Judgment:
1. These four appeals by the Revenue and five cross-objections by the assessees relate to different but connected assessees. Since some common issues are involved in all these matters, we are, therefore, proceeding to dispose them of by this consolidated order for the sake of convenience.
2. Following two grounds have been raised by the Revenue in this appeal: 1. On the facts and in the circumstances of the case, the learned CIT(A) has erred in accepting the money-lending business in the status of HUF since 1981 to 29th March, 1995 because the money-lending business is not evident, status of HUF was never disclosed and it is neither supported by evidence found in the course of action under Section 132 nor produced by the assessee in the course of assessment or appellate proceedings.
2. Without prejudice to the first ground, the learned CIT(A) has erred in allowing the opening capital Rs. 47.50 lakhs on 1st April, 1997 of Shri Gopi Lal Mor in the status of HUF The assessee has also raised the solitary effective ground in his cross-objection as under: On the facts and in the circumstances of the case, the learned CIT(A) should have allowed credit of opening capital as on 1st April, 1997 in the hands of Shri Gopi Lal Mor, HUF, at Rs. 51.30 lakhs instead of credit allowed by him to the extent of Rs. 47.50 lakhs only.
3. Briefly stated, the facts of this case are that the search and seizure operations under Section 132 were carried out at the residential and business premises of the assessee and his three sons viz., Shri Sohan Lal Shri Man Mohan and Shri Yashwant and his concern, M/s M.R. Mor & Co., Fatehnagar, on 23rd Oct., 2002. Certain incriminating documents were found. Returns for the block period were furnished on 24th April, 2003 by the assessee and his three sons declaring undisclosed income at nil. Cash of Rs. 71,71,820 was found out of which Rs. 69 lakhs were seized. During the course of block assessment proceedings, the explanation of cash was stated as under: (a) Rs. 2,14,556 was cash in hand as per cash book of Manroop Radhakishan Mor & Co. (petrol pump), Fatehnagar, on 22nd Oct., 2002 at 5 PM. (b) Rs. 80,000 was cash sale at petrol pump during the period from 5 PM, 22nd Oct., 2002 to 8 AM of 23rd Oct., 2002.
(c) Rs. 33,147 were cash as per cash book of M/s Manroop Radhakishan Mor, Fatehnagar.
(d) Rs. 88,255 which were recovered from different ladies and children lying with them as their savings.
(e) Rs. 67,62,877 recovered from the possession of Shri Gopi Lal and his three sons which they have admitted as their undisclosed income of the past which is related with the finance business of the family and belongs to HUF of Shri Gopi Lal, Shri Sohan Lal, Shri Man Mohan Lal and Shri Yashwant Lal. The finance business of the family was never disclosed to the Income-tax Department neither by the forefather nor by Shri Gopi Lal and his sons till the date of search. During the course of search all of them have admitted that the cash lying with the family is undisclosed income of the past, out of which Rs. 47,50,000 were lying with family on 29th March, 1995 and with further addition due to interest earned during the period from 1st April, 1995 to 31st March, 1996 @ 8 per cent per annum the total amount lying with the family comes to Rs. 51,30,000 as on 31st March, 1996, which is although part of undisclosed income admitted but out of block period i.e. before 1st April, 1996. Thus, the balance of Rs. 16,32,877.00 being accretion during the block period is shown in their IT returns filed by all four HUFs separately along with other undisclosed income of the family.
