JUDGMENT
1. The above matter was called out for admission today. Parties were heard on admission. The petition was dismissed for the reasons to be recorded later. Accordingly, our reasons for rejection of petition based on the following facts are as under :
2. Although as many as nine questions are sought to be raised as substantial questions of law arising out of the order of the Tribunal, in our opinion, the appellant is in fact seeking reappraisal of the evidence and there are no substantial questions of law arising in this appeal.
3. The assessment order relevant for the purpose herein is the block period from April 1, 1986, to October 18, 1996.
4. The assessee is a firm of diamond exporters. On April 3, 1996, the office premises of the assessee were searched by the FERA authorities, wherein cut and polished diamonds, weighing 20,076.07 carats, found in the cupboard and on the table top of the assessee’s office premises were seized. Thereafter, the matter was referred to the investigation branch of the Income-tax Department. On detailed enquiry and investigation, cut and polished diamonds weighing 1,156.53 carats valued at Rs. 68,36,099 were only seized by the income-tax authorities under Section 132A of the Income-tax Act, 1961, on October 18, 1996. In the block assessment, those diamonds weighing 1,156.53 carats valued at Rs. 68,39,099 were added to the income of the assessee as unexplained income of the assessee under Section 69A of the Income-tax Act. On appeal filed by the assessee against the assessment order, the Income-tax Appellate Tribunal on October 28, 1999, dismissed the same. Hence, this appeal under Section 260A of the Income-tax Act.
5. Mr. Pardiwala, learned counsel appearing on behalf of the appellants, submitted that without leading positive evidence that the seized diamonds belonged to the assessee and without substantiating that the assessee was the owner of the seized diamonds, the same could not be added to the income of the assessee. He submitted that the Tribunal was in grave error in holding that for the first time on April 18, 1996, the assessee had contended before the FERA authorities that the diamonds in question belonged to the brokers, when in fact immediately after seizure on April 3, 1996, in the statement recorded by the FERA authorities on April 4, 1996, the assessee had categorically stated that the diamonds seized from the table top belonged to the brokers. It was submitted that when, the income-tax authorities themselves by their letter dated June 3, 1996, had informed the FERA authorities about their no objection for release of the seized diamonds, it could not be held that the seized diamonds were unexplained income of the assessee. It was submitted that since the inception, it was the case of the assessee that the seized diamonds belonged to the brokers who were present in the office of the assessee at the time of search by the FERA authorities. It was submitted that in support of his claim, the assessee had filed the affidavit of Ashok D. Patel, the broker, who had brought the diamonds belonging to ten different parties to the office of the assessee for approval. It was submitted that the said broker had jangad receipts (letter/bills issued by diamond owners to whom the diamonds are given for the purpose of business prior to sale/export, etc.) from the ten owners. It was submitted that not only had the said ten parties filed their affidavits claiming the seized diamonds but they were also made available for examination. Mr. Pardiwala, vehemently argued that once the source of the seized diamonds was attributed to the broker, the assessee cannot be burdened with the proving of the “source of source” or “origin of origin”. It was submitted that the assessee co-operated with the Department and even the source of acquisition of diamonds by the broker was also established by producing the ten diamond merchants. It was submitted that even if the “source of source” is not established, at best it could be assessed as undisclosed income of the broker but certainly not in the hands of the assessee.
6. Mr. Desai, learned counsel for the Revenue, on the other hand, took us through the order passed by the Assessing Officer, as well as the Tribunal and submitted that in view of the concurrent findings of fact recorded by the authorities below, there is no merit in the appeal filed by the assessee.
7. After hearing counsel for both sides, we are of the opinion that the authorities below were justified in holding that the assessee has failed to discharge the burden cast upon it to establish that the seized diamonds did not belong to the assessee and consequently the addition of the value of the seized diamonds as unexplained income of the assessee under Section 69A of the Income-tax Act is justified. A perusal of the assessment order shows that after seizure of the diamonds from the office of the assessee on April 3, 1996, the FERA authorities had recorded the statement of the partner of the assessee on April 4, 1996. It is true that in the said statement, it was stated that the seized diamonds in boxes DD, EE, FF and GG belonged to the brokers. On proper verification, the diamonds seized by the FERA authorities contained in boxes DD, EE, FF and part of GG were released by the income-tax authorities and only part of GG weighing 1,156.53 carats valued at Rs. 63,87,522 were seized by the income-tax authorities on October 18, 1996.
