1. The appellant, Smt. Rajrani Gupta, runs a sex and health clinic named "M/s Kayakalp International" and a beauty clinic named "Monalisa". Her husband, Dr. Sohanlal Gupta, is a dental surgeon. Her son, Dr. Arunkumar Gupta, is also a qualified doctor, being a Bachelor of Ayurvedic Medicines & Surgery (B.A.M.S.). Her daughter-in-law, Dr.
Renu Gupta, is also a qualified doctor and has the same qualifications as that of her husband, Dr. Arunkumar Gupta. There is another entity called "Dr. Sohanlal Gupta (HUF)" in which all the abovementioned persons are members. The entire family was residing at Bathinda, Punjab, upto mid-July 1991. Because of the terrorist activity in the State of Punjab, they moved to Bombay in 1991, where the appellant has been running the aforesaid sex and health and beauty clinics. Her family members have also been working with her as salaried employees.
She has set up three branches of her sex and health clinic in Mumbai.
The first one was set up at Borivali in 1991, the second one at Charni Road in May 1995 and the third one at Dadar in November, 1995. A search was conducted at the residential and business premises of the appellant on 26th March, 1996. During the search, the following cash was found :(1) At the residential premises situated at Flat(2) Nos. 201, 202 and 203-A,Lancelot Building, Borilvili (West), as per Panchnamadt. 27th March, 1996 49,36,500(2) At Clinic, at 15, Ghamat Terrace, Senapati A substantial portion of the above cash, excluding a small portion, was offered to tax as the unexplained income of the appellant.
2. During the search, it was also noticed that the appellant and her abovementioned family members received substantial gifts from certain non-residents out of their NRE Accounts in different years, in the names of the aforesaid family members of the appellant and also in the name of the appellant herself. Apart from the gifts from the non-resident Indians, the family members of the appellant had also received other domestic gifts, and the details of the gifts received in different financial years are recorded by the AO at p. 5 of his order, which are as follows :--------------------------------------------------------------------- Name Financial N.R.E. Non-N.R.I. Total 1 2 3 4 5 Rs. Rs. Rs.---------------------------------------------------------------------Dr. Arun Gupta 1992-93 - 27,305 27,305 1993-94 - 1,53,451 1,53,451Aakansha Gupta 1995-96 50,000 1,89,069 2,39,069Dr. SohanlalGupta 1992-93 - 21,000 21,000 1993-94 1,00,000 31,000 1,31,000Gupta 1992-93 - 72,251 72,251 1993-94 25,000 82,704 1,07,704Gupta (HUF) 1993-94 1,00,000 31,000 1,31,000Dr. Renu Gupta 1994-95 2,11,000 1,46,112 3,57,112 1995-96 - 1,501 1,501 The details of the non-residents who allegedly made the gifts are given by the AO at p. 6 of his order and they are as follows :---------------------------------------------------------------------- Sr. No. Donor Amount Rs.----------------------------------------------------------------------(1) Francis Vaz 2,00,000(2) A.T. Dianold 2,25,000(3) Pramod V. Simon 10,000(4) Luis D'Silva 75,000(5) Joe Vaz 2,00,000(6) Darshan Singh 4,00,000(7) Trevour Castilliro 12,00,000(8) Murtza Hussain 25,000(9) Keshav Jadhav 3,51,000(10) Sheel Cabral 2,00,000(11) Derick Vaz 1,50,000(12) Hasmukh Dave 1,00,000(13) Mohamadi M.F. Hussein 2,11,000(14) Manisha Kapila 50,000(15) Unidentified donor 1,50,000---------------------------------------------------------------------- The AO also noticed that a large number of flats have been acquired between 1991 and 1996 in the names of the different family members and the details of such properties acquired and their values are given by the AO at p. 17 of his order and they are as follows :-----------------------------------------------------------------------------Sr. No. Property details Agreement Name of the person Value 1 2 3 4 Rs.----------------------------------------------------------------------------- (1) Flat No. C-110, Lancolot Bldg.
3,41,000 Dr. Sohanlal Gupta Opp. Shastri Nagar, (2) Flat No. 504-B, Mermaid-I, Plot 8,60,000 -Do- No. 32/33, Sector 11, (3) Flat No. 506, 5th floor, 'C' 7,00,000 -Do- Wing, Bldg. No. 4, (4) Shop No. 7 (Proposed bldg.), 8,02,700 -Do- Trimbhak Tower, (5) Flat No. 806, 8th Flr., Punit Tower-2, Plot No. 53, Sector No. 11, (6) Office 1001/1002, 10th flr, (proposed bldg.), Bay-view (7) Flat (number not given), 7th flr.
Akashganga, Plot No. A-21, (8) Flat No. 201-A, Lancelot Bldg., Opp. Shastri Nagar, S.V. Road, (9) Flat No. 202-A, Lancelot Bldg., Opp. Shastri Nagar, S.V. Road, (10) Flat No. 203-A, Lancelot Bldg., S. V. Road, Borivali (W), Mumbai-92 (11) Tenament No. 15, 2nd flr., Ghamat Terrace, Senapati Bapat (12) Room No. H, 3rd flr., Laud Mansion, Queens Road, Mumbai (13) Flat No. C-411, Lancelot, S.V. Road, Borivali (W), Mumbai-92 (14) Shop No. 37, Chawla Plaza, Plot 14/15, Sector 11, CBD, Belapur, (15) 2nd flat from south side, Manek Kunj (proposed bldg.),--------------------------------------------------------------------------------- The AO was of the view that the abovementioned gifts received by the appellant and the family members were not properly explained and so he brought them to tax as the income of the appellant and the other family members to the extent he regarded them as unexplained. Similarly, he was of the view that there was investment in the abovementioned properties outside the books of account and he brought that unexplained investment also to tax as the income of the respective family members, Apart from that, he also brought to tax certain unexplained loans recorded in the books as the income of the appellant and the other family members. Apart from that, the search party noticed certain patients' registers in which the visits of the patients, the nature of the disease treated and the fee collected are recorded and on the basis of such patients' registers, the AO concluded that all the fees received were not recorded in the books and accordingly he estimated the professional income of the appellant as follows : Asst. yr.
Professional income Rs. 1993-94 10,00,000 1994-95 43,44,325 1995-96 46,66,762 1996-97 (after set off for the unexplained cash found at the time of search offered as income) 18,89,779 Apart from the above additions, the AO also made certain miscellaneous additions which will be referred to in due course. The learned counsel for the assessee assailed all the additions made and they are dealt with hereunder.
3. The gist of the first ground of appeal is that the AO erred in making an addition of Rs. 1,24,360 under s. 69 as unexplained cash. In the block return filed by the appellant, she had worked out the excess cash as under :Cash found at the time of search as on 26th March, 1996(inclusive of Rs. 300 found at Charni Road clinic) 49,70111Less : Cash balance in the personal books as on 26th March, 1996 :Sohanlal Gupta (Dental Clinic A/c Book) 44,515Arunkumar Gupta 10,412Renu Gupta 24,287Sohanlal Gupta (HUF) 9,888Aakanksha Grand-daughter 465 89,567 -------- ---------- It may be observed that the appellant worked out the above excess cash of Rs. 46,75,640 on the basis of the cash balances reflected in the cash books of the different family members, inclusive of the grand-daughter of the appellant, Aakanksha. After working out the unexplained cash at the above figure of Rs. 46,75,640, an amount of Rs. 39,74,375 was offered as the income of the appellant and the balance of Rs. 7,01,265 was offered in the assessment of Dr. Sohanlal Gupta. The AO has not raised any dispute about the allocation of the excess cash between the appellant and her husband. He has, however, mentioned that the cash balance in the cash books seized during the raid at Kayakalp International stood only at Rs. 1,37,373 as against the amount of Rs. 1,83,428 taken credit of by the appellant in the above computation for working out the excess cash. He has also mentioned that the appellant surrendered, in the deposition taken from her under s. 132(4) at the time of search, an amount of Rs. 48,00,000 as against the income offered in the block returns filed by the appellant and her husband on this account of Rs. 46,75,640. He was of the view that there was no reason for the appellant to resile from the position of Rs. 48 lakhs offered during the search. He also observed that the appellant did not furnish the details of the entries made in the respective cash books for the period from the date of the last entry as on the date of the search to 26th March, 1996. Accordingly, he brought the impugned amount of Rs. 1,24,360 as the income of the appellant on account of unexplained cash under s. 69 of the IT Act over and above the amount offered by her.
4. The learned counsel for the appellant pleaded before us that the entries in the respective cash books were not upto-date as on the date of the search, but subsequently the cash books were made upto-date by incorporating the necessary entries in them on the basis of the patients' registers which were found and seized during the search.
Thus, as the entries were made on the basis of the seized material, there is no question of any manipulation in the matter and so there is no reason at all for the impugned addition of Rs. 1,24,360.
5. We are in agreement with the submissions of the learned counsel for the appellant. In the light of the explanation offered, we do not find any reason for this addition. We may also mention that no evidence has been produced before us to the effect that the appellant had been required at any stage to prove the entries made in the respective cash books on the basis of the patients' registers. In the absence of a specific opportunity given to the appellant on this issue, we do not find any justification for the remarks of the AO that the necessary details of the entries made in the cash book by way of updating them upto 26th March, 1996, were not furnished. In this view of the matter, we delete the addition of Rs. 1,24,360.
6. The gist of the net objection is that the AO erred in making the addition on account of NRI gifts of Rs. 4,06,080, as per following details :---------------------------------------------------------------- Asst. yr.
