TMI Blog2000 (1) TMI 170X X X X Extracts X X X X X X X X Extracts X X X X ..... Kailash Lodge and Shankaranand Lodge, both proprietary concerns. A search and seizure 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... department. To this the amount accounted for in the fair books of account was added to arrive 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 O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions recorded in the loose papers or Bharna Register were only ones in which on money was 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e goods of a shopkeeper. Each plot is unique and each deal also is different from other. The price 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 Registe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the assessee in various paper books that the assessee was selling plots by receiving on money 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 atte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [1981] 130 ITR 421 (Delhi); (f) CST v. H.M. Esufali H.M Abdulali [1973] 90 ITR 271 (SC); (g) Sumati Dayal v. 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plete. As regards the contention of the learned D.R. that pages 41, 42 and 33 of the Paper Book shows only advances, the 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. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tually Rs. 9,000 was received on 12-4-1996 (B.R.90 - P.96) and Rs. 1,000 on 19-7-1996 (B.R. 90 - P. 101) -- total receipt Rs. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... andit Co. v. Asstt. CIT [1998] 61 TTJ (Asr.) 602 (TM). 25. We have considered the rival submissions and perused the facts on record. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 43(2) and (3) for regular assessment stands in contrast to the exercise of the Assessing Officer under section 158BB read with section 158BC(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 presumpti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity suggests that if he has maintained a personal record, he would not maintain a false record showing receipt of on money in some cases and not 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here is no case for estimation of profit on the basis of material available, further question regarding reasonableness of the estimate has no relevance. 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 premi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no material to hold that the cash flow statement is unreliable or incomplete. In such cases as distinguished by the Hon'ble Apex Court, the assessment 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d out whether in a backward district of Dhule presumption of earning of on money in case of all the plots for all the years in the Block assessment can be 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oney from its three projects; viz. Tulip, Sunflower and Blue Bell and accordingly calculated receipt of on money. But there was no document or evidence found 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not correct and deserves to be deleted because the average rate is applied to sales and not to purchases. In fact, this addition has been made by the Assessing 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 Rs. 600 Shri Jagdish Thakur Rs. 550 -------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 and received which are as follows: ----------------------------------------------------------------------------- Asstt. year Telephone charges Telephone Bal debited recovered bill paid to P L a/c ----------------------------------------------------------------------------- 1992-93 NIL NIL NIL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (f) Smt. Venubai Rs. 36,000 --------------- 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... To whom paid ----------------------------------------------------------------------------------- 05-07-1985 10,000 Hede 13-12-1985 50,000 -do 03-01-1986 20,000 -do --------- 80,000 Beyond block period --------- 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 30,000 ----------- 2,12,000 ----------- 14-03-1990 5,000 Shri Rajguru 14-03-1990 5,000 -do 22-01-1990 1,000 -do 22-08-1990 10,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30,000 ----------- 95,000 ----------- 2,28,000 ----------- 07-11-1990/ 17-12-1990 50,000 Shri Prakash Parkhe 17-12-1990 1,000 Shri Prakash Parkhe 17-01-1992 50,000 Bhanudas Parkhe 17-01-1992 1,000 -do -------- 1,02,000 --------- 09-08-1990 15,000 Smt. Venubai 13-03-1991 10,000 -do 07-02-1992 500 -do 27-03-1992 1,000 -do 01-08-1992 50 -do 05-08-1992 9,000 -do 01-01-1993 600 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relied upon, the order of the learned Assessing Officer. 49. We have considered the rival submissions and perused the facts on record. We have gone through the cash flow statement and find that it is a comprehensive statement prepared to arrive at surrender of undisclosed income. There is no adverse comment on cash flow statement by the Assessing Officer. It is noted that the payments were made by different members of Khopade group who had been separately assessed to tax. The lands were purchased by them in their individual names and the payments were made by each and every member separately as detailed above. The learned Assessing Officer brushed aside the explanation of the assessee simply ignoring the cash flow statement, according to which, the assessee had surrendered a sum of Rs. 15,73,000. The surrender was for unrecorded payments and accordingly, the Assessing Officer should not have ignored the explanation of the assessee in a summary manner. Since all the above payments stand explained by the cash flow statement which belong to different members of Khopade group who have shown such payments in their cash flow statements, we see no justification for sustaining such addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... --------------- 967713.00 --------------- To Gross profit 47585.65 By closing stock 250802.20 -------------- ---------------- 1218515.20 1218515.20 -------------- ---------------- ---------------------------------------------------------------------------------------- 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s there is difference of Rs. 85,760 (18,92,591 - 18,06,83 1). Detailed copy of sales register No. A-1/9 is enclosed herewith vide Page Nos. 138 to 138. (F) Asstt. year 1997-98 Sales as per register No. A-1/10 9,25,033 Less: Sales shown in return 7,86,790 --------- suppressed sales 1,38,243. --------- ------------------------------------------------------------------------------------------- Thus, the sales shown in audit report and the sales as per books of account are the same. The sum of Rs. 10,57,235 is not appearing anywhere in the books of account as stated in the assessment order on page 44. No clarification was asked for the same and hence there is no excess sales of Rs. 89,541 as stated 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an opportunity of being heard to the assessee. 