P.R. Patel Vs. Deputy Commissioner of - Court Judgment

Excerpt:
1. the assesses, an individual, is carrying on business of construction activities, in his own name and in the names of various partnership firms, where he is a partner. he has also dividend income, interest income, salaries from private limited companies and capital gains. the assessing officer has pointed out in para 6 of his order that the assessee's construction activities are mainly in mira road and bhayender. it has also been pointed out that the assessee also indulges in advancing loans to various builders and others on a heavy interest.the assessing officer has also stated that the seized books indicate that the assessee was receiving huge cash premium in selling flats which is re-invested either in purchase of flats or in giving advances to various parties on interest. the.....

Judgment:
1. The assesses, an individual, is carrying on business of construction activities, in his own name and in the names of various partnership firms, where he is a partner. He has also dividend income, interest income, salaries from Private Limited Companies and Capital Gains. The Assessing Officer has pointed out in para 6 of his order that the assessee's construction activities are mainly in Mira Road and Bhayender. It has also been pointed out that the assessee also indulges in advancing loans to various builders and others on a heavy interest.

The Assessing Officer has also stated that the seized books indicate that the assessee was receiving huge cash premium in selling flats which is re-invested either in purchase of flats or in giving advances to various parties on interest. The Assessing Officer has also pointed out that the assessee admitted in his statement recorded under section 131 that he is advancing cash loans. The assessee has also admitted in answer to question No. 2, when pointed out certain entries in the personal memorandum diaries relating to 1992 and earlier period, that these entries are written in the coded language. Regarding one amount of Rs. 2,000 written against one Ramakant Kadam on entry No. 4182 in Annexure A-7, the assessee admitted that this amount really represented a sum of Rs. 2 lakhs paid to Shri Ramakant Kadam.

2. The search and seizure action under section 132 was conducted in the business and residential premises of the assessee on 15/16th July, 1996. As a result of search, the assessment was completed by the Assessing Officer under section 158BC of the Income-tax Act, 1961 for the block period 1-4-1986 to 15-7-1996. During the course of search, cash of Rs. 1,25,000 was seized apart from seizure of jewellery to the extent of Rs. 1,07,703 (out of jewellery worth Rs. 3,45,092 found at the Vile Parle residence of the assessee) and seizure of shares and debentures etc. worth Rs. 39,29,432 out of such assets found at Rs. 41,58,230. During the interrogation immediately after the search, the assessee Shri P.R. Patel in his statement recorded on 9-9-1996 before the A.D.I.T. accepted having concealed income to the extent of Rs. 25 lakhs, which he promised to declare in the return to be filed under section 158BC. The assessment was completed on a total income of Rs. 2,07,28,910 as against the income declared at Rs. Nil. Being aggrieved by the Assessing Officer's order, the assessee is in appeal before us.

3. Initially, the assessee raised 20 grounds of appeal in the appeal filed on 28-8-1997. But subsequently, the assessee has sought to raise seven additional grounds of appeal vide his letter dated 5th November, 1998 on the ground that the additional grounds of appeal are questions of law arising out of the original grounds of appeal. The additional grounds of appeal sought to be raised are admitted for hearing. The grounds of appeal raised are discussed and disposed of as follows : " 1. The Assessing Officer erred in holding that the sum of Rs. 23,00,000 was undisclosed income of the block period, and erred in including the same in the order under section 158BC of the Act.

2. Assuming for the sake of argument that it is held that Rs. 23,00,000 could form part of assessment under section 158BC(c), the Assessing Officer hereby held that the sum was the balance of sale proceeds receivable on transfer of a capital asset, ought to have computed the chargeable capital gain in accordance with the Act." 5. The Assessing Officer has pointed out that pages 7, 20 and 21 of Annexure A-1 are original copies of certain agreements of sale of land sold by the assessee to M/s. Vishal Developers in March, 1995. It is stated that as per the first agreement dated 8-3-1995 certain plots of land at Bhayender village N.S. Nos. 281 and 282 were agreed to be sold for an amount of Rs. 31.11 lakhs by the assessee to M/s. Vishal Developers. It is pointed out that however this agreement was revised reducing the amount to Rs. 22.61 lakhs for no apparent reason. It is pointed out that after receiving a cheque payment of Rs. 8.11 lakhs, the balance amount shown is Rs. 14.50 lakhs. When the assessee was questioned about the reason for reduction in price, he gave some vague replies before the Assessing Officer like reduced market demand etc.

The Assessing Officer has mentioned that it is not understood why the assessee voluntarily reduced the agreed price by Rs. 8.50 lakhs. The Assessing Officer has stated that the only reasonable explanation appeared to be that the assessee had received the difference in cash.

The assessee had argued before the Assessing Officer as well as the CIT that the land was never in his possession nor the possession was given to M/s. Vishal Developers. The assessee had also produced 7/12 extract and a letter dated 30-7-1997 from M/s. Vishal Developers showing that M/s. Vishal Developers do not have any physical possession of the plot due to non-availability of the right of way. However, the assessee agreed that he is having Power of Attorney for sale of this plot. The Assessing Officer has stated that by virtue of the Power of Attorney the assessee became owner and in view of the agreement mentioned above, the assessee sold the plot of land for Rs. 31.11 lakhs to M/s. Vishal Developers. The Assessing Officer pointed out that this transaction is not declared by the assessee in his return of income. The Assessing Officer has pointed out that the assessee had received Rs. 3,11,000 in the previous year relevant to the assessment year 1995-96 and Rs. 5 lakhs in the previous year relevant to the assessment year 1996-97.

These amounts appeared in the relevant Balance Sheets. The Assessing Officer has stated that the assessee was given an opportunity to produce documents to show the date of purchase etc. so that the difference could be treated as Capital Gain. However, as no such documents were produced by the assessee regarding the purchase of the plot, the entire amount of Rs. 23 lakhs was treated as assessee's income from undisclosed sources subject to rectification as and when the assessee produces evidence of cost so that the difference could be treated as Capital Gains.

6. The learned Counsel of the assessee made the following submissions for the deletion of the addition :-- (i) The property under consideration was under dispute and Notice dated 10-3-1995 was received by Shri Sailesh D. Thakkar, Advocate High Court, disputing the title of Shri P.R. Patel.

(ii) The appellant was not in a position to give grant of way for the said property and hence the buyer was unable to take possession of the said land which was bought by them for development.

(iii) The buyer was not ready to pay the full consideration in view of the delay in the project. Accordingly, fresh negotiations were going on. The buyer had sent draft agreements to modify the original Agreement. This Draft Agreement was seized by the Department and the additions have been made on that account. The fact that the Agreement was a draft Agreement is specified on the top as "Draft without Prejudice". Further this Agreement was unsigned.

(iv) The appellant submits that the Agreement on the basis of which the addition was made was a Draft Agreement. Further as the appellant had not given possession of the said plot, the sale was not complete. Hence, there was no question of making any additions.

(vi) The Assessing Officer has not brought any evidence apart from the Draft Agreement that the appellant has received the sum of Rs. 23 lakhs in cash.

(vii) The party has confirmed that a sum of Rs. 23 lakhs is still due and payable.

(viii) Land under consideration is covered by the Bombay Tenancy and Agricultural Lands Act, 1948 and hence could not be transferred without permission of Collector.

6.1 The learned Counsel further stated that no addition could be made on presumptions. Reliance was placed on the following decisions :-- (i) St. Teresa's Oil Mills v. State of Kerala [1970] 76 ITR 365 (Ker), 6.2 The learned Counsel further stated that the apparent state of affairs is to be treated as real unless contrary is proved and no addition can be made on presumption:--Kalwa Devadattam v. Union of India 6.3 The learned Counsel further contended that no addition could be made on the basis of rough sheets/loose papers. In this regard, reliance was placed on the following decisions:-- 6.4 The learned Counsel further argued that presumption under section 132(4A) is available only for the limited purpose of sections 132(5) and 132(11) and not for the purpose of framing assessment under Chapter XIV-B (D.K. Gupta v. Dy. CIT [2000] 69 TTJ (Delhi) 587 relied upon).

6.5 The learned Counsel of the assessee invited our attention to the answers given by the assessee to question Nos. 3, 4, 5 of his statement recorded on 22-7-1997 (available at page 75 of the Paper Book) and also to page 325 of the Paper Book wherein a letter written by M/s. Vishal Developers to the assessee is available confirming that a sum of Rs. 23 lakhs is still due and payable to the assessee. The learned Counsel of the assessee invited our attention to pages 469, 475 and 520 of the Paper Book wherein some of the relevant decisions relied upon are available.

