9911796707
TMI Blog2000 (1) TMI 170X X X X Extracts X X X X X X X X Extracts X X X X ..... izure action under section 132(1) of the Income-tax Act, 1961 was carried out in the assessee's residential premises situated at 'Kailash' Garud Colony, Deopur, Dhule from 26-11-1996 to 29-11-1996. At the same time, simultaneously, survey action under section 133A of the Act was also carried on at the following premises from where he operated his business activities. (1) M/s. Kailash Lodge, Dhule; (2) M/s. KM. Khopade and Co., Dhule; (3) M/s. Kailash Motor Cycle Agency, Dhule; (4) M/s. Shankaranand Lodge, Ranapratap Chowk, Dhule. (4) The assessee has maintained separately regular books of account for the above proprietary business concerns and has also subjected them to audit under section 44AB. As many as 36 grounds have been raised. The same are discussed and disposed off as follows: (5) In Ground No. 1, it has been submitted that the order under section 158BC of the Act is ab initio bad in law and is required to be quashed, inasmuch as the same is based on notice issued under section 158BC(a) on 17-2-1997 on which date the learned Asstt. CIT had not acquired jurisdiction over the case, since the notice under section 158BC(a) is the foundation of Block Assessment and since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive at the actual real consideration received for the transaction. This amount was divided by the sq. ft. of land sold to arrive at the average rate per sq. ft. of land transacted in. If different rate came for different year, then to rule out any prejudice all different rates for different years were added and there sum totals were divided by the number of years to arrive at the average rate for a particular Gat number. To arrive at unaccounted consideration, the sq. ft. of land transacted in is then multiplied by the average rate of per sq. ft. The amount already accounted for was substracted from the total consideration to derive unaccounted consideration. In her order, the Assessing Officer stated that this method was the best method because it was extremely difficult to arrive at a uniform rate which would rule out prejudice either in favour or against either the department or the assessee. The Assessing Officer has further stated in her order that due to this method was provided by other assessees in Khopade Group who had provided calculation in respect of Survey No. 566. The Assessing Officer further pointed out in her order that the assessee himself had adopted and pleaded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charged. Since the variation in on money earned had been accepted, according to the Assessing Officer, the average rate method was the best method and she applied the same so as to cover the excess charged from one transaction with lesser amount transacted for another. 9. The assessee had filed a chart with the revised return. Taking up this chart, the Assessing Officer referred to transactions in Gat No. 46 and pointed out that there was large variation of sale rates for different plots in same Gat No. The rates varied from Rs. 23.15 per sq. ft. for plot No. 32 to Rs. 15.15 per sq.ft. for plot No. 40. The transactions in this Gatwere done in several years and these were recorded in Register No. 74 and Bharna Register No. 91. These gave average rate of Rs. 18.01 per sq.ft., which was universally applied by the Assessing Officer for all the transactions in the Gat in the block period. The Assessing Officer then calculated the on money for average rate basis for all Gat Nos. year wise by taking different average rates for different Gats. She did similar working for transactions appearing in books of M/s. Kailash Motor Cycle Agency, a proprietary concern of the assessee. The year wis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice realised is bound to vary depending upon time, demand and supply position. The urgency of buyer or seller, the peculiar defects of lands such as access to road, nearness to nulla, marshy lands, high tension wires passing through the land, odd size of the plot etc. In view of this, it is difficult to find any standard pattern of price or price even in the same survey number. According to the learned counsel, the learned Assessing Officer accepted the fact that there could be variation in the quantum of on money (vide her observations on page 18 of the assessment order) but she felt that it was naive and unrealistic to say that the transactions recorded in Bharna Register were the only ones in which on money was charged. This shows that the learned Assessing Officer had in mind the market pattern in big cities where every plot or flat is sold for on money. It is here that she should have considered the peculiar background of Dhule District where the assessee was operating. 12. Shri KA. Sathe further submitted that the learneed Assessing Officer failed to appreciate that Bharna Registers were meant for assessee's personal purpose and not for disclosing to the Department. Therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y at a very large scale during the entire period of Block assessment and that almost in all if not all the Gat numbers dealt in by the assessee, he had received on money. He submitted that Bharna Registers were not complete record of the on money earned by the assessee and that the cash flow statement filed by the assessee has defects. Coming to the specific defects, he pointed to page 34 of the Paper Book No. 3 (S.No. 170) and submitted that the on money is for 12 plots. He submitted that it impossible to believe that rest of plots were sold without charging on money. The learned D.R. further submitted that there were no transactions recorded in Bharna Register Nos. 89, 90 and 91 during the period from 18-1-1992 to 9-3-1993. No entries prior to 18-8-1988 and after 26-8-1996 were found. Therefore, it cannot be said that these registers recorded entire on money transactions of the assessee. How can the cash flow statement prepared from 13-11-1985 onwards be complete when these Bharna Registers are base for on money received and which are available from 18-8-1988 onwards. He drew our attention to pages 41, 42, 33 of the Paper Book and submitted that these show only advances and pages ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT [1995] 214 ITR 801/80 Taxman 89 (SC); (h) CIT v. Durga Prasad More [1971] 82 ITR 540 (SC); (i) Smt. Amar Kumari v. CIT [1979] 120 ITR 747/2 Taxman 462 (Raj.); (j) Bhikaam Chand Jain [IT Appeal No. 647 (Pune) of 1994]; (k) Overseas Chinese Cuisine v. Asstt. CIT [1996] 56 ITD 67 (Bom.) (TM). 16. In his rejoinder to the submissions of the learned D.R., Shri K.A. Sathe, reiterated that the assessee was not receiving on money in all Gat Nos. on large scale; that cash flow statements were not defective but for minor mistakes of totalling etc.; that Bharna Registers were complete record of the assessee's transactions outside the books of account and that the basis of estimate by the Assessing Officer was highly arbitrary and unreasonable. He submitted that the assessee did not deny that he received on money. But his contention has been that he received the same only in those transactions which had been covered in cash flow statement which in turn was based on Bharna Registers, diaries, loose papers etc. The assessee has made an honest effort to exhaustively show the entire receipt of on money. According to the learned counsel, the department is trying to estimate, without evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he learned counsel for the assessee submitted that the cash flow statement, the on money in respect of transactions Where sales have been completed is shown in the year in which the sale is effected. Bharna Registers 89,90 and 91 and other records only show advances (and not on money) for a particular land. When the advances as per these registers are received but subsequently no sale deed is finalised till the date of raid, such advances are shown as excess money and shown on credit side of cash flow. Where advances received are less than sale price, the entire sale price is reflected in regular book and there was no question of showing any on money. The learned counsel. 19. As regards the contention of the learned D.R. that pages 1 to 7 of Paper Book No. 2 and page 4 shows the decrease in on-money but increase in commission payments, the learned counsel for the assessee submitted that on money is shown as per actuals. In respect of land at S.Nos. 6/4,566 and 170 which were sold through the Agents, the advances received were not noted according to Plot Numbers. Hence, the total advances received per person had to be bifurcated among the co-owners on square foot basis. That is why ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 10,000. Sale registered of Rs. 5,000. Hence not amount of Rs. 5,000 is shown. The details of advance and sale effected have remained to be shown in inner column. (d) The details of transactions are fully shown. There is totalling mistake of Rs. 75,000 which requires to be added. But this is not a case of commission. (e) As stated earlier, Bharna Register is not the only record. Other registers, diaries, loose papers are also taken into account in preparing cash flow. The Assessing Officer had got the cash flow checked and in the assessment order she has not made any adverse comment. The mistakes now shown do not make the cash flow incomplete or unreliable." 