55. Ground No. 10: In this ground an addition of Rs. 5,00,000 on account of expenditure on education of the children of the assessee has been challenged. The facts leading to this addition have been discussed in para 16 on pages 46 to 48 of the assessment order. During the course of assessment proceedings, the Assessing Officer noted that the assessee's children were bright and intelligent persons. His elder son is a doctor who was initially doing the medical course from Belgaum in Karnataka and is now persuing post graduation from some medical college at Mumbai. His younger son Jayendra was studying to become an Architect from Vidyapeeth Pune. His daughter Anita was doing Post Graduation from a College at Jalgaon and his younger daughter was doing Dental Medicine course also from Pune. According to the learned Assessing Officer substantial amounts must have been spent by the assessee on the education of his children. She further 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he children who were grown up were also recorded during the course of search and they gave the details of the maintenance expenses. For example in her statement recorded at the time of search, Kum. Kiran Kisanrao Khopade, who had taken education in North Maharashtra University at Jalgaon in M.Sc. (Microbiology) stated that monthly expenses were of Rs. 1,000 to Rs. 1,200. It is noted that a sum of Rs. 20,000 has been debited on account of her maintenance expenses. The maintenance expenses have been sent to her every month from Dhule to Jalgaon. Taking into consideration the detailed explanation furnished by the assessee, we find that the addition has been made purely on assumption and presumption and at no time the assessee admitted that he had spent over and above than what was recorded in the books of account on account of education of the children of the assessee. Accordingly, we see no justification for the impugned addition. The same is accordingly deleted. 58. Ground No. 11: In 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 discus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -------------------------------------------- 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 seized during the search and accordingly we saw the Video film in the room of the D.R. on 25-8-1998 from 12.00 noon to 1.00 p.m. in the presence of all the D.Rs. Shri K.A. Sathe and Shri Kisanrao M. Khopade The Video Cassette pertains to reception where simple vegetarian food was served. There was no service of liquor though the assessee is dealing in liquor. Reception was held in a Shamiyana and not in a hotel. During the course of Video show we noted that some persons handed over chandlo to the couple but no credit has been taken by the assessee. In our opinion, the chandlo am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as in his possession to show that this amount had been given to Shri Khopade under the agreement of a deal for the purpose of land for the society. She recorded a statement of Shri Shaikh under section 132(1) of the Act but was not satisfied whether Shri Shaikh had handed over a sum of Rs. 1,50,000 to Shri Kisanrao Khopade. According to the Assessing Officer it was a very clumsy and a desperate attempt by the assessee and via him of his associates to help him wriggle out of the admitted declaration and place on record a rationate ustifying the bifurcation. As regards the third amount of Rs. 12,17,453 it was admitted that this was unaccounted cash but the same was declared in the cash flow statement. But the Assessing Officer was not satisfied and accordingly made an addition of Rs. 14,47,453 (Rs. 80,000, + Rs. 1,50,000 and Rs. 12,17,453). 61. Shri K.A. Sathe, the learned counsel for the assessee submitted that Shri Amrut Ramdas Kuwar is the Chairman of Anmol Co-op. Griha Nirman Society Ltd. It was proposed to extend the existing housing society and some persons approached to the said Chairman Mr. A.R. Kuwar. In answer to question Nos. 9 and 10 of the Statement recorded under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,17,453, the learned counsel submitted that this is the cash on account of sale proceeds of plots not recorded in the books of account and is appearing in the cash flow statement prepared by the members of the family of the assessee in their respective cash flow statements. He submitted that it is an admitted fact that the assessee had stated that the cash found does not represent the cash received on account of excess consideration received and which is not recorded in the books of account. According to him, the assessee had wrongly made the said admission because the cash found was only on account of excess consideration received on sale of plots and there was no other source of income. 63. The learned D.R. Strongly supported the order of the learned Assessing Officer. He submitted that mere admission by way of two parties Mr. Nitin Gaikwad and Mr. Sanjay Mohite without any documentary evidence is of no assistance to the assessee and in the absence of any documentary evidence, the Assessing Officer was justified in holding that the amounts belonged to the assessee. 