TMI Blog1998 (9) TMI 114X X X X Extracts X X X X X X X X Extracts X X X X ..... icer noted that page 5 of item No. A-20 seized at the residence of Smt. Pamela Syal and Sh. A. L. Syal during search on 7-9-1995 related to purchase of land by various family members at Mirpura in the month of August, 1995. He noted that in the case of Smt. Neena Syal, the transaction related to 12 bighas of land at Mirpura and that date of registration was 24-8-1995 at an amount of Rs. 3 lakhs. He also noted that total consideration paid for the said plot was Rs. 7.83 lakhs. He observed that perusal of the aforesaid document showed that certain payments were made to sellers over and above registered value of property. He also observed that the assessee denied payment of any such premium. He also observed that the seller had filed affidavit in response to summons under section 131, where she denied having received any premium. He further observed that, according to the assessee, there were two proposals -one by individual and family and the other by Golden Forest (India) Ltd. (for short GFI Ltd.). The assessee contended that individuals bought the land on cash down payment but GFI Ltd. offered them FDRs for higher amounts. Assessing Officer did not accept the said plea on the groun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wherein it was observed that legal fictions are created only for a definite purpose and they are limited to the purpose for which they are created and should not be extended beyond their legitimate field. The said observations were made in the context of second proviso to section 10(2)(vii) of the Indian Income-tax Act, 1922. He further referred to the decision of Hon'ble Allahabad High Court in the case of CIT V. Rampur Timber Turnery Co. Ltd [1973] 89 ITR 150, wherein it was observed that 'section 41(1) of the Act creates a legal fiction that the sum of Rs. 6,092 shall be deemed to be the business income of the assessee for the relevant previous year, although in fact the business had ceased to exist. If so, the inevitable corollary of the fiction would be that the business would be deemed to have been carried on in that year'. He further referred to the decision of Hon'ble Gujarat High Court in the case of CIT V. Deepak Textile Industries Ltd. [1987] 168 ITR 773 / 35 Taxman 92, wherein it was observed that 'it is clear that the purpose of the Legislature in introducing the legal fiction is to give the benefit of the unabsorbed depreciation in the following previous year or in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year of assessment was 1958-59 and the liability to tax had to be determined under 1922 Act. It also observed that in case of unregistered firm advance tax had to be deposited by the firm and, in case of a registered firms, the individual partners deposited advance tax according to their own personal liability and such advance payment of tax was given credit in the ultimate tax liability found at the end of the year. It further held that since in the said case it was a registered firm there was to be no determination of tax liability, apart from the nominal tax which the registered firms had to pay after the year 1956. It was ultimately held that the contention of the department that only the amount deposited in advance by the firm can be deducted, was correct. It also observed that the fiction created by section 271(2) of 1961 Act is merely to this extent that for the purpose of calculating penalty imposable on the firm, the basis will be the same which would have been applied if the firm had not been registered. It, therefore, held that this fiction must be applied to the existing facts and it cannot further be supposed that the advance deposits made by the individual partners w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of any premium of the said plot of land. He also submitted that there was no other evidence with the department except item A-20 at page 2 of APB. On a query as to whether the seller of the plot was confronted regarding receipt of extra payment. Id counsel replied in the negative. He submitted that the registered deed and the balance sheet of the assessee at page 46 of APB were direct evidence for purchase of plot in question at Rs. 3 lakhs. On a further query, Id counsel submitted that Assessing Officer never asked the assessee to produce seller of the plot and, therefore, she felt that the explanation given to the Assessing Officer has been accepted. He, however, pointed out that Assessing Officer independently issued summons under section 131 to the seller, Smt. Ajaib Kaur, and that she filed an affidavit, placed at page 1 of APB. On a further query as to whether the seller appeared in person before Assessing Officer, Id. counsel submitted that it was not clear. Id. counsel pointed out that in the affidavit filed by Smt. Ajaib Kaur, she has certified in para 3 that she had received only an amount of Rs. 3 lakhs and that no other amount of whatsoever kind either in cash or cheq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntities of goods, was a dumb document and, therefore, no addition could be made on basis of such document. He further submitted that there were two facets of document found during search under section 132, i.e. (a) finding of the document; and (b) truthfulness of the document and its veracity has to be evaluated before making any addition on the basis of such document. He further submitted that the presumption mentioned in section 132(4A) is for the purpose of making an order under section 132(5) and not for the purpose of making assessment