Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
Popular Search: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: ARTICLES ON INPUT TAX CREDIT IN VAT :: TDS :: TAX RATES - GOODS TAXABLE @ 4% :: cpt :: VAT RATES :: articles on VAT and GST in India :: ACCOUNTING STANDARDS :: form 3cd :: list of goods taxed at 4% :: empanelment :: Central Excise rule to resale the machines to a new company :: ACCOUNTING STANDARD :: VAT Audit :: due date for vat payment
From the Courts »
 ACIT vs. Veer Gems (ITAT Ahmedabad)
  CIT vs. Subhash Vinayak Supnekar (Bombay High Court)
 Pr. Commissioner Of Income Tax-06 Vs. M/s N.C Cables Ltd.
 Sports Infratech Pvt. Ltd. & Anr. Vs. Deputy Commissioner Of Income Tax (Hqrs)
 Delhi High Court interprets applicability of amendments to Arbitration Act
  M/s Skin Institute And Public Services Charitable Trust Vs. Commissioner Of Income Tax (Exemption)
 M/s Skin Institute And Public Services Charitable Trust Vs. Commissioner Of Income Tax (Exemption)
 ITO vs. Emami Paper Mills Ltd (ITAT Kolkata)
 Surya Prakash Toshniwal HUF vs. ITO (ITAT Kolkata)
 CIT vs. Subhash Vinayak Supnekar (Bombay High Court)

Syed Ahmed Abbas Naqvi 705, Sea Creast No. 2, J. P. Road, Seven Bunglows, Andheri (W), Mumbai-400 061 Vs. Dy. CIT, Central Circle-2, Mumbai
October, 12th 2015

      .  ,      ,                                  

                ./I.T.A. Nos. 2807 & 2808/Mum/2010
             (   / Assessment Years: 2004-05 & 2005-06)
Syed Ahmed Abbas Naqvi          Dy. CIT, Central Circle-2,
705, Sea Creast No. 2,      / Mumbai
J. P. Road, Seven Bunglows, Vs.
Andheri (W), Mumbai-400 061
      . /  . /PAN/GIR No. ABVPN 7551 K
        ( /Appellant)                       :           (    / Respondent)

      / Appellant by                        :    Shri Rajiv Khandelwal
         /Respondent by                     :    Shri Girish Dave &
                                                 Ms.Kadambari Dave
                                            :    09.09.2015
                 Date of Hearing
                                            :    09.10.2015
          Date of Pronouncement
                                   / O R D E R
Per Sanjay Arora, A. M.:
      The assessee, an individual, is a Mumbai based interior designer. He, along
with his wife, Muskan Naqvi, was subject to search action u/s.132 of the Income Tax
Act, 1961 (`the Act' hereinafter) by the Investigation Wing (Mumbai) of the Revenue
at their residence, on 05.01.2007, as a part of the search operations on Hasan Ali Khan
(HAK) Group. The case was subsequently centralized with Central Circle-2, Mumbai
on 20.03.2007, and assessment for the different years framed u/s.153A r/w s. 143(3)
of the Act. We are in these appeals concerned with the assessments for assessment
years (A.Ys.) 2004-05 and 2005-06, made vide assessment orders dated 31.12.2008,
                                                                                 ITA Nos. 2807 & 2808/M/10 (A.Ys. 2004-05 & 2005-06)
                                                                                                            Syed Ahmed Abbas Naqvi
               as modified by the Commissioner of Income Tax (Appeals)-6, Mumbai (`CIT(A)' for
               short) vide his appellate orders, again of even date, i.e., 28.01.2010.

               2.1      The first Ground for both the years is based on the same set of documents
               found in search, tabulated as under, which has led to an addition for the following
               year, i.e., A.Y. 2006-07, as well; the same having been confirmed in first appeal:

                     Sr. No.         Reference to Seized material                                      AY               Amount                 APB pg.
                        1          Page no. 53 (*)                                                   2004-05            1,41,742/-              113
                        2          Page No. 7 (*)                                                    2005-06           10,90,507/-               66
                        3          Page No. 53 (*)                                                   2006-07            3,03,237/-              113
                        4          Page No. 52 (*)                                                   2006-07              40,824/-              112
                                   Total                                                                               15,76,310/-
               (*)      of Annexure A1 to the Panchnama dated 06.01.2007. APB=>Assessee's Paper-

