TaxTMI 
TaxTMI 
TaxTMI 
2003 (5) TMI 209
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....e appellants. Suresh Kumar Agarwal and Satish Kumar Agarwal are also appellants before us along with Smt. Santosh Kumari wife of Suresh Kumar Agarwal. There was a firm in the name of M/s Om Prakash Suresh Kumar in which Om Prakash and Suresh Kumar were said to be partners. After the death of Om Prakash, Suresh Kumar became the sole proprietor of that firm and M/s Om Prakash Suresh Kumar is also one of the appellants. Suresh Kumar HUF and Satish Kumar HUF were also partners in a firm Healthways Dairy Products (hereinafter referred to as "HDP"), which was constituted w.e.f.1st April, 1990, and other two partners of the firm were Rajendra Singh HUF and Surendra Singh who were from Paras group. All these four were having equal shares of 25 per cent and deriving income from manufacturing and sale of dairy products in the factory of HDP located at Gulawati and its head office was at Connaught Circus,New Delhi. 3. On14th June, 1996, there was a search operation under s. 132(1) of the Act, carried out by the Department in Om Prakash Suresh Kumar group of cases as well as search was conducted at Connaught Circus office of HDP. From the residence of Suresh Kumar, besides other items/assets,....
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.... by Suresh Kumar in the finance business for which an amount of Rs. 85 lakhs had already been offered for taxation in the hands of M/s Om Prakash Suresh Kumar. It was further submitted that entire amount of Rs. 139 lakhs could be substituted for the amount offered as undisclosed income in the return filed by said firm M/s Om Prakash Suresh Kumar and it will not be of much importance as income either can be assessed in the hands of assessee or in the firm M/s Om Prakash Suresh Kumar because rate of tax for both the cases will be 60 per cent and Revenue is not to suffer any loss. 6. To substantiate the plea that amount withdrawn by Suresh Kumar from M/s HDP was utilised for finance business, the assessee submitted fund flow statement drawn on the basis of seized material in respect of income from Annex. A3 and A6 and other annexures and deployment of cash in the finance business. It was also contended that assessee was having Rs. 16.03 lakhs as undisclosed income on 1st April, 1985 prior to block period also and that amount was initially employed by the assessee for finance business as well as for milk product business carried out by this assessee in undisclosed manner without the k....
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....t entire unaccounted operation of the group was covered by the umbrella being formed on the basis of the papers seized at Annex. A3 and A6 at the assessee's residence. The contention was not found acceptable by the AO on the ground that each entity was a separate assessable person and there was no positive evidence to show the flow of funds generated in M/s HDP, was introduced in the business of M/s Om Prakash Suresh Kumar or Satish Agarwal or Laxmi Agarwal or in the case of assessee. AO also noted that contention of the assessee that Suresh Kumar had withdrawn Rs. 1.29 crores from M/s HDP was not acceptable since entry in the said Annex. A3 and A6 clearly linked with M/s HDP. Secondly, assessee had not shown any undisclosed income for the block period based on the entries of A3 and A6. The AO rejected the contention of the assessee and prepared separate peak of investment and interest account in the case of assessee Suresh Kumar and his brother Satish Kumar Agarwal. 9. AO also noted that Rs. 85.88 lakhs were recovered at 42, Bagh Diwar, Fatehpuri, Delhi-6, and another sum of Rs. 72,700 from the same proprietary concern at 58, Bagh Diwar, Fatehpuri. Another sum of Rs. 82,800 was a....
