ITA No. 72 of 2006 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 72 of 2006 Date of Decision: 6.4.2011 Ashok Kumar Goyal ....Appellant. Versus Commissioner of Income Tax and another ...Respondents. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. ----- PRESENT: Mr. Akshay Bhan, Advocate for the appellant. Mr. Rajesh Katoch, Standing Counsel for the respondents. ---- AJAY KUMAR MITTAL, J. 1. 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 20.6.2005 passed by the Income Tax Appellate Tribunal, Chandigarh Bench “A”, Chandigarh (hereinafter referred to as “the Tribunal”) in ITA No. 5/Chandi/2004, relating to the assessment year 1988-89, claiming the following substantial questions of law:- ITA No. 72 of 2006 -2- “i) Whether in the facts and circumstances of the present case, the action of the authorities below in framing assessment without providing the appellant an opportunity to cross examine Sh. Rajesh Awasthi on the basis of whose statement, such assessment has been made, is legally sustainable in the eyes of law? ii) Whether in the facts and circumstances of the present case, the action of the authorities below in holding the investments to be unexplained in the hands of the appellant when the source with regard to the same had been fully explained by the appellant and the fact that if the source of the investment is not satisfactorily proved, the same cannot be added to the income of the appellant is ignored, is legally sustainable in the eyes of law? iii) Whether in the facts and circumstances of the present case, the search carried on under Section 132(4A) of the Act, when the essential ingredients of the provision of Section 132(4A) are not complied with, is legally sustainable in the eyes of law? iv) Whether in the facts and circumstances of the present case, the action of the authorities in treating the investments to be unexplained in the hands of the appellant by acting on its own presumption, is legally sustainable in the eyes of law? ITA No. 72 of 2006 -3- v) Whether in the facts and circumstances of the present case the impugned orders A-1 to A-3 are legally sustainable in the eyes of law?” 2. Briefly stated, the facts necessary for adjudication as narrated in the appeal are that assessee is an individual and he filed his return declaring a total income of Rs.20,220/-. Search and seizure operation was carried out on 17.1.1995 at the residential premises of one Rajesh Avasthi and a bundle of share certificates of M/s Guru Nanak Solvent and Chemicals (P) Ltd., Patiala was found and seized. However, these share certificates were in the names of different persons without any address. On 16.11.1987, the share certificates had been transferred in the name of the assessee, his family members and associates. On the basis of the statement made by said Rajesh Avasthi that these valuables had been kept by the assessee who is his employer, notice under Section 148 of the Act was issued on 22.3.1999. The Assessing Officer vide assessment order dated 26.3.2001 made an addition of Rs.13,88,000/- under Section 69A of the Act on account of unexplained investment. Feeling aggrieved, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [in short “the CIT(A)”]. The CIT(A) vide order dated 6.10.2003 partly allowed the appeal relating to household expenses and granted a relief of Rs.42,000/-. On further appeal by the assessee, the Tribunal vide order dated 20.6.2005 partly allowed the appeal. The assessee still dissatisfied has approached this Court by way of instant appeal. 3. We have heard learned counsel for the parties and perused the record. ITA No. 72 of 2006 -4- 4. Learned counsel for the assessee submitted that the search and seizure operation was carried out at the premises of Shri Rajesh Avasthi where certain documents were found in his possession. The application of the provisions of Section 132(4A) of the Act is restricted to proceedings under that chapter, no aid could have been taken therefrom at the time of finalising assessment of the assessee. The liability, thus, could not have been fastened on the assessee on that basis. According to the learned counsel, without affording any opportunity to the assessee to cross-examine Shri Rajesh Avasthi, the Assessing Officer, the CIT(A) and the Tribunal had erred in treating the amount as unexplained investment of the assessee under Section 69A of the Act. 5. Controverting the aforesaid submission and supporting the orders passed by authorities below, learned counsel for the revenue urged that the assessee had never sought permission to cross examine Shri Rajesh Avashti and, therefore, no benefit could be derived by him from the said fact. It was also submitted that no addition was made by invoking the provisions of Section 132(4A) of the Act as has been sought to be canvassed by learned counsel for the assessee and, therefore, question No.(iii) as claimed does not arise. 6. After giving our thoughtful consideration to the submissions made by learned counsel for the parties, we do not find any substance in the arguments raised by learned counsel for the assessee. 7. It would be expedient to refer to the findings recorded by the Tribunal while upholding the addition which read thus:- “8. We have given our careful consideration to the rival ITA No. 72 of 2006 -5- contentions. In order to appreciate as to whether the addition made by the Assessing Officer is justified in the case or not, it would be necessary to consider the contention raised on behalf of the assessee. The first and foremost objection raised on behalf of the assessee is that Shri Rajesh Avasthi was not an employee of the assessee and that the assessee was not given an opportunity to cross-examine him in regard to his claim that the shares in the name of the assessee and various family members had been handed over to him by the appellant. It has been argued on behalf of the assessee in so far as it is not disputed that Shri Rajesh Avasthi is the employee of the group concerns and the assessee is Director or Managing Director of some of the concerns. Regarding the objection that cross-examination was not allowed in respect of Shri Rajesh Avasthi, it is observed that the assessee had never asked for the cross-examination of Shri Rajesh Avasthi. Moreover, there is circumstantial evidence to establish the claim of Shri Rajesh Avasthi