9911796707
TMI Blog1998 (10) TMI 87X X X X Extracts X X X X X X X X Extracts X X X X ..... r 1991-92 read as under:- 1. On the facts and in the circumstances of the case the ld. CIT(A) has erred in deleting the addition made on account of unexplained opening capital of Rs. 4,81,836. 2. It is prayed that the order of the ld. CIT(A) be set aside and that of the AO be restored. 4. I.T.A. No. 1590 is the appeal by the assessee relating to assessment year 1993-94 wherein the grounds taken are as under:- 1. That the ld. CIT(A) was not justified in estimating the profit on sale of gold at Rs. 400 per gold biscuit. 2. That the ld. CIT(A) was not justified in upholding the addition of Rs. 8.00 lacs made on account of surrender made by the assessee under section 132(4) of the Income-tax Act, 1961. 5. Briefly, the facts are that an action under section 132(1) of the Income-tax Act, 1961 was taken in the case of the assessee on 17-4-1993 and the following assets were seized:- Rs. Cash &nb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessment order passed by the AO for the assessment year 1991-92 mentions that no accounts or other records are available to prove the opening credit of Rs. 4,81,836. The submission of the assessee that he was doing the business of purchase and sale of gold for the last fifty years was not accepted by the AO for lack of proper evidence. Accordingly the AO treated the credit of Rs. 4,81,836 in the personal account books of the assessee as unexplained income of the assessee under section 68 of the Act for the assessment year 1991-92. 6. At the time of search, the assessee was not found at his residence as he was admitted in the hospital on account of high blood pressure and related diseases. The ADI recorded the statement of the assessee in the hospital which is apparent from the opening lines of the statement, before administering the oath that the assessee was located in ward-11 of Rajendra Hospital in Patiala and his statement was recorded there only. In the statement, the ADI brought various facts to the knowledge of the assessee, which, inter alia, included the fact of peak investment of approximately Rs. 8.5 lakhs which was projected to be based on certain documents which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 10. We will take up the assessee's appeal first. Ground of appeal No.1 relates to the action of the CIT(A) in upholding the addition of Rs. 20,000 on account of unexplained investment with regard to sale proceeds of house. During the course of search, it was found that the assessee owned a house at Jalandhar jointly with his two brothers. This house was allegedly partitioned amongst three brothers and thereafter the share of the assessee was sold for a consideration of Rs. 55,000. It was claimed on behalf of the assessee that at the insistence of the purchaser the consideration mentioned in the instrument of transfer was stated at Rs. 35,000 but since the assessee has taken an amount of Rs. 55,000 it was shown as such in the note book which was seized during the course of raid. The AO, however, was of the view that since the sale was made for a consideration of Rs. 35,000 as per the instrument of transfer which was duly registered, the amount of Rs. 20,000 represents unexplained credit introduced by the assessee in his note book. Accordingly, the addition of Rs. 20,000 was made. On appeal, the ld. CIT(A) upheld the addition of the AO taking into consideration that the sale deed s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as such that information could not be used against him. It was submitted that during the course of assessment proceedings, the assessee has filed written explanation intimating that the purchase and sale rate of gold biscuit of approximately 10 totals varies from Rs. 5 to Rs. 366 and as such there was no justification for the CIT(A) to estimate the profit at Rs. 400 per gold biscuit of 10 totals each. The ld. D.R. on the other hand, supported the order of the CIT(A) in this regard and further submitted that the purchases and sales as recorded in the diaries were not vouched and it is no doubt true that the profit on the sale of gold bullion/gold biscuit varies from day-to-day but in the absence of vouchers and other relevant materials, the AO was justified in estimating the profit at Rs. 500 per 10 gms keeping in view the investment of money involved in the bullion trade and the CIT(A) has been more than reasonable in directing the AO to estimate the profit on sale of gold at Rs. 400 per gold biscuit of 10 tolas. She accordingly supported the order of the CIT(A). 