ORDER
T.A. Bukte, J. M.
1. This appeal is filed by the assessee and he has challenged the order of the CIT(A), Nasik, dt. 30th March, 1985, on the ground that the lower authorities have erred in coming to the conclusion that no fund was collected by Gurudwara Gurusing Sabha, Shrirampur, which is a public charitable trust. The next ground is that he has also erred in confirming the addition of Rs. 25,000 as unexplained deposit kept by Mrs. Priya Jaggi, assessee’s daughter. Ground No. 3 is that he has further erred in confirming the additions of Rs. 15,000 each kept by Balvantsing Juneja and Nanaksing Chug.
2. The assessee narrated several facts and produced some witnesses before the ITO in support of his contentions that there was a building fund committee and the assessee was the chairman of the said committee. The committee was authorised to collect donations from the Gurudwaras around Srirampur taluka and accordingly, the amount collected by the building fund committee was deposited with him and the said amount was lying in his custody. Some of the persons deposed in support of his version before the ITO. Similar is the case regarding confirmation of Rs. 25,000 having deposited by the assessee’s daughter Mrs. Priya Jaggi, She has confirmed having deposited the said amount with the assessee and the assessee’s contention is that he was in custody of the said amount as a trustee of his daughter. In regard to the ground No. 3 also, identical explanation is given by the assessee that one Balvantsing Juneja and another Nanaksing Chug had deposited with him Rs. 15,000 each and he was holding the said amount as trustee for them. The assessee has tried to establish their credibility of having the amount of Rs. 15,000 saved by them and deposited with the assessee. Both these persons have confirmed having deposited these amounts with the assessee.
3. In the light of the assessee’s contentions and the evidence brought on record in respect of the additions confirmed by the CIT(A), the issues which have arisen for our consideration are whether the assessee’s version of having in possession of the funds collected by the building fund committee of Gurudwara Gurusing Sabha, Shrirampur, which is a public charitable trust, is correct. Similar are the issues in respect of additions of Rs. 25,000 deposited by his daughter with him and Rs. 30,000 deposited by two different persons, Balvantsing Juneja and Nanaksing Chug, and the evidence in support of the assessee’s contentions require to be scrutinised to find out the truth or the falsehood to believe or not to believe the assessee’s version in respect of the said confirmed items of additions. It would be proper to scrutinise the evidence on record properly and minutely and to find out whether the assessee states truth or not.
4. There is no doubt that every assessee submits explanations. There is further no doubt that every explanation should not be accepted as a truth. But wherever the explanation contains truth, it requires to find out such truth and to give benefit of the same to the assessee. It would not be correct to reject the explanation outright without weighing the evidence and without seeing the reasonableness of the evidence.
5. One point arises to consider seriously is that the assessee’s preliminary statement before the search and seizure of his premises does not contain many more fact as the final statement contains. The assessee’s explanation in this respect is that he was not in a better state of mind to disclose all the true facts before the search and seizure and, therefore, it could have been that he might not have disclosed all the facts before the raiding authorities. But according to him, he has disclosed all the true facts in his final statement and this should not be ignored or rejected merely on the ground that because he has disclosed them in the final statement and such statement is an afterthought. It may be correct that the final statement may be an afterthought, but whether in the eye of law the statement is reasonable and convincing and if it is reasonable and convincing the question arises why such a statement should not be accepted. In the light of these facts, now we start to consider each item separately and the relevant evidence in respect of such item.
6. The assessee’s first statement before starting search and seizure was recorded on 6th Aug., 1976. He has stated in the statement that he was having a cash of Rs. 20,000 and gold ornaments of about 75 tolas in his house. He is doing the business in partnership of motor spare parts and petrol pump. The firm’s name is M/s Ramchandra & Sons. He also accounted for the construction of the house. This statement was recorded on the same day after the search and seizure was over. He holds 60% share in the profits of the firm and he has been assessed to income-tax since 1961. He has been also assessed for wealth-tax about 8 years prior to the search and seizure. He had disclosed Rs. 50,000 under Voluntary Disclosure Scheme in Oct., 1975, much prior to the search and seizure.
7. On the day of search and seizure, i.e., on 6th Aug., 1976, cash of Rs. 2,23,400 was found in his house. He has stated that the amount of Rs. 50,000 disclosed under the Voluntary Disclosure Scheme in October, 1975, also included in Rs. 2,23,400 found in his house. His wife also had disclosed Rs. 40,000 under the said Scheme. He showed his incapability to explain regarding the balance of Rs. 1,33,400 at that stage and told the officer that he will explain later on. Thereafter, he wrote a letter dt. 28th Oct., 1976, to the ITO, A Ward, Ahmednagar.
8. What is required to consider at this stage is two important points. The first point is whether the assessee was in a disturbed mental condition before starting the search and seizure or not and the second important point is whether his explanation given afterwards should be discarded, even though proper reasons are shown because he had not given such explanation in the beginning. These points have arisen for our consideration because the learned Departmental Representative, Shri A. Roy, has urged to a great length that the assessee was not mentally disturbed and all along he was in peaceful mind. Therefore, his statement given in the beginning before the search and seizure must be taken as a true one and the statement given later on should not be given any credit. It would be pertinent to note here that the assessee stated in his first statement before the search and seizure that he had 75 tolas of gold in his house. But surprisingly it was found after the search and seizure that he had only 25 tolas of gold. If the assessee was not in a disturbed mental condition, then he would have definitely stated in his first statement that he had only 25 tolas of gold. As he had stated that he had 75 tolas of gold, therefore, this instance goes to indicate that the assessee was not in a peaceful condition of mind. We are not of the opinion that this one instance (sic) to arrive at such a conclusion, but there are other instances also.
9. So far as the second point is concerned, the issue is why the assessee’s explanation which is given after the search and seizure, if reasonable and convincing, should not be accepted or whether it requires to be discarded for the reason that it is given after the search and seizure. In our opinion, the explanation given after the search and seizure is not to be rejected merely on the ground that it is given afterwards and it is an afterthought, as long as it is reasonable and convincing. Therefore, we have to see whether the said explanation is reasonable and convincing or not. The assessee explained in his letter dt. 28th Oct., 1986, the position of cash amount of Rs. 2,23,400 which was found in his house on 6th Aug., 1976, as under :
Rs.
1. Cash deposit kept by Mrs. Priya Krishanal Jaggi
of Bombay (married daughter) 25,000
2. Cash deposit received from Gurudwara Gurusingh
Sabha (Building Fund Committee) 1,10,000
3. Amount belonging to assessee's mother
Mrs. Jeevandevi Mangalsen Oberoi
(removed from separate purse) 4,300
4. Personal cash balance of Gobindram Oberoi 2,200
5. Personal cash balance of Mrs. Bimlawanti 840
6. Cash belonging to Shri Gobindram (out of sub-contracts) 51,060
7. Deposit received from assessee's two
friends Rs. 15,000 each 30,000
---------
2,23,400
---------
The ITO has accepted the explanation in respect of Item No. 3 being Rs. 4,300 belonging to the assessee’s mother, Item No. 14 being Rs. 2,200 belonging to the assessee himself, Item No. 5 being Rs. 840 belonging to Mrs. Bimlawanti and Item No. 6 belonging to the assessee himself out of sub-contracts of Rs. 51,060. The ITO did not accept the explanation in respect of (1) Rs. 25,000 cash deposit kept by Mrs. Priya Krishanal Jaggi, assessee’s married daughter, (2) Rs. 1,10,000 cash deposit received from Gurudwara Gurusingh Sabha, Building Fund Committee, and (3) Rs. 30,000 being deposits received from the assessee’s two friends of Rs. 15,000 each.
10. The assessee’s explanation regarding Rs. 2,200 is that he had his cash from his personal savings out of withdrawals made for household expenses from the firm of M/s Ramchandra & Sons, Shrirampur. An amount of Rs. 840 is the personal balance of his wife Mrs. Bimlawanti. His explanation regarding Rs. 51,060 is that this amount represented earnings out of sub-contracts and bidding at Government auction at Mula Dam and Dehu Road. He along with Shri Pritamsingh Dhapar had gone to Mula Dam site in the last week of May, 1976, to bid at Government auction. There, he along with other four contractors made some ring and shared the profit received from the highest bidder. The assessee’s share was Rs. 30,000. Thereafter, in second week of July, 1976, he had gone to Dehu Road, near Pune to buy some machinery at Government auction conducted by M/s Shankar Ramchandra & Sons, Government auctioneers at Pune. There he along with other three contracts (sic) made a ring and highest bidder gave them the extra profit and he received his share of Rs. 21,060. Thus, he accounted the amount of Rs. 51,060 as his personal earnings out of sub-contracts at the Government auction and the same is accepted by the ITO. The explanation regarding Rs. 4,300 being the amount belonging to assessee’s mother Mrs. Jeevandevi M. Oberoi was also accepted. It would be pertinent to note here that when the explanations in respect of these 4 items have been accepted, what made the ITO not to accept the explanation in respect of the remaining three items.
11. The assessee’s explanation regarding the deposit of Rs. 25,000 kept with him by his daughter Mrs. Priya Krishanal Jaggi is that she had married and she was staying in Bombay. Her husband died. She had personal savings of Rs. 25,000 in the month of May, 1976. She has been assessed to income-tax later on. She gave a confirmation letter and stated on oath on 13th Sept., 1985 (page 21-22 of compilation) that she had kept deposit of Rs. 25,000 with her father. Regarding the source of her deposit, she explained that she was doing embroidery work at Bombay and thus she had savings. After death of her husband she came to her father and kept the amount with him. This evidence of both the assessee and his daughter has been disbelieved by the lower authorities. It is unimaginable that how the word by word of the evidence would come in consistence. Few contradictions are bound to occur here and there. Therefore, because of occurring few contradictions in the evidence of witnesses, it would be incorrect to disbelieve the entire story. We are of the opinion that the explanation given by the assessee in respect of the deposit of Rs. 25,000 kept by his daughter with him requires to be accepted as his daughter also gave explanation regarding the source of income and her savings. Therefore, we are satisfied to accept the said explanation and to delete the addition of Rs. 25,000.
12. The second item is of Rs. 1,10,000 pertaining to Gurudwara Gurusingh Sabha Building Fund Committee. The assessee’s case, though in the later statement, is that the members of the Gurudwara Gurusingh Sabha Building Fund Committee had gone to different villages to collect funds and they had collected it. They brought this amount and kept with the assessee on 5th Aug., 1976. Two members of the said Sabha have signed the letter and stated that they had gone to collect these funds from different villages and came to Shrirampur in the evening and kept the same amount with the assessee. Gurudwara Gurusingh Sabha Building Fund Committee is registered under s. 12A of the IT Act and it is granted registration certificate. In this connection, the assessee was cross-examined to a great length by the ITO.
13. The assessee has filed the list of the donors from pages 43 to 50 of the compilation. Names of 200 donors have been mentioned. The collections have been made from 6th Nov., 1975, to 5th Aug., 1976, till the date before the search and seizure. The amounts of donations also have been mentioned against their names. One S. Sardar Singh Kathuria gave evidence, page 51 of compilation. He has stated 5 names of the Building Fund Committee being (1) Shri Subhash R. Gulati, (2) Shri Jagjit Singh R. Chug, (3) Shri Balah Singh Chug (late), (4) Shri Balwantsingh Juneja, and (5) Shri Somsingh Kathuria. He has stated that he was not present at the time of handing over the collections to the assessee for keeping safely, but he came to know from Shri Saran Singh Chug, one of the trustees, that the building fund collected by them was kept with the assessee and the same is attached under the Panchnama by the IT Department. This entire evidence has been rejected only on the ground that it is an afterthought and the assessee has cooked up the evidence to support his case. One of the trustees made a representation to the ITO vide his letter, page 53 of the Department’s paper book, demanding the amount attached under the Panchnama. Shri Saran Singh Chug was cross-examined. He supported the assessee’s version.
14. We do not intend to make much out of the evidence of the authorised ITOs and the clerks who had gone for the search and seizure. The only point which is pressed by the learned Departmental Representative is that if the assessee had the funds of Gurudwara Gurusingh Sabha Building Fund Committee with him as a safe deposit as a trustee, then he could have disclosed the same in the initial statement before the search and seizure. According to him, he was in a peaceful mental position and he could have disclosed the same. By not doing so, it is argued that the story is an afterthought.
15. We have gone through the orders of the authorities below as well as the evidence of the different witnesses, trustees and the assessee himself. There is no doubt that there are some minor contradictions and they do not give correct meaning. But that does not mean that the assessee’s version is fully unbelievable and the same requires to be rejected. The assessee has stated (page 9 of Department’s compilation) that the bills of collection of the building fund are with the Department. We are of the opinion that when the reasons are shown for submission of the explanation and if the explanation is convincing, it is not to be discarded merely on the ground that it is an afterthought and the story is created or concocted by the assessee. We hold that the assessee’s explanation is quite reasonable and acceptable. We are satisfied to delete the addition of Rs. 1,10,000. The assessee succeeds on this ground of appeal.
