TMI Blog2004 (9) TMI 580X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee. The addition should be deleted. 3. The learned Assessing Officer erred in law and on facts in considering a sum of Rs. 56,260 as undisclosed income on account of interest receivable on shares sale to Mr. Prem though he denied to have made any such payment. The addition should be deleted. 4, 5 6. The learned Assessing Officer erred in law and on facts in considering the following amounts as undisclosed investment though the said amounts were fully covered by the undisclosed income offered by the assessee for taxation as per peak chart. Thus, the addition should be deleted. Assessment years Amount (Rs.) Assessment year 1995-96 33,225 Assessment year 1996-97 3,06,450 Assessment year 1997-98 6,05,129 7. The learned Assessing Officer erred in law and on facts in considering a sum of Rs. 6,57,129 as undisclosed income for the funds introduced by the assessee in an undisclosed business the source of which was his undisclosed income in the earlier years as offered for taxation and sale of declared shares belonging to his wife outside the books of account. Thus, the addition should be deleted. 8. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on examination of the books of account of the assessee and M/s. Rainbow Industry, a family concern, it was found that the transactions appearing in the seized material were not found recorded in the books either of the assessee or M/s. Rainbow Industry. The assessee vide his reply dated 13-11-1997 stated before the Assessing Officer that business of selling compound and PVC films in personal capacity was started in the month of June, 1996 and the cash received and cash paid entries recorded in these cash books pertained to transactions of cash received on sale and cash paid for purchases respectively. Besides sales/purchases transactions, the details of expenses were also appearing in these cash books. The assessee had also furnished a P L Account prepared on the basis of transactions recorded in the seized cash books for the period between 1-6-1996 and 5-11-1996 and stated that the P L Account so prepared reflected net profit of Rs. 3,94,073 which has been declared as undisclosed income for the block period. The Assessing Officer on perusal of the ledger also prepared on the basis of entries in the seized cash books revealed that while computing the net profit of the unaccount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nto N.C. Daga (Hol) account. Therefore, the assessee s claim that cash received and cash paid out of N.C. Daga (Hol) account represents sale and purchase transactions is not acceptable. N.C. Daga (Hol) account is in fact an Uchant Account, which is used for introducing money into the unaccounted business when there is a shortage of funds and for taking out money, when there is surplus. The total sale and purchase figures out of N.C. Daga (Hol) account, which are in fact money introduced and taken out of the business, are as under : N.C. Daga (Hol) Account (Rs.) Purchases 71,66,303 Sales 68,88,266 2,78,037 The Assessing Officer, therefore, held the above difference as the surplus profit which the assessee has taken out from the unaccounted business and the same is, therefore, added to the total undisclosed income of the assessee for the financial year 1996-97 in addition to the profit declared in the undisclosed income for the block period. 5. From the balance sheet prepared as on 6-11-1996 on the basis of seized cash books it was seen that there was an opening balance of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15-5-1995 Parveen Arora - Loan advanced (3,00,000) (4,38,143) 30-5-1995 Parveen Arora - Loan returned 3,00,000 (1,38,143) 30-5-1995 Shares (4,500) (1,42,643) 1-06-1995 Shares (60,000) (2,02,643) 30-11-1995 Tyres (1,950) (2,04,593) 30-3-1996 Shares (42,000) (2,46,593) 30-3-1996 Pawel Kakkar (Loan Given) (50,000) (4,06,593) 30-3-1996 Ajay Kakkar (Loan Given) (1,10,000) (4,06,593) 2-4-1996 B.L. Sipani (Loan Received) 1,00,000 (3,06,593) 20-4-1996 Sale of 2050 Reliance Shares 4,26,400 1,19,807 @ Rs. 208 out of books purchased from Date Particulars Amount Balance Mrs. Sushila Daga 30-4-1996 Manjeet (Loan Given) (1,53,000) (33,193) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loss on these transactions, no money was paid to Shri Daga. The Assessing Officer, however, disbelieved the statement of Shri Prem for the reasons - 1. Shri Prem has neither denied the business association with the assessee nor has not accepted that these entries relate to actual transactions. The entries on page 64 of A-13 showed that these pertained to money advanced on loan on which interest has been earned by the assessee; 2. A perusal of the entries recorded on page 63 showed that the assessee has written phrases like money kept by you and payment received and when confronted, Shri Prem could not give any satisfactory reply and merely stated that no payment was made by him. There is inherent contradiction in the statement of the assessee and it cannot be believed that the assessee received no payment from Shri Prem and yet the assessee recorded phrases