64. We have considered the rival submissions and perused the facts on record. We have gone through the statement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 5,00,000 was taken from M.H.F.D.C. and the balance amount is debited to M/s. Kailas Motor Cycle Agency, a proprietary concern of the assessee. On page 147 of Ledger, details of payments are given which are as follows: -------------------------------------------------------------------------------------------- Date Amount Mode of payment Where debited L /F -------------------------------------------------------------------------------------------- 12-3-1994 10,000 D.D. No. 27758 Kailas Motor Cycle 200 Agency, Prop. K.M. Khopade 26-7-1995 75,000 D.D. No. 16657 -do- 147 5-2-1992 2,38,685 D.D. No. 036074 -do- 147 19-2-1996 15,000 D.D. No. 036313 -do- 147 ----------- 3,38,685 -------------------------------------------------------------------------------------------- The above demand drafts are d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed to have purchased flats at Mumbai in the name of his son Shri Sanjay K. Khopade and Smt. Anita K. Khopade. According to the Assessing Officer the aforesaid flats purchased in the name of these two children were actually the flats purchased by the assessee out of his black money. She added these two amounts in the name of the abovenoted two members of the family on substantive basis in their respective assessments and on protective basis in the hands of the assessee. Thus, the following additions have been made. (a) Rs. 1,70,000 Protective addition on account of investment made by Sanjay Khopade in purchase of flat at Mumbai. (b) Rs. 2,70,000 Protective addition on account of investment made by Miss Kiran Khopade in flat at Mumbai. ------------ Rs. 4,40,000 ------------ 68. Shri K.A. Sathe, the learned counsel for the assessee submitted that Dr. Sanjay Kisanrao Khopade, the son of the assessee is assessed to Income-tax and he is also maintaining regular books of account. Dr. Sanjay Khopade had purchased a flat No. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 23 16 Bank of India, Dhule 28-6-1994 1,30,000 D.D. No. 30395 of Central 25 15 Bank of India, Dhule 17-10-1992 15,000 Not accounted in books of - - account hence covered in 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 them are assessed to income-tax and it is wrong on the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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 acknowledged undisclosed income filed by the assessee". ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tock of land. In fact, the Assessing Officer has made the impugned addition on a very vague basis without giving the names of landowners and without appreciating the facts as stated above. Accordingly, we see no justification for the impugned addition. The same is accordingly deleted. 76. Ground No. 17--In this ground an addition of Rs. 2,00,000 on account of investment in closing stock has been challenged. The facts leading to this addition have been discussed in para 22 on page 53 of the assessment order. The facts of this ground are the same as stated in ground No. 16 supra What the assessee had disclosed is excess cash received on account of sale proceeds of plots and not investment in closing stock. As the excess cash received on account of plots is already taxed, the same cannot be taxed twice again as a closing stock of Rs. 2,00,000. The addition made by the Assessing Officer is accordingly deleted. This ground therefore, succeeds. 77. Ground No. 18--In this ground an addition of Rs. 11,680 being alleged unaccounted money received on sale of plot No. 36 has been challenged. The facts leading to this addition have been discussed in para 23 on page 53 of the assessment ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 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 30-7-1997 vide letter dated 29-7-1997 vide page Nos. 9, 10 and 11. In the said letter all these transactions were explained and further Hede submitted affidavits to this effect. He submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7-1995 2,500 6. -do- -do- 9-9-1995 3,000 7. Sanjay Kisanrao Khopade Jagannath Hede 25-8-1995 75,000 8. -do- -do- 25-8-1995 75,000 ----------- 3,70,500 ----------- -------------------------------------------------------------------------------------------- Thus, the appellant had entered these transactions in the telephone diary i.e., No. 33. It was incorporated on page No. 16 of diary No. 33 in order to have some security known for the payments made against agreement to purchase land and which can be attached before judgment if Hede refuses to execute the sale. According to the learned counsel, the assessee himself had entered into 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 recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee with M/s. Sindkheda Taluka Sahakari Karkhana Ltd. on account of deposit. The facts leading to this consolidated addition which comprises of four additions of Rs. 50,000 each have been discussed by the A.O. in para 24 on pages 56 to 58 of the assessment order. During the course of search, it was noted that four FDRs of Rs. 50,000 each with Sindkheda Taluka Sah, Sakhar Karkhana were standing in the name of the following persons: 1. Shri Kisan M. Khopade; 2. Shri. Jayendra K. Khopade; 3. Shri Dilip Kisanrao kholawale; 4. Shri Bharat Shripati Yernale. The assessee's explanation on this was that the sugar factory was in need of money and in fact a cheque of Rs. 2,00,000 was obtained from the Chairman Mr. Deshmukh as a security of the above four FDRs. In fact this cheque was found in the possession of the assessee. The assessee had in reply to question No. 30 stated in this regard that"...... Dr. H. Deshmukh was the Chairman of the factory, he was in need of money to start the factory. He had met me 5-6 times and had requested for arranging 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 pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... returning the amount the assessee had obtained post-dated cheque of Rs. 2,00,000 from Dr. Hemant Deshmukh, who was the Chairman of the said Karkhana. The learned counsel submitted that Shri Dilip Kisanrao Kholawale had admitted in his statement recorded under section 131 vide answer to question Nos. 17, 18, 20 that he had saved the amount and admitted that he had paid Rs. 50,000 to K.M. Khopade for deposit with the said Karkhana. Similarly, Shri Bharat Shripati Yernale had kept Rs. 50,000 as a deposit with said factory on the request from the assessee counsel for the assessee, the assessee had discharged the burden by producing two depositors viz., Mr. Dilip Kisanrao Kholawale and Mr. Bharat Shripati Yernale. He submitted that psychologically seeking if the assessee has offered lakhs of rupees in his cash flow statement and the cash flow statement of his family members, he would not have given symbolic story as held by the Assessing Officer. 