TaxTMI 
TaxTMI 
2015 (4) TMI 269
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....irming the quantum of agricultural income based on inaccurate method of calculating the same?" 3. Before we address ourself on the questions, we may briefly state the facts as under:- 4. The common facts are that the search operations were conducted by the Income Tax authorities under Section 132 of the Income Tax Act (hereinafter referred to as the 'Act') on 26.09.1996 at the residential as well as business premises of various members of the group resulting, inter alia, in seizure of documents and records. Various concerns of the Group were engaged in the business of manufacture of ceramic tiles and food products etc. The members of the appellant - HUF are the real brothers being sons of Shri Devrajbhai Vachhani and the details thereof, can be summarised as under:- "1. Krishnadas D. Vachhani (appellant of Tax Appeal No.326 of 2002) (hereinafter referred to as Krishnadas); 2. Maganlal D. Vachhani (appellant of Tax Appeal No.327 of 2002) (hereinafter referred to as Maganlal); 3. Pravin Kumar D. Vachhani (appellant of Tax Appeal No.328 of 2002) (hereinafter referred to as Pravinkumar); 4. Bhagwandas D. Vachhani (appellant of Tax Appeal No.324 of 2002) (hereinafter r....
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....nal at paragraph Nos.6 to 10. The relevant for ready reference can be reproduced as under:- "6. ..... We may make a brief reference to such statements to bring out salient facts relevant for the present appeals At page-92 of the paper book appears the statement of Shri Maganlal Vachhani recorded on 27.6.96. In answer to question No.3 Shri Maganlal Vachhani stated as under: A.3. In this connection I have to state that it is very difficult for us to exactly identify the portion of the agricultural income which is not actually the agricultural income because our family members have been doing this for last many years, however, I admit that minimum of Rs. 1.75 crores of our unaccounted income has been introduced to our books of accounts and returns of income in the form of agricultural income, this amount is to be collaborated with the assets generated out of these funds in the respective years which we shall verify on scrutiny of our books of accounts. 7. Shri Krishnadas D Vachhani vide his statement dated 27.6.96, placed at pages 88 to 91 recorded at the business premises of M/s.Western India Ceramic P.Ltd., admitted that non-genuine agricultural income was to the tune of Rs....
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....rious lease lands in Chokari. Kindly give the bifurcation of the basis on which agricultural income was from the above land? Ans. 20% of our agricultural income shown is from land owned by us at Nagvadar, Upleta and remaining 80% is from leaseland at Chokari. We do not have any record regarding the basis of bifurcation of this income. However, the above approximation is on the basis of area of land at both the above places. 9. The Revenue Authorities have made detailed inquiries with regard to the ownership and cultivation of agricultural lands wherefrom agricultural income has been claimed by five HUFs of the group. There are mainly three categories of agricultural lands wherefrom agricultural income has been claimed by the five families. (1) Agricultural income from lease land at Chokari and Kharkhadi villages (2) Agricultural income from leased land at Upleta/Junagadh (3) Agricultural income from lands owned by the HUF at Nagvadar/Upleta. 10. With regard to the leased lands at Chokari and Kharkhadi Villages, Shri M D Vachhani in his statement recorded on 26-6-96 claimed that the HUFs have taken on lease a vast track of agricultural land measuring about 600 bigh....
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....income." 7. It appears that the A.O. found that the claim based on the lease land was non-genuine. It is true that certain copies of the lease deeds in support of the claim were produced before the A.O. but the A.O. noticed that no proper addresses of the land owners were given and further that the original lease deeds could not be produced for verification. No record of expenses incurred in respect of agricultural inputs or day to day expenses or record pertaining to the sale of the agricultural produce was available with said Vachhani family. Further, spot inquiries made by the A.O. from Upleta reveal that no such lands were leased out to the aforesaid five HUFs of Vachhani family and the claim was found to be false. 8. It further appears that before the Tribunal, learned counsel for the aforesaid appellant-HUFs did concede that Vachhani family had not taken any land on lease basis either in Chokari or Karkhadi or in Upleta, as falsely claimed before the Income Tax authorities. The said part of the question made is recorded by the Tribunal at paragraph No.11.1 in the impugned order. It further appears that before the Tribunal, the question was agitated regarding the extent ....
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.... surfaced for the first time in the books of accounts of HUFs and their various bank accounts, the entire such non-genuine agricultural income is treated as unexplained and undisclosed income of HUFs and the tax assessment was made on substantive basis of the respective HUFs. 10. However, while making block assessment in the case of aforesaid seven companies, A.O., made protective assessment by bifurcating the aforesaid aggregate addition of Rs. 7,16,52,533/- in proportion to the turnover of the respective companies. 11. Against the aforesaid assessment by the A.O., on substantive basis in the cases of all the aforesaid five HUFs as well as on protective basis in the cases of the aforesaid 7 companies, appeals were preferred before the Tribunal. Before the Tribunal, on behalf of the HUFs, it was contended that the quantum of addition on account of the inflation of agricultural income was not properly made, whereas on behalf of the revenue, it was contended that since unexplained investments in the form of bank deposits are appearing in the Bank Accounts of the HUFs, the substantive additions has rightly been made in the HUFs cases under the provisions of Section 69 of the Act....
