ABDUL RAZACK, J.M. : -
(1.) THE surrounding facts, in brief in this assessees appeal for the asst. yr. 1985-86, are as follows : THE assessee filed his return of income on 30th March, 1988 declaring an income of Rs. 21,520 and the assessment was completed on 8th Aug., 1988 on the basis of the said return. THEreafter, the assessee filed another return on 13th Dec., 1988 (or 31st Dec., 1988 is not clear) declaring income at Rs. 19,130 which was less by Rs. 2,390 as compared to the original return filed on 30th March, 1988. THE Assessing Officer (AO) on the basis of the recovery of the sale deed dt. 22nd March, 1985 of agricultural land for Rs. 31,320 in search operation on the assessee in July, 1988, issued notice under S. 148 on 10th March, 1989. THE assessee did not file any return in compliance to the notice under S. 148 but was contending that the return filed on 13th Dec., 1988 was non set in law and demanded refund on the basis of the other return. THE assessee even filed petition under S. 154 of the Act which we were informed that it was not disposed of by the ITO. THE assessment was completed on a total income of Rs. 13,81,130 which included a sum of Rs. 12,50,000 as unexplained investment in agricultural land, Rs. 1,00,000 estimated expenses in connection with the purchase of the agricultural land and Rs. 12,000 as income from undisclosed sources. Before making the assessment, the AO recorded oath statement of the assessee on 22nd March, 1989 and the replies given were very unsatisfactory and evasive so much so that the assessee did not even know the exact expenditure of the agricultural land purchased. He pleaded ignorance on many aspects relating to the purchase of agricultural land and answered that his brother Shri Devilal G. Shah could throw more light in this regard. It was contended before the AO that the purchase price of the agricultural land was made from out of withdrawal from the partnership firm of M/s. Vimla Prints in which the assessee was a partner and account copy of the assessee in the said firm was also filed during the course of assessment proceedings. According to the AO, the assessee was benamidar of his brother Shri Devilal G. Shah, who, in fact was the real owner. This is stated in the assessment order passed on 28th March, 1990 in the case of the assessee for the asst. yr. 1987-88, which is at pages 72 to 74 of the assessees paper-book and also in the assessment order dt. 29th March, 1990 for the year under appeal. THE AO made an addition of Rs. 12,50,000 to the returned income on the ground that the assessee derived an average income of Rs. 1,00,000 in the three immediately succeeding year from those agricultural lands and when the yield/income is so high, then surely the investment will be also high and not Rs. 31,320 as was recorded in the sale deed dt. 22nd March, 1985. THE AO therefore, took 8% annual yield and worked out an assumed investment of Rs. 12,50,000 by the assessee in the said agricultural land. While this addition was made, the AO further added another sum of Rs. 1,00,000 towards probable estimated expenditure for purchase of stamp-papers, registration charges etc.; whereas according to the assessee, he spent only Rs. 3,395. A sum of Rs. 12,000 was further added towards household expenses. All these additions were challenged in first appeal and the CIT(A) agreed with the AO for unexplained investment in agricultural land, but directed the AO to reduce the addition by Rs. 31,320 being amount spent from explained sources. Regarding the addition of Rs. 1,00,000, the CIT(A) sustained the addition to the extent of Rs. 75,000. Another addition of Rs. 12,000 was sustained by the CIT(A) in connection with household expenses. In the second appeal the assessee challenged; (a) Validity of the re assessment made on 29th March, 1990. (b) Sustenance of the addition to the extent of Rs. 12,28,680 as unexplained investment in agricultural land. (c) Sustenance of the addition of Rs. 75,000 towards expenditure incurred in connection with the purchase of the agricultural land. (d) Upholding of the addition of Rs. 12,000 towards household expenses. After some discussion with the assessees authorised representative at the time of hearing of this appeal on the validity of reopening of assessment and recording of the reasons by the AO the assessees authorised representative withdrew ground No. 1 relating to reopening of assessment. No decision is, therefore, being given in this regard.
(2.) Regarding the addition of Rs. 12,28,680 sustained by the CIT(A), the assessees authorised representative submitted that the AO made the addition on mere suspicion that the assessee paid more money than recorded in the sale deed dt. 22nd March, 1985 and not on the basis of any cogent and reliable evidence. He took us through the contents of the assessment order to support this submission. According to the assessees counsel, therefore, the addition of Rs. 12,50,000 as unexplained investment has been made merely on suspicion, conjectures and surmises and the CIT(A) should have deleted the entire addition and not a fraction of the addition. It was also highlighted by the assessees counsel that according to the AO, the assessee was a benamidar and the real owner in respect of agricultural land was his brother Shri Devilal G. Shah and that being the case, no addition was warranted in the assessees hands towards unexplained investment. To support this argument, our attention was invited to the finding/observation of the AO in the assessment order for the year under appeal which was passed on 29th March, 1990 and the assessment order of the assessee for the asst. yr. 1987-88 which was passed on 28th March, 1990 which is found at pages 72/73 of the assessees paper book. The authorised representative of the assessee further submitted that the AO assessed unexplained investment on the basis of yield from those agricultural lands in terms of three succeeding years at Rs. 1,00,000 whereas in fact the average income from those agricultural lands was only to the extent of Rs. 64,876 in the three immediately succeeding years and this was brought to the notice of the CIT(A) in the written submissions filed before him which can be seen from pages 10 to 13 of the assessees paper-book. Since the addition was made on assumed investment on yield basis and not on the basis of any cogent and credible evidence, the entire addition deserves to be deleted and should have been deleted by the CIT(A), submitted the assessees counsel in the end. Regarding the sum of Rs. 75,000 sustained by the CIT(A) towards probable estimated expenditure in acquiring the agricultural land, the assessees authorised representative submitted that this addition has also been made on suspicion and guess work and the AO had no material or basis before him for making such an addition. The CIT(A) has failed to appreciate this submission and has unnecessarily confirmed the addition to the extent of Rs. 75,000; whereas the entire addition requires deletion. Regarding the addition of Rs. 12,000 towards household expenses, the assessees counsel submitted that the assessee stays with his elder brother and, therefore, there is no withdrawal towards household expenses and this fact was wholly ignored by both the lower authorities. He, therefore, urged that the addition of Rs. 12,000 towards household expenses should be deleted by us. The assessees counsel relied on the decision of the Supreme Court in the case of K.P. Varghese vs. ITO (1981) 131 ITR 597 (SC) and a decision of Ahmedabad Bench of this Tribunal in the case of Gautam Laljibhai Gajjar vs. ITO (1991) 41 TTJ (Ahd) 542 : (1991) 37 ITD 514 (Ahd) at page 517.
