SHRI. GULAM HAIDER G. KHARODIA, MUMBAI V. ASST. C.I.T., CENT.CIR-45, MUMBAI

ITSSA 79/MUM/2007

• Counselvise Citation: [2015] 122 COUNSELVISE.COM (IT) 0547 (ITAT-MUMBAI)
• Duration Of Justice: 7 year(s) 8 month(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 14-01-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 22-10-2014
• Assessment Year: misc
• Appeal Filed On: 14-05-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S PADMAJA
• Assessee Lawyers: B V JHAVERI
• Keywords: Unexplained investment; Business income; Search and seizure; Source of fund; Corroborative evidences; Block assessment; Reason to believe
• Section: 132

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES G MUMBAI , . ! ' # BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER IT(SS)A NO.79/MUM/2007 (BLOCK PERIOD 01.04.1995 TO 14.08.2001) SHRI GULAM HAIDER G. KHARODIA, LUCKY TIME CENTRE, 63, IBRAHIM REHAMTULLAH ROAD, BHENDI BAZAR, MUMBAI 400 003. (APPELLANT ) VS. THE ASSTT. COMMISSIONER OF INCOME TAX, CENT.CIR.45, AAYKAR BHAVAN, M.K.ROAD, MUMBAI 400 020 (RESPONDENT) IT(SS)A NO.101/MUM/2007 (BLOCK PERIOD 01.04.1995 TO 14.08.2001) THE DCIT, CC.45, AAYKAR BHAVAN, MK ROAD, MUMBAI. (APPELLANT ) VS. SHRI GULAM HAIDER G. KHARODIA, LUCKY TIME CENTRE, 63, IBRAHIM REHAMTULLAH ROAD, BHENDI BAZAR, MUMBAI 400 003. (RESPONDENT) REVENUE BY : SMT. S. PADMAJA ASSESSEE BY : SHRI B .V.JHAVERI DATE OF HEARING : 18/12/2014 DATE OF PRONOUNCEMENT : 14 /01/2015 ORDER PER VIJAY PAL RAO, J.M: THESE CROSS APPEALS ARE DIRECTED AGAINST ORDER DA TED 12/03/2007 OF LD. CIT(A),C-III, MUMBAI ARISING FROM BLOCK ASSESS MENT UNDER SECTION 158BC OF THE INCOME TAX ACT 1961 (THE ACT) FOR THE BLOCK PERIOD 01/04/1995 TO 14/08/2001. IT(SS)A NO.79&101/MUM/2007 (BLOCK PERIOD 01.04.1995 TO 14.08.2001) 2 2. THE ASSESSEE IS AN INDIVIDUAL AND PROPRIETOR OF M/S. LUCKY TIME CENTRE. THERE WAS A POLICE RAID / SEARCH AT THE P LACE OF THE ASSESSEE ON 13/08/2001, WHEREIN A CASH OF RS.68.90 LAKHS WAS S EIZED BY THE POLICE. ON THE BASIS OF INFORMATION RECEIVED FROM THE POLICE REGARDING THE CASH OF RS.68.90 BEING SEIZED A SEARCH WAS CONDUCTED UNDER SECTION 132 OF THE ACT AT THE BUSINESS PREMISES OF THE ASSESSEE. A CASH O F RS.68.90 WAS SEIZED BY THE INCOME TAX DEPARTMENT AFTER ACQUIRING THE SAME FROM POLICE AUTHORITIES UNDER SECTION 132A OF THE ACT. THE ASSESSEE EXPLAI NED TO THE DDIT((INV.) THAT THE CASH FOUND IN THE PREMISES REPRESENTED CA PITAL CONTRIBUTION OF PARTNERS IN RESPECT OF M/S. E.N. MOHAMMED & CO. ( I N SHORT, M/S. ENM & CO.), A NEWLY FORMED PARTNERSHIP CONCERN. THE ASSE SSEE EXPLAINED THAT A CAPITAL OF RS.69.00 LACS WAS INTRODUCED BY 15 PARTN ERS IN THE MONTH OF JUNE/JULY 2001 AND RS.10,000/- WAS CLAIMED AS EXPEN DITURE TOWARDS PRELIMINARY EXPENSES. THE ASSESSEE FURNISHED A COP Y OF PARTNERSHIP DEED OF M/S. ENM & CO. DATED 01/06/2001 TOGETHER WITH STATE MENT OF ACCOUNT AND PROFIT AND LOSS ACCOUNT IN SUPPORT OF THE CLAIM. THE AO EXAMINED THE EVIDENCE FILED BY THE ASSESSEE AND FOUND THAT THE P ARTNERSHIP WAS NOT REGISTERED WITH THE REGISTRAR OF FIRMS, MUMBAI WITH IN THE TIME LIMIT PRESCRIBED UNDER SECTION 158 OF INDIAN PARTNERSHIP ACT. THE AO ALSO MADE CORRESPONDENCE WITH THE REGISTRAR OF FIRMS IN WHICH IT WAS REVEALED THAT THE APPLICATION FOR REGISTRATION WAS RECEIVED FROM M/S . ENM & CO. ON 10/04/2002 WHICH WAS RETURNED ON 12/06/2006 FOR C ORRECTION OF CERTAIN IRREGULARITIES AND DISCREPANCIES. THE AO DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE REGARDING FLOATING OF PARTNERSHIP FIR M AS WELL AS CONTRIBUTION BY THE PARTNERS AND HELD THAT THERE WAS NO FIRM IN THE NAME OF M/S.ENM & CO. IN EXISTENCE AT THE TIME OF SEARCH AND SEIZURE AND CASH WAS SEIZED BY THE AUTHORITIES AND ACCORDINGLY THE CLAIM OF THE AS SESSEE THAT THE CASH BELONGS TO THE FIRM WAS REJECTED. IT(SS)A NO.79&101/MUM/2007 (BLOCK PERIOD 01.04.1995 TO 14.08.2001) 3 3. ON APPEAL LD. CIT(A) ORDERED FOR A REMAND REPOR T ON THE ADDITIONAL DOCUMENTS FILED BY THE ASSESSEE. AFTER CONSIDERING THE REMAND REPORT DATED 11/7/2007, THE LD. CIT(A) ACCEPTED THE CLAIM OF CON TRIBUTION OF CASH BY 12 PERSONS OUT OF 15 AS EXPLAINED AND SUSTAINED THE AD DITION IN RESPECT OF THREE PERSONS FOR WANT OF SOURCE OF INCOME TO CONTRIBUTE THE ALLEGED CASH. THUS, THE LD. CIT(A) PARTLY DELETED THE ADDITION UNDER S ECTION 69A AND PARTLY CONFIRMED THE ADDITION TO THE EXTENT OF RS.27.50 LA CS IN RESPECT OF THREE PERSONS NAMELY (I) SHRI ADAM NOOR MOHAMMED TARADRA RS. 10.00 LACS, (II) SHRI ABBAS ADAM MUDHIA RS.8.50 LACS AND (III) SHRI USMAN ADAM SELIA RS.9.00 LAKHS. THE SOURCE EXPLAINED REGARDING THE CASH RECEIVED FROM 12 PERSONS WAS ACCEPTED BY LD. CIT(A) AND ACCORDINGLY THE PART RELIEF WAS GIVEN TO THE ASSESSEE. THUS, BOTH ASSESSEE AND REVENUE A RE AGGRIEVED BY THE IMPUGNED ORDER OF LD. CIT(A) AND FILED THE CROSS A PPEALS BEFORE THE TRIBUNAL. 4. THE ASSESSEE HAS RAISED THE FOLLOWING CONCISE GROUNDS: 1. THE COMMISSIONER (APPEALS) ERRED IN CONFIRMING THE ADDITION OF RS.27,50,000/- U/S. 69A OF THE INCOME-TAX ACT, 1961 IN RESPECT OF THE CAPITAL INTRODUCED BY THE FOLLOWING THREE PARTNERS OF M/S. E.N. MOHAMMED & CO.: (1) SHRI ADAM NOOR MOHAMMED TARADRA .. RS .L0,00.000/- (2) SHRI ABBAD ADAM MADHIA .. RS. 8,50,000/- (3) SHRI USMAN ADAM SELIA .. RS. 9,00,000/- 2. THE COMMISSIONER (APPEALS) ERRED IN NOT APPRECIA TING THAT (1) SHRI ADAM NOOR MOHAMMED THARADRA, (2) SHRI ABBAS ADAM MADHIA AND (3) SHRI USMAN ADAM SHEILA WHO HAD CONTRIBUTED CAPITAL AS PARTNERS OF M/S. E.N. MOHAMMED & CO., ARE AGRICULTURISTS HAVING SUBSTANTIAL AGRICU LTURAL LANDS WHICH ARE CULTIVATED AND THE COMPLETE EVIDENCE IN RESPECT THE REOF WAS PRODUCED. II. M/S. E.N. MOHAMMED & CO:- PARTNERSHIP FIRM: 3. THE COMMISSIONER (APPEALS) ERRED IN HOLDING THAT THE PARTNERSHIP FIRM OF M/S. E.N. MOHAMMED & CO. WAS NOT IN EXISTENCE ON TH E DATE OF THE SEARCH AT THE PREMISES OF THE ASSESSEE EVEN THOUGH THE ASSESS EE HAD PRODUCED THE PARTNERSHIP DEED AT THE FIRST AVAILABLE OPPORTUNITY (I.E., ON 7-9-2001) AFTER THE SEARCH VAS CARRIED OUT BY THE OFFICERS OF THE INCOM E-TAX DEPARTMENT. IT(SS)A NO.79&101/MUM/2007 (BLOCK PERIOD 01.04.1995 TO 14.08.2001) 4 4. THE COMMISSIONER (APPEALS) FAILED TO APPRECIATE THAT THE OFFICERS OF THE INCOME-TAX DEPARTMENT HAD CARRIED OUT THE SEARCH ON 20-8-2001 AT THE SHOP PREMISES OF THE ASSESSEE. VIZ., LUCKY TIME CENTRE A ND THEREFORE, THE OFFICERS OF THE DEPARTMENT COULD NOT FIND ANY BOOKS OF ACCOUNT OF THE PARTNERSHIP FIRM OF M/S. E.N. MOHAMMED & CO. ON THE DATE OF THE SEARCH. 5. THE COMMISSIONER (APPEALS) FAILED TO APPRECIATE THAT THE MERE IDEA OF FORMING A PARTNERSHIP IS SUFFICIENT TO BRING THE PA RTNERSHIP FIRM IN EXISTENCE BECAUSE ONCE THE PERSONS COME TOGETHER AND CONTRIBU TE THE CAPITAL, THE PARTNERSHIP FIRM COMES INTO EXISTENCE SUBJECT TO FO RMALITY OF GETTING THE PARTNERSHIP DEED REGISTERED WITH THE REGISTRAR OF F IRMS AND OPENING A BANK ACCOUNT. 