these papers were not discovered from his premises but were discovered from the premises of the above-mentioned sister-concern. He explained that the Shobhraj Cold Storage and Ice Factory (hereinafter referred to as 'Shobhraj Cold Storage' for the sake of brevity) had 5 partners, one of whom was Shri Kishanchand and since the searches were conducted at the business premises and residential premises of all the sister-concerns and their partners and since Sh. Kishanchand was a common partner in these two concerns, the paper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er in the assessment order regarding the explanation of these items given by assessee, Shri Aggrawal clarified that the explanation was with reference to the transactions of the Shobhraj Cold Storage and not with regard to assessee's own case although admittedly the reply was given by the assessee. Shri Aggrawal explained that it was because Shri Kishanchand, who holds 60% share in the assessee-firm is also a partner having 30% share in the Cold Storage and since the matters pertained to the Group Cases, the explanation was being given with reference to the Group Cases and not necessarily with reference to assessee's own case. Shri Aggrawal further submitted that the explanation given by the assessee in this regard was on account of misconception of law about which the assessee became clear only later on. With reference to the observations of CIT(A) in this regard, Shri Aggrawal repeated that the assessee had nothing to do with the transactions recorded in Annexure C-1/46. Shri Aggrawal stated that the CIT(A) had given a finding in the case of Shobhraj Traders, another sister concern that these transactions pertain to that assessee. He pointed out that the CIT(A) on page 6 bottom p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... burden was on the Revenue to prove that the documents on the basis of which it is being alleged that the assessee had made investments belonged to the assessee and there is nothing on record to show that the Revenue has discharged that burden. Secondly, Sh. Aggrawal submitted, the burden u/s 69 on the Revenue is also to prove that the assessee had made the alleged investments and only thereafter the question of adding it to the income of the assessee would arise. Shri Aggrawal regretted that the only mistake which the assessee had unfortunately committed was that it had tried to explain the matters in this regard as a Group forgetting that, in fact, these documents did not belong to the assessee, as for the remark of the ACIT quoted on page 9 of order of CIT(A) to the effect that it "appears to be simply an afterthought and concocted story", Shri Aggrawal submitted that it could not be an after-thought when all the entries were found recorded. On the other hand, he claimed that the Assessing Officer had not been able to reconcile that figure of 12,047 bags; the Assessing Officer was not able to explain in his report the exact working of the alleged number of bags and hence he reduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld they be treated as belonging to assessee. Regarding the entries of freight of Rs. 3,72,217, he further pointed out that if that figure was taken as assessee's investment, what treatment was to be given to the entry regarding the receipt of bahara amounting to Rs. 3,73,732.85. He argued that the burden of proving that what was recorded in those papers was not correct was on the Revenue, which it had failed to discharge. Regarding the treatment given by the CIT(A), the learned counsel argued that since the Potatoes were kept in the Cold Storage, it was obvious that the sales had not taken place, at least no evidence or presumption regarding sale was adduced or argued and hence there was no basis for working out the profits on the assumed sales by the CIT(A) and the Revenue. Shri Aggrawal clarified on a question from the Bench that the assessee had never owned the Potato bags but had only explained that the 683 bags even as per the documents were kept in Shobhraj Cold Storage and belonged to other parties. 13. Shri Aggrawal reiterated that in this case clearly the documents on the basis of which additions had been made did not belong to the assessee-firm nor were they discovered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey belong to the assessee firm and not to any other firm of this group. Therefore, the arguments of the counsel for the assessee that they belonged to the Cold Storage etc. has no basis. As per the stand of the Revenue that the transactions noted on pages 71, 73, 74 and 75 of the paper book do not represent merely freight and labour charges but represent purchase of Potatoes from different parties, he argued that since no signatures of the parties whose goods were claimed to have been put in Cold Storage are available on those papers, it could not be accepted that these goods belonged to some other parties and not the assessee. Shri Kundra argued that initially the assessee had taken the plea that these goods were placed in Shobhraj Cold Storage but since there was no sufficient space available there, they were transferred to M/s. Heera Cold Storage. However, Sh. Kundra pointed out, that those potatoes were not found in Heera Cold Storage and hence the question arises as to where they had disappeared. 