TMI Blog1998 (9) TMI 123X X X X Extracts X X X X X X X X Extracts X X X X ..... ere was a document No. 7 of Annexure A/17 which contained figures of certain receipts and expenses as per details below: 80 Pusa Road 1050 marriage 395 Pitam Pura 550 flat 4000 IOC rent 1000 Anil 250 interest 36.60 house expenses 5000 Advance rent IOC The figures given in the seized document were deciphered by AO as under: Receipt Expenditure 8,00,000 10,50,000 39,50,000 5,50,000 4,00,000 10,00,000 2,50,000 35,60,000 5,00,000 59,00,000 61,60,000 2.2. When required it was explained that it was a very old document and the same also did not prove any business transactions. The document was also not claimed to have been written by the assessee. According to the AO the assessee received an amount of Rs. 59 lakhs and made payments of Rs. 61,60,000. This document also related to more than one assessee of the group and the assessee gave a common reply. As regards the receipt amount of Rs. 39,50,000 relating to Pitampura, the AO note ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO the flat is situated in a posh locality and membership of the society commanded premium. The assessee was not the original member of the society. Original member was one Shri Satish Kumar Jain who acquired membership in the society in 1988. The assessee in fact purchased the membership from Satish Kumar Jain after a gap of six years in 1994. Value of the membership had gone up substantially by that time as this became sought after location. The AO, therefore, treated the said amount of Rs. 5.50 lakhs as per the document paid as premium to Satish Kumar Jain for acquisition of membership of the society for a flat. The premium so paid was not accounted for in the books of account. Local enquiries made according to the AO, revealed that there was huge premium going on for membership of the societies in that locality including Samant Bhadra Cooperative Group Housing Society. On these facts the AO treated the said amount of Rs. 5,50,000 as assessee s undisclosed income for the block period. 2.5. The AO noted that during the course of search certain documents were found pertaining to the construction of a house property atN.S.Park, Panipat. One of the documents seized No. 7 of Annex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d woodwork, etc. A copy of the valuation report was given to the assessee to seek his reaction and the assessee in response made submissions in the letter dt.27th Nov., 1996. According to the AO gist of the submissions made was that the assessee used cheap and inferior quality material which aspect was not considered by the DVO. It was also claimed that the construction was supervised by the assessee and his family members and, therefore, the DVO should have allowed 10 per cent deduction for personal supervision instead of 5 per cent given by him. It was also claimed that the assessee saved substantial amount in cartage and cement purchase, etc. as also in respect of labour expenses. The AO was not satisfied with the explanation so offered. According to the AO the assessee has not furnished any evidence in support of his submissions either before the DVO or before him and in the absence of any evidence the submission made cannot be accepted. The AO had also noted that the bank withdrawals made by the co-owners during the relevant period and found that the construction expenses recorded in the seized documents are not fully explainable from the withdrawals made from the bank. The AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing: 1. Reliance Polythene 100 debentures @ 50 dt.25-4-94 5,000 2. Reliance Petroleum Ltd. 300 debentures @ 26, dt.18-2-1995 7,800 3. Rejlaxmi Unit of UTI dt.3-12-1993in the name of Meghna 3,500 x 100 d/o Sh. Atul Jain 35,000 4. Rajlaxmi Unit of UTI dt.28-4-93, in the name of Sakshi 2,000 x 100 d/o Sh. Atul Jain 20,000 67,800 2.10A. When required it was explained that debentures of Rs. 12,800 were taken from unaccounted income and investment in units of UTI in the names of daughters were out of gifts received by them on their birthdays. Daughters received gifts from maternal grandfather; maternal grandmother; material uncle, aunty and other relatives. The assessee was required to give the details of the amount received in gifts from relatives with their complete names and addresses. Learned counsel of the assessee Shri S.K. Gupta, who appeared before the AO, expressed his inability to give name and addresses of the donors. The AO, therefore, treated the total amount of Rs. 67,800 investment in debentures and units of UTI as representing the undisclosed income of the assessee for the block period. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale of Pitampura property of Rs. 10,69,500 and accordingly no separate addition was made. The AO, therefore, assessed the undisclosed income only on account of premium received on Pitampura property at Rs. 10,69,500 and investments in units of UTI at Rs. 55,000 totalling to Rs. 11,24,500 for the block period and charged tax thereon @ 60 per cent. 2.13. The assessee has raised as many as nine grounds in this appeal and the same are reproduced hereunder: "1. That, on the facts and circumstances of the case, the assessment made under s. 158BC on 29th Nov., 1996, determining the undisclosed income at Rs. 11,24,500 is illegal, unjust and unfair and is vitiated being contrary to the facts on record and the provisions of the Act. 2. That, on the facts and in the circumstances of the case, the learned AO erred in making an addition of Rs. 10,69,500 as income from undisclosed sources. 