TMI Blog1998 (1) TMI 526X X X X Extracts X X X X X X X X Extracts X X X X ..... and assessment was made upto assessment year 1995-96. On 8th Feb., 1996, a search and seizure action under section 132 of the Act was conducted at the residential and business premises of the assessee. During the course of search, cash, jewellery and documents with regard to the certain assets were found and seized. A notice under section 158BC was issued requiring the assessee to file return of income for the block period. However, the assessee did not file any fresh return. At the assessment stage, the assessee was directed to submit details of his assets and liabilities as the Assessing Officer was of the view that the assessee had not reflected the true facts in his balance sheet. The assessee furnished the details and explanation, but the same were not accepted by the Assessing Officer and the Assessing Officer assessed the assessee s income at ₹ 1,59,59,342 for the block period. With regard to cash, assessee s explanation was found satisfactory and, therefore, no addition on this account was made. Since aggrieved, the assessee filed the present appeal. 3. We have heard Shri Shivram, the learned counsel for the assessee and Shri S.K. Jha, the learned Departmental ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stinguishable on the facts from the present case. Ekbal Co. s case does not help the assessee in any manner. In Ekbal Co. s case (supra), the issue involved was with regard to the serving of the notice requiring the assessee to furnish return of his income within such period not being less than 30 days. In these circumstances, the hon ble High Court held that the notice was not issued within clear 30 days period and, therefore, the notice was held to be invalid. The observation of the hon ble High Court are worth mentioning wherein the Court had held that the word within 30 days is within two points of time, one at which the period begins and the other at which it expires . As per section 158BE, the time-limit begins on 1-3-1996, and expires on 28-2-1997. It is well established under the common law that the complete one year has to be taken as a calendar year which would expire at the midnight of 365th day. Accordingly, we hold that the impugned order passsed by the AO was within time-limit. 6. The next legal issue raised by the learned counsel is that the AO did not pass speaking order on 28th Feb., 1997. He had only passed a computation sheet which was served on the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could apply after paying the copying charges. The learned Departmental Representative pointed out that even from the affidavit of the assessee which is at pp. 1 to 7 of the paper-book, it becomes abundantly clear that the assessee was very much present in the office of the Assessing Officer on 28-2-1997. The assessee has also admitted that he was served with one page order for the block assessment on the same date along with the assessment order of assessee s wife Mrs. Badamibai at his residence at 12.05 midnight. The learned Departmental Representative submitted that from the affidavit of the assessee itself it is clear that the order was served on the assessee at the midnight i.e. night between 28-2-1997, and 1-3-1997. The assessee s contention that the speaking order was served upon him on 30-5-1997 in the Tribunal at the time of the hearing of the stay application is falsified as there is no such mention of these facts in the order sheet of the Tribunal dated 30-5-1997. 8. As regards the difference in typography of the impugned order, the learned Departmental Representative submitted that as per the assessee s own deposition, there was power failure on 28-2-1997 and in these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out by the learned counsel is that there are discrepancies in the additions made in the body of the order and the computation sheet. The substantial difference pointed out by the learned counsel are given at p. 828 of the paper-book. The difference as seen from the paper-book is reproduced below : Asst. yr. Income as per order Income as per computation sheet Difference 1986-87 1,38,282 1,38,282 - 1987-88 2,66,519 2,66,519 - 1988-89 2,73,651 2,64,651 (-) 9,000 1989-90 3,18,108 3,19,005 897 1990-91 5,51,873 5,51,873 - 1991-92 8,36,302 8,36,307 5 1992-93 21,93,198 22,93,198 1,00,000 1993-94 5,39,800 1, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessed for the entire block period which is not a separate order as projected by the assessee s counsel. 