               2.2      It shall be relevant to reproduce the said documents, being the basis on which
               the impugned additions have been made:
                                                        Pg. 53 of Annexure A1 (APB pg. 113)
Month            Sale        Add           Less          A       Less         Less           Less        Less          Profit       Loss       Final     Tot   Mont
                             closing       Purchase      dv      Expense      Reject         Commi       Opening                               Balance   al    hly
                             Stock                                                           ssion       stock
Upto Nov, 03             -             -            -        -            -          -               -             -            -          -    141742    53   2674
Dec'03     to     667810       233408       563018                155200                                        2484   180516                   251678    71   3545
June'05              97787     159982         37335                15354             0               0      233408              0     28328     223350    72   3102
July'05              25866     191026                              24756             0               0      159982       32156             0    255506    73   3500
Aug'05               37170     163095              0               15226             0               0      191026              0      5987     249519    74   3372
Sept'05              19028     145640                              17417             0               0      163095              0     15844     233675    75   3116
Oct'05               14339     146774              0               11085             0               0      145640        4388             0    238063    76   3132
Nov'05               63063     230784         62650                19249                                    146774       65174             0    303237    77   3938
Dec'05               57333     176957             420              22557                                    230784                    19471     303237    78   3888

                                                        Pg. 52 of Annexure A1 (APB pg. 112)
                                                          Total to be received by mm @ 30%
                     given                                                                                          Total                  C/f balance
                                                                 Profit                              Less        Pr   Less
                                              ITA Nos. 2807 & 2808/M/10 (A.Ys. 2004-05 & 2005-06)
                                                                         Syed Ahmed Abbas Naqvi
17.07.04        1000 June 04 to                     120000          36000
Sept 04         6448 June'05                          28328            8500   June 05       27500
                     July'05                          32156            9646   July'05       37146
                     Aug'05                            5987            1796   Aug'05        35350
                     Sept'05                          15844            4753   Sept'05       30597
                     Oct'05                            4388            1316   Oct'05        31913
Upto           32500 Nov'05                           65174           19552   Nov'05        51465
                     Dec'05                            19471           5841 Dec'05          45624
Dec'05          2000 Upto dec'05
Total =        34500 Taxes & other expenses            16000           4800 Bal till dec    40824

                          Pg. No. 7 of Annexure A1 (APB pg. 66)

           "Munna Capital account as under:
                           Given                                      Receipt
                                                         1.6.04                 100000
                                                         3.7.04                 50000
                                                         5.10.04                150000
           at the time of
           Dhiren's tran
           Given to munna's person              5000
           Munna P/F a/c
                       Given                                        Receipt
                                                 To Pay
                                                 Up to end of Sep, 04            7448
           17.7.04                     1000
           Sept, 04                    6448
           Upto Nov 05                 32500
           :-Company Position:-
           Stock      :      230000
           Credit     :      320000
           Advance    :        30000
           Now we will count from June 04 to Dec 05
           consolidated a/c & consolidated profits
           June 04 to may 05                                                         1,20,000/-
                                          ITA Nos. 2807 & 2808/M/10 (A.Ys. 2004-05 & 2005-06)
                                                                     Syed Ahmed Abbas Naqvi
        Less Losses:                                                                50,159
        Upto Nov 05                                                               1,71,559
        Less taxes                                                                  10,000
        Dec'05                                          ------------->

Proceedings before the Revenue authorities
3.      Before the Assessing Officer (A.O.), the assessee's explanation was that the
said documents (as also others found and seized along with, viz. pg. 6 of Annexure A-
1/APB pg. 65), did not belong to him but to RDC World Wide, New Delhi (a
proprietary firm of one, Radhika Devi Choudhary), indicating payments made by the
said firm to one, Shri Bharat, a contractor. A certificate to the effect from the said firm
that he was working therewith from November, 2003 to November, 2005 (pertaining
to A.Ys. 2004-05 to 2006-07) was also produced (APB pgs. 35-36). Before the ld.
CIT(A), however, and in fact before the A.O. himself for A.Y. 2005-06, the assessee
admitted the said documents, also seeking to explain the same, admitting to only the
following incomes, working to a total of Rs.3.41 lacs, for being included (i.e., over
and above the returned income), as against an aggregate income of Rs.15.76 lacs, i.e.,
qua the said documents, added and sustained by the Revenue (refer para 2.1):
     a) Unexplained investment of Rs.3,00,000/- for the AY 2005-06
     b) Unaccounted profit in partnership business of Rs.30,000/- for the AY 2005-06
     c) Unaccounted profit in partnership business of Rs.10,824/- for the AY 2006-07

        The same did not find favour with the Revenue in-as-much as the assessee
gave conflicting statements even before the first appellate authority, so that the
additions stood confirmed as such, resulting in the present appeals before us.

