DINESH KHANNA, MUMBAI V. DCIT CEN CIR-39, MUMBAI

ITA 6586/MUM/2009

• Counselvise Citation: 658619914 RSA 2009
• Duration Of Justice: 1 year(s) 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 29-07-2010
• Assessment Year: 2007-2008
• Appeal Filed On: 29-12-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR B SENTHIL KUMAR
• Keywords: Search and seizure; Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: MUMBAI BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO. 6586/MUM /2009 (ASSESSMENT YEAR: 2007-08) DINESH KHANNA, 501/502, ASHOK HOUSE, GAMDHIGRAM ROAD, JUHU, MUMBAI -400 053 ....... APPELLANT VS DCIT CEN CIR-39, GROUND FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI -400 020 ..... RESPONDENT PAN: AAFPK 8037 Q APPELLANT BY: SHRI PARESH VAKHARIA SHRI HETAN PATEL SHRI DHIREN VAKHARIA SHRI PINANG SHAH RESPONDENT BY: DR. B. SENTHIL KUMAR O R D E R PER R.S. PADVEKAR, JM IN THIS APPEAL THE ASSESSEE HAS CHALLENGED THE IMPU GNED ORDER OF THE LD. CIT (A) MUMBAI DATED 7.10.2009 FOR THE A .Y. 2007-08. THE SHORT ISSUE IN CONTROVERSY IS WHETHER THE ADDITION MADE BY THE A.O. OF RS 4,50,000/- TOWARDS CASH FOUND AT THE TIME OF SEA RCH; TREATING THE SAME AS UNDISCLOSED INCOME IS JUSTIFIED. 2. FACTS IN BRIEF ARE AS UNDER. THERE WAS A SEARCH AND SEIZURE OPERATION AGAINST THE ASSESSEE U/S.132 OF THE I.T. ACT ON 22.2.2007. ITA 6586/MUM/2009 DINESH KHANNA 2 DURING THE COURSE OF THE SEARCH AND SEIZURE ACTION CASH OF ` 4,75,000/- WAS FOUND AT THE RESIDENCE OF THE ASSESS EE. THE ASSESSEES STATEMENT WAS ALSO RECORDED U/S.132(4) OF THE I.T. ACT. IT APPEARS THAT IN THE STATEMENT GIVEN TO THE SEARCH PARTY, THE ASS ESSEE STATED THAT THE SAID CASH BELONGED TO HIM AS HIS FOUR FAMILY ME MBERS AND HIS HUF. AS NOTED BY THE A.O. THE STATEMENT BETWEEN MRS . NISHI KHANNA (WIFE OF THE ASSESSEE) WAS ALSO RECORDED U/S.132(4) OF THE ACT ON 10.4.2007. HER EXPLANATION WAS ALSO SOUGHT IN RESP ECT OF THE SAID CASH. SHE STATED THAT PART OF THE CASH BELONG TO S HRI RAJESH KHANNA WHO IS THE ELDER BROTHER OF THE ASSESSEE. SHE STAT ED THAT IN THE STATEMENT (QUESTION NO.6) SHRI RAJESH KHANNA CAME T O MUMBAI FOR PURCHASING OF JEWELLERY, LOOSE DIAMONDS ETC. IN HIS LINE OF BUSINESS. HE CAME AT THE END OF THE JANUARY, 2007. SHE FURTH ER STATED THAT IN RESPECT OF THE CASH BELONGING TO M/S. KHANNA HOTELS P. LTD., WHICH WAS KEPT AT HOME FOR MEETING SOME URGENT NEED AS TH E CHIEF ACCOUNTANT MR. K.P. K. MURTHY TRAVELS TO KERALA FOR THE PURPOSE OF THE OFFICIAL WORK. MRS. NISHI KHANNA GAVE FOLLOWING DE TAILS OF THE SOURCE OF THE CASH OF RS 4,75,000/-:- (I) CASH BELONGING TO SHRI RAJESH KHANNA - ` 2,50,000 (II) IMPREST AMOUNT OF M/S. KHANNA HOTELS P. LTD. - ` 2,00,000 (III) BALANCE CASH FROM WITHDRAWALS OF THE EXPENSE S - ` 25,000 ----------------- - ` 4,75,000 ============ 3. IT APPEARS THAT IN THE SUBSEQUENT STATEMENT THE ASSESSEE OFFERED THE CASH AS UNDISCLOSED INCOME FOR THE A.Y. 2007-08. PART OF HIS STATEMENT IS REPRODUCED IN THE ASSESSMENT ORDER . BUT SUBSEQUENTLY, ON 18.5.2007 