TMI Blog2006 (3) TMI 248X X X X Extracts X X X X X X X X Extracts X X X X ..... capital accounts, balance sheets and cash flow statements, the particulars of which tally with the chart of incomes as per returns already filed contained in p. S-1 of the paper book. Unexplained investment in gold ornaments - It is clear that the gold jewellery which should have been available with the assessee comes at 1030.886 grams, as against which gold ornaments weighing 939.800 grams were found during the course of search. In such circumstances there cannot be any addition on account of unexplained investment in the gold jewellery. The ground taken by the assessee is allowed and that of the Revenue is dismissed. Estimation of income - We have given our separate finding in respect of the three calculations made by the AO. The undisclosed income is to be computed on the above basis after excluding the amount already shown by the assessee and considered by the AO in the block assessment order. The AO is directed to give effect to our finding and determine the amount of undisclosed income resulting from the business operations of the assessee. It is made clear that the amount which already stands offered for taxation should not be added once again as has been discussed in the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at shown by the assessee in the sale deed. Apart from the DVO's report no material was found in the search which could show that the assessee had made more investment than that declared in the sale deed. The Hon'ble Bombay High Court in the case of CIT vs. Vinod Danchand Ghodawat [ 2000 (6) TMI 13 - BOMBAY HIGH COURT] has held that no addition of undisclosed income can be made only on the basis of DVO's report. We note from the assessment order that as per the AO, the assessee had admitted to surrender the amount for taxation on the basis of DVO's report. We have perused his statement, copy of which is available at the paper book. The assessee had stated in answer to question No. 2 that he was ready to pay tax as per rules. He has not surrendered the amount of Rs. 1,20,000 for taxation. Apart from that, we find that the house was purchased by three persons and the assessee was one of the co-owners. Thus, we find no justification in making addition of Rs. 1,20,000. We hold that the learned CIT(A) rightly proceeded to delete this addition. The cross-objection filed by the assessee is simply in support of the reliefs allowed in the first appeal. As the Departmental app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 47,760 was not subject to verification. He however, accepted the genuineness of cash to the extent of Rs. 7,760 and made addition for the balance amount of Rs. 40,000 under s. 69A of the Act. No relief was allowed in the first appeal. 4. We have heard both the sides and perused the relevant material on record. The undisputed fact is that the assessee was doing the work of goldsmith. Earlier he was doing the job of Nagina setting but later on started doing jobs of manufacturing (including jobs of polishing and nagina setting). It is further not disputed that the assessee had not maintained his books of account. Returns for the asst. yrs. 1989-90 to 1992-93 were not furnished as in his opinion the income was below the taxable limit and hence there was no requirement for filing of return. However, return for the asst. yrs. 1993-94 and 1994-95 were filed on 20th Oct., 1994 and the computation of income and capital account for the asst. yrs. 1989-90 to 1992-93 were furnished along with the return for the asst. yr. 199394. This fact is corroborated from p. 17 of the assessment order. No return for the asst. yr. 1995-96 was filed as the income was below the taxable limit. Again ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 'undisclosed income'. In such circumstances it becomes the duty of the AO to verify the balance sheet and cash flow statement, etc., with the necessary material including the details already available, filed along with the returns in the past. The so-called incriminating material gathered during the course of search is required to be tallied with the cash flow statement and the additions are to be made only for the amounts which are not properly explainable. We are therefore, unable to endorse the opinion of the authorities below on this count. 5. Adverting to the facts of the case, it is noted that the first balance sheet filed by the assessee is for the asst. yr. 1989-90 and no return was filed for this year because the income was below the taxable limit at Rs. 17,400. A detailed chart incorporating the assessment years from 1989-90 to 1998-99 with the amount of income declared and the dates of furnishing the returns, wherever the income is taxable, has been made available at p. S-1 of the paper book. As per balance sheet and capital account furnished for asst. yr. 1989-90, we note that the closing capital balance has been taken at Rs. 71,118. It is further observed tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , nook and corner of the assessee's premises is thrown open before the search team and there is no possibility of anything escaping the attention of the officers. There is no reference in the assessment order, even remotely suggesting the utilization of the sum of Rs. 1,47,500 elsewhere, withdrawn by the assessee from bank. On the perusal of the cash flow statement for the period 1st April, 1998 to 15th July, 1998, copy placed at p. 261 of the paper book, it is palpable that the withdrawal of Rs. 1,47,500 is duly reflected and the closing cash balance on the date of search is at Rs. 97,198.05, which is certainly more than Rs. 47,760 found at the time of search. Under these circumstances we are of the considered opinion that no addition on this count is warranted. We, therefore, order for the deletion of addition of Rs. 40,000. 