The dispute in these grounds centers around the explanation given by the assessee for cash amounting to Rs. 67,62,877 stated to be belonging to the HUF of the assessee and his three sons. It was stated on behalf of the assessee that cash of Rs. 67,62,877 comprised of opening capital as on 1st April, 1997 at Rs. 51,30,000. Explaining further, it was claimed that during the course of search certain documents were found which divulged that the income belonged to the HUF of the assessee and his three sons. It was further stated that the opening balance of the capital available prior to the block period was divided amongst the four persons. Elaborating further, it was stated that Shri Radha Kishan Mor, father of Shri Gopi Lal Mor and Shri Shiv Prasad expired in 1949 who established business in 1922 in the concern named Manroop Radha Kishan. After his death in 1949, his elder son, Shri Shiv Prasad, became proprietor and continued the business till 1959. In this year the firm's business was converted into partnership and Shri Gopi Lal Mor and Shri Chanchal Kumar also became partners. Family partition took place in 1981 and the business was again converted into proprietorship concern of Shri Gopi Lal Mor. In this 1981 partition, Shri Shiv Prasad took over the business of M.R. More & Sons, Udaipur, and M.R.Automobiles, Chittor, and M.R. Fabrics, Udaipur, and residential bungalow situated at Sarvritu Vilas, Udaipur. Shri Gopi Lal Mor's family got, besides Kirana business, petrol pump and cash worth Rs. 10 lakhs deployed in Sahukari business and also got ancestral residential house and 10 bighas of agricultural land at Fatehnagar. Pursuant to this partition, Shri Gopi Lal Mor and his three sons took complete control and possession of the business activities at Fatehnagar.
Accretion due to interest earned year to year made the original capital of Rs. 10,00,000 to Rs. 47,50,000 till 29th March, 1995 when again there was a partition amongst Shri Gopi Lal Mor and three sons and every party to the partition got Rs. 11,87,500 alongwith other business and non-business assets. It was, therefore, submitted that as per settlement of 1995, the undisclosed investment out of money-lending business of joint family of Shri Gopi Lal Mor was at Rs. 47,50.000.
Interest @ 8 per cent was claimed to have been earned on this amount making this investment at Rs. 51,30,000 as on 31st March, 1996 i.e. the period prior to the block period. On this basis, it was claimed that cash to the tune of Rs. 51.30 lakhs may be kept out of the purview of block assessment. The remaining income on the principal amount to the tune of Rs. 16,82,877 was stated to have been disclosed in the IT returns filed by the respective HUFs of Shri Gopi Lal Mor, Shri Sohan Lal, Shri Man Mohan and Shri Yashwant. In support of the assessee's explanation, reliance was placed on two seized documents in the nature of family partition viz., one dt. 22nd Nov., 1981, disclosing partition between Shri Shiv Prasad and Shri Gopi Lal Mor marked as p. 5 of Annex.
33 and the other dt. 29th March, 1995, disclosing partition between Shri Gopi Lal and his three sons marked as p. 14 of Annex. A 33. The AO has extracted the contents of these documents in Hindi at pp. 14 and 15 of the assessment order. Affidavits in support of the claim were furnished by Shri Gopi Lal Mor and his three sons, which have also been incorporated in the assessment order at p. 20 onwards. On the strength of these submissions, it was claimed that the money-lending business of Shri Gopi Lal Mor was realized first and then cash was divided on 29th March, 1995 amongst the four claimants. The AO did not accept the genuineness of the above referred two documents, being partition deed of 1981 and family settlement of 1995 for the following reasons: (b) As per the assessee's contention the family partition (as per page No. 14) took place on 29th March, 1995 and each of the four members received Rs. 11,87,500 in cash out of the capital employed in their so-called ancestral money-lending business. However, in the same page no mention of distribution of debtors/outstanding lending as on 29th March, 1995 (date of family settlement) is mentioned anywhere, which shows that as on 29th March, 1995, the so claimed ancestral money-lending business of the assessee does not have any loan debtor existing as on 29th March, 1995. This is in contradiction to assessee's own submission made vide his Authorised Representative's letters dt. 22nd April, 2003 (attached with the Rule 1), under para I(e) of which it is clearly mentioned that the so claimed money-lending business was in continuation even after 29th March, 1995. Thus, there is a contradiction even in assessee's own submission because if the so claimed money-lending business was in continuation, it is impossible not to have any loan debtor as on particular day i.e. 29th March, 1995. In money-lending business, it is impossible not to have any outstanding debtor at any point of time. In this business, the continuous process of receipts of repayments of principal amount and interest besides giving fresh loan is always going on, which should have been present in the case of assessee also.
(c) It is often a practice by the big assessee groups to keep such family partition deeds or other paper mentioning therein the availability of cash and/or other assets as on such particular day which is barred by limitation under IT Act. Nevertheless, if the assessee wants the cognizance of such papers to be taken by the Department, the onus is on the assessee to prove the genuineness of such papers vis-a-vis other circumstantial and corroborative evidences. In the instant case: (i) None of the members of the assessee group neither during the search nor during the post-search proceedings ever even referred to their so claimed ancestral money-lending business.
