Affidavit submitted by Assessee cannot be rejected without any reason

Fact and Issue of the case

The brief facts of the case are that the assessee is an individual and derived income from commission received as agent of M/s Lux Industries Ltd., Kolkata which was shown under the head business income, besides petty interest received from banks. The assessee filed his return of income on 13/09/2012 declaring total income of Rs. 2,20,007/-. Subsequently, a search and seizure operation U/s 132 of the Income Tax Act, 1961 (in short the Act) was carried out on 19/04/2011 at New Delhi Airport, during search, an amount of Rs. 25.00 lacs were found and seized from the assessee. On being asked, the assessee filed a reply dated 04/10/2013 and stated that the cash amount of Rs. 25.00 lacs seized from the assessee does not belong to the assessee but belongs to the company M/s Lux Industries Limited, Kolkata which is an existing assessee, assessed to tax by DCIT, Circle-9, Kolkata and further that the assessee is connected with the said company and posted at Delhi as commission agent, therefore, the amount was carried for and on behalf of the company and he has nothing to do with the amount so seized from him. Thereafter the A.O. completed the assessment U/s 143(3) r.w.s. 153B(1)(b)/144A/154 of the Act determining the total income of the assessee at Rs. 27,20,010/-.

Being aggrieved by the order of the A.O., the assessee carried the matter before the ld. CIT(A), who after considering the submissions of parties and material placed on record, upheld the action taken by the A.O.. Against the said order of ld. CIT(A), the assessee has preferred the present appeal before the ITAT on the grounds mentioned.

The present appeal has been filed by the assessee against the order passed by the ld. CIT(A)-IV, Jaipur dated 07/09/2019 for the A.Y. 2012-13 wherein following grounds have been taken by the assessee:

“1. That the order passed by the Assessing Authority and sustained by the Commissioner of Income Tax (Appeals) is illegal and against the law.

2. That the order is illegal in view of the fact that the Commissioner of Income Tax (Appeals) as well as the Assessing Authority fails to cross examine the deponent of the affidavits submitted before the Assessing Officer. In view of judgment of Hon’ble supreme Court delivered in the case of M/s Mehta Parekha & Co., the contents of the affidavit should have been accepted.

3. That the assessment completed in the hands of the assessee is not justified because the amount belongs to M/s Lux Industries Limited as admitted by the Director of the company. Therefore, the assessment is illegal.

4. That the statement of Mr. Bhaskar Poddar which was the basis of sustaining the addition, was no statement in the eye of law in view of the judgment of Hon’ble Rajasthan High Court.

5. That the order passed by the Commissioner of Income Tax (Appeals) is against judicial decorum and judicial discipline because the judgment having the character of binding nature and not followed by the Commissioner of Income Tax (Appeals).

6. That the charging of interest is illegal and against the law.”

Observation of the court

The tribunl has considered the rival contentions and carefully perused the material placed on record. As per the facts of the present case, we noticed that the assessee is a commission agent and received commission as agent of M/s Lux Industries Ltd., Kolkata, he filed his return of income for the year under consideration declaring total income of Rs. 2,20,007/-. A search and seizure operation was carried out on 19/04/2011 at New Delhi Airport and during search, amount of Rs. 25.00 lacs were found and seized from the assessee. On verification, the assessee told that the cash amount of Rs. 25.00 lacs seized from the him belong to the company M/s Lux Industries Limited, Kolkata and the assessee is connected with the said company and posted at Delhi as commission agent, therefore, the amount was carried for on behalf of company and he has nothing to do with the amount so seized from him.