15. We have considered the rival submissions. The AO has made an addition of Rs. 16,653 by rejecting the trading account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccordingly made by sale of goods to various customers." The ld. counsel for the assessee submitted that Shri Anil Kumar is the son of Shri Baldev Krishan, the assessee, who was married in the year 1988 with Smt. Saroj Rani. Smt. Saroj Rani expired on 10-5-1990 leaving behind minor son Pankaj and at the time of her death Smt. Saroj expressed her desire that gold ornaments belonging to her may be sold and the amounts so realised may be utilized for the benefit of son Pankaj. That in order to fulfil the wish of Smt. Saroj Rani, Shri Anil Kumar gave the gold to Shri Baldev Krishan who sold it to one Shri Hans Raj for Rs. 38,000 and out this an amount of Rs. 28,000 was advanced to Shri Anil Kumar which was found recorded in the seized paper. In support of the above, an affidavit of Shri Anil Kumar was furnished at page 24 of the paper-book. Accordingly, it was submitted that the departmental authorities were not justified in making the disputed addition. The ld. D.R. supported the order of CIT(A) and submitted that the affidavit was never filed before the lower authority and the assessee is making altogether a new case which should not be entertained at this stage. 17. We have considere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty deleted the addition by holding that although no regular books of account were maintained, the return was prepared on the basis of seized diaries/note books which were found at the time of search from the premises of the assessee. The assessee had been maintaining rough diaries for all these years. Diaries up to 1990-91, were, however, washed away due to floods and those for assessment years 1991-92, 1992-93 and 1993-94 were duly available with the appellant and were seized by the department. The assessee had filed returns taking extracts from these seized diaries and other record. The ld. first appellate authority noted that the opening cash balance as on 1-4-1990 was taken as per the diary seized at the time of search. Similarly, debts recoverable were worked out on the basis of the seized record. Memoranda cash books and ledgers were prepared from the seized record and produced before the AO and the AO did not find any specific defects in those books regarding purchases and sales of gold/ silver made by the assessee in the assessment year under consideration. Accordingly, the learned first appellate authority came to the conclusion that the opening stock of gold/silver bullio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; --------- Accordingly, the ld. first appellate authority held that there was no justification in treating the amount of Rs. 4,81,836 on account of opening capital credited in the books prepared on the basis of seized record on 1-4-1990 as the income of the assessee under section 68 for assessment year 1991-92. Accordingly, the addition of Rs. 4,81,836 was directed to be deleted. The revenue is aggrieved and has come up in appeal before us. 20. It was submitted by the ld. D.R. that the ld. CIT(A) was in error in deleting the addition of Rs. 4,81,836 because this was the opening capital credited in the books of account prepared by the assessee on the basis of which return was filed and the assessee could not give any reasonable explanation for this credit and as such the AO was justified in taxing the same as the undisclosed income of the assessee by invoking the provisions of section 68. 21. The ld. counsel for the assessee, on the other hand, relied on the order of the CIT(A) and submitted that the assessee has been carrying on the business of dealing in primary gold/silver for the last 50 years and although no regular books were maintained and no returns were filed, the depa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... explanation is accepted, there is an end of the matter. The question then might arise, whether the assessee's claim that the amount credited is not taxable income is justified or not. The burden in the first instance must be on the assessee to show the true nature of the amount credited in the books and why he claims that it is not taxable income. When the assessee furnishes an explanation, the AO must consider that explanation and if according to the AO the explanation is unsatisfactory, that may in itself be a circumstance which the AO may be entitled to take into consideration but it need not necessarily, in every case, lead to the conclusion that the credit is the income liable to tax in that particular year. That question must always remain a question of fact which has to be decided on the material available on record. In every case, AO is entitled to take into consideration the fact that the explanation given by the assessee is either unreasonable or is false and then to consider whether that circumstance alone or the other materials available along with that circumstance would entitle him to hold that the amount so credited represents the undisclosed income of the assessee i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that while recording the statement of the assessee, the ADI induced the assessee to make a surrender of Rs. 8 lakh by narrating to him the facts relating to peak investment of approximately Rs. 8.5 lakhs which was projected on the basis of certain documents including rough note-books/diaries which were recovered from the almirah of the assessee at his residence. Shri Bajaj made pointed reference to para 2 of the statement where after recording the explanation of the assessee regarding sources of his income, the ADI brought to the notice of the assessee the following:- "During the course of search at your residence, the following points were noted/seizure made:- 1. Gold biscuits with foreign markings numbering six (6) were found valued at Rs. 3 lac appx. 2. Cash worth Rs. 90,000 was seized. 