Vildirect: IncomeTax-caselaws-2000-VIL-299-ITAT-DEL

2000-VIL-299-ITAT-DEL

Equivalent Citation: ITD 074, 147, TTJ 069, 821,

Income Tax Appellate Tribunal DELHI

Date: 14.07.2000

DOLLY FARMS & RESORTS (P.) LTD.

DEPUTY COMMISSIONER OF INCOME TAX.

BENCH

Member(s) : M. K. CHATURVEDI., MOKSH MAHAJAN., U. B. S. BEDI.

JUDGMENT

Per Miss Moksh Mahajan, Accountant Member. - In an appeal filed the assessee has challenged the order of the Assessing Officer passed under section 158BC of the Income-tax Act for the block period 1986-87 to15-9-1995.

2. The premises of the assessee were searched oh15-9-1995by the department. Certain documents and the books of account were seized. The proceedings were concluded on27-9-1996and the income computed was at Rs. 1,34,87,700. Aggrieved against the order the assessee came in appeal before the Tribunal. The following additions to the income were contested:

(1) Addition of Rs. 2,31,000 for want of documentary evidence;

(2) Addition of Rs. 15,30,000 for want of confirmations being filed;

(3) Addition of Rs.50 lakhs for want of confirmation;

(4) Addition of Rs.4,18,000 on account of entries in Annexure-I;

(5) Addition of Rs.9,35,000 for want of confirmation certificates;

(6) Addition of Rs.8 lakhs on account of share capital receipt;

(7) Addition of Rs.40,73,700 on account of membership deposits;

(8) Addition of Rs.5 lakhs towards an estimated income; &

(9) Refusal to allow deduction for a loss of Rs.26,83,800 as per the income-tax returns.

3. The assessee filed a Paper Book consisting of 151 pages listing the documents and the information contained therein along with the certificate which reads as under:

"This is to certify as under:

1. That the papers at Serial Nos. 1 to 11 of the paper book are the copies of Panch Nama prepared by the Search party on 16-9-1995 in connection with a search on the premises of the Appellant on 15-9-1995.

2. That the papers at Serial Nos. 13 to 22 of paper book are the copies of the letters submitted by the appellant or its director Shri G.S. Chhabra to the concerned income-tax authorities.

3. That the papers at pages 25 to 29 are the copies of seized documents.

4. That the papers at Serial Nos. 33 to 41, 95 to 121 and 151 are the copies of the letters and evidences submitted to the Assessing Officer during the course of assessment proceedings."

4. The learned Departmental Representative brought to the notice of the Tribunal that the following documents appearing against the following papers were not filed before the Assessing Officer.

"Page 30 of the paper book: List of unsecured loans as on15-9-1995which is a typewritten statement total of which shown at Rs.10,50,003.

Pages 96 & 97: Copy of ledger account of Palvinder Singh (2 pages).

Page 98: Statement of account of Dolly Farms & Resorts (P.) Ltd. on the Letter Pad of Aggarwal Gases.

Pages 117 to 120: Letter dated25-9-1996and27-9-1996addressed to CIT-Delhi-I,N. Delhi.

Page 151: Confirmation from Rubina Leasing Ltd."

5. When confronted the assessee filed an affidavit of Shri S.K. Gupta, Chartered Accountant, the then counsel of the assessee to show that the letters dated 25th September, 1996 and 27th September, 1996 mentioned on pages 117 to 120 were submitted to the Commissioner of Income-tax personally seeking appointment to explain the draft order which was stated to have been forwarded by the Dy. CIT for approval. The letters clearly showed that the request was made for personal hearing and the consideration of the submissions. There could have been no mala fide intention on the part of the then counsel of the assessee in making a wrong statement about the aforesaid letters as the same would not have helped him in any manner, The decision on the additions as made by the Dy. Commissioner of income-tax had to be rendered on merits. No prudent counsel would try to fabricate an evidence or make a wrong statement which would have not been in his interest. The fact that the said letters could not be located or traced out by the office of the Commissioner would not show that these were not given. The letter dated27-9-1996was submitted to the Commissioner personally as per the remarks on the office copy of the letter available with the assessee. In support the assessee maintained that he was prepared to produce Shri S.K. Gupta, CA for recording statement if so required.

6. As regards document on page 30 of the Paper Book it was submitted that the same relates to the information as contained on page 108 of the Paper Book which is in the form of a letter to DCIT, Special Range-26. Vide this letter, the assessee brought to the notice of the Assessing Officer that confirmations of these parties in respect of their unsecured loans have been called for. There was no fresh information contained in the document. In any case Page 30 is the only typed statement of the list of unsecured loans as attached with the balance-sheet as on the period ending15th September, 1995.

7. Pages 96-97 contained the ledger account of Mr. Palvinder Singh. The information in respect of Mr. Palvinder Singh along with other parties was given to the Assessing Officer vide letter dated 10-9-1996 as appearing on Page 108 of the Paper Book. On an understanding that the information stood furnished to the Assessing Officer, the same was included in the Paper Book. Vide letter dated16-9-1996at page 108 of the Paper Book the details regarding the amounts received from certain parties including Mr. Palvinder Singh as submitted to the Assessing Officer. Under mistaken impression that the copy of account of Shri Palvinder Singh was submitted to the Assessing Officer, the same was submitted before the Tribunal.

8. Page 98 contained statement of accounts of assessee in M/s. Aggarwal Gases. This was submitted to the Assessing Officer on27th September, 1996under instructions from CIT. The Papers are placed by the DCIT on separate file instead of assessment file. This statement stands confirmed by Shri S.K. Gupta, CA in his affidavit.

9. On page 151 of the Paper Book is given the confirmation from M/s. Rubina Leasing Pvt. Ltd. which is dated15-9-1996. Since the copy of the, confirmation certificate dated 15-9-1996 was lying in the papers received from Shri S.K Gupta, under a mistaken impression that the same was made available before the Assessing Officer, it was included in the Paper Book also.

10. The above facts were perused in the light of the information filed.

11. Coming to pages 101 to 104 of the Paper Book wherein the copies of Statement of Account 1995-96 of M/s. Trikuta Leasing (India) Pvt. Ltd. have been furnished along with GIR number as mentioned in the same, it was submitted that in the letter of confirmation filed before the DCIT no PAN/GIR number was mentioned. Shri S.K. Gupta was advised to ascertain the GIR number and as per the advice the same was noted on the copy of account available with the assessee.

12. We have considered the submissions as made before us. The Tribunal is a final fact finding body and has to render judicial decision on the issues raised before it. Judicial decision presupposes existing dispute between two or more parties and involves four requisites as cited by their Lordships of Supreme Court in the case of Bharat Bank Ltd. v. Employees of Bharat Bank Ltd. [1950] 1 S.C.R. 459. This appears on page 477 of the reported decision and the observations have been lifted from the decision in the case of Cooper v.Wilson[1937] 2 K.B. 309 at page 340:

"A true judicial decision presupposes and existing dispute between two or more parties, and then involves four requisites: (1) The presentation (not necessarily orally) of their case by the parties to the dispute; (2) if the dispute between them is a question of fact, the ascertainment of the fact by means of evidence adduced by the parties to the dispute and often with the assistance of argument by or on behalf of the parties on the evidence; (3) if the dispute between them is a question of law, the submission of legal argument by the parties, and (4) decision which disposes of the whole matter by a finding upon the facts in dispute and application of the law of the land to the facts so found, including where required a ruling upon any disputed question of law. A quasi-judicial decision equally presupposes an existing dispute between two or more parties and involves (1) and (2), but does not necessarily involve (3) and never involves (4). The place of (4) is in fact taken by administrative action, the character of which is determined by the Minister's free choice."

13. The extent of judicial power exercised by the Tribunal is determined under the Act under which it has been constituted. The dispute between the parties has to be adjudicated upon in accordance with the provisions of the Income-tax Act. This presupposes that the issues have to be resolved as per law and not in any other manner. Rules have been framed prescribing the procedure for the functioning of the Bench and to facilitate rendering the justice in the speedier and best possible manner. In this context, we may refer to a particular Rule 18 relating to preparation of Paper Book etc. This reads as under:

"Preparation of paper books, etc.

18. (1) If the appellant or the respondent, as the case may be, proposes to refer or rely upon any document or statements or other papers on the file of or referred to in the assessment or appellate orders, he may submit a paper book in duplicate containing such papers duly indexed and paged at least a day before the date of hearing of the appeal with proof of service of a copy of the same on the other side at least a week before:

Provided, however, the Bench may in an appropriate case condone the delay and admit the paper book.

(2) The Tribunal may suo motu direct the preparation of a paper book in triplicate by and at the cost of the appellant or the respondent containing copies of such statements, papers and documents as it may consider necessary for the proper disposal of the appeal.

(3) The papers referred to in sub-rule (1) above must always be legibly written or type-written in double space or printed. If xerox copy of a document is filed, then the same should be legible. Each paper should be certified as a true copy by the party filing the same, or his authorised representative and indexed in such a manner as to give the brief description of the relevance of the document, with page numbers and the Authority before whom it was filed.

(4) The additional evidence, if any, shall not form part of the same paper book. If any party desires to file additional evidence, then the same shall be filed by way of a separate paper book containing such particulars as are referred to in sub-rule (3) accompanied by an application stating the reasons for filing such additional evidence.

(5) The parties shall not be entitled to submit any supplementary paper book, except with the leave of the Bench.

(6) Paper--Paper books not confirming to the above rules are liable to be ignored."

The aforesaid Paper Book is to be certified either by the assessee or a counsel to the effect that the papers on which the reliance is to be placed have been filed before the lower authorities. On the strength of the aforesaid certificate the Tribunal proceeds to dispose of the appeal taking into consideration the facts as given and the documents as appended. The framing of the aforesaid rule presupposes the correctness of the statement as well those of the documents. This is necessary for administration of justice. It is true that the Tribunal is not a court in strict sense of the terms but it has all trappings of the court as held by their Lordships of Supreme Court in the case of Bharat Bank Ltd. Under certain circumstances if so required, the High Court can be moved for contempt of court which as per the common law definition is an act or omission committed to interfere with the due administration of justice (Bowen, L.J. in Helmore v. Smith (No. 2) [1886] 35 Ch. D. 436,455: as stated in the Delhi Judicial Service Association v. State of Gujarat [1991] 4 SCC 406. While interpreting the expression their Lordships have held "the definition of criminal contempt is wide enough to include any act by a person which would tend to interfere with the administration of justice."

14. In this context we find that as regards documents 117 to 120 the assessee has furnished affidavit of Shri S.K. Gupta, counsel explaining the circumstances under which the documents came to be placed in the Paper Book. The assessee also made a request to produce Mr. Gupta for examination. There is no material with us to either disbelieve the version or show that the statement made is false. Coming to document on page 30, the same was only translated version of the information already on record. The filing of the same in no manner would have advanced the case of the assessee and as such no mala fide could be attributed to the assessee. The documents filed on pages 96 & 97 are merely copies of the ledger account. Since these are verifiable from the records available with the department no mala fide intention could be attributed to the assessee. The application seeking admission of confirmation of Aggarwal Gases in no way disprove the assessee's contention in this regard. Similar is the case in regard to the statement of account of Dolly Farms appearing on page 98 which as per the assessee's version were found available in the papers of Shri S.K. Gupta. The affidavit to this effect is also available on record. There is no other material either to confirm or controvert the version. The only document which is admitted to have not been filed relates to Rubine Leasing (P.) Ltd. In this regard the explanation rendered is that the same has been filed under mistaken impression. There is nothing even to confirm or controvert the assertion of the assessee. On appraisal of facts and circumstances in which the assessee was placed in our considered view we would restrain ourselves from initiating proceedings as discussed above. It would be sufficient if the documents so filed are ignored in terms of sub-rule (6) of Rule 18 of the ITAT Rules as cited above.

15. The assessee has filed an application for admission of additional grounds of appeal which read as under:--

"1. That the Dy. Commissioner of Income-tax and earlier Asstt. Director of Investigation (ADI) had not, in spite of several specific requests, supplied copies of all the seized records. Thus the assessment made by him is, therefore, void in law.

