Arun Kumar Tiwari HUF, Jabalpur V. Assistant Commissioner of Income Tax(INV),

ITSSA 1/JAB/2015

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 2789 (ITAT-JABALPUR)
• Duration Of Justice: 7 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 15-09-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Next Hearing Date: 06-09-2022
• Assessment Year: misc
• Appeal Filed On: 12-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Gift; Onus to prove
• Section: 68; 132; 143(3); 158BC; 48; 158BD

Judgement Text

1 | P a g e IN THE INCOME TAX APPELLATE TRIBUNAL JABALPUR BENCH, JABALPUR (through web-based video conferencing platform) BEFORE SHRI SANJAY ARORA, HON‟BLE ACCOUNTANT MEMBER & SHRI MANOMOHAN DAS, HON'BLE JUDICIAL MEMBER I.T.(SS)A. No. 01/JAB/2015 (Asst. Year: 1999-2000) (B. P. 1989-90 to 1999-2000) Appellant by : Shri M.M. Nema, Advocate Respondent by : Shri Sanjay Kumar CIT-DR Date of hearing : 07/09/2022 Date of pronouncement : 16/09/2022 O R D E R Per Sanjay Arora, AM: This is an Appeal by the Assessee in respect of the dismissal of it‟s appeal contesting it‟s assessment under section 158-BC read with section 143(3) of the Income Tax Act, 1961 („the Act‟, hereinafter) dated 31/10/2000 for the Block Period 01/04/1988 to 09/10/1998, by Commissioner of Income Tax (Appeals) -1, Jabalpur („CIT(A)‟) vide his order dated 15/01/2015. The impugned addition pertains to Assessment Year (AY) 1999-2000. 2. The brief facts of the case are that the assessee, stated to be a Builder and Agriculturist by occupation, was subject to a search u/s. 132 of the Act on 09/10/1998 (continuing up to 10/10/1998) at his residence (i.e., 257/1, Wright Town, Jabalpur). Gold jewellery and silver articles were, inter alia, found thereat, Arun Kumar Tiwari, HUF Jabalpur (M.P.) [PAN : AAEHA 7957 E] vs. Assistant Commissioner of Income Tax (Investigation) Circle-1(1), Jabalpur (Appellant) (Respondent) IT(SS)A No. 01/JAB/2015 (B.P.1989-90 to 1999-2000) Arun Kumar Tiwari HUF v. Asst. CIT 2 | P a g e part of which was also seized. The relevant details, as well as the assessee‟s explanation in its respect, are as under: Gold Ornaments: Particulars Quantity (in grams) Explanation Found in Locker No. 271 with SBI City Branch 441.100 Claimed to be belonging to Smt. Gomti Devi (mother) Found in residential premises 463.500 Claimed as belonging to the assessee Found in locket No. 271 SBI City Branch 689.500 Claimed to be belonging to Smt. Kiran Tiwari (wife) Total 1594.100 Silver Articles: Particulars Quantity (in grams) Exp. Found in locker 2419 Claimed to be belonging to Smt. Gomti Devi (mother) Found in Almirah of bed- room in residential premises 1650 Claimed to be belonging to Smt. Gomti Devi (mother) Total 4069 (the relationship is with reference to the assessee) Apart from the explanation afore-stated, gold ornaments and silver, to the extent of 550 grams and 1000 grams respectively, valued at Rs. 1,07,092, were stated to have been disclosed by the assessee per his return of income, being in fact since 1985, the year of the assessee‟s marriage. The Assessing Officer (AO), while accepting the assessee‟s claim qua gold jewellery found in a bank locker stated to be of the mother, as well as silver found therein (up to 2069 gms.), regarded the balance as the assessee‟s unexplained valuables, and brought the same to tax u/s. 69A, allowing though a further relief of 175 grams of gold jewellery as Stridhan of his wife, Kiran Tiwari, making the addition as under: „4.2 ....... Apart from agricultural lands, there is no evidence to show that the assessee had received substantial gold ornaments and silver articles at the time of marriage or any other function. The HUF of the assessee was not assessed to Wealth-tax. In his statement IT(SS)A No. 01/JAB/2015 (B.P.1989-90 to 1999-2000) Arun Kumar Tiwari HUF v. Asst. CIT 3 | P a g e recorded on 10.10.1998 by the authorised Officer, Shri Laxmi Prasad Tiwari has given the following information regarding possession of jewellery with the family as under:- (i) Received on partition of family 35 tolas = 408.00 gms (ii) Purchased by the family from agricultural income Total 4 tolas (Approx) ---------------------- 39 tolas = = 46.64 gms ------------------ 454.64 gms (iii) Brought by Smt. Kiran Tiwari, wife of Arun Kumar Tiwari on marriage 