Commissioner of Income Tax (Central) 7/81-B, Tilak Nagar, Kanpur Vs Shri Neeraj Rastogi, 1-University Road, Lucknow

Dr. Satish Chandra

1. This appeal u/s 260-A of the Income Tax Act has been filed against the judgment and order dated 25.07.2005 passed by the Income Tax Appellate Tribunal, Lucknow in I.T.A.No.811/Lko/2001 for the block period mentioned above.

2. A coordinate Bench of this Court vide order dated 06.02.2006 has admitted the appeal on the following substantial questions of law:

1. Whether on the facts and in the circumstances of the case, the Hon''ble Income Tax Appellate Tribunal was justified in law in deleting the addition of Rs.22,35,783 made by the Assessing Officer on account of unexplained investment in purchases during the financial year 1998-99 by directing that the figures for the F.Y. 1998-99 should be adopted for working out the availability of funds for making undisclosed investment instead of figures of F.Y. 1997-98 adopted by the Assessing Officer, without appreciating that the unexplained investment in purchases during the F.Y. 1998-99 was determined by the Assessing Officer on the basis of peak unexplained investment as recorded in the seized papers and the undisclosed turnover effected by the respondent after the date of the said peak investment in purchases could not have been taken into consideration while working out the availability of the funds with the respondent for making the said peak undisclosed investment.

2. Whether on the facts and in the circumstances of the case, the Hon''ble Income Tax Appellate Tribunal was justified in law in deleting the addition of Rs.5,75,000/-made on account of unexplained cash found during the course of the search without appreciating that the claim of the respondent made subsequent to the search that the said cash belonged to Dr. T.K. Rastogi was only an afterthought and the affidavit given by Dr. T.K. Rastogi in this regard could not have been relied upon as it was only a self serving statement nor supported by any documentary evidence.

3. The brief facts of the case are that on 08.07.1999, a search was conducted at various residential and business premises of M/s Jugal Kishore Jewellers Group, wherein the assessee is a partner. During the course of search, several loose papers, cash and jewellery were found and seized.

4. The A.O. in its order observed that there was certain undisclosed sales of the jewellery. When there was undisclosed sale certainly undisclosed investment in purchases of jewellery must have been made. As no other details of undisclosed purchases is available, the peak of undisclosed purchases is taken to be Rs.9,480.327 gms gold+Rs.67,557. Applying the rate of 10 gms of gold for that years, the computation was made @ Rs.4045/-. Thus, the value of undisclosed purchase was computed at Rs.31,94,870+67,557 = Rs.32,62,427. Out of this amount, source of Rs.10,26,644 was treated as shown available out of the declared undisclosed funds. So, the A.O. has taken the balance amount of Rs.22,62,427 as on ''undisclosed investment in purchases'' for the year 1998-99. Finally, the A.O. made the addition of this amount for the said year.

5. However, the said addition was reduced by the First Appellate Authority to Rs.3,47,798/-by giving a relief to the assessee of Rs.18,87,985/-. Further, in second appeal, the Tribunal deleted the remaining amount of Rs.3,47,798/-. Being aggrieved, the department has filed the present appeal.

6. With this background, Sri D.D.Chopra, learned counsel for appellant justified the order passed by the A.O. He submits that during the period under consideration, a huge undisclosed sale was made. Certainly, there was undisclosed investment, for which the assessee has no explanation. He further submits that on the basis of seized documents, the assessee disclosed the following unaccounted sale and 20% profit thereon as undisclosed income:

7. He reads out the assessment order, wherein it was mentioned that for affecting such large unaccounted sale, the assessee has not disclosed any initial capital investment. The A.O. noticed that during the year 1998-99, the assessee has shown unaccounted sale of Rs.1,12,58,177/-, which shows a quantum jump from the immediate preceeding year where undisclosed sale was of Rs.7,67,408/-. Learned counsel also submits that undisclosed investment must necessarily have been made by the assessee in generating the sale of Rs.1,12,58,177/-. The A.O. worked out peak undisclosed purchases as per the seized material to Rs.32,62,427/-. The A.O. has already accepted the investment of Rs.10,26,644/-, out of the declared undisclosed funds of the assessee. Lastly, he justified the impugned order passed by the A.O. and made a request to set aside the impugned order passed by the Tribunal as well as by the CIT(A).

8. On the other hand, Sri Rakesh Pandey, learned counsel for the assessee relied on the impugned order passed by the Tribunal. He submits that the assessee has already declared the undisclosed income of Rs.79,00,000/-. The assessee disclosed the unaccounted sale and 20% profit thereon as undisclosed income.

