2000-VIL-297-ITAT-RKT

Equivalent Citation: ITD 077, 166, TTJ 072, 211,

Income Tax Appellate Tribunal RAJKOT

Date: 25.02.2000

ASSISTANT COMMISSIONER OF INCOME-TAX

Vs

LAXMANBHAI J. PATEL.

BENCH

Member(s)  : BEHARI LAL., SHAILENDER K. YADAV.

JUDGMENT

Per Behri Lal, A.M.---This appeal has been filed by the department against the order of the CIT(A)-II, Rajkot, dated 25-9-1990, for the assessment year 1987-88. The only ground of appeal taken up by the department reads as follows :

"The learned CIT(A) erred in law and on facts in deleting the addition of Rs. 31,31,165 made by the Assessing Officer on account of undisclosed sources."

2. The assessee is an individual. He is having an industrial (proprietary) unit by the name 'Saurashtra Industries' and is manufacturing brass and bush from gun metal. He is also a partner in M/s. Saurashtra Engineers with 10% share. Saurashtra Engineers are manufacturing engineering goods and engine parts.

3. There was a search at Ahmedabad and Bhavnagar on some party known to the assessee. Thus, there was a consequential action, under section 132 of the Act, at the residential as well as business premises of the assessee on 17-7-1987. Some cash and gold ornaments were seized.

4. The Assessing Officer has made an addition of Rs. 31,31,165 being the income of the assessee from undisclosed sources. This addition has been made in addition to the disclosure of Rs. 6 lakhs in his return filed for the assessment year under consideration. The addition has been made on the basis of seized documents, item No. 30 of Annexure 12 found from the office premises of M/s. Sourashtra Industries, the proprietary concern of the assessee. This seized paper, is in the hand-writing of the assessee as admitted by him during the course of search and the same was written by him before Diwali 1986. On one side of the paper, total assets worth Rs. 25.5 lakhs belonging to him, as admitted by him, have been noted down. On the other side of the paper, details of loans advanced to various parties have been mentioned, which amount to Rs. 12,31,165. The Assessing Officer considered the entire amount of loans of Rs. 12,31,165 as unaccounted income of the assessee. He also has considered the amount invested in the assets mentioned on the reverse page of Item No. 30 of Annexure 12, as undisclosed income of the assessee except the amount of Rs. 6,50,000 invested in the factor building. Thus, the investment made by the assessee of Rs. 31,31,165 the working of which is given below, has been considered as concealed income of the assessee and, accordingly, addition has been made to his income for the assessment year under consideration :

Front page : advances made to others Rs. 12,31,165

Reverse page: Assets (movables) worth Rs. 25,50,000

-----------------------

Rs. 37,81,165

Less : Factory building Rs. 6,50,000

-----------------------

Rs. 31,31,165

-----------------------

5. The learned CIT(A) has deleted the addition mainly on the ground that in the past the assessee has been assessed only on net wealth of Rs. 2,91,907. Therefore, the assessee cannot have undisposed income to the tune of Rs. 31,31,165. According to him, the disclosure made by the assessee of Rs. 6 lakhs in his return would cover all the possible omissions and also the undisclosed asset found during the course of search.

6. During the course of hearing, the learned departmental representative contended that the additions have been made on the basis of the seized paper and the learned CIT(A) has deleted the addition without considering the merit of the case. He invited our attention to paras 5, 10 & 11 of the assessment order. In para 5 of the assessment order, the Assessing Officer has given his findings regarding the disclosure of income of Rs. 6 lakhs made by the assessee. In para 10, the Assessing Officer has stated that the disclosure of Rs. 20 lakhs made by the assessee under section 132(4) of the Act is fully substantiated with the undisclosed income mentioned in the seized document, Item No. 30 of Annexure 12. He has further stated in para 11, that the statement made under section 132(4) can always be used as evidence against the assessee.