3. Gold and silver ornaments valued at approx. 7.5 lacs rupees were found which included gold biscuits also and jewellery worth Rs. 8.5 lacs was seized. 4. Further from your almirah certain documents have been recovered which are detailed in Annexure-A to the panchnama. These documents include cash books written in your hand which give details of your sale purchase of golds. As per these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 132(4) besides other additions. It was submitted that the ld. CIT(A) has wrongly confirmed the order of the AO with regard to the addition of Rs. 8 lacs for the reasons given in para 5.1 of the appellate order. It was submitted that the order of the AO as well as the CIT(A) are merely based on the statement of the assessee recorded under section 132(4) by the ADI which was subsequently resiled by the assessee. It was submitted that the case of departmental authorities is that the statement recorded under section 132(4) is binding on the assessee and since no doctor of the hospital objected to the giving of the statement, it is presumed that it was recorded with the permission of the doctor and that the assessee's contention that the facts narrated to him were incorrect is not borne out from the statement. It was submitted that there is no denying the fact that the statement recorded under section 132(4) could be used as evidence in any proceedings under the Income-tax Act. However, Shri Bajaj submitted that if it is proved that the admission of the assessee was induced by representation of wrong facts, it loses its evidentiary value. It was submitted that the Hon'ble Supreme C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , is binding on the assessee and the departmental authorities were justified in making the addition of Rs. 8 lacs. 28. We have considered the rival submissions and have gone through the orders passed by the AO as well as the CIT(A). The search and seizure operation were carried out in the case of the assessee on 17-4-1993 which date falls in the accounting year 1993-94 relevant to the assessment year 1994-95 and yet the ADI in the question which was posed to the assessee at the time of recording his statement in the hospital has suggested that as per the documents, a peak investment of Rs. 8.5 lacs appear for the financial year 1992-93 relevant to the assessment year 1993-94 which is obviously incorrect. The answer of the assessee in response to the question put by the ADI while recording the statement of the assessee in the hospital is conditioned by the question put and it was under these circumstances that the alleged surrender of Rs. 8 lacs was made by the assessee which surrender was subsequently resiled by the assessee while furnishing a detailed reply to the very first notice issued under Rule 112-A read with section 132(5) on 29-7-1993, copy of this reply has been furnishe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incorporated in para 25 and arguments of the assessee are at para 26 and that of ld. D.R. at para 27 of the proposed order and these need not be repeated here in my order. After hearing both the parties, perusing the record and considering the statement made before the ADI, where surrender of Rs. 8 lakhs was made, I find that in the statement made before the ADI during search operation, the assessee made surrender which was resiled by him subsequently and it was alleged that statement of the assessee was induced by misrepresentation of facts and in ignorance of his legal rights and under duress and therefore on this count addition could not be made or confirmed. But from the facts as emerging, I am of the view that statement is voluntary made by the assessee before the ADI and same was witnesses by two independent witnesses and while making surrender in the said statement, assessee surrendered the amount subject to no penal action and this action of the assessee makes it clear that he was mentally alert and conscious of penal consequences also. So it cannot be held that statement was made in ignorance of legal rights or under duress as nothing was placed on record to suggest that e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was no corroborating evidence to support the addition particularly when the date of search falls in the assessment year 1994-95, or the view taken by the Judicial Member that the addition was rightly made by the departmental authorities and should be confirmed, as no basis or material has been shown or placed on record to justify the action of the assessee to resile from the statement made during search operation for surrender made of the amount included, is correct?" THIRD MEMBER ORDER 1. The following point of difference has been referred to me as a Third Member by the Hon'ble President acting under section 255(4) of the Income-tax Act, 1961:- "Whether the addition of Rs. 8,00,000 made by the departmental authorities solely on the basis of a confessional statement of the assessee recorded by the ADI on 17-4-1993 had been rightly