under section 143(3). He also referred to the following decisions :- (i) Addl ITO T. Mudduveerappa Sons [1993] 45 ITD 12 (Bang), wherein the Tribunal held that presumption raised under section 132(4A) could not be availed of for purpose of making an order of assessment under section 143(3). (ii) Asstt. CIT v. Rajeshbhai Jagjivandas Thakkar [1996] 58 ITD 283 (Ahd), where Assessing Officer relying upon order under section 132(5) added the value of the ornaments in the assessee's hands. The Tribunal observed that the essential and material distinction between the provisions contained in section 132(5)/143(3) had gone unnoticed at the hands of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d every other part of the books of account may be assumed to be in the handwriting of the person by whom it is purported to have been written. This presumption cannot, however, have the effect of excluding section 69 when regular assessment is made in regard to the income of the person from whose possession those books of account were seized under section 132. It does not obviate the necessity to establish by independent evidence the genuineness of cash credits'. 4.3 Ld. counsel then referred to item A-8, as relied upon by Assessing Officer for making the impugned addition of Rs. 4.83 lakhs. He pointed out that the said document cited as A-8 was seized from the residence of Sh. Vinod Viyogi, as a mentioned by Assessing Officer. He stated that the assessee is not aware of any such person or any such document and that the said evidence was never confronted by Assessing Officer to the assessee. He, therefore, submitted that the said evidence has no meaning, as Sh. Vinod Viyogi is not the assessee's agent or buyer. 4.4 Ld. counselnextreferred to the provisions of section 158BB, whereunder the undisclosed income of the block period is to be computed in accordance with the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctually in favour of the Department. Similarly, he submitted that the decision in Chhotelal Kanhaiyalal's case (supra) is on different issue. He further submitted that the provisions of the Evidence Act are not applicable to the deeming provisions of sections 69-69B. 4.7 Ld. D.R. pointed out that Mr. Vinod Viyogi was doing work of purchasing land for GFI Ltd. He referred to page 22 of the department's paperbook (DPB), where a copy of an affidavit filed by Mr. Vinod Viyogi is placed. In para 2 of the said affidavit, it is mentioned that he is arranging purchase of various agricultural lands for and on behalf of different group of companies of GFI Ltd. through various brokers and sub-brokers who are paid commission as per normal practice in the said business. It is also mentioned in para 1 that he is working as a property consultant for and on behalf of Golden Forest Group Companies. Ld. D.R. submitted that the said affidavit has been filed to prove relationship of Sh. Vinod Viyogi with the assessee. On a query as to whether the said affidavit was confronted to the assessee and where it was filed or taken on record,Id. D.R. kept silent. 4.8 Ld. D.R. invited our attention to copie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e entire record in the form of diary pertained to the transactions of GFI Ltd. He further referred to pages 19-21 of DPB, which are extracts from the diary seized from the residence of Sh. Vinod Viyogi, marked as A-35. He also referred to page 10 of DPB, where entries against name of Smt. Ajaib Kaur for purchase of 12 bighas of land in Mirpura are made and the rate is indicated at Rs. 2.61 lakhs. Ld. D.R. then referred to balance sheet of Smt. Neena Syal beginning with pages 36 APB and submitted that the said balance sheet had been prepared up to date of search and that they were not found during search. He pointed out that in the balance sheet as on 31-3-1986 (page 36 APB), the assessee had shown Indira Vikas Patras worth Rs. 1 lakh. He submitted that there is no evidence of purchase of these IVPs. He further submitted that in balance sheet as on 31-3-1987 (page 37 of APB), IVPs have been shown at Rs. 75,000 and that there is no evidence of sale of IVPs and investment in shares of GFI Ltd. He also submitted that whereas members of this family are investing in IVPs, the company GFI Ltd is making offers to other people to double their money in a limited period. He referred to balanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DPB and submitted that in respect of plot at Mirpura, rate of Rs. 2.61 lakhs per acre is clearly written and that further entries at pages 9-10 establish the relationship of the assessee and Sh. Vinod Viyogi. He further submitted that the documents placed at pages 9-21 of DPB represented common books maintained by Sh. Vinod Viyogi for purchase of land. He submitted that these diaries were perused by directors of GFI Ltd. and thus these are books of account of the assessee maintained by Sh. Vinod Viyogi. He further referred to page 16 of DPB and pointed out that the said page corresponds to page 104 of the diary seized from the residence of Sh. Vinod Viyogi. 4.14 Ld. D.R. referred to the provisions of section 132(4) and (4A) and submitted that whatever is seized during search or found in possession or control of the concerned person in the course of search is presumed to belong to such person. It is also presumed that the contents of the books of account and other documents so found are true. 4.15 Ld. D.R. referred to the following case law in support of his arguments :- (a) Pushkar Narain Sarraf's case (supra), wherein it is observed that presumption regarding correctness of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing provisions and submitted that Ld. D.R. has not rebutted any of the said principles. Ld. counsel pointed out that there are more than 20 deeming provisions in Income-tax Act, for example, sections 7, 8, 9, 25A, 41(1), 45(1), 59, 68 to 69D, 73A, etc., whereunder things or state of affairs which are not actual are deemed to be actual. He submitted that the decision in S. Teja Singh's case(supra) also relates to a deeming provision. 