TMI Blog2004 (3) TMI 340X X X X Extracts X X X X X X X X Extracts X X X X ..... ers of the assessee-firm, i.e., Dr. Naresh Pamnani. The said cash was found in the envelopes of the hospital. Dr. Naresh Pamnani explained that the cash belongs to the assessee-hospital. It was a usual practice to bring the cash of the hospital to his residence for the purpose of security. The assessee has further explained that the said cash balance is duly reflected in the books of account maintained in the regular course of business. This explanation of the assessee did not find favour with the AO for the reason that the assessee had maintained two sets of books. The AO, therefore, treated the sum of Rs. 62,430 as undisclosed income for financial year 1996-97 forming part of the block period. 3. We have heard the parties with reference to the material on record. A perusal of the order reveals that the assessee s explanation was duly verified by the AO with reference to the white card, which is a prime record of receipts and payments maintained by the assessee in respect of daily transactions of its business. The AO rejected the contention of the assessee primarily on account of two sets of books of account for which the learned CIT(A) has observed that the maintenance thereof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und written meticulously. Furthermore, entries in Annex. A-13 , i.e., original cash book were made for the period from1st April, 1983to7th Aug., 1983, by one accountant while the entries in the other book for the corresponding period were in the handwriting of another accountant. This raised suspicion in the mind of the AO that the assessee has made adjustments in the fair cash book, i.e., regular cash book to manipulate the profit to be disclosed in its IT returns. On comparison of entries in the two sets of books, the AO has observed that some of the expenses as debited in the fair cash book as exhibit A-16 were found to be more than as entered in exhibit A-13 , i.e., original cash book. Such instances have also been noted in the assessment order at p. 5 thereof, which, inter alia pertains to different heads of expenses. The AO, therefore, presumed that the original cash book is the actual cash book reflecting actual receipts and expenses in the day to day running of the business of the assessee and the same was never meant to be produced to the Department. The AO, therefore, in the light of his observations has redrawn final accounts and worked out net profit for each of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers and profits drawn on the basis of regular books of account have duly been disclosed in the regular returns filed before the IT authorities. The AO did not find any discrepancy in the claim of expenses made by the assessee in the regular returns filed by it. 6. The aggregate difference of Rs. 30,51,859 treated as undisclosed income by the AO has been reconciled by the following items: (i) Claim of depreciation of Rs. 14,02,015 has not been given. (ii) Interest paid to financial institutions on the equipments used in the business of the assessee amounted to Rs. 7,72,390. This also has not been reduced while working out the undisclosed profit. (iii) There has been an excess computation of undisclosed income by Rs. 7,73,423 as the AO wrongly noted the profit as Rs. 24,16,732 for financial year 1995-96 as against his own calculations at internal p. 8 of his order at Rs. 16,43,309. The aggregate of these three items has been worked out at Rs. 29,46,028 which goes to reconcile the difference of Rs. 30,51,851 to the extent of Rs. 29,46,028. The balance of Rs. 1,05,831 is the amount of expenditure incurred out of imprest account of the partners, the details of which have been fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the assessee inasmuch as she has conveniently ignored the explanation reportedly filed by the assessee during the assessment proceedings and she continued to dismiss the same with utmost contempt without giving any thought as to the justification advanced by the assessee on different occasions during the assessment proceedings. He was satisfied with the authenticity of the white cards maintained by the assessee on day-to-day basis and eversince such a primary record stood accepted by the Department during the regular assessment proceedings also. He was also satisfied with the explanation of the assessee maintaining two sets of books as one being Katchi and other being Pucca cash book. The explanation about the incurring of expenditure from the imprest account was also found acceptable by the learned CIT(A). The learned CIT(A), therefore, came to the conclusion that the AO has altogether ignored the assessee s method of accounting through system of white cards which conclusion was arrived at after having a due reference to the office note at para 10 of the assessment order. This note has been reproduced by the learned CIT(A) at internal p. 25 of his order as under: "Annexure A-5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash book. The learned CIT(A) has also recorded a finding of fact after examination of the assessment record along with seized material that all the entries about the receipts are corresponding with each other. The difference in expenses has also been reconciled by the assessee as attributable to certain reasons as narrated hereinbefore in the submissions before the learned CIT(A). In any event, it is the case of the assessee that no expenditure has been found incurred outside the books of account maintained in the regular course of business. The expenditure claimed in the P L a/c filed with the returns of income is fully supported with vouchers. It is not the case of the Revenue that the expenditure claimed was non-genuine or that was not for the business of the assessee. Even otherwise, all the expenses claimed by the assessee were a subject-matter of regular assessment only. The consideration thereof again in block assessment was outside the scope of undisclosed income within the meaning of s. 158B(b) of the IT Act, 1961. Block assessment under Chapter XIV-B of the IT Act, 1961, is not intended to be a substitute for a regular assessment. Its scope and ambit is limited in that s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thdrawn depreciation allowed to the assessee in the earlier years. This depreciation was treated as undisclosed income for the block period but the learned CIT(A) deleted the same vide para 3.4.2 of his order at internal page No. 32. 13. We have heard the parties with reference to the material on record. The AO vide para 7.2 of her order declined to allow claim of depreciation under s. 32 to the assessee for the asst. yrs. 1992-93 to 1997-98 forming part of the block period and treating the aggregate amount of depreciation of Rs. 32,65,096 as undisclosed income of the block period for the reason that the assets are in the names of the partners and the hospital is, therefore, not entitled to the claim of depreciation thereon. 14. The learned CIT(A) however has recorded a finding of fact that the depreciation on the business assets was rightly claimed by the assessee in the regular proceedings and also allowed by the concerned AO inasmuch as the said assets were used by way of capital contribution by the respective partners. The proprietary rights in these assets have also been transferred in favour of the partnership. These assets were exclusively used for the business purpose o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as an asset or the depreciation is found given in the earlier years, the same shall not be withdrawn and the same also cannot be treated as undisclosed income of the block period. The AO, therefore, shall give a reasonable opportunity of being heard to the assessee before carrying out the aforesaid verification as in principle there is no infirmity in the decision arrived at by the learned CIT(A). 16. The last ground relates to deletion of an addition on account of undisclosed investment made in the construction ofSarvodayaHospitalbuilding. As noted in the impugned order, the hospital is constructed on an area of 4,000 sq. ft. and it consists of one basement and three fully constructed floors, and partly constructed top floor. The value of the said building has been declared by the assessee at Rs. 16,25,590. The AO has made reference to the Valuation Officer, who worked out the cost of construction of the said building at Rs. 62,16,786. As noted by the VO, the actual area covered and plinth area constructed is 1,355.77 sq. mts. The period of construction was from April, 1990 to March, 1992, and the day of completion was March, 1992, itself. The VO had adopted land and building m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any finding as to the factual mistakes which were obviously conceded by the VO but ignored by the AO for the reasons best known to her despite assessee s petition under s. 154 of the IT Act, 1961, having been filed as per her own admission and which is pending atleast till the date of the counter-comments submitted by her in her letter dt.30th May, 2000. For that matter, I refrain from giving any findings as to the various adjustments being claimed by the appellant and not being allowed by the VO/AO despite the fact that these claims are very reasonable and in consonance with the actual practice on the subject despite the same being conceded by the DVO during the appeal. As the reference for estimating cost of construction was beyond the parameters laid down for block assessment, the entire addition of Rs. 45,31,202 by way of undisclosed investment inSarvodayaHospitalis hereby entirely deleted." 18. We have heard the parties with reference to the material on record and case law relied upon by them. As a result of search on the assessee, no evidence was found, which may represent wholly or partly income or the property which has not been or would not have been disclosed for the pu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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