4.      The parties were heard at length. We may at this stage, transcribe pg. 6 of
Annexure A1 (APB pg. 65), referred to during hearing, as under:
                                                           ITA Nos. 2807 & 2808/M/10 (A.Ys. 2004-05 & 2005-06)
                                                                                      Syed Ahmed Abbas Naqvi
          JT/AC 2 Non-ferrous Scrap
Month               Sale     Add       Less       Adv   Less       Less       Less       Less Opening     Profit       Loss       Final
                             closing   Purchase         Expense    Reject     Comm       Stock                                    Balance
Dec,      03   to   667810   233408     563018          155200                                    2484    180516
May'05                                                                                                        (*)
June'05              97787   159982      37335           15354            0          0           233408            0   28328
July'05              25868   191026                      24756            0          0           159982    32156              0
Aug'05               37170   163095           0          15226            0          0           191026            0    5987
Sept'05              19028   145640                      17417            0          0           163095            0   15844
Oct'05               14339   146774           0          11085            0          0           145640     4388              0
Nov'05               63063   230784      62650           19249            0          0           146774    65174              0

          (*) For Munna bhai's purpose, it will be counted @ 120000 since he invested from

                    The assessee's case before us was that once the documents found and seized
          were owned up and sought to be explained by him, the addition/s in law could only be
          made on that basis. That is, it was not open for the Revenue to not accept the said
          explanation, i.e., except of-course for cogent reasons. The Revenue's case, on the
          other hand, was that the explanation advanced is only in the absence of any link
          between the same and RDC World Wide, i.e., as originally claimed and averred by the
          assessee, who had thus in fact lied not only before the A.O. but also before the ld.
          CIT(A). Falsus in uno, falsus in omnibus. On merits, i.e., of the explanation, there was
          nothing to show that the documents or the transactions specified therein belong to a
          partnership firm, in which the assessee claims to be a partner with 30% share, so that
          he is liable to tax only on his share. The explanation is again incomplete in-as-much
          as the assessee has not divulged either the name of the partnership; its address and
          business, nor the names of the other partners, whereby only the truth of the assessee's
          explanation, and thus its veracity, could be ascertained. The same is, thus, merely a
                                          ITA Nos. 2807 & 2808/M/10 (A.Ys. 2004-05 & 2005-06)
                                                                     Syed Ahmed Abbas Naqvi
make-believe, and the Revenue not obliged to accept the same, so that it, in not doing
so, is in the right.

5.     We have heard the parties, and perused the material on record.
5.1    Our first observation in the matter is that the assessee though admitting to a part
of the assessed income (refer para 3), yet impugns the entire additions made per his
appeal/s, which thus could at best be only partly allowed.

5.2    The Revenue's stand in not accepting the assessee's explanation of the seized
documents (or the transactions stated therein) as reflecting payments by RDC World
Wide, his `employer', is tenable in law. There is neither any mention nor an iota of
evidence linking the said firm with the documents found, being essentially statements
profiling the trading profit/profit. Section 292C of the Act also provides a statutory
presumption as to the truth of the contents of such documents, i.e., as found in search
or survey. The plea of the same as having been left by some visitor is again untenable,
being without any basis in fact or in law. In fact, these explanations are of no
consequence in view of the assessee's subsequent acceptance - he admitting the same,
seeking to explain the entries therein. Whatever thus may have been the assessee's
earlier stand or endeavor, his subsequent explanation cannot be rejected outright
merely for the reason that the first one was found as not valid. It is open for the
Revenue to adjudicate the same on merits, rejecting the subsequent explanation as
well. Reference in this regard may be made to the decision Prabhavati S. Shah vs. CIT
[1998] 231 ITR 1 (Bom). The legal maxim of falsus in uno, falsus in omnibus, as
explained by the higher courts, cannot be considered to have the status of a rule of
law, much less an inflexible one, but is only a rule of caution. In fact, as explained in
Ugar Ahir vs. State of Bihar, AIR 1965 SC 277, 279, it is neither a sound rule of law
nor a rule of practice. The matter, as apparent, is purely factual, i.e., whether the
                                         ITA Nos. 2807 & 2808/M/10 (A.Ys. 2004-05 & 2005-06)
                                                                    Syed Ahmed Abbas Naqvi
assessee has been able to satisfactorily explain the source of the investment in a joint
business, the profits of which have admittedly not been disclosed, even post search.
That is, has he discharged the burden of proof cast on him on the basis of the material
found, particularly considering the statutory presumption of s. 292C of the Act, or not.
      Toward this, we find that the documents are self-evident and corroborative,
establishing their truth or of their representing actual transactions, with the figures
therein in agreement, both internally as well as in relation to each other. PB pg. 113 is
a statement of the trading account, month-wise. The last two columns appear to be
that of the number of transactions and the profit per transaction respectively. The
same though is not relevant in view of our concern being with the figure of profit (or
loss). Likewise APB pg. 112 lists the fraction of the monthly profit (or loss), reckoned
at 30%, stated to be the assessee's share therein (as a partner in a partnership firm, to
which the said profit is stated to belong or is earned through). APB pg. 65 is again a
trading account, tabulated for different months; its figures matching with that per PB
pg. 113. APB pg. 66 is in respect of the assessee's account, ostensibly in the books of

