K. Ramachandraiah V. The Commissioner of Income Tax, Anantapur

ITTA/73/2000

AI Insights

The case involves K. Ramachandraiah, the appellant, who was subjected to a search by the Income Tax Department, leading to a block assessment under Section 158BC of the Income Tax Act, 1961, for the period from 01.04.1985 to 05.01.1996. The assessment revealed undisclosed investments totaling Rs.11,49,125, primarily in money lending and share acquisitions. Initially, the appellant admitted these were unaccounted for but later retracted his statements. The Tribunal, after considering the materials and explanations provided, adjusted the undisclosed income to Rs.5,30,000. The appellant contested the Tribunal's decision, arguing it was based on conjectures, which the court rejected, emphasizing the appellant's failure to substantiate the sources of his income.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 805160 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 27-06-2013
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Keywords: Block assessment; Investment; Money lending business; Promissory notes; Search and seizure; Undisclosed income
• Section: 158BC

Judgement Text

"HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND HON’BLE Ms. JUSTICE G.ROHINI I.T.T.A.No.73 of 2000 Date: 27.06.2013 Between: K.Ramachandraiah, Kurnool .....Appellant AND The Commissioner of Income Tax, Anantapur. ...Respondent HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND HON’BLE Ms. JUSTICE G.ROHINI I.T.T.A.No.73 of 2000 JUDGMENT: (per Hon’ble the Chief Justice Sri Kalyan Jyoti Sengupta ) This appeal is directed against the judgment and order of the learned Tribunal dated 26.06.2000 in I.T.(SS)A.No.31/Hyd/97. By an order of this Court dated 21.12.2000, this appeal was admitted on the following substantial questions of law: i. Whether on the facts and in the circumstances of the case, the Tribunal is correct in law in relying on the oral evidence (statements) of the appellant in preference to the documentary evidence available for explaining the source for investments? ii. Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in passing the order on surmises and conjectures without any material evidence in support of its findings? We have heard the learned Counsel for the appellant and gone through the impugned judgment and order. We answer question No.2 in affirmative, as we are of the view that the learned Tribunal has not rendered any findings based on surmises or conjectures. We record our reason in support of our decision as mentioned hereunder:- The fact of the case is that there was a search conducted by the department of the officials in the residential premises and business premises of the assessee. After search and after collecting material, block assessment under Section 158BC of the Income Tax Act, 1961 was undertaken. The block period covers from 01.04.1985 to 05.01.1996 relevant to assessment years 1986-87 to 1996-97. The assessment has been completed by the Assistant Commissioner of Income Tax, Investigation Circle-1, Anantapur, by his order dated 28.01.1997. The assessee is a partner of Sri Rama Medical and Surgical Agencies, Kurnool. His wife and other close relatives are also partners of the said firm as well as other firms like M/s Sri Rama Medical Agencies. The Department was in possession of certain information to the effect that the partners of the firm were engaged in money lending business outside the books of account. On the basis of information, search was conducted and certain relevant information and materials were seized. On the basis of the material collected out of the search and the evidence available from the relevant materials, Investigating Officers found out that an investment of Rs.11,49,125/- has not been accounted for by the assessee in the books of account. This investment was mainly in the form of money lent on promissory notes, acquisition of share certificates etc., When the appellant was asked to explain about the source of the investment, he did so swearing affidavit dated 05.01.1996 and admitted that investments worth Rs.11,49,125/- has not been recorded in the books of account and that he was not in a position to explain the sources for the investment. Later on, after conclusion of the enquiry by the Investigating Officers, when the assessee was again called upon to explain finally to come to an agreed assessment of the case regarding the undisclosed income in the hands of the assessee, the assessee changed his version and denied that he made any such statement earlier that investments worth Rs.11,49,125/- remained un-accounted for. He denied all his earlier admissions and statements, which might implicate him. The assessing officer found that the assessee has to be assessed for the undisclosed income found out in the course of search. The assessee was called upon to file the return in Form- 2B. In his nil return, he did not admit any undisclosed income. The assessing officer examined the materials, item wise and finally determined an undisclosed income of Rs.6,14,945/- in the hands of the assessee as against undisclosed income of Rs.11,49,125/- earlier admitted by the assessee. Against the aforesaid assessment order, the assessee preferred second appeal before the learned Tribunal. The learned Tribunal, after scrutinizing the details, has deleted a sum of Rs.84,945/- from the computation of undisclosed income in the hands of the assessee. The aforesaid amount of Rs.84,945/- consists of unexplained investment in sterling holiday resorts, shares in the name of minor son of the assessee and interest on promissory notes. Thus, the learned Tribunal directed the assessing officer to re-compute the undisclosed income of the assessee, after deleting the above items, and determine the undisclosed income at Rs.5,30,000/-. The learned Counsel for the appellant submits that the judgment and order of the learned Tribunal is based on surmises and conjectures and on the statements made in the affidavit and also during search and seizure and, therefore, all the impugned orders should be set aside. The learned Standing Counsel appearing for the respondent-Revenue supported the judgment and order of the learned Tribunal and contends that it is the initial burden of the appellant-assessee to explain the source of income and that was not done so. The learned Tribunal, after scrutinizing everything, came to the conclusion that source income of Rs.84,945/- was properly explained by the assessee, and therefore, the said amount was deleted from the computation of undisclosed income. After hearing the learned Counsel for the parties, we are of the view that in this case the question of basing the decision on surmises and conjectures does not and cannot arise because as rightly contended by the learned Standing Counsel for the respondent-Revenue that it is the burden of the appellant-assessee to establish the source of income. Therefore, when there is no proof or explanation, the Revenue Authority and the Tribunal has no option but to come to the conclusion that the unexplained amount is undisclosed one. Since the initial burden was not discharged by the assessee, the version of the Revenue has to be accepted to be correct. If no evidence is produced by the assessee, in this situation, the income remain undisclosed or also its source. Under the above circumstances, we are of the view that there is no element of surmise or conjecture in the present case as contended by the learned counsel for the appellant. The learned Tribunal has decided the matter on correct proposition of law and also on facts. Therefore, we affirm the order of the learned Tribunal. Accordingly, the appeal is dismissed. Miscellaneous petitions, if any, pending shall also stand closed. No order as to costs. ___________________ K.J. SENGUPTA, CJ _______________ G.ROHINI, J 27.6.2013 Gsn. "