5. REVENUE HAS RAISED THE FOLLOWING GROUND OF APPE AL: 1.ON THE FACTS AND IN THE CIRCUMSTANCES AND IN LA W, THE LD. CIT(APPEALS) HAS ERRED IN DELETING THE ADDITION U/S.69A OF THE I.T. ACT, OF RS.41.5 LAKHS INCLUDING RS.7.5 LAKHS CLAIMED TO BE THE ASSESSEES OWN CONTR IBUTION, WITHOUT APPRECIATING THE FACT THAT THE LENDERS FAILED TO ES TABLISH THE CREDITWORTHINESS OF THE ALLEGED CREDITORS. 6. BEFORE US LD. AR HAS SUBMITTED THAT LD. CIT(A) H AS ERRED IN CONFIRMING THE ADDITION ON ACCOUNT OF CASH RECEIVED FROM THREE PERSONS WHO ARE PARTNERS OF M/S.E.N.MOHAMMED & CO. AND CONTRIBU TED THE CAPITAL IN THE PARTNERSHIP FIRM. HE HAS FURTHER SUBMITTED THAT TH E CASH IN QUESTION WAS FOUND FROM THE RESIDENTIAL PREMISES OF THE ASSESSEE IN THE COURSE OF SEARCH CARRIED OUT BY THE POLICE DEPARTMENT ON 13/08/2001. THE INCOME TAX DEPARTMENT HAS CARRIED OUT SEARCH ACTION ON 20/08/2 001 AT THE BUSINESS PREMISES OF THE ASSESSEE AND LUCKY TIME CENTRE. L D. A.R HAS SUBMITTED THAT THE PARTNERSHIP FIRM M/S.E.N.MOHAMMED & CO. W AS FORMED ON 1/6/2001 HOWEVER DUE TO THE REASON THAT SOME PART NERS WERE OUT OF BOMBAY THE BANK ACCOUNT COULD NOT OPEN IN TIME. HE HAS CONTENDED THAT THE AO AND LD. CIT(A) DID NOT ADMIT THE EXISTENCE OF THE PARTNERSHIP, WHEREAS ON 17/8/2001 WHEN THE ASSESSEE WAS ARRESTED BY THE POLICE AND WAS TO BE PRODUCED BEFORE THE COURT OF ADDITIONAL CHIEF METROPOLITAN MAGISTRATE (ACMM), THE ASSESSEE MOVED A BAIL APPL ICATION AND EXPLAINED THE SOURCE OF CASH FOUND AT THE PLACE OF THE ASSESS EE. THEREFORE, SINCE BEGINNING THE ASSESSEE EXPLAINED THE SOURCE OF CAS H BEING CONTRIBUTION OF IT(SS)A NO.79&101/MUM/2007 (BLOCK PERIOD 01.04.1995 TO 14.08.2001) 5 CAPITAL BY 15 PARTNERS INCLUDING THE ASSESSEE IN T HE FIRM M/S. E.N. MOHAMMED & CO. HE HAS FURTHER EXPLAINED THAT THE A SSESSEE WAS DISCHARGED FROM THE POLICE CASE BY THE COURT OF ADD ITIONAL CHIEF METROPOLITAN MAGISTRATE (ACMM) AND THE CASE REGISTERED BY THE P OLICE HAS NOT FOUND TO BE TRUE. THE SEARCH UNDER SECTION 132 OF THE ACT WAS CARRIED OUT AT THE BUSINESS PREMISES, WHEREAS THE CASH WAS FOUND AND S EIZED BY THE POLICE FROM THE RESIDENCE OF THE ASSESSEE. THE DOCUMENTS AND RECORD WAS AVAILABLE AT THE RESIDENCE OF THE ASSESSEE, THEREFORE, DURING THE SEARCH THE INVESTIGATION TEAM DID NOT FIND THE PARTNERSHIP DEE D IN QUESTION AT THE BUSINESS PREMISES OF THE ASSESSEE. HE HAS REFERRED TO THE LETTER DATED 7/09/2001 WRITTEN TO THE DDIT(INV) AND SUBMITTED TH AT AT THE FIRST AVAILABLE OCCASION THE ASSESSEE PROVIDED ALL THE RELEVANT DOC UMENTS AND EVIDENCES IN SUPPORT OF HIS EXPLANATION AND CLAIM. LD. AR HAS T HEN REFERRED TO THE PARTNERSHIP DEED AND SUBMITTED THAT THE FORMATION O F PARTNERSHIP FIRM WAS ESTABLISHED BY THE ASSESSEE BY PRODUCING DOCUMENTS AND CONFIRMATION OF PARTNERS. LD. AR REFERRED TO THE DETAILS OF SOURCE OF INCOME OF THREE PARTNERS WHO WERE AGRICULTURIST AND HAVING SUFFICI ENT LAND HOLDING AS WELL AS AGRICULTURAL INCOME. 6.1 REFERRING TO THE 7/12 EXTRACT LD. AR HAS SUBM ITTED THAT THE ASSESSEE PRODUCED THE LAND HOLDING RECORD OF THESE THREE PER SONS TO PROVE THAT THEY HAD THE SOURCE OF INCOME TO CONTRIBUTE THE CAPITAL IN THE PARTNERSHIP FIRM. LD. AR HAS ALSO REFERRED TO THE SALE BILL FOR AGRI CULTURAL PRODUCE SOLD BY THESE THREE PERSONS AND SUBMITTED THAT THE LAND HOL DING AND SALE BILLS CLEARLY SHOW THE AVAILABILITY OF SUFFICIENT FUNDS WITH THE PERSONS TO CONTRIBUTE THE AMOUNT IN QUESTION. LD. CIT(A) HAS NOT ACCEPTED THE SOURCE