(ii) Not even a single paper/document/diary or any books relating to so claimed money-lending business was found in the possession of the assessee's group members at any of their residential as well as business premises during the course of search.
(iii) The said paper No. 14 though sounds like a family partition deed among the family members of Gopi Lal Mor group, yet all of them were found to be staying in a common premise, and even the assets of one family members were found to be available in the possession of another family members as is evident from the fact of cash of Rs. 49,10,580 found from the possession of Shri Sohan Lal Regarding this cash found from his possession, Shri Sohan Lal had stated that out of this cash, Rs. 20,58,500 pertain to his younger brothers, Shri Man Mohan Lal and Shri Yashwant Lal and a part of this cash also pertains to Shri Gopi Lal Mor, Prop., M/s Manrup Radha Kishan Mor.
Even the FDRs, NSCs, share certificates and UTI units, etc.
belonging to one family members were found in the possession of the bedroom/shop of other family members which clearly establishes the fact that Sh. Gopi Lal Mor, his three sons and their sons and their family members were staying in a joint family without any partition of HUF assets. These facts are contradictory to the assessee's claim of his family partition.
(iv) In an actual family partition, the entire assets as well as liabilities are supposed to be divided among the family members. In the instant case, only a part of the assets available with the assessee group were distributed and strangely, none of the liabilities have been distributed among the family members, which further fortifies the fact that in actual the partition was never happened in the Mor group of family members.
Thus, no cognizance of such papers can be taken in the absence of any corroborating evidence either found during search.
(v) The contradiction is also reflected in the assessee's submission in the sense that under para 1(e) of his letter dt. 22nd April, 2003, the Authorised Representative of the assessee has stated that 'the balance of Rs. 16,32,877 being accretion during block period is shown in the R/1s filed by four HUFs1, whereas these HUFs have returned the entire undisclosed income only for the asst. yr.
2003-04 which is also not correct as per assessee's own contention.
In fact, this income should have been offered in the block period i.e. asst. yrs. 1997-98 to 2002-03 and asst. yr. 2003-04 (1st April, 2002 to 23rd Oct., 2002). It is pertinent to mention here that all the four HUFs have filed their R/1s for the first time for the asst.
yr. 2003-04. It is vital to note here that these returns were filed only after the date of search i.e. 23rd Oct., 2002. It is not out of place to mention here that during the course of search proceedings, the members of Mor family in their preliminary statements had stated that 'no assets of them are lying with anyone or else nor assets of anyone else are lying with them'. It proves that the members of Mor family consider themselves as a single unit and not as a partitioned unit.
(vi) Both the documents do not bear any signature of witness. And the same does not appear to have been executed in the presence of a person of social repute who can vouch safely the execution of the documents as well as the contents.
(vii) In the partition deed dt. 29th March, 1995, there are no preamble/reasons for family settlement and it does not state who asked for family settlement, existences of family dispute or other reasons for arriving at family settlement, (viii) It is pertinent to note that the partition deed dt. 29th March, 1995 does not bear signature of Smt. Shanti Devi so as to make her intention clear as to whether she agrees to the arrangement of giving her partnership share to Mr. Sohan Lal.
(ix) It is also seen that the partition deed dt. 29th March, 1995 is totally silent about properties and assets owned by Shri Gopi Lal Mor in the proprietary firm of M/s Manroop Radha Kishan Mor doing Kirana business viz., capital and fixed assets owned by him in the said firm.
(x) It is also seen that there are no signatures giving assets to partition of assets by daughters of Shri Gopi Lal Mor viz., Smt Laxmi Devi, Smt. Kusum and wife, Smt. Shanti Devi.
(xi) It is also seen that no effect has been given to the partition deed dt. 29th March, 1995 in respect of immovable properties viz., Paitruk Makan and agricultural land, which even today continues to be in the name of Shri Gopi Lal Mor. No mutation entry in the revenue records giving effect to partition deed dt. 29th March, 1995 has been made nor any application for the said purpose has been made to respective Revenue authority.
The AO, therefore, refused to take cognizance of these documents.
