C I T vs. M/S BAIRATHI SHOE

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ITA/618/2008HC RajasthanRJHC02020809200823 May 20177 pages
AI SummaryDismissed

What did the High Court hold?

The High Court stated that it was in complete agreement with the view taken by the Tribunal. The Court found that the issue had become academic. The reasoning implies that the Tribunal's findings, which were based on the assessee's ability to rebut the presumption under Section 132(4A) with plausible explanations and on findings of fact, were considered legally and factually sustainable. The decisions relied upon by the assessee, which emphasized that the presumption under Section 132(4A) is rebuttable and relates to a question of fact, were implicitly accepted. The Court did not delve into the specifics of each question of law but provided a general affirmation of the Tribunal's decision. The operative direction was that the appeals stand dismissed. No issue was expressly left undecided.

What were the facts?

These appeals by the CIT (appellant) challenge the orders of the Income Tax Appellate Tribunal (ITAT). The ITAT had partly allowed the appeals filed by the assessee (M/s Bairathi Shoe/M/s Bairathi Shoe Co.) and dismissed the appeals filed by the Revenue. The specific assessment years are not explicitly stated for all appeals, but the context suggests they pertain to periods where the ITAT's decisions were under review. The core dispute revolves around documents seized during a search and the subsequent rectification of orders. The High Court admitted these appeals by framing substantial questions of law.

What were the issues?

The High Court had to decide the following substantial questions of law: 1. (ITA No. 618/2008) Whether the ITAT acted illegally and perversely in holding that documents were not seized from the assessee's possession, without appreciating the facts, inquiries, and provisions of Section 132(4A) of the IT Act, 1961, and Sections 101 and 102 of the Indian Evidence Act? 2. (ITA No. 677/2008) Whether the ITAT was justified in confirming the order of the CIT(A) passed under Section 154, holding it to be based on a mistake apparent from the record? 3. (ITA No. 567/2011) Whether the ITAT was justified in allowing the assessee's application under Section 254 for rectification of its original order, and whether the reasoning for rectification was legally and factually sustainable? Assessee's Contentions: The assessee's counsel relied on several High Court decisions, including CIT vs. Raj Pal Singh Ram Avtar, CIT vs. Ved Prakash Choudhary, CIT vs. S.M.S. Investment Corpn. (P.) Ltd., and CIT vs. Devendra Kumar Singhal, to support the ITAT's findings that presumptions under Section 132(4A) can be rebutted with plausible explanations and that findings of fact by the ITAT do not raise substantial questions of law. Revenue's Contentions: The Revenue's counsel contended that the view taken by the ITAT should be reversed and the Assessing Officer's view restored, citing decisions of the High Court.

Which sections of the Income-tax Act were involved?

Section 132(4A),Section 154,Section 254,Section 101,Section 102

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 618 / 2008 C I T ----Appellant Versus M/S Bairathi Shoe ----Respondent Connected With D.B. Income Tax Appeal No. 677 / 2008 C I T ----Appellant Versus M/S Bairathi Shoe Co ----Respondent D.B. Income Tax Appeal No. 567 / 2011 C I T ----Appellant Versus M/S Bairathi Shoe Co ----Respondent _____________________________________________________ For Appellant(s) : Mr. R.B. Mathur For Respondent(s) : Mr. Siddharth Ranka _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE DR. JUSTICE VIRENDRA KUMAR MATHUR

Judgment 23/05/2017 1. In all these appeals identical questions of law and facts are involved, hence these appeals are decided by this common

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judgment.

2.

By way of these appeals the department has challenged the judgment and order of the Tribunal whereby the Tribunal has partly allowed the appeal filed by the assessee and dismissed the appeal of the Department.

2.