5.3   The economic activity generating profit, as it appears from the account and its
constituents, i.e., purchase and sale and the mention of the item, is trading in non
ferrous scrap (refer PB pg. 65). The assessee's claim of having joined a partnership/
venture from June, 2004, is evidenced by the credits to his capital account beginning
01.06.2004 at Rs.1 lac/PB pg. 66; there being no balance in his account prior thereto.
This gets also corroborated by the note mentioning of the profit of Rs.1,80,516/- (i.e.,
Rs.1.80 lac approximately), to be, for the purpose of Munna Bhai (stated to be the
assessee's nick name), taken at Rs.1,20,000/-, i.e., corresponding to the period for
which he is a partner. As explained by the ld. Authorized Representative (AR), the
assessee's counsel, the profit of Rs.1.80 lacs is for the 18 month period, i.e., from
                                         ITA Nos. 2807 & 2808/M/10 (A.Ys. 2004-05 & 2005-06)
                                                                    Syed Ahmed Abbas Naqvi
December, 2003 to May, 2005, as stated in the document itself, so that the profit for
the 12 month period (June, 2004 to May, 2005) would be at Rs.1.20 lacs. That Munna
Bhai is the assessee's name, is in agreement with the document and the narration
therein; the assessee would, after all, be interested only in his account. Further, the
other documents found during search also confirm his name as Munna Bhai (APB
pgs. 63, 136, 143, 144), with in fact it being the accepted position between the
assessee and the Revenue, the other additions being also made with reference to that
name only.

5.4   The next question thus would be the amount assessable in the assessee's hands.
APB pg. 112 clearly states of the share of profit (to be received by mm, i.e., the
assessee, at the rate of 30%). This, in fact, gets also confirmed by the working, in
hand, totaling on the side, the share of profit (taken at 30%) with Rs.1,20,000/-, i.e.,
the profit of the assessee (Munna Bhai) for the period June 2004 to May, 2005 (at PB
pg. 66). We, therefore, confirm the addition of the profit (including loss) as specified
for different months (from prior to November 2003 to December 2005) in the
documents, as falling to the assessee's share (30%), spanning over 3 years. The profit
of Rs.1,20,000/-, referred to at para 5.3, spreading over (first) two years, the same can
safely be taken at a uniform rate of Rs.10,000/- p.m. for the purpose of determining
the quantum of profit to be assessed for different years. No income other than the
same, i.e., on account of the profit/loss earned/suffered from such trading, is inferable
from the material on record. We say so as the Revenue has separately added the
cumulative profit (from Dec., 2003 to Dec., 2005) of Rs. 3,03,237/- (APB pg. 53).
      The second category of addition would be for the capital invested in the
firm/entity (Rs.3 lacs, from June to October, 2004/APB pg. 66). For the balance
addition, how we wonder could, firstly, the same be added, much less in the assessee's
hands - the same being undoubtedly the figures of stock, credits and advances,
                                         ITA Nos. 2807 & 2808/M/10 (A.Ys. 2004-05 & 2005-06)
                                                                    Syed Ahmed Abbas Naqvi
aggregating to Rs.5.80 lacs, of the `company'. We accordingly confirm the addition of
Rs.3,00,000/- on account of capital invested, being admittedly unexplained, the entire
of which falls in A.Y. 2005-06. We may here though clarify that when we hold so, we
are not in any manner confirming the existence or otherwise of a partnership firm, for
which there is no evidence as such, but only of an economic activity, in the form of
trading in non-ferrous (scrap), the assessee's share in surplus (or deficiency) from
which is at 30% - nothing more and nothing less. In fact, the law (Act) does not
recognize a partnership firm unless the same is evidenced by an instrument, with
specified shares, certified copy of which is furnished to the A.O. We decide
accordingly, disposing the sole ground of appeal for A.Y. 2004-05 and Gd. 1 for A.Y.
2005-06, and the assessee gets part relief.

