TaxTMI 
TaxTMI 
2005 (9) TMI 245
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....aining to this matter, which are as under: 4.1. The assessee is a registered firm and is running a nursing home in the name of Bali Nursing Home. It had four partners, namely, Dr. RK.Bali, Dr. Rajinder Bali, Dr. Abha Bali, and Dr. Veena Bali. A search and seizure operation under s. 132 of the IT Act, 1961 was carried out at the business premises of the assessee at B-2/B-3,D.B. Gupta Road,New Delhion12th Jan., 1998. During the course of search, certain incriminating documents were found. Statements of three partners were also recorded on 12th and13th Jan., 1998. On the basis of the incriminating documents, the AO made addition of Rs. 71,097 on account of undisclosed income. He also made addition of Rs. 42,33,686 on account of the undisclosed income for the block period. Thus, total undisclosed income was worked out at Rs. 43,04,783 for the block period. In appeal, the learned CIT(A) deleted the additions. The Revenue has challenged the deletion of additions in this appeal. 5. Ground NO.1: During the course of search, Annex. A-89 was seized from the premises of the assessee. It contained some small chits on which certain amounts were mentioned. Details of such papers with seria....
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....tion of the work, advance paid by the partners was entered in the books on10th April, 1998. In this regard, reference was made to the relevant entries in the ledger. Similarly, explanation was furnished about the amount of Rs. 2,250 and Rs. 1,440 and it was submitted that these loose papers pertained to Dr. RK.Bali. Regarding the amount of Rs. 21,159, it was explained that a bill amounting to Rs. 28,320 pertained to Punjab Timber Traders and payment of this amount was made by cheque which is reflected in the bank account of the assessee. 5.2. About the figure of Rs. 25,248 also it was explained that it pertained to Hari Chand Bhagt Ram and these bills were paid through cheques, which have been duly reflected in the bank account. The learned CIT(A) found the explanation of the assessee fully convincing and deleted the addition by observing as under: "I have examined the explanation with reference to evidence contained in paper book and I find that the explanation of the assessee is correct and there is no reason to make addition of Rs. 71,097 in the hands of the appellant i.e., M/s Bali Medical & Dental Centre. Accordingly, the addition of Rs. 71,097 is deleted." 5.3. The l....
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....f account in relation to the loose papers, it cannot be said that the incriminating documents pertaining to the addition of Rs. 71,097 related to undisclosed income of the assessee. In our view, therefore, the learned CIT(A) was fully justified in deleting the addition. Hence, we do not find any scope to interfere and reject the ground taken by the Revenue on this issue. 6. Ground NO.2: This ground challenges the deletion of addition of Rs. 42,33,686. 6.1. During the course of search, certain documents annexed with Annex. A-26 and Annex. A7 were seized. On the basis of the documents and on the basis of the statements of the partners of the assessee-firm, recorded at the time of search, the AO made addition of Rs. 42,33,686 as suppressed income of the assessee. This was done by taking 25 per cent of the professional receipt as being earned outside the books of account. The addition in various years has been made in the following manner: ---------------------------------------------- Financial Amount Amount Receipts Year as per considering  ....
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....ee is that the statements of three partners were not really voluntary statements but their signatures were obtained under compulsion. It was emphasized that it is most improbable and unnatural that all the three persons shall give the answers to a particular question in identical words and language. For examining this issue, we consider it proper to reproduce the statements also for the purpose of analysis and comparison. Relevant portion of statements of Dr. Veena Bali, which is available at pp. 15 and 16 of the paper book, relevant portion of statement of Dr. Abha Bali which is available at pp. 19 and 20 of the paper book and relevant portion of statement of Dr. RK.Bali, which is available at pp. 28 and 29 of the paper book, are being reproduced in the following manner: Dr. Abha Bali: Q. Please state categorically what is the total amount earned from unaccounted professional receipts outside the books of account for last 10 years by you, your husband Sh. Dr. Ravinder Kumar Bali, Dr. Rajinder Bali and Dr. Veena Bali and M/s Bali Nursing Home where you, your husband and Dr. Rajinder Bali and Dr.Veena Bali and kindly to relate the abovesaid undisclosed income with its investme....
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....essional receipt outside the regular books of account and offer the same amount of Rs. 80 1akhs for taxation in our hand in individual capacity and in the hand of the firms. I also undertake to pay the taxes due on the amount. I also hereby state that the undisclosed income of Rs. 80 1akhs has been invested in the purchase and renovation of property no. 20B/2, D.E. Gupta Road, New Delhi, purchase of flat Nos. 1A and 1B White House, Bhagwan Das Road, New Delhi, renovation of Nursing Home Premises 20B/2, D.B. Gupta Road, New Delhi, unaccounted loans including an amount of Rs. 161akh app. To Mrs. Usha Bhaumik, E-13, East of Kai1ash,New Delhi, and foreign gift of an amount of US $ 18,000. Undisclosed investment in stock of medicine found at M/s Balis Medicos Chemist and any other property or loan or advance or expenditure incurred by me for last 10 years upto the date of search, including the cash found at my/our residence 20B/2 and residence of my mother-in-law Mrs. Vidyawati Bali, 20B/3, D.B. Gupta Road, New Delhi. Dr. Veena Bali: Q. Please state categorically what is the total amount earned from unaccounted professional receipts outside the books of account for last 10 years b....