From perusal of the record, we observed that, the assessee is a commission agent of Lux Industries Ltd. and as per the prevalent law, the real owner should have been taxed and not the representative thereof. The assessee is only a representative of the Lux Company. The assessee in his statement recorded U/s 132(4) of the Act has specifically stated that the amount seized from him at the Air Port belongs to Lux Industries Limited. Statement of Director of the company namely Shri Ashok Kumar Todi was also recorded, which are available at page No. 10 to 13 of the paper book in which he had specifically admitted that the amount seized pertains to sale proceeds of a particular lot of T-shirts of Kolkata Knight Riders sold in Delhi and since the goods originally belonged to Kolkata and there was requirement of cash in Kolkata. Therefore, Mr. Ashok Banthia was directed to bring the cash to Kolkata. As far as in the affidavit of Shri Ashok Todi, Director of Lux Industries Limited is concerned, in the said affidavit, it has been accepted that money belongs to the company and Shri Ashok Banthia was only courier of money and following the instruction of the company bringing the money from Delhi to Kolkata on behalf of the company. In support of this fact, the assessee submitted the copy of air ticket which was sent by the Kolkata officer for coming to Kolkata.

The ld. AR has drawn our attention towards the admission of Shri Ashok Kumar Todi, Director of the Lux Industries towards the fact that the amount belongs to the Lux Industries Limited. The relevant portions of statement are reproduced here under:-

Q. No. 4 Since Mr. Ashok Banthia is your commission agent and entitled only to a small commission why as he carrying so much cash of about Rs. 25 lakhs on 19.04.2011?

Ans. The amount pertains to sale proceeds of a particular lot of T-shirts of Kolkata Knight Riders sold in Delhi and since the goods originally belonged to Kolkata and there was requirement of cash in Kolkata, Mr. Ashok Banthia was directed to bring the cash to Kolkata.

Q. No. 5 How much commission is paid to Mr. Ashok Banthia on an average per annum?

Ans. The amount of commission depends on sales made through him. The amount of commission is around Rs. 5 to Rs. 6 lakhs per annum is respect of sales made on behalf of Lux Hosiery Ltd and Todi Hosiery Ltd.

Q. No. 6 Mr. Ashok Kr. Banthia in his statement recorded by DDIT (Inv.), Unit-V(1), Delhi on 19.04.2011 has stated that he is employed as Sales Head in Delhi for Lux Industries Ltd. and his annual salary is Rs. 3 lakhs per annum. What do you have to say in this regard?

Ans. Mr. Ashok Kr. Banthia is the commission agent in Delhi and no fixed salary is paid to him.

Even otherwise, the tax authorities are also required to tax the real owner and not the representative thereof and in this case, the real owner of the cash amount seized from the assessee belongs to M/s Lux Industries Ltd. and not to the assessee.

Statement of Shri Bhaskar Poddar, who is an accountant in M/s Lux Industries Ltd. was also recorded and in his statement, Sh. Bhaskar Poddar also stated that the amount belongs to Lux Industries Limited. The statement of Bhaskar Poddar also established that the amount belongs to Lux Industries Limited. In view of the above statement, we can say that the amount seized from the assessee does not belong to him but belonged to the Lux Industries Limited. However, as per facts of the present case, the A.O. adopted the method of pick and choose certain words from the statement of Sh. Bhaskar Poddar and reached to a contrary conclusion. The A.O. has chosen only those words which were more favourable to the Revenue whereas it is a settled law that any statement recorded by the Revenue authorities is to be read as whole and no pick and choose method should be adopted which favours the revenue. The statement of Sh. Bhaskar Poddar is on the record which specifically depicts that the assessee Ashok Kr. Banthia was working as a Regional Sales Officer of M/s Lux Industries Ltd. and he was handing all the cash transactions of the company. It is undisputed fact that the assessee was posted for the Delhi region and was looking after sales and cash collection of the entire region on behalf of the company. It is also an admitted fact that the affidavit filed by Shri Ashok Todi, which is at page No. 13 of the paper book who was director of M/s Lux Industries Ltd. had categorically admitted that on 19/04/2011, the assessee was carrying amount of Rs. 25.00 lacs in cash on behalf of the company from Delhi office to its head office at Kolkata. The said statement of Shri Ashok Todi, director of M/s Lux Industries Ltd. was never cross examined by the A.O.. Apart from this, the A.O. also did not collect any other material to show that the contents contained in the affidavit was not correct. The A.O., merely rejected the affidavit of Shri Ashok Todi who was director of M/s Lux Industries Ltd. without any plausible reason. The A.O. was not justified in rejecting the affidavit and other material in such a manner. Whereas the affidavit of Shri Ashok Todi was supported by the statement of Ashok Todi himself, the assessee, Shri Bhaskar Poddar and also supported by extract of cash book with certificate of C.A. which at page Nos. 67-73 of the paper book, calculation of VAT from the month of April, 2011 which is at page No. 65 of the paper book, extract of sales register for the month of April, 2011 which is at pages No. 56-61 of the paper book, challan of VAT, proof of payment of VAT which is at page No. 62 of the paper book and air tickets provided by Kolkata office which are at page Nos. 63 and 64 of the paper book.

