TMI Blog2005 (5) TMI 242X X X X Extracts X X X X X X X X Extracts X X X X ..... are that IT Department had carried out search and seizure action under s. 132(1) on 6th Feb., 2001, at the business and residential premises of the assessee. During search action, cash of Rs. 4,87,175, gold ornaments and jewellery worth Rs. 19,95,737 and other valuables worth Rs. 2,65,300 were found. Besides, some incriminating documents indicating undisclosed income from business/profession were also found. Thereafter, the AO issued notice under s. 158BC on 12th Dec., 2001, calling upon the assessee to file the return for the block period within 20 days of service of the notice. The return was filed on 31st July, 2001, disclosing therein undisclosed income of Rs. 7,48,000. The AO completed block assessment on 28th Feb., 2003, determining the undisclosed income at Rs. 21,37,302 by making certain additions. These were subject-matter of appeal before the CIT(A) and are also subject-matter of present appeal. The merits of such claims are discussed in succeeding paragraphs. 2.1 During the course of search, certain loose documents in the nature of statements of receipts and expenditure were found from the residence of the assessee. These documents were listed in Annex. AR-1, at pp. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,000 found on the receipts during the period from 1st Jan., 2001 to 5th Feb., 2001, at Rs. 7,77,500 and made the addition for the block period accordingly. 2.3 During the course of search of the assessee's residence, two computer floppies marked as OR-I and OR-II forming part of the seized document Annex. AR-VII were found and seized which contained date-wise records of the patients admitted, operated at Adhlakha Hospital including the names of the doctors, names of the patients, date of admission, date of discharge and fees charged from the patients under the different heads for the period from 23rd Aug., 1996 to 28th June, 1997, i.e., for about 10 months. When the assessee was confronted with these facts, the assessee stated vide letter dt. 17th Feb., 2003, that data was prepared on the computer on a trial basis and that the receipts mentioned in this record were not only the hospital receipts, but also receipts of the doctors/surgeons operating at the hospital which were directly credited to their accounts. It was also stated that the total hospital receipts during the period aggregated to Rs. 14,27,700 out of which substantial part was recorded in the books. The assessee su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the maintenance of accounts and, therefore, reliance by the AO on her statement was not proper. Thus, it was contended that the assessee had already declared undisclosed income based on the daily statement of receipts and expenditure and transactions recorded on the computer floppies. It was also argued that the judgment of Hon'ble apex Court in the case of Rajnik Co. vs. Asstt. CIT was distinguishable on the facts of the case. In that case, there was detection of suppressed sale for 24 days from 28th Dec., 1995 to 20th Jan., 1996, and 15 days from 23rd Oct., 1996 to 8th Nov., 1996, which were not entered in the books of account. Besides, there was a sworn statement of the partner that the assessee-firm had followed a practice of suppression of sales not only during the asst. yrs. 1996-97 to 1997-98, but also in the earlier asst. yrs. 1986-87 to 1995-96. It was stated that only in these circumstances, the estimation of undisclosed income for block period based on material on record and statement of partner was held to be proper. But in the present case, there was no such admission by the partners. Accepting the contentions of the assessee and by relying on the decisions cited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd statement of partner was held to be justified. He further relied on the judgment of Hon'ble Punjab Haryana High Court in the case of Ved Parkash vs. CIT (2004) 265 ITR 642 (P H), where the Hon'ble High Court has held that since the books of account maintained by the assessee were not reliable, the assessment had to be made in the light of material found during the search where some element of estimation was unavoidable. He referred to amendment to sub-s. (b) of s. 158BC as amended by the Finance Act, 2002, w.e.f. 1st July, 1995, as per which s. 144 and s. 145 were specifically made applicable to the computation of undisclosed income for the block assessment. He submitted that even if the amendment has been introduced on a subsequent date, yet it would be applicable to the present case, because the amendment has been made with retrospective effect. The learned Departmental Representative advanced similar arguments in support of addition of Rs. 11,09,802 made on the basis of two computer floppies marked as OR-I and OR-2 of Annex. VII covering period 23rd Aug., 1996 to 28th June, 1997, i.e., for 10 months. He submitted that on the basis of these entries, the assessee herself work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... direct nexus on the point, no addition in block assessment can be made. Thus, it was contended that the additions in this case could not have been made by multiplying the results of seized documents to the whole year and it was argued that the learned CIT(A) had rightly deleted the impugned additions. 