3. That, on the facts and in the circumstances of the case, the learned AO erred in holding that the property at pitampura was sold for a consideration of Rs. 39,500. 4. That, on the facts and in the circumstances of the case, and without prejudice to the preceding grounds of appeal, the learned AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be a document. In any case it was wholly uncorroborated. He further argued vehemently that the AO has substituted the figures by adding a number of zeros at his whims and caprice. In some figures he has added "oo". For example, he has converted the figure of 4,000 into 4,00,000 and 5,000 into 5,00,000. In other figures the AO has adding "000" or "0000" such as the figure of Rs. 250 is converted into 2,50,000; by added "000" and the figures of 80 and 395 are converted into figures of 8,00,000 and 39,50,000 respectively. The total of left hand side is thus worked out by the AO at 59,00,000, as against meagre total amount of 9,725 as appearing in the original paper. The figures on the right side are presumed to be of expenditure. The said figures have been decoded by adding "000" and the total is worked out at Rs. 61,60,000 as against 2,635.60 (or 6,160 if 30.60 is read as 3,560) in the original paper. the learned counsel has contended that there was absolutely no material to support the finding of the AO and that his conclusion and inferences are based on surmises and conjectures. The AO has assumed certain transactions to have taken place of certain amounts imaginary without any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... document, no uncorroborated evidence could be relied upon to discredit the original documentary evidence in relation to the sale price of a property. The learned counsel also sought support from the decision of the Hon ble Supreme Court in the case of K.P. Vargese vs. ITO (1981) 24 CTR (SC) 358 : (1981) 131 ITR 597 (SC) for the proposition that fictional receipt cannot be deemed to be a receipt in the absence of any cogent material to support the factum of actual receipt. 3.4. The learned counsel has also made a reference to the definition of the term "document" as given in Black Law Dictionary, Evidence Act and General Clauses Act along with the meaning of the words "describe" and "express" used in the definitions under the Indian Evidence Act and General Clauses Act to support the contention that the document should have graphic presentation and distinct manifestation leaving no room for guess, surmise and conjecture and it should be capable of being evidentiary use. It has also been contended that if a chit of paper is to be considered as document for the propose of s. 158B(b) of the IT Act, it would create rather a dangerous situation as any person having a little knowledge o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and requested the AO not to make any addition on account of unaccounted investment to that extent as the same would amount to double taxation. 5. Referring to the submissions made by the learned Departmental Representative the learned counsel of the assessee invited our attention to the decision in the case of Pushkar Narain Saraf and Rajpal Singh Ramautar, according to which the presumption under s. 132(4A) is not available in the assessment proceedings. Hence s. 132(4A) does not override the provisions of ss. 68 and 69. He also reiterated that before any paper can constitute a document it should be capable of being evidentiary use and should contain clear expression and description leaving no room for presumption, assumption and substitution as done in the present case. He also clarified that there was no question of any confession or admission on the part of the assessee. The assessee in fact without conceding to the interpretation of the document as proposed by the AO raised only a question of law alternatively seeking set off of receipts against the expenditure in case the assessee s submission did not find favour with the AO so that the assessee was protected from double t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion relating to him. We find that the AO has not brought any material on record, oral or documentary to show that the said paper was recovered from the possession of the assessee and it contained among other transactions relating to the sale of Pitampura property. The presumption under s. 132(4A) is thus not available against the assessee. We further find that Pitampura property was sold by the assessee and his brother Avinash Jain through two agreements to sell placed at pp. 40 to 47 of the paper book and as per these agreements to sell the ground floor was sold for a consideration of Rs. 9,11,000 and the first floor for Rs. 9 lakhs and the property as a whole was thus agreed to be sold for a total consideration of Rs. 18,11,000 to Harish Chand Jain on 5th/31st May, 1994. The amount received has been recorded in the relevant books of account. 