TaxTMI 
TaxTMI 
1997 (3) TMI 610
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....y and also had not been given before the A.C. The assessee claims to have deducted his personal drawings out of the total profit of the firm to arrive at a figure of ₹ 1,38,412, which is not possible to believe as the assessee is only a partner in the firm, at least officially. Also the story regarding the personal drawings and dates of repayments selected by the assessee on the basis of their auspiciousness is not possible to believe. In any case the CIT (Appeals) did not allow the A.C. an opportunity to cross-examine the assessee on this explanation given at appeal stage before the CIT (Appeals)." 2. We have heard the learned D.R., as well as assessee's counsel and before elaborating their respective stands, we would like to extract the facts necessary for the disposal of the issue before us. 3. The facts of the case are that the assessee was a partner in a firm styled as M/s. Gem India Manufacturing Co. having 15% share. The firm's business was that of cutting and polishing of diamonds. The appellant-assessee as well as the firm were maintaining their accounts for the purpose of income-tax on the basis of Samvat Year and therefore, their previous year relevant for t....
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....paper. It is clear that assessee does not want to give correct fact about that paper and in view of this fact, I hold that the paper contains such transaction which the assessee does not want to disclose. Since that paper contains income of the assessee, I take the relevant income for tax purpose. As discussed above, the papers shows commission of ₹ 1,77,052 for the period from Jan. 85 to Dec. 85. I hold that this income is assessable in the hands of the assessee for the assessment year 1986-87. Besides, the amount of ₹ 1,50,000 on which interest of ₹ 11,100 has been shown, I hold that the amount of ₹ 1,50,000 also represent undisclosed income of the assessee." 5. The assessee agitated the addition before the CIT (Appeals) and explained the various figures on loose paper 44 as per his written reply dated 2-2-1990 filed before the CIT (Appeals) which is in the following form: "Shailesh S. Shah, 7, Hill View, 15, Ridge Road, Bombay-400 006. Date: 2-2-1990. The Commissioner of Income-tax (Appeals)-IX, Bombay. Dear Sir, Re: Appeal No. CIT (Appeals) Ward-7/71/89-90 for Assessment year 1986-87 The learned Assistant Commissioner of Income-....
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....cal production figure of the firm M/s. Gem India Manufacturing Co., of the calendar year 1985. I am enclosing the summary of monthwise production details, labour charges paid, profitability etc. of my firm for the relevant period marked Annexure 'C'. 2. Labour Charges ₹ 44,26,304. This figure represents the actual labour charges paid by the firm during the relevant period as per Annexure 'B'. 3. At 4% -Rs. 1,77,052. This is the working of average profit earned in the industry which is in conformity with the book results of the Firm for the relevant period as can be seen from Annexure 'C'. 4. Less -Withdrawals ₹ 38,640. This is the actual figure of my personal withdrawals for the year 1985 from M/ s. Gem India Manufacturing Co. I am enclosing the extracts of my Capital Account for the Calendar year 1985 marked as Annexure 'B'. Incidentally I follow the Samvat Year for the purposes of my tax Assessments. 5. Rs: 1,38,412. This is the balance drawn after deducting my withdrawals for the relevant period. 6. ₹ 1,50,000. This is the figure which I am intending to borrow. I was informed by my financial partners that they intended to wind up the operati....
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....uspicion however strong cannot take place on proof. The learned Assistant Commissioner did not bring any evidence but for a scrap sheet of paper in order to arrive at conclusion. The figures appearing in this page are mere jointings which were explained to the learned officer that these are working in respect of project in contemplation. It will be observed from records that none of my partners have confirmed any such arrangement of my receiving any income over and above my share of profit much less my earning commission @ 4% as concluded by the learned Assistant Commissioner. From the above I submit that if at all I was entitled to commission as concluded by the Assistant Commissioner of Income-tax it could not be for one solitary year. I have been a partner since 1981. My assessment records are clear and no addition of this manner has ever been made in my assessments. All my investments and assets have been disclosed by me correctly and at the time of action under section 132, no assets as valuable were seized as unexplained. I therefore once again pray before your honour that trust my above submission in regard to page at serial No. 44 are based on the best recollections I....