2. That the Dy. Commissioner of Income-tax had not afforded any opportunity and, in any case, adequate opportunity to the Appellant and hence the assessment is void in law."

16. The assessee has also filed an application under Rule 29 of the ITAT Rules for admission of additional evidence. This related to admission of confirmations from one Shri Kanwarjit Singh Bansi, M/s. Jasleen Leasing Pvt. Ltd., M/s. Handloom Cottages & M/s. Goel Gases Ltd. We would first advert to the additional ground of appeal which is vital to the decision to be rendered on various issues.

17. Shri P.P. Gambhir who appeared on behalf of the assessee, submitted that soon after searches the assessee approached the department for supply of photocopies of the seized material vide various letters addressed. These were dated26-10-1995,8-11-1995,22-11-1995,4-12-1995,30-1-1996,11-7-1996,17-7-1996,26-7-1996and8-8-1996. In absence of the information made available, the assessee could neither file the return in time nor could furnish the information as required by the Assessing Officer. In fact on many occasions the assessee attended the office with the purpose of taking the photocopies of the documents but was denied the facility on the ground that the instructions of the seniors had to be taken in this regard. This apart, there was a common notice issued to 8 assessees who appeared before the DCIT on17-9-1996and asked for the clarification in regard to the specific queries raised against the specific assessees. On25-9-1996the letter was submitted to the CIT seeking appointment on certain issues contained in the draft order. The assessee also appeared before the CIT on27-9-1996in connection with the draft assessment as made by the DCIT. The circumstances under which the assessment was framed would clearly show that while the assessee was denied proper opportunity of hearing, the assessment framed was without taking into consideration the material available on record. The learned DR in this respect drew our attention to the number of hearings given by the Assessing Officer in this respect and non-compliance on the part of the assessee. It was stated that as mentioned in the assessment order vide letter dated25-4-1996the assessee was to appear in the office on or before2-5-1996as well on18-6-1996for taking the photocopies of the seized material. He was asked to furnish a reply on11-7-1996vide questionnaire dated4-7-1996where he repeated his earlier request for supply of copies of the documents. The Assessing Officer had to issue summons under section 131 of the Act to enforce the attendance of the assessee and it was on24-7-1996when the final opportunity was given. While the assessee attended on the subsequent date the information as sought was not given. In the circumstances, there was no way out but to frame the assessment as done by the Assessing Officer.

18. We have carefully considered the rival submissions. We have also gone through the material placed in the form of Paper Book. We find that while searches were conducted on the premises on 15/16-9-1995 as per the assessment order the assessee was asked to take the photocopies of the documents on2-5-1996. Against this vide letter dated22-11-1995the assessee submitted that the photocopies of the seized records and papers be made available in order to enable him to file the return. Reference was also made to the letter dated24-10-1995addressed to the Assistant Director of Investigation before whom the same request was made. Similar request was made on4-12-1995. On30-1-1996another request was made for supply of the copies of the records. What happened on26-7-1996,2-5-1996and18-6-1996is not borne out by the material placed in the Paper Book. However in response to notice dated4-7-1996the assessee requested for supply of photocopies of seized material and the time to furnish the requisite information. Similar request was repeated in a letter dated26-7-1996whereby photocopies of the books of account were insisted upon. Subsequently in his letter dated8-8-1996appearing on page 22 of the Paper Book the assessee brought to the notice of the Assessing Officer that it will be difficult to furnish the information in absence of photocopies of the records. On subsequent dates the assessee appeared before the Assessing Officer and furnished information as required. The letter was filed on10-9-1996explaining the queries raised. These facts clearly showed that while the assessee repeatedly requested for supply of photocopies of the documents, the Assessing Officer insisted on getting information on the questionnaire as raised from time to time. Insistence was also made for producing the books of account of M/s. Green Land Farms and M/s. Rubina Pvt. Ltd. which were not made available by the assessee. These facts clearly showed that the proper and adequate opportunity was not allowed to the assessee to represent its case fully before the Assessing Officer. It would be pertinent to point out that a consolidated notice was issued in respect of 8 parties by the Assessing Officer in respect of which the clarification had to be sought as to the specific queries pertaining to a particular assessee. In the aforesaid background the additional grounds is raised are admitted.

19. We would now discuss the preliminary objection raised by the assessee in regard to the assessment framed under section 158BC of the Act. Chapter XIVB relates to a special procedure for assessment of search cases. Section 158B defines what is meant by undisclosed income. It is an income which would not have been disclosed for the purposes of the Act. As held in the case of Sunder Agencies v. Dy. CIT [1997] 63 ITD 245 (Mum.) assessment under the section could only be made in respect of undisclosed income. The aforesaid income is to be the one which is hidden from the department and has to be discovered as a result of search. Reliance is placed by the ITAT on the case of L.R. Gupta v. Union of India [1992] 194 ITR 32 (Delhi) as to what is meant by undisclosed income. In the aforesaid case of Sunder Agencies it was clearly held that the scheme of Chapter XIVB does not give power to the revenue to draw the presumption in regard to the undisclosed income. The entries as recorded in the regular books of account which are otherwise available for scrutiny of the department cannot be termed as undisclosed as understood within the meaning of section.

20. In the above background the various contentions as raised are discussed hereafter.

21. The assessee had raised objection against an addition of Rs. 2,31,000 and Rs. 4,18,000 made under the head undisclosed income. These additions are taken together as they have bearing on each other. The aforesaid additions are based on the entries appearing in Annexure A1. These are annexed hereto as Annexures A1 to A6 and form part of the order.

22. The assessee's explanation at the first instance was that the scribblings as made represent membership deposits which work out to Rs. 1,39,000 and not Rs. 4,18,000. These are duly reflected in the books of account. As to Rs. 2,31,000, this was on account of cash available with GS, and balance Rs. 26,000 in the name of Wadhwa. Expanding on the explanation before us it was submitted that page 9 of Annexure A would show that the brought forward balance mentioned was Rs. 2,79,000 from which after deducting Rs. 13,500, Rs. 20,000 and Rs. 14,500 the net amount was arrived at Rs. 2,3 1,000. This in turn was bifurcated into Rs. 1,15,000 representing cash and out of the remaining Rs. 1,16,000, Rs. 90,000 was shown against GS & Rs. 26,000 against Membership. As regards Rs. 4,18,000 nowhere the Assessing Officer has indicated the working of the same and as such it is not known as to how the amount has been arrived at. In any case the close reading of the documents would show that the number of entries appear twice or thrice and as such they could not be accounted for more than once. On the other hand, before both the authorities, the assessee explained that an amount of Rs. 1,39,000 shown as membership subscription from certain members were duly reflected in the regular books of account and as such there could be no question of making an addition under the head 'undisclosed income' under Chapter XIVB of the Act.

23. The learned DR on the other hand, submitted that a sum of Rs. 2,31,000 clearly represents the expenditure as would be evident from the remarks against the figures as reflected in Annexure Al. This could not be therefore, substituted for the membership deposits for which separate addition is called for. Since the expenses and the receipts fall under different heads, the addition was rightly made.

24. We have carefully considered the rival submissions. The reading of the documents show that while entries on page 6 are in respect of the amounts received from various persons as mentioned therein, pages 7 & 8 relate to the expenses incurred as is evidenced from the word 'paid to'. The description bearing the expenses also is suggestive of the same. On page 8 are recorded certain entries which again are of the same nature. This is indicative from the word 'to give' against amount of Rs. 11,400 and 'to pay' against amount of Rs. 12,850 at the end.

25. Running total on page 6 has first been worked out to Rs. 1,87,300, subsequently an amount of Rs. 95,000 standing in the names of some parties whose names also figure in the narration of Rs. 1,87,300 appear. The explanation of the assessee that these are double entries is plausible and accepted. This is for the reason that both the amounts as well the names are same. Further these amounts have not been added to Rs. 1,87,300 as is clear from the entries made on subsequent dates. On these pages the totals have been struck in respect of the amounts as recorded therein. The documents have to be read in the manner as the plain reading would permit. Accordingly, it is the amount of Rs. 1,87,300 which alone has to be considered. This again has to be verified from account maintained in the normal course whether the entries in regard to membership deposit have been reflected therein or not. In this context we find that on page 6, date12-7-1995appear indicating date and the period of recording. This has to be taken into consideration while considering the explanation of the assessee in regard to membership deposits. To the extent amounts are reflected in the books, those have to be considered in the regular assessment proceedings. Entries other than as mentioned are to be considered under Chapter XIVB. However before addition could be made, assessee is to be provided an opportunity of being heard.

26. On page 7 the first three entries are Rs. 10,900, Rs. 20,000 and Rs. 20,000. While there is no name mentioned against an amount of Rs. 10,900, the other two entries appear in the names of Monga and Wadhwa. Description against the entries is Dolphin Pools. The amounts have not been totalled up. Apparently these are subscriptions against the membership. The nature and purpose of the amounts are to be ascertained. In this context we find that in a questionnaire dated4-7-1996a specific query has been raised in regard to payments of Rs. 7,23,550 on account of Dolphin Pools. Whether these amounts are of the same nature or not. This has to be established. The assessee's contention that these have been entered in the books of account maintained in the normal course needs to be verified on the explanation of the parties whose names are mentioned therein and in case it is so, the addition if called for would be during the course of framing regular assessment and not in the block assessment otherwise addition called for if any, to be considered under Chapter XIVB of the Act.

27. Coming to the latter part of page 7 we find that the expenses have been mentioned against various items namely Vodka, Desu Bhatta, Seth Lamp House, Petrol, Petrol (Palvinder), car scooter, electricity, commission etc. These total upto Rs. 1,07,100 as against Rs. 1,06,400 mentioned which has been carried over to the back side of page 7. The amounts have been totalled up to Rs. 1,75,900. On page 9 there are further notings to the tune of Rs. 1,02,850 (Rs. 1,01,400 + Rs. 1,450). There are contra entries of Rs. 20,000 against one of which the name of Baldev appear. The net balance after deducting Rs. 90,000 has been struck at Rs. 12,850 against which narration appears 'to pay'. This totals upto Rs. 2,78,750 (Rs. 1,75,900 + Rs. 1,02,850). When rounded up these work out to Rs. 2,79,000. Since against aforesaid amount no description appears and its mention finds its place on page 9 of the Annexure which comes after page 7 & 8, the only logical deduction could be that the amounts have its link in the expenses as mentioned. After deducting (Rs. 13,500 + Rs. 20,000 + Rs. 14,500) the amount works out to Rs. 2,3 1,000. The latter has been bifurcated into two parts namely Rs. 1,15,000 + Rs. 1,16,000. The former representing cash, the latter is divided into two parts - Rs. 90,000 (GS) and Rs. 26,000 as membership. There are further scribbles to the tune of Rs. 26,000 and Rs. 11,000. A sum of Rs. 2,31,000 has been again repeated against the name Palvinder Singh. Thus while the total expenses recorded are Rs. 2,79,000 the balance struck is at Rs. 2,31,000. Thus the total expenses incurred are at Rs. 2,79,000 for which no plausible explanation has been furnished. As regards amount appearing in the name of Shri Palvinder Singh, no separate addition is called for as the same would be the case in regard to GS against whom an amount of Rs. 90,000 stands mentioned. The entries recorded twice or thrice cannot be taken into consideration except once.

28. Admittedly working of Rs. 4,18,000 has not been detailed at the end of the Assessing Officer. On the other hand, the expenditure at Rs. 2,79,000 cannot be considered along with Rs. 1,87,300. They have to be treated separately. Thus in the end while an addition of Rs. 2,79,000 is called for on account of expenditure incurred for which no explanation was rendered, the amount of Rs. 1,87,300 has to be given treatment as warranted after verifying the entries which are stated to have been recorded in the books of account maintained in the normal course by the assessee.

