Vildirect: IncomeTax-caselaws-2002-VIL-180-ITAT-PNE

2002-VIL-180-ITAT-PNE

Equivalent Citation: ITD 082, 018, TTJ 076, 339,

Income Tax Appellate Tribunal PUNE

Date: 18.02.2002

DHUNJIBHOY STUD & AGRICULTURAL FARM.

DEPUTY COMMISSIONER OF INCOME-TAX.

BENCH

Member(s) : J. P. BENGRA., B. L. CHHIBBER., U. B. S. BEDI., K. C. SINGHAL.

JUDGMENT

Per Chhibber, Accountant Member--The assessee is a firm of builders. It has a division known as 'M/s Somerset Developers'. The main grievance projected in this appeal by the assessee is that the learned Assessing Officer is not justified in assessing an amount of Rs.10,65,000 as undisclosed income of the assessee for the block period 1986-87 to 1996-97.

2. One Dr. Dilip D. Tanna had purchased a flat at Pune from M/s Somerset Developers, vide Agreement dated 17-9-1994 according to which the purchase price was fixed at Rs.6.55 lakhs. On 2-11-1995, there was a search at Dr.Tanna's premises at Mumbai wherein a piece of paper--loose paper No. 37 was seized. This paper is annexed to this order. The back side of this paper had the following contents:

"Somerset Developers - (village)

17.2 total value incl. garage

A 6.55 cheque

-------

10.65 cash

.55 cheque II

Actual paid"

During the course of statement recorded under section 132(4), when confronted with this paper, Dr. Tanna spontaneously submitted as under:

"Q. No. 7: Particularly I would like to show you back side of loose paper bearing Sr. No. 61 of Annexure A-1. Kindly go through it and explain to me the contents thereof?"

Ans.: "It is very simple. I have to pay by cheque a sum of Rs.6.55 lacs as per agreement for purchase of flat at Pune from Somerset Developers. Some of the instalments have gone through my bank account. I have paid a sum of Rs.10.65 lacs as cash from my professional income not recorded as yet in my books of account and I wish to admit the same as my admitted concealed income."

In his Block assessment completed by the Dy. CIT, Special Range-26, Mumbai, Dr. Tanna surrendered Rs.10.65 lakhs. The statement of Dr. Tanna under section 132(4) and the said seized paper was forwarded by the Dy. CIT, SR 26, Mumbai to the Dy. CIT, SR-4, Pune, who has jurisdiction over the assessee. Accordingly, the Dy. CIT, SR-4, Pune, issued notice under section 158BC read with section 158BD to the assessee in the month of July, 1997. The assessee filed its return for the block period on 13-8-1997 declaring 'Nil' undisclosed income. During the course of assessment proceedings, the assessee submitted before the Assessing Officer that no cash payment of Rs.10.65 lakhs was received by it. The flat had been sold at a price recorded in the Agreement and the payment had been received through bank only and is duly recorded in the accounts. While explaining the entries recorded on loose paper No. 61, the assessee, vide its reply dated 26-2-1997 stated that the figure of Rs.1,00,000 with remarks "new cheque" is not correct as under the Agreement for sale Dr. Tanna had paid to the assessee initial deposit of Rs.50,000 which was acknowledged in the receipt of the end of Agreement and Dr. Tanna had given second cheque of Rs.50,000 which had been appropriated towards the balance consideration payable by Dr. Tanna to the assessee. Regarding the figure of Rs.57,000 with the remarks "second cheque" it is stated that the same has been received by the assessee from Dr. Tanna. Regarding the figure of Rs.10.65 lakhs appearing at loose paper No. 61, it was contended that no such payment had been received by the assessee and that the same does not refer to the assessee's transaction for the simple reason that as against the flat of the value of Rs.6 lakhs as per the Agreement, it is inconceivable that a sum of Rs.20.91 lakhs would be paid in cash. The flat in question sold to Dr. Tanna was in a complex developed in a remote undeveloped area of Wanworie, where considering the slackness in the market and the number of flats available, the assessee was compelled to sell flats at the best available price. It was further submitted that one Mr. Bachubhai who was a friend of Dr. Tanna had contacted Mr. Prakash, a commission agent working for the assessee-firm. Mr. Prakash was produced before the Assessing Officer on 14-7-1998 and his statement also was recorded wherein he had stated that he was doing the business of commission and brokerage. Though he did not know Dr. Tanna and his wife, he came in contact with Mr. Bachhubhai and took him to the office of Somerset Developers. When he was shown loose paper No. 61, he admitted that telephone No. 655892 (written on the said paper) which belonged to M/s. DSAF was given by him to Mr. Bachhubhai as his contact number. From the statement of Shri Prakash, the learned Assessing Officer concluded "From the above discussion, it is clear that entries on this paper have some direct as well as indirect nexus with the sale of flat by the assessee to Dr. D.D. Tanna. No doubt various other entries are also recorded on this paper including those of amounts as well as area of flats but then only those entries are being considered for the purpose of block assessment which are found related to purchase of flat by Dr. Tanna. While the assessee discussing various entries has dismissed them as not relating to him, I am of the opinion that transaction which has been admitted by Dr. Tanna in his statement during the course of search pertain to the purchase of flat by him from the assessee." Reliance was placed by the assessee on the judgment of the Bombay High Court in the case of Addl CIT v. Miss Lata Mangeshkar[1974]97 ITR 696. The Assessing Officer distinguished the facts of the case of the assessee from those of Miss Lata Mangeshkar's case and concluded that Dr. Tanna had made a cash payment of Rs.10.65 lakhs over and above the price given by cheques and the assessee had not recorded this cash payment in its books of account and accordingly the amount of Rs.10.65 lakhs was assessable in the hands of the assessee as undisclosed income.

3. The Assessing Officer prepared a draft order and sent it to the CIT for approval. The CIT, after giving an opportunity of being heard to the assessee, approved the order of the Assessing Officer, vide detailed Note dated 29-7-1998 which forms Annexure to the assessment order. Before the CIT, besides the reliance placed on the judgment in the case of Miss Lata Mangeshkar, the assessee had placed reliance on the following two cases:

(1) CBI v. V.C. Shukla [1998] 3 SCC 410,

(2) ITO v. Bala Prasad R. Lokmanyawar [1984] 18 TTJ (Pune) 167.

The CIT distinguished the facts of the assessee's case from the facts of the three cases cited before him and held that the ratio laid down in the above three cases was not applicable to the facts of the present case. He concluded "in the present case, the overall facts show that the paper pertained to the transaction between Dr. Tanna and the assessee, the figure of Rs.10.65 lakhs was found recorded and Dr. Tanna admitted having paid this amount to the assessee and also surrendered the same in his assessment. Obviously no prudent person would voluntarily subject himself to substantial tax burden unless he knows that he did earn undisclosed income. Accordingly, I hold that these arguments are devoid of any merit." Before the CIT, the assessee had also pointed out that the Registrar of Stamp Duty, State of Maharashtra, approved rate of Rs.441 per sq.ft. for stamp duty purposes for the financial year 1994-95 in respect of Wanworie area whereas on the basis of the documented price of Rs.6 lakhs the rate of the flat sold by the assessee to Dr. Tanna works out to Rs.594. On this basis, it was argued before the CIT that this was a cogent evidence of the fact that the rate was reasonable and there was no scope of passing of any on-money. The CIT rejected this argument observing: "This argument cannot be accepted when sufficient material is available as already indicated in the draft order. It is common knowledge that the rates approved for stamp duty purposes may not have any relation to the prevailing market rates which are normally substantially higher than the approved rates."

4. Dr. Sunil Pathak, the learned counsel for the assessee submitted that there is no justification for the impugned addition in the hands of the assessee-firm. His first submission is that the papers seized are not indicating in any manner that Dr. Tanna paid any such amount to the assessee. For this, following important aspects were highlighted by the learned counsel:

(a) The seized paper is an undated and unsigned loose paper admittedly not in the handwriting of Dr. Tanna or his wife. The said paper refers to three flats and none of the areas of such flats as mentioned in the paper tallies with that of the flat sold to Dr. Tanna by the assessee-firm.

(b) The paper mentions so many figures in cash and it is not known how the Assessing Officer adopted this figure of Rs.10.65 lakhs as on-money paid for the flat.

(c) The total of all the figures is Rs.25.62 lakhs and it is not known on what basis the Assessing Officer selected only a sum of Rs.10.65 lakhs as on-money paid and did not adopt the entire sum of Rs.25.62 lakhs as on-money having been paid.

(d) The papers mention the name of Mr. Prakash and he has confirmed that he was a broker in deal. Secondly, the paper clearly states that one Mr. Bachhubhai a friend of Dr. Tanna was the person in between for this deal because Dr. Tanna has handed over the cheques for payment to him. This writing conclusively proves that the entire deal was done, negotiated and completed by Mr. Bachhubhai on behalf of Dr. Tanna.

(e) Even the cheque payments mentioned in the paper do not tally with actual payments received by the assessee as per the Agreement.

Shri Prakash has confirmed that Shri Bachhubhai was the person who had contacted him on behalf of Tanna's for purchase of the flat. Shri Prakash, who was summoned before the Assessing Officer, has in his statement denied that any on-money was paid.

5. Dr. Pathak further submitted that Mrs. Tanna in her statement on page 56 has confirmed that the handwriting on page No. 37 is neither her's nor Dr. Tanna's. They have also confirmed that no on-money was paid to the assessee for the flat. The learned counsel also drew our attention to the Affidavit of Dr. Tanna filed before the CIT wherein he had confirmed that he never paid any on-money to the assessee. In support of his contentions, the learned counsel relied upon the three judgments cited before the CIT namely, (1) Miss Lata Mangeshkar's case, (2) V.C. Shukla's case and (3) Bala Prasad R. Lokmanyawar's case.

