TaxTMI 
TaxTMI 
2006 (8) TMI 239
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....the Assessing Officer and relatable to such evidence' appearing in section 158BB(1) of the Act as substituted by the Finance Act, 2002 with retrospective effect from 1-7-1995." 2. In this appeal the assessee originally filed grounds of appeal running into 24 pages. As these grounds were not in accordance with rule 8 of the Appellate Tribunal Rules, the assessee was directed to file concise grounds of appeal. Finally the assessee filed revised "Summarized ground of appeal" on 8th December, 2003. 3. In this appeal the assessee has disputed various additions made by the Assessing Officer while computing assessee's undisclosed income within the meaning of section 158BC. The learned Assessing Officer has made an elaborate assessment order and for a full appreciation of the facts found by him and his conclusions it is necessary to recount the discussion in the assessment order at some length. We wish to add here that it would be appropriate to refer to the assessment order for a micro view. Facts of the case leading to this appeal as stated in the impugned order of the learned Assessing Officer briefly are that a search under section 132(1) of the Act was conducted on 28th ....
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....in wholesale. Those vends were not auctioned but allotment was made on application that could be renewed from year to year. L-I vendor could purchase liquor, on payment of Excise Duty, from any distillery. From L-2 vends liquor was sold in retail to consumers. These vends could be taken on auction. L-2 vendor could purchase IMFL only from L-I vends. L-2 licence was given for one year, was not renewable. Every year a fresh auction was conducted. L-2 vendor was not required to pay Excise Duty but had to obtain a permit. From L-13 vend country liquor was sold in wholesale. Such vend was being allotted on application. L-13 vender could purchase country liquor on payment of Excise Duty only from distilleries of Haryana. From L-14A vends liquor was sold in retail to consumers. Those vends could only be taken on auction. L-14 could purchase liquor directly from distillery or from L-13 vendor on payment of Excise Duty. According to the learned Assessing Officer the assessee' succeeded to outbid others every year for obtaining L-2 and L-14 licences in Hansi Circle. The assessee obtained licences in the names of different firms for different Circles in different years. The learned Assess....
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....tatement and only after that his statement was recorded. There was certificate of Medical Officer, Government Hospital to that effect. In FIR the assessee had given minute details of the incident, amount of cash stolen, registration number of Maruti Gypsy, the colour of other cars and the names of several persons who had joined Shri Dalip Singh. In the statement the assessee had clearly stated that he was partner in the liquor vend and that Shri Manohar Singh was his cashier. Tape Recorded Conversation 8. On 19th July, 1996 the assessee appeared before the ADIT, Hissar in response to summons. On that occasion the conversation was tape-recorded without the knowledge of the assessee. In that conversation the assessee admitted off the record that he was 40 per cent shareholder in Gupta Wine Place L-I, Hansi and 50 per cent partner in Bawani Khera. He also admitted having 45 per cent share in L-2 and L-14A vends in Hansi. The assessee admitted that he had lost one crore rupees in a particular year out of the total Rs. 2 1/2 crores earned by him and therefore, the assessee was left with only Rs. 1 crore in cash and Rs. 50 lakhs in property. The assessee was asked if he had only 45....
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....of closing balance was then arrived at and carried forward as the opening balance in the summary sheet of the next day. As an illustration, the learned Assessing Officer has in para 20 of his order elaborately discussed page 32 of documents marked as D-12 being summary sheet of 11th June, 1996. This summary sheet indicated opening balance of Rs. 62,58,722. According to the statement of Shri Manohar Singh, this amount was arrived at by adding the entire cash received on account of sales of L-1, L-2 and L-14A vends at Hansi, L-2 and L-14A vends at Narnaund, Bawani Khera, Tosham and Jind and after deducting various expenses on account of purchases, excise duty, disbursement of loans, personal expenses of the assessee etc. After opening balance, the summary sheet recorded sale from liquor vends at Hansi and cash received from liquor vends at Bawani Khera, Tosham and Jind etc. expenditure on purchase of liquor and excise duty at Hansi; Licence fee and other day-to-day expenses; cash used for personal expenses of the assessee and cash given by way of loans to various persons. Shri Manohar Singh used to receive daily sale proceeds in cash and tally with sales reports from all Hansi vends.....
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....hs as cash received from Jind shop was found recorded. Shri Manohar Singh in whose handwriting the entry was made, stated that Shri Mange Ram personally brought cash received from Jind vends and at his instance the entry was made. Similarly entries were found in the seized document in respect of cash received from Bawani Khera vends. These entries showed that cash was being collected from Jind and Bawani Khera vends also. In his cross-examination Shri Manohar Singh stood by this statement that he had made entries with respect to cash receipts from those places at behest of the assessee. According to the learned Assessing Officer there appeared to be no other reasons for Shri Manohar Singh to have made entries with respect to cash received from Jind, Bawani Khera, L-1 vend at Hansi etc. During cross-examination Shri Manohar Singh specifically confirmed that money receipts from Jind and Bawani Khera did not pertain to sales Made at Gupta Wine Place, Hansi to those places but represented the cash received from the business of retail sales of the vends there. Shri Manohar Singh pointed out that cash received on account of sales of Gupta Wine Place was being separately mentioned as "L-1....
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.... petty employee would be passing and counter signing all the bills relating to the business. 12. The learned Assessing Officer found that summary sheets on Documents D-1 to D-12 indicated that there was a system of centralized purchase. On page 26 of Documents D-10 expenditure on account of purchase of liquor for vends at Hansi and Bawani Khera from the distillery of Yamuna Nagar was debited. It showed purchases of Rs. 3,68,850 on account of Hansi and Rs. 51,000 on account of Bawani Khera from Haryana Distillery, Yamuna Nagar. At the bottom the assessee wrote "Check Kiya Gaya". A more detailed working with respect of this purchase was made on page 1 of Documents D-10. The entries on that page showed that 8 trucks comprising of 600 cases of country liquor each were purchased at the rate of Rs. 51,000 per truck for Hansi and Bawani Khera and after including other expenses including labour expenses for loading etc., the total cost worked out to Rs. 4,24,000. Shri Krishan Lal had already been paid a sum of Rs. 3,50,000 and thereafter he was paid another sum of Rs. 6,24,000 representing Rs. 74,000 on earlier account and Rs. 5,50,000 lump sum advance. Shri Manohar Singh, Cashier who w....
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....ips and record on a paper. Next morning he would take all the cash to Barsi Gate along with details and the salesmen would bring daily sale report of the previous day. Shri Manohar Singh would tally the cash receipts at night with the daily sale reports and place a tick mark on the rough sheet of cash receipt brought by him. One such rough sheet seized from the residence of Shri Manohar Singh being page 2 to Document D-5 showed cash received from various locations. According to Shri Manohar Singh, after tallying the cash received on the rough sheet with the daily sale report he would prepare the summary sheet of every day next morning. The total cash as per these slips dated 26th June, 1996 enumerated in Para 25 of the impugned order added up to Rs. 6,49,000. As regard the cash out of Rs. 8,35,490 found from the bedroom of Shri Manohar Singh, he stated that Rs. 1,86,490 was cash pertaining to preceding days which he had kept separately in bundles. The learned Assessing Officer found that there was ample evidence to support the fact that cash of Rs. 8,35,000 belonged to the business. First, the cash was found in small bundles, secondly it was wrapped in slips on which details of cur....
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....n the cross-examination of Shri Manohar Singh by the assessee which lasted for two days, no rebuttal was made of these facts. The assessee maintained in his reply dated23-5-1997that nowhere in the papers containing documents No. D-2 there appeared any signatures of the assessee. Alleged facts were that the cash was counted by the salesmen and handed over after wrapping them in slips to Shri Manohar Singh. Cash was found from the possession of Shri Manohar Singh. There was no evidence on record that cash was being given to the assessee by Shri Manohar Singh. It was the finding of the Assessing Officer that cash belonged to M/s. Mittal & Co. but there was no reason to treat the assessee as owner of that company. Liquor was the business controlled by the Excise Department and in none of the certificate of the Excise Department and Partnership Deeds etc. the name of the assessee had figured anywhere. He was merely an employee of Mittal & Co. and there was no reason to treat cash of Rs. 8,35,490 as belonging to the assessee. The learned Assessing Officer did not accept the claim of the assessee that he was merely an employee. There were numerous entries on debit side of the summary shee....
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.... persons deposed that they were petty salesmen at the vends of Hansi and that they had been employed by the assessee as salesmen. According to the Assessing Officer the very fact that various persons working as salesmen in the vends of Hansi were shown to be partners in the liquor firms of Hansi, Jind, Bawani Khera, Tosham indicated that there was centralized planning. 15.1 According to the learned Assessing Officer during the course of search at the residence of the assessee in addition to the partnership deeds of several firms handwritten documents comprising names and father's names of the persons made to appear as partners were found. The documents also contained the addresses of such people. At the residence of the assessee copies of licences issued by Excise Authorities; copies of challans of licence fee; documents relating to the running of the business; correspondence with Excise and Police Departments etc. were found. Documents also comprised of court cases on behalf of various firms, announcement by the Collector, Excise of terms and conditions for auctions, new prohibition policy of the State Government after election in 1996; copies of maps of various god owns an....
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.... Manohar Singh who counted the sales and kept in safes at Barsi Gate. Cash was carried by Shri Manohar Singh to his residence in night wrapped in slips on which details of currency notes, name of vend and signature of salesmen were written. Shri Manohar Singh clubbed the cash after separating the slips and wrote the details from such slips on a rough sheet. The salesmen had to go back to the vend and keep the vend open till 11 P.M. or so. Next morning by 9.30 to 10 A.M. they brought the remaining cash of previous night along with daily sales report with respect to sale of previous day to Shri Manohar Singh. Daily Sales Reports were written and signed by the salesmen. Shri Manohar Singh carried the daily sales report to his house next evening and tallied the cash written on daily sale reports with the rough sheet prepared on which the cash received on previous night was written. Then he consolidated the entries from all the reports on a single sheet where he wrote the daily cash arrival, daily expenses, daily opening stock, daily sold stock and closing stock of all the vends. Cash was brought by the assessee Shri Mange Ram from Jind, Bawani Khera, Tosham vends. Accordingly entries w....
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....iness at various places. Certain bills relating to the construction of Sunder Hotel Building were also found and seized from the residence of Shri Manohar Singh. The learned Assessing Officer has given illustration of such entries in paras 28.1 and 28.2 of the impugned order. The same was corroborated by the statement of Shri Manohar Singh recorded on 19th December, 1996. Shri Manohar Singh was cross-examined by the assessee but no question regarding this issue was put to him. The learned Assessing Officer found from the seized documents that various household expenses were mixed up along with expenditure of the liquor business. Payments made to some other persons as well as cash taken by the assessee himself in person were recorded in the documents including a sum of Rs. 60 lakhs collected by the assessee in cash. The learned Assessing Officer recorded the statement of Shri Shanker, driver of NE car of the assessee bearing No. HR-9B-0004. He admitted to be in employ of the assessee as a driver at monthly pay of Rs. 1,500 and driving the assessee's car and sometimes the assessee's jeep. At the same time, the name of Shri Shanker appeared as a partner in the liquor firms of ....
