Case Law Details
Narsinga RAO Vs ACIT (Telangana High Court)
Conclusion: Revenue had placed no material on record to show that the loose papers were in the hand-writing of assessee and there was no corroborative material on record to prove that the expenditure recorded in the said loose papers was incurred by assessee. Therefore, no addition could be made on account of undisclosed expenses.
Held: Appellant was engaged in distribution of ‘Four Square’ cigarettes in Hyderabad city. During the course of search, certain incriminating material in the form of loose papers/slips was found and seized, which indicated huge expenses made by asessee for purchase of jewellery etc. On examination of capital account of assessee, it was found that assessee did not make any drawings from the firm for household expenses. Assessee admitted the undisclosed income of Rs.8,65,000/- towards on-accounted household expenditure and Rs.2,00,000/- towards expenses incurred on the marriages of his two children. However, despite admission, assessee filed return for block period without admitting the income towards undisclosed expenditure incurred by him. A notice under Section 158BC was issued to the appellant and assessee filed the block period return in Form-2B admitting a sum of Rs.3,23,584/- as undisclosed income of the block period. AO did not satisfy with the explanation filed by assessee and came to conclusion that entire amount of Rs.10.65 lakhs, out of which sum of Rs.2,59,280/- was admitted by assessee as undisclosed income and balance amount of Rs.8,05,720/- was added by AO, as undisclosed income. CIT(A) held that expenditure incurred by the appellant amounting to Rs.10,65,000/- was explained only to the extent of Rs. 1,00,000/- and the remaining amount of Rs.9,65,000/- represented unaccounted expenditure of the appellant, out of which, Rs.2,59,280/- had been admitted, as such in the block return. Hence, the addition of Rs.8,05,720/- made by the AO, was restricted to Rs.7,05,720/- and the addition of Rs .3,07,942 / – representing unaccounted expenses towards medical expenses, purchase of jewellery and other purchases assessed by the AO, was confirmed and accordingly, allowed the the appeal partly. It was held that assessee had contended that the loose papers did not belong to him, therefore, the quantum of expenditure noted therein be not taken cognizance thereof inasmuch as, the medical expenses incurred on his daughter’s delivery were met by her husband and father in law and not by assessee. Revenue had placed no material on record to show that the loose papers were in the hand-writing of assessee or the notings made therein were belonging to assessee. There was no corroborative material on record to prove that the expenditure recorded in the said loose papers was incurred by assessee. Appellate Tribunal had considered the grounds raised as well as submissions made on behalf of the appellant and recorded the detailed reasons for its conclusion. Question of law on which the present appeal was filed was factual in nature and finding of facts, which was already considered by the Appellate Tribunal. Therefore, the Appeal thus failed and was accordingly dismissed.
FULL TEXT OF THE JUDGMENT/ORDER OF TELANGANA HIGH COURT
The present appeal has been filed under Section 260-A of Income Tax Act, 1961 (for short, the “Act”) assailing the order passed by Income Tax Appellate Tribunal, Bench-A, Hyderabad (for short “Tribunal”) in I.T. (SS) .No.8/ Hyd/ 2002, dated 31.05.2007 for the block period between 01.04.1987 to 11.02.1999.
2. We have heard the learned counsel Sri Naga Deepak on behalf of Sri S.Ravi for the appellant and the learned senior standing counsel Sri J.V.Prasad for the respondent.
3. The brief facts leading to filing of present appeal are as under:
4. The appellant is a Managing Partner of M/s. A.N.Cigarette Trading Company, which is a partnership firm, engaged in distribution of ‘Four Square’ cigarettes in Hyderabad city. A search operation under Section 132 of the Act was conducted on 11.02.1999 on the residential premises as well as the business premises of the appellant. During the course of search, certain incriminating material in the form of loose papers/slips was found and seized, which indicate huge expenses made by the asessee for purchase of jewellery etc. On examination of capital account of the assessee, it was found that assessee did not make any drawings from the firm for household expenses.