Accordingly, no deduction for Rs. 51.30 was allowed by the AO and the resultant addition was made. In the first appeal, the learned CIT(A) accepted the existence of HUFs and also accepted the assessee's contention to the tune of Rs. 47,50,000 and did not allow deduction for Rs. 3,80,000 (Rs. 51.30 lakhs minus Rs. 47,50,000) claimed as interest on the capital of Rs. 47,50,000 upto the period 31st March, 1996. Both the sides are in appeal against their respective stands.
4. We have heard both the sides and perused the relevant material on record. The controversy in these appeals is against the set off of Rs. 51.30 lakhs claimed by the assessee against cash found at the time of search. There is no dispute about the fact that the partition deed of 1981 between Shri Gopi Lal Mor and his brother alongwith family settlement deed of 1995 between Shri Gopi Lal Mor and his three sons were found during the course of search. The AO has not disputed the contents of the original partition deed of 1981 as a result of which Shri Gopi Lal Mor got ancestral property and his HUF came into existence. It is further borne out from the facts noticed during the course of search that the business was done in a joint family notwithstanding the family settlement dt. 29th March, 1995 and further no partition took place. Thus, it becomes clear that the HUF of Shri Gopi Lal Mor continued to be in existence. When this ancestral property devolved upon Shri Gopi Lal Mor on the death of his father, which was continued and later distributed amongst the sons and self, there cannot be any dispute about the existence of HUF. It is only due to this reason that the assessee agreed during the first appellate proceedings that the old undisclosed income could be taxed in the hands of Shri Gopi Lal Mor, HUF. The learned CIT(A), in our considered opinion, was justified in directing the AO that the undisclosed income is required to be taxed in the hands of the HUF and not in the individual status.
Further, the change of status would not make any difference because the rate of taxation in the block assessment remains the same in both the statuses. We, therefore, hold that the direction given by the learned CIT(A) for taxing the undisclosed income in the hands of the HUF status is correct. First ground is, therefore, dismissed.
5. As regards the second ground, being the benefit of opening capital allowed by the learned CIT(A), it is noted that the family settlement deed dt. 29th March, 1995 found during the course of search clearly mentions that a sum of Rs. 47,50,000 is to be divided amongst Shri Gopi Lal Mor and his three sons equally. The AO has observed that this amount of Rs. 47,50,000 might have been spent elsewhere does not carry any weight. Once the availability of cash to the tune of Rs. 47,50,000 is accepted, its utilization is also to be accepted as stated by the assessee unless it is proved that this amount was utilized elsewhere.
The AO cannot be allowed to presume that a particular amount might have been utilized elsewhere without bringing on record any such utilization, moreso, when it is a case of search in which each and every aspect of the assessee is open before the Department. Under these circumstances, the availability of cash to the extent of Rs. 47,50,000, as divided between four persons, as per family settlement deed dt. 29th March, 1995, cannot be denied. Here it is important to mention that the availability of income to this extent has been established beyond any shadow of doubt as the family settlement deed of 1995 clearly mentions that Rs. 47.50 lakhs were equally divided "in cash" amongst the four persons. The position would have been otherwise if the amount recoverable from the debtors had been found, in which case a deduction on account of unexplained creditors would have been warranted to determine the amount of undisclosed income available in the hands of the assessee. In the facts of the instant case it is a net amount of cash in hand, which has been eventually realized from the money-lending business and distributed amongst the four persons. We, therefore, uphold the impugned order to this extent.
6. Now coming to the remaining portion of Rs. 3,80,000 claimed as interest on Rs. 47.50 lakhs for the period beyond the date of agreement till 31st March, 1996, we are not convinced with the learned Authorised Representative's submission which cannot be accepted because there is absolutely no material on record to show that this money was lent by the assessee after 29th March, 1995. Even the learned Authorised Representative could not point out any evidence for bringing home the point that the income of Rs. 3,80,000 was earned in the period after the date of settlement and upto 31st March, 1996, i.e., before the beginning of the block period on 1st April, 1997. Such an assertion, made in the air, does not merit acceptance. We, therefore, hold that the learned CIT(A) was justified in directing to allow credit of Rs. 47.50 lakhs being capital balance as on 1st April, 1997 while making out undisclosed income of the group in the hands of Shri Gopi Lal Mor, HUF.7. In the result, the appeal of the Revenue as well as the cross-objection of the assessee stand dismissed.