29. As regards the addition of Rs. 15,30,000 before the Assessing Officer it was explained that the amount of Rs. 8,80,000 against the name of Shri Palvinder Singh is with regard to the amount received from him and his brother Shri Kanwarjit Singh. This was in respect of share application money and for the assessment year 1995-96. The amounts were stated to have been shown in the books of account as maintained. A sum of Rs. 1 lakh was stated to have been taken as a loan from M/s. Jasleen Leasing Pvt. Ltd. owned by Mr. Jasvinder Singh which was also stated to have been shown in the accounts as loan. This explanation of the assessee was not verified from the books of account which were stated to be available with the Assessing Officer. The addition was made on the ground that the confirmation was not filed. Before addition could be sustained on this account it was necessary to have shown that the amount was intended to be not disclosed and was not reflected in the books of account otherwise the same has to be considered in the regular assessment which is independent of block assessment. In this context we however note that the documents reads as under:

***

Rs.

"Palvinder Singh 8,80,000

6,50,000

Rs. 2,30,000

2,30,000 =

34,500

2,30,000 =

34,500 =

2,64,500

1,20,000

1,44,500

To take from Palvinder."

The above would show that addition if any called for is to the extent of Rs. 6,50,000 + Rs. 34,500. This is also in case the same is not recorded in the books which is the contention of the assessee. Before us there is no material to verify the fact either way. In any case the addition to be considered was to be at Rs. 6,50,000 + Rs. 34,000 = Rs. 6,84,000.

30. The next contention relates to addition of Rs. 50 lakhs made on account of five cheques. Addition as made by the Assessing Officer was with the following observations:--

"The Coy. M/s. Dolly Farms Resorts (P.) Ltd. reed. an amount of Rs. 50 Lacs from M/s. Goel Gases (P.) Ltd. into its A/c No. 5915 with Canara Bank, Nehru Place, New Delhi as under:

*****

1-5-1994 Ch. No. 46130 on PNBSansad Marg,N.D.10,00,000

20-5-1994 Ch. No. 461390 on PNBSansad Marg,N.D.10,00,000

24-5-1994 Ch. No. 461391 on PNBSansad Marg,N.D.10,00,000

7-6-1994 Ch. No. 461479 on PNBSansad Marg,N.D.10,00,000

15-7-1994 Ch. No. 461791 on PNBSansad Marg,N.D.10,00,000

The above said amount was paid back to M/s. Aggarwal Gases upon instruction of M/s. Goel Gases Ltd. vide following cheques.

14-5-1994 Ch. No. 160496 Canara Bank, N.D. 10,00,000

30-5-1994 Ch. No. 385963 Canara Bank, N.D. 10,00,000

26-5-1994 Ch. No. 385967 Canara Bank, N.D. 10,00,000

7-6-1994 Ch. No. 385974 Canara Bank, N.D. 10,00,000

16-7-1994 Ch. No. 385999 Canara Bank, N.D. 10,00,000

****

The account No. 1499 with Punjab National Bank, Chander Nagar, (GZB), U.P. was opened to facilitate the reversal of above transaction undertaken. In this account payment of Rs. 50,00,000 was received by way of transfer from M/s. Aggarwal Gases on 25-8-1995 in two instalments of Rs. 20,00,000 and one instalment of Rs. 10,00,000. On the same day payment was made to M/s. Goel Gases Ltd. vide five cheques of Rs. 10 lacs each as under:--

*****

Ch. No. 23929 Rs. 10,00,000

Ch. No. 23930 Rs. 10,00,000

Ch. No. 23926 Rs. 10,00,000

Ch. No. 23927 Rs. 10,00,000

Ch. No. 23928 Rs. 10,00,000

****

The above transactions has not in any way benefited the Coy. No income of any sort was earned on the same. No other transaction was done in A/c. No. 1499 PNB Ghaziabad except above transaction. Thus from the above it is clear that the assessee has tried to prove that the money in fact was never utilised by him and since the money was returned therefore, it has no impact on its books of account. The explanation of the assessee was considered. However, the assessee did not file any confirmation from the parties concerned nor did he produce the copy of the account from the party. No explanation from the party from whom this amount was alleged to have been taken and paid has been filed. Under the circumstances the sum of Rs. 50,00,000 is taken as the unexplained investment of the assessee and added to its income."

The above clearly shows that the entries were recorded in the cheque book of Punjab National Bank, Chander Nagar,Ghaziabad. The addition was made on the ground that no confirmation in this respect was filed by the assessee. The assessee's contention on the other hand was that the information filed was late and such could not be considered by the Assessing Officer. In any case the point was to examine whether the aforesaid amounts stood recorded in the books of account or not. In case it was not so the next step was to verify from the party. Whether these entries were made to accommodate the party as mentioned by the assessee. If it were so the assessee merely acted as a post office and the amounts were not used by him in any manner in his business. In the circumstances no addition could be made in his hands in case the assessee's explanation is found to be verifiable. If so, the addition would stand deleted.

31. This brings us to another addition made at Rs. 9,3.5,000. It was contended that the addition made is in respect of credit balances lying to the account of the following parties in the books of account of the company for the year ending31st March, 1995:

*****

Sl No. Particulars Amount (Rs.) L. F. No. Year

i. Rubina Leasing Finance 1,35,000.00 92 1993-94 & Credit Private Limited.

ii. Handlooms House, Naraina, 50,000.00 9 1 1994-95 New Delhi.

iii. Trikuta Leasing Pvt. Ltd.

(a) Account No. 1 80,666.00 1994-95

(b) Account No. 11 1,72,334.00 1995-96

V. Jasleen Leasing Pvt. Ltd.

(a) Account No. I 1,05,670.00 Exhibited in the

(b) Account No. 11 58.333.00 Balance sheet for the year 1995-96 placed at page 89 of P.B.

****

The entries in respect of parties were stated to have been duly accounted for in the books of account. The aforesaid contention of the assessee has not been controverted by the learned DR. The addition has been made on the ground that no confirmations were furnished in this regard. In case the aforesaid amounts are found to be reflected in the books of account the action if any is to be taken in the course of regular assessment and not in block assessments. The contention of the assessee however requires to be verified. In case it is found to be correct the addition would stand deleted and action if any would lie in the course of regular assessment. If not then the amounts have to be considered in the block assessments after giving opportunity of being heard to the assessee.

32. The next addition contested is in regard to Rs.8 lakhs received from two persons towards application money as detailed below:

****

SL No. Person Date of payment Mode of Amount payment

Mr. Kanwarjit Singh Bansi16-1-1995Cheque 4,00,000

Mr. Kanwarjit Singh Bansi5-2-1995Cheque 2,00,000

Mr. Palvinder Singh Bansi15-2-1995Cheque 2,00,000

Total 8,00,000.

The amounts are stated to be reflected in the books of account for the relevant year 1994-95 at ledger Folio Nos. 34 and 251. While the aforesaid position has not been ascertained, we find that the addition has been made on the ground that confirmations were not furnished in this regard. The first question for decision is whether the amounts could be considered in the block assessment or not. In case these are reflected in the books of account maintained in the normal course, they cannot be dubbed as undisclosed income within the meaning of section 158B(b) of the Act to have been discovered as a result of search. Accordingly we would restore the matter back to the file of the Assessing Officer to verify the assertion of the assessee and decide the issue afresh in accordance with the provisions of the Act.

33. This brings us to the next addition of Rs. 40,73,700. The addition has been made in respect of the membership fees received by the assessee for the years 1993-94 till 1995-96. As per the submissions of the learned AR the amounts were reflected in the books of account for the following years:

SL. No. Particulars Amount (Rs.)

(a) During the year 1993 (upto31-3-1994) 3,75,000.00

(b) During the year 1994-95 17,12,000.00

Total 40,73,700.00

****

The Assessing Officer has not verified the aforesaid position and proceeded to make addition on the ground that the same constituted income of the assessee and that too for the block period as confirmations in this regard were not filed. The assessee's submission that sufficient opportunity was not allowed, was not considered. In this context, we would like to state that the question whether the entries are of revenue or capital nature or are in the nature of refundable securities can only be addressed to after having ascertained whether the same are reflected in the books of account or not. If these are reflected in the books of account the field of enquiry would lay in the course of regular assessment otherwise in block assessment. The nature and source of funds are then to be gone into. The issue in respect of mutuality or are fundable deposits to be found out and on the ascertainment of facts vis-a-vis the contract with the members the nature of income if assessable is to be determined. The slip-shod approach of the Assessing Officer in this manner is not appreciated. In the circumstances, we have no option but to restore the matter back to the file of the Assessing Officer with the direction that assertion of the assessee has to be verified vis-a-vis the books of account maintained which are stated to be in possession of the Assessing Officer. It is only the entries which are found as a result of search, not reflected in the books of account which could be considered in the block assessments. The Assessing Officer is to decide the issue afresh in accordance with the provisions of law.

34. The next ground relates to addition of Rs. 5 lakhs made on estimated basis. The aforesaid addition has been made on the basis of estimated profit for the period1-4-1995to15-9-1995as against returned loss of Rs. 8,37,830 filed by the assessee. While doing so no material has been brought on record to justify the addition. The declared version of the assessee has not been accepted without assigning any reasons. In absence of any supporting material we would delete the addition as made.

35. Finally it is contended that the assessee be allowed adjustment in respect of returned and assessed loss of Rs. 26,83,800 as per the Income-tax returns for the block period 1994-95 to 1996-97. In this regard at the outset we would like to mention that as per the submissions of the assessee, the assessee filed a return for the block period from assessment years 1994-95 to 1996-97 showing the accumulated loss as under:

***

a. Loss for the assessment year 1994-95 Rs. 2,87,500 b. Loss for the assessment year 1995-96 Rs. 16,68,470 c. Loss for the assessment year 1996-97 Rs. 8,37,830

Total 26,83,000 (sic).

36. We are not aware of whether the regular assessments were framed for the aforesaid assessment years or not. On the other hand, the Assessing Officer has computed the income at Rs. 1,34,87,700 without bifurcating the same in the years in which it is assessable. As indicated earlier the assessee has maintained books of account in the normal course and certain entries are stated to be reflected in the aforesaid books prior to the date of search. During the course of discussion, we are also informed that the assessee had maintained cash books which are in the custody of the Assessing Officer. The explanation for the same was also rendered. From the Panchnama the copy of which has been furnished before us it is also clear that in addition to the membership register, ledgers and cash books pertaining to the period 1993 to 1995 have been seized by the authorities. The books include stock register, credit/deposit record, receipt book, daily sale register and other loose papers. Before proceeding under the aforesaid section the first issue to be decided wag whether these entries in the books are the ones which are maintained in the normal course and are recorded prior to date of search within the meaning of section 158BA of the Act or not. In case of former the entries recorded therein cannot be considered for the purpose of framing assessment for the block period. This basic and vital exercise has not been done by the Assessing Officer and the assessment has been framed without giving adequate opportunity to the assessee. In absence of the latter there is no other recourse left but to restore the matter back to the file of the Assessing Officer as indicated in the discussion above. While doing so the Assessing Officer is required to give proper and effective opportunity to the assessee of being heard. In the course of such hearing, he is at liberty to requisition necessary evidence in support of submissions as made. The assessee can also file any evidence to support his point.

37. In the circumstances, we do not find it necessary to deal with the application of the assessee for admission of additional evidence.

38. In the ultimate analysis the appeal of assessee is allowed in part for statistical purposes in terms of discussion as contained above.

Per U.B.S. Bedi, JM--I have gone through the proposed order of learned AM and despite my best persuasion to myself I have not been able to concur with either of the reasonings or of conclusions as arrived at by her. Therefore, I am writing my order, as under.

2. This is an appeal directed against the order of DCIT, Special Range-26,New Delhiin the capacity of Assessing Officer dated27-9-1996for the block period starting from assessment years 1986-87 to 1995-96 (upto the period of search ie.,1-4-1995to 115-9-1995) passed under section 158BC of the Income-tax Act. Following grounds have been raised by the assessee:

"1. That the order passed by the learned DCIT is bad at law, wrong in facts and against the principles of natural justice.

2. That the learned DCIT has erred in making an addition of Rs. 2,31,000 on the ground that the explanation offered by the appellant is not accepted as it is not supported by any documentary evidence. In fact, the addition has been made on the basis of certain entries on a rough paper which were made during the course of business operation.

3. That the learned DCIT has erred in making an addition of Rs. 15,30,000 on the ground that the appellant had not furnished confirmation/copy of account of the persons from whom the appellant had received share application money.

