TASADDUQ HUSSAIN BOHRA vs. A.C.I.T. UDAIPUR

This appeal preferred by the petitioner assessee under Section 260A of the Income Tax Act, 1961 (for short ‘the Act of 1961’) arises out of order dated 19.1.07 passed by the Income Tax Appellate Tribunal (ITAT), Jodhpur Bench, Jodhpur in appeals ITA No.40/JDPR/2006 and ITA No.43/JDPR/2006, for the block period comprising of Assessment Years 1997-98 to 2002-03. 2. The relevant facts are that the search was carried out at residential and business premises of the assessee on 23.10.02 in which various incriminating documents were found, which inter alia indicated investment made by the assessee towards purchase of various assets, the total whereof was worked out by the (2 of 7) [ITA-27/2008] assessee himself at Rs.12,87,794/-. The assessee admitted the details of investment made as representing his undisclosed income during the block period. The assessee claimed an amount of Rs.10,56,991/- as set off against the above undisclosed income being realisation from debtors falling outside block period. The Assessing Officer (“A.O.”) rejected the claim observing that these debtors never suffered any taxation and the claim of set off in the form of income of Rs.10,56,991/- earned prior to block period is not admissible because the same was never disclosed in I.T. Returns nor suffered taxation. That apart, an addition of Rs.75,000/- in the Assessment Year 1997-98 was made by the Assessing Officer on account of unaccounted lending of Rs.75,000/- to Shri D.P.Agarwal and Rs.11,250/- interest thereon, which was not included in the undisclosed income by the assessee, while rejecting his contention that the promissory note was signed on the first day of block period in lieu of renewal of old advances made by the assessee’s father who had expired on 9.2.95. 3. Aggrieved by the additions made by the Assessing Officer as aforesaid, the assessee preferred an appeal before Commissioner of Income Tax (Appeals) [CIT(Appeals)], Jaipur. The Appellate Authority observed that if there are sundry debtors, there should be sundry creditors also and accordingly, making reasonable estimation of unexplained sundry creditors prior to 1.4.97 keeping in view the disclosure made by the assessee as aforesaid treated 25% of sundry debtors covered by the unexplained sundry creditors prior to block period and treated balance 75% i.e. Rs.7,92,743/- as outstanding sundry debtors prior to 1.4.97 and (3 of 7) [ITA-27/2008] accordingly, given the credit of Rs.7,92,743/- to the assessee from the undisclosed income of Rs.10,56,991/-. The addition made by the A.O. on account of unaccounted lending of Rs.75,000/- to Shri D.P.Agarwal and Rs.11,250/- interest thereon was upheld by the CIT (Appeals). Other additions made and relief given are not referred to inasmuch as, no controversy is raised in respect thereof in the present appeal.

Aggrieved by the order passed by the CIT (Appeals) as aforesaid, the Revenue as also the assessee preferred appeals before the ITAT. The ITAT arrived at the finding that the calculation made by the CIT (Appeals) has no logic and opined that the ratio of unexplained debtors and creditors as at the beginning of the block period can be better determined by the ratio of disclosed debtors and creditors as per the books of account as on 31.3.96 being the beginning of the block period and accordingly, while setting aside the order passed by the A.O. in this regard, remanded the matter with the directions to A.O. to determine the amount available at the beginning of the block period from the undisclosed opening debtors, clarifying that the balance sheet of the assessee as on 31.3.96 should be considered for finding out the proportion of disclosed debtors to the disclosed creditors and that ratio be applied to determine undisclosed creditors for the purpose of deduction from undisclosed debtors claimed by the assessee at Rs.10,56,991/-. The additions towards unaccounted lending to Shri D.P.Agarwal sustained by the CIT (Appeals) was upheld by the ITAT. Hence, this appeal by the assessee.

