TMI Blog1999 (5) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... found indicating the expenditure which were not recorded in the books of account and for which the payments were made in cash. 4. A notice under section 158BC of the Income-tax Act, 1961 was issued and the assessee filed its return in Form No. 2B on 5-9-1997 declaring total undisclosed income for the block period at Rs. 'nil' As against that, the Assessing Officer has assessed the total undisclosed income at Rs. 71.23 lakhs for the block period. Being aggrieved by the order of the Assessing Officer, the assessee has preferred this appeal to the Tribunal. 5. Ground No. 1: that the order under section 158BC is bad, illegal, void and is without jurisdiction has not pressed by the learned counsel for the assessee and, therefore, the same is rejected as not pressed. 6. Ground No. 2 reads as under: "The Dy. Comm. of Income-tax on facts of the case and in law erred in holding that the gifts received by Shri Sopan N. Patil, Shri Purushottam N. Patil and Shri Dyandeo N. Patil from NRI account during the Block Period aggregating to Rs. 31,23,000 is undisclosed income of the assessee-firm." According to the Assessing Officer, the assessee has so far completed one project known as " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e collected between the date of booking and the date of agreement. d. Statements of Shri Purushottam Patil Shri D.N. Patil were recorded during the course of search at Malkapur and Akola respectively wherein they have shown the ignorance about receipt of such gifts. Shri Purushottam Patil has accepted in his statement that he has received the gifts from the persons who had purchased flats from their family firms M/s. Elite Developers and Aund, Pune. They are not having any relationship with the donors accept that of the business relation. Shri D.N. Patil has also show his ignorance about the NRI gifts taken in his name. e. The statement of Shri S.N. Patil, Shri P.M. Patil and Shri D.N. Patil were also recorded by the A.D.I.T., Akola, wherein it was found that the acquaintance of the donees with the donors was very casual and just by chance. Even this acquaintance was of a very recent time say not more than 3 to 4 years. All the brothers as referred to above have brought biodata details of the donors which they were consulting while ensuring the questions asked by the A.D.I.T. they had very little knowledge about the primary details of the other members of the donors family. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... til and Shri D.N. Patil from NRE a/c's of the Non-Resident Indians have been discussed and a conclusion has been drawn that the gifts are nothing but amounts received as on-money against sale of flats by the assessee. While coming to this conclusion it is presumed that on-money is taken from other flats purchasers also which is based on surmises and conjectures. It is respectfully submitted that sale price of flats have no nexus with the amount of gifts received by various persons. The gifts in question are received from non-residents out of the NRE a/c's by cheque and necessary evidence is in already in your possession. There are other non-resident Indians who have purchased flats but no gifts have been given by them to any partner or relative. The rates offered to Non-resident Indians and other local buyers are same and also comparable with current rates of flat in same area having same specification etc." The Assessing Officer gave particulars of gift i.e., names of donors, flat numbers, amount of gifts, date of gift and date of booking of flats in his order, considered the explanation of the assessee and came to the conclusion that the gifts were taken in consideration of on- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here is no question of additional consideration. According to the Representative of the assessee, the Assessing Officer is wrong in observing that Shri Purushottam Patil and Shri D.N. Patil denied under section 132(4) and were ignorant of gift. He attracted our attention to Pages 39 and 40 of Paper Book-II, particularly question and answer No. 9 and Page 47 of the Paper Book-II, question and answer No. 3 and assailed that the recipients were not ignorant of the gifts, but have stated the amount of gift at Rs. 9.72 lakhs and that the details are in Pune Office. It is further submitted that the gifts are supported by the Gift Deed and Certificates from bank, as it is evident from the documents, placed at Pages 1, 8, 14, 18, 24, 26.30 and 32 of the Paper Book-II and Pages 4 to 9 of the Paper Book-III The learned counsel for the assessee also pleaded that although the credits are proved by the bank records and Gift Deeds of the donors, as there is no credit in the firm's books of account, there is no question of any addition in the hands of the firm. As regarding the presumption under section 132(4A), he argued that although the papers are seized from the premises of the firm and raise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lour of genuine gift. The learned Departmental Representative further pointed out that there is connecting link between the purchasers of flats and gifts, while there is no relation between donor and donee. It was also submitted that they have