H.M. Constructions V. The Assistant Commissioner of Income-Tax, Circle 8(1)

ITA/370/2015

AI Insights

The case involves M/S H.M. Constructions, a firm engaged in real estate, which faced a block assessment for the period from 01.04.1991 to 29.05.2001 following a search under Section 132 of the Income Tax Act. The search revealed notings and a statement from an attesting witness, which were used to substantiate claims of on-money payments for land purchases. The Assessing Officer added Rs.30,35,750 as undisclosed income based on these findings. The Tribunal and subsequent appeals upheld this addition, leading to the present appeal in the High Court, which also dismissed the appeal, affirming the lower authorities' decisions.

• Counselvise Citation: [2020] 140 COUNSELVISE.COM (IT) 690541 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 02-12-2020
• Assessment Year: misc
• Other Referred Cases: ANDAMAN TIMBER INDUSTRIES VS. COMMISSIONER OF CENTRAL EXCISE, P.R. METRANI VS. CIT, CIT VS. P.V. KALYANASUNDARAM, CIT VS. SMT. K.C. AGNES, CIT VS. GIRISH CHAUDHARY, CIT VS. S.M. AGGARWAL, CIT VS. DAULAT RAM RAWATMULL
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: K V ARAVIND
• Assessee Lawyers: S PARTHASARATHI
• Keywords: Block assessment; Cross Examination; Cross-examination; On-money payment; Search and seizure; Statutory presumption; Undisclosed income
• Section: 263; 132; 158BC; 132(4A); 260-A

