TaxTMI 
TaxTMI 
2004 (9) TMI 332
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....der section 132(4) of the Act, out of Rs. 2,47,294, an amount of Rs. 47,294 was claimed to be of the assessee's wife Smt. Savitri Devi and the balance of Rs. 2 lakhs as the amount belonging to M/s. Vaishali Enterprises. The Assessing Officer did not accept the explanation with respect to amount of Rs. 2 lakhs and treated the same as income from other sources. In the original assessment, the ld. Commissioner of Income-tax (Appeals) vide his order dated 5-3-1990 remanded the matter back to the Assessing Officer with a direction to re-examine the case and give a fresh finding by observing as under: - "I feel that the matter needs to be examined once again by the ld. Assessing Officer in the light of the above facts and then a fresh finding is to be recorded. Obviously, the Department is not able to make out a case that either the on money earned by the appellant itself as its own share amounting to Rs. 1,22,659 and taxed in that case for assessment years 1984-85 to 1986-87 has been utilized prior to 9-1-1986 or adjustment has been demanded and allowed for the same against seized cash in any other assessee of this group, then certainly the adjustment of Rs. 1,00,000 demanded in the ....
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....sp; Rs. 57,568 1986-87 Rs. 52,173 ----------- Rs. 1,22,659 ------------------------------------------ Out of this the Tribunal has considered that set off for the amount of Rs. 4,635 has already been given and the balance of Rs. 1,18,000 was available with the assessee, out of which the assessee claims that Rs. 1 lakh needs to be set off from the cash of Rs. 2 lakhs found from him. The authorities below have erred in not accepting the said explanation. 4. The second portion is claimed to be on account of Rs. 1 lakh which is available out of the amount collected for its Principals GPL A statement of account was also found at annex. G-2/90 & 91. The account was from April to October and this reveals that the assessee collected Rs. 1,64,924 for the month of Sept., 1985.....
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....s. 2,56,689 the amount of Rs. 2 lakhs belonged to M/s. Vaishali Enterprises, Rs. 9,395 belonged to M/s. Bharosa Agarbatti and balance is of his wife. It is an admitted position that the partnership of M/s. Vaishali Enterprises is governed by a deed of partnership duly constituted by the partners and also that the share of profits or losses of the firm are distributed/credited to the accounts of the partners at the end of each year. The ld. Commissioner of Income-tax (Appeals), while setting aside the assessment vide order dated 5-3-1990 has observed that the department is not able to make out a case that either the 'on money' is earned by the appellant itself as his own share amounting to Rs. 1,22,659 and taxed for the assessment years 1984-85 to 1986-87 and has been utilized prior to 9-1-1986 or adjustment has been demanded and allowed for the same against seized cash in any other assessee of this group, then certainly the adjustment of Rs. 1 lakh demanded in the appellant's case is to be allowed. From such observation of the ld. Commissioner of Income-tax (Appeals) it is revealed that a fresh finding was to be recorded by the Assessing Officer to the fact that as to whether the a....
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....es, besides on fact that profits/losses of the business stood distributed amongst the partners at the end of each of the year in terms of partnership amongst themselves. We are, therefore, not inclined to agree with the assessee's explanation or claim that amount of Rs. 1 lakh belonged to M/s. Vaishali Enterprises out of a sum of Rs. 2 lakhs found from his custody, control and possession. The same, therefore, remains unexplained and the Assessing Officer was justified in treating the same as undisclosed income from other sources forming part of the total of Rs. 2 lakhs. 7. The assessee has also claimed that the balance of Rs. 1,00,000 belongs to M/s. GPI Ltd. as per letter placed at APB 112. This letter reads as under: - "M/s. Vaishali Enterprises, Opp. Plaza Cinema, Ajmer-305 001. Dear Sir: This has reference to your letter dated 7-1-1992 requesting us to certify the payments received during September, 1985 to March, 1986. We hereby certify that the company has not received any payment from M/s. Vaishali Enterprises over and above the sale price of cigarettes as per invoices and debit notes raised by the company in that regard during the period September, 1985....
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.... claim that amount of Rs. 1 lakh belonged to M/s. Vaishali Enterprises out of a sum of Rs. 2 lakhs found from his custody, control and possession. The same, therefore, remains unexplained and the Assessing Officer was justified in treating the same as undisclosed income from other sources forming part of the total of Rs. 2 lakhs." 1. after having discussions with my learned brother, record my dissent and reasons for doing so are given in the following paragraphs: 2. Briefly, the facts are that the assessee, an Individual, derives income from business of manufacturing and sale of Agarbatti under the name and style of M/s. Bharosa Agarbatti Works, Ajmer and share income from two Registered Firms. There was a search on Godfrey Philips India Ltd. (GPI for short) group of companies and their associates on 9-1-1986 and assessee being one of the partners in M/s. Vaishali Enterprises, Ajmer, the wholesale dealers of GPI was also covered. During the course of search, a sum of Rs. 2,56,689 was found in cash. Out of this the credit for cash of Rs. 9,395 belonging to M/s. Bharosa Agarbatti Works, was allowed. Out of the balance amount of Rs. 2,47,294, it was explained by the assessee tha....