received gifts from NRI for the first time and that Nanavati family has given a heavy gift of Rs. 9 lakhs. It is also submitted that all the donors are abroad and, therefore, they could not be examined by the Assessing Officer. But one thing is clear that most of the gifts are received after the booking of flats and in most of the cases before agreement, as the gift was possible till the date of possession of the flat. He further argued that if the gift amount is considered as consideration, the rate given in the agreement is less than 25 per cent to 45 per cent and, therefore, the assessee's contention is not correct. The learned Departmental Representative also clarified that since he is not having details of Koltey and Patil group, no comparision can be made without knowing the locality and area etc. He maintained that a lot of materials were found during the course of search and survey and, therefore, the contention of the assessee is wro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Circular which is deterrent to the interest of the Government. He further replied forcefully that the assessee has not received the gift and, therefore, all allegations raised by the Department are against the donees and not against the assessee and, therefore, it is donees 'job and not assessee's job to reply. He further argued that certain arguments and contentions are put up by the learned Departmental Representatives for the first time before the Tribunal and there is no such mention in the assessment order. According to him, the allegations of the Department that gifts are taken by three partners as on-money for the sale of flats is totally wrong and is based on surmises, as such arrangements where only three partners enjoyed the profits, other two are deprived of the same could have never been tolerated by other two partners. Ultimately, he urged that the undisclosed income which is based on surmises and which is assessed in the hands of the assessee-firm should be deleted, as the assessee-firm has never received any on-money in the shape of gift. 11. We have carefully considered the rival contentions, relevant facts and materials placed on record and we have also gone thro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esentatives have not controverted and contradicted the above facts by producing any material or by adducing any evidence. We find that in assessment orders narrations are contrary to the facts and there is no nexus between the facts found and conclusions reached by the Assessing Officer. Thus, we find that the Assessing Officer's allegation is absolutely wrong as neither any partner nor assessee-firm has received any gift from NRIs who have purchased flats from the assessee-firm. Therefore, we are of the opinion that findings arrived at, inferences drawn and conclusions reached by the Assessing Officer are based on wrong facts that partners have received gifts from NRIs who have purchased flats from the assessee-firm. Although, these findings of facts are sufficient and enough to quash the assessment on this issue, yet in order to meet the end of justice, we have to look into the merits of other reasons recorded by the Assessing Officer for making the assessment of gift as undisclosed income. 14. The next main contention of the Assessing Officer is that three brothers, namely Shri S.N. Patil, Shri P.N. Patil, Shri D.N. Patil along with their sons and partners namely Shri Gajendra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atil recorded at Malkapur and Akola respectively and has mentioned that Shri Purushottam N. Patil and Shri D.N. Patil have shown the ignorance about the receipt of such gifts in their statements. The learned counsel for the assessee has challenged the remarks and has contended that the Assessing Officer is wrong in stating so, as both persons have not shown their ignorance, but have admitted to have received the gifts and stated that they do not remember name and amount as details are available in Pune office. After going through the statement of Shri Purushottam N. Patil, placed at page-40 of the Paper Book-II, we find that he has admitted that he himself has received gifts of Rs. 9.72 lakhs from NRIs, but at Present he is unable to give names and addresses of NRIs. Likewise, Shri D.N. Patil has stated positively at Page-47 of the Paper Book-II, but he does not remember the particulars of gifts, as the information is available in Pune office. Thus, it is evident that the deponents have neither denied nor have pleaded or shown any ignorance as alleged by the Assessing Officer. What they have stated is that because they do not have any record, they cannot give the details. The conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he search show the receipt of gifts. On the facts and circumstances of the case, we find that the presumption under section 132(4A) may be classified in the following categories: (i) Since the original gift deeds are seized from the office of the assessee-firm at Pune, it may be presumed that they belonged to the assessee-firm. (ii) Since Xerox copies of gift deeds are seize from the office of Krishi Kendra, it may be presumed that they belonged to Krishi Kendra and not the assessee. (iii) Some of gifts and other papers are recovered from the residence