7. On the other hand, the learned Departmental Representative pointed out that the assessee filed the return of income declaring income at Rs.Nil after a span of seven months after the issue of the notice. The learned Departmental Representative also invited our attention to page 4 of the assessment order wherein regarding certain entries the assessee has admitted that the entries are made in the coded language.

Our attention was further invited to page 309 of the Paper Book, where Supplementary Agreement for Assignment and sale is available. It was pointed out that the heading of this agreement is "Draft Without Prejudice". The learned Departmental Representative contended that the meaning of the words "Draft Without Prejudice" was that the original agreement was still valid. The learned Departmental Representative invited our attention to Exhibit-I to the assessment order where the Agreement for the Assignment and Sale is available. It was pointed out that both the parties had signed the agreement and hence the existence of the agreement cannot be doubted. The learned Departmental Representative also relied upon the letter dated 1st September, 1996 of M/s. Vishal Developers written to the assessee (available at page 325 of the Paper Book) in which it has been confirmed that a sum of Rs. 8,11,000 has been paid to the assessee till date in respect of the property at village Bhayender and the balance amount of Rs. 23 lakhs was still due and payable to the assessee. To the assessee's argument that no addition could be made on presumptions, the learned Departmental Representative pointed out that there is no presumption and the addition is based on the documents found during search. To the argument of the learned Counsel of the assessee that no addition can be made on the basis of rough sheets or loose papers, the learned Departmental Representative contended that the relevant papers are not rough sheets or loose papers, but they are duly signed documents. To the assessee's argument that presumption under section 132(4A) is available only for the limited purpose of section 132(5) and 132(11), the learned Departmental Representative relied upon the decision of the ITAT Hyderabad Bench 'B' Third Member in the case of Smt. Kesari Bai v.ITO [1990] 32 ITD 1 (TM) (SB) and the decision of Jaipur Bench of the ITAT in the case of R.N. Ghiya v. Asstt. CIT [1995] 54 ITD 269 and contended that section 132(4A) raises a presumption, though rebuttable, that the available article or thing found during the course of search in the possession or control of any person shall belong to him. It was stated that this presumption is not only available for the exercise of passing an order under section 132(5), but also for making the assessment including the block assessment. It was vehemently argued that the argument of the assessee's Counsel that presumption under section 132(4A) is not available for block assessment, is not correct at all. To the argument of the learned Counsel of the assessee that the property in question was in dispute and could not be legally transferred, it was contended by the learned Departmental Representative that even the Power of Attorney holder and possessor or enjoyer of the property is considered as the owner of the property as per the definition of "transfer" given in section 2(47) of the Income-tax Act, 1961. The learned Departmental Representative relied upon the decision of ITAT, Pune Bench in the case of Parakh Foods Ltd. v. Dy. CIT [1998] 64 ITD 396 and contended that the undisclosed income would include every income, which is hidden from the knowledge of the Department whether detected as a result of search or not.

8. In the rejoinder to the arguments of the learned Departmental Representative, it was argued by the learned Counsel of the assessee that the decision reported at Parakh Foods Ltd.'s case (supra), which is relied upon by the learned Departmental Representative is not applicable to block assessment. It was pleaded that similarly the other decisions relied upon by the learned Departmental Representative do not pertain to block assessment. It was further argued that section 132(4A) is relevant for the seizure of the assets and not documents. It was argued that merely because the documents were found in the assessee's premises, they should not go against the assessee as they are not in assessee's handwriting. It is further contended by the learned Counsel that when the possession of the property in question is not given to the buyer, there is no question of Capital Gain and hence the addition made is without justification. The learned Counsel also invited our attention to the Assessing Officer's remark that 'the difference of Rs. 23 lakhs is added to the income of the assessee on accrued basis." It is contended that making addition on accrued basis does not mean that the amount is assessed as income from undisclosed sources.

9. We have given a careful consideration to the rival submissions and to the facts and circumstances of the case. We find that in this case though the property under consideration was in dispute, yet as the assessee was having a Power of Attorney he could be treated as owner in view of the extended meaning of "owner" contemplated by the provisions of section 2(47). However, as the Capital Gains of Rs. 23 lakhs are proposed to be taxed on accrual basis, it is important to see whether there was a transfer within the meaning of section 2(47). Even before the Assessing Officer the assessee had taken the stand that M/s. Vishal Developers do not have any physical possession over the plot of land due to the non-availability of the right of way. In this regard a letter dated 29th July, 1997 (wrongly mentioned as dated 30-7-1997 by the Assessing Officer) from M/s. Vishal Developers was produced before the Assessing Officer along with 7/12 extract. The Assessing Officer has not proved that the transferee had taken possession of the property or otherwise became the owner of the property. On the other hand, looking to the evidence produced before the Assessing Officer, the learned Counsel of the assessee has been able to prove that the transfer was not complete because neither the possession was taken by the buyer nor the property was otherwise transferred to him. The possession was not taken because the right of way could not be provided to the buyer. It is also true that the Assessing Officer has not brought out any evidence that the assessee has received a sum of Rs. 23 lakhs in cash, apart from receiving a sum of Rs. 8.11 lakhs by cheque.

Moreover, we find that the Assessing Officer is not proposing to tax this amount of Rs. 23 lakhs as income from undisclosed sources but is only proposing to tax the capital gains arising because of the transfer of the property in question from the assessee to M/s. Vishal Developers. As the transfer is not proved, we feel that there is no question of taxing the Capital Gains in respect of the property in question. The assessee has been taking consistent stand that M/s.

Vishal Developers could not take physical possession of the property in question due to non-availability of the right of way. This stand of the assessee could not be rebutted by the Assessing Officer. Therefore, we hold that taxing of Rs. 23 lakhs by the Assessing Officer as Capital Gains was without any justification. The addition is, therefore, deleted. As the relief has been allowed to the assessee on the ground that there could not be any Capital Gains as there was no transfer, we feel that it is not necessary to go into the various decisions relied upon by the learned Counsel of the assessee as they relate to the additions made on the basis of presumptions or on the basis of rough or loose sheets etc. Regarding the argument that presumption under section 132(4A) is available for the limited purpose of section 132(5) and 132(11) and not for the purpose of framing assessment, we hold that the incriminating evidence found and seized in the course of search could be used against the assessee even without reference to the provisions of section 132(4A) provided such evidence was relevant and material for assessee's assessment and put to him before use against him in the assessment proceedings.

"3. The Assessing Officer erred in holding that the sum of Rs. 78,34,000 was undisclosed income of the block period and erred in including the same in the order under section 158BC of the Act.

4. Even assuming for the sake of argument that any sum could be part of an assessment under section 158BC as a result of dealings with Mr. S.R. Dantal, the Assessing Officer erred in including the following in the figure of Rs. 78,34,000-- (5) The Assessing Officer ought to have appreciated that there was no material in support of the case that an amount of Rs. 78,34,000 was the undisclosed income of the appellant and in fact all the available material was to the contrary." 11. The Assessing Officer has made addition of Rs. 78,34,000 on the ground that the source of the capital for financing the loans advanced by the assessee could not be explained and hence full amount of capital along with the interest amounting to Rs. 78,34,000 was added as assessee's income from undisclosed sources. The relevant seized papers on which the addition is based, are page Nos. 104, 105 and 106 of Annexure A-1 (available at Exhibit-II to the assessment order). The relevant extracts from the Assessing Officer's order are reproduced as under :-- "From the seized material file A-1, it is seen that assessee has financed to Mr. S.R. Dantal against which he has collected agreements for the flats which are going to be constructed as Surety. Such documents are as under: Mr. S.R. Dantal has addressed to P.R. Patel and declared that he has received Rs. 20 lakhs as under: Against which the flats to the extent but not less than 7200 sq. ft.

in the proposed building were to be allotted. The total consideration price is Rs. 43,20,000. Out of which Rs. 20 lakhs are paid as mentioned above. The balance of Rs. 23.20 lakhs will be paid as per the conditions given in agreements. The receipts of Rs. 20 lakhs are signed by Shri S.R. Dantal. Also this Indemnity-cum-declaration is attested by V.N. Konkar, Advocate and Notary on 20-11-1993, i.e. after the receipts of amount. The agreements for the flats are as under: The corresponding receipt entries are also made in one note book which is seized and numbered as A/8 on page Nos. 66 & 67 in the name of Sambha Dantal.