84. Shri Hari Krishan, the learned Departmental Representative strongly supported the order of the Assessing Officer. He also drew our attention to the statement of Shri Kholawale and Yernale and submitted that these persons were not men of m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he year 1990." From the above statement, it is amply clear that he is a man of stock. In answer to question No. 21, he admitted that he had paid an amount of Rs. 50,000 to Sidhkheda Sahakari Sakhar Karkhana in the year 1994. He also submitted that an amount was given in the shop i.e., Kailas Motor Cycle which belongs to the assessee. Simply because, he paid the cash amount in the shop of the assessee does not make the assessee owner of the amount of Rs. 50,000. In our opinion, the assessee, by producing both the creditors viz., Shri Dilip Kisanrao Kholawale and Shri Bharat Shripati Yernale, discharged the primary onus which lay upon him. Coupled with these, the evidence that their names appear in the books of Sugar Mill before the search go to prove that the deposits belong to the Shri Dilip Kisanrao Kholawale and Shri Bharat Shripati Yernale and not to the assessee. Accordingly, we delete the entire addition of Rs. 2,00,000. These grounds accordingly succeed. 86. Ground No. 25: In this ground an addition of Rs. 1,10,550 made on account of value of gold ornaments has been challenged. The facts leading to this addition have been discussed by the Assessing Officer in para 25 on pag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ------------ ---------- 3. Sanjay K. Chain 63.369 32,951 Khopade (1 -with pandal) Baby-chain 2 15.750 8,190 Bangles-2 Chipalli-2 20.860 10,843 Vedha (finger - rings 7) 46.143 23,994 Finger-ring (1-smalt) 6 29.016 15,088 ----------- --------- 175.128 91,066 ----------- --------- 4. Miss Anita Kisanrao Khopade Description No.of items Wt. in gms (net) Amount Bangles 4 52.525 27,261 Har ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 minus 422.500) valued at Rs. 1,10,550 have been added to the income of the assessee. The explanation of the assessee before the Assessing Officer that in fact, the balance of 300 grams (30 tolas) were received by the assessee in the month of December, 1995 from his father viz. Manikrao Narayanrao Khopade who died on 21-1-1996. In this regard, the statement of Mr. Arun Manikrao Khopade brother of the assessee was recorded under section 131 on 20-8-1997. In answer to question No. 13 he had stated that his father was having one gof which is in possession of his wife and a piece of gold and kada of gold was given to Mr. Kisanrao Khopade which Was told by his father. The Assessing Officer did not accept the statement of the brother of the assessee on the ground there was no person at the time when the father handed over the ornaments before his death, to the assessee though the said statement is confirmed by Mr. Arun Manikrao Khopade in the cross examination taken by the assessee and he further stated that gof (thin chain) which was owned by his mother was given to his wife. Further, the statement of other brothers were also recorded. But the Assessing Officer was not satisfied and ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accordingly succeeds and the addition of Rs.1,10,550 is deleted. 90. Ground No. 26: In this ground an addition of Rs. 2,25,000 on account of value of Shankaranand Lodge has been challenged. The facts leading to this addition have been discussed in para 27 on pages 62 to 65 of the assessment order. The Assessing Officer noted that the assessee purchased the Shankaranand Lodge in the Assessment year 1991-92. He states that "on going through the old records of the assessee, it is seen that no investment has been shown in Shankaranand Lodge.... Therefore, it is presumed that the amount of investment is unaccounted". She referred the matter for valuation of this property to the D.V.O. who valued this property at Rs. 2,25,000. She accordingly made an addition of Rs. 2,25,000. 91. Shri K.A. Sathe, the learned counsel for the assessee submitted that the assessee had purchased the said Lodge building on 31-5-1990 and the cost of acquisition was debited in M/s. K.M.K. and Co. (Wine Shop) during 1-4-1990 to 31-3-1991 having L/F 193 in the name and style of Navin Ghar Khardi Khate, Tembhekar Building C.T.S. No. 1460, Galli No. 2 Peth, Dhule and the same is appearing in balance-sheet as on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , who valued at Rs. 2,95,000. The Assessing Officer states that "on going through the old records of the assessee, it is seen that no investment has been shown in Vawdekar Sadan. Therefore, it is presumed that the amount of investment is unaccounted" and added the same to the undisclosed income for Assessment year 1989-90. 95. Shri K.A. Sathe, the learned counsel for the assessee submitted that the said building viz., Vawdekar Sadan was purchased by the assessee on 30-6-1988 and the cost was debited to the account of M/s. Kailas Motor Cycle Agencies. He drew our attention to the account extract of the same in Ledger for 1-4-1988 to 31-3-1989 which is as follows: -------------------------------------------------------------------------------------------- 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 10,3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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: -------------------------------------------------------------------------------------------- Asstt. Accounting Confirmed total L/F No. of year year Kailas MotorCycle --------------------------------------------------------------------------------------------- 1985-86 5-11-83 to 24-10-84 23,401 23,401 1986-87 25-10-84 to 12-11-85 58,100 81,501 1987-88 13-11-85 to 2-11-86 38,843 1,20,344 1988-89 3-11-86 to 22-10-87 1,54,680 2,75,025 87 1989-90 23-10-87 to 31-3-89 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10,000 -------------------------------------------------------------------------------------------- (5) Certain construction expenses were incurred but were not recorded in books of account but are found in loose papers at the time of action under section 132 and hence the same are covered in cash flow statement, details of which are as follows: -------------------------------------------------------------------------------------------- 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 1990-91 99,741 Material 79 1 to 9 1996-97 purchases 26,247 Construction 17 18 5 to 8, 1997-98 expenses 47, 50 to 62 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same cannot be termed as "undisclosed income" within the meaning of section 158B. In this we are supported by the decision of this Bench in the case of Parekh Foods Ltd. v. Dy. CIT [1998] 64 ITD 396, Kasat Textiles (P.) Ltd. v. Asstt. CIT [1998] 66 ITD 510 and Ghodawat Pan Masala Products (P.) Ltd. [IT (SS) Appeal No. 68 (Pune) of 1996 dated 21-1-1999]. 