6. Shri Naresh Kumar, the learned senior D.R. strongly supported the order of the Assessing Officer as approved by the CIT vide his Note dated 29-7-1998 which forms Annexure to the order. He produced before us the original seized document which we have made Annexure to this order. He submitted that the learned counsel of the assessee had filed only photocopy of the front page of the seized paper, while he had conveniently omitted to file the photocopy of the back page. He drew our attention to the entries on the back page of the seized paper which we have reproduced in para 2 above. He submitted that it is this Page which is most important and it was on the basis of entries made on this page that Dr. Tanna in answer to question No. 7 admitted that he had paid a sum of Rs.10.65 lakhs as cash from his professional income "not recorded as yet in my books of account and I wish to admit the same as my admitted concealed income". As regards the front page of the seized paper, the learned D.R. submitted that the paper does refer to the price of three flats and the figures in the middle portion refer to this particular flat. These notings were more in the nature of proposals and really the entries which go to the root of the controversy are on the back page which are self evident and which were duly admitted by Dr. Tanna in a spontaneous way during the course of statement under section 132(4). The learned D.R. further stated that Dr. Tanna is a leading Doctor, hence he must be an intelligent person and it is not expected that he would hand over so much of money to Mr. Bachhubhai or Mr. Prakash, the middleman. He would himself hand over the same to the assessee. Thus, he argued that it can be safely said that the assessee only has received this money. He further submitted that if it is the case of the assessee that Shri Bachhubhai has taken the money, the assessee should have produced him. Having not done that, the assessee cannot take up such a contention. The learned D.R. further submitted that Dr. Tanna's Affidavit was produced before the CIT only a few days before the assessment was getting time barred. Thus, no cognizance can be taken of the same. Secondly, it is filed after three years and thus it has no evidentiary value. The learned D.R. further submitted that Mrs. Tanna came over to Pune to see the flats and it is unlikely that she did not meet the assessee. Thus, the money must have been paid by Tannas to the assessee only. As regards the case laws, the learned D.R. sought to make the same distinction as made by the Assessing Officer for not following the three cases as done by the Assessing Officer and the CIT.

7. In rejoinder, Dr. Pathak submitted that the alleged back side of the paper No. 37 which is produced by the learned D.R. is fresh evidence. The alleged back side of the paper No. 37 was neither shown to the assessee nor a xerox copy was furnished to the assessee and the assessee had no opportunity to deal with the notings made thereon. According to the learned counsel, the assessee had given exhaustive comments on paper No. 37 (front side of the loose paper) and if a copy of the back side had been given to the assessee, it would have definitely dealt with the same appropriately. No reasons were given by the learned D.R. as to why the Assessing Officer and the CIT had not referred to it at all or why they did not cross-examine the assessee with regard to the back side. According to the learned counsel, the said back side of paper No. 37 which is not serially numbered is a new piece of evidence and since no reasons were put forward by the D.R. as to this default on the part of the Assessing Officer and the CIT the said back side of paper No. 37 is not admissible in evidence and it should not be admitted in evidence at all. Moreover, the said back side of paper No. 37 cannot be tendered as evidence unless the authenticity thereof or the contents thereof are proved by applying the principles of Evidence Act. The learned counsel further submitted that the front side of the Note in question appears to have been prepared by a third person and such note (front side) contains details of a number of transactions. The alleged reverse side of the said Note is not serially numbered and the same was not handed over at any time by the Assessing Officer or CIT to the assessee nor even referred to by them in the assessment order. The learned counsel reiterated that in his Affidavit dated 28-7-1998 filed before the CIT, Dr. Tanna had categorically stated in para 4 that the said Note is neither prepared by him nor by his wife. It is significant to point out that although Dr. Tanna, at the time of raid, is alleged to have admitted that cash amount of Rs.10.65 lakhs was paid by him, he had subsequently retracted the said statement on the ground that it was given under coercion and pressure. Dr. Tanna's wife was summoned before the Assessing Officer and both Mrs. Tanna and Dr. Tanna's Chartered Accountant, Mr. Ghabawalla categorically denied payment of any cash amount for purchase of the flat.

8. As rejoinder, Shri Naresh Kumar, the learned senior D.R. submitted that the seized paper forms part of record. it had two sides and the same was given to the assessee. In fact the whole controversy lay around the seized paper as a whole and particularly reverse side of the paper and now the learned counsel cannot say that is a fresh piece of evidence. First of all, the learned counsel did not produce this paper in his paper book and it was only when he (DR) produced the seized paper in original, the learned counsel chose to make a flimsy argument that the reverse side of the paper is a new piece of evidence. The loose paper as a whole was part of the seized record. It was seized from the residence of Dr. Tanna. Dr. Tanna had owned up this paper (both front side and back side) and on the basis of the entries on the back side which were particularly confronted to Dr. Tanna he admitted payment of cash money of Rs.10.65 lakhs and also surrendered the same for assessment in his block assessment before the Dy. CIT, Special Range-26, Mumbai.

9. We have considered the rival submissions and perused the facts on record. As stated above, a paper (which forms Annexure to this order) was seized during the course of search at the premises of Dr. D.D. Tanna. This seized paper was produced before us, in original, by the learned Sr. DR. The paper has two sides, the front side and back side. A perusal of the seized paper reveals that the front side of the paper contains entries which refer to the particulars of three flats and the figures in the middle portion refers to this particular flat. These notings are more in the nature of proposals and in reality, the entries which go to the root of the controversy are on the back side, which are self-evident and which were duly admitted by Dr. Tanna spontaneously during the course of statement recorded under section 132(4). A paper found during the course of search has to be read as a whole--both sides of the paper--as held by this Bench in the case of Chander Mohan Mehta v. Asstt CIT [1999] 71 ITD 245 (Pune). It is noted that in the paper book filed by the learned counsel only photocopy of the front page of the seized paper was filed, while he had conveniently omitted to file photocopy of the back page. The learned senior DR. took pains for which we must compliment him to produce before us the entire seized paper and perusal of the seized paper clearly reveals that it had two sides. It was when the reverse side of the paper was confronted to Dr. Tanna, he in response to question No. 7 spontaneously submitted "It is very simple. I have to pay by cheque a sum of Rs.6.55 lakhs as per agreement for purchase of flat at Pune from Somerset Developer......." Now, it is very naive on the part of the learned counsel to submit that the back side of the seized paper was never confronted to the assessee by tile Assessing Officer during the course of assessment proceedings and the CIT when he gave an opportunity to the assessee before approving the order of the Assessing Officer, because the seized paper is the fulcrum point on which the whole case revolves and it is too much to say that such vital evidence on which the authorities below based their conclusions was not shown to the assessee. From the reading of the order of the Assessing Officer and the note of the CIT, it is very clear that the seized paper with both sides was confronted to the assessee. We accordingly reject the argument of the learned counsel that the back side of the seized paper is a new piece of evidence and the same should not be admitted.

10. The argument of the learned counsel that the seized paper is an undated and unsigned loose paper admittedly not in the handwriting of Dr. Tanna or his wife is unreliable piece of evidence, has no legs to stand. It is an established fact that the seized paper was found during the course of search at the premises of Dr. Tanna and he owned up and on the basis of this seized paper, he also surrendered a sum of Rs.10.65 lakhs in his block assessment. No doubt, the seized paper is undated and unsigned and even if it is admitted that it is not in the handwriting of Dr. Tanna or his wife, it is a vital piece of evidence which was duly admitted by Dr. Tanna as belonging to him and on the basis of entries made on the back side of this paper, Dr. Tanna offered a sum of Rs.10.65 lakhs as undisclosed income (being cash component of the purchase price of the flat). Further, there is no evidence that the admission was made by Dr. Tanna under any pressure or coercion, because Dr. Tanna is a leading Doctor and an intelligent person and he spontaneously admitted that he had paid a sum of Rs.10.65 lakhs as cash over and above the price recorded in the sale agreement.

11. The argument of the learned counsel that either Mr. Prakash or Mr. Bachhubhai might have pocketed a sum of Rs. 10.65 lakhs is to be stated to be rejected. Mr. Prakash was produced before the Assessing Officer and his statement was recorded and nowhere he admitted that he had got a sum of Rs.10.65 lakhs. He, however, admitted that the telephone number on the seized paper was that of the firm which he had given to Mr. Bachhubhai, Mr. Bachhubhai was never produced before the authorities below. It does not appeal to commonsense that a leading Doctor will pass on a sum of Rs.10.65 lakhs to a middleman and not to the assessee-firm. We accordingly reject the above contention of the learned counsel.

12. The reliance placed by the learned counsel on the Affidavit of Dr. Tanna filed before the CIT only a few days before the assessment was getting time barred is of no assistance to the assessee. The Affidavit was filed by Dr. Tanna after three years when the search took place during the course of which he made a spontaneous statement as referred to above that he had paid cash amount of Rs.10.65 lakhs over and above the price recorded in the sale agreement. It is an established legal position that the first statement recorded during the course of search has greater evidentiary value and the subsequent retractions have to be ignored. In this connection, reference may be made to the decision of the Hon'ble Supreme Court in the case of C. Vasantlal & Co. v. CIT[1962] 45 ITR 206 where it was held that the statements made by witnesses before the Assessing Officer are material upon which the Tribunal could act disbelieving the statement subsequently made by the same witnesses before the A.A.C.

13. Now, we come to the decisions relied upon by the learned counsel. In the case of Miss. Lata Mangeshkar a search was conducted on the premises of M/s Vasu Films of Madras and a ledger was found and seized. On the basis of certain entries recorded in the ledger which related to payment of amounts to Miss Lata Mangeshkar in respect of which no receipts were issued, the Assessing Officer made additions in the case of Miss Lata Mangeshkar. The additions were confirmed by the AAC, however, the same were deleted by the ITAT. A Reference filed by the department before the Bombay High Court was rejected after appreciating various facts and circumstances of the case and it was held that there were serious infirmities in the evidences presented by the department. While rejecting department's Reference, the Bombay High Court held that mere entries in the accounts regarding payments to the assessee was not sufficient as there was no guarantee that the entries were genuine. The Hon'ble Bombay High Court, inter alia, observed that the statement of Shri N. Vasudev Menon could not carry the case of the department as he had no personal knowledge of the actual payments made to the assessee Miss Lata Mangeshkar. Regarding the testimony of Shri C.S. Kumar, the Bombay Manager of M/s Vasu Films, it was pointed out that he used to receive amounts from Madras from out of which he used to make disbursement in Bombay, but he maintained no account in respect of same, which made it difficult to rely on his evidence. Observing thus, the Hon'ble High Court observed that entries in the day book or ledger would be a corroborative piece of evidence and once the direct evidence of the person who is said to have made payments in "black" to the assessee is disbelieved, no value could be attached to the entries in the ledger. It is, therefore, seen that in the above case reference has been rejected while finding serious infirmities in the direct evidence, ie. statements of the Managing partner and the Bombay Manager. Once the direct evidence was found to be unreliable by the Tribunal and the Bombay High Court, the corroborative evidence, i.e. entries recorded in the ledger were also rejected. However, in the case of the assessee before us, there is direct evidence in the form of seized paper and spontaneous statement of Dr. Tanna recorded during the course of search and there is no infirmity of the like in the case of Miss Lata Mangeshkar in this direct piece of evidence. Accordingly, we hold that the ratio laid down by the Bombay High Court in the case of Miss Lata Mangeshkar is not of any assistance to the assessee.