FOR WANT OF INCOME TAX RETURN AS THESE THREE PERSON S ARE NOT INCOME TAX PAYEES WHICH IS NOT JUSTIFIED WHEN THE SOURCE OF FU NDS WAS AGRICULTURAL INCOME AND THE PERSONS ARE LIVING IN VILLAGE HAVIN G VERY LESS HOUSEHOLD EXPENSES. LD. AR HAS FORCEFULLY CONTENDED THAT AL L THE PARTNERS/PERSONS IT(SS)A NO.79&101/MUM/2007 (BLOCK PERIOD 01.04.1995 TO 14.08.2001) 6 WHO HAD CONTRIBUTED TO THE CAPITAL OF THE FIRM APPE ARED BEFORE THE AO AND CONFIRMED THEIR RESPECTIVE CONTRIBUTION IN THE PART NERSHIP FIRM. 6.2 AS REGARDS 12 PERSONS WHOSE SOURCE OF FUNDS WAS ACCEPTED BY LD. CIT(A), LD. AR HAS SUBMITTED THAT ALL THESE 12 PERS ONS ARE INCOME TAX ASSESSEES AND SHOWN THE FUNDS IN THE RETURN OF INC OME AVAILABLE WITH THE DEPARTMENT. HE HAS RELIED UPON THE FINDINGS OF LD. CIT(A) TO THE EXTENT OF THE CONTRIBUTION OF THESE 12 PERSONS. 7. ON THE OTHER HAND LD. DR HAS SUBMITTED THAT THE ASSESSEE FAILED TO PROVE THE EXISTENCE OF PARTNERSHIP FIRM. EVEN THE DEED OF PARTNERSHIP WAS NOT SIGNED BY ALL THE PARTNERS, THEREFORE, IT WAS A N AFTER THOUGHT EXPLANATION BY THE ASSESSEE. THE EXPLANATION BEFORE INCOME TAX AUTHORITIES IS CONTRARY TO THE STATEMENT GIVEN BY THE ASSESSEE TO THE POLIC E AUTHORITIES WHEREIN THE ASSESSEE STATED THAT RS.25.00 LACS BELONGS TO HIM AND ANOTHER RS.25.00 LCAS BELONGS TO ONE MR. MOHAMMED YUSUF AND THE REST ARE DONATION FOR MOSQUE IN GUJARAT BUT IN THE INCOME TAX PROCEEDINGS THE ASSESSEE TOOK A NEW STAND AND STATED THAT THE CASH WAS CAPITAL CONT RIBUTION BY 15 PERSONS OF THE ALLEGED PARTNERSHIP FIRM M/S. ENMC LD. DR SUBMITTED THAT LD. CIT(A) AFTER HOLDING THAT THE FIRM WAS NOT IN EXIST ENCE ACCEPTED THE EXPLANATION REGARDING THE CASH RECEIVED FROM 12 PE RSONS WHICH ITSELF IS CONTRARY TO THE FINDING ON THE EXISTENCE OF THE FIR M. THE ASSESSEE DID NOT GIVE A PROPER REPLY WHEN THE QUESTION WAS ASKED BY THE INVESTIGATION TEAM ABOUT THE CONTRADICTION BETWEEN THE EXPLANATION BE FORE THE TAX AUTHORITIES AND STATEMENT TO POLICE AUTHORITIES. THE STATEMENT TO THE POLICE WAS RECORDED IN THE PRESENCE OF WITNESS AND A PANCHNAM A WAS PREPARED, THEREFORE, THE EXPLANATION OF THE ASSESSEE IN THE I NCOME-TAX PROCEEDINGS CANNOT BE ACCEPTED. HE HAS FURTHER CONTENDED THAT THE ASSESSEE FAILED TO PROVE THE CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION. LD. DR HAS RELIED UPON THE FOLLOWING DECISIONS. IT(SS)A NO.79&101/MUM/2007 (BLOCK PERIOD 01.04.1995 TO 14.08.2001) 7 1. CIT VS. DURGA PRASAD MORE, 82 ITR 540 (SC). 2. SUMATI DAYAL VS. CIT, 214 ITR 801 8. IN THE RE-JOINDER LD. AR HAS SUBMITTED THAT THE PARTNERSHIP DEED WAS DULY SIGNED BY ALL THE PARTNERS AND IT WAS NOT DOUB TED BY THE AO. LD. CIT(A) HAS MENTIONED IT WITHOUT ANY BASIS. HE HAS FURTHER POINTED OUT THAT THE PARTNERSHIP WAS DULY PRODUCED BEFORE THE DIT(INV.) WITH LETTER DATED 07/09/2001, WHICH WAS DULY SIGNED BY THE PARTNERS. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND REL EVANT MATERIAL ON RECORD. CASH OF RS.68.90 LACS WAS FOUND BY THE POL ICE ON 13/08/2001 FROM THE RESIDENCE OF THE ASSESSEE. ON THE BASIS OF THE INFORMATION RECEIVED FROM THE POLICE AUTHORITIES A SEARCH UNDER SECTION 132 O F THE ACT WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASSESSEE ON 20/08/2 001. BEFORE THE INCOME-TAX AUTHORITIES THE ASSESSEE EXPLAINED THAT THE CASH IN QUESTION IS TOWARDS CAPITAL CONTRIBUTION OF 15 PARTNERS INCLUDI NG THE ASSESSEE IN THE PARTNERSHIP FIRM NAMELY E.N.MOHAMMAD & COMPANY. THE INVESTIGATION