| SooperKanoon Citation | sooperkanoon.com/71679 |
| Court | Income Tax Appellate Tribunal ITAT Chandigarh |
| Decided On | Aug-02-2001 |
| Reported in | (2004)90TTJ(Chd.)946 |
| Appellant | Anil Aggarwal |
| Respondent | Dy. Cit |
Briefly, the facts are that the assessee Sh. Anil Aggarwal is one of the directors of M/s. Modesto Polymers (P) Ltd. and he is also having share income from Gulmarg Hotel. Sh. Anil Aggarwal is also a member of the HUF, M/s. Inder Sain Aggarwal & Sons, whose Karta is Sh. Mool Krishan, father of Sh. Anil Aggarwal. For asst. yrs. 1987-88 to 1990-91, originally assessments were framed in the case of the assessee as detailed below : There was a search and seizure operation by the IT Department on 19-10-1994, at the Chandigarh residence of Sh. Anil Aggarwal at House No. 81, Sector 28A. The business premises of M/s. Modesto Polymers (P) Ltd. and other group cases of Gulmarg Hotel were also searched on the same day. During search, a small ledger, namely, mentioned as Annex. A- 13 to the Panchnama, was seized from the premises 81/28A, 1/3rd of which belongs to Sh. Anil Aggarwal and in the remaining 2/3rd, S/Sh.
Rajiv Agghrwal and Vikas Aggarwal, cousins of the assessee, were also residing. This house was also used by Sh. Mool Krishan as his residence as and when he used to come to Chandigarh and the gas connection.
installed in this house was also in the name of Sh. Mool Krishan as well as the telephone installed was in the name of Sh. Mool Krishan, father of Sh. Anil Aggarwal. In the seized ledger, there were several transactions relating to receipt and payment in the names of Sh. Anil Aggarwal and one Sh. Bhupinder Kumar. Total receipts on different dates in the ledger were to the extent of Rs. 41,64,644 and total payments were to the extent of Rs. 66,80,426. After search, Sh. Mool Krishan, Karta of Inder Sain Aggarwal & Sons made a declaration under VDIS vide his letter dated 26-12-1997, addressed to learned Commissioner, which reads as under: Sub : Declaration under section 65(1) of the Finance Act, 1997, in r/o M/s. Inder Sain Aggarwal & Sons, HUF, c/o New Gulmarg Hotel, Shimla.
Enclosed please find a duly filled in declaration being made under VDIS-1997 by our HUF, an assessee in the office of Asstt. CIT, Shimla, at PAN 28-062-HQ0940.
It may not be out of place to mention that on 19-10-1994, a search under section 132 of the Act took place at H. No. 81/28A, Chd., where Sh. Anil Aggarwal, member of the family, resides. From there, one Neelgagan ledger containing 95 pages pertaining to the HUF was also noticed and seized. HUF in the past had run some unaccounted businesses and also had unaccounted dealings and hence this declaration under VDIS 1997.
On working out total of entries in the said ledger, the same total (comes) at about Rs. 68 lakhs and, hence, present declaration is being made at Rs. 70 lakhs to cover any inadvertent omission in working out the same.
It is made clear here that though the said ledger was noticed and found at the residence of Sh. Anil Aggarwal, a member of the family, the fact remains that the same belongs to HUF, the declarant, and not to him and that our HUF has never been the subject-matter of any search under section 132.
It is accordingly prayed that necessary certificate under section 68(2) of VDIS-1997 may kindly be issued favouring the petitioner-HUF After receipt of the letter in his office, learned Commissioner gave a certificate dated 19-1-1998, under section 68(2) of VDIS 1997, wherein cash disclosure of Rs. 70 lakhs in the hands of HUF Inder Sain Aggarwal & Sons, which was being assessed under PAN 28-062-HQ-0940 was accepted, as the assessee had paid taxes due amounting to Rs. 21 lakhs.
In the meanwhile, it appears that the assessing officer has issued notices under section 148 on 25-3-1997, in the case of Sh. Anil Aggarwal and in response, returns were filed on 7-10-1997, 'under protest' declaring the incomes as originally assessed. Thereafter, the assessing officer issued detailed questionnaire vide No. 6631, dt.