6.    Ground # 2 for A.Y. 2005-06 relates to an addition in the sum of Rs.30 lacs on
the basis of a MOU (Memorandum of Understanding) between the assessee and one,
Mr.Nirmal Daftary, found from the assessee's residence (as Annexure A1 to the
Panchanama dated 06.01.2007/APB pgs. 75-76) during search and seized. The
contents thereof are relevant, and reproduced as under:
      This MOU (memorandum of understanding) is drawn between Mr. Nirmal
      Daftary and Mr. Abbas Naqvi, both of Bombay.
      Following are the terms & conditions of the MOU:
      1)    Mr. Naqvi & Mr. Daftary will jointly invest in the business of Imports-
            Exports, of various products.
      2)    The ratio of investment:
            Mr. Nirmal Daftary: Between 45 & 50%
            Mr. Abbas Naqvi: Between 45 & 50%
      3)     The type of investment:
             Mr. Nirmal [L/C + Bank] Total of Rs.40-50 lacs.
             Mr. Naqvi: Total of Rs.45-50 lacs.
      4)     Expected turnover with the same investment:
             1st Year 1CR to 1.5 CR
                                       ITA Nos. 2807 & 2808/M/10 (A.Ys. 2004-05 & 2005-06)
                                                                  Syed Ahmed Abbas Naqvi
            2nd year ­ 2CR to 2.5 CR
            3rd Year ­ 3CR
      5)   Expected profit before taxes:
           App. 10% to 12% nett:
           1st year @ 12% - 18 lacs App.
           2nd year @ 12% - 25 lacs App.
           3rd year @ 12% - 30 lacs App.
      6)   Division of profit:
           It has been agreed by and between above two parties that it will be divided
           as under, after making provision for taxes.
           Mr. Abbas Naqvi ­ 35% (as he will be a sleeping partner)
           Mr. Nirmal Daftary ­ 65%
      7)   Mr. Abbas Naqvi has already invested Rs.30 lacs from Nov'04. He will
           invest another Rs.20 lacs by the 15th of January'05
      8)   There is a proposal of MNC's giving us business of imports for them,
           terms and conditions of which will be separately decided with them. After
           deducting commissions, profits will be divided by & between the above
           two parties, in the same ratio.
      9)   Present business constitutes of imports of tools, abrasives & metal
      10) Any expansion in the above will be jointly decided by the above two
      11) Rs.25,000 (Rs. Twenty five thousand) will be paid every month to Mr.
          Abbas Naqvi as a part payment towards his share of profit.

      12) A/c's will be done at the end of December. Every year, beginning
          January' 05.
     Signed - Mr. Abbas Naqvi:
            - Mr. Nimal Daftary:'

                                                                    [emphasis ours]
     The assessee, on being called upon during the assessment proceedings to explain
the source of Rs.30 lacs, stated to have been invested by him vide clause 7 of MOU,
denied having paid any such sum in-as-much as he did not have the said amount.
True, an understanding was arrived at and sought to be implemented, but did not
                                          ITA Nos. 2807 & 2808/M/10 (A.Ys. 2004-05 & 2005-06)
                                                                     Syed Ahmed Abbas Naqvi
materialize. This was also evident from the fact that the document (MOU) was
unsigned and undated. Nirmal Daftary was also examined on oath (on 24.12.2008)
u/s.131 of the Act in this respect (APB pgs. 118-119). He reiterated the same, stating
his refusal to make the assessee a partner in the venture, which was insisted upon as a
condition for investing, for the failure of the deal, i.e., to get going. On being further
questioned as to why in that case it was specifically stated in the MOU that the
assessee had already invested the said sum from November, 2004 (Q. No. 12 of the
statement), he would submit that this was as the assessee was ready with the money,
but in view of the afore-stated issue, the deal did not materialize, as happens
generally. The said explanation did not find favour with the Revenue, so that,
aggrieved, the assessee is in further appeal.