10 tolas --------------------- = 116.60 gms. ------------------ Less: Given to two daughters on marriage 49 tolas 11 tolas ---------------------- = = 571.24 gms. 128.26 gms ------------------ Balance in the possession of family 38 tolas --------------------- = 442.98 gms ------------------ Shri Laxmi Prasad Tiwari made it very clear that the only source of income of the family was agricultural and so he could not spend much on the marriages of his daughters. In her statement recorded on 10.10.98 by the authorised officer, Smt. Kiran Tiwari expressed her ignorance regarding the extent of jewellery, etc, received at the time of marriage in the year 1985. Smt. Gomti Devi, accepted the version of her husband. Keeping in view the depositions made in the statements of Shri L.P. Tiwari, Shri Gomti Devi and Smt. Kiran Devi, and keeping in view the fact that some gold ornaments and silver might have been purchased out of savings in later years, their gold, ornaments of 441.100 grams claimed to be belonging to Smt. Gomti Devi is accepted. Further, possession of silver articles to the extent of 2,069 gams is also accepted as explained. The balance of 2 kgs. of silver is considered as unexplained investment as having been purchased out of the undisclosed income of the assessee. Considering 20% impurities, the value of 2 kgs. of silver @ Rs. 6000 per kg. works out to Rs. 9,600/-. The same is added as income of the assessee from undisclosed sources for the period from 1.4.98 to 9.10.98 relevant to assessment year 1999-2000. However, in the absence of evidence, the claim of 689.500 as received at the time of marriage cannot be accepted. Considering the status of the families, such receipt of gold ornaments is accepted at 15 tolas, i.e., 175 grams. The balance of 514.500 grams is treated as unexplained investment of the assessee from undisclosed sources. Similarly, the claim of 463.500 grams of gold ornaments as attributed to the assessee is also not proved with material evidence., Therefore, the value of gold ornaments weighing 978 grams of gold ornaments, which at the rate of Rs. 4,100/- per 10 grams works out to Rs.4,00,980/- is added as the income of the assesse from undisclosed sources for the period from 1.4.98 to 9.10.98 (assessment year 1999-2000) on substantive basis and it has been protectively assessed in the hands of the Individual.‟ The same stood confirmed in his first appeal by the ld. CIT(A), who held as under: IT(SS)A No. 01/JAB/2015 (B.P.1989-90 to 1999-2000) Arun Kumar Tiwari HUF v. Asst. CIT 4 | P a g e „8. This ground is regarding addition in relation to jewellery. I find that this addition has been made on account of alleged unexplained investment in 2 kgs of silver ornaments amounting to Rs.9,600/- and alleged unexplained investment in 978 grams of gold ornaments amounting to Rs.4,00,980/-. This aspect has been discussed from para 4.2, page 5 of the assessment order. The AO has initially referred to the gold and silver articles seized. It is the claim of the assessee that the acquisition of jewellery is by way of inheritance from grandfather, gifts received at the time of marriage from friends and relatives and income from agricultural holdings. The AO found that apart from agricultural land, there is no evidence to prove the other facts claimed by the assessee. The assessee is also not assessed to wealth-tax. It is also an admitted fact that the statement before the authorized officers proves that there was only the source of income which was agriculture. Further, Smt. Kiran Tiwari, wife of Shri Arun Kumar Tiwari showed ignorance regarding the extent of jewellery received at the time of her marriage. Considering the facts, the AO accepted gold ornaments to the tune of 441.100 grams and also silver articles to the tune of 2,069 grams. Thereafter giving weightage to impurities, the addition has been made in para 1, page 7 of the assessment order. In the written submission, it is the claim of the assessee that all the assets found have been clubbed in the name of the assessee, which are explained in the hands of the individual members. Further, it was claimed that the market value as on present date has been added instead of market value at the time of acquisition. I have considered the arguments placed by the assessee as well as the