of Smt. Jyothi Chaudhary, sister of Shri Sudhir D. Kolte and, therefore, the gift deeds belonged to Smt. Jyothi. (iv) Since some of the deeds and other papers are seized from the residence of Smt. Jyothi Chaudhary at Pune, where Shri Sudhir was residing, the deeds and papers belonged to Shri Sudhir. (v) As in their statements, donees have accepted the gifts and such gifts are supported by gift deeds, bank certificate and NRE accounts etc., it is presumed that they belonged to donees only. 17. In our opinion when there is possibility of five categories of presumptions under section 132(4A), the Assessing Officer was not ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the Revenue as the Assessing Officer has claimed that although the persons other than the assessee have received the gifts, the amount of gift is taken by the assessee as on-money on sale of flats. The Department has completely failed in discharging this onus of proving that gifted money belongs to assessee or is received by the assessee. On the other hand, the assessee has proved by the adducing positive evidence and by producing relevant materials that the assessee has nothing to do with the gifted money. It is also noticed that the Assessing Officer has reached the conclusion on the basis of extraneous and irrelevant materials and even without examining the donors. Therefore, in our opinion, since the Assessing Officer's findings are vitiated by use of inadmissible and irrelevant materials and since his conclusions are based on conjectures, surmises and suspicions only, his order cannot be sustained in the eyes of law. Our view gets due support from Supreme Court decision in the case of Daulat Ram Rawatmull where the assessee-firm had opened an overdraft account with a limit of Rs. 10 lakhs against the collateral security of two fixed deposit receipts of Rs. 5 lakhs each, one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e amount which may be found due from the principal debtor. The concepts of the security and ownership are different and it would be a wholly erroneous approach to hold that a thing offered in security by a third person to guarantee the payment of debt due from the principal debtor belongs not the surety but to the principal debtor. (iv) That the fact that B received no consideration for offering the fixed deposit receipt as security for the overdraft facility would not result in any inference against the respondent. (v) That the onus of proving that the apparent was not the real was on the party who claimed it to be so. As it was the Department which claimed that the amount of fixed deposit receipt belonged to the respondent-firm even though the receipt had been issued in the name of B, the burden lay on the department to prove that the respondent was the owner of the amount despite the fact the receipt was in the name of B. (vi) That the fact that the branch of the bank in Calcutta was in the same building in which there were the business premises of the firm was a wholly extraneous and irrelevant circumstance for determining the ownership of the sum of Rs. 5 lakhs. (vii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of the transaction and to hold that it was income. Every loan granted without security or in regard to which no repayment has been made cannot automatically be termed as a payment either towards commission or as a receipt from business. Without tangible material to suspect that the receipt was by way of commission and without recording such a finding, the conclusions of the Tribunal that the amount was assessable as income was holly untenable". 22. In the instant case also the gifted money received by others have been assessed as on-money in the hands of the assessee-firm without examining the donors and without tangible materials and evidence to corroborate the conclusion reached by the Assessing Officer. In other words the heavy burden of proving that the apparent state of affairs was not the real one has not been discharged by the Department. 23. The decision of Karnataka High Court in the case of Bedi Co. (P.) Ltd. as mentioned above has been affirmed by the Hon'ble Supreme Court in the case of Bedi Co. (P.) Ltd. wherein it was held as under: "Held, admissing the appeal, that the High Court had rightly held that the circumstances taken singly or cumulatively did no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x authorities were entitled to look into the surrounding circumstances to find out reality of the gifts deeds. In the case of Durga Prasad More, the assessee purported to act as trustee of a trust created by his wife and purchased certain house property for Rs. 1,85,000 on September 30, 1940. On the basis of deed of conveyance in his favour and the deed of trust executed by his wife nearly a year thereafter on September 10, 1941, the assessee claimed that the income from property should not be brought to tax in his hands. For assessment year 1942-43, the assessee did not produce any material to prove any independent source of income of his wife, but claimed that it was her stridhan property and a sum of Rs. 2.00,000 were all along lying in the hands of his father-in-law. The Tribunal rejected his claim leaving it open to the assessee to establish his case in subsequent assessment