7. Ground No. 3 of the assessee's appeal and ground 1 of the Revenue's appeal deal with the addition on account of unexplained investment in gold ornaments. The facts apropos of this ground are that gold ornaments weighing 939.8 grams (net) were found during the course of search. On being show caused to explain the source of this gold jewellery, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2 grams. The AO however accepted that Smt. Santosh Soni, the wife of the assessee received 62 tolas of gold ornaments at the time of her marriage and the assessee received a gift of ornaments of 3.69 tolas. Accordingly it was held that 70 tolas of gold ornaments were received by the assessee and his wife at the time of their marriage. Resultantly, an addition for 876 grams (939.8 minus 63.8 grams {possession of 70 tolas accepted to have been received by the assessee and his wife at the time of marriage minus 63.79 tolas sold}) was made which amounted to Rs. 3,74,052. In the first appeal the learned CIT(A) came to the conclusion that total gold ornaments weighing 815.149 grams were acceptable. This included 644.436 grams possessed by the HUF, 198.28 grams received by assessee's wife out of the Will of Shri Ramchandra and 72.433 grams (equivalent of 6.21 tolas) accepted by the AO himself. Accordingly he restricted the addition to Rs. 10,526 by allowing the relief of Rs. 3,63,526. Both the sides are in appeal against their respective stands. 8. We have heard the rival submissions and perused the relevant material on record. It is noticed that the total gold ornaments found during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their marriage. The AO has further taken note of the fact that the assessee and his wife have sold 744.95 grams of gold. When this position is considered, the final availability of gold comes out to be as under: (i) Anand Prakash Soni HUF (as evidenced by WT order) 644.436 gms. (ii) Smt. Santosh Soni (as per Will of Shri Ramchandra Soni and accepted in the case of assessee's brother Shri Suraj Prakash Soni) 198.280 gms. (iii) Anand Prakash Soni (purchased) 116.640 gms. (iv) Smt. Santosh Soni and Shri Anand Soni (on marriage, 70 tolas) 186.480 gms. Total 1775.836 gms. Less: Sold (63.79 tolas) 744.950 gms. Balance gold ornaments which should be with the assessee 1030.886 gms. Hence, it is clear that the gold jewellery which should have been available with the assessee comes at 1030.886 grams, as against which gold ornaments weighing 939.800 grams were found during the course of search. In such circumstances there cannot be any addition on account of unexplained investment in the gold jewellery. The ground taken by the assessee is allowed and that of the Revenue is dismissed. 9. Ground Nos. 4 and 5 of the assessee's appeal and ground No. 6 of the Departmental appeal deal with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t accepting the source of these entries. Insofar as two entries of Rs. 25,000 and Rs. 15,000 representing the deposits in the bank on 11th Feb., 1991 and 25th Feb., 1992 (wrongly mentioned in the assessment order as 25th Feb., 1991) are concerned, we note that the entry of Rs. 25,000 finds its place in cash flow statement for the asst. yr. 1991-92, a copy of which is available at p. 208 of the paper book. The other entry of Rs. 15,000 is a deposit of cheque received from one Shri Narpat Singh Kothari on 25th Feb., 1991 which was withdrawn and given back to him after 3 days. Both the entries of debit and credit for Rs. 15,000 each can be found in the copy of bank statement placed before us. The AO has considered only one side of the pass book namely the deposits and ignored the other side, namely the withdrawals. Since an equal amount was received and returned to a party which is duly reflected in the pass book, there is no occasion for making addition only for the deposit of the amount. Coming to the amount of Rs. 25,000 accepted by the learned CIT(A) we find same is also shown in the cash flow statement. All the relevant receipts and payments shown in the cash flow statement in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ival submissions and gone through the necessary material on record, we find that all the household items have been duly recorded in the cash flow statements of the respective years. The purchase of car is shown in cash flow statement for the period lst April, 1996 to 31st March, 1997 at p. 245 of, the paper book. This amount of car is duly reflected in the balance sheet for the year ending 31st March, 1997. Similar is the position for the purchase of scooter which has been shown in the cash flow statement at p. 223 of the paper book and equal amount is shown in the balance sheet for the year ending 31st March, 1994 at p. 221 of the paper book. Regarding the other items which have been treated as explained by the learned CIT(A) , we find that these are normal household items like freeze, sofa set and geyser etc. These small amounts totalling Rs. 38,750 spreading over a number of years cannot be doubted and have to be treated as out of the withdrawals for household expenses. In our considered opinion the learned CIT(A) rightly deleted the addition to the extent of Rs. 38,750 but erred in sustaining the addition on account of purchase of scooter and car. We, therefore, order the delet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by multiplying the quantity of gold as per annexures with the rate of gold per 10 grams. This percentage of 11.83 consisted of two parts, viz., 8.33 per cent being the difference between 24 ct. to 22 ct. and 35 per cent being the soldering made of copper/silver. Accordingly addition of Rs. 2,02,314 was made in the asst. yr. 1997-98, Rs. 6.17,194 in the asst. yr. 1998-99 and Rs. 5,98,893 in the asst. yr. 1999-2000. In the first appeal the learned CIT(A) opined that there was no material with the AO to estimate job charges @ Rs. 30 per gram. He, therefore, deleted the addition to that extent. About the other part of the addition in all the three years, he reduced the rate to 09 per cent instead of 11.33 per cent applied by the AO. Both the sides are in appeal on their respective stands. 