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....e of JMD 51,738 (e) Undisclosed investment in property in Bulandshahr 5,00,000 (f) Interest income on estimated basis 35,960 (g) Undisclosed investment in stock 11,24,500 (h) Presumed business profits of Healthways Dairy Products on the basis of seized material for items mentioned as a, b & c in HDP -- 1,49,44,843 (i) Interest on moneylending business assessed substantively in the hands of Mr. Satish Kumar -- 12,02,500 Sub Total 1,28,77,744 1,61,47,343 11. Satish Kumar Agarwal has also taken the plea that whole of the business belonged to M/s Om Prakash Suresh Kumar but that plea was also rejected. It was concluded by the AO that this assessee was also carrying on separate moneylending business and he worked out the separate peak credit and ultimately an addition of Rs. 85,91,800 was made in the hands of this assessee as undisclosed income. An amount of Rs. 13,52,000 was found and seized from the custody of Smt. Laxmi Agarwal. Smt. Laxmi Agarwal in her statement deposed that the amount was given by her father-in-law Om Prakash but AO did not believe that version and made the addition in the hands of Smt. Laxmi Agarwal as undisclosed income. 12. Addition in the han....
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....mar reveled availability of Rs. 16.03 lakhs as on1st April, 1986, and that firm was carrying on the business of moneylending as well as milk product during the block period. Suresh Kumar was able to procure a licence to manufacture milk products which was a prime commodity as very restricted number of licenses had been issued to different parties. Suresh Kumar came into agreement with Paras Dairy group and formed a firm in the name of M/s HDP in which Suresh Kumar HUF and Satish Kumar HUF were having 25 per cent shares while two members viz., Rajendra Singh and Surendra Singh also became partners of 25 per cent shares each. The contention of the learned counsel was that amount of any premium at the time of sale over and above the printed price would be taken away by Suresh Kumar HUF to the exclusion of members of Paras Dairy Group. The learned counsel pointed out that Suresh Kumar was dealing with the sale of goods of M/s HDP inDelhiand used to collect payment for sale of goods and also making payment of the same for business of the firm. In this process substantial amount as above was being retained by Suresh Kumar alone for his own benefit to the exclusion of other members of the....
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....e amount of capital available to M/s Om Prakash Suresh Kumar, before the block period but later on the volume increased and for this the learned counsel referred to page No. 100--the copy of peak credit balances as per rotational cash book and it is prepared on the basis of seized material recovered at the time of search. Referring to this, the learned counsel submitted that up to financial year 1991-92 the peak was not more than Rs. 15.54 lakhs and it increased to Rs. 45.08 lakhs and it gets corroboration from the amount withdrawn in cash by Suresh Kumar from M/s HDP. Right hand side entries show the amount withdrawn by Suresh Kumar and up to30th Nov., 1992, the same was Rs. 1.29 crores. The amount of peak credit never exceeded this amount but the family members of this group were engaged in the business of moneylending and were getting the amount back. The contention is that as soon as Suresh Kumar withdrew money from M/s HDP, the volume of moneylending business increased substantially. The other circumstances referred to by the learned counsel is that there was no other material detected by the search party which may show that assessee group was in any way engaged in any other u....
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....d counsel also contended that moneylending business was undertaken by Om Prakash in the name of different family members as per his choice by using the family hotchpotch fund and interest in the said business which is Rs. 23.56 lakhs and odd as worked out at page No. 86 of the paper book should be assessed in the hands of M/s Om Prakash Suresh Kumar. The learned counsel also submitted that AO had worked out different peak and investment in the case of Suresh Kumar, Satish Kumar but the fact remains that business was of one family under different names of the family members. To substantiate this fact the learned counsel also referred to the statement of Smt. Laxmi Agarwal who is admittedly wife of Naresh Kumar (deceased son of Om Prakash)--who stated in the statement recorded on the date of search that the amount of Rs. 13.52 lakhs recovered from her house, was the same which was given by her father-in-law Om Prakash from time-to-time during his lifetime. Relevant portions of the statement are appearing at pp. 75 and 78 of the paper book. 18. Learned counsel also pointed out that paper No. 80 is the statement of affairs as on14th June, 1996, as reproduced below: (A) Undisclosed Ta....