10. The next issue raised by the learned counsel is that the order passed by the AO is not in accordance with the scheme as provided under Chapter XIVB of the Act. Our attention was invited to various provisions laid down in the said chapter. The learned counsel argued that section 158BA deals with the assessment of undisclosed income as provided under section 158B(b) of the Act. According to the learned counsel, the undisclosed income would mean income which is hidden from the Department. In support, the learned counsel made reference to the decision of the Delhi High Court in the case of L.R. Gupta v. Union of India [1992] 101 CTR (Del.) 179 : [1992] 194 ITR 32(Del), wherein the hon ble High Court has held that expression income which has not been or would not be, disclosed for the purposes of the IT Act means that income which is liable to tax but which the assessee has not returned in its IT return or made known to the IT Department. The learned counsel also invited our attention to the budget speech of the Finance Minister for the year 1995-96 reported in [1995] 212 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Punjab Haryana High Court in the case of Rajaram Kulwantrai v. Asstt. CIT [1997] 142 CTR (P H) 292 : [1997] 227 ITR 187 (P H) and the decision of the Kerala High Court in the case of N.T. John v CIT Anr. [1997] 137 CTR (Ker) 656 : [1997] 228 ITR 314 (Ker), and submitted that the AO has made the addition on the basis of the documents and the books of accounts seized during the search. 13. The next contention of the learned Departmental Representative was that the circular cannot override the statutory provisions of law as circulars are merely clarificatory in nature. In support, the learned Departmental Representative placed reliance on the decision of the Supreme Court reported as Kerala Financial Corpn. v. CIT [1994] 119 CTR (SC) 164 : [1994] 210 ITR 129 (SC). 14. On careful consideration of the rival submissions, we feel that in order to adjudicate this legal issue it is pertinent to understand the object, implications, of provisions of Chapter XIVB of the Act. Chapter XIVB provides for a special procedure for assessment in search cases, where search action has been initiated after 30th June, 1995. The definition of undisclosed income as provided in section 158B(b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng within the block period 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 AO, as reduced by the aggregate of the total income, or as the case may be, as increased by the aggregate of the losses of such previous years, determined. (2) In computing the undisclosed income of the block period, the provisions of sections 68, 69, 69A, 69B, and 69C shall, so far as may be, apply and reference to financial year in those sections shall be construed as references to the relevant previous year falling in the block period including the previous year ending with the date of search or of the requisition. (3) The burden of proving to the satisfaction of the AO that any undisclosed income had already been disclosed in any return of income filed by the assessee before the commencement of search or of the requisition, as the case may be, shall be on the assessee. (4) For the purpose of assessment under this Chapter, losses brought forward from the previous year under Chapter VI or unabsorbed depreciation under sub-se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rary and unlimited power to the AO to review the assessment completed unless and until there is any direct or clinching evidence to indicate that the assessee had withheld or had not disclosed any income. No ad hoc additions can be made merely on the basis of presumption or hypothesis. The words such other material as used in section 158BB(1) does not mean that the AO has got unfettered powers to override the rules of evidence so as to make the hypothetical and ad hoc additions. However, we are of the opinion that the undisclosed income as provided under section 158BB would certainly include any income based on any entry in books of account or documents where such entry in books of account or documents represents wholly or partly which has not been or would not have been disclosed for the purpose of this section by the assessee. For example, if entry representing income has been shown as liability or loan and not as income in the seized material, it would certainly come within the ambit of definition of undisclosed income provided such material has been found or has come to the knowledge of the AO from the books of accounts or the seized material during the search. As per sub-cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at all discussed or decided by the hon ble Kerala High Court and accordingly, the ratio of the said case is not at all applicable to the present case. 17. As regards the circular, there is no dispute that the law laid down by the apex Court in Kerala Financial Corporation (supra) that the circular of the CBDT cannot override the statutory provisions of the Act. However, the Circular No. 707 of the CBDT is merely clarificatory in nature and does not override the main provisions of the Act. 18. Now, we shall discuss each addition separately