7.     Before us, the case of both the parties was the same. The ld. AR would
emphasize on the document (MOU) being unsigned and undated, so that it represented
merely a proposed agreement, which was to be put through, i.e., actually executed, but
did not. Further citing an example of where a draft agreement is prepared for its
registration, stating of money having been paid/exchange hands. In practice, however,
it is not so, and the money is actually parted with only on the signature on the
Agreement at the time of its registration. The ld. DR would, on the other hand, submit
that a note-book was also recovered during search from the assessee's residence. The
same, bearing the details of the purchase and sale of a trading business, was
subsequently confirmed by Nirmal Daftary as belonging to him and, in fact, written in
his own hand (in answer to Q. Nos. 7 & 8), even as he denies having any business
relation with the assessee, but as being only his friend (in answer to Q. No. 6). How
could that be? The statement, he would further submit, taking us through it (placed at
pages 118 & 119 of APB), is internally inconsistent, and that the two had a business
relationship is patent.
                                         ITA Nos. 2807 & 2808/M/10 (A.Ys. 2004-05 & 2005-06)
                                                                    Syed Ahmed Abbas Naqvi
8.   We have heard the parties, and perused the material on record.
     The assessee and Mr. Nirmal Daftary, a businessman, have known each other for
long, i.e., 15 to 20 years; are admittedly friends, implying a relationship of mutual
trust and goodwill (refer answers to Questions 5 & 6 of the statement on oath u/s.131).
That they discussed business extensively, and in detail, envisaging its joint conduct,
with the assessee as an investor/sleeping partner, is apparent from the undisputed facts
and circumstances of the case. The recovery of Nirmal Daftary's note-book,
containing the details of the business, found at the assessee's residence during search,
further establishes this. This is also borne out by the MOU and, in fact, admitted
thereby. The fact of a joint business being in contemplation is again admitted. To what
effect or purport, then, the argument of the document being not signed? The plea of
the document being unsigned and undated is, in view thereof, as also of s. 292C of the
Act, casting a statutory presumption as to the truth of the contents of any document
found during search or survey, of no moment.
        The only issue is as to whether the assessee had already invested the
impugned sum of Rs.30 lacs, i.e., as stands stated in the MOU, or was only in
contemplation. Toward this, the document is to be read as a whole, and in the
backdrop of the facts and circumstances of the case, even as in view of section 292C
the onus to disprove the same or dislodge the presumption of truth of it's contents is
on the one who so alleges. Every detail of the joint business has been, as apparent,
thought out, including the investment; its financing; turnover; profitability; the
division of the profit amongst the two partners, etc. The accounting period as well as
the manner of disbursement of profit to the assessee, a silent/sleeping partner, has also
been agreed upon and stands clarified. The business is of import & export, with the
imports being of tools, abrasives and metal powders, i.e., the same category of trade ­
Import and Export of stone cutting tools, in which Mr. Nirmal Daftary already is
(refer APB pg. 118). The document itself bears, as would be apparent, a clear
reference to dates. As we infer, the business had already commenced in November,
                                         ITA Nos. 2807 & 2808/M/10 (A.Ys. 2004-05 & 2005-06)
                                                                    Syed Ahmed Abbas Naqvi
2004, if not earlier, with the note-book containing the details thereof. The business is
of trading, so that there was no reason to delay it once the investment starts pouring
in. The assessee was to invest Rs.45-50 lacs. Rs.30 lacs had already been invested
from November, 2004 onwards, and the balance Rs.20 lacs was to be invested by
15.01.2005. How could, then, it be said that no amount had in fact been invested, or
that the arrangement had not actually materialized? Clearly, the question of
investment of the balance Rs. 20 lacs would arise only if Rs. 30 lacs had already been
paid and received! That is, the figure of Rs. 20 lacs being the balancing figure, comes
into reckoning only once some amount (Rs. 30 lacs in the instant case) stands already
paid/invested. The assessee's case gets in fact impugned even on the basis of Mr.
Nirmal Daftary admitting (on oath) to the assessee having the money in readiness,
implying he being in possession thereof, though did not part with it as he (Mr.
Daftary) did not accept the condition of the assessee being taken in as a partner. The
argument is frivolous, if not specious, in-as-much as that in fact is the primary
condition for the conduct of the business, disagreement on which would have the
effect of scuttling the proposition at the threshold, while MOU would stand to be
reduced in writing only on an agreement on all major issues, and on the verge of the
commencement of the business and, rather, as it appears in the present case,
subsequent to its' commencement from Nov., 2004, or perhaps even earlier. The ld.
AR, on this being observed by the Bench during hearing, would submit that the
assessee did not have any money, as shall also be evident from the books of account
produced during the assessment proceedings. On what basis then, it was asked, could