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....akhs is not taxable in the block assessment and the same is the case in respect of Rs. 7,35,967 which was cash balance as on14th June, 1997, as per books of OPSK. The contention is that net taxable income of whole of the group comes to Rs. 1,69,87,776 and the same may be assessed. 20. About other grounds of Rs. 5 lakhs in the case of Suresh Kumar as envisaged in third ground of his appeal, the learned counsel mentioned that AO had added this amount as investment made by Suresh Kumar in the purchase of property. The contention is that no property was purchased as the sale-deed was later on cancelled. The necessary affidavit of the alleged seller and other documents are appearing at pp. 126 to 132 of the paper book. 21. The fourth ground in the appeal of Suresh Kumar relates to investment in stock but that is taken care of as is apparent from the statement of affairs reproduced above. About protective addition in the case of Suresh Kumar of Rs. 1,61,47,343 the learned counsel submitted that already amount of Rs. 1,41,18,418 has been confirmed substantially in the hands of M/s HDP by Tribunal Delhi Bench "A" in IT(SS) 129/Del/1997, decided on 29th Sept., 2000 and Rs. 8,26,425 in res....
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..... He further stated that he was earning 10 per cent to 20 per cent of the interest. Learned Departmental Representative also pointed out that other copy of statement of Satish Kumar is appearing at page No. 23 onwards of the paper book filed by the Department. Satish Kumar was specifically put, to question about the amount recovered from the premises of M/s OPSK. He could not say anything about the same and specifically mentioned that he had no knowledge about the said amount nor he ever handled any amount so detected. The learned Departmental Representative pointed out that if there was any business of the family members for common interest, then Satish Kumar must have given all the factual position on the date of search. It is also mentioned that case of the assessee was that Rs. 16.03 lakhs, which was available on 1st April, 1986, was invested in the business of milk products and moneylending then it could not be argued that Rs. 1.29 crores taken by Suresh Kumar, were invested. 24. The other argument of the learned Departmental Representative is that once Rs. 16.03 lakhs were invested as stated by the assessee in business of milk products and moneylending then cash book/peak ch....
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....has all rights to prove that statement so made was not correct on the basis of material as well as facts and circumstances. For this, the learned counsel pointed out to the decision of Pullangode Rubber Produce Co. Ltd. vs. State of Kerala 1972 CTR (SC) 253 : (1973) 91 ITR 18 (SC), wherein it was observed by Their Lordships that admission is an extremely best piece of evidence but it cannot be said that it is conclusive. It is open to the assessee who made the admission to show that it is incorrect. Some other case law to the same effect are in the cases of R.P. Locks Co. vs. Dy. CIT (2000) 67 TTJ (Del) 588, India Seed House vs. Asstt. CIT (2000) 69 TTJ (Del)(TM) 241, S. Arjun Singh vs. CWT (1988) 73 CTR (Del) 37 : (1989) 175 ITR 91 (Del) in which it was laid down that admission is an important piece of evidence but it is not conclusive and it is open to the assessee to show that it is incorrect. 29. Relying upon the case law, the learned counsel pointed out that it is also to be noted that Satish Kumar simply stated to have borrowed funds from market and M/s OPSK is also one of the persons in the market. It is not stated by him that he has earned any undisclosed income himself. F....
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....t is more than sufficient evidence to conclude that amount was actually that of Suresh Kumar and his father. The contention is that whole of the additions are to be deleted. 32. We have heard the learned representatives of both the parties and also perused the material to which our attention was drawn during the course of hearing by them. 33. At the very beginning, it is to be pointed out that M/s OPSK was found carrying on the business of moneylending from 1985 onwards and Suresh Kumar in his statement recorded on various dates had stated that Rs. 16.03 lakhs were available to that firm prior to 1st April, 1986, prior to block assessment period as was evident from A7 and A8, material seized from the assessee and this fact has not been controverted by the Department. Further, the peak credit as given out by the assessee up to4th March, 1992goes to reveal that it was less than Rs. 16.03 lakhs. The peak material as appearing at page No. 100 of the paper book for the period up to4th March, 1992, are as under: Amount (Rs.) Peak credit upto18-7-1990 11,94,423 Peak credit financial year 1990-91 on7-8-1990 15,54,423 Peak credit financial year 1991-92 on4-3-1992 10,18,423 34. The....