3-3-1998, requiring the assessee to explain entries in the seized small ledger vide Annex. A-13, Panchanama, dt. 19-10-1994. The assessee filed a detailed reply dt. 16-3-1998, and pleaded that the seized ledger recovered during search under section 132 on 19-10-1994, from H. No.81/28A belongs to the HUF of Inder Sain Aggarwal & Sons, of which the assessee is a member but the Karta is Sh. Mool Krishan Aggarwal, the assessee's father, and the said HUF has already made a disclosure of Rs. 70 lakhs under the VDIS-1997, which has been duly accepted by learned Commissioner vide certificate dated 19-1-1998. However, the assessee submitted to the assessing officer that the information called for from the assessee has been forwarded to the HUF, Inder Sain Aggarwal & Sons, for further necessary action and a prayer was made that the proceedings initiated against the assessee under section 148 should be dropped as the entire payments mentioned in the seized ledger have been surrendered by the HUF, Inder Sain Aggarwal & Sons, to whom that ledger belongs and that the declaration made by the said HUF has been accepted by learned Commissioner. Accordingly, the assessing officer vide his order dated 1-5-1998, held that no further addition is required to be made in the hands of the assessee for all the four assessment years for which the proceedings were initiated and the income originally assessed remains the same, as per order passed by the assessing officer dated 1-5-1998.
Subsequently, it appears that learned Commissioner called for record of the assessee and issued a show-cause notice dated 26-2-2001, to the assessee stating that the order passed by the assessing officer under section 147/143(3) for the four assessment years under consideration, i.e., 1987-88 to 1990-91, on 1-5-1998, was erroneous insofar as it was prejudicial to the interests of the revenue as the assessing officer has failed to charge tax on undisclosed income of Rs. 66,80,426 in the assessment years on the basis of seized ledger as per Annex. A- 13 of the Panchnama found from H. No. 81/28A, Chandigarh. According to learned Commissioner, the amount of Rs. 66,80,426 appearing in the said ledger was required to be assessed in the hands of the assessee as the name was found from the house in which the assessee had 1/3rd share as per will of late Sh. Inder Sain and also the fact that HUF of Inder Sain Aggarwal & Sons who had made declaration in respect of entries in seized ledger did not have the resources for making such unheavy investment. Learned Commissioner accordingly asked the assessee to show cause why action under section 263 may not be taken in respect of the order passed by the AO on 1-5-1998, for four assessment years under consideration. The assessee filed a detailed reply dt. 10-3-2001, wherein he explained the circumstances and pleaded that seized ledger actually belongs to the HUF of Inder Sain Aggarwal & Sons, whose Karta was Sh. Mool Krishan, who though normally resided at Shimla, used to stay at 81/28A during his visits to Chandigarh and the entries in the ledger/diary related to the undisclosed transactions of Inder Sain Aggarwal & Sons. It was pleaded that learned Commissioner has accepted the declaration and has issued a certificate under section 68(2) of VDIS 1997 dated 19-1-1998, since there was no search warrants in the case of Inder Sain Aggarwal & Sons, HUF, and the declaration covered all the entries in the seized ledger. The assessee pleaded that presumption under section 132(4) was available with the departmental authorities for the purpose of seizure of assets, whereas during the course of regular assessment proceedings the assessee was free to lead evidence to show that the documents seized did not belong to him, in view of the decision in the case of Pushkar Narain Sarraf v. CIT (1990) 183 ITR 388 (All). Learned Commissioner, however, did not find the explanation given by the assessee as satisfactory and he passed an order under section 263 on 23-3-2001, holding that the order passed by the assessing officer on 1-5-1998, under section 143(3)/147 for asst.
yrs. 1987-88 to 1990-91 in the case of the assessee was erroneous and prejudicial to the interests of the revenue as the same was not in accordance with the material available on record, the appraisal report prepared in the investigating wing of the department who carried out search and seized the documents. He accordingly set aside the order of the assessing officer and directed him to take appropriate action as per law, after giving due opportunity to the assessee.
The assessee is aggrieved and has filed appeal before the Tribunal taking the following specific grounds : "1. That the order under section 263 passed by Commissioner is against law and facts on file inasmuch as assessment order dated 1-5-1998, was neither erroneous nor prejudicial to interests of revenue and viewing the issue in the total circumstances, no action under section 263 stood attracted.
