KARUN DUTT SINGH ALIAS RINKU SINGH V. COMMISSIONER OF INCOME TAX

ITA/48/2012

AI Insights

The case revolves around an income tax appeal by Karun Dutt Singh, an employee of M/s Prakash Gold Palace Pvt. Ltd., who contested the addition of Rs.63,64,123 to his income, representing the value of gold ornaments seized from him. The gold was requisitioned under Section 132 of the Income Tax Act, 1961, following its recovery by the police. Initially, the First Appellate Authority set aside the addition, but the Tribunal restored it, leading to this appeal. The main legal issues pertained to the ownership of the gold and the applicability of Section 69A of the Income Tax Act, which deals with unexplained investments.

• Counselvise Citation: [2017] 140 COUNSELVISE.COM (IT) 755410 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 23-08-2017
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax, Salem v K.Chinnathamban
• Laws Referred To: Income Tax Act, 1961, Evidence Act, 1872
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: JOSE JOSEPH
• Assessee Lawyers: R BINDU; PRASHANTH
• Keywords: Assessment; Burden of Proof; Gold Ornaments; Income Tax; Unexplained investments
• Section: 143(3); 132; 69A; 110

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE ANTONY DOMINIC & THE HONOURABLE MR. JUSTICE DAMA SESHADRI NAIDU WEDNESDAY, THE 23RD DAY OF AUGUST 2017/1ST BHADRA, 1939 ITA.No. 48 of 2012 () ---------------------- APPELLANT/RESPONDENT/ASSESSEE: ------------------------------ KARUN DUTT SINGH ALIAS RINKU SINGH C/O.PRAKASH GOLD PALACE (P) LTD, 144, PURUSAWALKAM HIGH ROAD, KELLY, CHENNAI - 600 010. BY ADVS.SRI.R.BINDU (SASTHAMANGALAM) SRI.PRASANTH M.P RESPONDENT/APPELLANT/REVENUE: ----------------------------- COMMISSIONER OF INCOME TAX, KOCHI - 682 018. R BY SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 23-08-2017, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ITA No.48 of 2012 APPENDIX APPELLANT'S EXHIBITS: ANN.A TRUE COPY OF THE ASSESSMENT ORDER DTD.26.3.2008 PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 BY THE ASSESSING OFFICER ON THE APPELLANT FOR THE AY 2007-2008. ANN.B TRUE COPY OF THE APPEAL MEMORANDUM FILED BY THE APPELLANT BEFORE THE COMMISSIONER OF INCOEM TAX (APPEALS) I, KOCHI. ANN.C TRUE COPY OF THE FIRST APPELLATE ORDER DTD.3.10.2008 PASSED BY THE COMMISSIONER OF INCOEM TAX (APPEALS) 1, KOCHI FOR THE ASSESSMENT year 2007-2008. ANN.D TRUE COPY OF THE CORRIGENDUM DTD.3.10.2008 ISSUED BY THE COMMISSIONER OF INCOME TAX (APPEALS) I, KOCHI. ANN.E TRUE COPY OF THE APPEAL MEMORANDUM FILED BY THE INCOME TAX DEPARTMENT BEFORE THE INCOEM TAX APPELLATE TRIBUNAL, COCHIN BENCH. ANN.F TRUE COPY OF THE ORDER DTD.9.2.2011 PASSED BY THE HONOURABLE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH FOR THE ASSESSMETN YEAR 2007-2008. ANN.G TRUE COPY OF THE ORDER AND THE DEMAND NOTICE DTD. 31.1.2012 ISSUED BY THE ASSESSING OFFICER. ANN.H TRUE COPY OF THE PENALTY NOTICE DTD. 31.1.2012 ISSUED BY THE ASSESSING OFFICER FOR THE AY 2007-2008. TRUE COPY P.S.TO JUDGE css/ Antony Dominic & Dama Seshadri Naidu, JJ. ------------------------------------------- ITA No.48 of 2012 -------------------------------------------- Dated this the 23rd day of August, 2017 JUDGMENT Antony Dominic, J. In this appeal filed by the assessee the order passed by the Income Tax Appellate Tribunal, Cochin Bench in ITA No.25 of 2009 concerning the assessment year 2007-2008 is challenged and the questions of law framed for the consideration of this Court are the following: a) Whether the Tribunal was correct, in law and fact of the case, in setting aside Annexure C order of the CIT (Appeals)-I, Kochi and restoring the addition made by the assessing officer to the tune of Rs.63,64,123/- (the value of the gold ornaments requisitioned) in the hands of the appellant for the AY 2007-08? b) Having accepted that the appellant is an employee/traveling sales man of M/s Prakash Gold Palace Pvt. Ltd., Chennai; Was the Tribunal correct, in law and fact of the case, in upholding the finding of the assessing officer that the gold jewellery found in possession of the appellant did not belong to the Company M/s Prakash Gold Palace Pvt. Ltd., Chennai and therefore to assess the value of the Gold of Rs.63,64,123/- in the hands of the appellant under section 69A of the Income Tax Act, 1961? Is not the said finding perverse? c) The