22. In response to the charge of the learned D.R. that the Bharna Registers have overlapping entries, etc. the learned counsel for the assessee submitted that for the purpose of cash flow which is the basis of disclosing undisclosed income, full account of seized record has been taken. The fact that there are overlapping entries has been duly mentioned by the assessee himself. The Bharna Register is written chronologically and from day-to-day and in any case the fact remains that it is part of seized record. The cash flow i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The provisions under Chapter XIV-B are the special provisions. These were brought on the statute book specially and specifically for assessment of undisclosed income detected as a result of search. The assessment made under section 158BC has to be distinguished from the assessment in the normal circumstances. Though it has to be made in the manner similar to one under section 143 or 144, the material in block assessment and in regular assessment is different. In a normal assessment when regular books of account are produced, the Assessing Officer has to compute the income on the basis of such books and if these are defective material except the one collected. On the other hand, when search takes place, the entire seized material gives complete picture of the activities of the assessee including all his disclosed and undisclosed assets. In computing the undisclosed income, the Legislature advisedly has required the computation of income under Chapter XIV-B and no reference is made to section 145. If omission of section 145 is specific, section 145 cannot be invoked even by implication. The process of estimation of undisclosed income by estimate of "best assessment" by rejecting th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C(b), where he has to assess only the undisclosed income of the block period on the basis of the evidence found and material available as a result of the search conducted under section 132 of the Act." On page 741, the Hon'ble High Court has held as follows: "The definition of 'undisclosed income' in section 158B(b) 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 asset, entry or other document or transaction representing wholly or partly income or property which has not been or would not have been disclosed for the purposes of the Act. It therefore, follows that what has assessee had already disclosed or would have disclosed is not to be treated as undisclosed income." The maximum of English Law as propounded by Holroyd, J. prescribes: "It is better than the guilty men should escape rather than one innocent should suffer". The principle of justice requires that no one should be punished on the basis of presumption. Addition should not be made merely on surmises. It should be supported by cogent material and evidence. 26. In the case before us a searc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t showing receipt of any such on money in cases of others. The human probability does not presume that person acts prudently or rationally all the time -- J.K. Commercial Corpn. Ltd v. CIT [1969] 72 ITR 296 (All.). The human probability also must be based on honesty of a person and dishonesty cannot be a rule. If a person maintains full record of on money received for himself, it is logical to state that this is honest record of all his deals. We further find that this is not the case of the Assessing Officer that the Bharna Registers were not complete and the learned D.R. cannot be allowed to make altogether a new case than what has been made by the Assessing Officer. 27. We also do not agree with the arguments of the learned D.R. that cash flow statement filed by the assessee with the revised return was not exhaustive and was defective. First of all, it is wrong to presume that cash flow statement is based on Bharna Registers alone. The details of on money have been collected from other sale registers like Register No. 93, 14, diary No. 32, loose papers etc. Thus, the cash flow statement is exhaustive. We have gone through the cash flow statement and find that except two specifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evance. 29. The decision of the Delhi High Court in the case of Raza Sugar Co. Ltd. is equally distinguishable. This was a case where the ITO found four instances showing that the sugar manufactured by the assessee was superior to one found in the market and its selling rate in the market was always higher than the normal rate. The four instances were also found which showed that full sale price was not recorded in the books of account. In a case of commodity like sugar which has standardised price in the market and where the facts had established that there was a possibility of assessee having earned on money, the authorities concerned had no difficulty in holding that on money received by the assessee would be estimated on some basis. In the case of the assessee before us, he deals in land which is not the commodity having a standardised price in the market. As stated above, each plot of land has its unique features. Moreover, there is no material to show that there was a premium for each plot sold as possibly there could be such premium in big cities like Bombay, Delhi, etc. The Assessing Officer has also not gathered any material in that behalf. There was therefore, no questio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has to be based on cash flow statement itself making adjustment only for genuine mistakes. The question of best judgment is ruled out and therefore, the application of any formula for estimating income does not arise. 31. Reliance has been placed by both sides on the judgment of the Hon'ble Supreme Court in the case of C. Velukutty. The representative of the assessee submitted that this judgment of the Apex Court supports his case while the department has tried to distinguish the applicability of this case. This was a case where the Head Office of the assessee had recorded sales of goods transferred from Branch Office as also goods purchased from its own Office. A parallel set of accounts was found showing that sales as per the parallel accounts were more by 135%. The Assessing Officer proceeded to compute the sales in Branch account also on the same basis. In this context, the Hon'ble Supreme Court on pages 244 and 245 observed as under: "From the discovery of secret documents in the Head Office it does not necessarily follow that a corresponding set of accounts were maintained in the Branch Office, though it is probable that such accounts were maintained. But as the accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e drawn in the absence of any evidence to the contrary. 33. In the case of Bhikaam Chand Jain decided by the Pune Bench of the Tribunal, the assessee had denied any receipt of on money. There was however, a paper found during the raid which according to the Tribunal suggested possibility of receipt of on money. Thus, there was justification for estimation. When estimation was justified, the basis of estimation was based on actual sale instances and evidence of market value in the form of comparable cases and Valuation Officer's report. In the case of the assessee before us, when the assessee accepted the receipt of on money in sale of plots where there was actual evidence available, it will not be reasonable to believe that he did receive on money in other sales when there is no evidence to the contrary and other factors regarding on money are not present or not established. 34. In the case of Overseas Chinese Cuisine, it was a case of a hotel and it was found that there was suppression of sales. This was based on a particular method adopted by the Hotel owner in recording the sales. Since the activities were continuously carried on in a hotel, a reasonable conclusion could be dr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or seized by the department in respect of rest of the five buildings under construction by the assessee. The Assessing Officer simply by applying the rate taken by him for the other three buildings and basing on presumption that as the five buildings are situated in the same premises the assessee must have earned on money estimated undisclosed income at Rs. 5.37 crores. Thus, the facts of the present assessee's case are similar to those in the case before the Bombay Bench of the Tribunal. The argument of the assessee as well as the department proceeded on similar lines. The decision of the Supreme Court in the case of Sumati Dayal was also relied upon by the department. The Tribunal, however, disagreed with the contention of the Department as is clear from the discussion in para 13.1 of the order and held that the seized material possibly recorded receipt of on money in respect of different flats/shops, inference to be drawn was that whenever on money was received it was recorded. It was not possible to hold without material that documents are incomplete and then take average and hold that on money was received in respect of each flat. This would tantamount to writing something not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer on wrong premise and without appreciating the facts correctly. The same is accordingly deleted. 41. Ground No. 4: In this ground, an addition of Rs. 43,200 for assessment year 1996-97 on account of salary to employees of Kailash Lodge has been challenged. The facts have been discussed by the Assessing Officer in para 12 on page 3 8 of the Assessment Order. According to the Assessing Officer during the course of survey under section 133A on the business premises of the assessee situated at Kailash Lodge, the statement of Shri Rameshsing Babasing Rajput, Manager of Kailash Lodge was recorded on 26-11-1996. In his statement in Question No. 4, Shri Rameshsing Babusing Rajput stated that ".... the four persons are working in Kailash Lodge including himself and they are drawing the salary as under...." Shri Rajput (Manager) Rs. 1,100 Shri Shyam Gangu Rs. 700 Shri Bharat Yellappa Mane &nb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew of the submissions of the learned counsel and keeping in view the entries in the Pagar Patrak Registers which formed part of the seized material, we see no justification for the impugned addition. The same is accordingly deleted. This ground accordingly succeeds. 44. Ground No. 5: In this ground, an addition of Rs. 25,000 on account of telephone charges has been challenged. The facts leading to this addition have been discussed by the learned Assessing Officer in para 13 on page 39. The assessee runs a Lodge viz. Shankar Anand lodge. In the said Lodge, Telephone No. 21122 was installed on 24-2-1993. The said lodge was started with effect from 17-10-1991. According to the Assessing Officer the assessee had not shown income from this telephone and she estimated such income at Rs. 25,000. 45. Shri K.A. Sathe, the learned counsel for the assessee submitted that the assessee charges Rs. 2 per call if any visitor uses the same in the Lodge. Whenever local calls are collected they are recorded in the regular books of account. Almost all visitors are villagers and charges are very meager as the lodge building is very old. He drew our attention of the details of telephone bills paid a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 630 630 ----- -------- -------- Total: 918 4,714 3,796 ----------------------------------------------------------------------------- He further drew our attention to Ledger Extract of Telephone Bill a/c placed at page Nos. 224 to 227 of the Paper Book No. 1, which gives the above account. Pointing out to the above account, the learned counsel submitted that estimation is based on mere imagination without any basis. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 14,43,000 ------------------------------------- According to the learned Assessing Officer these payments are not reflected in the regular books of account. He further stated that in reply to Question No. 22 and the statement of the assessee recorded under section 132(4), the assessee confessed that these payments were unaccounted. The Assessing Officer confronted the assessee with the diaries and later on further examined the diary No. 32. The assessee made a declaration of Rs. 15,73,000 as undisclosed income for the various years and for this, he submitted a cash flow statement. The Assessing Officer was not satisfied with the explanation furnished and added the amount of Rs. 15,43,000 to the total income of the assessee. 48. Shri K.A. Sathe, the learned counsel for the assessee submitted that the above payments were made by various members of the family of the assessee towards purchase of agricultural lands. The said payments were not recorded in the regular books of account. All the assessees have prepared cash flow statements on unaccounted transactions and have included all the above payments in cash flow statement. He drew our attention to the following details of pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sp; 15,000 -do 19-10-1992 20,000 Prakash Parkhe 17-03-1993 4,100 -do 26-11-1986 40,000 Hede 12-02-1987 &n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 09-10-1993 15,000 -do 19-07-1995 2,500 Kisan Hede 09-09-1995 3,000 -do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sp; --------- 06-09-1986 2,000 Hede 31-12-1987 15,000 23-07-1988 15,000 20-09-1988 20,000 18-11-1988 25,000 27-10-1988 25,000 12-10-1991 & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; Shri Rajguru 24-08-1991 10,000 -do 19-12-1991 5,000 -do 26-05-1992 10,000 -do 28-07-1992 5,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 35,000 -do 25-08-1995 75,000 -do 25-08-1995 75,000 -do 30-09-1996 70,000 &n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; -do ------------ 1,00,000 Less: Accounted in books 12,000 ------------- 88,000 15-11-1987 &nb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p; Shri Prakash Parkhe 17-12-1990 1,000 Shri Prakash Parkhe 17-01-1992 50,000 Bhanudas Parkhe 17-01-1992 1,000 -do & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sp; -do 01-01-1993 600 -do 06-01-1993 10,000 -do 28-01-1993 5,000 -do 27-03-1993 5,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sp; -do 05-07-1993 1,000 -do 19-06-1993 1,500 -do 30-06-1993 1,000 -do 19-08-1993 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; ---------- (D) Shri Sanjay K. Khopade: 1990-91 50,000 Shri Rajguru 25-08-1995 75,000 Hede 25-8-1995 75,000 Hede &nb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e above details, it is noted that the payments made to the tune of Rs. 1,99,000 and Rs. 80,000 being prior to the block period cannot be added during this block period. In view of this, the whole addition of Rs. 15,43,000 is deleted. 50. Ground No. 7: In this ground, the addition of Rs. 7,14,934 on account of alleged suppressed sales has been challenged. The facts leading to this addition have been discussed by the Assessing Officer in para 15 on pages 44 to 46 of his order. According to the Assessing Officer the books of M/s. K.M. Khopade and Co. (Wine shop) were inventorised and subsequently impounded as per Annexure A-4. Pages 2 and 3 Sr. Nos. 16 to 35 were deeply scrutinised. On scrutiny of the said books of account, it was noticed that the assessee suppressed the sales and inflated the expenses. She has given the details of such inflation in extenso on pages 44, 45 and 46 of the order. She accordingly made an addition of Rs. 7,14,934. 51. Shri K.A. Sathe, the learned counsel for the assessee submitted that no opportunity was given to the assessee to reconcile the figures. As per the learned counsel, the facts are as under: --------------------------------------------------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... L/F 11 to 30 liquor L/F to 10. 850545.10 Mild Liquor L/F 41 to 55 68759.00 Mild liquor 65598.50 Fermented liquor L/F 34 to 36 L/F 69 to 83 &nb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sp; ---------------- ---------------------------------------------------------------------------------------- Thus sales shown in Audit report and sales as per books of account are the same. The amount of sales of Rs. 10,57,253 is not appearing anywhere in books of account as stated in assessment order. No clarification was asked for the same and hence there is no excess sales of Rs. 89,541 as stated in assessment order. Copies of a/c sales of liquor are enclosed vide page Nos. 259 to 308. ----------------------------------------------------------------------------------- (B) Asstt. year 1992-93 : F.Y. 1-4-1991 to 31-3-1992 Sales as per sales register (seized) 11,89,643 Less: Sales recorded in books of a/c 11,65,953 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sp; 1,14,576 ---------- (D) Asstt. year 1995-96 Sales as per sales register No. A-1-9, loose paper bundle No. 11. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sp; --------- Actual suppressed sales : 21,911 --------- In the assessemnt order on page No. 46 sales as per register have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the assessment order. He drew our attention to the copies of sales of liquor at pages 289 to 303 of the Paper Book, and submitted that if the Assessing Officer had given an opportunity everything would have been reconciled and there would have been no occasion for the alleged addition. The learned D.R. relied upon the order of the learned Assessing Officer. 52. We have considered the rival submissions. We find that the extensive calculation given in the assessment order by the Assessing Officer were not confronted to the assessee. It is not known from where the figure of Rs. 10,57,253 was adopted by the Assessing Officer for the period 1-4-1990 to 31-3-1991 ie. A.Y. 1991-92. In fact, no opportunity was given to the assessee to reconcile the same. After all, the assessee is maintaining regular books of account and the sales of liquor is subject to check by the Excise authority. In all fairness before making an addition, the Assessing Officer ought to have given an opportunity to the assessee to explain the discrepancy in sales, if any. The above facts given by Shri K.A. Sathe, also need verification at the hands of the Assessing Officer. In the circumstances, we deem it fit to r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... points that in reply to question No. 24 in the statement recorded at the time of search, the assessee had unconditionally and voluntarily declared a sum of Rs. 5,00,000 to cover any omissions regarding the expenditure made in the education of his children. She accordingly made an addition of Rs. 5,00,000. 56. Shri K.A. Sathe, the learned counsel for the assessee submitted that there is no justification for the impugned addition. He drew our attention to question No. 24 and submitted that the assessee had nowhere admitted and declared an amount of Rs. 5,00,000 on account of education expenditure for his children. What the assessee had exactly stated in answer to question No. 24 is as follows: "For admission to Medical College in respect of my son Dr. Sanjay I have not paid an kind of donation. For his education every year Rs. 35,000 was expended and how much is expended for his maintenance is not known. For education of daughter Kum. Anita in first year B.D.S. she had paid Rs. 1,00,000 and for second year Rs. 70,000. How much is expended for maintenance is not known. For education for my son Jayendra I have paid Rs. 32,000 on account of fees. How much is expended for maintenance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this ground an addition of Rs. 5,00,000 on account of expenditure on marriage of Dr. Sanjay K. Khopade, the son of the assessee has been challenged. The facts leading to this addition have been discussed in para 17 on pages 48 and 49 of the assessment order. Assessee's son Dr. Sanjay married Dr. Kamini on 3-12-1995. The assessee had exp ended Rs. 64,910 on account of marriage of the son. During the course of search under section 132(1) a Video Cassette of their marriage was seized which according to the Assessing Officer was screened from time to time so as to come to the correct conclusion about the expenses on the marriage. The learned Assessing Officer states that Shri K.M. Khopade is an Ex-MLA having his own social and political status in Dhule district and accordingly, the expenditure shown at Rs. 64,910 was on the lower side. The learned Assessing Officer further observed that in the Video Cassette, "it is seen that huge amount has been expended on decoration, buffet dinner, cloth and ornaments. The standard of the wedding was justifying his status." Keeping in view all these facts, the learned Assessing Officer estimated the total marriage expenses at Rs. 5,60,000 and thereb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; -------------- 16,05,521.49 16,05,521.49 --------------------------------------------------------------------------------- Further Rs. 491 were debited to cash flow statement of Mr. K.M. Khopade. The learned counsel for the assessee submitted that during the assessment proceedings not a single question was asked about marriage expenses of Dr. Sanjay nor any question was asked regarding cassette seized by the department. He submitted that both the groom and bride were Doctors by profession. The marriage was performed in a dignified manner without much lavishness. The learned D.R. relied upon the order of the learned Assessing Officer. He made arrangements for viewing of the cassette seiz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n shah Griha Nirman Society, Dhule. 4. Rs. 12,17,453 Cash out of sale proceeds of various plots not recorded in books of a/c. --------------- Rs. 15,75,255 --------------- There is no dispute about the cash of Rs. 1,27,802 which has been accepted by the Assessing Officer. The remaining three amounts have not been accepted by the Assessing Officer and added to the income of the assessee. As regards the cash of Rs. 80,000 received from Shri Amrut Ramdas Kuwar, Chairman of Anmol Co-op. Griha Nirman Society, the Assessing Officer recorded a statement under section 132(1) of the Act on 21-8-1997. According to the Assessing Officer in reply to question No. 19 of the said statement Shri Amrut Kuwar stated that he had not handed over the cash of Rs. 80,000 personally to Shri Kisanrao Khopade, nor did he had any documentary proof for the same. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00 was received on 23-11-1996 or not. According to him, the answer is in the affirmative as stated in answer to question Nos. 9 and 10 and also answer to question No. 19. According to the learned counsel, it is totally irrelevant whether cash is paid by Shri Amrut R. Kuwar or by other members viz. Sanjay Mohite or Nitin Gaikwad. He filed a copy of sale deed in respect of the same. He further submitted that an amount of Rs. 80,000 was duly recorded in the regular books of account. 62. As regards the amount of Rs. 1,50,000 received from Shaikh, Chairman of Ajanshah Griha Nirman Society, Dhule, the learned counsel submitted that it is an admitted fact by both the assessee's witnesses and department and the assessee himself that Shri Shaikh had paid a sum of Rs. 1,50,000 to Shri Kisanrao M. Khopade. The said admission is made by Shri Shaikh into his statement recorded under section 131 on 30-6-1997 vide answer to question No. NIL on page No. 4. He further submitted that the said amount of Rs. 1,50,000 is appearing in the register maintained by the society and into the statement recorded on page 4. It is stated that the figure was checked from the register and found correct. As regards ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the members who are dealing in plats but the Assessing Officer did not bother to go into the detailed cash flow statement and made the impugned addition without giving any cogent reasons. Since the amount of Rs. 12,17,453 stands duly accounted for in the cash flow statement, we see no justification for the impugned addition. This ground accordingly succeeds and the assessee gets relief of Rs. 14,47,453. 65. Ground No. 13-In this ground an addition of Rs. 3,38,685 on account of alleged unexplained investment in flat No. 601 Oshiwara, Andheri, has been challenged. The facts leading to this addition have been discussed in para 19 on page 51 of the assessment order. The Assessing Officer noted that the assessee had invested a sum of Rs. 8,38,685 in flat No. 601 Oshiwara, Andheri. A sum of Rs. 5,00,000 was taken as loan from M.H.F.D.C. and for the balance of Rs. 3,38,685 the assessee had no explanation. She accordingly made an addition of Rs. 3,38,685 to the income of the assessment in the assessment year 1996-97. Shri K.A. Sathe, the learned counsel for the assessee submitted that the flat was purchased from M.H.A.D.A. for a sum of Rs. 8,38,685. For purchase of this flat, a loan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; D.D. No. 036313 -do- 147 ----------- 3,38,685 -------------------------------------------------------------------------------------------- The above demand drafts are debited to Bombay Housing Area Development Board, Mumbai. He further submitted that in the balance-sheet filed for 1-4-1996 to 29-11-1996 on page No. 10, Rs. 8,38,685 was shown on asset side in the name and style of M/s. Bombay Housing Area Development Board, Mumbai. He further drew our attention to the extract of Ledger a/c on page 136 which is as follows: ------------------------------------------------------------------------------------ &nb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; 8,38,685 ------------------------------------------------------------------------------------ The learned D.R. relied upon the order of the learned Assessing Officer. 66. We have considered the rival submissions. In view of the submissions made by the learned counsel for the assessee detailed above and after verifying the whole position, we hold that there is no justification for the impugned addition. The investment stands debited in the books of account and stands explained. This ground of the assessee therefore, succeeds and the addition of Rs. 3,38,685 is deleted. 67. Ground No. 14--This ground reads as under: "Learned A.C. I.T. (Inv.) had erred in adding Rs. 1,70,000 and Rs. 2,70,000 on account of investments made by Shri Sanjay K. Khopade and Yiran K. Khopade respectively in the flats at Mumbai even though the same are accounted for in regular books of account maintained by them (Ref. para No. 20 and page No. 52). Hence addition of Rs. 1,70,000 and Rs. 2,70,000 made on protective basis be deleted." The facts leading to these two additions have been dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p; By taking loan from L.I.C. of India. Rs. 1,70,000 Out of regular income, details of which are as follows: ------------- Rs. 2,70,000 -------------------------------------------------------------------------------------------- Date Amount Mode of payment CB. L/F &nb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e payment of Rs. 2,70,000 is accounted for in the regular books of account. Details of payments are as follows: -------------------------------------------------------------------------------------------- Date Amount Mode of payment CB. L/F No. No. -------------------------------------------------------------------------------------------- 22-3-1993 35,000 &n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; cash flow statement of 1-4-1992 to 31-3-1993 and offered for taxation. -------------------------------------------------------------------------------------------- The learned counsel therefore, submitted that there is no justification for the two impugned additions. The learned D.R. relied upon the observations of the learned Assessing Officer. 69. We have considered the rival submissions and perused the facts on record. Both Dr. Sanjay and Miss Kiran Khopade are major members of the family of the assessee and as stated above, they purchased two flats on their own after making investments from out of their respective books of account. Both of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned addition. The learned D.R. relied upon the order of the learned Assessing Officer. 72. After considering the facts of the case, we hold that the addition made by the Assessing Officer is on wrong appreciation of facts. The amount of Rs. 8,00,000 which is part of total unaccounted debtors of Rs. 14,43,000 has been declared by the assessee in his cash flow statement and accordingly there is no justification for the impugned addition. The same is accordingly deleted. This ground therefore, succeeds. 73. Ground No. 16-In this ground, an addition of Rs. 5,00,000 on account of advance to landowners has been challenged. The facts leading to this addition have been discussed by the Assessing Officer in para 22 on page 53 of the assessment order. According to the Assessing Officer the assessee had paid a sum of Rs. 5,00,000 as advance to landowners and had also subsequently made admission of the same amount in account of advances paid to the landowners. The Assessing Officer made the addition stating that "as the explanation put by the assessee are not satisfactory and the cash flow statement filed does not throw light on the expenditure incurred or investments made out of the acknowl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; Shri Y-M. Yhopade Investment in closing stock of land 1,00,000 Mrs. Kamal K Khopade -do ----------- 15,00,000 ---------------------------------------------------------------------------------- The learned counsel submitted that thus from the answer to question No. 17 it is clear that what the assessee had disclos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leted. 79. Ground No. 20--In this ground an addition of Rs. 6,25,000 on account of FDRs kept by Hede family members had been challenged. The facts leading to this addition have been discussed by the Assessing Officer in para 24 on pages 54 to 56 of the assessment order. During the course of assessment, on scrutiny of page 16 of diary No. 33, the Assessing Officer noted that the following transactions had been entered into by the assessee: -------------------------------------------------------------------------------------------- Sr. No. Name Amount Date -------------------------------------------------------------------------------------------- 1. Shri Jagannath Hede Rs. 50,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ---------------------------------------------------------------------------------- According to the Assessing Officer the assessee had purchased land from the above persons. Shri Jagannath Erappa Hede had filed an affidavit dated 7-9-1997 before the Assessing Officer and had admitted that he had received advances against the agreement to sale of agricultural land bearing S. Nos. 88/1 and 91/1 of Mahindale Shiwar, Dhule. According to the Assessing Officer the above transaction do no find place in the regular books of account. The above monies were FDRs with Rajawade Mandal Peoples Co-op. Bank in the name of the Hede and his family members. In the affidavit Shri Jagannath Errappa Hede owned up the FDRs but the Assessing Officer rejected the contents of the affidavit and as the entries appear in diary No. 33 found at the residence of the assessee held that the above FDRs belong to the assessee. She accordingly made the impugned addition. 80. Shri K.A. Sathe, the learned counsel for the assessee submitted that the learned Assessing Officer had simply asked vide her letter dated 30-6-1997 to explain the transactions on page No. 16 of Diary No. 33. Accordingly, a reply was submitted on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sp; ----------- 1,67,000 ----------- -------------------------------------------------------------------------------------- Be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,15,000 5. Kishanrao M. Khopade Kisan Hede 29-7-1995 2,500 6. -do- -do- 9-9-1995 3,000 7. Sanjay Kisanrao Khopade Jagannath Hede 25-8-1995 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement with Hede regarding S. Nos. 88/1 and 91/1 and hence was knowing. Since deal with Hede was not complete, the assessee had kept record of the said FDRs. Shri Hari Krishan, the learned D.R. strongly supported the order of the Assessing Officer. He submitted that details of these FDRs were found at page 16 of the diary No. 33 found at the residence of the assessee at the time of search. The onus was on the assessee to prove that the above deposits actually belonged to Hede family and not the assessee. According, to the learned D.R., this onus was not discharged and hence, the Assessing Officer was justified in making the impugned addition. 