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....e 15. This calculation was vital because on expiry of contract the liquor vend could not sell unsold stock next day. There were other documents such as pages 9, 10, 12, 13, 14, 19 of Annexure A-5 wherein the stock position had been worked out in relation to various dates in the handwriting of the assessee himself. The learned Assessing Officer has given the example of page 10 of Annexure A-5 in para 29 of the impugned order. The statement of Shri Manohar Singh was also to the effect that the assessee was receiving daily stock position reports and he himself was taking stock position of the business every now and then. This established that the assessee was engaged in the control and management of every aspect of the business. Statements of Shop Owners 19. On the date of search one Shri Ishwar Singh was found present at the premises of M/s. Gupta Wine Place, Hansi. He stated that the premises belong to his elder brother Shri Sajjan Kumar, who had let it out to the assessee. Subsequently statement of Shri Sajjan Kumar was recorded on 2nd August, 1996. Shri Sajjan Kumar admitted that the building had been let out to the assessee who was operating the liquor business under the na....
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....s for renting was done by the assessee who visited the premises frequently and who used the premises for selling liquor. The rent was being paid by the assessee when he visited the village or when Shri Dalip went to Barsi Gate vend to collect rent payment on the direction of the assessee. Similarly Shri Shiv Ram, resident of Gosai Gate, Bye Bass, Hansi stated on oath that he had let out two shops at Gosai Gate belonging to him at an annual rent of Rs. 8,000 to the assessee for the last few years. Rent arrangement was finalized by the assessee only. Likewise two shops situated at G.T. Road, Hansi given on rent to M/s. Mittal & Co. belonged to Smt. Mohinder Kaur, mother of Sardar Manohar Singh, Cashier of the assessee. It was stated that those premises were taken on rent by the assessee. In the statement recorded on 23rd July, 1996 the assessee was confronted with the various statements given by landlords of various properties from where liquor business was being conducted. The assessee denied having rented any shop and claimed that he was merely an employee. In the statement on oath the assessee stated that he had never signed any rent receipt. The learned Assessing Officer noted th....
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....id not, therefore, carry out adequate enquiries to ensure that no licences were obtained in benami names. These aspects were duly noted in the Memorandum of Finance Bill reported in 170 ITR (Statute) 187. It was experience of the department that associations of persons specifically constituted to take auction contracts for sale of liquor were difficult to be tracked thereafter. Real persons took licence in benami names and floated front associations of persons for short period. Ex parte assessments made against such association of persons did not result into collection of the taxes due to the public exchequer. In such a state of affairs the defence of the assessee entirely based on Excise Department's records was not of much consequence. In that respect the learned Assessing Officer recorded statement of Shri R.K. Daggar, who was posted as ETO at Hissar from May, 1994 to June 1996. He stated that he was in-charge of the whole of the Hissar District. In Hissar District there were six Excise Circles and each one of them was under an Excise Inspector. He stated that he was present at the time of auction at Hissar for financial years 1995-96 and 1996-97 held in March, 1996 and Marc....
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....it the Excise Branch and submit documents in respect of liquor licence fee on behalf of M/s. Mittal & Co. 23. The learned Assessing Officer examined surety bonds (M-75 Form) to be deposited by the successful bidder in the matter of surety of the partner on Rs. 50 affidavit. For 1995-96 a surety bond of Rs. 1 crore was given by one Shri Anil Kumar, son of Shri Chhabil Dass, resident of Rajli and Shri Subhash Chander, s/o Shri Jagan Nath r/o Uklana. Both persons were close relatives of Shri Mange Ram and assisting him in his business. Shri Anil Kumar was assessee's brother-in-laws. The assessee had purchased land at Yeti Nagar, Hansi, in the names of his three brothers-in-law. For this purpose the learned Assessing Officer referred to the statement of Smt. Prem Lata, wife of the assessee. Shri Subhash Chander was the nephew of the assessee and he was actively involved in the business of the assessee as a Munim and used to maintain his books of account. He was also in-charge of checking the various liquor vends. Lot of documents seized from the residence of the assessee were in the handwriting of Shri Subhash Chander. The assessee had purchased plot at Yeti Nagar in the name of....
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..... According to the learned Assessing Officer it could be said with utmost certainty that all those persons were not wine contractors but only petty salesmen. After the closure of business, they were hard pressed for their daily bread. Shri Shankar Lal was a driver by profession and used to drive the assessee's NE Car HR-93-0004. After he came to know the fact that he was shown as a partner in a liquor concern, he left the employment. He was earlier employed as deriver with M/s. Jamna Dass Chhabil Dass, Hansi. Thereafter he was unemployed. The Income-tax Inspector visited his house and found Shri Shankar Lal living in misery. Shri Ashok Kumar too was unemployed at the time of enquiry. The conditions of his house and family were pathetic. It was really very sad to learn that he was shown as a partner in a liquor concern that was auctioned at a bid of Rs. 4 crores. Income-tax Inspector visited his residence also and found him living in misery. Shri Pushkar was Arora by cast and working as daily wager with M/s. Manchan Medical Hall in Hansi. Income-tax Inspector visited his premises also and likewise found him living in misery. The learned Assessing Officer found that as in the cas....
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....ts it was pertinent to note that the partnership deeds were found from 835/14, Yeti Nagar, Hansi, residence of the assessee. The learned Assessing Officer held that from the examination of a large number of persons falling in the category of salesmen/partners and their cross-examination by the assessee it emerged that all the persons categorically denied having any interest in liquor vends as partner/owner and all of them categorically stated that Shri Mange Ram was the real owner and they were only employees. They were employed by the assessee and salary was fixed by the assessee only. Salary was being paid by Shri Manohar Singh at the directions of the assessee for which diary was given to them and their salary account was written on that diary. Many of them produced the diary, which was impounded. All of them denied having made investment in liquor business. All of them stated that their signatures were obtained either by the assessee or by Shri Subhash Munim. They had signed because they did not want to loose their employment and many of them being illiterate did not understand what was written on the documents. Their photographs were taken on the pretext that the same were req....
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....defaults or unauthorized activity. A black listed person was barred from taking part in the auction of Excise Department. That did not matter much because next time a new person not black listed could be introduced as a partner/bidder to form a new concern. Financial Status 25. The learned Assessing Officer made enquiries as to financial capacity of the assessee. He found that the assessee had been taking liquor contracts since 1980. On the date of search he was found living in luxury in a big and well furnished house No. 835/14, Yeti Nagar, Hansi. There were six air-conditioners, colour televisions, VCR, table-tennis table, fridge, sofas, telephones etc. The assessee was owning NE 118 car for his personal use for which purpose a driver was employed. The assessee's monthly phone bills varied from Rs. 8,000 to Rs. 10,000. The assessee was found spending considerable money on purchase of fruits from fruit vender Shri Ashok Kumar. The assessee had three children. His son was studying in one of the most expensive boarding school in Ambala and his daughter was studying in an expensive girls school. The assessee was found to be having a number of immovable properties. From the ....
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....sheets were found to have been checked by the assessee and thereafter being inscribed "Check kiyagaya". In subsequent statement the assessee stated that he was inscribing "Check kiyagaya" on summary sheets as he was directed to check the accounts as per the directions of Satpal. In the initial stages of statement Shri Satpal claimed that he was a partner in business at Hansi and in the same breath he stated that he was an employee of M/s. Mittal & Co., Hansi at a monthly salary of Rs. 1,500. Satpal was in no position to state the details regarding the writing of books of account, names of other partners, amounts of security deposit/licence fee, quantum of sale, stock, rules and bye laws of function of liquor vends, salary and employment of salesmen. Shri Satpal therefore in no manner could substantiate his initial statement that he was a partner in business at Hansi in financial year 1996-97. Significantly on the date of search i.e., 28th June, 1996 Satpal was found working at G.T. Road, Hansi L-2 vend and in the statement he merely stated that he was an employee drawing a salary of Rs. 1,000 per month and in reply to a specific question he denied having any share in the liquor ven....
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....ight because he had no residential house to stay. In the preliminary statement Shri Mange Ram had stated that none of his family member had gone on foreign tour. During the course of search proceedings certain papers relating to foreign tour by his daughter were found and the assessee admitted that his daughter visited Singapore and Malaysia on her educational tour. Regarding source of educational tour the assessee stated that these were made out of reward amount of Rs. 1,00,000 received from Shri Satpal. In his statement recorded on 30th July, 1996 Shri Satpal not only stated that he was an employee but also denied having given any salary/reward, award etc., to the assessee. On denial by Shri Satpal, the assessee changed his stand in his statement dated 10th June, 1997. He stated that the amount was given to him by Sri Chander Bhan who was his contractor. The assessee in his preliminary statement had stated that partnership deeds of M/s. Ashok Kumar & Co., Sirsa, Chander Bhan Om Prakash & Co., Hansi and M/s. Gupta & Co. found at his residence during search were left by Shri Ashok Kumar, Chander Bhan and Shri Gupta respectively whose full name and address were not known to him. ....
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....he assessee had not supplied any information with respect to the total investment and source in the concerns above mentioned, nor had he produced any books of account. The learned Assessing Officer therefore, found that the income of the assessee for various assessment years was required to be estimated for which purpose the learned Assessing Officer adopted the following criteria:- (1) Investment in security The learned Assessing Officer noted that various liquor contracts in Haryana were being sold by auction in the month of March every year for the following financial year. The successful bidder was required to deposit 1/6th of the licence fee as security. The learned Assessing Officer therefore, held that in the absence of any explanation the security deposit made by the assessee in advance in the initial year was required to be assessed as assessee's unexplained investment. Any accretion in the amount of advance security deposit in subsequent year(s) was required to be assessed as the assessee's unexplained investment of that year(s). (2) Investment in licence fee After security deposit the remaining licence fee was required to be de....
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....imated at Rs. 5,30,000 yielding a net profit rate of 4.5 per cent. On that basis the learned Assessing Officer held that the assessee's profit should be worked out at the rate of 5 per cent net profit on the estimated sales. Based on these parameters, the learned Assessing Officer proceeded to determine the assessee's income from dealing in IMFL and country liquor for various contracts taken by the assessee in respective assessment years as enumerated by us in the earlier paragraphs. The learned Assessing Officer adopted actual quota lifted by the assessee as per Excise record as the starting point. The Assessing Officer has made fairly elaborate working of the assessee's undisclosed business income running from pages 57 to 73 of the impugned order. As a result of those elaborate calculations the learned Assessing Officer has assessed the assessee's undisclosed business income over various assessment years in the block assessment period in the following manner:- Assessment year 1991-92 Security deposit and other expenses for M/s. Gupta & Co., Hansi made in March, 1991 - Rs. 80,95,000 Assessment year 1992-93 Initial investment in pu....
