Buldhana Liquor Distributors v. Commissioner of Income-tax, Nagpur
[Citation -2017-LL-0630-3]

Citation 2017-LL-0630-3
Appellant Name Buldhana Liquor Distributors
Respondent Name Commissioner of Income-tax, Nagpur
Court HIGH COURT OF BOMBAY AT NAGPUR
Relevant Act Income-tax
Date of Order 30/06/2017
Assessment Year 1984-85
Judgment View Judgment
Keyword Tags best judgment assessment • search and seizure • undisclosed income • unexplained income • valuable article • burden of proof • seized material • deemed income • total income
Bot Summary: According to the assessee, the resources for acquiring the gold, were generated over the previous years relevant to the assessment years 1983-84 and 1984-85. The Tribunal observed that the assessment order for assessment year 1983-84 does not show that the AO had decided to accept Rs.1 ::: Uploaded on - 04/07/2017 ::: Downloaded on - 06/07/2017 09:15:21 ::: 5 ITR19 08.odt lakh as real income of the year and he accepted the figure of Rs.1 Lakh as it was offered for taxation. After considering the facts and circumstances of the case, the Tribunal was of the view that there is no evidence on record to prove that the sum of Rs.1 Lakh as assessed by the Department in the assessment year 1983-84 was available to the assessee in the next ::: Uploaded on - 04/07/2017 ::: Downloaded on - 06/07/2017 09:15:21 ::: 6 ITR19 08.odt year. Consequently the entire explanation for the seized yellow metal found during the course of the search has to be explained by the assessee in the subject assessment year and offering a part of the tax payable in the subject assessment year in the earlier assessment year would not enure to the benefit of the applicant-assessee. In the present facts the Assessing Officer for the assessment year 1983-84 has accepted an amount of Rs.1,00,000/- as income for the assessment year 1983-84, being a part of Rs.2,83,000/- i.e. the value of the yellow metal seized during the course of the search. The Court relied and quoted extensively from an earlier judgment in Abraham vs. CIT ILR 1975 Ker 426, and observed that the Court in that judgment had been unable to accept as a general principle that in all cases where an addition had been made to the income of the assessee in making the assessment for an earlier year, the amount so added should be presumed to be available to the assessee during the subsequent years. In the facts of the present case, the Tribunal was not justified in assessing the entire value of the yellow metal for the assessment year 1984- 85 to the extent of Rs.2,83,000/- when an amount of Rs.1,00,000/- out of the above amount stands explained as undisclosed income having been assessed to tax in the earlier assessment year 1983-84.


IN HIGH COURT OF JUDICATURE AT BOMBAY NAGPUR BENCH : NAGPUR Income Tax Reference No.19 of 2008 M/s Buldhana Liquor Distributors, Khamgaon, district Buldhana .. APPLICANT .. Versus .. Commissioner of Income Tax, Vidarbha, Nagpur. .. RESPONDENT Mr. K.P. Dewani, Advocate for Applicant. Mr. S.N. Bhattad, Advocate for Respondent. . CORAM : M.S. Sanklecha & Manish Pitale, JJ. DATED : June 30, 2017. P.C. 1. This reference under Section 256(2) of Income Tax Act, 1961, (Act) made by Income Tax Appellate Tribunal, seeks our opinion on following question of law:- Whether in facts and circumstances of case, Tribunal was justified in assessing entire value of yellow metal brick for assessment year 1984-85 even though part of value of gold bar amounting to Rs.1,00,000/- has already been taxed in assessment year 1983-84 and same has attained finality? ::: Uploaded on - 04/07/2017 ::: Downloaded on - 06/07/2017 09:15:21 ::: 2 ITR19 08.odt 2. This reference relates to assessment year 1984-85. facts leading to above question as stated in statement of case sent by Tribunal is as under:- 1. During search and seizure proceedings conducted on 18.04.1983 corresponding to assessment year 1984-85, gold brick worth Rs.2,83,326/- was discovered. assessee offered to be taxed sum of Rs.3,00,000/- to be assessed for assessment years 1983-84 and 1984-85. According to assessee, resources for acquiring gold, were generated over previous years relevant to assessment years 1983-84 and 1984-85. oder u/s 132(5) was passed in this case wherein value of primary gold at Rs.2,83,326/- was considered as income of firm. assessee submitted