7. The learned counsel for the assessee contended that the entire addition has been made on the basis of a piece of paper seized during the course of the search without taking into consideration the explanation given by the assessee during the course of the search. He invited our attention to the statement of the assessee recorded on 18-7-1987. In this statement the assessee made a disclosure, of Rs.10 lakhs of his undisclosed income but the Assessing Officer has made addition of Rs. 53,70,670. He also stated that the assessee made revocation of his statement given on 18-7-1987 in the month of November, 1987, and made the final disclosure of only Rs. 6 lakhs. The learned counsel also explained that at the back side of the seized paper, Item No. 30 of Annexure 12, the figure of Rs. 7,50,000 has been wrongly written, the actual figure is only of Rs. 75,000 and this is the value of the car which the assessee has purchased. He stated that the car registration No. 7962 has also been mentioned on the seized paper and this is the same car which the assessee has sold later on. He invited our attention to the sale documents of the car to support his contention. According to him, the figure of Rs. 4 lakhs mentioned in the paper pertained to the house purchased by the assessee. He also stated that the residential house purchased has been reflected in the books of account and has also been shown in the wealth-tax return. The learned counsel also invited our attention to pages 12 & 15 of the II paper book filed by him during the course of hearing. On page 12, the account pertaining to Maruti car (7962) has been filed whereas at page 15, the copy of the English translation of the letter written by Shri Bhanvarlal H. Shah to the assessee wherein Shri Bhanvarlal H. Shah has mentioned that he never accepted/ taken loans from Rajkotwalla Shri Laxmanbhai Patel or Saurashtra industries by cheque or cash. It is further stated that they used to keep sometimes with the assessee, some amount from his Bhavnagar transactions for safe custody. But it has been stated that they do not remember the exact amount or time/dates due to non-availability of records, but it may be around 1987 April. The learned counsel for the assessee relied on the order of the Pune Bench of the ITAT in the case of Chander Mohan Mehta v.Asstt. CIT [1999] 71 ITD 245 wherein the Pune Bench has held that the statement as a whole has to be taken into consideration. Regarding the retraction of the statement, the learned counsel referred to the Allahabad High Court decision in the case of Abdul Qayume v. CIT [1990] 184 ITR 404.

8. We have heard the rival parties. We have also gone through the various documents filed before us during the course of the hearing. The main point for consideration is whether the addition made by the Assessing Officer of Rs. 31,31,165 is justified or that the same has been made without consideration of the documentary evidence produced by the assessee during the course of the assessment proceedings. There was a search action, under section 132 of the Act, against the assessee and his residential and business premises were searched on 17-7-1987. During the course of search, some cash and gold jewellery was seized. The search party also seized certain documents, during the course of the search, from the residential and business premises of the assessee. Document marked as Item No. 30 of Annexure 12 was seized from the business premises of the assessee. This document was a paper and on both sides of the paper, the assessee has written certain amounts in his own hand-writing. As admitted by him, this paper was written before Diwali 1986. The statements of the assessee were recorded under section 132(4) of the Act during the course of the search. The explanation of the assessee regarding the various amounts mentioned in the seized paper is discussed in the following paras.

9. In the statement recorded, under section 132(4) of the Act, on 17-7-1987 afternoon, the assessee admitted that the amount of Rs. 1,10,843 found from the bed room and recovered from lockers is undisclosed income and the same was not entered in any books of account. In reply to Qn. No. 43, in his statement recorded on 18-7-1987, the assessee admitted and declared an amount of Rs. 20 lakhs under the provisions of section 132(4) of the Act. Rs. 10 lakhs, he declared in the name of his wife and the remaining Rs. 10 lakhs, he declared in his own name. He further clarified that the disclosure of Rs. 20 lakhs was not including the income earned from his business in the name of M/s. Saurashtra Industries and the business of his wife in the name of M/s. Saurashtra Brass Works and also stock of business of M/s. Saurashtra Engineers in which the assessee is a partner. He also stated that whatever differences of tax would come of these firms, he would pay the tax separately. He categorically stated that he was making this declaration without any pressure and at his own desire. This statement of the assessee is very relevant to ultimately determine his unaccounted income. This is the statement recorded during the course of search without any pressure and the same is the most reliable document to be used as evidence against the assessee.

