HIGH COURT OF DELHI
Commissioner of Income-tax
Versus
Jai Pal Aggarwal
IT APPEAL NO. 226 OF 2010
SEPTEMBER 17, 2012
JUDGMENT
R.V. Easwar, J. – In this appeal filed by the revenue under Section 260A of the Income Tax Act, (‘Act’, for short) the following questions are sought to be raised as substantial questions of law: –
(a) Whether on the facts and in the circumstances of the case, the Ld. ITAT erred in law and on merits in deleting the addition of Rs. 2,00,000/- on account of purchase of property bearing premises No.2-70, Seelampur-III, Shahdara?
(b) Whether as per the provisions of Section 132(4A) of the Income Tax Act, 1961 and on the basis of documents relating to the property at Seelampur, the assessee is deemed to be the owner and thus the value of the property is the undisclosed income/investment liable to be added to the income of the assessee?
(c) Whether on the facts and in the circumstances of the case, the Ld. ITAT erred in law and on merits in deleting the addition of Rs. 27,50,000/- on account of FDRs by holding the same to be based on dumb documents?
(d) Whether on the facts and in the circumstances of the case, the Ld. ITAT erred in law and on merits in deleting the addition of Rs. 7,62,392/- on account of investment made by the assessee in M/s Fair Deal Garments?
(e) Whether on the facts and in the circumstances of the case, the Ld. ITAT erred in law and on merits in deleting the addition of Rs. 16,80,100/- on account of cash deposits made by the assessee?
(f) Whether order passed by the Ld. ITAT is perverse in law and on merits?
2. The assessee is an individual. A search under Section 132 of the Act was conducted at his residence on 20.3.1996 and his bank lockers were also searched on 19.4.1996. Cash, jewellery and documents were found during the search and were seized. An assessment under Section 158BC(c) was made on 29.4.1997. An appeal against that assessment was filed by the assessee before the Income Tax Appellate Tribunal (‘Tribunal’, for short), which was the first appellate authority at that time. The Tribunal set aside the assessment by order dated 23.11.2004 with directions to the Assessing Officer to reframe the assessment after giving due opportunity of being heard to the assessee; the assessee was also directed to extend co-operation for the expeditious finalization of the assessment. Thereafter, a fresh block assessment order was passed on 28.3.2006 as per the directions of the Tribunal in which certain additions were made. The assessee filed an appeal to the Tribunal in IT(SS)A.No.121/Del./06. The Tribunal allowed the appeal of the assessee partly, confirming some of the additions and deleting some of them. The revenue has preferred the present appeal against this order of the Tribunal and the appeal is confined to the following four issues:-
(1) Addition of Rs. 2 lakhs on account of benami purchase of property No. 2.70, Seelampur-III, Shahdara;
(2) Addition of Rs. 27,50,000/- on account of investment in fixed deposits;
(3) Addition of Rs. 62,392/- on account of investment in M/s Fair Deal Garments; and
(4) Addition of Rs. 16,80,100/- on account of cash deposits made in bank accounts.
3. We have heard the rival submissions and we have examined the orders of the Assessing Officer and the Tribunal.
4. Questions (a) and (b) relate to the addition of Rs. 2 lakhs on account of benami purchase of property in Seelampur. In the course of the search of the premises, documents were seized, which according to the revenue showed purchase of the aforesaid property by the assessee from one Fakir Chand in September, 1987. These documents include the General Power of Attorney, Deed of Will, Agreement to Sell, all of which were signed by Fakirachand. Name of the purchaser of the property was not mentioned in the documents nor was the sale price written on them. On these facts, the Assessing Officer proposed to treat the property as having been purchased by the assessee, benami, by utilizing his unaccounted monies. The assessee submitted that he had nothing to do with the property and that one Om Prakash of Shahdara, Delhi-32, a property dealer, brought the papers relating to the property to the assessee a day or two before the search as the owner of the property wanted to sell it. He left the original papers with the assessee for verification of title etc. The owner of the property was in dire need of money and therefore wanted to sell the property through the property dealer. According to the assessee the papers were left with him by the property dealer only for verification and therefore no adverse inference could be drawn. In support of the claim the assessee filed the property dealer from the property dealer’s affidavit.