8. The authorities below have noted that although the partner of the assessee had claimed that diamonds seized on April 4, 1996, and kept in boxes marked DD to GG belonged to the brokers in question, the assessee produced jangads only on April 18, 1996. Although, it was claimed by the assessee that the diamonds in question were seized from the brokers who were present in the office of the assessee on April 3, 1996, the panchanama recorded by the FERA authorities on April 3, 1996, does not mention about the presence of the brokers or that the diamonds were seized from the brokers. In any event, the fact remains that jangads in respect of the diamonds were submitted almost after 15 days from the date of the seizure. Thereafter, the letters of the ten parties claiming ownership of the seized diamonds were received. The income-tax authorities with a view to verify the genuineness of the jangads, conducted a survey under Section 133A of the Income-tax Act. During the course of the survey, it was found that out of the ten parties who were claiming to be the owners of the seized diamonds as per jangads, some of them were not available at the given addresses and some were found to be not living at those addressees at all. When confronted with these findings, the assessee sought to file the affidavit of the broker, Ashok V. Patel, dated July 3, 1997, and also affidavit of the said ten parties and requested that the statement of the ten persons to whom the said diamonds belonged be recorded.
9. After recording the statements and analysing the statements of those ten persons, the authorities have come to the conclusion that the assessee has engineered the evidence in the form of such claims including that of Mr. Ashok-bhai V. Patel. It was held that most of the parties, who claimed ownership of the diamonds were either men of no means or negligible means. It was seen that most of them had not even maintained books of account or had maintained them at the instance of the said Shri Ashokbhai Patel. It was found that the affidavits of the ten parties were stereotyped and were verbatim the same. It is also recorded that some of the parties confessed the involvement of the broker, Mr. Ashokbhai, in preparation of the papers at Bombay which were sent to the party at Bhavnagar. It was found that one of the parties had admitted that he had not purchased any diamonds from any person as entered in the books. Thus, after evaluating the overall evidence on record, the authorities below have concluded that the assessee has engineered the evidence and since the assessee failed to prove the identity of some and the creditworthiness and genuineness of the remaining claimants, it was held that the “source” or “origin” itself was not proved and, therefore, the assessee being found in possession of the seized diamonds shall be deemed to be the owner thereof.
10. We do not find any infirmity in the order passed by the authorities below. The panchanama recorded on April 3, 1996, does neither show the presence of any broker in the office of the assessee nor indicate that the diamonds were seized from the brokers. There is no answer to be found as to why the said brokers, if present at the time of search, did not protest or object to their diamonds lying on the table top being seized by the FERA authorities. The broker, Ashokbhai Patel, in his affidavit dated July 3, 1997, categorically admitted that the seized diamonds did not belong to him. It is the assessee who in a bid to establish the source insisted on recording the evidence of the ten parties who claimed to be the owners of the seized diamonds. Since the conduct, as well as evidence of the parties failed to prove the genuineness of the source and the confession thereof failed to inspire confidence in the authorities below, it was rightly held that the seized diamonds represented the unaccounted income of the assessee and the additions made were in accordance with law.
11. Mr. Pardiwala drew our attention to the decision of the apex court in the case of CIT v. Smt. P.K. Noorjahan [1999] 237 ITR 570, wherein it was held that the word used in Section 69A “may” and not “shall” and, therefore even if the explanation regarding source was not satisfactory, the source of investment was not necessarily be treated as income of the assessee. In our opinion, the said decision is not of relevance as in that case, the apex court held that the question whether the source of the investment should be treated as income or not under Section 69 of the Income-tax Act has to be considered in the light of the facts of each case. In that case, on the facts, the Tribunal had come to the conclusion that the Assessing Officer had not properly exercised the discretion, but still the Revenue insisted on adding the same as income of the assessee. In that context, the apex court held that even if the explanation regarding the source was not satisfactory, the source of investment was not necessarily to be treated as income of the assessee. In the instant case, the Tribunal has found that the Assessing Officer has properly exercised the discretion and accordingly upheld the assessment order. Thus, the aforesaid decision does not support the case of the assessee.
12. Mr. Pardiwala, then relied upon the decision of the apex court in the case of CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349 and the decision of this court in the case of Orient Trading Co. Ltd. v. CIT [1963] 49 ITR 723 and submitted that in the absence of a finding that the diamonds in question belonged to the assessee, the same could not be held to be unexplained income of the assessee. It was submitted that when the assessee had produced prima facie evidence to show that the seized diamonds belonged to the third parties, the initial burden cast upon the assessee can be said to be discharged and it was for the Revenue to establish to the contrary by sufficient and adequate material. In our opinion, in the present case, the Tribunal has given sufficient and cogent reasons for rejecting the claim of the assessee and holding that the assessee is the deemed owner of the seized diamonds and accordingly adding the same as deemed income of the assessee. The view taken by the Tribunal is a possible view.
13. In this view of the matter, we find no merit in the appeal and the questions sought to be raised by the assessee cannot be said to be substantial questions of law arising out of the order of the Tribunal.
14. Accordingly the appeal is dismissed in limine with no order as to costs.
