TaxTMI 
TaxTMI 
2005 (10) TMI 276
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....0-4-1996. 2.2 In the assessment order, it is mentioned that the assessee is a private limited company, and its shareholders consist of persons from Mishrikotkar family and Goyal family. On the basis of returns filed in earlier years, it is seen that it has carried forward losses from year to year. Search and seizure operations were conducted at the premises of Mishrikotkar on 15-2-1996, in which some incriminating documents pertaining to the assessee were also found and seized. Statement of Shri Akalank, who is one of the directors of the assessee-company, was recorded, in which he made declaration of undisclosed income of Rs. 48,95,000. The declaration was in respect of 'on money' received by the assessee from its customers by way of cash, which was stated to be not accounted in the books of the assessee. It is further mentioned that Shri Akalank made a further disclosure of Rs. 1 lakh in respect of other incriminating documents found in the course of the search. On 17-1-1997, the said Shri Akalank filed a letter admitting to the undisclosed income of Rs. 10 lakhs in the names of various concerns, and in view thereof, no cognizance is taken, of the disclosure of Rs. 1 lakh made b....
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....ken up regarding the validity of search and it was inter alia prayed that search and seizure operation conducted under section 132 may be declared as null and void and consequently the order under section 158BC passed on the basis of legal search may also be declared as void. However, the matter regarding the jurisdiction of the Tribunal to look into the validity of the initiation of a search operation was decided by full Bench of Hon'ble ITAT in the case of Promain Ltd v. Dy. CIT [2005] 95 ITD 489 (Delhi). The full Bench of the Tribunal held that assessment under section 158BC is based upon the conduct of a search. In other words, if it is shown that if a search has been conducted on the basis of a warrant of authorization, it will not be for the Tribunal to look into the matter of validity of initiation of search. In view of pendency of that case before the Hon'ble Tribunal, the assessee had been seeking adjournments before us also. However, on receipt of the decision, the learned counsel did not argue those grounds of appeal, but stated that he would only keep the issue alive. The learned counsel of the assessee thereafter confined himself to the merits of the computation of und....
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....mers of the assessee, which could suggest that the assessee received any amount over and above the amount disclosed in the books of account. On the basis of these facts, the case of the learned counsel was that the impugned document was a dumb document from which no conclusion regarding undisclosed income could be drawn. 4.2 At this stage, it may be mentioned that the assessee was questioned by the Bench about the names mentioned in the document, cheque amounts received by it and then cross tallying with the amounts entered in the books of account. It was fairly conceded that the names mentioned therein were of the clients q of the assessee and the amounts entered by way of cheque represented the sale consideration in an abbreviated form by removing three zeros. Therefore, the learned counsel was asked as to how the impugned document could be termed as dumb document. The explanation was that the document does not bear the name of the assessee anywhere and no date is mentioned against any receipt. 4.3 In the alternative, the learned counsel pointed out that even if the amounts entered in the cash column are taken as sale consideration received in thousands, then, the full consider....
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....re sale proceeds. The Tribunal found there was no evidence to indicate that investments were made outside the books of account to make alleged sales, and therefore, it held that the entire sale proceeds could not be added, but only profit embedded in the sales could be added to the income. On reference by the Department, the Hon'ble High Court held that the sale proceeds could not represent the income of the assessee and only the excess of sale process over cost incurred could form profits, which could be included in the income of the assessee. 4.7 The learned counsel again referred to the seized document regarding 'on money' and pointed out that this paper does not bear any name. It was also pointed out by him that the statement relied upon by the Assessing Officer was retracted and, therefore, a retracted statement cannot constitute any piece of evidence, which could be used against the assessee. It was, therefore, argued that the dumb document and the retracted statement constituted no evidence on the basis of which an assessment of such a magnitude could be made. In this connection, he relied on the decision of Hon'ble ITAT, Pune Bench, in the case of Chander Mohan Mehta v. As....
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....ion of Hon'ble ITAT, Bombay "B" Bench, in the case of Deepchand & Co. v. Asstt. CIT [1995] 51 TTJ (Bom.) 421, in which it was inter alia, held that in absence of any supporting evidence to confirm the addition, the statement of two partners recorded at the time of search, later on retracted by filing proper evidence, cannot be relied upon. It may be mentioned here that no proper evidence has been filed by the assessee later on. 4.10 The learned counsel also pointed out that the names of the directors also appeared in the seized material. It would be incomprehensible that the company charged 'on money' from the directors also and for this reason it was argued that the impugned seized material cannot be relied upon for making the aforesaid addition. In this connection, it may be mentioned here that if actual cost was higher than the cost recorded in the books, the charging of 'on money' from them will be in order and such an arrangement will be suitable and convenient for both the parties. 4.11 The learned counsel also referred to the figure of 4,200 finding place in the said paper. We have already taken note of this figure earlier. However, the learned counsel's case may also be s....
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....search and seizure operation was carried out on 15-2-1996, in the course of which incriminating documents were seized. Notice under section 158BC was issued on 11-4-1996. That was also the date on which the assessee made a retraction from the confessionary part of the statement. Since the return for the block period was not filed, two reminders were issued on 12-8-1996 and 25-9-1996 for filing the return for the block period. There was no response from the assessee either to the notice or the reminders. Consequently, summons were issued on 16-12-1996 and 1-1-1997. There was no response to the summons also. The Assessing Officer prepared a draft of the order for forwarding it to the CIT for his approval on 27-1-1997. The assessee filed the return of undisclosed income on this date, i.e., 27-1-1996. Though the draft order had already been prepared, the Assessing Officer took into account the contents of the return, in which undisclosed income was computed at Rs. 1,18,200. A questionnaire was issued on 4-2-1997, which was responded to on 17-2-1997. The case, which the learned DR wanted to make out was that the assessee did not co-operate in completion of block assessment proceedings a....
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.... which we have already referred to earlier. On the basis of this answer, the case of the learned DR was that the partner had accepted undisclosed income of Rs. 48.95 lakhs. The Assessing Officer had made enquiries from a number of buyers which leads to a reasonable inference that 'on money' was charged by the assessee at the time of booking the premises. Out of the total amount of Rs. 48.95 lakhs, the Assessing Officer had conducted enquiries covering an amount of Rs. 31 lakhs admittedly paid by the buyers also. Therefore, there was no reason to hold that the document should be held to be a dumb document as on the basis of the books of account of the assessee as well as enquiries of the Assessing Officer, it is clear that the document speaks of receipt of proceeds by way of cheque and 'on money' by way of cash. Coming to the working out of the profit, the case of the learned DR was that onus of proving the expenditure was on the assessee. If the assessee had incurred expenditure by way of cash, the expenditure would also be caught within the mischief of provisions of section 40A(3). Therefore, the final assessment would be on the basis of 'on money' received as no deduction could b....
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....arguments against placing reliance on this paper inter alia were that -(i) the paper does not bear the name of the assessee, (ii) no evidence has been found regarding actual receipt of cash, and (iii) the paper does not contain the dates on which respective cash amounts were allegedly received. Therefore, his case was that the impugned document is a dumb document and, therefore, it cannot be relied upon for the purpose of assessment. We are unable to persuade ourselves to agree with the learned counsel in either of these matters. The reason is that the authenticity of the names and decoding of amounts received by way of cheques lead to establishment the fact that the document belongs to the assessee and various amounts entered therein are correct if three zeros are supplied. The absence of the names of the assessee thus gets fully corroborated on the basis of aforesaid interpretation of the document. The document speaks of receipt in cash and also receipt by way of cheques. The receipts by way of cheques tally with the books of account. Therefore, it is a natural consequence that the receipt by way of cash have also been made. As we shall see subsequently, the date of receipt of ca....
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....basis will have to be estimated. Such conclusion also gets strength from the fact that the figure is a round figure. Accordingly, it is held that the expenditure of round some of Rs. 40 lakhs becomes admissible to the assessee as cash expenditure in relation to cash receipts of the assessee. Thus, the excess of receipts over the expenditure can be worked out at Rs. 8.95 lakhs. The matter does not end here. It has been pointed out earlier that there are certain other figures of cash amount to be received by the assessee. The two sums of 400, being old and 179 from Dhawal, aggregating to 579, are to be received in cash. Therefore, this amount will have to be added to the undisclosed income. Thus, the undisclosed income, by reading the document as a whole is calculated at Rs. 14.74 lakhs (Rs. 8.95 lakhs + Rs. 5.79 lakhs). The argument of the learned DR in this matter may also be considered here. His case was that the expenditure has to be proved by the assessee. We are unable to agree with this submission if the impugned seized material is to be considered for the purpose of computation of the undisclosed income. The learned DR. had pointed out that the Assessing Officer had verified ....
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....of search and later on a reasonable interpretation has to be placed by the combined reading of the facts found and deposition made in the course of search. The statement of Shri Akalank to the effect that 'on money' to the extent of Rs. 48.95 lakhs was received is clear and un-ambiguous, supported by the seized material. Therefore, even after retraction this fact cannot be displaced. The other part of the statement was that the aforesaid amount will be offered for taxation as additional income over and above the book profits for assessment year 1996-97. The computation of income involves not only ascertaining all facts but also analyzing and interpreting the facts for computing the income. The receipt of 'on money' is an objective fact. However, the income is a legal concept, which has to be arrived at after considering various other aspects such as expenditure and the year of taxability. A businessman cannot be expected to know about all these matters. Such matters cannot be ignored in making assessment even if a confessionary statement is made, Therefore, after having fixed the quantum of 'on money', the questions of computation of income and the year of taxability of such income....