proceedings. During the assessment years 1942-43 to 1957-58, the income of those premises was assessed in his hands. For assessment years 1958-59 and 1959-60 the assessee revived his plea and the Tribunal against rejected it, holding that the recitals in the two deeds were make-believe statements. The foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by donors and donees and have been witnessed by two witnesses and bank has also certified the transactions. So not only second party, but there is also third party and, therefore, these documents cannot be assumed as self-serving documents. Moreover, the assessee has nothing to do with these documents, as in the case of Durga Prasad More, (ii) in that case assessee's wife was not shown to have any source of income, but in the instant case the source of income of NRIs which has been proved by bank certificates has not been challenged and questioned, (iii) in that case inspite of Tribunals observations on assessee included the income of the premises in his returns for several years and could not advance any satisfactory explanation and that is why it was held that it is a circumstance, which the Taxing Authorities were entitled to take into consideration. There is no such fact and circumstance in the present case. Moreover, the genuineness of gift is established and, therefore, there is no such circumstance in the case of the assessee which can be looked into, (iv) in the instant case what is apparent from gift deeds, bank certificates, NRE accounts, etc. is gifted money given and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on that both the requirements of a cash credit are not fulfilled in the instant case and, therefore, the provision of section 68 are not applicable. Accordingly, the contention of the learned Departmental Representatives that since the three ingredients of a cash credit equally applicable to gifts are not fulfilled and complied with, therefore the gifts are not genuine is not correct and accordingly all the case laws which are relied upon are neither relevant nor applicable to the facts of the instant case. However, to clarify the legal position and to meet the end of justice all the case laws on which reliance is placed by the Departmental Representatives are discussed one by one as under: (1) Sumati Dayal's case. 29. In this case the assessee credited Rs. 3,11,831 in the financial year relevant to assessment year 1971-72 and Rs. 93,500 in the financial year relevant to assessment year 1972-73 in her capital account and claimed that she received these amounts by way of race winnings in jackpots. The Income-tax Officer added the same as unexplained cash credit and AAC confirmed the same. The Settlement Commission giving several reasons held that credits are liable to tax as win ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se. But in this case donors are men of means and had given gifts from NRE accounts by account payee cheques. (iii) In that case the Tribunal held that gifts were not genuine. But in the instant case the Assessing Officer has not held so and also could not have done so without examining the donors and in this case donors have not been examined. (3) D.C. Rastogi (HUF)'s case. 32. In this case the assessee received gift from two Non-Resident Indians and furnished confirmatory letters from them. The assessee could not disclose the source of amount nor could establish the identity of the donors. The cash credits were treated as unexplained and added to the income of the assessee. The CIT(A) confirmed the addition. On further appeal, the Tribunal held as under: "Considering the facts and circumstances of the case and the evidence on record, the onus that lay on the assessee to establish the creditworthiness of the donors and genuineness of the gifts had not been discharged. The Assessing Officer in such circumstances was justified in invoking section 68 in deeming the receipts to be income from undisclosed sources." 33. The ratio of this decision is also not applicable to the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hird party and has nothing to do with the gift of donor and donee, no such addition can be made in the hands of the assessee as unexplained credit. (5) CIT v. Precision Finance (P.) Ltd. [1994] 208 ITR 465 (Calcutta High Court). 35. In this case, the Assessing Officer found various cash credits in the books of the assessee. Enquiries were conducted through Inspector and it was found that either the files did not exist as per details given by the assessee or the records did not tally with the facts mentioned by the assessee. Various letters were issued by the Assessing Officer to assessee, but there was no response. It was, therefore, held by the Calcutta High Court that the Tribunal was not justified in law in deleting the additions of unexplained credits and interest thereon. While holding so, the Hon'ble High Court has observed as under: "It is for the assessee to prove the identity of the creditors, their creditworthiness and the genuineness of the transactions. Mere furnishing of the particulars is not enough. Mere payment by account payee cheques is not sacrosanct nor can it make a non-genuine transaction genuine." 