14. As regards the reliance placed on the judgment of the Hon'ble Supreme Court in the case of V.C. Shukla, the judgment was rendered in the context of criminal proceedings and further in that case there was no admission by the concerned person that payments were made as recorded in the Jain Hawala Diaries. It is an established legal principle that the rules of evidence which are applicable in criminal proceedings have no relevance for Income-tax proceedings, because the assessment has to be framed on the basis of relevant 'material' and the Assessing Officer is not fettered by the technical rules of evidence, as held by the Supreme Court in the cases of CIT v. East Coast Commercial Co. Ltd. [1967] 63 ITR 449, C. Vasantlal & Co. and Calcutta High Court in the case of Mriganka Mohan Surv. CIT[1979] 120 ITR 529. Therefore, the above decision of the Supreme Court has no applicability in the present proceedings; more so in view of the fact that in the present case the notings on the documents have been admitted as pertaining to the assessee and it was further admitted that the amount as recorded in the paper was actually paid to the assessee.

15. The decision of the ITAT, Pune Bench in the case of Bala Prasad R. Lokamanyawar is also not relevant to the facts of the present case. In that case, there was discrepancy in the sales recorded in the books of the assessee and corresponding figures found to have been recorded in the books of third person. In the circumstances, it was held by the I.T.A.T. that "Simply because in the books of a stranger assessee's name comes and the entry narrates that there were certain sales effected by the assessee, it will be unwise to tax the assessee on such infirm material i.e. the books of a third party." In the present case, the facts clearly show that the paper pertained to the transaction between Dr. Tanna and the assessee and the figure of Rs.10.65 lakhs was also found recorded and Dr. Tanna admitted having paid this amount to the assessee and also surrendered the same in his block assessment. Obviously, no prudent person would voluntarily subject himself to substantial tax burden unless he knows that he did earn undisclosed income. Accordingly, we hold that the decision of the I.T.A.T, Pune Bench, in the case of Bala Prasad R. Lokamanyawar is not applicable to the facts of the present case.

16. The above discussion covers the first nine grounds raised by the assessee which stand dismissed by us as indicated in the preceding paragraphs.

17. Ground No. 10 reads as under:

"On the facts, in the circumstances of the case and as per law, the ld. Assessing Officer was not justified in invoking provisions of Chapter XIV-B of the Act in making this assessment."

Dr. Pathak, learned counsel for the assessee, submitted that provisions of section 158BD have been wrongly invoked in this case. He drew our attention to the opening line of the section which reads as under:

"Where the Assessing Officer is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made under section 132 ............"

In view of the above provision, the learned counsel submitted that this provision can be invoked only in a case wherein it is found that the undisclosed income as a result of notings, assets etc. etc. belongs to a third person other than the assessee. The learned counsel pointed out that in this case, addition on the basis of notings is already made in the hands of Dr. Tanna and hence no further addition can be made in the hands of the assessee by invoking this section. He placed reliance on the judgment of the Calcutta High Court in the case of Parag Nivesh (P.) Ltd. v. Dy. CIT [1999] 240 ITR 419 which has dealt with the provisions of section 158BD. The learned counsel pointed out that it has been clearly held by the Hon'ble High Court that this section is to be applied only if it is found that the income, which is allegedly undisclosed belongs to some third party other than the assessee.

18. Shri Naresh Kumar, the learned senior D.R. submitted that provisions of section 158BD are clearly attracted in this case and the judgment relied upon by the learned counsel of the Calcutta High Court is of no assistance to the assessee.

19. We have considered the rival submissions. In the case of Parag Nivesh (P.) Ltd it was to be determined whether income belongs to the assessee or to 'S' Ltd. The facts appear to indicate that the income could be taxed in the hands of either S. Ltd. or the assessee and it could not be taxed in both the hands. In the case of the assessee before us, it is clear that the amount is a taxable receipt in the hands of M/s Dhunjibhoy Stud & Agricultural Farms and accordingly, section 158BD would be applicable in its case. The fact that this amount was also the undisclosed amount of Dr. Tanna and has been disclosed by him as such does not preclude it from being taxed in the hands of the assessee. The judgment of the Calcutta High Court referred to supra and relied upon by the learned counsel does not lay down the principle that undisclosed income can be taxed in the hands of only one person, especially when the facts suggest that the undisclosed income of one person is also the receipt of another and has not been disclosed in the hands of the latter as well as in this case (M/s Dhunjibhoy Stud & Agricultural Farms). In the case before us, even if the income belongs to Dr. Tanna, the payment of the same amount to the assessee would amount to a receipt in the hands of the assessee, which would be taxable under Chapter-XIV-B and there would be justification to issue notice under section 158BC/BD.

20. It may also be mentioned that the Madras High Court in the case of Thanthi Trust v. Asstt. Director of Income-tax[1999] 238 ITR 635 has held that the judgments and orders of Courts and Tribunals cannot be construed or interpreted like Acts of Parliament or as Mathematical Theorems. The judgment has to be read in the context of actual findings of the case. The finding in the case before us is that the amount of Rs.10.65 lakhs was the undisclosed income of Dr. Tanna and that Dr. Tanna had passed on the same in cash to the assessee as part of the purchase price of the flat and in the hands of the assessee, it was a business receipt which ought to have been reflected in its books of account. To the extent of Rs.10.65 lakhs, the assessee concealed its taxable income.

21. Also if the interpretation of the learned counsel now sought to be made of section 158BD is accepted, it will make the section unworkable. A seized paper may show transactions involving two or more parties and may represent the unaccounted income of all such parties. Such an interpretation would allow all other parties except one to escape taxation. That is not the intention of the Legislature. Reference is invited to the judgment of the Hon'ble Gauhati High Court in the case of CIT v. Satyanarayan Sikaria [1999] 238 ITR 855 wherein it has been held that an interpretation of statute which makes law workable and enforceable should be preferred. We, therefore, hold that provisions of section 158BC/BD are clearly attracted in this case and the Assessing Officer was justified in invoking the same.

22. In the light of above discussion, we hold that the impugned addition of Rs.10.65 lakhs is perfectly justified as undisclosed income in the hands of the assessee.

23. In the result, the appeal is dismissed.

Per Singhal, Judicial Member

24. The order proposed by my learned Brother has been gone through by me carefully. I agree with his conclusion that Block assessment proceedings against the assessee had been validly initiated under section 158BD, but have not been able to persuade myself to agree with his conclusions on merits of the case. Therefore, I proceed to express my dissenting views.

25. The question for our consideration is, whether the addition of Rs.10.65 lakhs can be sustained in law on the basis of loose paper No. 61 found from the premises of Dr. D.D. Tanna of Mumbai. The facts have been narrated by my learned Brother in the proposed order and, therefore, need not be repeated.

26. A finding of fact has been recorded by my learned Brother to the effect that the back side of the loose paper was duly shown to the assessee in the course of assessment proceedings (para 9 of the order). By recording such finding, he has rejected the contention of Mr. Pathak, learned counsel for the assessee, that the back side of the loose paper is a fresh evidence, since it has been shown for the first time before the Tribunal by the senior D.R. and it was never shown to the assessee either by the Assessing Officer in the assessment proceedings or by the CIT in the course of discussion before approval. By raising this contention, the learned counsel for the assessee had prayed that such new evidence should not be taken into consideration while deciding the issue on merits. The finding of fact has been recorded by him in the following words:

"From the reading of the order of the Assessing Officer and that of the CIT, it is very clear that the seized paper with both sides was confronted to the assessee. We accordingly reject the argument of the learned counsel that the back side of the seized paper is a new piece of evidence and the same should not be admitted."

27. The order of assessment is well as Note of the CIT have been gone through by me very carefully. There is nothing either in the assessment order or in the Note of the CIT on the basis of which it can be said that back side of the loose paper was ever shown to the assessee. What has been stated by the Assessing Officer at page 2 of his order is that copy of the loose paper seized from the residence of Dr. Tanna was given to the assessee. On the basis of this reference, one may argue that copy of both sides might have been given to the assessee. In the absence of any specific reference and the specific allegation of the assessee that back side of the loose paper was never shown, the controversy can be resolved only by referring to the attendant circumstances of the case. At page 3 of the assessment order, the Assessing Officer has referred to the reply of the assessee dated 26-2-1997 furnished in the regular assessment proceedings for the assessment year 1994-95. Copy of this letter is placed at pages 21 to 26 of the paper book. The assessee vide its letter has explained all the entries jotted down by Dr. Tanna on the front side of the loose paper, but there is no reference to the alleged jottings on the back side of the paper. There was no reason for not explaining entries on the back side had it been shown or disclosed to the assessee. In the Block assessment proceedings, the Assessing Officer again issued a letter dated 23-4-1998 along with the copy of the aforesaid loose paper. Copy of this letter along with the Annexures, including the loose paper appear at pages 33 to 40 and copy of the loose paper allegedly given to the assessee appears at page 37 of the paper book. Again it is the xerox copy of the front page only. Reply to this notice is given by the assessee vide letter dated 30-4-1998, appearing at pages 41 to 43 of the paper book. In this letter, it is said that earlier reply dated 26-2-1997 may be treated as reply of this letter as far as the loose paper is concerned. It is pertinent to note that the Assessing Officer has not made any comments anywhere in the entire order as to why the assessee had not replied regarding the jottings on the back side of the loose paper. Rather, it appears that perhaps even the Assessing Officer was not aware of the alleged jottings on the back side of the loose paper. Had he been aware of the contents of the back side of the loose paper, he would have certainly made some remarks/observations about that. Further written submissions of the assessee before the CIT, Pune, as well as the Note of the CIT dated 29-7-1998 also deal with only details on front side of the loose paper and there is no whisper about the jottings made on back side of the loose paper. This also shows that even the CIT was not aware of such jottings.

28. It was for the first time that the back side of the loose paper was brought to the notice of the Tribunal by the senior D.R. in the course of his reply to the arguments of the learned counsel for the assessee. Admission of this evidence was seriously objected to by Mr. Pathak in his arguments as well as in the written Note copy of which is placed on record. Para 14 of the said Note states as under:

"14. In reply to D.R.'s submissions, it was submitted by Shri Pathak that first of all, the alleged back side of the paper No. 37 which is produced by the DR. is fresh evidence. The alleged back side of paper No. 37 was neither shown to the appellants nor a xerox copy was furnished to the appellants and the appellants had no opportunity to deal with the notings made thereon. The appellants had given exhaustive comments on paper No. 37 (the front side of the loose paper) and if a copy of the back side had been given to the appellants, they would have definitely dealt with the same appropriately. No reasons were given by the DR as to why Assessing Officer and CIT have not referred to it at all or why they did not cross-examine the appellants with regard to this alleged back side. The said back side of paper No. 37 which is not serially numbered is new piece of evidence and since no reasons were put forward by DR as to this default on the part of Assessing Officer and CIT the said back side of paper No. 37 is not admissible in evidence and should not be admitted in evidence at all. Moreover the said back side of paper No. 37 cannot be tendered as evidence unless the authenticity thereof or the contents thereof are proved applying the principles of Evidence Act. Although the Evidence Act may not apply, the principles thereof do apply. See ratio of the judgment of Supreme Court in the matter of Chuharnal v. CIT, MP (May 2, 1988)."