4.18 Ld. counsel further raised a basic objection to the admission of the paper book filed by the department. He urged the Tribunal to peruse the said paperbook and submitted that taking documents contained in the said paperbook on record was possible only if such documents were part of record of the assessee/court. He submitted that these documents were never part of record of the assessee and that the concept of the group, as mentioned by Id. D.R., is not relevant. He submitted that Assessing Officer has rightly indicated document marked A-8 as part of record of Sh. Vinod Viyogi. He also submitted that the Tribunal is the last appellate authority and that it is not an income-tax authority and that in this case the department is respondent. He urged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lated to this particular transaction in the case of the assessee. Ld. counsel referred to preliminary and final statement of Smt. Neena Syal recorded on 7-9-1995 (pages 31 -35 of APB) and submitted that not a single question about purchase of land in Mirpura by the assessee has been put to her. He further referred to the statement of Sh. A.K. Syal (pages 7-8 of DPB) and submitted that no question about this transaction was put to Sh. Syal. Ld. counsel further referred to the statement of Sh. Vinod Viyogi and the assessment order in his case. He referred to page 6 of the said assessment order and pointed out that addition of Rs. 14.20 lakhs found at the residence of Sh. Vinod Viyogi has been made in his case and there is no discussion of the diary found at his residence. He, therefore, submitted that the sanctity of the said diary for the purpose of making an addition in the case of Smt. Neena Syal is very much open to doubt. He further submitted that even circumstantial evidence is in favour of the assessee, as the said diary nowhere mentions that Sh. Vinod Viyogi received any money from Smt. Neena Syal for the purpose of paying premium or on money to Smt. Ajaib Kaur. He also submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orpn. (P.) Ltd.'s case (supra) and Chuharmal's case (supra) are distinguishable on facts. He further submitted that the decision in Roshan Di Haiti's case (supra) as relied upon by Id. D.R., is also relied upon for the possibility that the assessee had earned the amount of Rs. 4.83 lakhs, which is allegedly paid as on money. He submitted that in the said case, the onus of proving the source of money found to have been received was placed on the assessee by the Apex Court and that in the present case the allegation of the department is not for receipt of Rs. 4.83 lakhs by the assessee but for payment of that amount by the assessee to the seller and, therefore, the burden lies on the department to prove receipt of such money by the assessee before the assessee could have paid any on money of that amount. Ld. counsel further submitted that there was no attempt by the department to find out the actual market value of the land before alleging payment of any premium/on money by the assessee. He emphasised that the document relied upon by the department do not prove conclusively that any premium/on money was given by the assessee. Ld. counsel referred to the decision of Hon'ble Supreme Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to large number of seized documents, paucity of time, complexity of issues and lengthy proceedings, the recordings of the confronted documents were recorded in the general language on the order sheet, the AR of the assessee was clear regarding the documents confronted and relevant for the proceedings. Sh. Varinder Mehta has further clarified that in the case of Smt. Neena Syal, he has perused the paperbook submitted by the Assessing Officer and the said documents were confronted at the various stages and that he had written a letter on 22-4-1996 in this case. It is also stated that after getting reply and further discussion after tallying various seized documents pertaining to purchase of immovable property transaction at Mirpura, order sheet entry was made on 12-8-1996 to the effect that 'in case of Mirpura property, on 24-8-1995, registration is done for Rs. 3 lakhs and as per documents seized this is for Rs. 7.83 lakhs. Explain why Rs. 4.83 lakhs should not be treated as undisclosed income'. Ld. D.R. also filed a copy of order-sheet entries beginning from 1-7-1996 to 2-9-1996 in the case of Smt. Neena Syal. Similarly, order-sheet extracts have been filed in the case of Smt. Bim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted. He also submitted that an affidavit is a piece of evidence once it is given in court and similarly statement at bar is evidence. He further submitted that whereas affidavit is declaration of facts, a certificate is only confirmation of assertion. He also submitted that the facts can be proved by evidence or through affidavit and that knowledge and belief are important limbs of an affidavit. He further submitted that formation of belief is on the basis of source of information and knowledge is based on facts which could be proved. He emphasised that the impugned certificate