TEAM AS WELL AS ASSESSING AUTHORITY DID NOT ACCEPT THIS EXPLANATION AND CONFRONTED THE ASSESSEE WITH THE STATEMENT RECORDE D BY THE POLICE. SINCE THERE WAS CONTRADICTION IN THE STATEMENT RECORDED B Y THE POLICE AND THE EXPLANATION BEFORE TAX AUTHORITIES, THE AO MADE ADD ITION OF THE ENTIRE AMOUNT OF RS.69.00 LACS INCLUSIVE OF RS.10,000/- AS PRELIMINARY EXPENDITURE FOR FORMING PARTNERSHIP FIRM. THE ASSESSEE PRODUCE D THE PARTNERSHIP DEED DATED 1/6/2001 BEFORE DDIT(INV) VIDE LETTER DATED 7 /09/2001, HOWEVER, THE AO AS WELL AS LD. CIT(A) REFUSED TO ACCEPT THE SAME FOR WANT OF REGISTRATION. LD. CIT(A) HAS ALSO GIVEN THE REASON FOR NON-ACCEP TING THE EXISTENCE OF PARTNERSHIP FIRM AS NON-SIGNING OF THE DEED OF P ARTNERS. IT IS PERTINENT TO NOTE THAT THE DEED OF PARTNERSHIP WAS SUBMITTED B Y THE ASSESSEE VIDE LETTER DATED 07/09/2001 AND NEITHER THE DDIT (INV) NOR THE AO HAD MADE ANY SUCH ALLEGATION OF NON-SIGNING OF THE DEED. FURTHE R, WE FIND FROM THE COPY IT(SS)A NO.79&101/MUM/2007 (BLOCK PERIOD 01.04.1995 TO 14.08.2001) 8 OF THE PARTNERSHIP DEED THAT IT WAS SIGNED BY ALL P ARTNERS ON EACH AND EVERY PAGE AS WELL AS AT THE FOOT OF THE DEED. WE FURTHE R FIND THAT EVEN BEFORE THE SEARCH UNDER SECTION 132 OF THE ACT THE ASSESSEE EX PLAINED THE SOURCE OF CASH BEING CAPITAL CONTRIBUTION BY THE 15 PARTNERS IN THE BAIL APPLICATION MOVED ON 17/08/2001 IN THE COURT OF THE ADDITIONA L CHIEF METROPOLITAN MAGISTRATE, MUMBAI. THE RELEVANT PARA OF THE APPL ICATION IS PARA-1, WHICH READS AS UNDER: 1. THE APPLICANT SUBMITS THAT THE AMOUNT I.E. ALL EGED UNACCOUNTED MONEY OF RS.68,90,000/- IS THE AMOUNT OF PARTNERSHIP FIRM NA MELY MESSRS E.N. MOHD. & CO. IN WHICH THERE ARE 15 PARTNERS INCLUDING THE AP PLICANT AND EACH PARTNER HAS CONTRIBUTED TOWARDS SHARE IN THE PARTNERSHIP BU SINESS, THE SAID PARTNERSHIP BUSINESS WAS .. INTO WRITING BY A DEE D OF PARTNERSHIP DATED 1 ST JUNE, 2001. THE APPLICANT SUBMITS THAT THE DETAILS OF THE CONTRIBUTION OF THE SHARE OF THE PARTNERS WOULD BE SUBMITTED TO THE CO NCERNED INCOME-TAX DEPARTMENT IN WHOSE POSSESSION THE ALLEGED UNACCOUN TED CASH OF RUPEES 68,90,000/- IS LYING. THE APPLICANT FURTHER SUBMIT S THAT EACH AND EVERY DOCUMENT PERTAINING TO THE PARTNERSHIP BUSINESS WIL L BE SUBMITTED TO THE POLICE AS WELL AS TO THE INCOME TAX DEPARTMENT FOR THEIR P ERUSAL AND SATISFACTION, THEREFORE, THE SEIZURE OF THE ALLEGED UNACCOUNTED C ASH OF RS.68,90,000/- BY THE POLICE IS BAD-N-LAW AND THE SAME IS NOT WITHIN THE LAW. 9.1 THEREFORE, EXPLANATION OF SOURCE OF CASH BEING CAPITAL CONTRIBUTION BY 15 PARTNERS IS NOT AN AFTER THOUGHT ON ACCOUNT OF S EARCH UNDER SECTION 132 OF THE ACT BUT IT WAS EXPLAINED BY THE ASSESSEE PRI OR TO THE SEARCH IN THE CRIMINAL PROCEEDINGS BEFORE THE COURT OF ADDITIONA L CHIEF METROPOLITAN MAGISTRATE(ACMM). AS REGARDS STATEMENT RECORDED BY THE POLICE AUTHORITIES WE FIND THAT THE ASSESSEE HAS BEEN DISCHARGED BY TH E COURT OF CHIEF METROPOLITAN MAGISTRATE VIDE DECISION DATED 04/10/2 005 IN PARA-8 AS UNDER: 8. INVESTIGATING OFFICER AJAY SHINDE HAS ADMITTED THAT TO-DATE NO LINK OF THE ACCUSED HAS BEEN ESTABLISHED WITH ANY ANTI SOCIAL E LEMENT AND THE AMOUNT SEIZED IS NOT LINKED WITH ANY CRIME. THIS IS DESPI TE THE FACT THAT, INVESTIGATION WAS GOING ON FROM 13.08.2001 TILL 15.07.2003 I.E. TILL CHARGESHEET WAS FILED ON 15.07.2003. HE FURTHER ADMITS THAT DURING THE COUR SE OF INVESTIGATION IT WAS NOT DISCLOSED AS TO WHO BROUGHT THIS AMOUNT, FROM WHOM, WHEN AND FROM WHERE. THE FACT THAT SEIZURE OF AMOUNT TOOK PLACE ON 13.08.2001 AND ON THE SAME DAY THE AMOUNT WAS HANDED OVER TO INCOME TAX D EPARTMENT, THAT IT(SS)A NO.79&101/MUM/2007 (BLOCK PERIOD 01.04.1995 TO 14.08.2001) 9 ACCUSED CAME TO BE ARRESTED ON 17.08.2001(THE ACCUS ED WAS RELEASED ON BAIL ON THE SAME DAY) AND THAT CHARGESHEET HAS BEEN FILE D ON 17.07.2003 INDICATES THAT INVESTIGATING AGENCY WAS DOUBTFUL WHETHER THEY WERE RIGHT IN SEIZING THE AMOUNT. IT IS SEEN THAT THE ACCUSED IS CLAIMING TH E SAID AMOUNT FROM INCOME TAX DEPARTMENT, IT IS EVIDENT FROM LETTER OF ASSTT . COMMISSIONER OF INCOME TAX, MUMBAI EX.P.3 THAT THEY HAVE RECOVERED TAX ON THE SAID AMOUNT OF RS.68,90,000/-. LETTER EX.P-3 FURTHER INDICATES TH AT IF THE AMOUNT HAD NOT BEEN CLAIMED, THEN ENTIRE AMOUNT WOULD HAVE BEEN SE IZED BY INCOME TAX DEPARTMENT. IN VIEW OF TESTIMONY OF INVESTIGATING OFFICER- AJAY SHINDE PW.NO.3 THAT TO-DATE NO LINK OF THE ACCUSED HAS BEEN ESTABL ISHED WITH ANY ANTI SOCIAL ELEMENT AND THAT THE SAID AMOUNT IS NOT LINKED WITH CRIME AND THERE BEING NO COMPLAINT OF THEFT LODGED IN RESPECT TO THE SAID AMOUNT, NO INCRIMINATING DOCUMENT WAS FOUND IN THE PREMISES, PROSECUTION HAS MISERABLY FAILED TO ESTABLISH THAT ACCUSED WAS FOUND IN POSSESSION OF T HE SAID AMOUNT HAVING REASON TO BELIEVE THAT IT WAS STOLEN OR FRAUDULENTL Y OBTAINED. IN SUPPORT LEARNED ADVOCATE FOR ACCUSED HAS RELIED UPON CITATI ONS; (1) 1979 BOM. C.R 159 STATE OF MAHARASHTRA V. LINGA YYA KARIAPPA (2) 1979 BOM. C.R 90 STATE OF MAHARASHTRA V. HUSSEI N AHMED ALIJI (3) 1070 MH.L.J 729 PRATAP BHOSALE V. STATE OF MAHA RASHTRA AND THEY DO SUPPORT HIS CONTENTION. IN A CASE REPORTED IN 1970 MH.L.J 729 PRATAP B. BHOSALE V. STATE OF MAHARASHTRA, IT IS CONCERNIN G POSSESSION OF FOUR GOLD BISCUITS. IN THE SAID CASE, IT IS HELD THAT THERE MUST BE REASON TO BELIEVE THE ACQUISITION OF PROPERTY IRRESPECTIVE OF THE FACT TH AT THE ACCUSED WAS FOUND IN POSSESSION OF FOUR GOLD BISCUITS. IN OTHERWORDS, Q UANTUM OF MONEY OR MERE POSSESSION OF VALUABLE ARTICLE IS NOT SUFFICIENT TO PROVE THE OFFENCE U/SEC. 124 OF BOMBAY POLICE ACT BUT IT MUST BE PROVED BY MEANS OF COGENT EVIDENCE THAT THERE IS REASON TO BELIEVE THAT ACQUISITION OF THE SAME TO BE STOLEN OR FRAUDULENTLY OBTAINED. 9.2 THE ASSESSEE WAS DISCHARGED BY THE COURT OF AC MM THEREFORE, THE STATEMENT RECORDED BY THE POLICE DURING THE POLICE CUSTODY IS NOT AN ADMISSIBLE EVIDENCE AS PER PROVISIONS OF EVIDENCE A CT. MOREOVER, THE ASSESSEE DENIED THE STATEMENT GIVEN TO THE POLICE A ND EXPLAINED THE SOURCE BEFORE THE DDIT (INV) AS WELL AS BEFORE THE AO WHEN THE ASSESSEE WAS CONFRONTED WITH THE STATEMENT RECORDED BY THE POLIC E. IN THE FACTS AND CIRCUMSTANCES THE ALLEGED STATEMENT RECORDED BY TH E POLICE CANNOT BE CONSIDERED AS THE RELEVANT EVIDENCE FOR THE ASSESSM ENT PROCEEDINGS AND THE AO WAS REQUIRED TO CONDUCT AN INDEPENDENT ENQUIRY T O ESTABLISH THE NON- EXISTENCE OF THE PARTNERSHIP FIRM. THE NON-REGISTR ATION OF PARTNERSHIP FIRM DOES NOT NEGATE THE FACT OF FORMATION OF PARTNERSHI P FIRM OTHERWISE PROVED. IT(SS)A NO.79&101/MUM/2007 (BLOCK PERIOD 01.04.1995 TO 14.08.2001) 10 EVEN OTHERWISE THE REGISTRATION OF PARTNERSHIP FIRM IS NOT MANDATORY AND THEREFORE, IT IS HARDLY RELEVANT FOR THE QUESTION OF EXISTENCE OF THE PARTNERSHIP FIRM WHEN THE ASSESSEE HAS PRODUCED THE EVIDENCE ( DEED OF PARNERSHIP) INCLUDING ALL THE PARTNERS AND CONFIR MATION. 