The learned senior D.R. has not been able to state as to why the Assessing Officer or the CIT had not referred to in the assessment order/Note about the jottings on the back side of the loose paper. In order to counter the objection of the learned counsel for the assessee, the Revenue could have filed at least the Affidavit of the Assessing Officer which it had failed to produce. In view of the abovesaid attendant circumstances, it is held that the contents of back side of the loose paper was never disclosed or shown to the assessee, either by the Assessing Officer or by the CIT.

29. Having held that back side of the loose paper was never shown to the assessee, it has to be further held that there was gross violation of principles of natural justice and, consequently, it has to be excluded from consideration on merits, since it cannot be considered as an admissible evidence/material, in view of the Supreme Court judgment in the case of Kishinchand Chellaram v. CIT[1980] 125 ITR 713. In that case, addition of Rs.1,07,350 was made on the basis of letter dated 18-2-1955 said to have been addressed by the Manager of Punjab National Bank to the ITO which was never shown to the assessee. In this connection, following observations were made by their Lordships at page 720:

"It is true that the proceedings under the Income-tax Law are not governed by the strict rules of evidence and, therefore, it might be said that even without calling the manager of the bank in evidence to prove this letter, it could be taken into account as evidence. But before the I.T. authorities could rely upon it, they were bound to produce it before the assessee so that the assessee could controvert the statements contained in it by asking for an opportunity to cross-examine the manager of the bank with reference to the statements made by him."

Proceeding further, it was observed at page 722 as under:

"We are clearly of the view that the letters dated 18-2-1955, and 9-3-1957 did not constitute any material evidence which the Tribunal could legitimately take into account for the purpose of arriving at the finding that the amount of Rs.1,07,350 was remitted by the assessee from Madras, and if these two letters are eliminated from consideration, it is obvious that there was no material evidence at all before the Tribunal which could support this finding."

In view of the above discussion, it is held that back side of the loose paper cannot be considered as an admissible evidence/material and, consequently, is excluded for consideration on merits.

30. Before coming to the merits of the case, it would be useful to refer to the settled legal position that what is apparent is real state of affairs and the onus to prove the contrary lies on the person who alleges that apparent is not the real one. Reference can be made to the two decisions of the Hon'ble Supreme Court in the case of CIT v. Daulatram Rawatmull[1973] 87 ITR 349 and in the case of CIT v. Durga Prasad More [1971] 82 ITR 540. In the present case, it is the revenue who has alleged that the sale consideration as shown by the assessee of the flat sold to Dr. Tanna is not correct. Therefore, the onus of proving that the assessee has received the alleged sum of Rs.10.65 lakhs as 'on money' lies heavily on the Revenue which can be discharged only by producing positive material/evidence and, therefore, no addition can be made on mere assumptions or presumptions.

31. Now, coming to the merits of the case, the so-called materials on the record on the basis of which addition has been made are:--

(i) jottings on the front page of the loose paper, and

(ii) a part of the statement of Dr. Tanna, i.e. answer to question No. 7 recorded under section 132(4).

Copy of the loose paper is part of the order as Annexure while relevant part of the aforesaid statement appears in para 2 of the proposed order. The most pertinent question is whether the Revenue can be said to have discharged this onus by bringing admissible material/evidence on the record. In my opinion, the so-called material brought on record suffers from legal infirmity. The xerox copy of the loose paper and part of the statement on the basis of which addition has been made are nothing but the mere informations received by the Assessing Officer from his counterpart in Mumbai. Such informations cannot be considered as admissible material/evidence, unless it is corroborated by direct evidence, i.e. by the person who made the statement or who made jottings on the loose paper. If the Assessing Officer wanted to use such informations against the assessee, then he must have examined Dr. Tanna and an opportunity to cross-examine should have been given to the assessee.

This is a bare minimum requirement of the principles of natural justice, which has not been complied with by the Assessing Officer. In my considered opinion, no information obtained from outside can be admitted as evidence against the assessee unless such information stands to the test of cross-examination. No doubt, the Assessing Officer is not fettered by technical rules of evidence, yet the basic principles of Evidence Act are applicable to the tax proceedings. Reference can be made to the Supreme Court judgment in the case of Chuharmal v. CIT [1988] 172 ITR 250. Since Dr. Tanna was neither examined by the Assessing Officer, nor the assessee was allowed an opportunity to cross-examine, in my opinion, the information used by the Assessing Officer suffers from serious infirmity and, therefore, in law cannot be used against the assessee as an evidence.

Non-compliance of the natural justice has weakened the case of the Revenue. The statement of Dr. Tanna under section 132(4) and the loose paper found from his possession might have evidentiary value in the assessment of Dr. Tanna, but as far as the assessment in the case of third party is concerned, it has no evidentiary value, unless such information stands to the test of cross-examination. In the case of Miss Lata Mangeshkar it was held by the Bombay High Court that entries in the books of third party were corroborative evidence and could not be used against the assessee unless supported by direct evidence. Since direct evidence in that case suffered from infirmities, the High Court upheld the finding of the Tribunal that entries in the books of account of third parties could not be used against the assessee. In view of the above discussion, in my opinion, no addition can be sustained on the basis of such informations, inasmuch as it cannot be said that the onus which lies on the Revenue has been discharged.

32. The aforesaid view taken by me is also fortified by the decision of the Punjab and Haryana High Court in the case of Chiranji Lal Steel Rolling Mills v. CIT [1972] 84 ITR 222, wherein it has been held as under:

"The ITO has power to collect evidence from any source but it is his duty to put it to the assessee before making it the basis of his assessment. If the assessee denies the information collected by the ITO, it is the duty of the ITO to satisfy himself by making independent enquiry from sources considered reliable by him and decide whether the information passed on to him is true or not. If as a result of his own independent enquiry he comes to the conclusion that the information received by him is true, he is at liberty to act thereon after disclosing it to the assessee and affording him a reasonable opportunity of rebutting it.

The copy of entries from the accounts of another firm supplied to the ITO by the sales-tax department was not legal and admissible evidence on which the ITO could act for imposing extra burden of income-tax on the assessee when the original accounts were missing and could not be verified and when the assessee denied the entries therein."

The Apex Court in the case of Central Provinces Manganese Ore Co. Ltd v. ITO [1991] 191 ITR 662 has held that finding of the Customs Authorities may be sufficient for reopening the assessment under section 147(a), but not binding upon the Income-tax authorities. In view of these decisions, it is clear that no assessment can be made merely on the information received from other authorities. If the Assessing Officer wants to make an addition, then he must make an independent enquiry and the assessee be allowed to cross-examine the concerned persons.

33. However, it is surprising to note, at this stage, that the Assessing Officer had issued summons under section 131 along with the letter dated 1-6-1998 to Dr. Tanna of Mumbai seeking information about the flat purchased by him. One of the query was as to how much cash payment had been made by him to the assessee which had been offered by him as undisclosed income. In response to the said summons, Dr. Tanna through his Chartered Accountant replied vide letter dated 11-6-1998 wherein it was categorically stated that he had not paid any 'on money' in respect of the flat purchased from this assessee and the amount of Rs.10.65 lakhs was offered just to avoid prolonged litigation and to buy peace. These correspondences appear at pages 61 to 67 of the paper book. Probably because of such specific denial, the Assessing Officer did not examine Dr. Tanna and conveniently did not refer to this factual aspect in the assessment order. In view of this factual aspect, it can be said that the information obtained by the Assessing Officer remained un-corroborated by direct evidence and, therefore, no addition could be made.

34. Even assuming for the sake of argument that the Assessing Officer was entitled to consider the aforesaid information as admissible material, still in my view, the said information does not lead to the conclusion that the assessee had received the sum of Rs.10.65 lakhs from Dr. Tanna. The front page of the loose paper refers to the area of the flat at 1140 sq.ft. while the flat purchased by Dr. Tanna was of a different size, i.e. 1010 sq.ft. built-up area with terrace of 83 sq.ft. Below the area, following entries were made:

"1,00,000 New cheque

57,000 2nd cheque

10,26,000

cash

10,65,000

5,27,000 as work progresses upto December, 1995."

The details of payment received by the assessee from Dr. Tanna appear at page 27 of the paper book.

Perusal of the same shows that there is no single receipt of Rs.1,00,000 by cheque. No doubt, there was initial receipt of Rs.1,00,000, but the same was by two cheques of Rs.50,000 each. The word 'second cheque' mentioned in the loose paper clearly shows that the earlier payment of Rs.1,00,000 by single cheque. Further, there is no receipt of Rs.57,000 by cheque. Therefore, it can be inferred that the cheque payments as shown in the loose paper do not tally with the receipts by cheque in the books of the assessee. Further, no name is mentioned on the front side of the loose paper. The last narration "as work progresses upto December, 1995" shows that all these payments related to one property. If that is so, then there is no reason to pick up one entry of Rs.10.65 lakhs and attribute the same to the transaction with the assessee. The total sum of the payments comes to Rs.27.75 lakhs which can never be the price of a flat of such small size. Possibility of such payment in respect of some other flat in Mumbai cannot be ruled out. There might be also a possibility of jotting down of details of payment in respect of a flat to be purchased in future and final deal might not have been struck down.

Therefore, considering all these factual aspects as a whole, I am of the view that no inference can be drawn on the basis of jottings on the loose paper that the assessee received payment of Rs.10.65 lakhs.

35. It is also to be noted that Dr. Tanna had referred to the payment of Rs.6.55 lakhs by cheque. That too does not tally with the amounts received by the assessee as per the books.

The agreed consideration as per the Agreement was Rs.6 lakhs, while actual receipt by the assessee (including interest) by cheque was Rs.6,03,600. If the figure of cheque payment does not tally with the figure of receipt by the assessee, then the question of attributing payment of Rs.10.65 lakhs to the assessee does not arise. Further Dr. Tanna has retracted from the statement in his assessment proceedings by specifically denying such payments to the assessee. He had also denied this fact vide letter dated 11-6-1998 addressed to the present Assessing Officer appearing at page 61 of the paper book. Therefore, the veracity of the informations received by the Assessing Officer cannot be said to have been established.

36. Even assuming for the sake of argument that back side of the loose paper was admissible material, even then, I am of the view that no addition can be made. It is pertinent to note that on the back side two names are written, viz. K.M. Associates and Somerset Developers (village). It is interesting to note that the name of K.M. Associates is scored out. It is not known as to how and why this name was scored out. Further, it is noted that payment by cheque has been shown at Rs.6.55 lakhs. As already mentioned by me, the agreed price for the flat was Rs.6 lakhs only and the payment by cheque received by the assessee was only Rs.6,03,600 including interest. Therefore, if the payment by cheque does not tally, then the question of attributing such payments to the transactions with the assessee does not arise. In such eventuality, the entire figures are to be rejected and cannot be relied on.

