K S DATTATHREYA Vs. ASSISTANT COMMISSIONER OF INCOME TAX
LAWS(IT)-1994-3-25
INCOME TAX APPELLATE TRIBUNAL
Decided on March 17,1994

Appellant
VERSUS
Respondents

JUDGEMENT

S. Bandyopadhyay, Accountant Member - (1.) THE assessee has been engaged in the liquor business as an excise contractor for a long time. THE assessment records however show that he carries on the business not individually but as the partner of six different firms. In that way, he does not have individual business. Besides, he also earns quite substantial amounts of income from agricultural operations.
(2.) A search and seizure operation was carried on by the Income-tax Department in the residential and the business premises of the assessee on 7-6-1985, which resulted in the discovery of a bank pass-book of the assessee with Canara Bank Langford Town Branch, showing inter alia, amongst others, the following credits on three different dates in the month of May 1985 : JUDGEMENT_7296_TLIT0_19940.htm The assessee stated in a statement taken from him during the course of the search that he himself was not aware of the source of the money but that his son Shri K. Venkatesh Dutt had arranged the fund and knew every thing about it. It was however, found out that the credit entries in the bank occurred by way of realisation of demand drafts in favour of the assessee purchased by one Shri P.J. Fernandez. The son of the assessee and Shri Fernandez originally confirmed about the loan of the entire amount of Rs. 135 lakhs by Shri Fernandez to the assessee on the basis of a pro-note. Shri Fernandez again told that he had borrowed the major portion of the amount from his partner, viz., one Shri Srikanta Datta Wodeyar. Shri S.D. Wodeyar also confirmed the transaction. The assessee stated at this stage that he was also aware of the fact that the loan had come from Shri Fernandez, although the entire affairs had been arranged by his son. The Department, however, conducted search and seizure proceedings successively in the premises of Shri Fernandez and Shri S.D. Wodeyar. During the course of examinations as a sequel to the search, both Shri Fernandez and Shri S.D. Wodeyar categorically denied that they had advanced the amount of Rs. 135 lakhs to the assessee. On the other hand, Shri Fernandez came up with the version that on being approached, he allowed his own name to be lent in the affair and in that way he had simply acted as an accommodator. 3.1 At that stage, the Department confronted both the assessee as well as his son with the latest version of Shri Fernandez and of Shri S.D. Wodeyar about having not lent the money to the assessee. The assessee simply stated that his son knew every thing about the matter. His son, however, originally tried to stick to the old version about the loan having been given by Shri Fernandez, although when confronted with the categorical denial by Shri Fernandez, he stated that he would have to consult his father before coming out with any clear-cut statement.
(3.) ALL these things happened in the months of June and July 1985. However, in the month of August 1985, Shri K. Venkatesh Dutt, son of the assessee, filed a petition before the CIT in which he stated that he was a partner of a firm M/s. Intercorp Associates and that the said firm had opened certain bank accounts and had also obtained facilities for discounting of bills and furthermore that such bills and cheques were being discounted and the proceeds thereof were being advanced by way of loans to businessmen in the line of film and real estate at very high rates of interest. He also stated that monies earned from such business were now being offered for tax. The petition also mentioned that there had been certain complications with the said bank facility of discounting the bills, in that the cheques discounted were not realised as sufficient funds were not available with the drawee bank. Shri Venkatesh Dutt furthermore mentioned in the petition that for the purpose of depositing one month's kist in excise auction bids, huge amounts were required by his father, viz., the assessee and that in order to meet such requirements, Shri Venkatesh Dutt had credited the amounts in the bank account of the assessee in the garb of loans from Shri Fernandez. In the petition, it was urged that in order to buy peace with the Department and to settle the matters in regard to the search proceedings in the case of the assessee, the petitioner Shri Venkatesh Dutt would like to offer a part of the said credit in the bank account of the assessee, viz., Shri K.S. Dattatreya, shown as loan from Shri Fernandez as the income of the firm/income of the managing partner earned during the period from June 1984 to June 1985, i.e., relevant to assessment year 1986-87. It was also tried to explain therein that as criminal proceedings had been initiated against the partners of the firm, M/s. Intercorp Associates, it was considered expedient not to bring the monies of M/s. Intercorp Associates into the books of account of Shri K.S. Dattatreya directly and for this reason, the name of Shri Fernandez had been used as a name-lender. Shri Venkatesh Dutt actually filed a return of income of his for assessment year 1986-87 on 31-3-1987 showing the return as having been filed under the Amnesty Scheme. He disclosed a total income of Rs. 30 lakhs along with the net agricultural income of Rs. 50,000 in the said return. In the statement showing computation of income, Shri Venkatesh Dutt started with the amount of Rs. 135 lakhs being the gross credit in the name of Shri K.S. Dattatreya, added thereto interest received to the extent of Rs. 15,68,702 and after making adjustments on account of various allowances and losses etc., ultimately came down to the figure of Rs. 20,56,203. During the course of the proceedings at different stages, it was stated by Shri Venkatesh Dutt that although initially he had come up with the figure of his income for this year as calculated above at Rs. 20.56 lakhs, as a gesture of goodwill he offered for taxation the total amount of Rs. 30 lakhs.;


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