16. Further according to Sh. Kundra, the inference was obvious that the labour charges mentioned @ 0.30 p. per bag on page 74 of the paper book @ Re. 1 per bag on page 75 of the pap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness premises of the assessee, has been filed before us by the Revenue. Regarding the argument of the learned Sr.D/R that on all the pages running from pages 71 to 76 of the paper book the name of the firm has been given on the top, we may point out that only on pages 71 and 72 of the paper book, the name of the assessee firm has been given on the top while on pages 73, 74, 75 and 76, no such name has been given. Even on page 72 of the paper book whereas on the top, the name of the assessee firm has been given-, at the bottom there is a Stamp of M/s Shobhraj Cold Storage and Ice Factory, a fact which was pointed out by Shri Aggrawal in his reply. In our opinion since, as rightly pointed out by Shri Aggrawal, the entire case of the assessee would depend on its proving as to whether these documents were recovered from the possession of the assessee or not, the Revenue should have adduced some cogent and reliable evidence to conclusively prove that these documents were recovered from the premises of the assessee. This is so in spite of assessee's plea to this effect before CIT(A) as mentioned by him in his order dt. 14-12-1989 for AY 1986-87 where similar issues were involved. We are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r part of this order that presumption u/s 132(4A) cannot be drawn only with regard to the part of a document by ignoring other part of the same document. Moreover, if it is very clearly and legibly written on the documents available in tabular form that they show the details as under: -------------------------------------------------------------------------------------------------------------------------------------------------- Freight Name of the Party Bags Truck No. Dated Remarks -------------------------------------------------------------------------------------------------------------------------------------------------- and the column give the amount of freight, name of the party, number of bags, truck Nos. and dates according to the columns mentioned above, the presumption as provided in section 132(4A)(ii) would be that the contents of such books of account and other documents are true. In turn, it would mean that the number of bags mentioned against each party belonged to that party which were transported by the truck, registration number of which has been given on that paper, that they were brought on the date mentioned therein and that the amount of freight ment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the person from whose possession these documents were found had been paying some charges @ 0.30 p. per bag and the labour and other charges one rupee per bag and the total of such labour charges worked out to Rs. 4,797.40 p. Further, he had paid Rs. 3,67,419.70 as freight as noted on right-hand side on page 76 of the paper book. This figure can be verified on the working of the reverse side of page 71 of the paper book where initially a total of Rs. 3,65,975.60 has been worked out as freight charges. Thereafter, on the same page the figure of Rs. 3,67,419.70 has been deducted from the figure of Rs. 3,73,732.85 p. which figure is noted as "bahara aya" on left-hand side of page 76 of the paper book. It would not be correct and there appears to be no basis or any corroborative evidence or any circumstantial evidence to presume that all those goods and potato bags were the investments made by the assessee. Had that been so, it should not have been necessary to mention all the details regarding the names of the parties, the truck no., the freight and the labour charges paid and in several documents, these names, truck nos., number of bags and date being repeated. This situation would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discovered from its business premises which only show that they were Arhat transactions. Those parties have also confirmed that very often they would pay the money to the assessee or they would take some money from the assessee, if and when required. We are referring to all this on the assumption that even if these documents, namely, C-1/46 are accepted to have been recovered from the business premises of the assessee it cannot be presumed that all the potato bags were purchased or sold by the assessee in its own account for which it had invested money at one point of time without circulation of money and that it had been paying freight charges on behalf of the agriculturists for the entire year and suddenly at the end of the year it realised in one lump sum an amount of Rs. 3,73,732.85. In our view, even if a presumption is raised, we have to keep in mind the normal human conduct, the prevalent trade and business practices and the common course of natural events. In that view of the matter the normal trade practice would be that if and when the freight is paid by an Arhatia, it is realised as soon as the goods of the constituent are sold by him. It is a known fact that a person wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on pages 48, 49 and 70 (pages 71, 72 and 73 of the paper book) relate to purchases made for keeping the same in Cold Storage and hence they cannot belong to the assessee who is doing Arhat business but may belong to Shobhraj Cold Storage which is running a Cold Storage. 19. Taking all these factors into account, we firstly hold that the Revenue has not been able to establish that the documents mentioned as C-1/46 were found in the possession or control of the assessee, as provided in Section 132(4A) and hence the additions made on that basis cannot be sustained. Secondly, even if they are presumed to be belonging to the assessee, the assessee has given a reasonable explanation, about them all be it on behalf of Shobhraj Cold Storage, and on that basis also the presumptions and inferences drawn by the Revenue to the effect that these transactions represent assessee's investments in purchase and sale of potatoes cannot be upheld and hence the addition of Rs. 6,87,240 sustained by the CIT(A) is directed to be deleted. 20. The next objection of the assessee is that the CIT(A) has sustained an addition of Rs. 1,00,000 as notional income on the money supposed to have been recovere ..... X X X X Extracts X X X X X X X X Extracts X X X X
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