37. In view of the above discussion, I am of the view that the department has not been able to establish its case against the assessee. Accordingly, the addition made by the Assessing Officer cannot be sustained. Consequently, the addition made by the Assessing Officer is deleted.

38. In the result, the appeal of the assessee is allowed.

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

As there is a difference of opinion between the Accountant Member and Judicial Member, the matter is being referred to the President of the Income-tax Appellate Tribunal with a request that the following questions may be referred to a Third Member or to pass such orders as the President may desire:

"(1) Whether on the facts and in the circumstances of the case, can it be said that back side of the loose paper was shown or disclosed by the Assessing Officer to the assessee? If not, can it be considered as an admissible evidence for making addition?

(2) Whether on the facts and in the circumstances of the case, as well as in law, the Assessing Officer was justified in making addition of Rs.10.65 lakhs as undisclosed income?"

THIRD MEMBER ORDER

Per Shri J.P. Bengra, Vice-president--There being a difference of opinion between the Members constituting the Division Bench, the Hon'ble President has referred, under section 255(4) of the Income-tax Act, 1961, the following points of difference to me as a Third Member to resolve the controversy:

"1. Whether, on the facts and in the circumstances of the case, can it be said that back side of the loose paper was shown or disclosed by the Assessing Officer to the assessee? If not, can it be considered as an admissible evidence for making addition?

2. Whether, on the facts and in the circumstances of the case as well as in law, the Assessing Officer was justified in making addition of Rs.10.65 lakhs as undisclosed income?"

2. The facts of the case are that the assessee is a firm dealing in the business of construction and sale of flats. The assessee has undertaken construction of a project on the land at Wanowrie. The construction of flats at Wanowrie has been undertaken in two phases, i.e. Phase-I by the name May Fair Developers and Phase-II by the name of Somerset Developers.

3. On 2-11-1995, a search action under section 132 of the Income-tax Act, 1961 was conducted at the premises of one Dr. D.D. Tanna in Mumbai. Certain documents were found and seized from his. possession, in which it was found that Dr. Tanna had purchased Flat No. 122 on the second floor from Phase-II of the assessee's construction at Wanowrie, viz. Somerset Developers, vide agreement dated 17-9-1994, according to which the purchase price was fixed at Rs.6.55 lakhs. In this search, a loose paper, which was marked as Paper No. 37, was seized. The backside of this paper had the following contents:

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

"Somerset Developers - (village)

17.2 total value incl-garage

A 6.55 cheque

-------

10.65 cash

.55 cheque II

Actual paid."

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During the course of proceedings under section 132(4) of the Act a statement of Dr. D.D. Tanna was recorded in which Dr. D.D. Tanna was confronted with this loose paper and he explained as under:

"Q. No. 7: Particularly I would like to show you back side of loose paper bearing Sr.No. 61 of Annexure A-I. Kindly go through it and explain to me the contents thereof?

Ans. It is very simple. I have to pay by cheque a sum of Rs.6.55 lacs as per agreement for purchase of flat at Pune from Somerset Developers. Some of the instalments have gone through my bank account. I have paid a sum of Rs.10.65 lacs as cash from my professional income not recorded as yet in my books of account and I wish to admit the same as my admitted concealed income."

The Dy. Commissioner of Income-tax, Special Range-26, Mumbai, completed the block assessment in which Dr. Tanna surrendered a sum of Rs.10.65 lakhs being the cash payment made to the assessee, besides payments made through bank. The statement of Dr. D.D. Tanna recorded under section 132(4) of the Act and the said seized papers were forwarded by the Dy. CIT, Special Range-26, Mumbai to the Dy. Commissioner of Income-tax, Special Range-4, Pune, who had the jurisdiction over the assessee. Accordingly, the Dy. CIT, Special Range-4, Pune (hereinafter referred to as the 'Assessing Officer') issued notice to the assessee under section 158BC read with section 158BD of the Act to the assessee in the month of July, 1997. In pursuance to the said notice, the assessee filed its return for the block period on 13-8-1997 declaring undisclosed income at NIL.

4. During the course of assessment proceedings, the assessee submitted before the Assessing Officer that no cash payment of Rs.10.65 lakhs was received by it from Dr. D. Tanna. Rather, the flat had sold at a price recorded in the agreement and the payment had been received through cheque, which is duly recorded in the accounts. While explaining the entries recorded on loose paper No. 61, the assessee, vide its reply dated 26-2-1997 which was filed during the course of regular assessment for assessment year 1994-95, stated that the figure of Rs. 1 lac with remarks 'Now cheques' is not correct as under the agreement for sale, Dr. Tanna had paid to the assessee the initial deposit of Rs.50,000 which was acknowledged in the receipt at the end of the agreement and Dr. Tanna had given second cheque of Rs.50,000 which had been appropriated towards balance consideration payable by Dr. Tanna. As regards the figure of Rs.57,000 with the remarks 'Second cheque' it was explained that the same had been received by the assessee from Dr. Tanna.

Regarding the figure of Rs.10.65 lakhs appearing on loose paper No. 61, it was contended that no such payment had been received by the assessee and that the same does not refer to the assessee's transaction for the simple reason that as against the flat of the value of Rs.6 lakhs, it is inconceivable that a sum of Rs.20.91 lakhs would be paid in cash. The flat in question sold to Dr. Tanna is in a complex developed in a remote undeveloped area of Wanowrie, where considering the slackness in the market and the number of flats available, the assessee was compelled to sell the flats at the best available price. It was further submitted that one Mr. Bachhubhai, who was a friend of Dr. Tanna, had contacted Mr. Prakash, a commission agent working for the assessee-firm. The statement of Mr. Prakash was recorded on 14-7-1998, wherein he has stated that he was doing the business of commission and brokerage. Though he did not know Dr. Tanna and his wife, he came in contact with Mr. Bachhubhai and took him to the office of Somerset Developers. On being shown loose paper No. 61, he admitted that telephone No. 655892 (written on the said piece of paper), which belonged to the assessee, was given by him to Mr. Bachhubhai as his contact number. From the statement of Mr. Prakash, the Assessing Officer concluded -- 'From the above discussion it is clear that entries on this paper have some direct as well as indirect nexus with the sale of flat by the assessee to Dr. Tanna. No doubt various other entries are also recorded on this paper, including those of amounts as well as area of flats but then only those entries are being considered for the purpose of block assessment which are found related to purchase of flat by Dr. Tanna. While the assessee discussing various entries has dismissed them as not relating to him, I am of the opinion that transaction which has been admitted by Dr. Tanna in his statement during the course of search pertain to the purchase of flat by him from the assessee." The assessee had also placed reliance on the decision of the Bombay High Court in the case of Miss Lata Mangeshkar However, the Assessing Officer distinguished the facts of the present case from those of Miss Lata Mangeshkar's case and thereby concluded that Dr. Tanna had made a cash payment of Rs.10.65 lakhs over and above the consideration agreed to and given by cheques and the assessee had not recorded this cash payment of Rs.10.65 lakhs in its books of account and accordingly the amount of Rs.10.65 lakhs was assessable in the hands of the assessee as undisclosed income.

5. The Assessing Officer prepared a draft assessment order and sent it to the Commissioner of Income-tax for approval, who, after giving an opportunity of being heard to the assessee, approved the order of the Assessing Officer, vide detailed Note dated 29-7-1998, which formed Annexure to the assessment order. Before the CIT, besides the reliance placed on the decision of the Bombay High Court in the case of Miss Lata Mangeshkar, the assessee had further placed reliance on the following two decisions:

1. V.C. Shukla's case

2. Bala Prasad R. Lokmanyawar's case.

The CIT, in his note, distinguished the facts of the assessee's case from the facts of the cases cited before him and held that the ratio laid down in the above cases was not applicable to the facts of the present case. While concluding he held that the paper pertained to the transaction between the assessee and Dr. Tanna, the figure of Rs.10.65 lakh is was found recorded and Dr. Tanna admitted having paid this amount to the assessee and also surrendered the same in his assessment. He concluded that no prudent person would voluntarily subject himself to substantial tax burden unless he knows that he did not earn undisclosed income. Accordingly, he held that the arguments of the assessee are devoid of any merit.

6. Before the CIT, the assessee had also pointed out that the Registrar of Stamp Duty, Maharashtra State, had approved the rate of Rs.441 per sq. ft. for stamp duty purposes for the financial year 1994-95 in respect of Wanowrie area, whereas on the basis of the documented price of Rs.6 lakhs the rate of the flat sold by the assessee to Dr. Tanna worked out to Rs.594. On that basis, it was argued before the CIT that this was a cogent evidence of the fact that the rate was reasonable and there was no scope of passing of any on-money. However, the CIT rejected this argument of the assessee observing "This argument cannot be accepted when sufficient material is available as already indicated in the draft order. It is common knowledge that the rates approved for stamp duty purposes may not have any relation to the prevailing market rates which are normally substantially higher than the approved rate."

7. Aggrieved, the assessee filed an appeal before the Tribunal. The learned counsel for the assessee, Dr. Sunil Pathak, raised the following important aspects before the Division Bench:

(a) The seized paper is an undated and unsigned loose paper admittedly not in the handwriting of either Dr. Tanna or his wife. The paper refers to three flats and the area mentioned in any of the flats mentioned therein tallied with the area of the flat sold to Dr. Tanna.

(b) The paper mentioned so many figures in cash and it is not known how the Assessing Officer has adopted the figure of Rs.10.65 lakhs as on-money paid for the flat in question.

(c) The total of all the figures is Rs.25.62 lakhs but how the Assessing Officer selected only Rs.10.65 lakhs as the on-money paid in cash for the flat in question.

(d) The papers mention the name of Mr. Prakash, the broker for the deal. Secondly the paper clearly states that Mr. Bachhubhai, a friend of Dr, Tanna, was the person in between for this deal and the entire writing conclusively proves that the entire deal was done, negotiated and completed by Mr. Bachhubhai on behalf of Dr. Tanna.

(e) The cheque payments mentioned in the paper do not tally with actual payments received by the assessee as per the Agreement.

(f) Mr. Prakash in his statement recorded before the Assessing Officer has denied that any on-money was paid.

8. Dr. Sunil Pathak, the learned counsel for the assessee further submitted that Mrs. Tanna in her statement, appearing at page 56 of the paperbook, had confirmed that the handwriting in page 37 is neither her's nor of her husband, Dr. Tanna. Both the Tannas have also confirmed that no on-money was paid to the assessee for the flat in question. Attention of the Bench was invited to the Affidavit of Dr. Tanna, dated 28-7-1998 filed before the CIT wherein he has stated that he had not paid any on money to the assessee. Besides this argument, reliance was placed on the decision of the Bombay High Court in the case of Miss Lata Mangeshkar V.C. Shukla and Bala Prasad R. Lokmanyawar.