5. The Assessing Officer did not accept the assessee’s explanation. He noted that the property documents were dated September, 1987 and therefore, it was not true that they were given to the assessee only a few days prior to the search. He issued summons to Fakir Chand in an attempt to probe the matter further but the summons came back unserved. Though the documents were seized, nobody came forward to claim them or sought release from the income tax authorities. From these facts the Assessing Officer drew the inference that the property was purchased by the assessee benami and that there was no explanation to the contrary. Since the investment in the property was not shown in the books of account, the Assessing Officer made an addition of Rs. 2 lakhs as the assessee’s undisclosed income.
6. On appeal the Tribunal referred to the contents of the affidavit dated 13.7.1998 of Om Prakash and held as under:-
“15. On going through the documents found during the course of search, therefore, it cannot be said that it pertained to any transaction carried out by the assessee in relation to any property of Shri Fakir Chand. The denial of the assessee in relation to any such transaction, which is supported by his affidavit, clearly negates the inference drawn by the department. For corroborating the denial, the assessee has also filed the affidavit of the property dealer, namely, Shri Om Prakash. In view of the deposition made through affidavits and in view of the clear denial of the assessee and further in view of the clear denial of the assessee and further in view of the fact that no evidence could be collected by the Assessing Officer to correlate the purchase of the property by the assessee, the Assessing Officer was not justified in holding that the assessee had made any investment in the purchase of any property from Shri Fakir Chand on these documents.
16. It is a settled law that in block assessment order, addition can be made only on the basis of the material found during the course of search. In the instant case, on the basis of the material found during the course of search, no addition can be justified.
17. In view of the above and on considering the entire material on record, we are unable to uphold the view taken by the Assessing Officer and, therefore, the addition is deleted. The ground is allowed.”
7. It is difficult to uphold the conclusion of the Tribunal. The Tribunal overlooked that though Om Prakash filed an affidavit before the Assessing Officer, Fakir Chand did not respond to the summons issued by the Assessing Officer. There is no plausible explanation from the assessee why the documents relating to the property were found in his residence if he had nothing to do with it. The affidavit on which reliance was placed by the Tribunal (which claims to support the version of the assessee) cannot be relied upon to rebut the inference reasonably drawn by the Assessing Officer from the recovery of the documents from the premises of the assessee. The documents include the General Power of Attorney and an Agreement to Sell which bore the signature of Fakir Chand. The fact that the name of the buyer was not mentioned in the documents is a fact which goes in favour of the revenue. In considering whether any property was acquired benami, possession of the documents relating to the property is a relevant and important piece of evidence. The payment of money can therefore be inferred and since the assessee’s books of account did not disclose the investment, the Assessing Officer rightly drew the inference that it represented the assessee’s undisclosed investment. The Tribunal further overlooked that neither Fakir Chand nor Om Prakash, the property dealer, came forward to claim the documents which is quite unusual if the intention of handing over the documents was only to enable the assessee to consider the proposal for buying the property. The Tribunal also overlooked that the name of the owner of the property was not mentioned in the affidavit of the property dealer. In these circumstances, the finding of the Tribunal is contrary to the evidence on record which it failed to take proper notice of.
We therefore, answer questions (a) and (b) in favour of the revenue and against the assessee.
8. As regards question (c), the brief facts are that in the course of the search, a document appears to have been seized in which the assessee had recorded the value of his assets, which included FDRs (fixed deposit receipts) for Rs. 27.50 lakhs. The Assessing Officer examined the assessee’s bank account with Karnataka Bank and found that the following deposits were made in FDRs:
