TMI Blog1999 (2) TMI 672X X X X Extracts X X X X X X X X Extracts X X X X ..... d beauty clinics. Her family members have also been working with her as salaried employees. She has set up three branches of her sex and health clinic in Mumbai. The first one was set up at Borivili in 1991, the second one at Charni Road in May 1995 and the third one at Dadar in November 1995. A search was conducted at the residential and business premises of the appellant on 26-3-1996. During the search, the following cash was found : - (1) At the residential premises situated at Flat Nos. 201, 202 and 203-A, Lancelot Building, Borivili (West), as per Panchanama dated 27-3-1996. ₹ 49,36,500 (2) At Clinic, at 15, Ghamat Terrace, Senapati Bapat Marg, Dadar (West), as per Panchanama dated 26-3-1996 ₹ 32,400 A substantial portion of the above cash, excluding a small portion, was offered to tax as the unexplained income of the appellant. 2. During the search, it was also noticed that the appellant and her above mentioned family members received substantial gifts from certain non-residents out of their NRE Accounts in different years, in the names of the aforesaid family members ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idents who allegedly made the gifts are given by the AO at page 6 of his order and they are as follows : - Sr. No. Donor Amount (1) Francis Vaz 2,00,000 (2) A.T. Dianold 2,25,000 (3) Pramod V. Simon 10,000 (4) Luis D' Silva 75,000 (5) Joe Vaz 2,00,000 (6) Darshan Singh 4,00,000 (7) Trevour Castilliro 12,00,000 (8) Murtza Hussain 25,000 (9) Keshav Jadhav 3,51,000 (10) Sheel Cabral 2,00,000 (11) Derick Vaz 1,50,000 (12) Hasmukh Dave 1,00,000 (13) Mohamadi M.F. Hussein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S.V. Road., Borivili (W), Mumbai-92. ₹ 5,58,780 -do- (10) Flat No. 203-A, Lancelot Bldg., S.V. Road., Borivili (W), Mumbai-92. ₹ 2,30,343 -do- (11) Tenament No. 15, 2nd flr., Ghamat Terrace, Senapati Bapat Marg, Dadar (W), Mumbai-28. ₹ 3,50,000 Dr. Arunkumar Gupta (12) Room No. H, 3rd flr., Laud Mansion, Queens Rd., Mumbai. ₹ 6,00,000 Dr. Arunkumar Gupta (13) Flat No. C-411 Lancelot S.V. Road., Borivili (W), Mumbai-92. ₹ 3,61,000 -do- (14) Shop No. 37, Chawla Plaza, Plot 14/15, Sector 11, CBD, Belapur, New Mumbai. ₹ 4,86,900 -do- (15) 2nd flat from South Side, Manek Kunj (Proposed bldg.), C.S. No. S/118 of Parel, Sewri Division. ₹ 6,10,000 Dr. Renu Gupta The AO was of the view that the abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24,287 Sohanlal Gupta (HUF) 9,888 Aakanksha Grand daughter. 465 89,567 48,80,544 Less :Cash balance in the books of account of clinics as on 26-3-1996 : Kayakalp Internationals 1,83,428 Kayakalp International (Export) 21,476 2,04,904 Excess Cash 46,75,640 It may be observed that the appellant worked out the above excess cash of ₹ 46,75,640 on the basis of the cash balances reflected in the cash books of the different family members, inclusive of the grand daughter of the appellant, Aakanksha. After working out the unexplained cash at the above figure of ₹ 46,75,640, an amount of ₹ 39,74,375 was offered as the income of the appellant and the balance of ₹ 7,01,265 was offered in the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h book by way of updating them upto 26-3-1996 were not furnished. In this view of the matter, we delete the addition of ₹ 1,24,360. 6. The gist of the next objection is that the AO erred in making the addition on account of NRI gifts of ₹ 4,06,080, as per following details : - Assessment Year Gift Amount Premium 1994-95 25,000 2,000 1995-96 3,51,000 28,080 Total 3,76,000 30,080 The AO observed that the members of the family of the appellant had received substantial gifts and this was only a mode of converting black money into white. Particularly with reference to the NRI gifts, it is mentioned that there was no relationship at all between the donors and the appellant or the members of her family and it is inconceivable that they developed such close relationship with the donors, as alleged by the appellant, in a short span of three to four years after their coming to Mumbai from Bhatinda, Punjab. It is also mentioned that the gifts received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Salary. I am married, my wife's name is Dr. Renu Gupta. She is also working with said clinic drawing about ₹ 16,000 salary and got two daughters by name (1) Aakanaksha (1 frac12; year) (2) not named yet (one month). Myself and my wife are Income-tax assessees. I have a flat situated at 411-C, Lancelot S.V. Road, Borivili (W). It was purchased in the year 1993-94 for about ₹ 4/5 lacs. My wife is not having any property in her possession but booked a flat in Lalbaug and same is under construction. I am holding Indian Passport No. . . . . dated 21-12-1995 issued at Bombay but never visited abroad. My wife also hold Indian passport. She also never visited abroad. I am maintaining S.B. A/c. with SBI No. Borivili (W) Branch A/c. No. 18117. My wife also had Bank A/c. with same Bank. Daughter also. Regarding the gifts received by me and my wife and my daughter, I state that I have