M/S SHIVAM INVESTMENTS vs. THE ASSTT. COMMISSIONER OF INCOME TAX

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TAXAP/192/2022HC GujaratGJHC24015079202214 March 2022Author: HONOURABLE MR. JUSTICE J.B.PARDIWALA,HONOURABLE MS. JUSTICE NISHA M. THAKORE4 pages
AI SummaryDismissed

What did the High Court hold?

The Tribunal held that the seized document, which was signed by all partners and three witnesses, clearly indicated withdrawals from the partnership firm. While withdrawals generally represent capital contributions or profits/remuneration/interest due to partners, these transactions were not reflected in the firm's financial statements or the partners' capital accounts. The Tribunal relied on Section 292C of the Act, which presumes the contents of seized documents to be true, and stated that the onus was on the assessee to rebut this presumption with documentary evidence. Since the assessee failed to provide evidence that these withdrawals were personal settlements and not unaccounted income of the firm, and also failed to show them reflected in individual partner accounts, the Tribunal confirmed the addition. The High Court found that the ITAT's findings were based on material on record and did not raise substantial questions of law, thus dismissing the appeal.

What were the facts?

The assessee, M/s Shivam Investments, filed an appeal before the Gujarat High Court against an order dated December 15, 2021, passed by the Income Tax Appellate Tribunal (ITAT). The ITAT's order pertained to assessment year 2004-05 and confirmed an addition of Rs. 61,01,104/- made by the Assessing Officer as unexplained income. The appeal was filed under Section 260A of the Income Tax Act, 1961. The core of the dispute revolves around the interpretation of seized documents indicating withdrawals from the partnership firm.

What were the issues?

1. Whether on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in confirming the addition of Rs.61,01,104/- made by the Assessing Officer as unexplained income of the appellant firm for A.Y. 2004-05, as provided under Section 153C of the Act? 2. Whether on the facts and in the circumstances of the case, the conclusion reached by the Income Tax Appellate Tribunal to uphold the addition of Rs.61,01,104/- as unexplained income of the appellant firm for A.Y. 2004-05 is such as could have been arrived at from the material on record or is reasonable, turning on the interpretation of partner withdrawals as unaccounted income of the firm. Assessee's Contention: The amount shown as withdrawals in the seized documents represents amounts belonging to the partners in their personal capacity, arising from a settlement of their individual share investments made through the firm. Therefore, it does not represent the income of the firm. Revenue's Contention: The revenue argued that the seized documents, presumed to be true under Section 292C of the Act, indicated withdrawals from the firm. The assessee failed to discharge the onus to prove otherwise by providing documentary evidence that these withdrawals were personal settlements and not unaccounted income of the firm. The ITAT did not record any specific arguments for the revenue beyond what was considered in its order.

Which sections of the Income-tax Act were involved?

Section 260A,Section 153C,Section 292C

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
C/TAXAP/192/2022 ORDER DATED: 14/03/2022 IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 192 of 2022 ========================================================== M/S SHIVAM INVESTMENTS Versus THE ASSTT. COMMISSIONER OF INCOME TAX ========================================================== Appearance: MR SN DIVATIA(1378) for the Appellant(s) No. 1 for the Opponent(s) No. 1 ========================================================== CORAM: HONOURABLE MR. JUSTICE J.B.PARDIWALA and HONOURABLE MS. JUSTICE NISHA M. THAKORE Date : 14/03/2022

ORAL ORDER (PER : HONOURABLE MR. JUSTICE J.B.PARDIWALA) 1 This appeal under Section 260A of the Income Tax Act, 1961 (for short, “the Act, 1961”) is at the instance of an unsuccessful assessee and is directed against the order passed by the Income Tax Appellate Tribunal dated 15th December 2021 in the IT (SS)A No.56/AHD/2015 for the assessment year 2004-05. 2 The assessee has proposed the following two questions of law for the consideration of this Court: “A. Whether on the facts and in the circumstances of the case, Income-tax Appellate Tribunal, was right in law in confirming the addition of Rs.61,01,104/- made by the Assessing Officer as unexplained income of the appellant firm for A.Y. 2004-05? B. Whether on the facts and in the circumstances of the case, the conclusion reached by the Income Tax Appellate Tribunal to uphold the addition of Rs.61,01,104/- as unexplained income of the appellant firm for A.Y. 2004-05 is such as could have been arrived at from the material C/TAXAP/192/2022 ORDER DATED: 14/03/2022 on record or is reasonable which could be arrived?” 3 The Income Tax Appellate Tribunal looked into the two issues for the purpose of deciding the appeal filed by the writ applicant herein. The two issues are as under: “i. Whether the documents seized from the premises of Shri Lilchand Patel of “Vimal Group” belongs to the assessee as provided under Section 153C of the Act. ii. Whether the amount shown as withdrawals in the name of the partners of the firm represents the unaccounted income of the firm.” 4 The controversy is not regarded the findings recorded so far as the first issue is concerned. The writ applicant seeks to question the findings recorded by the Tribunal so far as the issue No.2 is concerned. The issue No.2 came to be answered as under: “9.2

