O/ITR/25/2001 JUDGMENT IN HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE NO. 25 of 2001 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER =========================================================== 1 Whether Reporters of Local Papers may be allowed to see judgment ? 2 To be referred to Reporter or not ? 3 Whether their Lordships wish to see fair copy of judgment ? 4 Whether this case involves substantial question of law as to interpretation of Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to civil judge ? ================================================================ C.I.T.....Applicant(s) Versus CHANDRAKUMAR JETHMAL KOCHAR....Respondent(s) ================================================================ Appearance: MR NITIN K MEHTA, ADVOCATE for Applicant(s) No. 1 MRS SWATI SOPARKAR, ADVOCATE for Respondent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER Date : 12/11/2014 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE K.J.THAKER) Page 1 of 9 HC-NIC Page 1 of 9 Created On Thu Nov 19 18:12:06 IST 2015 O/ITR/25/2001 JUDGMENT 1. In compliance to direction of Hon ble Apex Court, Tribunal has referred following questions of law to this Court: 1. Whether Appellate Tribunal is right in law and on facts in deleting addition made by A.O. based on statements recorded during search proceedings ? 2. Whether Appellate Tribunal s finding to effect that other concerns were not benami of assessee is borne out from record ? 2. facts in brief are that on 08.08.1990 search and seizure operation was conducted by Income Tax Authorities on business premises of assessee u/s 132 of I.T. Act. Statement of assessee was recorded by authorized Officer u/s 132(4) and during that course assessee admitted that one Kamal Traders, Naman Traders, Adarsh Textiles and Sampat Traders were benami concerns of assesssee and these business concerns were being run by assessee in name of his employees. Thereafter, statement of concerned employees were also recorded, wherein it was admitted that businesses run in name of assessee himself. authorized Officer also recorded statement of wife of assessee. Subsequently, during course of assessment proceedings, Assessing Officer recorded statements of aforesaid four Page 2 of 9 HC-NIC Page 2 of 9 Created On Thu Nov 19 18:12:06 IST 2015 O/ITR/25/2001 JUDGMENT employees as well as wife of assessee, wherein it has been claimed that business carried out in their respective names belonged to them. However, Assessing Officer, placed reliance on earlier statements recorded during course of search operations on 8.8.1990 and made additions for Assessment Years 1989 90 to 1991 92 treating profits of benami businesses as belong to Assessee. 2.1. In Appeal, CIT(A) upheld additions made by Assessing Officer. Being aggrieved by same, Assessee filed appeal before ITAT. Tribunal vide its order dated 21.1.1997 deleted additions holding that revenue has failed to prove benami nature of businesses carried on in name of four employees and assessee s wife. Against said order, revenue filed reference before this Court. This Court also rejected reference of revenue. revenue therefore, filed SLP before Apex Court. Apex Court vide its order dated 17.09.1999 directed Tribunal to refer questions to this Court as mentioned hereinabove. 3. Learned advocate for appellant has submitted that Tribunal has committed error in allowing appeal. He further submitted that Tribunal has not given any cogent reasons in its order. 4. As against this, Mr. Soparkar, learned Page 3 of 9 HC-NIC Page 3 of 9 Created On Thu Nov 19 18:12:06 IST 2015 O/ITR/25/2001 JUDGMENT Senior counsel heavily relied upon decision of this Court in case of Kailashben Manharlal Chokshi Vs. Commissioner of Income Tax, reported in [2010] 328 ITR 411 (Guj.), more particularly paragraph No.23. In aforesaid case, judgment rendered in CIT Vs. D.L.F., reported in [2000] ITR 855 has been referred. Paragraph No.23 of decision of Kailashben Manharlal Choksh (supra) reads as under: 23. main grievance of Assessing Officer was that statement was not retracted immediately and it was done after two months. It was afterthought and made under legal advise. However, if such retraction is to be viewed in light of evidence furnished alongwith affidavit, it would immediately be clear that assessee has given proper explanation for all items under which disclosure was sought to