in view of our discussion above. (1) Addition on account of jewellery (i)During the search, jewellery, weighing 1721.07 gms (gross) and 1,662,05 gms (net) was found out of which only 765.25 gms were seized. The assessee s contention before the AO was that the jewellery belonged to his various family members which includes his wife, sons, daughters and grand daughter including the HUF. The assessee further claimed that the jewellery had been acquired by his family members out of their own sources over a long period of time. The AO after taking into consideration the explanation submitted by the assessee made addition only with regard t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of 500 gms per married lady, 250 gms per unmarried lady and 100 gms per male member of the family need not be seized. It further provides that having regard to the status of the family and custom and practice of the community to which the family belongs, the officer may exclude a large quantity of jewellery and ornaments and seizure. In the present case, there are four male members in the family, the assessee and his three sons. Similarly, there are two married ladies and one unmarried lady. The learned counsel for the assessee submitted that the jewellery of the assessee and his wife was low and was received by various occasions, like marriage delivery, birth, etc. and the jewellery belonged to the children was also received in similar occasions. On the other hand, the learned Departmental Representative argued that the assessee has not provided any evidence to explain the source of the investment in the jewellery. (iii)On careful consideration of the rival submission we find that the assessee has not placed on record any evidence to prove that the jewellery has been received as gift by him by producing the GT return or any other evidence. However, we are conscious of the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eas the assessee had shown the expenses at ₹ 58,323. The said addition was made on the ground that the marriage of assessee s daughter took place during the relevant assessment year, i.e., asst. yr. 1988-89. The AO issued show-cause notice dated 29-7-1997, asking the assessee as to why the personal expenditure for family be not estimated at ₹ 75,000 for asst. yr. 1996-97, and proportionately for the earlier years. The assessee did not file any explanation or reply to the said notice and accordingly, the AO estimated the additions as referred to above. (ii)We have heard the rival submission. The learned counsel for the assessee submitted that the withdrawals were duly reflected in the capital account for each of the year and were accepted as such by the AO in the respective assessment years. He further submitted that no material was found during the course of search having nexus or highlighting that the assessee had not made correct disclosure with regard to the personal withdrawals and, therefore, the AO cannot made ad hoc addition on estimate basis. The learned counsel pointed out that even for the asst. yr. 1996-97, the assessee had shown the withdrawals at ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counsel for the assessee submitted that Smt. Pankubai who is the window of assessee s brother, had advanced the leant of her past savings and the said loan had been reflected in the regular books of accounts. Smt. Pankubai had given the confirmation letter and in case the AO wanted to make verification, summons could have been issued to her. A perusal of the statement and the balance sheet for the asst. yr. 1986-87 which is placed at p. 887 of the paper-book, it is clear that the assessee had shown the loan as well as the interest paid to Smt. Pankubai along with the return. Similarly, the loan from Vikas Jain, Nilesh Jain and Kamlesh Jain have been reflected in the computation filed along with the return. As regards the source of income of the assessee s sons, it was argued that they are beneficiaries of Shirodiya Trust which was assessed to tax. The assessee has filed the copies of the beneficiaries account in the trustees well as the copy of the order of the Tribunal in the trust s case. The assessee has also filed the confirmation of all the four creditors which are placed at pp. 37 to 59. On the other hand, the learned Departmental Representative argued that mere confirmatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -88 had been completed under section 143(3) of the Act and the assessee had disclosed all the loans which were accepted by the AO. The copy of the assessment order and the computation have been placed at pp. 892 to 898 of the paper-book. A perusal of the property account and the balance sheet which is at p. 893 shows that the assessee has shown the loan from all the above five creditors. As per the assessee, all the creditors are assessed to tax and the copies of their