As regards the contention of the assessee on merit that the amount of withdrawal shown in the seized documents represents the amount belonging to the partners in their personal capacity. As per the assessee, the settlement was made among the partners for setting their individual accounts of the investments made in the shares through the partnership firm. Thus, the impugned amount does not represent the income of the firm. In this regard, we find that the provisions of Section 292C of the Act contains the assumption with respect to the documents found in the course of search. The assumption says that the contents of the documents found during the course of search are true. Indeed this presumption is rebuttable by the assessee based on the documentary evidence. The relevant provisions of section 292 reads as under: “292C. (1) Whether any books of account, other documents, money, bullion, jewellary or other valuable article or thing are or is found in the possession or control of any person in the course of a search under section 132 or survey under section 133A, it may, in any proceeding under this Act, be presumed- (i) xxxxxxxxxxxxxxxxxxxxxxx ii) that the contents of such books of account and other documents are true; and 9.3 In view of the above, there remains no ambiguity that the onus C/TAXAP/192/2022 ORDER DATED: 14/03/2022 lies upon the assessee to prove that the transactions shown in the seized paper do not represent the true contents.

9.

4 On examination of the seized document, we note that it was duly signed and dated not only by all the partners but also by three witnesses. The name of the partnership firm along with partners was appearing. It was discernible from the seized document that there was withdrawal of money from the partnership firm. Generally, the withdrawal from the firm represents the withdrawal of the capital by the partners. This capital can either be in the form of money contributed by the partner or maybe the share of profit/remuneration/interest on the capital of the partner generated from the partnership firm. Likewise, all these transactions should have been duly recorded in the books of accounts of the firm as well as in the individual ledger of the partners maintained by the firm. But, on perusal of the financial statement of the firm and the capital account of the partners, we note that such figures are not appearing herein. The necessary details of the financial statement of the assessee and capital account of the partners are placed on pages 12 to 20 of the paper book. Thus, we find difficult to believe the version of the assessee that the impugned withdrawal represents the settlement of the partners account in their individual capacity.

9.

5 It is also significant to note that the addition in the present case was made based on the seized documents. In other words, the addition was not made solely on the basis of the statement recorded in the course of search of Shri Lalchand Patel the father-in-law of Shri Himanshu Patel one of the partner of the firm. Therefore, it is not necessary to provide the opportunity of cross examination to the assessee of statement as discussed above.

9.

6 Be that as may be, let us assume that these transactions were not recorded in the books of accounts of the firm. But in that situation, at least such transactions was to be reflected in the individual accounts of the partners which are maintained by them in personal capacity to support the contention. But, we note that there is nothing brought on record that such amount of transactions were recorded in the books of accounts of the individual partners. In other words, we find that the assessee has not brought anything on record even in the present proceedings which is the 2nd innings. The assessee cannot escape from its liability in discharging the onus cast upon it under the provisions of law in the garb of the matter sub-judice in the course of law. In view of the above, we are of the opinion that the assessee failed to discharge its onus imposed under the provisions of law by furnishing the necessary documentary evidence. Thus, in such facts and circumstances, we are constrained and have no alternative except to confirm the order of the authorities below. Hence the ground of appeal of the assessee is C/TAXAP/192/2022 ORDER DATED: 14/03/2022 dismissed.” 5 Thus, the principal contention of the writ applicant assessee before the Tribunal was that the amount of withdrawal reflected in the seized document represented the amount of the partners in their personal capacity. The Tribunal first looked into Section 292C of the Act and thereafter, noticed from the materials on record that the note in question was duly signed not only by all the partners of the firm, but also by three witnesses. The names of the partnership firm also figured in it. The Tribunal also took notice of the fact that the withdrawal of the money was from the firm. 6 Thus, in view of the findings of fact recorded by the Tribunal as referred to above, none of the two questions as proposed by the writ applicant could be termed as substantial question of law for the purpose of deciding this appeal under Section 260A of the Act. 7 In view of the aforesaid, this appeal fails and is hereby dismissed. (J. B. PARDIWALA, J) (NISHA M. THAKORE,J) CHANDRESH

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