TMI Blog1999 (5) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... old to Mr. H.S. Grewal vide agreement dated 10-6-1989. The document marked as page No. 34 of the bunch of loose sheets marked as HS-8 seized from the possession of Mr. H.S Grewal (save the complete details of the payment made by Mr. H.S. Grewal and his wife Mrs. D. Grewal against the purchase of said flat to M/s. D.N. Kamani (HUF). According to the Assessing Officer Mr. H.S. Grewal and his wife paid Rs. 5,25,000 by cheque and additional amount of Rs. 3,35,000 in cash, but the records of M/s. D.N. Kamani (HUF) did not disclose that part of sale proceeds received in cash. The Assessing Officer, therefore, required the assessee to furnish return of income for the block period tinder section 158BD and various other information relating to construction and sale of those flats. The assessee M/s. D.N. Kamani (HUF) filed the return of income for the block period covering 1-4-1985 to 8-12-1995 on 30-11-1996 and also information and details of construction and sale of those flats, such as area of construction, cost of construction, period of construction names and addresses of the buyers, sale price, date of transfer, date of giving possession to buyers, etc. In course of hearing copy of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 was actually for purchase of flats by Mr. H.S. Grewal in Dharamchand Mansion at 4-IC Road, Bistupur, Jamshedpur. About the words mentioned 'Cash paid in full amount' and various transactions during the some of months the Assessing Officer found that actual figure shown as 3.35 lakhs was meant for 3.35 lakhs and the words 'paid full' projected that the entire consideration amount of the flat was paid in full. The Assessing Officer observed that during the course of hearing in the case of Mr. H.S. Grewal he admitted that '3.35' stood for Rs. 3.35 lakhs. So according to the Assessing Officer on the basis of seized document page 34 of HS-8 it was evident that Mr. and Mrs. Grewal actually paid Rs. 3.35 lakhs and Rs. 5,25,750, but against that disclosed sale proceeds was only Rs. 5,20,750. He noted that in fact the consideration amount for flat received by cheque and received by cash payment consisted of in the ratio of 60%: 40%. The Assessing Officer noted that in the business of real estate there was practice of referring the properties after taking on money and since both the sellers and buyers were benefited through such transactions the real things were not disclosed. The Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case properly nor the special provisions contained in Chapter XIV of the Act. He said that no books of account or any incriminating documents was found from the possession of the assessee. Admittedly, therefore, the authenticity of the document for the purpose of assessment under section 143(3)/158BD in the case of the assessee could not be fully relied upon. He said that the document in question did not disclose for which flats the payments were made. The ld. AR of the assessee particularly referring to the latter part of the impugned document which spoke of certain transactions of payment in cash, he said that those transactions did not specifically speak as to for what purpose they were being paid. In course of his argument, the ld. AR of the assessee drew our attention to page 34 of HS-8 placed as Annexure I of the assessment order. He said that no doubt there was mention of 'Cash-paid full amount' but for what purpose there was no mention. Some figures were shown against some of the months, but those figures did not have prefix as 'Rupees' or that the figures '1', '75', '60' and '50' did not reflect any clear thing. The payment might have been made for other purposes and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sale price of the flats was @ Rs. 295 per sq. ft. He said that the Assessing Officer himself in the assessment order at page 8 recorded that nothing was found during the course of search and seizure operation on the basis of which the cost of construction of project Dharamchand Mansion at 4-IC Road, Bistupur, Jamshedpur could be doubted. The Assessing Officer further observed that the cost of project as disclosed in the account was found reasonable. The ld. AR of the assessee said that before the Assessing Officer the assessee through letter dated 9-10-1996 and brought to the knowledge of the Assessing Officer that the assessee got the valuation done by the Registered Valuer and obtained his report on 8-3-1993. According to this report of the Registered Valuer the value of the building was Rs. 68,75,000. Even the TISCO vide its letter No. nil dated Jan., 1993 arrived the value of this building at Rs. 60,29,716. When there was no dispute of cost of construction, there did not seen any reason why the sale price was to be doubted or marked with question particularly when there was