C.I.T. CENTRAL, JAIPUR vs. PAWAN KUMAR GAVADIA

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ITA/83/2010HC RajasthanRJHC01036270201004 August 2010Author: JAGDISH BHALLA,DINESH MAHESHWARI9 pages
AI SummaryDismissed

What did the High Court hold?

The Tribunal decided each ground as follows: Grounds 1 & 2 (unexplained cash): Remitted to the AO for proper adjudication, allowing credit for reasonable savings, pin money, Stridhan, cash with the firm, and ensuring no double taxation. Grounds 3, 4 & 5 (jewellery/ornaments): Set aside the CIT(A)'s decision and restored to the AO for proper verification and decision, noting procedural lapses by the CIT(A) and the applicability of Section 69B. Ground 6 (household withdrawals): Modified the CIT(A)'s order, finding the AO's estimate excessive and unreasonable, and worked out annual drawings. Ground 7 (marriage expenditure): Sustained addition after modification. Ground 8 (household/valuable items): Remitted to the AO for fresh adjudication. Ground 9 (FDRs and interest): Rejected the Revenue's ground, finding the CIT(A)'s deletion justified based on the assessee's explanation and the AO's failure to examine it. Ground 10 (construction of shops/house): Set aside the CIT(A)'s order and remitted to the AO for fresh decision, noting the CIT(A)'s order was silent on material aspects and lacked proper verification. Ground 11 (surcharge): Allowed in favour of the Revenue, with reference to the Supreme Court decision in CIT vs. Suresh N. Gupta. The High Court, in its appeal, found that the issues before the ITAT were essentially questions of fact and no substantial question of law arose, thus dismissing the Revenue's appeal.

What were the facts?

The Revenue (Commissioner of Income Tax-Central, Jaipur) appealed against an order of the Income Tax Appellate Tribunal (ITAT), Jodhpur Bench, for the block period assessment years 1997-1998 to 2002-2003 and up to 28.05.2002. A search and seizure action under Section 132 of the Income Tax Act, 1961, was conducted on 28.05.2002. The assessee, Pawan Kumar Govadia, a partner in M/s. Dhanraj Govadia & Sons, filed a return declaring undisclosed income of Rs.15,50,000/-. The Assessing Officer (AO) determined the total undisclosed income at Rs.54,83,230/-. The Commissioner of Income Tax (Appeals) partly allowed the assessee's appeal. The Revenue's subsequent appeal to the ITAT was also partly allowed by the impugned order dated 10.03.2010.

What were the issues?

The Tribunal had to decide the following issues raised by the Revenue against the deletion of additions by the CIT(A): 1. Whether the CIT(A) erred in deleting the addition of Rs. 86,230/- on account of unexplained cash found from the assessee's residence. 2. Whether the CIT(A) erred in deleting the addition of Rs. 2,10,318/- on account of unexplained cash found from a common tijori. 3. Whether the CIT(A) erred in deleting the addition of Rs. 2,93,860/- made on account of unexplained investment in gold jewellery and diamond found at the assessee's residence. 4. Whether the CIT(A) erred in deleting the addition of Rs. 16,39,107/- made on account of unexplained investment in gold jewellery found from a strong room. 5. Whether the CIT(A) erred in deleting the addition of Rs. 2,31,468/- made on account of unexplained investment in silver ornaments found from a strong room. 6. Whether the CIT(A) erred in deleting the addition of Rs. 3,57,731/- made on account of unexplained expenditure incurred for household expenses. 7. Whether the CIT(A) erred in deleting the addition of Rs. 7,88,442/- made on account of unaccounted expenditure incurred on the marriage of the assessee's daughter. 8. Whether the CIT(A) erred in deleting the addition of Rs. 1,67,290/- made on account of unexplained investment in acquiring household/valuable items. 9. Whether the CIT(A) erred in deleting the addition of Rs. 1,50,731/- and Rs. 83,100/- made on account of unexplained investment in FDRs and accrued interest thereon. 10. Whether the CIT(A) erred in deleting the addition of Rs. 14,34,650/- made on account of unexplained investment in the construction of shops and a residential house. 11. Whether the CIT(A) erred in deleting the surcharge levied, as the Finance Act clearly laid down that surcharge is leviable on the rate prescribed under Section 113 of the Act. Assessee's Contentions: The judgment does not explicitly record the assessee's arguments before the ITAT. However, it notes that the assessee offered explanations which were capable of examination, and the CIT(A) was satisfied with some explanations. Revenue's Contentions: The Revenue contended that the CIT(A) erred in deleting various additions made by the AO on account of unexplained cash, investments in jewellery, household expenses, marriage expenses, household items, FDRs, and construction of properties. The Revenue also argued that surcharge was leviable as per Section 113 of the Act.

