Abdul Razack, Judicial Member -
(1.) THESE are cross-appeals filed by the revenue and the assessee. The grievance of the revenue in its appeal is that the Appellate Commissioner (A.C.) erred in deleting the addition of Rs. 6 lakhs made by the Assessing Officer (A.O.) under Section 69 of the Act. The grievance of the assessee in her appeal is that the A.C. erred in confirming the addition of Rs. 15,000 towards low G.P. We shall first deal with the revenue's appeal.
(2.) The surrounding facts as culled out from the records are as under:
There was a search operation on 26-6-1981 in the business and residential premises of the assessee. During the course of search, the authorised officer found apart from jewellery two Banakhatas (agreement to sell), one executed on 18-12-1980 in respect of Shop No. 183 in New Cloth Market (hereinafter referred to as the said shop) for a consideration of Rs. 11,51,000 and another Banakhata executed on 19-12-1980 in respect of the said shop was also found in which the consideration was shown as Rs. 2,50,000. Both the documents were executed by the partner of M/s. Panachand Mangaldas (hereinafter referred to as the vendor-firm) on the one hand and the assessee on the other hand. The statement of the assessee was recorded on the date of search under Section 132(4) of the Act and the replies given by her were unstisfactoiy and evasive and the same have been extracted by the Assessing Officer in his order. The statement of the assessee as well as her husband Shri Shivbhagwan Agarwal were recorded subsequent to raid also on two or three different dates and the same have been duly extracted in the assessment order by the Assessing Officer. The Assessing Officer also on 20th July, 1981 examined one of the partner Shri Prabodhchandra Panachand of the vendor-firm who stated that the said shop was sold for a sum of Rs. 11,51,000 and the payments were received as under:
He also admitted having executed both the documents; one on 18-12-1980 evidencing consideration of Rs. 1,51,000 and the other on 19-12-1980 evidencing consideration of Rs. 2,50,000. The document dated 19-12-1980 was also witnessed by one Shri Mangaldas Dahyabhai Patel, but there are no attesting witnesses to the document dated 18-12-1980. The Assessing Officer also examined the witness who attested the document dated 19-12-1980 and he admitted his signature as witness in the said document. The said witness further stated before the Assessing Officer that though he was present on 18-12-1980 when the document was executed, yet he did not attest the same as a witness. The Assessing Officer also summoned the books of account of the vendor-firm wherein entries about the receipt of the total consideration of Rs. 11,51,000 were recorded and on query from us, the D.R. submitted that the books of account of the vendor-firm were also impounded under Section 131(2) of the Act. The other partners of the vendor-firm were also examined by the Assessing Officer who merely affirmed the version of one of their active partner Shri Prabhodhchandra Panachand. The witness as well as the partner were subjected to cross-examination by the assessee's counsel and the same are fully recorded in the assessment order. According to the assessee, the said shop was purchased for Rs. 2,50,000; whereas according to the vendor-firm, the said shop was sold for Rs. 11,51,000. Thus, there was a difference of Rs. 9,26,000 in respect of the consideration which was considered as extra money paid by the assessee and considered as unexplained investment and added by invoking the provisions of Section 69 of the Act. According to the partner of the vendor-firm, the extra amount of Rs. 9,26,000 was for the transfer of goodwill; whereas according to the assessee and her husband, though it was originally agreed on 18-12-1980 that the vendor-firm will transfer the said shop along with the goodwill, furniture, fittings, etc., and also eject the tenants from the said property, the same was later on retracted by the vendor-firm and, therefore, another document was executed on the next day, i.e., on 19-12-1980 agreeing to purchase the said shop for Rs. 2,50,000 and not for Rs. 11,51,000 as was originally agreed on 18-12-1980. The said shop in question was transferred in the name of the assessee on 5-6-1981. According to the version of the partner of the vendor-firm, the extra sum of Rs. 9,26,000 towards transfer of alleged goodwill was paid on three different dates which are as under and which found recorded in the books of account of the vendor-firm :