no evidence that if the additional amount was received by the Assessing Officer. The ld. AR of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. The special provisions have been introduced by way of Chapter XIV of the IT Act. The ld. AR of the assessee relied on the decision of the Tribunal, Bombay Bench in the case of ITO v. W.D. Estate (P.) Ltd. [1993] 45 ITD 473 wherein also the assessments have been made on the basis of certain impugned documents, but in the absence of any evidence to show that the assessee, in fact received on money the Tribunal deleted the addition. The AR of the assessee said that manifestly no books of account or impugned document was recovered and seized from the possession of the assessee on the basis of which any undisclosed income could be said to have been found. The ld. AR of the assessee said that the addition on presumption or addition or estimate were not within the realm of provisions of Chapter XIV of the Act and in support thereto reliance was placed in the cases of Smt. Gita Rani Mondal v. Asstt. CIT[IT Appeal No. (99)M/7 (Cal.) of 1989] Calcutta 'E' Bench of Tribunal, Sunder Agencies v. Dy. CIT [1997] 63 ITD 245 (Mum.), Bench of Tribunal and Rishabh Marketing (P) Ltd. v. Dy. CIT [IT Appeal No. (SS) 11 (Pat.) of 1997] Patna Bench of the Tribunal. The ld. AR of the assessee con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isted of 40% of the total sale price of Rs. 8.60 lakhs. The ld. DR of the Revenue further said that the Assessing Officer was right in considering the matter on the preponderance of probabilities and circumstantial evidences. Seller and buyer were mutually benefited and as such they did not come out with true facts and consider that circumstances the entire attending factors required consideration. She said that it was the matter of common knowledge and experience that for purchase of the flat purchaser as to pay money. She further added that the Assessing Officer rightly observed and came to conclusion that the flat situated at 4-IC Road, Jamshedpur was in the heart of the city with best commercial and residential prospects and as such the sale price as disclosed by the assessee could not be said to be the correct and true. She said that no doubt the building in question was on lease land of TISCO, but there were provisions in the lease deed for renewal as was evident from the findings given at page 3 of the assessment order for 1992-93 in regular assessment. So it was wrong to say that the prospective buyers would be reluctant to pay a good price. She said that in fact at Jamshed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king up one or two entries contained therein. At the, top of the impugned document the words 'payment for flat' and in the bottom the words 'D. Mansion' are written. Naturally the payment relates to flat of Dharamchand Mansion situated at 4-IC Road, Bistupur, Jamshedpur. The said document contains two parts. Top portion speaks of the payment by cheque either by Mr. Grewal himself and by his wife Mrs. Grewal. The first two payments by cheque for Rs. 1 lac and Rs. 75,000 have been made by Mrs. Grewal and other 4 payments by cheques have been made by Mr. Grewal i.e., Rs. 1.25 lakhs, Rs. 75,000, Rs. 50,000 and Rs. 47,000. it is to be seen that a remark 'balance left by cheque is Rs. 52,500' has been made which was paid later on. The assessee has admitted to have received these payments by his letter dated 29-10-1996. Mr. and Mrs. Grewal have paid in total Rs. 5,20,750 by cheque. The other part of the document shows transactions by cash which, when reproduced, reads as follows:- "Cash-paid full amount April'88 1 Nov.' 88 75 Feb.' 89 60 Jan.' 89 50 Jan.' 90 50 paid full" ------ 3.35 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al, the assessee must have taken on money @ 40% in cash from the other buyers also and in that view of the matter he worked out the concealed income of Rs. 45,53,134. For the proposition that the assessee must have taken on money @ 40% in cash, he observed that in real estate business this practice of taking on on money is prevalent. He has also said that the flats of Dharamchand Mansion are situated in the heart of the City near Regal Ground of Jamshedpur and in the best commercial and residential area and, as such, the price of which the assessee showed to have sold the flats could not be accepted. According to the assessing Officer in that area Rs. 400 per sq. ft. would have been the reasonable price and in fact during that period that was the prevailing marketrate of flats of that area. The Assessing Officer on the basis of those observations worked out the undisclosed income of the assessee as detailed above. The Assessing Officer, however, in his assessment order at page 9 has observed that it is a case of strong presumption and circumstances and even then has proceeded to make out a heavy