TMI Blog2003 (6) TMI 185X X X X Extracts X X X X X X X X Extracts X X X X ..... otal sum of Rs. 86 lacs. He, however, admitted that he has received so far only Rs. 66 lacs and the balance of Rs. 20 lacs were still owed to him by Shri Harjeev Aggarwal though he had signed the receipt for the total sum of Rs. 86 lacs consisting of Rs. 74 lacs in cash and Rs. 12 lacs by way of cheque. On the basis of this information, a search was carried out at the premises of Shri Harjeev Aggarwal on2nd Feb., 1999. His statement was recorded and it was admitted by him that he entered into a deal for purchase of C-104, Naraina Vihar for a sum of Rs. 86 lacs He further confirmed that a sum of Rs. 74 lacs was paid in cash and Rs. 12 lacs by way of cheque. Shri Harjeev Aggarwal by his letter dt.5th Feb., 1999, admitted that out of Rs. 86 lacs, Rs. 74 lacs were paid as follows: "That I have been asked to submit certain information relating to the search. That as for the information presently available with me I may submit that a property bearing No. C-104, Naraina Vihar was agreed to be purchased by us jointly in names of Harjeev Aggarwal, Harjeev Aggarwal Sons HUF and Anita Aggarwal from Arvind Seth. The sum agreed to be paid was Rs. 86 lacs out of which Rs. 74 lacs was paid in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted the following reply: "The assessee had entered into an agreement for purchase of property bearing No. C-104, Naraina Vihar,New Delhithrough Sh. J.K. Gulati, Power of Attorney holder of Arvind Seth for Rs. 86 lacs on8th July, 1998, along with one Sh. D.D. Berry, builder. However, D.D. Berry builder withdrew from the bargain forcing assessee to make full payment of Rs. 86 lacs including Rs. 12 lacs by cheque as on 28th Jan., 1999 and the assessee simultaneously agreed for purchase of above property floor-wise in concurrence with Sh. Arvind Seth, as per details given below: (a) Shri Harjeev Aggarwal purchased ground floor of the property bearing No. C-104, Naraina Vihar for Rs. 37.35 lacs. (b) Mrs. Anita Aggarwal purchased Ist floor of above property for Rs. 29 lacs. (c) M/s Harjeev Aggarwal, HUF purchased IInd floor of the property for Rs. 19.65 lacs. The original receipts of Rs. 86 lacs issued by Arvind Seth against sale of property bearing No. C-104, Naraina Vihar,New Delhito aforesaid three purchasers have been seized by the IT Deptt. Source of investment: Your honour would appreciate the assessee had originally intended to develop the above property on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... op. and Chairman, etc. of the companies. It was admitted by them that cash advance to Shri Harjeev Aggarwal for the purchase of property No. C-104, Naraina Vihar,New Delhiwas given by them. The AO, however, found that Shri Aggarwal was buying this property from Shri Arvind Seth, NRI and till date the title was not in the name of Sh. Harjeev Aggarwal, although Sh. Arvind Seth has admitted in the receipt that he has received total amount of Rs. 86 lacs and Sh. Harjeev Aggarwal has also admitted that he has paid full amount of Rs. 86 lacs as full and final payment for this property. The AO further found that the entries were made in cash and reflected in the books of account as advance against the property No. C-104, Naraina Vihar, to avoid provisions of s. 269SS. It was further noticed that the same amount had been received back by both the chit fund companies and M/s Jay Associates. He, therefore, held that it was only a book entry and no actual transaction of cash was made. The AO further found that there was no urgency for making the transaction in cash. It was also his view that when the property was not in the name of Harjeev Aggarwal till today, there is no question of enteri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 as follows: "8. The director and partner of the above-named three concerns were again served with summons under s. 131 by the Asstt. CIT, Circle 27(1), and the case was fixed for22nd Jan., 2002. However, a single representative, Shri M.N. Sehgal, appeared on behalf of the three concerns and requested for adjournment. The case was adjourned to23rd Jan., 2002, but nobody appeared on this date. However, after a perusal of the impounded books of account of these concerns, the AO has reported as under: (a) In the books of M/s Penguin Chits (P) Ltd., cash deposits have been shown as under, just prior to date of alleged advance on22nd Jan., 1999, to the assessee: Insert Table Against each of these entries the noting "Ind.Landat Anand Parbat, By cash