While admitting the appeals, this Court has framed following substantial questions of law. Appeal No. 618 / 2008 “(i) Whether in the facts and circumstances of the case the ITAT has not acted illegally and perversely and was justified in holding that the documents were not seized from the possession of the assessee without appreciating the facts of the case and enquiries conducted and overlooking the provisions of section 132 (4A) of the IT Act, 1961 and section 101 and 102 of the Indian Evidence Act” Appeal No. 677 / 2008 “(i) Whether in the facts and circumstances of the case the ITAT was justified in confirming the order of CIT(A) passed u/s 154 holding it to be on mistake apparent from record?” Appeal No. 567 / 2011 “(i) Whether the Tribunal was justified in allowing the application made by the assessee under Section 254 of the Income Tax Act seeking rectification of the original order passed in the appeal? (ii) Whether reasoning given by the Tribunal for rectifying the order is legally and factually sustainable?”

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3 Heard learned counsel for the parties.

4.

Mr. R.B. Mathur, learned counsel for the appellant contended that view taken by the Tribunal is required to be reversed and the view taken by the AO is to be restored in view of the decision of this Court.

5.

However, counsel for the respondent has relied upon the following decisions:

1.

Commissioner of Income-tax Vs. Raj Pal Singh Ram Avtar, (2007)288 ITR 498 (All), wherein it has been held as under:

“5. The Tribunal has taken note of the presumption deemed under Section 132(4A) of the Act and has held that the respondent has rebutted the presumption by giving plausible explanation that neither the partners nor their employees knew English and they do not read or write in English and further the said paper was found from the debris in the shop premises and might have been left by someone and it did not belong to them. The Tribunal has further found that when the partners and the employees had made a statement that they did not know English, no attempt was made by the AO to cross-examine the partners or their employees to extract the truth and, therefore, the explanation offered by them was to be believed. The approach of the Tribunal is in accordance with law and calls for no interference. The Tribunal has further held that aforesaid Rs. 1,35,000 in any event represented principal amount, could not have been earned during the assessment year in question even if it is assumed that the investment belonged to the respondent, it might have been made in the earlier assessment year because the interest for one full year appears to have been calculated on the seized paper. This finding also does not suffer from any legal infirmity.”

2.

Commissioner of Income-Tax, (Central)-1, New Delhi Vs.

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Ved Prakash Choudhary, (2008)305 ITR 245 (Delhi), against which SLP was dismissed. The Delhi High Court observed as under” “10. Section 132(4A) of the Act uses the expression 'it may be presumed'. It is not obligatory on the assessing authority to make a presumption. Even if a presumption is required to be made, then, as held in Commissioner of Income Tax v. S.M.S. Investment Corporation P. Ltd., the presumption is a rebuttable one and relates to a question of fact. While coming to this conclusion, the Rajasthan High Court relied upon an earlier decision rendered by it in Commissioner of Income Tax v. S.M.S. Investment Corporation.

11.

Even in Income Tax Officer, B-Ward, Ernakulam

v.

T.

Abdul

Majeed: [1988]169ITR440(Ker), it has been held as follows: It is true that Section 132(4A) of the Act enables the court to presume the truth of the contents of such books. However, it is a presumption which can be rebutted. Moreover, the presumption envisaged therein is only a factual presumption. It is in the discretion of the court, depending upon other factors, to decide whether the presumption must be drawn. The expression used in the sub- section is 'may be presumed' as is used in Section 114 of the Evidence Act, 1872. It is not a mandate that whenever the books of account are seized, the court shall necessarily draw the presumption, irrespective of any other factors which may dissuade the court from doing so.

12.

In so far as the present case is concerned, the assessed had stated that in fact there was no transfer of money between him and Ravi Talwar and Madhu Talwar. On the other hand, Ravi Talwar and Madhu Talwar had denied receipt of any money from the assessed. In the fact of these denials, there ought to have been corroborative evidence to show that there was in fact such a (5 of 7) [ITA-618/2008]

transfer of money. Both the Commissioner as well as the Tribunal have come to the conclusion that there was no such material on record.

13.

