TMI Blog1999 (10) TMI 111X X X X Extracts X X X X X X X X Extracts X X X X ..... al before us. 3. Four grounds have been raised. The same are discussed and disposed of as follows. Ground Nos. 1 and 2 read as under : "1. On the facts and in the circumstances of the case, the learned ACIT erred in treating that the entire income of Rs. 1,51,29,500 as per the return filed by the appellant for assessment year 1996-97 as undisclosed income, on the ground that the appellant had not maintained proper books of account and that the return income was based on the statement of affairs. The learned ACIT erred in interpreting the provision of section 158BB(i)(d) in this behalf. The appellant submits that the appellant did maintain books of account though incomplete and also other documents such as bank statement, vouchers, etc. from which the income could be computed. It is significant to note that even the ACIT has accepted the income returned as correct without making additions. The appellant therefore submits that on true and proper interpretation of section 158BB(i)(d), the undisclosed income of the appellant for 1996-97 may kindly be taken as 'Nil'. 2. On the facts and in the circumstances of the case the learned ACIT erred in treating the income for the broken p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee had filed the return of income for assessment year 1996-97 only on the basis of statement of affairs and has not prepared its accounts. This clearly establishes that the assessee has not been maintaining books of account and other documents that are required to be maintained in the normal course. 22. The assessee was claiming sub-contracts in the names of various persons which were detected and admitted by the assessee to be not genuine and various assets in the name of other persons were found to be belonging to the assessee. From the records seized during search action in the form of incomplete accounts for assessment year 1996-97 and assessment year 1997-98, it is clear that the assessee would have continued to suppress its income in this manner, but for the search action. Also, the assessee has not paid any advance tax for assessment year 1996-97, the due dates for which had expired before search action, which also is in indication that the assessee would not have disclosed the income now shown for assessment year 1996-97 and for part period of assessment year 1997-98, but for the search action. Hence, the disclosed income for assessment year 1996-97 and the part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... casion for the assessee to disclose any income for these two years. Therefore, the Assessing Officer is not justified in observing that but for the search the assessee would not have disclosed the above income. According to the learned counsel, there is ample material to show that from the seized record there was enough indication to show that the assessee would have disclosed some income. The first presumption of the Assessing Officer that no income would have been disclosed for these two years is therefore, totally unwarranted. The learned counsel further submitted that during the course of the search, 20 floppies were seized. According to the assessee, the assessee's records are prepared from the floppies. The basic data in the form of primary record is all available. For example, the assessee's receipts are entirely from the banks. Full bank details showing the receipts and payments are available. The assessee has maintained all the vouchers for the expenses which were also available during the course of search. Besides this, the assessee has maintained labour register, and stock register at different sites. From all these basic records, the assessee's accounts are written up a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld not have been reflected for the broken period. The assessee, therefore, decided to show income on the basis of total profits of block. The learned counsel drew our attention to the working of this income placed at page 130 of the paper book. This page shows that the assessee had taken entire gross receipts up to 8-8-1996 into account, reduced therefrom receipts pertaining to sub-contracts. These sub-contracts were genuine contracts about which there was no dispute. These figures could be found from floppies and other primary record. On the net profit receipts, the profit was arrived at. This profit was as per the working given on page 26 of the paper book which shows a statement of affairs for the entire period from the start of the firm till the date of search. The profit for this period was Rs. 3,70,81,860 adding thereto profit of the sub-contract of Rs. 14,98,761 the total profit for the entire period was Rs. 3,55,83,099 which worked out to 14.3% on the total receipts. By taking this as the basis, income for the contract business for the broken period was shown at Rs. 4,27,864. To this, profit on sub-contract of Rs. 3,59,090 was added. The profit on sub-contract also was fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the assessee showed profit of Rs. 1,51,29,500 on contract receipts of Rs. 9,14,68,850. This gives an average profit of 16.5% the profit for the broken period from 1-4-1996 to 8-8-1996 was 14.3%; the profit for the rest of the period, i.e., 9-3-1996 to 31-3-1997 was 33.69%. The learned counsel pointed out that for assessment year 1998-99 the assessee has filed its return of income in which its net contract receipts were Rs. 13,00,82,884 on which profit disclosed was Rs. 3,53,57,802 which gave a profit of 25.6%. For assessment year 1999-2000, the net receipts were Rs. 16,89,34,358 while the net profit was Rs. 4,05,81,724 which worked out to 24.2%. The return for this year is yet to be filed. According to the learned counsel, these figures have been considered for paying advance tax. According to the learned counsel, this pattern of the profit shown for the subsequent years clearly indicates the assessee's stand that the assessee would not have shown lower profit as alleged, but would have shown much more improved profit genuinely worked out from the records maintained. Coming to the charge of the learned Assessing Officer that the assessee had not paid advance tax and this indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 29,500. The assessee had computed the total tax of Rs. 60,51,800. The payment made by the assessee through TDS is of Rs. 26,69,072 and the balance payable is Rs. 33,82,728. The total tax payable including interest under sections 234B and 234C as per the computation of the assessee is Rs. 40,59,276. A sum of Rs. 30 lakhs was paid on 19-10-1996 and balance of Rs. 10,59,276 was paid on 24-11-1996. Thus, page 119 of the paper book clearly shows that no advance tax for the assessment year 1996-97 was paid. According to the learned D.R. this goes to prove that the assessee would not have shown income of Rs. 1,51,29,500 in regular course. It is only after the search that the assessee had disclosed this income just to escape the consequence of search. In support of his contention, the learned D.R. relied upon the judgment of the Madras High Court in the case of B. Noorsingh v. Union of India [1999] 105 Taxman 101 at page 104. According to the learned D.R. the Madras High Court has taken judicial cognizance of the fact that a person who comes forward with the return or with further information after the search, does so only on account of the detection already made under the search. In the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be held to have maintained books of account only for purposes of Act and thus returned income did not form part of undisclosed income. However, in the instant case it is the case of the Revenue that the assessee had not maintained any books of account at all. Therefore, the ratio of the decision of the Indore Bench of the Tribunal is not applicable in the instant case. The learned D.R. reiterated that the assessee had not based his return of income on any books of account but based his return of income on the statement of affairs. The Assessing Officer has also proved that the true income of the assessee could not have been computed from the floppies seized by the Department, since the floppies did not contain full and true picture of the business activities of the assessee. The learned D.R. also produced before us the seized floppies and concluded that the action of the Assessing Officer in treating the amount of Rs. 1,51,29,500 for assessment year 1996-97 and Rs. 51,81,310 for assessment year 1997-98 as undisclosed income of the assessee, is justified. 13. As a rejoinder, Shri K.A. Sathe submitted that since the floppies were seized by the department, the figures in the seiz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shown only 1.46% profit in the past and would have continued to show such profit, it was contended that the assessee's subsequent records very clearly show that as and when the assessee started earning better profits, it had on his own shown more profit. Even for assessment years 1997-98 and 1998-99 which are post-search assessments, the profit shown by the assessee is very substantial. According to the learned counsel, this also indicated that in this business, profit of 14% shown by the assessee is not very unusual. The learned counsel submitted that it is true that in earlier years profit was less and this was admittedly because the assessee had shown some bogus contracts. But then for these earlier years the assessee agreed for the additions made and that is not subject-matter of dispute between the Tribunal. 16. As regards the contention of the learned D.R. that the annexure to the assessment order was meant only to reconcile the figures, Shri Sathe repeated that this in fact showed what profit the Assessing Officer had intended to adopt. 