assessing officer having accepted the returns filed by the appellant for the Ays 2005-06 and 2006-07 admitting the salary income received from Prakash Gold ITA No.48 of 2012 2 Palace Pvt. Ltd., Chennai, whether the Tribunal was correct, in law and fact of the case in restoring the addition made to the returned income for the AY 2007- 2008 by the assessing officer of the value of the Gold ornaments seized from the possession of the appellant (who is an employee of Prakash Gold Palace Pvt. Ltd., Chennai) to the tune of Rs.63,64,123/- in the hands of the appellant? Is not the said finding perverse? d) Whether the Tribunal was right, in law and in facts and circumstances of the case, in holding that the appellant has not proved that he is not the owner of Gold ornaments requisitioned by the Income Tax department and the nature and source of acquisition and also as to who the real owner is? e) Was the Tribunal right in law and facts of the case, in suo motu raising question of its own both on facts and on law after reserving the appeal for orders and answering such questions in a manner prejudicial to the interest of the appellant without affording opportunity of being heard on such questions raised? f) Was the Tribunal right in law and facts of the case, in referring to various judicial decisions and also the provisions of Evidence Act which was not cited by any of the parties or discussed during the hearing before the Tribunal and thereby taking a decision without affording the opportunity of being heard on the above? g) Whether the Tribunal was right in law and facts of the case in holding that the presumption u/s 132 (4A) of the Income Tax Act is not applicable in the present case. 2. On 24.7.2006, the Sub Inspector of Police, Hill Palace, Thripunithura apprehended the assessee and recovered gold ornaments weighing 7191.700 gms. The recovery was reported ITA No.48 of 2012 3 to the Income Tax Department which requisitioned the gold under Section 132 of the Income Tax Act. On that basis assessment proceedings were initiated against the assessee. By Annexure-A assessment order, Rs.63,64,123/- being the value of the gold recovered was added to the income of the assessee under Section 69A of the Act. The assessment order was set aside by the First Appellate Authority, the Commissioner of Income Tax (Appeals). The revenue carried the matter in appeal to the Tribunal. The Tribunal allowed the appeal by Annexure-c order and restored Annexure-A assessment order. It is in this background the assessee has filed this revision. 3. We heard the counsel for the assessee and the senior counsel appearing for the revenue. 4. The contentions raised by the counsel for the assessee are mainly that he is a salesman of M/s Prakash Gold Palace (P) Ltd., 144, Purasawalkam High Road, Kellys, Chennai- 10 that his employer had issued communication dated 26.7.2006 asserting ownership over the gold recovered and that if at all it was found that the gold was not accounted by his employer, they having accepted the ownership over the same, the assessing officer ought to have taken recourse to proceedings under Section 69A ITA No.48 of 2012 4 against the employer and not against the assessee. The assessee further referred us to the Writ Petition No.24585 of 2007 filed by him and his employer seeking release of the gold in question. It is contended by judgment dated 22nd August 2007, the writ petition was disposed of directing release of the gold, on furnishing of bank guarantee for 70% of its value and executing a simple bond for the balance 30%. It is stated that aggrieved by the aforesaid condition, the assessee and his employer filed Writ Appeal No.168 of 2008 which was disposed of by a Division Bench of this Court by its judgment of 25th January 2008 directing that the employer shall deposit a sum of Rs.24 lakhs with the Income Tax Department and that if such deposit is made, the gold shall be released either in favour of the employer or in favour of the assessee. Judgment further shows that liberty was reserved to the department to recover any amount that may be found due after completing assessment proceedings against either the employer or the assessee. It is, therefore, contended that the assessee having disclosed to the police and to the Income Tax Department at the earliest possible opportunity that the ownership