6. We have heard both the parties and considered the rival submissions with reference to facts, evidence and material on record. We have also gone through the orders of the authorities below and referred to relevant pages of the paper book to which our attention has been drawn. The undisputed facts of the case are that search took place on 6th Feb., 2001, and during the course of search, daily statement of receipts and expenditure for the period 1st Jan., 2001 to 5th Feb., 2001, i.e., for 36 days right upto the date of search were found and seized. There is no dispute about the fact that all the receipts and expenses shown on the daily statements were not recorded in the regular books of account. In fact, the assessee admitted income of Rs. 76,413 and when detailed and minute working was done by the AO, undisclosed income was found at Rs. 84,374. Since these daily statements showed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he word "evidence" has to be construed in a comprehensive sense and it includes circumstantial evidence. The material or evidence on which the taxing authorities may base assessment is not confined to direct testimony by witnesses. Such evidence need not only be evidence found during the course of search, but also on the material gathered by him. The Tribunal further observed that the AO was not fettered by the technical rules of evidence and the like and he may act on material which may not, strictly speaking, be accepted as evidence in a Court of law. It may be circumstantial evidence or assessment based on preponderance of probabilities judged by human conduct. For this purpose, the past history of the case, living style of the assessee and general conditions of the market in the particular trade will constitute relevant material for the purposes of assessment. Thus, it was held that the provisions of s. 145 could be applied for computation of undisclosed income. Even in the case of Rajnik Co. vs. Asstt. CIT, detection of suppressed sales was found only for 24 days from 28th Dec., 1995 to 27th Jan., 1996, and 15 days from 23rd Oct., 1996 to 8th Nov., 1996. On the basis of such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for the reasons that the additions were made purely on surmises and conjectures. But as mentioned earlier, in the present case, there is direct evidence about the undisclosed income during the period for which additions have been made. Therefore, the ratio of this judgment would not be applicable to the facts of the present case where there is direct evidence found during the search which shows suppression of income during the period falling in block period. The assessee herself admitted undisclosed income on the basis of seized documents and records. In the subsequent case of Ved Parkash vs. CIT, the facts before the Hon'ble Punjab Haryana High Court were that during the course of search under s. 132, certain incriminating material had been found from the residential and business premises of the assessee and its partners which indicated that the assessee had purchased substantial quantity of Sarson outside the books of account. Since the books of account maintained by the assessee were not found reliable, the assessment had been made in the light of material recovered during the search. In the light of these facts, the Hon'ble Punjab Haryana High Court held that some element ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot earned such income is not enough. Therefore, we are of the opinion that estimation of income for those assessment years for which seized documents were found during the search was justified and warranted by the facts of the present case. Thus, the action on the part of the CIT(A) in deciding the appeal by relying on decisions which were applicable to pre-amended provisions and without referring to the amendment introduced to s. 158BC(b) with retrospective effect is erroneous and unjustified. Be that as it may, the quantum of additions to be made requires to be decided after allowing an opportunity to the assessee on these aspects. Having regard to these facts and circumstances of the case, we consider it fair and appropriate to set aside the order of the CIT(A) and restore these two grounds to his file for deciding the same afresh as per law and after allowing proper opportunity to the assessee and after taking into account the amended provisions of s. 158BC(b) of the Act. While redeciding the matter, the assessee shall be free to make all submissions, which were made before us. We order accordingly and these two grounds of appeal are treated as allowed for statistical purposes. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I have examined the matter carefully and I am inclined to agree with the contentions of the learned Authorised Representative for the reason that the AO has estimated the income for two years, i.e., asst. yrs. 1998-99 and 1999-2000 which is duly recorded in the books of Dr. A.L. Adlakha, HUF. The appellant vide letters dt. 14th Feb., 2003 and 25th Feb., 2003, had informed the AO that the medical camps were organised by M/s IVF Diagnostic Centre, Prop. Dr. A.L. Adlakha (HUF), and that all the fees charged had duly been recorded in the books of account of HUF and that the HUF has shown the receipt of the said amounts in the asst. yrs. 1997-98 to 2000-01. No admission was ever made regarding the income of these camps as belonging to the appellant and no seized document indicated any undisclosed income. Further, the income of these camps for the earlier years has been accepted by the AO in the hands of HUF itself. 4.3 In the light of the above, it becomes absolutely clear that the said income pertained to the HUF of Dr. A.L. Adlakha and was being duly accounted for therein. Therefore, I see no justification for the said addition in the hands of the appellant. The AO is accordingly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the period of 3 years totalled to Rs. 5,084. When the assessee was confronted with these facts, the assessee explained that payments of Rs. 25,218 made to the school in 1990 related to the period prior to the commencement of the block period. The amount of Rs. 46,559 being payments made to school in 1991 and 1992 were debited in the books of account and the remaining payment was part of her undisclosed income. It was stated that in Delhi, he was staying with his uncle, father's brother, and the expenditure incurred was made out of regular withdrawals. He visited Hyderabad only for a day and incurred expenses of Rs. 1,600. As regards trip to New York, the assessee claimed to have incurred expenses of Rs. 2,95,481, which were accounted for in the books of account. The AO, however, observed that the withdrawals shown during the period when he was studying in New Delhi were nominal. Taking into account these facts and the expenditure of fees, books, stationery, clothing, pocket money, travelling, etc., the AO made an addition of Rs. 1 lakh to the undisclosed income. 8.1 Being aggrieved, the assessee impugned the addition in appeal before the CIT(A). The learned CIT(A) observed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the assessee. The assessee filed various objections stating therein that the DVO has assessed the cost of construction upto the date of inspection, i.e., 4th Oct., 2002, whereas the block period ended on 6th Feb., 2001. The rates applied by the DVO for giving credit to the old building were less than the rate applied for valuing the cost of construction of the whole building. While giving credit for the old existed structure, the DVO had left many items, basis of rates supplied were not given and the rebate for self-supervision at 7.8 per cent instead of 15 per cent to 20 per cent and further reference to valuation cell could not be made. The learned AO after taking into account the various contentions arrived at difference between the cost of construction shown in the books and as determined by the DVO at Rs. 13,80,358 and made addition of the same under s. 69 of the IT Act. 9.1 Being aggrieved, the assessee carried the matter in appeal before the CIT(A). It was submitted before the CIT(A) that during the course of search and seizure action, no material was found which could show that the assessee had understated the cost of construction. It was also argued that the report ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f construction and the same was duly reflected in the books of account. No material and evidence were found during the course of search to show that the assessee had incurred any extra amount on the cost of construction than what was reflected in the books of account. In addition to the decisions/judgments already relied upon during the course of proceedings before the CIT(A), the learned Authorised Representative further relied on the decision of the Tribunal, Amritsar Bench, in the case of Narinder Singh vs. Asstt. CIT in IT(SS)A No. 24/Asr/2003, dt. 31st March, 2005, Daljit Singh vs. Asstt. CIT IT(SS)A No. 8/Asr/2001, dt. 30th Dec., 2002, and Tribunal, Chandigarh Bench, in the case of Kapur Sons Steels (P) Ltd. vs. Asstt. CIT (2001) 119 Taxman 113 (Chd). 