The Assessing Officer relied on certain other transactions entered into by the assessed with Ravi Talwar and Madhu Talwar for drawing a presumption in respect of the transfer of money, but the Tribunal rightly held that those were independent transactions and had nothing to do with the MOUs, which were the subject matter of discussion. Even if there was something wrong with some other transactions entered into, that would not give rise to an adverse inference in so far as the subject MOUs are concerned.

14.

In our opinion, no substantial question of law arises.”

3.

Commissioner of Income-tax Vs. S.M.S. Investment Corpn. (P.) Ltd., (1994)207 ITR 364 (Raj.), wherein this Court held as under:

“6. We have considered the matter. In accordance with Section 132(4A), if any document is found in the course of a search, then by legal fiction, a presumption has to be drawn that such document belongs to the person from whose possession or control it was found and the contents of such documents are true. In accordance with the provisions of Section 132(4A), we are of the opinion that a presumption has to be drawn that the seized documents belongs to the assessee and is a true document. The said document was found from the branch office of the assessee which was situated on Rajmahal Palace (Hotel). The finding in the judgment dated April 13, 1988 as has been given is that the question involved is a question of fact. The Tribunal has taken into consideration the books of account of Citric India Ltd. which shows that, for the financial year 1965-66, interest was charged at 12 per cent In the next year, although the opening balance included the interest charged in the earlier year, the entry regarding interest was reversed on January 31, 1967, and then interest up

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to March 31, 1967, was calculated. This resulted in the principal amount on which the interest was charged for the financial year 1966-67 did not include the interest charged in the financial year 1965-66. Further, no interest has been credited by Citric India Ltd. to the assessee in the accounting years relevant to the assessment years in appeal. The agreement dated July 27, 1965, was also taken into consideration in which it was provided that simple interest at 12 per cent was to be charged. A copy of page No. 107 of serial No. 7 of annexure "A" of the panchnama dated February 13, 1978, which was seized from the branch office of the assessee-company, Rajmahal Palace, Jaipur, was annexed along with the statement of case. In the head line of the said paper it is mentioned "interest due from Messrs. Citric India Ltd. at the rate of 12 per cent." The Income Tax Appellate Tribunal has agreed with the conclusion arrived at by the Commissioner of Income Tax (Appeals). In the present matter, it has also taken into consideration that the debtor did not credit any interest in the books of account from the financial year 1968-69 onwards and declined to pay the interest. The finding which has been recorded being a finding of fact on the basis of which the presumption stands rebutted, and the matter being covered by the decision given by this court dated April 13, 1988, we are of the opinion that the Income Tax Appellate Tribunal was justified in upholding the finding of the Commissioner of Income Tax (Appeals) that the reopening of the assessment under Section 147(a) was not justified.” 4.Commissioner of Income-Tax Vs. Devendra Kumar Singhal, (2014) 45 Taxmann.com 148 (ALL), wherein it has been held as under: “6 So far as agricultural income is concerned, the ITAT found that the assessee had produced the intikhab-Khatauni (document on title) before the AO, which was not considered by the AO. In the letter dated 23.11.2004 the assessee had stated before the AO that he owned agricultural land

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measuring 32 Bighas and he has shown the income derived from sale of sugarcane. The total yield of sugarcane in the area is about 50-60 per quintals per Bigha and with the sale consideration of sugarcane being Rs. 90-105/- per quintal (in the relevant year), the income of Rs. 1 lac from agricultural counsel be reasonably accepted as income from agriculture.

7.

In our view the findings recorded by the CIT (A) and ITAT are findings of fact. They have considered the entries in the diary, and the extent of agricultural income. These findings of fact and do no raise any substantial questions of law as framed in the memo of appeal for our consideration.”

6.

We are in complete agreement with the view taken by the Tribunal. Even otherwise the issue is academic.

7.

The issue is answered in favour of assessee.

8.

The appeals stand dismissed.

9.

A copy of this judgment be placed in each of the file. (VIRENDRA KUMAR MATHUR),J. (K.S. JHAVERI),J. //Bm Gandhi 19-21

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