of the recovered gold is that of his employer M/s Prakash Gold Palace Pvt. Ltd. and his employer having accepted ITA No.48 of 2012 5 the ownership by a letter issued on 26.7.2006, the assessment proceedings should not have been completed against the assessee. These contentions were refuted by the counsel for the revenue mainly contending that in a proceedings under section 69A, the burden to prove that the ownership is not that of the assessee is entirely upon him and that the case should be appreciated in the light of the principles governing section 110 of the Evidence Act. 5. The learned senior counsel referred in this context to us the judgment of the Apex Court in Commissioner of Income Tax, Salem v K.Chinnathamban1. According to him, a reading of the order impugned would show that the findings therein are rendered entirely on appreciation of the evidence available and it being completely factual, no question of law arises for the consideration of this Court in this appeal. 6. We have considered the submissions made. 7. Section 69A of the Act provides that where in any financial year, the assessee is found to be the owner of any jewellery and such jewellery is not recorded in the books of account, if any, maintained by him for any source of income, and 1 (292 ITR 682) ITA No.48 of 2012 6 the assessee offers no explanation about the nature and source of acquisition of the jewellery or the explanation offered by him is not, in the opinion of the assessing officer, satisfactory, the money and the value of the jewellery may be deemed to be the income of the assessee for such financial year. Reading of this provision shows that the burden is cast entirely upon the assessee to explain about the nature and source of acquisition of the jewellery and if the assessing officer forms an opinion that the explanation offered is not satisfactory, he may deem it to be the income of the assessee. This provision has been construed by the Apex Court in the judgment in Commissioner of Income Tax, Salem v K.Chinnathamban (supra), where it inter alia has been held that in order to find out whether the assessee is the owner of any money in terms of Section 69A of the Act, the principle of common law jurisprudence in section 110 of the Evidence Act, 1872 can be applied. Section 110 of the Evidence Act provides that when the question is whether any person is the owner of anything of which he is shown to be in possession, the burden of proving that he is not the owner is on the person who affirms that he is not the owner. It is in the light of the above statutory provisions and the principles laid down by the Apex ITA No.48 of 2012 7 Court that we have to appreciate the case of the assessee and the legality of the conclusions rendered by the Tribunal. 8. Reading of the orders passed by the assessing officer shows that the assessing officer has analysed the case of the assessee in the light of the statements of the Director and Senior Manager of his employer and found out the following contradictions are noted in paragraph-5:- a. Shri.Karun Dutt Singh stated that he had brought the gold ornaments to Kochi from Chennai. But Shri.Abhilash Kumar Jain, Director of the company stated that no gold ornaments were given to Shri.Karun Dutt Singh either for sale or as samples for canvassing from Chennai. b. Shri.Abhilash Kumar Jain stated that the books of account of Branch offices are maintained at the Branch itself. But during the course of survey u/s 133A at Kochi Branch, no books of account were found. c. The Stock Register of Kochi Branch produced by Shri.Chakaraborthy, Sr.Manager was not the one maintained in the normal course of business, but one written subsequently to show the existence of gold ornaments at Kochi Branch and to link it with the gold ornaments Shri.Karun Dutt Singh was carrying with him when he was apprehended by the police. d. As per the Stock Register and transfer voucher dated 19.7.2006, produced by Shri.Chakraborthy the gold ornaments weighing 5584.550 gms. reached Chennai office after 19.7.2006, the date of the transfer voucher, stated to be prepared at Kolkota. But according to the statement of the assessee he reached Kochi from Chennai with gold ornaments on 18.7.2006. e. As per the transfer documents subsequently produced, the quantity of gold ornaments transferred to Kochi was 7432.880 