TMI Blog1999 (9) TMI 118X X X X Extracts X X X X X X X X Extracts X X X X ..... AO issued a further letter, dt. 11th April, 1997, reminding the assessee to file return. AO issued notice under s. 142(1) on 28th May, 1997 along with a detailed questionnaire fixing the date of hearing for 5th June, 1997. AO mentioned in the questionnaire that if no return was filed by the assessee, the assessment would be completed ex parte under s. 144. On 5th June, 1997 the assessee along with Mr. Rajeev Sood, C.A. attended assessment proceedings but no return was filed. AO, therefore, proceeded to make assessment under s. 144. 4.2. He observed that the assessee, along with his brother, Shri Wazir Singh had purchased property known as Pushpak Hotel. In this connection AO observed that the assessee had voluntarily made surrender of Rs. 8,25,000 on account of renovation of the rooms and construction of roof, etc. and purchase of building. He further observed that in his reply dt. 5th June, 1997, the assessee had submitted that he purchased the hotel building and made renovation of the building and total consideration was paid at Rs. 7.50 lakhs. He further observed that the assessee had not given any source of investment of the amount of Rs. 7.50 lakhs and, therefore, the entire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the AO only made an addition of Rs. 5,680 in respect of loan from bank (for which no details were available) and further addition of Rs. 20,000 paid to the seller from undisclosed sources of income. He further referred to the order of the learned CIT(A) dt. 17th Sept., 1996 placed at pp. 20-21 of the paper-book, whereby he sustained the aforesaid additions of Rs. 5,680 and Rs. 20,000 respectively. He further referred to the valuation report in respect of Pushpak Hotel, wherein value declared by the assessee for his share in the entire property had been shown as Rs. 1,33,095. The Valuation Officer determined the valuation of the property at Rs. 3,61,777. The learned counsel further referred to the letter, dt. 20th Aug., 1996 written by the assessee and other co-owners to the Asstt. Director of Investigation whereby the assessee and other members of the group made a surrender of Rs. 43 lakhs for the block period on behalf of all the assessees in the group. He referred to the last para of the said letter which is reproduced hereunder for the sake of convenience: "Thanking you for all your guidance and mature advice and without prejudice to any of our rights if the above is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered, apart from the decision of the Hon'ble Punjab Haryana High Court in the case of Krishan Lal Shiv Chand Rai vs. CIT (1973) 88 ITR 293 (P H). The learned counsel further referred to the reply filed by the assessee in response to questionnaire issued by the AO. He referred to para 6 of the said reply, wherein it has been mentioned that the total consideration paid for land and building on which the Hotel Pushpak was set up, was Rs. 7.50 lakhs, and that the break-up of the amount and source of the said investment along with documentary evidence was submitted to the AO at the time of hearing of the case for asst. yr. 1991-92 and in the assessment order dt. 31st Jan., 1996, the said investment stood explained in toto except for an amount of Rs. 25,680 for which second appeal is pending before the Tribunal. With reference to cost of additions and alterations the assessee submitted that the cost determined by the Distt. Valuation Officer was on the higher side and that on rough estimate the genuine expenses incurred were Rs. 2.25 lakhs and not Rs. 3,61,777 as computed by the Valuation Officer. The assessee submitted that the amount of Rs. 2.25 lakhs was spent from the income g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asst. yr. 1982-83 in the case of Shri Wazir Chand. He submitted that the learned CIT(A) vide orders dt. 31st Oct., 1990 had set aside the issue of investment to the file of the AO. He further referred to the assessment order dt. 14th June, 1991 made in the set aside, proceedings and submitted that only an addition of Rs. 10,000 was made on account of investment in the said property on agreed basis. The learned counsel further referred to the valuation report now made by the Valuation Officer, Patiala after inspection of the property on 25th June, 1996. He submitted that the assessee had hardly recovered from the shock of search when the inspection of Hotel Unique was made by the Valuation Cell. He pointed out that the present valuation has been made at a figure of Rs. 20,03,709, which included revenue expenditure of Rs. 2.50 lakhs debited by the assessee. In the said report value declared by the assessee for entire property has been mentioned at Rs. 11,23,158. The learned counsel urged that the issues which had become final in regular assessments, were being reopened in the block assessment. He referred to the provisions of s. 158BG, whereunder previous approval of the CIT is requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther query by the AO. The learned Departmental Representative submitted that no return was filed by the assessee in spite of various reminders and that the assessment was completed under s. 144 on the basis of evidence available with the AO. He referred to the provisions of s. 158BB which specify that undisclosed income of the block period shall be the aggregate of the total income of the previous years falling within the block period computed, in accordance with the provisions of Chapter IV, on the basis of evidence found as a result of search........... and such other materials or information as are available with the AO. He, therefore, submitted that the evidence available with the AO could be direct or indirect. The learned Departmental Representative further referred to the statement of the assessee, wherein in response to query regarding Hotel Pushpak and Hotel Kohinoor, the assessee stated that he was not maintaining any books of account as the turnover in each case was below limitation prescribed in s. 44AA. He also stated that Hotel Pushpak was owned by him and his brother, Shri Wazir Singh equally. He further referred to a portion of the statement, wherein the assessee s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o defect has been pointed out in the said report. He further submitted that in the present case various notices asking the assessee to file the return, were to be issued immediately in view of the limitation period of one year for passing assessment order and that the assessee could have filed the return even declaring nil income, as no penalty under Chapter XIV-B is leviable. He further submitted that the case law relied upon by the learned counsel is distinguishable on facts and that the said decisions are not relevant. In this connection he submitted that the facts in the present case are not disputed. He further submitted that certain FDRs had been encashed by the assessee for repayment of loans and accordingly the case law was not relevant. 5.3. With reference to investment in construction of Hotel Unique, the learned Departmental Representative referred to the statement of Shri Bhagat Ram, manager, Hotel Unique. In answer to question No. 3, Shri Bhagat Ram stated that he joined the Hotel Unique in 1979 and at that time there were 22 rooms and the number of rooms was increased to 34 in 1981. He further stated that the number of rooms was increased to 54 in 1984 and 7 rooms w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of investments in Hotel Pushpak and Hotel Unique ought to be upheld. 5.4. The learned counsel in his reply referred to the reply furnished by the assessee as also his statement. He submitted that the assessment had been completed on 31st Jan., 1996, before search and each item of investment was duly discussed by the AO and the AO was satisfied with reference to the investment of Rs. 7.50 lakhs in Hotel Pushpak, except for an amount of Rs. 25,680. Regarding plea of the learned Departmental Representative about sources of repayment of loans, the learned counsel submitted that AO did not ask the assessee any further questions after reply made by the assessee. He further stressed that photocopies of the relevant documents were not given by the Department to the assessee. In this connection he referred to the order sheet entry, dt. 30th Sept., 1996 regarding request of the assessee for photocopies. He further submitted that the valuation report was obtained by the AO after search and copy thereof has not been given to the assessee. Regarding surrender letter dt. 20th Aug., 1996 the learned counsel again stressed that at that point of time search was over and after two mont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f debtors/creditors, etc. and in order to make a fresh beginning". The assessee and other members of the group also gave their consent to deal with the assets retained under s. 132(5) in accordance with the provisions of s. 132B. In view of the foregoing, we feel that much cannot be read into the last paragraph of the said letter, whereby the assessee and other members of the group have thanked the ADI for his guidance and mature advice and the same cannot be the basis for coming to the conclusion that the aforesaid surrender has been made under duress. It may be mentioned that some discussion are bound to take place between the assessees and the ADI after search and if after such discussions the assessees had come to the conclusion that they have undisclosed income for the block period, which ought to be surrendered to the Department, such surrender has to be considered as voluntary surrender and without any coercion or duress as mentioned by the assessee and other members of the group. They have also referred to the adage of Mahatama Gandhi, namely, "Mother Earth has provided for everyone's need but not for everyone's greed". We may mention that the case law relied upon by the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, the AO had rightly made the addition of Rs. 7.50 lakhs in the present assessment. We feel that there has to be a finality in relation to a particular issue and the investment of Rs. 7.50 lakhs has been properly looked into and the same cannot be reopened under assessment being made for the block period. In any case the said approach is against specific provisions of s. 158BB(1)(a). Now we are left with the remaining addition of Rs. 3,61,777. The learned counsel has pleaded that only an investment of Rs. 1,33,095 is involved and that addition to that extent could be sustained. It is observed from the valuation report placed at pp. 22-23 of the paper book that the value declared by the assessee as mentioned against Col. 4.3 has been stated at Rs. 1,33,095. The Valuation Officer has, however, worked out the value of additions/renovation at Rs. 3,61,777. In the surrender letter the assessee has shown an amount of Rs. 2.25 lakhs on account of renovation of rooms and construction of roof. The assessee has further shown an amount of Rs. 6.00 lakhs on account of FDRs encashed to discharge loans taken for purchase of purposes of building known as Hotel Pushpak. The learned counsel state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the statement of the assessee recorded on 25th June, 1996 under s. 131, that he stated that there are 62 rooms in Hotel Unique and during the years 1986 to 1990, 17 rooms were added. No further stated that in 1994, 11 to 12 rooms were renovated and also reception portion was constructed. He also stated that the expenditure incurred on construction of 17 rooms during 1986-90 was Rs. 3 lakhs and expenditure on construction of reception portion was Rs. 25,000 to 30,000. He further stated that about Rs. 35,000 was being spent every year on repair and maintenance. It is also observed from the letter of surrender that the assessee surrendered an amount of Rs. 5.60 lakhs on account of investment in construction of additional rooms and office block during the block period from 1986-87 to 1995-96. A perusal of the valuation report also shows that the value declared by the assessee for the impugned property as mentioned against Col. 4.3 was Rs. 11,23,158. The Valuation Officer has valued the property at Rs. 20,03,709. In the valuation report filed by the assessee the property has been assessed at Rs. 17,03,338. Thus there is difference of Rs. 8,80,551 in the value declared by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted that the addition could only be made on the basis of evidence found during search. In this connection he referred to the provisions of s. 158BB. The learned counsel also referred to the decision of the Tribunal, Jaipur Bench, 7 IT REP 435, wherein the Tribunal observed in para 14 that "the withdrawal shown by the assessee has not been taken into consideration by the AO at all. He made his estimate on the basis of presumption and by mentioning that the assessee has been enjoying luxurious life and has acquired all kinds of household goods to make his life comfortable. In our considered view this is not a way to estimate the household expenses. The AO should have brought evidence on record if he is going to make such an estimate. No material was with him to make the estimation and in assessment completed under s. 158BC.such estimates are not permissible. Therefore, the addition on account of household expenses is hereby deleted". The learned counsel further submitted that the assessee had been making regular withdrawals from Hotel Unique and that the same could have been taken into consideration. He referred to the chart of withdrawal made by the assessee during the block peri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h is hidden from the Department, whether detected as a result of search of not? 6.4. The learned counsel in his reply submitted that the withdrawals made by the assessee from Hotel Unique and Beauty Palace, are genuine withdrawals and the assessee was not indulging in lavish living. He submitted that even cooking range was not found. The learned counsel referred to the decision of the Tribunal, Mumbai Bench in the case of Sunder Agencies vs. Dy. CIT (1997) 59 ITJ (Mumbai) 610 : (1997) 63 ITD 245 (Mumbai), wherein it has been observed that scheme of Chapter XIV-B does not give power to Revenue to draw presumption in regard to undisclosed income. These observations have been made in the context of estimate of sales promotion expenses. 6.5. We have carefully considered the rival submissions on this issue and have perused the orders of the AO. We have also perused the relevant documents placed in the paper book to which our attention has been invited during the course of hearing. We have also seen the case law relied upon by both the parties. We feel that the decision of the Tribunal in the case of Sunder Agencies is distinguishable on facts and is of no help to the assessee. We fe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erein marriage expenses were estimated at Rs. 5 lakhs. He further submitted that the assessee did not give any reply to this issue. He further referred to p. 68 of the paper-book and submitted that the assessee himself had shown an expenditure of Rs. 1.93 lakhs on two marriages. 7.4. The learned counsel in his reply submitted that the marriage was simple. He further submitted that jewellery given in the said marriage was out of Istri Dhan of the wife of the assessee. 7.5 We have carefully considered the rival submissions on this issue and have perused the orders of the AO as also the various documents placed in the paper-book to which our attention was invited during the course of hearing. We feel that on the facts and circumstances of the case it would be just and fair to sustain an addition of Rs. 1 lakh on account of marriage expenses. The assessee gets a relief of Rs. 1 lakh. 8. Ground No. 8 raised by the assessee relates to an addition of Rs. 3,16,372 (figure as corrected by the counsel) on account of un explained investment in stock. 8.1. The AO observed that survey under s. 133A was conducted on the business premises of the assessee i.e. Beauty Palace. He further obs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he parties on this issue and have perused the assessment order as also various documents placed in the paper-book to which reference was made during the course of hearing. We feel that the submissions made by the learned counsel have force. The objections of the learned Departmental Representative that the sale price is only mentioned at pp. 35-39 and not on other pages, has no merit, as the pages are in continuation. It is not the case of the Department that at other pages only cost price has been mentioned. Thus on the facts and circumstances of the case, we feel that the assessee should be allowed rebate of 25 per cent on total stock of Rs. 8,38,695. The resultant difference would work out to about Rs. 1,07,000. The addition of Rs. 1,07,000 is, therefore, sustained. The AO may allow appropriate relief to the assessee on the said basis. 9. Ground No. 9 raised by the assessee relates to an addition of Rs. 13,19,563 on account of investment in FDRs, RDs, etc. 9.1 The AO observed that during the course of search, total investments in the form of FDRs, NSCs, etc. valued at Rs. 9,17,745 and Rs. 4,01,818 were found. He further observed that the entire FDRs, NSCs and RDs were seized ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that approximately FDRs in respect of other persons amounted to Rs. 4,65,268 and that the said amount could not be added in the hands of the assessee. He further submitted that Mrs. Renu Kukreja, is a married daughter and no addition in relation to her FDR could be made in the hands of the assessee. The learned counsel further referred to p. 33 of the paper-book, where details of saving bank deposits have been given. He further referred to p. 34 of the paper-book, where details of total income returned/assessed for the block period have been given. He submitted that the total assessed income in the block period amounts to Rs. 12,37,259 and that the assessee ought to be given the benefit of income already returned/assessed. In this connection he referred to items 14-28 and deposits at Sl. Nos. 1 to 8 mentioned at p. 33 of the paper-book. He further submitted that the figures relating to these investments as mentioned in the chart accompanying the letter of surrender, are wrong and that the ADI wanted computation on the said basis. 9.3. The learned Departmental Representative submitted that the assessee cannot claim the benefit of entire assessed income of Rs. 12,37.000 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed in the block period in relation to the investments in FDRs, etc. We feel that the submissions made by the learned counsel in this regard have some force as the amount invested in the FDRs from year to year is given out of the returned/assessed income. Thus, we feel that it will be just and fair to allocate an amount of Rs. 1.50 lakhs on account of interest, etc. which is embedded in the investment in FDRs. Thus out of the balance amount of Rs. 9,81,621 which remains after deduction of amount of Rs. 3,37,942 mentioned above, a further relief of Rs. 1.50 lakhs, is allowed. The addition to the extent of Rs. 8,31,621 is, therefore, examined, in relation to investment in FDRs, etc. 10. Ground No. 10, raised by the assessee relates to addition of Rs. 10,77,980 on account of certain deposits in banks and FDRs. 10.1. The AO observed in para 13 of his orders that during post-search investigation and enquiries, detailed information was called from all the banks in which the assessee and his family members had accounts. He observed that the information showed that loans was sanctioned to Smt. Harbans Kaur for purchase of vehicles after giving equal amount of deposit to the bank in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion as claimed by the learned counsel. 10.3. We have carefully considered the submissions made by both the parties on this issue and have perused the assessment order as also other documents to which our attention was invited during the course of hearing. We feel that the submission made by the learned counsel have some force as the items pointed out above give impression of duplication of addition. In view of the foregoing facts we sustain the addition of Rs. 1,70,786 as conceded by the learned counsel. With reference to item Nos. 3 to 12 at p. 7 of the assessment order, we direct the AO to verify the factual position and delete those items which have already been covered in the addition of Rs. 13,19,563 as made by the AO vide para. 6 of the orders. He may allow appropriate relief of the assessee on the said basis. He may also allow reasonable opportunity of being heard to the assessee in this connection. 11. Ground No. 11 raised by the assessee relates to addition of Rs. 1,20,000 on account of investment in purchase of land. 11.1. The AO observed that the assessee had purchased land from Smt. Sarla Devi for Rs. 1,20,000 and that the assessee, when confronted, could not expl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of about Rs. 2 lakhs from Hotel Unique. He submitted that the assessee had no time to go to the bank and retained the cash with him. In this connection he also referred to the assessment made in the case of Hotel Unique, where cash receipts have been estimated at Rs. 3 lakhs and protective assessment has been made. On a query from the Bench as to whether the assessee had any bank transactions, the learned counsel submitted that nothing was deposited in the bank during this period. He further pointed out that similarly the assessee had cash receipts from Beauty Palace aggregating Rs. 1,50,000. He further submitted that items Nos. 3 4 shown in the cash flow amounting to Rs. 31,000 on account of household expenses and commission payable to Khans of Hotel Unique are not pressed. He further submitted that the amount of Rs. 70,000 shown against item No. 5 of the cash flow statement, was Istri Dhan of Smt. Harbans Kaur, wife of the assessee and who is separately assessed. He further submitted that the amount of Rs. 1 lakh shown against item No. 6 pertained to Shri Parveen Ahuja who was doing lottery business from 1st April, 1988 to 1993. He further submitted that Shri Parveen Ahuja is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,81,000 and delete the balance of addition in the case of assessee. 13. Ground Nos. 13 14 raised by the assessee relate to giving lesser credit of income already disclosed for block period and making of additions without application of mind. 13.1. In this case the AO has computed total undisclosed income of the assessee for block period at Rs. 56,21,730. He reduced the said income by an amount of Rs. 5,80,470 on the basis of income returned by the assessee for the block period. The net undisclosed income has been taken at Rs. 50,41,260. 13.2. During the course of hearing the learned Departmental Representative pointed out that ground Nos. 13 and 14 taken by the assessee in the revised grounds of appeal, are new grounds. He submitted that the Tribunal asked the assessee only to modify the grounds as the earlier grounds were lengthy and argumentative. He further submitted that the AO has already given credit with reference to the income already disclosed by the assessee. The learned counsel submitted that benefit of earlier years' income as assessed has to be allowed by the AO. 13.3. We have carefully considered the submissions made by both the parties on these grounds. We ..... X X X X Extracts X X X X X X X X Extracts X X X X
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