Case Law Details
Commissioner of Income Tax Vs Ghanshyam Das Johri (Allahabad High Court)
Regarding the investment, it appears that the seized jewellery was claimed by three ladies namely Rupali Rastogi, Smt. Sunita Rastogi; and Smt. Kamni Rastogi. All the ladies belonged to the reputed families and they are married. As per the CBDT Circular discussed in the case of Smt. Pati Devi vs. ITO; 240 ITR 727 Karnatka 500gm, jewellery is expected in the possession of a married lady and that much of ornaments cannot be seized. If we go with the CBDT Circular dated 11.05.1994 and the ratio laid down in the case of Smt. Pati Devi (supra), then each lady is expected to own 500gm. ornaments.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
Present Appeal is filed by the department under Section 260-A of the Income Tax Act, 1961, against the judgment and order dated 30.09.2004 passed by the Income Tax Appellate Tribunal, Lucknow in I.T.A. No.608/Luc/2003 for the block period from 01.04.1989 to 08.07.1999.
On 30.03.2005, a Coordinate bench of this Court has admitted the instant appeal on the following substantial questions of law:
1. Whether on the facts and in the circumstances of the case, the Hon’ble ITAT was justified in brushing aside the statement of Sri Surendra Nath Rastogi, partner of the firm recoded at the time of search under section 132 (4) of the I. T. Act, 1961 admitting the total undisclosed income of the firm at Rs.40,00,000/- without appreciating that the statement recorded under section 132 (4) of the I.T. Act, 1961 stands on a different footing and a great evidentiary value has been attached to such a statement, under the I.T. Act, 1961.
2. Whether on the facts and in the circumstances of the case, the Hon’ble ITAT was justified in placing reliance on a part of the statement of Shri Surendra Nath Rastogi, partner recorded under section 132 (4) wherein he had stated that whatever was being earned out of undisclosed transactions was being invested by the firm in the shape of undisclosed stock while ignoring the other part of the same statement of Sri Surendra Nath Rastogi in which he categorically stated that the total undisclosed income of the firm was Rs.40.00 lakhs.”
The brief facts of the case are that the assessee, a partnership firm, during the block period, was engaged in the business of the Sarrafa. On 08.07.1999, a search under section 132 was carried out at the business and residential premises of the partners in which several incriminating documents, cash and ornaments were found. The A.O. has issued the notice under Section 158BC of the Act and in compliance of the notice, the assessee has filed the return for the block period in which an amount of Rs.20.00 lacs was disclosed on account of undisclosed income. During the course of search operation, statement of Sri Surendra Nath Rastogi, the partner, was recorded under section 132 (4) of the Act, who surrendered a sum of Rs.40.00 lacs as undisclosed income, as per the details mentioned in the A.O.’s order, but the A.O. was not satisfied. So, he applied the G.P. rate @ 22% on the estimated turnover of Rs.1,00,00,000/- (one crore) and made the addition of Rs.22.00 lacs. The A.O. further made the addition of Rs.22.00 lacs on account of undisclosed investment required for effecting a turnover of Rs.1.0 crores outside the book. Thus, the total addition on the two counts was made by the Assessing Officer for Rs.42,00,000/-.
In first appeal, the CIT(A) has estimated the GP rate @20% and also accepted the investment disclosed by the assessee for the turnover and gave a partial relief of Rs.40.00 lacs to the assessee vide order dated 04.07.2003. Not being satisfied, the department has filed the second appeal before the Tribunal (608/luc/2003) and the assessee has also field cross objection (47/luc/2004) for the block period. The Tribunal vide its impugned order has dismissed the appeal filed by the department and the cross objection filed by the assessee by upholding the order of the CIT (A). Still not being satisfied, the department has filed the present appeal.
With this background, Sri D. D. Chopra, learned counsel for the department has justified the order passed by the A.O. He submits that the ITAT has summarily brushed aside the statement of Sri Surendra Nath Rastogi, the partner, recorded at the time of search under section 132(4) admitting the total undisclosed income of the firm but without appreciating that the statement recorded is a valuable evidence. The addition was made by the A.O. on the basis of the seized documents at the premises of the assessee.