confirmation, capital account, balance sheet and IT return s acknowledgment have been placed on the record, which are at pp. 37 to 69 of the paper-book. The learned counsel submitted that the assessee has proved the identity and capacity to advance loan of the creditors and has also proved the genuineness of the transaction. On the other hand, the learned Departmental Representative submitted that the assessee had failed to prove the regular source of income of all the creditors and, therefore, the AO was justified in making the addition. (b)On careful consideration of the rival submission we find that the loan of all the parties have been accepted in the regular assessment under section 143(3). Moreover, in the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the said agreement is placed at pp. 796 to 804 of the paper-book) and the payment had been made with regard to the said flat. On the other hand, the learned Departmental Representative submitted that the AO was justified in making the addition as the assessee failed to produce the creditors for verification and also failed to prove the creditworthiness of the creditors. (c)On careful consideration of the rival submission we find that the AO was not justified in making the additions on account of the unexplained cash credit unless he had some positive evidence to prove that the cash credits were not genuine. The assessee has rather discharged the burden of proving the identity, creditworthiness and genuineness of the transaction. All the loans have been disclosed by the assessee in his original assessment which was accepted by the AO under section 143(3) of the Act. In this view of the matter, we delete the additions made by the AO on account of cash credit and the interest thereon. (v) Asst. yr. 1989-90 (a)During this assessment year, the additions have been made on account of the loans from following persons: Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sideration of the real submission and the documents on record, we find that the AO was not justified in making the additions as the assessee has discharged the burden of proving the identity, creditworthiness and genuineness of the transaction. The assessee had disclosed all the transactions during regular assessment and the same were accepted. The Revenue has miserably failed to bring any material on record to support the addition and accordingly, the additions are deleted along with the corresponding addition on account of interest on these advances. (v) Asst. yr. 1990-91 (a)During this assessment year, the AO made an addition of ₹ 4,01,000 on account of unsecured loan from the following persons and also made addition of ₹ 1,22,773 on account of interest on the loans : Rs. (1) Smt. Pankubai C. Jain 15,000 (2) Mahavir Traders 32,000 (3) Madhu Jain 9,000 (4) Bhikabhai Patel 50,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Kalyan Income-tax Office and the computation of income, confirmation, capital account, balance sheet and the IT return s acknowledgment have been placed on record at pp. 108 to 113 of the paper-book. With regard Bhikabhai Patel, Jyotsana N. Patel and Tulsibai Patel, the assessee had submitted the confirmation letters which are placed at pp. 114, 115, 120 to 128. It is further submitted that since these parties were not co-operating, the assessee had requested the Assessing Officer to issue summons vide his letter dated 6-2-1997, which is placed at pp. 116 to 118. However, the Assessing Officer did not issue any summons. As regards Champalal, the learned counsel stated that the Assessing Officer has wrongly observed that no confirmation letter in respect of Champalal has been submitted whereas Champalal had submitted letter dated 26-2-1997, before the Asstt. CIT (Inv.) explaining the source of fund with regard to loan of ₹ 1,25,000 wherein it is stated that the said loan was given by cheque on 29-2-1990, and the details of the funds raised for the said loan were also given in the said letter. Along with the said letter, the statement of income, capital account and balance s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 35,000 (3) Anil S. Sanklecha 35,000 (4) Suresh P. Sanklecha 60,000 (5) Mayur F. Sanklecha 35,000 (6) Monica F. Sanklecha 35,000 (7) Sapana F. Sanklecha 40,000 (8) Kamlabai R. Choka (and not Kamlabai H. Sanklecha) 50,000 (9) Sunderdevi Ranka and G.P. Ranka (and not Sunderdevi H. Sanklecha) 1,00,000 4,30,000 The Assessing Officer made the addition on the ground that the assessee failed to produce the creditors and that all the creditors had deposited money in cash immediately prior to advancing the loan to the assessee. The Assessing Officer, therefore, observed that the accounts seems to have been opened by the creditors merely for advancing the loans which may be a play used by the assessee to introduce his unaccounted money throug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reement