received from NRE cheques of totalling ₹ 12,50,000. (Twelve lacs fifty thousand) and my wife received NRE cheque of ₹ 2,11,000 (Two lacs eleven thousand) and my daughter received cheque of ₹ 50,000 (Fifty thousand) drawn from different NRE holders residing in different for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. There is no Book of Accounts, all from the Indian currency paid for the purchasing the NRE cheque. My wife and my children are not aware of the same of NRE cheque purchased and payment made as I am maintaining the account of the family. My father Dr. Sohanlal Gupta and my mother also received different NRE cheques totalling to ₹ 17,36,000 from different NRIs by paying premium and cheque amount details can be furnished by them. I will submit photocopies of accounts of myself, my wife and my daughter within two days. I have gone through the statement running into 5 pages and the same is true to the best of my knowledge and the same has been written by me without any force or any promise and same is true. The Assessing Officer has also extracted the relevant portion of the deposition of Dr. Sohanlal Gupta at page 10 of his order and it reads as follows : Regarding your query about the NRE cheques received from differ- ent non-resident Indian Accounts maintaining with different Indian Bank in Bombay, I state that I received Ten Cheques of N.R.E. A/cs totalling to Rupees thirteen lakhs sixty thousand (Rs. 13,60,000) and my wife also received two cheques of three lacs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nforcement Directorate on 8-11-1996) and may be seen at pages 130 and 131 of the APB and it reads as follows : I was called by the Enf. Dept. on 6-11-1996 and accordingly I have gone there at 14.00 and my statement has been recorded along with interrogation with regard to gift cheques received by me (1) Self ₹ 12 1/2 lakh (2) Wife 2,11,000 (3) Daughter ₹ 50,000 received from Seamen (1) Trevor, Sheel, Francis, Mohd. Hussein and Manish Kapil all are NRI working on foreign going vessels. I told the Dept. they know me personally well since last 4/5 years and they have given gifts to me and my family in 1995-96 out of personal relationships developed over a period of years. However, the officer did not believe me and got angry on me and insisted that I must write down as told to me that these gifts were purchased by me in exchange of cash + 8% commission and if I do not write down, I will have to face dire consequences and further harassment and my whole family will be in trouble. I will be arrested and detained under COFEPOSA. I became nervous and being professional man got afraid and wrote down what was dictated to me and asked to sign the same. The Statement got ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ased any gift cheques from the said Seamen. These gifts were received during the period 1993 to 1996. This application of mine be taken on record. It may be observed from the above depositions that both father and son have admitted that the donors of the NRI gifts involved were mostly Seamen working on foreign going vessels. The learned counsel for the appellant pleaded that when a confession is retracted, the evidentiary value of the original confession is either nil or it should be taken not simply with a pinch but with a tonne of salt. He also pleaded that the original inculpatory statement cannot be relied on de hors the retraction and for this proposition he has relied on the decision of the Foreign Exchange Regulation Appellate Board in the case of Nizamuddin v. Director of Enforcement (1998) 96 Taxman 408(FERAB) and also the decision of the Apex Court in the case of K.T.M.S. Mohammed v. Union of India (1992) 65 Taxman 130 . In this context, reliance is also placed upon the decision of the Tribunal in the case of Asstt. CIT v. Mrs. Sushiladevi S. Agarwal (1994) 50 ITD 524 (Ahd.) in which it was observed in para 7 that the search is an invasion on the privacy of a citizen, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the various family members in the respective years in the books maintained by them and as for certain years, the assessments have been completed, the matter cannot be reconsidered while completing the block assessment. In other words, the argument made out is that in a block assessment, only the undisclosed income can be brought to tax and the determination of such undisclosed income has to be based only on material found or seized during the search. If there is no such material located during the search, there is no legal basis or justification for bringing any amount to tax. For this proposition, the learned counsel for the appellant relied upon the decision of the Tribunal in the case of Sunder Agencies v. Dy. CIT (1997) 63 ITD 245(Mum.). In the present case, the confessions made by Dr. Sohanlal Gupta and Dr. Arunkumar Gupta before the FERA authorities were subsequent to the date of search and so it is pleaded that those confessions cannot be taken into account for bringing the NRI gifts to tax as the undisclosed incomes of the family members. 