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....filing the returns of income as well as while filing the appeals before the Tribunal. The Tribunal also found that during the search operations, the Directors gave numerous statements, which were categorical and unequivocal, on sworn testimony to the effect that they have indulged in under-invoicing of sales and inflation of expenses in the cases of group Companies, yet while filing the returns in the cases of group Companies on one hand as well as HUFs on the other, such undisclosed income has not been reflected. The Tribunal ultimately formed the opinion that the Assessee - HUFs have failed to discharge onus under Section 69 of the Act and, therefore, A.O., was fully justified in holding that no evidence has been furnished during the assessment proceedings of 5 HUFs for linking the cash deposits with the income and funds of the Companies of the group. The Tribunal also found that in view of the fact situation on record income has to be assessed substantively in the hands of the HUFs in the light of realities and actualities of the situation hereunder the assessee HUFs have received the income by utilizing instrumentality of corporate entity as mere puppets. The Tribunal also reco....
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.... submitted by learned counsel Mr.Soparkar, minimum 10% rise or, in any case, more agricultural income than assessed by the A.O. as well as the Tribunal was required to be assessed and, therefore, this Court may consider in the present appeals. The second limb of argument of learned counsel Mr.Soparkar was that the Tribunal has totally ignored the evidence on record through the statements of Vachhani brothers that the amount which was deposited in the respective bank account of the HUFs. was on account of under invoicing of sales of products and over invoicing of the capital goods of the respective companies and, therefore, in his submission, if the income were as that of the companies, liability to pay tax could be of the companies and not of the HUFs., in whose bank accounts, money was found. As per learned counsel Mr.Soparkar, once the income was earned by the company, the aspect of diversion of the amount would be totally irrelevant and he relied upon the various decisions to show that once the income is earned, irrespective of the aspect of money diverted to any third party or any person, the liability would be of the party, who earns the income. In his submission, there was no....
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....e inconsequential. 18. However, Mr.Bhatt, learned counsel for the Revenue did contend that the Tribunal, even on facts, had found that the corporate entity of the so called companies was dummy so far as the amount deposited in the HUFs.' accounts are concerned and, therefore, the Tribunal rightly found it proper to lift the corporate veil as the so called companies, who were shown as the mask for the amount in question, the explanation has been rightly not accepted by the Tribunal and as the substantive assessment was maintained in the cases of the HUFs., the protective assessment in cases of the company has rightly been set aside by the Tribunal. He, therefore, submitted that all the appeals deserve to be dismissed. Mr.Bhatt, learned counsel for the Revenue also contended that there was no satisfactory material or no material whatsoever was produced by the co-relating to the entries in the books of account of the company with the amount deposited in the bank account of the HUFs. from time to time and, therefore, in absence of such evidence, it cannot be said that the findings recorded by the A.O. as well as by the Tribunal, could be said as perverse or contrary to the record. ....
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....(1965) 57 ITR 532. But, in view of Section 68 of the Act, where any sum is found credited in the books of the assessee for any previous year the same may be charged to income tax as the income of the assessee of that previous year if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory. In such case there is, prima facie, evidence against the assessee, viz., the receipt of money, and if he fails to rebut, the said evidence being unrebutted, can be used against him by holding that it was a receipt of an income nature. While considering the explanation of the assessee, the Department cannot, however, act unreasonably. (See : Sreelekha Banerjee's case (1963) 49 ITR (SC) 112 at page 120." 22. The aforesaid shows that the burden would be upon the Assessee to give explanation and the Assessing Officer has to consider the explanation reasonably. The relevant aspect is that so far as the H.U.F. is concerned, it is not at all maintaining any books of account. Therefore, deposit of the amount in the respective bank accounts of the H.U.F. may be required to be considered by showing the corresponding entry ....
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....No.26, it was observed by the Apex Court, inter alia, as under:- "26. To say the least the approach of the High Court was improper. It is the obligation of the Courts of law to further the clear intentment of the legislature and not frustrate it by excluding the same. This Court in a catena of decisions held that where findings of fact by the lower appellate Court are based on evidence, the High Court in second appeal cannot substitute its own findings on reappreciation of evidence merely on the ground that another view was possible." 24. In our view, as observed by us earlier, the findings of fact arrived at after considering the material on record with the reasonable prudence would be beyond the scope of judicial scrutiny in the present appeals which is limited to the substantial questions of law. In our view, it cannot be said that formation of opinion by the A.O. as well as by the Tribunal upon the facts on record, was not with the reasonable prudence which was expected to be was not applied more particularly, in view of the fact that vague statement of getting the amount from the under invoicing of the sales or over invoicing of the expenses or over invoicing of the capi....