PCIT-1 Vs Hassan Ali Khan (Bombay High Court)
Summary: The Bombay High Court dismissed the Revenue’s appeal concerning additions made in the assessment of Hassan Ali Khan for Assessment Year 2000-01. During a search at the residence of Kashinath Tapuriah, three bank drafts of Union Bank of Switzerland were found and seized, including a US$2 million draft in favour of Pan Asian Distribution Ltd. and another US$2 million draft in favour of the assessee. The Assessing Officer added the rupee equivalent of the amounts in the assessee’s hands. The Tribunal confirmed the addition relating to the draft in the assessee’s name but deleted the addition relating to the draft payable to Pan Asian Distribution Ltd. The Revenue contended that the presumptions under Section 132(4A) and Section 292C of the Income-tax Act applied because documents concerning the draft were seized during the search.
Read SC Judgment in this case: Bank Draft Seized From Third Party Cannot Establish Assessee Ownership: SC
The High Court noted that the search was not conducted at the assessee’s premises, the disputed draft was payable to Pan Asian Distribution Ltd., and there was no material establishing that the company did not exist or showing a link between the company and the assessee. The Court further held that a bank letter concerning revalidation of the draft did not establish a relationship between the payable amount and the assessee, particularly when the draft was in favour of a limited company and the documents were recovered from a third party. The issue was therefore factual and no question of law arose. The second issue, concerning reduction of unexplained lifestyle expenditure, was likewise held to be factual. The appeal was dismissed.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
The Revenue is in Appeal against the Judgment of the Income Tax Appellate Tribunal (in short “the Tribunal”), raising the following questions for our consideration:-
“(a) Whether on the facts and circumstances of the case and in law, the Tribunal was justified in deleting addition of Rs.8,57,00,000/- on account of unexplained income appearing in the name of Pan Asian Distribution Ltd by not appreciating the document containing the details was seized during the course of search and therefore the presumptions envisaged in the provisions of Section 132(4A) as well as provision of Section 292C are squarely applicable in the case of the assessee and consequently the AO was justified in treating the said amount as the assessee’s unexplained income?
(b) Whether on the facts and circumstances of the case and in law, the Tribunal was justified in restricting the addition on account of unexplained expenditure in lifestyle related expenses from Rs.28.50 lacs as admitted by the assessee in his statement recorded on oath u/s. 132(4) of the Act to Rs.7.50 lacs, without appreciating the fact that the assessee had failed to furnish any evidence to the contrary either before the Assessing Officer or the CIT(A) or before the Tribunal itself?”
2. The Respondent-Assessee is an individual. Appeal relates to Assessment Year 2000-01. During the search operation at the residence of one Kashinath Tapuriah, three bank drafts of Union Bank of Switzerland were found and seized. One bank draft was for payment of 2 Million US$ drawn in favour of one -Pan Asian Distribution Ltd, payable at Singapore. Another draft was for a sum of Rs.2 Million US$ drawn in favour of the the Respondent-Assessee, payable in India. The Assessing Officer added Indian Rupees, equivalent of such sums in the hands of the Assessee. The issue eventually reached to the Tribunal. The Tribunal by the impugned judgment, confirmed the addition in relation to bank draft in the name of the Assessee, whereas addition in connection with the bank draft in favour of the Pan Asian Distribution Ltd., was deleted.
3. Having heard the learned Counsel for the parties and having perused the documents on record, we notice that, the search was not conducted at the premises of the Assessee but at the residence of the third party from where, the bank drafts were recovered. The draft in question did not contain name of the Assessee as payee but of Pan Asian Distribution Ltd. It was in this back-ground that, the Tribunal refused to accept the Revenue’s contention that, the Assessee was beneficiary of this payment. The Tribunal noted that, there was no material on record to suggest that, such a company did not exist nor there was any evidence of any link between the said Company and the Assessee. The Tribunal, therefore, observed that the presumption as referred to in Section 292C of the Income Tax Act, 1961 (in short “the Act”) in such a case would not arise. Entire issue is thus factual.
4. Counsel for the Revenue, however, vehemently contended that, during the search operation, Revenue Authorities had found a document in the nature of letter from the bank, pointing out that, the last date for presentation of the draft in question had expired and that the Assessee should get the draft re-validated. He submitted that, no such letter would have been written by the bank, unless the assessee was the beneficiary of the payments.
5. In our opinion, mere letter from the bank would not established a relation between the payable amount and the assessee, particularly when the draft was in favour of a limited Company. As recorded, documents were not seized from the possession of the Assessee but during the raid from a third party. No question of law, therefore arises.
6. Question 2 relates to addition of the amount of the Assessee’s un-explained expenditure. The Tribunal considered the material on record and reduced these additions made by the Assessing Officer under this head. The entire issue is factual.
7. In the result, Appeal dismissed.