8. The learned Departmental Representative on the other hand mentioned firstly that the appellant had adopted delaying and evasive tac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relied upon the decision of the Hon'ble Kerala High Court in the case of Kalpaka Bazar v. CIT (1991) 186 ITR 617where the search was held to be legal because there was no proof that the authorised officers who conducted the search had misbehaved during the search operation. He has also relied on the decision of the Tribunal in the case of Param Anand Builders (P.) Ltd. v. ITO (1996) 59 ITD 29(Mum.) wherein it was held that a mere allegation of torture and harassment by the search party cannot be accorded credence in the absence of any account of what exactly happened and in the absence of any corroboration by witnesses. He also mentioned that Dr. Sohanlal Gupta and Dr. Arunkumar Gutpa had addressed their retractions to the very same officers who were allegedly guilty of exercising coercive measures against them and not to any of the higher authorities who exercised administrative control over them, and so it is made out that the so-called retraction is only a self-serving device. The learned DR also mentioned that some of the so-called donors have given multiple gifts and this is also a feature that proves the incredibility of the version of gifts. In this context, he filed a s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dvance the queries in this regard from the Department and so prepared themselves to answer the queries and kept ready the evidence in support of the gifts. It is conceded that there are suspicions in the matter but it is pleaded that such suspicions cannot take the place of evidence. It is also pointed out that there is no evidence at all to the effect that the appellant or the family members had given back the cash to the donors after the receipt of the cheque money from them and so there is no basis at all for the version of the Department that the gifts were not genuine. 10. We are of the view that we have to sustain the addition of ₹ 4,06,080, being the NRI gifts received by the appellant and the estimated premium thereon at 8%. Firstly, the appellant did not produce the donors for the examination of the Assessing Officer on the plea that they were not available in India. The failure of the appellant to produce them before the Assessing Officer by itself may not be a sufficient reason for sustaining the addition. This circumstance has to be viewed in conjunction with the other facts of the case. As mentioned by the learned DR, the letters from the donors located during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 041 120023-006. The same has been accepted by you as per our oral talk. I have made this gift of the amount of ₹ 1,75,000 to you out of natural love and affection and the high esteem and regards that I have for you. Henceforth you are the sole owner of the proceeds of this gift and can enjoy the same as you may deem fit and proper. I have made this gift without any past, present or future consideration, of any kind whatsoever and declare that I have not got any type of right, title, control or interest on the amount gifted to you as mentioned hereinabove. Please convey my regards to Bhabiji. How is Arun, Renu, Aakanksha. With best wishes, Your's lovingly, Sd/- (A.T. Dianold) . Such similarities in language in letters originating from different donors situated in different countries on different dates can neither be accidental nor natural. We have necessarily to infer that they are the product of a design. It may also be noticed that they are supposed to be personal letters which are written in the normal course of dealings and not of the nature of legal deeds. There are separate gift deeds which also have the same type of similarities. As observed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the bank pass books of the NRE accounts on which the cheques were drawn. In the case of Murtuza Hussain Jangad, the passport is dated 14-9-87, as may be seen from the photocopy given at page 58 of the APB. The passport of the NRE Account bearing No. 1047 with the State Bank of India, Marol, Bombay, shows a balance of ₹ 6,01,600 as on November 30 and there are no transactions thereafter. As the cheque in question for ₹ 25,000 was issued on 15-12-1993, the debit does not figure in the passbook. Similar are the features in respect of the other NRI gifts involved in this group. Even in the case of Keshav Govind Jadhav mentioned earlier, what is given in support of the donor is only the copy of the passport, which seems to have been issued in September 1993, as may be seen from pages and 93 of the APB. Even in his case, the entries in the savings bank pass book relating to the NRE Account No. 60837 with State Bank of India, Main Branch, are of May 12, 1994, whereas the gift in question of ₹ 3,51,000 was received on 27-7-1994. Even in this case, the pass book does not bear the debit. However, in the course of the hearing before us, the learned counsel for the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e considered de hors their subsequent retraction before the FERA authorities. That is the ratio of the decision of the FERA Board in the case of Nizamuddin (supra) and on which the learned counsel for the appellant relied. While the retraction cannot be ignored, neither can the original statement be ignored. Both have to be considered together and the reliability of each of them has to be considered in the light of the other circumstances of the case. We have already mentioned that in the present case, the circumstances indicate the existence of a design and a money-laundering exercise and not of genuine gifts. We may also mention that we find that the case laws cited by the learned counsel for the appellant are all distinguishable on facts. In some of those cases like the one decided by the Apex Court in the case of Orissa Corpn. (P.) Ltd. (supra) the creditors were all assessees on the rolls of the Department and in none of those cases there are incredible features as the similarities in the language and the contents of the letters we have noted in respect of the correspondence relating to the NRI gifts received by the appellant and her family members. We take support for the vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,959 77,000 (3) Dr. Rajrani Gupta 1,57,516 83,014 74,502 (4) Dr. Sohanlal Gupta (HUF) 31,000 - 31,000 (5) Dr. Renu Gupta 1,47,613 55,812 91,801 (6) Ms. Aakanksha Gupta 1,89,069 2,510 1,86,559 He mentioned that some of the gifts received were substantial like an amount of ₹ 51,000 received on the occasion of the appellant's birthday celebrated at here native place, Batinda, on 15-1-1993. It is mentioned that no particulars are given for this substantial gift. He also mentioned that the donors were not produced in spite of repeated opportunities and so their creditworthiness is not proved. He therefore made the impugned addition of ₹ 1,57,456 in the assessment of the appellant as mentioned in the ground taken by her. 12. Before us, the learned counsel for the appellant mentioned that the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcumstances, we sustain the addition of ₹ 11,000 being the gift from Shri Francis Bosco Vaz included in the assessment year 1993-94 among domestic gifts and the aggregate of the remaining for NRI gifts of ₹ 26,500 brought to tax by the AO as part of the domestic gifts in the assessment year 1994-95. So an addition of ₹ 37,500 (11,000 + 26,500) is sustained out of the addition of ₹ 1,57,456 made by the AO under the head Non-NRI gifts . In respect of the other domestic gifts we have to delete the addition on the short ground that the regular assessments for the years in which the gifts were received had been completed and some of them were considered for addition in the regular assessments and there was no material located during the search on the basis of which the genuineness of these domestic gifts could be reconsidered in the impugned block assessment. Further, we find that the amounts involved are small and the necessary details are available and we do not find any such incredible features in respect of the domestic gifts as we have noticed in respect of the NRI gifts. In the circumstances we are of the view that the ratio of the decision of the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessment Year Amount Rs. 1994-95 9,25,333 1995-96 6,83,833 Total 16,09,166 The AO mentioned that the appellant and her family members acquired certain properties numbering 15, the details of which we have already given here in before in para 2 on page 4 of this order. The properties mentioned at Sr. Nos. 5, 6 and 7 of the list of 15 properties were acquired in the name of the appellant, whereas the balance 12 properties were in the names of the other members of the appellant's family. In the course of the search, a paper, enclosed as Annexure E to the assessment order, was located in which it was written that the white portion represented by the letter W was 60 and the black portion represented by the letter B was 40% and the shop area was 3,600 sq. ft. and the rate was ₹ 11,000 per sq. ft. and the name of the Builders is Desai Builders. On the basis of this material, the AO inferred that the appellant has paid money over and above the investment reflected in the books for acquiring these three properties in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re no comparable cases for the properties at (1) and (2) above, i.e., Punit Tower and Bay-View Tower, among the sale instances given by the Appropriate Authority. It is also pleaded that in respect of the property at Oshiwara, the appellant had made the investment in lumpsum before the construction had begun, which was quite risky, and so the builder had given a concession of about ₹ 4 lacks and this fact is supported by a letter given by the builder himself, which can be seen at page 178 of the APB. The letter given by the builder, Agrawal Builders Developers, reads as follows : - 15th March 97 To Whom Soever This May Concern We hereby declare and confirm that Smt. Rajrani Gupta w/o Dr. Sohan Lal Gupta has booked a Flat admeasuring 1,000 sq. ft. super covered area, in our