ITAT CHANDIGARH BENCH ‘A’
Naresh Kumar Verma
Versus
Assistant Commissioner of Income-tax, Central Circle, Patiala
Ms. Sushma Chowla, JUDICIAL MEMBER
AND MEHAR SINGH, ACCOUNTANT MEMBER
IT Appeal Nos. 802 to 806 & 818 (Chd.) of 2012
[ASSESSMENT YEARS 2002-03 TO 2007-08]
NOVEMBER 27, 2012
ORDER
Per Bench – The present bunch of six appeals filed by the appellant is directed against the order, dated 28.03.2012/10.5.2012 passed by the ld. CIT(A) u/s 250(6) of the Income-tax Act,1961 (in short ‘the Act’). As the appeals involve similar grounds of appeal and issues, the same are being decided by a consolidated order for the sake of convenience and brevity.
2. In ITA No. 802/Chd/2012, the assessee has raised following grounds of appeal :
“1. That the ld CIT (Appeals) has erred in confirming the addition of Rs. 54,000/- on account of certain alleged job work on the basis of statement recorded during the course of search on 7.8.2007.
2. That notwithstanding the above said facts, the year involved being financial year 2001-02, no presumption could be drawn in respect of alleged job work carried out in financial year 2001-02.
3. That the ld CIT (Appeals) has erred in confirming the addition of Rs. 59,193/- on account of household expenses against the addition of Rs. 86,193/- as made by the AO.
4. That notwithstanding the above grounds of appeal, the ld CIT (Appeals) was not justified in upholding additions in the assessment framed u/s 153A since no material was found during search leading to various additions made during the assessment proceedings.
5. That the addition in the aforesaid paras has been made against the facts and circumstances of the case and submissions made by us has not been considered properly.
6. That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off.”
3. Ld. ‘AR’ stated that all the grounds of appeal in ITA No. 802 to 806 & 818/Chd/2012, for various assessment years are common in nature, except there being variation in figure of addition, made by the AO, on account of alleged job work and house-hold expenses etc. Ld. ‘AR’ filed written submissions, in the form of chart and placed reliance, on the decision dated 22.08.2012 of Chandigarh Bench in ITA No. 343/Chd/2012, for the assessment year 2003-04 and ITA 376/Chd/2012, for the assessment year 2003-04 (in the cross appeals), in the case of Vipan Kumar Verma v. Asstt. CIT Ld. ‘AR’ referred to question No. 4 & 10 of statement dated 7.8.2007, recorded u/s 132(4) of the Act. He, further, vehemently contended that the statement of the assessee appellant was recorded, on 7.8.2007, u/s 132(4) of the Act and in response to question No. 10, appellant nowhere mentioned that he had earned income from job work, in any of the past assessment years. He, further, stated that even in the assessment year, 2008-09, pertaining to the specified previous year, a surrender of Rs. 22 lacs had been made by the appellant, however, no declaration has been made, in respect of job work, as no material was found and seized, in the course of search operations. In response to question No.4 of the said statement, the assessee appellant stated about the nature of his business. Ld. ‘AR’, clearly pointed out that no books of account are maintained by the appellant, hence, there is no question of applicability of the provisions of section 132(4A) of the Act. He, vehemently argued that no addition, what-so-ever, can be made, without the foundation of any material or evidence, brought on record. However, the AO made the impugned addition, on account of job work, purely based on the general and vague deposition made by the assessee, in the course of search operation in response to question No.10. However, the said deposition remained uncorroborated and, hence, no income from such source was declared by the appellant. The AO resorted to estimation of income, without bringing any material on record and acting in an arbitrary manner.
4. Ld. ‘DR’ placed reliance, on the decision of Honorable Punjab & Haryana High Court, in the case of CIT v. Lekh Raj Dhunna [2012] 344 ITR 352 Ld. ‘DR’ also placed reliance on the provisions of section 132(4A) of the Act, to support his contentions, in respect of applicability of the presumptions within the meaning of such provisions of the Act. Ld. ‘DR’ also stated that the appellant has failed to rebut the statement recorded, in the course of search operations, particularly the answer, in response to Q.No. 10.
5. We have heard the rival submissions, and carefully perused and considered the facts of the case, Paper Book filed by the assessee and reliance placed by ld. ‘DR’ on the decision of jurisdictional High Court. The first two grounds of appeal raised by the appellant- assessee are inter-connected. In the first ground of appeal, the appellant contended that CIT (Appeals), erred in confirming the addition of Rs. 54,000/-, made on account of certain alleged job work, based on the statement of the appellant recorded, on 7.8.2007, in the course of search operation u/s 132 of the Act. In Ground No. 2, appellant contended that no presumptions can be raised in respect of alleged job work, for the assessment year 2002-03.