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....P. This fact gets corroboration from the admission of Rajendra Singh another partner and who was from Paras group. His statement was recorded by AO on19th June, 1997, and copy thereof is appearing at pp. 87 to 89 of the paper book. He was shown seized material Annex. A3 and A6 as well as month-wise details of P&L a/c as well as balance sheet copy of which is appearing at page No. 97 of the paper book and was asked to explain as to whether these were the duplicate sets of books of account for the period June, 1992 to Nov., 1992. His answer is quite specific that these did not relate to M/s HDP. He brought the account books of the relevant period of M/s HDP and those entries of Annex. A3 and A6 and P&L a/c, etc. were not appearing in the books of account. No other question was put by the learned AO to this partner Rajendra Singh. No other partner was also examined and rightly so as one of the partner admitting that it was he who was indulging in earning undisclosed income out of that underhand transaction earning premium on the sale of milk products to the exclusion of others. Suresh Kumar specifically admitted at the very beginning as is evident from his copy of statement dt.22nd Ju....
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....ncome in M/s HDP came to an end by the month of November, 1992, as after that the Government of India delicensed the milk business which was source of earning undisclosed income. After that volume of moneylending business also substantially fell down and even came to nil. 39. From the above discussion it is to be concluded that seized material is to be read as a whole and in case Department is treating undisclosed income of Rs. 1.40 crores on the basis of Annex. A3 and A6 as well as balance sheet, then the other entries appearing in Annexs. A3 and A6 showing that Suresh Kumar had withdrawn Rs. 1.29 crores out of undisclosed income has to be believed as it stands mentioned in the very said documents. It cannot be overlooked. Second, the Department has not brought anything on record to show that assessee and his family members were having another source to generate funds invested in the moneylending business. Thirdly, the substantial evidence also supported the case of the assessee that as soon as Suresh Kumar started withdrawing funds from undisclosed income of M/s HDP which was in his exclusive control, the volume of moneylending business stands substantially increased as is evide....
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....ber was having another source to generate funds then statement of Satish Kumar that he was borrowing funds from market, will not be so much damaging to the case of the assessee group. The conclusion will be that assessee group was carrying on the moneylending business in the name of different family members out of the funds being withdrawn by Suresh Kumar from M/s HDP as found noted in the Annexs. A3 and A6 referred to above. 41. The other point was that amount withdrawn by Suresh Kumar from M/s HDP was more than Rs. 1.29 crores then volume of moneylending business was not exceeding Rs. 68 lakhs as worked out in the peak statement. In this connection the learned counsel was justified in contending that money cannot be thrown to any one who comes to demand. Persons of credibility are to be chosen and then only amount can be given to suitable person who has capacity to return the amount of loan along with interest. Whatever amount was given, the same was given to correct person and remaining amount remained with them. In the same way as peak credit reveals there was no moneylending business after 1995 and it is not the case of the Department that during search operation any document....
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.... taxed in the hands of M/s OPSK as that firm alone was dealing in all the moneylending business. That firm is no more in existence after the death of Om Prakash which took place prior to the date of search and admittedly Suresh Kumar is the sole proprietor of that firm. The Revenue is not going to suffer as rate of tax is identical in the case of individual as well as in the case of firm in block assessment year. The conclusion will be that assessee Suresh Kumar is to be taxed at an undisclosed income of Rs. 1,69,87,776 and that takes care of the unexplained jewellery in the case of Smt. Bhagwanti Devi and that of Smt. Santosh Kumari. It is also including the unexplained stock, etc. The statement of affairs reproduced above is to be taken as correct. Under these circumstances there remains nothing more to be added in the hands of different persons including Satish Kumar for moneylending business. 43. On the basis of above, the conclusion is that Rs. 1,69,87,776 is treated as undisclosed income and that is to be taxed in the hands of Suresh Kumar who was the person generating the undisclosed income from M/s HDP. The addition in the hands of others namely, M/s Om Prakash Suresh Kuma....