TMI Blog2005 (10) TMI 276X X X X Extracts X X X X X X X X Extracts X X X X ..... e year in which project is completed or substantially completed. Therefore, the learned counsel's arguments on all three grounds fail. Accordingly, it is held that the document is not a dumb document but it is a speaking document and it pertains to the business transactions of the assessee. This conclusion is further fortified by answer to question No. 12 of Shri Akalank to the effect that the cash will be shown for 1996-97 assessment year as additional income over and above the book profits of Dhanvarsha Builders and Developers Pvt. Ltd. After this statement, the document becomes, in fact, an eloquent document regarding the receipt 'on money' of the assessee. It appears that no opportunity of cross examination has been given by the Assessing Officer to the assessee in this behalf. Therefore, the evidence gathered by him in respect of receipt of 'on money' is only a tentative evidence on which no firm conclusion can be drawn. If the learned DR's arguments regarding expenditure were to be accepted, then, the figures of cash receipts mentioned in the seized paper will also have to be ignored. Such course of action will be against the tenor of the evidence seiz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore grounds were taken up as additional grounds of appeal. The additional grounds pertain to the legality of initiation of search and seizure operation. However, in the course of hearing before us, the learned counsel of the assessee pointed out that the issue involved in the dispute is only one, namely, that the learned Assessing Officer erred in assessing the total undisclosed income at Rs. 49,25,000 by relying on the declaration made under section 132(4) on 16-2-1996, which was retracted by way of filing a letter dated 10-4-1996. 2.2 In the assessment order, it is mentioned that the assessee is a private limited company, and its shareholders consist of persons from Mishrikotkar family and Goyal family. On the basis of returns filed in earlier years, it is seen that it has carried forward losses from year to year. Search and seizure operations were conducted at the premises of Mishrikotkar on 15-2-1996, in which some incriminating documents pertaining to the assessee were also found and seized. Statement of Shri Akalank, who is one of the directors of the assessee-company, was recorded, in which he made declaration of undisclosed income of Rs. 48,95,000. The declaration was in re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed any details about the method of accounting followed by it, sales effected by it and the unsold work lying with it. In the absence of any detail, the Assessing Officer assessed the undisclosed income at Rs. 49.25 lakhs consisting of the declared amount of Rs. 48.95 lakhs and disallowed interest of Rs. 30,000. Aggrieved by this order, the assessee has filed appeal before us. 3. In the course of hearing before us, the assessee filed a paper book consisting of 125 pages. As pointed out earlier, a number of grounds were taken up regarding the validity of search and it was inter alia prayed that search and seizure operation conducted under section 132 may be declared as null and void and consequently the order under section 158BC passed on the basis of legal search may also be declared as void. However, the matter regarding the jurisdiction of the Tribunal to look into the validity of the initiation of a search operation was decided by full Bench of Hon'ble ITAT in the case of Promain Ltd v. Dy. CIT [2005] 95 ITD 489 (Delhi). The full Bench of the Tribunal held that assessment under section 158BC is based upon the conduct of a search. In other words, if it is shown that if a search ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt was retracted on 10-4-1996. Apart from the aforesaid evidence, no other evidence was found regarding receipt of cash. No undisclosed cash was also found in the course of search. Thereafter, the learned counsel drew our attention to the assessment order, which does not make any mention about retraction made by the assessee. The learned counsel also pointed out that in the course of assessment proceedings, the Assessing Officer had not appraised the assessee regarding any cross verification made by him with the customers of the assessee, which could suggest that the assessee received any amount over and above the amount disclosed in the books of account. On the basis of these facts, the case of the learned counsel was that the impugned document was a dumb document from which no conclusion regarding undisclosed income could be drawn. 4.2 At this stage, it may be mentioned that the assessee was questioned by the Bench about the names mentioned in the document, cheque amounts received by it and then cross tallying with the amounts entered in the books of account. It was fairly conceded that the names mentioned therein were of the clients q of the assessee and the amounts entered by w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jendra and another amount of 579 to be received from AMM. This amount is also cross verifiable if sale cost is cross tallied with cash received, cheque received and the balance receivable. 4.6 The learned counsel relied on the decision of Hon'ble Gujarat High Court in the case of CIT v. President Industries [2002] 258 ITR 654. In that case, in the course of survey, excise records were found which disclosed sales not disclosed in the books of account of the assessee. The Assessing Officer made addition of the entire sale proceeds. The Tribunal found there was no evidence to indicate that investments were made outside the books of account to make alleged sales, and therefore, it held that the entire sale proceeds could not be added, but only profit embedded in the sales could be added to the income. On reference by the Department, the Hon'ble High Court held that the sale proceeds could not represent the income of the assessee and only the excess of sale process over cost incurred could form profits, which could be included in the income of the assessee. 4.7 The learned counsel again referred to the seized document regarding 'on money' and pointed out that this paper does not bear an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y by cooking up a story. The vendor's books of account were not subjected to chemical examination, which could reveal forgery and thus his books of account lost credence. It was highly improbable that the vendor who initially agreed to sell shop for Rs. 11.51 lakhs, later on sold it for Rs. 2.50 lakhs. In a sense, the finding of the Hon'ble Tribunal was that statement under section 132 cannot be relied upon blindly and it is to be read with surrounding circumstances. 