16. Now the next item is regarding addition of Rs. 30,000 being deposit received from two friends of the assessee of Rs. 15,000 each. The assessee’s evidence and explanation is on record that one Shri Balwant Sing S. Juneja kept Rs. 15,000 as a deposit with the assessee. The manager of the Bank of Baroda, Shrirampur Branch, to whom a letter was written by the ITO replied by letter dt. 10th Feb., 1979, that this Balwant Sing S. Juneja had an account from 31st Dec., 1975, and he was having balance of Rs. 1,205 on that day. There was a balance of Rs. 873 as on 31st Dec., 1976, and on 31st Dec., 1977, the account was closed. There was also an account in the State Bank of India, Shrirampur, and the branch manager by letter dt. 17th Feb., 1979, replied that this account held by Shri Balwantsing S. Juneja was transferred to Aurangabad branch in 1977. Shri B. S. Juneja was serving in LIC. The assessee did not demand any loan from him, but the said Shri Juneja himself had kept the money with the assessee as a deposit. The said Shri Juneja confirmed this. Again the same doubt is raised that the assessee did not state in his first statement before the search and seizure and, therefore, it is an afterthought. We are unable to rely on the doubt expressed by the lower authorities.
17. The second amount of Rs. 15,000 was kept with the assessee by Shri Nanaksingh R. Chug. The deposits are with the assessee himself till his statement was recorded upto 2nd May, 1979. The assessee’s statement is that this Shri Nanaksingh R. Chug wanted 1000 x 20 size Modi nylon tyres and the assessee was not having them. Therefore, he had deposited the said amount for the purchase of tyres. The said Shri Nanaksing R. Chug himself has confirmed in his statement recorded on 23rd Sept., 1978, that he deposited the sum of Rs. 15,000. He was a truck owner and he was not dealing in tyres. Therefore, he wanted to purchase the tyres from the assessee. He did not get the tyres or his money because of the search and seizure at the assessee’s premises. The ITO wrote a confidential letter to the manager of the Maharashtra Sugar Factory, Shrirampur, to know whether any payment was made to Shri Chug for plying his truck. Shri N. R. Chug was having a balance of Rs. 56,279.33 ps. as on 23rd July, 1976, in the State Bank of India, Shrirampur. His credibility is not doubted at all, but what is doubted is that he might not have deposited the amount of Rs. 15,000 with the assessee. The said amount of Rs. 15,000 might be of the assessee himself and the assessee might have taken the name of Shri Chug just to divert the said amount and, therefore, the addition is made.
18. We are of the opinion that the evidence which is on record goes to show that the version of the assessee appears to be quite probable in respect of the deposit of Rs. 30,000. Therefore, we are satisfied to delete the addition of Rs. 30,000. The assessee succeeds on this ground also.
19. After we have dealt with the evidence on record, it would be now necessary to deal with the arguments advanced by Shri L. R. Bhojwani, learned counsel for the assessee, and the learned Departmental Representative Shri A. Roy.
20. Shri Bhojwani has narrated that Mrs. Priya Jaggi was doing the work of embroidery. She had kept Rs. 18,000 in fixed deposit and she was also having Rs. 50,000 as bank balance. Her financial position was quite good to deposit Rs. 25,000 with her father. The ITO has merely suspected the deposit and there is no basis for such suspicion. It was not necessary to take receipt from her own father for the deposit kept with him to show that she had kept the said deposit with her father. She filed the return of income. It would be incorrect to say that she did not claim the said amount at the time of raid and, therefore, it should be presumed that the amount belongs to the assessee.
21. In this respect, Shri Roy has submitted that Smt. Priya K. Jaggi was present in Shrirampur and she did not come forward claiming Rs. 25,000 as belonging to her. There is an inconsistency in her evidence. According to him, there is no evidence in respect of her savings and her conduct appears to be unnatural. He has pointed out certain statements from her evidence from pages 19, 21 and 22 of the Department’s paper book. The balance sheet is on page 29. He has urged that she has gold ornaments only of Rs. 1,600 and, therefore, she could not have deposited the sum of Rs. 25,000 with her father and the presumption drawn by the lower authorities is correct.
22. Regarding the item of Rs. 30,000 being deposits by two friends of the assessee, Shri Bhojwani has submitted that the assessee has repaid Rs. 15,000 to Shri Juneja by cheque dt. 31st March, 1980, and the connected evidence is on page 79 of his paper book. His arguments are already discussed in the foregoing paras in connection with this item. Shri Roy’s reply is that there is no proof regarding the savings of Shri Juneja. This claim is made after two and half months of the raid. The position of money was suppressed at the initial stage and the ITO’s order does not have any lacuna in it. According to him, no savings remained with Shri Juneja to keep the deposit with the assessee. He has posed a question, who gave the money to the assessee, whether Shri Juneja himself or somebody else on his behalf ? According to Shri Roy, the conduct of Shri Juneja appears to be unnatural and, therefore, his statement is not worthy to be believed. He has pointed out that page 70 was not before the lower authorities and the statement is inconsistent. Page 65 of the assessee’s paper book is regarding Rs. 15,000 deposited by Shri N. R. Chug. Shri Roy contended that no evidence of having paid the money is brought on record. Receipt is not recorded to know whether this is from personal savings or from truck business. Shri Roy contended that it is a false story made out by Shri Chug. There was a cash withdrawal of Rs. 18,000. Having loan out of Rs. 55,000 with interest of the assessee and nobody would like to keep the deposit of Rs. 15,000 with the assessee without any interest. The capital account of Shri Chug is adjusted by purchasing diesel, etc., and the same is not substantiated. Shri Roy went on probabilities of unbelievability of the evidence.
23. The biggest item is regarding Rs. 1,10,000 being cash deposit of Gurudwara Gurusingh Sabha Building Fund. Shri Bhojwani contended that it is a genuine claim of the assessee and he made this claim immediately before the ITO on 27th Oct., 1976, by letter which is on page 123 of the paper book. It is not an afterthought. According to him, the ITO has merely tried to find out the defect. The distance travelled by the committee members cannot be doubted because villages from where the funds were collected are around Shrirampur. All the amounts were received in cash and the Building Fund Committee has issued receipts. The ITO has seen the receipts. This amount was to be credited to the Building Fund Corpus. Evidence regarding the building fund is at pages 116, 117 and 118 of the assessee’s paper book. He has pointed out that Shri S. V. Harhare has filed his affidavit on page 24 and he has also tried to rely on the evidence of the ITO Shri N. G. Thite. We have already stated above that we are very much reluctant to take the evidence of authorised staff members who have made the search and seizure at the assessee’s premises. He has also contended that the Department is not at all sacrosanct to be treated every assessee as a dishonest one.
24. Shri Bhojwani contended that it would be incorrect to say that the assessee was all along in a good and peaceful mental condition and he was not puzzled. It is against the nature of a person to be unpuzzled when a raiding party comes to his house. Shri Saran Singh is one of the trustees and his statement does not require to be rejected. CIT(A)’s order is merely mechanical and he has simply agreed with the ITO without applying his mind. Inspector’s report cannot be relied on, because no chance was given to the assessee to controvert it. It cannot be believed which does not relate to the donation. The assessee may not be telling gospel truth, but at the same time, Department is not correct.
25. Shri Roy pointed out the assessment order, particularly paras 32 to 60. According to Shri Roy, a question arises, whether this fund was collected by the Gurudwara Gurusing Sabha and whether it belongs to the assessee. The assessee did not react immediately at the time of raid and if the amount was really kept with him by the said Sabha, he would have been prompt in disclosing the same. He has also posed a question why the assessee has suppressed in respect of this item in his original statement. According to him, the affidavit of the another trustee has no evidentiary value. If the affidavit would have been put to test of disproving its contents, then certainly the affidavit would not have any evidentiary value.
26. Shri Bhojwani in his rejoinder has tried to reiterate his earlier submissions and the family circumstances of the assessee. According to him, the original statement and the closing statement cannot become the criteria to judge the mental condition. There is a definite doubt and there is no clear-cut case against the assessee to hold that this amount does not belong to the Gurudwara Gurusing Sabha Building Fund Committee, but it definitely belongs to the assessee himself. Under such circumstances, the assessee is entitled to get the benefit of doubt and the assessee’s explanation in respect of all the items is within the reasonable time and, therefore, it should not be discarded without having found unreasonable or unconvincing.
27. Shri Roy has relied on the judgments of the Calcutta High Court in Smt. Kamala Devi Jhawar vs. CIT (1978) 115 ITR 401 (Cal) and Smt. Sakti Rani Roy vs. CIT (1978) 115 ITR 722 (Cal) by making a statement that the assessment made in the name of the daughter of the assessee and consequent accumulation of income have no evidentiary value. We fully agree with him and we have not considered the assessee’s daughter’s filing IT return after the raid as a material piece of evidence. What we have considered is whether she was having source of income and whether her financial position was such to allow her to keep the deposit of Rs. 25,000 with her father, after the death of her husband in an accident at Bombay. The facts in this respect have been already narrated above.
28. After going through the order of the lower authorities and the entire evidence on record, we are satisfied to come to the conclusion that there is explanatory evidence, though the explanation given is not right from the original statement of the assessee, but the explanation with evidence given by the assessee vide his letters and statements and the supporting evidence of another trustee of the Gurudwara Gurusingh Sabha Building Fund Committee are acceptable. Secondly, the presumptions raised by the Department are also not out of doubt. Under such a circumstance, and when doubt cannot be removed, it would be always safer to give the said benefit of doubt to the assessee. Hence, we feel that the explanations given by the assessee in respect of the items of additions appear to be reasonable and if reasonableness is so straightforward, there is nothing wrong to allow the assessee’s claim. We reverse the orders of the authorities below.
29. In the result, the assessee succeeds and the appeal is allowed.
V.S. Gaitonde, A.M.
1. I have carefully studied the facts and the arguments and tried my level best to persuade myself to agree with the conclusion proposed by my learned brother. In conformity with the well established principles set out in Mahomed Akil vs. Asadunnisa Bibee (1868) 9 WR 1, quoted approvingly by Chaturvedi & Pithasaria Income-tax Law (3rd Edn.) Vol. 5, page 4410, I have taken the benefit of conference with my learned brother and discussion in an endeavour to arrive at an agreed judgment. I regret my inability to concur with the proposed conclusion. I do not see how on facts within the knowledge of the assessee there could be any benefit of doubt going to the assessee. I do agree that the explanation should not be rejected in a casual or light-hearted manner but in the present case, as the facts unfold themselves in ITO’s order, clearly, the conclusion against the assessee becomes inevitable. I find it difficult to hold that the preliminary and concluding statement at the time of search lose their evidential value on the plea of alleged disturbed state of mind. I cannot also agree to the proposition in para 11 that few contradictions are bound to be there. I am prepared to consider some strong contradiction or addition as not affecting the case but when there is a series of new cooked up explanations with no reason for non-mention of these very explanations for such a long time, one has to take the new explanations with a pinch of salt.
2. This appeal is filed by the assessee against the order of CIT(A), Nasik, dt. 30th March, 1985 for asst. yr. 1977-78 confirming the addition of Rs. 1,65,000 made as income from undisclosed sources by the ITO by his order dt. 27th Sept., 1979.
3. The background of the case is as below. The assessee’s known source of income are from property (net Rs. 1,972) and 60% share of profit from registered firm M/s Ramchand & Sons, Shrirampur. The assessee is also liable to be assessed on an income accruing to his minor sons Harish Kumar and Anilkumar arising from M/s Friends Contractor Co. to which they have been admitted to the benefits of partnership. The assessee denied having had any other source of income in the past but in the course of proceedings before the ITO, stated that, for the year under consideration, he had his own business of sub-contract (auction). The contention was that this business between May and July 1976 enabled the assessee to pile up cash of Rs. 51,060 by 6th Aug., 1976. The ITO after examining the evidence on the point held that a sum of Rs. 51,060 is not from alleged business (sub-contract) but from some other undisclosed sources. Strictly speaking, since the tax liability is the same whether the income is from contract business or from undisclosed source, the issue would be academic and this is what the CIT(A) stated in para 20 of his order. The issue, however, is not academic and has a direct bearing on the remaining addition of Rs. 1,65,000 from undisclosed sources. The ITO asked some searching questions regarding the activity which fetched the alleged sum of Rs. 51,060 held in cash. There are no books of accounts or other evidence. The assessee in his sworn statement on 12th July, 1978, could not remember the details or even the name of the highest bidders. All that he could say was that the total profit was Rs. 1,50,000 and that his share was Rs. 30,000. Whilst volunteering to produce evidence regarding auction he did not in fact do so. He did not also know the amount of deposit to be made in the auction. Whilst claiming to have formed a syndicate or a ring with three other contractors in the auction at Dehu Road, the assessee could not give even the names of contractors. Again whilst stating that the auction was for automobile parts he could not state what was the deposit paid by the highest bidder. He claimed to have kept his share of profit from the above bids in house (page 7 of the DR’s compilation). In a letter in the course of s. 132 proceedings dt. 28th Oct., 1976 (page 3 of the DR’s compilation) the assessee stated that the above earnings are from sub-contractors and bidding at Government auction at Mula Dam in May 1976. He mentioned the names of one Pritamsing Thapar who had gone with him for the auction. The number of other contractors who made the ring was mentioned as four. He did not state the date of receipt of Rs. 30,000 from this. He further stated that in the second week of July, 1976, he went to Dehu Road again to buy machinery at Government auction conducted by Shankar Ramchandra & Sons. This time he claimed, he made a ring through other contractors and got a profit of Rs. 21,060 all in cash. The ITO examined these contentions and held that the assessee has come forward with this story because he found it impossible to explain the source of cash which came to Rs. 2,23,400 found at the time of search on 6th Aug., 1976, at the residence of the assessee. The tenor of the ITO’s contention is that this itself would show that the assessee was indulging in some activities and that such undisclosed activities might have fetched more than Rs. 51,060. If so, the addition of Rs. 1,65,000 which has been made for other reasons rejecting the explanation of the assessee would stand on a firmer ground tracing its origin to same or similar activities in the accounting period.