Which sections of the Income-tax Act were involved?

Section 260-A,Section 132,Section 158BC,Section 113,Section 4,Section 69B

AI-generated summary — verify with the full judgment below

1 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR :: ORDER :: Commissioner of Income Tax-Central, Jaipur Vs. Pawan Kumar Govadia D.B.INCOME TAX APPEAL NO.83/2010 ... Date of Order :::: 4th August 2010. PRESENT HON'BLE THE CHIEF JUSTICE MR. JAGDISH BHALLA HON'BLE MR. JUSTICE DINESH MAHESHWARI

Mr.K.K.Bissa, for the appellant. <><><> BY THE COURT: This appeal under Section 260-A of the Income Tax Act, 1961 ['the Act'] by the appellant (Revenue) is directed against the judgment and order dated 10.03.2010 passed by the Income Tax Appellate Tribunal, Jodhpur Bench, Jodhpur ['the Tribunal'] in IT(SS)A No.06/JU/2006 for the block period relevant for the assessment years 1997-1998 to 2002-2003 and upto 28.05.2002. Put in brief, the relevant background aspects of the matter are that the respondent assessee is an individual and a partner of the firm M/s. Dhanraj Govadia & Sons. A search and seizure action was carried out under Section 132 of the Act on 28.05.2002 at the residential and business premises of the Govadia Group of which, the assessee is said to be a member.

2 A notice under Section 158BC of the Act was issued to the assessee who filed a return on 10.12.2002 declaring undisclosed income of Rs.15,50,000/- for the block period assessment years 1997-1998 to 2002-2003 and upto 28.05.2002. The assessment proceedings were completed by the Asssessing Officer ('the AO') by the order dated 20.05.2004 while determining total undisclosed income of the assessee at Rs.54,83,230/- Aggrieved by the aforesaid order dated 20.05.2004, the assessee preferred an appeal that was considered and partly allowed by the Commissioner of Income Tax (Appeals), Udaipur ['the CIT (A)'] by the order dated 18.10.2005 wherein the learned CIT (A) granted relief to the assessee on various scores, as noticed infra. Aggrieved by the order dated 18.10.2005 so passed by the CIT (A), the appellant (Revenue) filed an appeal before the Tribunal that has been partly allowed by the impugned order dated 10.03.2010. In the appeal before the Tribunal, the appellant (Revenue) raised different grounds, which have been summarised at the outset by the Tribunal and are reproduced hereunder for ready reference:- “1. On the facts and the circumstances of this case, the learned CIT (A), Udaipur has erred in deleting the addition of Rs. 86,230/- made on account of unexplained cash found from his residence as per annexure-C to Panchnama dated 28/05/2002. 2. On the facts and in the circumstance of this case, the Ld. CIT (A), Udaipur has erred in deleting the addition of Rs.210318/- made on account of unexplained cash found from common tijori.

3.

On the facts and in the circumstances of this case, the learned CIT (A), Udaipur has erred in deleting the addition of Rs.2,93,860/- made in account

3 of unexplained investment in gold jewellery and diamond found at the residence of the assessee.

4.

On the facts and in the circumstance of this case, the Ld. CIT (A) Udaipur, has erred in deleting the addition of Rs.1639107/- made on account of unexplained investment in gold jewellery found from strong room.

5.

On the facts and the circumstance of this case, the Ld. CIT (A), Udaipur has erred in deleting the addition of Rs.2,31,468/- made on account of unexplained investment in silver ornaments found from strong room.

6.

On the facts and in the circumstance of this case, the Ld. CIT (A), Udaipur has erred in deleting the addition of Rs.3,57,731/- made on account of unexplained expenditure incurred for household expenses of the assessee.

7.

On the facts and in the circumstance of this case, the Ld. CIT (A), Udaipur has erred in deleting the addition of Rs.7,88,442/- made on account of unaccounted expenditure incurred on marriage of assessee's daughter.

8.

On the facts and in the circumstance of this case, the Ld. CIT (A), Udaipur has erred in deleting the addition of Rs. 1,67,290 made on account of unexplained

investment

in acquiring

of household/valuable items found during the course of search at the residence of the assessee.

9.

On the facts and in the circumstance of this case, the Ld. CIT (A), Udaipur has erred in deleting the addition of Rs. 1,50,731/- and Rs. 83,100/- made on account of unexplained investment in acquiring of FDRs and accrued interest thereon respectively.

10.

On the facts and in the circumstance of this case, the Ld. CIT (A), Udaipur has erred in deleting the addition of Rs. 14,34,650/- made on account of unexplained investment in construction of shops and residential house.

11.