The appeal was admitted by a coordinate Bench of this court on 2.2.08 on the following substantial question of law: (1) Whether in the facts & circumstances of the case, learned Income Tax Appellate Tribunals, Jodhpur Bench, Jodhpur was legally justified in partly allowing the appeal filed by the non-petitioner-Assessing Officer directing him to deduct from the undisclosed income, estimated amount of undisclosed creditors; determined on the basis of ratio of disclosed debtors and disclosed creditors as per Books of Accounts as on 31.3.96? (2) Whether in the facts & circumstances of the case, the learned Tribunal was legally justified in upholding the addition of Rs.75,000/- on account of loan given to Dwarka Prasad Agarwal, which was reflected in the diary even on opening day of block period?”

Learned counsel appearing for the petitioner contended that the A.O. has applied Expenditure-Investment Theory for arriving at the figures of undisclosed income and therefore, while applying the said theory, the A.O. must calculate the figures of increase in investment or assets during the block period and for this purpose, the A.O. is expected to give due credit or reduction of investment standing on the opening day of the block period and thus, the A.O. and the ITAT have seriously erred in not reducing the amount being opening debtors of Rs.10,56,991/- as on 1.4. 96. Learned counsel contended that the ITAT has erred in partly allowing the appeal preferred by the Revenue and setting aside the order of the CIT (Appeals) allowing rebate of Rs.7,92,743/- on account of estimated debtors as on 1.4. 96. Learned counsel contended that the ITAT has erred in upholding the addition of Rs.75,000/- loan given to Shri D.P.Agarwal on 1.4. 96. Learned counsel would contend that the said amount being pending balance of loan should have been reduced from undisclosed income. It is (5 of 7) [ITA-27/2008] submitted as on first day of the year i.e. 1.4.96, the assessee cannot be presumed to have earned Rs.75,000/- which he had applied or utilised for providing loan to Shri D.P.Agarwal and thus, the loan advanced to him pertinent to period prior to block period could not have been brought to tax net for the block period.

On the other hand, learned counsel appearing for the Revenue while supporting the order passed by the ITAT, submitted that the ratio of the unexplained debtors and creditors at the beginning of block period can be better determined by ratio of the disclosed debtors and disclosed creditors as per the books of account as on 31.3.96 being the beginning of the block period, as suggested by the ITAT and thus, the order impugned does not suffer from any infirmity or illegality so as to warrant interference by this court. Learned counsel submitted that addition of Rs.75,000/- made by the A.O. disclosed as loan given to Shri D.P. Agarwal on 1.4.96, affirmed by the CIT(A) and ITAT also does not suffer from any infirmity and illegality and does not give rise to any question of law, requiring determination by this court.

I have considered the rival submissions and perused the material on record.

Indisputably, the assessee has admitted undisclosed income for the block period at Rs.12.87 lacs. The deduction was claimed by the assessee of Rs.10,56,991/- against the above undisclosed income as set off being the realization from the debtors prior to block period. Obviously, the onus was on assessee to lead direct evidence to show that he had the said amount of undisclosed income available at the beginning of the block period. Apparently,

Coming to the question of addition of Rs.75,000/- towards the loan given to Shri D.P.Agarwal as on 1.4.96 being the first day of the block period, it is noticed that sum of Rs.75,000/- was taken by Shri D.P. Agarwal from the assessee in cash and it is also specifically mentioned that no amount was outstanding prior to the said transaction. There was no evidence furnished showing that the amount was advanced by the late father of the assessee and therefore, the bald assertion of the assessee in this regard has rightly been not accepted by the A.O. and thus, the addition made by the A.O. sustained by the CIT (Appeals) and ITAT is absolutely justified. As a matter of fact, the concurrent finding arrived at as aforesaid by the A.O., CIT (Appeals) and ITAT after due consideration of the material on record, remains a finding of fact, which cannot be said to be capricious or perverse so as to (7 of 7) [ITA-27/2008] give rise to a substantial question of law to be determined by this court.

The questions framed are answered accordingly.

In the result, the appeal fails, it is hereby dismissed. No order as to costs.