Gift amount Premium Rs. Rs.---------------------------------------------------------------- 1994-95 25,000 2,000 1995-96 3,51,000 28,080 Total 3,76,000 30,080 The AO observed that the members of the family of the appellant had received substantial gifts and this was only a mode of converting black money into white. Particularly with reference to the NRI gifts, it is mentioned that there was no relationship at all between the donors and the appellant or the members of her family and it is inconceivable that they developed such close relationship with the donors, as alleged by the appellant, in a short span of three to four years after their coming to Mumbai from Bathinda, Punjab. It is also mentioned that the gifts received from the NRIs have no relevance to any particular occasion like marriage or birthday and there was no reciprocation by the appellant. It is further mentioned that the gifts are supported by informal letters alleged to have been received from the respective donors confirming the gifts and these letters were seized during the raid, but "surprisingly, the contents of all such informal letters are identical except the particulars related to the gift such as date, amount and draft No. etc.". The AO wondered how the persons situated in different countries like Hong Kong and Singapore could write the same letter to the appellant and her family members unless the draft of the letter itself had been supplied by the appellant just for their signatures. The AO also made the copies of such letters as Annexure-B to the assessment order. As the letters were identically worded, the AO inferred that "this speaks of nothing but of a 'design'". The AO also mentioned that the authorities under the Foreign Exchange Regulation Act took a deposition of Dr. Arunkumar Gupta on 6th November, 1996, and of Dr. Sohanlal Gupta on 7th November, 1996, and the two deponents have admitted to the 'design' in the matter of NRI gifts. The AO has extracted the relevant portion of the deposition of Dr. Arunkumar Gupta before the FERA authorities at pp. 9 and 10 of his order and the full deposition, which is available in the appellant's paper book (APB) filed along with her letter dt. 15th July, 1998 (placed in the appeal folder), is as follows : "Received your summon No. T-3/595-B/96, dt. 22nd October 1996, accordingly I appeared before you today to give evidence in the proceedings. I have been explained ss. 40 and 48 of the Act and I understand that giving false evidence is an offence and if any statement is proving wrong I can be punished under the provision of the Act. I understand the above. I hereby give these facts as under : My full name is as stated above and stay at above address for the last 5 years. My profession, I am a doctor serving with Kaya Kalp International Clinic situated at 110-C Lancelot, S.V. Road, Borivali (W). I am serving for the last 8 years approximately Kaya Kalp Clinics belongs to my mother. Smt. Raj Rani Gupta is sole Proprietor of Kaya Kalp. I am drawing a salary of Rs. 16,000 p.m. and my father Dr. Sohanlal Gupta is also working with the said clinic and he is also getting Salary. I am married, my wife's name is Dr. Renu Gupta.
She is also working with said clinic and drawing about Rs. 16,000 salary and got two daughters by name (1) Aakamsha (1-1/2 yr.), (2) not named yet (one month). Myself and my wife are income-tax assessees. I have a flat situated at 411-C, Lancelot S.V. Road, Borivali (W). It was purchased in the year 1993-94 for about Rs. 4/5 lacs. My wife is not having any property in her possession but booked a flat in Lalbaug and same is under construction. I am holding Indian passport No. . . . . dt. 21st December, 1995, issued at Bombay but never visited abroad. My wife also hold Indian passport. She also never visited abroad, I am maintaining S.B. a/c with S.B.I. No. . . . . Borivali (W) Branch A/c No. 18117. My wife also had bank a/c with same bank. Daughter also.
Regarding the gifts received by me and my wife and my daughter, I state that I hae received from NRE cheques of totalling Rs. 12,50,000 (twelve lacs fifty thousand) and my wife received NRE cheque of Rs. 2,11,000 (two lac eleven thousand) and my daughter received cheque of Rs. 50,000 (fifty thousand) drawn from different NRE holders residing in different foreign countries from their accounts maintaining with Hong Kong Bank, United Bank of India. Bombay Merchant Bank, Bank of America in Bombay.
I will furnish the full names and addresses of the persons from whose NRE accounts I received cheques as follows :-------------------------------------------------------------------------- Cheque No. Account No. Amount Name of party Rs.--------------------------------------------------------------------------072831 dt. 19-2-1996 11-239159-006 5,00,000 Trevor Gastellino072830 dt. 20-12-1995 " 1,50,000 "009042 dt. 13-2-1993 1129 20,000 Union Sheel Cabral Bank001607 dt. 24-8-93 1400 1,00,000 Francis Bosco Vaz UBI421784 dt. 20-8-94 112395906 3,00,000 Trevor Hongkong Renu Gupta8283 dt. 28-3-95 53344 2,11,000 M.P. Hussain Aakamkasha40639 dt. 25-2-96 340451 50,000 Manisha Kapila Bank of America In total myself, my wife and daughter received total 15,11,000 (fifteen lacs eleven thousand) with the foreign exchange in Indian cheque rupees from different NRE a/c holding and persons staying abroad and for receiving the above said amount I paid to NRE cheque amount plus 8 per cent premium for the said amount to the said NRE a/c holder for releasing the NRE cheque. I have paid about Rs. one lac twenty thousand as premium for the said amount from amount I receive directly from the NRIs who came on leave from abroad, the same of Indian currency in payment of the NRE cheque purchased from different NRIs was from our family savings from time to time. There is no Book of accounts, all from the Indian currency paid for the purchasing the NRF cheque. My wife and my children are not aware of the same of NRI cheque purchased and payment made as I am maintaining the account of the family.
My father Dr. Sohanlal Gupta and my mother also received different NRE cheques totalling to Rs. 17,36,000 from different NRIs by paying premium and cheque amount details can be furnished by them. I will submit photocopies of accounts of myself, my wife and my daughter within two days. I have gone through the statement running into 5 pages and the same is true to the best of my knowledge and the same has been written by me without any force or any promise and same is true." The AO has also extracted the relevant portion of the deposition of Dr.
Sohanlal Gupta at p. 10 of his order and it reads as follows : "Regarding your query about the NRE cheques received from different non-resident Indian accounts maintaining with different Indian bank in Bombay, I state that I received ten cheques of NRE a/cs totalling to Rupees thirteen lakhs sixty thousand (Rs. 13,60,000) and my wife also received two cheques of three lacs seventy-six thousand (Rs. 3,76,000) from different NRI's a/c maintaining in Bombay I paid to the NRE a/c holders 8 per cent (eight) premium alongwith the cheques amount as a compensation for the amounts received. This cheque amount and the compensation received with NRE cheques was paid by cash. The source of Indian currency for the NRE cheques received was from family savings from time to time. I have no account for the Indian currency raised for the payment of NRE cheques. My wife also not having any book of account for the Indian currency paid to the NRIs, for the cheque received from their accounts. The persons from whom myself, my wife and my son, daughter-in-law and granddaughter received NRE cheques from their accounts in different banks in Bombay are not related to us. These persons are permanently employed in different foreign countries. We received NRE cheques from them when they visited India directly from the persons. All the amounts received from NRE a/c are converted into FDRs." The AO has also mentioned that both Dr. Sohanlal Gupta and Dr.
Arunkumar Gupta retracted their statements before the FREA authorities on the ground that the original depositions were extracted from them through coercion, but he mentioned that there was no evidence that the statements given before the FERA authorities were vitiated by coercion and so the so-called retraction was not of any significance but was only self-serving. The AO also mentioned that the appellant was required to produce the donors before him for examination but not even a single donor was produced. He also observed that the only reply given to him was that the donors were not available in India and had gone abroad. He also mentioned that the Indian addresses of the donors were not furnished. In the circumstances he inferred that, as already mentioned, the so-called gifts which were credited in the account books of the family members were unproved and as such be brought them to tax along with the premium thereon as the income of the respective family members, apparently under the provisions of s. 68 of the IT Act.
7. Before us, the learned counsel for the appellant invited our attention to the retractions by Dr. Arunkumar Gupta and Dr. Sohanlal Gupta. The retraction by Dr. Arunkumar Gupta is dt. 6th November, 1996 (received in the Enforcement Directorate on 8th November, 1996) and may be seen at pp. 130 and 131 of the APB and it reads as follows : "I was called by the Enf. Dept. on 6th November, 1996 and accordingly I have gone there at 14.00 and my statement has been recorded along with interrogation with regard to gift cheques received by me, (1) self Rs. 12-1/2 lakh (2) wife 2,11,000, (3) daughter Rs. 50,000 received from Seamens (1) Trevor, Sheel, Francis, Mohd. Hussein and Manish Kapila all are NRI working on foreign going vessels.
I told the Department they know me personally well since last 4/5 years and they have given gifts to me and my family in 1995-96 out of personal relationships developed over a period of years.
However, the Officer did not believe me and got angry on me and insisted that I must write down as told to me that these gifts were purchased by me in exchange of cash + 8 per cent commission and if I do not write down, I will have to face dire consequences and further harassment and my whole family will be in trouble. I will be arrested and detained under COFEPOSA. I became nervous and being professional man got afraid and wrote down what was dictated to me and asked to sign the same. The statement got over at about 4 p.m. and I was told to come again when called by them.
Thus in the said circumstances I say that my statement is neither true nor voluntary statement nor by consent. I have not purchased gift cheques against cash payments.
The retraction of Dr. Sohanlal Gupta is 7th November, 1996 (received in the Directorate office on 11th November., 1996) and may be seen at p.
132 of the APB and it reads as follows : "I was called in the office of the Enforcement Department through message from my son. Accordingly I have attended the office today at 12.30.
2. The officer started interrogating me at 2.00 p.m. and told me that he knew everything about the receipt of gift cheques in lieu of cash payments from certain seamen and he has told me that he would dictate the said statement to me which I will have to write down as per his dictation. I told the officer that I knew the seamen personally for a long time and this is a genuine gift transaction and there is no cash payments against this gift totalling Rs. 17,36,000 which includes gift received by my wife also + HUF. The officer was not prepared to believe me and he insisted that I must write down that this is a gift against cash payment. He threatened that if I do not write down as dictated by him my whole family will face dire consequences and I will be arrested and prosecuted under COFEPOSA. Being a thyroid patient aged over 62. I became desperately nervous. I had no other choice but to write down whatever was dictated to me by the officer. The recording of the statement went on till 5.30 p.m. and then I was asked to sign the said statement which I did unwillingly. When I was going, I was handed over summons by the officer and asked me to sign the same. The said summons was handed over to me at 5.30 p.m. when I went to the Department at 12.30, I had to sign the register with date and time and I have put the time 12.30 and date 7th November., 1996.
I say that in the aforesaid situation my statement was wrongfully obtained from me under force and duress and, therefore, the same is not true and voluntary statement of mine. I, therefore, hereby resile from the same. I repeat that it is a genuine gift transaction from seamen who are personally known to me for a long period of time. They are permanently employed on foreign vessels. I deny having purchased any gift cheques from the said seamen. These gifts were received during the period 1993 to 1996. This application of mine be taken on record." It may be observed from the above depositions that both father and son have admitted that the donors of the NRI gifts involved were mostly seamen working on foreign-going vessels. The learned counsel for the appellant pleaded that when a confession is retracted, the evidentiary value of the original confession is either nil or it should be taken not simply with a pinch but with a tonne of salt. He also pleaded that the original inculpatory statement cannot be relied on de hors the retraction and for this proposition he has relied on the decision of the Foreign Exchange Regulation Appellate Board in the case of Nizamuddin vs. Director of Enfrocement (1998) 96 Taxman 408 (FERAB) and also the decision of the apex Court in the case of K.T.M.S. Mohammed vs. Union of India (1992) 65 Taxman 130 (SC). In this context, reliance is also placed upon the decision of the Tribunal in the case of Asstt.
