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2007 Supreme(P&H) 1333
PUNJAB & HARYANA HIGH COURT
M.M.Kumar and Ajay K.Mittal JJ.
Commissioner Of Income-tax
Versus
Ravi Kumar
Income tax Reference No. 35 of 1997,
Decided On : JULY 16, 2007
The burden of proof lies on the Revenue to establish the nature of transactions before making any additions based on loose slips.
Headnote:
Income-tax - Assessment - Section 256(2) of the Income-tax Act, 1961 - Sections 69A, 132(5), and 143(3) - The court discussed the provisions of section 69A and its interpretation, highlighting the conditions that need to be fulfilled before the provisions are applied. The court also emphasized the importance of the Revenue proving the nature of transactions before making any additions based on loose slips. The judgment influenced by the interpretation of section 69A and the burden of proof on the Revenue.
Fact of the Case:
A search was carried out at the premises of the assessee, and certain cash and jewelry were found. The Assessing Officer made additions based on calculations appearing on loose slips, which were upheld by the Commissioner of Income-tax (Appeals). The Tribunal, however, allowed the appeal filed by the assessee.
Finding of the Court:
The court held that the provisions of section 69A were not applicable to the facts of the case as the assessee was found in possession of loose slips and not valuable articles. The court also emphasized that it was for the Revenue to prove the nature of the transactions before making any additions based on the loose slips.
Issues: The issues revolved around the applicability of section 69A, the burden of proof on the Revenue, and the correctness of the findings of the Tribunal.
Ratio Decidendi: The court emphasized that the provisions of section 69A require the assessee to be found in possession of valuable articles not recorded in the books of account, and the Revenue must prove the nature of the transactions before making any additions based on loose slips.
Final Decision: The court answered both questions of law against the Revenue and in favor of the assessee, disposing of the reference accordingly.
Ajay Kumar Mittal, J.
1. On a direction issued by this court vide order dated May 17, 1996, under section 256(2) of the Income-tax Act, 1961, (in short "the Act"), the Income-tax Appellate Tribunal, Amritsar Bench, Amritsar (hereinafter referred to as "the Tribunal) has referred the following questions of law for the assessment year 1988-89 :
"1. Whether, on the facts and in the circumstances of the case, the Tribunal is right in deleting the additions of Rs. 1,642, Rs. 36,140, Rs. 99,000 and Rs. 6,23,000 made by the Assessing Officer and upheld by the Commissioner of Income-tax (Appeals), by holding that the assessee had discharged the onus by explaining that slips contain the rough calculations and it was for the Revenue to prove that the same represent the transaction of sale of stock-in-hand ?
2. Whether, on the facts and in the circumstances of the case, the findings of the Tribunal are perverse ?"
2. The facts are that on January 19, 1988, a search was carried out at the premises of M/s. Nanak Jewellers, Patiala, owned by the assessee and during the search, the assessee was found in possession of 1470 grams of gold ornaments and Rs. 50,750 in cash. Five slips/loose papers/chits containing some calculations written in the assessees hand were also seized from him. The assessee surrendered a sum of Rs. 5,00,000 for tax on account of the unexplained cash and jewellery and the return declaring an income of Rs. 4,79,800 was filed by the assessee on March 31,1988, and the Assessing Officer applying the provisions of section 69A of the Act completed the assessment on February 28, 1990, and included the following amounts on account of calculations appearing on the five slips : (Rs.)
"Slip No. (i) 1,642 Slip No. (ii) 36,140 Slip No. (iii) 99,000 Slip No. (iv) 6,23,000"
3. Aggrieved by the order of the Assessing Officer, the assessee filed an appeal before the Commissioner of Income-tax (Appeals) who upheld additions made by the Assessing Officer by observing that the assessee had failed to explain the contents of the documents. The assessee took the matter before the Tribunal by filing second appeal which was allowed.
4. No one has appeared on behalf of the assessee to oppose the reference.
5. We have heard learned counsel for the Revenue.
6. Section 69A of the Act at the relevant assessment year reads thus :
"69A. Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year."
7. A Division Bench of the Calcutta High Court in Kantilal Chandulal and Co. V/s. CIT [1982] 136 TTR 889, while interpreting the provisions of section 69A of the Act had laid down that two conditions need to be fulfilled before the provisions of section 69A are applied. The first condition for applying the provisions of section 69A is that the assessee should be found to be owner of any money, bullion, jewellery or other valuable article and, secondly, the same should not be found recorded in the books of account, if any, maintained by him-
8. In the present case, the assessee was found to be in possession of loose slips and not of any valuable articles or things. Neither the possession nor the ownership of any jewellery mentioned in the slips could prove. In view thereof, the provisions of section 69A of the Act had rightly not been applied by the Tribunal to the facts of the case in hand. Accordingly, question No. 1 is answered against the Revenue and in favour of t