he think of investing, much less in terms of being an investor/sleeping partner?
Through borrowings perhaps, was his reply. The financing arrangement, it escapes
him, stands in fact stipulated at cl. 3 of the MOU itself, with the bank borrowing and
the non-fund based financing to be arranged by Mr. Daftary, while the risk (owner's)
capital is to the account of the assessee. The same put pays and, in fact, disproves the
argument, which is only a bald statement. We have in fact already seen in the context
14 ITA Nos. 2807 & 2808/M/10 (A.Ys. 2004-05 & 2005-06) Syed Ahmed Abbas Naqvi of Ground # 1 the assessee to have invested in another business of trading in non- ferrous scrap, also earning profits there-from, both admittedly undisclosed to the Revenue. Clearly, the assessee has access to source/s of income, which is not disclosed. It may well be or also include his regular profession (of interior designing), fetching him returns/income far higher than that he chooses to disclose ­ he returning an income of Rs.1.25 lacs for the current year. Leave alone investing, it would be extremely difficult for one to survive in Mumbai on that income. Again, the accounts are to be settled after the year-end, and the assessee is to only get a small fraction of his share on a monthly basis (Rs.25,000/-). Surely, a person subject to interest, which is usually charged on a monthly/quarterly basis, would seek repartition of profit to that extent so as to meet the interest obligation. How, in its absence, one may ask, would the interest on the admitted proposed investment of Rs.50 lacs be discharged? The same, is again, a bald statement, completely inconsistent with the facts and circumstances of the case. Coming to the contention of the arrangement being not executed, the same is misplaced. The Revenue has not added any income by way of profits of the said business, for us to dwell on that aspect of the matter. The only issue in dispute is if the assessee had indeed invested Rs.30 lacs, the sum specified in the document (MOU) as having been already invested, i.e., as on the date on which the MOU was reduced in writing, and which could theoretically be anytime between November 2, 2004 to January 14, 2005. It could be that the assessee had also invested the balance Rs.20 lacs, as is likely, or perhaps did not. We say likely, as, why, where not so, did the assessee preserve the afore-referred note-book as well as the document itself, if the arrangement had, for some reason, failed, and not actually carried out? A holistic and contextual reading of the MOU, together with the facts and circumstances of the case, clearly points to an arrangement which had been put in place, being on for some time, and there is no merit in the argument that when the Revenue considers an investment of Rs.30 lacs to have been made by the assessee in the business, it is not reading the 15 ITA Nos. 2807 & 2808/M/10 (A.Ys. 2004-05 & 2005-06) Syed Ahmed Abbas Naqvi said document as one whole. It may well be that the business, though envisaged on a continuing basis (refer cl. 12 of MOU), did not continue for long, and was stopped subsequently, but that is a matter with which we are not concerned with. Whichever way, thus, one may look at it, the assessee's case is without basis, unsubstantiated by and de hors any document or even circumstantial evidence/s, which rather point to the contrary, as does the clear language of the document itself. Section 292-C of the Act is a rule of evidence, clear in its import. Under the circumstances, we, in view of the foregoing, are in complete agreement with the Revenue of the impugned sum of Rs.30 lacs as representing an investment by the assessee in a joint venture with Mr. Nirmal Daftary, the source of which being unexplained would stand to be deemed as unexplained income u/s. 69, also drawing support for the purpose from the decision in Surendra M. Khandhar vs. Asst. CIT [2010] 321 ITR 254 (Bom). We, accordingly, confirm the same, dismissing the assessee's relevant ground. 9. The third and the final ground of appeal for A.Y. 2005-06 is qua an addition in the sum of Rs.3,60,000/- based on a seized document (Pg. 8 of Annexure A-3 to the Panchanama dated 06.01.2007/APB pg. 135). The same is in respect of notings in a diary bearing different dates of the calendar (on the leaf dated 12.01.2005), listing the payments made to different contractors on account of one, Dimple, as well as payments received from her, the same being found reflected in the assessee's books of account. Before the Assessing Officer (A.O.), the assessee's explanation was that the said notings relate to payments received from Ms. Dimple Athawali, Lokhandwala, a client, as well as disbursements made to the different contractors, for and on behalf of the RDC World Wide, New Delhi for the interior work undertaken for the said client. The same did not pass muster as the assessee could not establish any nexus between the said document and RDC World Wide (RDC), so that the document belonged to 16 ITA Nos. 2807 & 2808/M/10 (A.Ys. 2004-05 & 2005-06) Syed Ahmed Abbas Naqvi and the payments were made only for and on behalf of the assessee, also adverting to section 292C of the Act. In appeal, the ld. CIT(A) noted that, firstly, no written submissions were filed by the assessee in respect of this addition. Two, neither there was any mention of RDC on the said or even in any allied document nor did the assessee furnish any confirmation from the same so as to link the said firm with the transactions under reference. There was, in fact, no confirmation even from any contractor as well. The assessee being thus unable to improve his case in any manner, the addition stood confirmed by the ld. CIT(A) relying on the decisions by the Hon'ble High Court in the case of Surendra M. Khandhar (supra) and Fifth Avenue vs. CIT [2009] 319 ITR 127 (Kar), besides on section 292C of the Act in-as-much as the assessee had failed to rebut the presumption mandated thereby. Aggrieved, the assessee is in second appeal. 