2. That enclosure to declaration under VDIS 1997 filed under section 65(1) of the Finance Act, 1997, having fully explained that a ledger (Annex. A-13) noticed and seized from H. No. 81/28A, Chandigarh (residence of Sh. Anil Aggarwal appellant), on 19-10-1994, during search under section 132 pertained to HUF, Inder Sain Aggarwal & Sons, of which Anil Aggarwal was a member and that transactions recorded in the ledger pertained to the HUF and not to the appellant and that declaration made under VDIS 1997 having been accepted, impugned order is virtually a revision of acceptance of declaration under VDIS 1997 which the law did not allow and that in any case assessment made in terms of order dated 1-5-1998, being in pursuance of such acceptance was not an erroneous order and thus provisions under section 263 were not attracted.
3. That show-cause notice dated 26-2-2001, termed order dated 1-5-1998, as erroneous and prejudicial to the interests of the Revenue because- (i) the HUF who made declaration in respect of entries in seized ledger did not have the source of any heavy investment; (ii) the subject ledger (Annex. A-13) having been found during search on 19-10-1994, at H. No. 81/28A, wherein appellant resided, the same pertained to the appellant and that reply dated 10-3-2001, fully explained the position in that regard.
4. That there was no mention of any appraisal report now relied upon for drawing the inference.
In any case, no action under section 263 was attracted and that order dated 23-3-2001, passed under section 263 thus deserves to be cancelled. " Learned authorized representative pleaded that the order passed by learned Commissioner under section 263 is against law and facts available on record because the assessment order dt. 1-5-1998, passed by the assessing officer under section 147/143(3) was neither erroneous nor prejudicial to the interests of the revenue and as such the provisions of section 263 were not at all attracted in this case. It was pleaded that Sh. Anil Aggarwal upto the year 1985 was residing in Shimla and was having share income from the family firm, Gulmarg Hotel, besides some rental and interest income. He shifted to Chandigarh in the year 1986, after completing his studies from Himachal Pradesh University and started residing in 81/28A, which house was willed in favour of him and his two cousins-S/Sh. Rajiv Aggarwal and Vikas Aggarwal-1/3rd each by their grand father, Sh. Inder Sain Aggarwal. Sh.
Anil Aggarwal started his first business venture independently as a director of the company, Modesto Polymers (P) Ltd., in the year 1987.
It was submitted that consequent upon search under section 132 on 19-10-1994, at the assessee's residence at 81/28A, one small ledger, Annex. A 13, was noticed and seized from the house wherein the assessee along with his two cousins was residing and thereafter proceedings under section 148 for asst. yrs. 1987-88 to 1990-91 were reopened in the case of the assessee, as entries in the said ledger pertained to the period relevant to asst. yrs. 1987-88 to 1990-91. It was submitted that 81/28A was jointly used as a winter resort by the members of the joint family styled as Inder Sain Aggarwal & Sons, whose most of the members reside at Shimla. Sh. Mool Krishan, Karta of the HUF, used to stay in this house during his visits to Chandigarh. It was submitted that the seized ledger did not pertain to the assessee, Sh. Anil Aggarwal but to the HUF styled as Inder Sain Aggarwal & Sons, of which Sh. Mool Krishan was Karta, although accounts in the said ledger were recorded in the name of Sh. Anil Aggarwal, who was member of the HUF.It was submitted that the assessee had nothing to do with the ledger or with any business transaction recorded therein. It was submitted that while proceedings initiated under section 148 in the case of the assessee were in progress, the HUF, Inder Sain Aggarwal & Sons, made a declaration of Rs. 70 lakh to cover all the entries recorded in the ledger after paying taxes amounting to Rs. 21 lakhs and the said declaration was accepted by learned Commissioner, who issued a certificate under section 68(2), dated 19-1-1998, in token of having accepted the said declaration. It was submitted that along with the declaration form, the assessee has given complete factual backdrop relating to seizure of ledger from 81/28A, wherein one of the members of the HUF, namely, Sh. Anil Aggarwal, resided. All these facts were duly taken note of by the assessing officer, who passed an order under section 143(3)/147 on 1-5-1998. It was submitted that before passing the order, the assessing officer confronted the assessee with the presumption under section 132(4A) with respect to the ownership of the ledger, the same having been found and seized from the residence of the assessee being 81/28A and the assessee also explained during the course of the assessment proceedings that the real owner of the ledger, Inder Sain Aggarwal & Sons, had owned it and that any presumption earlier raised which was only a rebutable presumption automatically vanished.