36. The ratio of Calcutta High Court decision also doe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tween the donor and donee is one of clientele which indicates clandestine nature of transaction. Thus, the Department has taken contradictory stands. We have already examined and found that gifts are genuine, as they are supported by deeds, bank certificates, account payee cheques and statement of donee. On the contrary, the Department has not produced any material or evidence to prove that the gifts are not genuine. Even donors have not been examined. In view of this and in the absence of corroborating evidence in our opinion, the Department cannot declare gifts to be non-genuine only on the basis of materials available. Then, even if the gifts are not genuine, it is between the donors and donees to prove as the assessee is least concern and has nothing to do. 40. The next contention raised by the learned Departmental Representative is that there is connecting link between the sale of flats and receipt of gifts and that evidence may not be direct, but circumstantial also to prove. This simply means that there is no direct evidence to prove that allegation. However, we find that the Department has not been able to prove this even by circumstantial evidences. We have stated in for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the total income of the assessee. The Tribunal held that though the parties were closely related to the assessee, there was no evidence to hold that the assessee was holding these amounts in benami names. The Tribunal, therefore, deleted the addition of principal amount, but sustained the addition of interest. On a reference, it was held by the Madras High Court as under: "Held, that the Tribunal was of the view that the principal amount standing in the pronotes belonged to those in whose names the pronotes stood. Therefore, the principal amount was not included in the hands of the assessee. Interest follows the principal amount. If the principal amount did not belong to the assessee, on the same reasoning it should also be held that the interest also belonged to the persons in whose names the pronotes stood." 42. In the instant case also gift deeds in the name of relatives of partners of assessee were discovered from the premises of the assessee but the corroborating evidences, apart from this that they stand in the name of relatives of partners of assessee, proved that they belonged to the persons in whose names they stand and the money mentioned therein also belonged to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent entity and, therefore, the donees are not Benamis of the assessee. Neither this is a case of the Department nor there is any evidence or material to prove Benami transaction. As the assessee is an independent entity as partnership firm and different from donees, the amount of gifts received by the donees cannot be assessed as undisclosed income in the hands of the assessee. Our view gets support from the Delhi High Court decision in the case of CIT v. Oswal Enterprises (P.) Ltd. [1998] 234 ITR 483, where Oswal Tailors was carrying on export business in its own money. Income from export business earned by Oswal Tailors was clubbed with the income of the assessee and assessed as such. On appeal, the Tribunal deleted the addition. On a reference the Delhi High Court held as under: "On consideration of materials on record, the Tribunal has recorded as a finding of fact that Oswal Tailors is in independent entity and is not the benami of the assessee-company and the business activity is being carried on by Oswal Tailors in its own name and that no evidence has been brought on record to show that the income from the export business carried on by Oswal Tailors is the income of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f survey also certain loose papers were found. On a scrutiny of some of the papers, he came to the conclusion that the assessee has taken on-money against the sale of flats in Elite Garden. He invited the attention of the assessee to Pages-11 and 17 of Annexure-A, Bundle No. 1 of Party-7, which relate to the transaction with Mr. Narey as admitted in reply dated 20-10-1997. According to him, the agreement consideration for Rs. 5.75 lakhs is matching with the figure noted in Paper at Page-11 and the figures of Rs. 3.48 lakhs are also matching if the payment schedule is seen. He, therefore, came to the conclusion that the figure of Rs. 4.40 lakhs is the amount taken as on-money from Shri Narey, since it has not been entered in the books of account nor it figures in the payment schedule and it is confirmed by the entry at Page-17, wherein payment of Rs. 1.5 lakhs was received, but not recorded. The Assessing Officer gave second example of paper at Page-92 of Bundle No. I, Annexure-A of Party No. 7, which according to him relates to charging of on-money. According to him, the entry in the paper is relating to sale of flat and its total consideration and the flat having 826 sq. ft. area ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... type of flat. The Assessing Officer found from these slips that at no point of time the rates have been offered for less than Rs. 1100 per sq.ft. and more than Rs. 1700 per sq.ft. According to the Assessing Officer though the deal may have not been finalised with the above prospective buyers, but