assessment order. Once the assessee is not been able to establish the source and period of holding the aspect of present and past date is irrelevant, the rate as on date has correctly been taken by the AO and that objection is accordingly dismissed. Further, once the jewellery has been found and an addition of this nature has been made, the onus shifts to the assessee to establish that the jewellery did not pertain to it. Due and proper credit has already been given by the AO to the explained part of the jewellery. Accordingly, it is held that the two additions have been correctly made and no interference is called for in the same. The additions made are accordingly confirmed.‟ Aggrieved, the assessee is in second appeal. 3. Before us, the assessee raises both legal and factual Grounds, which we shall take up in seriatim. The assessee per it‟s legal ground claims the assessment as bad in law as it could not, in view of the search warrant being in the name of „Arun Tiwari and Others‟ (PB pgs. 18-20), be validly made thereon u/s. 158-BC, i.e., is to be u/s. 158-BD. The ld. CIT(A), before whom this aspect was also raised, repelled the argument, stating that the assessment u/s. 158-BD is only an assessment u/s. 158BC. IT(SS)A No. 01/JAB/2015 (B.P.1989-90 to 1999-2000) Arun Kumar Tiwari HUF v. Asst. CIT 5 | P a g e 4. We find no merit in the assessee‟s claim. As correctly observed by the ld. CIT(A), also apparent from a bare reading of sec. 158BD, read out during hearing, an assessment u/s. 158BD is only an assessment u/s. 158BC – which provision bears the relevant procedure, and which may therefore be termed as an assessment u/s. 158BD r/w s. 158BC. The assessee, accordingly, has been rightly issued and served a notice u/s. 158BC (PB pg. 40A). Even going by the assessee‟s plea, the notice that ought to have been issued instead is u/s. 158BD r/w s. 158 BC, which is not a valid objection inasmuch as proceedings being initiated thereby, and the ensuing assessment, is only u/s. 158BC. Further, as explained in L. Hazarimal Kuthalia v. ITO [1961] 41 ITR 12 (SC), the exercise of power would be referable to a jurisdiction which conferred validity upon it, and not to a jurisdiction under which it would be nugatory. It is again trite law that mention of a wrong section, as long as the source of power exercised is available, would be to no moment (L. Hazarimal Kuthiala (supra); Hukumchand Mills Ltd. v. State of Madhya Pradesh & Anr. [1964] 52 ITR 583 (SC)). The issue arising is also considered from the standpoint of whether the authorization as drawn, i.e., in the name of „Arun Tiwari and Others‟, is to be regarded as on Sh. Arun Tiwari as karta (representing his family, consisting of himself, his wife and two minor sons), or only Sh. Arun Tiwari, i.e., in his individual capacity. The assessee is not residing alone at the premises, to search which the warrant stands issued, but with his family; rather, as Sh. Nema, the learned counsel for the assessee, would explain during hearing (also apparent from the fact that the silver articles found in the cupboard in a bedroom stand explained and accepted as belonging to his mother, Smt. Gomti Tiwari), along with his parents. The search warrant, which is to search the residence of the assessee and his family, can thus only be reasonably construed to include him in both capacities, i.e., as the karta of his family as well as in his individual capacity. As observed by the Bench during hearing: Could the assessee, i.e., Arun Tiwari (karta), legally IT(SS)A No. 01/JAB/2015 (B.P.1989-90 to 1999-2000) Arun Kumar Tiwari HUF v. Asst. CIT 6 | P a g e deny entry to the search team or validly object to the search of his (and his family’s) residence on that basis, i.e., that the search warrant does not explicitly state his capacity, either as karta of his family or as individual? To no answer by Sh. Neema. We consider it as not. If he could not, how, one may ask, could he possibly object to the concomitant issue of notice u/s. 158BC on him, which follows in consequence? Rather, in our view, the words „and Others‟ following the assessee‟s name in the search warrant (for search of his residence), could, in context, only include his family members, i.e., all family members residing thereat. If that be so, how, one may ask, could