6.3. We find that the AO has neither made any valid enquiry from purchaser of the property so as to prove that the assessee along with his brother Shri Avinash Jain did receive sale consideration of the property at Rs. 39.50 lakhs against the apparent consideration shown in the agreement to sell and that recorded in the books of account at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The word "document" has been defined in s. 32 of the Indian Evidence Act to mean any matter expressed or described upon any substance by means of letters, figures, or marks or by more than one of those means, intended to be used or which may be used for the purpose of recording that matter. The word "document" has also been similarly defined in the General Clauses Act. The meaning of the word "describe" used in the definition as given in the New Shorter Oxford English Dictionary is "portray in words, recite the characteristics of, in a detailed or graffic account of. The meaning of the word "express" used in the definition as per the New Shorter English Dictionary is "A graphic representation as image; an act of expressing or representing by words, signs or actions, expressions, a mode of speech, of phrase; an utterance. According to the Hon ble Supreme Court in the case of Ramji Dayawala Sons (P) Ltd. vs. Invert Import AIR 1981 SC 2085, mere proof of the handwriting of a document would not tantamount to a proof of all the contents or the facts stated in the documents, it the truth of the facts stated in a document is in issue, mere proof of the handwriting and execution of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counting journal, consisting, in double entry book keeping, of debits and credits. Further, books of account means "books in which merchants, traders and businessmen generally keep their accounts. Entries made in the regular course of business; serial continuous and permanent memorials of business affairs. 6.8. The said piece of paper seized in search has not been proved to be written by the assessee relating to various business transactions in the normal course of business and, therefore, said paper also does not fall within the campass of the meaning of the books of account having credibility of its acceptance without support of corroborative evidence which is admittedly missing. This view is supported by the ratio of decisions of the Hon ble Supreme Court in the case of V.C. Shukla JT (1998) 2 SC 172; and L.K. Adwani in Crl. Revision petition No. 265 of 1996. 6.9 In the case of Rajpal Singh Ramautar vs. ITO, the papers seized from the premises contained certain figures, rate and consequent calculation but they did not bear any name. The assessee categorically denied its ownership and also explained that it was not in the handwriting of any of the partners or employees or any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... calculation of interest and on that basis the AO presumed that interest was calculated on compound interest basis and the assessment was reopened. Debtor had not credited interest in its accounts and declined to pay interest. Finding by Tribunal that on basis of seized paper no inference could be drawn that the assessee charged compound interest. Accordingly, reassessment proceedings were held invalid. 6.14. In the case of K.P. Varghese vs. ITO the Hon ble apex Court held that the difference between the market value and consideration declared is not sufficient. The assessee must be shown to have received more than what is declared or disclosed by him as consideration. Only that income which is accrued or received is to be considered in computation and the burden of proof lies on the Department. 6.15. The said paper seized, therefore, cannot be treated as a document and it also does not prove that the sale consideration for the Pitampura property as received by the assessee and the co-owner Avinash Jain was at Rs. 39,50,000 from the vendee. 6.16. Looking to the nature of the paper seized and ratio of various decisions cited and discussed we finally come to the conclusion that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treating the figure "550" as Rs. 5,50,000. Moreover, we have already considered and given a finding above that the said paper was neither a document nor a book of account and accordingly no reliance could be placed thereon without any supporting or corroborative evidence which the Revenue failed to bring on record. 7.3. We find that the AO has not made any enquiry about the premium paid, if any, either from the vendor or from the society nor there is an independent material evidence brought on record to prove that the assessee paid Rs. 5,50,000 over and above Rs. 3,86,000 paid by the assessee and accounted for in the books of account. No such addition thus could be made merely on the basis of presumption and conjectures. The addition made in this respect is equally unjustified and the same is also directed to be deleted. 