received from Shri Rajinder Prasad Sharma" is mentioned. (b) In the books of M/s Parmeshwar Chits (P) Ltd., which is claimed to have advanced Rs. 15 lacs on 25th Jan., 1999 in cash, the opening cash balance as on 1st Dec., 1998 was Rs. 12,17,842 and closing balance as on 31st Dec., 1998, was Rs. 22,85,025. The cash shown as received was Rs. 2,15,000 from Shri Sanjay Sharma, Rs. 2,33,500 from the directors of the company and bala ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al, and Rs. 3,70,000 by Harjeev Aggarwal HUF. He also admitted the payment of Rs. 74 lacs in cash. This aspect is duly recorded in the statement vide pp. 38 to 44 of the paper book. It is also submitted that Smt. Anita Aggarwal admitted on2nd Feb., 1999, that she too had purchased the said property alongwith her husband as per her statement appearing at pp. 45 46 of the paper book. In such a case, it is submitted that the AO grossly erred in initiating the proceedings under Chapter XIV-B of the IT Act in respect of the investment made in the said property by treating the amount invested in the purchase of property as unexplained and thus representing the undisclosed income of the assessee. Shri C.S. Agarwal submitted that the said amount was invested by (assessee) himself, his wife and the HUF out of explained sources and cannot be regarded as undisclosed income of the assessee for asst. yr. 1999-2000. 12. It is further submitted that for financing the aforesaid investment the assessee had made investment out of the sale proceeds of the stocks and also by arranging funds which have been duly entered in the books of account and on the basis whereof returns of income for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le Calcutta High Court in the case of Bhagwati Prasad Kedia vs. CIT (2001) 167 CTR (Cal) 336 : (2001) 248 ITR 562 (Cal) for the proposition that block assessment is not a substitute for regular assessment and the details of creditors furnished in the regular assessment itself should be considered only in regular assessment and not in block assessment. It is, therefore, submitted that the transaction which is otherwise admitted and has been duly recorded in the books of account before finalizing of the accounts in respect of assessment year when the accounting year has not ended cannot be regarded as undisclosed transaction. If at all, such transaction should be considered in the regular assessment as held by the Hon'ble Calcutta High Court in the case of Bhagwati Prasad Kedia. Reliance also is placed on the decision of the Tribunal, Chennai Bench, in the case of P.K. Ganeshwar vs. Dy. CIT (2002) 80 ITD 429 (Chennai) for the proposition that the addition of amounts recorded in the books of account is outside the pale of Chapter XIV-B of the IT Act. Shri C.S. Agarwal further submitted that the addition made as a result of follow up investigation after search is outside the pale of Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raina Vihar,Delhi. The property was being sold for Rs. 86 lacs out of which only Rs. 12 lacs were paid by cheque and balance was to be paid in cash. The search resulted in a recovery of Rs. 42.50 lacs and 30,000 US Dollars from Shri Arvind Seth and Nalini Seth, N-29,GreenPark,New Delhi. Copy of the agreement to sell, the part payment receipt, etc. were found and seized from Shri Arvind Seth. It was admitted by him that he received a consideration of Rs. 86 lacs out of which Rs. 12 lacs were received by cheque. From the above facts, it is clear that there was intention to suppress the actual amount of the sale consideration and there was an attempt not to disclose the entire sale proceeds. The AO examined Shri Arvind Seth, the seller of the property and his agent Shri, J.K. Gulati. Harjeev Aggarwal, the assessee also was duly examined. After careful consideration of all these statements and the evidences produced before him, he further examined the sources of the investment claimed to be from some chit fund companies like M/s Penguin Chits (P) Ltd., M/s Parmeshwar Chits (P) Ltd and also M/s Jai Associates. These parties also could not properly explain the sources of the deposits i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties as temporary accommodation. 