9. Further, learned counsel submits that for the year (1998-99), the assesse has shown a sum of Rs.1,12,58,177/-as undisclosed sales, but the A.O. again made a separate addition for undisclosed peak purchases for Rs.22,35,783/-on the basis of seized material. He also submits that out of total weight of 9480.327 gm. gold, the assessee has shown only 3397.880 gm of gold and the rest 6082.447 gm. gold have been shown as outstanding, therefore, only 3397.880 gm. of gold can be considered as available with the assessee in place of 9480.327 gm. gold. Thus, the value of this gold @ Rs.4045/-per 10 gm. gold comes to Rs.13,74,442/-.

10. According to learned counsel, the A.O. also treated Rs.10,26,644/-as available with the assessee so the net addition had worked out Rs.3,47,798/-, by the CIT(A). Lastly, he submits that the correct calculation as per the method adopted by the A.O., the availability of funds with the assessee is much more than the amount of the addition made by the A.O. So, there is no occasion to make any addition. Lastly, he justified the impugned order passed by the Tribunal.

11. We have heard learned counsel for the parties at length and gone through the materials available on record.

12. From the arguments of the learned counsel for parties, it appears that dispute is pertaining to the calculation of the available funds in the form of gold and its value. The A.O. and CIT(A) have taken the different methods for calculating the initial investment in the form of gold, therefore, different figures were emerged as undisclosed investment in purchases. With the help of above mentioned table, both the counsels for the parties have agreed, that the difference is apparent. Thus, the facts are quite contradictory, as different figures were claimed by the counsels during the course of arguments. When it is so then the same needs fresh determination. Before passing impugned order in a mechanical way, the Tribunal has not examined properly the facts pertaining to the availability of investment.

13. If the finding of the facts is against the material on record or it has ignored the relevant material, the said findings can be scrutinized by this Court and is liable to be set aside the order to find out as to whether the finding is vital or not. It is necessary to examine the orders passed by the authorities below, as per the ratio laid down in the case of CTT vs. Brandavan Prem Narain, 2005 (27) NTN 366 All.

14. In the instant case, the finding of facts are not clear and the material available on record was ignored, therefore, we set aside the impugned order passed by the Tribunal by keeping in mind the ratio laid down in the case of CST vs. Nangal Electrict Company, 2000 (40) CST 11 280 All. and restored back to the file of the Tribunal to decide the same de novo by providing reasonable opportunity to the assessee as per law. It is very painful to restore the matter back to the Tribunal in this very old matter, therefore, in the interest of justice, we direct the Tribunal to decide the same on merit within a period of three months after receiving a certified copy of this order and the assessee will co-operate at every stage.

15. In view of above, when we restore the matter back to the Tribunal, then no answer to the substantial question of law can be given and it will be considered in an appropriate case.

16. Regarding second substantial question of law, which relates to the addition of Rs.5,75,000/-, we heard the parties and gone through the material available on record.

17. From the records, it appears that on 08.07.1999, the search and seizure operation was carried out. During the course of search, at 81 Katori Tola, the total cash amounting to Rs.56,02,705/-was found, out of this amount, the assessee vide his letter dated 22.02.2001 claimed that Rs.5,75,000/-belonged not to the assessee family, but one visiting guest, namely, Dr. T.K.Rastogi (N.R.I.) 33, Dunids Park, Colderstones, Liverpool, London. An affidavit was also filed before the CIT. In the affidavit dated 12.07.1999, Dr. T.K.Rastogi alleged that he had come to visit Lucknow on 27.06.1999 and he had withdrawn Rs.6,05,850/-from the SBI, Main Branch, Lucknow on 28.06.1999 and 01.07.1999 by converting the sterling Pounds brought by him from England. He had handed over a sum of Rs.5,75,000/-for safe custody, out of that withdrawal, to the assessee as he went to visit his friends and relatives at Bareilly, Mussorie, Delhi and Patna. On 10.07.1999, he came to know that money was seized on 08.07.1999 by the income tax department from the assessee. The said affidavit which is self explanatory was accepted by the CIT(A) as well as by the Tribunal and accordingly addition in question was deleted.

18. Needless to mention that the Tribunal is a final fact finding authority as per the ratio laid down in the following cases:

1 CTT vs. Suraj Dal Mill, 2005 (37) STJ 547 Alld.;

2 CTT vs. Durga Dal Mill, 2006 (3) VLJ 152 Alld.;

3 Kamala Ganapathy Subramaniam and Another Vs. Controller of Estate Duty, ; and

4 Anjani Coal Agency vs.CTT, 2005 (37) STJ 294 Alld.

19. In view of above, no interference is required in the impugned order passed by the Tribunal, which has uphold the order passed by the CIT(A) where the addition of Rs.5,75,000/-was deleted. Facts pertaining to the issue are clear and the same were verified by the department, therefore, we decline to interfere with the impugned order passed by the Tribunal. The same is hereby affirmed to that extent. The answer to the substantial question of law no.2 is in favour of the assessee and against the department.

20. In the result, the appeal filed by the department is partly allowed as stated above.