TMI Blog1998 (2) TMI 612X X X X Extracts X X X X X X X X Extracts X X X X ..... tice under s. 158BC was issued on 17-10-1996, in response to which the assessee filed a return for the block period showing undisclosed income of ₹ 17 lakhs. Thereafter the assessment proceedings were continued which culminated in passing of an order by the assessing officer on 31-10-1996, wherein the undisclosed income was computed at a figure of ₹ 1,47,91,840 as per the break-up given at p. 13 of the assessment order. 2. Briefly the facts are that the assessee is an individual deriving income from business of yarn trading and manufacturing of grey cloth from yarn. There was an action under s. 132 at the residence of the assessee on 6-10-1995, along with the factory premises at factory at 1978-79, Suryapur Industrial Estate, and another factory at 32, Shivkrupa Industrial Society, Surat. As a result of the search certain incriminating documents along with the unaccounted investment in the form of unaccounted stock were found. During the course of search the assessee made a disclosure of ₹ 17 lakhs as his concealed income and additional income of ₹ 2 lakhs was offered by his brother as concealed income. Consequently notice under s. 158BC was issued on 17- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd on that basis the assessee admitted his share of undisclosed income from the organising and building activity of Hare Krishna Apartment at ₹ 17 lakhs which was subsequently declared' as undisclosed income in the return filed in response to the notice under s. 158BC. The assessee, during the course of statement recorded by the search party identified various investments in the form of unaccounted assets as noted at p. 5 of the assessment order to be coming out of the undisclosed income of ₹ 17 lakhs earned by the assessee from organising and building activity of Hare Krishna Apartment. On the basis of the admission of the assessee that he in fact has charged on money in respect of sale of flats in the Hare Krishna Apartment, the assessing officer issued a show-cause notice to the assessee adopting sale consideration of the entire area of flats totalling 58,400 sq. ft. in the Hare Krishna Apartment at ₹ 400 per sq. ft. amounting to ₹ 2,33,60,000 and the 11 on money received at 56.9 per cent of the above figure on the basis of the seized paper and thereby proposed to make an addition of ₹ 1,32,91,840. Besides the above, the assessing officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that perusal of the assessment order passed by the assessing officer indicates that the entire controversy relates only to one piece of paper found during the course of search proceedings which reflects the unaccounted income by way of cash collection on the sale of a flat aggregating to a sum of ₹ 2.30 lakhs. It was submitted that the assessing officer has determined the unaccounted income of the assessee for the block period aggregating to ₹ 1,47,91,840 mostly on presumptions and assumptions on the basis of a single piece of paper found at the time of search. It was submitted that such type of additions are not at all contemplated under s. 158BC in view of the decision of the Mumbai Tribunal in the case of Sunder Agencies v. Dy. CIT (1997) 59 M (Mum) 610 : (1997) 63 ITD 245 (Mum). Reliance was also placed on the decision of the Tribunal in the case of M/s Patel Rakesh Kumar Kantilal in ITA No. 8/Ahd/97. It was submitted that the assessing officer while determining the unaccounted income of more than ₹ 1.47 lakhs has relied on a hypothetical working given by the assessee during the course of assessment proceedings which was submitted by the assessee on a com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sition that some payments must have been made by the assessee for taking over the project at p. 12 of the assessment order. However it was submitted that the assessing officer did not give any deduction in respect of this amount. 4.1 As regards the payment for the cost of land mentioned at B2 above it was submitted that the same was brought to the notice of the assessing officer who has recorded the same at p. 6 of the assessment order but chose not to give any deduction while computing the undisclosed income of the assessee. As regards item at B3 relating to the cost of construction it was submitted that the same was estimated at ₹ 158 lakhs on the basis of valuation report given by the approved valuer certifying the cost of construction and the same has been duly noted by the assessing officer at p. 7 of the assessment order. It was submitted that the assessing officer has not disputed this cost in the whole order and yet failed to allow any deduction in this regard. It was submitted that if the above three payments are not disputed by the assessing officer and which cannot be disputed on the basis of material on record, then even on the basis of working given by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ideration was by cheque which was accounted in the books of the NTC. He accordingly submitted that the assessing officer was perfectly justified in making the disputed addition. As regards the alternative submission of the learned representative of the assessee not to tax the entire receipts as undisclosed income but only the net profit earned by the assessee from the building activity, it was submitted by the learned departmental Representative that the decision of the Tribunal in the case of Gurubachan Singh J Juneja (supra) has not been accepted by the Revenue. 6. We have considered the rival submissions and have also gone through the order passed by the assessing officer. In view of the factual findings in the form of a paper seized during the course of search which clearly indicated that the assessee was receiving on money of ₹ 2,30,616 out of the total sale consideration stipulated at ₹ 4,04,161 which gives percentage of 56.9 per cent approximately, which was also admitted by the assessee before the authorised officer during the course of search, we are of the opinion that the assessing officer was justified in holding that the assessee in fact charged on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under s. 69C the corresponding deduction will have to be allowed under s. 37 of the Act as the investment was made in acquisition of business assets and as such the amount spent, was for the business of the assessee. Thus, what can be added as the undisclosed income of the assessee under s. 168BC, is a reasonable amount of profit which the assessee could have earned by charging on money in respect of flats and the Mumbai Bench of the Tribunal in the case of Mrs. Mehroo N. Irani in ITA No. 1140/Bom/89 has taken the view that when a person is found to have been engaged in building construction activity and has received unaccounted money, what is required to be taxed is not the receipt but only 5 per cent of the receipt which is to be taken as a net profit. As against the above decision the assessee has himself offered 8 per cent profit on the total receipts which should be considered fair and reasonable. In any case it is to be seen that after the exhaustive search and obtaining the disclosure of ₹ 17 lakhs the search party has not been able to find any unaccounted assets except those which have been referred to in the statement of the assessee and a broad break-up of whic ..... 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