TMI Blog1991 (12) TMI 95X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income-tax Act, 1961 amounting to Rs. 2,20,896. The ITO did not give any reason for this levy except the calculation of interest at the bottom of page 7 of the assessment order. The assessee objected to this levy of interest in his appeal filed before the CIT (Appeals) in Ground No. 8 in the following words :---- " For that in view of the facts and circumstances the Ld. ITO was wholly unjustified in charging Rs. 2,20,896 as interest under section 217 and in view of the facts and circumstances, your petitioner was not at all liable for any such interest and in view of the facts and circumstances, your petitioner completely denies his liability for any such interest, without prejudice and even otherwise the computation of interest @ 15 per cent was wholly bad and illegal. " The CIT (Appeals) disposed of this ground in paragraph 9 of his order. He held that though the assessee denied the liability under section 217 fully, however, the relief claimed by the assessee was only consequential to the other reliefs given earlier in the order, which would automatically follow at the time of giving effect to the appellate order. The assessee felt dissatisfied with this order of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per Annexure 'C' of the Panchnama in addition to other valuables and documents. A sum of Rs. 50,000 was seized out of the total cash of Rs. 66,116 by the authorised officers. At the time of the search, a statement on oath was also recorded from the assessee, Shri Biswanath Pasari. To a specific question put by the authorised officers as to how much cash he had in the house at the time of the search, the assessee stated that he did not personally keep any cash except for daily requirements of about Rs. 500 to Rs. 700. The assessee could not explain the source of the sum of Rs. 66,116 found in his residence at the time of the search. Subsequently, the assessee submitted a written explanation in his letter dated 28-3-1984 explaining the source of cash of Rs. 50,000 seized under section 132(5) of the Act. The apparent contradiction between his earlier statement recorded at the time of the search on 31-1-1984 and his explanation in his letter dated 28-3-1984, was put to the assessee by the ITO in a statement recorded from the assessee on 18-4-1984 in the course of the said proceedings. In reply to Question No. 24 the assessee stated that he was never specifically asked to explain the na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Passbook of Munmun Pasari, one of the granddaughters of the assessee wherein there were deposits of Rs. 2,500 each in cash on 14-1-1983 and again on 14-1-1984. The ITO expressed surprise that the same amount was received as birthday gifts by the granddaughter. However, after allowing some margin for cash savings of the unmarried daughter and the grandchildren to the extent of Rs. 6,116 only, the ITO treated the balance of Rs. 60,000 as unexplained income of the assessee and added the same to the assessee's income for the year under appeal. 11. When the matter went before the CIT(Appeals) the assessee reiterated the submissions made before the departmental authorities and contended that there was no justification for disbelieving the assessee's case when the departmental officers had allowed the entries to be recorded in the books of M/s. Luxmi Traders as on 30-1-1984 after being satisfied about the genuineness of the two withdrawals of Rs. 25,000 by the assessee and of Rs. 15,000 by the assessee's son, Shri Virendra Kumar Pasari on the same date. It was further urged that the balance of Rs. 15,000 received from Vijay Paper Trading Co. should also have been accepted by the depart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clinched the issue in favour of the assessee regarding the sums of Rs. 25,000 and Rs. 15,000 having been withdrawn by the assessee and his son on 30-1-1984 from the said firm M/s. Luxmi Traders. 14. The CIT (Appeals) did not accept the assessee's plea regarding the receipt of cash of Rs. 15,000 from Vijay Paper Trading Co. on 30-1-1984 as he found no evidence to substantiate this claim. 15. As regards the balance amount of Rs. 11,116 which was claimed to belong to the unmarried daughter of the assessee and his three grandchildren, the CIT(Appeals) held that it would be reasonable to estimate such savings at Rs. 8,000 at the rate of Rs. 2,000 for each of the persons concerned in the absence of any definite evidence in this regard. He, therefore, accepted a sum of Rs. 8,000 out of Rs. 11,116 as properly explained and treated the balance of Rs. 3,116 as unexplained cash. 16. Thus, the CIT(Appeals) deleted a sum of Rs. 48,000 and sustained the balance amount of Rs. 18,116 as unexplained cash found at the time of the search in the assessee's premises which represented unexplained income of the assessee. Accordingly, he sustained the addition to the extent of Rs. 18,116 to the inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the assessee, particularly having regard to the state of his mind at the time of the search as could be seen from the opening part of his statement dated 31-1-1984 and that the ITO was not justified in rejecting the said explanation as a mere after-thought, ignoring all the other facts pointed out by the assessee in the course of assessment proceedings. He argued that the CIT(Appeals) had correctly appreciated the facts of the case and after examining the books of account of the assessee as well as M/s. Luxmi Traders which were in the custody of the department, the CIT(Appeals) was fully justified in deleting the addition to the extent of Rs. 48,000 accepting the assessee's case to this extent. The learned Counsel argued that there was no infirmity either in the reasoning or the conclusion of the CIT(Appeals) and that the same should be upheld. 19. We have carefully examined the contentions set out above in the light of the materials placed before us. In our view, the CIT(Appeals) had correctly appreciated the facts of the case as well as the evidence already brought on record to reach the conclusion that the assessee had satisfactorily explained the nature and source of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting the explanation offered by the assessee's son Shri Narendra Kumar Pasari who stated that it was his savings out of US $ 500 which was sanctioned to him in foreign exchange by the Reserve Bank of India when he went on a foreign tour previously and that as he was not aware of the legal position that this amount should have been surrendered to the Reserve Bank of India, he kept the said US $ 89 with himself. The CIT(Appeals), however, accepted the assessee's case accepting the said explanation offered by the said Shri Narendra Kumar Pasari who had filed an affidavit even in the course of the assessment proceedings. The passport of Shri Narendra Kumar Pasari was also produced before the CIT(Appeals) which was examined by him in the presence of the ITO and the IAC (Assessment) and the recitals in the said passport corroborated the assessee's claim. The CIT(Appeals) found that the assessee was not a dealer in foreign exchange and that it was also not the ITO's case that the assessee had engaged in any such sort of business in foreign exchange in a clandestine manner. He, therefore, accepted the affidavit of the assessee's son and deleted the addition of Rs. 800 from the income of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mi Traders and the seized books of account and other documents which were necessary for disposal of the appeal. Therefore, the order of the CIT(Appeals) cannot be faulted on the ground of contravention of Rule 46A. We, therefore, find no merit in the objection raised by the Revenue. Accordingly, this ground is rejected. 