TMI Blog1998 (9) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... BC was issued on 17th Oct., 1996, in response to which the assessee filed a return for the block period showing undisclosed income of Rs. 17 lakhs. Thereafter the assessment proceedings were continued which culminated in passing of an order by the AO on 31st Oct., 1996, wherein the undisclosed income was computed at a figure of Rs. 1,47,91,840 as per the break-up given at p. 13 of the assessment order. 3. Aggrieved with the order of the AO the assessee has filed this appeal before us. Briefly the facts are that the search and seizure operation in the case of the assessee were offshoot of the main search in the case of Shri Naresh Agarwal group. During the course of search of Shri Naresh Agarwal it was found that Shri Naresh Agarwal was initially a member of non-trading corporation viz., Chanakya Corporation which has taken up the work of organising and building activity of Hare Krishna Apartment at Bhatar Road. Surat. The above project was then left by Shri Naresh Agarwal after its planning and initiation and it was taken over by Shri Kishore M. Telwala (the assessee before us). Thus, it was on the basis of this information that the residence and the factory of the assessee were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roject when he took over as chairman of the NTC from Shri Naresh Agarwal and Shri Mangtulal Harlalka and Shri Mahavir Prasad Jain. The assessee objected to the proposed additions by the AO and submitted that there was absolutely no justification for making of such a huge additions only on the basis of a piece of paper which was not in the handwriting of the assessee which was in relation to only one flat measuring 1,020 sq. ft. and projecting the same over the entire covered area of Hare Krishna Apartment. Alternatively it was pleaded before the AO that assuming, though not admitting, that "on money" were received by the assessee on the sale of flats in the Hare Krishna Apartment, necessary deduction should be allowed to the assessee on account of payment made by him to Shri Mangtulal Harlalka and Shri Mahavir Prasad Jain amounting to Rs. 38 lakhs which amount both of them disclosed under the VDI Scheme, as the receipts from the assessee and further deduction should be allowed on account of the cost of construction which was estimated at Rs. 1,58,00,500 as per the certificate given by Shri Nikunj M. Chokshi, government approved valuer who valued the property known as Hare Krishna A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hs from the project. In order to appreciate the working of the profit of 15.69 lakhs from the project which was given in a hypothetical working to the AO, the learned counsel filed a zerox copy of VDIS certificate of one of the payees Shri Mahavir Prasad Jain which reflected the receipts of money by said Mahavir Prasad Jain as paid by the assessee in his submissions as well as the working given by the assessee. Attention was invited by the learned representative of the assessee to the statement of the assessee recorded under s. 132(4) during the course of search wherein the assessee offered a sum of Rs. 17 lakhs as his unaccounted income which has been offered to tax in the return filed in response to notice under s. 158BC. It was submitted that there was no retraction from the disclosure made by the assessee during the course of search proceedings and accordingly there was no basis for applying any presumption and assumption by the AO while working the huge undisclosed income of more than Rs. 1.47 lakhs. It was submitted that the hypothetical profit which could have been earned by the assessee even on the basis of the seized paper can be determined as under: "Without prejudice: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maintained the legislature assumes that the rate of net profit is 8 per cent of the receipts and since in the case of the assessee a part of the project was already undertaken by the earlier president of the NTC, the assessee's share in the profit earned in relation to this project would definitely be much less than the sum of Rs. 17 lakhs offered by the assessee because assuming a net profit on the whole project the net profit will come to Rs. 18,68,800 on the receipts of Rs. 2,33,60,000. Alternatively, it was submitted that even assuming, though not admitting, that the assessee had in fact received "on money" in respect of each and every flat in the Hare Krishna Apartment, even then s. 158BC empowers the AO to tax only the undisclosed income and not undisclosed receipts. Reliance was placed on the decision of the Calcutta High Court in the case of CIT vs. S.M. Omer (1992) 107 CTR (Cal) 272 : (1992) 201 ITR 608 (Cal) and the decision of the Tribunal in the case of ITO vs. Gurubachan Singh J. Juneja (1996) 54 TTJ (Ahd) (TM) 1 : (1995) 216 ITR 99 (AT). Accordingly it was submitted that the reasonable rate of net profit is applied on the unrecorded receipts then the addition which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch such thing or state of thing usually ceases to exist, is still in existence. If a thing or state of thing is shown to exist, an inference of its continuity within a reasonably proximate time goes forward and backward may sometimes be drawn. In the instant case, it is shown that the assessee was charging "on money" in respect of booking of flats in Hare Krishna Apartment as is apparent from the seized paper in which flat No. 301 having total area of 1,020 sq. ft. was claimed to be sold to one Shri Sunil Kumar M. Kapadia wherein the total sale consideration was shown at Rs. 4,04,161 out of which Rs. 1,48,544 was collected in cheque and the balance of Rs. 2,30,616 collected in cash and the transaction was not denied by the assessee. Accordingly we are of the opinion that the assessee in fact did charge "on money" in relation to booking/sale of flats in Hare Krishna Apartment. However, the entire receipts on account of "on money" charged by the assessee on sale/booking of flats cannot be the undisclosed income of the assessee for the block period because what can be taxed under Chapter XIV-B is undisclosed income and not the undisclosed receipts. During the course of hearing befo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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