Ld. CIT (A) has erred in law and facts while deleting the surcharge levied as the finance Act clearly laid down that the surcharge is leviable on rate prescribed U/S 113 of the Act. Section 113 prescribed rate for block period only. The rates for block period would be governed by charging section 4 of the Act, which says that rate prescribed under central Act would be applicable to income of previous year.” In relation to grounds Nos.1 and 2 relating to unexplained cash found respectively at the residence and in 4 common Tijori, the Tribunal, after examining various aspects of the matter, found it justified to remit the matter to the AO for proper adjudication. The Tribunal said,- 13. ....We, therefore, consider it proper and reasonable to remit the matter back to the Assessing Officer to consider the explanation of the assessee in right perspective and if need be, take material as may be adduced on record by the assessee and examine the claim on merits and in accordance with law. He shall also allow credit of reasonable savings including pin money of various family members and Stridhan with the ladies of the family etc. while adjudicating the issue in remand proceedings. He shall also ensure that the cash available with partnership firm as per their books of account and with various other family members that is being claimed forming part of the aforesaid amount of Rs.3,00,161/- is not claimed to have been utilized for explaining the formation of other assets found as a result of search or otherwise. The Assessing Officer shall also ensure that the part of the undisclosed income of Rs.8,16,000/- fallen to the share of the assessee declared in the return of undisclosed income, is not brought to tax again on account of unexplained cash to that extent. Ground No.1 & 2 in appeal stand answered accordingly.” In relation to grounds Nos.3,4 & 5 relating to different jewelleries/ornaments, the Tribunal found procedural lapses on the part of CIT (A) while accepting the contention of the assessee and again considered it proper to restore the matter to the file of AO for proper verification and decision. The Tribunal said,- “9. The ld. CIT (A) also did not consider the applicability of section 69B for unexplained investment found and assessable as undisclosed income under Chapter XIV-B, but the surrender made by various family members at the dictates of their head of the family and in order to maintain harmony in the family, stood accepted even though such surrendered amount was not, in fact, the income that could be assessed as their undisclosed income in their hands but was subsequent amount of appropriation that at best could be taken as application of income of those persons, who in fact, have earned and as such, such unexplained investment could be deemed to be their undisclosed income. There are, thus, serious procedural lapses committed by the ld. CIT (A) in accepting the correctness of the annexure 5&6 on the basis of 5 which additions have been deleted whereas correct and complete facts in that regard were neither laid on record nor enquired by him. We, therefore, consider it proper and justified to set aside his decision with respect to gold ornaments and likewise for silver ornaments as well and restore the matter to the file of Assessing Officer so that the assessee has an opportunity to put up his case before him alongwith documentary evidence to the satisfaction of the Assessing Officer, who after making verification of facts shall reach a conclusion in accordance with law. Accordingly, this issue is restored to the Assessing Officer and the respective grounds Nos. 3, 4 & 5 raised by revenue in appeal, stand allowed for statistical purposes only.” In ground No.6 relating to addition on low house hold withdrawals, though the Tribunal found CIT (A) not justified in deleting whole of the addition but at the same time, found the AO's estimate on undisclosed income to be excessive and unreasonable; and proceeded to work out the annual drawings on the basis of the facts on record so as to reach to the figure of undisclosed income; and modified the order of CIT (A) accordingly. In relation to ground No.7 pertaining to unaccounted expenditure incurred on marriage of the assessee's daughter, the Tribunal modified the orders of the subordinate authorities and sustained addition to the tune of Rs.2,25,000/- with reference to the statement of assessee and other co-related evidence. In relation to ground No.8 pertaining to unaccounted expenditure on valuable items, the Tribunal did not agree with the total deletion ordered by the CIT (A) but considered it proper to remit the matter to AO for necessary factual enquiry as to whom such assets belong to and for ensuring against double taxation. The Tribunal while making observations on the 6 safeguards for the Department and for the concerned persons said,- “20.

We have heard the parties and perused the entire material on record. The ld. CIT (A) accepted the disclosure of undisclosed income on the basis of suo moto allocation made by various family members in the return of undisclosed income filed for the block period. This neither factually nor legally is correct in view of the fact that the undisclosed income on account of household items/ valuables has to be ascertained in the hands of the individual assessee to whom such household items belong. The undisclosed income so determined and thereafter allocation of such undisclosed income in any other hand would only be application of that income. We, therefore, set aside the order of ld. CIT(A) and remit the matter back to the Assessing Officer so that undisclosed income determined on the basis of factual finding of the facts as to whom such assets belong is first done and thereafter bring undisclosed income to tax. He shall ensure that any amount forming part of such undisclosed income determined shall not be added twice. It, however, transpires that some of the individuals in this group have declared their undisclosed income on the basis of allocation made at the dictates or upon some private understanding between the family members and did not consider the fact that the undisclosed income so declared is neither their earned income nor deemed income. If their case is that, they committed a mistake in making wrong disclosure to that extent, it shall be open for them to get the mistake corrected from the stage they committed such mistake in the light of judgment in the case of Ramesh Chandra & Co. vs. CIT(1987) 168 ITR 375 (Bom.).” In relation to ground No.9 pertaining to FDRs and interest thereon, the Tribunal found the matter requiring no interference while saying,- “23.