CIT vs. Sushiladevi S. Agarwal (1994) 49 TTJ (Ahd) 663 : (1994) 50 ITD 524 (Ahd) in which it was observed in para 7 that the search is an invasion on the privacy of a citizen, and that what is stated by a deponent on the search day should not be taken as the whole truth, particularly when there is a subsequent retraction. It is also pleaded that the appellant had furnished the pass books of the donors from which the gift cheques were issued to the appellant and to her family members and their addresses were also furnished and the confirmatory letters were either furnished or seized during the raid and so the initial onus lying on the appellant and her family members of proving the gifts in question was discharged. In this context, the learned counsel for the appellant relied upon the decision of the apex Court in the case of Parimsetti Seetharamamma vs. CIT (1965) 57 ITR 532 (SC) for the proposition that the onus is on the Department and not on the assessee to prove that the apparent is not the real, or that in the present case the gifts are not genuine. He has also relied upon the decision of the jurisdictional High Court in the case of CIT vs.
Gokaldas Hukumchand (1943) 11 ITR 462 (Bom) for the proposition that suspicion cannot take the place of evidence and so it is pleaded that in the present case, addition is made only on the basis of suspicion, which is unjustified. It is mentioned that in the present case, the gifts were received by account payee cheques or drafts and the addresses of the donors were available and so the onus lying on the appellant of proving the gifts is discharged and in this context, reliance is placed upon the decision of the Patna High Court in the case of Addl. CIT vs. Bahri Bros. (P) Ltd. (1985) 154 ITR 244 (Pat) and the decision of the jurisdictional High Court in the case of Orient Trading Co. Ltd. vs. CIT (1963) 49 ITR 723 (Bom). It is also pleaded that the AO could have summoned the donors if he so desired and without exercising such power it was not justified on his part to have made the addition in question. In this context, reliance is placed upon the decision of the apex Court in the case of CIT vs. Orissa Corpn. P. Ltd. (1986) 159 ITR 78 (SC). So it is pleaded that the additions made on account of NRI gifts in the case of all the family members of the appellant inclusive of the amount of Rs. 4,06,080 made in the case of the appellant require to be deleted. It is also pleaded that the NRI gifts were credited either to the capital accounts or separate gift accounts of the various family members in the respective years in the books maintained by them and as for certain years, the assessments have been completed, the matter cannot be reconsidered while completing the block assessment. In other words, the argument made out is that in a block assessment, only the undisclosed income can be brought to tax and the determination of such undisclosed income has to be based only on material found or seized during the search. If there is no such material located during the search, there is no legal basis or justification for bringing any amount to tax. For this proposition, the learned counsel for the appellant relied upon the decision of the Tribunal in the case of Sunder Agencies vs. Dy. CIT (1997) 59 TTJ (Mumbai) 610 : (1997) 63 ITD 245 (Mumbai). In the present case, the confessions made by Dr. Sohanlal Gupta and Dr. Arunkumar Gupta before the FERA authorities were subsequent to the date of search and so it is pleaded that those confessions cannot be taken into account for bringing the NRI gifts to tax as the undisclosed incomes of the family members.
8. The learned Departmental Representative, on the other hand, mentioned firstly that the appellant had adopted delaying and evasive tactics. It is mentioned that while the search action took place on 26th March, 1996, and a notice calling for the return under s. 158BC of the IT Act was issued as early as 27th June, 1996, the appellant filed the return, after several reminders, only on 6th March, 1997, i.e.
after a lapse of about eight months from the date of issue of the said statutory notice and towards the close of the statutory period available to the AO for the completion of the assessment, which ended on 31st March, 1997. Secondly, it is mentioned that the acquisition of as many as 15 properties by the family members within a period of about five to six years of their migration to Bombay from Punjab and the receipt of gifts to the tune of Rs. 40 lakhs by the various family members as well as the seizure of cash of about Rs. 50 lakhs are all tell-tale signs of accumulation of black money. The learned Departmental Representative invited our attention to the letters received from the non-residents which were seized during the search and mentioned that even though they were written in different years and from difference places, they are all in the same type, which indicates that they were written on the same typewriter. It is also mentioned that the deeds read alike even though they ostensibly have emanated from different places like America, Singapore and Hong Kong. It is stressed that the letters are mass produced. He also mentioned that there is no relationship between the donors of the NRI gifts and any of the members of the appellant's family and there can be no conceivable reason why the donors, who are mostly sailors, should have exhibited such love and affection towards the members of the family of the appellant. He also pleaded that the confessions given by Dr. Sohanlal Gupta and Dr. Arunkumar Gupta on their behalf and on behalf of the appellant are quite conclusive of the matter. It is also pleaded that the so-called retraction subsequently made by them is of little significance inasmuch as there is no evidence at all to the effect that the FERA authorities had exercised any coercion. In this context the learned Departmental Representative relied on the decision of the Hon'ble Kerala High Court in the case of V. Kunhambu vs. CIT (1996) 219 ITR 235 (Ker), where an addition made in the hands of the firm on the basis of a statement given by a partner of the firm under s. 132(4) was held to be valid. He has also relied upon the decision of the Hon'ble Kerala High Court in the case of Kalpaka Bazar vs. CIT (1990) 186 ITR 617 (Ker) where the search was held to be legal because there was no proof that the authorised officers who conducted the search had misbehaved during the search operation. He has also relied on the decision of the Tribunal in the case of Param Anand Builders (P) Ltd. vs. ITO (1996) 56 TTJ (Mumbai) 21 : (1996) 59 ITD 29 (Mumbai) wherein it was held that a mere allegation of torture and harassment by the search party cannot be accorded credence in the absence of any account of what exactly happened and in the absence of any corroboration by witnesses. He also mentioned that Dr. Sohanlal Gupta and Dr. Arunkumar Gupta had addressed their retractions to the very same officers who were allegedly guilty of exercising coercive measures against them and not to any of the higher authorities who exercised administrative control over them, and so it is made out that the so-called retraction is only a self-serving device. The learned Departmental Representative also mentioned that some of the so-called donors have given multiple gifts and this is also a feature that proves the incredibility of the version of gifts. In this context, he filed a statement which indicates the following multiple gifts by the same donors :--------------------------------------------------------------------- Sr.
Name of the Name of the donee Amount Date No. donor (Rs.)---------------------------------------------------------------------(1) Francis Vaz (1) Dr. Sohanlal Gupta 1,00,000 7-3-1994 (Rs. 2,00,000)(2) A.T. Dianold (1) Sohanlal Gupta 50,000 29-6-1994 (Rs. 2,25,000)(3) Trevor Castilliro (1) Sohanlal Gupta 2,50,000 23-2-1996 (Rs. 12,00,000) It is also pleaded that the donors were not produced for the examination of the AO even though specifically required and as the onus of proving the gifts, which are on par with cash credits, lies on the appellant, it must be held that the version of the gifts is not proved at all. Ultimately, the learned Departmental Representative pleaded that human probabilities cannot be ignored in assessing the genuineness of the NRI gifts in question and in this context he relied upon the decision of the apex Court in the case of Sumati Dayal vs. CIT (1995) 214 ITR 801 (SC) and mentioned that the gifts in question are simply a money-laundering exercise by the appellant and her family members, as was actually admitted by her husband and son before the FERA authorities.
9. In his rejoinder, the learned counsel for the appellant pleaded that the enquiry by the FERA authorities was instigated by the IT Department in order to strengthen their case and the FERA authorities are known for adopting coercive measures. It is also mentioned that the addition of premium on the gifts at 8 per cent is totally unjustified, as there is no evidence at all in support of such payment of premium. It is also mentioned that the similarities in the contents of the various letters received from the donors are easily explained, because the appellant herself drafted the letters and obtained the signatures of the donors.
It is explained that the appellant and her family members visualised in advance the queries in this regard from the Department and so prepared themselves to answer the queries and kept ready the evidence in support of the gifts. It is conceded that there are suspicions in the matter but it is pleaded that such suspicions cannot take the place of evidence. It is also pointed out that there is no evidence at all to the effect that the appellant or the family members had given back the cash to the donors after the receipt of the cheque money from them and so there is no basis at all for the version of the Department that the gifts were not genuine.
10. We are of the view that we have to sustain the addition of Rs. 4,06,080, being the NRI gifts received by the appellant and the estimated premium thereon at 8 per cent. Firstly, the appellant did not produce the donors for the examination of the AO on the plea that they were not available in India. The failure of the appellant to produce them before the AO by itself may not be a sufficient reason for sustaining the addition. This circumstance has to be viewed in conjunction with the other facts of the case. As mentioned by the learned Departmental Representative the letters from the donors located during the search have unusually striking similarities. In fact, the language in a good number of the letters is identical. Just to illustrate, a letter dt. 29th September, 1995, addressed by one Darshan Singh Raina, a donor, to Mr. Sohanlal Gupta, which may be seen at p. 16 of the APB filed along with the appeal memo, reads as follows : Mr. Sohanlal Gupta, 201-A, Lancelot, S.V. Road, Borivali (W), Bombay-92. My Dear Sohanlal ji, By the grace of God, I trust this letter will find you and your family in the best of health and spirits. Likewise I am also keeping fine.
I am enclosing herewith a cheque No. 001437, dt. 21st September, 1995, for Rs. 4,00,000 (Rs. Four lakhs only), drawn on Bank of Baroda, NRE Branch, Veena Nagar, Mulund (W), Bombay-400 080, India, issued out of my NRE account No. 75016, the same has been accepted by you as per our oral talk.
I have made this gift to the amount of Rs. 4,00,000 to you out of natural love and affection and the high esteem and regards that I have for you. Henceforward you are the sole owner of the proceeds of this gift and can enjoy the same as you may deem fit and proper. I have made this gift without any past, present or future consideration, of any kind whatsoever and declare that I have not got any type of right, title, control or interest on the amount gifted to you as mentioned hereinabove.
Please convey my regards to Bhabhiji, Arun, & Renu. Love to baby Aakanksha.
A subsequent letter dt. 2nd February 1996, from one A.T. Dianold appearing at p. 17 of the APB filed along with the appeal memo reads as follows : Shri Sohan Lal Gupta, 201/A, Lancelot, S.V. Road, Borivli (West), Bombay-400 092.
By the grace of God, I trust this letter will find you and your family in the best of health and spirits. Likwise I am also keeping fine.
I have given cheque No. 031029, dt. 13th December, 1995, for Rs. 1,00,000 and cheque No. 031031, dt. 2nd February 1996 from Rs. 75,000. Both cheques, drawn on Hong Kong & Shanghai Banking Corporation Ltd. payable at Madras, issued out of my NRE a/c No. 041 120023-006. The same has been accepted by you as per our oral talk.