9.3 IT IS AN UNDISPUTED FACT THAT THE ASSESSEE PROD UCED ALL THE PERSONS BEFORE THE AO TO EXPLAIN AND PROVE THE SOURCE OF CASH BEING CAPITAL CONTRIBUTION IN THE PARTNERSHIP FIRM BY 15 PARTNERS . THE DETAILS OF THE PARTNERS, THEIR CONTRIBUTION AND SOURCE OF INCOME H AVE BEEN GIVEN BY THE AO AT PAGE -10 OF THE BLOCK ASSESSMENT AS UNDER: S.NO. NAME OF PARTNERS AMOUNT CONTRIBUTED ASSESSING OFFICER MAIN SOURCE OF INCOME. 1. SHRI ADAMNOOR MOHAMMED TARADRA, PALANPUR 1,000,000 NOT ASSESSED AGRICULTURAL INCOME RS.1,25,000/- P.A. 2. SHRI ABBAS ADAM MADHIA, PALANPUR 850,000 -DO- --DO- 3. SHRI USMAN ADAM SELIA, PALANPUR 900,000 -DO- -DO- 4. SHRI YUNUS HABIB KHARAWALLA 275,000 ITO-25(3) SHARE OF PROFIT, BROKERAGE, AGRICULTURAL INCOME 5. SHRI USMAN N. KHARAWALLA 450,000 -DO- -DO- 6. SHRI IDRIS HABIB KHARAWALLA 325,000 -DO- -DO- 7. SHRI AMIN SULEIMAN BADARPURA 350,000 ITO-28 (13) AGRICULTURAL INCOME, PROFESSIONAL INCOME, BANK INTEREST. 8. SHRI ISMAIL A. KARIM GAJAWALA 350,000 -DO- COMMISSION, BROKERAGE, SALARY 9. SHRI MEHMOOD HABIB ALAD 325,000 -DO- -DO- 10. SHRI UMER HABIB ALAD 325,000 ITO.28(14) -DO- 11. SHRI ABDUL KADER GULAM RASOOL DAWA, JOGESHWARI 400,000 ITO-28 (13) PROPERTY INCOME, SHARE OF PROFIT FROM FLAINGO ENTERPPRISES, BROKERAGE 12. SMT. RUKAIYYA ABDUL QATYAN 300,000 28(14) STITCHING CHARGES 13. SHRI REHMATULLAH SULEMAN KHADAD 250,000 28(14) COMMISSION, SALARY, BROKERAGE 14. SHRI MOOSA GHULAM 50,000 13(10) BUSINESS INC OME, IT(SS)A NO.79&101/MUM/2007 (BLOCK PERIOD 01.04.1995 TO 14.08.2001) 11 RASOOL KHARODIA SHARE OF PROFIT, INTEREST FROM BANK 15. SHRI GHULAM HYDER RASOOL KHARODIA 750,000 -DO- BUSINESS INCOME, BANK INTEREST, JOB WORK IN WATCH REPAIRING. 9.4 THE ASSESSEE ALSO PRODUCED THE INCOME-TAX RETUR N OF 12 PERSONS TO EXPLAIN THE SOURCE OF EACH PERSON FOR CAPITAL CONTR IBUTION IN THE PARTNERSHIP FIRM. LD. CIT(A) ACCEPTED THE SOURCE OF FUND IN RE SPECT OF 12 PERSONS OUT OF THE 15 PERSONS AND CONFIRMED THE ADDITION IN RESPEC T OF THREE PERSONS WHO ARE NOT INCOME-TAX ASSESSEES. AS REGARDS THESE THR EE PERSONS WHO BELONGS TO VILLAGE IN GUJARAT, THE ASSESSEE PRODUCED 7/12 EXTRACTS TO SHOW THE LAND HOLDING AND ALSO PRODUCED THE SALE BILLS AS PROOF O F AGRICULTURAL INCOME AND SOURCE OF CONTRIBUTION. THE LD. CIT(A) AFTER CONSI DERING THE REMAND REPORT HAS CONFIRMED THE ADDITION IN RESPECT OF THESE TH REE PERSONS IN PARA 2.7 AT PAGE -7 AS UNDER: 2.7 I HAVE GONE THROUGH THE FACTS BROUGHT ON RECOR D BY THE A.O IN THE ORIGINAL ASSESSMENT ORDER AS WELL AS DURING THE COURSE OF RE MAND PROCEEDINGS AND ALSO THE CONTENTIONS OF THE APPELLANT. IT IS SETT LED LAW THAT COGENT EVIDENCE REGARDING SOURCE OF INVESTMENT IS TO BE GIVEN AND I N THIS CASE, THE AO HAS CLEARLY INDICATED THAT THE WITHDRAWALS FOR HOUSEHOL D PURPOSES IN ALL THE THREE CASES WERE EXTREMELY LOW VIS--VIS OF THE RESPECTIV E FAMILY SIZES, EVEN AFTER TAKING INTO ACCOUNT THE FACT THAT THESE PERSONS WER E VILLAGERS. HENCE THEIR CREDITWORTHINESS BECOMES DOUBTFUL. THIS COUPLED WI TH THE FACT THAT THESE THREE PERSONS ARE NOT EVEN INCOME TAX ASSESSEES, CLEARLY INDICATES THAT THESE PERSONS DID NOT HAVE THE CAPACITY TO ADVANCE MONEY TO THE APPELLANT. THE ACTION OF THE AO IN TREATING CASH OF RS.27.50 LAKHS FOUND IN THE APPELLANTS POSSESSION BUT PURPORTED TO HAVE BEEN REEIVED (FROM THREE PERSONS AS ABOVE) AS UNEXPLAINED INVESTMENT U/S.69-A IS THEREFORE, CO NFIRMED. 