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....Initial investment in purchase of liquor Gupta Wine Palace, Hansi (L-1) - Rs. 1,20,44,056 Profit of above concern - Rs. 7,25,143 Security deposit in March, 1994 for M/s. Chander Bhan Om Prakash & Co., Hansi (L-14) - Rs. 1,10,71,700 Security deposit in March, 1995 for M/s. Chander Bhan Om Prakash & Co. (L-2) - Rs. 20,57,900 Other related expenses - Rs. 2,00,000 Security deposit in March, 1995 of M/s. Ashok Kumar & Co., Sirsa (L-14) - Rs. 90,00,900 Security deposit of M/s. Ashok Kumar & Co., Sirsa (L-2) - Rs. 53,13,700 Other connected expenses - Rs. 7,00,000 Thus the learned Assessing Officer estimated investment in security deposit during the month of March, 1994 at Rs. 2,83,44,200. He reduced therefrom the brought forward assessed investment of Rs. 90,79,000 and accordingly made for assessment year 1995-96 addition of Rs. 1,92,65,200 only. The total undisclosed investment as of March, 1995 amounted to Rs. 2,83,44,200. Assessment year 1996-97 Initial investment in purchase of liquor Chander Bhan Om Prakash & Co., Hansi (L-14) -Rs. 7,04,640 Profit of above concern - Rs. 38,30,900 Initial investment in purchas....
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.... assessee had been making huge investment in immovable properties in benami names. In the statement recorded during the course of search, the assessee denied owning any immovable property in his name or in the name of his relatives. However, in the tape-recorded conversation supposed to be "Out of record", the assessee admitted to be the owner of the properties worth Rs. 50 lakhs. In the statement recorded on oath on10th June, 1997in the presence of the assessee, Smt. Prem Lata, his wife denied knowledge about the purchase and ownership of any property. However, subsequent enquiry revealed otherwise. (A) Residential House No. 835/14, Yeti Nagar, Hansi At the time of search the assessee was found residing in House No. 835/14, Yeti Nagar, Hansi. In the statement recorded during the course of search the assessee stated that the house belonged to Shri Baldev Singh, resident of House No. 118, Block-2, Sirsa and that he was a tenant paying a rent of Rs. 400 per month. Local enquiries revealed that no such Baldev Singh ever lived in any capacity in House No. 118, Block-2, Sirsa. That house belonged to Shri Chaudhary Ram s/o Shri Varam Chand Kamboj who was an agriculturist. Shri Bald....
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....d only put his name. Shri Manohar Singh, Cashier also in his statement recorded on 21st April, 1997deposed that house No. 835/14, Yeti Nagar belonged to the assessee. When the assessee was asked as to why the house property should not be treated as his benami property, he simply stated that the house belonged to Shri Baldev Singh. The assessee was confronted with the statement of Shri Baldev Singh and statements of Shri Badri Prasad, Shri Subhash and various other material. The assessee however, merely reiterated that house belonged to Shri Baldev Singh as evidenced by the purchase deed and he was only a tenant. The assessee, however, did not furnish any documentary evidence to support this claim. Neither any purchase deed nor any rent agreement or rent receipt was produced by the assessee. According to the assessee he was paying a rent of Rs. 400 per month. The house was double storied, covered area 342 sq. meters, located in posh area and involved investment of Rs. 16 lakhs. It was impossible for such house being let out at a meagre rent of Rs. 400. The house was fitted with six ACs and those were also according to the assessee, covered by the rent of Rs. 400 per month. The learn....
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.... the assessment year 1994-95. (C) Property No. 110/18, Near Sunder Hotel, Old Bus Stand, Hansi According to the learned Assessing Officer enquiries made after the search revealed the acquisition of the property above named in the name of the assessee's wife. Evidence in that respect was found in the form of map plan, registration deed and affidavit made by the assessee's wife Smt. Prem Lata - the documents collected from the Office of Municipal Committee. The consideration for registration was shown at Rs. 1,00,000 and stamp duty of Rs.15,500 was paid as per deed dated 13th January,1995. After purchase of the plot of land new building was constructed afresh. The learned Assessing Officer made reference to the Departmental Valuation Cell and the Valuation Officer estimated cost of construction at Rs. 6,46,175. The learned Assessing Officer therefore, treated investment of this property as unexplained investment of the assessee. He has assessed cost of construction at Rs. 6,46,175 as valued by the Departmental Valuation Cell and added thereto cost of land estimated at Rs. 2 lakhs on the basis of local enquiries and treated these amounts as undisclosed investment of the ....
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....ion 131. He was asked to identify the actual purchasers with their complete addresses, Shri Vijay Kumar stated that a property dealer named as Ram Dhari asked him to sign those documents on 16th January, 1990 and he was not aware about the purchasers. The learned Assessing Officer found that same Shri Ram Dhari had purchased the stamp paper for registration of House No. 835/14, Yeti Nagar, Hansi. When the assessee purchased the property known as Sunder Hotel in the name of his wife Smt. Prem Lata, the conveyance deed was witnessed by Shri Ram Dhari. Shri Vijay Kumar in his statement stated that Shri Ram Dhari was employed with the assessee. Subsequently the statement of Shri Ram Dhari was also recorded on oath. He could not tell names of actual owners of those plots. The names of the purchasers could not be found in the voters list. Shri Ram Dhari stated that Shri Satish and Shri Subhash, brothers-in-law, of the assessee approached him for the aforesaid conveyance deeds. The learned Assessing Officer recollected that in the statement given Shri Devinder Singh had also stated that he had been approached by Shri Ram Dhari for preparing drawing 835/14, Yeti Nagar. Moreover, Shri Manoh....
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.... 1991-92 10,000 Withdrawals This includes a sum of Rs. 2,130 as School fees paid. 1992-93 12,500 1993-94 13,000 1994-95 28,000 Withdrawals In the assets side a sum of Rs. 35,210 has been shown on a/c. of fee 1995-96 21,000 Withdrawals A sum of Rs. 53,350 has been shown as receivable from V.D. School but no payment has been shown in the Capital account. 1996-97 33,000 A sum of Rs. 1,09,250 & 67,000 has been shown on a/c. of VD School fee and Chaman Vatika Fee respectively. 1997-98 10,000 The payment against the above have been Ending shown at Rs. 1,19,550 & Rs. 1,27,000 respectively on the assets side of the B/Sheet. 31. During the course of proceedings under section 158BC the learned Assessing Officer asked the assessee to furnish the details of household expenses as well as other expenses made by him during the block period. A specific questionnaire was addressed to him under letter dated 5th December, 1996. The assessee was asked to furnish the details by 10th January, 1997 and when that was not done on 24th January, 1997 it wa....
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....ceedings the assessee was found owner of various assets such as ACs, Table-tennis table, fire arms, fridge, colour T.V., VCP etc. for which the learned Assessing Officer assessed a sum of Rs. 1,50,000 as assessee's unexplained investment. In respect of premier NE 118, that was found registered in the name of one Shri Hardwari Lal, statement of Shri Shankar Lal, driver established that the car was in exclusive possession and control of the assessee and was being used by the assessee and his family. On vehicle running, repair and maintenance, expenses were being incurred by the assessee. The summary sheets found in documents D-1 to D-12 seized from residence of Shri Manohar Singh also indicated that expenditure on this car was being met from the liquor vends belonging to the assessee. Besides NE car the assessee was found to be the owner of one truck HR-39-1544 for business purposes. That vehicle was registered in the name of Shri Subhash Munim who was nephew of the assessee and his accountant. Shri Subhash Munim was also shown as a partner in some of the benami concerns as well as owner of some benami plots in Yeti Nagar, Hansi. Shri Himmat Singh employed as a driver of the vehi....
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....d through the assessee's bank account No. 7003 with Oriental Bank of Commerce, Hansi that was opened and operated for the sole purpose of creating a garb of genuineness to the purchase of property by the assessee's wife. Fresh sundry creditors of Rs. 2,22,000 were shown for financial year 1995-96. The names of persons constituting "Sundry creditors" were not given. During that year the assessee paid school fee for children, bore cost of Gurgaon plot and made other expenses. The learned Assessing Officer noticed that though those credits continued in the accounts of the assessee year after year, no interest was paid. Based on these facts the learned Assessing Officer held that addition on account of unexplained cash credits was called for. He therefore, made an addition of Rs. 3,23,500 for assessment year 1987-88; of Rs. 2 lakhs for assessment year 1992-93 and Rs. 2,20,000 for assessment year 1996-97. Gifts 34. The learned Assessing Officer found that for financial year 1994-95 the assessee had shown gifts of Rs. 30,000 from Shri Satish Kumar and Rs.30,000 from Shri Subhash Chander. The learned Assessing Officer wrote a letter to the assessee to produce these persons t....
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....d he held that no separate addition was called for the cash found at the residence of Shri Manohar Singh. 37. During the course of search it was found that with various Excise Authorities security deposits aggregating to Rs. 22,25,906 were lying deposited in the name of various liquor firms found to be benami concerns of the assessee. Those amounts were attached by the Assessing Officer under section 281B to protect the interest of revenue and according to the Assessing Officer they represented unexplained investment of the assessee. However, the learned Assessing Officer did not make separate addition of those amounts in view of the business income and unexplained investment in security deposits for various financial years having already been assessed. Undisclosed income from seized documents 38. The learned Assessing Officer has made reference to pages 4 and 6 of documents A-4 and page 7 of document A-5 in para 81 of the impugned order. Pages 4 and 6 of documents A-4 were seized from the pocket of Shri Mange Ram himself during the course of search. It contained record of receipt and payment of cash for financial years 1995-96 and 1996-97. The account was in the name of t....
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....tpal was once again asked to specifically comment on pages 4 and 6 of documents A-4. In response Shri Satpal once again confirmed that he was not aware of those documents and contents thereof. Only Shri Mange Ram could explain as those documents were found from Shri Mange Ram and he had nothing to do with those papers. Shri Satpal stated that he had never handed any cash or papers to the assessee. When confronted with the statement of Shri Satpal the assessee could not furnish any satisfactory explanation and he could merely repeat what he earlier stated. During the course of assessment proceedings the learned Assessing Officer in his letter dated 29th January, 1997 specifically asked the assessee to explain the entries on those documents. The assessee in his reply stated that the paper had been left with him by Shri Subhash Munim and that the assessee had nothing to do with that paper. The learned Assessing Officer found that the assessee changed his stand from time-to-time and he failed to give any worth while or plausible reply. It was clear that the assessee was avoiding to give correct reply on those seized papers. The learned Assessing Officer therefore, held that the assesse....