25. This takes us to Ground No. 3 in which the Revenue objects to the deletion of a sum of Rs. 11,66,441 which was added by the ITO as the concealed income of the assessee from his share business. This addition was made by the ITO with reference to the four sheets of paper numbered as pages 41 to 44 of Annexure A22 which were seized from the briefcase of the assessee, Shri Biswanath Pasari. On an examination of these papers the ITO found that there were transactions of purchase and sale of shares by the assessee on account of two parties, namely, "R.N." and "Jain". The assessee totally denied his connection with these papers and contended that they did not relate to him much less to the business carried on by him. He claimed that these papers might have been left by so many persons who came to transact business with him and that he had kept these papers in his bri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was not, however, possible for him to accept the theory propounded by the ITO in the assessment order. He held that if the papers in question had to be accepted as belonging to and relating to speculative transactions indulged in by the assessee, then there might be three different sets of circumstances which he set out. Then the CIT(Appeals) held that the scrutiny of the papers concerned, however, did not lead to any definite conclusion as to whether the final results were actually of the nature of profit or loss to the account holder or holders whosoever he or they, was or were. He was of the view that so far as the assessee was concerned, the results would be just the reverse in case theory No. (iii) as propounded by him be the fact in place of theory No. (ii), that furthermore, although the transactions were written on two sides, it was not at all possible to understand which side represented the purchases and which side the sales and hence whether the net results of a particular transaction represented a profit or loss. The CIT(Appeals) then examined the basis on which the ITO had proceeded with his theory that the transactions related to two separate identities, namely, "R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee would hold no water unless it could definitely be shown that the assessee actually made the payments concerned. The CIT(Appeals) next pointed out that the ITO had taken into consideration only the profits arising out of the transactions recorded in the four sheets of paper which appeared on the right hand side of the final accounts, that there was, however, clear indication that there was a brought forward balance of Rs. 4,81,626 appearing on the left hand side of the final table on page 41 and that if the entries on the right hand side denoted profits of the assessee, this particular entry on the left hand side should, therefore, denote the loss arising to the assessee in the earlier months, i.e., before October, and that, however, nothing could be said definitely on this point also. The CIT(Appeals) then referred to two entries of the amounts of Rs. 24,960 and Rs. 28,430 appearing on the left hand side on page 43 against two names : "Shulpe" and "Sumte" and that the nature of these two transactions apparently appearing on the "loss" side (according to the ITO) was also shrouded in mystery as the detailed transactions leading to these final results were not appearing a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ITO would not hold good in the case of a normal assessment under section 143(3) of the Act. 28. In the absence of definite evidence pointing out the connection of the assessee with the papers in question, the results of the transactions recorded therein could not be fixed on the assessee. He further held that the four pieces of seized papers by themselves also did not lead to any definite conclusion as to whether any profit or loss arose out of the transactions recorded therein and whether the payment by way of cheque or cash denoted receipt or payment by the account holder in question. Ultimately, the CIT(Appeals) was of the view that the addition of Rs. 11,66,441 had been made by the ITO on mere surmise and was not backed by even any supporting evidence and hence could not stand in the assessment of the assessee. He, therefore, deleted this addition. This is the subject matter of objection by the Revenue in Ground No. 3 in the departmental appeal before the Tribunal. 29. Shri D.S. Roy, the learned Departmental Representative relied on the findings of the ITO and argued that the seized papers clearly indicated transactions of a speculative nature indulged in by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he custody of the Department along with the report of the ADI as could be seen from the CIT(Appeals)'s letter dated 20-5-1987 wherein he requested that those documents should be produced before him at the time of hearing of the appeal on 27-5-1987. The learned Counsel, therefore, argued that apart from mere suspicion, surmise and conjectures on the part of the ITO there was nothing to connect these papers with the assessee much less to justify such a huge addition of Rs. 11,66,441 which was rightly deleted by the CIT(Appeals). He, therefore, submitted that the order of the CIT(Appeals) deserved to be confirmed. 31. We have already summarised the findings of the CIT(Appeals) in support of his conclusion deleting the addition of Rs. 11,66,441 made by the ITO. We have also perused the copies of the four sheets of paper marked as pages 41 to 44 of Annexure A22 contained in pages 8 and 9 of the assessee's compilation. As rightly held by the CIT(Appeals), there is nothing to show that these papers belonged to the assessee or that they represented the transactions indulged in by the assessee or put through by the assessee either on his own behalf or on behalf of two other identities, na ..... X X X X Extracts X X X X X X X X Extracts X X X X
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