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.... bring to your notice that the statements of our family members which were recorded during the course of the search were neither voluntary nor out of free will. I am writing this to place on record that the statement of mine and other family members which were recorded under duress are without sanctity of law and, therefore, not binding on us.You are requested to take appropriate action in the matter and save us from any further adverse consequence. Yours faithfully, Sd/ (Dr. R.K. Bali)" 6.7. In order to further explain the entire factual position relating to the confession and retraction, a letter dt.19th Jan., 2000, was written by the assessee which is available at pp. 163 to 165 of the paper book and relevant portion of which is as under: "1. That the persons searched were in a state of shock and circumstances were so created concerning their prestige and reputation that they were left with no alternative but to succumb to pressure. It was therefore desirable that the statement be retracted and accordingly immediately after the total search was complete and the persons were in a position to regain the lost confidence retracted the statements on29th Jan., 1998, whi....
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....proceeds on surmises and conjectures. (vi) It is settled law that the time to decide what is or is not evidence is when trial takes place. The special procedure for assessment of search cases lays down that computation of the total income is to be made irrespective of other provisions as is seen from the words of s. 158BA. which states that the AO must proceed to assess the undisclosed income as per s. 158BB notwithstanding any other provision contained in the Act. The proceedings start by furnishing of a return in the prescribed form (Form No. 2B) wherein the assessee would set forth his total income including the undisclosed income, if any, for the block period. The return has been submitted in the prescribed form and verified in the manner prescribed. No undisclosed income has been declared as there was none. The alleged binding nature therefore is of no avail as the alleged statement without any substantiating material cannot be considered as evidence. It is settled law that the AO cannot deny the assessee its right to prove that the fact of alleged surrender was no admission and that the so-called admission was in fact wrong and the alleged surrender was made solely under p....
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....the concealment as reflected in these seized papers have been considered as undisclosed income of the assessee for the block period." 6.10. Likewise, reference to para 9.4 of the assessment order in the case of Dr. R.K. Bali has been made, which is as under: "9.4. The facts as discussed elaborately in para Nos. 4 to 8 above clearly establish that there are suppression of professional receipts by the assessee. When the first statement of Dr. R.K. Bali recorded during search is viewed in conjunction with these facts, there is no doubt about the factum of suppression. However, instead of the admitted 25 per cent suppression in receipts the suppression in this case has been worked out on the basis of the seized material which have been examined in detail and only the concealment as reflected in these seized papers have been considered as undisclosed income of the assessee for the block period." 6.11. Both the above mentioned affidavits were not controverted before the learned CIT(A). Likewise, the Department neither called the witnesses Shri Bishamber Singh Rana and Shri Trilok Singh Rana, who filed affidavits, for cross-examination nor filed any counter-affidavit in rebuttal.....
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....ement is on p. 14 of the paper book. She has signed the statement and thereafter again the statement has been recorded. In the last she has signed the statement and the date put by her is13th Jan., 1998. The certificate below her statement is also dt.13th Jan., 1998. However, the signatures of the Asstt. Director of IT who recorded the statement were dt.12th Jan., 1998. It has not been clarified as to how the signatures have been made by her on13th Jan., 1998on the remaining part of the statement. There is no indication in the statement that part of it was recorded on12th Jan., 1998and remaining on13th Jan., 1998. If the statement was discontinued on12th Jan., 1998, then a note should have been given for continuing the same on the next date. That has not been done. Similar is the position in relation to statement of Dr. Abha Bali. She was administered oath on12th Jan., 1998. However, in the last she has signed the statement on13th Jan., 1998. Statement of Dr. R.K. Bali was also recorded on12th Jan., 1998and he too had signed the statement in the last on13th Jan., 1998. In his case also the Asstt. Director of IT has made signatures on12th Jan., 1998. Thus, this discrepancy indicates....