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....st the CIT (Appeals)'s decision to consider the fresh explanation without giving the Assessing Officer an opportunity of being heard. This objection was further supported by the submission that during the assessment proceedings, the assessee had not submitted the explanation which was submitted before the CIT (Appeals) and the same being on quite different footing amounted to fresh material and the CIT (Appeals) should not have considered the same without giving the Assessing Officer an opportunity of being heard. On merits, the learned D.R. submitted that the ownership of the paper having been accepted by the assessee, it was his onus to explain the contents fully and truly and to the satisfaction of the Assessing Officer, which he failed to do and under these circumstances, the Assessing Officer was justified to consider the entries on this paper as assessee's income. He, therefore, supported the order of the Assessing Officer. The learned D.R. put great emphasis on the entry' "at 4% = 1,77,052. From this entry, the learned D.R. submitted that if the figure of 44,26,304 appearing just above this entry and below the words "Labour charges" was the amount of labour ch....
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.... to the figure of 1,50,000, the assessee's counsel submitted that the entry against this figure and the entry showing balance of 40,000 can lead to two presumptions; namely, either the amount of ₹ 1,50,000 represents the loan or advance given by the assessee against which 1,10,000 might have received back and that is why 40,000 has been shown as balance or the figure of 1,50,000 might represent loan or advance taken by the assessee but in both the cases, the amount of ₹ 1,50,000 cannot be assessed as assessee's income and that is so because there is no date against this figure as to when it was given or it was taken. Similarly, he submitted that the figure of 11,100 which is below the word "interest" cannot be considered as assessee's income. Concluding his submissions, the assessee's counsel submitted whatever may be case, none of these figures can be taxed in assessee's hand as his undisclosed income for the assessment year 1986-87 as the Revenue has not brought any material except rejecting the assessee's explanation; on record to prove that these figures represent assessee's income. On the point of onus, the assessee's counsel submitted that it is well-set....
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....oned any evidence or material, as to how or on what basis the figures referred to above were considered as assessee's income, we are of the opinion that the Assessing Officer has not invoked any of the deeming provisions of sections 69 to 69D and therefore, it is clear that these figures have been considered as assessee's income under the substantative provision of the Income-tax Act. Under the substantative provision of Income-tax Act, it is now settled law that every receipt is not necessarily or cannot necessarily be income in the hands of the recipient and therefore, the question whether any particular receipt is income or not depends. On the nature of the receipt and true scope as well as the fact of the relevant taxing provisions -as has been held by the Hon'ble Mum,hai High Court in the case of Mehboob Productions (P.) Ltd. v. CIT [1977] 106 ITR 758. In view of this settled proposition, it follows that Revenue can tax only those receipts, which, first have been proved to be income in the hands of the recipients and secondly, the same have to be proved as non-exempt from tax. We are therefore, of the opinion that it is Revenue's onus, before assessing any receipt as taxable i....
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.....1 If the figure of 1,77,052 is taken as commission, as has been impressed upon by the Revenue, then also, according to us, this figure cannot be assessed as assessee's income for the assessment year 1986-87 because, (a) there is no evidence as to how this figure is "commission" and not anything else, (b) there is no evidence as to whether the assessee had received the amount during this period and if read, then when. On the other hand, the inclusion of the balance out of the figure of 1,77,052, i.e., of a figure of 1,38,412 (1,77,052 -38,640) at the bottom of this loose paper goes to show that the figure of 1,38,412 was yet to be received. In view of this, we are in agreement with the submission of the assessee's counsel that even if it is assumed that this figure represents commission due to the assessee then also, the figure cannot be taxed in this year because if it is taxed in this year then in absence of exact date of receipt, it will be deemed to have been taxed on mercantile system which is not justified as the Revenue has nowhere claimed that the assessee computing his income on accrual basis. On the other hand, the assessee's source of income being share fro....
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....resaid probabilities, one thing has become clear that except suspicion, there is no evidence in favour of the conclusion arrived at by the Assessing Officer or the one canvassed by the learned D.R. and, as it is settled law that if the decision of the Tribunal is based on suspicions, conjectures and surmises or on no material or partly on evidence and partly en suspicion; same is likely to be set aside by the higher courts. We are therefore, of the opinion that the findings of the Assessing Officer are based only on suspicion and suspicion however strong it may, cannot take the place of proof. So, we are unable to sustain the findings of the Assessing Officer. In support of this finding, we can usefully seek support from the following decision of the Hon'ble Supreme Court:- (i) In the case of Dmar Salay Mohamed Sait v. CIT [1959] 37 ITR 151 , where the Hon'ble Apex Court on the facts and circumstances of the case held at page 170 as under: "We are aware that the Income-tax Appellate Tribunal is a fact finding Tribunal and if it arrives at its own conclusions of fact after due consideration of the evidence before it this court will not interfere. It is necessary, however, th....