9.5 THE GROUND AND REASONS ASSIGNED BY LD. CIT(A) FOR NOT ACCEPTING EXPLANATIONS ARE LOW HOUSEHOLD WITHDRAWALS AND NOT ASSESSED TO INCOME TAX, ACCORDINGLY, LD. CIT(A) HAS HELD THAT THESE P ERSONS HAVE NO CAPACITY TO ADVANCE MONEY. WHEN THESE THREE PERSONS WERE HAVIN G ONLY AGRICULTURAL INCOME THEN THERE IS NO QUESTION OF ASSESSMENT TO I NCOME TAX. FURTHER THE LAND HOLDING AND AGRICULTURAL INCOME SHOWN BY THES E THREE PERSONS BY FILING IT(SS)A NO.79&101/MUM/2007 (BLOCK PERIOD 01.04.1995 TO 14.08.2001) 12 THE SUPPORTING EVIDENCE HAS NOT BEEN DISPUTED BY AO OR LD. CIT(A). WE REFER THE RELEVANT DETAILS OF LAND HOLDINGS OF THESE THRE E PERSONS AS UNDER: NAME & SIZE OF FAMILY AGRICULTURAL LAND MR. ADAM NOOR MOHAMMED THARADRA + WIFE + DAUGHTER RS.10 LAKHS 1/3 RD SHARE IN 26.38 ACRES MR. ABBAS ADAM MADHIA + WIFE + SOS RS. 8.5 LAKHS 4.35 ACRES MR.USMAN ADMAN SALIA + WIFE + TWO SONS RS.9.00 LAKHS 1/4 TH SHARE OF 11 ACRES. 9.6 THE LAND HOLDING OF MR. ADAM NOOR MOHAMMED THA RADRA IS ABOUT 9 ACRES AND THAT OF MR. ABBAS ADAM MADHIA IS 4.35 AC RES. THE LAND HOLDING OF MR. USMAN ADAM SALIA IS RS.2.75 ACRES. THE A.O RECORDED THE STATEMENT OF ALL THESE PERSONS WHEREIN THEY HAVE ADMITTED TH EIR RESPECTIVE AMOUNT OF CONTRIBUTION AND EXPLAINED THE SOURCE OF FUND BY P RODUCING THE LAND HOLDING AND SALE BILLS. THEREFORE, BY PRODUCING TH ESE PERSONS ALONGWITH RELEVANT EVIDENCES THE ASSESSEE DISCHARGED ITS PRIM ARY ONUS OF PROVING THE TRANSACTION. IN ABSENCE OF ANY CONTRARY EVIDENCE O R FACT REJECTING THE EXPLANATION MERELY ON THE BASIS OF SUSPICION IS NO T JUSTIFIED. ACCORDINGLY, WE ARE OF THE VIEW THAT THE ASSESSEE HAS PROVED THE T RANSACTIONS OF CONTRIBUTION OF CASH BY THESE PERSONS. 9.7 AS REGARDS THE EXPLANATION ABOUT THE SOURCE OF CAPITAL CONTRIBUTION BY REMAINING 12 PERSONS THE LD. CIT(A) RECORDED THE FA CT THAT ALL THE PERSONS ARE ASSESSED TO TAX AND APART FROM OTHER RECORDS S HOWING THE SOURCE OF FUND THE RETURN OF INCOME WERE FILED BY THE ASSESSEE. T HE OTHER RECORDS INCLUDES THE LAND HOLDING, PAN AND LAST SIX YEARS INCOME TAX RETURNS WITH COMPUTATION OF INCOME AND BALANCE SHEET WERE FILED IN RESPECT OF ALL 12 PERSONS. THE LD. CIT(A) FURTHER NOTED THAT ALL THE SE PERSONS WERE HAVING BUSINESS INCOME AND OTHER INCOME DULY RECORDED IN T HE BOOKS OF ACCOUNT AND WERE ALSO HAVING SUFFICIENT CASH BALANCE IN THE BOOKS OF ACCOUNT AS WELL IT(SS)A NO.79&101/MUM/2007 (BLOCK PERIOD 01.04.1995 TO 14.08.2001) 13 AS IN THE BANK. THE FACTS RECORDED BY LD. CIT(A) HAS NOT BEEN CONTROVERTED BY THE REVENUE BEFORE US. THEREFORE, WE DO NOT FIN D ANY ERROR OR ILLEGALITY IN THE ORDER OF LD. CIT(A) IN DELETING THE ADDITION IN RESPECT OF THE CASH CONTRIBUTION BY THESE 12 PERSONS INCLUDING THE ASSE SSEE. THE CONTROVERSY BEFORE US IS PURELY FACTUAL IN NATURE AND, THEREFO RE, THE DECISION RELIED UPON BY LD. DR ARE NOT APPLICABLE IN THE FACTS OF THE PR ESENT CASE. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED AND THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14/01/2015 $ % &'( ! ) *+, 14.1.2015 ' % - # SD/- SD/- ( . / D.KARUNAKARA RAO ) ( /VIJAY PAL RAO ) ! / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; *+ DATED 14/01/2015 $ $ $ $ % %% % ./ ./ ./ ./ 0 (/ 0 (/ 0 (/ 0 (/ / COPY OF THE ORDER FORWARDED TO : 1. 12 / THE APPELLANT 2. .312 / THE RESPONDENT. 3. 4 ( ) / THE CIT(A)- 4. 4 / CIT 5. 5- ./+ , , / DR, ITAT, MUMBAI 6. - 6 / GUARD FILE. $+ $+ $+ $+ / BY ORDER, 3/ ./ //TRUE COPY// 7 77 7 / 8 8 8 8 (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . + . ./ VM , SR. PS