4. That the learned DCIT has erred in making an addition of Rs. 50,00,000 on the ground that the confirmation of the party to whom the amount of Rs. 50,00,000 was refunded has not been furnished. In fact, the confirmation and statement of account of M/s. Agarwal Gases,Delhiand Goyal MG Gases Ltd.,New Delhito whom the amount was refunded were duly furnished on25-9-1996which contained the particular of their income-tax assessments.

5. That the learned DCIT has erred in making an addition of Rs. 4,18,000 on the ground that certain entries as detailed at pages 6-8 of Annexure I have not been properly explained.

6. The learned DCIT has erred in making an addition of Rs. 9,35,000 (wrongly mentioned Rs. 11,75,003) on the ground that the appellant had not furnished the confirmation certificates of the parties in respect of certain amounts. In fact, the DCIT never called for any confirmation except that on the last day of the proceedings when there was little time left for finalisation of order by him asked the appellant that confirmation should have been filed.

7. That the learned DCIT has erred in making an addition of Rs. 8,00,000 on account of share capital received from Mr. Palvinder Singh Rs. 2,00,000 and from Mr. Kanwarjeet Singh Rs. 6,00,000 on the ground that no confirmation certificates were furnished.

8. That the learned DCIT has erred in making an addition of Rs. 40,73,700 on account of membership deposits are revenue receipts and not the liability as contended by the appellant and also on the ground that the confirmations of the members from whom the deposits were received have not been furnished.

9. That the learned DCIT has erred in making an addition of Rs. 5,00,000 on the basis of an estimated income for the period 1-4-1995 to 15-9-1995 by rejecting the books as they were alleged to be incomplete and not written upto the date of search.

10. That the learned DCIT has erred in not allowing a deduction of adjustment of returned and party assessed loss of Rs. 26,83,800 as per the Income-tax returns for the block period 1994-95 to 1996-97 (upto15-9-1995)."

3. In this case assessee filed application dated24th November, 1997contending therein for admission of two additional grounds of appeal which read as under:

"1. That the DCIT and earlier Asstt. Director of Investigation (ADI) had not, in spite of several specific requests, supplied copies of all the seized records. Thus the assessment made by him is, therefore, void in law.

2. That the DCIT had not afforded any opportunity and, in any case, adequate opportunity to the appellant and hence the assessment is void in law."

4. However, no reason has been given in the said application why these were not incorporated along with grounds of appeal submitted with memorandum of appeal on25-10-1996.

5. This case was earlier represented by Shri R. Ganeshan, CA, who was being assisted by Shri P.P. Gambhir, CA and when case for first effective hearing was taken up on 23-6-1998, it was specifically mentioned by Shri R. Ganeshan, CA representing assessee that as per instructions from his client he will not like to press application for additional grounds of appeal. The application for the same may not be considered or should be treated to have been withdrawn. But later on during the course of further hearing Shri R. Ganeshan stopped representing the case. w.e.f.28th July, 1998and the second counsel for the assessee Shri P.P. Gambhir,C.A., succeeded him and he pleaded that applications for additional ground should be taken up, and considered because same has not been withdrawn. Mr. Gambhir was specifically asked by the Bench that during early hearing Mr. Ganeshan who was handling this case has specifically stated that his client does not want to press application for additions grounds then Mr. Gambhir submitted that even if Mr. Ganeshan has withdrawn the application, now he has taken over and as per fresh instructions from his client he would like to press the said application. That is how this application for additional grounds as filed by the assessee is being re-considered.

6. The learned counsel for the assessee Shri P.P. Gambhir submitted that due to inadvertence these grounds could not be incorporated in the memorandum of appeal filed in due time, so in the interest of justice these should be allowed and taken as part of grounds of appeal already filed as these involve point of law and legal ground can be raised at any stage. Therefore, it was submitted for allowing additional grounds of appeal.

7. The learned DR while opposing this move of the assessee has Pleaded that since earlier this application was not pressed by previously engaged counsel of the assessee and no specific reasons has been given in the application for allowing additional grounds of appeal, so application of the assessee deserves to be dismissed.

8. I have heard rival submissions, perused the record, gone through the application of the assessee for additional grounds of appeal. After considering the arguments of both the sides, I find though no specific reason has been given for not originally incorporating these two grounds in the memorandum of grounds of appeal filed with the appeal papers which contain other grounds yet in the interest of justice and grounds being on legal issues, I allow them to be raised and this would form part of the memorandum of grounds of appeal and considered as ground Nos. 11 and 12 of the memorandum of appeal.

9. Assessee has moved an application for adducing additional evidence under Rule 29 of the Income-tax Appellate Tribunal Rules, which reads as under:

1. That the respondent has completed the block assessment on27-9-1996. Search operations were conducted under section 132 of the Income-tax Act, 1961 in the premises of the applicant. Several papers has been seized.

2. That the applicant has been praying for copies of such seized papers, so that the applicant will be in a position to explain satisfactorily the queries raised by the respondent.

3. That the applicant had not been supplied photocopies of the same until till the fag end of the time limit for completing the block assessment as provided in Chapter XIVB.

4. That the applicant had, on 16th September and20th September, 1996apprised the respondent that the applicant has to obtain the confirmation from Shri Kanwarjit Singh Bansi, M/s. Sonika Creations, M/s. Jasleen Leasing (P.) Ltd. and M/s. Handloom Cottage. Shri Kanwarjit Singh Bansi is a resident ofNorway(Europe).

5. That the applicant has been making efforts to obtain the confirmations from the aforesaid parties and a response received from M/s. Jasleen Leasing (P.) Ltd. had been disclosed to the respondent.

6. That the applicant had obtained the confirmations, subsequent to the completion of the block assessment, from:

(i) Shri Kanwarjit Singh Bansi (ii) M/s. Jasleen Leasing (P.) Ltd. (iii) M/s. Handloom Cottage

7. That though the confirmation furnished by M/s. Goel Gases Ltd. was obtained before the completion of assessment and furnished the respondent but the respondent did not take note of the same as the same was reported to have been submitted after submission of draft order by him to the CIT-I.

8. That from the various letters addressed by the applicant to the respondent, it will be seen that the applicant has been seeking photo copies of various papers seized. The assessment proceedings were also taken up at the fag end of the time limit period.

9. That the applicant has also addressed the CIT, Delhi-I, New Delhi enclosing certain further evidences and explaining to him in person the efforts that were continued to be made by the applicant to obtain the rest of the evidences.

10. From the above, it will be clear and the applicant submits, that the applicant was prevented by sufficient cause in furnishing such confirmations which are to be received from other parties. The transactions related to the earlier years, while the assessment was completed on27-9-1996. Thus the applicant has been prevented by sufficient cause in submitting the following evidences:

(i) Confirmations from Shri Kanwarjit Singh Bansi

(ii) Confirmations from M/s. Jasleen Leasing (P.) Ltd.

(iii) Confirmations from M/s. Handloom Cottage

(iv) Confirmations from M/s. Goel Gases Ltd. Photocopies of the above confirmation are enclosed.

PRAYER It is, therefore, respectfully prayed that this Hon'ble Tribunal may kindly be pleased to admit the aforesaid evidences under the enabling powers vested in it by section 254 of the Income-tax Act, 1961 read with Rule 29 of the Appellate Tribunal Rules, 1963 and the issues involved in the appeal may kindly be adjudicated on the basis of the aforesaid and other evidences, and justice rendered to the applicant."

9.1 Assessee has enclosed 4 photocopies of following documents:

(1) Letter dated23-9-1997of one Mr. Tony Bansi alias Kanwarjit Singh (Tony) Bansi:

(2) Letter dated10-9-1996addressed to Palvinder Singh Managing Director of M/s. Jasleen Leasing (P.) Ltd., A-36, Janakpuri,New Delhi, wherein endorsement of Palvinder Singh is appended on the bottom of the said letter.

(3) Copy of account of M/s. Dolly Farms & Resorts (P.) Ltd. in the books of account of M/s. Handloom Cottage and this letter is dated nil

(4) Statement of account of M/s. Dolly Farms & Resorts (P.) Ltd. on the letter pad of Goel Gases (P.) Ltd.

9.2 These evidences were sought to be allowed by the assessee and marked as Annexures A, B, C & D (not reproduced here) respectively of my order which would form part of my order.

9.3 After having heard both the sides, going through the contents of application of the assessee and photocopies of documents enclosed and considering the arguments advanced by both the sides, it would be seen from para 10 of the application for admission of additional evidence dated 9-12-1997 that assessee had not sought admission of letters of confirmation but of photocopies of so called letters of confirmation of the above parties. Moreover, from the contents of photocopies of these letters, if noting of Palvinder Singh appended on the letter dated10-9-1996, written by the assessee to Palvinder Singh Bansi, is carefully read, it would transpire that as the Managing Director of Jasleen Leasing (P.) Ltd., while confirming the receipt of the letter has undertook to provide the assessee the information at the earliest as mentioned in the said letter and therefore, it cannot be said to be confirmation in itself. Similarly, there is no date given on photocopies of account statement furnished of M/s. Handloom Cottage or M/s. Goel Gases Ltd. which are not even properly readable due to poor quality of photostats. Therefore, these letters do not support the plea of the assessee as to when these confirmations were received, either prior to the assessment proceedings or during the proceedings or after the proceedings of block assessment got completed. Moreover, photocopies of confirmations are not primary evidence and cannot take the place of confirmations as required to be filed before the Assessing Officer. Since photocopies of documents filed are sought to be adduced as additional evidence and cannot be termed as letters of confirmations/copies of account as original of the same were not sought to be filed or adduced as additional evidence in absence of date (on two of the letters/copies of account) do not justify the stand of the assessee that for one of these letters assessee was prevented by sufficient cause in submitting this document before Assessing Officer during the assessment proceedings and moreover no material was furnished to show that this was produced before Assessing Officer or CIT as contended and endorsement on letter dated 10-9-1996 (Annexure B) even cannot be said to be confirmation because Shri Palvinder Singh, Managing Director of Jasleen Leasing (P.) Ltd. has given an assurance to the assessee that he would furnish the information mentioned in the letter without putting name, address, signatures and permanent account number, ward/circle etc. after recording confirmation of the transaction as suggested by the assessee as these places have been kept blank. Therefore, in view of facts and circumstances and after going through the application of the assessee, arguments as advanced by both the sides, I am of the considered view that assessee has not been able to make out a case for admission of additional evidence as neither evidence sought to be adduced is primary evidence nor letter dated 10-9-1996 marked as Annexure B can be held to be even photocopy of the confirmation letter and other two copies of accounts are also undated. Thus, in view of facts and circumstances, it cannot be held that assessee is entitled to lead additional evidence as sought to be allowed. Therefore, while rejecting the application of the assessee, I decline to admit these documents as additional evidence sought to be adduced by the assessee. Therefore, application under Rule 29 of the Income-tax Appellate Tribunal Rules gets rejected and these documents shall be ignored for the purposes of this appeal.

10. Assessee filed a paper book consisting of 151 pages listing the documents and information contained therein along with a certificate which reads as under:

"This is to certify as under:--

1. That the papers at Serial Nos. 1 to 11 of the paper book are the copies of Panch Nama prepared. by the search party on16-9-1995in connection with a search on the premises of the appellant on 15-9 1995.

2. That the papers at Serial Nos. 13 to 22 of paper book are the copies of the letters submitted by the appellant or its Director Shri G.S. Chhabra to the concerned income-tax authorities.

3. That the papers at pages 25 to 29 are the copies of seized documents,

4. That the papers at Serial Nos. 33 to 41, 95 to 121 and 151 are the copies of the letters and evidences submitted to the Assessing Officer during the course of assessment proceedings.

11. The learned Departmental Representative brought to the notice of the Tribunal that the following documents appearing against the following papers were not filed before the Assessing Officer:

"Page 30 of the paper book: List of unsecured loans as on 15-9-1995 which is a typewritten statement total of which shown at Rs. 10,50,003.

Pages 96 & 97: Copy of ledger account of Palvinder Singh.