22. In the case of M/s Jai Associates, withdrawals from the bank on different dates have been shown. As the concern did not comply with the summons, the AO, therefore, submitted that no further enquiry could be made as there was no compliance from these parties. The learned CIT(A), therefore, held that the alleged amount received from these parties was only a paper transaction and the accounts were fabricated to explain the source of cash paid by the assessee. He, therefore, rightly rejected the explanation furnished by the assessee for the source of payment of Rs. 45 lacs in cash. 23. Coming to the amount of Rs. 12.90 lacs claimed to have been withdrawn by the assessee from his proprietary concern M/s Machine Tools Hardware Store, it was found by the learned CIT(A) that the withdrawals of Rs. 4 lacs were made from the bank on26th Nov., 1998and7th Dec., 1998. In such a case, credit could not be given as the withdrawals were made much prior to the date of payment and no nexus could be established. The learned CIT(A), however, allowed relief of Rs. 12 lacs claimed to have been made by cheque on the reasoning that the amount was not in cash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tten to the DIT (Investigation). The assessee, thereafter contended that the agreement was entered into by him alongwith his wife and the HUF and the investment was made by each of the parties and further contended that the sources of the investment were fully explained. This claim of the assessee was rejected by the AO and the learned CIT(A) and it was further held that the subsequent evidences produced were fabricated by the assessee for the purpose of explaining the source of investment. The same was accordingly rejected. 28. It is the contention of the learned counsel of the assessee that there was no element of concealment and the full facts have been disclosed and reflected in the books of account of the assessee. According to the learned counsel the sale consideration of Rs. 86 lacs was admitted by Shri Arvind Seth as well as by the assessee. Shri Arvind Seth admitted the amount received from the parties in the statement given by him at the time of the search which shows that Rs. 4,45,000 were paid to him by Shri Harjeev Aggarwal by cheque and a sum of Rs. 3,85,000 were paid by Smt. Anita Aggarwal by cheque and Rs. 3,70,000 by the HUF making it a total of Rs. 12 lacs. Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Inv) to the officers of the Department that such confessions during the course of search and seizure and survey operations do not serve any useful purpose and, therefore, it was advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the IT Department. It was further desired that while recording statement during the course of such operations no attempt should be made to obtain confession as to the undisclosed income. In view of the above instructions it is necessary to look into the facts of the case and examine the evidences in the instant case so as to find out whether there is any undisclosed income invested by the assessee in the purchase of the property. 32. The learned counsel before us stated that the agreement to purchase the property No. C-104, Naraina Vihar,New Delhiwas entered into by three different individuals, namely, the assessee himself, his wife and the HUF. The AO stated to have discovered copy of the agreement to sell at the time of the search. However, his order is totally silent as to the nature of the agreement. The assessee supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng controlling power over these chit fund companies. In such a case, the deposits in the books of these chit fund companies have to be explained by the chit fund companies and it cannot be co-related with the investment made by the assessee in the form of advance received from these parties. We hold accordingly. 34. Having regard to the above facts and circumstances of the case, we are of the view that the AO did not make out any valid case for treating the investment as the undisclosed income of the assessee for the block assessment. Even if there is any doubt about the genuineness of the investments, they have to be considered in the respective hands of the persons who made the investment in the regular proceedings as held by the jurisdictional High Court in the case of CIT vs. Ravi Kant Jain. We hold accordingly and delete the addition. 35. With regard to the appeal of the Revenue, it is seen that the learned CIT(A) deleted the addition to the extent of Rs. 12 lacs on the specific finding that the cheque amount of Rs. 12 lacs was not encashed in the instant case. In such a case, the cheque issued does not have any real value as the amount represented by the cheque has not be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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