8. The next ground raised is against addition of Rs. 3,61,166 made on account of unaccounted investment in construction of house atNarainSinghPark, Panipat. This house is owned by three co-owners i.e., assessee, his brother Avinash Jain and mother Urmila Jain. The house was constructed during the period from April, 1993 to March, 1995. The AO estimated the cos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... truction of the two houses shown i.e. Rs. 15,28,930 for Model Town house and Rs. 20,70,000 for N.S. Park house. To prove the correctness of the cost of construction of Model Town house further reliance has been placed at the seized document at p. 15 of paper book No. 2 wherein the cost of construction for basement worked out at Rs. 2,74,000 @ Rs. 125 per sq. ft. and of the other floors at Rs. 11,89,936 @ Rs. 200 per sq. ft. and after adding over an expenditure @ 2 per cent amounting to Rs. 29,293 the total cost of construction of Model Town house comes to Rs. 14,93,924 and it broadly tallies with the cost of construction at Rs. 15,28,930 shown by the co-owners. The difference is primarily because the document at page No. 15 of paper book No. 2 showed the estimate while the other amount represents the actual expenditure. The aforesaid document was seized from theModelTownhouse and the same has not been disputed by the AO either. 8.3. The learned counsel has placed reliance on the report of the approved valuer placed at p. 88 of the paper book, according to which, the cost of construction ofN.S.Parkhouse was at Rs. 20,80,000. Referring to circular issued by the Chief Engineer CPWD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elied upon the other of the AO and he also made elaborate submissions in support thereof. The learned Departmental Representative has further submitted that as per the said paper seized cost of construction was at Rs. 36.60 lakhs. Further, papers seized relating to the construction of the house has shown the total investment in the property at Rs. 35,34,456 and out of this Rs. 7,11,461 is shown as investment on Model Town house leaving the balance amount of Rs. 28,22,995 as the cost of construction of N.S. Park house. Moreover, the DVO to whom reference was made also estimated the cost of construction of N.S. Park house at Rs. 28,61,452 excluding cost of furniture, fittings and fixtures which almost tally with the investment found recorded in the seized papers. The AO made certain adjustments and adopted the total investment in N.S. Park house and unaccounted investment in the said house was adopted at Rs. 10,83,500 and the assessee having 1.3rd share in the house addition of Rs. 3,62,166 as undisclosed income has rightly been made. 8.7. We have carefully considered the facts, relevant material on record and the rival submissions. We find that the assessee Shri Atul Jain and his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n regard to the investment made in the house property. 8.11. Certain loose papers running from p. 51 to 83 to Annexure 1 to Panchnama were found and seized during the course of search fromN.S.Parkhouse. According to the AO the total of figures given in these documents and as noted at p. No. 53 is Rs. 35,34,455. The AO noted that these papers showing details of expenses incurred on construction of house are for the period from March, 1993 to 1995. Page 78 of the paper seized gives details of Rs. 7,11,461 with the caption "(MT)". According to the AO these expenses related to the construction of the house at "ModelTown". The remaining expenses recorded in the said papers for Rs. 28,22,995 were taken as relating to "N.S.Parkhouse". 8.12. We note that photo copies of these papers have not been placed by the assessee in the paper book. The Bench requires the learned Departmental Representative to produce the said papers claimed to be in possession of the Department for perusal but he also expressed his inability to produce them. The position being so we are not in a position to appreciate the nature of the entries made therein, actual period to which these papers relate and how the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epresented before the DVO with the submission that the assessee procured building material and labour at very cheap rate. The DVO, therefore, for arriving at realistic conclusion about procurement of building material and labour in view of the difference in rates at source of material and local rates as well as difference in local labour rates and labour from Bihar, etc. divided the total estimated cost into material cost at Rs. 21,88,048 and labour cost at Rs. 6,72,452 and allowed deduction at 35 per cent from material cost and 25 per cent from labour cost which worked out to material cost at Rs. 14,22,881 and labour cost at Rs. 5,84,339 respectively. The total cost was thus worked out at Rs. 20,07,220 in his subsequent report dt.27th Nov., 1996, placed at pp. 78 to 79 of the paper book. Similarly the cost estimated ofModelTownhouse was also revised for similar reasons to Rs. 19,00,254 vide report of the DVO dt.27th Nov., 1996, placed at pp. 80 to 82 of the paper book. 8.15. We