9.4 We have heard both the parties and given our thoughtful consideration to the rival contentions with reference to facts, evidence and material on record. Now, the undisputed facts of the case are that the assessee had maintained complete records of the cost of construction and the same was duly reflected in the books of account. During the course of search and seizure action, while evidence was found indicating undisclosed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (SS)A No. 5/Del/1996, dt. 14th Dec., 2004, we hold that no addition on account of difference in the cost of construction as shown and as determined by the DVO can be made for computing the undisclosed income for the block period, if there is no evidence or material found during the course of search to show such explained investment. The facts of the present case are pari materia with the facts of the abovesaid case. Here also, no evidence was found during the course of search to show that the assessee had incurred part of the cost of construction from his undisclosed income. Therefore, in the light of these facts and circumstances of the case and respectfully following the aforesaid decisions/judgments, we confirm the order of the learned CIT(A) in deleting the impugned addition. We confirm his order and reject this ground of appeal of the Revenue. 10. The next ground of appeal relates to deletion of addition of Rs. 20,000 being unexplained expenditure incurred on foreign trip of the son. The facts of the present case are that assessee's son, Sh. Sahil Adlakha, visited South East Asia in 1993 and countries covered during the visit were Malaysia, Singapore and Bangkok. The trip w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treated the source of jewellery as representing undisclosed income of Rs. 2,04,147 and made the addition accordingly. 11.1 Being aggrieved, the assessee filed an appeal before the CIT(A). The submissions made before the AO were reiterated. It was submitted that this jewellery had been received from her mother-in-law by registered will. The assessee's husband came to know only in the year 1996 from one Sh. Ram Mohan Rai. His affidavit was also filed and Sh. K.N. Chaudhary, advocate, was a witness. The learned CIT(A) accepted the submissions of the assessee for the reason that the will in question was a registered will, the jewellery was received by assessee's husband in 1996 from Sh. Ram Mohan Rai, cousin of the assessee's husband, and his affidavit had also been filed. A certified copy of the will was obtained in 1996. He also observed that the AO had not doubted either the affidavit filed by Sh. Ram Mohan Rai nor the AO had made any enquiry that Sh. K.N. Chaudhary, advocate, had witnessed will. Revenue is aggrieved with the order of the CIT(A). Hence, this appeal before us. 11.2 The learned Departmental Representative heavily relied on the order of the AO. 11.3 The learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2002, where following the judgment of Hon'ble Tribunal, Calcutta Bench, in the case of Builcon Towers Ltd. vs. Asstt. CIT (2000) 113 Taxman 74 (Cal)(Mag) it was held that surcharge was not leviable in respect of searches, conducted before 1st June, 2002, as this amendment has not been made applicable with retrospective effect. The judgment of the Hon'ble Tribunal, Mumbai Bench, in the case of D.G.P. Windsor (India) Ltd. vs. Dy. CIT (2002) 74 TTJ (Mumbai) 291 : (2003) 84 ITD 641 (Mumbai), relied upon by the learned Authorised Representative also adopts a similar view. Respectfully following the above decisions, I direct the AO not to levy surcharge as the case pertains to a search conducted prior to 1st June, 2002." Revenue is aggrieved by the order of the CIT(A). Hence, this appeal before us. 12.1 At the outset, the learned Departmental Representative and learned counsel for the assessee submitted that this issue is covered in favour of the assessee and against the Revenue by earlier decisions of Tribunal, Amritsar Bench. 12.2 We have heard both the parties and considered the rival contentions. We find that the same issue came up before us in the case of Dy. CIT vs. R.K. J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to s. 113 was inserted. Therefore, the ratio of the aforesaid decision is directly applicable to the facts of the present case. Respectfully following the same, we confirm the order of the CIT(A) and reject the ground of appeal of the Revenue. 13. We now take up appeal in the case of Sh. Sahil Adhlakha, in IT(SS)A No. 33/Asr/2003. The only issue raised in this appeal relates to deletion of an addition of undisclosed income based on computer floppy. The facts of the case are that during the course of search and seizure action at the residence one CD-ROM marked "Doctor" and a floppy diskette marked as OR-3 were seized forming a part of the Annex. AR-VII. The said CD-ROM contained a file where details of sales of pharmacy and general store for the period 18th Sept., 1998 to 27th Nov., 1998, were found. Besides, the floppy diskette marked as OR-3 contained data regarding the sales for the period from 1st April, 1997 to 27th June, 1997. The AO then compared the transactions found on this computer CD-ROM/floppy diskette with those recorded in the books of account and found difference in sales outside the books amounting to Rs. 2,51,002 for the period 1st April, 1997 to 27th June, 1997 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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