It was submitted that having been satisfied with the explanation given by the assessee and also the fact that learned CIT has accepted the declaration made by HUF, Inder Sain Aggarwal & Sons, vide his order dt.
19-1-1998, presuant to which a certificate under section 68(2) of VDIS was issued after ascertaining the factual position, the assessing officer passed the order on 1-5-1998, holding that no further addition is required to be made to the income already assessed in the case of the assessee for the four assessment years under consideration. Thus, it was pleaded that the assessing officer framed reassessment taking into consideration the entirety of facts, made enquiries and applied his mind fully before taking a decision that no part of any entries in the seized ledger, Annex. A-13, pertained to the assessee. Accordingly, it was submitted that the order passed by the assessing officer cannot be considered as erroneous and as such there was no necessity of learned Commissioner taking recourse to action under section 263.
It was pleaded, that in the show-cause notice dt. 26-2-2001, learned Commissioner termed the order dated 1-5-1998, as erroneous and prejudicial to the interests of the revenue because : (i) the HUF who had made declaration in respect of entries in the seized ledger did not have the resources of such heavy investment-, and (ii) the subject ledger having been found during search on 19-10-1994, at 81/28A, wherein the assessee resided, the same pertained to the assessee.
It was submitted that there was no mention of any appraisal report by the investigation wing of the department which was subsequently relied upon by learned Commissioner while passing the impugned order under section 263. Learned authorized representative pleaded that the HUF of Inder Sain Aggarwal & Sons has been in existence since long and it has been enjoying income from rent, interest and running of taxis as disclosed to the department in the returns filed. It also did some unaccounted business as recorded in the seized ledger and it is how it owned it, and made a declaration. It was submitted that the assessee-HUF has been a wealth-tax assessee during the years under consideration 1986-87 to 1989-90 relevant to asst. yrs. 1987-88 to 1990-91. It was submitted that the credit balance in the account of the HUF as on 31-3-1986, in the books of Sant Lal Inder Sain was Rs. 1,03,520, in addition to immovable property and investments on video cassettes and such balance as on 31-3-1987, in the books of Sant Lal Inder Sain was Rs. 1,40,952. On the other hand, credit balance in the account of Sh. Anil Aggarwal as on 31-3-1990, in the firm, Gulmarg Hotel, was only Rs. 13,050 and credit with Sant Lal Inder Sain Rs. 41,535. The wealth of Sh. Anil Aggarwal was below taxable limit upto 31-3-1989, and he filed wealth-tax return for the first time for asst.
yr. 1990-91. Accordingly, it was submitted that taking into consideration the totality of facts and circumstances of the case, it would be more reasonable to presume that the entries in the seized ledger though in the name of the Sh. Anil Aggarwal actually belonged to the HUF of Inder Sain Aggarwal & Sons, who owned it and sought to cover the same by making a declaration under VDIS 1997, which declaration was duly accepted by learned Commissioner. Accordingly, it was submitted that since the order passed by the assessing officer on 1-5-1998, was in accordance with the order of learned Commissioner accepting the declaration made by HUF, Inder Sain Aggarwal & Sons, under section 68(2) dated 19-1-1998, the same was neither erroneous nor prejudicial to the interests of the revenue and as such learned Commissioner was in error in cancelling the same, Reliance was made on the following cases : (ii) Silver Cloud Estates (P) Ltd. v. State of Tamil Nadu (1996) 219 ITR 244 (Mad); (iv) GEC Alsthom (India) Ltd v. Dy. CIT (2000) 112 Taman 241 (Cal)(Mag); and Learned Departmental Representative strongly supported the order of learned CIT and pleaded that since the transactions recorded in the seized ledger were in the name of Sh. Anil Aggarwal, the assessee, and also one Sh. Bhupinder Singh, who was an employee of the company, Modesto Polymers (P) Ltd., whose director was Sh. Anil Aggarwal, there was presumption under section 132(4A) that the ledger and the entries recorded therein belong to Sh. Anil Aggarwal because the assessee could neither identify Sh. Bhupender Singh nor produced him, as Sh. Bhupinder Singh was a fictitious name. It was submitted that merely because HUF, Inder Sain Aggarwal & Song has made the declaration, owning up the entries in the seized ledger will not debar the Departmental authorities to tax the income/investment recorded in the seized ledger in the hands of the assessee which the assessing officer failed to do and as such learned Commissioner was perfectly justified in cancelling the order passed by the assessing officer on 1-5-1998, and his action deserves to be upheld.We have considered the rival submissions and have also gone through the orders passed by the assessing officer as well as learned Commissioner.