it is clear from the above that the deal may not have been finalised below the amount offered. In his order, the Assessing Officer observed that these no tings have been made by Shri Sudhir Kolte, who is the partner of the firm and has admitted this fact in his statement recorded during the course of search. According to him, though these notings do not refer to Elite Garden Project, it is quite understandable that they are for Elite Developers only, as the assessee has constructed only one ownership project. He further pointed out that these notings create enough circumstantial evidences indicating the actual rate of sale of flats, a large part of which must have been collected as on-money over and above the documented price. The Assessing Officer also invited the attention of assessee to Pages-9 to 11 of Bundel No. 7 of Annexure-A-2 of panchanama, wherein certain transactions have been r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visitors slips found in the office cabin of Shri Sudhir D. Kolte it is submitted that none of the visitor's mentioned in para 7.1 have purchased flat in our scheme. The figures mentioned in the slips may be notings regarding rates in prime localities such as Bhandarkar Road, Prabhat Road, Deccan Gymkhana etc. The inference drawn by you that flats have been sold for the prices shown in slips is not correct. i. The nature of documents mentioned in this para are already explained in our reply dated 20-10-1997. The inferences drawn by you from mere notings without any indications of Name of the party etc., are incorrect." The assessee also filed a further reply on 17-11-1997 with reference to the Assessing Officer's letter dated 11-11-1997. Regarding the disclosure of Rs. 40 lakhs by Shri Gajendra S. Patil in his statement recorded during the course of the search, it was stated that the same was made without proper application of mind and under tension and the statement is not based on any facts or material. The Assessing Officer has further mentioned in his order in Para-13 that a letter from Shri Gajendra S. Patil was also filed in which all the above things have been repeated. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sclosed income is in addition to the undisclosed income received by the partners of the assessee and the fathers of the partners in the shape of NRI gifts. As evidences found, indicate no dates, the Assessing Officer determined the undisclosed income on estimate considering the sale of flats in each year as Rs. 5,00,000 in assessment year 1995-96, Rs. 30,00,000 in assessment year 1996-97 and Rs. 5,00,000 in assessment year 1997-98. 52. The learned counsel for the assessee contended that the Assessing Officer was not justified in assessing the on-money alleged to have been received by the assessee-firm on sale of flats and that he has based his estimate on few examples, which are wrong. He invited our attention to the documents, relating to Mr. Narey, placed at Pages-47 and 48 of the Paper Book-I and submitted that the Assessing Officer is wrong to say that Rs. 1,50,000 is not recorded, as the Assessing Officer has wrongly read as 'receipt'. According to the learned counsel for the assessee, document has not shown as receipt. He also invited our attention to explanation of the assessee, placed at Page-14, wherein it is explained that Shri Narey promised to pay at least Rs. 1,50,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessing Officer has wrongly assumed the same as expenses. 57. With regard to visitor's slips it was submitted that they all are nothing, but visitors' slips' and that none of the visitors purchased any flat in assessee's scheme and that the figures mentioned in the slips may be notings regarding rates in prime localities as already explained vide assessee's reply placed at Page-40 of the paper book. As regarding expenses of Rs. 38,28,341 mentioned in Para-9 of the assessment order, it is explained that the notings are some rough estimates and measurements. 58. The learned counsel for the assessee then further contended that both the additions i.e., Rs. 31.23 lakhs on account of gifts and Rs. 40 lakhs on account of on-money cannot be made as one is covered by the other by telescopic method of adjustment. He further pleaded that the assessee's case is that none of the additions is to be sustained. But without prejudice to that one addition is unwarranted and, therefore, should go. He invited our attention to the statement of Shri Gajendra S. Patil recorded under section 132(4), a copy of which is placed at Page-109 of the Paper Book-I and submitted that in reply to Question N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umb one and as per the Departmental stand a sum of Rs. 4,40,000 is on-money received by the assessee. He also pleaded that nobody will confirm the payment of on-money. Regarding to his interpretation, since document seized from the premises of the assessee, presumption is that all the contents are true and they de novo on-money. He contended that there is no amount of Rs. 1,50,000 recorded in the ledger. 