BHAVESH M. GADA, MUMBAI v. ITO WD 23(1)(2), MUMBAI

ITA 3177/MUM/2009 | 2005-2006
Pronouncement Date: 21-05-2010 | Result: Allowed

Appeal Details

RSA Number 317719914 RSA 2009
Bench Mumbai
Appeal Number ITA 3177/MUM/2009
Duration Of Justice 1 year(s) 7 day(s)
Appellant BHAVESH M. GADA, MUMBAI
Respondent ITO WD 23(1)(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 21-05-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted I
Tribunal Order Date 21-05-2010
Date Of Final Hearing 11-05-2010
Next Hearing Date 11-05-2010
Assessment Year 2005-2006
Appeal Filed On 14-05-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH MUMBAI. BEFORE S/SHRI N.V.VASUDEVAN JM & T.R.SOOD AM I.T.A NO. 3177/MUM/2009 ASSESSMENT YEAR:2004-05 SHRI RAKESH DAMANI V. THE DCIT CENTRAL CIRCLE- 47 52 CASA GRANDE LITTLE GIBBS ROAD MUMBAI. MALABAR HILL ROAD MUMBAI-06. PA NO.AACPD 6338 D (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI KIRANA MEHTA RESPONDENT BY : SHRI R.N.JHA O R D E R PER T.R.SOOD AM THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 19.3.2009 OF LD CIT (A)-III MUMBAI FOR THE ASSESSMENT YEAR 2 004-05. 2. IN THIS APPEAL THE ASSESSEE HAS RAISED VARIOUS GROUNDS. HOWEVER AT THE TIME OF HEARING IT WAS SUBMITTED THAT THE ONLY DISPUTE INV OLVED IS REGARDING CONFIRMATION OF ADDITION AMOUNTING TO RS.4 80 044/- ON THE BASIS OF LOOSE PAPER FOUND DURING THE COURSE OF SEARCH. 3. AFTER HEARING BOTH THE PARTIES WE FIND THAT A S EARCH WAS CONDUCTED IN THE CASE OF ORBIT CORPORATION LTD. ON 22.11.2006. SINCE TH E ASSESSEE WAS WORKING AS A MARKETING EXECUTIVE OF THIS COMPANY HIS PREMISES W ERE ALSO SEARCHED. DURING THE SEARCH A DOCUMENT WAS FOUND IN THE FORM OF LOOSE P APER WHICH HAS BEEN EXTRACTED BY THE AO AS UNDER:- CASH RS.5 00 000 ITA NO.3117/M/2009 SHRI RAKESH DAMAI 2 RS.1 45 000 50 000 TAKEN TO UK BAL. 95 000 RS.3 55 000 BAL. 21.4.2004 RS. 20 000 SPENT ON MISC.EXP. E.G. TAILOR WATCHMAN ETC. RS.3 35 000 PAGE 44 95 000 CASH BALANCE 1 50 000 CASH 4.6.2004 2 45 000 FROM THE ABOVE THE AO CONCLUDED THAT THERE WAS CAS H OF RS.5 LAKHS BEFORE THE ASSESSEE LEFT FOR UK. THEREFORE THE AO HAS DISCUS SED THE PERIOD OF SUCH CASH BELONGED TO THE ASSESSEE AND CONCLUDED THAT IT IS RELEVANT T O THE ASSESSMENT YEAR 2005-06. SINCE THE ASSESSEE COULD NOT EXPLAIN THE SOURCE OF THIS C ASH ADDITION OF RS.4 80 044/- WAS MADE TO THE INCOME OF THE ASSESSEE. 