5. The assessee was asked to explain the reason for not showing household expenses. The assessee in his statement admitted that approximate household expenses for maintaining his family to the tune of Rs.70,000/- to Rs.85,000/- per year. He also admitted the undisclosed income of Rs.8,65,000/- towards on-accounted household expenditure and Rs.2,00,000/- towards expenses incurred on the marriages of his two children. The assessee also filed a letter before the DDIT confirming the admission towards personal expenses and functional expenses, which were not reflected in the accounts. However, despite admission, the assessee filed return for block period without admitting the income towards undisclosed expenditure incurred by him.
6. A notice under Section 158BC of the Act was issued to the appellant on 15.06.1999. In response to the said notice, the assessee filed the block period return in Form-2B admitting a sum of Rs.3,23,584/- as undisclosed income of the block period. Thereafter, notices under Sections 143 (2) and 142 (1) of the Act were issued seeking further information and in response, the Chartered Accountant of the appellant appeared before the authority on 19.09.2000. Written replies were also filed through the Chartered Accountant from time to time.
7. A detailed questionnaire dated 06.10.2000 was issued to the assessee to explain as to how the admitted income has not been offered. In response, the assessee filed his reply dated 12.12.2000 and not satisfied with the same, the Assessing Officer (AO) vide his office letter dated 2 1.12.2000 asked the assessee to substantiate his explanation. In response, the assessee filed reply dated 27.12.2000. The A.O. did not satisfy with the explanation filed by the assessee and was of the view that explanation given by the assessee is only an after thought and assessee has failed to substantiate the explanation and came to conclusion that entire amount of Rs.10.65 lakhs, out of which sum of Rs.2,59,280/- was admitted by the assessee as undisclosed income and balance amount of Rs.8,05,720/- was added by the A.O., as undisclosed income.
8. Aggrieved thereby the order of A.O., dated 29.03.200 1, the assessee preferred appeal vide ITA No.665/DC. 1(1)/ CIT(A)-V/ 2001- 02 before the Commissioner of Income Tax (Appeals)-V, Hyderabad [for short, ‘CIT(A)’]. The CIT(A), on due consideration of facts and material, vide order dated 21.01.2002, held that expenditure incurred by the appellant amounting to Rs.10,65,000/- was explained only to the extent of Rs. 1,00,000/- and the remaining amount of Rs.9,65,000/- represented unaccounted expenditure of the appellant, out of which, Rs.2,59,280/- had been admitted, as such in the block return. Hence, the addition of Rs.8,05,720/- made by the A.O., was restricted to Rs.7,05,720/- and the addition of Rs .3,07,942 / – representing unaccounted expenses towards medical expenses, purchase of jewellery and other purchases assessed by the A.O., was confirmed and accordingly, allowed the the appeal partly.
9. Not satisfied with the order of CIT (Appeal), dated 21.01.2002, the assessee preferred appeal before Income Tax Appellate Tribunal, vide I.T. (SS) .A.No.8/Hyd/02.
10. Learned counsel for appellant would submit that appellant retracted the statement earlier given and there is no time limit for such statement and thus, the same ought to have been considered by the assessing officer. Learned counsel referred to orders of CIT(A) and the Appellate Tribunal in a great detail and submitted that Appellate Tribunal committed erred in sustaining the addition of Rs.5,09,600/- only on the basis of statement of appellant. The learned counsel for the appellant relied upon the following decisions in support of his contention:
i) Commissioner of Income Tax vs. Shri Ramdas Motor Transport1; and
ii) Principal Commissioner of Income Tax, Central-3 vs. Abhisar Buildwell Pvt. Ltd.,2
11. Per contra, learned senior counsel for the respondent relied upon the decision of the Hon’ble Apex Court in Roshan Lal Sanchiti vs. Principal Commissioner of Income-Tax3 to support his contention that retraction of statement after a sufficient long gap or point of time loses its significance and is an afterthought and referred to observation of Hon’ble Apex Court at page 237 of the decision, which is reproduced as under:
“… In our view, retraction after a sufficient long gap or point of time, as in the instant case, loses its significance and is an afterthought. Once statements have been recorded on oath, duly signed, it has a great evidentiary value and it is normally presumed that whatever stated at the time of recording of statements under section 132 (4), are true and correct and brings out the correct picture, as by that time the assessee is uninfluenced by external agencies. Thus, whenever an assessee pleads that the statements have been obtained forcefully/by coercion/undue influence without material/contrary to the material, then it should be supported by strong evidence which we have observed hereinbefore. Once a statement is recorded under section 132(4), such a statement can be used as a strong evidence against the assessee in assessing the income, the burden lies on the assessee to establish that the admission made in the statements are incorrect/wrong and that burden has to be discharged by an assessee at the earliest point of time. …. ”
Consideration:
12. Before the Appellate Tribunal, the appellant raised the following grounds:
(1) General in nature and in the absence of any specific plea, the same is therefore rejected being not pressed.