that it did not admit possession and ownership of primary gold but for purpose of avoiding litigation, it offered value of this gold as income of firm for two years. A.O. while passing order of assessment for assessment year 1983-84 while discussing above contention of assessee observed as below:- But it is un-necessary to go into controversy for purpose of determination ::: Uploaded on - 04/07/2017 ::: Downloaded on - 06/07/2017 09:15:21 ::: 3 ITR19 08.odt of income of firm. Since value of metal has been offered as income of firm it is unnecessary for me to dwell at length of meaning of words 'possession and ownership' and other aspects. A.O. accordingly assessed total income of assessee at Rs.1,00,000/- for assessment year 1983-84. 2. When assessment for assessment year 1984-85 came for consideration, A.O. directed assessee to explain as to why entire value of gold should not be added as income for assessment year 1984-85 u/s 69A of I.T. Act, 1961. assessee submitted that it had disclosed business income of Rs.1 lakh for assessment year 1983-84 and no investment was made out of said amount. contention raised before A.O. was that his amount was available with assessee and, therefore, only unexplained income for assessment year 1984-85 could be Rs.1,83,325/-. A.O. did not accept this contention of assessee in view of provisions of Section 69A, which according to him, clearly lays down that when assessee is found to be owner of any bullion and such bullion is not recorded in books of account maintained by him and assessee offers no explanation about nature ::: Uploaded on - 04/07/2017 ::: Downloaded on - 06/07/2017 09:15:21 ::: 4 ITR19 08.odt and sources of acquisition of bullion or explanation offered by him is not satisfactory, value of bullion may deemed to be income of assessee for such financial year. He did not accept assessee's contention that because he had offered to be assessed on income of Rs.1 lakh for assessment year 1983-84, that amount should be considered as part of source for investment in this year. He held that this could not be accepted as there was no evidence to show that money earned by it in earlier year has gone to purchase of gold brick. AO accordingly estimated assessee's income from other sources at Rs.2,83,325/-. 3. assessee appealed before CIT (Appeals) and learned CIT (Appeals) after considering arguments of both sides and considering citations relied upon by assessee, deleted addition of Rs.1 lakh made by AO for this year. 4. Being aggrieved, Revenue filed appeal before Tribunal. Tribunal after considering submissions of parties was of opinion that CIT (Appeals) was not justified in allowing relief to assessee of Rs.1 lakh from total income. Tribunal observed that assessment order for assessment year 1983-84 does not show that AO had decided to accept Rs.1 ::: Uploaded on - 04/07/2017 ::: Downloaded on - 06/07/2017 09:15:21 ::: 5 ITR19 08.odt lakh as real income of year and he accepted figure of Rs.1 Lakh as it was offered for taxation. There is no evidence on record to prove that this sum of Rs.1 Lakh was available to assessee in next accounting period. Tribunal further observed that under section 69A, money or value of bullion, jewellery or other valuable article may be deemed to be income of assessee for financial year in which assessee is found to be owner of such money, bullion, jewellery or valuable article, if- (a) such money, etc. is not recorded in books of account, if any, maintained by assessee; (b) assessee offers no explanation about nature and source of acquisition of such money; and (c) explanation offered by him is, in opinion of Income Tax Officer, not satisfactory. Tribunal has also considered arguments of both sides carefully and also gone through decisions relied upon. After considering facts and circumstances of case, Tribunal was of view that there is no evidence on record to prove that sum of Rs.1 Lakh as assessed by Department in assessment year 1983-84 was available to assessee in next ::: Uploaded on - 04/07/2017 ::: Downloaded on - 06/07/2017 09:15:21 ::: 6 ITR19 08.odt year. Tribunal also opined that decisions quoted by assessee's counsel do not apply to facts of this case. Accordingly order of CIT (Appeals) was set aside and order of A.O. was restored by Tribunal allowing appeal filed by Department." 