be obtained from assessee. So far as amount invested in house property is concerned, assessee has specifically stated in his explanation dated 28.2.1989 that there was absolutely no basis for making disclosure on account of bunglow at 68, Sarjan Society, Athwa Lines, Surat. It was in year 1964 that assessee took one Plot No.68 in Sarjan Co.Operative Housing Society which was also constructing bunglow for which assessee claimed to have been made contribution from time to time. assessee took possession of bunglow in 1974 when only ground floor was constructed. Since then he has been living there. assessee has constructed first floor during 1986 to 1988 and he has incurred expenses for first floor structure to tune of Rs.2,03,185.65 ps. but this amount has been withdrawn from account of firm in which assessee is partner. As per say of Mr.Shah even departmental valuation officer has also accepted that cost of construction of first floor worked out to Rs.2,06,060/ . There was, therefore, no reason for making addition of Rs.4 lacs on basis of alleged disclosure made by assessee in his statement recorded under Page 4 of 9 HC-NIC Page 4 of 9 Created On Thu Nov 19 18:12:06 IST 2015 O/ITR/25/2001 JUDGMENT Section 132(4) of Act. In support of this statement Revenue has not brought any evidence whatsoever which would establish that assessee had in fact incurred amount of Rs.4 lacs on construction of first floor and that amount was invested out of undisclosed income. Hence there is no justification for making account of Rs.4 lacs merely on basis of statement recorded under Section 132 (4). None of authorities have considered this explanation and CIT(A) as well as Tribunal both have proceeded on footing that Assessing Officer has considered explanation. So far as addition on account of gold ornament to tune of Rs.1 lac is concerned, assessee has given explanation that was reproduced by Assessing Officer in his assessment order which says that during course of search and seizure proceeding, statement of assessee's wife, Smt. Kailashben Chokshi was recorded and according to which she had received about 25 tolas of gold each from her parents and from her parents in law side at time of her marriage in year 1960. She had given 15 tolas of gold ornaments to her daughter Ritaben at time of her marriage in month of March, 1988. If total jewellery found during course of search is taken into consideration, in light of instructions issued by Board, any middle class Indian family may be having jewellery and gold ornaments to that extent. Hence, no addition can be made on that count. Even if board Circular may not have retrospective operation, looking to quantum of holding and assessee's explanation, we are of view that this is normal holding which can be found in any middle class Indian family and hence no addition could have been justified on that count. So far as addition of Rs.1 lac on account of unaccounted investment in furniture is concerned, it is stated by assessee that on ground floor furniture was made before 15 years and assessee had spent Rs.25,000/ for renovation after making withdrawal from firm's account. It is further submitted that Page 5 of 9 HC-NIC Page 5 of 9 Created On Thu Nov 19 18:12:06 IST 2015 O/ITR/25/2001 JUDGMENT furniture on first floor was partly received and paid out of withdrawals from firm. At time of search additional furniture meant for first floor was just received by way of parcel from Ahmedabad and was lying in bundles. detailed source of investment of furniture purchased from Ahmedabad with due confirmation from party concerned have been filed by assessee before Assessing Officer. Since no payment of this additional furniture was made by assessee till date of search, no addition could have been made on this count. 