6. A bare perusal of the assessment order, dated 19.12.2009, for the assessment year in question, passed u/s 143(3) read with section 153A of the Act reveals that the AO estimated income of the appellant from the alleged job work and consequently, made an addition of Rs. 54,000/-, to the income of the assessee, treating the same as unaccounted income from job work. The AO, made the impugned addition purely on the foundation of statement of the assessee recorded, on 07.08.2007, in the course of search operations. It would be pertinent to reproduce the relevant text of the question No. 10 and answer thereto, upon which reliance has been placed by the AO, for making the impugned addition :
“Q.NO. 10 “Have you other source of income except salary income, you are drawing from M/s Verma Jewelers ? If so, please give details.
Ans. “I also do job work at the shop from which I earn Rs. 5 to 6,000/- per month.”
In response to question No.4, the assessee merely stated the nature of business undertaken by him. The appellant stated that, “I assisted with my father at the shop for which I get salary of Rs. 10,000/- per month.” The AO, vide Questionnaire dated 31.07.2009, issued to the assessee, sought his explanation as to why income from job work at Rs. 6,000/- per month may not be added to the income, as admitted income Rs. 5,000/- to Rs. 6,000/- per month, in the statement recorded in the course of search operation. The AO, made the impugned addition, purely on the basis of the statement recorded u/s 132(4) of the Act, as is evident from the findings of the AO, reproduced here under:
“A search and seizure operation was conducted on the residential premises No. 94-A, Guru Nanak colony, Rajpura of the assessee on 7-8-2007 and statement on oath of Sh. Naresh Kumar Verma recorded u/s 132(4) of the I.T. Act. Vide question No. 10, the assessee was required other sources of income other than salary from Verma Jewelers. In reply to the question, the assessee admitted that he did job work at the shop and earned Rs. 5000 to 6000 per month but the assessee not shown the said income in his return.
Vide questionnaire dated 31-7-2009, the assessee was show caused as to why income from job work at the shop Rs. 6000/- per month may not be added to the income as he admitted income Rs. 5000 to 6000 per month in his statement recorded during the course of search proceedings at his residence on 7-8-2007 u/s 132(4) of the I.T Act. The show cause notice was properly served, but the assessee filed no reply which prove that he has nothing to say. Since the assessee admitted income from job work Rs. 5000 to 6000 per month during the course of search at his residence on 7-8-2007, but the has not shown income from job work in his return. Therefore, income for the assessment year 2002-03 is estimated Rs. 4500 per month and Rs. 54000/- added to the income of the assessee treating as income from job work not accounted for.”
6. (i) Before CIT (Appeals), the appellant submitted that no business of job work of jewellery was carried out by him, for which requisite place and infrastructure is required. It was contended that the addition is purely founded, on the statement made, in the course of search operation. The assessee also referred to contentions and recommendations of Raja Chelliah Committee to show that mere statement cannot be made the foundation of any addition, in the absence of any material to be brought on record. The instructions of CBDT contained in F.No. 286/203/IT(INV.) dated 11.03.2003 were also quoted, in the matter. The appellant also placed reliance on the decision such as Chief CIT v. Pampathi [2009] 310 ITR 64; Magnetic Intermediates (P.) Ltd. v. ITO [2009] 310 ITR (AT) 237 (Ahd.); CIT v. Ravindra Kumar Jain [2011] 12 taxmann.com 257. In a nut-shell the appellant contended before the CIT (Appeals) that no addition can be made purely on the basis of statement, without its corroboration by way of cogent material. However, ld CIT (Appeals) upheld the addition, as per findings recorded in para 7 of the order dated 28.03.2012. The relevant part of the order is reproduced here under :
“I have considered the basis of addition made by the AO and the arguments of the AR on the issue. It is seen that the AO has relied upon the statement of the appellant made before the authorized officer in response to the general question as to what was his sources of income and/the appellant had very categorically stated to have done job work on regular basis at his shop. In the circumstances the claim of the AR that the AO did not have any material to base his estimation, is without any basis. The appellant has not been able to bring on record any logical reasons to show that statement given during the course of search was in any way out of any fear or compulsion or inducement. It clearly was a voluntary submission of facts as recalled by the appellant at the time of making the statement and there is no reason to disbelieve the authenticity of same. As such the addition made by the AO is confirmed.”