the HUF be excluded? That is, even if therefore „Arun Tiwari‟ in the search warrant is understood to mean reference to him only as an individual, his HUF would stand to be included in the term „and Others‟ that follow his name. Either way, the assessee stands covered by the search warrant and, thus, is a person searched. Section 158BD is contemplated in respect of persons other than the person/s searched, i.e., in whose case the search proceedings u/s. 132 have been initiated or requisition u/s. 132A made. If, therefore, material in respect of any undisclosed income of any third person/s is found in search, it is this person/s who is liable to be proceeded with u/s. 158BD, observing the procedure enshrined in and, thus, issue of notice under, sec. 158BC. As explained in Gursahai Saigal v. CIT [1963] 48 ITR 1 (SC), being even otherwise trite law, that the provisions of a taxing statute dealing with the machinery for assessment have to be construed by the ordinary rules of construction, that is to say, in accordance with the clear intention of the legislature, which is to make the charge levied effective. In interpreting the (machinery) provision, the rule is that construction should be preferred which makes the machinery workable. That is, a machinery section should be so construed as to make the charge effective (also see: India United Mills Ltd. v. CEPT [1955] 27 ITR 20 (SC)); the corresponding legal maxim being “ut res valeat potius quam pareat”. Further, the rule of strict construction, it is again well-settled, applies only IT(SS)A No. 01/JAB/2015 (B.P.1989-90 to 1999-2000) Arun Kumar Tiwari HUF v. Asst. CIT 7 | P a g e to a taxing provision, i.e., to a provision creating a charge for tax and not that laying down the machinery for its calculation or procedure for its collection (see: Banarsi Debi v. ITO [1964] 53 ITR 100 (SC)). The charging provision is clearly s. 4 r/w s. 158B, defining „undisclosed income‟, and not sec. 158-BC. Further still, whether an asset found and seized during search is liable to be regarded as the unexplained asset of the HUF or the Individual, is a matter subsequent, which would depend on the evidences found and explanation/s furnished. Why, some assets found have been explained as belonging to the mother, residing along with, and accepted. In fact, in the facts of the case, the addition for the unexplained assets has been made substantively on the assessee, and only protectively in the hands of the individual, which may well have been the other way round. We may at this stage, for the sake of completeness of the discussion in the matter, also advert to some decisions where an assessment has been impugned for want of status on the notice. The same, however, as found, is not required in view of the decision in Gaya Prasad Pathak v. Asst. CIT [2007] 290 ITR 128 (MP), which decision, in retrospect, makes the discussion aforesaid also academic. Per the same, the Hon'ble jurisdictional High Court upheld the order by the Tribunal holding that an assessment u/s. 158BC could not be assailed, which was on the basis of non-mention of status of the assessee on the authorisation u/s. 132A, before it. Dismissing the appeal, it explained that this Tribunal had no jurisdiction to look into the legality and the validity of an authorisation issued u/s. 132A, which would equally apply to an authorisation u/s. 132; the same being neither a jurisdictional nor an adjudicatory fact in relation to an assessment under the Act. Whichever way one may look at it, the argument is to no moment. The assessee‟s objection, accordingly, fails. We decide accordingly. 5. The second issue raised in appeal is the non-acceptance of the assessee‟s explanation qua the gold jewellery and silver articles. We find the assessee‟s claim to be valid in part. That is, to the extent the assessee claims to have disclosed 550 IT(SS)A No. 01/JAB/2015 (B.P.1989-90 to 1999-2000) Arun Kumar Tiwari HUF v. Asst. CIT 8 | P a g e grams of gold ornaments and 1000 grams of silver, gifted by his parents at the time of his marriage in 1985. The plea, toward which the assessee would take us through the Balance-Sheet (the capital account of the HUF) as on 31/03/1997 (PB- 1, pgs. 21-22), stands made before the AO, as indeed before the ld. CIT(A), has though not been met