4. BEFORE THE CIT (A) IT WAS SUBMITTED THAT THE SA ID PAPER DID NOT BEAR THE HAND WRITING OF THE ASSESSEE OR HIS WIFE OR ANY OTHER FA MILY MEMBERS. IN FACT THIS PAPER WAS A PART OF ROUGH MEMO PAD AND WAS NOT PART OF ANY CA SH BOOK AND WAS A DUMB PAPER. IT WAS ARGUED THAT IT HAD NO EVIDENTIARY VALUE. IT WAS FURTHER ARGUED THAT THE PRESUMPTIONS RAISED BY SECTION 132(4A) COULD NOT BE INVOKED IN THE COURSE OF ASSESSMENT PROCEEDINGS. IN ANY CASE SECTION 132(4 A) ITSELF REQUIRES THAT IT WILL BE PRESUMED TO BELONG TO A PERSON IN WHOSE HAND WRITIN G SUCH DOCUMENT WAS WRITTEN. RELIANCE WAS PLACED ON CERTAIN CASE LAWS. IT WAS F URTHER ARGUED THAT THE ASSESSEE WAS AN NRI SETTLED IN USA. THE ENTRY IN THE SAID PIECE OF PAPER SHOWED BALANCE AS ON 21.4.2004 AFTER TAKING MONEY FOR UK VISIT. IF THE ASSESSEE TRAVELED TO UK ON 30.6.2003 AS ALLEGED THE BALANCE WOULD NOT BE AS OF 21.4.290 04 BUT WOULD BE AS AT 30.6.2003 OR FOR ANY PROXIMATE DATE. THE GAP OF OVER NINE MONTH S FROM THE DATE OF THE ALLEGED VISIT TO UK AND ALLEGED CASH BALANCE AS AT 21.4.2004 IS T OO DISTANT A DATE TO RELATE TO THE SAID ENTRY ON 21.4.2004. THUS IT WAS CLEAR THAT THE SA ID PAPER AND ENTRIES THEREIN DID NOT PERTAIN TO THE ASSESSEE. HOWEVER THE CIT (A) DID NOT AGREE WITH THE SUBMISSIONS OF THE ASSESSEE AND CONFIRMED THE ADDITION. 5. BEFORE US LD COUNSEL FOR THE ASSESSEE REITERATE D THE SUBMISSIONS MADE BEFORE THE CIT (A) AND INVITED OUR ATTENTION TO THE CONCER NED LOOSE PAPER COPY OF WHICH HAS ITA NO.3117/M/2009 SHRI RAKESH DAMAI 3 BEEN PLACED AT PAGE-5 OF PAPER BOOK AND SUBMITTED THAT AGAINST THE FIGURE 3.5 LETTER B HAS BEEN WRITTEN WHICH ONLY CAN MEAN BALANCE AND THEREFORE AS PER THE INTERPRETATION GIVEN BY THE DEPARTMENT BALANCE W AS DRAWN ON 20.4.2004. HE THEN SUBMITTED THAT THE ASSESSEE IS A NON-RESIDENT AND M OST OF THE TIME HE STAYED OUTSIDE INDIA. HE FILED A COPY OF THE PASSPORT WHICH SHOWS THAT THE ASSESSEE HAD DEPARTED FROM BOMBAY ON 1.4.2004. FROM THE ABOVE IT IS CLEAR T HAT HE WAS NOT PRESENT IN INDIA AT THE RELEVANT POINT OF TIME WHEN THE CASH BALANCE WA S DRAWN IN THE SAID PAPER. FURTHER THE LOOSE PAPER DO NOT BEAR THE HANDWRITING OF THE ASSESSEE OR HIS WIFE AND THEREFORE IT CANNOT BE PRESUMED THAT THE PAPER BELONGS TO THE ASSESSEE. IN CASE SOME RELATIVES OR FRIENDS HAD COME TO HIS RESIDENCE THIS PAPER MI GHT HAVE BEEN WRITTEN BY THEM FOR WHICH THE ASSESSEE CANNOT BE HELD RESPONSIBLE. HE ALSO ARGUED THAT DURING THE COURSE OF SEARCH THE STATEMENT OF THE ASSESSEE WAS RECORD ED IN WHICH NO QUESTION WAS ASKED REGARDING THIS PAPER AND THUS LATER ON THE ASSESSE E CANNOT BE FASTENED ON ANY LIABILITY ON THE BASIS OF THE SAID LOOSE PAPER. THE JWELLERY WORTH APPROXIMATELY RS.40 LAKHS WAS ALSO FOUND AT THE TIME OF SEARCH WHICH HAS BEEN AC CEPTED BY THE DEPARTMENT WHICH CLEARLY SHOWS THAT THE ASSESSEE HAS NOT INDULGED IN ANY TRANSACTIONS WHICH ARE NOT REFLECTED IN THE BOOKS. 