is based on conjectures and surmises of Sh. Varinder Mehta, who was Assessing Officer in the year 1996, and who is now ADI. He further emphasised that Sh. Mehta was acting on memory and that such certificate was not admissible was evidence. He referred to the decision of Hon'ble Supreme Court in the case of ITO v. Madnani Engg. Works Ltd. [1979] 118 ITR 1 / 1 Taxman 345, wherein with reference to counter-affidavit filed by the department in which grounds were not disclosed on the plea that it would cause prejudice to the interest of the revenue, it was held that the said counter-affidavit was not tenable an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred to the contents of para 1 of the certificate, wherein it is mentioned that 'all the relevant issues/documents were discussed'. It further refers to a clear understanding with Sh. S. Mukhi. Ld. counsel submitted that no assessee would empower its counsel to reach any understanding with Assessing Officer without reference to the list of seized documents and knowing the terms and conditions of the understanding. He further submitted that Assessing Officer had drawn adverse inference on the basis of understanding without putting any question and that there were no minutes of the meeting or the said observations. He pointed out that the name of Smt. Neena Syal did not occur in the list of documents inspected or handed over and that even Sh. S. Mukhi is not mentioned in that list. He submitted that copies of certain documents were given to Sh. Surinder Panwar. Ld. counsel pointed out that in the said certificate, Sh. Varinder Mehta, Assessing Officer, is making a confession that due to large number of seized documents, paucity of time, complexity of issues and lengthy proceedings, the record confronted documents were recorded in general order on order-sheet and that documents were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , which is placed at pages 72-73 of APB. He also submitted that assessment was completed on 24-9-1996 and that sequence of events would show that Assessing Officer never confronted the assessee with papers now filed by the department. He pointed out that Assessing Officer is only relying on one document, ie. A-8, and that veracity of the other papers in departmental paperbook (DPB) is not there. He, therefore, emphasised that the documents placed at Sr. Nos. 4 to 12 of DPB were never confronted to the assessee. He further urged that the certificate now filed is self-contradictory when Assessing Officer himself had not relied on other documents placed in DPB. He also pointed out that if papers were confronted to the assessee, there would have been some reply by the counsel. He submitted that there was no prayer by the department for admission of additional evidence under the Income-tax (Appellate Tribunal) Rules and that the department was only attempting to improve its case. Ld. counsel also submitted that the assessee was not taking any ground of violation of principles of natural justice and that, therefore, no second inning should be provided to the department. 4.23 Ld. counse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealing with assessment of Smt. Neena Syal, document A-20, page 5, seized from Smt. Pamila Syal and himself were confronted and no document seized from Sh. Vinod Viyogi's residence was either confronted to Smt. Neena Syal or any question was put in statement taken by Assessing Officer to Smt. Neena Syal, Sh. R.K. Syal, Smt. Pamila Syal or Sh. Vinod Viyogi. It is also stated that Assessing Officer himself has not relied upon all seized documents of Sh. Vinod Viyogi except A-8, page 14, and total cash found from him at the time of search and arising out of the said document amounting to Rs. 14.20 lakhs has been assessed in the hands of Sh. Vinod Viyogi as his undisclosed income. It is further stated that production of search documents by the department before the Tribunal, though not relied upon by the then Assessing Officer in the case of Smt. Neena Syal and contained in DPB at pages 9 to 23 at Sr. Nos. 4 to 12 seized from Sh. Vinod Viyogi is an attempt to complicate the proceedings and mislead the Tribunal. Ld. counsel submitted that the department may file a counter-affidavit having regard to the aforesaid affidavits of Sh. S. Mukhi and Sh. A.L. Syal. Ld. counsel further filed a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ords 'pass such order as the Tribunal thinks fit' include all the powers (except possibly the power of enhancement) which are conferred to the Appellate Assistant Commissioner by section 31. It further observed that consequently the Tribunal has authority under section 33 to direct the AAC or the ITO to hold a further enquiry and dispose of the case on the basis of such enquiry. Ld. D.R., therefore, prayed that Assessing Officer may not be required to file any counter-affidavit with reference to affidavits filed by Sh. S. Mukhi and Sh. A.L. Syal. He again referred to various documents filed in DPB. He pointed out that document at pages 12-13 is a document referred in assessment order and document at pages 9 to 18 are from the same bunch of loose papers marked as document A-8. He submitted that the other documents are explanatory of pages 9-18 of document A-8. He reiterated that as mentioned in the certificate of Sh. Varinder Mehta, all relevant documents had been confronted to the assessee and, therefore, there was no necessity to file any counter-affidavit or make an application for admission of additional evidence. He further referred to the provisions of rule 18 of the Income-ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king them on record and that there is no prayer by the department for taking such papers on record. 