It is also a submission of the learned counsel for the appellant that the Tribunal has improperly appraised the evidence in the form of statement of Sri Surendra Nath Rastogi recorded under section 132(4) of the Act, inasmuch as while weightage has been given to that part of the statement of Sri Rastogi in which he had stated that whatever was being earned out of undisclosed transactions was being invested by the firm in the shape of the undisclosed stock while the other part of the statement of Sri Rastogi in which he categorically admitted undisclosed income of Rs.40.00 lacs was ignored by the Tribunal. He submits that the seized jwellary belongs to three ladies and ITAT has taken into the consideration the claim made by the ladies. Lastly, he made a request to set aside the impugned order passed by the Tribunal.
On the other hand, Sri Mudit Agarwal, learned counsel for the assessee has justified the impugned order passed by the Tribunal.
After hearing both the parties and on perusal of record, it appears that the A.O. has estimated the GP Rate @20% on the estimated turnover of Rs.1.0 crore. The A.O. also made the addition in respect of the undisclosed investment. He applied the rate of 1/5 of Rs.1.0 crore on the basis of rotation of the investment as taking place in five time rotation period and worked out the amount of Rs.20/- lacs as undisclosed investment on transactions of Rs.1.0 crore. Total addition on these two counts made by the A.O. for Rs.42.00 lakh.
The CIT (A) has estimated the G.P. Rate @ 20% and deleted the addition of Rs.20.00 lacs, which was for the difference between 22 to 20 lacs. From the record, it also appears that the G.P. rate in the trade of the Saraffa in various cases was accepted by the A.O. @ 15% to 25%. So, the CIT (A) has taken the average G.P. Rate @ 20% on the estimated sale and deleted the addition of Rs.20/- lacs which was endorsed by the Tribunal.
Needless to mention that the estimation is a question of fact as per the ratio laid down in the following cases:
1. Commissioner of Customs (Import) vs. Stoneman Marble Industries and Ors., (2011) 2 SCC 758.
2. Vijay Kumar Talwar vs. CIT (2011) 1 SCC 673;
3. New Plaza Restaurant v. ITO 309 ITR 259 H.P., and
4. Sanjay Oil Cake v. C.I.T. 316 ITR 274 Gujarat.
In view of above, it appears that the A.O. has made the addition of Rs.20.0 lacs on estimate basis. The CIT (A) has deleted the same on estimate basis and the Tribunal upholds the same. When it is so, then we find no reason to interfere in the concurrent finding of the appellate authorities.
Regarding the investment, it appears that the seized jewellery was claimed by three ladies namely Rupali Rastogi, Smt. Sunita Rastogi; and Smt. Kamni Rastogi. All the ladies belonged to the reputed families and they are married. As per the CBDT Circular discussed in the case of Smt. Pati Devi vs. ITO; 240 ITR 727 Karnatka 500gm, jewellery is expected in the possession of a married lady and that much of ornaments cannot be seized. If we go with the CBDT Circular dated 11.05.1994 and the ratio laid down in the case of Smt. Pati Devi (supra), then each lady is expected to own 500gm. ornaments.
Moreover, prior to search, the entire jewellery was already disclosed in the statement of affairs attached to the regular returns filed by each lady, as submitted by the learned counsel for the assessee. When it is so, then the same cannot be treated undisclosed during the block period.
Thus, the entire seized jewellery is covered with the aforesaid Circular. When it is so, then there is no occasion to make any addition.
In view of above also, there is no reason to interfere with the concurrent findings of both the appellate authorities in this regard, who have deleted the same addition of Rs.20.0 lacs.
In view of above, the entire additions has been explained and the same was rightly deleted by both the appellate authorities.
Further, it may be mentioned that the assessee has filed a writ petition No. 838 (MB) of 2005 before this Hon’ble Court, where this Court vide order dated 03.04.2008 has already released the entire seized jewellery, cash and ornaments etc.
In these circumstances, the answer to the substantial question of law is in favour of the assessee and against the revenue.
In the result, the appeal filed by the department is dismissed.