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....ded by the Tribunal on this issue vide para 9 on page 16 of its order are reproduced as under: - "9.....However, we find some force in the argument of Shri Sogani that some weightage should be given to the additions made by the Revenue on account of 'on money' in the preceding years and in the current years. According to Shri Sogani this works out to around Rs. 1,22,000 out of which we have already given a set off of Rs. 4,635 while dealing with Ground No. 2. Therefore, a balance of about Rs. 1,18,000 may be available to the assessee for being set off against these additions. However, since we have got no definite information about the fate of those additions, particularly for the preceding years we direct the Assessing Officer to verify if those additions have become final or not. In case they have become final, the assessee may be allowed a deduction from these additions for amount upto Rs. 1,18,000 depending as to how much additions have been finally sustained out of those additions." 5. Following the directions of the CIT(A) as per his order dated 5-3-1990, the Assessing Officer has completed the setting-aside assessment vide order dated 28-2-1992, passed under section 14....
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.... all the facts of the case the Assessing Officer was justified in adding the amount of Rs. 2,00,000. No interference is called for." 7. Now, the assessee is in appeal before us. With regard to the addition of Rs. 1,00,000, the ld. counsel for the assessee submitted that it is out of earning of on money assessed in the hands of the firm M/s. Vaishali Enterprises, in which the assessee is one of the partners in the assessment years 1984-85, 1985-86 and 1986-87, aggregating to Rs. 1,22,659. He vehemently argued that despite the clear direction of the CIT(A) in his order dated 5-3-1990 that if the adjustment of the said amount has not been allowed in any other assessee of this group, then certainly the adjustment of Rs. 1,00,000 demanded in the appellant's case is to be allowed, the Assessing Officer has not allowed the said adjustment and the finding of the Assessing Officer in this regard is not correct as no credit has been given on this amount either to the firm M/s. Vaishali Enterprises or any person, including the assessee in this group of the case. The ld. counsel further submitted that the Tribunal, in the case of Vaishali Enterprises for the assessment year 1986-87, has ....
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....ent was made as a result of the order of the CIT(A), who has set aside the assessment vide his order dated 5-3-1990 with certain specific directions, which we have already mentioned in para 3 of this order. The CIT(A) has not set aside the assessment de novo. When the assessment has been set aside with certain directions, therefore, it was the duty of the Assessing Officer to follow those directions and decide the issue accordingly. Even the Tribunal, in the case of the firm Vaishali Enterprises, has also directed to allow the deduction of Rs. 1,18,000. On the combined reading of the orders of the Tribunal and the CIT(A) dated 24-12-1991 and 5-3-1990 respectively, it is crystal clear that the amount of on money of Rs. 1,18,000 was available with the assessee, who is main partner of the firm M/s. Vaishali Enterprises. Since the ld. CIT D/R has not placed any material as to show that the credit of Rs. 1,18,000 or Rs. 1 lakh, as claimed by the assessee, has already been allowed either to the assessee or to the firm M/s. Vaishali Enterprises or any other assessee of this group, therefore, I am of the view that the Assessing Officer was duty bound to follow the directions of the CIT(A) ....
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....learned brother Accountant Member in para 7 starting from pages 8 to 10 of his order and, accordingly, no interference is called for on this account. 12. In the result, the appeal filed by the assessee is partly allowed. REFERENCE UNDER SECTION 255(4) OF THE INCOME-TAX ACT, 1961 1. As there is a difference of opinion between the Members in the present appeal, the same is required to be resolved by one or more Members of the Tribunal as may be nominated by the Hon'ble President, Income-tax Appellate Tribunal in terms of section 255(4) of the Act. Accordingly, the following questions of difference are referred: - Question per Shri B.R. Jain, AM: "Whether on the facts, whether the finding that the amount of 'on money' of Rs. 1,18,000 available with the appellant can be held as a correct finding despite the Tribunal already having accepted and directed to set off the same in the hands of partnership firm M/s. Vaishali Enterprises or that the view of the ld, Accountant Member is justified in not accepting the explanation or claim of the appellant that the amount of Rs. 1,00,000 found from the appellant is the same and thereby sustained the addition ?" Question per Shri....