Page 98: Statement of account of Dolly Farms and Resorts (P.) Ltd. on the letter pad of Aggarwal Gases."

12. When assessee was confronted with the objection as raised by learned DR, assessee's counsel filed an affidavit of Shri S.K. Gupta, CA, who is stated to have represented the case before the Assessing Officer wherein it was stated that the letter dated 25th September, 1996 and 27th September, 1996 mentioned at pages 107 to 120 were submitted to the Commissioner personally seeking appointment to explain the draft order which was stated to have been forwarded by DCIT for approval. In these letters request was made for personal hearing and the consideration of the submissions. It was submitted that there could not be any mala fide intention on the part of the then counsel in making their own statement about the aforesaid order as the same could not have helped him in any manner as the decision on the addition as made by DCIT had to be on merits and no prudent counsel would try to fabricate the evidence or make a wrong statement which would not have been in his interest. The fact that the said letters could not be located or traced out by the office of the Commissioner would not show that these were not given. The letter dated27-9-1996was submitted to the Commissioner personally and this fact stands recorded on the office copy of the letter available with the assessee.

13. As regards documents at page 30 of the paper book, it was submitted that same relates to information which is in the form of letter to the DCIT vide which the assessee brought to the notice of the Assessing Officer that confirmation of these parties in respect of their unsecured loans have been called for. It was stated that there was no fresh information contained in the documents and this page is the only typed statement of the list of unsecured loans as attached to the balance sheet as on period ending15-9-1995.

14. As regards pages 96 & 97, these contain the ledger account of Shri Palvinder Singh and information in respect of Palvinder Singh along with other parties was given to the Assessing Officer vide letter dated 10-9-1996 as appearing on page 108 of the paper book. Vide letter dated16-9-1996at page 108 the details regarding the amounts received from certain parties including Mr. Palvinder Singh as submitted before Assessing Officer. Under mistaken impression that the copy of account of Mr. Palvinder Singh was submitted to Assessing Officer, the same was submitted before the Tribunal.

15. At page 98 it contains statement of accounts of assessee in M/s. Aggarwal Gases. It was stated that this was submitted on27-9-1996under instruction from CIT. The papers are placed by the DCIT on separate file instead of assessment file. This statement stands confirmed by Shri S.K. Gupta, Chartered Accountant.

16. At page 151 of the paper book it is confirmed from M/s. Rubina Leasing Pvt. Ltd. which is dated15-9-1996. Since copy of the confirmation certificate dated15-9-1996was lying in the paper book received from Shri S.K. Gupta, under a mistaken impression that the same was made available before Assessing Officer, it was included in the paper book also. After perusing the above facts in the light of the information and details filed it is found that pages 101 to 104 of the paper book wherein the copies of statement of account 1995-96 of M/s. Trikuta Leasing (India) Pvt. Ltd. have been furnished along with GIR number as mentioned in the same it was submitted that in the letter of confirmation filed before the DCIT, no permanent account number or GIR number was mentioned. Shri S.K. Gupta was advised to provide the GIR number and as per advise the same was noted on the copy of account available with the assessee.

17. The learned DR while reacting to the submissions made by the Assessing Officer and affidavit filed by assessee's counsel Shri S.K. Gupta, Chartered Accountant submitted that in fact assessee sought to file copies of documents which were not actually filed before the Assessing Officer certifying that originally all these have been filed before the Assessing Officer. In this way assessee's counsel has tried to mislead the Bench in order to press its claim on certain points. The affidavit of Shri S.K. Gupta, Chartered Accountant is self-serving document without furnishing any evidence or material to support the same. So no cognizance could be taken to accept the theory put forth by the counsel of the assessee when facts are totally different. It was also submitted that certification done on the paper book filed is false and this action of assessee and his counsel amounts to contempt of the Tribunal (Court) for which action requires to be taken besides ignoring these documents which were actually not filed before the Assessing Officer and assessee on the pretext of having filed before Assessing Officer has sought to file the copies thereof.

18. I have considered the submissions as made before the Bench by both the sides. The Tribunal is a final fact finding authority and has to act judicially. The extent of judicial power exercised by the Tribunal is determined under the Act under which it had been constituted. The dispute between the parties has to be adjudicated upon in accordance with the provisions of Income-tax Act which presupposes that issues have to be resolved as per law. Rules have been framed prescribing the procedure for functioning of the Bench and to facilitate rendering the justice in the speedier, judicious and best possible manner. As per Rule 18 of the Income-tax Appellate Tribunal Rules which relates to preparation and filing of paper book etc. reads as under:

"Preparation of paper books, etc.

18(1) If the appellant or the respondent, as the case may be, proposes to refer or rely upon any document or statements or other papers on the file of or referred to in the assessment or appellate orders, he may submit a paper book in duplicate containing such papers duly indexed and paged at least a day before the date of hearing of the appeal with proof of service of a copy of the same on the other side at least a week before:

Provided, however, the Bench may in an appropriate case condone the delay and admit the paper book.

(5) The parties shall not be entitled to submit any supplementary paper book, except with the leave of the Bench.

(6) Paper books not confirming to the above rules are liable to be ignored."

19. The aforesaid paper book is to be certified either by the assessee or a counsel to the effect that the papers on which the reliance is to be placed have been filed before the lower authorities and on the strength of the aforesaid certificate, the Tribunal proceeds to dispose of the appeal taking into consideration the facts as given and the documents as appended in the paper book. The framing of the aforesaid rule pre-supposes the correctness of the statement as well as those of the documents. This is necessary for administration of justice. Though the Tribunal is not a court in a strict sense of the terms yet it has all the trappings of the court as held by their Lordships of the Supreme Court in the case of Bharat Bank Ltd., Under certain circumstances, if so required, the High Court can be moved for contempt of court which as per the common law definition is an act or omission committed to interfere with the due administration of justice as have been held by Hon'ble Supreme Court in the case of Delhi Judicial Service Association. While interpreting the expression their Lordships have held 'the definition of criminal contempt is wide enough to include any act by a person which would tend to interfere with the administration of justice."

20. In this context, I find that as regards document at pages 30, 96, 97, 98, 117 to 120 and 151 are concerned, none of these documents were filed before the Assessing Officer. The arguments advanced in this respect and affidavit filed by Shri S.K. Gupta, CA of the assessee who is stated to have represented the case before Assessing Officer does not give any convincing reason which could prove the bona fides of the assessee or his counsel having issued certificate on the bottom of the covering letter for furnishing of paper book with respect to abovenoted documents. Since contents of the affidavit are not corroborated with any material or other independent evidence, therefore, I am of the considered view that this act of assessee in furnishing of paper book by certifying certain documents to have been filed before Assessing Officer which was, in fact, not filed before the Assessing Officer, tantamounts to interference with the administration of justice which make the assessee liable for penal action but these are separate proceedings, for which, action required, may be taken at appropriate time separately. I am dealing with the appeal of the assessee under the Income-tax Act so I will confine myself with the proceedings relating to issue involved in the appeal and for that purpose, all these documents as pointed out in earlier paragraphs, would be ignored in terms of sub-rule (6) of Rule 18 of the Income-tax Appellate Tribunal Rules, as cited above for the purpose of this appeal under Income-tax Act.

21. Now ground wise issues will be taken up.

22. As regards ground No. 1 assessee has challenged the order being bad at law, wrong in facts and against the principles of natural justice. Since these are general type of observations so would be taken care in latter part of the order as no specific finding can be given in isolation, Before discussing each of the ground taken, assessee has taken up general objection that section 158B defines what is meant by "undisclosed income". It is an income which would not have been disclosed for the purposes of the Act. Reliance was placed on Sunder Agencies' case wherein it was held that assessment under the section could only be made in respect of undisclosed income. The aforesaid income is the one which is hidden from the department and is discovered as a result of search. Reliance is also placed by the Bombay Bench on the case of L.R. Gupta's as to what is meant by "undisclosed income". It was submitted that in the aforesaid case of Sunder Agencies Tribunal held that scheme of Chapter XIVB does not give power to the revenue to draw the presumption in regard to the undisclosed income. The entries as recorded in the regular books of account which are otherwise available for the scrutiny of the department cannot be termed as undisclosed income as understood within the meaning of the said section. In view of the above document, the other grounds as raised are discussed hereafter.

23. The facts as per assessment order in this case are like this that search and seizure operation was conducted on15-9-1995under section 132(1) of the Income-tax Act and same was concluded on16-9-1995. Notice under section 158BC of the Income-tax Act dated23-11-1995was issued to the assessee-company which was duly served upon the assessee on28-11-1995but assessee has not made any compliance. Notice under section 142(2) of the Income-tax Act dated19-2-1996issued for asking the assessee to furnish the return in the prescribed Form No. 2B for the disclosed and undisclosed income of the block period. None attended on the date fixed in the said notice. Another notice under section 142(1) dated25-4-1996issued for6-5-1996which also remained uncomplied with. On25-4-1996a letter was also sent to the assessee to appear in the office of Assessing Officer on or before2-5-1996in connection with the request of the assessee for supplying the photocopy of the seized material and books of account etc., but in response to this letter also the assessee has not made any compliance. Another opportunity was given vide letter dated14-6-1996for getting the photocopies on or before18-6-1996which also remained uncomplied with. Further notices on4-7-1996under section 142(1) along with a questionnaire was issued to the assessee-company and case was fixed for11-7-1996. In response to this notice assessee attended and he has filed a letter dated11-7-1996and stated therein that the photocopies of the seized material is to be provided to enable them to compile the required information and also to furnish the return of income for the block period. Summon under section 131 of Income-tax Act dated 11-7-1996 were sent to the assessee for appearance on 19-7-1996 and to furnish the detail as per questionnaire dated 4-7-1996, In response to this Shri P.P. Gambhir attended and he has not furnished any document and again requested for to provide photocopies of the seized material and case was adjourned on 22-7-1996. On 24-7-1996 assessee was given final opportunity vide letter dated 24-7-1996 to attend the office on 26-7-1996 along with books of account of the assessee-company as also other companies of which he is a director and it was also intimated him to make his arrangement for getting the photocopies of the seized documents/ books etc. On26-7-1996summon under section 131 of the Income-tax Act were sent to Shri G.S. Chhabra, Managing Director of the company to attend the office. Mr. Chhabra attended along with Shri Gambhir but did not furnish any detail in respect of the case and requested for adjournment and thereafter case was adjourned for 30-7-1996. A detailed questionnaire dated30-7-1996relating to entire group of cases was sent to the assessee and assessee was asked to reply by8-8-1996. On that date assessee-company's Managing Director Shri G.S. Chhabra attended but he has not filed any document relating to this company. Summons under section 131, dated 27-8-1996 were sent to Shri G.S. Chhabra along with letter dated 27-8-1996 for appearance on 29-8-1996 to furnish the required information as per the questionnaire dated 30-7-1996 and also for recording the statement of the assessee and to cross-examine the facts and verification of the seized documents/papers with the books of account as to complete the pending assessment for the block period. On29-8-1996Shri Chhabra attended but again did not furnish any reply to the said questionnaire dated30-7-1996and requested for further adjournment and case was adjourned to2-9-1996. Again Shri Chhabra attended on4-9-1996requested for adjournment and case adjourned on9-9-1996. On 10-9-1996 Shri S.K. Gupta, CA attended and he has filed the power of attorney and return of income for the block period declaring the undisclosed income as nil He has also furnished the letter with annexure in reply to this office letter dated 4-7-1996 and a questionnaire dated 30-7-1996 and the case was partly discussed and assessee was further asked to furnish the followings:

(i) Confirmations of loans A/cs

(ii) Land purchased

(iii) Addressee of all the club members

(iv) To furnish the remaining reply of the said letter,

and he was asked to attend the office on12-9-1996to cross-examine with the books of account and seized documents etc. and also to produce Shri G.S. Chhabra on the date for recording the statement on the various points as per the questionnaire dated4-7-1996and30-7-1996to verify with the seized document. On12-9-1996Shri S.K. Gupta, CA attended and he has filed two confirmation letters and reply of the remaining all the points. For further details and confirmation, case was adjourned to13-9-1996. That is how the assessee behaved and represented the proceedings.