8. This appeal by the Revenue and cross-objection by the assessee arise out of the order passed by the learned CIT(A) on 15th Feb., 2006 in relation to the block period comprising of asst. yrs. 1997-98 to 2002-2003 and upto 23rd Oct., 2002.
1. On the facts and in the circumstances of the case, the learned CIT(A) has erred in accepting the money-lending business in the status of HUF since 1981 to 29th March, 1995 because the money-lending business is not evident, status of HUF was never disclosed and it is neither supported by evidence found in the course of action under Section 132 nor produced by the assessee in the course of assessment or appellate proceedings.
2. Without prejudice to the first ground, the learned CIT(A) has erred in allowing the opening capital Rs. 47.50 lakhs on 1st April, 1997 of Shri Gopi Lai Mor in the status of HUF. 3. On the facts and in the circumstances of the case, the learned CIT(A) has erred in allowing the gold ornaments found even in excess of quantity prescribed in the instruction of the CBDT.The assessee has also raised the solitary effective ground in his cross-objection as under: On the facts and in the circumstances of the case, the learned CIT(A) should have allowed credit of opening capital as on 1st April, 1997 in the hands of Shri Gopi Lal Mor, HUF, at Rs. 51.30 lakhs instead of credit allowed by him to the extent of Rs. 47.50 lakhs only.
10. Both the sides are in agreement that the facts and circumstances of the assessee's cross-objection and ground Nos. 1 and 2 of the Revenue's appeal are similar to those of Shri Gopi Lal Mor, discussed above. We are in agreement with these submissions. Following the view taken above, both the grounds of the Revenue's appeal and the only ground of the assessee's cross-objection are dismissed.
11. This leaves us with the last ground of the assessee's (sic-Revenue's) appeal by which an addition on account of gold ornaments has been deleted.
12. Facts of this ground are that total gold ornaments found from this assessee's bedroom and locker No. 18 at 733.930 gms were valued at Rs. 2,94,594. The dispute in this ground is only against the gold ornaments and not silver weighing 780 gms. It was claimed by the assessee during the block assessment proceedings that the gold jewellery found from Smt. Indira Goyal, the assessee's wife, was reasonable and did not warrant any addition. The AO noted that Smt. Indira Goyal had stated in answer to question No. 5 that she owned three sets of gold ornaments, but the weight was not explained. By taking assistance from the statements of Smt. Kusum Goyal and Smt. Santosh Devi who stated to be owning 30 Tolas of gold ornaments, the AO held that the three sets of the assessee's wife also weighed 30 Tolas. He also took into consideration the birth of two children, which took place before the date of search. Benefit of five Tolas of gold ornaments per child was allowed. Thus, total of 40 Tolas [30 gms. + 10 gms (5 x 2)] i.e. 466 gms was held to be explained and addition for the remaining jewellery 267.93 gms (733.93 gms minus 466 gms) was made for Rs. 1,07,455. The learned CIT(A) deleted this addition.
13. We have heard both the sides and perused the relevant material on record. CBDT Instruction dt. 11th May, 1994 provides that no seizure should be made in the search for the jewellery held by the ladies at 500 gms, girls at 250 gms and males at 100 gms each. This instruction came to be considered by several Benches all over India in which it has been held that it would be relevant for the purposes of making addition as well. The Hon'ble Rajasthan High Court in the case of CTT v. Kailash Chand Sharma (2005) 198 CTR (Raj) 201 : (2005) 147 Taxmann 376 (Raj) has upheld this view. When this instruction is applied to the facts of the case, we observe that the possession of gold jewellery of 733.930 gms by the family of four persons cannot be held to be unexplained. We, therefore, approve the action of the first appellate authority on this count.
14. In the result, the appeal of the Revenue as well as the cross-objection of the assessee stand dismissed.
15. This appeal by the Revenue and cross-objection by the assessee arise out of the passed by the learned CIT(A) on 15th Feb., 2006 in relation to the block period comprising of asst. yrs. 1997-98 to 2002-2003 and upto 23rd Oct., 2002.