15. We have heard both the sides and considered the material available on record. We have also looked into the copies of annexures produced before us on the basis of which additions were made. At the outset we would like to mention that the case before us through these grounds is not a' mere estimation of undisclosed income by the AO. It is the making of estimate from the incriminating material f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounts of additions pertained to the business of Nagina setting. It was noticed that as per details available in Annex. A-8 from pp. 25 to 94, the assessee carried out the work of nagina setting. These details were in the shape of weight of gold ornaments, weight of stones, name of artisans through whom the work was got done, wastage, weight of gold ornaments returned and payments made to customers. Name of the customers and job charges received were not recorded in this note book. On being called upon to explain the reasons for not recording the job charges, it was stated that no job charges were received as the assessee retained gold in lieu of impurity mixed. It was also claimed that some wastage was given to the artisans. It was further clarified that the assessee had not retained any gold in view of the impurity mixed as the gold ornaments given to artisans were out of gold ornaments in Annex. A-8 recorded from pp. 1 to 25 in respect of which he had shown job receipts and wastage retained. The assessee gave few examples to show that the gold ornaments remade were sent for Nagina setting. Such reconciliation is tabulated on p. 23 of the assessment order. For example page No.1 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al gold ornaments got manufactured by the assessee, but there is no solid reason for bifurcating the total into the three years namely, 1997-98 to 1999-2000. The details as per annexures do not bear any date at most of the places. In such circumstances there should have been no reason to view the assessee's contention with suspicion on this aspect. Moreover we find that the assessee has reconciled some details of Annex. A-8 from pp. 1 to 24 with those sent for Nagina setting recorded on pp. 25 to 94 of Annex. A-8. Such details are contained in para 41 of the assessment order. Considering the totality of the facts we are of the considered opinion that the entries on pp. 25 to 94 of Annex. A-8 were the details of gold ornaments sent for Nagina setting which were not manufactured by the assessee and income therefrom has been considered as per calculation No. 1 above. In our opinion the learned CIT(A) was justified in deleting this addition. 18. Calculation No. 3 made by the AO at page No. 26 of the assessment order is for the asst. yrs. 1995-96, 1996-97 and 1997-98. He found that Annex. A-6 and A-7 contained details of job work of Nagina setting done by the assessee in the period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he strength of the similar material as was available for the three assessment years considered by the AO in this calculation. On the contrary the learned Authorised Representative argued that the learned CIT(A) was not justified in sustaining the additions inclusive of job receipts which were already offered for taxation by the assessee. It was contended that the amount of job receipts shown by the assessee ought not to have been reconsidered by the CIT(A). We note that insofar as the showing of job receipts amounting to Rs. 34,047, Rs. 68,614 and Rs. 20,882 in the asst. yrs. 1995-96 to 1997-98 are concerned, the same are duly reflected in the capital accounts and cash flow statements etc. for these years. Naturally if these amounts stand included in the calculation of undisclosed income, then the same should not be reconsidered as it would amount to double addition. Now we turn to the main objection of the learned Departmental Representative that labour charges at the rate of Rs. 30 per gram and profit in the shape of retention of gold at 11.33 per cent were rightly considered by the AO. We have perused the relevant pages of Annex. A-8 to take stock of the actual position. We obse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and considered by the AO in the block assessment order. The AO is directed to give effect to our finding and determine the amount of undisclosed income resulting from the business operations of the assessee. It is made clear that the amount which already stands offered for taxation should not be added once again as has been discussed in the preceding para. These grounds are allowed pro tanto. 