ITA No. 197 of 2011 (O&M) -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 197 of 2011 (O&M) Date of Decision: 14.7.2011 M/s United Agencies ....Appellant. Versus Assistant Commissioner of Income Tax ...Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL, ACTING CHIEF JUSTICE. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Sandeep Goyal, Advocate for the appellant.. AJAY KUMAR MITTAL, J. 1. This order shall dispose of ITA Nos. 196 and 197 of 2011. For brevity, the facts are being taken from ITA No. 197 of 2011. 2. This appeal has been preferred by the assessee under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against the order dated 30.4.2009 passed by the Income Tax Appellate Tribunal, Delhi Bench 'I', New Delhi (hereinafter referred to as “the Tribunal”) in ITA No. 39/Del/2005, relating to the assessment year 1988-89, claiming the following substantial questions of law:- “(i) Whether on the facts and circumstances of the case, the Ld. Tribunal was justified in holding that even the payments which had not been made as on the date ITA No. 197 of 2011 (O&M) -2- of search would also be treated as unexplained investment? (ii) Whether on the facts and circumstances of the case, the Ld. Tribunal was justified in holding that the additions with regard to Rs.2,74,616/- was justified even though corresponding entries were found in the documents recorded in the account books of the assessee? (iii) Whether on the facts and circumstances of the case, the Ld. Tribunal was justified in sustaining the addition of a cumulative figure of alleged monthly instalment of liquor vend even though it has been noted that the said vend would earn an income of about Rs.2,90,000/- per month, which would be sufficient for meeting the liquor vend instalment?” 2. Put shortly, the facts necessary for adjudication as narrated in the appeal are that the assessment for the assessment year 1988-89 was completed on 27.3.1991 at an income of Rs.68,01,146/-. An addition was made on account of a note book seized from the business premises of the assessee during search and seizure operation carried on 30.10.1987. The Assessing Officer took cognizance of certain entries made in the said note book which related to bid amount for the liquor vend and made an addition of Rs.12,90,000/- on this account. Similarly, an addition of Rs.2,74,616/- was also made based on seized documents. Feeling aggrieved, the assessee took the matter in appeal before the Commissioner of Income Tax (Appeals) [in short the “CIT ITA No. 197 of 2011 (O&M) -3- (A)”]. After various rounds of remand and re-assessment, the matter was finally decided by the Assessing Officer on 20.3.2002 by making certain additions. On appeal, the CIT(A) vide order dated 10.11.2004 deleted some of the additions. However, additions of Rs.12,90,000/- and Rs.2,74,616/- were kept intact. Feeling dissatisfied, the assessee as well as the revenue filed appeals before the Tribunal. The Tribunal vide order dated 30.4.2009 partly allowed the appeal of the assessee and dismissed the appeal filed by the revenue. The Tribunal upholding addition of Rs.2,74,616/- also recorded that the sum of Rs.10,00,000/- had to be reduced from addition of Rs.12,90,000/- on account of investment towards initial capital and sustained addition of Rs.2,90,000/-. Hence, the present appeal by the assessee. 3. We have heard learned counsel for the assessee. 4. Learned counsel for the assessee had sought to challenge the additions sustained by the Tribunal amounting to Rs.2,74,616/- and Rs.2,90,000/-. 5. The Tribunal while upholding the addition of Rs.2,74,616/- on account of unexplained capital introduced in different names, i.e. Ashok Jain-Rs.85,000/-; H.S. Madan-Rs.89,616/- and P.S. Oberoi- Rs.1,00,000/- had recorded as under:- “6.5. In the course of hearing before us, the learned counsel for the assessee has tried to reconcile the figures shown in the seized document with the figures recorded in the regular books by attempting that capital introduced by Smt. Vanita Jain, Smt. Satnam Kaur Madan and Smt. Satinder Oberoi are to ITA No. 197 of 2011 (O&M) -4- be taken together and are to be consolidated, and if so consolidated, there would be no difference between the figures mentioned in the seized paper and/the figures recorded in the books of account. This explanation of the assessee is not at all found to be convincing. The seized documents are with regard to the capital introduced in cash by Ashok Jain, H.S. Madan and Shri P.S. Oberoi. In the partnership deed, it is