We have heard the parties with reference to the material on record. The assessee had offered explanation which was capable of examination. The Assessing Officer, however, failed to examine the explanation of the assessee with respect to the FDRs. The ld.CIT(A) examined the source and was satisfied about the explanation of the assessee. He, thus, deleted the addition on appreciation of facts, which needs no interference. Accordingly, ground raised in appeal by the Revenue stand rejected.”

7 In relation to ground No.10 pertaining to unexplained investment in construction of shops and residential house, the Tribunal found the order of CIT (A) silent on the material aspects and in the totality of circumstances, considered it proper to remit the matter to the AO while observing,- “27.

We have heard the parties and have perused the material on record. The ld. CIT(A) made no reference to any material from which it could be discerned that the approved valuer estimated the cost of construction of the assessee's residential property in a harried and haphazard manner and made no verification of the actual cost of material and other relevant evidence. The ld. CIT(A) also did not make any reference to such law that permits variation of 10% in the cost of construction claimed and estimated by the registered valuer. Any discount that can be given is on the basis of appreciation of facts, vis a vis, type of construction, quality of material used and the area in which property is constructed and other relevant factors relating to the actual cost of construction. The order of the ld. CIT(A), however, is silent on all these aspects. The ld. CIT(A) also did not indicate as to how one property that came into consideration of the ld. Assessing Officer is to be taken as two properties. No municipal number or property identification as such has been spelt out in his order before recording a finding that there are two properties and not one for which addition of Rs. 14,34,950/- has been made as undisclosed income on account of unexplained investment in construction of property for the period as under forming part of the block period. In any event, the addition as unexplained investment in the property cannot be made dehors material and it is also correct that the Assessing Officer cannot estimate the cost of construction of the properties as he is not an expert for making comment on technical matters in view of the decision of Hon'ble Supreme Court rendered in allowed to the assessee.” The Tribunal further proceeded to allow ground No. 11 with reference to the decision of the Hon'ble Supreme Court in the case of CIT vs. Suresh N.Gupta: (2008) 214 CTR 274. 8

The appellant (Revenue) seeks to question the order so passed by the Tribunal particularly in relation to the grounds that have not been allowed or that have been decided partly against it by the Tribunal and substantial questions of law have been suggested in that regard. Having heard the learned counsel for the appellant and having perused the material placed on record, we are clearly of opinion that none of the grounds suggested could be said to be leading to any substantial question of law worth consideration in this case. Hereinabove, we have referred to all the grounds that were raised before the Tribunal and the summary of the findings of the Tribunal. In our considered opinion, every aspect that is sought to be questioned in this appeal essentially relates to the question of fact. The Tribunal in its considered decision has dealt with each and every item and ground in meticulous details; and we find absolutely no reason to show interference in this case at the instance of the appellant (Revenue) particularly when the matter relates only to the questions of fact and no case of perversity is made out. In relation to the grounds on which there are concurrent findings by the CIT (A) and the Tribunal, there does not arise any question of law what to say of a substantial one. In relation to some of the items like expenditure on household and on marriage, the Tribunal has consciously modified the order of CIT (A) after proper appreciation of the record. In relation to some of the other grounds like unexplained cash, jewelleries/ornaments, investments in construction of house

9 and renovation of shop, and valuable items, the Tribunal has consciously taken note of all the facts and, after recording the necessary findings, has remitted the issues to the AO for further enquiry and final conclusion. The matters therein also relate to the questions of fact. Then, the order remitting some of the relevant questions for enquiry does not finally decide the rights of the parties. It has only afforded an opportunity to the assessee to place its case before the AO and to get the issues tried in accordance with law. It cannot be disputed that the Tribunal while exercising the appellate powers has the juri iction to remit the question/s to AO or to the First Appellate Authority as it may deem fit and proper depending upon the facts of each case. In such circumstances, if in the facts of this case, the Tribunal formed an opinion to remit some of the questions to AO for re- determination, no fault can be found in its approach. No substantial question of law is made out in this case within the meaning of Section 260-A of the Act.

The appeal fails and is, accordingly, dismissed.

(DINESH MAHESHWARI),J. (JAGDISH BHALLA),CJ. MK

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