Judgement Text

"1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 2ND DAY OF DECEMBER 2020 PRESENT THE HON’BLE MR. JUSTICE ALOK ARADHE AND THE HON’BLE MR. JUSTICE H.T.NARENDRA PRASAD I.T.A. NO.370 OF 2015 BETWEEN: M/S H.M.CONSTRUCTIONS NO.14, GENEVA HOUSE CUNNINGHAM ROAD BANGALORE-560 052. REPRESENTED BY ITS PARTNER SRI.H.J.SIWANI AGED ABOUT 54 YEARS SON OF SRI.J.K.SIWANI. ... APPELLANT (BY SRI.S.PARTHASARATHI, ADV.,) AND: THE ASST.COMMISSIONER OF INCOME-TAX, CIRCLE 8(1) SAMPIGE ROAD, MALLESWARAM BANGALORE-560 003. ... RESPONDENT (BY SRI.K.V.ARAVIND, ADV.,) - - - THIS ITA IS FILED UNDER SECTION 260-A OF I.T. ACT, 1961 ARISING OUT OF ORDER DATED 23.03.2015 PASSED IN IT(SS) A NO.9/BANG/2014, FOR THE ASSESSMENT YEAR 01.04.1991 TO 29.05.2001 PRAYING TO:(I) FORMULATE THE QUESTION OF LAW STATED ABOVE.(II) ALLOW THE APPEAL AND SET ASIDE THE ORDER OF THE ITAT DATED: 23.03.2015 BEARING 2 IT(SS)A NO.9/BANG/2014 FOR THE BLOCK PERIOD 01.04.1991 TO 29.05.2001: AND ETC. THIS ITA COMING ON FOR FINAL HEARING, THIS DAY, ALOK ARADHE J., DELIVERED THE FOLLOWING: JUDGMENT This appeal under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act for short) has been preferred by the assessee. The subject matter of the appeal pertains to the block assessment period from 01.04.1991 to 29.05.2001. The appeal was admitted by a bench of this Court vide order dated 31.05.2016 on the following substantial question of law: Whether the Tribunal was justified in law in dismissing the appeal of the appellant and sustaining the addition made by the assessing officer on the basis of invalid evidence and in the absence of cross examination of the witness, whose statement formed the foundation along with the unsigned notings seized during the search and thus passing the order that is perverse in law? 3 2. Facts leading to filing of this appeal briefly stated are that the appellant is a firm engaged in real estate business. On 18.08.1995, it purchased two parcels of land from Smt.Venkatanarasamma and Smt.Venkatamma and others for consideration of Rs.3,00,000/- and Rs.8,25,000/- respectively. In the group of the appellant, a search under Section 132 of the Act was conducted on 29.05.2001. During the search, a paper containing notings about the above properties purchased was seized and assigned No.A/3/HMC/23. The said notings were neither in the handwriting of any of the partners of the firm nor in the handwriting of any of the employees of the firm. With regard to details of sale consideration paid, a statement was recorded from one Sri Y.Jayaram on 31.08.2001 who was a attesting witness to the left thumb impression of the sellers. As a consequence of the search, proceedings were initiated under Chapter XIV-B of the Act by issue of a notice under Section 158BC on 4 24.04.2002. The appellant filed return of income on 20.02.2003 declaring ‘NIL’ income. The Assessing Officer by an order dated 29.05.2003 on the basis of the material seized during the course of the search as well as statement of one Jayaram, added a sum of Rs.30,35,750/- as undisclosed income on account of on- money paid to the sellers of the land. Thus, the total undisclosed income in the block assessment was determined at Rs.3,21,04,380/-. 3. The assessee thereupon filed an appeal before the Commissioner of Income Tax (Appeals) who by an order 31.12.2004 deleted a sum of Rs.79,05,894/- from the block assessment and the total undisclosed income was revised to Rs.2,41,98,485/-. The assessee thereupon filed an appeal before the Income Tax Appellate Tribunal (hereinafter referred to as 'the tribunal' for short). The tribunal by an order dated 21.04.2006 directed deletion of all the additions except a sum of Rs.30,35,750/- relating to Assessment Year 5 1996-97 and the matter was remitted to the Assessing Officer to afford an opportunity to the assessee and to re-determine the issue. 4. The Assessing Officer passed an order of assessment on 31.12.2007 without obtaining the approval of Joint Commissioner of Income-tax. The aforesaid order was set aside by the Commissioner of Income Tax in exercise of powers under Section 263 of the Act by an order dated 24.03.2010. The Assessing Officer thereafter, again determined the total undisclosed income for the block period at Rs.30,35,750/- and held that the aforesaid sum related to on-money payment made towards purchase of land relating to Assessment Year 1996-97. The assessee thereupon filed an appeal, which was dismissed by the Commissioner of Income Tax (Appeals) by an order dated 20.05.2014. The assessee thereupon approached the Tribunal by filing an appeal. The tribunal by an order dated 23.03.2015 dismissed the appeal preferred by the 6 assessee. In the aforesaid factual background, the assessee has approached this court. 5. Learned counsel for the assessee submitted that the authorities under the Act failed to appreciate that the assessee was not given an opportunity to produce the party to whom the payment was made and the statement of Jayaram was recorded behind the back of the assessee and no opportunity was afforded to the assessee to cross-examine the aforesaid witness. It is also argued that the document seized during the search did not show that any payment was made and the material, which was relied upon was not supplied to the assessee. It is further submitted that the assessee had appeared before the Assessing Officer to cross examine aforesaid Jayaram, however, on the aforesaid date Jayaram did not appear and there was no material on record except Jayaram's statement to show with regard to on-money payment and in the absence of any opportunity for cross-examination, the aforesaid 7 statement could not have been relied upon by the assessee. In support of aforesaid submissions, reliance has been placed on decisions in 'ANDAMAN TIMBER INDUSTRIES VS. COMMISSIONER OF CENTRAL EXCISE', (2015) 127 DTR 241 (SC), 'P.R.METRANI VS. CIT', 287 ITR 209 (SC) 2006, 'CIT VS. P.V.KALYANASUNDARAM', 282 ITR 259 (MAD) 2006, 'CIT VS. SMT.K.C.AGNES', 262 ITR 354 (KER) 2003, 'CIT VS. GIRISH CHAUDHARY', 296 ITR 619 (DEL) 2007, 'CIT VS. S.M.AGGARWAL', 293 UTR 43 (DEL) 2006 AND 'CIT VS. DAULAT RAM RAWATMULL', 87 ITR 349 (SC) 1972. 6. On the other hand, learned counsel for the revenue submitted that the Assessing Officer has not relied on the statement of Jayaram and therefore, even assuming that an opportunity of cross-examination was not afforded to the assessee, the same does not cause any prejudice to the assessee in any way. It is further submitted that Section 132(4A) of the Act provides for 8 statutory presumption against the assessee and the assessee has not rebutted the same by adducing either any material or evidence before the authorities, even though, six opportunities were available to the assessee. It is also pointed out that the seized document is admittedly in relation to the property in question and subsequent to which the sale deeds were registered in favour of the assessee, therefore, it can be safely presumed in the light of Section 132(4A) of the Act that the payment was made. It is also pointed out that the assessee filed an affidavit of Jayaram, before Commissioner of Income Tax (Appeals). However, the Commissioner of Income Tax (Appeals) found that there has been a discrepancy in the signatures of aforesaid Jayaram in the statement dated 31.08.2001 as well as in the affidavit, which was filed by the assessee and therefore, rightly discarded the same. It is further submitted that the aforesaid aspect of the matter speaks volumes about the conduct of the assessee. It is further 9 submitted that finding recorded by the authorities are finding of fact and the same does not suffer from any infirmity and therefore, no substantial question of law is involved in this appeal. 7. We have considered the submissions made by learned counsel for the parties and have perused the record. Before proceeding further, it is apposite to take note of Section 132(4A) of the Act, which reads as under: 132(4A) Where any books of account, other documents, money, 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, it may be presumed- (i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person; (ii) that the contents of such books of account and other documents are true; and 10 (iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person' s 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. Thus, the aforesaid provision raises a statutory presumption and the burden shifts on the assessee to rebut the aforesaid statutory presumption by leading cogent evidence. 8. In the instant case, the assessee was supplied a copy of statement of aforesaid Jayaram recorded on 31.08.2001, by the Assessing Officer by communication dated 31.05.2003 and the assessee was instructed to produce one G.Anand on 19.05.2003. However, on 19.05.2003, even though assessee 11 appeared he did not produce G.Anand and on the said date, aforesaid Jayaram sought adjournment and did not appear before Assessing Officer. From the perusal of the order of assessment, it is evident that the Assessing Officer relied on the document seized during the course of the search and not on the statement of Jayaram and brought to tax a sum of Rs.30,35,750/- as undisclosed income. The assessee had the opportunity to adduce the evidence in rebuttal before the Commissioner of Income Tax (Appeals) as well as before the tribunal, however, he failed to do so. Even in second round of litigation, the Assessing Officer has placed reliance on the document seized during the course of search in the premises of the assessee and the aforesaid document admittedly relates to transaction in question in respect of which sale deeds have been executed in favour of the assessee. Therefore, the presumption arises that the payment was made to the assessee in view of Section 132(4A) of the Act. Despite opportunities being granted, the assessee 12 did not lead any evidence in rebuttal and did not discharge the burden. Therefore, the finding recorded by the tribunal that a sum of Rs.30,35,750/- was an undisclosed income cannot be said to be perverse. In view of preceding analysis, the substantial question of law framed by a bench of this court is answered against the assessee and in favour of the revenue. In the result, we do not find any merit in this appeal, the same fails and is hereby dismissed. Sd/- JUDGE Sd/- JUDGE ss "