addition to the tune of Rs. 42,18,134. If in the real estate business the practice is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al state transaction in metropolitan titles was discussed. The Tribunal, Bombay Bench, however, deleted the addition because it found that employees from whose possession the file and diary were found was a disgruntled employee who was trying to black-mail the assessee company. The Tribunal also noted that there was absolutely no evidence to show that the assessee, in fact, had received on money payments. Here in the case under consideration also, the Assessing Officer has not been able to bring any evidence to prove that if the assessee has received on money and that also in cash from each and every buyer. It is to be noted that he examined the buyers, but from them also he could not gather any supporting material or evidence. The whole exercise of the Assessing Officer to determine the on money received from the purchaser at Rs. 42,18,134 is mere on presumption and as such the aforesaid amount of Rs. 42,18,134 cannot be said to be the undisclosed income of the assessee as contemplated in Chapter XIV of the Act. The Assessing Officer has tried to substantiate his presumption of receipt of on money by the assessee for flat of Dharamchand Mansion situated at 4-IC Road, Bistupur, Jam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er to come to a finding that the assessee must have received on money from all the buyers is without any basis cannot be approved of. It is merely his presumption. In view of our finding given above the undisclosed income is only Rs. 3.35 lakhs which could be assessed under section 143(3)/158BC/158BD of the Act, and not the whole amount of Rs. 45,53,134. 6. In the result, the appeal is allowed in part. Per Shri Sikander Khan, Accountant Member-I have gone through the proposed order of the ld. Brother. In the proposed order the ld. Brother has given two findings. Firstly, he held that from the seized documents it was established manifestly that the assessee had received on money of Rs. 3.35 lakhs from Mr. Grewal which was undisclosed income of the assessee as contemplated under section 158(1)(b) of the Income-tax Act. Secondly, he held that the addition of the remaining amount of Rs 42,18,134 for similar on money on the sale of other flats could not be approved. While I agree with my ld. Brother in respect of his first finding regarding the addition of Rs. 3.35 lakhs I respectfully differ with him in respect of the finding to delete the remaining addition of Rs. 42,18,134. 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... money of Rs. 3.35 lakhs for the purchase of the flat from the assessee which the assessee had not disclosed in its books of account. 9. After the above finding the Assessing Officer observed that the assessee must have received similar on money on the sale of the other flats. He added that H.S. Grewal was business partner of Kamani. Kamani and Grewal were the major shareholders of M/s. Arc Horn Global Systems Pvt. Ltd. They were also the partners in M/s. Arc Horn Leasing Company. Their business connection had been very old. Despite this close relationship the assessee had taken cash of Rs. 3.35 lakhs from Mr. Grewal against the sale of the flat to him, over and above, the payments by cheques. He further added that the quality of construction of the flats was similar. He, therefore, held that the assessee must have received similar on money on sale of other 15 flats. He added that after the addition of the on money the average sale price would come to Rs. 400 per sq. foot which was fair and reasonable considering the fact that Dharamchand Mansion is situated in the heart of the city of Jamshedpur and in the best commercial and residential area. It is situated besides the famous Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0% from sale of all the flats. He added that the addition had been made only on presumption. He argued that such an addition could not be made in block assessment under section 143(3)(1)/158BD. He relied on several decisions as discussed in the proposed order of my ld. Brother. 14. The ld. D.R., on the other hand, supported the order of the Assessing Officer. She contended that the seized document was a clinching document of the payments of on money of Rs. 3.35 lakhs by H.S. Grewal for the purchase of the flat from the assessee. She added that the Assessing Officer was justified in adding similar on money from the sale of the other flats. She relied on section 114 of the Evidence Act, Supreme Court's decision reported in 62 STC 381. 