81. We have considered the rival submissions and perused the facts of record. The fact that the lands were sold by Hede family to the assessee is not disputed. It is also a fact that the assessee entered into an agreement to sale and accordingly made the above payment to Hede family to purchase the FDRs with Rajawada Mandal Peoples Co-op. Bank. At the time of search, the FDRs were with the Hede family and not with the assessee. What was found at the assessee's residence was only the entries about the above fixed deposits on page 16 of diar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anging Rs. 2,00,000 as deposit in his factory. It was only in his request that I had arranged the amount from the above mentioned person." In question No. 31 of the statement recorded under section 132(4) the assessee was asked to explain the sources of Rs. 2,00,000. In reply, the assessee had given the following sources: 1. By himself - Rs. 50,000 2. Shri Jayendra Khopade - Rs. 50,000 3. Shri Dilip Kisanrao Kholawale -Rs. 50,000 4. Shri Bharat Shripati Yernale - Rs. 50,000. The statement of Shri Deshmukh was recorded which is placed at page 73 of the paper Book No. 4. The Assessing Officer also called Shri Dilip Kisanrao Kholawale and Shri Bharat Shripati Yernale and recorded their statements under section 132(4). The statement of Shri Kholawale is placed at page 66 of the Paper Book No. 4 and the statement of Shri Yernale is placed at page 56 of the paper book No. 4. According to the assessee Rs. 50,000 paid by him were accounted for in his cash flow statement. Similarly, Rs. 50,000 paid by Shri Jayendra Khopade was also accounted for in his respective cash flow statement. It was explained that both Shri Kholawale and Yernale had deposited Rs. 50,000 with the assessee out of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. He also drew our attention to the statement of Shri Kholawale and Yernale and submitted that these persons were not men of means, that the cheque of Rs. 2,00,000 was found at the time of search at the residence of the assessee and the assessee was the defacto owner of these deposits. He therefore, submitted that so far as the two additions of Rs. 50,000 each in the name of Kholawale and Yernale, the same deserve to be upheld. 85. We have considered the rival submissions and perused the facts on record. The FDRs of Rs. 50,000 kept with the aforesaid Karkhana dated 13-9-1994 in the name of the assessee is admittedly unaccounted and since it is covered in the cash flow statement, there is no justification for the addition of Rs. 50,000. So far as the FDR of Rs. 50,000 kept by Jayendra Khopade with the aforesaid Sugar Mill, we hold that this deposit belongs to the son of the assessee in his name and since he too offered it for taxation in his cash flow statement, there is no justification for the impugned addition. Accordingly, the two additions of Rs. 50,000 aggregating to Rs. 1,00,000 are deleted. As regards the other depositors viz., in the name of Mr. Dilip Kisanrao Kholawale s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aments has been challenged. The facts leading to this addition have been discussed by the Assessing Officer in para 25 on page Nos. 59 to 62 of the assessment order. The details of gold ornaments found and seized of various members are as follows: -------------------------------------------------------------------------------------------- Name of Member Gold ornaments Seized Value found in gms (Net) -------------------------------------------------------------------------------------------- Prescrip- Weight ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; 27,977 Khopade Neckless-1 1 37.720 19,614 Chapalhar-2 67.107 34,895 Finger rings-2 7.968 4,143 & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p; Bans-2 22.000 11,440 Top-1,set, finger-ring 1 ------------ ---------- &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p; - rings 7) 46.143 23,994 Finger-ring (1-smalt) 6 29.016 15,088 ----------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; 5,200 ----------- ----------- 102.425 53,261 5. Miss Kiran K. Khopade Bangles 2 &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .144 65,056 6. Mrs. Shalini Sanjay Khopade Kangan 2 47.088 24,485 Bangles 2 25.560 13,290 Bindi 1 &n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 197.584 1,02,741 ----------- ----------- -------------------------------------------------------------------------------------------- The above details are as per the panchanama made during the course of search. From the above details, it is noted that the gold ornaments owned by the assessee weigh at 676.640 grams (net). Out of this, 422.500 grams shown in the wealth-tax return have been accepted and balance of 254.140 grams (676.640 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be upheld. 89. We have considered the rival submissions and perused the facts on record. We have gone through the statements of the brothers of the assessee and after perusing the same, we do not find any force in the contention of the learned D.R. that the fact that the assessee got some jewellery from his father before the later's death is a concocted story. It is a fact that the father of the assessee died on 21-1-1996. It is customary in the Indian Society that the jewellery is inherited by the sons. There is nothing unusual about it. We accept the statement of the assessee which is supported by the statements of his brothers that he got jewellery (a piece of gold and kada of gold) weighing about 30 tolas from his father before the later's death. We accordingly delete the addition of Rs. 1,10,550. Though the Assessing Officer states that she is making a substantive addition on account of jewellery of three members of the family in the hands of the assessee and protective addition in the case of jewellery belonging to Smt. Kamal, we do not find that such additions have been made. However, we will discuss this issue in the individual cases of the family members. This ground acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; ---------- 2,25,000 2,25,000 ----------- ---------- ------------------------------------------------------------------------------------ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ghar Kharedi Khata L/F 143 -------------------------------------------------------------------------------------------- 30-6-1988 To Cash 2,95,000 31-3-1989 By Bal. C.B. 252 B/F 3,06,849.50 30-6-1988 To regn. 1,493 Exp. CB 252 30-6-1988 To Stamp &nb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of undisclosed income. She accordingly made the addition of Rs. 6,15,000 in the assessment year 1993-94. 98. Shri K.A. Sathe, the learned counsel for the assessee submitted that the assessee had constructed a house and has maintained day-to-day construction a/c and all construction expenses are supported by the vouchers. From the said vouchers only copies of bills of material purchased were submitted to the Departmental Valuer. Further, year wise break up of construction was given from the said construction a/c to the Departmental Valuer. No opportunity was given to the assessee before making reference to the D.V.O. to produce the detailed construction account of house building. The assessee was not asked to produce either the books of account maintained in respect of construction of house nor was asked to submit his valuation report. According to the learned counsel, the department was in possession of cash book of construction account which was impounded vide Panchanama Annexure 'A' Sr. Page No. at Sr. No. 76 A-77 i.e., Delux A/c book cash book plot etc. total pages 111, written pages 111. The details of expenses incurred for construction of house property are as follows: ----- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; 3,40,025 116 1992-93 1-4-91 to 31-3-92 26,960 3,66,985 104 1993-94 1-4-92 to 31-3-93 86,000 4,52,985 -------------------------------------------------------------------------------------------- (1) During assessment year 1992-93 Rs. 10,000 is debited to capital a/c in M/s. K.M.K. & Co. L/F 138. (2) During assessment year 1993-94 Mrs. Kamal Kisanrao Khopade had expended Rs. 39,000 for construction of the said house which is appearing on L/F 69 under the head Shri Kisanrao M. Khopade Navin Ghar Bandhani Khate Garud Colony. (3) During assessment year 1993-94 Rs. 27,000 are debited to K.M. Khopade Capital a/c for construction purposes, in M/s. Details of withdrawals are as follows: Kailas Lodge L/F 68. ------------------------ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; 27,000 --------- (4) During assessment year 1993-94 Rs. 10,000 are debited into M/s. Shankaranand Lodge. Details of which are as follows: -------------------------------------------------------------------------------------------- Date &n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... --------------- Amount Particulars BND No. Page No. Asstt. year -------------------------------------------------------------------------------------------- 9,529 Construction A-76/77 4,5 1988-89 Expenses 15,000 -do- A-76-77 26 &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ----------------- Rs. 7,00,953.27 ----------------- -------------------------------------------------------------------------------------------- 99. Shri K.A. Sathe, the learned counsel for the assessee submitted that the assessee accounted for a sum of Rs. 7,00,953 as against Rs. 6,15,000 adopted by the D.V.O. Since all the investments were recorded in the books of account, there was no justification for the impugned addition of Rs. 6,15,000. 100. The learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incorporated as undisclosed income in the cash flow statement must have been spent for, the above mentioned expenditure. Thereafter, she assumes that "the assessee must have spent a sum of Rs. 10,30,840 on cost of land, furniture, fixtures, household expenses etc. and proceeded to make an addition of Rs. 10,30,840. Shri Sathe, the learned counsel for the assessee submitted that the land i.e., plot on which house is constructed at 25, Garud Colony, Dhule was purchased for Rs. 22,000 on 2-12-1983 which is beyond block period i.e., prior to 13-11-1985, and which is appearing in the balance-sheet as on 31-3-1991. On 31-3-1992 it is transferred to construction a/c on L/F 104 of M/s. Kailas Motor Cycle Agency. Hence, addition on account of land cost cannot be added. Shri Sathe further submitted that the addition on account of furniture, fixtures, household expenses etc. cannot be made without pointing out any specific evidence. T.V., V.C.R., A.C. are debited in regular books of account and the said information was called at 5.45 p.m. on 17-11-1997 and was asked to submit within two hours, hence the same was submitted on 17-11-1997 at 7.45 p.m. But the Assessing Officer did not bother to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were before the Assessing Officer. The disallowance, if any, should only be made in the course of regular assessment proceedings. In this, we are supported by the order of this Bench in the case of Shree Vastu Construction [IT (SS) Appeal No. 32 (Pune) of 1997 dated 4-2-1998]. Accordingly, we delete the addition of Rs. 21,67,240. 