102. Ground No. 29--In this ground an addition of Rs. 10,30,840 on account of land cost, furniture, fixtures, household etc., has been challenged. The facts leading to this addition have been discussed in para 27 on pages 64 and 65 of the assessment order. The Assessing Officer states in her order that whenever the assessee was asked to explain certain investment or expenditure, he has very conveniently said that the expenditure is incorporated in the cash flow statement. However, since no investment has been shown in the cost of land, furniture, fixtures, household etc. it is "presumed" that the amount of cash 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, f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee had made cash payments exceeding Rs. 10,000 in contravention of provisions of section 40A(3) of the Act. The details of such payments have been given by the Assessing Officer at pages 67 to 70. According to her, the assessee could not give any plausible explanation why the payments were made in contravention of provisions of section 40A(3) of the Act. She accordingly made an addition of Rs. 21,67,240 being aggregate of such payment. 106. Before us, Shri K.A. Sathe, the learned counsel has given explanation for each and every entry. We are of the opinion that we need not go into the details of such payments and the explanation given by the assessee because it is a legal question. In our opinion, such a disallowance cannot be considered as undisclosed income within the ambit of Chapter XIV-B. The genuineness of the transactions is not disputed before us. In our considered opinion, this cannot be treated as undisclosed income since all the particulars 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 Constr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 08. Ground No. 32-In this ground an addition of Rs. 1,68,725 on account of cost of acquisition of agricultural land has been challenged. The facts leading to this addition have been discussed in para 32 on pages 72 and 73 of the assessment order. The addition (sic). 109. Shri K.A. Sathe, the learned counsel for the assessee has filed the following details of the land purchased by the assessee and his family members from time to time. -------------------------------------------------------------------------------------------- Date of Situation S.No. Area Amount Where value is purchase A G debited -------------------------------------------------------------------------------------------- 8-2-1972 Dhule 307/1 8 14 15,000 Kailas Motor 306/1 3 38 Cycle Agency and appearing in B/S of each ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 29,366 in the accounts of creditors of wine shop. The facts leading to this addition have been discussed by the Assessing Officer in para 34 on page 74 of the assessment order. At the time of hearing, the assessee only disputed the addition of Rs. 20,686 i.e., the difference in the account of Soni Traders, Jalgaon, Accordingly, the addition of Rs. 8,680 is confirmed. According to the Assessing Officer there was a difference of Rs. 20,686 as per the extract debit and as per assessee's record. Shri Sathe the learned counsel for the assessee submitted that Bill No. 1637, dated 26-11-1996 of Rs. 20,686 of M/s. Soni Traders was received after search action under section 132. When action under section 132 was going on, neither the goods nor the bill were received. However, the same was received after 26-11-1996, ie., on 27-11-1996 and was recorded in books of account on 27-11-1996 by crediting Soni Traders a/c and debiting purchase account. Hence the difference stands explained. The learned D.R. submitted that the contention of the assessee needs to be verified at the Assessing Officer level. 112. After hearing both the parties, we remit this issue to the file of the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdingly succeeds and the addition of Rs. 23,141 is deleted. 115. Ground No. 35-In this ground an addition of Rs. 500 on account of bank interest on S.B. a/c of HUF has been challenged. The HUF of the assessee received an amount of Rs. 25,000 from Shri Ghanashyam Pandurang Lokare and the same was deposited in the Saving Bank account of the assessee. The HUF earned interest of Rs. 500. The Assessing Officer did not accept the genuineness of the gift, as also the status of the HUF of the assessee. Vide our order in IT (SS) A. No. 272/(PN)/ 1997, dated 23-10-1998 in the case of Kisanrao Manikrao Khopade (HUF) we have accepted the status of the HUF of the assessee as also 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. 3,10,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,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 ------------------------------------------------------ 12,17,000 15,73,000 3,10,000 31,00,000" -------------------------------------------------------------------------------------------- He submitted that on perusal of question and answer reproduced supra, there is no reference of disclosure to question asked. Disclosure of stock of Rs. 3,10,000 is obtained on the basis of answer to question Nos. 42 and 43. In fact, no such stock was disclosed either in answer Nos. 42 and 43. Question No. 42 states as follows: "In your office/shop of M/s. K.M. Khopade and Co. inventory of closing stock was taken on that basis it appears that as per inventory in your shop stock of Rs. 5,77,694 is found whereas as per your Trading a/c stock comes to Rs. 2,76,955. It means there is excess stock of Rs. 3,00,739. What you have to stay on this? Answer to question No. 42: In reference to Question No. 42 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Hence, Section 145 cannot be invoked even by implication. (b) In the absence of application of section 145 there is no scope of estimation of undisclosed income under section 143. (c) The seized materials consisting of Bharna Register, Diaries and Loose Papers are the complete record of unaccounted transactions and therefore, the undisclosed income has to be restricted to the amounts mentioned in the seized material regarding excess money charged by the assessee on the sale of plots. According to him, this is the record which was maintained by him for his personal knowledge and information and therefore, according to the human probabilities, it is to be considered as true and correct of his undisclosed income. (d) efect has been found in the cash flow statement prepared by the assessee on the basis of the entries in the Bharna Register, diaries and loose-papers except the minor discrepancy. 126. The controversies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 create anomalies and frustrate the object of the Act should be avoided and Court should adopt the harmonious construction where there is any ambiguity. In the present case, there is no ambiguity since section 158BH is very clear on this point. 