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....i through Sajjan 1.45 70 Bhup Pawan 40 Anand Rohtak 2.55 The learned Assessing Officer found that the document was written in the handwriting of the assessee himself. The document was found and seized at the residence of the assessee. The learned Assessing Officer held that the amounts were written in lakhs. In the tape recorded conversation the assessee had admitted that the document had been written in the code language. The learned Assessing Officer noted that document being in code was proved by the same entry appearing on page 26 of documents D-9. There was an entry with the narration "70 lakhs H.T. Hansi Ke Naam". Shri Manohar Singh explained that that amount was paid by him to the assessee. Thus it was amply clear that the figures on page 7 of documents A-5 were in lakhs. The learned Assessing Officer vide letter dated 29th January, 1997asked the assessee to explain those papers. The assessee merely stated that the entries were some rough calculations. The assessee was once again by letter dated 2nd May, 1997 asked to explain the entries on this document as well as page 27 of document D-9 seized from the residence of Shri Manohar Sing....
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....the Assessing Officer has recorded in the impugned order in para 84 that the assessee was allowed opportunity to cross-examine a larger number of persons whose statements were recorded during the course of block assessment proceedings. The learned Assessing Officer has enumerated the particulars of cross-examination in Annexure 11 of the assessment order. There were 95 persons who were called for examination and best efforts were made to have them cross-examined by the assessee. The persons who could not be cross-examined fell into two categories viz., (1) those whose depositions had not been used against the assessee and (2) those whose evidence had been used only as an illustration e.g., salesmen at various liquor vends of the assessee present on the date of search. In any case if the assessee felt that any particular employee was required to be cross-examined by him, nothing prevented the assessee to produce that person for further examination. According to the learned Assessing Officer from the particulars enumerated in Annexure 11, it was clear that the assessee was not co-operative towards cross-examination and squandered most of the opportunities. Affidavits 43. In the....
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....laces. The affidavits filed by the assessee had been recorded on the same date at one place on stamp papers purchased from the same stamp vendor. The learned Assessing Officer therefore, held that those affidavits were merely self-serving documents. The learned Assessing Officer mentioned that in view of the assessee's petition the assessee was granted an opportunity of being heard by the CIT before granting approval to the draft order furnished to him for approval by the Assessing Officer. Annexures 44. The learned Assessing Officer has annexed to the impugned order under section 158BC as part of the order a number of annexures. The following is the list of annexures thus appended to the order:- (1) Copy of the statement of the assessee before the Police and FIR No. 114 dated 15th April, 1996. (2) Verbatim reproduction of tape-recorded conversation. (3) Copies of summary sheets. (4) Computation, of figures relating to second entry in the summary sheets. (5) Computation of figures relating to third entry in summary sheets. (6) Details of slips found along with cash bundles. (7) List of important documents foun....
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....were heard by us and as the hearing could not be concluded the matter was adjourned to 22nd March, 2006for further hearing. On 22nd March, 2006the assessee Shri Mange Ram Mittal appeared in person and filed an application in writing, inter alia, stating that as Shri K. Sampath had not been able to obtain justice for the assessee from the earlier Bench, the assessee wanted to engage some Supreme Court Advocate. The assessee sought 8 weeks time for that purpose. Smt. Sangeeta Gupta, CIT DR strongly opposed the application of the assessee and submitted that arguments of both the parties had virtually been concluded and the Assessing Officer had personally come from Hissar along with assessment record. After consideration the hearing was adjourned to 27th March, 2006. On 27th March, 2006 an application was received from Shri Krishan Mahajan that he had received brief of the present appeal on 24th March, 2006 and he may be allowed further time by at least 10 days so as to facilitate proper representation of the case by him. Thereupon hearing was adjourned to 4th April, 2006. On 4th April, 2006 Shri Kishan Mahajan, Advocate appeared on behalf of the assessee and filed submission on quest....
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....y the assessee on 14th January, 1997 undisclosed income of Rs. 1,00,000 was shown. 49. During the course of hearing before us, the learned counsel for the assessee pointed out that the Parliament has enacted a separate Chapter XIV - B laying down special procedure for assessment of search cases by the Finance Act, 1995 with effect from1-7-1995. The fact that separate Chapter was inserted instead of any amendment of existing provisions showed that this Chapter had been inserted as a self-contained code. Therefore, while interpreting any part or portion of the Chapter, the view should be taken having regard to the nature of the special provision. The learned counsel devoted considerable length of arguments to bring home the point that for any amount to be subject to tax under Chapter XIV-B, there should be direct nexus with the material discovered during the course of search operations. The learned counsel relying on the judgments in Gursahai Saigal v. CIT [1963] 48 ITR 1 (SC); CWT v. Kripashankar Dayashanker Worah [1971] 81 ITR 763 (SC); H.H. Lakshmi Bai v. CWT [1994] 206 ITR 688 (SC) and CIT v. Kasturi & Sons Ltd. [1999] 237 ITR 242 (SC), argued that any special provision create....
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.... out the following meaning to expression "relatable":- CHAMBERS DICTIONARY Relate (Pg. 1393) • to refer, bring into connection or relation • to date back in application • to have reference or relation • to connect oxford dictionary Related (Pg. 1216) • connected by blood or marriage • having (mutual) relation, associated, connected Relatable (Pg. 1216) • connected by blood or marriage Relatable (Pg. 1216) • Bring back, Referable (1211) - to carry back. Advanced Law Lexicon, Book 4 at pages 4022, 4034 Related Matters. The expression 'related matters', in common parlance, means connected matters which are connected or related and have relevance to the matter in issue. Relates to. Ordinarily means "is connected with" or "have reference to". Relating to. The phrase "relating to" as it occurs in an enactment restrictive of the right to sue, must be construed strictly, i.e., in favour of the right to proceed. (29B 480, 7b Bom. LR 497). 52. The learned DR argued that the main question was the nature and scope of "relatable" in the amended provisi....
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....vits of Sarva/Shri Subhash Chander, Vipin Kumar, Karambir, Giyan Chand, Om Prakash, Mahabir Singh, Shiv Ram, Darshan, Nafe Singh, Sant Lal, Ramesh Kumar, Subhash Chander, Dariya Singh, Manpal Singh, Naresh Kumar, Rajender Kumar, Jaibeer Singh, Raj Kumar, Kishan Kumar, Ram Kishan were placed on record. However, none of the affidavits had even been mentioned in the impugned order leave aside of being considered. Hence relevant material germane to the first issue framed by the impugned order namely, whether the assessee was the wine contractor who took liquor contracts in names of various benamidars, was never considered by the Assessing Officer. The material on the record clearly showed that the assessee was merely an employee of M/s. Mittal & Co. Those affidavits were relatable to Mittal & Co. and had to be considered for assessment. On their consideration the inference of the Assessing Officer would appear erroneous. The affidavit of Sarva/Shri Satpal Chandra Bhan and Subhash Chander clearly stated that the assessee was not a licensee of the liquor contracts or vends allotted or auctioned by the Haryana Excise Department. However, the Assessing Officer while passing the impugned or....
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....he pre-determined conclusion of the assessee being a wine contractor taking liquor contracts or licences in the names of various Benamidars. The Assessing Officer ignored the specific statement of Excise & Taxation Officer Shri R.K. Dagar who in his cross-examination stated that while any person could bid on behalf of the person in whose name the receipt of Rs. 50,000 had been issued by the Excise Department, but he could not produce any record to show that Shri Mange Ram had bid during the auction. Accordingly there was nothing in the statement of Shri R.K Dagar to show that Shri Mange Ram was the controlling hand of the liquor business on behalf of Benamidars and that he was not an employee of M/s. Mittal & Company. 55. The learned counsel further argued that there were serious allegations against the Assessing Officer having pressurized certain witnesses to give statements against the assessee. Those witnesses - Sarva/Shri Ishwar Chand, Vipin Kumar and Rajbeer filed affidavits before the Assessing Officer stating that they had been pressurized earlier and had either refused to say anything against the assessee or had retracted their statements given earlier under pressure of ....
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....e test applied by the Assessing Officer Shri Mange Ram could never be the actual owner of the business instead of being its employee. It was only an employee who would deliver the cash from a vend to the cashier. The Assessing Officer had selectively and illegally used the evidence of Manohar Singh against the assessee by adverting only to those portions of the evidence which, according to the Assessing Officer, which might showed that the assessee Shri Mange Ram was the controlling hand of the liquor business. Accordingly, the Assessing Officer had stated that the daily sale reports of the salesmen were received by Shri Manohar Singh who carried these reports to his house next evening and tallied them with the rough sheet on which cash received on the previous night and the next morning were written. However, the cross-examination of Shri Manohar Singh showed that he specifically stated that the daily sales reports of Bawani Khera, Tosham, Jind and Gupta Wine Palace did not come to him. That portion of the evidence had been conveniently ignored by the Assessing Officer to proffer his version of facts. If the daily sales reports did not come to Shri Manohar Singh, as stated by him ....
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....sment as they were neither collected in search nor had any connection with any material recovered during search. 59. The learned counsel argued that the basic evidentiary principle was that oral evidence did not generally negate the primary documentary evidence especially when the documentary evidence was an official record. Strangely enough the Assessing Officer had relied upon the statements of a few officials of the Excise Department to conclude that the official excise record was incorrect insofar as it did not show Shri Mange Ram, the assessee as a shareholder in any of the licences given by the Excise Department. No thought was given as to how the Excise Department could be functioning in defiance of the law and the excise policy. Further, the Assessing Officer had completely ignored that the certificate of the Collector-cum-Joint Excise & Taxation Commissioner (Proh.), Haryana, Chandigarh categorically stating that 15 partners of M/s. Mittal & Company to whom the licences for country liquor and foreign liquor vends were granted in the year 1996-97 did not show Shri Mange Ram anywhere as a partner in that firm, was conclusive under the Evidence Act. 60. The learned coun....
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..... With regard to papers recovered during the search the Assessing Officer was required to prove the contents incorrect and erroneous if he so asserted in terms of the legal presumption envisaged under section 132(4A) and also on generally accepted principles of law as mentioned in CIT v. Daulatram Rawatmull [1973] 87 ITR 349 (SC). There was no evidence uncovered during the search of Mange Ram either of his being the owner or partner in any of the 9 firms listed in para 43 of his order. The search only showed recovery of cash of Rs. 1 lakh and odd in Mange Ram's hands plus jewellery of around 4 tolas. That showed the status and position of Mange Ram. There was no proof at all of the assessee having paid any security deposit. Likewise, there was no proof of the assessee having earned the estimated profits as worked out by the Assessing Officer. The working of the estimated profits was narrated by the Assessing Officer in paras 53 to 65 of the assessment order. The assessee was never confronted for rebuttal. A perusal of those paras revealed that all information had been collected by the Assessing Officer after search and that there were no documents or papers recovered during the....