HE RETRACTED THE STATEME NT AND DECLINED TO ACCEPT THAT THE CASH OF ` 4,50,000/- FOUND AT HIS RESIDENCE WAS HIS UNDISCLOSED INCOME. HE EXPLAINED THE SOURCE OF THE SAID CASH SAME AS PER THE EXPLANATION GIVEN BY MRS. NISHI KHANNA, HIS WIFE. HE ALSO FILED THE CONFIRMATION LETTER FROM MR. RAJESH KHANN A AND SUBMITTED THAT RS 2 LAKHS BELONGS TO M/S. KHANNA HOTELS P. LT D. HE ALSO STATED THAT HE HAS RETURNED BACK THE AMOUNT OF RS 2,50,000 /- TO MR. RAJESH ITA 6586/MUM/2009 DINESH KHANNA 3 KHANNA ON 10.06.2007. THE A.O. REJECTED THE EXPLAN ATION OF THE ASSESSEE BY GIVING REASON THAT THE ASSESSEE CHANGED HIS STATEMENT FROM ONE END TO ANOTHER END. IN THE OPINION OF THE A.O. IF THE AMOUNT OF RS 2 LAKHS WAS BELONGS TO M/S. KHANNA HOTELS P. LTD. THEN THE SAID FACT WAS WITHIN THE KNOWLEDGE OF THE ASSESSEE ON 19 .4.2007 THE DATE ON WHICH HE OFFERED THE ENTIRE CASH AS HIS UNDISCLO SED INCOME. 3.1 SO FAR AS AMOUNT OF RS 2,00,000 IS CONCERNED, W HICH WAS CLAIMED TO BELONG TO SHRI RAJESH KHANNA; BROTHER OF THE ASSESSEE, THE A.O. DISBELIEVED THE EXPLANATION AND FINALLY MADE T HE ADDITION OF RS 4,50,000/- TREATING THE SAID CASH AS UNDISCLOSED IN COME OF THE ASSESSEE. THE ASSESSEE CHALLENGED THE ADDITION BEF ORE THE LD. CIT (A). NOW, THE ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTI ES AND PERUSED THE RECORDS. THE LD. COUNSEL REITERATED THE ARGUME NT WHICH WAS MADE BEFORE THE LD. CIT (A). THE SHORT CONTROVERSY IS IN RESPECT OF THE ADDITION OF RS 5,50,000/- TOWARDS CASH FOUND DURING THE COURSE OF THE SEARCH AND SEIZURE OPERATION. IN THE INITIAL STATE MENT, THE ASSESSEE DID NOT GIVE THE EXPLANATION IN RESPECT OF THE SOUR CE OF THE SAID CASH. IT APPEARS THAT, SUBSEQUENTLY, THE WIFE OF THE ASSE SSEE MRS. NISHI KHANNA EXPLAINED THE SOURCE IN RESPECT OF THE SAID AMOUNT. IT WAS STATED THAT THE SUM OF RS 2.50 LAKHS BELONG TO HIS BROTHER SHRI RAJESH KHANNA WHO VISITED TO MUMBAI IN CONNECTION WITH HIS BUSINESS FOR BUYING THE JEWELLERY ETC. AND RS 2 LAKHS BELONG TO M/S. KHANNA HOTELS P. LTD.. THE ASSESSEE ALSO FILED THE CONFIRMATION LETTERS FROM SHRI RAJESH KHAN AND M/S. KHANNA HOTELS P. LTD. THE ASS ESSEE CONTENDED THAT AS PER THE COMPANIES POLICY, THE ASSESSEE WAS KEEPING THE IMPREST CASH OF RS 2 LAKHS FOR SOME EMERGENCY PAYME NTS. 5. NOW, LET US DEAL WITH THE FIRST EXPLANATION OF T HE ASSESSEE IN RESPECT OF RS 2.5 LAKHS WHICH WAS CLAIMED TO HAVE B EEN RECEIVED FROM SHRI RAJESH KHANNA. ADMITTEDLY, THERE IS CONTRADIC TION IN THE ITA 6586/MUM/2009 DINESH KHANNA 4 STATEMENT GIVEN BY THE ASSESSEE TO THE SEARCH PARTY AND TO THE A.O. ALSO. THE CONTENTION OF THE ASSESSEE IS THAT THERE IS A VARIATION IN THE STATEMENT, AS HE WAS UNDER TREMENDOUS TENSION AND D UE TO FEAR HE DID NOT EXPLAIN THE SOURCE OF THE SAID CASH. THE A SSESSEE, THOUGH INITIALLY OFFERED THE SAID CASH AMOUNT AS HIS UNDIS CLOSED INCOME BUT SUBSEQUENTLY HE RETRACTED THE STATEMENT AND HE TOOK THE STAND THAT THERE IS EXPLAINED SOURCE OF THE SAID CASH. IT IS A WELL SETTLED PRINCIPLES OF EVIDENCE THAT ONCE