Akashganga Co-op. Hsg. Society, on Plot No. A-21, Oshiwara, Bombay for an aggregate value of ₹ 6,00,000 (Rupees Six lakhs only), after a discount of ₹ 4,00,000 being the party agreed to pay the entire amount in lumpsum, in advance.We also hereby confirm that ₹ 1,000 (Approx.) per sq. ft., was the prevailing market rate, at the time of booking.We also give below some other booki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment which explains the low cost of acquisition. The explanation offered by the appellant regarding the nature of the properties cannot be thrown out as incredible. The decision of the Hon'ble Rajasthan High Court in the case of Smt. Amar Kumari Surana (supra), is distinguishable, as in that case the assessee could not furnish any explanation for the low cost of acquisition compared to the prevailing market rate, whereas the appellant has given sufficient reasons as to why her cost of acquisition was on the low side. In the circumstances, we delete the addition of ₹ 16,09,166. 18. The next ground is that the AO erred in making an addition of ₹ 3,72,520, being alleged undisclosed sale consideration in respect of the sale of flat by the appellant to the HUF of which her husband is the Karta, i.e., Sohanlal Gupta (HUF). The appellant had sold a property, i.e., Flat No. 202-A, Lancelot Building, S.V. Road Borivili (W), to Sohanlal Gupta (HUF), for a consideration of ₹ 5,58,780 vide an agreement dated 14-5-1993. In the assessment of Sohanlal Gupta (HUF), the AO made an addition of ₹ 3,72,520 in respect of the acquisition of this property on the ground of u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re obtained only as a safeguard against certain contingencies like certain employees leaving service without accounting for the advances received. It is claimed that the blank vouchers obtained were never utilised. 23. We find that the Assessing Officer has not spelt out which expenditure is suspected to have been inflated. No linkage is established between the blank vouchers obtained and the inflation of any particular expenditure. In the circumstances, we have to delete the ad hoc addition of ₹ 50,000 each made for the assessment years 1994-95 to 1996-97. 24. The next ground is that the Assessing Officer erred in making an addition of ₹ 15,300, being alleged unexplained investment in the clinic at Charni Road. The appellant incurred some expenditure by way of repairs and renovation to her clinic situated at Land Mansion, 3rd floor, Charni Road, Mumbai. The account of the contractor, M/s. Ghanshyam Co., who carried out the repairs and renovation work, was seized during the search. When the appellant was required to furnish details of the expenditure incurred on renovation, she furnished the details which included an amount of ₹ 76,000 shown to have been p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer made the impugned addition of ₹ 2,42,870 on the ground that the appellant received the said commission in cash outside the books of account. 27. Before us, the leaned counsel for the appellant sought to explain that so far as Panther Advertising is concerned, the bills issued by them to the appellant reflected the payment of discount by them at 7.5% and the same is noted in the seized papers as commission receipts. In this context, he invited our attention to a copy of the bill dated 2-5-1995 issued by Panther Advertising to the appellant in the name of Kayakalp International which may be seen at page 200 of the APB. The bill indicates the discount received by the appellant at ₹ 1,196. It is further pleaded that so far as Chintamani Advertising is concerned, it reflected only the payments made for rent towards hoardings on railway platforms and no such commission is received in respect of rent paid to railways. 28. We are not convinced by the explanation given by the learned counsel for the appellant. Annexure `F' to the assessment order indicates entries relating to commission from 28-12-1992 onwards. It is true that even if the bills iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 46,66,762 1996-97 59,89,779 Less:Unexplained cash assessed separately 41,00,000 18,89,779 Total 1,24,00,866 The Assessing Officer mentioned that certain patients' history forms numbering 2,341 were seized from the premises of the appellant during the search action and these forms record the number of visits of each patient and the amount of fees collected from them. These forms relate to the financial years 1993-94 to 1995-96 and on the basis of the entries made in these forms, he estimated the undisclosed receipts of these years at ₹ 1.5 crores. He mentioned at page 24 of his order that the amounts recorded in these forms were reflected in the books of account for income-tax purposes. He further observed that four patients located during the search, i.e., Shri Vishwanath S. Jadhav, Shri Sachinkumar Shetty, Shri Deepak Joshi and Shri Mohd. Ismail were examined on oath during the search and in their statements they gave the details of payments made by them ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t as follows : Receipts