4. Coming to the main point, it is to be noted that when the search began (page 1 of the DR’s compilation) the assessee denied having any books of accounts and hazarded a guess that cash in hand would be about Rs. 20,000. He did not state that any amount belonging to any other person were in his custody. At the end of search at about 4.45 p.m. on the same day, the assessee was asked to explain the difference in the cash holding. The explanation on the relevant issue is as below :
“As regards cash of Rs. 2,23,400 found in my residence today during the search, I have to say that it is out of the amounts disclosed by me under Voluntary Disclosure Scheme and out of the sum of Rs. 40,000 disclosed by my wife under the above Scheme. I cannot explain the balance of the amount of Rs. 1,33,400 at this stage. I will explain the same later on.”
It may be mentioned here that the amount disclosed by the assessee under the Voluntary Disclosure Scheme was Rs. 50,000. Thus, the assessee tried to explain Rs. 90,000 as having their origin in the voluntary disclosure made by him. But soon after the search was over the assessee realised the futility of pursuing the same possibly because he found that these disclosed amounts have already had their destination fixed somewhere else and would not therefore be available to explain the whole or part cash of Rs. 2,23,400. Having given up this explanation, purporting to act on his promise, by letter dt. 28th Oct., 1976, the assessee gave the following break-up for Rs. 2,23,400.
Rs.
(1) Cash deposit kept by Mrs. Priya Krishanlal Jaggi of
Bombay (married daughter) 25,000
(2) Cash deposit received from Gurudwara Gurusingh Sabha
(building fund committee) 1,10,000
(3) Amount belonging to my mother Mrs. Jeevanadevi
Mangalsen Oberoi (removed from separate purse) 4,300
(4) Personal cash balance of Gobindram Oberoi 2,200
(5) Personal cash balance of Mrs. Bimalwanti 840
(6) Cash belonging to Shri Gobindram (out of sub-contracts) 51,060
(7) Deposit received from friends (my two friends have
kept deposit of Rs. 15,000 each and total Rs. 30,000) 30,000
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2,23,400
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The ITO had no difficulty in accepting the explanation for the small items i.e., Sr. No. 3, 4 and 5. Regarding item 6 too since it was admitted by the assessee to be from taxable income, the ITO made his enquiries only to the extent mentioned above. This left the ITO with the task of examining the correctness of the claim that at the time of search the assessee had a custody of cash belonging to the persons as below :
(1) Daughter - Priya K. Jaggi Rs. 25,000
(2) Gurudwara G ursingh Sabha (building fund committee) Rs. 1,10,000
(3) Two friends who till then remained anonymous Rs. 30,000
It was only long afterwards that the two anonymous friends surfaced and appeared as Balwant Singh Juneja and N. R. Chugh.
5. Coming to the claim about custody of funds belonging to Priya, the facts brought out by the ITO are as below. She was married in 1972 but unfortunately lost her husband sometime later. The amount of Rs. 18,000 received from the husband’s estate was kept intact in bank. She claimed to have earned some income from embroidery, etc. when she was staying with her father-in-law at Laxmi Niwas, Byculla, Bombay. Returns were filed in Bombay on 14th April, 1976, showing income of Rs. 5,200 for asst. yr. 1973-74, Rs. 5,500 for 1974-75, and Rs. 6,500 for asst. yr. 1975-76. Returns were accepted by the ITO, C-III Ward, Bombay, subject to nominal additions of Rs. 500 for asst. yr. 1973-74, Rs. 600 for asst. yr. 1974-75 and Rs. 500 for asst. yr. 1975-76. For asst. yr. 1976-77 it was claimed that a return was filed showing not merely income from embroidery but also a complete statement of affairs giving a total wealth of about Rs. 43,000, Rs. 18,000 being in bank inherited from her husband and Rs. 25,000 out of embroidery income and lying with father of the assessee. The ITO examined this contention in details and highlighted the following aspects :
(1) As there was not even a whisper about such cash at the time of search or soon after, the story is made up later. There has been no satisfactory explanation why the assessee or his daughter who was present at the time of search did not utter a word about it. Even assuming that she was not allowed to speak at the time of search, how could the assessee himself have developed such an acute amnesia ? If the contention had any element of truth the same would have come out at least within a reasonable time after the search. Between 7th Aug., 1976, and 18th Oct., 1976, there was no communication from the assessee. Confirmatory letter dt. 24th Oct., 1976, from the daughter was filed only on 24th Oct., 1976; (2) the assessments made by the ITO, Bombay, do not show the destination of the funds derived out of such income. There is no explanation as to how and why such amounts, if any, were held in cash when the amounts inherited from her husband were already in bank; (3) There was no satisfactory evidence as to how and when the amounts were brought from Bombay to Shrirampur; (4) The returns of income filed with ITO, Bombay, showed that these returns had little evidential value. All that can be said from the returns is that the capital build-up returns which were possibly intended to benefit somebody were diverted for the benefit of the assessee. The ITO’s records in Bombay showed that the original returns for 1976-77 did not have the statement regarding handing over the money to the assessee. According to the ITO these statements were interpolated much after the search (vide para 7 of the ITO’s order). The original returns for 1976-77 filed on 11th June, 1976, did not mention the deposit of Rs. 25,000. The statement was incorporated on or about 11th Oct., 1976, when the assessee was making frantic efforts to seek name-lenders to explain the huge cash found at the time of search; (5) The daughter was examined on oath. From her statement and Deportment the ITO held that she did not have the requisite expertise for embroidery. Her claim to have acquired the same in Bombay after the death of her husband was also not proved. She could not give a proper demonstration of her skill (see pages 21 and 22 of DR’s compilation). In reply to a question whether she can exhibit practical work of stitching and embroidery she could only say “to some extent”. Thus, for reasons discussed in paras 6 to 10 of his order the ITO held that no portion of any amounts belonging to Smt. Priya could have formed a part of cash found at the premises of the assessee at the time of search. Smt. Priya did state that she had a diary about her receipt but apprehending trouble hastened to add that the same was lost or left with the parents-in-law and could not be produced before the ITO. The statement of Priya confirming assessee’s version thus did not deserve credence. 6. One can now scrutinise the explanation regarding the two originating anonymous ‘friends’ who later on surfaced as Balwant Juneja and N. R. Chugh. As mentioned above, as late as 28th Oct., 1976, the assessee could not even tell the names of these “friends”. The ITO noticed that this is very peculiar feature because whereas the assessee could mention other names with comparative ease, the two friends were not identified throughout s. 132(5) proceedings. It was only; nearly two years later on 13th July, 1978, that the assessee in his sworn statement for the first time gave out the names of the two friends as Balwant Singh Juneja and N. R. Chugh contributing Rs. 15,000 each. The ITO pursued the matter further recording the statement of Juneja. He found that although Shri Juneja confirmed the assessee’s version the circumstantial evidence was in favour of adverse inference against the assessee. Shri Juneja was a branch manager of LIC at Shrirampur at the time of raid. He claimed to have given the money to the assessee on 4th-5th Aug., 1976, just a day or two before the search. Yet on 6th Aug., 1976, the assessee could not remember any aspect of this alleged custody. Shri Juneja claimed to have kept the same amount earlier at his home out of his own savings. He had not taken any acknowledgment, etc. Whilst asserting that he had asked for the return of money orally, he admitted that he has not pursued the matter. The ITO held that it is unbelievable that Shri Juneja would be keeping substantial amount idle out of his own savings. It would also be a very curious thing to keep the amounts in this way. In fact, Shri Juneja had two savings bank account – one of Bank of Baroda and the other in State Bank of India at Shrirampur. The Bank of Baroda account was opened in August, 1975 when he was transferred from Sitapur in U. P. to Shrirampur. This account was maintained even till June, 1977 when he was transferred from Shrirampur to Aurangabad. During the period December, 1975 to June, 1977, the balance in account was nominal say, Rs. 800 to Rs. 1,300. The State Bank of India account position was also similar. 7. The ITO critically analysed the sworn statement given by Shri Juneja on 24th July, 1979. As mentioned in paras 20 and 21 of the ITO’s order, Shri Juneja was asked as to the reasons for keeping such large amounts and that too with an outsider when Shri Juneja had two bank accounts at Shrirampur. Shri Juneja came out with a new explanation that the amounts were kept with his mother who had suggested on or about 4-5th Aug., 1976, that the amounts be kept with the assessee as she had full faith in the assessee. An attempt to show that a part of funds came from the mother of Shri Juneja did not succeed because the rental income of mother was hardly Rs. 200 per month from the property and that too was not being received regularly. Actually, it was not received for the preceding year. The property was let out only from February, 1974. Ultimately, as mentioned by the ITO in para 22 of his order Shri Juneja came round with admission as below :
“I cannot say definitely about the extent of my savings out of the amount because whatever and whenever I saved, I handed over the amount to my mother for keeping it in her custody.”
Thus, from his statement it would be clear that Shri Juneja was not keeping his savings of salary with him but that his mother herself offered the amount from the salary which Shri Juneja claimed to have handed over to his mother. Admittedly, Shri Juneja had no source of income apart from salary. Ordinary prudence would lead anyone to infer that when Shri Juneja had two savings bank account the purpose of which was to put his salary savings, there was no possibility of any substantial amount remaining with him or with her mother in cash. Lastly, whilst claiming to have kept similar amounts with the assessee in the past, Shri Juneja could not give any convincing material to support the same. Thus, for reasons summarised in para 25 of his order, the ITO rejected the contention in para 26. He discussed the impact of contentions made by the assessee’s representative by his letter dt. 23rd May, 1979, on the point.
8. Regarding the claim made on behalf of deposit by one Nanaksingh R. Chug, a blind truck operator, the ITO noticed facts which were markedly similar regarding the unconscionably long time taken by the assessee to identify this party. The ITO examined Shri Nanaksingh on 27th April, 1979. Here again whilst confirming the assessee’s version Shri Nanaksingh failed miserably to show the circumstances under which he could have made such an extraordinary contribution. His claim is that he gave the sum of Rs. 15,000 to the assessee in that hope of getting some tyres in which the assessee was dealer. The assessee was certainly not in a proprietary business and if these facts were correct the amount should have reached the coffers or the firm as advance from Shri Nanaksingh. Shri Nanaksingh did not even purchase the tyres from the assessee or the firm. He got them from another concern M/s Vikas Cycles which would show that his version regarding giving an advance to the assessee was not correct. Shri Nanaksingh made further statement that the sum paid as an advance to the assessee could be traced to a receipt by him from Maharashtra Sugar Mills as transport commission, etc. The ITO pursued the matter with Maharasthra Sugar Mills and found that Nanaksingh has actually received Rs. 18,035 on 23rd June, 1976, by cheque which was credited by Nanaksingh into his bank account in State Bank of India. Thus, the version regarding receipt from Maharashtra Sugar Mills for identifying the alleged cash payment to the assessee stood disproved. Further, the ITO took the trouble of examining the partner of M/s Vikas Agency who had, according to Shri Nanaksingh, supplied tyres to Nanaksingh. The partner Shri Ganghan was examined on oath and came out with the revelation that Nanaksingh had not purchased any tyres through Vikas Agency. Further enquiries showed that the firm in which assessee was a partner had actually received Rs. 4,200 cash from two persons of Chugh primarily by way of advance for purchase of tyres. These have been duly accounted for in the books of Ramchand and Sons as advance for tyres. If Shri Nanaksingh had really made such advanced the same way these would have found place in the books of the firm. When the assessee was confronted with this position, the assessee in his statement on 2nd May, 1979, tried to wriggle out the situation by stating that the amount was received by him at his residence and that since the firm was not having any stock of the Modi tyres he did not account for the same as advance in the books of the firm. Such an explanation is clearly unbelievable. Ultimately for reasons given in paras 29 and 31 of his order, the ITO rejected the claim regarding these alleged deposits to the extent of Rs. 30,000.