15. My ld. Brother in the proposed order after considering the facts and circumstances of the case and the submissions of the ld. ARs of both the parties in dispute field that the seized documents manifestly established that the assessee received on money of Rs. 3.35 lakhs from Mr. Grewal which was undisclosed income under section 158(1)(b) of the Income-tax Act. He, however, did not approve of the addition of the remaining amount of Rs. 42,18,134 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lats at the same rate per sq. ft. subject to adjustment for any extra work, floor, timing of sale, market conditions, etc. If the sale price of ordinary shares of face value of Rs. 10 of company 'X' was Rs. 100 per share on 31-3-1997, the sale price of all ordinary shares of company 'X' as on 31-3-1997 must be taken at Rs. 100. Similarly, all the other flats were in the same building of the same project of the assessee having similar quality of construction. If the sale price of flat sold to Grewal was Rs. 400 per sq. ft., the sale price of other flats should be taken similarly subject to the adjustment for variables like extra works, etc. 20. The proof of payments of on money in one flat sold to Grewal had already established the fact that the books of account of the assessee were not reliable and correct. Under the circumstances, the application of section 145 and estimate of sale price of other flats on the basis of the sale price of flat to Grewal was proper and justified. It is wen known that the ITAT, High Courts and Supreme Court upheld the addition on reasonable estimate in the cases where the books of account were not reliable and correct. In the instant case, the books ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f on money by Grewal for the purchase of the flat from the assessee. After this finding by him the seized documents became relevant documents for the determination of the sale price or other flats in the same building. Section 158B(b) defines "undisclosed income" as under: "(b) 'undisclosed income' includes any money, bullion, jewellery or other valuable article or thing or any income based on any entry in the books of account or other documents or transactions, where such money, bullion, jewellery, valuable article, thing, entry in the books of account or other document or transaction represents wholly or partly income or property which has not been or would have been disclosed for the purposes of this Act." 24. From the above it is evident that the undisclosed income includes any income based on any document representing income which had not been or would not have been disclosed for the purposes of the Act. Clearly the seized documents in question represented the income which had not been or would not have been disclosed for the purposes of the Act. It will be wrong to give a restrictive meaning to the provisions of section 158B(b) and to say that it will cover only the und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der section 147 separately for the concerned years. All the 10 assessment years had to be merged into the block assessment. Facts of the cases relied upon by ld. Brother were different. In the present case the seized document had been held to be concrete evidence of payment of on money by Grewal. No such document was found in the cases relied upon. 26. I would, therefore, hold that the undisclosed sale price of other 15 flats was covered under section 158B and addition for the same in the block assessment would be proper and justified under Chapter XIV-B of. the Income-tax Act. 27. The last ground mentioned for deleting the addition of Rs. 42,18,134 in the proposed order is that there would be fantastic profit after this addition. In my view, this is not a strong reason to delete the addition. The profit margin would differ from case to case and transaction to transaction depending upon various factors. It is worthmentioning here that the price of the land where the building was located, must be very high. The land was acquired at low price but its market value at the time of sale of the flats was very high. Thus, the profit of the land was also embedded in the profit on the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt: "Whether, on the facts and circumstances of the case and in law, on the basis of seized documents page 54 of HS-8 which is the details of the price paid for purchase of flat can presumption be made that the assessee-HUF must have received on money from all the remaining 15 purchasers of the flats and an addition of undisclosed income of Rs. 42,18,134 be made on estimate under section 158BC/158BD of the Act?" Per Nathu Ram, Third Member-On account of difference of opinion between the Members of the Bench, the following questions posed by them have been referred to me by the Hon'ble President as per the provisions of section 255(4) of the Income-tax Act for decision as Third Member: Question posed by J.M.: "Whether, on the facts and circumstances of the case and in law, on the basis of seized documents page 34 of HS-8 which is the details of the price paid for purchase of flat can presumption be made that the