24. However, background of the case is like this that M/s. Dolly Farms and Resorts (P.) Ltd. was incorporated in December, 93 and is running a resort under the name of Executive Club. The directors of the company are Mr. G.S. Chhabra, his wife and Shri Parvinder Singh. Shri G.S. Chhabra is mainly indulging in the sale/purchase of the property as noted by Assessing Officer. However, the activities of this club includes providing membership to the person desirous of becoming members. This club is also providing other facilities which include catering to the members. Incriminating documents was stated to have found during the course of search which were also examined. During this period the assessee has spent money on construction etc. to provide various facilities in the club which included construction of swimming pool and providing of facilities such as billiard room, tennis court, bat room, bed room, open lawn for big parties etc.

25. As regards Ground No. 2 facts are like this that the assessee during the assessment proceedings was asked to explain the entries of the payment made as per Annexure A-1 at page 9 of the writing pad seized during the course of search. Cash payments has been shown at Rs. 1,15,000 as paid and Rs. 90,000 in the name of Shri G.S. Chhabra and Rs. 26,000 in the name of Shri Wadhwa. Assessee has stated that this is an undated and unsigned scribble on a pad sheet which is only giving the bifurcation of Rs. 2,31,000 into cash of Rs. 1,15,000 and from balance of Rs. 1,16,000, Rs. 90,000 has been shown against GS, balance of Rs. 26,000 has been shown. Assessing Officer noted that the cash balance in the company used to be kept by director as there were no proper arrangement at club for its safe custody. The explanation so tendered was not accepted by the Assessing Officer on the ground that assessee has been avoiding giving proper replies. It has also been seen in other connected case more particularly the case of individual that assessee is denying the knowledge of almost all the documents either as not belonging to him or the reply is evasive. Therefore, the explanation offered by the assessee was not accepted as it was supported by documentary evidence. Hence the total amount of Rs. 2,31,000 was added to the income of the assessee.

25.1 Aggrieved by this assessee has come up in appeal and it was submitted that this amount of Rs. 2,31,000 was on account of cash available with Shri G.S. Chhabra and balance Rs. 26,000 in the name of Wadhwa and further to this it was submitted that page 9 of Annexure A would show that brought forward balance mentioned was Rs. 2,79,000 from which after deducting Rs. 13,500, Rs. 20,000 and Rs. 14,500 the net amount was arrived at Rs. 2,31,000. This in turn was bifurcated into Rs. 1,15,000 representing cash and out of the remaining Rs. 1,16,000, Rs. 90,000 were shown against GS and Rs. 26,000 against membership. It was also submitted that the paper in question was undated and unsigned scribbling which contain bifurcated figure of Rs. 2,31,000 and details were not in any way related to any expenses or income and DCIT has unnecessarily concluded that the figures related to expenses and since they are not incorporated in the books and same have been included in the assessment. So in all fairness, this addition was to be deleted.

26. The learned DR, on the other hand, submitted that sum of Rs. 2,31,000 clearly represent the expenditure as would be evident from the remarks against the figures reflected in Annexure A-1. Thus this could not be, therefore, substituted for the membership deposit for which separate addition is called for. Since expenses and receipts fall under different heads, the addition was rightly made and it was urged for confirmation of the order of Assessing Officer in this regard.

27. I have heard rival submissions perused the record and photocopies of the relevant papers seized has also been carefully looked into. After considering arguments of both the sides, going through the order of Assessing Officer and the document seized. I am of the view that assessee has just furnished an explanation without supporting it with any evidence or material. So in my considered view, addition has rightly been made which calls for no interference. Thus, it has to be confirmed and this ground of assessee gets rejected.

28. Ground No. 3 relates to addition of Rs. 15,30,000 on the ground that assessee had not furnished form/copy of accounts of the persons from whom assessee has received share application money.

29. Facts are like this that as per seized material Annexure A-4 at page 31 of the writing pad assessee was asked to explain the transaction of the amount of Rs. 8,80,000 and Rs. 6,50,000 which has been mentioned against the name of Palvinder Singh. Assessee has stated in his written reply dated10-9-1996amount received from him and his brother Shri Kanwarjeet Singh as share application money Rs. 1 lac has been taken as loan from M/s. Jasleen Leasing (P.) Ltd. Since no confirmation/copy of account in respect of these amounts have been furnished by assessee before Assessing Officer. Same amount was treated as income of the assessee from undisclosed sources.

30. In appeal it was submitted that this amount was in respect of share application money and pertains to assessment year 1995-96. It was further submitted that amounts were stated to have been shown in the books of account as maintained. A sum of Rs. 1 lac was stated to have been taken as loan from M/s. Jasleen Leasing (P.) Ltd. owned by Jasvinder Singh which was also stated to have been shown in the accounts as loan. This explanation of the assessee was not verified from books of account which were very much available with the Assessing Officer. It was submitted that before addition could be made on this account, it would be necessary to show that amount was intended to be not disclosed and was not reflected in the books of account otherwise the same has to be considered in the regular assessment which is independent of block assessment. In reference to Annexure A-1 at page 13, it was submitted that addition, if any, is called for to the extent of Rs. 6,50,000 and Rs. 34,500 and this is also in case same is not recorded in the books which is the contention of the assessee. Before the Bench, no material was placed to verify the fact as stated in earlier part.

31. The learned DR while relying upon the basis and reasoning as given by Assessing Officer has pleaded that nothing was placed on record to substantiate the plea taken by the assessee and rather confusing argument has been advanced by the counsel for the assessee without any basis or material. Therefore, in view of facts and circumstances, it was pleaded that addition of Rs. 15,30,000 has rightly been made and order of Assessing Officer requires to be confirmed.

32. After having heard both the sides, perusing the record and looking into the details as written on the seized document, assessee has not furnished any evidence or material to justify deletion of this addition either before Assessing Officer or before the Bench. Therefore, in view of facts and circumstances, I do not find any ground to interfere in this regard and confirm the addition made by Assessing Officer to the extent of Rs. 15,30,000 as assessee has failed to justify the same.

33. Ground No. 4 relates to making an addition of Rs. 50 lacs on the ground that confirmation of party to whom the amount of Rs. 50 lacs was refunded has not been furnished.

34. Facts are like this that as per seized material A-4 at page 4 a cheque book counter foil of Punjab National Bank, Chander Nagar, Ghaziabad, UP were payments by five cheques of Rs. 10 lacs each dated 10-3-1995 to 23-3-1995 made to M/s. Goel Gases Ltd. from the current account No. 5915 with Canara Bank, Nehru Place, New Delhi. Assesseevidereply dated10-9-1996has stated as under:

"The transactions in Punjab National Bank, Chander Nagar, (GZB) UP was done to favour a friend of the Director of the company to facilitate transfer of funds from his one company to other company. The company M/s. Dolly Farms Resorts (P.) Ltd. received an amount of Rs. 50 lacs from M/s. Goel Gases (P.) Ltd. into its account No. 5915 with Canara Bank,Nehru Place,New Delhias under:

****

1-5-1994Ch. No. 46130 on PNB Sansad Marg,New Delhi10 lacs.

20-5-1994Ch. No. 461390 on PNB Sansad Marg,New Delhi10 lacs.

24-5-1994Ch. No. 461391 on PNB Sansad Marg,New Delhi10 lacs.

7-6-1994Ch. No. 461479 on PNB Sansad Marg,New Delhi10 lacs.

15-7-1994Ch. No. 461791 on PNB Sansad Marg, New Delhi IO lacs.

The above said amount was paid back to M/s. Aggarwal Gases upon instruction of M/s. Goel Gases Ltd.

****

vide following cheques.

14-5-1994Ch. No. 160496 Canara Bank 10 lacs.

30-5-1994Ch. No. 385963 Canara Bank 10 lacs.

26-5-1994Ch. No. 385967 Canara Bank 10 lacs.

7-6-1994Ch. No. 385974 Canara Bank 10 lacs.

16-7-1994Ch. No. 385999 Canara Bank 10 lacs.

***

The account No. 1499 with PNB, Chander Nagar,Ghaziabad, UP was opened to facilitate the reversal of above transactions undertaken. In this account payment of Rs. 50 lacs was received by way of transfer from M/s. Aggarwal Gases on25-3-1995in two instalments of Rs. 20 lacs and one instalment of Rs. 10 lacs. On the same day payment was made to M/s. Goel Gases Ltd. vide five cheques of Rs. 10 lacs each as under:

****

Ch. No. 23929 Rs. 10 lacs

Ch. No. 23930 Rs. 10 lacs

Ch. No. 23926 Rs. 10 lacs

Ch. No. 23927 Rs. 10 lacs

Ch. No. 23928 Rs. IO lacs

****

The above transaction has not in any way benefited the company. No income of any sort was earned on the same. No other transaction was done in account No. 1499 PNB Ghaziabad except above transaction."

35. The Assessing Officer observed that assessee tried to prove that money in fact was never utilised by him and since the money was returned, therefore, it has no impact on its books of account. The Assessing Officer considered the explanation of the assessee and noted that assessee did not file any confirmation from the parties concerned nor did he produce the copy of books. No explanation from the party from whom this amount was alleged to have been taken and paid has been filed. Under these circumstances sum of Rs. 50 lacs was taken as unexplained income of the assessee and added to its income.

36. In appeal assessee submitted that Assessing Officer made this edition on the ground that no confirmation in this respect was filed. The assessee explained that confirmation filed by the assessee was late so not considered by the Assessing Officer. However, it was submitted that the transaction as made by the assessee have not in any way benefited the assessee-company. No income of any sort was earned on this income. No other transaction was done in account No. 1499 atGhaziabadexcept above transaction. Since assessee had just acted as Post Office and amounts were not used in any manner in the business, therefore, no addition is called for as made by Assessing Officer and same needs to be deleted.

37. The learned DR, on the other hand, submitted that neither any confirmation was filed nor any document was furnished to establish that the transaction actually belong to the party as contended by the assessee. So Assessing Officer was fully justified in making the addition and same requires to be confirmed.

38. After having heard both the sides and perusing the record and going through the documents seized in relation to these transactions and carefully considering the entries as recorded in the seized material for which no documentary evidence was furnished to substantiate the contention as raised by the assessee, I am of the considered view that addition was rightly made and same is confirmed while rejecting this ground of appeal of the assessee.

39. As regards Ground No. 5 the challenge is with regard to addition of Rs. 4,18,000 on the ground that certain entries as detailed at pages 6 to 8 of Annexure-1 have not been properly explained. Facts are like this that vide questionnaire dated4-7-1996the assessee was asked to explain the entries mentioned at pages 6/8 of the Annexure A-1. It had been certain entries and figures. Same were detailed and after excluding the entries which looked repetitive, the total came to Rs. 4,18,000. Assessee in his reply stated that these pages only included some entries pertaining to the persons who became members of the club and these total to Rs. 1,39,000. Thus, according to him the sum of Rs. 1,39,000 being noted in the books of account and the entries stood ignored. The Assessing Officer after having considered the explanation of the assessee observed that he did not agree with the assessee. He further noted that a perusal of these pages has shown that there are numerous entries. Apart from the entries mentioned by the assessee, the other entries are Gurcharan Diwan Rs. 14,500, Sanjay Khullar Rs. 12,000, Sanjay Khullar Rs. 50,000. Certain entries on the back of pages 7 amounting to Rs. 1,75,200. Further on page 8 certain totals on month to month and party to party basis amounting to Rs. 2,31,000 and then further Rs. 1,28,500. From this it was clear that assessee has merely tried to divert the attention from the main issue. Even otherwise the assessee has not been able to reconcile the entries amounting to Rs. 1,39,000 with records. Under the circumstances, the plea of the assessee that the entries have been explained is not acceptable and the sum of Rs. 4,18,000 is added to the income of the assessee being unexplained investment.

