Cash book not found at search produced later was eye wash. Allahabad High Court rejects contention that it was with accountant as generally users take only data
ABCAUS Case Law Citation:
ABCAUS 1192 (2017) (03) HC
The Substantial Question of Law raised:
The appeal was admitted inter alia on the question if the cash book produced was an after thought as no cash book was found either during the course of search or, from the possession of counsel / accountant as claimed by the assessee during search and the cash book produced subsequently was not even supported by vouchers?
Assessment Year : Block period 1.4.1997 to 24.4.2003
Date/Month of Pronouncement: March, 2017
Brief Facts of the Case:
Search proceedings u/s 132 of the Income Tax Act, 1961 (‘Act”) was conducted in the case of the assessee doctor. During the search a large number of bank lockers in the name of assessee and his family members were also searched resulting in seizure of large amount of hard cash and jewellery.
Simultaneously, a survey u/s 133A(1) of the Act was also carried out at the assessee’s clinic. No regular books of account for the current year or for the preceding years were found either at the clinic or at the residence. The assessee stated that books of accounts were with the counsel. In order to obtain the books, summons were issued to the counsel of the assessee during the course of search itself to produce the books but no books were produced. At the residence only the cash book and the ledger for the F.Y. 97-98 were found and seized.
During the course of the block assessment proceeding, the assessee, for the first time produced a computer printed cash book relating to his professional income. However, no corroborative evidence as to existence of such books had been found during the course of the search and survey proceedings. Also, no books of account were produced in respect of the income of assessee’s wife and sons. Consequently, vide block assessment order total undisclosed income of the assessee was assessed including the cash found at various bank lockers.
Against the block assessment, the assessee preferred appeal which was dismissed by the CIT (Appeal).
On further appeal, the Tribunal partly allowed the appeal of the assessee as majority view after the third member concurred with the accountant member.
The Income Tax Department (ITD) being aggrieved by the order of the Tribunal approached the Hon’ble High Court.
Observations made by the High Court:
The Hon’ble High Court observed that it was an admitted fact that no cash book was found during the course of search and it was not produced in the course of investigation following the search, though the search and survey conducted was quite extensive. The cash book was produced for the first time in the block assessment proceedings itself. The Court opined that this act appeared to be clearly a case of poor afterthought after considerable lapse of time of almost one year or more.
The Court observed that the assessee had initially offered a shifting stand on this issue inasmuch as during the course of search he first claimed that the books of accounts were with the lawyer, later however it he stated it to be with the accountant but the cash book that was produced was a print taken from computerized record which contradicted the stand taken by the assessee during search and survey proceedings.
The Hon’ble Court stated that normally, computerized accounts are maintained on a computer that stores the data on its hard drive and other users take either prints of the same or copies of the data on storage devices. The Court observed that at no stage of the search and survey proceedings any evidence was adduced of the existence of such cash book on a computer.
It was further observed that the Assessing Officer (AO) was of the view that such books if regularly maintained, some proof or evidence of such accounts being maintained would have been found during the search proceedings itself. It was itself difficult to believe that the assessee was under any difficulty to produce prints of cash book maintained on the computer specially when, the computer on which it later claimed to have maintained such cash book) was neither seized nor discovered during the course of search of proceedings. The Court opined that in this regard also the case of the assessee did not inspire any confidence as some of the statements and explanation smacked of intention to evade tax.
The ITD contended that the cash sought to have been explained by the assessee through the production of cash book was found in various bank lockers. The last operation of the bank lockers was admittedly done by the assessee on 27.6.2002 whereas as per the cash book the same cash balance appeared on 31.3.2003. The ITD alleged that the cash book was even otherwise not related to the cash found in the bank lockers for the reason that the cash earned up to 31.3.2003 could not have been placed in the bank lockers in June, 2002.
In this regard, The Court observed that the third member of the Tribunal had recorded a finding to the effect that the banks allow their premier customers to operate their bank lockers without obtaining their signatures. However, the Hon’ble high Court observed that this finding had been reached in absence of any pleading or evidence of such fact thereby implying, on a mere presumption, unfounded in fact and in law that the assessee must have operated the bank lockers even after 27.6.2002 and would have deposited the cash sought to be explained through entries made in the cash book after date 27.6.2002. The Hon’ble Court observed that there was no such evidence led by the assessee and it was not even his case that such state of affairs prevailed with the banks.
The Hon’ble Court observed that the finding of the third member of the tribunal was not only perverse but also a conjecture and a pure figment of imagination. The Court stated that while hearing the appeals, the Tribunal being the last fact finding authority can reach the conclusion different from that recorded by the lower authority. However this power does not give a license to the Tribunal to record a finding contrary to the pleadings and evidence and the law itself. There was no pleading or case or evidence that the bankers had allowed or could have allowed the assessee to operate the lockers without making relevant entries in their record. In fact, to the contrary, banks being governed by statute and guidelines by the Reserve Bank of India, it may be safely presumed that the assessee did not operate the bank lockers after the date 27.6.2002 and if the assessee had claimed otherwise then the heavy burden would have been on him to prove such an occurrence. The Tribunal being quasi judicial authority ought to have confined itself to the facts and pleadings of the case and the law governing the conduct of the parties.
The assessee had contended that none of the authorities had rejected the books of account of the assessee and had not invoked Section 145 therefore explanation of the assessee was rightly accepted by the Tribunal. The Hon’ble Court observed that though the authorities had not invoked Section 145 of the Act and not passed a best judgment assessment order under Section 144, the submission could not be accepted as in the instant case the department had found and seized the cash from the bank lockers operated and maintained by the assessee. The assessee was required to explain the source of acquisition of such money. It was for the assessee to offer such explanation as was true and correct to explain source of cash found in the lockers, the cash having been found placed in the lockers that were last operated on 27.6.2002. Thus the source of acquisition of cash found in lockers could be only for up to 27.6.2002 and not 31.3.2003.
The Hon’ble High Court was of the view that the assessee’s attempt to explain the cash found in bank lockers by means of the cash book entries showing the cash balance on 31.3.2003 was clearly an eye wash. The Court observed that this being so, in such a situation ITD would have made further addition of Rs. 8,44,294/- disclosed in the cash book as on 31.3.2003 or considered it to be part of the regular assessment of the assessee.
The Hon’ble High Court observed that the explanation offered by the assessee was rightly not accepted by the AO and the said finding was rightly sustained by the CIT (Appeals) and the judicial member of the Tribunal who had taken note of the circumstances of the cash book having not been found during the search; of it having been produced belatedly during the assessment proceedings; of the entries in the cash book being not supported by any voucher and of the lockers having been last operated date 27.6.2002.
On the relevant question of Law, the Hon’ble Court held that the wholly imaginative finding recorded by the third member of the Tribunal was perverse and wholly unsustainable in law and, therefore, set aside.