not mentioned that Ashok Jain and other partners are representing their respective family, and any amount deposited by any of the other member shall be consolidated while preparing the capital account. The other family members of the three partners are separate and independent legal entity. The assessee's explanation to consolidate all the accounts is not acceptable, we hold that it is a futile attempt on the part of the assessee to get out from incriminating document found during the course of search. In these facts and circumstances of the case, we do not find any justification to delete the addition of Rs.2,74,616/- made by the Assessing Officer and further confirmed by the CIT(Appeals). Thus, this ground raised by the assessee is rejected.” 6. The Tribunal on appreciation of material on record had concluded that the amount of Rs.2,74,616/- introduced as unexplained capital in the names of Ashok Jain, H.S. Madan and P.S. Oberoi was ITA No. 197 of 2011 (O&M) -5- undisclosed income of the assessee. It was further recorded that no benefit could be availed by the assessee by pleading that in fact it was capital introduced by Smt. Vanita Jain, Smt. Satnam Kaur Madan and Smt. Satinder Oberoi which was contrary to the seized documents. The said findings have not been shown to be perverse or illegal in any manner. 7. Adverting to the addition of Rs.2,90,000/- the Tribunal observed as under:- “5.10. After considering the totality of facts and circumstances of the case and after hearing both the parties, we are in agreement with the authorities below that M/s Singh and Company and M/s Hari Singh and Company are the benami business of the assessee, and the document found with the assessee is to be considered as belonging to the assessee and an income arising therefrom is to be assessed in the hands of the assessee firm. It is common that on papers these firms were created as a separate entity but in reality the said firms were the benami business of the assessee. Therefore, merely because a licence issued by the department stands in the name of the aforesaid benami concerns would not help the assessee that they are not benamidar of the assessee inasmuch as the control and management and the documents belonging to these concerns were found with the assessee firm. ITA No. 197 of 2011 (O&M) -6- Further, the CIT(Appeals) has appreciated the constitution of these firms with that of assessee's firm and found that the documents relating to the aforesaid benami concerns were found in the assessee's premises. The assessee has not given any satisfactory or cogent reason as to why the papers relating to the business activities of the aforesaid firms were found with the assessee. The affidavit given by the assessee is not supported by any corroborative evidences and they are mere self serving without explaining as to why the papers or documents belonging to the aforesaid firms were found in the custody and control of the assessee firm. Therefore, the assessee's contention that the seized document marked A-11 cannot be considered in assessee's hands is rejected. Now, the question arises as to whether any addition on the basis of the aforesaid seized document A-11 can be made. The extract of the document has already been set out above. On perusal of it, it is seen that the bid amount in respect of shop at Old Railway Road No.1 was settled at Rs.13,00,000/-. An advance amount of Rs.65,000/- and security amount of Rs.1,52,000/- were initially paid and thereafter the sum of Rs.10,83,000/- was paid in installments beginning from April to December, 1987 and then in January, ITA No. 197 of 2011 (O&M) -7- 1988. It has been contended by the assessee that the sum of Rs.65,000/- being 5% advance was paid on 12.3.1987 and thus, it is beyond the financial year 1987-88 relevant to the assessment year 1988-89 and thus, it cannot be considered in the present assessment year 1988-89. It was further submitted that sum of Rs.1,52,000/- was also paid in March, 1987. It was further contended by the learned counsel for the assessee that installments paid are to be considered as expenses while determining profit from running shop at Old Railway Road No.1. After considering the facts and circumstances of the case and hearing both the parties, we are of the considered opinion that in case the sum of Rs.65,000/- and Rs.1,52,000/- have actually been paid in the month of March, 1987, the same cannot be added as undisclosed income of the assessee in the present assessment year 1988-89. We, therefore, restore this aspect of the matter to the file of the Assessing Officer to examine and verify the same and decide the matter accordingly. 