(2) The CIT(A) is not justified in sustaining the addition of Rs.7,05,720/- out of the total addition of Rs.8,05,720/- representing explained household expenditure incurred during the block period. The CIT (A) did not appreciate the appellant’s contention that the domestic expenditure under consideration was met out of the cash available with the appellant, which was admitted by the appellant as undisclosed income during the earlier search operation conducted in 1986.
(3) The CIT(A) failed to appreciate that probability of the availability of funds which the appellant which was beyond doubt proved during the assessment proceedings itself and which explanation would cannot be ruled out of the possibilities.
(4) The CIT(A) is not justified in upholding the addition of Rs .3,07,942/ – as allegedly representing unaccounted expenses towards medical expenses, purchase of jewellery etc., during the previous years relevant to the block assessment period. Here also neither the AO nor the CIT(A) considered the probabilities and possibilities of the position explained by the appellant concerning the lose papers on the basis of which the addition was made. The CIT(A) also did not take into consideration the judicial opinions wherein it was held that lose papers found during search do not represent ‘document’ and could not be taken as basis for making any addition.”
13. On due consideration of grounds, facts and submissions the Appellate Tribunal vide order dated 31.05.2007 considered ground Nos.2 and 3 had held that the assessee is entitled to get the total benefit of Rs.2,96,120/- inclusive of the relief of Rs.1,00,000/- allowed by the CIT(A), out of total addition of Rs.8,05,720/- made by the A.O. Thus, the addition sustained by the learned CIT(A) of Rs.7,05,720/- is reduced to Rs.5,09,600/-.
14. With regard to ground no.4, the Appellate Tribunal came to conclusion that in the absence of any contrary material brought on record by the revenue, the addition of Rs.3,07,942/- was not sustainable and accordingly deleted the same. The Appellate Tribunal came to the above conclusion by relying upon the decision of I.T.(SS).A.Nos.85-87/Hyd/97 in the case of G.Muralikrishna vs. ACIT and others, dated 08.09.2003 and recorded the reasons at paragraph-13, which is reproduced hereunder for ready reference.
“13. Having heard the submissions of the rival parties and perusing the material available on record, we find that there is no dispute that the assessee has contended that the loose papers do not belong to him, therefore, the quantum of expenditure noted therein be not taken cognizance thereof inasmuch as, the medical expenses incurred on his daughter’s delivery were met by her husband and father in law and not by the assessee. The revenue has placed no material on record to show that the loose papers are in the hand-writing of the assessee or the notings made therein are belonging to the assessee. There is no corroborative material on record to prove that the expenditure recorded in the said loose papers is incurred by the assessee. The AO has not recorded any statement of the assessee’s daughter or her husband or her father-in-law.”
15. Perusal of the order of CIT(A) as well as Appellate Tribunal, shows that the contentions raised by the appellant have been considered and detailed reasons have also been recorded by the Appellate Tribunal while passing order. As mentioned supra, the Appellate Tribunal had considered the grounds raised as well as submissions made on behalf of the appellant and recorded the detailed reasons for its conclusion.
Conclusion:
16. In the above factual matrix and circumstances of the case, the question of law on which the present appeal is filed is factual in nature and finding of facts, which was already considered by the Appellate Tribunal. Therefore, we do not find any reason to interfere with the order passed by the Appellate Tribunal. The Appeal thus fails and deserves to be and is accordingly dismissed. There shall be no order as to costs.
17. Pending miscellaneous applications, if any, shall stand closed.
Notes:
1 (1999) 238 ITR 177(AP)
2 (2023) 454 ITR 212 (SC)
3 (2023) 452 ITR 229 (SC)
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