like payment received . The Assessing Officer, therefore, concluded that the assessee had made unexplained investment by way of advancement of loans to Shri Prem to earn interest. Accordingly, the total investment of Rs. 19,15,304 alongwith the interest accrued thereon @ 3% p.m. which comes to Rs. 2,33,967 aggregating to Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted in the books of account. This amount reflected the profit generated from buying and selling of shares and money lent out on interest. He accordingly treated the amount of Rs. 12,51,500 as unaccounted profit and added the same as undisclosed income for the financial year 1990-91. He has also added an amount of Rs. 56,260 as interest from Shri Prem which was reflected on back of page 63 of Annexure A-13 - interest Account from 16-3-1992 to 31-3-1992, as undisclosed income of the assessee. 9. Pages 5, 6 and 8 of Annexure A-4 seized from the residence of Shri Sudhir Thakran showed the details of payments received by certain persons and so also details of certain expenses which were written in coded form. Shri N.C. Daga was shown these pages pertaining to entry against the name of Shri N.C. Daga-40 which has been decoded as Rs. 40,000 based on the details of expenses like rent, electricity, telephone on the said page and asked to explain the receipt of this Rs. 40,000. The assessee in his reply dated 17-11-1997 denied to have received any payment in respect of these transactions, which was not acceptable to the Assessing Officer. He observed that Shri Daga is closely related to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... truction from my daughter Prerna, I gave a sum of Rs. 60,000 each to her on two occasions as per those cash books. She gave to my wife before the date of search in cash a sum of Rs. 70,000 and, therefore, it was lying in the house and found at the time of search. Since, it was not received by me, it was not recorded in my cash book. My daughter, Prerna had sufficient cash available with her to return it to me before 6-11-1996. The said amount is duly explained from her personal income tax return and books of account from which the said transactions is verifiable." The above explanation of the assessee was not accepted by the Assessing Officer. According to him, the explanation that there was cash in hand of Rs. 21,887 in the unaccounted cash books in respect of which addition has already been made was acceptable. However, the explanation in respect of his son Rahul Daga advancing Rs. 20,000 was not acceptable because according to the Assessing Officer had his son advanced any cash to him, then it could have been recorded in the books of account, which was not the case. Similarly, explanation regarding assessee s daughter give Rs. 70,000 to his wife was also not accepted as the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee, but to an independent person, with whom the assessee undertook share transactions for and on behalf of Mr. Prem. He stated that since these pages were written by assessee himself, it cannot be said that Mr. Prem, whose name is appearing on top of the page, could have sent these pages to the assessee. The margin and profit on each transaction was shown as payable in favour of the addressee as per details given on the back of the page and therefore, it clearly shows that the assessee never paid these amounts to the said person because sale consideration of Reliance Industries share mentioned therein was retained by the addressee as could be seen from the noting kept by you on the said sheet. This is clearly an indication to show that no benefit was accrued to the assessee. Further, as per the trade practice in share business, margins are given only where there is no actual delivery and transactions are recorded or settlement at any future date. It is strange to find out from the assessment order that the Assessing Officer ultimately concluded that the sale consideration of shares was retained by the addressee. In this connection, the learned counsel questioned the evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rejoinder, the learned counsel for the assessee contended that it is not necessary to be a registered share broker to work as an intermediatory in such transactions particularly when the transactions were being recorded outside the books of account. The alleged margin money was not paid by the assessee but was payable to the beneficiary as it has been added in the summary column for the amounts payable. He strongly contended that as has been admitted by the learned DR that the transactions recorded were not for actual delivery, it should be presumed that no investment was made particularly when, the person, whose name appears on the paper categorically refused to have made any payment. On a query from the Bench, whether these facts were brought to the notice of the Assessing Officer, the learned counsel for the assessee contended that when Mr. Prem denied to have made any payment to the assessee before the Assessing Officer, since the Assessing Officer did not raise any further query, that could be seen from the assessment order also, the assessee was under the impression that the Assessing Officer was satisfied with the submissions made before him and, therefore, did not reali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to disbelieve the statement given by Shri Prem, consequently, to make the impugned additions. It is, therefore, we have to agree with the contention of the learned counsel for he assessee that if the papers seized show that the assessee was not benefited in any manner, then it has to be accepted even if it results into no taxability because no tax can be thrusted on him if it is not due from him. In this view of the matter we delete the addition of Rs. 34,00,771. This ground of the assessee succeeds. 