by either authority, much less rebutting the said argument. This balance-sheet (capital a/c) is claimed to have been furnished along with the return of income for AY 1997-98, also enclosed at PB-1, pgs. 42-45. The acknowledgement form, though not specifying the documents enclosed, states their number at 35. Even though there is no wealth-tax return of the assessee, or the gift tax return by his parent, which would exhibit the validity of the assessee‟s claim without doubt, we consider the said disclosure as meeting the requirement of law inasmuch as the assessee‟s wealth was not subject to tax, so that no adverse inference could be drawn from the non-filing of the wealth-tax return. The disclosure being not per the latest return prior to the search date, i.e., for AY 1998- 99, and it may well be that the assessee had disposed the same, in whole or in part, during the intervening period, i.e., from 01/4/1997 to 08/10/1998, Sh. Neema was called upon to exhibit the disclosure, like-wise, for AY 1998-99, return for which is claimed to have been, similarly filed, for AY 1998-99 & 199-00 (PB-2, pgs. 01- 06). How could, that being the case, the jewellery found during search be said to be undisclosed, i.e., to that extent? It is only an undisclosed asset that would translate into an undisclosed income u/s. 158B(b), and could be assessed u/s. 158BC read with section 143(3). The Apex Court in Asst. CIT vs. A.R. Enterprises [2013] 350 ITR 489 (SC) explained that the disclosure would have to be seen with reference to the intention, which is to be gathered from the facts of the case. In the instant case, there is an explicit disclosure per the assessee‟s regular accounts and returns of income furnished prior to search, satisfying the burden of proof cast on it u/s. 158BB(3). The assessee, to his credit, had explained the facts to the Revenue. Both authorities below however failed to take note thereof, much less IT(SS)A No. 01/JAB/2015 (B.P.1989-90 to 1999-2000) Arun Kumar Tiwari HUF v. Asst. CIT 9 | P a g e verify the assessee‟s claim and issue any finding in the matter. In fact, even ignoring the disclosure afore-stated, i.e., for the sake of argument, the same cannot be regarded as income unless any infirmity in the said disclosure per the accounts/returns stands pointed-out, as where the source of acquisition of the asset is unable to be proved, resulting in the invocation of s. 68 in its respect. The assessee, thus, is to be allowed credit to the extent of the disclosure, i.e., 550 grams of gold ornaments and 1000 grams of silver articles. No further credit, i.e., in respect of his father‟s return for AY 1998-99, similarly furnished before us, could be allowed. This is for the reason that it is the assessee‟s income that is being subject to assessment. The assessee has in fact been already allowed credit in respect of valuables found in the mother‟s locker as well as for silver in one of the almirahs in the house. The mother being not an assessee with the Department, the disclosure of her valuables would only be per the father‟s return/s, and which in fact matches with that per the depositions made during search proceedings, delineated at para 2 above. We are also in agreement with the ld. CIT(A) that the undisclosed income stands to be assessed substantially in the hands of the assessee, and only protectively in his individual capacity. We are also in agreement with him in that the rates of the undisclosed assets would be as applicable for f.y. 1997-98, i.e., relevant to the current year (AY 1998-99). We decide accordingly, and the assessee gets part relief. 6. In the result, the assessee‟s appeal is partly allowed. Order pronounced in open Court on September 16, 2022 Sd/- Sd/- (Manomohan Das) (Sanjay Arora) Judicial Member Accountant Member Dated: 16/09/2022 vr/- IT(SS)A No. 01/JAB/2015 (B.P.1989-90 to 1999-2000) Arun Kumar Tiwari HUF v. Asst. CIT 10 | P a g e Copy to: 1. The Appellant: Arun Ku mar Ti war i HUF, Bunglow No . 2, Kachnar Castle, S outh Civil Lines, Jabalpur (M.P.) 2. The Respondent: Assistant Commissioner of Inco me Tax (Investigation) Circle - 1(1) Jabalpur. 3. Principal CIT-1, Jabalpur 4. CIT( Appeals)-1, J abalpur (MP) 5. The CI T-DR, I TAT, Jabalpur. 6. Guard File. By order (VUKKEM RAMBABU) Sr. Private Secretary, ITAT, Jabalpur.