9. Coming to the main point regarding the claim of receipt of Rs. 1,10,000 from Gurudwara Committee, here again the ITO noticed that there was not a whisper about it in the preliminary and concluding statements. If, as alleged, the amount came only the previous night this would have been fresh in the mind of the assessee. The separate bundle with Gurudwara earmarking would have come to the notice of the search party. The ITO examined the case from this background. His observations and conclusions on the point are mentioned in paras 32 to 60 of his order dt. 27th Sept., 1979. The assessee produced in support of his claim certain confirmatory letters signed by the two members of the alleged Gurudwara Sabha alongwith the assessee’s explanation dt. 28th Oct., 1976. The explanation was that during the two days preceding the date of search (dt. 4th and 5th Aug., 1976) the members of the Sabha had gone from place to place and collected the amounts in cash to be kept in the safe custody of the assessee who was the chairman. The ITO recorded the statement of the members of the committee, viz., Jagjitsingh R. Chug, Saransingh R. Chugh and Shri Somsing J. Kathuriya. It may be mentioned here that Shri Saransingh was also the panch witness at the time of search. Shri Jagjitsingh was the panch in respect of search carried at the business premises of M/s Ramchand & Sons, Shrirampur, simultaneously as the assessee was having 60 per cent share therein. Both these brothers whilst confirming the assessee’s version had some explanations which were rather odd. Shri Saransingh was also present as panch throughout the search. He claimed to have pointed out to the officials that the amount belonged to the Gurudwara and that the authorised officers, at the time of search, as he was panch. He claimed to have made a statement to the authorised officers, curiously at a time when the assessee himself was not present in the room as he was called upon the shop where search was going on. It is surprising how Shri Saransingh chose this particular moment for the alleged revelation. One would naturally expect, if the assessee’s version is true, a claim coming from Saransingh or from the assessee within a few minutes of the commencement of the search. Shri Saransingh claimed to have again told the authorised officers at the time of seizure and counting of the cash and stated that at this time i.e., on the second occasion in the evening the assessee was present in the room when he said so. The other brother Jagjitsingh Chugh in his statement stated that he also knew from brother Saransingh that the amount of building fund of the Gurudwara Sabha which was kept with the assessee was seized. He further stated that Shri Saransingh had told him that he (Saransingh) had objected to the seizure as it did not belong to the assessee. He further claimed to have heard from Shri Saransingh that the officers-in-charge of the search had told Saransingh to make a separate representation. Shri Jagjitsingh further claimed that he himself proceeded along with the other members in the work of collecting found at Shrirampur and other places nearby (Sangamner, Rahata, Kopargaon, Yeola, Manmad, Vaijapur). Shri Jagjitsingh claimed to have taken a receipt on the back of the receipt book. Surprisingly he stated that he kept the receipt book with him and handed over to the Sardar Sardarsingh Kathuriya later on. The ITO took note of the fact that at the time of search at the business premises, it was claimed that only the cash of Rs. 2,000 belonged to Gurudwara Sabha and that is the reason why the cash was not seized at the business premises to this extent. The ITO also noted that at the time of search in the shop premises the assessee was physically present and even on that occasion did not say anything about the alleged cash. The ITO also noticed that even assuming that the authorised officers had asked Saransingh to put a claim after the search, the claim came very late, viz., on 27th Oct., 1976. The inference of the ITO from this was that supporting evidence was cooked up to show a state of affairs which never existed. The ITO also found fault with the reasons given in handing over the cash so late in the night, may be the assessee was the chief trustee but the bank account in which the amount was expected to the deposited was operated by the other persons also, as mentioned in para 37 of his order. Anyone can deposit cash in bank. The last occasion on which the assessee operated another bank account was on 17th Jan., 1975, when he had signed a pay slip for deposit of Rs. 33,915 in the S. B. account of Gurudwara. This deposit admittedly had nothing to do with the fund collection which is not claimed. Indeed even for this amount no specific collections were shown for tracing their origin.
10. The ITO then examined the alleged receipt book and also obtained from the parties the names and addresses of the so-called donors. His very first effort to cross-verify with the donors through the Inspector (sic – who) brought out the hard truth that none of these donors had any evidence or any record about such payments. The assessee had by then succeeded in persuading some persons to admit having given some amounts in vague terms. The Inspector’s enquiries at Kopargaon and Rahata where collections were claimed to have been made revealed that in many cases there are no persons at all whose names were furnished by the assessee. The enquiries with old Sikh residents at Kopargaon showed that they were also not aware of the whereabouts of such persons. When the assessee was confronted with this, he failed to avail of this opportunity and preferred to take an extraordinary plea that as he was not himself in the party of persons who collected the donations he could not throw light on the whereabouts of such persons. A guess was hazarded that many of these persons are truck operators who move from place to place. Putting his figure on some of the amounts, the ITO tried to locate on Shri Kripalsingh Kanhyalalsingh of Rahuri who it was claimed to have paid Rs. 1,0001 on 4th Aug., 1976. Once again the ITO noticed that there were no such persons at Rahuri. There were, however, two persons, viz., Kripalsingh and Kanhyalalsingh and thinking that the personal names of these two brothers were brought together to make a joint contribution of Rs. 1,001, the ITO enquired with them. They were partners in M/s Kathuria Sons but there was no entry in the books of accounts. In fact, they also gave a statement to the ITO that they have never given any donation to the building fund of Gurudwara Sabha. Once again when confronted the assessee merely took a stand that he cannot throw light on a matter to which he was not a party. Nevertheless an attempt was made to show that the mother of Kripalsingh and Kanhyalalsingh whilst on her trip to Shrirampur had donated a sum of Rs. 1,001 in the names of her two sons. The affidavit of the lady produced before the IAC in s. 144-B proceedings did not impress the ITO who held that the affidavit is only an after thought made to cover up an otherwise unacceptable explanation. The ITO also held that if the affidavit were correct, the names of the two sons would have been mentioned separately. The continuity in the two names with a coma and with no individual contribution mentioned led the ITO to hold that the receipt itself was fake. Lastly, when the assessee contended before the ITO that it was for the ITO to prove that the affidavit is wrong, the ITO relied upon the well-known principles that self-serving affidavits have little evidential value and there is no obligation on the ITO to go on verifying every affidavit and also set up a contrary case. In such cases, the ITO is expected to show how the evidence produced is insufficient and/or unrealiable.
11. The ITO then looked into the alleged appeal for donation made by the various Gurudwaras by letter dt. 27th July, 1976. The ITO even noticed that the entries were made in the Gurudwara books for postage and typing expenses on 22nd July, 1976, and 24th July, 1976, to the extent of Rs. 330 and Rs. 25. The ITO noticed from the above that whilst appeals were sent in the form of cyclostyled letters the debit in the books were for typing charges and not for cyclostyling charges. The ITO also took note of the fact that an appeal for donation on such mass scale would have been reflected through some other media also like newspapers but actually no such evidence was forthcoming. He held that the entries in the books of accounts were made after the search to support the assessee’s claim. The ITO did not also accept the contention that the cyclostyled letter now shown to him was actually in existence on the date mentioned therein. Ante-dating is a common feature of such attempts to produce fabricated evidence. The ITO also rejected the contention that since the books of accounts of Gurudwara have been audited and that the auditors have also confirmed the assessee’s version that same should be accepted. The ITO held that the auditors were not going beyond what was stated to them by the parties concerned, the audit itself having taken place after the raid. The auditors were never called upon to scrutinise the genuineness of the receipt, etc. and therefore, the auditors letter or report had little evidential value. The ITO then examined the claim regarding the manner of travelling by the alleged members. Shri Jagjitsingh claimed to have travelled in his car which he was himself driving. His statement recorded on 27th April, 1979, showed that he claimed to have been sufficient petrol in the car as he had taken petrol 2/3 days earlier. He had to take a stand because on the date in question he had no vouchers regarding purchase of petrol. He could easily come forward with the claim that prior to 4th Aug., 1976, the tank was full with 40 litres capable of taking him around 500 kms. The ITO highlighted the fact that Shri Jagjitsingh did actually purchase the petrol much prior to 4th Aug., 1976, and that too on account, that is, without cash payment. But the facts as verified from the seized accounts showed that there was no credit sales of petrol at any time from April 1976 onwards upto the date of raid. The statement of Jagjitsingh thus had a basic infirmity throwing serious doubts as to whether he did really go round various places as alleged on 4th Aug., 1976, and 5th Aug., 1976. Driven to the wall, on this count, the assessee took a stand that Jagjitsingh might have taken petrol without credit. He promised to produce the cash memo mentioning the car number of Jagjitsingh (Fiat MTJ 2367). The assessee did not keep his word. The ITO did not consider it necessary to go through the same because Jagjitsingh had himself stated on oath that he had bought the petrol on account from the firm in which the assessee is a partner. There was no question of verification of cash memo, having found such a serious deficiency in the statement of Shri Jagjitsingh.
12. The ITO decided to take the matter a little further. Shri Jagjitsingh assessed by the next door ITO, ‘D’ Ward, Ahmednagar, has a business in wines in the name of M/s Sardar Wines. This record showed that Jagjitsingh had only one car MHW 6884 which he had sold on 22nd July, 1976, to one Dr. Aziz Haji Sultan Shaikh of Shrirampur. This car was sold in settlement against the price for purchase of land from Dr. Aziz for Rs. 48,000 out of which Rs. 30,000 were paid in cash and Rs. 18,000 were adjusted in the form of sale of car. This means that Jagjitsingh could not have had any car after 23rd July, 1976. How then could he have gone on his own car on 5th Aug., 1976 ? It thus became clear that the statement of Jagjitsingh that he travelled in his own car had to be taken with a pinch of salt. In fact, the buyer of the car Dr. Aziz was emphatic about his having taken possession of the car on 23rd July, 1976, and retained by him to the entire exclusion of the vendors Shri Jagjitsingh. It appears however that it has not been possible to find out who is the registered owner of the impugned fiat car MTJ 3267. When the assessee was confronted with this, once again an extraordinary plea was raised that it was a slip on the part of Jagjitsingh in stating that he was travelling in his own car. A peculiar stand was taken that the evidence thus gathered is not sufficient to disbelieve Jagjitsingh who examined twice on oath had confirmed that he did actually travel at various places in his own car and driven by himself. Linking this piece of material with further evidence gathered, the ITO held that either collections were not made as alleged or that the collections, if made, had no link whatever with the cash found at the residence of the assessee. The ITO found that every time the assessee was confronted, he had some other card up his sleeve. A new twist was given asserting that the impugned car belonged to uncle of Jagjitsingh. Lastly, the ITO noticed that the places claimed to have visited Sangamner, Rahata, Kopargaon, Yeola, Manmad and Vaijapur on one day are too far away from each other even for a whirlwind tour. In fact, the assessee claimed to have made collections even from farther of places like Aurangabad, Jamkhed, Belpur, etc. in one day. When physical impossibility of such trips was pointed out once again an extraordinary plea was taken. ITO wondered how such persons could have made contributions when they could not have been aware of the impending visit of the alleged members of the alleged building committee. The geographical situation itself would show that it would not be possible for them to cover all these places within one day as their primary work was to collect the substantial donations which would have taken considerable time. 13. The ITO then proceeded to verify the claim of Shri Saransingh about his having told the authorised officers about the collections forming part of the cash found at the residence. He found that none of the officers or officials associated with the search party were aware of any such representation made by anyone. Only one authorised officer Shri Thite was mentioned as a person to whom Shri Saransingh had possibly whispered about the funds of Gurudwara. The authorised officer Shri Thite was also examined on oath at some length. The ITO has summarised his findings from para 52 onwards of his order. The ITO was, however, struck up by the information volunteered by Shri Thite about the assessee being in a disturbed mood at the time of search. Since this part of the elaboration was unsolicited the ITO had serious doubts about the motives of the authorised officer in giving this type of statement on oath. The ITO held that the assessee was all along conscious throughout the search and that the circumstances were not such as to make assessee confused or disturbed. The minor discrepancies regarding the quantity of gold, etc. in the assessee’s statement do not any way indicate that the assessee was not mentally alert. After all, such statements about gold are made on estimate basis. Ultimately the ITO came to the basic question as to whether and when Shri Saransingh did place the possibility of the alleged Sabha funds forming part of the cash seized before the authorised officer. The authorised officers stated as below :
“Whatever has been stated by Shri Saransingh R. Chugh above is partly true in the sense that at the end of panchanama he tried to tell me that some funds belonging to Gurudwara are also included in the cash that is being seized. Since it was stated too late when the operations were completed and the panchanama was made, advised him to approach higher authorities. Nowhere, did he state at that time about amount of Rs. 1,10,000 was so included in the seized cash.”
Even the most favourable part of the statement of authorised officer would suggest that Shri Saransingh might at best have got some ideas to put a claim only at the end of search. Obviously Saransingh’s mental faculty must have been working very fast throughout the search but could manufacture very late a plausible explanation which had a chance of getting some confirmation in the form of other make-believe evidence which would be prepared later. If Shri Saransingh had himself come with cash at 9.00 p.m. previous night why did he take such a long time to whisper into the ears of the authorised officer, carefully choosing a moment when the assessee was out of hearing distance ? The ITO held that the big time gap between the date of search i.e., 5th Aug., 1976, and the actual production of evidence i.e. 27th Oct., 1976, revealed a lot. He thus held that there was hectic activity on the part of the assessee and his friends to concoct and fabricate evidence. It may also be mentioned here that the ITO enquired with the authorised officers whether they had seen any receipt books of the Gurudwara funds. Only Shri Thite claimed to have seen some receipts. If the statement of Jagjitsingh is correct they had obtained the receipt of the assessee on the back side of their book and taken back with them, receipts would not have been lying with the assessee at the time of search. For this purpose, the ITO took note of the statement of the assessee dt. 2nd May, 1979, that there were no receipt books for the building fund other than those which were in the Department’s custody. Thus, if the authorised officials statement that he did see some receipt books of which he did not take possession at the time of search is correct, there is an apparent contradiction between the assessee’s version and Jagjitsingh’s version. Once again, the assessee claimed that the receipt books seen by the authorised officers were then handed over to him by Jagjitsingh. The ITO concluded that the authorised officers’ statement regarding the finding of receipt book at the residence of the assessee was not worth credence. The relevant statement of the authorised officers summarised by the ITO in para 56 of his order is as below :
“I do remember to have seen some receipt books of the Gurudwara in the residential premises at the time of search. Except the receipt book I did not find any other documents/books/register in respect of Gurudwara funds. Since the receipt books as stated above were not relevant for the purpose of search and seizure operations, I did not seize them.”