The statement on oath was taken of the assessee as well as Mr. S.R. Dantal. Both the parties dented for such deal. Also Mr. P.R. Patel filed an affidavit dated 17th July, 1997 showing a loan of Rs. 30,000 was given to Mr. S.R. Dantal. This affidavit is also signed by Notary Mr. V.N. Konkar.

The reply given by assessee is not satisfactory because the Indemnity-cum-Declaration is on stamp paper worth Rs. 100 signed by Advocate on 20-11-1993 i.e. after the part transaction took place.

Hence validity of such document can not be treated as null and void or as transaction not taken place. Further, as mentioned in the declaration the agreements of flats are also found where receipt value is near to the balance amount as mentioned in the Indemnity Bond. Hence the assessee's explanation is not accepted.

In the note-book A/8 the calculation for this deal is made with interest in the coded form. Same is decoded as under: Further on page 67 for calculation of interest as on 23-2-1993 Rs. 10 lakhs are shown as Rs. 10.00.

Accordingly after the addition of interest, the amount with interest as on 30-9-1995 comes to Rs. 78,34,000. As the source of capital for financing this loan is not known, full amount of capital with interest is added as undisclosed income. The documents referred above are enclosed as exhibit." 12. The learned Counsel of the assessee invited our attention to page 364 of the Paper Book wherein the copy of affidavit of Shri S.R. Dantal is available. The relevant extracts from the aforesaid affidavit are reproduced as under: "I have further to declare that I have received Rs. 20,000 from Shri P.R. Patel on different dates and he promised to pay me the remaining amount within three months, but he has failed to make further payments.

The amounts written on Page No. 3 as Rs. 10,00,000, Rs. 5,00,000 and Rs. 5,00,000 are neither written by me nor have received by me. It seems that Shri P.R. Patel's employee has written the figure so as to deceive me.

I have also given three different agreements for allotment of three different flats for Rs. 2,24,000 each. The agreements were given to Shri P.R. Patel for raising finance against the documents. In this case also Mr. P.R. Patel has made payment of Rs. 10,000 approximately on two different dates. However, the remaining amounts he has not paid me till today.

I have signed agreement in which name of buyer was not mentioned, as the finance can be raised from the person who makes payments to me.

The agreements were deposited with Mr. P.R. Patel so as to help me to get the finance against such documents.

Further I hereby declare that I have had also handed over three different agreements dated 27-5-1995, 27-5-1995 and 29-5-1995 respectively to Shri P.R. Patel to raise finance for my project at Village Kondivitta which were lying with him though transaction between us was not materialised.

The abovesaid plots have remained undeveloped as on today also, since I could not raise finance from any one." 12.1 The learned Counsel also invited our attention to the relevant portions of the assessee's statement (copy of which is available at page 79 of the Paper Book). The relevant portions from the assessee's statement are reproduced as under :-- "Q. 20: In reply to page No. 103 to page No. 132 of file A/1 you have stated that this is a proposal and it is not finalised.

The details of the agreement are as under: There is also one Indemnity Bond on page No. 128 which shows following transaction between S.R. Dantal and P.R. Patel: The Indemnity Bond is attested by Advocate & Notary Mr. U.N. Konkar please explain all the abovementioned agreements and documents A.: We have not entered into any monitory transaction with the above documents except Rs. 30,000 paid to Shri S.R. Dantal on different dates. Today we have given a copy of affidavit made by Shri S.R. Dantal in this connection.

Q. 21: Now I am showing you page No. 66 of file A/8. The date exactly tallies with the date mentioned in Indemnity Bond and date of different agreements as mentioned above. What you want to say about this A.: The diary serial No. A/8 was written by my Son-in-law Shri Arvind Patel. The basis on which he has maintained the diary is not known to me. As appearing on page No. 66 I have made the payments of Rs. 30,000 on different dates to Shri S.R. Dantal. To best of my knowledge the amounts written in diary is actual and there is no code or quoted figure." 12.2 Further to replies to question Nos. 20 and 21 by the assessee the learned Counsel contended that undisclosed cash, jewellery or shares/ debentures were not found during the course of search. It was stated that this shows that the transactions shown by the seized documents/ agreements did not materialise. The learned Counsel relied upon the same decisions which were relied upon by him in respect of grounds No.1 and 2.

13. The learned Departmental Representative stated that the copies of the relevant seized documents are available at Exhibit-II to the assessment order. The first document is Indemnity-cum-declaration duly signed by Shri S.R. Dantal and attested by Shri V.N. Konkar, Advocate and Notary. The other documents are Memorandum of Understanding for allotment of flats in the proposed project of Village Mogra, Andheri (East) Bombay on plot bearing S. No. 12, Hissa No. 2(PT) C.T.S. No. 250 (Part). The learned Departmental Representative invited our attention to page 3378 of the commentary of Chaturvedi and Pithisaria wherein it has been stated that the Mehta Parikh & Co. v. CIT [1956] 30 ITR 181 (SC) cannot be construed to lay down the proposition that unless the deponent is cross-examined, the affidavit cannot be rejected. The learned Departmental Representative also invited our attention to the copies of MOUs available at Exhibit-II to the assessment order. Towards the end of each M.O.U. there is a receipt duly signed by Shri S.R.Dantal wherein the amount received is mentioned along with the date of receipt but the name from whom the amount is received is left blank.

The learned Departmental Representative also invited our attention to page 369 of the Paper Book wherein the assessee had given vague reply to the question No. 13 put to him. The relevant extracts from the assessee's statement are reproduced as under :-- "Q. 13 : If you have not taken any finance from Mr. P.R. Patel, then why original document where receipt of Rs. 20 lakhs as discussed above and for the balance payment of Rs. 23,20,000 is found from the premises of Shri P.R. Patel? Whether any educated person will leave signed document for the receipt of payment in other premises and which is still there in the possession of Shri P.R. Patel. Please clarify A.: This is only a document and I had informed Mr. P.R. Patel to tear it of the document several times and he promised me that he will tear it out and I trusted on his word." 13.1 The learned Departmental Representative also invited our attention to the fact that the figures mentioned in the seized document available at page 360 tally with the seized document, namely, Indemnity-cum-Declaration available at Exhibit-II to the assessment order. It was stated that not only the figures tally, but the dates of receipt of the amounts by Shri S.R. Dantal also tally. The figures mentioned in the seized document available at page 360 are in coded language whereas the figures mentioned in the Indemnity-cum-Declaration are the normal figures and the learned Departmental Representative stated that this proves that the figures recorded in the seized document (copy of which is available at page 360 of the Paper Book) are in coded language. The learned Departmental Representative also relied upon the decision of Pune Bench of ITAT in the case of Parakh Foods Ltd. (supra).

14. We have given a careful consideration to the rival submissions and the facts and circumstances of the case. In the Indemnity-cum-Declaration (copy available at Exhibit-II to the assessment order) from S.R. Dantal to the assessee which is duly signed by Shri S.R. Dantal as Proprietor of M/s. S.R. Dantal, it is clearly stated that as agreed the assessee had already paid Shri S.R. Dantal the following amounts : It is stated in the said declaration that out of the total consideration of Rs. 43,20,000 the amounts aggregating to Rs. 20 lakhs have been received by Shri S.R. Dantal and the balance amount of Rs. 23,20,000 is payable by the assessee to Shri S.R. Dantal. This Indemnity-cum-Declaration is on the non-judicial stamp paper of Rs. 100 and is signed by Shri S.R. Dantal and attested by Shri V.N. Konkar, Advocate and Notary on 20-11-1993. Therefore, in view of the clear-cut documentary evidence available, we are of the opinion that the assessee or Shri S.R. Dantal cannot go back on the same. It is further found that the figures and dates mentioned in the Indemnity-cum-Declaration (supra) tally with the seized paper where in respect of the figures of Rs. 10 lakhs, Rs. 5 lakhs and Rs. 5 lakhs dates are the same and the figures are recorded in a coded language. The figure of Rs. 10,00,000 mentioned against the date 25-2-1993 in the seized paper (copy of which is available at page 360 of the assessee's Paper Book) seems to correspond to the figure of Rs. 10 lakhs mentioned against the same date i.e. 25-2-1993 in the Indemnity-cum-Declaration. Similarly, the figure of Rs. 5 lakhs against the date 10-10-1993 corresponds to figure of Rs. 5,00,000 against the same date in the seized paper. The third amount of Rs. 5 lakhs received by Shri S.R. Dantal on 1 -11 -1993 (as per Indemnity-cum-Declaration) corresponds to figure of Rs. 5,00,000 mentioned against the date 1-11-1993 in the seized paper (copy available at page 360 of the assessee's Paper Book). Thus, the learned Departmental Representative's contention that it is proved that the figures in the seized paper (page 66 -A/8, copy available at page 360 of the assessee's Paper Book) are recorded in the coded language, seems to be correct. In the statement of the assessee recorded under section 131 on 22-7-1997 (available at pages 75 to 84 of the assessee's Paper Book), the assessee has given vague and evasive replies in response to the questions put to him with regard to the relevant seized papers.