9. On the other hand, the learned Sr. Departmental Representative, Shri Naresh Kumar, had supported the order of the Assessing Officer as approved by the CIT, vide his note dated 29-7-1998. He produced original seized documents, of which the Bench has made an Annexure to its order. He pointed out to the Bench that the learned counsel for the assessee has filed only the photocopy of the front page of the seized paper and had omitted to file the back side of the same. He further submitted that this back side is most important and it was on the basis of the entries made on this back side that Dr. Tanna, in answer to question No. 7, admitted that he had paid a sum of Rs.10.65 lakhs in cash from his professional income "not recorded as yet" in his books of account and admitted the same as his concealed income. As regards the front page of the seized paper, the learned Departmental Representative submitted that the paper refers to three flats and the figure in the middle portion refers to the flat in question. These notings were more in the nature of proposals and really the entries which go to the root of the controversy are on the back page, which are self-evident and which were duly admitted by Dr. Tanna in a spontaneous way during the course of proceedings under section 132(4) of the Act. It was emphasised that Dr. Tanna has stated that he is a leading Doctor, hence he must be an intelligent person and it was not expected that he would hand over so much of money to Mr. Bachbubhai or Mr. Prakash, the middleman. He would himself hand over the same to the assessee. Thus he had submitted that it could be safely stated that the assessee had received this amount. Under these circumstances, Mr. Bachhubhai, who had taken the money, should have been produced. Having not done so, the assessee cannot take up such a contention. As regards the denial by Dr. Tanna in the Affidavit filed before the CIT, it was submitted that the Affidavit was filed only a few days before the assessment was getting time barred. Secondly, it was filed after three years and thus it has no evidentiary value. It was further emphasised that Mrs. Tanna came over to Pune to see the flats and it is unlikely that she did not meet the assessee. Thus the money must have been paid by Tannas to the assessee only.

10. In rejoinder, Dr. Sunil Pathak, the learned counsel for the assessee, submitted that the alleged back side of the paper No. 37 was neither shown to the assessee nor a xerox copy of the same was provided to it and thus the assessee had no opportunity to meet with the notings made thereon. It was pointed out that the assessee had given exhaustive comments on paper No. 37 (front side of the loose paper) and if a copy of the back side had been given to the assessee it would have definitely dealt with the same appropriately. No reasons were given by the learned Sr. Departmental Representative as to why the Assessing Officer and the CIT had not referred to it at all or why they did not cross-examine the assessee with regard to the back side. According to the learned counsel for the assessee, it was a new piece of evidence. It was further submitted that the back side of the paper No. 37 cannot be tendered as evidence unless the authenticity thereof or the contents thereof are proved by applying the principles of Evidence Act. The learned counsel for the assessee had attacked the contents of the paper No. 37, both on the front page and the back side. He emphasised that Dr. Tanna had categorically stated in para 4 of his Affidavit filed before the CIT that the said note is neither prepared by him nor by his wife and he has retracted from the statement having admitted making of cash payment of Rs.10.65 lakhs on the ground that it was given under coercion and pressure. It was submitted that Dr. Tanna's wife was summoned before the Assessing Officer and the Chartered Accountant, Mr. Ghabawalla, of both Mrs. Tanna and Dr. Tanna, had categorically denied the payment of any cash amount for the purchase of the flat in question.

11. In reply, Mr. Naresh Kumar, the learned Sr. Departmental Representative, emphasised that the seized paper formed part of the record. it had two sides and the same was given to the assessee. Therefore, it cannot be said that it was a fresh piece of evidence. He submitted that the learned counsel for the assessee did not produce this paper in the paperbook and it was only when he produced the seized papers that the learned counsel choose to make a flimsy argument. The loose paper as a whole was part of the material seized from the premises of Dr. Tanna in Mumbai. It was pointed out that on the basis of the entries on the back side, which were specifically confronted to Dr. Tanna, he admitted payment of cash money of Rs.10.65 lakhs and also surrendered the same for assessment in his block assessment.

12. On consideration of the facts of the case and the submissions on either side, the learned Accountant Member came to the conclusion that the seized paper shows that it pertained to the transaction between Dr. Tanna and the assessee and the figure of Rs.10.65 lakhs was also found recorded therein and Dr. Tanna had admitted having paid this amount to the assessee and also surrendered the same in his block assessment. He held that the paper found during the course of search has to be read as a whole--both sides of the paper as held by the Tribunal in the case of Chander Mohan Mehta. He observed that from the reading of the order of the Assessing Officer and the note of the CIT it is very clear that the seized paper with both sides was confronted to the assessee. The learned Accountant Member further observed that it is very naive on the part of the learned counsel to submit that the back side of the seized paper was never confronted to the assessee by the Assessing Officer and the CIT because the seized paper is the fulcrum point on which the whole case revolves and it is too much to say that such vital evidence on which the authorities below based their conclusions was not shown to the assessee. He accordingly rejected the argument that the back side of the seized paper is a new piece of evidence and the same should not be admitted.

13. The learned Accountant Member observed that no doubt, the seized paper is undated and unsigned and even if it is admitted that it is not in the handwriting of Dr. Tanna or his wife, it is a vital piece of evidence which was duly admitted by Dr. Tanna as belonging to him and on the basis of entries made on the back side of this paper, Dr. Tanna offered a sum of Rs.10.65 lakhs as undisclosed income (being cash component of the purchase price of the flat). He has also observed that there is no evidence to establish that the admission was made by Dr. Tanna under any pressure or coercion. Accordingly this argument of the learned counsel for the assessee was also rejected. The learned Accountant Member further observed that it does not appeal to commonsense that a leading Doctor would pass on a sum of Rs.10.65 lakhs to a middleman and not to the assessee-firm. Accordingly he rejected the argument of the learned counsel that either Mr. Prakash or Mr. Bachhubhai might have pocketed the sum of Rs.10.65 lakhs. The learned Accountant Member also rejected the reliance placed by the learned counsel on the affidavit of Dr. Tanna filed before the CIT by stating that it is an established legal position that the first statement recorded during course of search has greater evidentiary value and the subsequent retractions have to be ignored. In this connection, reference was made to the decision of the Hon'ble Supreme Court in the case of C. Vasantlal & Co. The learned Accountant Member was of the view that the decisions relied upon by the learned counsel for the assessee, namely, Miss Lata Mangeshkar's case; V.C. Shukla's case and Bala Prasad R. Lokmanyawar's case have no application to the facts of the present case as they are distinguishable on facts.

14. The learned Accountant Member has also rejected the ground of the assessee that the Assessing Officer was not justified in invoking provisions of Chapter XIV-B of the Act in making the assessment. Since no reference has been made under section 255(4) of the Act to me on this issue, it is not necessary to incorporate the findings of the learned Accountant Member on this issue, in this order.

15. On the basis of the above observations, the learned Accountant Member held that the impugned addition of Rs.10.65 lakhs was perfectly justified as undisclosed income in the hands of the assessee.

16. The learned Judicial Member, however, observed that there is nothing either in the assessment order or in the Note of the CIT to indicate that the back side of the loose paper was ever shown to the assessee. He noticed that what has been stated by the Assessing Officer at page 2 of his order is that copy of the loose paper seized from the residence of Dr. Tanna, was given to the assessee. However, he observed, in the absence of any specific reference and the specific allegation of the assessee that back side of the loose paper was never shown, the controversy can be resolved only by referring to the attendant circumstances. He noticed that the assessee in its letter dated 26-2-1997 filed during the course of regular assessment for assessment year 1994-95, which has been requested to be treated as the reply of the assessee to the letter dated 23-4-1998 in the block assessment proceedings, has explained all the entries jotted down by Dr. Tanna on the front side of the loose paper, but there is no reference to the alleged jottings on the back side of the paper. He observed that there was no reason for not explaining the entries on the back side had it been shown or disclosed to the assessee. The learned Judicial Member further observed that the Assessing Officer has not made any comments anywhere in the entire order as to why the assessee had not replied regarding the jottings on the back side of the loose paper. Rather it appears that perhaps even the Assessing Officer was not aware of the alleged jottings on the back side of the loose paper. He has also observed that the written submissions of the assessee before the CIT as well as the note of the CIT also dealt with only details on front side of the loose paper and there is no whisper about the jottings made on back side. Thus he held that it was for the first time that the back side of the loose paper was brought to the notice of the Tribunal. He observed that in order to counter the objection of the learned counsel for the assessee, the revenue could have filed at least the Affidavit of the Assessing Officer, which it had failed to produce. In the light of the attendant circumstances, the learned Judicial Member held that the contents of back side of the loose paper were never disclosed or shown to the assessee, either by the Assessing Officer or by the CIT.

17. Having held that back side of the loose paper was never shown to the assessee, the learned Judicial Member held that there was gross violation of principles of natural justice and, consequently, the back side of the loose paper has to be excluded from consideration on merits, since it cannot be considered as an admissible evidence/material. For this purpose, he referred to the decision of the Hon'ble Supreme Court in the case of Kishanchand Chellaram. Referring to the decisions of the Hon'ble Supreme Court in the case of Daulatram Rawatmull and in the case of Durga Prasad More, the learned Judicial Member was of the opinion that what is apparent is real state of affairs and the onus to prove the contrary lies on the person who alleges that apparent is not the real one. He observed that in the instant case, the onus was on the revenue to prove that the assessee has received the alleged sum of Rs.10.65 lakhs as on-money, which can be discharged only by producing positive material/evidence and, therefore, no addition can be made on more assumptions or presumptions.

18. On merits, the learned Judicial Member observed that the so-called materials on the record on the basis of which addition has been made are:--

(i) jottings on the front page of the loose paper, and

(ii) a part of the statement of Dr. Tanna, i.e. answer to question No. 7 recorded under section 132(4).

He observed that the most pertinent question is whether the revenue can be said to have discharged this onus by bringing admissible material/evidence on record. In his opinion, the so-called material brought on record suffers from legal infirmity, as the said materials are nothing but the mere information received by the Assessing Officer from his counterpart in Mumbai. He held that such information cannot be considered as admissible material/evidence, unless it is corroborated by direct evidence. He observed that if the Assessing Officer wanted to use such information against the assessee, then he must have examined Dr. Tanna and an opportunity to cross-examine him should have been given to the assessee. He further observed that no doubt, the Assessing Officer is not fettered by technical rules of evidence, yet the basic principles of Evidence Act are applicable to tax proceedings. Reference was also made to the decision of the Supreme Court in the case of Chuharmal. Since Dr. Tanna was neither examined by the Assessing Officer nor the assessee was allowed an opportunity to cross-examine, in his opinion, the information used by the Assessing Officer suffers from serious infirmity and, therefore, in law, cannot be used against the assessee as an evidence.

19. The learned Judicial Member observed that the statement of Dr. Tanna recorded under section 132(4) and the loose paper found from his possession might have evidentiary value in the assessment of Dr. Tanna, but as far as the assessment in the case of a third party is concerned, it has no evidentiary value, unless such information stands to the test of cross-examination. According to him the decision of the Bombay High Court in the case of Miss Lata Mangeshkar is applicable to the facts of the present case. He further observed that in view of the decision of the Punjab & Haryana High Court in the case of Chiranji Lal Steel Rolling Mills and the decision of the Apex Court in the case of Central Provinces Manganese Ore Co. Ltd., no assessment can be made merely on the information received from other authorities.

20. The learned Judicial Member has also observed that Dr. Tanna in response to the summons issued by the Assessing Officer had replied categorically stating that he had not paid any on-money in respect of the flat purchased from the assessee and the amount of Rs.10.65 lakhs was offered just to avoid prolonged litigation and to buy peace. He has also discussed the jottings on the front page of the loose paper and concluded that no inference can be drawn on the basis of such jottings that the assessee received payment of Rs.10.65 lakhs. The learned judicial Member has also observed that the payment by cheque of Rs.6.55 lakhs referred to by Dr. Tanna did not tally with the amounts received by the assessee as per its books. He observed that the agreed price for the flat was Rs.6 lakhs only and the payment by cheque received by the assessee was only Rs.6,03,600 including interest. Therefore, if the payment by cheque does riot tally, then the question of attributing such payments to the transactions with the assessee does not arise.

21. In the light of his above observations, the learned Judicial Member concluded that the department has not been able to establish its case against the assessee. Accordingly, the addition made by the Assessing Officer cannot be sustained. Consequently, the addition made by the Assessing Officer is deleted.

22. Before me, the learned counsel for the assessee, Dr. Sunil Pathak, reiterated basically the same arguments which were advanced by him before the Division Bench. He submitted that the seized paper is an undated and unsigned loose paper admittedly not in the handwriting of Dr. Tanna. However, on a query by me, the learned counsel for the assessee admitted that it might be in the handwriting of Dr. Tanna. The other submission of the learned counsel for the assessee was that the loose paper refers to three flats and the area mentioned in any of the flat found mentioned therein tallied with the area of the flat sold to Dr. Tanna. The paper mentions so-money figures in cash and it is not known as to how the Assessing Officer has adopted the figure of Rs.10.65 lakhs as on-money paid for the flat in question. Under these circumstances, he submitted, the payment does not tally with the seized paper, page 37. My attention was invited to the seized paper and the various entries on the front page of the paper. It was submitted that the total of all the figures comes to Rs.27.75 lakhs, but how the Assessing Officer has selected the figure of Rs.10.65 lakhs as the on-money paid for the purchase of the flat in question is not known. It was also pointed out that the paper is in the name of Mr. Prakash, the broker in deal and secondly the paper clearly states that Mr. Bachhubhai was the person in between for this deal and the writing conclusively proves that the entire deal was done, negotiated and completed by Mr. Bachhubhai on behalf of Dr. Tanna. He also pointed out that the cheque payment mentioned in the paper did not tally with the actual payment. It was pointed out that in her statement Mrs. Tanna had confirmed that the handwriting on page No. 37 is neither her's nor of her husband, Dr. Tanna. Both Tannas have confirmed that no on-money was paid to the assessee. It was pointed out that in the Affidavit filed before the CIT, Dr. Tanna had confirmed that no on-money was paid by him to the assessee. The main argument of Dr. Sunil Pathak, the learned counsel for the assessee, was that the alleged back side of the paper No. 37 was neither shown to the assessee nor a xerox copy of the same was ever provided to it and thus the assessee had no opportunity to meet the notings made therein. The assessee had given exhaustive comments on paper No. 37 (the front side of the loose paper) and if a copy of the back side had been given to it, it would have dealt with the same. The learned counsel for the assessee pointed out that this fact is corroborated by another circumstance that the back side of the paper does not find mentioned in the order of the Assessing Officer or in the note of the CIT. Therefore, it is evident that the back side of the paper No. 37 was not given to the assessee. Thus, it is a new piece of evidence which cannot be tendered as evidence unless the authenticity thereof or the contents thereof is proved by applying the principles of Evidence Act. It was further pointed out that Dr. Tanna's wife was summoned before the Assessing Officer and the Chartered Accountant of Tannas, Shri Ghabawalla, categorically denied the alleged cash payment for the purchase of the flat in question. The learned counsel for the assessee invited my attention to the Ready Reckoner of Stamp Duty of the Bombay Stamp Act, 1958 and pointed out that the stamp duty which was payable on Rs.6.25 lakhs was charged from the assessee in respect of the flat sold to Dr. Tanna. If the cost of the flat was more, the authorities cannot charge less stamp duty. Therefore, it is another circumstance which establishes that no on-money was paid for the purchase of the flat in question. The learned counsel for the assessee heavily placed reliance on the decision of the Hon'ble Supreme Court in the case of V.C. Shukla and also on the decision of the Bombay High Court in the case of Miss Lata Mangeshkar. Besides, he, has also placed reliance on the following decisions:

1. T.S. Venkatesan v. Asstt. CIT[2000] 74 ITD 298 (Cal.)

2. Rama Traders v. First ITO [1988] 25 ITD 599 (Pat.) (TM)

3. ITO v. W.D. Estate (P.) Ltd. [1993] 45 ITD 473 (Bom.)

4. Bala Prasad R. Lokmanyawar's case

5. Prarthana Construction (P.) Ltd. v. Dy. CIT [2001] 70 TTJ (Ahd.). 122

6. Monga Metals (P.) Ltd. v. Asstt. CIT [2000] 67 TTJ (All.) 247 at 252.

Further, my attention was invited to the decision of the Hon'ble Supreme Court in the case of Kishinchand Chellaram for the proposition that proceedings under the Income-tax Act governed by the strict rules of evidence. However, if the authorities want to rely on certain document an opportunity to cross-examine should always be given to the assessee. Therefore, the back side of the loose paper cannot be considered as an admissible evidence and material and consequently it should be excluded for the consideration on merits.

23. The learned Departmental Representative, Shri Raj Kumar, on the other hand, heavily relied on the order of the learned Accountant Member. My attention was invited to the statement of Dr. Tanna recorded immediately after the search under section 132(4) and it was pointed out that Dr. Tanna was confronted with the back side of the loose paper No. 37, which will be clear from the question and the answer given by Dr. Tanna as under:

"Q. No. 7: Particularly, I would like to show you back side of loose paper bearing Sr. No. 61 of Annexure A-I. Kindly go through it and explain to me the contents thereof.

Ans. It is very simple. I have to pay by cheque a sum of Rs.6.55 lakhs as per agreement for purchase of flat at Pune from Somerset Developers. Some of the instalments have gone through my bank account. I have paid a sum of Rs.10.65 lakhs as cash from my professional income not recorded as yet in my books of account and I wish to admit the same as my admitted concealed income."

Thus, it was submitted that the back side of the paper was put before Dr. Tanna and it was in the knowledge of the assessee during the proceedings before the CIT. So it is incorrect to say that the back side of the disputed paper was not in the knowledge of the assessee. It was pointed out that there is all possibilities that the back side of the paper was with the assessee as there is a pointed query to Dr. Tanna with regard to the back side of the paper on page 37. So the facts were disclosed to the assessee and it was aware of the back side of the disputed paper. As such, this piece of paper and its back side is admissible in evidence. Alternatively, it was pleaded that if it is assumed that the back side of the disputed paper was not within the knowledge of the assessee or given to it, the Tribunal can admit any additional evidence in an appeal before it for their fair and just disposal by exercising its inherent powers. In this connection, reliance was placed on the decisions of the Bombay High Court in the case of Smt. Suhasinibai Goenka v. CIT[1995] 216 ITR 518 and in the case of CIT v. Smt. Kamal C. Mehboobbani [1995] 214 ITR 15. He further pointed out that one cannot overlook the notorious fact that in real estate transactions on-money is paid for the purchase and sale of immovable properties and this fact has been taken note by the Hon'ble Supreme Court and various High Courts. He further reiterated that no prudent man of the status of Dr. Tanna would surrender the income himself and secondly by offering the income himself he has stopped further investigation in the matter. These facts coupled with the facts and circumstances of the present case, clearly establish that on-money of Rs.10.65 lakhs was paid in cash by Dr. Tanna to the assessee. He distinguished the facts of the case in the decisions relied upon by the learned counsel for the assessee, viz. in the case of V.C. Shukla and in the case of Miss Lata Mangeshkar. It was submitted that the rigours of the Evidence Act do not apply to Income-tax proceedings. The cases are decided on preponderance of probabilities and not by the strict rigours of the Evidence Act. In this connection, he placed reliance on the following decisions:

1. Asstt. CIT v. Yerra Nagabhushanam [1997] 226 ITR 843 at 849 (AP)

2. V. Kunhambu & Sons v. CIT [1996] 219 ITR 235(Ker.).

Lastly it was submitted that the statement of Dr. Tanna and his wife was recorded at the time of search on 2-11-1995 whereas the retraction by way of Affidavit was made on 28-7-1998, approximately after 2 1/2 years. Before that Dr. Tanna had already surrendered the amount of Rs.10.65 lakhs as undisclosed income and it was assessed as such. Therefore, the retraction was subsequently obtained by the assessee, which did not have any evidentiary value. Under these circumstances, it was submitted that the learned Accountant Member was right in sustaining the addition.

24. I have considered the rival submissions and have gone through the material available on record. The facts in this case are not in dispute that a search action under section 132 of the Act was taken place at the premises of Dr. Tanna in Mumbai in which the impugned loose paper, which is marked at paper No. 37, was seized. Back side of this paper contains certain entries, The evidence and the statement on record show that on the front-side of the paper there are entries relating to three flats, whereas on the back side of the paper there is an entry relating to purchase of the flat by Dr. Tanna from Somerset Developers, a division of the assessee. It is also not in dispute that on the date of search, i.e. 2-11-1995, Dr. Tanna's statement was recorded, inter alia, with reference to the back side of the loose paper No. 37 and he has admitted with reference to question No. 7 that the back side of the loose paper, bearing serial No. 61 of Annexure A-I, pertains to the purchase of a flat at Pune from Somerset Developers for which he had paid a sum of Rs.6.55 lakhs by cheque. Some of the instalments have gone through his bank account and he had paid a sum of Rs.10.65 lakhs in cash from his professional income not recorded in his books of account, which he admitted as his concealed income. Dr. Tanna had also admitted that this piece of paper pertains to the purchase of the flat by him from the assessee.

