TaxTMI 
TaxTMI 
1997 (7) TMI 197
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....unted payments 1,50,000 (Para5 of Asstt. Order) (b) Transaction in trial balance as not property explained 2,50,10,548 (Para8) (c) Unexplained expenses 75,000 (Para10) (d) Unaccounted expenses 67,000 (Para12) (e) Unexplained expenses 95,000 (Para15) (f) Cash receipt and expenses 250 (Para17) (g) Cash receipt and expenses 20,680 (Para17.1) (h) Unaccounted payments 11,700 (Para18) (i) Unaccounted receipts and payments 1,09,478 (Para19) (j) Expenses 1,60,000 (Para21) (k) Payments against vacation of flat 50,000 (Para22) (l) Unexplained cash receipts and expenses 1,23,899 (Para24) (m) Unexplained cash receipts and expenses 12,200 (Para24) (n) Unexplained cash receipts and expenses 25,704 (Para24.2) (o) Purchase of land 50,000 (Para25) (p) Transaction regarding purchase of property 37,55,316 (Para26.1) Total 2,97,16,768 3. Shri O.P. Sapra, the learned authorised representative for the assessee submitted that the AO has made a number of additions on the basis of mere presumption by invoking the provisions of s. 132(4A) of the Act.....
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.... 132(4A) clearly provides that any books of accounts/other documents, money, bullion, jewellery found in possession of any person in the case of a search, shall be presumed to be belonging to such person and the contents of books of accounts, documents shall also be presumed to be true. He submitted that provisions of s. 132(4A) are equally available to the Revenue while framing regular assessment. He submitted that the provisions cast a burden on the assessee to rebut the aforesaid statutory provisions of s. 132(4A) and such a rebuttal is not available merely by denial on the part of the assessee but it has to be rebutted on the basis of some cogent material or evidence, which is lacking in this case. He, therefore, submitted that the AO rightly made the impugned additions. The learned Departmental Representative also addressed on merits of various additions made by the AO. 4. We have heard the learned representatives at length and have carefully gone through the records/paper-book filed by both the parties. Before considering and deciding on merits of individual addition, we are of the considered view that the proposition as canvassed by the learned authorised representative f....
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.... by the Revenue that all the above circumstances do factually exist. It has further to be found out that if some expenses have been incurred outside the books of accounts or such expenditure is not fully recorded in the books of accounts, if any, maintained by the assessee, as to whether such unrecorded expenditure represented personal expenditure or pertained to business. 4.2 It is now in the light of aforesaid principles of law that we have to examine various items treated as undisclosed income of the appellant as challenged before us. 5. The first addition is of Rs. 1,50,000. Connected with this addition is an addition of Rs. 11,700. These additions were based on page 51 of Annexure 1 of the seized documents. It was explained that the assessee is not connected with this document and entries thereon do not indicate any link thereof with the assessee. The explanation rendered was found unacceptable and the AO added the amounts. 5.1 The learned authorised representative, Shri Sapra, reiterated the above submissions before us also. Having heard the learned representatives of the parties and after going through the document in question, there is no doubt in our mind that the....
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....dly paid total sum of Rs. 16.80 lacs (13.80 lacs cash + 3 lacs cheques) as per receipt placed on pages 10 and 14 and agreement at pages 11 to 13 of Annexure 1 (Metro Locker). It might be that 7,800 were to be paid later on or might have been short, but receipts in round figure might have been obtained. It means that the said entry of Rs. 16,72,000 is also tallied with above supporting documents. 8.3.2 Shri Kanwar Sain Aggarwal was a tenant on 1st floor of G-42,GreenParkwho had surrendered his tenancy right for total consideration of Rs. 17.01 lacs excluding cost of furniture at Rs. 50,000 and was paid Rs. 1.60 lacs till16th Oct., 1995vide two receipts placed at Sl. Nos. 75 and 76 of Annexure A (Metro Locker). It appears that out of Rs. 17.01 lacs only Rs. 4,00,000 were outstanding as on 9th Nov., 1995 and balance might have been paid and hence, Rs. 4,00,000 balance was shown as liability in credit side of trial balance. 8.3.3 'A/c GAM 06 Madan S-7 A/c' shows debit balance of Rs. 4,000.00 (coded in two digits). Smt. Madhu Madan was a tenant in S-7,GreenPark, who had been paid a part payment of Rs. 4,00,000 (coded as 4,000.00) for vacation of her portion against total considera....
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....a submitted that it was explained that the payment of Rs. 16,80,000 against purchase of first floor of K-52,GreenParkproperty, vide para 13 of letter dt.1st Aug., 1996, filed before the AO, which was found recorded in the account books seized during search and the AO himself has accepted the same and, therefore, no room was left for any suspicion on the part of the AO. Similarly, with regard to the surrender of tenancy right of Kanwar Sain Aggarwal, a tenant of first floor of G-42, Green Park, for total consideration of Rs. 17.01 lacs, the AO had acted on surmises/conjectures when he says that it appears) that out of Rs. 17.01 lacs only Rs. 4.00 lacs were outstanding on 19th Nov., 1995, and the balance might have been paid and hence, Rs. 4.00 lacs was shown as liability in the TB. Shri Sapra drew our attention to assessee's explanation vide para 5 of his letter dt.26th Aug., 1995, and also to letter dt. 28th Aug., 1996, by which the assessee explained that his brother Kailash and Sanjeev Gupta were the owners of the said property and complete details of the payments of Rs. 2,10,000 actually paid were furnished and this explanation has been accepted by the AO himself vide para 22.1 ....
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....d also his clients. Similarly, he is required to deal regularly with contractors/employees and is often required to indicate, petty expenses on ad hoc basis which are finally settled on submissions of final bills on imprest account. Sometimes there are petty pay-offs for liaison work, entertainment for which no supporting vouchers are available, though incurring of such expenditure is necessary in the nature of assessee's business. This imprest account was sorted out and ledgerised in regular books of accounts from time to time on settlement of an account for expenditure on imprest account. Shri Sapra further took us through various items appearing in the computerised TB along with supporting documentary evidence also photocopies of imprest ledger which has been seized, as Annexure A2, along with TBs, copies of relevant pages placed at pages 110 to 129 of the paper book and impressed upon us that various figures indicated in the TBs were not at all codified figures. He submitted that an insignificant and unintentional mistake as punching Rs. 47.23 instead of Rs. 4,723 could not afford a valid basis for the monumental addition made when, on the other hand, other figures as supported....
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....has also been accepted by the AO, it did not entitle the AO to infer in para 8.3.1 that Rs. 7,800 might have been paid later on or might have been short. The amount of Rs. 16,722 appearing on debit side of T.B. against account "Green Park Flat G. Pal" it was explained in the course of arguments that the same represented expenditure incurred by the assessee on account of commission and other incidental expenses in respect of purchase of property from Gopal Kapoor mentioned in TB as GPAL, the owner of the property. It is also pertinent to point out here that on the one hand the AO is treating all the items appearing in the trial balance as outside the account books and at the same time has tried to compare/tally with the recorded transaction as per seized books. This is self-contradictory. (iii) As regards Kanwar Sain Aggarwal, a tenant of FF of G-42, Green Park, the AO has himself recorded a finding in para 22.1 that he has verified that the assessee did not get vacant possession of the said property and Kanwar Sain still retains the property and that there is no other evidence by which it can be verified that some more payments have been made by the assessee. After having record....
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....in the imprest ledger at page 112 of PB. The assessee had also filed an affidavit before the AO confirming the loan advanced. He is in service as senior assistant in the Office of the XEN, Ranjit Sager Dam, Pathankot. This remains uncontroverted before the AO, as also before us. Therefore, the affidavit has to be accepted as correct. This demolishes AO's basis of inference against the assessee when he made the addition under discussion. (b) In TB on9th Nov., 1995, there is debit of Rs. 10,000.00 in the account of Sushil Rattan, which has been treated as Rs. 10 lacs by the AO following his assumption that a decimal has been inserted to hoodwink the Department. A perusal of paper book page 116, which is imprest ledger account of this very party, revealed that it represents balance b/d Rs. 5,000 plus Rs. 2,900 representing purchase of cement vide Bill No. 34784, dt.23rd June, 1995, besides certain other expenses. A copy of this bill is at page 33 of PB and shows that it was issued by M/s Dasmal Gian Chand, B-25, Prahlad Market, Karol Bagh, in respect of 20 bags of non-levy ACC cement @Rs. 145 per bag or Rs. 2,900. Now here is documentary evidence as seized from the assessee which a....
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....not be Rs. 1 lac, as is inferred by the AO, as against Rs. 1,000 shown by the assessee. (g) Rs. 4,000 in TB dt.9th Nov., 1995, also appears in imprest ledger, page 126 of paper-book which represents return of torn notes received back from Kanwar Sain, as discussed earlier, which again lends support to assessee's case against allegation of codification of figures by the AO. (h) Rs. 4,000.00 on credit side of TB dt.6th April, 1995, in the name of Manju as on30th Sept., 1995and9th Nov., 1995. Manju has filed her affidavit before the AO confirming having advanced this amount to the assessee. She is regularly assessed to income-tax in Ward 19(4),New Delhi, GIR No. 14088. This remains uncontroverted. 10.1A Same is the position with regard to Rs. 2,541.14 appearing on credit side of TB on9th Nov., 1995, against BPA Loan A/c. Braham Prakash Agarwal has confirmed this. He has filed his affidavit; he is assessed to tax [Ward 20(6)]. 10.2 Such examples can be multiplied. Therefore, the facts mentioned above supported by documentary independent evidence have neither been disapproved nor controverted by the Revenue. 10.3 On a careful analysis of facts and circumstances as also ev....
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....ee filed his replies on 1st August, 22nd August, 28th August, 1st November, 14th November and15th November, 1996, which we have already discussed in our foregoing paragraphs. The assessee also explained a few entries in support of his contentions. Yet the assessee has not explained all the items which he should have having been called upon to do so by the AO. This being a search case and the assessee having not been in a position to explain all the debit/credit entries, we hold that while the AO was not justified to take totals of TB as on 30th Sept., 1995, because the later TB of 9th Nov., 1995 which tallied at Rs. 1,99,559.58 only, the following entries aggregating to Rs. 11,541.14 stand accepted and the balance of Rs. 1,88,018 represents undisclosed income of the assessee: "Manju 4,000.00 BPA Loan A/c 2,541.14 Ku. Suman 4,000.00 Titu 1,000.00 . 11,541.00 Therefore, we uphold addition of Rs. 1,88,018 only out of addition of Rs. 2,52,00,000 made by the AO. 11. Next addition is of Rs. 75,000 on the basis of a paper, i.e., page No. 13 of Annexure A6. The addition was made with the following observations : "Unaccounted expenses Rs. 75,000 The....
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....f Rs. 32,500 but in the bottom this estimate has been finalised along with other final account for expenses totalling to Rs. 95,000. This fact is further corroborated with the entries on page 19. No satisfactory explanation is there for these expenses which are not reflected in the regular books of accounts. Therefore, the same is treated to have been incurred out of his undisclosed income from undisclosed sources and is added in the undisclosed income for the block assessment purposes for block period." 13.1 Shri Sapra took us through copy of the above seized paper. This paper is captioned "Estimate" and contains details of various expenses under the head "Electricity charges in respect of Shop No. 2, Royal Jewellers, M-15, GK-I, New Delhi upto 31st March, 1995" wherein details of units of electricity consumption, its rate, reading and the total has been worked out at Rs. 32,500. Below this account there is another account under the caption "final account" which contains certain figures with narrative like, Goggals, MCDE Pack, Telephone bill, etc., and this account also includes aforesaid Rs. 32,500, total coming to Rs. 95,000. This has been reduced to Rs. 70,000 on account of ....