that the share certificates had been handed over to him by the assessee. It is observed from the facts described elsewhere in this order that the appellant claimed that the shares had been purchased by means of an agreement dated 16.11.1987. If the assessee had not handed over the shares to Shri Rajesh Avasthi, then how did he get the possession of the shares, which belonged to the assessee and his family members and other associates. It is also pertinent to mention that the agreement ITA No. 72 of 2006 -6- dated 16.11.1987, copy of which is on record, is purported to have been executed between Shri Prithipal Singh, Rachpal Singh, Harminder Singh, Satinder Singh and Daljit Singh as vendors and Shri Madho Lal Goyal, Ashok Kumar Goyal and Shri Lalit Goyal described as purchasers. The names of all the shareholders are not mentioned in the agreement. Moreover the agreement stipulates that whereas the share certificates would be transferred in the name of the purchaser immediately on signing of the agreement, the consideration of Rs.40 lacs would be paid within three months. The agreement also indicates that in the event of non-compliance of the terms of the agreement, the vendors would be required to pay penalty of Rs.5 lacs to the purchasers. The Assessing Officer has doubted the authenticity of the agreement. The appellant insisted that the agreement is genuine. We will consider the consequences of treating the agreement dated 16.11.1987 to be a genuine agreement. As already pointed out, as per the said agreement, the purchasers are only three, namely, Madho Lal Goyal appellant's father, Shri Ashok Kumar Goyal, appellant and Shri Lalit Goyal, cousin of the appellant. As per the details available, the investment in shares in the name of Shri Ashok Kumar Goyal that is the appellant is Rs.79,000/-, Shri Madho Lal Goyal, Rs.81,000/- and Shri Lalit Goyal Rs.1,04,000/-. The total consideration in respect of the three persons named in the agreement works out to Rs.2,64,000/-. As per the agreement, the entire lot of ITA No. 72 of 2006 -7- shares was agreed to be purchased by the appellant, his father and his cousin. It, thus, becomes abundantly clear that the other relatives and associates are benamidars and not the real owners of the shares. Thus, there is no merit in the contention advanced on behalf of the assessee that the Assessing Officer was wrong in treating the investment in shares in the names of the relatives and associates as benamidars. We, however, agree with the contention on behalf of the assessee that the shares in the names of Shri Madho Lal Goyal and Shri Lalit Goyal could not be treated as benamidars of the appellant if the agreement dated 16.11.1987 is treated as genuine. 9. In respect of other ostensible shareholders, the treatment given by the Assessing Officer on the basis of statement of Shri Rajesh Avasthi and on the the basis of agreement and other circumstantial evidence have been benamidar of the appellant, is justified. As already pointed out Shri Rajesh Avasthi is in the employment of the group concerns of which the assessee was a prominent member. The assessee never produced Shri Rajesh Avasthi or his statement/affidavit to the contrary so as to rebut the statement made by Shri Rajesh Avasthi. It is not disputed before us that Shri Rajesh Avasthi continues to be in the employment of the assessee group. Therefore, no prejudice has been caused to the assessee by not cross-examining Shri Rajesh Avasthi, particularly, when no such request was ITA No. 72 of 2006 -8- made to the Assessing Officer. The purpose of cross- examination is to rebut the statement which may be against the assessee. Since Shri Rajesh Avasthi was under the control of the assessee group. The cross-examination of Shri Rajesh Avasthi would have been if no consequence in so far as the assessee was in a position to give any evidence to controvert and rebut the claim made by Shri Rajesh Avasthi that the share certificates had been handed over to him by the appellant for safe custody. 10. The investment in the names of Shri Madho Lal Goyal and Shri Lalit Goyal is bound to be excluded on the basis of the agreement as there is neither evidence on record to establish that the said persons who are party to the agreement dated 16.11.1987 are not the real owners of the shares which are in their respective names. Since the investment in the name of Shri Madho Lal Goyal is of Rs.81,000/- and in the name of Shri Lalit Goyal is of Rs.1,04,000/- the addition on account of unexplained investment could be made in their respective hands. The addition of Rs.1,04,000/- plus Rs.81,000/- (Rs.1,85,000/-) relating to these two persons being not warranted, is accordingly, deleted.” 8. The onus was on the assessee to establish his case as pleaded before the Assessing Officer. The Tribunal had concluded that Shri Rajesh Avasthi was an employee of the assessee group. It had further been recorded that the assessee neither produced Shri Rajesh ITA No. 72 of 2006 -9- Avasthi before the Assessing Officer nor made any request to the Assessing Officer to have an opportunity to cross-examine him. It was upon the assessee to have produced Shri Rajesh Avasthi in support of his version as the onus was upon him to prove the genuineness of the agreement dated 16.11.1987 and also to show that the persons named in the share certificates were the real owners of the shares. But in the present case, the assessee had failed to discharge the same. The Tribunal had concluded that the investment in shares in the names of the relatives and associates of the assessee was benami. However, benefit of investment in the name of Shri Madho Lal Goyal amounting to Rs. 81,000/- and in the name of Shri Lalit Goyal of Rs.1,04,000/- was allowed in the case of the assessee on the ground that the addition on account of unexplained investment of Rs. 1,85,000/- (i.e. Rs. 1,04,000/- + Rs. 81,000/- ) could be made in their respective hands. 9.. In view of the aforesaid finding of fact recorded by the Tribunal while affirming the finding of fact recorded by the CIT(A) and the Assessing Officer on this issue, wherein no perversity could be shown by the learned counsel for the appellant-assessee, we do not find any merit in the appeal. 10. Accordingly, the appeal is dismissed. (AJAY KUMAR MITTAL) JUDGE April 6, 2011 (ADARSH KUMAR GOEL) gbs JUDGE