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....ion of the confession, the written explanation in support thereof and the affidavits have not been properly met by the AO for discarding the retracted version and for placing reliance on the statements. (5) As mentioned by the learned CIT(A) on the point of investment of undisclosed income in properties, the matter was referred to Valuation Cell. The AO has not brought any material which was collected as a result of such investment (sic-enquiry). The report of the Valuation Officer has also not been filed on record. Thus, firstly, the result of enquiry was not communicated to the assessee and secondly the same was also not placed on record. On the basis of this it is also found that the statement regarding investment of undisclosed income in the properties has not been corroborated and substantiated. (6) The approach of the Department also does not appear to be consistent. On the basis of the material seized during the course of search and on the basis of statement recorded during the course of search, block assessments in the case of the individuals were also made but in such assessments no reliance was placed on the statements of such persons recorded during the course of s....
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....essee vide letter dt.17th Jan., 2000, available at p. 50 of the paper book was as under: "11(c) The alleged loose papers at A-6 p. 11, A-26 page Nos. 22, 52, 54, 55 are slips prepared indicating the amount of cash in bundle for deposit of cash in bank when the bundle is given to staff by the partners for deposit in bank, such a slip prepared by the partners or staff is put on top of the bundle of cash to indicate the amount in the bundle. This slip is discarded when the pay-in-slip is prepared and may have been discovered by your staff at the time of search." 6.15. The AO has not accepted this explanation of the assessee. However, he has not made any suppressed addition on this basis. 6.16. On going through the slips which are available at pp. 52 to 55 of the paper book, it is found that the amount has been noted on a smaller slip. It is noteworthy that on the slips 'morning' or 'evening' are indicated which shows that the calculation related to morning or evening. In any case, the explanation of the assessee in this regard appears to be acceptable because the Department has not been able to demonstrate that the slips related to undisclosed money. These documents are to be....
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....s received are voluntary we record them only at the time of final payment of the bill. We would also draw your attention to seized documents Annex. A-8 page Nos. 61, 62, 66, 71, 72, 76, 86 and 91 in which the estimates of the bill shows that the said advances have been received as also the final amount of the estimate. This final estimate agrees with the bill raised by us on the concerned person. ------------------------------------------------- Name of Amount Annexure Amount Amount Amount Patient of of of of adv.on No.and advance chgs. final A-7 page in in bill p. 29 No. of final final (Rs.) &....
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....nbsp; 16,000 ------------------------------------------------- Mrs. 1,500 A-8, 72 5,500 8,270 8,270 Chanchal Rai ------------------------------------------------- Mr. 1,500 A-8, 81 4,500 4,920 4,940 Prakash ------------------------------------------------- 6.20. We have also gone through the entire material relating to this seized document. On perusal of bills, copies of which have been filed on record, it is clear that the patients, against whom advances were received, were treated in the hospital of the assessee and final bills were prepared against parties. In this way the amount appears to have been adjusted. In any case, the AO has not made any separate addition on the basis of these documents, which also shows that he could not find any corroborative material. 6.21. On going through the above, it is clear that certain incriminating documents, namely, A-26 and A-7 were found which related to the professional activities of the assessee.....
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....t of emphasis on the evidentiary value of the admissions of the three partners. However, we are unable to agree with him. 6.26. In the case of Krishan Lal Shiv Chand Rai vs. CIT (1973) 88 ITR 293 (P&H), the Hon'ble Punjab & Haryana High Court has held as under: "It is an established principle of law that a party is entitled to show and prove that an admission made by him previously was in fact not correct and true. It was incumbent upon the IAC to have afforded the assessee full opportunity to prove his assertions. It was clear from the records that no such opportunity was afforded to the assessee. The IAC proceeded to impose penalty solely on the basis of the fact that the amounts were surrendered by the assessee at the time of the assessment. Even treating the surrender as an admission of the concealment of undisclosed income, the IAC could not deny the assessee its right to prove that the fact of surrender was no such admission and that the so called admission was in fact wrong and the surrender was made solely to avoid botheration as stated by the assessee." 6.27. In the case of Asstt. CIT vs. Mrs. Sushiladevi S. Agarwal (1994) 49 TTJ (Ahd) 663 : (1994) 50 ITD 524 (Ahd....
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....erved as under: "An admission or an acquiescence cannot be the foundation for an assessment, where the income is returned under an erroneous impression or misconception of law. It is always open to an assessee to demonstrate and satisfy the authority concerned that a particular income was not taxable in his hands and that it was returned under an erroneous impression of law. Each assessment year is an independent year and it is always open to the taxpayer to contend that he had wrongly been assessed in the past." 6.30. In the case of Smt. Ranjnaben Mansukhlal Shah. VS. Asstt. CIT (2004) 83 TTJ (Rajkot) 369, the Rajkot Bench of the Tribunal has considered the evidentiary value of admission and retraction of the same and has observed that additions made only on the basis of disclosure statement normally should not be confirmed in the absence of corroboration. In that case also the Revenue had made addition only on the basis of an admission which was retracted subsequently. The Revenue had not collected any material or evidence during the search in support of the disclosure statements. It was held that no addition can be made on the basis of such confession. 6.31. In the case....