deleted by the Accountant Member on the ground that the statement was resiled by the assessee and there was no corroborating evidence to support the addition particularly when the date of search falls in the assessment year 1994-95, or the view taken by the Judicial Member that the addition was rightly made by the departmental authorities and sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred to the statement recorded at the time of search reproducing in his order relevant extract leading to the alleged surrender of Rs. 8 lakhs. This is set out as under:- "During the course of search at your residence, the following points were noted/seizure made: (1) Gold biscuits with foreign markings numbering six (6) were found valued at Rs. 3 lakh appx. (2) Cash worth Rs. 90,000 was seized. (3) Gold and silver ornaments valued at approx. 7.5 lakhs rupees were found which included gold biscuits also and jewellery worth Rs. 8.5 lakhs was seized. (4) Further from your almirah certain documents have been recovered which are detailed in Annexure-A to the panchnama. These documents include cash books written in your hand which give details of your sale purchase of golds. As per these documents a peak investment of approx. Rs. 8.5 lakhs appears for the A.Y. 1992-93. Similarly some details of your profit can also be worked out. (5) We have not been able to find nor have any books of account been produced before us pertaining to any of the above mentioned points. In fact, no regular books of accounts are being maintained by you regarding the above transactions. Please explain th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regards the grounds in appeals of the parties for assessment year 1991-92, the ld. Members constituting the Division Bench agreed. As regards the point of difference, the assessee's counsel argued before the Division Bench that at the time of the search the assessee was admitted in the hospital and his statement was recorded at the hospital itself i.e. in Ward No. 11, Rajendra Hospital, Patiala. According to the assessee's counsel, the ADI had induced the assessee to make a surrender of Rs. 8 lakhs by narrating to him facts relating to peak investment of approximately Rs. 8.5 lakhs which figure was projected on the basis of certain documents including rough note-books and diaries which were stated to have been recovered from the almirah of the assessee at his residence. Para 2 of the statement was specifically referred to and which the ld. Accountant Member reproduced in para 25 of his order and which also finds a mention in the preceding part of my order. 4. The assessee's counsel submitted that the aforesaid extract from the statement revealed clearly that the same had been induced on the basis of certain factual details projected by the ADI and it therefore could not be consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ched to such an admission. The ld. counsel further argued that addition based solely on a confessional statement from which an assessee later resiled could not be upheld. The ld. counsel laid stress on point No. 4 of the question put by the ADI while recording the statement wherein the said ADI had pointed out to a peak investment in the purchase of gold and cash etc. to the tune of Rs. 8.5 lakhs contending that this was incorrect and had been wrongly portrayed to the assessee by the said ADI being not borne out from the record. The ld. counsel also pointed out to the assessment order contending that no case of unexplained investment had been made out there being no addition on this point. In concluding the assessee's counsel urged that the addition of Rs. 8 lakhs made on the basis of alleged surrender by the assessee which was subsequently resiled be deleted. In support of his arguments, the ld. counsel placed reliance on the decisions of the Hon'ble Supreme Court in the cases of Nagubai Ammal and Avadh Kishore Dass v. Ram Gopal AIR 1979 SC 861 as also a judgment of the Hon'ble Punjab and Haryana High Court in the case of Krishan Lal Shiv Chand Rai (supra), and lastly a decision o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ghlighted the decision of the Chandigarh Bench of the Tribunal in the case of Jagdish Chand Gupta, to which he was a party, observing that on identical grounds an addition of Rs. 48 lakhs had been deleted, namely, an admission/confessional statement subsequently resiled. In other words, the ld. Accountant Member followed the law laid down by the Hon'ble Supreme Court, Hon'ble jurisdictional High Court and the view expressed by the Chandigarh Bench of the Tribunal. 