25. The difference of opinion between the learned Accountant Member and the learned Judicial Member referred to me for decision is whether the back side of the loose paper No. 37 was shown or disclosed by the Assessing Officer to the assessee. If so, can it be considered as an admissible evidence. The learned Accountant Member was of the opinion that "from the reading of the order of the Assessing Officer and the note of the CIT, it is very clear that the seized paper with both sides was confronted to the assessee". He, therefore, rejected the argument of the learned counsel for the assessee that the back side of the seized paper is a new piece of evidence and the same should not be admitted. On the other hand, the view of the learned Judicial Member was that only the front side of the paper was supplied to the assessee, whereas the back side was never confronted to the assessee, which is clear from the reply given by the assessee, vide paper book page 22. Under these circumstances, he was of the opinion that the back side of the paper was never confronted to the assessee and hence opportunity has not been given to the assessee. Therefore, it cannot be admitted as an evidence to come to the conclusion that Rs.10.65 lakhs was paid by Dr. Tanna to the assessee in cash.

26. The problem looms large whether this piece of paper was within the knowledge of the assessee or not. One has to go to the entire facts and circumstances of the case. In this case, it is not in dispute that Dr. Tanna had purchased a flat from the assessee and paid a sum of Rs.6.55 lakhs by cheques. It is also not in dispute that at the time of search on 2-11-1995 at the premises of Dr. Tanna in Mumbai, he accepted that he has purchased a flat from the assessee and paid a sum of Rs.10.65 lakhs in cash which was not recorded in his books of account, besides the payment by way of cheques of Rs.6.55 lakhs. During the course of arguments, a specific question was posed by me to the learned counsel for the assessee whether the loose paper No. 37 (both sides) is in the handwriting of Dr. Tanna or not. In reply, the learned counsel for the assessee, Dr. Sunil Pathak, stated that the piece of paper may be in the handwriting of Dr. Tanna, though from the records I find that Mrs. Tanna and her Chartered Accountant, Mr. Ghabawalla, have stated that the jottings in this impugned paper is not that of Dr. Tanna. Since the learned counsel for the assessee did not dispute that the handwriting in the loose paper is that of Dr. Tanna, it is clear that the handwriting on both the sides of this paper, if compared, seems to be of one person and that of Dr. Tanna. Therefore, taking into consideration the statement of Dr. Tanna and the fact that the handwriting in loose paper No. 37 is not denied as that of Dr. Tanna, it is established that this paper reveals that the entries made therein related to the purchase of the flat by Dr. Tanna from the assessee for which a sum of Rs.10.65 lakhs was paid in cash, which was the concealed income of Dr. Tanna. Dr. Tanna had surrendered this amount of Rs.10.65 lakhs and had also paid the tax thereon. When the proceedings for block assessment were initiated, the Assessing Officer has issued notice based on this piece of paper. If one goes through the front-page of the loose paper, it can be seen that there are several entries relating to different flats. However, on the back side of the paper, the entry is related to Somerset Developers for the purchase of the flat. The notice was given to the assessee enquiring about the payment of Rs.10.65 lakhs in cash, based on the statement of Dr. Tanna. Therefore, it is not possible to presume that the Assessing Officer did not bring to the notice of the assessee the back side of the loose paper No. 37, when the entire case was built up on this loose paper relating to the purchase of the flat by Dr. Tanna from the assessee. Therefore, on the facts and attendant circumstances, I am of the opinion that the loose paper was brought to the knowledge of the assessee. There is another aspect of the matter that when the proceedings for block assessment were initiated, the statement of Dr. Tanna was brought to the notice of the assessee, in which it has been specifically admitted by Dr. Tanna that the entries on the back side of the loose paper were explained to him. So to say that the back side of the paper was not within the knowledge of the assessee is incorrect. Therefore, on the basis of preponderance of probabilities, it is established that the back side of the loose paper was in the knowledge of the assessee.

27. From the records, I find that Dr. Tanna, after about three years, has retracted from the admission made by him before the search party by way of an Affidavit filed before the CIT. The learned counsel for the assessee, Dr. Sunil Pathak, very vehemently argued that once Dr. Tanna had retracted from his statement given at the time of search, such statement cannot be relied upon. So far as this contention of the learned counsel for the assessee is concerned, the Hon'ble Supreme Court in the case of Surjeet Singh Chhabra v. Union of India 1997 (89) E.L.T. 646 -- has categorically held that where a confession has been made by a person before the customs officers and later on he retracts from the same, the confessional statement made before the customs officials, though retracted within six days, is an admission and binding since customs officers are not police officers. If the same analogy is applied to the instant case, it will be seen that Dr. Tanna had made a confessional statement before the search party of the department, who are not police officers. Therefore, the admission made by Dr. Tanna at the time of search is admissible against the assessee.

28. Looking to the aspect of the matter from another angle, I find that Dr. Tanna is a famous doctor of Mumbai. While making a statement it is not expected of a person highly educated and highly placed in the society to make a statement without realising its implications. It is also found that there is no allegation of coercion or pressure for making a statement by Dr. Tanna at the time of search and this allegation has also not been made before the Assessing Officer. It is only after three years before the CIT by way of an Affidavit that Dr. Tannia made the allegation, which according to the CIT, was a self-serving document and has been made after legal consultation and when the proceedings had been started against the assessee. Under these circumstances, I am of the opinion that the conclusion arrived at by the learned Accountant Member that the back side of the paper was confronted to the assessee is clear from the record and it is an admissible piece of evidence against the assessee.

29. In Chuharmal's case the Hon'ble Supreme Court has observed that the rigour of the rules of evidence contained in the Evidence Act is not applicable to the income-tax proceedings. But it did not mean that when the taxing authorities were desirous of invoking the principles of the Evidence Act in proceedings before them, they were prevented from doing so. Further, Evidence Act embodied a salutary principle of common law jurisprudence, viz. where a person was found in possession of anything, the onus of proving that he was not its owner was on that person. This principle could be attracted to a set of circumstances that satisfy its conditions and was applicable to taxation proceedings. Following the principle laid down by the Hon'ble Supreme Court, in this case when this piece of paper was admitted by Dr. Tanna and he has also made a statement that he has paid Rs.10.65 lakhs in cash for the purchase of the flat from the assessee out of his unrecorded income and no material has been brought on record to controvert this fact, the irresistible conclusion is that this piece of paper speaks of true nature of the transaction taken place between Dr. Tanna and the assessee. Otherwise, Dr. Tanna may not have offered Rs.10.65 lakhs for taxation if he had not paid this amount to the assessee. In the case of Yerra Nagabhushanam the Hon'ble Andhra Pradesh High Court has observed that an Authorised Officer during the course of search or seizure may examine on oath any person, who is found to be in possession or control of books of account, documents, etc., and the statement made by such person during such examination may thereafter be used in evidence in any proceedings under the Income-tax Act. Similar view was taken by the Hon'ble Kerala High Court in the case of V. Kunhambu & Sons.

30. In the case of C. Vasantlal & Co., the Hon'ble Supreme Court has observed that the Income-tax Officer is not bound by any technical rules of the law of evidence. It is open to him to collect materials to facilitate assessment even by private enquiry. But if he desires to use the material so collected, the assessee must be informed of the material and must be given an adequate opportunity of explaining it. In the present case, the statement of Dr. Tanna recorded during the course of the search was the material on which the Assessing Officer had acted upon. This statement and the piece of paper were brought to the knowledge of the assessee and an Explanation was sought. Therefore, to say that an opportunity has not been given to the assessee is incorrect. The duty was to inform the assessee about the existence of such evidence against it, which the Assessing Officer has discharged. Therefore, in my view, the principles of natural justice are not violated.

31. Now the question arises whether any addition can be made based on the back side of the loose paper seized from Dr. Tanna. Section 158BD of the Act provides that if during the course of search made under section 132 of the Act, any books of account or other documents or assets are found belonging to any other person, which disclosed concealed income of such other person, that material can be used against such other person. In the present case, the statement of Dr. Tanna made at the time of search that he had paid Rs.10.65 lakhs in cash out of his undisclosed income for the purchase of tile flat from the assessee and the fact that the flat, in fact, was purchased from the assessee, goes to establish that this amount was paid for the purchase of the flat in cash to the assessee. A report was published by the National Institute of Public Finance and Policy in March 1985, titled "Aspects of black money in India'. The report has discussed the prevalence of notorious practice of payment of black money in real estate transaction in the metropolitan city of Mumbai. Though technically the report of National Institute of Public Finance and Policy, cannot be substituted for evidence, but one has to take note of this practice coupled with the attendant circumstances of this case. Therefore, when the purchaser says that he had paid the unaccounted money and he had also paid the tax thereon, even if the seller denies the receipt of the on-money, I cannot overlook this notorious practice which is published in the report of National Institute of Public Finance and Policy. There cannot be any direct evidence for receipt of on-money. Obviously no sane person would admit that he is receiving on-money. But this fact can be established by facts and attendant circumstances of a particular case. In the present case, the assessee had denied the receipt of on-money. But when a man of high status in the society had admitted at the first instance, giving of on-money and also had paid tax on it, these circumstances themselves coupled with the fact that the transaction of purchase of flat had taken place between Dr. Tanna and the assessee, go to establish the payment of on-money to the assessee. There is no material on record to come to any other conclusion. Under these circumstances, I am of the opinion that the view taken by the learned Accountant Member is correct. I, therefore, agree with his views. So far as the case-laws relied upon by the learned counsel for the assessee are concerned, most of them have been discussed by the learned Accountant Member in his order and he has given his reasoning, to which I agree. So far as the other decisions, such as T.S. Venkatesan case; Bala Prasad R. Lokmanyawar's case; Monga MetaLs, (P.) Ltd.'s case and Prarthana Construction (P.) Ltd.'s case are concerned, these are the cases decided on their own facts. None of the facts are entirely similar to the case of the present assessee. Therefore, the decision rendered in those cases is not applicable to the facts of the present case.

32. For the above reasons I am agreed with the view expressed by tile learned Accountant Member. The matter will now be placed before the regular Bench to dispose of the appeal in accordance with the opinion of the majority.

Per Chibber, Accountant Member .--As there was a difference of opinion between the Accountant Member and Judicial Member, the following questions were referred to a Third Member:

(1) Whether, on the facts and in the circumstances of the case, can it be said that back side of the loose paper was shown or disclosed by the Assessing Officer to the assessee? If not, can it be considered as an admissible evidence for making addition?

(2) Whether, on the facts and in the circumstances of the case as well as in law, the Assessing Officer was justified in making addition of Rs.10.65 lakhs as undisclosed income?"

2. The learned Vice-President (Judicial Member) Shri J.B. Bengra, sitting as Third Member, vide his opinion dated 30-1-2002, has concurred with the views of the Accountant Member holding that the Assessing Officer was justified in making addition of Rs.10.65 lakhs as undisclosed income. In accordance with the majority view, the issue stands decided in favour of the Revenue and against the assessee.

3. In the result, the appeal is dismissed.

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