129. This controversy can be considered from another angle. Section 158BB provides for computation of undisclosed income in accordance with the provisions of Chapter IV. Chapter IV provides computation of income under various heads. One of the Heads is "profits and gains of business or profession". Section 145 provides the manner of computation of income chargeable under the Head "profits and gains of business or profession" and "income from other sources". Therefore, the computation of business income has to be made in the manner provided in section 145 and not in any other manner unless provided for specifically. That is the reason, perhaps, the Legislature did not thin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... how 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, following observations were made by their Lordships: "No doubt it is true than when the returns and the books of account are rejected, the Assessing Officer must make an estimate, and to that extent he must make a guess; but the estimate must be related to some evidence or material and it must be something more than mere suspicion. To use the words of Lord Russell of Killowen again, "he must make what he honestly believes to be a fair estimate of the proper figure of assessment" and for this purpose he must take into consideration such materials as the Assessing Officer has before him, including the assessee's circumstances, knowledge of previous returns and all other matters which the Assessing Officer thinks will assist him in arriving at a fair and proper estimate. In the case under our consideration, the Assessing Officer did not do so, and that is where the grievance of the assessee arises." The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, 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. Further, it is the plea of the Revenue that this Register does not record the payments made by assessee out of unaccounted money. No cash book had been maintained by the assessee in respect of unaccounted transactions and therefore, it is difficult to believe the contention of the assessee that the seized material is the complete record of unaccounted transactions. After considering the arguments of both the parties, my ld. Brother has accepted the plea of the assessee and the rejected stand of the Revenue in para 27 of his order on the ground that argument of the Revenue is based on presumptions. With all due respect, I am unable to agree with such view. The original seized records were produced by Revenue in the course of hearing. The perusal of the same compelled me to take the contrary view. It is found that it was not maintained in the normal course as is apparent from the facts that it was not writte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urse. 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 that he ever maintained a cash book of unaccounted transactions of receipts and payments in the normal course. Had it been so, I would have agreed to the view that no addition other than the one recorded in such cash book could be made. But in the present case, no regular record is maintained by the assessee either of the receipts or of payments. As discussed above, Bharna Register is merely a compilation of certain receipts and cannot be considered as regular record of all the unaccounted receipts. As far as payments are concerned, no record is maintained at all. Only certain entries are found in diaries and loosepapers. Therefore, it cannot be said that seized record is the complete record of the transactions made by the assessee outside the regular books of account. 133. Now I shall deal with the cash flow furnished by the assessee before the lower authorities and also before us. It is the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ight 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 amounting to Rs. 12,735 for the period from 13 November, 1985 to 2 November, 1986 as per page No. 18 of the said paper-book. It appears that assessee had shown such receipts equivalent to the unaccounted payments shown on the right hand side. That also clearly shows that there was no basis with the assessee for showing the undisclosed cash and was taken merely on assumption basis. Similar is the position for undisclosed cash receipts of Rs. 1,07,559 for the period 3-11-1986 to 22-10-1987 appearing at page 19 and for Rs. 1,34,390 and Rs. 75,000 for the period 23-10-1987 to 31-3-1987 appearing at page 21. These three instances clearly show that there was availability of unaccounted cash receipts outside the Bharna Registers or Diaries or loose-papers found in the course of search. This leads to the only conclusion that the seized material is not the complete record of unaccounted transactions. In v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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. In my opinion, such aspect of the argument cannot be accepted. Once a fact has been proved to be in existence, the presumption to the existence of such fact can be raised backward and forward as held by the President as 3rd Member in the case of Overseas Chinese Cuisine. It has been held thereon that if a particular habit or bad habit of manipulating the sale bills was found to be existing, then the same state of things could be presumed in respect of other transactions. Even according to the test of human probabilities, as approved by the Hon'ble Supreme Court in the case of Sumati Dayal, no man of prudence would sell similar items at similar place having great disparity. No doubt, there may be certain variations on account of mitigating circumstances, which have to be proved by the assessee. Perusal of the record shows that there is a great disparity in the prices of plots in respect of tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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 bearing Gat numbers 71/2 at Deopur, 105/A-2-B near Malegaon, 159/3 at Mohadi (Dhule) and 10/1 at Mohadi. Following the aforesaid decisions of this Bench mentioned above, it is held that no addition can be made in respect of such lands. 