6. As against the aforesaid view expressed by the ld. Accountant Member, the ld. Judicial Member confirmed the view taken by the tax authorities on the following main grounds:- (1) The statement had been voluntarily made by the assessee before the ADI and the same was witnessed by two independent witnesses. (2) In the statement recorded, the assessee made a surrender of Rs. 8 lakhs subject to no penal action and which made it clear that he was mentally alert. (3) There was nothing on record to suggest that the statement was made under duress or under any pressure and nothing could be inferred from the statement recorded that it was induced by misrepresentation of facts. (4) By merely resiling from a voluntary stateme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her no addition other than the "surrender" of Rs. 8 lakhs had been made by the AO. I may mention at this stage that the matter was heard by me on two occasions as same could not be concluded on the first date of hearing and it was desired by me to verify certain factual aspects with the assistance of both the parties. At the second hearing the ld. counsel filed copy of the Panchnama alongwith Annexure-A contending that the search commenced on 17-4-1993 at 8.30 a.m. and concluded on the same date at 8.15 p.m. A perusal of the Panchnama shows that the same is signed by the assessee on 17-4-1993 but according to the ld. counsel at the hospital and not at the residence as according to him the assessee remained in the hospital till 21-4-1993 when he was discharged. The other fact stated by the ld. counsel was that Annexure-A to the Panchnama was not signed by the assessee. Copies of the said Annexure alongwith the Panchnama were also filed. The copies of relevant papers issued by the hospital were also placed at pages 6 to 12 of the paper-book for the submission made in respect of the admission to the hospital and the discharge from the said hospital. The assessee who was present in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntant Member in his order has reproduced relevant extract from the statement recorded to come to the conclusion that the surrender of Rs. 8 lakhs was "conditioned" by the question put about peak investment of Rs. 8.5 lakhs for the financial year 1992-93 relevant to the assessment year 1993-94 and which according to him was obviously incorrect. It was noted by the ld. Accountant Member that the date of search i.e. 17-4-1993 pertained to the accounting year 1993-94 relevant to assessment year 1994-95 but still the ADI posed a question pertaining to "investments" for financial year 1992-93 relevant to assessment year 1993-94. The ld. Accountant Member took due note of the fact that at the first opportunity i.e. in proceedings u/s 132(5) read with rule 112A, the assessee by means of written submissions resiled from the earlier statement. Relying on the judgment of the Hon'ble Supreme Court in the case of Shri Krishan, that of the Hon'ble Punjab & Haryana High Court in the case of Krishan Lal Shiv Chand Rai, and lastly the judgment of the Chandigarh Bench of the Tribunal in the case of Jagdish Chand Gupta, the ld. Accountant Member in the ultimate analysis concluded that the addition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cable to the present case as follows:- 1. Nagubai Ammal's case: "An admission is not conclusive as to the truth of the matters started therein. It is only a piece of evidence, the weight to be attached to which must depend on the circumstances under which it is made. It can be shown to be erroneous or untrue, so long as the person to whom it was made has not acted upon it to his detriment, when it might become conclusive by way of estoppel." "It is no doubt true that what a party himself admits to be true my reasonably be presumed to be so. But before this rule can be invoked, it must be shown that there is a clear and unambiguous statement by the opponent, such as will be conclusive unless explained." 2. Sarwan Singh Rattan Singh v. State of Punjab MR 1957 SC 637: "In law it is always open to the Court to convict an accused on his confession itself though he has reacted it at a later stage. Nevertheless usually Courts require some corroboration to the confessional statement before convicting an accused person on such a statement. What amount of corroboration would be necessary in such a case would always be a question of fact to be determined in the light of the circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sional statement was made by the assessee when the marriage ceremony of his son was in progress. The ld. Members took this into account observing that the assessee simply penned his signatures on the statement recorded by the officials of the search party with a view to complete the formalities so as to go ahead with the Sehra Bandi ceremony of his son which was already delayed by four hours on account of search. I have no hesitation in saying that a person who is admitted to the hospital for whatever reason cannot be in a better frame of mind than a person who is engaged in the marriage ceremony of his son. It may be noted from the various documents filed before me including the Panchnama and the statement recorded that the assessee has signed in Hindi whereas the aforesaid documents are in English. Nobody has examined and nor has it been stated before me whether the assessee understands English or not but I do not propose to go into this aspect of the matter. 11. Coming to the order of the ld. Judicial Member, he has not differed with the recording of facts as noted by the ld. Accountant member but has treated the statement as a voluntary one made by the assessee primarily on th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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