10. In response to Qn. No. 44, in the statement recorded on 18-7-1987, the assessee has admitted that the hand-written paper found in the factory during the course of search belonged to him and had been written by him. He also admitted that the amount of Rs. 12,50,000 mentioned on one side of the paper was deposits given to various parties, but, out of that expenses of different accounts have also been incurred which includes cash-in-hand. Thus, he explained the details of Rs. 20 lakhs as under :

----------------------------------------------------------------------------------------------------------------------------------------------------------

S. No. Details Amount in Rs.

----------------------------------------------------------------------------------------------------------------------------------------------------------

1. Deposits given to different parties for retaining purpose 11,90,000.00

Additional amount on a/c of

2. Geeta Apartment Flat purchase 50,000.00

3. Flat renovation 20,000.00

4. New furniture in flat 30,000.00

5. National VCR purchase 12,000.00

6. Amount found from house and also from a

locker during the search 1,10,000.00

7. Value of 108 Tolas of gold 2,76,000.00

8. Marriage - Sudhaben 25,000.00

9. Maruti Motor purchase 60,000.00

10. Wood found from Karkhana 50,000.00

11. Construction of factory 50,000.00

12. Plot land purchase 1,00,000.00

13. Sundry 27,000.00

-------------------------

20,00,000.00

----------------------------------------------------------------------------------------------------------------------------------------------------- Thus, the disclosure made of Rs. 20 lakhs was quite specific and the assessee had given the full details of each and every item which he acquired by investing the unaccounted funds. All these items mentioned by the assessee are factual and the disclosure is, therefore, not on estimated basis but the same has been made on the basis of assets found during the course of search. It is quite surprising that the assessee brought this disclosure down to Rs. 6 lakhs without giving any reason for changing the items mentioned above so specifically. It is also not known how and under what circumstances, he brought into picture Shri Bhanvarlal H. Shah of Ahmedabad later on saying that the first two entries of Rs. 3,36,000 and Rs. 2,50,000 belonged to him and they are the deposits with the assessee.

11. During the course of hearing, the learned counsel for the assessee filed copy of the letter from Bhanvarlal H. Shah in which it has been mentioned :

" . . . never accepted/taken any loan from Rajkotwalla Shri Laxmanbhai Patel or Saurashtra Industries by cheque or cash. On the contrary we used to keep them sometimes with Shri Laxmanbhai from our Bhavnagar transaction for safe custody."

He further stated that he did not remember the exact amount or time or date due to non-availability of records. It is quite surprising that a person, who has advanced loans of Rs. 3,36,000 and Rs. 2,50,000 even does not remember the exact amount or date on which such loans were advanced. A shrewd business would never forget such financial transactions. What is more surprising is that he even does not know when such amounts were advanced and what was the exact amount advanced by him to the assessee. The total amount involved is about Rs. 6 lakhs and the story made out by the assessee does not appear to be convincing because the creditor would never forget such a huge amount of Rs. 6 lakhs. This is only a made-up story and an after-thought. But the fact remains that the assessee advanced loans to Bhanvarlal H. Shah which had been reflected in the seized papers and that is also what the assessee has admitted in his statement discussed above. The factual statement given by the assessee, during the course of search, cannot be brushed aside later on unless the assessee produces some reliable evidence in support of his contention. The assessee has not produced any evidence in support of his contention that the first two entries pertain to the deposits made by Shri Bhanvarlal H. Shah with him except a letter from Shri Bhanvarlal H. Shah which is also quite vague and not specific. Therefore, such a letter, which is vague, cannot be admitted as evidence in support of the contention of the assessee.

12. In reply to Qn. No. 45, in the statement recorded on 18-7-1987, what the assessee has stated, is also quite relevant to the disclosure of Rs. 20 lakhs made by the assessee. In response to this question, the assessee explained how he earned this undisclosed income. He stated that in both the businesses purchases were made without bills; some purchases were over invoiced and sales were made without bills. He also stated some unaccounted money was earned out of land dealings and its commission. Thus, the assessee had been quite precise and specific in explaining the sources of the unaccounted funds.

13. In response to Qn. No. 46, he gave the names of the parties from whom he was purchasing goods without bills and also over-invoicing the bills. He gave names of such parties as below :

"At Ahmedabad the firms known of Laxmi Group such as Laxmi Metal Syndicates, Laxmi Alloys and Casting, Laxmi Trading and Manu, Gujarat Metal Corporation etc. and Shantilal H. Shah, Mulchand Shah, Misrilal Shah, Bhanvarlal Shah, etc. who are partners or proprietary of the above firm."

Regarding the parties to whom he was selling goods without bills, he stated that such parties were numerous small parties and, therefore, it was difficult to give their names. The above reply of the assessee make it abundantly clear that he was dealing with unaccounted transactions and all such parties are from Ahmedabad. It is also very interesting to note that Bhanvarlal H. Shah is one of the partners of the firms with whom the assessee was having unaccounted transactions. When the assessee was asked (Qn. No. 49) how he was returning the amount of purchases without bills and over-invoicing of purchases, he stated that such amounts were given by Ahmedabad parties in cash or self-cheque. Here, it is established without any doubt that the assessee must be advancing some amount to Bhanvarlal H. Shah for purchases without bills and Bhanvarlal H. Shah must be making payments of unaccounted transactions to various parties at Ahmedabad. As has been explained by the assessee in his statement that he was making purchases from Ahmedabad parties, therefore, he must be making payments to such parties through Bhanvarlal H. Shah. Therefore, the assessee has correctly admitted, in his statement, as discussed above, that he was also advancing money to Bhanvarlal H. Shah and the same is confirmed by the fact that the first two entries in the first page of the seized paper are in the names of Shri Bhanvarlal H. Shah. There was specific need for the assessee to keep funds with Shri Bhanvarlal H. Shah for making payments to various parties at Ahmedabad but there was hardly any need for Bhanvarlal H. Shah to keep funds with the assessee. Therefore, the contention of the learned counsel for the assessee, during the course of hearing, that the first two entries on the seized paper pertain to deposits made by Bhanvarlal H. Shah with the assessee is without any force and cannot be accepted. The above facts which have been disclosed by the assessee are quite specific and the disclosure made by him of Rs. 20 lakhs is fully supported by the minutest details given by the assessee voluntarily and without any pressure on him and hence the revocation of the same, without any supporting evidence, that too after the lapse of four months, is without any basis. The same is, therefore, an after-thought and cannot be accepted as a reliable one.

14.The assessee also explained the nature of the various entries in his statement which was recorded at the factory premises on 18-7-1987. Regarding the first page of seized paper, Item No. 30 of Annexure 12, he stated that all the amounts have been advanced to various parties and he also gave the names of such parties to whom the advances had been made. However regarding the first two entries of Rs. 5,86,000, he explained that the amount has come to him from Shri Bhanvarlal H. Shah. This contention of the assessee is without any basis in view of our detailed discussion above. As we have discussed above, he admitted, in his first statement, that the amount of Rs. 5,86,000 has been advanced to Shri Bhanvarlal H. Shah and we have also supported his stand by circumstantial evidence. His change of stand in the subsequent statement is without any supporting evidence. Thus, the entire amount of Rs. 11,81,165 mentioned in the first page of the seized paper has been advanced to various parties out of the unaccounted funds of the assessee. The last entry is a fixed deposit in the name of the assessee's daughter which is also made out of unaccounted funds of the assessee.

15. During the course of hearing, the learned counsel for the assessee contended that the Assessing Officer had made the addition on both debit and credit entries appearing on the first page of the seized paper. In this connection, we would like to mention that nothing has been specifically mentioned against the entries. Therefore, the reasonable presumption is that the nature of all the credits is the same. No prudent businessman is going to commit such a serious mistake of mixing up the debit and credit entries together. Moreover, the final total has been taken by, adding up the amounts of all the entries together. This simply goes to prove that the nature of all the entries is the same. Otherwise, why the assessee should add up all the amounts together. When a particular document has been seized, during the course of search, the same has to be interpreted reasonably keeping in view the contents of such document. This document has been seized during the course of search. All the amounts mentioned on the first page have been added up. Therefore, the natural and logical interpretation is that the nature of all the amounts mentioned therein is identical. The assessee had also admitted in his first statement, as discussed above, that the entries in the paper seized pertain to his unaccounted transactions, i.e., such amounts had been advanced to various parties out of his unaccounted funds. Under the circumstances, the contention of the learned counsel is without any substance and the same is not acceptable.

16. Regarding the entries in the second page of the seized document, the assessee has explained that the first 15 items are small amounts. The 16th item of Rs. 7,50,000 is actually Rs. 75,000 and the same is actually cost of the Maruti car which he had purchased though, later on, the same has also been sold. Regarding this, the learned counsel, during the course of hearing, produced before us evidence regarding the sale of the same car. Moreover, the registration number of the Maruti has been mentioned in the seized paper. The car sold is also having the same registration number, i.e., 7962.

Therefore, the contention of the learned counsel for the assessee appears to be correct. We, therefore, agree with him that the figure of Rs. 7,50,000 has been wrongly mentioned and the actual figure is only Rs. 75,000. Therefore, the addition made of Rs. 7,50,000 is not justified.

17. The learned counsel also produced before us the car account maintained in the books of account. The value of this car has been fully reflected in the books of account. Therefore, the addition of Rs. 75,000 is also not required to be made as the amount spent on the car has been fully reflected in the books.

18. So far as the factory building is concerned, the contention of the assessee has been accepted by the Assessing Officer. Therefore, he has not made the addition of Rs.

8,50,000 which pertains to factory building.

19. The next amount of Rs. 4 lakhs has been shown against residential house and furniture. During the course of hearing, it was submitted that the amount of Rs. 4 lakhs pertains to the residential house in Shramjivi Society. According to the assessee, this house was purchased in 1975 for Rs. 32,000. Further amount of Rs. 16,675 was paid in July 1978 to the contractor for further construction. This house has been shown in the wealth-tax return at a value of Rs. 1 lakh. After going through the statement of wealth of the assessee for the assessment year 1985-86, the contention of the assessee is found to be correct that the amount of Rs. 4 lakhs is the value of the house and furniture. Therefore, the amount of Rs. 4 lakhs must be comprising of accounted funds and unaccounted funds invested in the residential house and furniture. The assessee is, therefore, given the benefit of Rs. 1 lakh which he has invested, out of accounted funds, for purchasing the residential house. The remaining amount of Rs. 3 lakhs is treated as investment by the assessee in the residential house and furniture out of unaccounted funds. Therefore, addition of Rs. 3 lakhs out of the above amount of Rs. 4 lakhs is fully justified.

20. The assessee has not filed any explanation regarding the amount of Rs. 35,000 mentioned against "Gadi". This amount is, therefore, fully unaccounted.

21. An amount of Rs. 15,000 has been mentioned against "Vahan". The assessee's explanation that the same has been mentioned in the books of M/s. Saurashtra Industries is not acceptable because the assessee is owning five vehicles as per his statement recorded on 18-7-1987. Therefore, it cannot be said that the same vehicle is mentioned in the books of account of M/s. Saurashtra Industries. This amount is, therefore, treated as the unexplained funds of the assessee.

22. Regarding gold of the value of Rs. 2 lakhs, the assessee has not given any explanation. Therefore, this has also been acquired out of unaccounted funds of the assessee.

23. So far as the amount of Rs. 2,50,000 is concerned, the assessee has stated that the plot was purchased on 28-11-1985 for Rs. 80,555. This has been credited in the books of account. The assessee, in his statement recorded on 18-7-1987 in the factory, has also stated (On. No. 21) that "Pan Katie Plot" has been shown in the books. But what is important to note here is that the assessee has shown the value in the seized paper at Rs. 2,50,000 but the actual value shown in the books is only Rs. 80,855. Therefore, it can be safely presumed that the amount of Rs. 2,50,000 is in addition to the amount of Rs. 80,855 shown by the assessee in its books of account. Therefore, the amount of Rs. 2,50,000 has been invested by the assessee in the purchase of a plot out of his unaccounted funds.

24. One should not forget that the seized paper is actually the account of the unaccounted funds of the assessee. The explanation of the amount of Rs. 50,000 mentioned against 'wood' is not acceptable in view of the fact that the assessee has admitted, in his statement under section 132(4) (On. No. 44), while making the disclosure of Rs. 20 lakhs that the amount has been invested out of unaccounted funds. Further, in his statement recorded at the factory, he has also stated that this amount is not reflected in the books of account (On. No. 2 1). Therefore, this amount has rightly been treated as concealed income of the assessee.

25. The assessee has not filed any explanation regarding the next amount of Rs. 50,000 mentioned against 'Not legible'. Therefore, the same is also treated as the concealed income of the assessee.

26. Regarding the amount of Rs. 1,50,000 mentioned against 'Dharambhavan', the assessee has explained that his wife had paid Rs. 3,100 in 1980 to book the plot in Dharamjivan Society. This statement of the assessee cannot be relied upon in view of the fact that the assessee, in his statement recorded in the factory, has no doubt admitted that the plot had been shown in the books but the fact remains that the amount of Rs. 1,50,000 has been mentioned in the seized paper whereas the value of the plot is only Rs. 3,100. This clearly proves that the amount of Rs. 1,50,000 might have been spent for developing the plot and for construction of the building and the amount might have been spent from unaccounted sources. Therefore, the amount of Rs. 1,50,000 is also treated as concealed income of the assessee.

27. Taking into consideration the discussion above, the concealed income of the assessee, as per seized paper (Item No. 30 of Annexure 12) is computed as follows :

Rs.

Front Page: Advances made to others 12,31,165

Reverse page : (Assets) :

(i) Residential house & furniture Rs. 3,00,000

(ii) Gadi Rs. 35,000

(iii) Vahan Rs. 15,000

(iv) Gold Rs. 2,00,600

(v) Pran Kutir plot Rs. 2,50,000

(vi) Wood Rs. 50,000

(vii) Not legible Rs. 50,000

(viii) Dharambhavan Rs. 1,50,000

---------------------------- 10,50,000

---------------------

22,81,165

--------------------

28. In addition to the concealed income of Rs. 22,81,165 computed above, the assessee also disclosed the following concealed income, in his statement under section 132(4) recorded on 18-7-1987 (Qn. No. 44) which has not been reflected in the seized paper :

Rs.

(i) Geeta Apartments 50,000

(ii) National VCR purchase 12,000

(iii) Amount found from house and also from locker 1,10,000

(iv) Gold of 108 Tolas 76,000

(Rs. 2,00,000 has been mentioned

in the seized paper which is

considered above. The total

amount disclosed is Rs. 2,76,000)

(v) Marriage : Sudhaben 25,000

(vi) Construction of factory 50,000

(vii) Plot of land purchased 1,00,000

(viii) Sundry 27,000

-------------------

4,50,000

------------------

Thus, the total concealment of the assessee amounts to Rs. 27,31,165 (Rs. 2,81,165 plus Rs. 4,50,000).

29. The amount of Rs. 27,31,165 is fully supported with the specific disclosure made by the assessee during the course of search under section 132(4) recorded on

18-7-1977 (Qn. No. 44). The assessee further stated that the disclosure of Rs. 20 lakhs does not include his individual income from M/s. Saurashtra Industries and the income of his wife from her business from M/s. Saurashtra Brass Works and the stock of business from M/s. Saurashtra Engineers where the assessee is a partner. He has further stated that whatever the stock will come of these three firms and whatever the difference will arise, he would pay the tax seperately. Thus the determination of the concealment of income at Rs. 27,31,165 is fully supported by the disclosure discussed above. Thus, in our opinion, the total income of the assessee from undisclosed sources, as discussed above, should be considered at Rs. 27,31,165. This would also include the undisclosed income of Rs. 6 lakhs which has been added by the Assessing Officer separately in his assessment order. Thus, the assessee would get relief of Rs. 10 lakhs out of the addition of Rs. 37,31,165 made by the Assessing Officer in his assessment order. The Assessing Officer is, therefore, directed to recompute the income of the assessee accordingly by taking the income of the assessee from undisclosed sources at Rs. 27,31,165.

30. The learned CIT(A) has deleted the addition mainly on the ground of financial status of the assessee as reflected in the wealth-tax return of the assessee for the assessment year 1985-86. According to the learned CIT(A), the total wealth of the assessee as on 9-11-1989 was determined at Rs. 2,91,090 before the wealth-tax liability was deducted. We fully agree with the findings of the learned CIT(A) that the financial status of a particular person can be judged from the income and the wealth reflected in the returns filed by him. But this is true and applicable only in respect of honest taxpayers. This criterion cannot be applied to dishonest taxpayers. If the views of the learned CIT(A) are accepted as correct, then the taxevaders who do not file returns at all should be considered as the poorest persons in the society, but, it is not true. Tax evaders in this country are generally in the top bracket of the richest persons in our society. Let us now consider the financial status of the assessee. Some of the assets of the assessee found during the course of search are as follows :

(i) Residential house in Sramjivi Society Rs. 4,00,000

(ii) Value of Pran Kutir plot Rs. 2,50,000

(iii) Plot at Pragna Chakshu Co-op. Society Rs. 50,000

(iv) Dharamjivan Society Plot Rs. 3,50,000

(v) Value of factory building Rs. 6,50,000

(vi) Gold found during search (unaccounted) Rs. 2,76,000

(vii) Advances made to various parties Rs. 11,81,165

(viii) Fixed deposits (daughter's name) Rs. 50,000

(ix) Cash found during search Rs. 1,10,000

(x) Flat in Geeta apartment Rs. 50,000

(xi) Plot of land purchased Rs. 1,00,000

----------------------------

Rs. 32,67,165

---------------------------

In addition to the above assets, the assessee has spent huge amount on renovation of flats, purchase of new furniture, marriage and on construction of factory.

31. The assessee is having a factory in the name of M/s. Saurashtra Industries. He is also a partner in the firm of M/s. Saurashtra Engineers which is making oil engine parts and solid blocks. The assessee also used to do business of land and buildings. His wife is carrying on business in the name of Saurashtra Brass Works. In addition to the above assets and business concerns, the assessee was owning five different types of vehicles at the time of search. He is also owning 20 acres of land and a house at Chharanadar (Dhoraji). The assessee must also be owning movable and immovable properties which he was reflecting in the books of account. In view of the financial position stated above, the remarks made by the learned CIT(A) in his appellate order that the net wealth of the assessee was Rs. 2,91,207 and, therefore, the addition made in the case of the assessee was unjustified is irrelevant and it appears that the learned CIT(A) passed this appellate order without understanding the facts of this case. The learned CIT(A) was simply carried away by the figure of Rs. 2,91,907 shown in the wealth-tax return forgetting totally that the assessee was indulging in evasion of tax on a very large scale as has been discussed above. The learned CIT(A) has, therefore, deleted the addition under the misconception of poor financial status of the assessee which is actually not true as has been proved above. The deletion, by the learned CIT(A), of the entire addition of Rs. 31,31,165 made by the Assessing Officer, is, therefore, without understanding the facts of this case and the same is unjustified.

32. The learned counsel for the assessee brought to our notice various decisions to support his arguments. The same are discussed as follows :

I. Abdul Qayume's case : In this case, the Hon'ble Allahabad High Court has laid down :

" . . . An admission or an acquiescence cannot be a 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."

The facts of the present case are totally different from the facts of the above case. The above decision is applicable only when the income was disclosed without any supporting evidence and on an ad hoc basis. In the present case, the disclosure has been made on the basis of certain assets which were found during the course of search. Thus, the disclosure is fully supported with the undisclosed assets, hence the same is quite specific and the assessee has not been left with any other alternative to change the same. Hence, the above case is not relevant to the facts of the present case.