4.27 In the alternative, Id. counsel reiterated that, at the most, document A-8, page 14, only could be taken on record, as Assessing Officer relied upon it and that if document A-8, page 14, is taken on record, the impugned addition of Rs. 4.83 lakhs has been made under section 69 and it is deemed as income by fiction and, therefore, heavy burden lies on the department to prove to the hilt that it is undisclosed income of the assessee. He further submitted that if one paper can lead to various possibilities, then the provisions of section 69 cannot be made applicable and that the said provisions can only apply where only one conclusion is possible. 4.28 Ld. D.R. also made a statement that even document A-8, page 14, is sufficient to make addition in the case of the assessee and in case the Tribunal takes a decision that the said document had not been confronted, let the matter be restored back to the file of Assessing Officer. 5. We have carefully considered the rival submissions and have perused order of Assessing Officer, various papers placed in the assessee's paperbook as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dence of Sh. Viyogi and which was not specifically confronted to her. We may make here a reference to order-sheet entry dated 12-8-1996 recorded by Assessing Officer in the case of the assessee, wherein it is mentioned that in case of Mirpura property, on 24-8-1995 registration is done for Rs. 3 lakhs and, as per documents seized, this is for Rs. 7.83 lakhs. Explain why Rs. 4.83 lakhs should not be treated as undisclosed income ? This order-sheet entry has been the subject-matter of hot debate before us between both the parties. While the department filed a certificate from the then Assessing Officer, Sh. Varinder Mehta, the assessee filed affidavits from Sh. Sunil Mukhi, Advocate, and Sh. A.L. Syal. Sh. Mukhi also made a statement at the bar that the impugned document No. A-8 and the diaries seized from Sh. Viyogi were not specifically confronted by Assessing Officer to him. This statement at the bar led to filing of aforesaid certificate by the department and the aforesaid affidavits by Id. counsel and Sh. A.L. Syal. The contents of the said certificate and affidavits have been mentioned in the foregoing paragraphs of this order. It is observed that Assessing Officer's assertions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o question was put to Sh. Viyogi about payment of premium to the seller of plot in Mirpura or other places. Thus, we feel that on the facts and circumstances of the case Assessing Officer did not comply with the conditions stipulated in section 69 of the Act, which are mandatory in nature and are relevant for assessment made under section 143(3) read with section 158BC. It may be mentioned that under section 15 8BB(2), the provisions of sections 68,69,69A, 69B and 69C have been made applicable for the purpose of computing undisclosed income of the block period. It is also observed from the decision of the Tribunal in the case of Rajeshbhai Jagjivandas Thakkar (supra) that "the fiction enacted under section 132(5) for the limited purpose cannot be extended while completing the assessment under section 143(3) and, therefore, the burden of proving that the assessee was the owner of the gold ornaments in question in the face of his spontaneous statements and statements of the family members lies on the taxing authority." We may also refer to the decision of Hon'ble Allahabad High Court in the case of Pushkar Narain Sarraf (supra) wherein it is held in the context of section 132(4A) tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... served that though the legislation in question, i.e. section 12B(2), proviso (i), of Indian Income-tax Act, 1922, was to remedy a social evil and should be read broadly and should be so read that the object is fulfilled, yet the onus of establishing a condition of taxability must be fulfilled by the Revenue. Thus, we feel that in the present case. Assessing Officer has simply jumped to the conclusion that the impugned amount of Rs. 4.83 lakhs is undisclosed investment, without following due course of law. 5.2 We may now deal with plea of Id. D.R. that in case the Tribunal comes to the conclusion that the documents in question have not been confronted to the assessee, the matter may be restored to the file of Assessing Officer. We may refer here to the Scheme of Chapter XIV-B, inserted by the Finance Act, 1995, w.e.f. 1-7-1995 and the object underlying the said provisions. In the Budget speech given by the then Finance Minister, he mentioned that 'in order to make the procedure more effective, I am proposing a new scheme under which undisclosed income detected as a result of search shall be assessed separately at a flat rate of 60 per cent. An appeal against the order can be filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessment of search cases cost effective, efficient and meaningful, it is proposed to introduce a new scheme of assessment of undisclosed income determined as a result of search under section 132 or requisition under section 132A. It is also mentioned at page 347 that 'where the assessee offers no explanation about the nature and source of acquisition of certain assets or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the value of such assets may be deemed to be the income of the previous year in which the search took place'. Thus, it will be seen that the new provisions are more