62. As regarding the document placed at Page-49 pertaining to Shri A.K. Sen, he admitted that name is not there, but two entries in the document are tallying with the agreement placed at Page-44 of the Paper Book and, therefore, it is a speaking document and presumption is true. Likewise, he referred to the documents placed at Pages 50 and 54 pertaining to duplex and submitted that the rate of Rs. 1650 per sq. ft. is applied. As regarding the visitor's slips he referred to Pages-60 to 69 and submitted that the people used to come and enquire about the rate, area, type of flats etc. and, therefore, the rate is worked out for booking the flats. He pointed out that the purpose of their visit is written at the back side of the slips. According to him, the rate is always Rs. 1400 per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue and the Department has completely failed in discharging the burden of proof and, therefore, the on-money assessed as undisclosed income on the basis of presumption and conjectures, cannot be sustained. 65. We have carefully considered the rival contentions, relevant facts and materials on record and we have also gone through the case laws and legal pronouncements, on which reliance is placed by both the parties. 66. The first contention raised by the Department is that the appeal filed by the assessee is not maintainable on this ground, as the assessee had surrendered Rs. 40 lakhs in his statement and for this reliance is placed for Bombay High Court decision in the case of Rameshchandra Co.. In the case of Rameshchandra Co. where the assessee purchased 467 bags of 'sarki', but its sales and closing stock amounted only to 117 bags. A partner of the assessee firm submitted in writing that the discrepancy could not be explained and the value thereof could be added to the firm's income. Before the AAC additional ground was taken and the AAC admitted the ground and deleted the addition. The Tribunal held that the AAC was wrong in entertaining the additional ground and in de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer taxed assessee in accordance with the statement of assessee, but in the instant case the Assessing Officer has not assessed the assessee in accordance with the partner's latest statement and in accordance with the return filed in Form No. 2B. (iv) In that case addition was not appealed against originally, but here in this case it is challenged in appeal. In that case the admission was not rectified, but in this case rectification is made by the deposition of partner under section 132(4) itself, which was recorded by the Department on 5-12-1996. Since it was rectified in continued statement under section 132(4) itself, the appeal is tenable and is competent as per the ratio of the Bombay High Court decision in the case of Rameshchandra Co. itself. The dictum laid down by the Bombay High Court that if the assessee can have no grievance, he can file no appeal is not applicable to the facts of the instant case, as the assessee is aggrieved and, therefore, has correctly filed the appeal. In view of his, the first limb of argument advanced by the learned Departmental Representative is, therefore, rejected. 67. Insofar as the circumstantial evidences are concerned, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer has relied on seized paper Page Nos. 11 and 17 of Bundle No. 1, Annexure-A of Party No. 7, relating to Mr. Narey as an evidence of taking on-money. The assessee's explanation is that the noting on paper. Page No. 11 of Rs. 3,48,000 was due to be received from Mr. Narey and other figures noted on Paper-11 are all scribblings not relating any transaction with Mr. Narey. The assessee has further explained that the noting on paper Page-17 as "Narey 1.50 lakhs", indicates payment due from Shri Narey. The assessee has filed extract of ledger, which is placed at Page-44 of the assessee's Paper Book-1 and has claimed that the actual payments of Rs. 1,00,000 on 30-1-1996 and Rs. 50,000 on 14-2-1996 have been received by the assessee, as it is evident from the extract of ledger filed by the assessee. In view of this, we find that the Assessing Officer was wrong in saying that payment was received, but not recorded in the books of account of assessee. In his statement placed at Page-89 of the Paper Book-I, Shri Gajendra S. Patil has deposed that the figure of Rs. 4.40 lakhs relates to the payment due or estimated to be received by 15-11-1996 from various customers. It is noticed tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the Assessing Officer has also referred to Pages-12 and 15 of the seized documents, in which scheduled on payment and calculation pertaining to sale of flats i.e., Flat Nos. 19 and 22 are given. According to the Assessing Officer, such type of entries are also appearing at Page-17 for the Flat No. 'A'-2/9 which seems to have been sold for Rs. 10.24 lakhs to one Shri Bhavani. Here also the Assessing Officer has done only guess work, as he is not sure as to whether one Shri Bhavani has purchased any flat. On Page-54 of the Paper Book-I at which relevant paper is placed following names with address and occupation are given: (1) Mrs. Komal Suresh Chainani. (2) Mr. Sunil Bhagwan Bhavani. 73. The assessee has totally denied any transactions with them and has asserted that they have not purchased any flat from the assessee. In the same document at left side there is a noting to the following effect: "No sale is effected". 