With regard to the affidavit of Shri S.R. Dantal relied upon by the learned Counsel of the assessee, the learned Departmental Representative has correctly stated that Mehta Parikh & Co.'s case (supra) cannot be construed to lay down the proposition that unless the deponent is cross-examined, the affidavit cannot be rejected. In view of the documentary evidence found and seized from the assessee's premises showing the transactions entered into by the assessee with Shri S.R. Dantal, not much evidentiary value can be given to the affidavit of Shri S.R. Dantal, which is a self-serving statement and goes against the documentary evidence seized during the course of search.

15. There is a receipt available in each of the Memorandums of Understanding for allotment of flat. One such receipt is reproduced as under: Received from Shri/Smt.......... a sum of Rs. 2,24,000 (Rupees Two Lakhs Twenty Four Thousand Only) IN CASH or vide Cheque No........... dated 24-4-1994 drawn on..... Branch, as earnest money deposit as agreed above for the booking of a flat as mentioned above in the said proposed project.

Similar receipts are there for the other amounts, namely, Rs. 2,24,000, Rs. 2,24,000, Rs. 40,000, Rs. 5 lakhs, Rs. 5 lakhs and Rs. 5 lakhs and the aggregate of all these amounts comes to Rs. 22,12,000. Shri S.R.Dantal has duly signed the receipts and these were found in the possession of the assessee at the time of search. This clearly shows that the amounts were paid by the assessee to Shri S.R. Dantal and as a proof he had kept with him the receipts duly signed by Shri S.R.Dantal. The assessee could not satisfactorily explain the source of the payment of Rs. 20 lakhs and Rs. 22,12,000 made by him to Shri S.R.Dantal. To the questions put to him in this regard, the assessee has only given vague and evasive replies. We are, therefore, of the opinion that the total amount of Rs. 42,12,000 (i.e. Rs. 20 lakhs + Rs. 22.12 lakhs) out of the total addition of Rs. 78.34 lakhs made by the assessee has to be treated as the assessee's income from undisclosed sources. The seized paper, page 67 of Annexure A-8 (copy available at page 361 of assessee's Paper Book) gives the calculation of interest on some amounts. It does not establish that such interest was actually received by the assessee. Therefore, we hold that making of addition of Rs. 78.34 lakhs on the basis of this paper will not be fair. We, therefore, restrict the addition to Rs. 42.12 lakhs. The assessee's argument that no addition could be made on the basis of loose papers does not hold good as the addition is based upon the Indemnity-cum-Declaration and Memorandums of Understanding for allotment of flats, which are duly signed by Shri S.R. Dantal. The Indemnity-cum-Declaration is also addressed to the assesses. Therefore, the seized documents on the basis of which the addition is sustained to a partial extent, cannot be called as rough/loose papers or dumb papers. Therefore, the decisions relied upon by the learned Counsel of the assessee are not applicable to the facts of the case. One of the arguments of the learned Counsel of the assessee is that presumption under section 132(4A) is available only for the limited purpose of section 132(5) and 132(11) and not for the purpose of framing assessment under Chapter XIV-B. In this regard, we are of the opinion that source and mode of acquisition of such incriminating evidence may give rise to some presumption against the assessee but such presumption would not arise under section 132(4A), but under some provisions of other laws, like the Indian Evidence Act, e.g., section 110 of that Act. When a presumption can be so raised under the provisions of another law and the application of the provisions of such other law is not expressly prohibited by any statute including the statute under which the assessee is being proceeded against, such presumption cannot be termed as having been raised under section 132(4A) and, hence, not permissible at law. The evidentiary value of the incriminating evidence found and seized in the course of search proceeding should then be examined and judged not with reference to the provisions of section 132(4A) but the other provisions in the allied law which are applicable to the proceedings under the Act. Therefore, the incriminating evidence which was found and seized in the course of search could be used against the assessee without any reference to the provisions contained in section 132(4A), provided such evidence was found to be relevant and material for the assessment of the assessee and the same had been put to him before its use against him at his assessment(s). In holding the above view, we are fortified by the decision of the I.T.A.T. Jaipur Bench reported at R.N. Ghiya's case (supra) relied upon by the learned Departmental Representative.

16. To sum up, the addition of Rs. 78.34 lakhs made by the Assessing Officer is restricted to Rs, 42.12 lakhs and the assessee, thus, gets partial relief on this point.

totalling to Rs. 11,24,000 was undisclosed income of the appellant for the block period and erred in including the same in his assessment order under section 158BC of the Act." 18. The addition of Rs. 11,24,000 comprising of three amounts of Rs. 3,21,000, Rs. 4,44,000 and Rs. 3,59,000, is based upon the seized papers marked as 84A and 84B of Annexure A-3, copy of which is available at Exhibit-III to the assessment order as well as at pages 373 to 389 of assessee's Paper Book. Three agreements were found from the premises of the assessee pertaining to the sale of fiats by Shree Ganesh Developers. Shri S.R. Dantal is one of the partners of Shreeganesh Developers. In the said agreements, the name of the flat purchaser is left blank. At pages 3 and 5 of the agreements, Shreeganesh Developers acknowledged the receipt of the amounts of Rs. 3,21,000, Rs. 4,44,000 and Rs. 3,59,000 for flat Nos. B-23, A-22 and A-19 respectively. The receipt at page 5 of the agreement for flat No.B-23 is reproduced as under : "Received the day and year first hereinabove written of and from the within named Flat Purchaser a sum of Rs. 3,21,000 (Rupees Three Lakh Twenty One Thousand only) being the amount of earnest money to be paid by them to us by cash...... dated 4-9-1995 .......

Similar are the receipts in respect of the other amounts of Rs. 4,44,000 and Rs. 3,59,000. As these agreements which include the receipt of the amounts were found from the possession of the assessee, it was presumed by the Assessing Officer that the said amounts have been paid by the assessee to Shreeganesh Developers and as the source of the same is not explained, the addition of Rs. 11,24,000 was made by the Assessing Officer as income from undisclosed sources.

19. The learned Counsel of the assessee took us through paragraph 11 at page 8 of the assessment order and also invited our attention to questions No. 32 and 33 put to the assessee in this regard. It was stated that the assessee denied having entered into any transactions pertaining to the said agreements. The learned Counsel also invited our attention to pages 261 and 278 of the assessee's Paper Book, wherein the replies were filed with regard to these documents before the Assessing Officer and CIT respectively. The case of the assessee is that the agreements in question were given by Shreeganesh Developers to the assessee to raise finance for their project. However, according to the assessee, as the plot was reserved by Municipal Authorities for a garden, finance could not be arranged. It is further slated that apart from the said agreements, the Assessing Officer has no other evidence that the amounts in question were given by the assessee to Shreeganesh Developers. Reliance is placed upon the same decisions which are relied upon in respect of grounds of appeal Nos. 1 and 2.

20. The learned Departmental Representative invited our attention to the seized paper marked 84A and 84B, copy of which is available at page 396 of the Paper Book filed by the assessee. The learned Departmental Representative further stated that as such addition is based upon the material seized during the course of search which is duly signed by Shri S.R. Dantal on behalf of Shreeganesh Developers, the assessee's arguments that the addition cannot be based on rough/loose sheets or presumptions are irrelevant. The seized papers on which the additions are based, according to the learned Departmental Representative, are not rough/loose sheets and the addition has been made on the evidence found during the course of search and not on the basis of presumptions.

The learned Departmental Representative relied upon the decision of ITAT, Pune Bench reported at Parakh Foods Ltd.'s case (supra). He further stated that presumption under section 132(4A) may not be applicable for regular assessment, but it is definitely applicable for block assessment. The learned Departmental Representative further contended that no statute bars the Assessing Officer to utilise the evidence found during the course of search. It is stated that the only condition is that the assessee should be given an opportunity of hearing before the evidence is used against him. It was stated that in the present case the assessee was duly confronted by the Assessing Officer with the seized documents before drawing the inference from the entries made in such documents. Our attention was also invited to section 110 of the Indian Evidence Act under which the source and mode of acquisition of incriminating evidence may give rise to some presumption against the assessee. Reliance was placed by the learned Departmental Representative on the decision of Pune Bench of ITAT reported at R.N. Ghiya's case (supra) and it was contended that incriminating evidence which was found and seized in the course of search could be used against the assessee even without any reference to the provisions contained in section 132(4A). It was further contended that it is immaterial as to whether such evidence is in assessee's handwriting or not. But the same can be used against the assessee after giving him a reasonable opportunity of being heard.

21. We have given a careful consideration to the rival submissions and the facts and circumstances of the case. It is not the assessee's case that he was not confronted with the seized material marked as page Nos.

84A and 84B of Annexure A-3 and enclosed with the assessment order as Exhibit-III. At the end of the each of the agreement for allotment of flat there is a receipt duly signed by Shri S.R. Dantal on behalf of Shreeganesh Developers acknowledging the receipt of the amounts of Rs. 3,21,000, Rs. 4,44,000 and Rs. 3,59,000 respectively. These agreements/receipts were found from the premises of the assessee during the course of search and hence it is the normal presumption, though rebuttable, that the assessee after making the payments in question to Shreeganesh Developers kept the receipts in his custody. The assessee has not been able to rebut this presumption. Therefore, we are of the opinion that the addition of Rs. 11,24,000 made by the Assessing Officer is fully justified. The decision of the Jaipur Bench of ITAT in R.N. Ghiya's case (supra) supports the case of the Revenue. As the receipts duly signed by Shri S.R. Dantal on behalf of Shreeganesh Developers indicating that the payments were received by Shreeganesh Developers were found from the custody of the assessee, it is the normal presumption that the assessee had made the payments to Shreeganesh Developers, though the name of the other party is left blank in the agreement for allotment of flat. It is the normal conduct in the business that the party who makes the payment keeps the receipts in his possession as the proof of the payment. Therefore the assessee being found in the possession of receipts, we hold that the Assessing Officer was not wrong to presume that the assessee had made the payments in question. We, therefore, uphold the order of the Assessing Officer on this point as there is no merit in the assessee's appeal on this issue. The arguments that no addition can be made on presumption or on the basis of loose/rough papers are not relevant as the addition is neither made 011 presumption nor on the basis of loose papers or rough papers. The addition is based upon the documents found during the course of search, which are in the nature of agreements of allotment of flats and are duly signed by Shri S.R. Dantal on behalf of Shreeganesh Developers. The payments of the amount in question are duly acknowledged and the receipts in token of having received the amount in cash are duly given which were found from the premises of the assessee.

The argument that presumption under section 132(4A) is not applicable to block assessment is of no consequence as the presumption could be raised under the provisions of section 110 of the Indian Evidence Act.

When a presumption could be raised under the provisions of any other law and the application of the provisions of such other law is not expressly prohibited by any statute including the statute under which the assessee is being proceeded against, such presumption cannot be termed as having been raised under section 132(4A). Therefore, the assessee's arguments in this regard also fail.

21.1 To sum up, the addition of Rs. 11,24,000 made by the Assessing Officer is upheld and the appeal of the assessee fails on this point.

"(7) The Assessing Officer erred in holding that a sum of Rs. 4,50,000 allegedly having some share of "Vasai Profit' was undisclosed income of the appellant for the block period and erred in including the same in his assessment order under section 158BC of the Act.

(8) The Assessing Officer failed to appreciate that the assessee and/or Mr. K.C. Builders had never sold/developed any property/plot at Vasai and therefore no amount could be treated as undisclosed income of the asses see in this regard." 23. The next addition of Rs. 4,50,000 is based upon seized document marked as Page 190 of Annexure A-4, copy of which is enclosed at Exhibit-V to the assessment order. The seized paper is not signed by anybody but indicates the calculation of 'Vasai Profit'. There is also indication that the seized papers belong to M/s. K.C. Builders and the share of the assessee is Rs. 4,50,000. The assessee's share in 'Vasai Profit' is indicated at 50% of Rs. 9,000.00 and after de-coding the figures the Assessing Officer has assumed that the sum of Rs. 9,000.00 should really be read as Rs. 9 lakhs.

24. The learned counsel of the assessee has contended that neither the assessee or M/s. K.C. Builders have any property at Vasai. It was stated that M/s. K.C. Builders had a property at Virar which the partners were unable to sell. Moreover, it is stated that the share of the assessee in M/s. K.C. Builders is 30% and not 50%. It is further slated that the rough sheet is not in the handwriting of the assessee.

The learned counsel of the assessee took us through paragraph 14 of the assessment order and also pages 398-399 of the Paper Book, where the copies of the seized documents are available. Our attention is also drawn to page 257 wherein the assessee had stated in the written reply dated 25-6-1997 before the Assessing Officer that-- "Myself and my daughter's father-in-law Shri K.A. Patel had done some land transactions in Virar. The investment was in the name of M/s. K.C. Builders. It is shown in my B/Sheet. We do not have good terms and the matter is under litigation." The learned counsel further stated that when the document is not in assessee's handwriting, no addition could be made on the basis of the same. It is further stated that no addition could be made on the basis of loose papers and in this regard reliance is placed upon the Hon'ble Supreme Court's decision in the case of CBI v. V.C. Shukla [1998] 3 SCC 25. The learned Departmental Representative on the other hand, stated that the seized paper though not signed by anybody bears the assessee's name and also indicates the period (i.e., upto 31-3-1993) upto which the profit is shown. It is argued by the learned Departmental Representative that even if the assessee has no property at Vasai, he could very well be involved in any other business not disclosed to the department. To the argument of the learned counsel of the assessee that the assessee has 30% of the share as per Partnership Deed and not 50%, it was argued by the learned Departmental Representative that the profit sharing ratio shown in the partnership deed does not apply to the income hidden from the knowledge of the department. It is further contended by the learned Departmental Representative that the Hon'ble Supreme Court's decision in V.C. Shukla's case (supra) is not relevant as it pertained to the criminal proceedings, but in the Income-tax Act we are not strictly governed by the rules of evidence as per Indian Evidence Act. It is further stated that the addition is not made merely on the presumption, but it is based upon the incriminating paper seized.

26. We have given a careful consideration to the rival submissions and the facts and circumstances of the case. We are of the opinion that the seized paper cannot be called a dumb paper as it bears the name of the assessee, period upto which the profit is worked out and the profit shown. It also indicates that the profit is not accounted for in the regular books of account by K.C. Builders. We are inclined to accept the argument of the learned Departmental Representative that even if the assessee has no property at Vasai, he could be involved in any other business undisclosed to the department. As the paper is found from the custody of the assessee and bears the name of the assessee, it is the natural presumption that the paper belongs to the assessee, which indicates the 'Vasai profit' and the assessee's share therein. We also hold that the Hon'ble Supreme Court's decision in V.C. Shukla's case (supra), which pertained to the criminal proceedings is not relevant in the Income-tax proceedings, which are not strictly governed by the Rules of evidence as per the Indian Evidence Act. We also hold that the profit is not worked out on any presumption but it is based upon the seized incriminating paper. We, therefore, uphold the addition of Rs. 4,80,000. The appeal of the assessee, therefore, fails on this point.

"9. The Assessing Officer erred in holding that a sum of Rs. 5,16,500 allegedly being undisclosed rent income of the appellant, for the block period and erred in including the same in the assessment order under section 158BC of the Act.' "Without prejudice to the taxability of rental income of Rs. 5,16,500, the learned Deputy Commissioner of Income Tax erred on facts and in law in not allowing deduction for repairs and collection charges as per section 24." 28. A paper was seized from the premises of the assessee, which is marked as page 206 of Annexure A-4. A copy of this seized paper is available at Exhibit-VI to the assessment order. This is a rough sheet giving the working of the rent. On the basis of this sheet, the Assessing Officer has considered the same as rent received and has taxed the same.

29. The learned counsel of the assessee stated that the copy of the seized paper is available at pages 400 and 401 of the Paper Book and it is stated that it is only the working of some proposed project. The following written arguments have been given by the learned counsel of the assessee with regard to this addition : (a) The assessee is a partner in firms which carry on construction activities and are builders. Many people consult the assessee as to their proposals.

(b) In this connection, various proposals are considered before a project is undertaken. The sheet found seems to represent a rough working of the rent payable to accommodate the tenants of a tenanted building if the said building were to be brought down and a new one to be constructed thereon. The working was to find out the additional cost to be incurred in the intermediate period to be borne for such property.

(c) The assessee does not own any property from which such huge rent can be received nor has the Assessing Officer brought out any evidence to the said effect.

(e) Without prejudice to the above, the Assessing Officer should have allowed statutory allowances like repairs, etc. while computing the income from house property.

30. The learned Departmental Representative contended that it is not a projection of some project as vacancy allowance is also made. It is stated that the only inference which can be derived is that the assessee was deriving rental income. The learned Departmental Representative further contended that statutory deductions from house property are not admissible, firstly on the ground that the assessee had not made this submission as a ground in the original ground of appeal and no additional ground should be admitted and secondly, as per section 158BC, no deductions are admissible.

31. We have given a careful consideration to the rival submissions and the facts and circumstances of the case. The argument of the assessee that he does not own any property from which such huge rent can be received, has not been dislodged by the Assessing Officer nor any material has been brought out by him to link the seized paper with the rental income of the assessee. The seized rough sheet does not bear the name of the assessee nor does it indicate the name or address of the property from which the rent is alleged to be received. It seems to be working of the proposed project only. Therefore, keeping in view the various decisions quoted by the assessee, we hold that the addition cannot be made on the basis of rough/loose sheet, which cannot be linked to the source of income of the assessee. We, therefore, delete the addition of Rs. 5,16,500 made by the Assessing Officer. As the addition has been deleted by us, the additional ground and alternative ground of appeal regarding the allowance of the statutory deductions under section 24 of the Act from the rental income becomes redundant.

"10. The Assessing Officer erred in holding that an amount of Rs. 4,49,652 allegedly being interest income was "Undisclosed Income' of the appellant for the block period and erred in including the same in the assessment order under section 158BC of the Act." 33. The addition of Rs. 4,49,652 is based upon the seized paper marked as page 207 of Annexure A-4. Copies of the seized papers are available at Exhibit-VII to the assessment order. In the assessee's Paper Book, the copy of these seized papers are available at pages 402 and 404 and the English translation are available at pages 403 and 405 respectively. These were the loose papers wherein the calculation of interest has been made under the heads "Rasdhara-Sombhai" and "Rasdhara" respectively. The Assessing Officer has considered the same as the income of the assessee and added to the total income.

34. The learned Counsel of the assessee contended that the loose sheets are not in the handwriting of the assessee and it was further argued that even if the addition has to be made on this account, the same has to be of the amount mentioned in the loose sheets and the said amount cannot be multiplied by 100. Reliance was placed on the same decisions which have been relied upon for the preceding grounds of appeal.

35. The learned Departmental Representative relied upon the decision of Jaipur Bench of ITAT in R.N. Ghiya's case (supra) to counter the argument of the Counsel of the assessee that loose paper cannot be considered for making the addition as it is not in the assessee's handwriting.

36. We have given a careful consideration to the facts and circumstances of the case and the rival submissions. We are of the opinion that in view of ITAT, Jaipur Bench's decision in the case of R.N. Ghiya (supra), the addition on the basis of loose papers can be made in the hands of assessee because the papers are seized from the custody of the assessee and the assessee has been duly confronted with the same in the course of assessment proceedings. The seized papers cannot be called dumb because they indicate the dates, amounts and also the calculation of interest. The alternative argument of the learned Counsel of the assessee that if at all the addition has to be made, it should be of the figures mentioned in the seized papers, is not acceptable as de-coding has to be done in respect of the figures mentioned in the coded language. As pointed out by the Assessing Officer in para 6 of her order, the assessee has admitted that the entries are made in the coded language. Therefore, we are of the opinion that the amount mentioned as Rs. 4.496.52 in the seized paper is in fact the amount of Rs. 4,49,652 as interpreted by the Assessing Officer. The decisions relied upon by the learned Counsel are distinguishable in facts as the seized papers here are not dumb papers, but they indicate the amounts, dates and the calculation of interest, on the amounts concerned. As the papers are seized from the custody of the assessee, we are of the opinion that the Assessing Officer is not wrong in presuming that they relate to the assessee himself. We are of the opinion that the incriminating evidence, which is found and seized in the course of search, could be used against the assessee without any reference to provisions contained in section 132(4A), provided such evidence was found to be relevant and material for the assessment of the assessee and the same had been put to him before its use against him at his assessment. The decision of ITAT Jaipur Bench in R.N.Ghiya's case (supra) relied upon by the learned Departmental Representative supports the case of the Revenue. We, therefore, uphold the addition of Rs. 4,49,652 made by the Assessing Officer.

"11. The Assessing Officer erred in holding that an amount of Rs. 28,23,408 allegedly being share of interest was undisclosed income of the appellant for the block period and erred in including the same in the assessment order under section 158BC of the Act." 38. The addition of Rs. 28,23,408 as discussed by the Assessing Officer in paragraph 16 of her order, relates to the seized papers, copy of which is available at page 406 of the Paper Book and at Exhibit-VIII to the assessment order. The amount consists of two figures, namely, Rs. 25,68,564 shown against "PRP B" and amount or Rs. 254844 shown against "PRP A". PRP here means Shri P.R. Patel, who is the assessee. It was pointed out by the learned Counsel of the assessee that many figures mentioned in the seized paper (which appears to be a sort of Balance Sheet) tally with the declared Balance Sheet as on 31-3-1993 of M/s.

Gem Builders. It was stated that these are the capital accounts of the partners, though the two amounts mentioned against the assessee in the seized paper aggregate to Rs. 28,23,408 (i.e. Rs. 25,68,564 + Rs. 2,54,844) yet in the declared balance sheet of M/s. Gem Builders on 31-3-1993 the amount shown is only Rs. 1,64,818.62. On the other hand, the learned Departmental Representative stated that the seized paper represents the true Balance Sheet of M/s. Gem Builders in which the assessee is a partner, as the amounts shown against flats (Rs. 1,90,650), Bank of India (2939) IOB (Rs. 1,018) and cash on hand Rs. 10,964 shown in the seized paper tally with the declared Balance Sheet of M/s. Gem Builders as on 31-3-1993. It was contended by the learned Departmental Representative that as the source of the capital has not been explained by the assessee, the addition has been rightly made by the Assessing Officer. The learned Counsel of the assessee, on the other hand, contended that, if at all, the addition is to be made, it should be made in the hands of the firm and not in the hands of the individual partner. The learned Counsel of the assessee further contended that it can be seen from the seized paper that the Balance Sheet is not tallied and hence the reliability of the same has to be doubted.

39. We have given a careful consideration to the rival submissions and to the facts and circumstances of the case. We are of the opinion that as some of the figures in the seized paper tally with the declared Balance Sheet of M/s. Gem Builders as on 31-3-1993, the seized paper cannot be brushed aside as not relevant to the assessment of the assessee. It shows the capital account of the assessee, who is a partner in M/s. Gem Builders. As the source of the capital has not been explained by the assessee, we are of the opinion that the Assessing Officer was justified in making the addition. However, as the capital to the extent of Rs. 1,64,818 has been declared in the Balance Sheet of M/s. Gem Builders as on 31-3-1993, we feel that the addition has to be reduced by this figure. We, therefore, restrict the addition to Rs. 26,58,590 (Rs. 28,23,408 minus Rs. 1,64,818). The other arguments for admission of the seized paper as evidence for the purposes of the assessment are the same as given in the preceding paragraphs for other seized papers. Our observations are also the same as given in the preceding paragraphs.

"12. The Assessing Officer erred in holding that an amount of Rs. 56,256 allegedly being share of interest was undisclosed income of appellant for the block period and erred in including the same in the assessment order under section 158BC of the Act." 41. The addition of Rs. 56,256 is based upon seized paper marked as page 30 of Annexure A-2, copy of which is available at page 413 of the Paper Book as well as at Exhibit-IX to the assessment order. The English translation of the seized paper is available at page 414 of the Paper Book. The Assessing Officer has pointed out that the seized paper shows that the assessee has advanced Rs. 2 lakhs on 14-6-1990 to somebody and had received back a sum of Rs. 93,117 on 14-8-1990, Rs. 76,296 on 26-10-1990 and Rs. 33,262 on 31-10-1990 aggregating to Rs. 2,02,675. The figures and the dates have been taken by the Assessing Officer from the seized paper itself. Thus, the principal is received back along with the interest of Rs. 2,675. Some balance amount was left on which interest has been worked out on various dates, namely, 1-11-1990, 1-11-1991, 1-11-1992, 1-11-1993, 1-11-1994 and 1-11-1995.

The working shows that the assessee was charging compound interest and interest chargeable as on 1-1-1995 is shown at Rs. 53,581. Thus, the total interest charged by the assessee works out to Rs. 56,256. This has been added by the Assessing Officer to the total income of the assessee.

42. The argument of the learned Counsel of the assessee is that the paper is not in the handwriting of the assessee, does not pertain to the assessee and hence no addition can be made on the basis of the same. Same decisions are relied upon which are relied upon in respect of the earlier grounds of appeal pertaining to the additions made on the basis of loose papers. On the other hand, the learned Departmental Representative contends that the possession of the paper from the custody of the assessee and the dates and amounts mentioned therein are material. It is stated that the assessee has been duly confronted with this paper. Relying upon the decision of the ITAT, Jaipur Bench in the case of R.N. Ghiya (supra) the learned Departmental Representative contended that the addition made should be confirmed.

43. We have given a careful consideration to the rival submissions and the facts and circumstances of the case. Though the seized paper does not bear the assessee's name, yet as it is found from the custody of the assessee, it was for him to explain the entries made therein. The assessee has been duly confronted with the seized paper, but rather than explaining the entries therein, the assessee has given only evasive reply. As the seized paper gives details of the advancing of amount of Rs. 2 lakhs on interest and the working of interest has also been given on the seized paper, we are of the opinion that the Assessing Officer was within her right to presume that the amount was advanced by the assessee and the interest to the extent of Rs. 56,256 was also charged by the assessee. Though this paper does not bear the assessee's name, yet it gives the amounts and the dates and the working of the interest. Therefore, this paper cannot be called a dumb paper.

The decisions relied upon by the learned Counsel of the assessee are distinguishable in facts and do not support the assessee's case. We, therefore, uphold the addition of Rs. 56,256 made by the Assessing Officer.

"The Assessing Officer erred in holding that an amount of Rs. 3,46,909 was undisclosed income of the appellant for the block period and erred in including the same in the order under section 158BC of the Act." 45. The addition of Rs. 3,46,909 is based upon the seized paper marked page 40 of Annexure A-4, copy of which is available at page 415 of the Paper Book as well as Exhibit-X to the assessment order. The Assessing Officer has stated in the assessment order that the assessee was confronted with this seized Paper, but he was not able to throw any light in respect of the amount shown against his name. The learned Counsel of the assessee contended that the assessee did not remember what this paper was about. In view of this the amount in question was treated as assessee's income from undisclosed sources by the Assessing Officer and added as such to the total income. The ld. D.R. relied upon Assessing Officer's order.

46. We have given a careful consideration to the rival submissions and the facts and circumstances of the case. In the seized paper, the amount is shown under the head 'Summary' and the names of the other persons also appear along with the amounts. The seized paper does not show from where the amount has come, whether the assessee had paid this amount or has received this amount. It is also not known whether the amount represents cash or stock-in-trade. Therefore this appears to be a dumb paper on the basis of which the addition cannot be made. The same is, therefore, deleted.

"14. The Assessing Officer erred in holding that an amount of Rs. 25,000 was undisclosed income of the appellant for the block period and erred in including the same in the order under section 158BC of the Act." 48. The addition of Rs. 25,000 is made on the basis of seized Paper marked as page 146 of Annexure A-4, copy of which is available at page 416 of the Paper Book as well as Exhibit-XI to the assessment order.

The Assessing Officer has pointed out that in the seized paper the amount of Rs. 25,000 is shown as receivable from one Mr. Jain from 10-4-1988 to 22-6-1988. It has been stated that since the assessee could not explain this amount, the same was added as assessee's income from undisclosed sources.

49. The learned Counsel of the assessee contended that the assessee does not know any Mr. Jain. It is further stated that no amount has been advanced on interest to any such person. Without prejudice to these arguments, it is stated that only a sum of Rs. 2,000 has been shown against the name of Jain. It is also contended that the seized paper is not in the handwriting of the assessee and hence the assessee is not liable to explain the entries made therein.

50. On the other hand, the learned Departmental Representative contended that the paper is seized from the custody of the assessee and some definite calculation of interest has been made therein date-wise aggregating to Rs. 25,000. It is contended that as the assessee could not satisfactorily explain the entries made in the seized paper, the addition made is justified and should be confirmed.

51. We have given a careful consideration to the rival submissions and the facts and circumstances of the case. The scrutiny of the seized paper reveals that on the left side the amounts advanced are given in the coded language and against two amounts advanced on 17-10-1988 and 3-12-1988 figures written are 1000 and 1000 and the name of the person is mentioned as Jain. The right side of the seized paper shows date-wise calculation of interest and the grand total of the interest is also worked out at Rs. 25,000. As the seized paper gives the working of the interest and is found from the custody of the assessee, the same has to be presumed to pertain to the assessee and his business and we are of the opinion that when confronted with the seized paper, the assessee cannot get away by giving evasive replies. Even if the seized paper is not in assessee's handwriting, but it is a fact that the same has been found from the custody of the assessee and the onus is on the assessee to prove that it does not belong to him. The normal presumption is that loan transactions indicated in the seized paper pertain to the assessee. We, therefore, uphold the addition of Rs. 25,000.

"15. The Assessing Officer erred in holding that an amount of Rs. 16,75,252 was undisclosed capital and interest income of the appellant for the block period and erred in including the same in the order under section 158BC of the Act." 53. The addition is based upon seized papers marked as page 169 of Annexure A-4, copies of which are available at pages 418 and 420 of the Paper Book and the English translation is available at pages 419 and 421 of the Paper Book filed by the assessee. These papers are also available at Exhibit-XU to the assessment order. The Assessing Officer has made the addition by observing as under :-- "On page 169 of Annexure A-4, an amount of Rs. 2,40,000 were advanced on 16-1-1989 and 30-1-1989 (in coded form). Total interest received on the basis of this paper upto 31-3-1993 works out to Rs. 6,02,988 which is added to the assessee's income. Likewise, the reverse side of page 169 an amount of Rs. 10,72,264 upto 31-3-1993 being capital of Rs. 7,00,000 advanced between 7-10-1988 to 31-3-1989 and interest thereon. This is also added to the total income of the assessee." 54. The learned counsel of the assessee contended that the said paper is not in assessee's handwriting and the assessee does not know what are the calculations in the said paper. Without prejudice to this argument, it is contended by the learned Counsel that the amount mentioned in the second sheet which is the reverse page of seized paper is Rs. 6,029.88 and not Rs. 6,02,988. It is stated that front page of the loose paper (page 418 of the Paper Book) is the copy of account of a party of Gem Builders (P.) Ltd., where TDS has also been deducted.

Hence, according to the learned Counsel, no additions can be made in the assessee's hands.

55. The learned Departmental Representative invited our attention to Annexure A-4 to the assessment order and pages 418 and 420 of the assessee's Paper Book. It is contended that the loans have been advanced by the assessee out of the undisclosed income on which interest has been received. Therefore the interest received has to be treated as undisclosed income of the assessee.

56. We have given a careful consideration to the rival submissions and the facts and circumstances of the case. As the assessee was duly confronted with the seized paper found from his custody, we are of the opinion that he was liable to explain the entries made therein. The natural presumption is that the entries made in the seized paper pertained to the assessee's business and the interest earned by the assessee on the amounts advanced on loan has to be treated as undisclosed income of the assessee. There is no force in the argument of the learned Counsel of the assessee that the amount shown as Rs. 6,029.88 should not be read as Rs. 6,02,988. The assessee has been making entries in the coded language and, therefore, decoded amount has to be considered for the purposes of assessment. The assessee has also admitted in the statement that he has been making entries in the coded language. Regarding front page of the seized paper (418 of the Paper Book), the argument of the learned Counsel of the assessee is that it is a copy of account of a party of M/s. Gem Builders, where TDS has also been deducted, hence no addition can be made in the hands of the assessee. However, in respect of the entries made on the reverse page the learned Counsel of the assessee was unable to say anything except saying that amount recorded as Rs. 6,029.88 should be read as such.

There is no indication on the seized paper (available at page 418 of the Paper Book) that it is the copy of account of a party of Gem Builders. No material has been produced before us to prove this contention. No evidence has also been produced that tax has been deducted at source, by M/s. Gem Builders as claimed. We, therefore, uphold the addition of Rs. 16,75,252 made by the Assessing Officer. The decisions relied upon by the assessee's Counsel are the same in respect of the grounds of appeal relating to loose papers and our finding is also the same that the facts are distinguishable.

"The Assessing Officer erred in holding that an amount of Rs. 11,98,242 was undisclosed capital and interest income of the appellant for the block period and erred in including the same in the order under section 158BC of the Act.' 58. The addition of Rs. 11,98,242 consists of one addition of Rs. 6,72,004 pertaining to seized paper marked as page 193 of File A/4 and another addition of Rs. 5,26,238 pertained to the seized paper marked as page 178 of file A/4. In respect of the amount of Rs. 6,72,004, the details are given by the Assessing Officer as Annexure A-1 to the assessment order and the copies of the seized papers are also available at pages 422 and 424 of the Paper Book. The English translation of these copies are also available at pages 423 and 425 of the Paper Book.

These seized papers contain certain calculation of interest on the basis of which the Assessing Officer has made additions as the assessee's income from undisclosed sources because the assessee could not explain the entries in the seized papers.

59. The argument of the learned Counsel of the assessee is that the papers are not in assessee's handwriting and the assessee does not know what are the calculations and they pertained to whom. Without prejudice to this argument, it is also contended that the amount in the seized papers which are written as Rs. 6,720.04 and Rs. 5,262.38 should be read as such and not Rs. 6,72,004 and Rs. 5,26,238. On the basis of the same reasons as given in the preceding grounds of appeal pertaining to loose papers, we confirm the additions made by the Assessing Officer.

"17. The Assessing Officer erred in treating amounts of Rs. 2,61,769 and Rs. 16,67,922 as undisclosed income of the appellant includible in the assessment under section 158BC. 18. The Assessing Officer erred in not considering Long Term Capital Gain on sale of Capital Asset amounting to Rs. 1,52,400 for the assessment year 1994-95 separately, liable to tax @ 20%, apart from the fact that the same could be not included in the computation at all.

19. The Assessing Officer erred in not considering Long Term Capital Gain on sale of Capital Asset amounting to Rs. 15,54,707 for the assessment year 1995-96 separately, liable to tax @ 20%, apart from the fact that the same could be not included in the computation at all." 61. The observations of the Assessing Officer in paragraph 3 of the assessment order are reproduced as under :-- "3. In the above return, the assessee has disclosed a total income of Rs. 2,36,770 for assessment year 1994-95, Rs. 16,38,670 for assessment year 1995-96 and Rs. 21,01,186 for assessment year 1996-97. However, from the details filed, it is seen that the assessee has filed his returns regularly only upto assessment year 1993-94, The returns for assessment years 1994-95, 1995-96 & 1996-97 were filed by the assessee only on 5-6-1997. Even though the return for assessment year 1996-97 could not have been filed before the search and seizure action on 15-7-1996. The assessee should have filed returns for assessment years 1994-95, 1995-96 within time allowable under section 139(1). Due to failure of the assessee to comply with the above provisions, the income returned by the assessee in the returns for assessment years 1994-95 and 1995-96 are treated as undisclosed income and clubbed for computation for the block assessment." 62. The learned Counsel of the assessee has contended that the regular income which has been disclosed to the Department for the assessment years 1994-95 and 1995-96 should not be treated as undisclosed income, though the returns were filed after the date of search only on 6-5-1997. Without prejudice to this argument, the learned Counsel further contended that the total income should be computed as per law and standard deduction and deduction under section 80L should be allowed and capital gains may be assessed at 20%. In support of the argument that regular income cannot be added in block assessment, the learned Counsel placed reliance upon the following decisions :-- The learned Counsel of the assessee also contended that advance-tax has been paid in respect of the assessment years 1994-95 and 1995-96 (as per details given at page 512 of the Paper Book) and hence this income should be treated as disclosed and not added in the block assessment.

It is further contended that on the dividend income tax of Rs. 4,477 has also been deducted at source.

63. On the other hand, the learned Departmental Representative contended that provisions of section 158BB are very clear and as per sub-clause (c) of sub-section (1) of section 158BB, the income in respect of the assessment years has to be added in the block assessment where the due date for filing of the returns of income had expired but no returns of income were filed. It is also contended that the assessee did not have any income which was subject to TDS and hence the case laws relied upon by the assessee are distinguishable. It was stated that the assessee's returns are much above the taxable limits. The learned Departmental Representative also contended that Standard Deduction and Deduction under section 80L are not admissible as per the scheme of the block assessment and no separate treatment can be given for taxing the capital gains. It is also stated that the decision of the Kerala High Court reported at CIT v. M.P. Ramachandran Nair [2000] 241 ITR 832 pertained to the case where the income was below the taxable limit. It is stated that in the present case, the assessee's income in the returns being above the taxable limit, the said decision is not applicable.

64. We have given a careful consideration to the rival submissions and to the facts and circumstances of the case. In one of the decisions relied upon by the learned Counsel, namely, Salvi Divashnka Shatikar v.ACIT, the matter pertained to a salaried assessee, whose employer had filed return under section 206 showing the details of income and tax deducted at source. This was treated as income disclosed to the Department. However, in the present case, the assessee has paid advance tax, the entries of which are recorded in the regular books of account and the advance tax and TDS payments are also reflected in the returns of income filed. It is seen that TDS of Rs. 4,477 is paid for assessment year 1995-96 on the dividend income of Rs. 34,594 and advance tax of Rs. 1,87,000 is paid for assessment year 1995-96. For the assessment year 1994-95, no advance tax is paid, but TDS of Rs. 3,779 is paid on dividend income of Rs. 21,359 and of Rs. 542 on interest income of Rs. 4,852.

64.1 We are of the opinion that the returns of income for assessment years 1994-95 and 1995-96 were filed on 6-5-1997, which is beyond the period prescribed under section 139(4) and hence the decision of ITAT Indore Bench in the case of Sitadevi Daga (supra) relied upon by the learned counsel of the assessee is not applicable to the facts of the assessee's case. In Sitadevi Daga's case (supra) the returns were filed within the period prescribed under section 139(4), hence the facts being distinguishable, the assessee cannot derive any support from the case of Sitadevi Daga (supra). Further, we are of the opinion that the income subject to TDS and the income corresponding to advance tax payments cannot be treated as undisclosed income and taxed in the block assessment under section 158BC. Such income has to be assessed as regular income in the normal assessments under section 143(3) or section 144 or section 143(3)/144 read with section 147. The Assessing Officer is, therefore, directed to delete such income from the block assessment.

64.2 Once the income is assessed in the regular assessment and not under block assessment, we are of the opinion that the assessee will be entitled to the normal deductions, like, Standard Deduction in respect of salary income and Chapter VI-A deductions from the gross total income. The capital gains, if included in the income assessed in the regular assessment, will also be subject to deductions at the rate of 20% as per law.

65. Ground No. 20 is of general nature and no comment or adjudication is needed for the same.

66. The additional grounds A-1 and A-2 are of general nature and no adjudication is required in respect of the same.

67. The additional ground No. B-3 relating to statutory deductions from rental income has already been dealt with along with ground No. 9 and hence no further discussion is required in respect of the same.

68. Ground No. D-7 is of general nature and hence no adjudication or discussion is required in respect of the same.

(5) Without prejudice to the original grounds of appeal and the additional grounds of appeal, the learned Deputy Commissioner of Income-tax erred on facts and in law in making additions for both the source of income as well as for the application of the said income.

(6) The learned Deputy Commissioner of Income-tax failed to appreciate that the addition on account of source and application leads to double taxation of the same income, once when the income accrues and once again when the same is spent. Hence, the appellant prays that the addition on account of source or on account of application be deleted." 70. The learned Counsel of the assessee contended that making additions for both source of income as well as for the application of the said income would amount to double taxation and hence it will not be fair and reasonable. In this regard, our attention was invited by the learned Counsel to Paper Book No. 2 filed by him where a statement showing additions made on account of source of funds as well as application of income, is given. On the other hand, the learned Departmental Representative contended that such issues were not raised before the Assessing Officer and moreover the set off cannot be given unless the assessee establishes nexus of the amount spent with the undisclosed income earned.

71. We have given a careful consideration to the rival submissions and the facts and circumstances of the case. We are of the opinion that there is some force in the arguments of the learned Counsel that making of addition on the basis of source of funds as well as application of funds will amount to double addition. We are of the opinion that if the earning of income is prior to the date of application of the funds, the set off will have to be given to the assessee. However, we find that the chart filed by the learned Counsel of the assessee does not give the dates of earning of income or the application of income. Moreover, certain additions based upon the source of funds or application of funds have been fully or partially deleted by us and hence on the basis of our order the Assessing Officer will have to verify whether the earning of income pertains to the period prior to the period of application of funds. Based upon this exercise, the Assessing Officer will give necessary set off to the assessee.