6. ON THE OTHER HAND LD CIT (DR) SUBMITTED THAT SE CTION 292C HAS BEEN SPECIFICALLY INCORPORATED IN THE ACT WHICH RAISES A PRESUMPTION THAT ANYTHING FOUND IN THE PREMISES OF THE ASSESSEE SHALL BE PRESUMED TO BE BELONGING T O THE ASSESSEE. FURTHER THE PRESUMPTION HAS BEEN PROVIDED IN THE SUB-SECTION (4 A) OF SECTION 132. HE SUBMITTED THAT PRINCIPLE OF PRESUMPTION ON THE BASIS OF POSSE SSION HAS BEEN APPROVED BY THE HONBLE SUPREME COURT IN THE CASE OF CHUHARMAL V COMMISSIONER OF INCOME-TAX 172 ITR 250 (SC) . THEREFORE THE PRESUMPTION WAS CORRECTLY DRAWN A ND THE ADDITION IS JUSTIFIED. HE THEN REFERRED TO THE LOOSE PAPER AND SUBMITTED THAT THE AO HAS CLEARLY DRAWN CORRECT INFERENCE THAT SOME CASH WAS AVAILABL E OUT OF WHICH SOME PORTION WAS TAKEN TO UK AND SOME PORTION WAS SPENT LOCALLY AND BALANCE WAS LEFT WITH THE ASSESSEE. 7. IN REPLY LD COUNSEL SUBMITTED THAT EVEN IF THE PRESUMPTION IS POSSIBLE U/S.132(4A) SUCH PRESUMPTION IS REBUTTABLE. IN TH IS REGARD HE RELIED ON THE DECISION OF THE MUMBAI TRIBUNAL IN THE CASE OF STRAPTEX (INDIA) (P) LTD V. DCIT 84 ITD 320 (MUM). ITA NO.3117/M/2009 SHRI RAKESH DAMAI 4 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY AND FIND THAT ONLY LOOSE PAPER WAS FOUND DURING THE COURSE OF SEARCH COPY OF WHIC H IS ANNEXED AT PAGE 5 OF PAPER BOOK WHICH READS AS UNDER:- RS.5 00 000 RS.1 45 000 RS.3 55 000 B 50 000 UK TAKEN 95 000 KEPT AT HOME 1 45 000 3.55 B 20/4/2004 - 20 TAKEN 3.35 ADMITTEDLY THIS PAPER WAS NOT IN THE HAND WRITING OF THE ASSESSEE OR HIS WIFE. NOW LET US EXAMINE HOW THE LAW DEALS WITH THE PRESUMPTION T HAT TO WHOM SUCH PAPER BELONGS. SECTION 292C WHICH HAS BEEN INSERTED BY THE FINANCE ACT 2007 HAS BEEN MADE APPLICABLE WITH RETROSPECTIVE EFFECT FROM 1.10.1975 . SUB-SECTION(1) OF SECTION 292C READS AS UNDER:- (1) WHERE ANY BOOKS OF ACCOUNT OTHER DOCUMENTS M ONEY BULLION JEWELLERY OR OTHER VALUABLE ARTICLE OR THING ARE OR IS FOUND IN THE POSSESSION OR CONTROL OF ANY PERSON IN THE COURSE OF A SEARCH UNDER SECTION 132 (OR SURVEY UNDER SECTION 133A) IT MAY IN ANY PROCEEDING UNDER THIS ACT BE PRESUMED- (I) THAT SUB BOOKS OF ACCOUNT OTHER DOCUMENTS MONEY B ULLION JWELLERY OR OTHER VALUABLE ARTICLE OR THING BELONG OR BELONGS T O SUCH PERSONS; (II) THAT THE CONTENTS OF SUCH BOOKS OF ACCOUNT AND OTHE R DOCUMENTS ARE TRUE; AND (III) THAT THE SIGNATURE AND EVERY OTHER PART OF SUCH BOO KS OF ACCOUNT AND OTHER DOCUMENTS WHICH PURPORT TO BE IN THE HANDWRIT ING OF ANY PARTICULAR PERSON OR WHICH MAY REASONABLY BE ASSUMED TO HAVE B EEN SIGNED BY OR TO BE IN THE HANDWRITING OF ANY PARTICULAR PERSON ARE IN THAT PERSONS HANDWRITING AND IN THE CASE OF A DOCUMENT STAMPED EXECUTED OR ATTESTED THAT IT WAS DULY STAMPED AND EXECUTED OR ATTESTED BY THE PERSON BY WHOM IT PURPORTS TO HAVE BEEN SO EXECUTED OR ATTESTED.] 