21. Ground No. 7 of the assessee's appeal and ground No. 8 of the Revenue's appeal deal with the addition on account of household expenses. In the course of search operation, the assessee in his statement recorded under s. 132(4) gave head-wise detail of household expenses. He stated that his elder son was studying in 9th class, his younger son was also a student and the total annual school fee was at Rs. 9,200. He admitted the expenses of Rs. 1,500 per month on meals of the family, Rs. 1,500 per month on cloth, petrol, phone, electricity and entertainment etc. These details were recorded vide question Nos. 25 to 33 of his statement. Accordingly, the sum total of these household expenses was determined by the AO at Rs. 35,780. In addition to that the assessee also admitted that he ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dence in the proceedings under this Act. We are equally conscious of the fact that the assessee can come out of the rigour of his admission by retracting. In such a case the onus is very heavy upon the assessee to lead strong evidence in support of his retraction. Where a simple statement is made retracting from the deposition under s. 132(4), that cannot be accepted. Be that as it may, we find that here the assessee had admitted the amount of household expenses in his statement and the contents thereof have not been disputed. We further find that the assessee's statement would carry more weight in the instant case because no books of account were maintained by him. Under these circumstances such a deposition made. by the assessee would become evidence in the block assessment proceedings and constitute the basis for addition. This view has been taken by us on an earlier occasion also. In the light of this position we are not inclined to accept the assessee's contention in this regard. 23. We observe that the AO has framed this block assessment in a very peculiar manner, inasmuch as he has not only included the incomes earned by the assessee but has also brought the expendit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e years in which it did not exceed the maximum (sic-minimum) taxable limit, could not be accepted. He, therefore, included the undisclosed income as shown by the assessee in his computation of income, balance sheet and cash flow statement etc. for the asst. yrs. 1989-90 to 1992-93, 1995-96, 1997-98 and 1998-99. In the first appeal the learned CIT(A) held that the AO was justified in including the income for asst. yrs. 1989-90 to 1992-93, 1995-96 and 1997-98. As regards the asst. yr. 1998-99 it was held that since the assessee had furnished return after the date of search, the undisclosed income computed for this year was to be substituted with the income shown by the assessee for this year after search because the return was filed after the search and it was not the declared income. 25. We have heard the rival submissions and perused the relevant material on record in the light of precedents cited before us. The question which falls for our consideration is to decide as to whether or not the income as per the returns not furnished for the years prior to the date of search is liable to be included in the undisclosed income? Insofar as the income of the years which is below taxable l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee along with his wife through account payee cheque and the evidence of having received the cheques was found during the course of search. The remaining amount of Rs. 37,500 has been rightly attributed by the learned CIT(A) to have come out of job receipts on the basis of various annexures. We have discussed in an earlier para that where income has been taken on the basis of income earned then no addition should be made for the investments made out of such income. In our considered view, the learned CIT(A) was justified in deleting this addition. 29. Ground No. 3 is against the deletion of addition of Rs. 6,639 in asst. yr. 199697 and Rs. 17,481 in asst. yr. 1997-98 on account of interest on deposit with CRB. The AO found that a sum of Rs. 1,75,000 was invested by the assessee in CBR Capital Fixed Deposit Scheme on 23rd Dec., 1995 for one year, the principal with interest of Rs. 21,708 was received on 16th Dec., 1996 and thereafter a sum of Rs. 1,75,000 was again deposited with CRB on 24th Dec., 1996. It was explained by the assessee that a cheque of Rs. 1,50,000 was received against the sale proceeds of house owned by the assessee and his father. This cheque was deposite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remaining amount of Rs. 12,883 was shown to have been invested out of her petty savings. The AO accepted the source of Rs. 1,77,117 but made the addition for the remaining amount of Rs. 12,883. The learned CIT(A) deleted this addition. We find that the lady got married in the year 1982 and the possession of this much amount cannot be held to be unreasonable out of Stridhan. In our opinion the learned CIT(A) rightly proceeded to delete this addition. This ground is not accepted. 33. Ground No. 9 is against the deletion of addition of Rs. 1,20,000 made on account of unexplained investment in the property. The assessee purchased a house in co-ownership with his wife and father for Rs. 3,90,000. During the course of statement it was admitted that the house was purchased for this amount. However, it was admitted that if valuation made by DVO came at a higher figure he would pay that tax. On a reference, the DVO estimated the value of the house at Rs. 5,10,000 and the AO made addition of Rs. 1,20,000 in assessee's hands as his undisclosed income. The learned CIT(A) deleted the same. It is noted that the main basis for making the addition is the difference in the value determined by ..... 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