TMI Blog1997 (11) TMI 525X X X X Extracts X X X X X X X X Extracts X X X X ..... 19/019 80,500) 3,95,850 Recd. 8-12 20 1,26,700 1,35,750 Recd. 9-2 09/009 1,66,000 Recd. + 20,000 Bal. 5,80,300 11,56,350 + 20,000 11,76,350 The partner of the assessee-firm by name Jagdish N. Lodaria, was asked to explain the notings in the course of the statement recorded from him under section 132(4) of the Income-tax Act, 1961 ( th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose earning the above income 42,14,720 10,53,680.00 Total taxable income 11,55,880.01 The Assessing Officer was of the view that whereas in the statement recorded under section 132(4) the partner of the assessee-firm had disclosed an income of ₹ 70 lakhs, in the return there has been retraction of the said statement inasmuch as the assessee had declared only ₹ 10,53,680 on account of undisclosed income. He noticed that the assessee had retracted from the statement in respect of two issues, the first being the undisclosed receipts, which were reduced from ₹ 70 lakhs to ₹ 52,68,400 and the second being the claim of expenses amounting to ₹ 42,14,720. The assessee was asked to explain the return and in response thereto the assessee vide letter dated 30-6-1992 stated as under (relevant portion only) : The aforesaid statement was recorded by the Asstt. Director of Inspection at 2.30 A.M. in the early morning, though it was mentioned at 11.45 P.M. Pre-recording of the Statement was sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3)For removing the hawkers tapories from front portion of plot. 13.00 Lakhs (4)Commission paid to Shri Suresh Patil for arranging the settlement with above-mentioned hawkers/ tapories for eviction. 4.00 Lakhs (5)Expenses incurred for Satyanarayan Pooja con-ducted after completing the construction. 0,14,720 Total 42,14,720 3. By letter dated 8-2-1993, the assessee was asked to produce the parties named above for verification and also to produce the bills and vouchers along with the books of account as proof of the expenditure. The assessee produced the following parties before the Assessing Officer on 17-2-1993 : Name of person Amount paid Purpose Salim Khan 1,50,000 Security Rampra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or claiming such expenses, as it is only an after thought. (3)The additional income declared under section 132(4) is only a net income for taxation after considering all possible expenses. Therefore, the expenses claimed by the assessee is a double one. (4)No evidences of transactions have been found or seized by the search party. Therefore, the unaccounted and unrecorded expenses claimed by the assessee is not an allowable deduction. (5)Lastly, there is no provision under the Act, to allow such type of deduction from the additional income declared under section 132(4) of Income-tax Act. (6)The submission of the assessee regarding the protection money paid to (a) Shri S.B. Shellar, Dombivli and (b) Shri Padmakar Choudhary that both these persons have expired is also not substantiated by proper documentary proof. He, therefore, brought to assessment a sum of ₹ 73,37,100 calculated @ ₹ 100 per sq. ft. in respect of 73,371 sq. ft. consisting of residential flats, shops and offices as addition on account of undisclosed income. 5. On appeal, the Commissioner (Appeals) observed that in the statement given under section 132(4), the partner of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the claim. He also drew our attention to the unreasonably high rate of gross profit which would arise if the expenses are not allowed and this he pointed out to demonstrate the inherent fallacy in the rejection of the claim for expenses. He also pointed out that the amount of concealed income as reflected by the seizure was not commensurate with what has now been allowed by the departmental authorities and this was one pointer to the unreasonableness of their stand. Wherever it was necessary, our attention was drawn to the evidence compiled in the paper book. According to the learned counsel, the real income of the assessee has to be estimated at it was common knowledge that the extra money received in cash was used for disbursements in the form of protection money, haftas, for acquiring tapories, etc., and after all such expenses have been incurred, the assessee-firm would hardly be left with about 15 per cent of such on moneys, which alone can be brought to tax. 7. The learned departmental representative submitted that the land had been purchased by the assessee in 1985 and construction had commenced immediately thereafter and in the year 1992, when the search took place, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... search or seizure who is found to be in possession or control of any books, documents, money, etc. and any statement made by such person may thereafter be used in evidence in any proceeding under the Act. The statement made by the partner of the assessee-firm can, therefore, be used as evidence for the purpose of making an assessment under section 143(3) of the Act. As per this section, the Assessing Officer is required to take into account all relevant material which he has gathered while making the assessment. Such material by virtue of section 132(4), also includes the statement made by the partner of the assessee. An admission is normally the best evidence against the person making it but it is evidence only so far as what has been clearly and specifically admitted. A perusal of question No. 5 and the answer thereto shows that there was an admission that cash was received for the sale of flats, shops, etc., and therefore it is not possible to accept the assessee s contention that in respect of shops and offices no on money was received. There is also an admission that the entire amount of ₹ 70 lakhs, @ ₹ 100 per sq. ft. for 70,000 sq. ft. at Kasturi Plaza has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ins can only be taxed as income. Therefore, in our opinion, the admission can be made use of only for the purpose of holding that the assessee received on moneys @ ₹ 100 per sq. ft. in respect of 73,371 sq. ft. on flats, shops and offices. The statement cannot be made use of for the purpose of precluding the assessee-firm from claiming the disbursements made out of the on money receipts as expenditure, if they are backed by satisfactory proof. 10. Coming to the various expenses claimed, we have already referred to the fact that eight persons appeared before the Assessing Officer on 8-2-1993 and had confirmed the fact that they had received various amounts from the assessee-firm in cash for the purpose of providing security to the partners or for vacating tapories which were vacated earlier. Their statements are placed in the paper book. We have gone through them and we find that there is categorical admission of having received the amounts from the assessee. A few of them have been independently verified by the Inspector and this also we have already referred to. It is, therefore, not possible to reject the claim for deduction of ₹ 9 lakhs. 11. As regards the clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in which the builders are placed, an additional estimated expenditure of ₹ 1 lakh is allowed as deduction. 14. The addition to be sustained as per our direction will be as below : Rs. Rs. Total on money receipts @ ₹ 100 per sq. ft. for 73,371 sq. ft. 73,37,100 Less payments as protection money, for vacating hawkers, tapories, etc. 30,00,000 Pooja expenses 14,720 30,14,720 Balance taxable as income 43,22,380 The addition is, therefore, reduced to ₹ 43,22,380. The learned departmental representative had submitted that there is no proof to show that the payments have been made during the relevant year, even assuming for the sake of argument that such payments have been made. It must be remembered that the assessment has proceeded on the basis that the entire moneys have been received by the assessee only during the relevant accounting year. It cannot be postulated that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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