Against this the assessee’s statement on 2nd May, 1979, asserted that since the assessee was the chief trustee all his records such as account books and receipt books were lying at his residence. The failure to see these records at the time of search may be a case of laxity on the part of the search party. Lastly, holding that the authorised officer’s contention as to how he came to know that the receipt books were of Gurudwara fund was not satisfactory the ITO held that the statement of the authorised officer on this point does not deserve much credence. Ultimately, therefore, the claim of Saransingh also was an imaginary statement made with view of give some sort of credibility to support the assessee who after a long time of the search came with the version regarding Gurudwara collections linked with with part of the cash found at the residence of the assessee. The ITO did not fail to take note of the fact that the affidavit of Saransingh was made very late, that is, only on 3rd Jan., 1978, when for the first time, he brought out this aspect of having pointed out to the authorised officers about the existence of Gurudwara fund in the cash seized from the assessee premises. It is strange that the necessity of making such an affidavit about the so-called claim of Gurudwara funds arose nearly one and half years after the raid. This inordinate time between making the affidavit and the date of raid certainly goes to disprove the claim sought to be made on behalf of the assessee. It will thus be seen that the ITO had marshalled all facts and ultimately held that the explanation on this part also deserves to be rejected because of the insufficient and unrealiable evidence produced in support of the claim.
14. One can come now to Dr. Bhojwani’s submissions. Dr. Bhojwani was aware of all the factual position marshalled by the ITO in his assessment order and confirmed by the CIT(A) in his appellate order. He, however, submitted that whilst the basic facts may be true, the conclusion is totally unwarranted. He saw no reason for disbelieving the assessee’s version particularly when the assessee has himself came out with a statement regarding auction contract business which fetched him Rs. 51,060 for the first time this year. It may be that the assessee has no contracts or other evidence about the auction and that he is not in a position to identify the other contractors who formed the syndicate. In such cases, it would indeed be unfair to hold that the assessee earned much more than Rs. 51,060 from that activity or from some other activity. The assessee’s contention should have been accepted with grace and need not have made the ITO hold that even the admitted income is from undisclosed sources and to draw adverse inference about the other cash for which proper explanation has been given. Dr. Bhojwani submitted that the ITO has allowed his mind to be prejudiced by this type of observations and the CIT(A) has wrongly side-tracked the issue by saying that the issue is not relevant.
15. Dr. Bhojwani contended that the failure of the assessee to give all the details at the time of preliminary and final statement on the occasion of the raid has been blown out of proporition by the authorities below. He submitted that due note should be taken of the difficulties of a person like the assessee at the time of search, for remembering all the events with a vivid precision expected of him by the ITO. According to Dr. Bhojwani, even the assessee’ statement regarding voluntary disclosure would show that the assessee was in a disturbed state of mind. He also submitted that the statement of the authorised officers Shri Thite that the assessee was in fact in a disturbed state of mind at the time of search represents a true statement of offence (sic).
16. Coming to the individual explanation Dr. Bhojwani submitted that the case of Priya the daughter of the assessee is really a pathetic one. She lost her husband soon after the marriage and had to (sic – stay) with her in-laws at Bombay. It was but natural for her to have thought of some activity which would keep her busy and avoid brooding over her misfortune. It is not at all difficult for a lady to work on embroidery work as she had already passed intermediate. Her bona fides are further proved that by her own voluntary returns before the C-III Ward ITO at Bombay, there being no dispute that she did file returns upto 1975-76 at least on 1st Jan., 1976, i.e., much before the raid. Regarding the statement accompanied with 1976-77 return, Dr. Bhojwani submitted that there is really no basis whatever for such an allegation that the same is given after search. Even without such a statement, it could have easily been seen from the return that there was cash in hand of about Rs. 25,000. Smt. Priya knew that her father was trying to rehabilitate her through a second marriage and she also knew that for this purpose she would have to keep money in cash without the knowledge of her in-laws. Thus, whereas she kept Rs. 18,000 inherited from her husband in bank, she thought it wiser to keep Rs. 25,000 with her father. She visited the assessee about two months before the raid. Secondly, possibly the assessee was not sure whether this Rs. 25,000 was part of the cash at home or had already been taken to the shop. This is the reason why the assessee in his preliminary and final statement did not refer to Priya’s funds being in his custody. Referring to the statement of Priya, Dr. Bhojwani submitted that the ITO has drawn unnecessary adverse inference regarding her capacity to earn income. ITO has also laid undue stress on the fact that the diary in which she had made such entries was lost or mislaid or could not be produced before the ITO. According to Dr. Bhojwani the returns themselves filed by Smt. Priya in Bombay, show clearly that she did have requisite cash. During the search, she could not have made any statement as none was asked. She could not also have prompted her father or reminded him about the cash which she had given. Thus, the entire version of Smt. Priya in her sworn statement being consistent with proved facts and tallying with assessee’s version should have been accepted. Dr. Bhojwani, however, could not throw light on the actual date of issue of notice under s. 148 which ITO, Bombay, had issued after the receipt of voluntary return on 14th April, 1978. Possibly the ITO was trying to regularise the voluntary returns for processing into the valid assessments. Dr. Bhojwani also could not throw light on the contents of the letter dt. 24th Sept., 1976, which is referred to by the ITO, C-III Ward, in his assessment order on the plea that the letter is now not available. Summing up his arguments on this issue, Dr. Bhojwani submitted that the assessee’s explanation to this extent deserves to be accepted.
17. In reply, Departmental Representative drew our attention to the various aspects of the case which we have already summarised above. He submitted that the alleged absence of proper mental condition at the time of search has not been proved. The form of questions and answers at the time of search does not indicate that the assessee’s frame of mind was so bad as to make him forget even the events of preceding night. It is also inconceivable that the assessee would not be knowing about the cash of his own daughter even if the cash was really given even a month or two earlier. There is no question of the assessee not knowing whether this cash was with him or was deposited elsewhere. If the assessee could make a self-exculpatory statement vainly trying to link all the cash with his wife’s voluntary disclosure he could as well have made some reference to the daughter’s cash, if such cash really existed. The conclusion that either Priya did not earn any amount or if she did earn, did not give any amount to assessee or if she did give such cash the same did not form part of the seized cash is thus inevitable. In support of his contention Shri Roy relied on the observations of the Calcutta High Court in Kamal Devi Jhawar vs. CIT (supra) and Smt. Sakit Rani Roy vs. CIT (supra). In both these cases it has been held that whereas the assessment order is final as far as particular year of assessment is concerned, it merely constitutes a piece of evidence in subsequent year of assessment. An earlier assessment year (sic) like any other piece of evidence may be accepted or rejected in a subsequent year depending on the facts and circumstances of the particular case. There is no doubt that the finding in earlier assessment year should not be ignored on flimsy ground. But in this case there are not even findings of cash savings in the earlier years. The earlier years’ returns were obviously capital build-up returns. It is indeed an extra-ordinary feature that anyone would file generously voluntary returns showing marginally above taxable income. Such returns are always filed by persons who want to have capital build-up and to lend their names for hawalas on commission. The returns filed prior to the raid were thus obviously intended to give hawalas possibly to some unknown parties. After the raid the assessee thought that he could himself as well take the advantage of the hawala. The observations of the ITO show clearly that the returns of Priya were motivated. There is no evidence regarding the existence of activity giving the alleged income or existence as cash without any outgoing. There is also no indication that such cash could have been kept with the assessee without the knowledge of the assessee. Lastly, there is also no evidence that such cash was brought to Shrirampur and formed part of the cash seized at the time of search. The conclusion of the authorities below are thus fully justified on this point.
18. Coming now to the question of funds alleged to be belonging to Shri Juneja and Chugh, Dr. Bhojwani contended that the authorities below have drawn adverse inference on the basis of very flimsy material. It is already on record that the assessee was not in a proper mental state at the time of search. It is true that the assessee could not give the names at the time of giving explanation dt. 28th Oct., 1976, but this is because even at that time the assessee had only a hazy idea that he had the custody of funds belonging to these parties. The assessee was not sure whether these funds were definitely part of the seized cash. The assessee had to strain his memory and contact the various parties and also to make sure that these funds were not already reflected somewhere else. As soon as the assessee recalled all the events and got them cross-checked the assessee identified the persons with complete certainty on 13th July, 1978. The reason for the delay in giving the explanation (identifying the facts) should, therefore, be accepted as bona fide. Referring to Shri Juneja’s statement, Dr. Bhojwani submitted that there is nothing wrong or unnatural in the statement of facts made by Shri Juneja. It is common knowledge that even salaried persons keep some cash for emergency. As a branch manager of the LIC, Shri Juneja did derive substantial income and did keep some money with his mother who in turn thought the assessee to be the most truth-worthy custodian. The most important point which according to Dr. Bhojwani has not been given due importance is that the amount has been returned by cheque at Aurangabad (pate 79 of his paper book).
19. Regarding Chug, Dr. Bhojwani referred to ITO’s observation at para 27 onwards already summarised above and pointed out that Shri Chug is a regular tax-payer at Ahmednagar. It is also on record that he purchased diesel and tyre from the firm. Thus, the small oddity regarding the advance are not sufficient to warrant a rejection of the assessee’s and Sri Nanaksingh Chug’s version regarding the custody of the sum of Rs. 15,000. Shir Nanaksingh Chug is blind and, therefore, may have made a small mistake regarding the date and the manner of receipt from Maharashtra Sugar Mills. Referring to page 79 of his compilation, Dr. Bhojwani highlighted the fact that the amount has been repaid on 29th Oct., 1979, by adjustment of dues against sale of diesel. Thus, the material on record is quite sufficient to warrant acceptance of the explanation regarding the origin of funds found at the time of search.
20. In reply, the Departmental Representative higlighted the facts that for nearly two years from the date of search, Shri Juneja and Chug had not surfaced. The evidence thus clearly points the fact that these persons have been bought over by the assessee to make false statements in his favour. The question really is not whether these people could have mustered the funds but whether they did really so muster them and hand them over. The material on record shows clearly that Shri Juneja is either vague or inconsistent. The subsequent return is clearly a made up affairs to give colour of credibility to a transaction which never took place in the form claimed by the assessee. Thus, a mere claim of return is no evidence to support the contention that original amounts were actually received and did form actual part of the cash found at the time of search. Regarding Nanaksingh also the ITO has brought out clearly how certain other purchases have been duly accounted. He has also brought out how a vain effort was made to link the origin of the funds to the amount received from Maharashtra Sugar Mills in the fond hope that the ITO would not cross-verify with Maharashtra Sugar Mills about the date and the mode of payment. The entire story is build up on half truth and falsehood to support the assessee’s contention asserting events which never took place in the manner now alleged. All subsequent made-up statements lose their evidential value in view of the failure of the assessee to identify these persons with certainty within a reasonable time from the date of search. It is clear that even on 28th Oct., 1976, when the assessee had to give a definite reply in the course of s. 132(5) proceedings the assessee was still hunting for name-lenders in his hectic efforts to reduce the impact of adverse inference which was likely to be drawn. The conclusion of the authorities below is therefore, fully justified.