assessee-HUF must have received on money from all the remaining 15 purchasers of the flats and an addition of undisclosed income of Rs. 42,18,134 be made on estimate under section 158BD of the Act Question posed by the Accountant Member: "Whether, on the facts an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,500 10. Mr. K. Gandhi 30-01-1990 1990-91 5,21,500 11. Mr. K. Gandhi 30-01-1990 1990-91 3,65,500 12. Mrs. A. Gandhi 30-01-1990 1990-91 3,65,500 13. Mrs. M.R. Varshnoi 27-02-1991 1991-92 3,76,000 14. Mr. S. Atwal 03-06-1991 1992-93 5,16,750 15. Mr. S.K. Shroff 21-04-1990 1991-92 3,75,000 16. Mr. N.K. Shroff 21-04-1990 1991-92 3,66,250 2.2 A search was conducted by the Department on 8th December, 1995 at the residential and business premises of Shri N.D. Kamani, Shri H.S. Grewal, Shri Sanjeev Kapila and members of their family. During the course of search at the residential premises of Shri H.S. Grewal, a bunch of loose-sheets marked as HS-8 was seized from his possession. Page 34 of the bunch of these papers contained details of payments made by Shri H.S. Grewal and his wife against the purchase of a flat from the assessee HUF. A photocopy of the said document is marked as Annexure I to the assessment order and the same is reproduced hereunder: Annexure I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o compute the undisclosed income on account of "on money" received on sale of sixteen flats at Rs. 47,18,500 based on the said document seized. The assessee HUF in reply submitted that the said document has no connection with the assessee regarding the remark "cash paid full amount" and it does not say anything regarding the payment to whom and for what purpose. It was contended that the presumption made that all the entries in the said document relate to the sale of flats is not correct. It was rather claimed that the document did not relate to the purchase of the said flat. Moreover, the Assessing Officer had examined certain buyers during the course of regular assessment proceedings and he did not find any excess sale proceeds received. Further, during the course of search no unexplained investment was found. Neither any documentary evidence was recovered reflecting the acceptance of "on money". Moreover, the Assessing Officer has referred to prevailing practice of charging such "on money". Such presumption is based on hearsay and is not correct. The assessee further furnished details of the consideration received on the sale of flat from Shri H.S. Grewal and denied having recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of Jamshedpur and is the best commercial and residential area. The assessee HUF has shown the sale of flats of Rs. 225 per sq. ft. He also noted that the cost of construction shown at about Rs. 175 per sq. ft. has been found to be reasonable by the Department. With these observations the Assessing Officer computed the undisclosed income on account of "on money" received on sale of 15 flats at Rs. 45,53,134 spread over various years as per the details below: Assessment year Undisclosed income --------------- ------------------ 1987-88 3,34,839 1988-89 9,06,735 1989-90 2,35,127 1990-91 20,25,276 1991-92 7,18,730 1992-93 3,32,427 -------------- 45,53,134 -------------- 2.8 The Assessing Officer added therein the income disclosed for the assessment year 1995-96 at Rs. 83,890 thereby computing the total undisclosed income at Rs. 45,37,024 and raised the tax liability thereon @ 60% Rs. 27,82,212. 3. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee HUF were not reliable and correct and therefore application of provisions of section 145 and estimate of sale price of other flats on the basis of the sale price of flat sold to Shri Grewal was proper and justified. (d) That the Assessing Officer while completing the regular assessment for the assessment year 1992-93 accepted the investments made in construction of flats and sale proceeds disclosed. Since the said document establishing payment of "on money" was seized after the original assessment, the finding given therein about sale price of flats is of no consequence. (e) That it is apparent from the provisions of section 158B(b) that undisclosed income includes any income based on any document representing income which had not been or would not have been disclosed for the purpose of the Act. Clearly the seized document represented the income which had not been or would not have been disclosed for the purposes of the Act. It would be wrong to give a restrictive meaning to the provisions of section 158B(b) and to say that it will cover only the undisclosed sale price in respect of the flat sold to Shri Grewal and that it will not cover undisclosed sale price of other fl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ea may also be varying. It would therefore be proper and appropriate for determining the sale price per sq. ft. based