stringent inasmuch as the assessee is liable to pay tax at 60 per cent in relation to undisclosed income, assessment order is to be made by an officer not below the rank of Assistant Commissioner and with the previous approval of the Commissioner. We, therefore, feel that the provisions of the new Chapter have placed a greater burden on the departmental authorities to comply with the essential provisions of law and that these provisions have to be construed strictly. Thus, in a situation where Assessing Officer has failed to comply with the basic provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he exercise of the power by the Tribunal and that it can decide only the points or grounds raised before it whereas the income-tax authorities can travel beyond the grounds and consider the entire assessment and that the Tribunal has no power of enhancement of any penalty or assessment nor can it remand a case with the object of such enhancement. It further observed that the power of remand is within discretion of the Tribunal, but the power being judicial, it must be exercised judiciously, according to rule and not according to hamour, the order must be legal and regular, disciplined as opposed to the capricious. We may also refer to the decision of Hon'ble Patna High Court in the case of Chunnilal Surajmal v. CIT [1986] 160 ITR 141 / 27 Taxman 229, where reassessment proceedings were taken in the case of HUF and on inspection of accounts and bank deposits, it was found that the bank deposits were in the name of wife of karta of HUF and that the karta's wife was not asked for explanation regarding the deposits and the bank deposits were included in the income of the HUF. It was held that reassessment were not valid and direction by the Tribunal to investigate bank deposits was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is reflected against House No. 570/12. He submitted that the assessee had a plot of 300 sq. mtrs., which was a small plot in the context of residential accommodation in Chandigarh/Panchkula. He further submitted that the assessee had disclosed rate of construction at Rs. 396 per sq.ft. and that expenditure incurred on construction is duly supported by vouchers, etc., which are with the department. He referred to the details placed at pages 95 to 176 of APB, where copies of various vouchers are placed. He further referred to the valuation report placed at pages 49 to 55 of APB, wherein cost of construction has been worked out at Rs. 8,21,900 and it is mentioned that cost of land, as per sale deed, was Rs. 1.95 lakhs plus expenses on registration at Rs. 25,000 totalling Rs. 2.20 lakhs. He further referred to note given at page 60 of APB, wherein it is mentioned that in the case of Smt. Pamela Syal, covered area of House No. 573, Sector 12, Panchkula is 3751 sq.ft. as compared to covered area of 2223 sq.ft. in the assessee's case, but the alleged construction cost has been taken at Rs. 32,02,908, while in the case of Smt. Pamela Syal, it was proposed to be taken at Rs. 23,92,106. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... items aggregating to Rs. 2,48,972, total expenditure on cost of construction has been worked out at Rs. 7,98,429. Further addition of Rs. 95,443 has been made with reference to doors, which expenditure was not written in the list of expenses. A further addition of Rs. 11,988 was made with reference to building material not reflected in the list of expenses. Another addition of Rs. 8,772 was made with reference to expenses incurred for common wall and thus total cost of construction was worked out at Rs. 8,74,632. He further referred to pages 116-124 of APB and pointed out that at page 116 expenses of Rs. 10,974 have been shown with reference to electrical wiring. He further referred to page 57 of APB and submitted that expenses of Rs. 28,019 against Sr. No. 38 were estimates only and similarly expenses against Sr. Nos. 39 to 44 were also estimates only. He also referred to pages 135-142 of APB, where the word 'estimate' has been given at the top to indicate that the same were only estimated expenses. He further referred to page 143 and submitted that the expenses mentioned reflected the payments actually made and that the said page was part of document A-11. In view of the foregoin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the alternative. Id. counsel submitted that the assessee filed return in time on 30-6-1995 and that the addition made by Assessing Officer is different that in the present case worked out as undisclosed investment. He pointed out that under the provisions of section 158BB, undisclosed income of the block period has to he computed in accordance with provisions of Chapter IV, on the basis of evidence found during search, as reduced by the aggregate of total income determined in assessment under section 143 for the earlier years. He referred in particular to the provisions of section 158BB(1)(d). wherein it is provided that where previous year has not ended or the dale of filing return of income under section 139(1) has not expired, undisclosed income may be determined on the basis of entries relating to such income or transaction as recorded in the books of account and other documents maintained in the normal course on or before the date of search or requisition relating to such previous year. He submitted that in the present case the previous year has not ended and that the assessee had maintained the books of account relating to cost of construction, wherein all transactions are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat let the matter be restored to file of Assessing Officer and the assessee be asked to reconcile total amount. He submitted that there may be variation in cost of construction and that the cases cited by Id. counsel are not relevant. With reference to plea of Id. counsel that construction was completed by 31-3-1995 and that addition, if any, should be taxed at the rate of 30 per cent, Id. D.R. submitted that no regular books of account were kept by the assessee with reference to cost of construction. He further submitted that powers of first appellate authority as mentioned in section 251 get merged with powers in section 254, when the Tribunal is hearing first appeal and that these powers of the Tribunal are coterminus with powers of Assessing Officer. He referred to the following decisions :- (a) CIT v. McMillan Co. [1958] 33 ITR 182 (SC), wherein in the context of section 13, proviso, of the Indian Income-tax Act, 1922, it was observed that if the ITO has failed to apply his mind to the proviso to section 13 or has come to a wrong determination for or against the assessee in the computation of the income, the Appellate Assistant Commissioner can correct that error when he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... APB gives a summary of expenses relating to H. No. 570/12 and that this summary is reflected in documents A-6, A-7, A-11, and A-12.He,therefore,submitted that the actual amount spent by the assessee id Rs.8,74,632 and that Assessing Officer has committed arithmetical error in computing cost of construction at Rs.14,20,725.He,therefore,urged that no addition is called for. 7. We have carefully considered the rival submissions on this issue and have perused order of Assessing Officer and relevant documents filed in the paperbook to which our attention was invited during course of hearing. We have also seen the case law relied upon by the parties. It is observed that Assessing Officer initially determined value of construction of H. No. 570/12 at Rs. 32,02,908, when he asked the assessee to explain the said expenditure. The assessee filed a reply, which is placed at pages 47-48 of APB. The assessee explained that total expenditure was not correctly worked out by Assessing Officer and that at different places the estimates given by various labourers and suppliers had been calculated and at later stages the actual amount paid against said estimates had also been included and that eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er. We feel that Assessing Officer has made the impugned addition without discussing the said report or pointing out any defect therein and discrediting the said report. We feel that report of the registered valuer cannot be ignored and that in the absence of any other material it has to be given due weightage and the decision of the Tribunal in Shanti Complex's case (supra) supports this proposition. It is also observed from assessment order in the case of Smt. Pamela Syal that Assessing Officer has taken cost of construction at Rs. 15,28,585 with reference to covered area of 3751 sq.ft. as against total cost of construction taken in the case of the assessee at Rs. 14,20,725 for covered area of 2223 sq.ft. The cost of construction in the case of the assessee works out to Rs. 639 against Rs. 407 in the case of Smt. Pamela Syal. It is not in dispute that both the houses were constructed simultaneously under the supervision of Sh. A.L. Syal. We may also refer here to the decision of the Tribunal in the case of Sunder Agencies v. Dy. CIT [1997] 63 ITD 245 (Mum.), wherein it has been held that the scheme of Chapter XIV-B does not give power to the revenue to draw presumptions in regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee to state as to whom the said jewellery belonged and explain source and acquisition thereof. He also referred to reply filed by the assessee, as at pages 77-81 of APB. The assessee mentioned that total jewellery found from different family members and their residence and lockers was to the extent of 5438 grams, which belonged to four families, ie. Sh. A.L. Syal and Smt. Bimla Syal; Smt. Pamila Syal and her daughter; Smt. Romila Sinha and her family including her husband and two sons; and Sh. R.K. Syal and Smt. Neena Syal and their children Ms. Madhurima Syal and Master Nikhil Syal. The assessee further stated that the said jewellery and other ornaments were acquired by various family members at the time of their respective marriage ceremonies or as gifts at different occasions and was also purchased from time in different years, as duly declared in their personal balance sheets filed before Assessing Officer. The assessee pleaded that looking into family status and background of Syal family and taking into consideration the circular of the CBDT, said jewellery as found was quite reasonable and as per declared source of acquisition of each family member, as stated above. Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause (iii) of section 132(1). He further referred to the provisions of section 132(4A), wherein it is specified that where any money, bullion or jewellery or other valuable article or thing are found in possession or control of any person in the course of search, it may be presumed that such money, bullion, jewellery or other valuable article or thing belongs to such person. He submitted that the said presumption provided in section 132(4A) is for the purpose of seizure and not for the purpose of assessment. He further referred to the provisions of section 69A and submitted that Assessing Officer can invoke the provisions of the said section where the assessee offers no explanation about nature and source of acquisition of money, bullion or other valuable article or thing or explanation furnished is not found satisfactory by Assessing Officer and thereafter value of bullion, jewellery, article or thing could be deemed to be income of the assessee for the relevant financial year. Ld. counsel referred to the decision of the Tribunal in the case of Rajeshbhai Jagjivandas Thakkar (supra) for the proposition that the provisions of section 132(5) have limited application and that duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd are not for public use. He also submitted that the assessee was showing only an income of Rs. 60,000 from consultancy in balance sheet as on 31-3-1995 (page 45 of APB). He submitted that the source of acquisition is to be proved by the assessee and that Assessing Officer could not travel back to the time of marriage. He further submitted that the department has been quite reasonable in accepting jewellery of Rs. 2 lakhs, which is alleged to have been purchased during financial year ending on 31-3-1995 and as reflected in balance sheet for that financial year. He also submitted that Assessing Officer has accepted the explanation of the assessee for 45 tolas including jewellery of the children. He further referred to para (iv) of CBDT instructions dated 11-5-1994, wherein it is mentioned that a detailed inventory of jewellery and ornaments found must be prepared to be used for assessment purposes. He, therefore, submitted that the assessee is still required to explain the source of jewellery. Ld. D.R. also referred to decision of Hon'ble Supreme Court in the case of CIT v. N. C. Budharaja Co. [1993] 204 ITR 412 / 70 Taxman 312 for the proposition that the principles for construi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellery of 211 tolas. We feel that the submission made by Id. counsel that the intention underlying CBDT instructions issued on 11-5-1994 is also relevant with reference to deeming provisions of section 69A, has force. It is observed from the said instructions that 500 grams jewellery is permitted to be retained in the case of a married lady, 250 grams for unmarried lady and 100 grams for male member of family. It is also observed from para (iii) of the said instruction that the authorised officer may having regard to the status of the family and customs and practice of the community to which the family belongs and other circumstances decide to exclude a larger number of quantity of jewellery and ornaments from seizure. We may also mention that we have come across a decision of the Tribunal in the case of Devi Lal Soni v. Asstt. CIT [1998] 99 Taxman 324 (Jp.), wherein aforesaid CBDT instructions dated 11-5-1994 have been considered in the context of section 69. In the said case. Assessing Officer made an addition of Rs. 2,14,720 as unexplained investment in gold jewellery. The assessee submitted that the ornaments belonged to various ladies of family and the assessee's wife also exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the names of minor children for Rs. 7,920 each in the names of Master Nikhil Syal and Miss Madhurima Syal were seized. Keeping in view the written submissions made by the assessee on 16-9-1996 that FDRs in the names of minors have been made out of gift, money and prizes won by them in individual capacity and FDRs worth Rs. 12,000 is reflected in balance sheet of Sh. A.L. Syal made in the name of daughter-in-law, Assessing Officer accepted the said FDR and made an addition of Rs. 50,000 for balance of FDRs as income from undisclosed sources to be taxed at 60%. 10.2 Learned counsel invited our attention to page 93 of APB, where a copy of Annexure 'O' is placed, indicating details of various FDRs amounting to Rs. 88,866. He further referred to balance sheet as on 31-3-1994 in the case of Sh. A.L. Syal, wherein FDR of Rs. 12,000 in the name of minor is reflected. He submitted that Assessing Officer has accepted FDRs worth Rs. 27,840 and out of balance of Rs. 61,026, Assessing Officer has made an addition of Rs. 50,000. He submitted that all these FDRs were in the names of minors and investments in FDRs have been made out of pin money, birthday gifts, prizes and daily collection. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs. 88,866 seized during search, Assessing Officer allowed credit of FDRs worth Rs. 12,000 in the name of the assessee which is reflected in balance sheet of Sh. A.L. Syal and that in the case of the children Assessing Officer gave credit of two FDRs of Rs. 7,920 each in the names of minor children, i.e. Rs. 15,840. The explanation given by the assessee is that investment in FDRs in the name of minor children has been made out of money received by them in their individual capacity on various occasions, like birth day gifts, shaguns, pin money, cash prizes, etc. The assessee further stated that the income from FDRs in the case of minor children has been included in the hands of respective parents w.e.f. assessment year 1993-94. As already held by us in the foregoing part of this order, the provisions of section 69A etc. are required to be complied with while deeming income as undisclosed, while making regular assessment under section 143(3) read with section 158BC. It is observed that Assessing Officer has not rebutted the explanation furnished by the assessee and has proceeded to make an ad hoc addition of Rs. 50,000. We feel that it is customary in Hindu family to give and recei ..... X X X X Extracts X X X X X X X X Extracts X X X X
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