of Dadar Clinic of the earlier day, i.e., 25-3-1996 ₹ 12,000 Receipts of Borivili Clinic of 26-3-1996 ₹ 9,150 Receipts of Dadar Clinic of 26-3-1996 ₹ 8,250 The balance cash of ₹ 3,000 is said to be cash in hand. The receipts of the Charni Road Clinic are not included and so the Assessing Officer mentioned that including the receipts of this clinic also, the daily receipts of the appellant could be estimated at ₹ 40,000 per day. Estimating the working days at 313, i.e., excluding Sundays and other holidays, the Assessing Officer mentioned that the receipts for the accounting year relating to the assessment year 1996-97 could be estimated at ₹ 1,25,20,000 (40,000 x; 313). He further estimated the receipts of earlier two years on the same lines with the following remarks : If on similar basis, the receipts of earlier two years are estimated when the Charni Road and Dadar Clinics were not existing as claimed by the assessee then for two years her receipts comes to ₹ 1,25,20,000 (20,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at this is not sufficient compliance with the canons of natural justice inasmuch as, to adopt the language of the learned counsel, the truth of their version has not been decided in the crucible of cross-examination. In this context, reliance is placed upon the decisions of the Apex Court in the case of State of Kerala v. K.T. Shaduli Grocery Dealer AIR 1977 SC 1627 wherein it was held that cross-examination has to be afforded where the statement of a deponent forms and integral part of the material on the basis of which the order is passed by the taxing authorities. In this context, reliance is also placed upon the decision of the Apex Court in the case of Suraj Mall Mohta Co. v. A.V. Visvanatha Sastri (1954) 26 ITR 1 and also the decision of the Apex Court in the case of Kishinchand Chellaram v. CIT (1980) 125 ITR 713/4 Taxman 29. The learned counsel has also filed written submissions regarding the incorrectness of the estimate of clinic income and it is mentioned therein that there is no basis for the Department's estimate of fees of ₹ 5,000 per patient in the aggregate or to apply this rate for the entire period of estimation from 1-4-1993 to 26-3-1996. It is also m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the aggregate daily receipts estimated by Assessing Officer are highly pitched. 4.Further, the Assessing Officer has not taken into account the fact on record (please see enclosed pages 5 to 10) that Dadar Clinic was started only on 27th November, 1995 and Charni Road Clinic was stated on 25th June, 1995 (the manner in which he has made allowance on this account is not discernible). 5.In view of the aforesaid, the estimate of the earnings for the financial years 1993-94 and 1994-95 is also not correct and proper. B.Estimate on the basis of number of patients, estimate or number of visits etc. are at page 29 of the assessment order : 1.Taken by the Assessing Officer : 2341 history sheets 2 (missing sheets assumed) 5 (number of visits per patient assumed) 23410 being total number of visits. 2.Invalidity of Assessing Officer's assumptions : (a)Not made any allowance for blank forms sample forms attached pages 11 to 15. (b)Not made any allowance for free consultation and where no treatment is involved pages 16 to 20. (c)Also not taken into consideration cases where the consultation as also treatment is free sample forms attached pages 21 to 25. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 995-96 Derived from the statement made by Dr. Arun Kumar Gupta under section 132(4) on 26-3-1996 Statement I 1.Borivili :Rs. 9, 150 x; 313 daysshown in accounts ₹ 28,63,950 ₹ 16,76,880 2.Dadar :Rs. 8,250 109 days ₹ 8,99,250 (Clinic started on 27-11-1995) shown in accounts. ₹ 4,91,121 Notes : 1.The declaration made on 26-3-1996 cannot be taken of representative nature so as to be made uniformly applicable. 2.No declaration was made under section 132(4) in respect of Charni Road Clinic. 3.The number of days mentioned above include the days falling after the date of search, i.e., from 27-3-1996 to 31-3-1996. Statement II Without prejudice, even if the declaration made is taken to be representative of receipts earned in all the three years in a uniform manner, the result would be as under : (a)Borivili : ₹ 9150 x; 313 days x; 3 years ₹ 85,91,850 (b)Dadar : Same as above, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the same is the position with regard to the NRE gifts which have been treated as income. They are also recorded in the books and so they go to swell the cash balance in the books and to explain the expenditure and investments recorded in the books. So even if they are treated as the income of the appellant, they cannot be taken into account for explaining the abovementioned difference of ₹ 32,88,105. The learned counsel for the appellant also pleaded that the patients' forms seized during the search relate only to the assessment years 1994-95 to 1996-97 and there is absolutely no material seized during the raid which had any bearing on the estimation of the professional income for the assessment