3. Mr. Dewani, learned counsel appearing for applicant-assessee in support of reference submits as under:- At time of search statements were recorded and order came to be passed on 13.07.1983 by Assessing Officer under Section 132(5) of Act. In aforesaid order, it is recorded that yellow metal valued at Rs.2,83,000/- found during course of search was acquired out of income of Rs. 1,00,000/- relating to assessment year 1983-84 and accepted same. Thereafter Assessing Officer by order dated 30.04.1984 for assessment year 1983-84 accepted above position and brought to tax Rs.1,00,000/- as undisclosed income. These orders it is submitted would estop revenue from seeking to tax amount of Rs.1,00,000/- which is part value of seized yellow metal in subject assessment year i.e. 1984-85. Therefore, Revenue cannot bring entire amount (value) of yellow metal at Rs.2,83,000/- to tax in subject ::: Uploaded on - 04/07/2017 ::: Downloaded on - 06/07/2017 09:15:22 ::: 7 ITR19 08.odt assessment year. 4. It is further submitted that basis of impugned order is that in terms of Section 69A of Act, nature and source of acquisition of yellow metal found during course of search on 18.04.1983 was not explained in its entirety is erroneous. This for reason it is submitted is that to extent of Rs.1,00,000/- out of Rs.2,83,000/- being value of yellow metal found during course of search had stood explained and accepted, when applicant declared this as undisclosed income for assessment year 1983-84. Thus only amount which could be brought to tax is balance amount of Rs.1,83,000/- which applicant- assessee has not explained. In above view, it is submitted that question as raised for our opinion be answered in negative i.e. in favour of applicant-assessee and against revenue. 5. On other hand Mr. Bhattad, learned counsel appearing for Revenue submits that order passed under Section 132(5) of Act is provisional in nature and only with view to protect interest of Revenue. This order under Section 132(5) of Act is only estimate of ::: Uploaded on - 04/07/2017 ::: Downloaded on - 06/07/2017 09:15:22 ::: 8 ITR19 08.odt undisclosed income on basis of best judgment assessment and determines tax payable on same. It does not operate as estoppel or final order passed by Assessing Officer deciding lis between parties finally. yellow metal was seized during search conducted in previous year relevant to subject assessment year. Consequently entire explanation for seized yellow metal found during course of search has to be explained by assessee in subject assessment year and offering part of tax payable in subject assessment year in earlier assessment year would not enure to benefit of applicant-assessee. It is submitted that Section 69A of Act has been appropriately invoked, as applicant-assessee has in subject assessment year not explained nature and source of acquisition of yellow metal. Thus entire amount of Rs.2,83,000/- has been correctly brought to tax by Tribunal in subject assessment year. 6. We have considered rival submissions. It is correct that order which has been passed under Section 132(5) of Act is provisional, on basis of summary enquiry. objective of order under Section 132(5) of ::: Uploaded on - 04/07/2017 ::: Downloaded on - 06/07/2017 09:15:22 ::: 9 ITR19 08.odt Act is with view to determine that how much of seized material should be retained so as to cover tax liability payable by person from whose possession seized material was found. order under Section 132(5) of Act being provisional order that does not determine rights of parties is no longer res integra in view of Apex Court's decision in Pooran Mal .vs. Director of Inspection etc. - AIR 1974 Supreme Court 348. 7. In present facts Assessing Officer for assessment year 1983-84 has accepted amount of Rs.1,00,000/- as income for assessment year 1983-84, being part of Rs.2,83,000/- i.e. value of yellow metal seized during course of search. This is evident from his assessment order dated 30.04.1984 where it is recorded that "since nature of metal has been offered as income of firm...." Nevertheless, for subject assessment year Assessing Officer proceeded on basis that yellow metal valued at Rs.2,83,000/- found during course of search on 18.04.1983 would be governed by section 69A of Act. Therefore, it proceeds on basis that applicant assessee would have to explain nature and source of acquisition of yellow metal found during course of search in ::: Uploaded on - 04/07/2017 ::: Downloaded on - 06/07/2017 09:15:22 ::: 10 ITR19 08.odt present proceedings and in absence thereof entire amount of Rs.2,83,000/- i.e. value of seized yellow metal would be treated as deemed income of applicant-assessee. 