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.... for short) and its allied companies and their associates were subjected to search operation under section 132 of Income-tax Act on 9-1-1986. M/s. Vaishali Enterprises, Ajmer was a wholesale dealer of GPI and assessee as a partner of above concern was also searched. A sum of Rs. 2,56,689 was found in cash from the premises. Out of the above sum, Rs. 2,00,000 were claimed by the assessee to belong to M/s. Vaishali Enterprises, Ajmer and lying with him as a partner of above concern. 2.1 The Assessing Officer in the first assessment order did not accept the explanation of assessee and treated Rs. 2,00,000 as income from unexplained sources. On appeal, the CIT(A), vide his order dated 5-3-1990, remanded the case back to the Assessing Officer with the following observations: "I feel that the matter needs to be examined once again by the ld. Assessing Officer in the light of the above facts and then a fresh finding is to be recorded. Obviously, the Department is not able to make out a case that either the on money earned by the appellant itself as its own share amounting to Rs. 1,22,659 and taxed in that case for assessment years 1984-85 to 1986-87 has been utilized prior to 9-1-19....
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....000 depending as to how much additions have been finally sustained out of those additions." 4. When the assessment of the assessee was taken for the second time, the assessee sought to explain that Rs. 1,00,000 out of addition of Rs. 1,22,000 were with the assessee and, therefore, above amount be not treated as cash earned from undisclosed sources. The assessee further placed reliance on the decision of Tribunal dated 24-12-1991, referred to above. The Assessing Officer, in the order dated 28-2-1992, observed that ITAT has already allowed credit for 'on money' earned in assessment years 1984-85 and 1985-86 upto Rs. 1,18,000 with directions to verify the facts and that addition in three assessment years had become final. Therefore, assessee's claim was held to be carrying no weight was accordingly rejected. The Assessing Officer added Rs. 2,00,000 as income from undisclosed sources for cash found with the assessee at the time of search. 4.1 The addition made was confirmed in further appeal by the ld. CIT(A). 5. The assessee then carried the matter in appeal before the Appellate Tribunal. During the course of hearing of appeal, assessee drew attention to order dated 5-3-1990....
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....or addition made, the remedy was available to the said concern. The direction of Tribunal could not be applied in the case of the assessee as Vaishali Enterprises did not make any claim of adjustment before the Assessing Officer or even before ITAT. The claim of the assessee for adjustment was untenable. The Assessing Officer did not say that set off has already been allowed in the hands of M/s. Vaishali Enterprises. He has simply denied the claim of the assessee for the reasons that assessee was not able to link up cash found with him with the 'on money' earned by the firm. With aforesaid observations, the ld. Accountant Member held that addition of Rs. 2,00,000 in the hands of assessee as income from undisclosed sources was fully justified. 7. The ld. Judicial Member, on the other hand, after considering the order of the CIT(A) dated 5-3-1990 and that of the Tribunal dated 24-12-1991, held that assessee was entitled to adjustment of Rs. 1,00,000 with the following observations: "10. We have carefully considered the rival submissions of the parties and perused the material available on record. We find that the impugned assessment was made as a result of the order of the CIT(....
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....r vis-a-vis the Tribunal, was bound by the judgment of the Tribunal and the Assessing Officer should not have tried to distinguish the same on untenable grounds. In this behalf, it will not be out of place to mention that 'in the hierarchical system of courts' which exists in our country, 'it is necessary for each lower tier' including the High Court, 'to accept loyally the decisions of the higher tiers'. It is inevitable in a hierarchical system of courts that there are decisions of the supreme Appellate Tribunal which do not attract the unanimous approval of all members of the judiciary. But the judicial system only works if someone is allowed to have the last word, and that last word once spoken is loyally accepted.' The better wisdom of the court below must yield to the higher wisdom of the court above as held by the Supreme Court in the matter of Asstt. CCE v. Dunlop India Ltd. [1985] 154 ITR 172. Accordingly, the Assessing Officer is directed to allow a relief of Rs. 1 lakh to the assessee on this account and to this extent, the ground taken by the assessee is allowed." In the above back-ground, the difference between the two ld. Members has come up for my consideration. ....
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....und with the assessee at the time of search. This way, order of the ld. Accountant Member was supported. 10. After careful consideration of the rival submissions of the parties and in the light of material available on record, I am inclined to agree with the order proposed by the ld. Judicial Member. There is no dispute that M/s. Vaishali Enterprises was receiving 'on money' on sale of cigarettes in cash outside the books of account and for above action, a sum of Rs. 1,22,659 was added in the hands of the firm. The benefit of above addition for explaining available funds was required to be allowed. The assessee had claimed that out of above Rs. 1,22,659, a sum of Rs. 1,00,000 was with him as he was principal partner of M/s. Vaishali Enterprises in dealing with GPI. This claim that the assessee was a major partner has been accepted even by the ld. Accountant Member and the revenue has not controverted this fact by referring to any material on record. It is true that assessee has to prove, as a matter of fact, that income earned by firm was lying with him and was found in the shape of cash at the time of search. A probable case has been established by the assessee and this is evid....