107. Ground No. 31-In this ground an addition of Rs. 4,91,120 on account of agricultural income has been challenged. The facts leading to this addition have been discussed in para 30 on pages 71 to 73 of the assessment order. The Assessing Officer has stated that the amount of Rs. 4,91,120 is the difference between the old return and revised block assessment return. In fact, this is not the position. After hearing both the sides, we find that there is a misunderstanding in following the entries in regular books of account. -------------------------------------------------------------------------------------------- Assessment Gross receiptsof Expenses of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 59,960 37,960 22,000 1992-93 58,131 26,899 31,232 1993-94 1,11,271 38,873 72,398 1994-95 &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; A G debited -------------------------------------------------------------------------------------------- 8-2-1972 Dhule 307/1 & 8 14 15,000 Kailas Motor 306/1 3 38 Cycle Agency &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p; 48,000 10-10-1974 Deopur, 133 11 12 8,000 -do- Dhule 12-2-1968 Dhule 4721+2 7 11 6,300 -do- 9-8-1984 Laling, 132/1 2 00 12,400 -do- &n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 fall outside the block period. He submitted that if proper opportunity had been given, the purchase deeds would have been furnished. The learned D.R. submitted that though from the submissions of the learned counsel, it appears that the purchase of lands is outside the block period but this matter was not considered by the Assessing Officer as the assessee did not file the details before the Assessing Officer. He, therefore, requested that the matter may be restored back to the file of the Assessing Officer. 110. We have considered the rival submissions. We restore this issue to the file of the Assessing Officer. From the details given above, it is noticed that the lands except the one purchased on 21-7-1988 fall beyond the block period. But the cost of that land at Rs. 88,725, according to the assessee, has been debited in the books of account. The whole issue needs verification at the end of the Assessing Officer. Accordingly, we restore this issue to the file of the Assessing Officer. 111. Ground No. 33--In this ground, the assessee has challenged the addition of Rs. 29,366 in the accounts of creditors of wine shop. The facts leading to this addition have been discussed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cash found -------------------------------------------------------------------------------------------- 1. K.M. Khopade & Co. (Wine Shop) 281 2. Kailas Motor Cycle Agency 79 3. Shankaranand Lodge - 4. Kailas Lodge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the genuineness of gift of Rs. 25,000. Accordingly, there is no justification for the impugned addition of Rs. 500. This ground accordingly, succeeds and the addition of Rs. 500 is deleted. 116. Ground No. 36 - This ground reads as under: The appellant craves leave to add, to amend or alter above grounds of appeal. Obviously this ground is general in nature and calls for no comments. 117. Vide letter dated 24-7-1998 the assessee has raised the additional ground No. 37 with regard to the addition of Rs. 3,10,000 on account of excess closing stock of plot. 118. Shri K.A. Sathe, the learned counsel submitted that this ground was remained inadvertently to be raised which appears on para 21 on pages 52 to 53 of the assessment order. In fact in the said para there is another addition of Rs. 8,00,000 which is raised in ground No. 15. As there were so many grounds and additions, through oversight the said ground remained to be raised. He therefore, requested to grant permission to raise the same. 119. After hearing both the paties, we also find that since this ground relates to vital controversy, the same is allowed to be raised and accordingly it is admitted. 120. The facts leadin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p; 3. Kamal K. Khopade 1,67,000 3,00,000 - 4,67,000 4. Anita K. Khopade 50,000 1,02,000 - 1,52,000 5. Kiran K. Khopade 1,00,000 1,71,000 - 2,71,000 ------------------------------------------------------ &nb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer mis-read this issue. The declarations were in respect of stock of liquor and spare parts and not in respect of stock of plots. In fact there is nothing like stock of plot. Under the circumstances, we see no justification in the impugned addition. The same is accordingly deleted. 123. In the result, the appeal is allowed in part. Per Singhal (JM) 124. After going through the proposed order of my learned Brother very carefully, I have not been able to persuade myself to agree with the conclusion reached by him in respect of Ground No. 2 which relate to the addition of Rs. 58,59,210 on account of excess money charged by the assessee on the sale of plots in the block period for the reasons given by me hereafter. 125. The conclusion arrived at by my learned Brother is that there is no scope of estimation of undisclosed income under the provisions of Chapter XIV-B and the facts of the case. This conclusion is based on the following reasons: (a) The Legislature has not made the provisions of section 145 applicable to search cases assessable under Chapter XIV-B. Though sections 143 and 144 are made applicable by section 158BC specifically, there is no reference to Section 145. Hen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed forward for set off in regular assessment. Similarly, section 158BF provides that no interest under section 234A, 234B or 234C or no penalty under section 271, 271A or 271B shall be levied or imposed upon the assessee in respect of undisclosed income. However, there is no provision for exclusion of section 145. Therefore, in my considered opinion, the provisions of section 145 has to be applied while making assessment of undisclosed income by virtue of the provisions of section 158BH. If the contention of the assessee is accepted in this regard, then it would create anomalies. For example, where glaring and patent mistake is committed by the Assessing Officer in his assessment order, he would not be able to rectify the same since section 154, which also deals with the assessment, has not been made applicable specifically. Similarly, there may be a case where seized material may contain unaccounted receipts which may be exempt from taxation under section 10. In such situation, assessee would be debarred from claiming exemption as the department would be able to take the plea that section 10 has not been made applicable to Chapter XIV-B. Any construction of the statute which creat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rger Bench of five Judges. The Court was concerned about the powers of the Income-tax Officer under section 23(3) of Indian Income-tax Act, 1922 which is similar to section 143(3) of 1961 Act. At page 782, their Lordships observed as under: "In making an assessment under section 23(3) of the Indian Income-tax Act, the Income-tax Officer is not fettered by technical rules of evidence and pleadings, and he is entitled to act on material which may not be accepted as evidence in a court of law, but the Income-tax Officer is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. There must be something more than bare suspicion to support the assessment under section 23(3). The rule of law on this subject has been fairly and rightly stated by the Lahore High Court in the case of Seth Gurmukh Singh v. CIT [1944] 12 ITR 393." The above observations show that estimate should not be made of pure guess and there must be something more than mere suspicion. This has been made crystal clear in the subsequent judgment of the Supreme Court in the case of Raghubar Mandal Harihar Mandal v. State of Bihar [1957] 8 STC 770. At page 778, fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether there is any justification for making the estimate. To answer this question, it will be necessary to go through the material placed before the Bench. The material seized from the premises of the assessee in the course of search comprised of Bharna Registers, diaries and loose-papers. In the Bharna Registers, the assessee had recorded the amounts received by him against the sale of plots from time to time. There is a serious controversy between the parties regarding this Bharna Register. It is the case of the assessee that this Register is a complete record regarding receipts of unaccounted sale consideration of the plots sold by him during the block period. The basis of the argument of the assessee that such record was regularly maintained for his personal knowledge and information and according to the test of human probabilities, it should be accepted as complete record. Other the other hand, it is the case of the Revenue that Bharna Register is merely a compilation of unrecorded sale consideration and not a complete record of such unaccounted transactions. The basis of this argument of the Revenue is that this Register is not maintained in the chronological order. Furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 13th July, 1993, Rs. 1,000 dated 10th July, 1993 and Rs. 500 dated 2nd August, 1993. Thereafter at page 48, there is entry of Rs. 1,000 dated 17/18 December, 1992 and thereafter there are entries for 1993-94 and again on right hand side, the entries for 1993 are recorded. At page 56, on right hand side there is entry of Rs. 700 dated 18th June, 1994 and thereafter there is entry of Rs. 2,000 dated 25th, January 1993. Similarly, in Bharna Register No. 91, there are entries dated 1st October, 1988, then 10th November, 1988, then again 11th October, 1988, and 25-10-1988. Similarly, there is entry on 3rd August, 1989 in the middle of entries of July 1989. 