on the total consideration paid by Shri Grewal. The Assessing Officer was thus held not justified in determining total sale price taking 4096 as payment of "on money" in cash. The proper and just course would have been to determine the total sale price on the basis of the per sq. ft. sale rate discovered from the seized document. Further, necessary adjustments for the floor on which each flat was located, time of sale agreement, extra work, if any, was required to be made. The Assessing Officer should have also obtained complete details of each flat and then determined the total sale price after giving sufficient and reasonable opportunity to the assessee in the matter. With such observations he has restored the matter relating to the Addition of Rs. 42,18,134 to the Assessing Officer for redetermination after compiling with the directions given. 5. The learned counsel for the assessee Shri S.B. Gadodia reiterated the submissions made before the lower authorities and further submitted that the undisclosed income has been computed on the basis of a paper found on s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further pointed out that the Assessing Officer has himself observed in para 18 of the assessment order that though this is a case of presumption in the case of other buyers but the presumption is very strong in view of the discussions made. The learned counsel submitted that it is settled law that no income can be taxed as undisclosed income only on the basis of presumption, howsoever strong the presumption may be. As regards the fifteen flats no material evidence was found during search at the business or residential premises of the assessee. In the absence of any document, books of account, material and/or evidence found in the course of search relating to payment of "on money" in respect of fifteen flats, no undisclosed income could be computed for taxation under the special provisions of Chapter XIV-B. 5.3 He has also pointed out that the Assessing Officer issued notices under section 131/133(6) to the purchasers of fifteen flats to find out payment made, if any, of "on money" for purchase of their respective flats but they have denied having made any such payment to the assessee HUF nor any material evidence was found at the residence of the assessee during the course of sea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S. Grewal and his statement recorded cannot be made the basis for computing the undisclosed income on account of "on money" in respect of other fifteen flats because the Assessing Officer has not examined Shri Grewal in the assessment proceedings of assessee HUF nor any opportunity was given to the assessee to cross-examine him. Unless the said document is through in the assessment records of the assessee and genuineness of the same is proved by examining Shri Grewal and opportunity given to the assessee to cross-examine him, the same cannot be used as evidence against the assessee HUF. Moreover, the said paper seized is also uncorroborated so far as the cash payment is concerned. 5.7 The learned counsel has also pointed out that admittedly the plot on which the building was constructed is a lease-hold and the assessee carried out only this construction activity. No such activity was carried out either before or after. The revenue has tried to justify the market rate at Rs. 400 per sq. f t. on the ground that realisation of price of land was also included in sale consideration of flats. He contended that market price of land be taken separately and considered for capital gain tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terms. Looking to the land rate and cost of construction the sale rate worked out based on the seized document at Rs. 400 per sq. ft. is fully justified and looking from this angle the undisclosed income computed is neither unreasonable nor unjustified. She further relied on the order of the learned A.M. and advanced elaborate arguments in support thereof. She further placing reliance on the decision of the Hon'ble Supreme Court in the case of CIT v. Durga Prasad More [1971] 82 ITR 540 submitted that looking to the documents seized, surrounding circumstances and human probabilities the addition made is justified. However, that needs recomputation as per the observations made by the learned Accountant Member. She, therefore, submitted that the view taken by the learned A.M. is correct and the same deserves to be confirmed. 