1. On the facts and in the circumstances of the case, the learned CIT(A) has erred in accepting the money-lending business in the status of HUF since 1981 to 29th March, 1995 because the money-lending business is not evident, status of HUF was never disclosed and it is neither supported by evidence found in the course of action under Section 132 nor produced by the assessee in the course of assessment or appellate proceedings.
2. Without prejudice to the first ground, the learned CIT(A) has erred in allowing the opening capital Rs. 47.50 lakhs on 1st April, 1997 of Shri Gopi Lai Mor in the status of HUF. 3. On the facts and in the circumstances of the case, the learned CIT(A) has erred in allowing the gold ornaments found even in excess of quantity prescribed in the instruction of the CBDT.The assessee has also raised the solitary effective ground in his cross-objection as under: On the facts and in the circumstances of the case, the learned CIT(A) should have allowed credit of opening capital as on 1st April, 1997 in the hands of Shri Gopi Lal Mor, HUF, at Rs. 51.30 lakhs instead of credit allowed by him to the extent of Rs. 47.50 lakhs only.
17. In the case of this assessee the total gold jewellery found was weighing 551.970 gms relating to family consisting of four, i.e. self, wife and two children. The learned CIT(A) deleted this addition. Both the sides are in agreement that the facts and circumstances of the assessee's cross-objection and all the grounds of the Revenue's appeal are similar to those of Shri Yashwant Goyal discussed above. We are in agreement with these submissions. Following the view taken above, all the grounds of the Revenue's appeal and the only ground of the assessee's cross-objection are dismissed.
18. In the result, the appeal of the Revenue as well as the cross-objection of the assessee stand dismissed.
19. This appeal by the Revenue and cross-objection by the assessee arise out of order the passed by the learned CIT(A) on 15th Feb., 2006 in relation to the block period comprising of asst. yrs. 1997-98 to 2002-03 and upto 23rd Oct., 2002.
1. On the facts and in the circumstances of the case, the learned CIT(A) has erred in accepting the money-lending business in the status of HUF since 1981 to 29th March, 1995 because the money-lending business is not evident, status of HUF was never disclosed and it is neither supported by evidence found in the course of action under Section 132 nor produced by the assessee in the course of assessment or appellate proceedings.
2. Without prejudice to the first ground, the learned CIT(A) has erred in allowing the opening capital Rs. 47.50 lakhs on 1st April, 1997 of Shri Gopi Lai Mor in the status of HUF 3. On the facts and in the circumstances of the case, the learned CIT(A) has erred in allowing the gold ornaments found even in excess of quantity prescribed in the instruction of the CBDT.The assessee has also raised the solitary effective ground in his cross-objection as under: On the facts and in the circumstances of the case, the learned CIT(A) should have allowed credit of opening capital as on 1st April, 1997 in the hands of Shri Gopi Lal Mor, HUF, at Rs. 51.30 lakhs instead of credit allowed by him to the extent of Rs. 47.50 lakhs only.
21. In the case of this assessee, the total gold jewellery found was weighing 725.330 gms relating to family consisting of four, i.e. self, wife and two children. The learned CIT(A) deleted this addition. Both the sides are in agreement that the facts and circumstances of the assessee1 s cross-objection and all the grounds of the Revenue's appeal are similar to those of Shri Yashwant Goyal discussed above. We are in agreement with these submissions. Following the view taken above, all the grounds of the Revenue's appeal and the only ground of the assessee's cross-objection are dismissed.
22. In the result, both the appeal of the Revenue as well as the cross-objection of the assessee stand dismissed.
23. The assessee has raised the solitary effective ground in its cross-objection as under: On the facts and in the circumstances of the case, the learned CIT(A) should have allowed credit of opening capital as on 1st April, 1997 in the hands of Shri Gopi Lal Mor, HUF, at Rs. 51.30 lakhs instead of credit allowed by him to the extent of Rs. 47.50 lakhs only.
24. Both the sides are in agreement that the facts and circumstances of the assessee's cross-objection are similar to those of Shri Yashwant Goyal discussed above. We are in agreement with these submissions.
Following the view taken above, the only ground of the assessee's cross-objection is dismissed.