136. In respect of lands bearing Gat/Survey Nos. 566, 6/4, 106/2B, 170 and 82/1+2, there is no dispute about the fact that all the plots in these lands were sold through brokers and all the money received by the assessee from them is duly recorded in the seized material and taken into consideration by the assessee and his family members while filing the return of undisclosed income. The only point to be clarified is that these lands belonged to assessee as well as members of his family and therefore, the entire consideration was apportioned between the assessee and his family members on the basis of their holdings. Therefore, question of making any estimate in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Officer on this issue and restore the matter to his file for fresh adjudication of estimate in the light of guidance given above. The Assessing Officer is also directed to rectify the mistakes as pointed out by the ld. counsel for the assessee before us. The assessee is also directed to show before the Assessing Officer all such mistakes for verification. The assessee shall also be at liberty to lead evidence before the Assessing Officer in respect of mitigating circumstances, if any, in respect of the plots sold by him. Assessing Officer shall also give proper opportunity to the assessee for producing such evidence or material. Ground No. 2 is accordingly allowed for statistical purposes. As a consequence of this order, no separate addition sustained by us on account of unaccounted expenditure on marriage of assessee's son is called for as the addition in respect of Ground No. 2 would cov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct 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 the amounts received by him against the sale of plots from time to time. That the said register is complete record regarding the receipts of unaccounted sale consideration of the plots sold by him during the block period. Whereas the learned AM has accepted the said claim of the assessee, the learned JM has rejected the contention by pointing out that the register was not maintained in chronological order and that it does not record all the payments. Whereas the learned AM has held that Chapter XIV-B is an independent code for assessment of undisclosed income and provisions of section 145 are not attracted in this case, the learned JM has held that in computing the income from profits and gains of income all the relevant provisions of the Act are attracted. In this connection he has also referred to section 158BH which provides that all other provisions of the Act shall apply to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs 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 or investments. The learned counsel contended that in the case of search assessments the entire findings are to be based on the material found and that there is no scope for estimation of income. Relying upon the decision of the Gujarat High Court in the case of N.R. Paper Board Ltd. it was contended that Chapter XIV-B assessment is a special type assessment than the regular assessment and therefore the decisions relating to the regular assessment relied upon by the learned JM are inapplicable. For the same reasons the decisions of the Supreme Court referred to by the JM in the case of Dhakeswari Cotton Mills Ltd. and in the case of Raghubar Mandal Harihar Mandal are inapplicable it was contended. Reliance was also placed on the following decisions in support of the contention that the assessment of undisclosed income under Chapter XIV-B and regular assessment are two separat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of account maintained by the assessee are defective or are incomplete. The learned DR further pointed out that the section 158BA lays down the procedure for assessment of undisclosed income and the non obstante clause applies to such provisions which have been specifically incorporated, or which come in conflict with the provisions of Chapter XIV-B. Referring to section 158BB(2) it was contended that a special reference has been made to sections 68, 69, 69A, 69B and 69C for the purpose of identifying previous year as the financial year is adopted as the previous year under the said provisions of the Act. Referring to section 158BB(2) it was contended that the Legislature has incorporated the reference to sections 142, 143 and 144 to clarify, the procedure to be followed for making the assessment and that section 158BH covers all the provisions of the Act which were applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. v. By. CIT [1999] 63 TTJ (Ahd.) 651 in support of the contention that when there is evidence of receipt of "on money" the Assessing Officer is justified in estimating its quantum. Reliance was also placed on the decision of the Ahmedabad Bench of the Tribunal in the case of Naresh kumar B. Agarwal v. Asstt. CIT [1999] 104 Taxman 222 (Mag.) in support of the contention that an estimate of income is permissible in block assessment proceedings. Reliance was also placed on the decision of the Supreme Court in the case of State of Haryana v. Jasmer Singh AIR 1997 SC 1788 in support of the contention that in making an assessment there is bound to be an element of guess work. Relying upon the decision of the Bombay Bench of the Tribunal in the case of Overseas Chinese Cuisine, the learned DR contended that once it was found that the assessee had received "on money" it was permi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 in any regular assessment as income of such block period; (c) the income assessed in this Chapter shall not be included in the regular assessment of any previous year included in the block period. (3) Where the assessee proves to the satisfaction of the Assessing Officer that any part of income referred to in sub-section (1) relates to an assessment year for which the previous year has not ended or the date of filing the return of income under sub-section (1) of section 139 for any previous year has not expired, and such income or the transactions relating to such income are recorded on or before the date of the search or requisition in the books of account or other documents maintained in the normal course relating to such previous years, the said income shall not be included in the block period." 13. Section 158BB reads as under: "(1) The undisclosed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 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 Chapter." 