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....om undisclosed sources and added in the undisclosed income of the assessee for the block assessment purposes for the block period. Addition Rs. 1,09,471." 16.1 The AO in the absence of satisfactory explanation from the assessee added Rs. 95,165 plus Rs. 14,306. The explanation of the assessee before the AO, as also before us that the expenditure of Rs. 95,165 related to a company in which the assessee is a director and the payment stand recorded in the books of the company. Regarding interest of Rs. 14,306, it is explained that the said company was asked to pay 24 per cent per annum coming to Rs. 14,306. However, the company paid 17 per cent. 16.2 Parties are heard. There is no doubt that the assessee did not file any evidence in support of recording of expenditure of Rs. 95,165 in the books of the company of which he is a director. Therefore, addition of Rs. 95,165 is held justified. 16.3 However, addition of Rs. 14,306 being interest is not justified, since the AO has on verification accepted the genuineness of the loan and interest thereon @ 17 per cent, as provided in the books of the company. there is, therefore, no material to hold that the interest charged was 24 pe....
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....resentative, submitted that payment of Rs. 2,10,000 is not disputed but the assessee was yet to record payment of Rs. 50,000 while he had acequate cash balance on15th Nov., 1995, i.e., more than Rs. 5 lacs. It was contended that Rs. 50,000 was paid out of cash in hand. However, Shri Sapra accepted that the said payment has been made before15th Nov., 1995, i.e., the date upto which cash book was written. Obviously, therefore, payment of Rs. 50,000, though made, is not found recorded in books of accounts. On these facts and under these circumstances, we hold the addition made is justified. The addition is confirmed. 19. Addition of Rs. 1,23,899 is based on Annexure A-1, page 85-87. The AO took the view that expenditure recorded in the seized paper are not recorded in regular books of the assessee. He treated the same as representing assessee's undisclosed income. 19.1 Shri Sapra, the learned authorised representative, pointed out that Sushil Ratan Gupta is the proprietor in M/s SRG Construction and was doing repair work for M/s Tulec Buildwell (P) Ltd., which owns property No. 18A, Shanker Market and also in respect of Karol Bagh property of M/s Shagun Developers Pvt. Ltd., whe....
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....executed in favour of Smt. Shanti Devi. In the absence of specific evidence regarding the total payment for this land, the total payment cannot be said to have been passed to the vendor. However, as per page 10 of Annexure A-1 seized from the residential premises G-25, Green Park, New Delhi, it appears that only Rs. 50,000 has been paid in advance towards this prospective deals. This amount of payment is not reflected in the books of accounts of the assessee and no satisfactory explanation is submitted. Therefore, Rs. 50,000 is treated to have been paid out of his undisclosed income from undisclosed sources and is added in the undisclosed income for block assessment purposes for the block period (Addition Rs. 50,000)." 22.1 The learned authorised representative argued that the above addition has been made on the basis of an unsigned and undated agreement to sell between the owner of agricultural land at village Kanwarshika, Shri Ashok Kumar Agarwal and Smt. Shanti Devi, who is mother-in-law of assessee's brother Shri S.K. Gupta. In the course of assessment proceedings, a letter of Shanti Devi, dt.1st Nov., 1996was filed before the AO denying to have purchased the land in questio....
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....osed sources and added to the undisclosed income of the assessee for block assessment purposes for the block period." 23.1A The learned authorised representative for the assessee invited our attention to letter dt.1st Aug., 1996, placed at page 15 of paper-book by which the assessee gave the following explanation : "The paper contains certain rough jottings. It bears caption "per month" jotting at best reveal the discussion and/or planning for hiring out the properties on rent. But the discussion/planning could not be given effect so far. The property at Serial No. 1 appears to be 18A, Shanker Market,Connaught Place, which was purchased for Rs. 8,10,000 as per registered sale deed and is duly entered into the books of account. It is still lying vacant. As regards the property K-52,GreenPark,New Delhithe assessee acted only as an estate agent and got a commission of Rs. 22,000. However, the property deal was partly financed by the assessee and a payment of Rs. 16.80 lakhs was made to the owner which was ultimately recovered from the buyer of the property. Since the property was sold out, there was no question of earning any rent. As regards Shivalik, the assessee h....