5.11 This leaves an amount of Rs.10,83,000/- now to be considered by us. It is not in dispute that on the basis of seized document, sum of Rs.10,83,000/- has been paid towards bid money during the year under consideration. No source thereof has been explained ITA No. 197 of 2011 (O&M) -8- by the assessee. The first installment of Rs.1,18,500/- was paid in the month of April, 1987. The subsequent installments were paid in each and every month. In order to run the business, the assessee would require initial capital, the source of which has not been explained by the assessee. The Assessing Officer has worked out the investment at Rs.10,00,000/-. The Assessing Officer has also added the sum of Rs.2,90,000/- as profit from the said activity. The installment of money has not been made at a single point of time but it has been made from month to month. Therefore, the profit earned by the assessee from month to month would certainly be available to the assessee for the purpose of making payment of installment every month. The profit has been estimated by the Assessing Officer at Rs.2,90,000/- which, in our considered opinion, is considered to be reasonable and justified. However, the investment towards initial capital taken by the Assessing Officer at Rs.10,00,000/- is to be reduced by the aforesaid amount to Rs.2,90,000/- available with the assessee. We, therefore reduce the addition by Rs.10,00,000/- to Rs.2,90,000/-. In other words, the total addition made by the Assessing Officer of Rs.12,90,000/- shall be reduced to an amount of Rs.2,90,000/-, and further Rs.2,17,000/- (Rs.65,000/- ITA No. 197 of 2011 (O&M) -9- + Rs. 1,52,000/-), if it is found that sum of Rs.2,17,000/- is actually paid in the month of March, 1987, otherwise the addition of Rs.2,17,000/- shall be added in the present year under consideration. The Assessing Officer shall modify the assessment order accordingly.” 8. The Tribunal noticed that M/s Singh and Company and M/s Hari Singh and Company were benami concerns of the assessee and income arising in their hands had to be assessed as belonging to the assessee. The profit of Rs.2,90,000/- estimated by the Assessing Officer was considered to be reasonable and justified. The finding of the Tribunal could not be held to be perverse in the absence of any ground made out by the learned counsel for the assessee. 9. No substantial question of law, thus, arises in this appeal which may require any adjudication by this Court. 10. It may be noticed that ITA No. 196 of 2011 has been filed challenging the order of the Tribunal whereby application for rectification of order dated 30.4.2009 was dismissed by the Tribunal. Since the order dated 30.4.2009 is found to be in conformity with law and no error apparent on the face of the record was found which may warrant interference in the impugned order, this Court is of the opinion that the Tribunal had rightly rejected the rectification application. Learned counsel was unable to substantiate his plea that an error had occurred in the order dated 30.4.2009 passed by the Tribunal which required to be rectified. 11. Learned counsel for the appellant having failed to show that ITA No. 197 of 2011 (O&M) -10- the findings recorded by the Tribunal in both the appeals are perverse in any manner giving rise to any substantial question of law to be considered by this Court. We find no merit in these appeals and the same are hereby dismissed. 12. Both the appeals are time barred and respective applications for condonation of delay have been filed along with the appeals. Since the appeals have been dismissed on merits, no further orders are required to be passed in the said applications and the same are disposed of as such. (AJAY KUMAR MITTAL) JUDGE July 14, 2011 (ADARSH KUMAR GOEL) gbs ACTING CHIEF JUSTICE ITA No. 197 of 2011 (O&M) -11- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 196 of 2011 (O&M) Date of Decision: 14.7.2011 M/s United Agencies ....Appellant. Versus Assistant Commissioner of Income Tax, Gurgaon Circle, Gurgaon ...Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL, ACTING CHIEF JUSTICE. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Sandeep Goyal, Advocate for the appellant. AJAY KUMAR MITTAL, J. For orders, see ITA No. 197 of 2011 (M/s United Agencies v. Assistant Commissioner of Income Tax). (AJAY KUMAR MITTAL) JUDGE July 14, 2011 (ADARSH KUMAR GOEL) gbs ACTING CHIEF JUSTICE