40. In appeal assessee's explanation at the first instance was that scribble as made represent membership deposit which work out to Rs. 1,39,000 and not Rs. 4,18,000. According to assessee's counsel these are totally reflected in the books of account. It was also submitted that as regards Rs. 4,18,000, nowhere the Assessing Officer has indicated the working of the same as such it is not known as to how the amount has been arrived at. In any case the close reading of the document would show that number of entries appear twice or thrice and as such they could not be accounted for more than once. On the other hand, before both the authorities, the assessee explained that an amount of Rs. 1,39,000 shown as membership subscription from certain members were duly reflected in the books of account as such there could be no addition under the head undisclosed income under Chapter XIVB of the Income-tax Act. On the other hand, expenditure of Rs. 2,79,000 cannot be considered along with Rs. 1,87,000. So no addition is called for.

41. The learned DR while relying upon the basis and reasoning as given by Assessing Officer has pleaded for confirmation of addition made as nothing could be filed to prove the contention as raised by the assessee. So order of Assessing Officer requires to be confirmed.

42. I have heard rival submissions, perused the record, gone through the orders of the learned Assessing Officer and carefully looked into the relevant seized document. After having considered the arguments of both the sides and looking to the relevant seized document, I am of the considered view that action of Assessing Officer in this regard is fully justified as assessee has not been able to substantiate any of the claims made and the contention raised by the assessee. While confirming the action of Assessing Officer, I dismiss this ground of appeal.

43. As regards ground No. 6 challenge is against the addition of Rs. 9,35,000 (wrongly mentioned at Rs. 11,75,000) on the ground that assessee had not furnished the confirmation certificates of the parties in respect of certain amounts. During the assessment proceedings, it was noted by Assessing Officer that assessee has shown loans to the tune of Rs. 10,50,003 as on15-9-1995. The assessee had further shown an item of sundry creditors to the tune of Rs. 2,40,000. The assessee was asked to file the details/confirmations of the parties from whom the loan have been received. The assessee filed details and finally by its letter dated16-9-1996submitted that it has already filed copy of account in respect of three parties and confirmations in respect of two parties. However, the assessee again asked for time to file further replies. No confirmations in respect of Rubina Leasing and Credits (P.) Ltd. Rs. 1,35,000 and Handloom Cottage Rs. 50,000 have been filed. The Assessing Officer after going through the submissions of the assessee accepted the confirmations from M/s. Amir Chand and M/s. BoltanIndiatotalling to Rs. 3 lacs as these were found to be in order. Since no confirmation in respect of other parties had been filed despite various adjournments granted to the assessee. However, at this stage assessee asked the Assessing Officer to call the parties and examine under section 131 of the Income-tax Act. When at the very beginning it was made clear by Assessing Officer that as it is time barring assessment, therefore, assessee should not only produce the confirmiations but also the parties for verification. But the assessee as per Assessing Officer sought adjournments on one ground or the other. Under the circumstances, at this stage this request of the assessee cannot be acceded to and the addition of Rs. 9,35,000 was made as assessee has not been able to discharge the onus with respect to following parties:

*****

Rs.

Rubina Leasing & Credits (P.) Ltd. 1,35,000

Handloom Cottage 50,000

Out of Rs. 10,50,000 assessee could explain Rs. 3 lacs so balance of

Rs. 7,50,000 stood unexplained.

****

44. In appeal, it was submitted that in fact learned Assessing Officer did not call for confirmation in some cases and in other cases did not give sufficient time to get confirmations from the parties. The Assessing Officer in fact asked the assessee to furnish confirmation certificates on 10-9-1996 and since the case was getting time barred on 30th September, 1996, so Assessing Officer wanted to close the case without providing proper and sufficient opportunity to the assessee to defend his case properly and provide required documents as desired by Assessing Officer. As such it was pleaded that there was no justification on the part of the Assessing Officer to make the addition of Rs. 9,35,000. It was pleaded for deletion of entire addition.

45. The learned DR while relying upon the order of Assessing Officer has pleaded that since assessee did not furnish other confirmations or produce those parties when he was specifically asked to do so, therefore, onus of proving the amounts could not be discharged by the assessee. Therefore, Assessing Officer was justified in making the addition which requires to be confirmed.

46. To counter these, assessee's counsel further submitted that all these amounts were duly recorded in the books of account. Action, if any, is to be taken in the regular course of assessment and not in block assessment.

47. I have heard rival submissions, perused the record, gone through the order of Assessing Officer in this respect. After having considered the arguments of both the sides, it is found that assessee has neither filed any confirmation nor produced the parties when he was specifically asked by the Assessing Officer to do so. Therefore, in these circumstances and in view of facts of the case, I am of the considered view that action of Assessing Officer is justified and calls for no interference.

48. Ground No. 7 relates to challenge regarding addition of Rs. 8 lacs on account of share capital money received from Shri Palvinder Singh Rs. 2 lacs and from Shri Kanwarjeet Singh Rs. 6 lacs on the ground that no confirmation certificate was furnished.

49. Assessing Officer vide questionnaire dated4-7-1996had asked the assessee to furnish the details and confirmations of paid up share capital of the company which was furnished by the assessee by giving details as under:

****

1. Sh. Palvinder Singh Rs. 2 lacs 2. Sh. Kanwarjeet Singh Rs. 6 lacs 3. Mrs. Dolly Chhabra Rs. 6 lacs 4. Sh. G.S. Chhabra Rs. 5,98,000.

*****

50. The assessee was asked to explain and file the confirmation but, as noted by Assessing Officer, for a long time the assessee had chosen to remain silent after filing the details and no confirmation were filed. Finally on16-9-1996the assessee filed confirmations in respect of Sh. G.S. Chhabra and Mrs. Dolly Chhabra. In respect of others, the assessee again took the plea that they may be summoned under section 131 of the Act. The Assessing Officer noted that attitude of the Director of the company has been most uncooperative inasmuch as in spite of issuing summon under section 131 many a time they either did not attend the proceedings or attended many days after the date on which they found convenient to attend. Under these circumstances at this stage the request of the assessee cannot be acceded to as the case is getting time barred on 30-9-1996, Since the first questionnaire was issued to the assessee day back in the month of July, 1996 he should have been duty bound to inform about real state of affairs. At this stage it is nothing but seems to be a device to gain more time and under the circumstances the request of the assessee is rejected as the assessee has not discharged its onus to the satisfaction of the Assessing Officer. Therefore, a sum of Rs. 8 lacs came to be added after taking on record confirmation of directors of the company.

51. In appeal, learned counsel for the assessee has submitted that these amounts have been received through cheques and stands reflected in the books of account for the relevant year 1994-95 at ledger folio 34-45. This is the contention of the learned counsel for the assessee that this amount cannot be considered in the block assessment as same are reflected in books of account maintained in the normal course and cannot be termed as undisclosed income within the meaning of section 158B(b) of the Act to have been discovered as a result of search. It was pleaded for deletion of the addition.

52. The learned DR by relying upon the order of Assessing Officer has pleaded for confirmation of the order of Assessing Officer in this regard. It was pleaded that since assessee has not been able to file confirmations from the parties in whose accounts amounts have been shown by the assessee, Assessing Officer was justified in making the addition. It was urged for confirmation of the same.

53. I have heard rival submissions, perused the record, gone through the order of Assessing Officer and after considering the submissions of both the sides, I approve this addition on the same reasons as taken with respect to ground No. 6 as no confirmation or other evidence was produced before Assessing Officer to justify credit entries. As a result this ground of appeal gets dismissed.

54. Ground No. 8 relates to challenge of addition of Rs. 40,73,700 on account of membership deposits received from various members on the ground that membership deposits are revenue receipts and not the liability as contended by the assessee and also on the ground that confirmation of the members from whom the deposits have been received has not been furnished.

55. The Assessing Officer while making this addition has observed as under in para 7 of the order for block assessment as under:

"The assessee started its Executive Club sometime back. The source of receipts was membership from the members which was temporary/life membership. There was some other types of membership also. It was seen that the assessee was crediting the life membership subscription to the reserve account while the annual subscription received on temporary membership was being credited to the reserve account. There was no annual subscription chargeable on the life membership. The assessee has collected a sum of Rs. 40,73,700 as membership deposits. The assessee was asked as to why this amount should not be treated as his revenue receipt in view of the fact that the amount received is not to be refunded to the members as also in view of the fact no annual subscription is being charged from the members who have life membership. In reply thereto the assessee stated that since the amount is to be refunded hence represents a liability and since it is a liability it cannot be treated as income. The assessee further stated that the member acquires a right of enduring nature to use the facilities of the club throughout his life. The life membership is transferable and hence the same cannot be treated as income. Moreover, it being credited to reserve account, therefore, it cannot be used for any other purpose and therefore, the same can be a capital receipt only. I do not agree with the contention of the assessee. First of all, the assessee has no liabilitv to return the amount and the only exception is when the club is closed. That is one of the reasons that the club membership has been kept as transferable only. Even the transfer can be returned. Thus the assessee can use this amount in perpetuity and the same will be refunded only if the club closes. In that case also it will be distributed like any other assets of the company only. Thus to say that the amount should not be treated as income is not correct and in view of the fact that this is a one time receipt, therefore, the same should be treated as revenue receipt only the same is treated as such. Even otherwise when the assessee was asked to give the evidence and confirmations of the parties from the amount has been received the assessee simply stated that the addresses are in the custody of the department and they can enquire from anybody. It is submitted that many of the deposits were taken in cash and if is the duty of the assessee to file the confirmations from the parties from whom the amounts have been received. The minimum amount has acceptable for deposits is Rs. 10,000, Rs. 15,000 to Rs. 30,000. Thus, it should be difficult for the assessee to get the confirmations and file the same. In view of the facts mentioned above and in view of the inability of the assessee to file the confirmations the sum of Rs. 40,73,700 added to the income of the assessee."

56. Aggrieved by this order of Assessing Officer assessee has challenged the addition made of Rs. 40,73,700 made in respect of membership fee received by the assessee for the year 1993-94 till the date of search as detailed below:

****

During the year 1993-94 to 31-3-1994 Rs. 3,75,000

During the year 1994-95 Rs. 17,12,000

During the year 1995-96 Rs. 19,86,700

(1-4-1995to15-9-1995)

Total Rs. 40 73,700 57.

****

57. It was contended by learned counsel for the assessee before the Bench that Assessing Officer has not verified the aforesaid position and proceeded to make addition on the ground that same constitute income of the assessee and that too for the block period as confirmation in this regard was not filed. The assessee's submissions that sufficient opportunity was not allowed, was not considered. It was submitted that question whether the entries are of revenue or of capital nature or are in the nature of a refundable security can only be addressed to after having ascertained whether the same are reflected in the books of account or not. If these are reflected in the books of account the field of enquiry would lay in the course of regular assessment otherwise in the block assessment. The nature and source of funds are then to be gone into. The issue in respect of mutuality or refundable deposits was not found out by Assessing Officer so his action is unjustified in treating this as income of the assessee. It was pleaded for restoring the matter back to the file of Assessing Officer to ascertain the nature of the receipts etc. and pass a fresh order after consulting the books of account lying with the Department.

58. The learned DR while relying upon the orders of Assessing Officer has pleaded for confirmation of his order. It was submitted that since membership fee is a non-refundable deposit, it is the income of the assessee and Assessing Officer has rightly charged it as undisclosed income.

59. After having heard the rival submissions, perusing the record and going through the details to which attention of the Bench was drawn. I am of the considered view that since these are membership deposits which are non-refundable, Assessing Officer was justified in treating it as undisclosed income and his action is confirmed while rejecting this ground of appeal of the assessee.

60. Next ground relates to challenge with regard to addition of Rs. 5 lacs made on the basis of estimated income for the period 1-4-1995 to 15-9-1995 by rejecting the books as they were alleged to be incomplete and not written upto the date of search. During assessment proceedings, it was noticed that Annexures 31 to 38 are vouchers/trial balance etc. of the assessee-company drawn by the assessee on month to month basis. Some other loose papers were also found in other annexures pertaining to the expenses incurred in relation to assessee-company. The assessee was asked to reconcile the vouchers with the records. To this, the assessee explained that all the vouchers are reflected in the books of account. The Assessing Officer test checked these vouchers with the books of account available with the Department. It was found that cash book has been drawn only upto4-5-1995. Under the circumstances, books of account of the assessee cannot be relied upon. As per counsel of the assessee all these expenses were later incorporated in the accounts and necessary entries made. Since the completed books of account have not been produced by the assessee under the belief that the books are lying with the Department which are in fact incomplete, therefore, Assessing Officer rejected the books of account and net income for the period 1-4-1995 to 15-9-1995 was estimated at Rs. 5 lacs and while doing so, it was also noted by the Assessing Officer that assessee has not been able to provide complete details of expenses debited to the Profit & Loss Account.