5. We have heard learned advocates appearing for both parties and perused material available on record. Tribunal while deciding appeal in paragraph No.8 has observed as under: 8. We have heard assessee s counsel and D.R. We are of opinion that CIT(A) when he relied upon statement of assessee made on 8.8.90 ignored fact that there were two statements recorded on that day. first statement was recorded at 8 am. and second statement was recorded at 8:45 pm. in night. In first statement recorded in morning which are contained on pages 1 to 12 of assessee s paper book. There is no acceptance of fact that business belonged to him and not to other persons who are said to have given statements against him. It is notable that 33 questions were asked in morning session and this morning session statement was first statement. Therefore, if line of reasoning recorded by CIT (A) is accepted then reliance has to be placed on first statement in morning. In this first statement in morning there is no acceptance of any benamidari or any disclosure. It is notable that second statement of assessee started at 8:45 pm. which according to assessee continued upto 6 am. next day. This is contained from pages 13 to 26 of paper book and contains 35 questions and Page 6 of 9 HC-NIC Page 6 of 9 Created On Thu Nov 19 18:12:06 IST 2015 O/ITR/25/2001 JUDGMENT answers. Till question No.21 of second statement there is no allegation of any benamidari. From question No.22 statement starts talking about proprietorship of different concerns in name of his various employees. Even in answer to question No.22 he could not give names of proprietors of Kamal Traders, Naman Traders, Sampat Traders, Adarsh textiles. In last sentence of said answer he stated as translated in English besides above there are no other firms in name of our employees . In answer to question No.23 he accepted that Sugam Textiles was being run by his employees as his benami. In answer to question No.24 he accepted that all concerns mentioned in question No.22 are his benami concerns. In answer to question No.26 he accepted that certain bank accounts were his benami bank accounts. In answer to question No.27 he further agreed that all deposits made in name of his employees are his deposits. In answer to question No.33 he disclosed income of Rs.15 lakhs. He could not give any further details on that date. On 31.8.90 another statement of this assessee was recorded. In that he accepted that he was partner in Padam Enterprises as individual and in Mahavir Trading Co. as HUF. In answer to question No.14 he stated that through two concerns of Sugam Textiles and Shanti Traders profits of 14 concerns belonging to his group were reduced. name of 14 concerns are given on assessee s paper book page No.28. In answer to question No.12 he made disclosure of Rs.24 lakhs in all including Rs.15 lakhs disclosed on 8.8.90. From above statements one thing is clear that in first statement made in morning of 8.8.90 this assessee did not disclosure any benamidari and it was only in second statement taken from 8:45 pm. onwards that he disclosed certain benamidaris and proceeded make certain disclosure. It is notable that disclosure. Made in answer to question No.12 appearing on assessee s paper book page No.32 in statement given on 31.8.90 talks about disclosure of 24 lakhs in 14 concerns as group disclosure. issue regarding group disclosure has neither been discussed by A.O. nor by CIT(A). Under I.T. Act assessment has to be made on Page 7 of 9 HC-NIC Page 7 of 9 Created On Thu Nov 19 18:12:06 IST 2015 O/ITR/25/2001 JUDGMENT assessee on income determined in his case for particular year. quantum of disclosure made in each and every 14 concerns have not been identified by either of lower authorities. department has also not contested fact that this assessee s son suffered from diabetes. In view of above circumstances we see reason to believe that second statement given by assessee after 8:45 pm. was not given under circumstances which could be said as normal for assessee. 6. In view of above discussion and considering principal laid down in case of Kailashben Manharlal Choksh (supra), we are of considered opinion that view taken by Tribunal is just and proper. We are not convinced with submissions made by Mr. Mehta, learned advocate for appellant that Tribunal has not given cogent reasons. Therefore, answer to first question would be against Revenue and in favour of assessee. second question will also enure for benefit of assessee as from record it is clear that other concerns were not Benami concerns of assessee. 7. For forging reasons, present appeal is dismissed. Accordingly, both questions which were referred to this Court are answered in favour of assessee and against revenue. (K.S.JHAVERI, J.) Page 8 of 9 HC-NIC Page 8 of 9 Created On Thu Nov 19 18:12:06 IST 2015 O/ITR/25/2001 JUDGMENT (K.J.THAKER, J) pawan Page 9 of 9 HC-NIC Page 9 of 9 Created On Thu Nov 19 18:12:06 IST 2015 C.I.T. v. CHANDRAKUMAR JETHMAL KOCHAR