for the purchase of the flat was submitted before the authority but the copy of the same has not been furnished to the assessee in spite of several requests. The learned counsel submitted that the letters of the assessee in this regard are placed at pp. 833, 871 and 872 of the paper-book vide which the assessee had requested the Assessing Officer to supply him the copies of the flat agreement and cancellation agreement copy in respect of Shri Davis. On the other hand, the learned Departmental Representative argued that there is nothing on the record to prove that the assessee reflected loan of ₹ 80,000 advanced by Shri P.R. Davis. Even the letters at pp. 833 and 871 show that the assessee had requested the Assessing Officer to give him the copy of the agreement of one Shri T.R. Davis and not Shri P.R. Davis. However, the assessee has failed to prove that Shri P.R. Davis had advanced sum of ₹ 80,000 for purchasing the flat as no agreement has been placed on the record. In this view of the matter, we find that the Assessing Officer was justified in making the addition as the assessee failed to discharge the burden of proving the said advance. (viii) Assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion letter and in spite of the repeated reminders, the creditor was not produced. The learned counsel for the assessee submitted that this amount of ₹ 50,000 is well proved as the LIC had paid money to Chhaganbhai R. Oswal. Copies of the LIC covering the letter were filed with the Assessing Officer. Copies of assessee s account in the books of Ramesh T. Oswal, HUF were also submitted. He further submitted that the loans were duly reflected in the balance sheet for the assessment year 1994-95 which was accepted by the Assessing Officer. (b)On careful consideration of the rival submission and the documents of the record, we find that the fact of ₹ 50,000 received from Shri Ramesh T. Oswal finds mention at p. 966 of the paper-book. The Assessing Officer has accepted the same in the regular assessment. In these circumstances, the Assessing Officer cannot, at this stage make the addition. The computation and assessment order is placed at pp. 961 to 965. Accordingly, we hold that the Assessing Officer was not justified in making the additions. (x) Assessment year 1995-96 (a)During the assessment year 1995-96, the Assessing Officer made the addition of ₹ 24,45,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dvancing loan amount of ₹ 24,45,000 to Vikas Builders. The other documents such as the partnership deeds and the other P L a/c, etc., are at pp. 484 to 527 of the paper-book. From the confirmation and the other documents, it is evident that Vignahar Builders and Developers had advanced the loan to Vikas Builders. The learned counsel submitted that this amount was used by Vikas Builders for the project which had been signed by partners of the firm. The learned counsel further argued that there is no iota of evidence from the record to show that the firms Vikas Builders and Vignahar Builders Developers are benami of the assessee. He further argued that the loan was advanced through account payee cheque. The statements of the partners of Vignahar Builders Developers are at pp. 789 to 793. The learned Department Representative, on the other hand, argued that from the statements of the partners, it is evident that the firms are benami of the assessee and other partners have nothing to do with the firm as they have no knowledge about any transaction or activity of the firm. He further argued that mere confirmation does not prove the genuineness of the transaction. (b)On care ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not advanced by the firm, Vikas Developers. A perusal of the acknowledgment which is placed at p. 533 of the paper-book that the return for the assessment year 1995-96 received by the Revenue authority in the month of January 1996 and therefore, the observation of the AO that the creditor had not filed the return for the assessment year 1995-96 does not appear to be correct. In view of the fact that the creditor firm is assessed to tax independently and is genuine and that the loan appears in the balance sheet for the assessment year 1995-96 and there is no evidence to prove that the assessee has shown these entries merely to account his income from unaccounted source and, therefore, the AO was not justified in making the addition of ₹ 14,95,000. The assessee in his capital account and the balance sheet for the assessment year which is placed at p. 715 of the paper-book has clearly shown amount of ₹ 14,95,000 from Vikas Developers. We, therefore, delete the addition made by the AO on this account. (xi) Assessment year 1996-97 (a)During this assessment year, the AO has made the following additions : Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd to the genuineness of