17. As regards the decisions on which the learned D.R. placed reliance, the learned counsel submitted that these were distinguishable o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he accounts in the computer duly recorded on the floppies. Admittedly, the maintenance of accounts by computer was started by the assessee effective from assessment year 1996-97 and there is no material on record to suggest that computer based accounts were maintained prior to assessment year 1996-97. The maintenance of accounts with the assistance of computer are legally valid and no fault can be found with the assessee in maintaining such accounts. It has been categorically stated by the assessee that the opening balances entered in the computer tallies with the closing balances of the previous year and no material has been brought on record to suggest to the contrary. Therefore, it is held that the assessee was maintaining the computerised accounts in the normal course of business. No doubt, the entire entries were not found recorded in the floppies but major entries were duly recorded. The assessee was also maintaining some other record on the basis of which the accounts were finally completed and no fault has been found by the Assessing Officer with such final results. Rather, the income computed by the assessee has been accepted by the Assessing Officer. Therefore, it is diff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch the return is yet to be filed, the assessee has declared the profit of 24.2%. Further these figures have been considered for paying advance tax. This pattern of the profit shown for the subsequent year clearly indicates the assessee's stand that the assessee would have not shown the lower profit as alleged, but would have shown much more improved profit genuinely worked out from the records maintained. 21. Coming to the contention of the learned D.R. that the assessee has not paid advance tax and this indicated that it had no intention to show any income for assessment year 1996-97, we again do not find any merit in the same. Non-payment of advance tax at worst could be a default on the part of the assessee. Further, non-payment of advance tax can be for several years. For example in a given case, the assessee may willingly fail to pay advance tax because it might be advantageous to him to pay interest under sections 234B and 234C rather than pay heavy interest on borrowings made for the purpose of payment of tax. In our considered opinion, a mere non-payment of advance tax does not lead to the conclusion that the assessee would have not shown any income. 22. Now we come to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would not have been disclosed for the purpose of this Act. In these circumstances, the returned income declared by the assessee did not form part of the undisclosed income." In the case of the assessee, it is duly established from the documents available on record that the assessee would have disclosed the income for the assessment years 1996-97 and 1997-98. 23. In the light of the above discussion, we hold that there is no justification on the part of the Assessing Officer to treat Rs. 1,51,29,500 for assessment year 1996-97 and Rs. 51,81,310 for assessment year 1997-98 as undisclosed income of the block period. He is directed to treat the same as disclosed income and allow the deduction therefor and then compute the tax liability of the assessee in respect of the remainder undisclosed income. These two grounds accordingly succeed. 24. Ground No. 3 reads as under : "On the facts and in the circumstances of the case, the learned ACIT erred in making addition of Rs. 7,09,750 on account of 'on money' in flat purchase on piece of paper seized at the time of search which did not relate to the assessee as the flats are purchased by the partners and not by the assessee." The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... registration charges is shown in the return of Shri Shivajirao Bhagwanrao Jadhav and Rs. 3,29,375 is shown as advance to Lodha Rane Associates in Schedule C-8 of the Block return. Agreement of flat is made on 23-11-1995. (2) Mrs. Meera Shivajirao Jadhav Rs. Agreement price 4,70,400 Stamp duty 7,920 Registration charges etc. 5,021 ----------------------- 4,83,341 Cash components 1,34,000 ----------------------- 6,17,341 ----------------------- Area 672 sq. ft. Rate per sq. ft. Rs. 900. Flat price of Rs. 4,83,341 is shown in the Block return of Mrs. Meera Shivajirao Jadhav and cash component is shown in the block return of Shri Shivajirao Jadhav as advance to Lodha Rane Associates. Agreement is made on 30-5-1996. On money of Rs. 4,63,375 is shown as advance to Lodha Rane Associates in the block return of S.B. Jadhav." The learned counsel submitted that in view of the above, the addition made by the Assessing Officer in the case of assessee is not correct. 26. Shri Naresh Kumar, the learned D.R. strongly supported the order of the Assessing Officer. He submitted that even though a paper was found at the residence of the partner, it was found amongst o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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