21. Referring to the sum of Rs. 1,10,000, Dr. Bhojwani submitted that the authorities below have totally erred in unwarranted ignoring all material evidence on the point and going by assumptions and presumptions. The Gurudwara fund was not a new innovation. The trust was created on 3rd April, 1974, long before the search. The accounts are regularly audited and even the decision to create a separate trust fund for the building was taken on 27th July, 1976, i.e., before the raid as per page 121 of the compilation. The Gurudwara building required estimated expenditure of about Rs. 3.50 lakhs and this is how the cyclostyled appeals for donation were sent. The ITO has made a mountain out of a molehill about book entries regarding the expenditure incurred on the circular appeal. The ITO has also let loose his imagination regarding the actual travels by the members of the building collection committee. The evidence on record is sufficient to support the assessee’s contention that actual collection was done on 4th Aug., 1976, and 5th Aug., 1976, at Shrirampur and other places. As the amounts contributed by individuals were nominal, it would be futile to expect these donors to keep a detailed account or to identify these amounts with their account version. Regarding the addresses, since many of the contributories were many persons in transit or truck drivers only the addresses as given by the drivers were noted. The receipt books, etc. have been duly found. Auditors have duly accepted the contention of the trustees and the assessee about the sum of Rs. 1,10,000 lying with the assessee at the time of search. Referring to page 123 of his compilation, Dr. Bhojwani submitted that the letter from the trustees dt. 27th Oct., 1976, is sufficiently eloquent and should leave no doubt about the origin of the funds. Here again, the fact that the assessee did not make any reference to this aspect in his preliminary and final statement at the time of search need not lead to a conclusion against the assessee. Even the delay between 5th Aug., 1976, and 27th Oct., 1976, is attributable to the circumstances beyond the control of the parties. It was thought that the information could as well conveniently be given at the time of hearing before the ITO under s. 132(5). Regarding the doubt raised about the actual travelling (page 128 of the compilation), Dr. Bhojwani contended that although the receipts were passed on 4th Aug., 1976, and 5th Aug., 1976, the actual collections reached Shrirampur only on 5th Aug., 1976, and ultimately reached the assessee’s premises at 9.00 p.m. on 5th Aug., 1976. In particular, Dr. Bhojwani highlighted the fact that at the time of search itself Shri Saransingh did inform the authorised officers about the linking between Gurudwara collection and cash found (page 124 of the compilation). Shri Saransingh took in good faith the assurance given by the authorised officers that the representation could be made later on. Shri Saransingh has filed an affidavit on 3rd Dec., 1977, and has also confirmed the version in the sworn statement before the ITO. Dr. Bhojwani further invited our attention to the statement of the authorised officer Shri Thite. This would show that the explanation regarding Gurudwara fund was not an afterthought but was constantly working in the mind of Saransingh even at the time of search when he was a panch witness. The statement of other members of the search party are natural as admittedly Shri Saransingh had mentioned these aspects only to the authorised officer Shri Thite when possibly the other officials were not around. Therefore, the ITO was wrong on drawing an adverse inference on the ground that the authorised officers were not aware of the oral statement made by Shri Saransingh. Regarding statement of the authorised officer Shri Thite, Dr. Bhojwani briefly took us through the pages 107 to 131 of his compilation regarding the statement of Shri Thite and Shri Saransingh. Referring to page 23 of the Department compilation, Dr. Bhojwani contended that the assessee was cross-examined only on 5th July, 1983. Since the assessee himself did not know at the relevant time whether Shri Saransingh had made any statement in presence or absence of other members of the staff (Shri Harhare) there is no point in blaming the assessee for the same. The other official Shri Change was not present at the time of counting the cash. Referring to page 33 of his compilation (the statement of the other panch), Dr. Bhojwani contended that his explanation that he started collection work of Gurudwara fund on 4th Aug., 1976, at Shrirampur accompanied by other persons further confirmed the assessee’s version. Shri Somsingh has further confirmed that they all went by car and returned on 5th August. He had also made it clear that the amounts collected on 4th August were kept with Jagjit. On 5th Aug., 1976, the party returned from Vaijapur and pooled all the cash collections including the previous day’s cash and along with Saransingh went to the residence of the assessee to hand over the amount as per the directions of “Sangat”. Shri Somsingh has also confirmed having taken receipt. Shri Juneja was not present on 5th Aug., 1976, when the party visited outside places. There is thus no question of contradicting the statement of Shri Juneja driving his own car, etc. Shri Somsingh has further stated that the receipts were issued on the spot by Shri Jagjitsingh. Finally he has given a figure of the amount given to the assessee as chief trustees exactly at Rs. 1,10,000 and has also given the reasons why the amount was given to the assessee. Dr. Bhojwani referred to the statement of Shri Juneja (page 135 of the compilation) and Shri Gurubachansingh (page 19 of the compilation).
22. Summing up his arguments Dr. Bhojwani contended that the assessee’s various explanations deserve to be accepted. CIT(A)’s order is mechanical and does not indicate an application of mind objectively. The Inspector’s report on which so much reliance is placed cannot be relied upon because the collections were made during a drive and the drivers may not have remembered all the details or preserved receipts. The driver does not take the receipt. It was, however, admitted that there is no mention in the grounds of appeal on this issue. The CIT(A)’s order is also silent. Regarding the donation by Kirpalsingh and his brother, Dr. Bhojwani submitted that the assessee could give an explanation only when he came to know about the ITO’s mind. Accordingly, Dr. Bhojwani sought reversal of the decision of the authorities below.
23. In reply, Shri Roy submitted that the entire issue has to be examined in the background of all the facts including in particular the conduct of the assessee at the time of search and within a short time thereafter. It is always possible for an assessee to come up with new evidence if he gets time with the help of obliging parties and friends. This operation white-wash is to be examined with care in proper perspective in the light of the opening and closing statements at the time of search. The statement at the time of search shows that the assessee could give precise details of insurance premium, lockers, etc. Thus, it is quite clear that at the time of search at least the assessee was not in a disturbed or confused state of mind. There is, therefore, no question of assessee’s turning amnesiac. The last sentence at the time of search “I will explain the same later on” is only a self-exculpatory statement and the later explanation was only regarding gold ornaments and discrepancy and not regarding the cash. In particular the Departmental Representative highlighted the fact that if there were Gurudwara funds there was no necessity for hiding the same. Thus, the issues to be examined on this point are three in number.
(1) Was there any actual cash collected by Gurudwara fund ? (2) Whether the alleged cash did really reach the assessee on 5th Aug., 1976, at 9.00 p.m. (3) If it did, whether it actually formed part of the seized cash ? The ITO has brought out clear material on record to show that the alleged cash collections were possibly not made and even if made not to the extent claimed. The explanations regarding trips made, parties contacted, transport used, etc. are bristling with inconsistencies and falsities. It is possible that some amount was collected but this is certainly no ground for holding that such amount also reached the assessee on 5th Aug., 1976, particularly because if it had reached only about 10 hours before the commencement of the search no man would normally forget existence of such a large amount. Shri Saransingh too would not have taken such a long time till evening to say this at the end of search. Assuming for the sake of argument that some amounts from Gurudwara fund did reach the assessee’s premises the same must have been kept somewhere else and did not catch the eyes of search party. Such would normally have been kept in earmarked and labelled packet. No such things was found. Thus, the cash seized at the time of search had nothing to do with the Gurudwara fund and the evidence regarding Saransingh’s statement is a cooked up affair in an effort to wriggle out of the uncomfortable situation. Even the statements of Shri Kathuria, Juneja and Gurbachansingh do not show that the cash found at the time of search had any link with the collection, if any. Referring to page 123 of the assessee’s compilation, the Departmental Representative pointed out an inconsistency viz., Juneja had at one time said that he was away on 4th Aug., 1976, but later contended that he was away on both days. Referring to page 124 of the compilation, the Departmental Representative wondered how Saransingh could have even imagined that the said cash included a sum of Rs. 1,10,000 for raising a doubt before the authorised officers. The normal course would have been for Saransingh to enquire with the assessee with the permission of the authorised officers, or to request the authorised officers to ask the assessee whether any Gurudwara funds are embedded in the cash. Not having done this, it is clear that even a contemporaneous statement made before the authorised officers on the evening of the date of search cannot be candidly accepted. The Departmental Representative admitted that Saransingh was not asked in cross-examination as to how he has reason to believe that any part of the Gurudwara fund formed part of cash seized. This, however, is not relevant because it was not necessary. Further, the statement of the authorised officer Shri Thite does not in terms supports the assessee’s verions. Shri Thite has stated that sometime at the fag end of the search, Shri Saransingh may have done some loud thinking whether the Gurudwara funds may have been part of the seized cash. Shri Saransingh as a panch did not claim to have given any explanation on behalf of the chief trustee (assessee). Thus, all the evidence points clearly to the fact that the entire explanation regarding the entire amount does not deserve to be accepted. The authorities below were fully justified.
24. In his rejoinder, Dr. Bhojwani submitted that the family circumstances in which the assessee found himself, viz., death of young son-in-law should have received due notice. According to him, the mistake or omission in keeping silent at the time of search is bona fide and has been duly explained later. Regarding the inability to give the names of Juneja and Chug, Dr. Bhojwani’s contention is that even till October the assessee was still not in a proper state of mind. Regarding Gurudwara fund, Dr. Bhojwani contended that all the facts supports the conclusion proposed by him.
25. I have examined the various facts and the arguments. Before coming to the actual conclusions, it is necessary to keep at the back of one’s mind certain well established principles. It is now settled law that since the relevant facts are within the knowledge of the assessee, the facts are primarily to be proved by the assessee. The evidence may be direct or circumstantial or both. In some instances even a mere statement of the assessee may be enough but in some other cases such self-exculpatory statement or explanation may not be enough. The cumulative impact of all the facts must be taken into account [see Addl. CIT vs. Noor Mohd. & Co. (1974) 97 ITR 705 (Raj)].
The provisions of Indian Evidence Act do not apply to income-tax proceedings. The ITO is not bound by any techincal rules of law or evidence and may rely on circumstantial evidence. In matters like cash credits or explanations regarding assets, it is not always possible to have positive and conclusive evidence. It is also not always necessary to produce counter-evidence to draw an adverse inference against the party on whom the burden of proof lies. The legal position was explained in Assam High Court in Chowchand Balabux vs. CIT (1961) 41 ITR 564 (Assam). It was observed as under, relying on Dhakeshwari Cotton Mills Ltd. vs. CIT (1954) 26 ITR 775 (SC).
“It is not necessary in all cases that the Department should come with some rebutting evidence of its own, but the parties concerned are entitled to make out a case on the material as they are before the officer concerned. It would depend always on the circumstances of each case as to whether an affidavit commands credit, irrespective of the fact as to whether deponent turns up for examination or not. No limit can be put to the discretion of the officer as to whom or what documents he will believe or what he will reject. He can take into consideration all relevant and admissible evidence rather in a wider sense than strictly legal.”
In CIT vs. Durga Prasad More (1971) 82 ITR 540 (SC) their Lordships of the Supreme Court observed as below :
“It is true that an apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real. In a case of the present kind a party who relies on a recital in a deed has to establish the truth of those recitals, otherwise it will be very easy to make self-serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door would be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents.”
In coming to the question of onus the law does not prescribe any quantitative test to find out whether the onus in a particular case been discharged or not. It all depends on the facts and circumstances or each case. In some cases, the onus may be heavy whereas in others it may be nominal. There is nothing precise about it.
26. The facts of the present case show that the onus is very heavy on the assessee. Every little piece of evidence produced by the assessee long after the search has to be tested on the touchstone of the assessee’s own statement on the date of search. Once this fact is borne in mind, it would be clear that unless the assessee gives an explanation as to how exactly he failed to give the very explanation which he later on brought, the subsequent material produced by the assessee would lose much of the evidential value. We thus find considerable force in the arguments of the Departmental Representative that when the evidence later produced by the assessee is looked into the background required in this case, there would be no difficulty in arriving at a conclusion against the assessee. The explanation now given regarding the assessee’s conduct at the time of search is not at all satisfactory. As rightly pointed out by the Departmental Representative, when the assessee could give some details of insurance, etc. from the mere fact that he made a small mistake regarding the extent of gold ornaments or from his reference to voluntary disclosures which, in fact, was later found to be of no help to the assessee and was withdrawn, does not lead one to the conclusion that the assessee was disturbed or had lost his faculties to such a great extent that he could not have remembered even the previous night’s incidents. It is common knowledge that every assessee when cornered take his time to explain in the hope the concocted evidence prepared later regarding the origin of the funds might come to his rescue. In such cleverly camouflaged matters one can see through the game only through the slips committed. Thus, the explanation given by the assessee as also the evidence produced is to be examined in the light of this background. It is to be noted that the assessee at an early stage of the hearing gave up all hopes of explaining the entire amount of Rs. 1,65,000 and came with an extraordinary explanation that for the first time in the accounting period he entered into some auction transactions with some anonymous dealers to fetch him a cash profit of Rs. 51, 060. If as alleged all these transactions have taken place between 1st April, 1976, and 6th Aug., 1976, one could reasonably expect the assessee to give at least some description and the other particulars of the syndicate who bid in the auction to give to the assessee such a whopping share of the profits made. It is quite clear the assessee came forward regarding Rs. 51,060 only because he found that in spite of his efforts he could not muster even credible evidence and found that the best way would be to surrender the amount of Rs. 51,060 as income of the current year.
27. Coming to the question of alleged custody of funds of daughter Priya the explanation given is far from convincing. It is clear that the so-called voluntary returns of Priya were made with the purpose of giving hawalas. It may be that in April, 1976, when the first of the returns were filed in Bombay the hawala taker was not identified. It is clear however that when her own father was in need of hawala, they could not have thought of any better person than the assessee’s own daughter. The ITO has also brought on record the fact that whilst the sum of Rs. 18,000 was banked the sum of Rs. 25,000 alleged to have been earned was not. The only point of distinction between the two funds is that whereas the first one is inherited from her husband the second one did not have such a character. This does not make any difference as far as the rejection of her explanation is concerned. Even assuming for the sake of argument that her income-tax returns in Bombay did show Rs. 25,000 cash, it does not mean that such cash was actually earned or was available or was actually brought or formed part of the cash seized. Departmental Representative’s reliance on (1978) 115 ITR 401 (Cal) and 472 (supra) is apt. One can understand the difficulties of Priya in making any statement at the time of search although she was present in the house but one cannot understand how the assessee himself could have failed to bring on record all these important aspects which could be in his favour. The inevitable conclusion is that no cash of Priya formed part of Rs. 2,23,000 seized. Thus, on a proper analysis of all these facts, the ITO and the CIT(A) can be considered to have acted reasonably in arriving at an inference against the assessee.
28. Regarding Juneja and Chug the explanations given are far from satisfactory. The assessee has never explained satisfactorily how these persons could not be mentioned by name for nearly one year after the search. It is quite clear, the assessee was himself in frantic search of such persons who could give some credible material to support the assessee’s contention regarding the holding of cash. Shri Juneja, an employee of LIC with two bank accounts at Shrirampur, cannot be said to have taken the steps of holding some cash giving to his mother and ultimately passing it on to the assessee for safe custody. The actual date of alleged delivery is not known with the precision required. The ITO has brought enough material to show that the story does not deserve acceptance. It is quite clear that the return by cheque long after the search has been made only to support the assessee’s explanation. If as alleged the amount was received on cash, the same could as well have taken returned in cash. The fact that the amount was returned to Juneja by cheque, therefore, does not improve the assessee’s case. Regarding Nanaksingh Chug who remained unidentified for nearly a year after the search, the explanation and the statement given are woefully inadequate as the question is not really whether Nanaksingh was capable of holding Rs. 15,000 but whether he really did give it to the assessee for safe custody. He had transactions with the firm in which the assessee is a partner. In normal course, therefore, any advance for purchase of tyres if they were not available for the time being, would have found place in the books of the firm. Actually, as pointed out by the ITO, the tyres were purchased from one Vikas Cycles. Even the origin of the funds tracing the same receipts from Maharashtra Sugar Mills has not been proved with the precision required because the amount was first received by cheque. Here again, the receipt of return produced much later, does not improve the assessee’s case further. In respect of these two amounts also, therefore, adverse inference is considered warranted.