132. The above entries are given by me by way of illustration to show that such entries in the Bharna Register were made from some other records and the only inference that can be drawn is that such registers were not maintained in the normal course. It appears there were certain other records from which the entries were made in the Bharna Register. The other records might not have been found in the course of search due to various reasons including the destruction of the same by the assessee. It is not the case of the assessee th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h cash flow deals with the unaccounted transactions for the financial year 1989-90. It is found that all the payments on the right hand side amounting to Rs. 1,12,250 were made prior to 31st December, 1989. On the left hand side, the assessee had shown the opening cash balance and the unaccounted sale consideration of plot received during this year. There are two entries of Rs. 15,191 and Rs. 16,559 in respect of unaccounted sale consideration of plots pertaining to survey No. 6/4 but no date is mentioned against these amounts. Giving benefit of doubt to the assessee that these sums were also received prior to 31st December, 1989, the total amount received upto 31-12-1989 (including the opening cash balance) comes to Rs. 97,305. This clearly shows that assessee had made excess payments than what was available with him. Further, it appears that there is a total mistake of about Rs. 10,000 on the right hand side since exact total comes to Rs. 1,51,431 against shown by the assessee at Rs. 1,61,241. Because of these discrepancies, the cash balance shown by the assessee at Rs. 39,181 cannot be accepted as correct. Further, it is found that assessee had shown undisclosed cash receipts am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see in his regular books of account and the sale agreements/deeds were false and incorrect. The assessee himself has also admitted this fact by offering the amount of undisclosed income in his return under section 158BC. Therefore, in my opinion, the onus which lies on the Revenue has been discharged. Since the sale consideration recorded in the sale deeds/agreements and in the regular books of account have been proved to be false, in my opinion, the Assessing Officer justified in making the estimate under section 143(3)/145 in accordance with the guidelines given by the Apex Court in the case of Dhakeswari Cotton Mills Ltd. and in the case of Raghubar Mandal Harihar Mandal as discussed by us in earlier part of the order. This view is also fortified by the decision of the Supreme Court in the case of H.M. Esufali H.M. Abdulali. It has been contended on behalf of the assessee that case law relied upon by the ld. senior D.R. where the estimate was justified related to cases where articles sold were standard articles while in the present case, it is the land which has been sold which is not of the standard quality in respect of each plot and those cases, therefore, are distinguishable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar as the question of estimation is concerned, there is enough material on the record to justify the same. 135. Now the last question for my consideration is what should be the quantum of the estimate. As discussed earlier, the estimate must have nexus with the material found and cannot be made arbitrary or on pure guess, suspicion or surmises. It has also to be taken into consideration that each year is an independent year and therefore, estimate has to be made in respect of the material found pertaining to each year. It has also been held by this Bench in the case of Shree Vastu Construction that each project or land in respect of which plots have been sold is an independent project or land and there must be some independent material in respect of each project/land to justify the estimation because there may be different circumstances prevailing in respect of each land/ project. The addition cannot be made in respect of 'A' building where there is no material, merely on the ground that material regarding charging of 'on money' is available in respect of 'Building. In the present case, admittedly, there is no material whatsoever of charging excess money in respect of four lands b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lah etc., and location of the plot etc. etc. These facts would have to be taken into consideration by the Assessing Officer for discounting the estimate in respect of such plot. It has been pointed out by my learned Brother that it is not necessary to charge excess money in every case and has justified his point by observing that assessee would not charge excess money from a Government servant. I have no dispute with such view. However, it has to be established by the assessee that there existed mitigating circumstances as discussed by me earlier. I may also add one more example where the purchaser of the plot or building may be an old tenant from whom the assessee might not be able to get extra amount. 138. Before parting with my order, it is necessary to mention that in the course of hearing, the Id. counsel for the assessee has pointed out various factual mistakes which had resulted in computation of higher average sale consideration and the ld. senior D.R. also admitted about such factual mistake, but he had requested us to restore the matter to the file of the Assessing Officer for verification. 139. In view of the above discussion, I set aside the order of the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax Act, 1961? 2. If the answer to question No. 1. is in the negative, whether there is any scope of estimation of undisclosed income under Chapter XIV-B, by applying the provisions of section 143 of the Income-tax Act, 1961?" 2. The relevant facts in this case are that the assessee is an individual residing at 25, "Kailash", Garud Colony, Deopure, Dhule. His main business is in the purchase and sale of land. The assessee mainly purchases agricultural land and after converting the land into plots, sells the same. The other activities of business include resale of motor cycle parts, sale of wine and running of lodges. Several additions were made by the Assessing Officer, which have been dealt with by the learned Accountant Member by a detailed order. The difference of opinion between the learned AM and the learned JM is relating to the computation of undisclosed income in respect of the sale of land. During the course of search it was found that the assessee had been receiving 'on money' on the sale of plots. The material was found in the shape of Bharna Registers, diaries and loose papers. It is the claim of the assessee that in the Bharna Registers the assessee had recorded all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and it also provides that the provisions of section 142, sub-sections (2) and (3) of section 143 and section 144 shall so far as may be applied. The learned counsel contended that there is no general application of section 143 and section 144, but only a limited application to the extent these provisions may be applicable. It was contended that section 144 will be attracted provided the conditions for making the assessment under section 144 exist. Say for example non-compliance of notices etc. If the said conditions do not exist the Assessing Officer cannot invoke the manner of assessment under section 144. Referring to the material found during the course of search, the learned counsel contended that the assessee was maintaining a record for his personal use and therefore keeping in view the human probabilities it must be held that all the transactions recorded in the registers represented the entire black money of the assessee and therefore, there was no scope for estimation of the same. It was further contended that the Assessing Officer has assessed an additional amount of more than Rs. 58 lakhs on account of 'on money' but the money is not reflected in the form of any assets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd to be there. Referring to section 158BH the learned DR contended that all the provisions of the Act are applicable in respect of the assessment made under the Chapter. It was contended that the section authorizes application of all the provisions of the Act in making the assessment as well as the provisions applicable after making the assessment. The section refers to the assessment in its entirety i.e., that is before and after the assessment. It was further contended that it is a well established principle of interpretation that the provisions of the Act should be interpreted in order to avoid unreasonable results and that there should be rational construction of the provisions of the Act. In this connection reliance was placed on the decisions of the Supreme Court in the case of CIT v. National Taj Traders [1980] 121 ITR 535/[1979] 2 Taxman 546 and in the case of K.P. Varghese v. ITO [1981] 131 ITR 597/7 Taxman 13. It was further contended that it is the duty of the Officer to compute the undisclosed income. If the assessee does not file a return the Assessing Officer has to make an assessment. In making the assessment provisions of section 145 would be attracted if the books ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The learned DR further pointed out that the affidavit filed by the assessee before the Assessing Officer confirms that the Bharna Register did not disclose the complete "on money" transactions in regard to sale of plots of land. It was further contended that in the circumstances of the case it was not necessary to have the direct evidence of "on money" receipt in respect of the sale of plots in respect of which no such transactions have been recorded. Referring to the finding of the JM in Para No. 132 the learned DR pointed out that some of the defects in the Bharna Register have been pointed out as instances and the same are only illustrative. Reliance was placed on the decision of the Supreme Court in the case of Calcutta Co. Ltd. v. CIT [1959] 37 ITR 1 in support of the contention that the Assessing Officer is empowered to make an estimate of income. Referring to the method to be adopted for determination of the income, the learned DR pointed out that the learned JM had given appropriate directions for fair estimation of income on the basis of relevant considerations. Reliance was also placed on the decision of the Ahmedabad Bench of the Tribunal in the case of Abhishek Corpn. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he issue at hand, it will be useful to reproduce the relevant provisions of the Act. 12. Section 158BA reads as under:-- "(1) Notwithstanding anything contained in any other provisions of this Act, where after the 30th day of June, 1995 a search is initiated under section 132 or books of account, other documents or any assets are requestioned under section 132A in the case of any person, then, the Assessing Officer shall proceed to assess the undisclosed income in accordance with the provisions of this Chapter. (2) The total undisclosed income relating to the block period shall be charged to tax, at the rate specified in section 113, as income of the block period irrespective of the previous year or years to which such income relates and irrespective of the fact whether regular assessment for any one or more of the relevant assessment years is pending or not. Explanation--For the removal of doubts, it is hereby declared that- (a) the assessment made under this Chapter shall be in addition to the regular assessment in respect of each previous year included in the block period; (b) the total undisclosed income relating to the block period shall not include the income assessed i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r sub-section (2) of section 32 shall not be set off against the undisclosed income determined in the block assessment under this Chapter, but may be carried forward for being set off in the regular assessments." 14. Section 158BC reads as under: "Where any search has been conducted under section 132 or books of account, other documents or assets are requisitioned under section 132A, in the case of any person, then (a) ................ (c) The Assessing Officer shall proceed to determine the undisclosed income of the block period in the manner laid down in section 158BB and the provisions of section 142, sub-sections (2) and (3) of section 143 and section 144 shall, so far as may be, apply;" 15. Section 158BF reads as under:-- "No interest under the provisions of section 234A, 234B or 234C or penalty under the provisions of clause (c) of sub-section (1) of section 271 or section 271A or section 271B shall be levied or imposed upon the assessee in respect of the undisclosed income determined in the block assessment." 16. Section 158BH reads as under: "Save as otherwise provided in this Chapter, all other provisions of this Act shall apply to assessment made under this Chapte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in such manner as the Assessing Officer may determine: Provided further that where no method of counting is regularly employed by the assessee, any income by way of interest on securities shall be chargeable to tax as the income the previous year in which such interest is due to the assessee: Provided also that nothing contained in this sub-section shall preclude an assessee from being charged to income-tax in respect of any interest on securities received by him in a previous year if such interest had not been charged to income-tax for any earlier previous year; (2) Where the Assessing Officer is not satisfied about the correctness or the completeness of the accounts of the assessee, or where no method of accounting has been regularly employed by the assessee, the Assessing Officer may make an assessment in the manner provided in section 144." 20. Section 158BC(b) provides the manner of assessment of undisclosed income. It provides that the assessment is to be made in the manner laid down in section 158BB and the provisions of section 142, sub-sections (2) and (3) of section 143 and section 144 shall, so far as may be, apply. 21. Section 158BB provides that the undisclosed i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n irrelevant or inadmissible material. The language of section 143(3) as also section 158BB makes it abundantly clear that the assessment to be made by the Assessing Officer should be based on evidence before the Officer. The word "evidence" has to be construed in a comprehensive sense and it includes circumstantial evidence. It is well settled principle of law that the material or evidence on which the taxing authorities may base the assessment is not confined to direct testimony by witnesses. It may be reiterated that the word used in section 143/ section 158BB is evidence. However, in making assessment the Assessing Officer does not act merely on what is technically described as evidence in the Indian Evidence Act. It is observed from section 143(3) that the Assessing Officer can base his assessment not only on the evidence found during the course of the search but also on the material gathered by him. It is now well settled that the Assessing Officer is not fattered by technical rules of evidence and the like and that he may act on material which may not strictly speaking be accepted as evidence in a Court of law. Such evidence need not necessarily be direct evidence. It may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invoking the powers under section 145. The Andhra Pradesh High Court in the case of Pendurthi Venkiah v. CIT [1955] 28 ITR 749 have expressed the same view. 25. Their Lordships of the Madras High Court in the case of Sree Shanmugar Mills Ltd. v. CIT [1974] 96 ITR 411 have also taken the same view. In this case it was held as under: "Section 13 deals with the method of accounting and not with books of account. The impropriety of the method of accounting should be distinguished from the falsity and unreliability of the books of account. While a method of accounting may be rejected under the proviso to section 13, the account books can be rejected in exercise of the power under section 23(3), for the power to reject the accounts is inherent in the power to call for evidence in support of the return and investigate the same. Section 13 can operate only in cases where the books of account are accepted as correct in regard to the transactions recorded therein and when the books of account are held to be false and incorrect, they cannot form the basis for computing the true income under section 13. It may be pointed out that section 13 of the 1922 Act corresponds to section 145 of the 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was received in respect of some of the deals. It had been argued before the Bench as well as before me that it was not necessary that in all cases the assessee would have received, "on money". In certain circumstances no "on money" might have been received by the assessee. As already pointed out, when evidence has been found of assessee having recorded only part of the money received in respect of the land deals and the other part not having been recorded in the regular books of account, it is for the assessee to establish as to under what circumstances such "on money" was not charged in respect of some of the land deals. I agree with the finding of the learned JM that apparent is real unless contrary is proved. In this case the consideration received by the assessee in respect of the land transactions was recorded in the sale deeds. The consideration recorded in the sale deeds was apparent and it was therefore for the revenue to establish the contrary. However, in this case, on the basis of the material found during the course of search and on the basis of the admission of the assessee that "on money" was received, it has been established that what is apparent does not reflect th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chapter, all other provisions of the Act shall apply to assessment made under the Chapter". The learned counsel for the assessee argued that the section authorizes applicability of such provisions of the Act as are applicable after the assessment is made. It was stated that once the assessment is made, then provisions of section 154, section 156, section 220 and other provisions for the recovery of tax etc. will be applicable. It was contended that the words used in section 158BH are "assessment made under this Chapter". According to the learned counsel, the language of section does not make other provisions of the Act applicable for purposes of making the assessment. The interpretation advanced by the learned counsel for the assessee is not well founded. The Legislature has used the words "save as otherwise provided in this Chapter". In Chapter XIV-B there is no reference to any of the provisions of the Act as are applicable after the making of the assessment. That being so, then the words "save as otherwise provided in this Chapter" in section 158BH are rendered redundant. It is well settled that the Legislature does not use superfluous words in a statute. Their Lordships of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer to make an arbitrary assessment or an assessment based on surmises or conjectures. The assessment has got to be based on relevant material and in the case of the search, the material might have been found as a result of search or from the books of account or other information gathered by the Assessing Officer. 34. Section 158BH refers to all the provisions of the Act and not only the provisions as are applicable after making of the assessment is also clear from the fact that there is no reference of certain provisions of the Act which have an important bearing on the determination of the income under Chapter XIV-B. For example, the provision for exemption under section 10 of the Act, there is no reference of this provision under Chapter XIV-B. If the interpretation advanced on behalf of the assessee is accepted, then it may not be possible for the Assessing Officer to grant exemption of income under section 10 of the Act. The said interpretation will render the scheme of assessment of undisclosed income as unworkable, which would not have been intended by the Legislature. Keeping in view the entire scheme of the Act, I am of the considered view that the interpretation adv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e powers conferred under the statute. Therefore the rules do not have the effect of curbing the scope of powers of Third Member conferred upon him under section 255(4). The Supreme Court in the case of Saiyad Mohammad Bakar El-Edroos v. Abdulhabib Hasan Arab JT 1998 (3) SC 76, 81 held that "procedural law is not to defeat the very object which is sought to be achieved and that it is always subservient to the substantive law. As nothing can be given by a procedural law what is not sought to be given by a substantive law, similarly nothing can be taken away by the procedural law what is given by the substantive law. Section 255(4) confers the power of reference to the Third Member in regard to the dispute arising between two Members of the Bench. Therefore, the rules cannot restrict the scope of the powers of the Third Member to the question(s) framed under the Rules. I am therefore of the considered view that once the issue is identified in the reference, the Third Member has the power to consider the entire material, the reasoning and the conclusions recorded by the Learned Members as well as the contentions advanced on behalf of the parties and record his findings in such a manner ..... X X X X Extracts X X X X X X X X Extracts X X X X
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