These entire bunch of documents go to prove that this cash was belonging to the company namely M/s Lux Industries Ltd. and the company had shown the said amount before the Sales Tax authorities and the Sales tax authorities had also accepted the sales belonging to M/s Lux Industries Ltd.. At this stage, we would like to draw support from the decision in the case of CIT Vs Anand Metal Corporation 273 ITR 262 (Mad) wherein it was categorically held that if the Sales tax authorities accept the sale belonging to a party then in that eventuality, the said findings of the Sales tax authorities are binding on the income tax authorities and the A.O., thus, in this way, the income tax authorities has not power to scrutinize the said documents again in respect of sales which have already accepted by the Sales tax authorities. As from the very beginning, it has been specifically stated by the assessee that M/s Lux Industries Ltd. had already shown this amount of sales at Rs. 25.00 lacs in their sales tax returns. Moreover, Shri Ashok Todi, director of M/s Lux Industries Ltd. has categorically mentioned that Mr.Bhaskar Poddar who has also got his statement recorded is a very junior staff and mainly looking after loading and unloading and some times preparation of invoices. It was submitted that sales are sometime recorded in draft sheets and the invoices are prepared at a later date against which VAT has also been paid and in this regard challan of payment of VAT has also been placed on record, which is at page No. 62 of the paper book which shows that the amount so carried by the assessee on behalf of the company was on account of sales collection regarding which required extracts of sales register for the period of April, 2011 has already been placed on record at page Nos. 56-61 of the paper book wherein the said amount has been shown received from the sales on account of Kolkata Knight Riders T-shirts and on that required VAT has also been paid. Thus, in this way, the assessee has successfully discharged the burden by disclosing source of cash amount by filing respective evidences which are available on the record in the paper book.

Although, the assessee had also filed an affidavit in support of his contention but he was never cross examined by the A.O. Therefore, the averments contained in duly sworn affidavit are to be accepted as a correct unless the same are rebutted by the evidence. On this proposition, we found support from the decision of Hon’ble Supreme Court in the case of Mehta Parikh & Company Vs CIT 30 ITR, 181 (SC), Dr. Prakash Rathi Vs ITO 36 TW 1 (Jodh ITAT), ITO Vs Doctor Tej Gopal Bhatnagar 20 TW 368 (Jodh ITAT), Labh Chand Bohra Vs ITO 219 CTR 571 (Raj), Shrikumar Vs ITO 36 TTJ 538, Smt. Savitri Devi Vs ITO 11 ITD 422 Delhi, CTO Vs Kewal Ram Sumnomal Cavanduspur 92 STC 629 (Raj), ITO Vs Vardhaman Industries 99 TTJ 509 (Jodh ITAT), ACTO Vs Kishore Shyam Brajesh Kumar 93 STC 213 (Raj), Indo Malwa United Mill Liikmed Vs State of MP 60 ITR 41 (SC), Late Mangilal Agarwal Vs ACIT 208 CTR 159 (Raj), CIT Vs Daulat Ram Rawat Mull 87 ITR 349 and Union of India Vs Kamalaxmi Finance Corporation 92 Taxmann 43. Considering the totality of facts and circumstances of the case, we are of the view that the amount seized from the assessee at the Delhi Air Port belonged to the Lux Industries Limited and not the assessee. The A.O. as well as the ld. CIT(A) wrongly made and confirmed the assessment and added the same in the income of the assessee, therefore, we direct to delete the addition qua this issue.