the transaction. The AO could issue summons and could also make verification from the IT returns filed by the creditor. The learned counsel argued that the previous for assessment year 1996-97 was to end on 31-3-1996, and the search proceedings was conducted on 8-2-1996, and, therefore, no addition could be made in the block assessment order for this year. On the other hand, the learned Departmental Representative submitted that the AO was justified in making the addition as none of the creditors were produced before the AO and from the documents on the record, it is apparent that Shri Shantilal R. Jain and Shri Rikabchand Jain had deposited the amount in cash just before advancing the loan. (d)On careful consideration of the rival submission we do not agree with the argument of the learned counsel that no assessment for the assessment year 1996-97 could be made under the block assessment under section 158BC of the Act. In fact, as per the provisions of Chapter XIVB, the income of each of 10 years prior to the year of search would also include the assessment year 1996-97 and that has to be determined under the block period. In fact, the pending assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activities. He further submitted that merely on the basis of statement under section 132, no addition could be made. In support, he placed reliance on the decision of the Supreme Court in the case of Shrikrishna v. Kurukshetra University AIR 1976 SC 376. On the other hand, the learned Departmental Representative contended that the assessee himself offered the said amount for tax and he has not retracted the said declaration and, therefore, the addition made by the AO was justified. (b)On careful consideration of the rival submissions we find that the assessee himself had offered the amount of ₹ 1 lakh on account of purchase of land at Kasabe and till date that statement has not been retracted and, therefore, we do not find any ground to interfere with the order of the AO and accordingly, we confirm the said addition. (ii) Addition on account of investment in land at Prakash Towers. The assessee purchase land for developing residential-cum-shopping complex known as Prakash Towers . The said project was developed during the assessment years 1994-95 and 1995-96 by Vikas Builders. The land for the said project was purchased from three persons, i.e., Parvati Rane, Yashwa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 352 15,36,128 Assuming 50 per cent reduction in the rate of 3,31,664 land on account of encumbrance on152 sq. mt. _______ 18,67,792 Shilpa Rane Total Land 222 sq. mt. Less - Encumbered land 87.74 Rate 2,385 134 Rs. Consideration at ₹ 2,385 per sq. ft. 3,19,590 50% reduction (as Yashwant Rane) 1,06,132 on account of encumbrance 4,25,722 Total consideration 22,93,564 Less - Consideration as per agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vendors as well as the assessee are suppressing the rates with regard to the land. From these facts, we find that there is no evidence on the record to show that the value as shown in the agreement was understated. Even on material was found during the course of search in this respect. Accordingly, we hold that the AO was not justified in estimating the cost of the land merely on conjectures and surmises. (iii) Cost of construction of Prakash Towers (a)On the date of search, out of the 7 storeys of Prakash Towers, the RCC and brick work had been carried out in respect of 5 storeys. The assessee submitted the details of expenses incurred on the construction upto the date of search vide his letter dated 10-1-1997 which is as under : Rs. Expenses and labour 8,29,650 Material 33,53,308 KMC MSEB charges 2,34,091 Other expenses 9,01,99 51,27,044 The AO referred the matter to the Department Valuation Officer (DVO), who determined the expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v) Addition on account of understatement of saleable area. (a)The project at Kalyan consists of 35 flats, 22 shops and 8 office accommodation. As per the agreements on record, the assessee sold flats @Rs. 700 per sq. ft. of the carpet area and shops at ₹ 1,142 per sq. ft. of carpet area. During the course of search, a diary was found wherein the areas of the flats and shops had been worked out differently on built up area basis. The same is annexed with the order of the AO as Annexure I. The AO further observed that in the cases of other builders who have been constructing similar projects in Kalyan, the rates ranges from ₹ 950 to ₹ 1,500 per sq. ft. per built up area whereas the assessee s price was ₹ 700 per sq. ft. carpet area. The AO found that in other construction company by the name of Joginder Construction Co. (P.) Ltd. was charging at 650 per sq. ft. on papers and ₹ 350 per sq. ft. as on-money on the built up area. The AO observed that as per assessee s calculation, the cost