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....t had not been able to throw light on those documents. Even the name was doubtful. It could be read as 'Bhage Ram'. To which business this document pertained too was not clear. According to the Assessing Officer there were more than 9 firms. To which of the 9 firms that paper pertained was not known. Furthermore, A4 and A6 read together resulted in a loss of Rs. 75 lakhs. (A4 interest: Rs. 4.91 lakhs, profit: Rs. 11 lakhs and A6 loss of Rs. 99.09 lakhs). The Assessing Officer should not have taken the profit alone. He had to take a total of the two even if the total of the two resulted in a loss. From paper A4 in assessment year 1997-98, the Assessing Officer made an addition of Rs. 41.38 lakhs. There was no such figure of computation of profit in that seized documents. For assessment year 1997-98, the additions had been made on page 7 from Annexure A-5. The addition was of a sum of Rs. 2.25 crores. In the first place, the entries in that paper were undated. The entries were not in the hand writing of the assessee. It was a dumb document not amenable to any intelligible interpretation or purposeful analysis. Admittedly, the papers were undated. The Assessing Officer pres....
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....de in the hands of the assessee for the reason that they were deemed regular owners of the property. The reason for holding benami were totally untenable. Merely by virtue of a close relationship, a benami relationship did not automatically come into existence. Just because one purchaser hailed from the same village as that of the assessee, it could not be presumed that he was benami of the assessee. For the fact that the purchases had taken place on a single day, it could not lead to the conclusion that the assessee was the owner of those plots. The statement of Vijay Kumar was being utilized to show that the persons mentioned as the owner in the registry had not visited the registry. In the first place in Vijay Kumar's statement, there was nothing to hold that the persons in whose name the plots were registered were benami of the assessee. The statement of Vijay Kumar could not be used as evidence against the assessee for it had never been confronted and remained uncorroborated. Even the statement of Manohar Singh did not establish that the assessee was the owner of those plots. The assessee had, in terms of the statement, only issued instructions for payment. That instruc....
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....ddition as made was beyond the purview of section 158BC of the Act. Para 71.1 of the assessment order contained the Assessing Officer's assessment of the social status of the assessee. In so doing he listed the various items that were found during the search. In para 75 the Assessing Officer made an addition of Rs. 5 lakhs on that count. The cost of procurement of any of the items was unknown. Further, none of the items were described in its completeness. The age of the items was also unknown. Unless there were vouchers or bills or any entry, or document or paper or evidence of procurement of those items during the block period out of unexplained sources no cognizance could be taken of the expenses on those assets. There was no presumption in law that such assets were acquired during the block period. The complete absence of any evidence to that end took these items totally out of the fold of the block assessments. Para 71.3 contained the Assessing Officer's account on account of education of children. So did para 72. In para 72 the Assessing Officer mentioned that "information was collected from the school where the sons and daughters are studying". In para 71.3 the Assess....
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....investment at Rs. 3,55,000. There was absolutely no proof of such investment by the assessee. In para 75.4 the Assessing Officer noted one truck Tata Canter HR 39-1544 registered in the name of Shri Subhash Munim holding that Subhash Munim was a benami of the assessee. Thereafter the Assessing Officer made enquiries during assessment from different people and on the basis of such enquiries he estimated the investment at Rs. 5 lakhs in the assessment year 1996-97. The utilization of evidence collected in this manner in a block assessment could not support addition as made. Apparently no paper was located in search which would confirm that Subhash Munim was a benami of the assessee; secondly Subhash Munim himself had not made any such statement and, thirdly, whosoever had made the statement had not made any mention as regards amount of investment. 65. The learned counsel referred to the addition of amounts in the assessment year 1987-88 (Rs. 3,23,500) in 1992-93 (Rs. 2,96,000) in 1991-92 (Rs. 2,20,000). In para 76 of the assessment order the Assessing Officer began by saying "the assessee has submitted copies of balance sheets for different years along with return under section 15....
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....ences acquired in various assessment years as elaborately established by the Assessing Officer in the impugned order. As the assessee had no intention to pay taxes and his entire investments in business operations were from black money, the assessee took recourse to obtain licences in benami names. The assessee hoped that as officially his name was not recorded anywhere, he would go scotfree. For official record purposes the assessee put up men of straw who were just a front and many of them were petty employees of the assessee only. Those persons and lot more persons connected with the assessee's business net work, in their statements on solemn affirmation pointed out that the assessee was the proprietor of various liquor vends and business. After having been thus cornered, the assessee tried to wriggle out after influencing and pressuring the concerned persons to hand over to him their affidavits of retraction. In the impugned order the learned Assessing Officer had elaborately described how the assessee obtained retraction affidavits with a view to escape the tax dragnet. 67. The learned CIT DR addressed us at a considerable length as to why the retraction statements subs....
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....f such coercion or threat. In support of this contention, she relied upon the decisions in Video Master v. Jt. CIT [2002] 83 ITD 102 (Mum.); K.V. Narasimhan v. ITO [1994] 209 ITR 797 (Mad.) and Greenview Restaurant v. Asstt. CIT [2003] 263 ITR 169 (Gau.). She further argued that a subsequent statement of retraction did not have the same value as the original statement. In case the original statement was retracted there should be good grounds to show as to why the original statement was incorrectly given and how the subsequent statement was factually correct and the earlier statement was not. In support of these contentions, the learned CIT DR relied upon the judgments in CIT v. Sardar Store [1986] 161 ITR 53 (Punj. & Har.) Asstt. CIT v. Laxmanbhai J. Patel [2001] 77 ITD 166 (Rajkot); Narayan Bhagwantrao Gosavi Balajiwale v. Gopal Vinayak Gosavi AIR 1960 SC 100; Video Master v. Jt. CIT [2002] 83 ITD 102 (Mum.); ITO v. Sadhu Ram Gupta [1998] 66 ITD 441 (Chd.); V. Kunhambu & Sons v. CIT [1996] 219 ITR 235 (Ker.); Rameshchandra & Co. v. CIT [1987] 168 ITR 375 (Mum.); Asstt. CIT v. Rameshchandra R. Patel [2004] 89 ITD 203 (Ahd.)(TM). Thus the learned CIT DR argued that stereotype affida....
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....e course of the search, to say that the computation of undisclosed income should be based upon the evidence, material and information gathered during the course of search alone was not correct. The Assessing Officer was entitled to conduct enquiries at any length as long as the same originated from the search proceedings. In support of this contention the learned CIT DR strongly relied upon the decision in the case of Napar Drugs (P.) Ltd. v. Dy. CIT [2006] 98 ITD 285 (Delhi)(TM). 70. The learned CIT DR argued that the assessee could not object to computation of undisclosed income made by the Assessing Officer for the reason only that the same was based on estimate. Undisclosed income, by its very nature, was not susceptible to accurate computation. Where the information was withheld from the Assessing Officer and the material necessary to arrive at an exact computation was not furnished before the Assessing Officer, the Assessing Officer had no option but to make his own estimate. An assessee who withheld information could scarcely be heard complaining that the computation of the Assessing Officer was an estimate and not a working based on complete data. In support of this cont....
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....re the search and therefore, could not be said to be evidence found as a result of search. Many of the papers being relied upon in the revenue's compilation of paper book had been recovered from Shri Manohar Singh. On that material the provisions of section 158BC could not be applied. The Assessing Officer was required to make block assessment only with regard to material found or recovered from the assessee. If in the search of a third party any document or evidence having a relevant bearing or vital connection with another was discovered, the same called for a separate assessment under section 158BD. For initiation of proceedings under section 158BD the satisfaction was required to be recorded by the Assessing Officer, being a mandatory condition. As no such steps were taken and no proceedings under section 158BD were initiated against the assessee after recording of satisfaction, no assessment could be made in the case of the assessee on the basis of any material recovered during the course of search proceedings at the residence of Shri Manohar Singh and in connection thereafter. 72. The learned counsel argued that for the purpose of assessment of an income on the basis t....
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..... v. Dy. CIT [2005] 95 ITD 1 (Mum.) and Napar Drugs (P.) Ltd. v. Dy. CIT [2006] 98 ITD 285 (Delhi). The learned counsel relying upon the decision of Hon'ble Delhi High Court in the case of P.C Puri v. CIT [1985] 151 ITR 584 argued that those two decisions of a Third Member of the Tribunal have the same force as that of the Special Bench of the Tribunal. The learned Advocate for the assessee argued that in view of those Third Member decisions, the matter stood already concluded and there was no need for reference by Hon'ble President of the question to us for consideration. We find that in the case of Morarji Gokuldas Spg. & Wvg. Co. Ltd. v. Dy. CIT [2005] 95 ITD 1 (Mum.)(TM), the factual position was that while the department had amassed after painstaking enquiries of considerable magnitude a lot of evidence/material, none of it was found or relatable to anything found or discovered during the course of or as a result of search proceedings. The question for consideration was whether in an order under section 158BC the Assessing Officer can bring to assessment any undisclosed income that he determines as on the date of framing the order under section 158BC or the Assessing O....
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....a result of search or requisition. Under the new provisions, the undisclosed income detected as a result of search initiated or requisition made after June 30, 1995, shall be assessed separately as income of a block of ten previous years. Where the previous year has not ended or the due date for filing a return of income for any previous year has not expired, the income recorded on or before the date of search or requisition in the books of account or other documents maintained in the normal course relating to such previous years will not be included in that block." [212 ITR (St.) 306]. The salient feature of Chapter XIV-B is that "undisclosed income" of a person would be assessed as the income of a block period consisting of previous years relevant to 10 assessment years preceding the previous year in which the search was conducted or requisition was made and also period of current previous year up to the date of the search or the requisition. The undisclosed income of the block period has to be taxed at a flat rate of 60 per cent as given in section 113. The order of assessment for the block period is to be passed within one year from the end of the month in which the last aut....
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....rch proceedings as well as post search enquiry or he had to confine himself only to that undisclosed income which had nexus with evidence found as a result of the search proceedings. ITAT in its orders in the cases of Sunder Agencies v. Dy. CIT [1997] 63 ITD 245 (Mum.); Indore Construction (P.) Ltd. v. Asstt. CIT [1999] 71 ITD 128 (Indore); Harakchand N. Jain v. Asstt. CIT [1998] 61 TTJ (Mum.) 223; Eseem Intra-port Services (P.) Ltd. v. Asstt. CIT [2000] 72 ITD 228 (Hyd.); Monga Metals (P.) Ltd. v. Asstt. CIT [2000] 67 TTJ (All.) 247; Tarun Goel v. Asstt. CIT [2000] 112 Taxman 77 (Chd.) (Mag.); A. Sadasivam v. Asstt. CIT [2002] 255 ITR (AT) 1 (Cal.) and Ms. Pooja Bhatt v. Asstt. CIT [2000] 113 Taxman 44 (Mum.)(Mag.) held that the computation of undisclosed income of block period in a block assessment must be related to evidence found as a result of search proceedings. The same view has been taken in various High Court judgments viz., N.R. Paper & Board Ltd. v. Dy. CIT [1998] 234 ITR 733 (Guj.); CIT v. Shambhulal C. Bachkaniwala [2000] 245 ITR 488 (Guj.); CIT v. Vinod Danchand Ghodawat [2001] 247 ITR 448 (Bom.); CIT v. Rajendra Prasad Gupta [2001] 248 ITR 350 (Raj.); Bhagwati Prasad....
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.... be concluded that "undisclosed income" to be computed under the provisions of section 158BC should be confined to evidence found during the course of the search. Even after the amendment by the Finance Act, 2002 with retrospective effect from 1-7-1995 the doors have been kept ajar to let in other materials or information gathered by the Assessing Officers during the course of post search enquiry, bur such other materials or information as now clearly mandated by the Legislature must be relatable to evidence found as a result of search. 79. In the case of N.R. Paper & Board Ltd v. Dy. CIT [1998] 234 ITR 733 Hon'ble Gujarat High Court held that a block assessment under section 158BC does not once and for all denude the Assessing Officer of all powers that he has in relation to assessment years falling in the block period and an assessee does not acquire by virtue of block assessment under section 158BC any immunity against discovery and assessment of some further undisclosed income found in relation to the block period subsequent to block assessment under section 158BC. The Hon'ble High Court observed, "The essence of the special procedure of Chapter XIV-B is to provide f....
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....ch. That makes it imperative to adjudicate the return with reference to material that has come in the possession of the assessing authority during the course of search proceedings and on which basis the belief about the existence of undisclosed income is entertained by the assessing authority inviting invocation of sections 158BB and 158BC. The enquiry into the correctness of such returns with reference to material so found has nexus with the object of the special provisions, to adjudge whether the assessee is still honestly disclosing his income correctly after incriminating material has been found in the possession of the revenue authority before such returns can be rejected and thereafter to frame assessment estimating the income-liable to tax to the best of judgment on the basis of the material that is available with him." 81. In the case of Bhagwati Prasad Kedia v. CIT [2001] 248 ITR 562, the Hon'ble Calcutta High Court have observed as under:- "On a composite reading of the said three parts of the Explanation it is crystal clear that the Legislature thought it fit to make a distinction between the block assessment and the regular assessment. As has been held b....
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....estimating the undisclosed income for the period for which no registration book indicating undisclosed income was found. The question that arose was whether the Assessing Officer was right in estimating the undisclosed income by applying the post 1993 weighted average rate of income to the period April, 1986 up to November, 1996. On these facts the Hon'ble Bombay High Court held as under:- "We agree with the finding of fact recorded by the Tribunal. While estimating the undisclosed income under Chapter XIV-B, the Assessing Officer cannot apply a rule of thumb. The Assessing Officer cannot estimate the undisclosed income on an arbitrary basis. We cannot lose sight of the fact that the assessee is a professional. It is highly improbable that his professional income, remained constant from 1983-84 (when he was put on the panel) right up to 1996. It is highly improbable that the fees which he was charging in 1993 were the same also during the period 1984, up to November, 1993. We agree with the contention advanced on behalf of the Department that in matters under Chapter XIV-B the Assessing Officer is required to estimate the undisclosed income. We agree with the contentio....
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.... income which had been hitherto returned under a particular section under a different head of income. On these facts the Hon'ble Delhi High Court held as under:- "In other words, he was proceeding with the scope of the assessment and was not really addressing himself as to the scope of exercising jurisdiction under Chapter XIV-B and section 158BA. The Tribunal, on analysis of the materials placed before it, has recorded the following finding: 'In the case in hand admittedly undisclosed income is not on the basis of any search material but on the basis of change of opinion, particularly on the basis of the report of the special auditors, who had given a different colour to the existing facts which stood assessed by the income-tax authorities in the earlier assessment orders.' The admitted position before the Tribunal was that the undisclosed income was not determined on the basis of any search material. That being the position, the Tribunal was justified in its view that section 158BA had no application to the facts of the case." 84. In the case of CIT v. C.J. Shah & Co. [2000] 246 ITR 671 (Bom.) loose papers marked as A3, A4 and A6 were fou....
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....yments by cheques to the supplier of the cylinders would not have been made. It appeared that there was some collusion between the supplier of the cylinders M.M. Industries and the lessee Miga Gases Ltd. On these facts the Tribunal held that there was no concealment in the manner provided under section 158B(b) of the Act, more so when the assessee had not claimed depreciation on gas cylinders. On revenue's appeal Hon'ble M.P. High Court held that the finding of fact recorded by the Tribunal called for no interference. 86. In the case of CIT v. Elegant Homes (P.) Ltd [2003] 259 ITR 232 (Raj.) there was a search at the residential and business premises of the assessee on November 9, 1995. The assessee had not filed any returns of income prior to the search. It was found that there were deposits of Rs. 41,400 in the names of various parties in the regular books of account of the assessee which were seized during the course of search. During the course of proceedings under section 158BC the assessee could not establish the genuineness of the credits. The Tribunal, however, deleted the addition on the ground that the entries had been shown in the regular books of account and,....
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....ideration was received on sale of capital asset for which the assessee was liable to pay capital gains by paying tax at the rate of 20 per cent. The same could not be charged at the rate of 60 per cent under the provisions of section 113 of the Act applicable to block assessment proceedings. Both the learned Assessing Officer as well as the Tribunal rejected this contention of the assessee. On these facts Hon'ble Madhya Pradesh High Court held as under:- "Conjoint reading of the aforesaid two sections would, thus, make it manifestly clear that, in order to take any income or transaction out of the clutches of the block period, it is for the assessee to prove to the satisfaction of the Assessing Officer that a particular income/transaction had already stood recorded in the books of account/documents in the normal course of business by the assessee prior to the date of search or their requisition. What is, therefore, material is its disclosure in the books of account and secondly, such disclosure should be prior to the date of search in point of time. In such circumstances, if an assessee has not filed his/her regular return under section 139(1), even then it would not m....
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....02 with retrospective effect from 1-7-1995 is intended to restrict the scope of material or information that may be relied upon by the Assessing Officer because the same has to be relatable to evidence found as a result of search in the first instance. Various judgments of Hon'ble High Courts and decisions of various Benches of Tribunal have by and large accepted the position that the evidence found as a result of the search need not be conclusive evidence. If that were so, there was no need to further add such other material or information as are available with the Assessing Officer. It, therefore, follows that as long as there is an evidence to the undisclosed income of the assessee, that would be sufficient to clothe the Assessing Officer with the powers to add to such evidence any further material or information that may be pertinent or necessary to reach a logical conclusion but there has to be a certain and specific nexus between the evidence found as a result of search and undisclosed income proposed to be assessed in the block assessment under section 158BC. At the same time it is not correct position in law to hold that conclusive evidence of undisclosed income should ....
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....of computation has two limbs, viz., (1) evidence found as a result of search, and (2) such other materials or information as are available with the Assessing Officer and relatable to evidence found as a result of search. 90. Before proceeding to the second limb it would be worthwhile to ponder upon what constitutes "evidence found as a result of search"? During the course of a search proceeding whether business premises or residential premises everything kept there, in open or hidden, is supposed to come to view. Can this entire mass of what is physically found at the searched premises be said to be evidence found as a result of search. During the course of carrying out of business or profession or any other source of income every person has to maintain some record of his activities. In the case of a businessman a huge mass of records in the ordinary course of carrying on of the business, such as books of account, bank account, stock registers, bills and vouchers and several other documents must be found. Whether all the particulars and information contained in such record can be made basis of computation of income of the block period? That aspect has to be answered bearing in m....
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....At this stage it is important to notice the different expressions employed by the statute. It is "evidence" that has to be found as a result of search in the first instance. Thereafter it is only "materials" or "information" available with the Assessing Officer. The expression "materials" is of much wider import than the expression "evidence". It can comprise of what can be considered an evidence as well as much more. It is worthwhile to compare this phraseology with that of section 143(3). The phraseology employed in section 143(3) is, "after hearing such evidence as the assessee may produce and such" other evidence as the Assessing Officer may require on specified points, and after taking into account all relevant material which he has gathered, the Assessing Officer shall, by an order in writing, make an assessment of the total income or loss of the assessee...." It is striking that what an assessee is required to produce on his own or on requisition by the Assessing Officer is "evidence"; whereas what the Assessing Officer has to gather is "materials". The same distinction has been maintained in the provisions of section 158BB(1). What has to be found as a resu1t of search is "....
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....as quasi-judicial in character. The Assessing Officer is not a court though he has some powers as are vested in a court for the limited purposes mentioned in sections 131 and 136 of the Act. [S.V. Kondaskar, Official Liquidator V. V.M. Deshpande, ITO [1972] 83 ITR 685 (SC); Lalji Haridas v. State of Maharashtra [1964] 52 ITR 423 (SC); Addl. CIT v. Jay Engg. Works Ltd [1978] 113 ITR 389 (Delhi); Indian & Eastern Newspaper Society v. CIT [1979] 119 ITR 996 (SC) and Dr. Baliram Waman Hiray v. Mr. Justic B. Lentin [1989] 176 ITR 1 (SC)]. As a result, the Assessing Officer may draw inferences and may consider evidence which may not be justified or be wholly inadmissible under the Evidence Act or in a court of law. In the case of Seth Gurmukh Singh v. CIT [1944] 12 ITR 393, Full Bench of Hon'ble Lahore High Court considered this aspect at length. It was held:- "Under the law as it stands, while proceeding under sub-section (3) of section 23 the Income-tax Officer is bound to hear such evidence as the assessee may produce in support of his return and, if, after hearing the evidence so produced, he still thinks that he is not satisfied on any particular point, he can require t....
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....sing Officer can exercise his powers in an arbitrary manner as Rankin C.J. pointed out in the case of Harmukhrai Dulichand v. CIT 3 ITC 198 (P.C.) though the Assessing Officer is not a court and to some extent a party or judge in his own case, fundamentally he must proceed in a judicial manner and come to a judicial conclusion upon properly ascertained facts. As pointed out by Hon'ble Supreme Court in the case of CIT v. Simon Carves Ltd. [1976] 105 ITR 212 it is not as if the Assessing Officer should exercise his powers only in a manner beneficial to the revenue and adverse to the assessee. He should arrive at his decision in judicial spirit on the basis of sound reasoning. He may not act on suspicion or conjectures or pure guess. In the case of Dhakeshwari Cotton Mills Ltd. v. CIT [1954] 26 ITR 775, Hon'ble Apex Court observed as under:- "As regards the second contention, we are in entire agreement with the learned Solicitor General when he says that the Income-tax Officer is not fettered by technical rules of evidence and pleadings, and that he is entitled to act on material which may not be accepted as evidence in a court of law, but there the agreement ends; be....
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....g of undisclosed income and the Assessing Officer may supplement it with "materials" or "information" that he may gather or are otherwise available with him at the time of computation of undisclosed income of the block period. The expression "relatable" appearing in section 158BB(1) permits the Assessing Officer to bring material on record as may be required for computation of undisclosed income in relation to "evidence" found as a result of search. All materials or information gathered by the Assessing Officer or received by the Assessing Officer in the process of computation of undisclosed income on the basis of "evidence" would constitute materials or information "relatable to such evidence". For example, if during the course of the search an evidence is found to the effect that the assessee had income from' a source not disclosed by the assessee, all further materials or information gathered by the Assessing Officer in regard to that source of income and for quantification of the assessee's income from that source would constitute materials or information relatable to such evidence. Similarly, if for example, during the course of search an evidence is found as to inflat....
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....ritten submissions filed by them is that the Assessing Officer has based his findings on materials or information that were either not admissible in law or could not be said to relatable to any evidence found during the course of the search in the case of the assessee. First and foremost argument of the assessee in this behalf is that entire post-search enquiry made by the Assessing Officer should be ignored and only what has been found during the course of search in the case of the assessee should form the basis of block assessment. As we have seen there is no force in the argument that all material or information gathered by the Assessing Officer other than during the course of search should be excluded for that reason alone. We, therefore, reject the contention of the assessee that for the purpose of block assessment the Assessing Officer has to remain confined to evidence found during the course of the search. At the same time we accept that any undisclosed income discovered by the Assessing Officer entirely on the basis of material or information gathered by him on his own without there being any relationship whatsoever with an evidence found as a result of search, cannot form....
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....Assessing Officer to lay his hands on direct evidence of undisclosed income and his inferences in that behalf are to be drawn on the cumulative effect of various facts and circumstances gathered by him. We are of the view, more so having regard to the nature of income-tax proceedings as distinguished from proceedings in a civil or criminal court of law, that the presence at the residence of assessee of so many partnership deeds of the so-called concerns, which successfully obtained excise licenses worth crores of rupees, coupled with the whole mass of details as enumerated by Assessing Officer in Annexure 7, definitely constituted an evidence found as a result of search in the case of the assessee that served as a pointer to the assessee's interest as a businessman carrying on the business of purchase and sale of IMFL and country liquor. 97. Apart from the partnership deeds as mentioned in the foregoing paragraph a plethora of other material was found at the residence of the assessee, e.g., a hand written document containing names and father's names of persons who were mentioned as partners in the partnership deeds relating to M/s. Mittal & Co. and M/s. Shanker Lal & Co.....
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....to an the vends of Hansi, Jind, Bawani Khera and Tosham. Statements of various salesmen working in those vends were recorded on oath. The salesmen/employees present at various vends at Hansi and Narnaund categorically stated that the assessee was their employer and the real owner of vends. They also narrated various aspects of the business. 99. In view of discussion in the foregoing paragraphs, we are unable to subscribe to the argument of the assessee that the assessment of income from liquor business in the impugned order is based on material entirely extraneous to the search in the case of the assessee. We hold that during the course of search at the residence of the assessee and other connected places considerable evidence was found that put the Assessing Officer on a legitimate course of enquiry in the block assessment proceedings under section 158BC as to the assessee's undisclosed income earned from liquor business in different assessment years. 100. As to the undisclosed income computed by the Assessing Officer on the basis of undisclosed investment in an immovable property in the benami name, we have no doubt that the assessee's enquiry in this behalf as resp....
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....r the assessee have argued that the basic evidentiary principle is that oral evidence does not generally negate the primary documentary evidence especially when the documentary evidence is an official record. The partnership deeds which were found during the course of search proceedings also did not indicate anywhere that the assessee was a partner. The security deposit receipts for license fee challans also did not indicate the assessee as the payer. There was not a single document in the name of the assessee as an owner. Reliance has been placed by the learned counsel on the provisions of section 132(4A) of the Act also to the effect that where any books of account, other documents etc. are found in the course of a search, it may be presumed that the contents of such books of account and other documents are true. There was also no proof of the assessee having earned the estimated profits as worked out by the Assessing Officer. On a careful consideration, we are of the view that too much significance cannot be attached to the names of the persons in whose names licenses of various liquor vends for various financial years had been issued by the Excise Department as a result of publ....
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....y various income-tax authorities, on relying upon the subsequent affidavits filed by the assessee. We see considerable force in this behalf in the contentions of the learned CIT, D.R. and the authorities relied upon by her as summarized by us in paragraphs 68 and 69 of this order. It is important to note here that the statements of various persons have not been recorded by a single officer on a particular date at a particular place. These statements have been recorded by several senior officers of Income-tax department at different places on different dates. The statements have been recorded by the officers empowered under the provisions of the Income-tax Act to record the statements to be used in any income-tax assessment proceedings. Apart from mere allegation no material has been brought on record to suggest that the various senior officers of the Income-tax department and the Assessing Officer in particular, had entered into a conspiracy to frame the assessee. No evidence has been brought on record apart from self-serving statements of the deponents that the statement given by them on the earlier occasion was under coercion and undue pressure. The learned Assessing Officer has ....
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....he assessee's defences. In our considered opinion, the learned Assessing Officer has brought on record sufficient material to arrive at his finding that the assessee Shri Mange Ram was not an employee but an influential businessman carrying on the liquor trade for a long period. As to the argument of the assessee that in none of the partnership deeds and nowhere in excise records pertaining to various liquor vends the ownership of which is ascribed to the assessee, the name of the assessee has ever been mentioned, the learned Assessing Officer has explained in detail that auction contracts for sale of liquor in the region were being taken by the people operating behind the scene and men of virtually no means were being "officially" designated as the partners/owner of the liquor vends. This practice had been so widespread that in the Memorandum Explaining Provisions in Finance Bill, 1988 at paragraph 25, the following has been stated:- "25. Considerable difficulty has been felt in the past in making assessment of incomes in the case of persons who take contracts for sale of liquor, scrap, forest products etc. It has been the. Department's experience that for taking ....
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.... There is no categorical denial of this statement in the subsequent cross-examination. The enquiries made by the learned Assessing Officer revealed that for financial year 1996-97, security deposit paid to Excise Department in respect of Mittal & Company, Hansi amounted to Rs. 1,38,34,000; for M/s. Ved Prakash Darshan Singh & Co., Jind- Rs. 2,41,67,000 and M/s. Shanker Lal & Co., Bawani Khera, Tosham - Rs. 66,83,000. Though such huge amounts were paid to Excise Department at one go for obtaining the contract of liquor vends for financial year 1996-97, no returns of income were filed by any person and nothing much is known of the people who were displayed as partners in the liquor licences go to prove the field reality as described by the learned Assessing Officer. In such a scenario not much can be made of the fact that in the relevant excise licenses the name of the assessee has nowhere been mentioned. On the contrary in the background of these facts, the fact that during the course of search at the residence of the assessee partnership deeds of various liquor firms, as enumerated in Annexure 12 to the impugned order, have been found assumes considerable significance. 105. Docu....
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....d to Shri Manohar Singh. Having regard to these contentions of the assessee the material found from the premises of Shri Manohar Singh and the inferences drawn by the learned Assessing Officer therefrom require a close scrutiny. During the course of search at the premises of Shri Manohar Singh cash of Rs. 8,57,490, jewellery 80 grams and a number of loose sheets comprising daily sales report, summary sheets and other papers relating to liquor vends at Hansi and various other places, such as Bawani Khera/Tosham were found. At the residence of the assessee himself cash amounting to Rs. 1,10,640, jewellery weighing 59 grams and of course a number of loose sheets comprising of documents relating to liquor business were found. On this basis it was argued as to why not Shri Manohar Singh from whom so much cash was found and why the assessee should be treated to be the owner of liquor business, to which various documents found at the premises of both Shri Manohar Singh and the assessee related. At the first blush this argument may appear to be quite impressive, but the learned Assessing Officer has supported his finding that the assessee was the owner and Shri Manohar Singh was his cashie....
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....Narnaund, Bawani Khera. All these summary sheets were duly verified and the noting "Check kiyagaya" was written at the bottom of each summary sheet in the handwriting of the assessee himself. In other words, while Shri Manohar Singh was writing the summary sheets, the assessee was examining and certifying the correctness thereof. These summary sheets apart the learned Assessing Officer found that all the expenditure bills relating to the liquor business were passed and counter-signed by the assessee. According to the learned Assessing Officer every single bill relating to the business bore the signature of the assessee. When the assessee was confronted with these facts, he stated that he had counter-signed the papers at the instance of Shri Sat Pal, partner. However, the assessee did not raise these issues while cross-examining Shri Manohar Singh. Shri Sat Pal in his deposition claimed that the assessee was the owner of the business and he was only an employee. The only documents where Shri Sat Pal was found having signed were the daily sales reports being signed by salesmen at liquor vends. The learned Assessing Officer has also mentioned the state in which cash of Rs. 8,57,490 wa....
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....the assessee for liquor business under some disputed claims of Smt. Budhwanti cannot be regarded as a material supporting the assessee. The owner of the premises of M/s. Gupta Wine Palace, of two shops at Gosai Gate also confirmed that-it was the assessee to whom the same were let out and who was carrying on liquor business there. All pointed to the assessee as having taken over the premises for running his liquor vends at those premises. Moreover, a rent receipt issued by Shri Nihar Singh was found to be in the handwriting of the assessee himself. There was also a document being rent agreement for certain premises taken on rent in the name of M/s. Chander Bhan Om Prakash & Co. that was signed by the assessee as contractor. 106. During the course of search proceedings a large number of statements were recorded of the salesmen found working at various liquor vends. Some of the salesmen were examined later on also. Those persons stated that they had been employed by the assessee. Once a person was employed he was given a diary under the signatures of the assessee fixing his monthly wages. Thereafter the salesman would get his wages from Barsi Gate vend after showing the diary to S....
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....ent that he was the owner of the liquor business being carried on in the name of M/s. Mittal & Co. and that he was carrying on the business of liquor at liquor vend at Old Bus Stand, Hansi which was in the name of Smt. Budhwanti since 1988-89. Furthermore, on 19-7-1996 the assessee appeared before A.D.I., Hissar. On that occasion the ADI tape recorded the conversation of the assessee without the knowledge of the assessee. The learned Assessing Officer has attached verbatim transcript of that tape recorded conversation as Annexure 2 to the impugned order. In that conversation the assessee admitted 'off record' that he was 40 per cent shareholder in M/s. Gupta Wine Palace and 50 per cent shareholder in Bawani Khera. He also admitted having 45 per cent share in L-2 and L-14A vends in Hansi. The assessee was asked if he had 45 per cent share, then who were the other partners but he could not tell their names even in that 'off record' conversation. A copy of the cassette of recorded conversation was given to the assessee but he made no reply. 108. The learned Assessing Officer has recorded that during the course of proceedings under section 158BC, the assessee could n....