I have made this gift of the amount of Rs. 1,75,000 to you out of natural love and affection and the high esteem and regards that I have for you. Henceforth you are the sole owner of the proceeds of this gift and can enjoy the same as you may deem fit and proper. I have made this gift without any past, present or future consideration, of any kind whatsoever and declare that I have not got any type of right, title, control or interest on the amount gifted to you as mentioned hereinabove.
Please convey my regards to Bhabhiji. How is Arun, Renu, & Aakanksha.
Such similarities in language in letters originating from different donors situated in different countries on different dates can neither be accidental nor natural. We have necessarily to infer that they are the product of a design. It may also be noticed that they are supposed to be personal letters which are written in the normal course of dealings and not of the nature of legal deeds. There are separate gift deeds which also have the same type of similarities. As observed by the AO in the assessment order and also the learned Departmental Representative before us, even the typewriters on which the letters are produced seem to be the same. Of course, in his rejoinder, the learned counsel for the appellant sought to explain away such similarities on the ground that the appellant herself had prepared all the evidence in this regard and that is how the letters and the deeds bear such similarities. We have to mention that the learned counsel for the appellant has taken this position only in his rejoinder and not at any stage before that. Because the learned counsel for the appellant saw the force of the argument of the Department in this regard, it appears, he resorted to this stand. Legal evidence cannot normally be prepared in the form of personal letters replete with personal enquiries and endearments. Apart from that, one cannot see how all the donors belong mainly to one category, i.e., sailors on foreign ships, as they are admitted to be by Dr. Sohanlal Gupta and Dr. Arunkumar Gupta before the FERA authorities. We are aware that the gift received by the appellant of Rs. 3,51,000 in the year of account relevant for the asst. yr.
1995-96 is from one Keshav Govind Jadhav and is supported by a gift deed dt. 27th July 1994, and the donor is a resident of Mogadishu, Somalia, and is stated to be an official of the UNDP. But this gift, even though being from an official of the UNDP, should normally carry higher credibility, we are not inclined to make any exception even in respect of this gift because it is also substantially falling into the same pattern as the other NRI gifts and it is not the case of even the learned counsel for the appellant that this particular NRI gift stands on any different footing from the others inasmuch as his contention has been that all the NRI gifts received by the appellant and the family members are, without exception, genuine. The other NRI gift received by the appellant and included in the addition of Rs. 4,06,080 is the one received on 15th December, 1993, from one Murtuza Hussain Januaryad and is ostensibly supported by a deed dt. 15th December, 1993, which may be seen at p. 49 of the APB. This gift is on the same pattern as that of the other gifts received by the members of the family of the appellant.
We may mention that in respect of all these gifts the appellant has given copies of the passport of the donors and the bank pass books of the NRI accounts on which the cheques were drawn. In the case of Murtuza Hussain Januaryad, the passport is dt. 14th September, 1987, as may be seen from the photocopy given at p. 53 of the APB. The passport of the NRE a/c bearing No. 1047 with the State Bank of India, Marol, Bombay, shows a balance of Rs. 6,01,600 as on 30th November and there are no transactions thereafter. As the cheque in question for Rs. 25,000 was issued on 15th December, 1993, the debit does not figure in the passbook. Similar are the features in respect of the other NRI gifts involved in this group. Even in the case of Keshav Govind Jadhav mentioned earlier, what is given in support of the donor is only the copy of the passport, which seems to have been issued in Septembermber, 1993, as may be seen from pages & (sic) and 93 of the APB. Even in his case, the entries in the savings bank passbook relating to the NRE a/c No. 60837 with State Bank of India, Main Branch, are of 12th May, 1994, whereas the gift in question of Rs. 3,51,000 was received on 27th July, 1994. Even in this case, the pass book does not bear the debit.
However, in the course of the hearing before us, the learned counsel for the appellant argued that when the NRE a/c is filed and a copy of the passport is filed, the identity and the creditworthiness of the donor is proved and if required the subsequent entries in the pass book could also be proved. What is to be seen is that when the assessment was being completed in the earlier part of 1997, the appellant could file before the AO only copies of pass books of the donors in support of their addresses and the copies of the pass books before the entries relating to the encashment of the cheques were recorded therein. If the gifts in question had been made because or long-standing family relationship, as alleged, the appellant would have been aware of the present whereabouts of the donors. It is inconceivable that none of the donors had changed their addresses after they obtained the passports.
If the version of long-standing family relationship is true, the appellant could also have produced before the AO himself the updated pass books reflecting the debits of the alleged gifts. The matters as they stand, to our mind, indicate only a money-laundering device where the copies of the passports, personal letters, gift deeds, copies of the pass books, etc., were all obtained simultaneously with the exchange of the cheque money and cash money between the alleged donors on the one hand and the members of the family of the appellant on the other. In a transaction of this type, the payment of premium is also normal and cannot be ignored. For these reasons we are of the view that the addition of Rs. 4,06,080 made by the AO by way of NRI gifts received by the appellant and premium thereon requires to be sustained.
We may also mention that the letters and gift deeds in respect of the NRI gifts were seized during the search and so the AO was quite justified in considering the genuineness of these gifts for determining the undisclosed income in the impugned block assessment and so far as these NRI gifts are concerned, the ratio of the decision of the Tribunal in the case of Sunder Agencies vs. Dy. CIT cited supra and relied upon by the learned counsel for the appellant does not apply. In this context, we may also mention that we have no quarrel with the proposition advanced by the learned counsel for the appellant that the confessional statement made by Dr. Sohanlal Gupta and Dr. Arunkumar Gupta cannot be considered de hors their subsequent retraction before the FERA authorities. That is the ratio of the decision of the FERA Board in the case of Nizamuddin vs. Director of Enforcement cited supra and on which the learned counsel for the appellant relied. While the retraction cannot be ignored, neither can the original statement be ignored. Both have to be considered together and the reliability of each of them has to be considered in the light of the other circumstances of the case. We have already mentioned that in the present case, the circumstances indicate the existence of a design and a money-laundering exercise and not of genuine gifts. We may also mention that we find that the case laws cited by the learned counsel for the appellant are all distinguishable on facts. In some of those cases like the one decided by the apex Court in the case of CIT vs.
Orissa Corporation (P) Ltd. cited supra, the creditors were all assessees on the rolls of the Department and in none of those cases there are incredible features as the similarities in the language and the contents of the letters we have noted in respect of the correspondence relating to the NRI gifts received by the appellant and her family members. We take support for the view we have taken from the decision of the apex Court in the case of Homi Jehangir Gheesta vs. CIT (1961) 41 ITR 135 (SC) wherein the headnote reads as follows : "It is not in all cases that by mere rejection of the explanation of the assessee, the character of a particular receipt as income can be said to have been established; but where the circumstances of the rejection are such that the only proper inference is that the receipt must be treated as income in the hands of the assessee, there is no reason why the assessing authorities should not draw such an inference. Such an inference is an inference of fact and not of law.
.........In considering probabilities properly arising from the facts alleged or proved, the Tribunal does not indulge in conjectures, surmises or suspicions." To our mind, the above decision is an authority for the proposition that the Tribunal is entitled to consider probabilities arising from the facts alleged for sustaining or deleting an addition and this is exactly what we have sought to do in respect of the issue regarding the NRI gifts received by the appellant. The same view is reiterated by the apex Court in the case of Sumati Dayal, cited supra, by the learned Departmental Representative. We may also mention that in the case of Shama Raising Chandel vs. ITO (1992) 42 TTJ (Ahd) 268 : (1992) 41 ITD 212 (Ahd), the Ahmedabad Bench of the Tribunal observed that there was a racket of converting black money into white by issuing bogus bank drafts from NRE a/c. In these circumstances, we sustain the addition of Rs. 4,06,080.
11. The next ground is that the AO erred in making the following additions in respect of gifts from friends and relatives in India : The AO mentioned that the appellant and the family members had received gifts from non-NRIs as follows : ------------------------------------------------------------------- Sr. No. Name Amount Cash Cheque Rs. Rs. -------------------------------------------------------------------(1) Dr. Arunkumar Gupta 2,82,353 1,17,399 1,64,954(2) Dr. Sohanlal Gupta 79,959 2,959 77,000(3) Dr. Rajrani Gupta 1,57,516 83,014 74,502(4) Dr. Sohanlal Gupta (HUF) 31,000 - 31,000(5) Dr. Renu Gupta 1,47,613 55,812 91,801(6) Ms. Aakansha Gupta 1,89,069 2,510 1,86,559------------------------------------------------------------------ He mentioned that some of the gifts received were substantial like an amount of Rs. 51,000 received on the occasion of the appellant's birthday celebrated at her native place, Bathinda, on 15th January, 1993. It is mentioned that no particulars are given for this substantial gift. He also mentioned that the donors were not produced in spite of repeated opportunities and so their creditworthiness is not proved. He, therefore, made the impugned addition of Rs. 1,57,456 in the assessment of the appellant as mentioned in the ground taken by her.
12. Before us, the learned counsel for the appellant mentioned that the appellant has received only one cash gift exceeding Rs. 10,000 and the gifts were mostly obtained on the 50th birthday of the appellant from friends and relatives and the necessary details with addresses are available. He has also invited our attention to pp. 118 to 127 of the APB wherein the details of the gifts aggregating to Rs. 50,000 from 107 parties, with their addresses, are given. Similarly, there is no single gift of Rs. 50,000 from any one party and so the remarks of the AO about the receipt of the gift of Rs. 50,000 is erroneous. The gifts actually range from Rs. 25 to Rs. 751 and so are in small amounts. All the gifts received, i.e. NRI and other gifts, are listed at pp. A to C of the APB, i.e., before the regular numbering starts. Out of the amount of Rs. 72,251 brought to tax by the AO for the asst. yr.
1993-94, there is a gift from an NRI, Shri Francis Bosco Vaz, of Rs. 11,000. For the asst. yr. 1994-95, the gifts received were of the order of Rs. 1,07,704, which included the following NRI gifts : (1) Shri Tarsem Gill 5,000 (2) Shri Padi Nadar Iyadurai 5,100 (3) Shri Murtuza Hussain Jagad 25,000 (4) Shri Soans Lambert Noel 3,400 (5) Shri Krishnamurthy Suresh 13,000 Out of the above five NRI gifts included in the amount of Rs. 1,07,704, the gift received from Shri Murtuza Hussain Jagad of Rs. 25,000 has been considered in the category of NRI gifts and it was added by the AO as the income of the appellant. The remaining four NRI gifts received in the year of account relevant for the asst. yr. 1994-95 have been erroneously considered as domestic gifts and brought to tax in the amount of Rs. 82,704 (1,07,704-25,000) as mentioned in the ground taken by the appellant. We have already taken the view that the NRI gifts are part of the money-laundering design admitted by the appellant. We do not see any reason to make an exception in respect of the NRI gifts erroneously included by the AO among domestic gifts for the asst. yrs.
1993-94 and 1994-95. In the circumstances, we sustain the addition of Rs. 11,000, being the gift from Shri Francis Bosco Vaz included in the asst. yr. 1993-94 among domestic gifts and the aggregate of the remaining four NRI gifts of Rs. 26,500 brought to tax by the AO as part of the domestic gifts in the asst. yr. 1994-95. So an addition of Rs. 37,500 (11,000 + 26,600) is sustained out of the addition of Rs. 1,57,456 made by the AO under the head "Non-NRI gifts". In respect of the other domestic gifts we have to delete the addition on the short ground that the regular assessments for the years in which the gifts were received had been completed and some of them were considered for addition in the regular assessments and there was no material located during the search on the basis of which the genuineness of these domestic gifts could be reconsidered in the impugned block assessment.
Further, we find that the amounts involved are small and the necessary details are available and we do not find any such incredible features in respect of the domestic gifts as we have noticed in respect of the NRI gifts. In the circumstances we are of the view that the ratio of the decision of the Tribunal in the case of Sunder Agencies vs. Dy.
CIT, cited supra, squarely applies to the domestic gifts and we accordingly delete the addition of Rs. 1,19,956 (1,57,456-37,500).
13. The next ground is that the AO erred in making an addition of unexplained cash credits as per the following details :------------------------------------------------------------------Asst. yr.
Loan amount Interest Rs. Rs.------------------------------------------------------------------1993-94 49,500 -1994-95 - 7,5271995-96 - 7,4651996-97 - 18,384 ---------------------------------------------(1) Shri Januaryk Rikhiram 19,500(2) Shri Chani Nanakchand 20,000(3) Shri Bhagwandas B.T.I. 10,000 All the above loans were credited in the books of account of the appellant during the previous year relevant for the asst. yr. 1993-94.
The AO mentioned that the creditors were not produced and so their identity was not proved. The learned counsel for the appellant mentioned that the amounts were received by draft and actually the creditors had their accounts in other firms and the amounts were withdrawn from those firms and deposited with the appellant. It is also mentioned that they were all considered in the regular assessment for the asst. yr. 1993-94 and no new material was seized during the search which cast any doubt on these loans. The details of the loans and affidavits of the creditors are available at pp. 169 to 174 of the APB.We do not find any suspicious features about these credits. Apart from that, as already mentioned, the ratio of the decision of the Tribunal in the case of Sunder Agencies vs. Dy. CIT, cited supra, squarely applies to these loans just as we have held this decision to apply in the case of domestic gifts received by the appellant. Accordingly, we delete the addition on account of loans along with the interest thereon of Rs. 82,876.
14. The next ground is that the AO erred in making the addition under s. 69B of the alleged undisclosed investment in certain properties as follows : The AO mentioned that the appellant and her family members acquired certain properties numbering 15, the details of which we have already given hereinbefore in para 2 on p. 4 of this order. The properties mentioned at Sr. Nos. 5, 6 and 7 of the list of 15 properties were acquired in the name of the appellant, whereas the balance 12 properties were in the names of the other members of the appellant's family. In the course of the search, a paper, enclosed as Annexure-E to the assessment order, was located in which it was written that the white portion represented by the letter "W" was 60 and the black portion represented by the letter "B" was 40 per cent and the shop area was 3,600 sq.ft. and the rate was Rs. 11,000 per sq.ft. and the name of the builders is Desai Builders. On the basis of this material, the AO inferred that the appellant had paid money over and above the investment reflected in the books for acquiring these three properties in question. He also obtained a list of sale instances from the Appropriate Authority functioning under Chapter XX-A of the IT Act and found that the cost of acquisition disclosed by the appellant was much less than the sale consideration shown by the other owners in respect of the sale instances given by the Appropriate Authority. On this basis, he estimated the undisclosed investment at 40 per cent of the cost of acquisition recorded in the books by the appellant in respect of each of the concerned properties and accordingly worked out the undisclosed investment at Rs. 16,09,166 as per the following details :---------------------------------------------------------------------- Property Investment Total investment Undisclosed Asst. yr.
as per books considering that investment in---------------------------------------------------------------------- 1 2 3 4 5---------------------------------------------------------------------- Rs. Rs. Rs.Bombay.
6,00,000 10,00,000 4,00,000 1995-96---------------------------------------------------------------------- 15. Before us, the learned counsel for the appellant pleaded that the slip of paper seized during the raid, which is enclosed as Annexure 'E' to the assessment order, is not in the handwriting of the appellant or any of the members of her family and it reflected only the information obtained on general enquiry by some of the employees about the prevailing market rates and as such no addition could be made on the basis of the seized paper in the present case. It is also pleaded that there are no comparable cases for the properties at (1) and (2) above, i.e., Punit Tower and Bay-View Tower, among the sale instances given by the Appropriate Authority. It is also pleaded that in respect of the property at Oshivara, the appellant had made the investment in lumpsum before the construction had begun, which was quite risky, and so the builder had given a concession of about Rs. 4 lakhs and this fact is supported by a letter given by the builder himself, which can be seen at p. 178 of the APB. The letter given by the builder, Agrawal Builders & Developers, reads as follows : We hereby declare and confirm that Smt. Raj Rani Gupta W/o Dr. Sohan Lal Gupta has booked a flat admeasuring 1000 sq. ft. supercovered area, in our Akashganga Cooperative Housing Society, on Plot No. A-21, Oshiwara, Bombay, for an aggregate value of Rs. 6,00,000 (rupees six lakhs only), after a discount of Rs. 4,00,000 being the party agreed to pay the entire amount in lumpsum, in advance.
We also hereby confirm that Rs. 1,000 (approximately) per sq.ft., was the prevailing market rate, at the time of booking.
We also give below some other bookings in the said project, as a proof for the prevailing market rate at the time when Smt. Raj Rani Gupta booked a flat.------------------------------------------------------------------ Name Area in sq. ft.
Aggregate value Rs.------------------------------------------------------------------Mr. Harshad D. Shroff 1,055 9,94,125Mr. Sanjay P. Kadaria 1,000 10,00,000Mr. Vishnu Agrawal 900 9,00,000------------------------------------------------------------------ The learned counsel for the appellant also invited our attention to pp.
179 to 184 of the APB wherein the distinguished features of the various properties are given in a letter addressed to the AO. It is mentioned at p. 184 that the appellant had invested in old dilapidated buildings and crumbling chawls with a gambler's instinct with a view to realise future gains. It is also pleaded that as no understatement of the consideration has been proved, no addition can be made on the basis of unexplained investment in view of the ratio of the decision of the apex Court in the case of K. P. Verghese vs. ITO (1981) 131 ITR 597 (SC).
16. The learned Departmental Representative, on the other hand, justified the addition relying on the decision of the Hon'ble Rajasthan High Court in the case of Smt. Amar Kumari Surana vs. CIT 89 Taxman 544 (Raj) wherein it was held that if it can reasonably be inferred that the price paid for a property by an assessee is much less than the prevailing market rate, it must be held that the assessee had paid a higher amount than that shown in the books of account and so an addition under s. 69B of the IT Act can be made.
17. We are of the view that we have to delete the addition of Rs. 16,09,166. The paper seized and included at Annexure-'E' to the assessment order, to which we have referred to above, cannot be linked to the appellant inasmuch as it is not in the handwriting of the appellant or any of her family members. During the course of the hearing, the learned Departmental Representative could not specify what exactly are the sale instances furnished by the Appropriate Authority which are held by the AO to be comparable to the properties acquired by the appellant. We have to hold that there are no sale instances comparable to the properties acquired by the appellant. In respect of Akashganga property, there is sufficient reason by way of advance payment which explains the low cost of acquisition. The explanation offered by the appellant regarding the nature of the properties cannot be thrown out as incredible. The decision of the Hon'ble Rajasthan High Court in the case of Smt. Amar Kumari Surana vs. CIT cited supra, is distinguishable, as in that case the assessee could not furnish any explanation for the low cost of acquisition compared to the prevailing market rate, whereas the appellant has given sufficient reasons as to why her cost of acquisition was on the low side. In the circumstances, we delete the addition of Rs. 16,09,166.
18. The next ground is that the AO erred in making an addition of Rs. 3,72,520, being alleged undisclosed sale consideration in respect of the sale of flat by the appellant to the HUF of which her husband is the Karta, i.e. Sohanlal Gupta (HUF). The appellant had sold a property, i.e., Flat No. 202-A, Lancelot Building, S.V. Road, Borivali (W), to Sohanlal Gupta (HUF) for a consideration of Rs. 5,58,780 vide an agreement dt. 14th May, 1993. In the assessment of Sohanlal Gupta (HUF), the AO made an addition of Rs. 3,72,520 in respect of the acquisition of this property on the ground of unexplained investment.
The reasons given for making the addition of Rs. 3,72,520 are the same as those mentioned by us in the context of the acquisition of properties by the appellant. We have already discussed those reasons and held that the reasons given for holding that the appellant has made any unexplained investment in the acquisition of properties are not tenable and accordingly we have deleted the addition of Rs. 16,09,166.
As the AO held that Sohanlal Gupta (HUF) paid on-money of Rs. 3,72,520 to the appellant in respect of the acquisition of the flat at Lancelot Building and brought the said amount of Rs. 3,72,520 to tax as unexplained investment, he made a corresponding addition in the hands of the appellant of Rs. 3,72,520 as undisclosed sale consideration or income.
19. Before us, the learned counsel for the appellant pleaded that there is no evidence that the appellant had received any sale consideration over and above the amount of Rs. 5,58,780 disclosed in the books and it is actually somewhat preposterous to hold that the appellant could have received on money in a sale transaction entered into with an HUF in which she herself is a member.
20. We agree with the contentions of the learned counsel for the appellant. For the reasons given by us at para 17 above in the context of the deletion of Rs. 16,09,166 and the additional reason that in the present case the vendee is the appellant's own HUF, we delete the addition of Rs. 3,72,520.
21. The next ground is that the AO erred in making an ad hoc addition of Rs. 50,000 each in the asst. yrs. 1994-95 to 1996-97 as alleged bogus expenses claimed by the appellant. Certain blank vouchers were seized during the raid bearing the revenue stamp and the signature of unidentified persons. The AO mentioned that the appellant could not explain as to why she was getting blank vouchers signed and in the absence of any explanation forthcoming from the appellant in this regard, he thought it fit to make an addition of Rs. 50,000 each on ad hoc basis in the asst. yrs. 1994-95 to 1996-97. The addition is made presumably on the ground of inflation of expenditure.
22. Before us, the learned counsel for the appellant mentioned that the expenditure booked by the appellant is very meagre and the vouchers were obtained only as a safeguard against certain contingencies like certain employees leaving service without accounting for the advances received. It is claimed that the blank vouchers obtained were never utilised.
23. We find that the AO has not spelt out which expenditure is suspected to have been inflated. No linkage is established between the blank vouchers obtained and the inflation of any particular expenditure. In the circumstances, we have to delete the ad hoc addition of Rs. 50,000 each made for the asst. yrs. 1994-95 to 1996-97.
24. The next ground is that the AO erred in making an addition of Rs. 15,300, being alleged unexplained investment in the clinic at Charni Road. The appellant incurred some expenditure by way of repairs and renovation to her clinic situated at Laud Mansion, 3rd floor, Charni Road, Mumbai. The account of the contractor, M/s Ghanshyam & Co. who carried out the repairs and renovation work, was seized during the search. When the appellant was required to furnish details of the expenditure incurred on renovation, she furnished the details which included an amount of Rs. 76,000 shown to have been paid to M/s Ghanshyam & Co. The proprietor of the said contractor M/s Ghanshyam & Co., Shri N. R. Tawadia, stated that he had received from the appellant Rs. 91,300 as against Rs. 76,000 stated by the appellant to have been paid. Accordingly, he brought the difference of Rs. 15,300 (91,300-76,000) to tax as the unexplained investment of the appellant in the clinic.
25. The learned counsel for the appellant did not dispute the factual position mentioned by the AO. He, however, pleaded that in case this addition is made on the ground that Rs. 15,300 is paid outside the books of account, a corresponding deduction should be given for the expenditure incurred in view of the ratio of the decision of the Tribunal in the case of M. K. Mathivathanan vs. ITO (1989) 31 ITD 114 (Mad). This argument would hold good only if the expenditure incurred is of a revenue nature. However, considering the smallness of the amount involved, we delete the addition in the light of the said decision of the Tribunal.
26. The next ground is that the AO erred in making an addition of Rs. 2,42,870 on the ground of alleged commission receipts from M/s Chintamani Advertising as per following details : A booklet was seized during the search which indicated certain commission receipts from the advertisers, M/s Panther Advertising and M/s Chintamani Advertising. An extract of the notings in the booklet are enclosed by the AO as Annexure 'F' to the assessment order. When the papers were put to Dr. Arunkumar Gupta who represented the appellant before the AO, he denied the receipt of any commission by the appellant from any of the two advertising agencies. He, however, did not deny that the papers related to the appellant. He could not also explain the nature of the entries made, nor could be prove that the commission reflected in the seized papers was accounted for in the books of account by the appellant. In the circumstances, the AO made the impugned addition of Rs. 2,42,870 on the ground that the appellant received the said commission in cash outside the books of account.
27. Before us, the learned counsel for the appellant sought to explain that so far as Panther Advertising is concerned, the bills issued by them to the appellant reflected the payment of discount by them at 7.5 per cent and the same is noted in the seized papers as commission receipts. In this context, he invited our attention to a copy of the bill, dt. 2nd May, 1995, issued by Panther Advertising to the appellant in the name of Kaya Kalp International which may be seen at p. 200 of the APB. The bill indicates the discount received by the appellant at Rs. 1,196. It is further pleaded that so far as Chintamani Advertising is concerned, it reflected only the payments made for rent towards hoardings on railway platforms and no such commission is received in respect of rent paid to railways.
28. We are not convinced by the explanation given by the learned counsel for the appellant. Annexure-'F' to the assessment order indicates entries relating to commission from 28th December, 1992, onwards. It is true that even if the bills issued by Panther Advertising reflect the discount allowed by them, no co-relation is established between the seized papers and the entries made in the books. The explanation offered by the learned counsel for the appellant does not explain the nature of the entries made or the context in which they were made. As their connection with the appellant is not denied and as it is not established that the commission payments reflected in the seized papers are also disclosed in the books, we have no material to dislodge the inferences made by the AO in this context. We accordingly sustained the impugned addition of Rs. 2,42,870.
29. The next ground is that the AO erred in making an addition of Rs. 63,591, being the alleged cash payment to Panther Advertising Co. The AO found that there are two bills in the handwriting of Dr. Arunkumar Gupta aggregating to the impugned amount of Rs. 63,591 and as per the notings on these bills, the amounts were received by a man of Panther Advertising Co. As these payments were not reflected in the books of account of the appellant, the AO inferred that the payments were made outside the books and he accordingly brought impugned amount of Rs. 63,591 to tax.
30. Before us, the learned counsel for the appellant pleaded that if an addition is made on the ground of unexplained expenditure or payment, a corresponding deduction has to be given for the expenditure incurred.
We find merit in this contention. Apart from that, we have sustained hereinabove, the addition of Rs. 2,42,870 on the ground of unrecorded commission receipts. It can safely be inferred that this expenditure was incurred out of the commission receipts which were not recorded in the books. In this view of the matter, we delete the addition of Rs. 63,591.
31. The next ground is that the AO erred in making the following additions towards alleged undisclosed professional receipts aggregating to Rs. 1,24,00,866 : The AO mentioned that certain patients' history forms numbering 2,341 were seized from the premises of the appellant during the search action and these forms record the number of visits of each patient and the amount of fees collected from them. These forms relate to the financial years 1993-94 to 1995-96 and on the basis of the entries made in these forms, he estimated the undisclosed receipts of these years at Rs. 1.5 crores. He mentioned at p. 24 of his order that the amounts recorded in these forms were reflected in the books of account for income-tax purposes. He further observed that four patients located during the search, i.e., Shri Vishwanath S. Jadhav, Shri Sachin Kumar Setty, Shri Deepak Joshi and Shri Mohd. Ismail were examined on oath during the search and in their statement they gave the details of payments made by them to the appellant but such payments do not tally with the entries recorded in the patients' forms of these four patients. He also mentioned that as per the patients' history forms, the appellant has been receiving some fees in kind like ring, shares and painting. So while admitting that the entries in the patients' history forms tallied with entries in the books of account, the AO came to the conclusion that all the patients' history forms themselves do not reflect the entire quantum of the fees received by the appellant or the fees recorded in kind. As already mentioned, the basis for the conclusion that all the fees are not recorded in the patients' history forms is the statements recorded from the four patients mentioned above during the search action. As the seized forms are not serially numbered, the AO inferred that the total number of patients treated by the appellant in all the three clinics mentioned hereinbefore must have been double the number of the seized forms and accordingly he estimated the number of patients at 4,682. He also estimated the number of visits of each patient at five and also estimated the fees collected for each visit at Rs. 1,000 and accordingly estimated the average gross receipts at Rs. 2,34,10,000 (4,682 x 5 x 1,000). He gave a deduction for the receipts shown in the books and expenditure reflected in the books of Rs. 69,50,798 and accordingly estimated the unaccounted income or income not recorded in the books at Rs. 1,64,59,202 (2,34,10,000 - 69,50,798) for the asst. yrs. 1994-95, 1995-96 and 1996-97. He gave some concession and determined the undisclosed receipts for the three assessment years on the basis of the ratio of the disclosed receipts as follows : The AO also mentioned that the above estimate can be approached and corroborated from a different angle. He observed that cash of Rs. 32,400 was seized from Dr. Arunkumar Gupta during the search action on 26th March, 1996, and he deposed that it related to the three clinics of the appellant as follows : i.e. 25th March, 1996 12,000 Receipts of Borivali Clinic of 26th March, 1996 9,150 Receipts of Dadar Clinic of 26th March, 1996 8,250 The balance cash of Rs. 3,000 is said to be cash on hand, the receipts of the Charni Road Clinic are not included and so the AO mentioned that including the receipts of this clinic also, the daily receipts of the appellant could be estimated at Rs. 40,000 per day. Estimating the working days at 313, i.e. excluding Sundays and other holidays, the AO mentioned that the receipts for the accounting year relating to the asst. yr. 1996-97 could be estimated at Rs. 1,25,20,000 (40,000 x 313).
He further estimated the receipts of earlier two years on the same lines with the following remarks : "If on similar basis, the receipts of earlier two years are estimated when the Charni Road and Dadar Clinics were not existing as claimed by the assessee then for two years her receipts comes to Rs. 1,25,20,000 (20,000 x 313 x 2). For these two years the receipts have been taken at Rs. 20,000 only in view of her claim that all patients used to come to Borivali Clinic during these two years, so the total receipts by this method will come to Rs. 2,50,40,000. If the deduction is allowed out of the total receipts on account of receipts shown and expenditure claimed by the assessee during last three years of Rs. 69,50,796 and Rs. 16,30,000 on account of the fact that Charni Road and Dadar Clinics have not run for the full year, then again the estimated undisclosed income comes to more than Rs. 1.5 crores." Thus, the AO mentioned that the estimate of the income for the asst.
yrs. 1994-95, 1995-96 and 1996-97 at Rs. 1,50,00,000 on the basis of the entries in the patients' history forms is corroborated by the estimate on the basis of the cash seized from Dr. Arunkumar Gupta of Rs. 32,400 on the date of search.
32. The thrust of the argument advanced by the learned counsel for the appellant is that any undisclosed income should emanate from the seized material and the estimation of the professional income made by the AO has no basis in the seized material. In the figurative language of the learned counsel, it is a volcano of the seized material that must emit the lava from the disclosed income and when the volcano is missing, there cannot be any undisclosed income. For this proposition, the learned counsel for the appellant has relied upon, as already mentioned, the decision of the Tribunal in the case of Sunder Agencies vs. Dy. CIT, cited supra. It is pleaded that all the receipts reflected in the patients, history sheets are disclosed in the account books and the excess cash found during the search has been offered to tax. Even if there are any small omissions on the part of the appellant in disclosing the correct income, such omissions should be regarded as covered by the excess cash offered to tax of Rs. 40 lakhs. It is also pleaded that the depositions of the four patients mentioned above on the basis of which the receipts have been estimated have never been put to the appellant and the appellant came to know of the contents of the depositions only in the assessment order. It is conceded that two of the patients, Shri Jadhav and Shri Shetty, were examined in the presence of Dr. Arunkumar Gupta but it is pleaded that this is not sufficient compliance with the canons of natural justice inasmuch as, to adopt the language of the learned counsel, the truth of their version has not been decided in the crucible of cross-examination. It this context, reliance is placed upon the decision of the apex Court in the case of K.T. Shaduli Grocery Dealer AIR 1977 SC 1627 wherein it was held that cross-examination has to be afforded where the statement of a deponent forms an integral part of the material on the basis of which the order is passed by the taxing authorities. In this context, reliance is also placed upon the decision of the apex Court in the case of Suraj Mal Mohta & Co. vs. A. V. Visvanatha Sastri & Anr. (1954) 26 ITR 1 (SC) and also the decision of the apex Court in the case of Kishinchand Chellaram vs. CIT (1980) 125 ITR 713 (SC). The learned counsel has also filed written submissions regarding the incorrectness of the estimate of clinic income and it is mentioned therein that there is no basis for the Department's estimate of fees of Rs. 5,000 per patient in the aggregate or to apply this rate for the entire period of estimation from 1st April, 1993, to 26th March, 1996. It is also mentioned that there are several instances where the appellant herself had shown receipts of Rs. 15,000, Rs. 13,500 and Rs. 15,000 (per visit of a patient) and such instances are recorded in the patients' forms, as can be seen from the compilation of patients' forms given in the Departmental paper book at pp. 6, 27, 31, etc. As against five visits per patient estimated by the AO, the appellant had also furnished on sample basis average number of visits of 1.1 (file No. B-1), 1.5 (file No. B-2), 1.3 (file No. D-1) and 1.4. (file No. D-2). The learned counsel has also invited our attention to certain pages of APB-II containing the fact that all the patients were not charged and even all the visits were not charged. It is also mentioned that there was an understanding that if the patient is not cured within the stipulated period, later visits will not be charged. The written submissions of the appellant in respect of the estimation of professional income of the appellant by the AO placed in APB-II at pages marked 'A' to 'C', read as follows : A. Observations in respect of estimate of Rs. 2,50,40,000 made by the AO as per p. 30 of the assessment order 1. First of all, the manner in which the AO has estimated daily receipts of Rs. 40,000 is not clear.
2. As per the statement made by Dr. Arun Kumar under s. 132(4) which has been extracted by the AO on p. 30 of the assessment order, the daily receipts of Borivali Clinic are Rs. 9,150 and of Dadar Clinic Rs. 8,250, aggregating to Rs. 17,400.
The AO has observed "Charni Road Clinic has almost equal number of patients".
This observation is factually incorrect since the receipts at Charni Road Clinic are far less than the receipts of the other clinics. For confirmation, please see pp. 166 to 168 of the paper book showing the patients' register of Charni Road Clinic, pp. 156 to 158 of the paper book showing the receipts of Borivali Clinic and pp. 160 to 163 of the paper book containing receipts of Dadar Clinic.
Further, as per the statement made under s. 132(4), the number of patients at Charni Road are far less than the other clinics (see enclosed pp. 1 to 4).
3. For the aforesaid reasons, the aggregate daily receipts estimated by AO are high-pitched.
4. Further, the AO has not taken into account the fact on record (please see enclosed pp. 5 to 10) that Dadar Clinic was started only on 27th November., 1995 and Charni Road Clinic was started on 25th June, 1995, (the manner in which he has made allowance on this account is not discernible).
5. In view of the aforesaid, the estimate of the earnings for the financial years 1993-94 and 1994-95 is also not correct and proper.
B. Estimate on the basis of number of patients, estimate of number of visits, etc. are at p. 29 of the assessment order : 2341 history sheets x 2 (missing sheets assumed) x 5 (number of visits per patient assumed) 23,410 being total number of visits.
(a) Not made any allowance for blank forms-sample forms attached-pp.
11 to 15.
(b) Not made any allowance for free consultation and where no treatment is involved-pp. 16 to 20.
(c) Also not taken into consideration cases where the consultation as also treatment is free-sample forms attached-pp. 21 to 25.
(d) Further, no cognisance is taken of those cases no medical treatment is given. Only consultation is involved at Rs. 200 to Rs. 300-sample forms attached - pp. 26 to 30 (e) While coming to the conclusion that some forms were missing, the AO did not take into account that in many cases, the patients had shifted from Borivali Clinic to Dadar/Charni Road Clinics and vice versa-sample forms-pp. 31 to 35.
(f) The AO has also not taken into account these cases where the treatment was given free after certain number of visits for the reasons explained in the course of proceedings or where the period of treatment has crossed the assured time frame of cure, etc. sample forms attached pp. 36 to 40.
(g) The AO has also erred in taking into account the history sheets belonging to the period prior to asst. yr. 1994-95. In view of this, his estimate determined on the basis of the clinic income declared in asst. yr. 1994-95 to asst. yr. 1996-97 is defective on this account-sample forms showing the history sheets belonging to the period prior to asst. yr. 1994-95 are attached at pp. 41 to 43.
3. The precise basis of assumption of 5 visits per patient and fees of Rs. 1,000 per visit has not been spelt out which is also exaggerated.
4. It is a common practice that any medical practitioner maintains records only of current patients." In effect, the learned counsel for the appellant has pleaded that in the ultimate analysis, addition to the income of the appellant cannot transcend the sum of Rs. 40 lakhs declared by the appellant without demur. We may also mention that we have put it to the learned counsel for the appellant that while he was questioning the assumptions made by the AO, he did not offer any working of his estimate of undisclosed income. We wanted his to give a working on the basis of the cash seized of Rs. 32,400 from Dr. Arunkumar Gupta and his deposition during the search regarding what this amount comprised of. According to the learned counsel for the appellant, even on the basis of the deposition given by Dr. Arunkumar Gupta, the undisclosed income would work out to only Rs. 32,88,105, as per the working given by him, which is as follows : Estimate of clinic income of Borivali and Dadar for the financial year 1995-96 derived from the statement made by Dr. Arun Kumar Gupta under s. 132(4) on 26th March, 1996.Rs. 1. Borivali : Rs. 9,150 x 313 days 28,63,950 Shown in accounts 16,76,880 1. The decision made on 26th March, 1996, cannot be taken of representative nature so as to be made uniformly applicable.
2. No. declaration was made under s. 132(4) in respect of Charni Road Clinic.
3. The number of days mentioned above include the days falling after the date of search, i.e., from 27th March, 1996, to 31st March, 1996.
Without prejudice, even if the declaration made is taken to be representative of receipts earned in all the three years in a uniform manner, the result would be as under : (a) Borivali : Rs. 3,150 x 313 days x 3 years 85,91,850 (b) Dadar : Same as above, since not in (c) Charni : As per patients register recorded Road in accounts since no declaration was made in respect of this clinic, Less : Receipts shown in the accounts in last three years in the accounts of Kaya Kalpa International (excluding the receipts of beauty clinic of Mona Lisa) Difference 32,88,105 Cash declared 39,74,375 Cash credits surrendered 3,50,000 ----------- It must be highlighted and taken note of that when Dr. Arun Kumar Gupta made the declaration under s. 132(4) on 26th March, 1996, he did not have the benefit of knowledge of the above made calculations or the conclusions." It is mentioned that the appellant had declared cash of about Rs. 40 lakhs and had separately surrendered cash credits of Rs. 43,50,000 and so the amount surrendered of Rs. 43,50,000 would exceed the understatement of professional income worked out in the above worksheet at Rs. 32,88,105. We have of course to mention that the cash credits are reflected in the books and so the surrender of cash credits cannot come to the assistance of the appellant for explaining the abovementioned difference of Rs. 32,88,105. In this context, we may also mention that the same is the position with regard to the NRE gifts which have been treated as income. They are also recorded in the books and so they go to swell the cash balance in the books and to explain the expenditure and investments recorded in the books. So even if they are treated as the income of the appellant, they cannot be taken into account for explaining the abovementioned difference of Rs. 32,88,105.
The learned counsel for the appellant also pleaded that the patients' form seized during the search relate only to the asst. yrs. 1994-95 to 1996-97 and there is absolutely no material seized during the raid which had any bearing on the estimation of the professional income for the asst. yrs. 1992-93 and 1993-94. It is also pleaded that the material that proves concealment of income in one particular assessment year cannot be utilised for concluding that a similar concealment of income was committed in the earlier assessment years. For this proposition, reliance is placed on the decision of the Hon'ble Orissa High Court in the case of J. Gopal Rao vs. State of Orissa 88 STC 488 (Ori) and the decision of the same High Court in the case of State of Orissa vs. J.P. Sikiria & Co. 67 STC 101 (Ori) and the decision of the apex Court in the case of The State of Kerala vs. C. Velukutty 17 STC 465 (SC). This is, of course, without prejudice to the main contention of the learned counsel for the appellant that the seized material does not warrant the estimation of income adopted by the AO for the asst.
yrs. 1994-95 to 1996-97.
33. The learned Departmental Representative on the other hand, tried to support the estimate of professional income adopted by the AO. At one stage, it was the case of the learned Departmental Representative that all the receipts noted in the patients' forms seized during the search were not reflected in the books of account, even though that was not the stand of the AO himself, as we indicated hereinbefore. He had initially given a letter dt. 4th August, 1998, on the basis of some selected history sheets in which it was mentioned as follows : "(D) The analysis of history sheets clearly shows that the assessee was not recording all the receipts from all the visits of the patients, which clearly reflects from low percentage of recording.
The average visit of the patients was much more than the reasonable estimate made by the AO. The average made for receipt of Rs. 1,000 per visit is also very much reasonable in view of the above example.
The above facts are based on the inventories made of history sheets of the patients during the search operations. The copy of Annexure B-8 and D-9 are enclosed for your reference." However, as this contention went to the root of the problem, we specifically gave an opportunity to the learned Departmental Representative to verify with the assistance of the learned counsel for the appellant, whether all the receipts noted in the patients' forms were reflected in the account books, as conceded by the AO, or not.
Subsequent to the verification, the learned Departmental Representative filed before us a letter dt. 10th September, 1998, conceding the position in question in favour of the appellant and this letter reads as follows : Sub : Smt. Rajarani Gupta & Ors. IT (S&S)/96/M/1997 - Report regarding professional income-Hearing fixed on In my letter, dt. 4th September, 1998, I have informed that entries found at the back of the patient history sheet inventorized in Annexure D-9, were not reflected in the patient register maintained at the Dadar office. This conclusion was drawn on the basis of comparing patient history sheets found at the Dadar office and the ledger sheets from the Dadar premises.
As directed by the Hon'ble Tribunal on 7th September, 1998, the verification was made in the presence of the assessee and it is found that many of the entries have been in the patient register maintained at Borivali and Charni Road offices. The assessee has narrated that the patients history Sheets are transferred to the other clinics on the request of the patients as sometimes it is convenient to them. Only the following entries could not be found in any of the patient registers :--------------------------------------------------------------------- No. History Name of the Date of visit Amt. recd. Assessee's sheet No. patient as per hist. explanation Sheet 1. B-950716-6 Ravinder Nimbale 17th October 500 Found in 1995 Borivali 2. B-941017-9 Shankar Raha 13th June, 300 Visit is 1995 cancelled 4. B-950030-7 Ravinder Kumar 19th Nov., 500 Visit is 1995 cancelled In view of the above, copy of the letter dt. 4th September, 1998 submitted to the Hon'ble Tribunal may please be considered as withdrawn." The learned Departmental Representative, however, contended that the four patients mentioned above were examined during the course of the search and as per their version, it has to be held that professional receipts at Rs. 1,000 per visit was reasonable. It is also mentioned that the patients' forms themselves do not record that every patient was charged and so to that extent there was suppression of income in respect of those patients who are not charged as per the patients' forms. It is also pleaded that the appellant was afforded an opportunity to obtain zerox copies of the patients' statement and the appellant did not request for a specific opportunity of cross-examining those patients. Even though the statements of two of the patients were taken before Dr. Arun Kumar Gupta, even he did not ask for any opportunity for cross-examining the four patients. In this context, in support of the proposition that the version of the depositions of the patients can be taken as a basis for estimation of the professional income notwithstanding the fact that they were not allowed to be cross-examined, the learned Departmental Representative relied upon the decision of the Hon'ble Calcutta High Court in the case of Kishanlal Agarwala vs. Collector of Land Customs AIR 1967 Cal 80. Further, it is claimed that in respect of the statements recorded in the course of action under s. 132, the procedural requirement of cross-examination need not be completed with as this is only an investigative stage of the proceedings and it is also pleaded that the estimate was not founded solely on the statement of the patients.
34. We are of the view that there is no basis for the estimation of the professional income at Rs. 1,24,00,866 over and above the declared income of Rs. 40 lakhs, being the cash outside the books seized during the course of search action. Firstly, the estimation of undisclosed income for the asst. yrs. 1992-93 at Rs. 5 lakhs and for 1993-94 at Rs. 10 lakhs has no legal validity because even the patients' forms seized during the raid relate only to the asst. yrs. 1994-95 to 1996-97 and in view of the authorities cited by the learned counsel for the appellant to the effect that the material seized during the raid relating to a particular assessment year cannot be utilised for drawing adverse conclusions against the assessee for earlier years. So, we have to delete the additions totalling Rs. 15 lakhs, being the professional income estimated for the asst. yrs. 1992-93 and 1993-94.
35. Even for the asst. yrs. 1994-95 to 1996-97, the estimate has to be based only on the patients' forms. This is because the depositions taken from the four patients were never put to the appellant. Allowing the appellant to take photocopies of the seized materials is not the same thing as supplying the copies of the depositions and giving an opportunity of cross-examining those patients to the appellant. Simply because the depositions were taken before Dr. Arunkumar Gupta, it cannot be said that an opportunity, much less sufficient opportunity of cross-examining, was afforded. In our view, the case laws cited on behalf of the appellant are authorities for the proposition that any material collected by the AO has to be put to the assessee before an adverse inference on the basis of that material is drawn to the prejudice of the assessee. We are constrained to remark that in respect of the four depositions relied upon by the learned AO, no such opportunity was given and accordingly we are of the view that they cannot be a basis for drawing any adverse inference to the prejudice of the appellant. So far as the patients' forms are concerned, the admitted position, after due verification by the learned Departmental Representative, is that the receipts recorded in them have been duly reflected in the books of account. The few omissions noticed vide the letter of the learned Departmental Representative filed before us are insignificant and at any rate are explained. The learned counsel for the appellant has also filed before us an analysis of the patients' forms contained in file No. B-1 (Borivali) as per which the total number of patients were 46 but the total number of visits were only 49, i.e., the average visit per patient was only 1.06 as against 5 adopted by the AO while estimating the average receipts of Rs. 2,34,10,000 at p. 25 of his order. Similar is the position in respect of file B-2 (Borivali) which has 128 patients and the average visits per patient in this file works out to 1.5. In file No. D-1 (Dadar), which has 147 patients, the number of visits is only 184, which works out to average visit per patient of 1.25. In file No. D-2 (Dadar), the total number of patients is 121 and the average visit per patient is only 1.42. It cannot also, to our mind, legitimately be argued that the fees received are not recorded in the patients' forms because that is the seized material on the basis of which estimation of undisclosed income is sought to be made and the entries made in such seized material must be regarded as reflecting the correct position. The Department cannot argue that while it relies on the patients' forms for the number of patients treated, it does not rely on the same material for the fees recorded therein. The position would have been different had the fees recorded in the patients' forms not been reflected in the account books. As already mentioned, this is not the position, as admitted by the learned Departmental Representative before us and as stated by the AO in the assessment order. In the circumstances, the patients' forms cannot be a basis for the estimate of professional income at the exorbitant figures adopted by the AO. The only other material is the amount of cash of Rs. 32,400 seized from Dr. Arunkumar Gupta during the search and on the basis of this deposition, the undisclosed professional income comes to only the difference worked out by the learned counsel for the appellant of Rs. 32,88,105. This also falls short of the 40 lakhs which has been declared by the appellant during the raid. Any receipts in kind and other small omissions noticed by the AO can also be regarded as covered by the excess cash of Rs. 40 lakhs over the difference worked out by the AO. In this view of the matter, we delete the addition of Rs. 1,24,00,866 towards undisclosed professional income. We do not have to separately mention that the unexplained cash has been correctly included in the income of the appellant. We accordingly delete the addition of Rs. 1,24,00,866.
36. The next ground is that the learned AO erred in making the addition of Rs. 11,59,250 on the allegation that the house property sold actually belonged to the appellant. The AO has mentioned that in the return of Sohanlal Gupta (HUF) filed for the asst. yr. 1993-94, there is a disclosure of capital gains arising from the sale of a building called "Monalisa", Municipal No. 2032A, Bhatinda, and a deduction under s. 54 was claimed from the capital gains on the ground that the sale proceeds were invested in other residential property. The AO has, however, concluded that the property belonged to the appellant and not to the HUF. For arriving at this conclusion, he relied upon the general power of attorney issued by the appellant, Smt. Rajrani Gupta, to Shri Pawan Kumar Jindal, who executed the sale deed of the property. In this general power of attorney, Smt. Rajrani Gupta was mentioned as the owner of the property in question. The AO has reproduced the relevant portion of the general power of attorney, which reads as follows : "Whereas I am the owner and seized and possessed of or otherwise and sufficiently entitled to a building property situated at and known as "MONALISA", Mall Road, Distt. Bhatinda, Punjab being the commercial premises, single storied building, total area adm. 2,528 sq. ft." Having held on the basis of the above narration in the general power of attorney that the appellant was the owner of the property, he proceeded to disallow the deduction under s. 54 on other grounds, into which we need not go in this order for the reasons mentioned hereunder.
37. Before us, the learned counsel for the appellant pleaded that the appellant was described as the owner of the property in the power of attorney only because the property stood in the name of the appellant.
It is also mentioned that the appellant was a member of Dr. Sohanlal Gupta (HUF) and simply because a property owned by an HUF stands in the name of a particular member, the HUF cannot be divested of the ownership of its asset. In the present case, it is pleaded that the purchase cost of the property in question proceeded from the HUF and it was duly shown in the return filed by the HUF at Bhatinda and so the Department is not justified in saddling the appellant with the capital gains in respect of this property.
38. The learned Departmental Representative on the other hand, relied upon the assessment order.
39. We are of the view that the appellant deserves to succeed on this issue. We find at pp. 201 to 205 of the APB the explanation dt. 6th April, 1994, wherein the source of the funds invested in the purchase of the house property was explained. The explanation reads as follows : Sub : Antecedents of Sohanlal Gupta (HUF) asst. yrs.
1992-93 and 1993-94 Sohanlal Gupta HUF has been in existence for a long time since the marriage of Dr. Sohanlal Gupta. It consists of three co-parceners as under : The source of income of the HUF has been rental income from house situated at Bathinda and interest income from loans given for the past several years.
The HUF purchased two plots measuring 16" x 79" each at a cost of Rs. 12,900 each from Shri Harbanslal and Shri Brijlal on 4th June, 1970, and 7th December, 1970, respectively. These adjoining plots are situated at Mall Road, Bathinda. The source of funds was from current income and sale of ancestral property. The construction on the said plots was commenced in the year 1976-77 and the said house was constructed in the year 1978-79 at a total cost of Rs. 71,740.
The yearwise break-up of the amount that was spent on the construction is shown as under : Source of funds for construction was current income and temporary loans from friends and relatives.
From 1983-84 onwards, the HUF let out the house and started getting Rs. 10,000 p.a. as rental income. In due course of time, the HUF repaid the loans taken by it.
During the year 1992-93 the HUF entered into agreements with two parties for the sale of house, the consideration being Rs. 6 lacs each.
The HUF received total advance amounting to Rs. 2.5 lacs from both the parties. As both the buyers violated the contract, the advances received from them were forfeited (please note that the cost of construction of the house will be deemed to be reduced by the forfeited amount i.e., Rs. 2,50,000. A detailed working has been enclosed with return of income).
Again after few months, another agreement of sale were entered into with six parties for Rs. 1,98,000 each. Subsequently, these amounts were received in March and April, 1993. Out of these three agreements fall in asst. yr. 1993-94.
The long-term capital gains arising from the sale of the house after deducting the amounts forfeited were Rs. 5,79,625 each for asst. yr.
1993-94 and asst. yr. 1994-95, respectively.
The considerations received from the sale of the house were utilized for purchasing house at Bombay costing Rs. 11,93,000 resulting in Nil capital gains tax as full consideration has been utilized.
It is not disputed before us that the above explanation had not been accepted by the AO of the HUF. As the funds for the acquisition of the property in question flowed from the HUF, we have to hold that the property belonged to the HUF and the capital gains, if any, has to be considered in the hands of the HUF only. In this view of the matter, we do not find it necessary to go into the reasons given by the AO for denying the deduction under s. 54. In the circumstances, we delete the addition of Rs. 11,59,250, being the capital gains brought to tax in the hands of the appellant.