10. Before us, the ld. AR would take us through another seized document (Pg. 54 of Annexure A1 / APB pg. 115), which reads as under: `Date: 02.06.2005 Dimple & Samit (Lokhandwala) 1) Suresh Mistry 70,000/- 2) Tiles 44,000/- 3) Plumbering 35,000/- 4) Electric works 25,000/- 5) Carpenter (Chand) 45,000/- 6) Amarnath Painter 25,000/- Total 2,44,000/- Less 75,000 40,000 1,30,000/- 15,000 1,14,000/-' The same is, he would continue, again, a statement drawn on the letter head of Annya Constructions, the assessee's proprietary concern, as on 02.06.2005, of payments made to different contracts on account of Ms. Dimple Athawali, 17 ITA Nos. 2807 & 2808/M/10 (A.Ys. 2004-05 & 2005-06) Syed Ahmed Abbas Naqvi Lokhandwala, as well as total amount received there-from. The figures therein completely match the figures stated in APB pg. 135 supra, save for a minor difference of Rs.1,000/-, substantiating the assessee's stand, i.e., of the same as being payments made in respect of interior work for a client, Dimple Athawali, to different contractors. The assessee had only acted as a consultant, overseeing the work, and made disbursement of the amount received to different contractors engaged for carrying out different works. How could, thus, there at all be any addition in the assessee's hands, who is only entitled to his professional charges? Again, only the net amount paid could, in any case, be considered as the assessee's income, he conceded, when asked about the source of the payments to the contactors, while reiterating the same (payments) as having been made by and on behalf of RDC. The ld. DR would also reiterate the Revenue's case of the absence of any nexus of the said documents with RDC, though could not show the two documents, i.e., APB pgs. 115 and 135, as not referring to the same set of transactions. 11. We have heard the parties, and perused the material on record. There is no merit in the assessee's contention of the payments as having been made by RDC ­ which assertion is wholly unsubstantiated or uncorroborated by any other material. The documents, thus, one of which (APB pg. 115) is on the letter-head of the assessee's proprietary firm, Ananya Constructions, are only of the assessee. The assessee has made a total payment of Rs.2.45 lacs over a period, receiving Rs.1.30 lacs from the client during the same period, so that the balance Rs.1.15 lacs is receivable from the client. As the dates of both the payments and the receipts are not available, the assessee would have to be, giving him the benefit of doubt, necessarily allowed credit in respect of the entire amount received, so that the balance amount receivable (Rs.1.15 lacs) was not exceeded at any given point of time, as where the assessee had effected payments, net of that received from the client, in a sum higher than Rs.1.15 lacs at any time covered by the said period. The source of the said 18 ITA Nos. 2807 & 2808/M/10 (A.Ys. 2004-05 & 2005-06) Syed Ahmed Abbas Naqvi payment being unexplained in-as-much as neither are the said payments reflected in the assessee's accounts nor shown before either authority, we confirm the addition of Rs.1.15 lacs outstanding for being received as on 02.06.2005, on account of payments made by the assessee to different contractors. We are conscious that the assessment year under reference is A.Y. 2005-06. However, it is clear that the payments are made not on a single day, but over a period, toward charges for services rendered, beginning, presumably 12.1.2005, to 02.6.2005, i.e., the date on which the final statement of outstanding was drawn. The Revenue has made an addition for the succeeding year as well, based on the same document (APB pg. 115), agitated vide Gd. # 2 for A.Y. 2006-07. Two additions cannot obviously be made for the same payments. The work being undertaken on an ongoing basis, we have no basis to determine the amount outstanding from the said client as on 31.3.2005, i.e., in the absence of date-wise detail of the amounts paid and received over the said period. Under the circumstances, we only consider it proper to assume (net) payments on a uniform basis. The net excess payment of Rs.1.15 lacs would, accordingly, stand to be allocated between the two different previous years, being f.y. 2004-05 and f.y. 2005- 06, during which the transactions have seemingly taken place, on the basis of time period, i.e., assuming a uniform accumulation of the said balance of Rs.1.15 lac over time. We decide accordingly, disposing the relevant ground of appeal. 12. In the result, the assessee's appeals are partly allowed. Order pronounced in the open court on October 09, 2015 Sd/- Sd/- (D. Manmohan) (Sanjay Arora) / Vice President / Accountant Member Mumbai; Dated : 09.10.2015 . ../Roshani, Sr. PS 19 ITA Nos. 2807 & 2808/M/10 (A.Ys. 2004-05 & 2005-06) Syed Ahmed Abbas Naqvi /Copy of the Order forwarded to : 1. / The Appellant 2. / The Respondent 3. () / The CIT(A) 4. / CIT - concerned 5. , , / DR, ITAT, Mumbai 6. / Guard File / BY ORDER, / (Dy./Asstt. Registrar) , / ITAT, Mumbai
Home | About Us | Terms and Conditions | Contact Us
Copyright 2017 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Software Development Software Programming Software Engineering Custom Software Development Requirement Based Software Development Software Solutions Software Serv

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions