1999 (3) TMI 113 - AT - Income Tax

Unexplained cash deficit in block assessment treated as undisclosed income; labour charges and warehouse valuation additions removed partly.

Unexplained cash deficit was assessed as undisclosed income in a Chapter XIV-B block assessment. The Tribunal held that the assessee failed to ... Computation Of Undisclosed Income - Block Assessment - Unexplained credits in Receipts & Payments Account - Cash deficit - Unverifiable labour charges - Valuation difference - HELD THAT:- The assessee-company has not produced, the share allotment details made to those applicants in the share capital of M/s. Essem Marbles (P.) Ltd. Even before the Tribunal, such necessary details and evidence such as share application form, allotment letters, share-holders register, share certificates etc. with reference to the allotment of shares in M/s. Essem Marbles (P.) Ltd. to those Udaipur people were not produced. According to the assessee company, those share application monies were received in June-July, 1995. Even after about four years, now in 1999, the assessee-company could not produce such relevant evidence and substantiate its contention. Therefore, in the facts and circumstances of the case, we find that the later version of share-application money is an after-thought and the confirmation-cum-source letters filed before the assessing officer are only self-serving evidence. The excess credit balance of Rs. 4,95,547 in the account of M/s. PBL Transport Corporation was found as on 31-03-1992, whereas the impugned deficit cash balance was worked out as on 01-08-91. Moreover Rs. 4 lakhs out of this credit balance was transferred by the assessee-company towards share application money in M/s. Essem Marbles (P.) Ltd. Therefore, that much amount is not at all available in the hands of the assessee-company for any such set off. The contention of the assessee fails. We confirm the addition as undisclosed income in the hands of the assessee-company. We find that the explanations offered by the assessee-company are satisfactory. The observations of the assessing officer that the vouchers produced by the assessee-company were only self-serving evidence has to be viewed in the light of the nature of the payment. The labour payments are usually supported by self-vouchers. In assessee company's own case, even the non-disputed labour payment's accounted in the books are supported by self-vouchers. K. Appala Naidu who deposed before the assessing officer has stated that payments were due from the assessee-company even though he could not remember the exact amount. In the circumstances, we do not find any justification to treat the outstanding balance in the Balance Sheet as on 31-03-1995 as the undisclosed income of the assessee-company. The latest return for the assessment year 1995-96 was pending before the assessing officer at the time of search operations. From the above details, we find that the factum of liability towards labour payments has been brought to the notice of the assessing officer year after year, through returns and accompanying documents, and there cannot be any element of nondisclosure on the part of the assessee in relation to this liability. Examining these factual aspects in the light of our discussion on the scope of determination of undisclosed income in block assessments under Chapter XIV-B, we cannot say that there was any non-disclosure in this case. Therefore, this amount of Rs. 19,38,346 is deleted from the computation of undisclosed income made by the assessing officer. We find that the differential amount cannot be treated as the undisclosed income of the assessee-company for the reason that the assessee has already disclosed the factum of construction of the warehouse, and also its cost as per the books of account to the departmental authorities well before the search and seizure operations. All the relevant records and related facts are very much available before the departmental authorities even before the search and seizure operations, and we cannot say that but for the search, they would not have become available to the Department. Therefore, on this short ground, we delete this amount treated as undisclosed income in this block assessment. We have deleted the undisclosed income adopted by the assessing officer on account of outstanding labour payments, and on account of differential cost of construction. All other items of undisclosed income determined by the assessing officer have been confirmed. The assessing officer is directed to modify the block assessment in the light of directions given. In the result, assessee's appeal is allowed in part. Issues Involved:1. Unexplained credits in Receipts and Payments Account2. Unexplained credit balance in the name of M/s. PBL Transport Corporation3. Cash deficit as on 1-8-19914. Unaccounted cash payments5. Unverifiable labour charges6. Difference in the construction of warehouseSummary of Judgment:1. Unexplained credits in Receipts and Payments Account Rs. 14,20,000:The assessing officer found unexplained cash receipts of Rs. 14,20,000 during the survey at Udaipur Branch Office. Initially, the Managing Director of the assessee-company admitted these amounts as undisclosed income. Later, the assessee-company claimed these were share application monies, providing confirmation letters. The Tribunal confirmed the addition as undisclosed income, stating the later explanation was an afterthought without substantial evidence.2. Unexplained credit balance in the name of M/s. PBL Transport Corporation Rs. 95,547:The assessee-company did not raise any specific ground against this addition. Therefore, the Tribunal did not consider this issue in the order.3. Cash deficit as on 1-8-1991 Rs. 5,47,107:The assessing officer found a peak deficit cash balance of Rs. 5,47,107 due to unaccounted cash payments. The assessee's explanation that vouchers were prepared at the site and payments made later was not substantiated. The Tribunal confirmed the addition as undisclosed income.4. Unaccounted cash payments Rs. 75,000:A seized document showed an unaccounted cash payment of Rs. 75,000 to M/s. Amya Sales Co., Calcutta. The source was not explained. The Tribunal confirmed this as undisclosed income.5. Unverifiable labour charges Rs. 19,38,846:The assessing officer treated outstanding labour charges as undisclosed income. The Tribunal found the assessee's explanations satisfactory and noted that the liability had been disclosed in balance sheets filed with returns. The Tribunal deleted this amount from the computation of undisclosed income, stating it did not constitute non-disclosure.6. Difference in the construction of warehouse Rs. 27,92,842:The assessing officer determined a difference in the cost of construction of a warehouse based on a valuation report. The Tribunal deleted this addition, stating that the factum of construction and its cost had already been disclosed to the department before the search, thus not qualifying as undisclosed income.Conclusion:The Tribunal deleted the additions related to outstanding labour payments and differential cost of construction, while confirming all other items of undisclosed income. The assessing officer was directed to modify the block assessment accordingly. The appeal was allowed in part.