6. (ii) It is mentioned that CIT (Appeals) misread and misquoted the said statement of the appellant, and read the same as “the appellant had categorically stated to have done job work on regular basis at shop”. In this context, a reference maybe made to the above reproduced relevant part of the appellant’s statement. In view of this, findings of the CIT(Appeals), are vitiated, being based on assumed incorrect facts.
7. The reliance placed by ld. ‘DR’ on the decision of the jurisdictional High Court in the case of Lekh Raj Dhunna (supra) is misplaced, founded on misreading of the facts of the case and the relevant provisions of section 132(4) read with section 132(4A) of the Act. A bare perusal of the fact-situation of the present case, as culled out from the relevant records, assessment order and the appellate order of the CIT (Appeals), reveals that the assessee never maintained any books of account. No seized material has been brought on record, to prove that assessee had earned job work, for the past asst. Years, including the asst. Year under reference. Ld. ‘DR’ has failed to demonstrate, as to how the facts and the ratio of the decision of the jurisdictional High Court, relied upon by him is applicable to the facts of the present case. A bare perusal of the fact-situation of the facts and the ratio of the decision relied upon by ld. ‘DR’ reveals that in that case, search was conducted, at the residence of the assessee. It was not in dispute that assessee had made a statement u/s 132(4) of the Act whereby a surrender of Rs. 2 lacs was made. Besides this, the assessee had admitted that he had earned commission on sales which was not disclosed in the return filed by him. Further, during search, certain sales documents were seized which bore the signatures of the assessee as well. These documents depicted total sale of Rs. 4,92,03,005/-. Therefore, in view of provisions of sub-section (4) & (4A) of section 132 of the Act, the AO was found by the jurisdictional High Court, as justified in drawing presumptions against the assessee and making the addition of Rs. 9,00,000/-. The Honorable jurisdictional High Court, further, pointed out that the onus was upon the assessee, to have produced cogent material, to rebut the presumptions, which he had failed to displace. However, in the present case, no such document, pertaining to earning of job work from jewellery was discussed and brought on record by both the AO and CIT(Appeals). Further, no declaration of any amount, on account of job work has been made by the assessee. No documents were brought by ld. ‘DR’, on record showing any such transactions of job work and signatures of the assessee thereon. Therefore, the presumptions as contemplated u/s 132(4)/132(4A) of the Act cannot be conceived in such a fact-situation of the present case. In view of this, the question of applicability of such statutory presumption does not arise. The case law relied upon by the ld. ‘DR’ was based on the foundation of total sales of Rs. 4,92,03,005/- recorded in the documents found in the course of search operation, and a surrender made by the assessee in lieu of such undisclosed sale commissions. In the present case, no such documents and details pertaining to the assessee’s job work, was brought on record by the ld. ‘DR’. Ld. ‘DR’ mechanically placed reliance, on this decision of the jurisdictional High Court. Needless to say that each case depends on its own facts and even close similarity between one and another case is not enough, because even a single significant detail, may alter the entire aspect and complexion of the case. The judicial precedents should be followed, to advance the cause of justice and not to perpetuate injustice. It is pertinent to state here that judicial precedent is an authority for what it actually decides and it is not an authority for any implication, assumption, or inference derived from judgement. Ld. ‘DR’ merely assumed application of the decision of the jurisdictional High Court, without having regard to the core issue that facts and circumstances of the case cited and relied upon are not in paramateria, in any respect vis-à-vis the facts obtaining in the present case. Ld. ‘DR’ placed reliance, on the decision of the said jurisdictional High Court, without discussing, as to how the fact-situation of the present case fits in the fact-situation of the decision, on which reliance is placed. In view of this, decision relied upon by ld. ‘DR’ is not applicable to the fact-situation of the present case.
8. The AO, in the present case made the impugned addition, on the foundation of bare husk of the statement of the appellant, made in the course of search operation, without there being any material for its collaboration. A bare reading of the said deposition of the appellant, reveals that the appellant he has not stated that he earned income from job work during the earlier asst. years, including the asst. year in question. The revenue has failed to demonstrate, by way of any material, brought on record, that the assessee appellant had earned job work, for the asst. year in question.
8. (i) The general rule is that ‘onus of proof’ is always on the party, who asserts a proposition or fact, which is not self-evident. In the present case, the AO presumes and asserts that the appellant has earned income, from job work, therefore, onus lies upon him, to prove the same, by bringing relevant corroborative and credible material, on record, before making the impugned addition. The assessee appellant has not made any surrender, in respect of income from job work and no document has been adduced by the revenue, to support its finding that assessee has earned income from job work, in the past asst. years.