gms. The quantity of gold ornaments seized ITA No.48 of 2012 8 was only 7191.700 gms. The assessee or the officials of M/s. Prakash Gold Palace (P) Ltd. could not explain the whereabouts or absence of the balance quantity of 241.180 gms. of gold. 9. Thereafter the claims of the assessee with respect to his being employed and the ownership of gold recovered from him were held to be not acceptable in paragraph-9 of the assessment order which also reads thus: • During the course of Survey at the Chennai office of M/s Prakash Gold Palace (P) Ltd., there were no books of accounts or other documents to show any jewellery having been sent to Kochi Branch or given to Karun Dutt Singh as samples to procure orders. • The Director of the company Shri.Abhilas Kumar Jain stated in his sworn affidavit that Shri.Karun Dutt Singh alias Rinku Singh was not given any ornaments from Chennai and there was no record to show that he was given gold ornaments for sale or canvassing. The subsequent reversal of stand is only an afterthought. • No books of account were found during the course of survey u/s 133A on 25.7.2006 at the Kochi Branch office at Poothullil House, 2nd Floor, Manastry Road, Cochin 11. As admitted by the Manager, the books produced subsequently have been written up after the survey. • In his letter dated 21.9.2007, Shri.Karun Dutt Singh has stated that Asst.Director of Income-tax (Inv)-1 verified the Stock Book of Ernakulam branch of M/s Prakash Gold Palace (P) Ltd., which was carried by him to various jewellery shops. But the ADI(Inv)-1 reported that the Stock Book produced before him is a fabricated one due to the reasons mentioned in Para No.4 and also the assessee is silent about the absence of this stock register at the time of survey u/s 133A on 25.7.2006 at the Kochi Branch Office at Poothullil House, 2nd Floor, Monastry Road, Cochin 11. It is pertinent to note that Shri.Karun Dutt Singh himself was present at Kochi ITA No.48 of 2012 9 Branch office at the time of Survey. So, the production of the Stock Register before the ADI(Inv)-I is an after thought. • In his letter dated 21.9.2007, the assessee also requested to assess the value of this jewellery as belongs to M/s Prakash Gold Palace (P) Ltd. U/s 153C of the Income-tax Act, 1961. But Shri.Karun Dutt Singh as well as the company M/s Prakash Gold Palace (P) Ltd. failed to establish that the seized gold ornaments belonged to the company. Merely furnishing of an affidavit from M/s Prakash Gold Palace (P) Ltd. is not sufficient to establish that the gold jewellery belongs to company. 10. This being the position, the contention raised by the assessee that the jewellery belongs to the company M/s Prakash Gold Palace (P) Ltd. in which the assessee is an employee is not at all acceptable. The assessee Shri.Karun Dutt Singh as well as the company M/s Prakash Gold Palace (P)Ltd. had never established at the time of surveys conducted and during the course of sworn in statements recorded u/s 131 of the IT Act, that the gold seized belongs to the company. In the circumstances, it is decided to assess the value of the gold of Rs.63,64,123/- in the hands of the assessee, Shri. Karun Dutt Singh as his unexplained investments for the assessment year 2007-2008 after considering all the facts and circumstances of the case. 11. It is these factual conclusions which were nullified by ITA No.48 of 2012 10 the First Appellate Authority on an erroneous appreciation of the evidence in the case and it was therefore that the Tribunal re- appreciated the entire evidence before it and set aside the First Appellate Authority's order and restored the assessment order. A reading of the Tribunal's order shows that the Tribunal has discussed each and every piece of evidence before it and came to the factual conclusion that the assessee has failed to discharge his burden under section 69A of the Income Tax Act read with section 110 of the Evidence Act. These conclusions, as rightly contended by the learned senior counsel for the revenue, are completely factual and therefore, it does not give rise to any question of law for the consideration of this Court in an appeal filed under Section 260A of the Income Tax Act to interfere with. Appeal, therefore, fails and is accordingly, dismissed. sd/- Antony Dominic, Judge sd/- Dama Seshadri Naidu, Judge css/ true copy P.S.TO JUDGE "