4.9 The learned counsel relied on the decision of Hon'ble ITAT, Bombay "B" Bench, in the case of Deepchand Co. v. Asstt. CIT [1995] 51 TTJ (Bom.) 421, in which it was inter alia, held that in absence of any supporting evidence to confirm the addition, the statement of two partners recorded at the time of search, later on retracted by filing proper evidence, cannot be relied upon. It may be mentioned here that no proper evidence has been filed by the assessee later on. 4.10 The learned counsel also pointed out that the names of the directors also appeared in the seized material. It would be incomprehensible that the company charged 'on money' from the directors also and for this reason it was argued that the impugned se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ages 105 to 110 and two bills from Shri Anup Agrawal and Shri Rajender Agrawal dated 23-12-1996 and 24-12-1996 regarding the construction work. The purpose of pointing towards the bill was that the name of Rajender appeared in the seized paper against the entry of 4,200 and, therefore, it was sought to be argued that there were payments to this party over and above the payments recorded in the books of account. 5.1 On the other hand, the learned DR referred to the history of the case. He pointed out that search and seizure operation was carried out on 15-2-1996, in the course of which incriminating documents were seized. Notice under section 158BC was issued on 11-4-1996. That was also the date on which the assessee made a retraction from the confessionary part of the statement. Since the return for the block period was not filed, two reminders were issued on 12-8-1996 and 25-9-1996 for filing the return for the block period. There was no response from the assessee either to the notice or the reminders. Consequently, summons were issued on 16-12-1996 and 1-1-1997. There was no response to the summons also. The Assessing Officer prepared a draft of the order for forwarding it to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be granted in respect of the retraction as it was not filed before the Assessing Officer and, therefore, it was not before him. 5.3 The learned DR also referred to the decision of Hon'ble ITAT, Pune Bench in ITA No. 308/PN/99, in which it was inter alia held that statement recorded under section 133A should be adhered to and the assessee should not be allowed to get away from the statement lightly. 5.4 The learned DR referred to page 2 of the paper book and, in particular, to answer to question No. 12, which we have already referred to earlier. On the basis of this answer, the case of the learned DR was that the partner had accepted undisclosed income of Rs. 48.95 lakhs. The Assessing Officer had made enquiries from a number of buyers which leads to a reasonable inference that 'on money' was charged by the assessee at the time of booking the premises. Out of the total amount of Rs. 48.95 lakhs, the Assessing Officer had conducted enquiries covering an amount of Rs. 31 lakhs admittedly paid by the buyers also. Therefore, there was no reason to hold that the document should be held to be a dumb document as on the basis of the books of account of the assessee as well as enquiries of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... premises No., name of the customer, total sale cost, money received by way of cash, money received by way of cheque and the balance amount to be received. All the figures are written by omitting three zeros. The learned counsel of the assessee fairly admitted that names mentioned in the list are those of its customers. He also fairly admitted that the amounts received by way of cheque will tally with the books of account if three zeros are supplied to the amount mentioned in the seized papers. His arguments against placing reliance on this paper inter alia were that -(i) the paper does not bear the name of the assessee, (ii) no evidence has been found regarding actual receipt of cash, and (iii) the paper does not contain the dates on which respective cash amounts were allegedly received. Therefore, his case was that the impugned document is a dumb document and, therefore, it cannot be relied upon for the purpose of assessment. We are unable to persuade ourselves to agree with the learned counsel in either of these matters. The reason is that the authenticity of the names and decoding of amounts received by way of cheques lead to establishment the fact that the document belongs to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prudence will read them. They cannot be read in bits and parts to suit the convenience of one or other party. Therefore, the expenditure of 4,200 will also have to be read on proper appreciation of the document. Such reading gets further fortified by the fact that one Mr. Rajender Agrawal was one of the contractor of the assessee and his bill was placed on page 112 of the paper book. Though the figure of Rs. 4,200 is qualified by the remark approximately in the said papers, the expenditure on that basis will have to be estimated. Such conclusion also gets strength from the fact that the figure is a round figure. Accordingly, it is held that the expenditure of round some of Rs. 40 lakhs becomes admissible to the assessee as cash expenditure in relation to cash receipts of the assessee. Thus, the excess of receipts over the expenditure can be worked out at Rs. 8.95 lakhs. The matter does not end here. It has been pointed out earlier that there are certain other figures of cash amount to be received by the assessee. The two sums of 400, being old and 179 from Dhawal, aggregating to 579, are to be received in cash. Therefore, this amount will have to be added to the undisclosed income. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Akalank under the aforesaid section and, therefore, his statement can be used in evidence in the proceedings of block assessment also. The statement was later on retracted. However, that retraction by itself does not lead to an inference that the statement should be rejected in toto. The section provides that the statement can be used in the proceedings. That does not mean that it should be used in toto or rejected in toto. The statement has to be seen in the context of facts found in the course of search and later on a reasonable interpretation has to be placed by the combined reading of the facts found and deposition made in the course of search. The statement of Shri Akalank to the effect that 'on money' to the extent of Rs. 48.95 lakhs was received is clear and un-ambiguous, supported by the seized material. Therefore, even after retraction this fact cannot be displaced. The other part of the statement was that the aforesaid amount will be offered for taxation as additional income over and above the book profits for assessment year 1996-97. The computation of income involves not only ascertaining all facts but also analyzing and interpreting the facts for computing the income. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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