2. THE READING OF THE ABOVE SECTION WOULD CLEARLY SHOW S THAT PRESUMPTION IS POSSIBLE FOR ANY DOCUMENT FOUND DURING THE SEARCH BUT FOR THAT C ONDITIONS LAID DOWN IN CLAUSES (I) TO (III) HAVE TO BE FULFILLED BECAUSE AFTER CLAUSE (I) ONLY ; HAS BEEN GIVEN AND AFTER CLAUSE (II) WORD AND IS THERE WHICH MEANS THAT SUB-CLAU SE(III) HAVE TO BE COMPLIED. SUB- CLAUSE (III) CLEARLY SHOWS THAT DOCUMENT CAN PRESUM E TO BE IN THE HAND WRITING OF THE PERSON WHOSE HAND WRITING IS THERE IN THE DOCUMENT. IT HAS NOT BEEN DENIED BEFORE US ITA NO.3117/M/2009 SHRI RAKESH DAMAI 5 BY THE DEPARTMENT THAT THE DOCUMENT IS NOT IN THE H ANDWRITING OF THE ASSESSEE OR EVEN HIS WIFE. THEREFORE IT CANNOT BE PRESUMED THAT TH E DOCUMENT BELONGS TO THE ASSESSEE. FURTHER EVEN PRESUMPTION U/S.132(4A) HAS BEEN HELD TO BE REBUTTABLE IN THE CASE OF STRAPTEX (INDIA) (P) LTD(SUPRA). THEREFORE IN THE ABSENCE OF ANY CORROBORATIVE EVIDENCE IT CANNOT BE PRESUMED BY THE DEPARTMENT T HAT THIS DOCUMENT BELONGS TO THE ASSESSEE. 9. AS FAR AS THE DECISION OF THE HONBLE SUPREME CO URT IN THE CASE OF CHUHARMAL V COMMISSIONER OF INCOME-TAX (SUPRA) IS CONCERNED IN THAT CASE A SEARCH WAS MADE BY THE CUSTOM DEPARTMENT AND 565 FOREIGN MAKE WATCHES WERE FOUND FROM THE ASSESSEES BED ROOM. THE ASSESSEE WAS NOT ABLE TO EXPLAIN THE SAME IN HIS STATEMENT AND LATER ON WHEN AN OPPORTUNITY WAS GRANTED HE DI D NOT AVAIL OF PERSONAL HEARING OR EVEN TO CROSS EXAMINE THE WITNESS IN WHOSE PRESENCE PANCHANAMA WAS DRAWN. IN THIS FACTUAL MATRIX WHILE DECIDING THE APPEAL OF PENALT Y U/S.271(1)(C) THE HONBLE SUPREME COURT HELD AS UNDER: I) WHAT WAS MEANT BY SAYING THAT THE EVIDENCE ACT DID NOT APPLY TO PROCEEDINGS UNDER THE INCOME TAX ACT 1961 WAS THAT THE RIGOUR OF THE RULES OF EVIDENCE CONTAINED IN THE EVIDENCE ACT WAS NOT APPLICABLE; B UT THAT DID NOT MEAN THAT WHEN THE TAXING AUTHORITIES WEE DESIROUS OF INVOKIN G THE PRINCIPLES OF THE EVIDENCE ACT IN PROCEEDINGS BEFORE THEM THEY WERE PREVENTED FROM DOING SO. II) THAT ALL THAT SECTION 110 OF THE EVIDENCE ACT 1872 DID WAS TO EMBODY A SALUTARY PRINCIPLE OF COMMON LAW JURISPRUDENCE VIZ WHERE A PERSON WAS FOUND IN POSSESSION OF ANYTHING THE ONUS OF PROVING THAT HE WAS NOT ITS OWNER WAS ON THAT PERSON. THIS PRINCIPLE COULD BE ATTRACTED TO A SET OF CIRCUMSTANCES THAT SATISFY ITS CONDITIONS AND WAS APPLICABLE TO TAXATI ON PROCEEDINGS. FROM THE ABOVE IT IS CLEAR THAT WHAT WAS LAID DOWN BY THE HONBLE SUPREME COURT IS THAT WHEN SOMEBODY HAS IN HIS POSSESSION ANY ARTICL E THEN IN THE ABSENCE OF ANY EXPLANATION SUCH PERSON WHO IS FOUND IN THE POSSES SION OF THE ARTICLE WILL BE PRESUMED TO BE THE OWNER OF THIS ARTICLE. THIS LOGIC CANNOT BE APPLIED TO A LOOSE PAPER FOUND WHICH IS NOT IN THE HANDWRITING OF THE ASSESSEE. 