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....stillery for which he was paid a monthly salary of Rs. 2,500. Besides, the assessee claimed that he had a monthly income of Rs. 400 from a petty grocery shop at his ancestral village Dhanauri. However, major documents related to business, such as partnership deeds, receipts of payment of licence fee, copies of returns, correspondence with Excise Department, police department, court papers were found from the residence. Many documents pertaining to conduct of the business in assessee's own handwriting was found. The assessee stated that all that working was done at the behest of Shri Sat Pal. Shri Sat Pal on the other hand denied having any knowledge of those papers. In the initial statement Shri Sat Pal claimed that he was a partner in the business at Hansi and in the same breath he stated that he was an employee on a salary of Rs. 1,500 p.m. On the date of search he was found working at liquor vend at G.T. Road, Hansi and in the statement recorded there he merely stated that he was an employee. In reply to a specific question, he had denied any share in the liquor vend. Subsequently Shri Sat Pal denied having any partnership interest in the liquor business. At the time of sear....
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....e name plate but a permanent stone embedded in the property at the time of construction. In his statement the assessee merely stated that the house belonged to Shri Baldev Singh, but he never furnished any documentary evidence to support that claim. Neither any purchase deed, nor any rent agreement or rent receipt was produced by the assessee. According to the assessee he was paying a rent of Rs. 400 p.m. The house was double storeyed with covered area of 342 sq. mts. Located in posh area and involved investment of Rs. 16 lakhs. The house was fitted with six air-conditioners that according to the assessee were covered by the rent of Rs. 400 p.m. Obviously the assessee was making an altogether improbable story. The assessee's children were found to be studying at expensive schools and it was found that educational expenses of Mr. Rajiv Mittal, son of the assessee at Chaman Vatika, Ambala amounted to Rs. 60,000 p.a. The educational expenses of the daughter at Vidya Devi Jindal School, Hissar amounted to Rs. 15,000 p.a. All these aspects showed that the assessee must have been in some prosperous business and he could not be a petty employee at a salary of Rs. 2,500 p.m. During the....
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....t no stage the assessee has produced any such material. Even though an argument in relation to books of account of various firms has been taken before us in the course of lengthy arguments of the parties, no indication has been made even during the course of hearing before us as to whether and where such books of account were and are lying. We, therefore, reject various contentions of the assessee in this behalf. 111. After taking into consideration the marathon order, numerous facts, circumstances, statements and other materials including a number of documents in the assessee's own handwriting relied upon and analysed by the learned Assessing Officer in the impugned order and after hearing the submissions of the assessee thereon, we are of the considered opinion that for the purpose of the impugned order under section 158BC the explanation of the assessee that he was a petty employee has to be rejected and by and large it should be accepted that the assessee was carrying on liquor business in his own right at a fairly large scale in benami names. 112. In view of the discussion in the foregoing paragraphs we accept, in principle, that the Assessing Officer has rightly hel....
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....osed income, if any, from these two concerns to the file of the learned Assessing Officer for decision afresh after allowing the assessee further opportunity of being heard in the matter. The Assessing Officer shall cull out from the massive evidence/material found as a result of the search or gathered by the Assessing Officer during the course of proceedings under section 158BC that may have bearing on the question of the assessee's interest in the two concerns abovenamed and weigh the same in the light of explanations arid contentions of the assessee. Thereafter the learned Assessing Officer shall decide the issue afresh in accordance with law and make a detailed speaking order. 113. While we accept the finding of the learned Assessing Officer that the assessee has carried out liquor business in the names of various concerns during the block period, we find that computation of undisclosed income of the assessee as made by the learned Assessing Officer requires certain modifications. We appreciate that in the instant case the learned Assessing Officer had a problem, inasmuch as the assessee had never filed any returns of income in the past and there are no books of account ....
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....rate the provisions of sections 142, 143(2), 143(3), 144 and 145 in relation to a block assessment order under section 158BC. It, therefore, follows that the same standards as in relation to an order under section 143(3) do apply to an order under section 158BC as well. At the same time on a careful appraisal of the computation of undisclosed income as made by the learned Assessing Officer in the impugned order, we are of the view that the same call for certain modifications for the following reasons:- (i) The learned Assessing Officer has on the one hand assessed undisclosed profits of the assessee from the liquor business in various assessment years comprised in the block period. He has, at the same time, made assessment of assessee's undisclosed investments in security deposits, license fee, initial investments for trading stock at various liquor vends, investments in immovable properties, movable assets and household expenses etc. The provisions of sections 69, 69A to 69D legally empower the Assessing Officer to assess such investments and expenditure in the absence of satisfactory explanation from the assessee. The provisions of sections 69, 69A to 69D have been c....
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....giving effect to the order of Tribunal. After excluding additions on account of unexplained investment, disallowances under section 40A(3) the trading profit worked out to Rs. 5,30,000 giving a net profit rate of 4.5 per cent. Taking a cue from that assessment, the learned Assessing Officer has thought it fit to apply uniform net profit rate of 5 per cent in the case of the assessee in respect of all the concerns for the block period assessment years 1991-92 to 1997-98. In our view the basis adopted by the learned Assessing Officer is not satisfactory. What has been held for assessment year 1985-86 may not hold good for assessment years 1991-92 to 1997-98. Secondly, that was the case of much smaller turnover. Thirdly, the approach of the learned Assessing Officer suggests that there has to be profit at uniform rate at all the concerns for all the years. In the liquor business the public auction is made and the contract is given to the highest bidder. In order to be successful, bidders have to come out with the maximum possible amount that puts considerable pressure on their margin of profit. Fourthly, the learned Assessing Officer has applied the same rate on IMFL as in respect of ....
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....income made by the learned Assessing Officer in respect of these seized documents are required to be deleted for a variety of reasons. First, insofar as the documents A4 and 6 are concerned, the learned Assessing Officer has not fully acted upon the seized document. It is not open to the Assessing Officer to selectively assess the transaction recorded on a seized document. The same should either be wholly acceptable to the Assessing Officer or wholly not acceptable. It is not open to the Assessing Officer to make assessment of income figures and at the same time ignore the loss figures on one and the same seized document. Moreover the learned Assessing Officer has himself not taken the seized document as a complete account of assessee's income and expenditure of the two financial years. As to the document A5, page 7 the figures have been read by the Assessing Officer in an arbitrary manner. He interprets the figure 70 to represent 70 lakhs and HT, Hansai to read Haryana Tube, Hansi without any further enquiry and co-relation with the alleged Haryana Tube, Hansi. We are, therefore, of the view that the learned Assessing Officer has not been able to support the additions made by ....
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....9;s wife was found to be entirely dependent upon the assessee and having no known source of income of her own. In her statement recorded during the course of search, she herself stated so. We, therefore, uphold the additions made by the learned Assessing Officer in regard thereto, after reducing the same by a sum of Rs. 5 lakhs on estimate on account of considerable difference between the value as admitted by the assessee and the value as estimated by the department valuation cell. (vi) As to the estimate of house-hold expenses made by the learned Assessing Officer, the same is based on what was seen first hand on the date of search and other evidence/material found as a result of search. We uphold inclusion of the same for the purpose of arriving at a fair estimate of assessee's undisclosed income of the block period from the liquor business. Here we find that the estimate of house-hold expenses of the assessee as made by the learned Assessing Officer for various assessment years are fair and reasonable. They are mainly based on concrete material, such as educational expenses of the assessee's children, electricity and telephone bills etc. For the same reason we a....
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....ion of house at Rania As per page 70 of the impugned order. 1,08,996 Total: 24,14,496 Note: No separate addition is made for security deposit and license fee amounting to Rs. 26,59,600 as the same are treated to be covered by the refund of security deposit made in the earlier assessment year in relation to M/s. Gupta & Co. Assessment Year 1993-94 Household expenses as per para 74 of impugned order 1,90,000 Investment in construction of house at Rania as per paragraph 70. 1,08,996 Profit of M/s. Mange Ram & Co. as per paragraph 64 of the impugned order. 11,93,010 Total: 14,92,006 Note: No separate addition on account of security deposit and license fee of Rs.72.08 lakhs of M/s. Gupta & Co. L-2, L-13 & L-14, Hansi and initial investment in purchase of liquor by M/s. Mange Ram & Co., as the same are treated to be covered by the income assessed for assessment years 1991-92 and 1992-93. Assessment Year 1994-95 Security deposit during the year of M/s. Mittal & Co. L-14, Hansi. 66,34,000 Security deposit of M/s. Mittal & Co. L-2, Hansi. 17,80,000 License fee of M/s. Mittal & Co. L-13, Hansi. 1,25,000 Lic....
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....hold expenses & investment in construction of house at Rania. 11,93,010 Undisclosed income for assessment year 1994-95 after excluding house-hold expenses & investment in immovable property. 4,72,590 (-) 1,18,91,100 1,87,03,047 Note: No separate business profit from business at Gupta Wine Palace, L-1, Hansi; M/s. Mittal & Co. L-2 and L-13, Hansi is assessed as the same is treated to have been included in various investments and expenditure during the year. Assessment Year 1996-97 Security deposit of M/s. Mittal & Co., Hansi 1,38,34,000 License fee of M/s. Mital & Co. L-13, Hansi. 1,50,000 Security deposit at M/s. Shanker Lal & Co., Bawani Khera. 66,83,000 License fee of M/s. Shanker Lal & Co. Bawani Khera, L-13. 1,50,000 License fee of M/s. Gupta Wine Palace, L-1, Hansi. 5,00,000 Undisclosed household expenses as per Para 74 of the impugned order. 4,01,000 Investment in construction of house at Yeti Nagar, Hansi, as per para 66.3 of the impugned order 3,97,908 Investment in vehicles as per, para 75 of the impugned order. 8,50,000 Initial investment in purchase of liquo....
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....earned Assessing Officer falls short of the undisclosed income already assessed up to assessment year 1996-97. It is because the block period for assessment year 1997-98 is less than three months. Under these circumstances we are of the view that for assessment year 1997-98 the assessee's undisclosed income should be restricted to business profits of the year as computed by the learned Assessing Officer. We accordingly estimate assessee's undisclosed income for assessment year 1997-98 in the following manner:- Profit of M/s. Mittal & Co. L-2 and L-14, Hansi. 19,02,305 Profit of M/s. Shanker Lal & Co., Bawani Khera L-2 & L-14. 9,59,916 Profit of M/s. Gupta Wine Palace, L-1, Hansi. 1,34,350 Total: 29,96,571 Thus, subject to any further order that the learned Assessing Officer may pass in relation to M/s. Ashok Kumar & Co., Sirsa and M/s. Ved Parkash Darshan Singh & Co., Jind, the assessee's undisclosed income for the block period is assessed as under:- Assessment year Undisclosed income 1987-88 16,800 1988-89 16,929 1989-90 17,500 1990-91 17,800 1991-92 80,75,000 1992-93 24,14,496 1993-94 14,92,006....