8. We note that applicant-assessee had during subject assessment year had offered explanation to extent of Rs.1,00,000/- in respect of source of funding of yellow metal at Rs.2,83,000/- found during course of search. It was further pointed out that Rs.1,00,000/- has already suffered tax as is evident from order of Assessing Officer dated 30.04.1984 for assessment year 1983- 84. Moreover, order dated 30.04.1984 of Assessing Officer has been accepted by Revenue. This order explains source and nature of acquisition of yellow metal to extent of Rs.1,00,000/-. This explanation was not accepted on ground that Rs.1,00,000/- was brought to tax in earlier assessment year 1983-84 only because applicant-assessee had offered it to tax and there is nothing to prove that amount of Rs.1,00,000/- was available with assessee in subject assessment year when yellow metal was found during course of search. 9. We are unable to understand basis for non- ::: Uploaded on - 04/07/2017 ::: Downloaded on - 06/07/2017 09:15:22 ::: 11 ITR19 08.odt acceptance of explanation, when assessment order for assessment year 1983-84 has been accepted by Revenue. Moreover as held by this in CIT .vs. Jawanmal Gemaji Gandhi (1985) 151 ITR 353 which placed reliance upon Apex Court's decision in case of Anantharam Veerasinghaiah & Co. .vs. CIT (1980) 123 ITR 457 (SC) to hold that undisclosed income for earlier assessment year can be capital from which purchases have been made. We can fruitfully reproduce observations of this Court as under:- "5. Mr. Joshi also cited judgment of Kerala High Court in Annamma Paul .vs. CIT (1979) 12 CTR (Ker) 299: (1980) 121 ITR 433 (Ker). Court relied and quoted extensively from earlier judgment in Abraham vs. CIT (1975) ILR 1975 (1) Ker 426, and observed that Court in that judgment had been unable to accept as general principle that in all cases where addition had been made to income of assessee in making assessment for earlier year, amount so added should be presumed to be available to assessee during subsequent years. Court also noted that it had been held by it that burden of proof to trace unexplained credits to intangible additions was on assessee. 6. Supreme Court has clearly stated that secret profits or undisclosed income of assessee earned in earlier assessment year can constitute fund, though concealed, from which assessee may draw subsequently. That observation is clearly contrary to finding of Kerala High Court. assessee acquired gold ::: Uploaded on - 04/07/2017 ::: Downloaded on - 06/07/2017 09:15:22 ::: 12 ITR19 08.odt during latter half of assessment year; it could then very well be that undisclosed income of Rs.10,702 earned in that very year constituted fund from which this asset was acquired." (Emphasis supplied) 10. As would be noticed Kerala High Court's view to contrary was expressly departed from. In this case also applicant-assessee has sufficiently established by virtue of assessment order passed in earlier assessment year that they were possessed of funds to extent of Rs.1,00,000/- and amount attributable thereto has been offered to tax in earlier assessment year. Therefore, in facts of present case, Tribunal was not justified in assessing entire value of yellow metal for assessment year 1984- 85 to extent of Rs.2,83,000/- when amount of Rs.1,00,000/- out of above amount stands explained as undisclosed income having been assessed to tax in earlier assessment year 1983-84. 11. Therefore, in facts and circumstances of this case, question of law posed for our opinion is answered in negative i.e. in favour of applicant-assessee and against respondent- revenue. ::: Uploaded on - 04/07/2017 ::: Downloaded on - 06/07/2017 09:15:22 ::: 13 ITR19 08.odt 12. Reference is disposed of in above terms. (Manish Pitale, J. ) (M.S. Sanklecha, J.) halwai/p.s. ::: Uploaded on - 04/07/2017 ::: Downloaded on - 06/07/2017 09:15:22 ::: Buldhana Liquor Distributors v. Commissioner of Income-tax, Nagpur
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