74. The Assessing Officer completely ignored this noting, as well as assessee's explanation, placed at Page-21 of the Paper Book-I. Although, names, occupation and addresses are given on the document itself, the Assessing Officer preferred not to examine thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these chits are nothing but visitors slips and that none of them has purchased any flat from the assessee. These facts are not controverted by the Department also. The allegation has also not been corroborated by any material or evidence. It is also noticed that in his statement placed at Page-138 of the Paper Book-II, Shri Sudhir D. Kolte has nowhere admitted that on-money is calculated or is charged. He has only stated that these are the rates per sq. ft. quoted at the time of negotiation and enquiry. Being incharge of booking and marketing does not mean that the partner is not allowed to plan for future and books flats to be sold in future in any coming scheme as explained. They are certainly not for booking of flats in Elite Garden, as none of these visitors has purchased any flat in Elite Garden. In the light of this actual fact which has also not been ignored by the Assessing Officer, darkness of presumption and probability cannot work and survive and, therefore, cannot be considered for arriving at a correct conclusion. In Para-8.2 of his order, the Assessing Officer himself has admitted this position and fact when he writes as under: "Though the deals may have not finali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e whether the figures referred to quantities of money or to quantities of goods and whether one side, and if so, which side represented receipt and which side represented outgoings. This was, thus a dumb document and as the orders of the authorities below showed that they had merely added the total of the right side of the slip without supplying the figures any language to indicate their meaning. In the case of such a dumb document, the provisions of section 132(4A) do not permit any one to presume that the total of the figures of right side of the slip represents the assessee's income. The presumption at the most was attracted to the figures and a further presumption that they represented the income of the assessee was not permissible under section 132(4A). When a dumb document, like the present slip, was recovered and the revenue wanted to make use of it, it was the duty of the revenue to collect necessary evidence which might provide an acceptable narration to the various entries. The evidence collected should be such that any reasonable man would accept the hypothesis advanced by the revenue that the figures written on the right side of the slip represented incomes earned by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income and, therefore, cannot be assessed under Chapter XIV-B of the Act. In view of this, we find that the learned counsel for the assessee has correctly relied on the decisions of the ITAT, Jabalpur Bench in the case of Agrawal Motors which clearly supports our view and is fully applicable to the instant case. In the case of Agarwal Motors supra) it was held as under: "The 'deemed income' and 'undisclosed income' are different items. Therefore, the deemed income cannot be brought within the purview of Chapter XIV-B". "The presumption of correctness would apply in respect of document found at the time of search and not for its expanded version. As per the list found at the time of search, the borrowing was within the tune of a few thousands rupees only. The revenue had expended it to more than Rs. 48 lakhs. Therefore, the burden was upon the revenue to establish that the figures mentioned in the list, found at the time of search was not correct figure but thousands times more was the correct figures". 82. We have already discussed that the Revenue has failed to discharge the burden of proof and, therefore, the estimate of undisclosed income on the basis of presumption at Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot be sustained, as the addition to the extent of Rs. 31.23 lakhs has already been made. 86. According to the Assessing Officer, the assessee has constructed, completed and booked flats so far of approximately 52,000 sq. fts. and earned alleged on-money of Rs. 40 lakhs, which gives a figure of Rs. 80 per sq. ft. as on-money. While, arguing, the paper pertaining to Mr. Narey, the learned Departmental Representative has asserted that on sale of flats on 61 mtrs. for Rs. 5,75,000 to Mr. Narey, the assessee has taken on-money of Rs. 4,40,000 which works out to more than Rs. 650 per sq. ft. At this rate and standard total alleged on-money works out to 52000 X 650 = Rs. 3,38,00,000. As against this, the Assessing Officer has estimated and assessed on-money at Rs. 31.38 lakhs + Rs. 40 lakhs = Rs. 71.23 lakhs. Even if unrecorded expenses of Rs. 38.20 lakhs are taken into account the total works out to only Rs. 1,09,43,000 as against Rs. 3,38,00,000. This proves that it is not only unrealistic and exhorbitant rate, but also fantastically high and imaginary one which is unbelievable. It was true, the Revenue could not have become so charitable to the assessee to keep more than Rs. 2,00,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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