The assessee's husband and her Advocate Shri R.D. Pathak submitted before the Assessing Officer that the said shop was purchased for an apparent consideration of Rs. 2,50,000 and not for Rs. 11,51,000 as allegedly stated by one of the partners of the vendor-firm, and that the vendor-firm in order to bring on record its unaccounted and concealed income, took advantage of the recovery of the first document executed on 18-12-1980 and further to derive the tax benefits in view of the decision of the Hon'ble Supreme Court in the case of Shrinivas Shetty (supra), built up a story about transfer of the said shop for Rs. 11,51,000 and forged and fabricated their books of account by making false and incorrect entries evidencing extra payment of Rs. 9,26,000 on three different dates from the assessee towards transfer of goodwill. A detailed reply was also given by the assessee on 20-2-1984. The Assessing Officer was not at all convinced that the said shop was purchased for Rs. 2,50,000 and not for Rs. 11,51,000 as stated by the vendor-firm's partner and as recited in the document dated 18-12-1980. The Assessing Officer was also of the view that the statement given by the assessee on the day of search was incoherent and at variance with the statement given by her husband Shri Shivbhagwan Agarwal in relation to the "transaction. It is also pertinent to mention that the vendor-firm declared the extra sum of Rs. 9,26,000 as receipt on transfer of goodwill and claimed it as exempt/non-taxable in view of the decision of the Supreme Court in the case of Shrihivas Shetty [supra). This claim was negatived by the officer assessing the vendor-firm and was confirmed in appeal. We are not informed about the fate of the second appeal being preferred by the vendor-firm before this Tribunal. The Assessing Officer therefore, proposed an addition of Rs. 6,00,000 for the financial year 1980-81 relevant to the assessment year under appeal and Rs. 3,26,000 for the financial year 1981-82 relevant to the assessment year 1982-83 and referred the matter to the J.A.C. under Section 144B of the Act. The submissions and pleadings before the I.A.C. by the assessee through her counsel under Section 144B did not find favour who confirmed the draft order passed by the Assessing Officer. In respect of the other addition also, the I.A.C. agreed with the Assessing Officer. Not being satisfied with the addition so made to the returned income, the matter was carried to the desk of the first appellate authority namely, the A.C. The submissions made before the Assessing Officer as well as before the I.A.C. in proceedings under Section 144B were reiterated. The A.C. came to the conclusion that the document executed on 18-12-1980 was not genuine as the same was not acted upon and the second document dated 19-12-1980 was the genuine document under which the assessee purchased the said shop for Rs. 2,50,000. The A. C. was also of the opinion that no extra or on money was passed from the assessee to the vendor-firm and, therefore, the addition of Rs. 6,00,000 in the year under appeal under Section 69 of the Act was based on presumption and conjectures and not on any valid or cogent evidence. He, therefore, deleted the addition of Rs. 6,00,000 but confirmed the addition of Rs. 15,000 towards low G.P. Thus, the cross appeals before us.
Shri M.S. Rai, appearing for the revenue contended that the Assessing Officer has made out a good case in respect of the addition of Rs. 6,00,000 as income from undisclosed sources being unexplained investment in the said shop under Section 69 of the Act and the A.C. has wholly ignored and mis-appreciated the facts, material and evidence brought on record by the Assessing Officer. He relied on the reasons given by the Assessing Officer in his assessment order and took us through the contents and observations made therein by the Assessing Officer to convince us that the A.C. erred in deleting the sum of Rs. 6,00,000 added by the Assessing Officer under Section 69 of the Act. The D.R. also filed English translation copies of the two agreements datedd 8-12-1980 and 19-12-1980 and took us through the contents of the same. Our pointed attention was drawn to the answers given by the assessee, her husband the main partner of the vendor-firm Shri Prabodhchandra Panachand, the attesting witness Shri Mangaldas Dahyabhai Patel and the answers given by the concerned parties during the course of cross-examination by the assessee's counsel Shri R.D. Pathak. It was strenuously submitted by the D.R. that the statement given by the assessee on the date of search as well as on subsequent dates were at variance and there was incoherence in her statement and in the statement of her husband and these important factors were wholly sidetracked by the A.C. while deciding the controversy before him. According to the D.R., if this incoherence and variance statement are taken into account, then the assessee has no chance of any success or for any relief in law. On the basis of evidence, the Assessing Officer clearly established that the said shop was purchased by the assessee for Rs. 11,51,000 as per document dated 18-12-1980 and not for Rs. 2,50,000 as is agreed and recited in the second document executed on 19-12-1980. The assessee, according to the D.R., paid an extra money of Rs. 9,26,000 towards goodwill of the said shop spread over in the two financial years and the addition of Rs. 6,00,000 made in the year under appeal should have been sustained by the A. C. on the facts, circumstances and evidence on record. In end, it was urged by the D.R. that the order of the A.C. impugned in the revenue's appeal be reversed.