7. I have carefully gone through the orders of the learned Brothers and have also considered the facts and rival submissions made before me. I find that the assessee HUF acquired the plot of land measuring 12467 sq. ft. on lease-hold from Tata Iron Steel Co. Ltd., Jamshedpur on 1-3-1961 for a period of thirty years on payment of annual lease rent of Rs. 87.55 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profit rate 1989-90 21.6% 1990-91 23.8% 1991-92 11.11% 1992-93 50.7% 7.4 The average net profit rate for all the years worked out to 29.7%. The Assessing Officer noted that the net profit rate disclosed was reasonable as compared with comparable cases of similar nature. Copy of the assessment order for the assessment year 1992-93 referred to above, is placed at pages 1 to 11 of the paper book. 7.5. I also note that the total built up area is about 36,610.20 sq. ft. and the parking space on the ground floor at 3566 sq. ft. It is also noted that the super floor area in each flat was at 1400/1500/2100 sq. ft. and accordingly, consideration received varied. 7.6. The Department conducted search at the business as well as residential premises of Shri N.D. Kamani. H.S. Grewal, Sanjeev Kapila and members of their family on 8th December, 1995 and during the course of search the aforesaid document was found and seized from the residence of Shri H.S. Grewal. No search was conducted in the case of the assessee HUF there being no separate search warrant issued. However, sea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, the buyers were summoned under section 131 during the course of proceedings for the assessment year 1992-93 and none of them admitted having paid any "on money" to the assessee HUF. The Assessing Officer rather accepted the book results wherein cost of construction of the building as well as the sale consideration of the flats were accounted for. During the course of search no incriminating material was recovered either from the assessee HUF or from its karta. Further, during the course of block assessment proceedings also the Assessing Officer called upon the flat buyers tinder section 131/133(6) of the IT Act and none of them gave any damaging evidence. He also referred to the confirmation filed by Smt. Varsha Gandhi who purchased one of the flats and the same is placed at pages 25 and 26 of the paper book. She confirmed that she made payment for the flat purchased at Rs. 3,66,500 through cheques as per details given therein. She has also made a reference to the summons under section 131 from the Assessing Officer during proceedings for the assessment year 1992-93 and explanation recorded thereof on 25th March, 1993. Moreover, I was given to understand that the Department has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of W.D. Estate (P.) Ltd. the addition sustained by the CIT(A) partly influenced by a report of the Finance Ministry wherein a notorious practice of payment of black money in real estate transaction in metropolitan city of Bombay was discussed, was deleted by the Tribunal treating the addition being on hear say evidence. 7.11 Another question that needs consideration is whether the undisclosed income could be estimated on account of "on money" from fifteen flats buyers based on the said document recovered from Shri H.S. Grewal invoking the provisions of section 145 of the IT Act. Section 145 provides the method of accounting. According to this section income chargeable under the head "Profits and gains of business or profession "or" "Income from other sources" is to be computed in accordance with the method of accounting regularly employed by the assessee. When accounts are correct and complete but method employed is such that income cannot properly be deducted therefrom, computation is to be made on such basis and in such manner as the Assessing Officer may determine. Where the Assessing Officer is not satisfied about correctness or completeness of accounts, or where no method ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment and which comes to his knowledge subsequently in the course of proceedings under this section or recompute the loss or the depreciation allowance or any other allowance as the case may be for the assessment year concerned. Thus for assessing an escaped income under section 147 the Assessing Officer must have reason to believe that any income chargeable to tax has escaped assessment. So far as the flat sold to Shri H.S. Grewal it is established from the seized document that cash of Rs. 3.35 lacs was paid to the assessee HUF over and above the apparent consideration and based on such evidence action under section 147 could validly be taken. However, there is no such material evidence found during the course of search about the "on money" paid by the remaining fifteen flat buyers to the assessee HUF or the assessee HUF receiving any "on money" from them. The Assessing Officer during the course of regular assessment proceedings for the assessment year 1992-93 examined the flat buyers under the provisions of section 131 of the IT Act but no incriminating material came on record from their cross-examination. Further, during the course of block assessment proceedings also the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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