The factual backdrop relating to cancellation of order passed by the assessing officer under section 147/143(3) for four asst. yrs. 1987-88 to 1990-91 is not in dispute and has been discussed in detail above.
Learned Commissioner considered the order passed by the assessing officer as erroneous and prejudicial to the interests of the revenue and gave reasoning for doing so in the show-cause notice under section 263, as under : (i) The HUF who owned entries in the seized ledger and made the declaration under VDIS did not have the resources of such heavy investment; and (ii) The said ledger having been found during search on 19-10-1994, at 81/28A, where the assessee resided, the same pertained to the assessee by virtue of presumption under section 132(4A).
However, while passing the impugned order under section 263, learned Commissioner has also referred to the fact that he has perused the assessment record of the assessee as well as the appraisal report of the search conducted in Chandigarh house of the assessee wherein the said ledger was found, although the said appraisal report was not confronted to the assessee either by the assessing officer or by learned Commissioner during proceedings under section 263. The order passed by learned Commissioner heavily relied on the appraisal report running into 96 pages, which was not confronted to the assessee at all and as such the order passed by learned Commissioner stood vitiated for violation of principles of natural justice, and also in view of the decision in the case of GEC Alsthoin India Ltd. (supra) as well as the decision in the case of Gestetner (India) Ltd. (supra). In the aforesaid decisions, it was held that the order, passed by learned Commissioner was against the principles of natural justice as the same was passed on a different ground than the one disclosed in notices issued under section 263. In the aforesaid decisions, reliance was placed on the decisions in the cases of CIT v. General Trade Agencies (1973) Tax LR 1383 (Cal) and CIT v. Panna Debi Saraogi (1970) 78 ITR 728 (Cal). Hon'ble Andhra Pradesh High Court in the case of G.K. Kabra (supra) held that learned Commissioner must give an opportunity of being heard to the assessee on the points on the basis of which he considers the order passed by the assessing officer to be erroneous and prejudicial to the interests of the revenue. It was also held that it is necessary for the Commissioner to point out the exact error in the order which he proposed to revise, so that the assessee would have an adequate opportunity of meeting that error before the final order is made and affording any further opportunity after setting aside the order of the assessing officer would not amount to an opportunity of meeting the alleged error in the assessment proposed to be revised.
Applying the ratio of the aforesaid decision to the facts of the present case, we are of the opinion that since the assessee was not allowed to meet the objections raised in the appraisal report by the investigation wing either at the assessment stage or in the show-cause notice issued by learned Commissioner under section 263, reliance of learned Commissioner on appraisal report of the investigation wing in the order passed under section 263 was not at all justified in law.
Even otherwise, the entries in the ledger having been owned by the HUF, Inder Sain Aggarwal & Sons, who made the declaration under VDIS which declaration was accompanied by a detailed covering letter giving factual backdrop and the circumstances under which the declaration was being made to learned Commissioner who accepted the said declaration after going through the covering letter, and issued a certificate under section 68(2) on 19-1-1998, the very same Commissioner could not have cancelled the order passed by the assessing officer under section 147/143(3) for these years, which order was in accordance with the facturm of declaration in the case of the HUF having been accepted by learned Commissioner himself. Since the order passed by the AO on 1-5-1998, under section 147/143(3) relating to all the four assessment years was in accordance with the order of the learned Commissioner passed under section 68(2) of VDIS 1997 dated 19-1-1998, the same cannot be considered as erroneous or prejudicial to the interests of the revenue as the assessing officer framing reassessment on 1-5-1998, could not have ignored the impact of the acceptance of the declaration, the factual backdrop having been explained in the covering letter attached with the declaration and the certificate issued by learned Commissioner himself. Therefore, taking into consideration the totality of facts and circumstances of the case, we are of the opinion that learned Commissioner was not justified in passing the impugned order under section 263, which is hereby cancelled.