also find that in the report of the DVO cost of woodwork done in the houses has been included and, therefore, there is no justification for adding the cost of woodwork in the cost estimated by the DVO. Fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her strengthened by the fact that the cost of construction shown for both the houses by the family members comes to Rs. 35,98,930 which almost tallies with the figures of expenses recorded in the seized papers. Moreover, the Revenue has not brought on record and material to establish from the seized papers that Rs. 28,22,995 were invested in construction ofN.S.Parkhouse alone and no part thereof related to the investment made inModelTownhouse. Considering the facts and circumstances discussed above we came to the conclusion that the details of expenses recorded in the seized papers on construction of houses related to both the houses atN.P.ParkandModelTown. 8.17. It is evident from above that the DVO has estimated the cost of construction of N.S. Park house at Rs. 20,07,220 which is less than the actual cost of construction shown by the co-owners at Rs. 20,70,000. Moreover, in view of the ratio of decisions cited in (1994) 121 CTR (Cal) 17 : (1994) 208 ITR 337 (Cal), (1997) 137 CTR (Guj) 98 : (1997) 221 ITR 608 (Gau), (1997) 226 ITR 111 (AP), (1997) 226 ITR 330 (All), no addition could be made on account of income from undisclosed sources merely on the basis of the report of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imately. The AO has not disputed these remarks. The learned counsel has, therefore, pleaded that in view of the position explained, there was no justification for making any addition on account of movable assets found. 9.2. The learned Departmental Representative, on the other hand, has relied upon the order of the AO and has further submitted that since the assessee failed to prove that source of acquisition of said movable assets, the AO was justified in treating the value of the said items as being income of the assessee for the block period. 9.3. We have considered the facts and rival submissions. It so appears, the family of Shri N.C. Jain at the time of search was living in the house atModelTownandN.S.Park. Following items were recovered from the residential premises of Shri N.C. Jain, Atul Jain (assessee) and Avinash Jain atN.S.Parkhouse.: (i) One colour T.V. (Vediocon Bazooka); (ii) On VCP (National); (iii) One Sterio (National); (iv) On washing machine (Videocon); (v) One sofaset (8 seater); (vi) One colour TV (Sony); (vii) Three a/cs (local made); fridge and (viii) Cooking range. 9.4. A copy of the inventory prepared at the time of search is placed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 700 15,015 1993-94 5,600 3,73,116 1994-95 12,000 41,732 9.6. Apart from the withdrawals shown by the assessee, his father Shri N.C. Jain has also made withdrawals for household expenses during the period ranging from Rs. 8,400 to Rs. 12,000 and his mother Smt. Urmila Jain has shown withdrawal for household expenses ranging from Rs. 10,000 to Rs. 19,000 during these years. Besides, other family members Arvind Jain, Anil Jain, Sneh Jain, Kusum Jain, etc. have also shown withdrawals for their household expenses separately. Complete details of the withdrawals made by all family members are placed at pp. 32 and 33 of the paper book. Looking to the withdrawal shown by the assessee and his parents the acquisition of two items of Rs. 7,000 is considered to be within the means of the assessee and accordingly the same are considered to be covered. The three items owned by the assessee s brother Shri Avinash Jain requires consideration in his individual case, since he is assessed to tax separately. 9.7. Having regard to all the facts and circumstances explained no addition on account of undisclosed income deserves to be made on this c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000 there is no valid explanation available either before the AO or before us. It is also not the case of the assessee that the amount invested came out of withdrawal shown for household expenses by the assessee or other family members. There being no valid explanation about the source of the amount invested in UTI the undisclosed income computed to the extent of Rs. 40,000 on this count in held justified and the same is confirmed. 11. The learned counsel of the assessee during the course of hearing raised the following additional ground with the request that the same may be admitted and decided on merits as it does not require any fresh investigation on fact, being a pure question of law: "On the facts and circumstances of the case and without prejudice to any other ground of appeal, the learned AO erred in not giving the benefit of s. 54 with regard to the capital gains arising on sale of Pitampura house in relation to the alleged sales proceeds of Rs. 21,39,000." 11.1. The learned counsel, however, on discussion and consideration sought permission to withdraw the additional ground raised and the learned Departmental Representative having no objection, he was allowed to wit ..... 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