29. Coming to the main claim regarding Gurudwara fund, the circumstantial evidence is quite clear. Apart from the fact that the assessee could not have forgotten the arrival of the funds only 10 hours before the commencement of search, all the evidence gathered supports the ITO’s conclusion. For this purposes, it is not necessary that every statement made by every person who has made the donation or collections need be disproved. The ITO has made every effort to show how Jagjitsingh has made inconsistent statement regarding the mode of travel. The ITO has also pointed out how the money of the donors were not identifiable and how the alleged receipts counterfoils mentioned vague addresses.
30. Much has been made about the alleged action of Saransingh about having told the authorised officer Shri Thite about the existence of the funds of Gurudwara. Here again, if as alleged Saransingh having come the previous night was aware of the existence of the Gurudwara fund, he would have said so at the earliest possible opportunity. Of course, in the course of search he is not expected to talk but if he did talk in the evening he has also to explain why he could not have done this very act earlier and why he chose an occasion to whisper to Shri Thite when no one was raised (sic). All that can be said, is his mind was working fast for some statement in favour of the assessee and he could compose the same to whisper into the ears of Shri Thite in the evening. Even assuming that Shri Thite made a correct statement about the statement made by Shri Saransingh there is no explanation as to why such a statement was made so late in the evening. There is also no explanation as to how Shri Saransingh, could have arrived at the figure with such a precision. Thus, as pointed out by the Departmental Representative, although some amounts might have been collected by the Gurudwara committee from the inception of the Trust in 1974 from time to time, there is no link established between such funds and the cash found at the time of search. The totality of the evidence thus indicates in the form of statements of the party collecting funds that there was at best a nominal collection and that even such collection had no link with the cash seized at the time of search. The auditors report being based on self-serving explanation given to them does not improve the assessee’s case. Adverse inference is thus fully justified.
31. On the question of benefit of doubt on facts it is not settled that whilst there may be some case in penalty and prosecution, there is no question in assessment proceedings where the ITO is merely expected to show how the evidence is insufficient or unreliable on the special circumstances. The authorities below have done this part of the job ably. The benefit of doubt can arise on points of law regarding interpretation of statute but the question does not arise here.
32. Appeal is to be dismissed.
ORDER UNDER S. 255(4) OF THE IT ACT, 1961
23rd April, 1996
As there is a difference of opinion between the members of this Bench, the following four points of difference are referred to the President.
“Whether, on the facts and circumstances and in law, the assessee’s explanation that he was the costodian of the following cash on the date of search, 6th Aug., 1976, forming part of the seized cash of Rs. 2,23,400 is to be accepted.
1. Rs. 25,000 as belonging to daughter Priya;
2. Rs. 15,000 as belonging to Balwant Juneja;
3. Rs. 15,000 as belonging to Nanikram, Chug;
4. Rs. 1,10,000 as belonging to Gurudwara Building.
M.K. Chaturvedi, J.M. (As Third Member)
1. This appeal was referred to me under s. 255(4) of the IT Act, 1961 (hereinafter called ‘the Act’) to express my opinion as a Third Member on the following question :
“Whether, on the facts and circumstances and in law, the assessee’s explanation that he was the custodian of the following cash on the date of search 6th Aug., 1976, forming part of the seized cash of Rs. 2,23,400 is to be accepted.
1. Rs. 25,000 as belonging to daughter Priya;
2. Rs. 15,000 as belonging to Balwant Juneja;
3. Rs. 15,000 as belonging to Nanikram Chug;
4. Rs. 1,10,000 as belonging to Gurudwara Building”.
2. Shri Govindram M. Oberoi was residing at Sr. No. 1801, B. F. P. No. 422, near Tahsildar Office, Shrirampur. On 6th Aug., 1976, search action under s. 132 of the Act was carried out at his residential premises. The raid operation was conducted by Shri N. G. Thite, ITO. Besides jewellery and other things, cash amounting to Rs. 2,23,400 was found. Out of this, cash of Rs. 2,20,000 was seized.
3. At 1.30 P.M. (6th Aug., 1976), before the commencement of the raid operation, statement of the assessee was recorded. Among other things, assessee stated that he had cash of Rs. 20,000 and gold ornaments about 75 tolas.
4. Again, when the raid was over at 6.45 P.M. (6th Aug., 1976), the statement of the assessee was recorded. The relevant portion of the said statement is reproduced here as under :
“….. As regards the cash of Rs. 2,23,400 found in my house, today during the search, I have to say that it is out of the amount disclosed by me under the Voluntary Disclosure Scheme and out of the amount of Rs. 40,000 disclosed by my wife under the above Scheme. I cannot explain the balance of the amount of Rs. 1,33,400 at this stage. I will explain the same later on. The gold ornaments found in my house weigh about 25 tolas. In my earlier statement it was wrongly stated as 75 tolas, as I was puzzled.” 5. In the course of the proceedings under s. 132(5) of the Act, apropos the cash, the following explanation was offered by the assessee vide his letter dt. 28th Oct., 1976 :
“(5) Cash amount of Rs. 2,23,400 Regarding cash of Rs. 2,23,400 found in the house premises, I have to submit as under :
Rs.
(1) Cash deposit kept by Mrs. Priya Krishanlal
Jaggi of Bombay (Married daughter) 25,000
(2) Cash deposit received from Gurudwara Gurusingh
Sabha (Building Fund Committee) 1,10,000
(3) Amount belonging to my mother Mrs. Jeevandevi
Mangalsen Oberoi (removed from separate purse) 4,300
(4) Personal cash balance of Gobindram Oberoi 2,200
(5) Personal cash balance of Mrs. Bimalwanti 840
(6) Cash belonging to Shri Gobindram (Out of sub-contracts) 51,060
(7) Deposit received from friends (my two friends have
kept deposit of Rs. 15,000 each total Rs. 30,000) 30,000
---------
2,23,400
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6. In regard to deposits from Mrs. Priya K. Jaggi, two friends (originally names not given) and Gurudwara Gurusingh Sabha (Building Fund Committee), Revenue did not accept the explanation offered by the assessee. The matter came up before the Tribunal. As regards the admissibility of the explanation offered by the assessee, learned Members, who heard this appeal, could not agree. There was cleavage of opinion. The President of the Tribunal, therefore, nominated me as Third Member, so the appeal could be decided according to the majority view.
7. I have heared the rival submissions in the light of material placed before me and precedents relied upon. I have also perused the relevant documents and papers available on record.
8. Smt. Priya Jaggi is the daughter of the assessee. She got married in 1972. She lost her husband. She was staying with her in-laws in Bombay. She is assessed to tax under GIR No. C-II/1623-P(4)/Bombay. On 14th April, 1976, she filed returns for the asst. yrs. 1973-74 to 1975-76. She disclosed income from embroidery Rs. 5,200, Rs. 5,500 and Rs. 6,500, respectively for these years. Copies of the assessment orders were produced. For the asst. yr. 1976-77, statement of assessable income was submitted. She reflected therein gross total income of Rs. 8,200. Drawing of Rs. 2,000. In her confirmation dt. 24th Oct., 1976, she said that this amount was given in March, 1976. This was personal savings of profession.
9. AO noticed that returns and statement of income were filed all of a sudden in 1976, much after the due date. The antecedents were submitted in September, 1976, consequent upon the raid operation. Nothing in this regard was stated in the deposition given prior to search and subsequent upon search.
10. Dr. Pathak stated that Mrs. Jaggi was present at the time of search. She did not say anything at that point of time. Our attention was revetted on the statement on oath of Miss B. B. Deshpande (member of the search party) recorded before the ITO, A-Ward, Ahmednagar, on 10th May, 1979 (Dept. paper book page 29). Relevant portion is reproduced here as under :
“4. Can you tell me whether anybody from the members of the assessee’s family, or the assessee himself or the Pancha had made any claim about the amount of any part of the (sic) as belonging to any person and if so, whether you remember in whose name such amount was claimed ? Only the assessee Shri Govindram had stated that some small amount belonged to his daughter and with that they had no concern. This amount was taken out by the other officials in our party from a separate cupboard from his daughter’s room and for this amount the assessee claimed that the amount belonged to her with which he had no concern.
5. Besides this amount, was there any other claim regarding any part of the amount from the seized cash belonging to anybody else ? No, only this much about the daughter’s claim.”
11. Opportunity was given to the assessee to cross-examine Mrs. Deshpande. But he declined to ask any question. Dr. Pathak adverting to the words ‘Normal human behaviour’ as used by Dr. Bhojwani in the course of his arguments stated that Mrs. Jaggi is an educated lady. She could have deposited the money with the bank. Earlier se didn’t file any balance sheet. Why consequent upon the search the balance sheet was filed. Her income was very meagre. According to Dr. Pathak, there also appears some contradiction in the statements given. On 13th July, 1978, Shri S. M. Oberoi, in reply to a question that how your daughter derived income from embroidery, said : “after her husband’s death, she learnt embroidery at Bombay only and I have seen her doing embroidery work whenever I visited Bombay. She has learnt doing embroidery work on garments, etc. She started earning by doing such work of outsiders”. (Dept. paper book page 20). On 13th Sept., 1985, vide her statement, Mrs. Jaggi categorically denied of having joined any class of stitching or embroidery at Bombay(Dept. paper book page 22).
12. Having regard to the facts, I am inclined to agree with the reasonings given by learned A.M. on this count. The stand taken by the assessee appears to be jejune. He failed to establish the capacity and genuineness of the alleged credit. Nothing in this regard was mentioned at the time of the search. Mrs. Jaggi was present but she did not make any claim. Besides, there is no sufficient evidence to indicate her capacity to deposit such amount. Accordingly, I find no merit in the explanation offered on this count.
13. Rs. 15,000 was said to be belonging to Balwant Juneja. This name was not given even at s. 132(5) stage. A confirmation dt. 24th, July, 1978, was filed, wherein it is state : “….. that I had deposited with Shri G. Oberoi a sum of Rs. 15,000 in cash on temporary basis, as I was proceeding on privilege leave and was going out of station with my family members, to avoid the risk of theft. This amount was from my own savings and was handed over to Shri Gobindram Oberoi in his residence in the month of August, 1976, when I was in Shrirampur. Thereafter in 1977, I was transferred to aurangabad.”
Shri Juneja was branch manager in LIC. Dr. Bhojwani stressed that Mr. Juneja is a man of status. He also confirmed the deposit. Dr. Pathak contended that Mr. Juneja had his two bank accounts. Assessee did not mention his name at the time of search. Why he kept the money for safe custody with the assessee when he had his account with the bank ? Mr. Juneja was with the assessee in the Gurudwara committee. He came forward after a gap of two years to help him.
14. Rs. 15,000 was said to be belonging to Nanak Singh R. Chug. This name was also not given even at s. 132(5) stage. A confirmation dt. 17th July, 1978, was filed wherein it is state : “…. I hereby confirm having advanced a sum of Rs. 15,000 to Shri G. M. Oberoi on 15th July, 1976. This amount represents my personal savings and is of truck plying business. I had two trucks bearing Nos. MHS 5107 TMB 1970 model and MHF 6646 TMR model. I am assessed to income-tax under GIR No. DW/N-718 since 1966-67. I further declare that I have voluntarily kept this amount with Shri Gobindram and have not received any interest.” Shri Chugh was stated to be a blind truck operator. ITO examined Shri Chugh on 27th April, 1979. He couldn’t sufficiently demonstrate the exigency for making the deposit with the assessee. The veracity of his statement was found to be dubious.
15. For doubt two years from the date of the search, this amount of Rs. 15,000 + Rs. 15,000 = Rs. 30,000 remained as a dark cat. Name of depositors were not disclosed. Explanation offered is riddled with incongruities. Consequent effort goes to show that it is a made up affair to give pep to the plausibility of explanation in regard to a transaction which never took place in the form claimed by the assessee. I have carefully considered the arguments adduced before me. The explanation offered by the assessee in regard to the deposits of Rs. 15,000 + 15,000 = Rs. 30,000 is not satisfactory. I have perused the reasoning given by the learned A.M. I am inclined to agree with him on this count also.
16. In explaining the source of Rs. 1,10,000, it was stated that this amount belongs to Gurudwara Gurusingh Sabha (Building Fund Committee). Dr. Bhojwani produced a copy of the Trust Deed dt. 3rd April, 1974 (page 80 of the paper book). It was submitted that the assessee was chief trustee of the said trust. This trust was registered under the Trust Act. Attention was also invited on the contents of the appeal for donation dt. 27th July, 1976. Learned counsel also referred to the report of the auditor dt. 29th Nov., 1978 (page 109 of the paper book) wherein the following remark was made.
“The amount of Rs. 1,10,000 of building fund which was kept with Shri L. M. Oberoi in last year is not still received. The special report for this amount is attached herewith”.
The balance sheet of the Trust as on 31st March, 1977, was produced wherein this amount was reflected under the caption” “With the Trustee, Shri G. M. Oberoi”.
17. In the audit report for 1976-77 (page 102 of paper book), the following remark was made vide para 10.
“The Trust had created a fund for building from donation of Rs. 1,11,282 and out of this amount Rs. 1,10,000 was given with Chief Trustee Shri Govindramji Oberoi but still that Chief Trustee has not refunded the amount to trust and also not deposited in bank. That amount is kept by him. Therefore, the other trustees must recover the amount from Chief Trustee as early as possible. This amount is in hands of Shri Gobindramji Oberoi and he is Chief Trustee of the Trust. therefore, this amount is shown as cash in hand”.
18. Affidavit of Shri Saran Singh (who signed the Panchnama) dt. 3rd Aug., 1978, was filed wherein it was stated –
“….. I was called as Panch at that raid. An amount of Rs. 2,20,000 was seized by the authorities from the house of G. M. Oberoi. At the time of seizure of amount, I told and disclosed to income-tax authorities then and there only that the seizure amount include an amount of Rs. 1,10,000 belonging to the trust of its building fund. That the income-tax authorities that time told me that I should make an appeal to the CIT, Poona, for release of the trust amount….”.
19. Shri N. G. Tihte (who conducted the search operation) was examined under s. 131 of the Act by the AO. The relevant portion of the statement is reproduced here as under :
“3. During the course of the subsequent hearing of the assessment proceedings in the case of Shri Govindram, Shri Sarangsing R. Chug, one of the Panchas who was present at the time of the search was examined and he has stated in his deposition that during the search operations he had pointed out to the officers present that the amount of Rs. 1,10,000 belonged to Gurudwara Fund and that it should not be seized. He has further stated that the officer present asked him to make a representation afterwards and not to say anything at that time since he was acting as a Pancha. Can you tell me as to what is stated by Shri Saransing as mentioned here is true ? Whatever has been stated by Shri Saransing R. Chug as above is partly true in the sense that at the end of Panchanama, he tried to tell me that some funds belonged to Gurudwara are also included in the cash that is being seized. Since it was stated too late when the operations were completed and panchnama was made, I did not take cognizance of that which he stated and advised him to approach higher authorities. Nowhere did he state at that time that amount of Rs. 1,10,000 was so included in the seized cash.
5. Please tell me whether the counting was done in the presence of Shri Govindram and also whether Shri Govindram was present when the above pancha, Shri Saransing made the claim ? Yes.
6. Since there is no mention of this claim of the Pancha anywhere in the concluding statement, does it mean that Shri Govindram Oberoi who was present at that time as you have stated now did not say anything about this claim of the money having belonged to Gurudwara funds ? Yes. Shri Govindram did not make any mention of the above funds being in disturbed mood.
7. Since there is no mention of this claim of the Pancha anywhere in the concluding statement, does it mean that Shri Govindram Oberoi who was present at that time as you have stated now, did not say anything about this claim of the money having belonged to Gurudwara funds ? Yes. He was present throughout the operations.
8. You have said that the Pancha Shri Saransing did make some mention of the Gurudwara funds. Can you tell me whether your came across any record of the Gurudwara fund during your search which you may not have seized because there is no mention of any seizure of records belonging to Gurudwara in the Panchanama ?
I do remember to have seen some receipt books of Gurudwara fund in the residential premises at the time of search; except the receipt book I did not find any other documents, books, registers in respect of Gurudwara funds. Since the receipt books as stated above were not relevant for the purpose of search and seizure operations I did not seize them.
9. How did you come to know that the receipt book found pertained to Gurudwara fund ?
After going through some of the counterfoils of the receipt book I have found them to be belonging to Gurudwara fund.
10. You have stated that you did not seize these receipt books as you did not find them to be relevant for the purpose of search. However, before the concluding statement of Shri Govindram, you have stated that Shri Saransingh, the Pancha made a claim about the Gurudwara funds. Still, however, you did not find it to question about the books and its connection with the claim of Gurudwara fund. At least there is no mention about any such query being made to Govindram ?
Since I had not taken cognizance of what Shri Saransing Chug was claiming about Gurudwara funds I did not feel it necessary to seize the receipt books.
11. You were also present as one of the authorized officers during the search of the business premises of M/s Ramchand & Sons, of which Shri Govindram is a partner and in the separate Panchanama made for the business premises it is mentioned that cash of Rs. 2,000 was not seized as it was stated to be of Gurudwara.
A cash of Rs. 2,000 was found in the business premises wrapped up in a letter-head of Gurudwara Sabha, and so it was not taken possession of. However, during the search operations I did not find any receipt book/account book/documents/registers relating Gurudwara Sabha in the business premises.
12. In the search at the residence also you came across receipt book of the Gurudwara but in the case of the Panchanama of business premises, there is no mention in the resident’s Panchanama about the finding of any such books. Do you have to say anything on my above query.
In the case of business premises there was a clear identity of the Gurudwara funds of Rs. 2,000 since it was wrapped separately in the letter-head of the Gurudwara Sabha. There was no such separate identity available in respect of any part of the cash at the residence and so, there was no question of any separate mention being made in the Panchanama.
20. The relevant portion of the statement of Shri Somasingh Kathuria, who was member of the Gurudwara Sabha is given here as under :
4. Are your in any way connected with the management of the Gurudwara ? Previously I had no such connection with the Gurudwara. But recently in the year 1975 a committee was formed to collect building funds for the Gurudwara and I was taken on the said committee.
8. Where did you keep the amount collected on the 4th and on the 5th ? The amount collected on the 4th was kept with Jagjitsing. On the 5th we returned in the evening from Vaijapur and went to Jagjitsing’s place, viz., the shop of Govindram. Shri Govindram was not in the shop. Hence, after going to Jagjitsingh’s place we took tea and collected previous day’s cash from Jagjitsing’s place and all of us including Jagjitsing’s brother, Sri Saransing, went to the residence of Govindram Oberoi. We handed over the amount to him since he was the chief trustee of the Gurudwara. We handed over the amount to him as per the directions of the “Sangat”. We obtained receipt for the amount given to him on the back of the last duplicate copy of the receipt book.
16. What was the amount handed over to Govindram on the 5th night. The amount given to Govindram was Rs. 1,10,000.
21. Relevant portion of the statement of Shri Jagjitsing R. Chug, who was member of the Gurudwara Sabha, is given here as under :
5. Are you connected with any social or religious institutions ? Yes. I am on the building committee of Gurudwara for the construction of new building. I am also a social worker. I am a member of Lions Club. I am also a Home Guard Commandant. I am a Special Executive Magistrate.
6. Have you worked for collecting Gurudwara funds ? If so, when. Yes. As per the directions of the building committee we had started collection work in the earlier months prior to August, 1976 but a drive was actually launched on the 4th of August, 1976. On the 4th we worked only in Shrirampur to collect funds. The amount collected on that day was kept by me in my custody. On the next day, i.e., on 5th I along with the other members of the committee Somsingh Kathuriya, Balaksingh Chug went in my car for collecting funds from outside places. First we went to Sangamner, then Rahata, Kopergaon, Yeola, Manmad, Vaijapur (Via Yeola) and from Vaijapur we returned to Shrirampur at night at about 8 o’clock.
8. When you had kept the first day’s amount in your house why did you think of handing over the amount collected on the second day to Govindram.
As per the instructions of the Gurudwara Committee for the Building Fund, it was decided to hand over the amount of Building Fund to Shri Govindram who was the chief trustee hence we drove to his residence and handed over the amount to him. We gave the amount at his place at about 9.00 P.M. or so.
10. Did you obtain receipt from Govindram after handing over the amount ? We obtained his receipt on the back of the last receipt.
22. Dr. Pathak submitted that the assessee failed to discharge the onus. Assessee alleged the things contradictory to each other. He changed the stand according to the promptings of his private interest. Statement recorded under s. 132(4) can be used against assessee as evidence since no sufficient material was produced to rebut the same. When search was conducted at the office premises of the assessee, Rs. 2,000 was found. It was stated that this belongs to the Gurudwara Sabha. In regard to the cash found at residential premises, no indication was made that it belongs to Gurudwara Sabha. It is not correct to say that the assessee was puzzled. In the statement recorded after the search, it was stated that quantity of gold was wrongly mentioned at 75 tolas instead of 25 tolas. He corrected the error after regaining equanimity of mind. But nothing was mentioned in regard to Gurudwara Sabha.
23. Referring to the list of donation, Dr. Pathak mentioned that from 6th Nov., 1975, to 3rd Aug., 1976, collection was only Rs. 14,220. Balance amount was collected just in two days only i.e., 4th Aug., 1976, and 5th Aug., 1976. Receipt No. 182 and 189 for Rs. 5,000 each are in the name of Premji (secret donations).
24. In the balance sheet of the Gurudwara Sabha no building account was shown uptil 31st March, 1976. Auditor’s statement was given after the completion of the search operation. Assessee himself was the chief trustee. He was, therefore, in a position to depict the picture of the trust funds in his own manner, to buttress the concoction. The auditor’s statement is self-serving. It has got no evidentiary value.
25. Department, in order to find out the veracity of the claim, made enquiry on the addresses given in the donors list. Some named donors denied having given any such donations. Some were found not traceable. Local residents of the area confirmed that such persons were not existing at the given addresses.
26. I have carefully perused the various documents and papers available on record. Shri N. G. Thite was the officer who conducted the search operations. The examination of Shri Thite, made under s. 131 of the Act, reveals that Shri Saransingh R. Chug (one of the Panchas), did mention to Shri Thite that some funds belonged to Gurudwara. But he did not take cognizance of this fact and advised Mr. Saransingh to approach the higher authorities. Vide para 6 of the examination report, Shri Thite accepted that the assessee was in a disturbed mood. Therefore, he did not make mention in regard to the funds belonging to Gurudwara Sabha. Shri Somasingh Kathuria, who was the member of the Gurudwara Sabha, categorically stated in his statement that Shri Saransing went to the residence of Shri Gobindram (assessee) and handed over the amount to him since he was the chief trustee of the Gurudwara. 27. Adverting to the statement made under s. 132(4), I find that assessee categorically stated that explanation in regard to Rs. 1,33,400 will be given at a later stage. Statement given under s. 132(4) can be used as evidence against the assessee. Presumption can be drawn on the basis of such evidence. But this gives rise to a presumption which can be rebutted; statement given at the time of search cannot be treated as sacrosanct. The statement of Mr. Saransingh is relevant. It is said that attention of Sri Thite was invited in respect of the Gurudwara fund at the time of search.
Dr. Bhojwani submitted that this amount of Rs. 1,10,000 belongs to Gurudwara Sabha. It is to be used for the construction of Gurudwara. The amount is duly reflected in the books of Gurudwara. Construction activities are half-way through due to the paucity of funds. The moment money gets released it shall be used for the completion of the construction work of Gurudwara. In the light of the material adduced, there appears to be some truth in the statement of Dr. Bhojwani.
28. The figure of justice carries a pair of scales, not a cornucopia. This means that Court must endeavour to attain exactitude in dispensing justice. But human behaviour is complex in its nature. Court cannot peep into the penumbral areas. Justice Bowen, in Edgington vs. Fitzmaurice (1985) 29 Ch. D 459 at p. 483 said : “the state of a man’s mind is as much a fact as the state of his digestion”. Six years later in Angus vs. Clifford (1891) 2 Ch. 449 at 471 he put the point thus :
“A great deal of argument which has been addressed to the Court, arises, as it seems to me, of all under cover of the fallacious use, first of all of the principle that you cannot look into a man’s mind. It is said you cannot do that; therefore, what follows ? It is said that you are to have fixed rules to tell you that he must have meant something, one way of the other, when certain exterior phenomena arise. The answer is that, there is no such thing as an absolute criterion which gives you a certain index to a man’s mind. There is nothing outside his mind which is an absolute indication of what is going on inside.”
It is all very well to paint justice blind, but she does better without a bandage round her eyes. She should be blind indeed to favour or prejudice, but clear to see which way lies the truth, and the less dust there is about the better. Let the counsel one after the other put the weights into the scales the ‘nicely calculated less or more – but the judge at the end decides which way the balance tilts, be it ever so slightly.
29. The maxim of English law as propounded by Horloyd’. J. prescribes :
“It is better that ten guilty men should escape, rather than one innocent should suffer”.
I have considered the pros and cons of the case. Though there is no clinching evidence that the sum of Rs. 1,10,000 belongs to the Gurudwara Sabha, but the material placed before us and the surrounding circumstances go to show that the claim of the assessee cannot be rejected as untrue. Records of Gurudwara Sabha, auditors note, statement of Somasingh Kathuria and Jagjit Singh Chugh, buttress the claim of the assessee. Having regard to the facts, I allow the appeal of the assessee on this count.
30. To conclude, I do not agree with the assessee’s explanation in regard to the following :
(1) Rs. 25,000 as belonging to daughter Priya;
(2) Rs. 15,000 as belonging to Balwant Juneja.
(3) Rs. 15,000 as belonging to Nanakram Chug.
Resultantly, I agree with the learned A.M. on this point.
I agree with the explanation given by the assessee in regard to Rs. 1,10,000 as belonging to Gurudwara building. Resultantly, I agree with the learned J. M. on this point.
31. The case will now go back to the regular Bench which heard the appeal, for disposal, in accordance with the opinion of the majority.