The learned Departmental Representative countered the arguments made by the assessees counsel and submitted that the CIT(A) has considered the entire facts and circumstances of the case and the reasons given by the AO and he has been fair and reasonable in directing the AO to reduce the addition in agricultural land by a sum of Rs. 31,320. Regarding the other additions of Rs. 75,000 and Rs. 12,000, the Departmental Representative relied on the order of the CIT(A). According to the Departmental Representative, the appeal is wholly misconceived and the assessee is not entitled to any further relief from this Tribunal. The Departmental Representative relied on the decision of Ahmedabad Bench of this Tribunal since reported in 27 ITD 397 (sic).
(3.) WE have given due consideration to the submissions of both the representatives and perused the orders of both the lower authorities as well as the documents found in the assessees paper-book relevant for the purpose of disposal of this appeal. In our view, for the reasons which we give below, the assessees appeal has to be allowed in part. The AO has not mentioned whether he invoked the provisions of S. 69 or S. 69B and made the addition to the extent of Rs. 12,50,000. However, we think that the AO invoked the provisions of S. 69B and not S. 69 of the Act, because the provisions of S. 69 can get attracted where the investment is not recorded in the books of account of the assessee and there is no explainable source. In the instant case, the sum of Rs. 31,320 being purchase price was made out of the withdrawal from the firm of M/s. Vimla Prints in which the assessee is a partner and the account copy of which was filed before the AO and a copy is also enclosed in the paper-book filed by the assessees counsel. Therefore, the addition was perhaps made under S. 69B of the Act. Now when we examine the provisions of S. 69B, three conditions are required to be satisfied/attracted for making the addition. They are : (i) If it is found that the assessee has made investment or the assessee is found to be the owner of any bullion, jewellery or other valuable article, and (ii) It is found that the amount expended on making such investments or in acquiring such bullion, jewellery or other valuable article exceeds the amount recorded in that behalf in the books of account maintained by the assessee, and (iii) Either the assessee offers no explanation about such extra amount or the explanation offered by him is not satisfactory. Thus, is clear that the above circumstances are cumulative. If all these circumstances exist, the excess amount may be deemed to be the income of the assessee for the financial year in which the said investment was made or the assessee became the owner of the bullion, etc. From the facts of the case and evidence on record, we do not find existence of any such circumstances and, therefore, addition as made by the AO and confirmed by the CIT(A) though in part is not warranted. It is a trite law by now that apparent is real until proved by cogent evidence to be otherwise. The apparent consideration of Rs. 31,320 has to be accepted in the absence of any cogent positive evidence gathered by the AO to empower him to come to the conclusion that the assessee has paid more than what is recorded in the sale deed dt. 22nd March, 1985. There is no such finding given by the AO based on credible evidence. The AO has merely assumed on the basis of yield from agricultural land in the three immediately succeeding years that the assessee might have paid more than what is recorded in the sale deed. The AO took 8% of the annual yield at Rs. 1,00,000 and capitalised the same and worked out the unexplained investment to the extent of Rs. 12,50,000. This, in our view, is highly unwarranted and improper and the addition under S. 69B for excess expenditure in making investment cannot be made. When the Department wants to make out a case that the assessee has paid more money/consideration, then surely they should have some basic material and evidence on their hands which we do not find in the instant case. Understatement of consideration or payment of excess concealed money has to be proved by the Department as has been stated by the Honble Supreme Court in the case of K.P. Varghese (supra). Though their Lordships of the Supreme Court were concerned about the controversy relating to understatement of consideration in terms of the provisions of S. 52(2) of the Act, yet the observations made therein are relevant for the purpose of deciding this appeal. Ahmedabad Bench A of this Tribunal in the case of Gautam Laljibhai Gajjar vs. ITO (supra) while consideration the controversy relating to unexplained investment has taken a view in para 7.2 at page 517 of 37 ITD as under : "Such a case made by the ITO cannot even be sustained by resort to S. 69B which provides that amount of investment etc. not fully disclosed in books of account may be deemed to be the income of the assessee for such financial year in which the assessee is found to be the owner of such assets. The legal fiction enacted in S. 69B comes into effect only where all the circumstances enumerated in S. 69B do factually exist. The onus to prove the existence of all circumstances lies on the Department. There is no room or scope for making any presumption about the estimated or hypothetical value of the diamond jewellery in question. It must be factually established that the real investment made by the assessee for purchase of the diamond jewellery in question was more than what was shown in the purchase invoices. The valuation report prepared by the valuer of the Department at the time of search cannot be made the basis for concluding that the assessee really spent more amount than what has been shown in the respective purchase bill and bill for labour charges." WE have to agree with the assessees counsel that the AO made the addition of Rs. 12,50,000 in agricultural land on mere suspicion, conjectures and surmises and not on the basis of any valid and cogent material.;