9. It is categorically held by the Honorable Apex Court in a plethora of decisions, that it is a well settled principle of law that revenue cannot decide, an issue, without proper facts and law, supporting its decision. A decision based on mere surmises, guess work or conjectures or irrelevant material and evidence is liable to be quashed. The Honorable Apex Court, in plethora of decisions has often frowned upon the tendency of Assessing Officers, to frame assessment orders or make additions purely on surmises. In the present case, a bare perusal of the finding of the AO and the CIT (Appeals), as reproduced above, clearly reveals that no material has been brought on record, to support the impugned additions. The AO as well as CIT (Appeals), being quasi-judicial authority must not base their findings, on no-material or no-evidence. This is a fundamental rule of justice and established legal proposition that there may be something more than bare suspicion, to support the findings, in the assessment order, as held by the Hon’ble Supreme Court, in the case of Dhirajlal Girdharilal v. CIT [1954] 26 ITR 736; Omar Salay Md. Sait v. CIT [1959] 37 ITR 151 (SC), Dhakeswari Cotton Mills Ltd. v. CIT [1954] 26 ITR 775 (SC); Lal Chand Bhagat Ambica v. CIT [1959] 37 ITR 288 (SC). In the present case, AO had not made any enquiry except quoting Question No. 10 and reply thereto. The AO, further, failed, to bring any material on record, even prima-facie to suggest earning of income from job work, by the appellant. Therefore, the AO, being quasi-judicial authority is not competent, to draw inferences in vacuum, without the base of foundational material, evidence and relevant provisions, as has been done, in the present case. The AO is required to act in a judicial manner while framing asst order.
10. It is also a well settled proposition that the AO is not competent, even to make any estimate of income or addition, without the fulcrum of relevant, and credible material, to support such estimation or addition or any findings. The Honorable Supreme Court, in the case of CST v. H.M. Esufali H.M. Abdulali [1973] 90 ITR 271 has held that no addition can be made without there being any rational and reasonable basis for such addition. It is, further, held that authority, while making the best judgement assessment, should arrive at his conclusions without any bias and on rational basis. The relevant and operative part of the decision is reproduced here under, for the purpose of its proper appreciation:
‘Held that the re-assessments were valid. From the circumstance that the assessee had dealings outside the accounts of the value of Rs. 31,171.28 for 19 days, it was open to the officer to infer that the assessee had large-scale dealings outside the accounts. In such a situation, it was not possible for the officer to find out precisely the turnover suppressed and he could only make an estimate of the suppressed turnover on the basis of the material before him. So long as the estimate made by him was not arbitrary and had a reasonable nexus with the facts discovered, it could not be questioned. It was wrong to hold that the officer must have material before him to prove the exact turnover suppressed.
In estimating any escaped turnover, it is inevitable that there is some guess-work. The assessing authority while making the best judgment assessment, no doubt, should arrive at his conclusion without any bias and on a rational basis. That authority should not be vindictive or capricious. If the estimate made by the assessing authority is a bona fide estimate and is based on a rational basis, the fact that there is no good proof in support of that estimate is immaterial. Prima facie, the assessing authority is the best judge of the situation. It is his best judgment and not any one else’s. The High Court cannot substitute its best judgment for that of the assessing authority.”
11. Further, both the text and the scheme of the Act, does not contemplate that the AO can make addition without bringing any relevant and cogent material on record. The assessment to be made by the AO u/s 143(3), u/s 147 read with 148, u/s 153A of the Act or under the repealed provisions of section 158BC of the Act, is required to be supported by relevant evidence or material. Under the scheme of Act, the assessee is statutorily required, to support his return of income or contentions, by adducing evidence and the AO is required to make addition, on the basis of relevant material or evidence on record, whether direct or circumstantial. No addition can be made under the scheme of Income-tax Act by the AO, purely on the basis of surmises or conjectures or as a matter policy. In the present case, the appellant declared income in the statement recorded on 30.08.2007 u/s 132(4) of the Act. The declaration of income in the statement, recorded, on 30.08.2007, for the asstt. Year 2008-09 is made as under:
“Statement u/s 132(4) of the I.T. Act, 1961
Statement on oath of Sh. Naresh Kumar Verma S/o Sh. Ram Sarup Verma on 30.08.2007 u/s 132(4) of the Income Act, 1961
I have been administered the oath by Shri K.S. Bains, DDJT(Inv.), Patiala that I shall speak the truth and nothing but the truth. I have further been made aware of the fact that any fake or untrue statement given by me here under shall make me liable to prosecution under the Indian Penal Code and under the Income Tax Act, 1961. Following is being stated by me on oath.