II.Pullangode Rubber Produce Co. Ltd v. State of Kerala [1973] 91 ITR 18 (SC) wherein the Hon'ble Supreme Court has held :

"It is open to the assessee who made the admission to show that it is incorrect and the assessee should be given a proper opportunity to show that the books of account do not disclose the correct state of facts."

We do not understand how this case is relevant to the facts of the present case. The above case is regarding the books of account and the apex court held that the assessee should be given an opportunity to show that the books of account do not disclose the correct state of facts. In the present case, the assessee made the disclosure under section 132(4) during the course of search which is not ad hoc but the same is quite specific. Each item of disclosure is supported by the corresponding asset and such assets have also been reflected in the seized paper. Therefore, the disclosure is factual and the assessee has not been left with any chance to say that the disclosure was made under erroneous impression or misconception of law.

III. Chander Mohan Mehta's case ITAT, Pune Bench :

We are, respectfully, in agreement with the findings of the ITAT, Pune Bench in the above case. The Pune Bench has held "If the loose papers seized do not indicate the names of the assessee, such loose papers cannot be used against the assessee unless the department further finds out some supporting evidence to link such papers with the activities of the assessee". The ITAT has further stated that 'If some loose papers are considered along with assessee's statement, they certainly can be considered as relevant material having evidenciary value and, therefore, that statement had to be considered and accepted as a whole and the revenue could not be permitted to use part of the statement which was beneficial to it and reject the other part of the statement which was detrimental to it." This is what exactly we have done in the present case. We have accepted the statement of the assessee recorded under section 132(4), during the course of search as a whole and the same is supported by the seized papers. During the course of search, the assessee made a disclosure under section 132(4) of Rs. 20 lakhs and that disclosure was made on the basis of various documents mentioned therein, as discussed above. This disclosure of the assessee was also supported by the seized documents. Therefore, the disclosure made was based on the statement of the assessee recorded during the course of search supported by the various documents mentioned in the seized paper. Therefore, this case of the ITAT, Pune Bench fully supports our findings given above.

IV. Udeyaraja Goliya (HUF) v. Asstt. CIT[1998] 64 ITD 21 (TM) wherein the Bombay Bench of the ITAT held :

"When except seized paper which was letter-head of a firm, there was no evidence on record to suggest that said sum had been paid by assessee, addition could be sustained."

We fail to understand how this case is applicable to the facts of the present case. In the present case, the disclosure has been fully supported by the seized paper and the statement of the assessee recorded under section 132(4) of the Act during the course of search.

V.S.K. Gupta v. Dy. CIT [1999] 63 TTJ (Delhi) 532 (ITAT, Delhi Benches)

Wherein it is held that ". . . unless there is a corroborating evidence to show that the purchase and sale of these properties has taken place and the assessee has earned income, no amount can be added in the hands of the assessee.' It has also been pointed out by the ITAT that no evidence was brought on record to corroborate the allegation that the assessee had entered into any transaction and earned any income. This case is also not applicable to the facts of the present case. In the present case, the disclosure is fully supported by the evidence collected during the course of search. The assessee has also admitted specifically, in his statement, that the income has been earned out of the unaccounted transactions which he was having with various parties.

VI. Srinivasa Ultrasound Scanning Centre v. Asstt. CIT [1998] 61 TTJ (Bang.) 619.

wherein the Bangalore Bench of the ITAT has held :

"Entry on a loose paper found in bank locker cannot lead to an incontrovertible evidence that R. who owned the locker, had withdrawn the noted amount from the locker. Even if it was so, bank locker had no connection with the income of assessee-firm. Addition cannot be made in the hands of firm."

In the present case, the entries in the seized paper have been fully linked with the various assets acquired by the assessee out of his unaccounted funds. The assessee has also made categorical admission in his statement recorded under section 132(4). Therefore, the facts of the case are different from the facts of the case decided by the ITAT, Bangalore Bench mentioned above.

33. In view of the detailed discussion above, we are of the opinion that the computation of the concealed income of the assessee at Rs. 27,31,165 made by us above is fully justified.

34. The appeal is partly allowed.

 

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