TaxTMI 
TaxTMI 
1997 (11) TMI 525
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....; 9-2 09/009 1,66,000 Recd. + 20,000 Bal. 5,80,300 11,56,350 + 20,000 11,76,350 The partner of the assessee-firm by name Jagdish N. Lodaria, was asked to explain the notings in the course of the statement recorded from him under section 132(4) of the Income-tax Act, 1961 ('the Act'). The relevant questions and the answers are as below : "Q. No. 5I now show you page 12 of serial No. 9, a rough paid seized from your office. Please explain the cash receipts received in the month of February 1992 and where they are accounted. Ans. :This shows that I have received some money in cash for sale of our flats, shops, etc. (Received in the current financial year which is not accounted in the books of a/c) I have been charging on an average Rs. 100 per sq. ft. In cash over and above the agreed price at Kasturi Plaza, Dombivli. The area is approx. 10,000 sq. ft. sold so far. Rs. 100 on this area comes to Rs. 70,00,000. This entire amount has been received by me in thi....
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....assessee vide letter dated 30-6-1992 stated as under (relevant portion only) : "The aforesaid statement was recorded by the Asstt. Director of Inspection at 2.30 A.M. in the early morning, though it was mentioned at 11.45 P.M. Pre-recording of the Statement was started at 11.45 P.M. on the previous day and it ended at 2.30 A.M. in the early morning on the next day. I was totally tried. I was under tremendous pressure and not in a proper state of mind to understand the implications as to what is stated in the said statement. I did make a mention of the fact before the A.D.I. during the course of discussion that the aforesaid amount of Rs. 80 lakhs is the gross receipts, but as a Builder, we are required to incur lot of expenditure, which is unaccounted for. It is difficult to produce the evidence regarding the expenditure incurred, though it is for the purpose of business in the course of business and such expenditure is in the vicinity of almost 80 per cent of the amount that is received. The statement made by me, therefore, needs some modifications to the extent that the amount received by way of income being the 'on-money' for the sale of the flats is not the net income,....
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.... had received the amount from the assessee in cash. They were not maintaining books of account, bank accounts nor were they assessed to income-tax. The Assessing Officer also deputed his Inspector to verify the claim and as per the report of the Inspector dated 4-3-1993 he had verified the assessee's claim from Gopal Reddy, Ramprasad Dubey and Salim Khan at the addresses given by them and they had also admitted to have received the money from the assessee in cash either for providing security to the partners or for vacating tapories, as claimed by the assessee. The Inspector could not contact Shri Eknath Sudham Patil at the given address since he has gone to his native place. So far as the amounts paid to S.B. Shellar of Dombivli and Padmakar Choudhary are concerned, the assessee wrote to the Assessing Officer on 22-2-1993 that these persons could not be produced for enquiry since both of them had been killed in a gangwar. The assessee also produced certain paper cuttings before the Assessing Officer in support of the claim that these persons were killed in gangwars. 4. The Assessing Officer rejected the assessee's claim on the following grounds : "(1)No such expenses h....
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....course of the search proceedings. He referred in this connection to the statement made by Jagdish Lodaria in the course of the proceedings under section 132(5) to the effect that no evidence can be produced in support of the expenses. He, therefore, concluded that the claim for expenses and the evidence produced in support thereof was only an afterthought. He was of the view that the assessee cannot be allowed to retract from the statement made under section 132(4). In this view of the matter, the inclusion of Rs. 73,37,100 in the assessment was upheld. 6. Before us, the learned counsel for the assessee submitted that it is not proper to characterise the modification of the statement made under section 132(4) as a retraction. He pointed out that the partner of the assessee-firm was not in complete control of his mental facilities when the statement was recorded. In this connection, he pointed out that the statement was recorded at a time when the partner was totally exhausted and tired and was not in a fit state of mind to realise or analyse the implications of the statement. As regards the claim that the assessee-firm did not receive on-money in respect of the shops and offices....
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....flats, he pointed out that the commercial properties are generally in greater demand than residential properties even during periods of lull in the real estate market and in the assessee's case it was clear from the details filed at pages 14 and 89 of the paper book that the sale of shops was not slack. Therefore, he submitted that it is not possible to accept the claim that the assessee did not receive any on money in respect of the shops or offices. As regards the assessee's claim that there has to be an estimate of the net profit in such cases taking a practical view and considering the various types of disbursements required to be made by builders, the learned departmental representative submitted that 15 per cent as claimed by the assessee was very low. In this connection, he drew our attention to the trading account filed at page 42 of the paper book, wherein the net profit has been declared at Rs. 51,908 which reflected only 0.77 per cent of the turnover, which is ridiculously low. On the basis of these statements and facts, the learned departmental representative contended that the addition has been rightly made and sustained by the departmental authorities. 8. We have c....
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....claim for expenses can be accepted. We are of the opinion that too much cannot be read in the admission, so as to preclude the assessee from claiming such expenses. Considering the fact that the statement was recorded after a tiresome search proceedings and considering the state of mind of the partner, it would be too much to expect him to be alert enough to claim the expenses while the statement is being recorded or to make any mention regarding the expenses. After all we have also to take the human probabilities into account. It must be remembered that the partner was shown page No. 12 of diary No. 9, which was seized. That page did not relate to the assessee-firm at all. It related to the sale of shops, etc. made by Viral Enterprises. The diary was written by Suresh Shah, who was a partner in Viral Enterprises. These are admitted facts. This page, admittedly, did not contain any claim regarding the expenses. What is showed was only the on money receipts on sale of shops. It is therefore quite natural that when this page was shown to the assessee-firm's partner, Jagdish Lodaria, his mind was fixed to the amount of on money received by the assessee-firm and the amounts disbursed b....
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....to pay Padmakar Choudhary and S.B. Shellar. There is strong circumstantial evidence supporting such payments. It must be remembered that the assessee made the claim for the first time in its letter dated 3-2-1993. The names were mentioned in its letter at page 2. The Assessing Officer had required the assessee to produce these persons before him by letter dated 8-2-1993. But these two persons were reportedly killed in gangwars on 10-2-1993 and, therefore, could not produced before the Assessing Officer. The assessee could not have anticipated this. Therefore when it claimed that it had paid Rs. 20 lakhs to these two persons, the claim may be taken as genuine. It would be a fair inference that had these persons not died, the assessee would have been able to produce them before the Assessing Officer. The fact that the assessee came out with the names of these two persons in its letter dated 5-2-1993 is a strong circumstantial piece of evidence in its favour. We, therefore, consider that the claim of Rs. 20 lakhs has to be allowed. 12. So far as the pooja expenses are concerned, the expenditure of Rs. 14,720 which is stated to have been incurred for Satyanarayana Pooja conducted af....