of project was at ₹ 2,90,61,538 whereas the total sale consideration as per his calculation comes to ₹ 2,72,39,550 which means that the assessee was sufferi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er pointed out that the assessee has been maintaining the accounts regularly and, therefore, no addition could be made on presumption. In support, the learned counsel placed reliance on the following decisions : (1) KP Varghese v. ITO [1981] 24 CTR (SC) 358 : [1981] 131 ITR 597 (SC); (2) Umarchand Shah Bros v. CIT [1960] 39 ITR 231 (SC); and (3) St. Theresa Oil Mills v. State of Kerala [1970] 76 ITR 365 (Ker.) The learned counsel argued that whatever is apparent from the records should be treated as real unless contrary is proved. In support, the learned counsel referred to the following decisions of the Supreme Court : Kalwa Deva Datta v. CIT [1963] 49 ITR 165 (SC); CIT v. Durgaprasad More [1973] CTR (SC) 500 : [1971] 82 ITR 540 (SC); and CIT v. Daulatram Rawat Mull [1972] CTR (SC) 411 : [1973] 87 ITR 349 (SC) The learned counsel, therefore, argued that the entire additions have been made by the AO on presumptions and on the basis of the suspicion. He further argued that the AO did not furnish the copies of the statements of the parties recorded by him in the course of assessment proceedings nor he was given an opportunity to cross-examine them and, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee he has charged the rate at ₹ 700 per sq. ft. or the flats and ₹ 1,142 for the shops on carpet area basis. As per the assessee, the rates in similar locality available with the sub-registrar has been submitted before the AO which shows that the rate prevalent at that time was ₹ 500 per sq. ft. whereas the assessee had charged ₹ 700 per sq. ft. We agree with the argument of the learned counsel that there cannot be any comparison with the cases of Godrej Builders and Lok Udyan as these parties have a high reputation in the market and, therefore, they can command a considerably high price on account of their name and reputation. Since the agreements of some of the purchasers are on the record, the AO could very well verify from the purchasers, the rates and the area from the purchases. The finding of the AO that even as per the assessee s calculations he would suffer loss seems to be misconceived as at p. Nos. 690 and 691 of the paper-book, the assessee has given the project working wherein it is apparent that the profit @9 per cent has been made by the assessee. After going through all the facts and documents, we are of the opinion that the AO has made th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19-4-1991 was found having executed between the assessee and C.S. Pandit at bundle No. C-1/6 wherein at p. 3 it is stated that the assessee, developer is entitled to deduct the compensation for the additional area over and above the 1,050 sq. ft. @ ₹ 350 sq. ft. built-up area from the balance amount payable to the owner by the developer and accordingly, the AO was of the view that the assessee had arrived at the figure of ₹ 300 per sq. ft. as the fair market value. Therefore, he has understated the price charged from the other buyers of the flat. The AO has observed that there seems to be no cogent reason as to why the assessee should charge more from the land owner and less from the other buyers. The assessee, on p. 203 of the paper-book has given the computation as under : Total area of project 4,605 sq. ft. Less : Tenement Area Y.V. Jape 582 sq. ft. Vithal Jagannath Sathe 425 sq. ft. 1007 sq. f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee has maintained the accounts regularly. In support, the learned counsel placed reliance on the decision of the Hon ble Supreme Court in the case of Kalwa Dewo Dettam v. CIT (supra) and in the case of KP Varghese Co. v. CIT (supra). He further argued that suspicion, however, strong cannot take place of the proof. On the other hand, the learned Departmental Representative argued that the AO has justified in making the addition as the assessee has offerred ₹ 300 per sq. ft. to the other buyer and on lesser rate to the land owner. The AO came to know about the price offered to the landlords from the seized documents in bundle No. C-1/16 found during the search. (c)We have considered the rival submission and the documents on record. From the facts it is apparent that the assessee had agreed to give an equivalent area to the tenants at a concessional rate as per the agreements between the assessee and the tenants S/Shri V.J. Sathe and Y.V. Jape. The Revenue authorities have not questioned the genuineness of the agreements with the tenants and, therefore, impliedly accepted the same. Having done so, we find no reason as to why the said agreements were not considered ..... X X X X Extracts X X X X X X X X Extracts X X X X
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