61. In appeal, assessee submitted that aforesaid addition has been made on the basis of estimated profit for the period1-4-1995to15-9-1995as against returned loss of Rs. 8,37,830 filed by the assessee. While doing so, Assessing Officer has not brought on record on any material to justify the addition. The declared version of the assessee has not been accepted without assigning any reason. It was pleaded for deletion of entire addition of Rs. 5 lacs made by the Assessing Officer.

62. The learned DR while supporting the order of Assessing Officer has pleaded for confirmation of the addition made. It was submitted that since assessee's accounts book seized by the Department, were incomplete and assessee has not been able to prove the expenses incurred during the period under reference, Assessing Officer had no option but to make the addition on estimated basis. Same needs to be confirmed.

63. After having heard both the sides, perusing the record and going through the orders of Assessing Officer, I am of the considered view that while making this addition Assessing Officer has not placed any concrete material or evidence to arrive at the estimate finally made for determining the income. After considering the arguments of both the sides and facts and circumstances of the case, I am of the view that so far as this ground is concerned, the order of Assessing Officer is set aside and restore back on the file of Assessing Officer with a direction that he will decide this issue afresh after giving due opportunity to the assessee.

64. The last ground relates to not allowing deduction of adjustment of returned and partly assessed loss of Rs. 26,83,800 as per income-tax return for the block period 1994-95 to 1996-97 (upto15-9-1995). In appeal it was submitted that assessee filed the return for the block period from assessment year 1994-95 to 1996-97 (upto15-9-1995) showing as accumulated loss of Rs. 26,83,800 as detailed below:

*****

Loss for 1994-95 Rs. 2,87,500

Loss for 1995-96 Rs. 16,68,470

Loss for 1996-97 Rs. 8,37,830

(upto15-9-1995) Rs. 22,63,800 (sic).

*****

65. While the losses for 1994-95 and 1995-96 were as per the income-tax return filed by the assessee, the loss for the assessment year 1996-97 was worked out for filing of the return for the block period. The total loss of Rs. 26,83,800 consisted of business loss of Rs. 19,11,290 and depreciation of Rs. 7,72,510 as provided under the Income-tax Act, the assessee is entitled to carry forward the loss and adjust the same against the profits of the succeeding eight assessment years. As such loss of Rs. 26,83,800 as claimed by the assessee should have been deducted out of the total income computed by Assessing Officer. Though the learned Assessing Officer has not made any mention of the loss in his order and has remained totally silent about it, the assessee is entitled to adjustment of the loss against the income computed by the DCIT. It was thus urged for allowing loss as claimed.

66. The learned DR supported the order of Assessing Officer and submitted that since it has not been discussed even and otherwise loss is not allowable in block assessment, so Assessing Officer was justified in ignoring the same. His order needs to be confirmed.

67. After having heard both the sides and perusing the record, it is observed that this is block assessment of undisclosed income and there is no room for giving any benefit of carry forward loss or other losses as claimed by the assessee. While rejecting this ground of appeal, it is held that such loss as claimed by the assessee is not allowable to be deducted from the income determined as undisclosed income for the block period under Chapter XIVB.

68. Now we will take up additional two grounds raised by the assessee and allowed by me as legal grounds. The assessee's counsel submitted that soon after searches the assessee approached the department for supply of photocopies of the seized material vide various letters addressed. These were dated26-10-1995,8-11-1995,22-11-1995,4-12-1995,30-1-1996,11-7-1996,17-7-1996,26-7-1996and8-8-1996. In absence of the information made available, the assessee could neither file the return in time nor could furnish the information as required by the Assessing Officer. In fact on many occasions the assessee attended the office with the purpose of taking the photocopies of the documents but was denied the facility on the ground that the instructions of the seniors had to be taken in this regard. This apart, there was a common notice issued to 8 assessees who appeared before the DCIT on17-9-1996and asked for the clarification in regard to specific queries raised against the specific assesses. On25-9-1996the letter was submitted to the CIT seeking appointment on certain issues contained in the draft order. The assessee also appeared before the CIT on27-9-1996in connection with the draft assessment as made by the DCIT. The circumstances under which the assessment was framed would clearly show that while the assessee was denied proper opportunity of hearing, the assessment framed was without taking into consideration the material available on record. The learned DR in this respect drew our attention to the number of hearings given by the Assessing Officer in this respect and non-compliance on the part of the assessee. It was stated that as mentioned in the assessment order vide letter dated25-4-1996the assessee was to appear in the office on or before2-5-1996as well as on18-6-1996for taking the photocopies of the seized material. He was asked to furnish a reply on11-7-1996vide questionnaire dated4-7-1996where he repeated his earlier request for supply of copies of the documents. The Assessing Officer had to issue summons under section 131 of the Act to enforce the attendance of the assessee and it was on24-7-1996when the final opportunity was given. While the assessee attended on subsequent date the information as sought was not given. In the circumstances, there was no way out but to frame the assessment as done by the Assessing Officer.

69. The learned DR while relying upon the detail of sequences of events which is recorded in paras 3 from page 1 to last but one para of page 4. It was submitted that in view of facts recorded by Assessing Officer, it cannot be held that either opportunity has not been afforded or photocopies as demanded have not been issued. Moreover, assessee filed return under Chapter XIVB only after receiving copies and more than a month's time was there when number of opportunities, adjournments etc. were given as requested by the assessee. So plea of the assessee has no force and same is liable to be dismissed.

70. After having heard both the sides and going through the sequences of events and dates recorded by Assessing Officer and detailed submissions as made by assessee's counsel, I am of the view that none of the grounds raised as additional grounds are found to be acceptable as photocopies as asked for were allowed to be taken to assessee by Assessing Officer and due opportunities were also allowed. Same are dismissed as not maintainable.

71. As a result, appeal of the assessee is partly allowed for statistical purposes.

ORDER UNDER SECTION 255(4) OF THE INCOME-TAX ACT, 1961.

Since in the above captioned appeal we have difference of opinion on the following point, the matter is submitted to the Hon'ble President for reference to the Third Member:--

"On the facts and in the circumstances of the case whether the order of the Accountant Member or Judicial Member is to be upheld?"

THIRD MEMBER ORDER Per Shri M.K. Chaturvedi, J.M.-- This appeal came before me as a Third Member to express my opinion on the following question:

"On the facts and in the circumstances of the case whether the order of the Accountant Member or Judicial Member is to be upheld?"

2. I have heard the rival submissions in the light of materials placed before me and precedents relied upon. Shri Sharma vehemently argued that there exist no difference of opinion between the two Members so far as the question of following the principle is concerned. It was pointed out that the learned Accountant Member followed the principle throughout the order that once transaction is reflected in the books of account regularly maintained and found to be so - such transaction cannot form the subject-matter of any addition of undisclosed income in the block period.

3. In arriving at the aforesaid conclusion the learned Accountant Member followed the principle enunciated by the Tribunal in the case of Sunder Agencies. The Tribunal held in this case that section 158BA does not provide a licence to Revenue for making roving enquiries connected with completed assessment. It is beyond the power of the Assessing Officer to review completed assessments unless some direct evidence comes to his knowledge as a result of search which indicates clearly the factum of undisclosed income. The scheme of Chapter XIV does not give power to Revenue to draw presumption in regard to undisclosed income. Dealing with the dimension of Chapter XIV, the Tribunal held that within the pale of this Chapter assessment could be made only in respect of undisclosed income and such undisclosed income must come as a result of search.

4. Controversy crept in the present case is not apropos the principle laid down in the case of Sunder Agencies. If an entry is disclosed in regular books of account - how it is to be treated with. On that the learned Judicial Member did not make any comment. The premises of the assessee were searched by the Department. Certain documents and books of account were seized. The income was computed at Rs. 1,34,87,700. The assessee contested the following additions:--

(1) "Addition of Rs. 2,31,000 for want of documentary evidence;

(2) Addition of Rs. 15,30,000 for want of confirmations being filed;

(3) Addition of Rs. 50 lakhs for want of confirmation;

(4) Addition of Rs. 4,18,000 on account of entries in Annexure-I;

(5) Addition of Rs. 9,35,000 for want of confirmation certificates;

(6) Addition of Rs. 8 lakhs on account of share capital receipt;

(7) Addition of Rs. 40,73,700 on account of membership deposits;

(8) Addition of Rs. 5 lakhs towards an estimated income; &

(9) Refusal to allow deduction for a loss of Rs. 26,83,800 as per the income-tax returns."

5. Learned Accountant Member examined all the aforesaid additions. It was noted by the learned Accountant Member that the assessee maintained books of account in the normal course. Certain entries were reflected in the aforesaid books prior to the date of search. It was also noted that the assessee maintained cash book which was in the custody of the Assessing Officer. It was revealed from the perusal of Panchnama, that in addition to the membership register, - ledger and cash book were also seized by the Revenue authorities. In order to invoke the provision of Chapter XIVB, it is sine qua non, on the part of the Assessing Officer to examine that whether the entries connected with the alleged undisclosed income were recorded in the books which were found at the time of search. This was not done. Assessment was also found to be framed without providing adequate opportunity to the assessee of being heard. Learned Accountant Member, therefore, in the interest of justice, restored the matter to the file of the Assessing Officer.

6. Coming to the order of the learned Judicial Member, I find that he proceeded to decide the issues on merits. It was stated in the order that the Tribunal is a final fact finding authority. The extent of judicial power exercised by the Tribunal is determined under the Act under which it had been constituted. The dispute between the parties has to be adjudicated upon in accordance with the provisions of the Income-tax Act which presupposes that the issues have to be resolved as per law. Rules have been framed describing the procedure for functioning of the Bench and to facilitate rendering the justice in the speedier, judicious and best possible manner. He, therefore, examined all the related issues in the light of the material which was available at the time of hearing. Learned Accountant Member first identified the principles and then decided the issues on the touch-stone of those principles. I find no difference of opinion in regard to the principles followed by the two Members. However, because of the non-availability of certain informations, learned Accountant Member set aside the order and restored the same to the file of the Assessing Officer whereas the learned Judicial Member decided the issues on the basis of available material.

7. As a matter of fact, search and seizure, is a serious invasion on the rights of the subject. The search and seizure was really not known at earlier stages to common law. When it was for the first time introduced, it was confined only to stolen goods, but its usefulness soon forced its recognition and was from time to time, extended such like searches and seizures. The provisions relating to search and seizure are intended to unearth the hidden or undisclosed income or property and bring it to taxation net. The objective of Chapter XIVB is to get hold of evidence bearing the tax liability of a person which the said person is seeking to withhold from the Assessing authority and to get hold of assets representing income believed to be undisclosed income. The words "undisclosed income" is defined under section 158B(b). This provision of law relates to the branch of jurisprudence which effects some of the very important rights of a citizen. It is, therefore, to be narrowly watched, jealously regarded, and never to be pressed beyond its true limits. It is risky to form presumption on the basis of inadequate material. It is a trite law canonised in the well-known common law dictum:--

'Fiat Justitia, Ruat Coelum"

[Justice should be done even if the heaven falls].

Justice is seen as the consequence of procedural fairness. The seekers of Justice many a time has to take a long circuitous routes, both on account of hierarchy of courts and the procedural law. Such persons are and can be dragged till the last ladder of the said hierarchy for receiving justice. It is, therefore, incumbent on the courts and Tribunals to deliver justice with due care so the litigant be not lost in the labyrinth of law.

8. In the instant case the learned Accountant Member found that some enquiries were not properly done. Therefore, to meet the ends of justice, the matter was set aside. I have perused both the orders. I am inclined to agree with the reasonings given by the learned Accountant Member. The matter should now go back to the Division Bench which would decide the issue, according to the majority decisions on the point of difference.

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