17. In the premises of the above decision, we do not find any merit in the addition of Rs. 56,250 being interest accrued on Rs. 12,51,500 which has been presumed to have been received by the assessee. Accordingly, we delete the same and ground 3 of the assessee also succeeds. 18. Grounds fourth, fifth and sixth challenge the action of the Assessing Officer in considering Rs. 33,251, Rs. 3,06,450 and Rs. 6,05,129 as undis- closed income in the block period on account of peak investments made as per the figures worked out by him in the table on page 4 of the assessment order in addition to the undisclosed income offered by the assessee at Rs. 4,88,965 on the basis of peak credits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee might have sold the same, as the asset found missing was disclosed asset. He stated that in such transactions outside the books, no broker s note is issued. The learned counsel also contended, had the Assessing Officer was in serious doubt, he could have very well ascertained the factual position from the company, viz. , Reliance Industries Ltd., itself. The learned counsel finally contended that with the discovery mistakes in the totalling of the figures in the chart adopted by the Assessing Officer, the genuineness of the addition itself is in serious doubt. The learned counsel, therefore, pleaded that the addition of Rs. 33,251, Rs. 3,06,450 and Rs. 6,05,129 should be deleted. 19. The learned departmental representative contended that the assessee is duty bound to file evidence in support of his claim, which is not discharged with. He contended that the onus is on the assessee to substantiate the claim and by making submissions, he onus is not discharged. He placed heavy reliance on the order of the Assessing Officer. However, he fairly conceded that the totalling difference of Rs. 99,928 needs to be deleted from the addition. 20. In the rejoinder, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ete the additions of the amount of Rs. 33,251, Rs. 3,06,450 and Rs. 6,05,129. Grounds 4, 5 6 are allowed. 22. The seventh ground pertains to addition of Rs. 6,57,129 as undisclosed investment in the capital of undisclosed activities of business appearing in the cash books marked Annexures A-1 to A-6 for the period from 1-6-1996 to 5-11-1996. The assessee was asked to prepare a balance-sheet on the basis of the said cash books and which was drawn and submitted to the Assessing Officer as per which an investment of Rs. 6,57,129 emerged as opening capital investment in the said business. The Assessing Officer, however, considered the same as undisclosed investment out of undisclosed sources and assessed it accordingly. 23. The learned counsel for the assessee contended that the Assessing Officer did not appreciate the source of the said investment and made the addition without confronting the assessee about the same. He furnished a consolidated balance sheet as on 6-11-1996 in the paper book at page 86 (which was compiled on the basis of pages 3, 31 and 87 of the paper book and which were stated to have been filed before the Assessing Officer to contend that the opening capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osed activities undertaken from 1-6-1996. The learned DR did not seriously challenge the admission of the consolidated balance sheet for consideration nor the contents therein. We, therefore, admit the same for consideration. Upon consideration of the same, we are of the opinion that the assessee has successfully explained the amount of Rs. 6,57,129 appearing as opening capital balance in the said undisclosed business activities. The addition of Rs. 6,57,129 is therefore, deleted. 25. The next ground pertains to addition of Rs. 40,000 on account of unexplained receipts made on the basis of some entry recorded in the loose papers seized from the residence of Shri Sudhir Thakran wherein a sum of Rs. 40,000 was shown as paid to some Mr. Daga. The learned counsel for the assessee contended that the addition has been made on pure surmises and conjectures. There can be any person by the name Daga. There is no specific mention about the assessee. Shri Sudhir Thakran never stated that he had given any money to the assessee. The addition was made only because the appellant was known to Shri Pradeep Singh and was a director in his company. The learned DR relied on the order of the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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