TaxTMI 
TaxTMI 
2004 (9) TMI 580
X X X X Extracts X X X X
X X X X Extracts X X X X
....ment to the assessee. The addition should be deleted. 3. The learned Assessing Officer erred in law and on facts in considering a sum of Rs. 56,260 as undisclosed income on account of interest receivable on shares sale to Mr. Prem though he denied to have made any such payment. The addition should be deleted. 4, 5 & 6. The learned Assessing Officer erred in law and on facts in considering the following amounts as undisclosed investment though the said amounts were fully covered by the undisclosed income offered by the assessee for taxation as per peak chart. Thus, the addition should be deleted. Assessment years Amount (Rs.) Assessment year 1995-96 33,225 Assessment year 1996-97 3,06,450 Assessment year 1997-98 6,05,129 7. The learned Assessing Officer erred in law and on facts in considering a sum of Rs. 6,57,129 as undisclosed income for the funds introduced by the assessee in an undisclosed business the source of which was his undisclosed income in the earlier years as offered for taxation and sale of declared shares belonging to his wife outside the books of account. Thus, the addition should be deleted. 8. The learned Assessing Officer erred in law and on facts in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ainbow Industry, a family concern, it was found that the transactions appearing in the seized material were not found recorded in the books either of the assessee or M/s. Rainbow Industry. The assessee vide his reply dated 13-11-1997 stated before the Assessing Officer that business of selling compound and PVC films in personal capacity was started in the month of June, 1996 and the cash received and cash paid entries recorded in these cash books pertained to transactions of cash received on sale and cash paid for purchases respectively. Besides sales/purchases transactions, the details of expenses were also appearing in these cash books. The assessee had also furnished a P&L Account prepared on the basis of transactions recorded in the seized cash books for the period between 1-6-1996 and 5-11-1996 and stated that the P & L Account so prepared reflected net profit of Rs. 3,94,073 which has been declared as undisclosed income for the block period. The Assessing Officer on perusal of the ledger also prepared on the basis of entries in the seized cash books revealed that while computing the net profit of the unaccounted business, the transaction recorded in the name of N.C. Daga (Hol....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ved and cash paid out of N.C. Daga (Hol) account represents sale and purchase transactions is not acceptable. N.C. Daga (Hol) account is in fact an Uchant Account, which is used for introducing money into the unaccounted business when there is a shortage of funds and for taking out money, when there is surplus. The total sale and purchase figures out of N.C. Daga (Hol) account, which are in fact money introduced and taken out of the business, are as under : N.C. Daga (Hol) Account (Rs.) Purchases 71,66,303 Sales 68,88,266 2,78,037 The Assessing Officer, therefore, held the above difference as the surplus profit which the assessee has taken out from the unaccounted business and the same is, therefore, added to the total undisclosed income of the assessee for the financial year 1996-97 in addition to the profit declared in the undisclosed income for the block period. 5. From the balance sheet prepared as on 6-11-1996 on the basis of seized cash books it was seen that there was an opening balance of Rs. 6,57,129 which was also held as unexplained investment for running this unaccounted business and accordingly added to the undisclosed i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....00 (3,06,593) 20-4-1996 Sale of 2050 Reliance Shares 4,26,400 1,19,807 @ Rs. 208 out of books purchased from Date Particulars Amount Balance Mrs. Sushila Daga 30-4-1996 Manjeet (Loan Given) (1,53,000) (33,193) 30-4-1996 Yogesh (Loan Given) (3,45,000) (3,78,193) 31-5-1996 Trading Business of cash trfd. (99,129) (4,77,322) 16-8-1996 Shares (1,000) (4,78,322) 16-8-1996 Shares (7,000) (4,85,322) * (4,85,322) From the above chart the Assessing Officer observed that the assessee has received back his loan amounting to Rs. 4,22,145 on 1-4-1993. As no evidence was furnished, except a confirmation from Sushila Daga that this amount was returned by her to the assessee, which was held to be self serving, the Assessing Officer did not accept the claim of the assessee. It was further found that on 20-4-1996, the assessee had shown to have received Rs. 4,26,400 on account of sale of 2050 Reliance shares @ 208, which were purchased out of books from Mrs. Sushila Daga and th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nterest. Accordingly, the total investment of Rs. 19,15,304 alongwith the interest accrued thereon @ 3% p.m. which comes to Rs. 2,33,967 aggregating to Rs. 21,49,271 was added to the total undisclosed income for the financial year 1990-91. 8. Pages 60 to 63 of Annexure A-13 showed certain transactions regarding shares purchased and sold as well as interest account details and the name of Shri Prem was again written on top of page 63. When asked to explain, the assessee furnished the following explanation : "Pages 60 to 63 seized vide Annexure A-13 from the residence of the assessee are in respect of transaction with some Prem. It has already been stated that the assessee entered into these transactions with Mr. Prem who did not honour his commitment and did not pay any money to the assessee. Moreover, the transactions on each of all these pages are not cumulative but are the same transactions. Same figures are appearing in one way or the other on all the said pages. The fact that the assessee was to take the said money from Mr. Prem is appear at page 60 where it is stated that a sum of Rs. 15,22,000 (vice two figures) was yet to be collected upto the said date. Since Mr. Prem was....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y payment in respect of these transactions, which was not acceptable to the Assessing Officer. He observed that Shri Daga is closely related to Shri Pradeep Singh and is a director in one of the companies of Shri Pradeep Singh. As the payment has not been accounted for in the books of account, the same was treated as unexplained receipt and added to the total undisclosed income. 10. During the course of search operation gold jewellery (net) weighing 3197 gms. was found. When asked, the assessee reconciled the same as under : As per Wealth Tax Return Gold in gms. (Net Weight) N.C. Daga (31-3-1987) 1519.200 164.050 Sushila Daga (31-3-1982) 1164.050 2847.300 As per Search Valuation Date (6-11-1992) Ritu Daga 149.000 N.C. Daga - Sushila Daga 453.300 Valuation Date (10-1-1997) Syndicate Bank Lajpat Nagar Locker Valuation Date (26-11-1997) 449.000 - Locker No. 38 Canara Bank 1946.300 Total 3197.200 Total gold jewellery found 3197.200 As per Wealth Tax Return as detailed in 2847.300 Above Chart Unexplained Gold Jewellery 349.900 As there was no wealth-tax return filed in respect of jewellery claimed to b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er, regarding the difference of Rs. 1,163 as no explanation was given, the same was also considered for addition. Resultantly, an addition of Rs. 91,163 being Rs. 20,000 + Rs. 70,000 + Rs. 1,163 was treated as unexplained cash and added to the total undisclosed income for the financial year 1996-97. 12. Now we will proceed to deal with various grounds taken in the appeal. The first ground is general which will be disposed of with the disposal of other specific grounds taken in the appeal. 13. The second ground of appeal pertains to alleged investment of Rs. 34,00,771 in shares and finance activities with one 'Prem', who was known to the assessee and also a dealer in PVC film. The learned counsel for the assessee contended that the above addition represents Rs. 14,33,795 treated as undisclosed investment in shares and Rs. 21,49,271 treated as undisclosed investment by way of advancement of loans plus interest therein @ 3% p.m. With regard to the addition of Rs. 14,33,795 the learned counsel contended that at the assessment stage the Shri Prem had denied to have made any payment to the appellant. He also categorically stated that the assessee did not undertake the business in share....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e scribbling on the loose sheet found should be ignored as it has no authenticity or evidentiary value in the eyes of law. He further contended that if at all the paper has to be relied upon, it has to be done in toto not that whatever suits to the department is accepted and whatever does not fit into the needs of the department is ignored. Further, if the loose sheets seized showed that the assessee was not benefited in any manner, then it has to be accepted, even if it results into no taxability because no tax can be thrusted on the assessee if it is not due from him. In the present case, Mr. Prem categorically denied of having paid any money to the assessee nor has he admitted the amount as payable to the assessee. The following authorities are relied : 1.Chander Mohan Mehta v. Asstt. CIT [1999] 71 ITD 245 (Pune) 2.CIT v. Orissa Corpn. (P.) Ltd. [1986] 159 ITR 78 (SC) 3.ITO v. Ranchhodlal B. Patel [1996] 86 Taxman 228 (Ahd.) (Mag.) 14. The learned departmental representative, on the other hand, contended that the impugned pages indicated existence of some person as a financer and the transactions in his opinion, were to earn interest (vyaz badla), a concept which was prevale....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mpletion of the assessment, nothing more can be furnished about a third with whom only the assessee (deceased) was in contact with. He strongly contended that no corresponding investments or documentary evidence was found suggesting earning of such income. Whatever, undisclosed investments or income were found, were, in fact, disclosed to the department voluntarily in the return of undisclosed income filed. He finally argued that the impugned additions were merely based on pure presumptions and surmises that the scribbling might be representing certain source of income. This, according to him, is in total contrast to the legal precedents of the country. 16. We have considered the rival submissions and material placed before him. On a careful perusal of the assessment order shows that the impugned additions were made on the basis of some loose sheets found and seized in the course of search. On examination, before the Assessing Officer, admittedly Shri Prem denied to have made payment to the assessee. However, the adverse inference drawn by the Assessing Officer seems based on the admission of Shri Prem to he had done business with Shri N.C. Daga for purchase and sale of shares of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sessee contended that besides, the two amounts, the peak worked out by the Assessing Officer is incorrect because of two totalling errors as on 30-4-1996 by Rs. 1,00,000 (less) and on 15-3-1994 by Rs. 72 (more). On merits, the learned counsel contended that the Assessing Officer cannot belief the contention of the assessee that the amount of Rs. 4,22,145 given by the assessee to his wife on 31-3-1992 was returned by her on 1-4-1993 so as to exclude the amount from the working of peak credits merely on the ground that the unaccounted cash books seized did not contain the said receipt. In that case, the entire figures appearing on the loose paper should have been ignored. He also contended that the Assessing Officer also cannot exclude the entry of Rs. 4,26,400 received by the assessee in cash outside the books of account on 20-4-1996 on sale of 2050 equity shares of Reliance Industries @ Rs. 208 per share only because no evidence like broker notes or distinctive numbers of shares bought or sold were submitted to him. He argued that had there been like documents, there was no question of receiving the amounts in cash outside the books. The learned counsel thus contended that there is....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vidence plays vital role for determination of facts and if they support the contention of any of the parties, then the same have to be accepted. 21. We have considered the rival submissions and perused the material available on record. We find merit in the contention of the assessee that in search cases not every evidence is found, but the circumstantial evidence plays a vital role. Here, in the present case, nothing valuable was found in possession of the assessee so as to make an addition, except some entries in some loose papers. So, when speak about the evidentiary value of the entries found without any corresponding accumulation in wealth or in any other form, in a loose sheet of paper and its acceptance, in our opinion, it cannot be considered for computation of undisclosed income. Any how, that is not the case of the assessee, in the present case. Looking to the merit of the addition, we find merit in the contention of the assessee that the department cannot ignore some of the entries which did not suit to them and accept the other. When a material seized has to be relied upon, the entire content appearing on it should be considered. The chart depicted that on 31-3-1992 the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....,672 and the difference is only of Rs. 1,19,457. The learned counsel attributed the difference to the fact that the assessee had a sum of Rs. 4,26,400 available with him in cash from sale of 2050 equity shares of Reliance Industries. Out of the above, a sum of Rs. 3,03,300 was invested in shares leaving a balance of Rs. 1,23,100 for investment in the said business as on 1-6-1996 and out of this, a sum of Rs. 1,19,457 was invested in the said business leaving a balance of Rs. 3,643. This balance of Rs. 3,643 was part of cash in hand. The learned counsel argued that the consolidated balance sheet of all the undisclosed activities of the assessee was to be drawn to ascertain the funds availability and not only for the limited period because undisputedly cash was available with the assessee as on 1-6-1996 for investment in the business and in no manner the entire investment could be considered as undisclosed income. The learned counsel stated that the sources of Rs. 6,37,672 invested as on 1-6-1996 also as undisclosed investment peak of Rs. 4,88,965 upto 31-3-1996 and addition income was offered for taxation by way of interest of Rs. 50,567. He pointed out that only a sum of Rs. 99,129....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n the addition firstly because, the said loose paper was not seized from the premises of the assessee. The loose paper does not specifically mentions the name of the assessee, nor the person, from whom the paper was seized admitted to have paid any money to the assessee. Accordingly we delete the addition of Rs. 40,000. Ground 8 of the appeal is allowed. 26. The last ground pertains to addition of Rs. 1,84,400 made on account of unexplained gold jewellery of Rs. 349.900 gms. The learned counsel contended that jewellery weighing 2847.300 gms. was accepted as explained as the same tallied with the disclosed jewellery in the wealth returns of the assessee and his wife and the remaining jewellery pertaining to his children Ritu Daga and Rahul Daga 196/400 gms. and 147.500 gms. respectively were treated as undisclosed since no wealth tax returns were filed in their case. The learned counsel contended that since assessment year 1993-94, wealth tax returns were to be filed only in those cases where the taxable wealth was more than Rs. 15 lakhs and since the children did not have taxable wealth, no return was filed. The learned counsel further contended that in view of CBDT Instruction No....