(3.) IN reply to the argument advanced by the D.R., Shri R.D. Pathak, the assessee's counsel while reiterating the submissions made before the lower authorities further highlighted that the Assessing Officer has not made out any case whatsoever for sustaining the addition of Rs. 6,00,000 as income from undisclosed sources in terms of Section 69 of the Act and the A.C. very correctly appreciated the true facts and circumstances of the case in the light of evidence brought on record. It was further submitted by the assessee's counsel that the assessee fell ill and was unwell on the date of search and the A. D.I. was kind enough to summon a Doctor for her treatment. To support this, he drew our pointed attention to the answer given by the A.D. I. in the prosecution case launched by the revenue against the assessee and her husband, which is found in the assessee's voluminous paper-book filed during the course of hearing. The incoherent and variant statement by the assessee on the search day and thereafter was due to the fact that she was not well on the search day and besides, she being illiterate, rustic, aged Marwadi lady wholly dependent on her husband in respect of her business and legal matters including tax problems; there is, therefore, nothing wrong in the assessee stating that her husband was fully aware of the entire deal and transaction relating to the said shop. Her ignorance or lack of knowledge in respect of certain matters relating to the deal of the said shop cannot be weighed against her for making the addition under Section 69 of the Act and more particularly, when no concrete evidence was forthcoming or on record to make such addition. Making further submission the assessee's counsel Shri R.D. Pathak submitted that the vendor-firm took advantage of the recovery of the document dated 18-12,-'1980 and in order to bring on record their unaccounted and concealed income earned in their business, fabricated their own books of account by incorporating false entries on three different dates in respect of the excess amount of Rs. 9,26,000 allegedly stated to be received by the vendor-firm from the assessee for the transfer of the goodwill, whereas in fact no goodwill was transferred to the assessee nor the possession of the said shop was given free of tenants. It is highly improbable that the assessee paid extra consideration/sum of Rs. 9,26,000 after execution of the agreement dated 19-12-1980 evidencing consideration of Rs. 2,50,000. If this is to be considered as true, then after the execution of the agreement dated 19-12-1980 which was for Rs. 2,50,000 the vendor-firm had ho legal document for laying its claim for the extra consideration of Rs. 9,26,000 from the assessee and the partners of the vendor-firm being businessman were not so unwise to execute a document on 19-12-1980 for Rs. 2,50,000 and then receive the extra money of Rs. 9,26,000 without there being any check or guarantee for the receipt of the extra money from the assessee not recorded in the agreement dated 19-12-1980 or any other collateral document. If this vital and pertinent fact is kept in mind and considered, then there is no case for drawing any presumption or inference of payment of extra consideration of Rs. 9,26,000 to the vendor-firm as claimed before the Assessing Officer. Thus, the story built up by the vendor-firm is wholly unbelievable and is a ruse and guise for bringing into account its/their unaccounted and concealed income. Taking advantage of the search on the assessee and the recovery of the document dated 18-12-1980, the vendor-firm wanted to take advantage and benefit and, therefore, created a story that the said shop was sold for Rs. 11,51,000 out of which Rs. 9,26,000 was for goodwill and thus fabricated and forged its own books of account by incorporating false and incorrect entries of payment/receipt of extra sum of Rs. 9,26,000 from the assessee. There was ample time for the vendor-firm, from the date of search till 20-7-1981, when the books of account were summoned by the Assessing Officer, examined and then impounded. This extra time enabled the vendor-firm to fabricate and forge its/their own books of account over which the assessee had no control. Such one-sided and unilateral evidence was believed by the Assessing Officer for making the addition of Rs. 6,00,000 under Section 69 of the Act. It was further brought to our notice by the assessee's counsel that the vendor-firm declared before its own Assessing Officer about the receipt of the sum of Rs. 9,26,000 on transfer of goodwill but claimed the same as not taxable in view of the decision of the Supreme Court in the case of Shrinivas Shetty (supra), but the Assessing Officer assessing the vendor-firm upon examination on facts of the case and evidence was of the opinion that there was no goodwill to the vendor-firm and therefore, did not give any exemption to the vendor-firm. This is also one of the most important factor which has been lost sight of by the Assessing Officer and duly considered by the A.C. while giving relief to the assessee. To fortify the case of the assessee, her representative Shri R.D. Pathak submitted that there have been repeated requests to the Assessing Officer to send the account books of the vendor-firm for chemical examination to find out the truth about the fabrication and forgery of the account books to establish that no extra money was paid by the assessee to the vendor-firm and the entries were false and incorrect. But the Assessing Officer for the reasons best known to him did not accede to such request because he was fully aware that if chemical examination of the account books of the vendor-firm is done, then he will have no case for making the addition. The Assessing Officer for his inaction cannot put the assessee to sufferance by making huge addition to the returned income under Section 69 of the Act, submitted the assessee's counsel. This was justifiably understood by the A.C. while giving relief to the assessee and in directing deletion of the addition of Rs. 6,00,000 made by the Assessing Officer. IN order to further convince us that the account books of the vendor-firm are false and unreliable, our specific attention was drawn to the answers given by the main partner of the vendor-firm regarding withdrawal of various sums by the partners of the vendor-firm after the alleged receipt of Rs. 9,26,000. It was, therefore, vehemently pleaded by the assessee's counse that the impugned order of the A.C. by the Revenue in this appeal was perfectly valid and justified in law and the same should be upheld by us by dismissing the revenue's appeal.;