years 1992-93 and 1993-94. It is also pleaded that the material that proves concealment of income in one particular assessment year cannot be utilised for concluding that a similar concealment of income was committed in the earlier assessment years. For this proposition, reliance is placed on the decision of the Hon'ble Orissa High Court in the case of J. Gopal Rao v. State of Orissa (1993) 88 STC 488and the decision of the same High Court in the case of State of Orissa v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8-99, dated 31-7-1998. In my letter dated 4-9-1998. I have informed that entries found at the back of the Patient History Sheet inventorized in Annexure D-9, were not reflected in the Patient Register maintained at the Dadar Office. This conclusion was drawn on the basis of comparing patient history sheets found at the Dadar office and the ledger sheets from the Dadar premises. As directed by the Hon'ble Tribunal on 7-9-1998, the verification was made in the presence of the assessee and it is found that many of the entries have been made in the Patient Register maintained at Borivili and Charni Road offices. The assessee has narrated that the Patients History Sheets are transferred to the other clinics on the request of the patients as sometimes it is convenient to them. Only the following entries could not be found in any of the Patient Registers : No. History Sheet No. Name of the patient Dt. of visit Amt. Recd. as per Hist. Sheet Assessee's explanation 1. B-950716-6 Ravinder Nimbale 17-10-1995 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,00,866 over and above the declared income of ₹ 40 lakhs, being the cash outside the books seized during the course of search action. Firstly, the estimation of undisclosed income for the assessment years 1992-93 at ₹ 5 lakhs and for 1993-94 at ₹ 10 lakhs has no legal validity because even the patients' forms seized during the raid relate only to the assessment years 1994-95 to 1996-97 and in view of the authorities cited by the learned counsel for the appellant to the effect that the material seized during the raid relating to a particular assessment year cannot be utilised for drawing adverse conclusions against the assessee for earlier years. So, we have to delete the additions totalling ₹ 15 lakhs, being the professional income estimated for the assessment years 1992-93 and 1993-94. 35. Even for the assessment years 1994-95 to 1996-97, the estimate has to be based only on the patients' forms. This is because the depositions taken from the four patients were never put to the appellant. Allowing the appellant to take photocopies of the seized materials is not the same thing as supplying the copies of the depositions and giving an opportunity of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been different had the fees recorded in the patient's forms not been reflected in the account books. As already mentioned, that is not the position, as admitted by the learned DR before us and as stated by the Assessing Officer in the assessment order. In the circumstances, the patient's forms cannot be a basis for the estimate of professional income at the exhorbitant figures adopted by the Assessing Officer. The only other material is the amount of cash of ₹ 32,400 seized from Dr. Arunkumar Gupta during the search and on the basis of this deposition, the undisclosed professional income comes to only the difference worked out by the learned counsel for the appellant of ₹ 32,88,105. This also falls short of the ₹ 40 lakhs which has been declared by the appellant during the raid. Any receipts in kind or other small omissions noticed by the Assessing Officer can also be regarded as covered by the excess cash of ₹ 40 lakhs over the difference worked out by the Assessing Officer. In this view of the matter, we delete the addition of ₹ 1,24,00,866 towards undisclosed professional income. We do not have to separately mention that the unexplaine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the HUF at Bhatinda and so the Department is not justified in saddling the appellant with the capital gains in respect of this property. 38. The learned DR on the other hand relied upon the assessment order. 39. We are of the view that the appellant deserves to succeed on this issue. We find at pages 201 to 205 of the APB the explanation dated 6-4-1994 wherein the source of the funds invested in the purchase of the house property was explained. The explanation reads as follows : - To, The Income-tax Officer, Ward 22 (9), Bombay Reg : Sohanlal Gupta HUF Sub : Antecedents of Sohanlal Gupta HUF Assessment Year 1992-93 and 1993-94 Dear Sir, In respect of the above we would like to inform you as follows : - A. Constitution of the HUF Sohanlal Gupta HUF has been in existence for a long time since the marriage of Dr. Sohanlal Gupta. It consists of three co-parceners as under : 1.Dr. Sohanlal Gupta Karta 2.Smt. Rajrani Gupta (Wife) Coparcener 3.Dr. A.K. Gupta (Unmarried Son) Coparcener B. Source of Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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