17. Section 143(3) reads as under:-- "143. Assessment (1)...................... (2) ............... (4) On the day specified in the notice issued under sub-section (2), or as soon afterwards as may be, after hearing such evidence as the assessee may produce and such other evidence as the Assessing Officer may require on specified points, and after taking into account all relevant material which he has gathered- (a) in a case where no assessment has been made under sub-section (1), the Assessing Officer shall, by an order in writing, make an assessment of the total income or loss of the assessee, and determine the sum payable by him or refundable to him on the basis of such assessment; (b) in a case where an assessment has been made under sub-section (1), if either such assessment has been objected to by the assessee by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anner 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 income of the block period shall be computed in accordance with the provisions of Chapter IV, on the basis of evidence found as a result of search or requisition of books of account or documents and such other materials or information as are available with the Assessing Officer. 22. Reading section 158BB and section 158BC(b) in conjunction with each other, it becomes abundantly clear that the Assessing Officer has to compute the undisclosed income in accordance with the provisions of Chapter IV and that assessment is to be based on the evidence found as a result of search or requisition of books of account or documents and such other material or information as are available with the Assessing Officer. Now in making the assessment, provisions of section 143(3) have been specifically made available to the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 circumstantial evidence or assessment based on preponderance of probabilities judged by human conduct. For instance, the past history of the case, living style of the assessee and general conditions of the market in the particular trade will constitute relevant material for the purposes of assessment. The Assessing Officer will be entitled to conclude that the assessee is carrying on some undisclosed business on the basis of the factors like unexplained Bank deposits or assessee's failure to prove the source from which certain investments have been made or meager drawings of an assessee for household expenses. Similarly, the profits of a business may be estimated by disallowing excessive claims for deductions such as wastage etc. The Assessing Officer, as already pointed out, may base his assessment on the past h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te 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 1961 Act and section 23(3) of 1922 Act corresponds to section 143(3) of 1961 Act." 26. The Assessing Officer power of making the assessment includes the power to make an estimate of income is also established by the decisions of the Supreme Court in the case of Dhakeswari Cotton Mills Ltd. and in the case of Raghubar Mandal Harihar Mandal. This view is also established from the decision of the Supreme Court in the case of H.M. Esufali H.M. Abdulali. 27. Thus the power of the Assessing Officer to make an assessment based on relevant material is also enshrined in section 143(3). If there is material on record to establish that the assessee has charged "on money" in regard to land deals which is not recorded in the regular books of account, it is permissible for the Assessing Officer to make an assessment on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the true state of affairs. Therefore, the burden that rested with the Department stands discharged. The onus has shifted to the assessee. It is in these circumstances that the assessee is required to discharge the onus for establishing that in respect of certain deals no "on money" had been received. 29. In this case the learned AM has recorded a finding that seized material consisting of Bharna Register, diaries and loose papers are the complete record of unaccounted transactions and therefore, undisclosed income has to be restricted to the amounts mentioned in the seized material regarding excess money charged by the assessee on the sale of plots. According to him the assessee had maintained these records for his personal knowledge and information and therefore it is to be considered true and correct state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise 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 Supreme Court in the case of National Taj Traders held as under: "The principle that a fiscal statute should be construed strictly is applicable only to taxing provisions such as a charging provision or a provision imposing penalty and not to those parts of the statute which contain machinery provisions." In this case it was further held that "a provision of the Act must be construed with reference to the context and other clauses thereof so that the construction to be put on a particular provision makes a consistent enactment of the whole statute. This would be more so if literal construction of a particular clause leads to manifestly absurd or anomalous results which could not have been intended by the Legislature." 32. Similarly, in the case of K.P. Varghese their Lordships of the Supreme Court h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 advanced on behalf of the revenue that section 158BH refers to all the provisions of the Act, is more reasonable and logical and accordingly I hold that section 145 of the Act can be invoked in making block assessment under Chapter XIV-B of the Act should be facts and circumstances of a case warrant such application. 35. Before I wind up I would like to deal with the suggestion made by the learned DR that the powers of the Third Member in a reference under section 255(4) is confined to the questions regarding the points of dispute contained in the reference. In my considered view this contention is not well founded. The Third Member derives his powers from section 255(4) which reads as under: "255.(1) ....... (4) If the members of a Bench differ in opinion on any point, the point shall be decided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 that the difference of opinion amongst the Members can be decided by a majority view. In my humble opinion it is not necessary for the Third Member to restrict himself to the language of: the questions framed de hors the context, reasoning and the findings recorded by the respective Members in regard to the point of dispute. I hold accordingly. 37. In the final analysis I hold that the provisions of section 145 can be applied while assessing the undisclosed income on sale of plots under Chapter XIV-B of the Income-tax Act, 1961. I further hold that there is scope for estimation of undisclosed income under Chapter XIV-B by applying the provisions of section 143 of the Income-tax Act, 1961. 38. Now the records may be placed before the regular Bench for passing consequential orders on the basi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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