10. WE FURTHER FIND THAT STRANGELY DURING THE COURS E OF SEARCH THOUGH THE STATEMENT HAS BEEN RECORDED COPY OF WHICH ALSO HAS BEEN FILE D BEFORE US NO QUESTION AT ALL HAS BEEN ASKED BY THE DEPARTMENT IN RESPECT OF THIS DOC UMENT. IT HAS BECOME MORE INTERESTING THAT WHEN LOOKED FROM THE ANGLE THAT T HIS WAS ONLY DOCUMENT FOUND DURING THE SEARCH. APART FROM THIS AT THE TIME OF SEARCH ONLY JEWELLERY WORTH RS.40 LAKH WAS ITA NO.3117/M/2009 SHRI RAKESH DAMAI 6 FOUND AND THE SAME HAS ALREADY BEEN ACCEPTED BY THE DEPARTMENT. WE FAIL TO UNDERSTAND THAT WHY NO QUESTION HAS BEEN ASKED IN R ESPECT OF THIS DOCUMENT. FURTHER LD COUNSEL HAD ALSO PRODUCED COPY OF PASSPORT AND D EMONSTRATED BEFORE US THAT THE ASSESSEE HAD LEFT INDIA ON 1.4.2004 AND CAME SOMEWH ERE IN JUNE 2004. THEREFORE IT IS NOT POSSIBLE FOR THE ASSESSEE TO DRAW THE BALANC E ON 20.4.2004 BECAUSE ON THAT DATE HE WAS NOT AVAILABLE IN INDIA. IN THESE CIRCUMSTAN CES IN OUR OPINION THIS PAPER HAS TO BE DECLARED AS A DUMB DOCUMENT AND IT COULD HAVE BE EN WRITTEN BY THE RELATIVE OF THE ASSESSEE OR BY ANYBODY ELSE. THE REVENUE HAS NOT B EEN ABLE TO BRING ANY CORROBORATIVE EVIDENCE/MATERIAL TO PROVE THAT THE ASSESSEE COULD HAVE GENERATED THIS INCOME IN CASH WHICH WAS NOT DECLARED TO THE DEPARTMENT. THE ASSE SSEE IS A NON-RESIDENT INDIAN WHO HAD REMAINED OUTSIDE INDIA FROM THE YEAR 2000 TO 20 06. THE ASSESSEE WAS AN EMPLOYEE AS A MARKETING MANAGER AND WAS NOT CARRYIN G ON ANY BUSINESS AND THEREFORE IT IS VERY DIFFICULT TO BELIEVE THAT THE ASSESSEE H AS GENERATED SOME CASH IN INDIA. IN THESE CIRCUMSTANCES WE ARE OF THE VIEW THAT ADDITI ON COULD NOT HAVE BEEN MADE ON THE BASIS OF DUMB PAPER. WE THEREFORE SET ASIDE THE ORDER OF THE CIT (A) AND ALLOW THE GROUNDS RAISED BY THE ASSESSEE. 11. IN THE RESULT APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 21 ST MAY 2010 SD/- (N.V.VASUDEVAN) (JUDICIAL MEMBER) SD/- (T.R.SOOD) (ACCOUNTANT MEMBER) MUMBAI DATED 21 ST MAY 2010 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)-C-III MUM BAI 4. COMMISSIONER OF INCOME TAX CENT-IV- MUMBAI 5. DEPARTMENTAL REPRESENTATIVE BENCH D MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR ITAT MUMBAI ITA NO.3117/M/2009 SHRI RAKESH DAMAI 7 DATE INITIALS 1. DRAFT DICTATED ON 18.5.2010 PS 2. DRAFT PLACED BEFORE AUTHOR 18.5.2010 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER AM/JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/J M 5. APPROVED DRAFT COMES TO THE SR. PS PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER ITA NO.3117/M/2009 SHRI RAKESH DAMAI 8