THE CASH OR JEWELL ERY OR ANY VALUABLE ARTICLE IS FOUND IN POSSESSION OF THE ASSESSEE THEN THE BURDEN IS ON THE ASSESSEE TO PROVE THE SOURCE OF THE SAME. IF T HE ASSESSEE EXPLAINED THE SOURCE THEN THE EXPLANATION SHOULD NO T BE DISCARDED IF THE SAME IS FOUND TO BE LOGICAL AND ACCEPTABLE. IN THE PRESENT CASE, THE ASSESSEE HAS FILED AFFIDAVIT OF HIS BROTHER AS WELL AS CONFIRMATION LETTER BUT THE SAME WERE REJECTED. NOTHING IS THER E TO SUGGEST THAT SHRI RAJESH KHANNA WAS EXAMINED BY THE A.O. BUT HIS AFFIDAVIT AND CONFIRMATION WAS FILED BY THE ASSESSEE. WE FURTHER FIND THAT THE ASSESSEE HAS RETRACTED THE STATEMENT WITHIN THE REA SONABLE TIME. ONCE THE STATEMENT IS RETRACTED THEN THE ENTIRE ONU S IS SHIFTED ON THE REVENUE TO PROVE THAT THE EARLIER STATEMENT WAS NOT UNDER DURESS OR FORCE OR COERSION. IN OUR OPINION, THE A.O. COULD HAVE EXAMINED SHRI RAJESH KHANNA WHEN THE CONFIRMATION LETTER AND AFFI DAVITS WERE FILED. IN OUR OPINION, IN RESPECT OF RS 2.5 LAKHS, THE ASS ESSEE HAS EXPLAINED THE SOURCE OF CASH FOUND AND HENCE, SAID CASH CAN N OT BE TREATED AS UNDISCLOSED INCOME. 06. SO FAR AS RS 2 LAKHS IS CONCERNED, IN THE INITI AL STATEMENT, THE ASSESSEE STATED THAT THE SAID CASH BELONGS TO HIM A ND HIS FAMILY MEMBERS BUT SUBSEQUENTLY STATED THAT IT BELONGS TO M/S. KHANNA HOTELS P. LTD. AND AS PER EARLIER NORMS OF M/S. KHA NNA HOTELS P. LTD. HE HAS REQUIRED TO KEEP THE SAID CASH CONSTANTLY WI TH HIM FOR ANY EMERGENCY PAYMENT. THE ASSESSEE ALSO FILED THE CON FIRMATION LETTERS FROM M/S. KHANNA HOTELS P. LTD., IN FACT, THE A.O. COULD HAVE VERIFIED FROM THE BOOKS OF ACCOUNT OF THE M/S. KHANNA HOTELS P. LTD. WHETHER ITA 6586/MUM/2009 DINESH KHANNA 5 THE SAID CASH WAS, IN FACT, BELONG TO M/S. KHANNA H OTELS P. LTD. AS PER THEIR RECORD. WE, THEREFORE, CONSIDERED IT FIT TO RESTORE THE ISSUE OF RS 2 LAKHS TO THE FILE OF THE A.O. FOR LIMITED PURPOSE OF VERIFICATION IF THE SAID AMOUNT IS RECORDED IN THE BOOKS OF ACCOUNT OF M/S. KHANNA HOTELS P. LTD. THEN NO ADDITION IS REQUIRED TO BE M ADE. THE A.O., THEREFORE, DIRECTED TO VERIFY FROM THE M/S. KHANNA HOTELS P. LTD. WHETHER THE SAID CASH WAS RECORDED IN THE BOOKS OF ACCOUNT OF THE SAID COMPANY/HOTEL AT THE TIME OF SEARCH. NEEDLESS TO SAY, THE A.O. SHOULD NOT TRAVEL BEYOND LIMITED VERIFICATION AND A LSO SHOULD ALSO GIVE REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. 07. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED FOR THE STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 1 5TH JULY 2011. SD/- SD/- ( R.S. SYAL ) ACCOUNTANT MEMBER ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI, DATE : 15TH JULY 2011 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) 41, MUMBAI. 4) THE CIT-CENTRAL-III MUMBAI. 5) THE D.R. D BENCH, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN ITA 6586/MUM/2009 DINESH KHANNA 6 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 12.07.2011 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 13.07.2011 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER