1. This appeal of the assessee arises out of block assessment order dt.
22nd May, 1998 for the block period ending 30th November, 1996.
2. The assessee was found engaged in the business of property dealing and his main source of income was commission earned on making arrangement for hiring out or letting out of the property and from purchase and sale of immovable properties. The assessee was having close links with Kohli group. Search and seizure operation was conducted on the Kohli group on 1st November, 1996 and subsequently a search under s. 132 of the IT Act, 1961, was also conducted at the residential premises of the assessee on 30th November, 1996. The Assessing Officer ("AO" in short) issued a notice under s. 158BC of the Act on 9th June, 1997 calling upon the assessee to file the return for the block period. The assessee filed the return declaring Nil undisclosed income for the block period. The AO issued detailed questionnaire based on the seized material which was also served and assessee filed reply thereto. During assessment proceedings it was noted by the AO that seized material and books of account were of complex nature. He after seeking permission from CIT, Delhi-II, New Delhi, appointed M/s Dinesh Mehta & Co. Chartered Accountants, Daryaganj, New Delhi as special auditors by passing an order under s.
142(2A) of the Act. The said firm of Chartered Accountants completed the special audit and submitted their report on 14th May, 1998. The assessee was given show-cause notice based upon the scrutiny of seized material and also on the report of auditors to show as to why additions should not be made on the issues referred to by the special auditors as well as on seized material. The assessee filed written reply thereto and preliminary point was that Special Auditors were supposed to file report by 31st March, 1998, which was illegally extended by the AO on 15th May, 1998. This objection of the assessee was rejected by the AO who noted that he was appointed as observer by the Election Commission of India and was out of Delhi for almost 40 days and Chartered Accountants could not have excess to the seized material during his absence.
3. The AO took into consideration the different points noted by the special auditors and the objection of the assessee to the same. The first objection of the assessee was that special auditors have wrongly observed that assessee was not entitled for exemption in respect of income arising out of sale of agricultural land and further to the second observation that profits arising out of such transactions were to be taxed under the head "business income". The Auditors while coming to the above conclusion have taken note of the fact that assessee had filed no proof to show that land was in fact agricultural land and any agricultural operation were carried on in the land in question. It was also stated that agricultural land was purchased in one lot but sold in parts by indicating that business activities were being carried on in respect of such transactions. Annexure B was also attached to the report of auditors giving out the instances to prove that land was sold in parts. The contention of the auditors was that profits on sale of property should be taxed under the head "business". The AO did not find force in the objection of the assessee. He was in agreement with the above observation of the auditors and noted that agricultural land was purchased by the assessee and assessee further incurred expenditure towards development of the land making thereby clear that assessee was having intention to develop the area to make it more attractive so that it can fetch higher price. It was not like a case of an investor who makes the investment in the land for his own use. The AO gave out three cases of purchase of agricultural land by the assessee in different villages and also the details as to how the said land was sold in parts after incurring expenses in the development. The AO also noted that assessee was not an investor in land otherwise it would not have sold land into parts nor would have incurred development expenses. He was of the opinion that assessee was carrying on the business of sale and purchase of plots and for arriving at that conclusion the AO quoted the decision of Hon'ble Supreme Court in the case of Raja J. Rameshwar Rao vs. CIT (1961) 42 ITR 179 (SC) and observation that in the case in hand facts were identical as assessee was carrying on an activity resulting in profit and activity of the assessee can only be described as a business venture. The AO did not find the ratio of Madras High Court in the case of CIT vs. Kasturi Estates (P) Ltd. (1966) 62 ITR 578 (Mad) applicable to the facts of the case. He also noted that Madras High Court has not discussed the ratio of Hon'ble Supreme Court in the case of Raja Jai Rajeshwar Rao (supra).
4. The AO further noted in the assessment order that in the return of income filed by the assessee it was specifically mentioned by him that he was engaged in the business of sale and purchase of properties on commission basis and otherwise. In assessment proceedings for asst. yr.
1991-92 it was communicated by the assessee to AO that his main business was sale/purchase/renting of property. The AO on the basis of these facts was of the opinion that income of the assessee was to be treated as "business income" from asst. yr. 1990-91 onwards and the factum that such income was not treated as business income in the earlier years will not stop him from assessing the income under the correct head. According to AO the assessee had wrongly shown the long-term and short-term capital gain of such transactions and assessment made as such on the income shown by the assessee would not operate as res judicata nor it will preclude him from holding that assessee was in fact a dealer or trader in the land in subsequent years. The AO was of the opinion that observation and findings in the asst. yrs. 1990- 91, 1991-92 may be good but the same are not binding and conclusive on the AO. He took help of the ratio of Hon'ble Supreme Court in the case of M. M. Ipoh vs. CIT (1968) 67 ITR 106 (SC), Dwarka Das Keshav Deo Morarka vs. CIT (1962) 44 ITR 529 (SC) and that of CIT vs. Brij Lal Lohia & Ors. (1971) 83 ITR 273 (SC). The AO was of the opinion that assessee had been selling the land in parts on a commercial consideration but he had been showing such income either exempt from income-tax on the pretext that it was sale of agricultural land and if surplus is offered for taxation then the same was to be taxed as a long-term capital gain. Assessee took benefit of cost index to the property and paid income-tax at a lower rate.
5. The AO took into consideration the inference drawn by the Special Auditors that profit/gain earned on sale and purchase of property should be charged as income from business and profession and not as income from capital gain. He called upon the assessee to explain as to why his submission that observations of auditors were illegal and arbitrary be not rejected. The assessee submitted that he was holding the property as investment and capital gains were shown out of transactions. All the transactions were recorded in the books of account, regarding purchase and sale of the property. It was also the case of the assessee that in block assessment proceedings, the assessee was to explain only about unexplained investment or income but in the case in hand all the transactions were recorded in the books of account and same stand assessed. There was no undisclosed income. Reliance was placed on the decisions of different Benches of the Tribunal particularly the cases of Sunder Agencies vs. Dy. CIT (1997) 59 TTJ (Mumbai) 610 : (1997) 63 ITD 245 (Mumbai), Express Movers (P) Ltd. vs.
Dy. CIT (1997) 59 TTJ (Del) 227 : (1997) 61 ITD 528 (Del), R.Ramanathan vs. Asstt. CIT (1998) 65 ITD 108 (Mad) and Parakh Foods Ltd. vs. Dy. CIT (1998) 64 ITD 396 (Pune). The AO considered all these case laws as well as submissions of the assessee and was of the opinion that only issue before him was as to whether income which had been returned under particular section of the Act could be brought to tax under different heads of income during the block assessment period or not. He referred to the provisions of s. 14 of the Act which provides heads of the income and further provide that all incomes shall for the purpose of charge of income-tax and computation of total income be classified under the head "A" to "F". According to AO the assessee was carrying on the business of purchase and sale of immovable property and his income was to be assessed under the head "business income". He again took into consideration the decision of the apex Court in the case of New Jahangir Vakil Mills Co. Ltd. vs. CIT (1963) 49 ITR 137 (SC) and noted that if assessing authorities are in possession of additional facts then they will be justified to reach a different conclusion in subsequent proceedings. The AO was of the opinion that in the case in hand facts go to prove that assessee was engaged in the business of sale and purchase of lands and his income was to be assessed under the head "business income" which was wrongly assessed as capital gains and thus irrespective of earlier assessments which were finalised under s.
143(3) or under summary assessments, the addition was to be made under the head 'undisclosed income, which was worked out by special auditors at Rs. 42,35,928 and after adjusting the short-term capital gains and long-term capital gains shown by assessee in earlier years the net taxable income arrived at by the AO was Rs. 41,24,406.
6. The AO also noted that assessee had been claiming expenditure incurred on development of the land so purchased by him. He further noted that development expenses were not supported from the books of account and the records as noted by the auditors. He called upon the assessee to explained and it was submitted by the assessee that all the entries of development expenses were duly recorded in the books of account and fully supported and verifiable from the record. Year-wise details were submitted as under : 7. The AO further looked into the details so furnished by the assessee.
After going into the details he noted that assessee was not able to identify the respective properties in which expenditure had been shown as income. The assessee also failed to give even the details in the respective years for which the expenditures have been incurred by supporting evidence in each of the years. He was of the opinion that Rs. 2 lakh stand explained. He was further of the opinion that Rs. 6,56,441 could not be proved and ultimately while making the addition of entire amount he treated Rs. 7,41,531 as amount of unexplained development expenditure claimed by the assessee but for which no proof/evidence was furnished nor assessee proved that such expenditure was incurred. After giving deduction of this amount the AO made further addition of Rs. 36,15,443 out of Rs. 41,24,406 and thus the said two additions are subject-matter of first ground agitated by the assessee.
8. The assessee was a property dealer and his main source of income was from the commission earned on making arrangement for hiring out, letting out of properties and also dealing in purchase of land and sale thereof. The contention of the learned counsel was that as and when assessee earned short-term or long-term capital gain on sale of agricultural land, the same was shown by the assessee in its income- tax return and Department accepted the same. In this connection our attention was drawn by the learned counsel for the assessee to paper Nos. 115 to 118 of his paper-book which contain the details of profit/gains made on sale of land/property transacted by the assessee from the asst. yr. 1991-92 till the date of search. The learned counsel pointed out that in asst. yr. 1991-92 assessee had shown short-term capital gain and Department accepted the same. In subsequent year the assessee had shown short-term and long-term gains and likewise in all the assessment years. Not only this the learned counsel also took us to the statement of assessable income for asst. yr. 1991-92 as appearing at pp. 186 to 188 of his paper-book giving out the details of short-term capital gains also and duly supported with copy of balance sheet and P&L a/c. Copy of assessment order for asst. yr. 1991-92 under s. 143(3) is appearing at p. 191 of the paper-book. Copies of statement of assessable income for asst. yr. 1992-93 with P&L a/c as well as copy of acknowledgment for filing of return for asst. yr. 1991-92 are appearing at pp. 192 to 198 of the paper-book. Copy of statement of assessable income for asst. yr. 1995-96 with P&L a/c and copy of assessment order are appearing at pp. 199 to 202. Copies of statement of assessable income, balance sheet and P&L a/c along with assessment order for asst. yr. 1996-97 are appearing at pp. 204 to 210 of paper-book. It was also the contention of the learned counsel for the assessee that all the entries in respect of all these transactions were being recorded by the assessee in the account books and even special auditors in their audit report had admitted this very fact. In this connection our attention was drawn to p. No. 76, extract of audit report in which points referred for special audit are mentioned along with observations of the special auditors. The first point was as to whether accounts of various years were mentioned correctly or not. The special auditors have replied this in affirmative. The plea of the learned counsel is that assessee was maintaining accounts properly and it is not the case of Department that assessee had failed to mention any of the transactions in the books of account. It is also the case of assessee that all the transactions and profits earned out of these either on long-term capital or short-term capital gains, stand assessed by the Department and in the block assessment proceedings the regular assessments which stand completed prior to the date of search cannot be reopened or looked into.
9. Our attention was drawn to Expln. 3 of s. 158BA which also provides that assessment of block period shall be in addition to the regular assessment in respect of each previous year included in the block period and total undisclosed income relating to the block period was not to include the income assessed in any regular assessment. The learned counsel contended that already assessments were completed and those are outside the purview of block assessment.
10. So far as "undisclosed income" is concerned, it stands defined under s. 158B(b) and the learned counsel submitted that the present addition made by the AO is not based on any material seized during the search operation but on the facts and figures which were already noted in the account books of the assessee as well as on the facts which were noted in the assessment proceedings of the earlier years. The learned counsel also placed reliance on the decision of different Benches of the Tribunal and first case referred to was Sunder Agencies vs. Dy. CIT (supra) in which scope of Chapter XIV-B relating to block assessment period was defined and it was made clear that block assessment could be made only in respect of undisclosed income and such undisclosed income must come as a result of search. Explaining the very purpose of s.
158BA the Bench has concluded that it does not provide a licence to Revenue for making roving enquiry connected with completed assessment and it was beyond power of AO to review assessment completed unless some direct evidence comes to the knowledge of the Department as a result of search which indicates clearly the factum of undisclosed income. The plea of the learned counsel was that said reasoning is fully applicable to the facts of the present case as AO was not justified to make enquiries in respect of completed assessments and admittedly there is no other material than the facts noted in the books of account and earlier assessment proceedings and that alone cannot be the basis for making addition on account of undisclosed income. There is nothing in possession of the Department as a result of search which was made basis for making any addition.
11. The learned counsel also placed reliance on the decision of Parakh Foods Ltd. vs. Dy. CIT (supra) in which it was concluded that where assessee had disclosed primary facts relating to particular receipts such income cannot be assessed as undisclosed income within the scope of s. 158B(b) merely on the ground that adverse inference is drawn by the AO. The plea of the learned counsel for the assessee was that in the case in hand already primary facts of receipts were mentioned by the assessee during assessment proceedings from asst. yr. 1991-92 onwards and Department has accepted each and every fact given by the assessee and as such the Department cannot be allowed to take adverse inference on the so given facts as it will be amounting to change of opinion which is not the very purpose of block assessment.
12. Another decision in the case of R. Ramanathan vs. Asstt. CIT (supra) was again relied upon in which it was laid down that on the facts and circumstances there was no material to hold that it was undisclosed income for the purpose of assessment under s. 158BC. On the basis of this, it was submitted that in the case in hand there is no such material with the Department to conclude against the assessee and again decision in the case of J. K. Narayan, HUF vs. Asstt. CIT (1999) 64 TTJ (Mad)(TM) 823 : (1999) 69 ITD 104 (Mad)(TM) was referred to in which it was laid down that in case where search did not unearth any other income and entire block assessment was based on declaration of income by assessee itself in returns filed earlier, there was no question for existence of any undisclosed income and block assessment was liable to be annulled. The learned counsel submitted that this reasoning again fortifies the stand of the assessee.
13. The last case relied upon by the learned counsel is that of Tribunal, Delhi "C" Bench in case of Ved Prakash vs. Dy. CIT in IT(SS)A No. 48/Del/1996 decided on 13th July, 1999, copies of which has been placed before us in which it was laid down that in case no material has been found during search or in subsequent enquiry, that the assessee had spent more than that he had shown or that he had received more perquisite than he had shown, then no addition in block assessment is warranted.
14. So far as decision of High Court is concerned, reliance was placed on the decision of Gujarat High Court in the case of N.R. Papers & Boards Ltd. vs. Dy. CIT (1998) 101 Taxman 525 (Guj) in which their Lordships have defined the scope of s. 158BA(1) which provides that AO can proceed to assess the undisclosed income only if a search is initiated. Their Lordships further laid down that undisclosed income is classified separately for the purpose of assessment and is required to be worked out in the manner prescribed therein and treated to a higher rate of tax. But this process did not disturb the assessments already made of the previous years and was only intended to sniff out what had remained hidden and would not have been disclosed by the assessee. The learned counsel stressed that Hon'ble High Court has specifically prohibited the AO not to disturb the already completed assessments. In the present case, the AO admittedly had disturbed the earlier assessments as on facts and figures of the earlier assessments the AO had tried to cull out a different conclusion than the earlier AO had arrived at.
15. The learned counsel lastly referred to the decision of the Hon'ble Kerala High Court in the case of Malayil Bankers vs. Asstt. CIT (1999) 235 ITR 869 (Ker) in which their Lordships have pointed out that s.
158BA was intended to assess undisclosed income in contradistinction with the earlier assessment.
16. On the basis of all these case laws the submission of the learned counsel was that AO was not justified to disturb the earlier assessments in which the AO had rightly assessed the short-term/long-term capital gains shown by the assessee resulting out from different types of transactions and to work out the income on those transactions in different manner and to charge the same under different heads viz. "business income". This was not the very purpose of block assessment which was meant for undisclosed income based on search material and in the case in hand admittedly there was no search material in the possession of the Department and thus all the additions so made by the Department in respect of business income as well as for non- explanation of development expenses deserve to be deleted.
17. As against it, the learned Departmental Representative had placed reliance on the assessment order as well as on the special auditor's report, copy of which is part of assessment order. The contentions of the learned counsel for the assessment were also challenged by the learned Departmental Representative on the plea that it is not mere change of opinion but AO was justified to treat the transactions as business transactions and to charge the income under the right head of "Income from business and profession" which was wrongly shown by the assessee in earlier assessment proceedings and accepted by the Department. The Department got necessary enquiries and found that assessee was indulging in business of sale and purchase of immovable properties and his modus operandi was to purchase agricultural land then to develop it and to sell the same in parts and such activities are business activities and AO was rightly referred to the decision of Hon'ble High Court in which such transactions were taken as business activities resulting into profit. Decision of Raja J. Rameshwar Rao (supra) was again referred to. The contention of the learned Departmental Representative was that order of AO deserves to be confirmed.
18. We have considered the rival submissions and perused the record carefully. Undisputed facts are that assessee is an old income-tax assessee. He had filed return of income from asst. yr. 1991-92 onwards.
A perusal of statement of income for asst. yr. 1991-92 shall show that assessee had shown short-term capital gain of Rs. 8,390 arising out of two transactions of sale and purchase of different plots. The assessee filed balance sheet as well as P&L a/c and Department accepted the income shown by the assessee under s. 143(3) of the Act, copy of which is appearing at p. 191 of the paper-book. In subsequent two years the assessment was completed under s. 143(1) but fact remains that whatever the assessee had shown stands assessed as such and result of the same is that assessee who had shown short-term/long-term capital gain arising out of different types of transactions stand assessed as such by the Department till the date of search i.e. 30th November, 1997. It is also admitted fact that all these transactions did find place in the books of account in the same manner the assessee had shown in his returns of income for asst. yr. 1991-92 onwards. It also admitted fact that during search operation no material whatsoever has come in the possession of the assessee in respect of such transactions. The only thing which forced the AO to make the addition is the special auditor's report who had concluded that nature of transactions being carried out by the assessee goes to prove that he was carrying on the business of purchase and sale of the immovable properties and thus his income should have been assessed under the head of "Income from business and profession" and all the sale and purchase transactions entered by the assessee with others should not have been subject-matter of long-term/short-term capital gains. The AO had also been carried away by this very observation of special auditors but fact remains that there was no material seized during the search operation and provision under Chapter XIV-B is meant for undisclosed income as defined under s.
158BA and undisclosed income had been defined under s. 158B(b) of the Act and the procedure of computation is given under s. 158BB. It has been consistent view of different Benches of the Tribunal that assessment under Chapter XIV-B could be made only in respect of undisclosed income and such undisclosed income must come as a result of search. In the case in hand admittedly undisclosed income is not on the basis of any search material but on the basis of change of opinion, particularly on the basis of report of special auditors who had given different colour to the existing facts which stood assessed by the IT authorities in the earlier assessment years. It has also been concluded in the case of Sunder Agencies vs. Dy. CIT (supra) that s. 158BA did not give a licence to IT authorities to make roving enquiries connected with completed assessments and what had been done in the case in hand, is the same that AO had conducted enquiries in completed assessments of the assessee and made the addition. Not only this, the Hon'ble Gujarat High Court in the case of N. R. Paper & Board Ltd. vs. Dy. CIT (supra) had given emphasis that process of Chapter XIV is not supposed to disturb the assessment already made of the previous years. These facts clearly go to indicate that assessment already completed under s.
143(3) or even summary assessment cannot be subject-matter of roving enquiries and are not to be disturbed under the garb of Chapter XIV-B of the Act and if we apply the above analogy of different Benches of the Tribunal to the facts of the case the only conclusion shall be that AO who made the addition on the basis of reopening of earlier assessment but AO is not justified in making such move and addition so made are not to be sustained. Accordingly, ground stands allowed and the additions of Rs. 36,15,441 and Rs. 7,41,531 made by the AO as undisclosed income of the assessee are deleted.
19. The next substantial ground of the assessee is relating to addition of Rs. 22,18,744 made by the AO as undisclosed income on the basis of surrender made by the assessee. During search operations, statement of the assessee was recorded and after post search operation, the assessee was examined at so many times to elicit information and to confront with the seized material. Copies of statements recorded in between 2nd January, 1997 to 13th February, 1997 are appearing at pp. 1 to 66 of the paper-book. It appears from the perusal of different answers given by the assessee on different dates that assessee when cornered by the authorities, surrendered Rs. 20 lakhs as undisclosed income and whenever he was confronted with any seized material, the assessee got rid of by saying that the amount involved in the said paper stands covered by the surrender of Rs. 20 lakhs. The assessee filed return in pursuance to the notice issued under s. 158BC and did not include the amount of Rs. 20 lakhs so surrendered but appended a note to the return mentioning therein that he surrendered Rs. 20 lakhs on the presumption that there may be some undisclosed income/investment, the said surrender of Rs. 20 lakhs was on general basis and without any specific verification and clarification. Jewellery and cash were verifiable from record of assessee's mother and wife and other members and no other document or evidence of undisclosed income or investment was detected.
Further, he mentioned that he was not feeling well and thus said surrender was out of fear, misconception and misguidance and the same is not acceptable. The AO noted all the facts and also observed that assessee was confronted with relevant seized material and whenever he was asked to comment, he gave valid explanation on some of the papers but also did not come forward to give any explanation and covered the amount of seized material in Rs. 20 lakhs surrendered by him. He also noted that statement of assessee was not recorded in one sitting but spread over on different dates. It was wrong on the part of assessee to assert that surrender was made out of fear, misconception and misguidance or there was no basis for surrender as voluminous documentary evidence was seized by the Department which was confronted to the assessee. The AO gave out some of the instances mentioning therein that assessee had admitted that the particular sums mentioned in any particular paper was out of undisclosed income. He referred to page No. 20 of Annexure A-4 and the assessee admitted that electricity expenses mentioned therein were borne by him from undisclosed income.
In the same way the AO referred to Annexure "C" to the auditor's report giving out the details of surrendered amount and the details mentioned therein was found not verifiable from the record and assessee himself admitted to have incurred the investment out of his unaccounted funds.
20. During assessment proceedings the AO placed reliance on the decision of apex Court in the case of CBI vs. V. C. Shukla & Ors.
Judgment Today 1998 (2) SC 172 but AO noted that no doubt the apex Court has laid down that there must be independent evidence to support the entries recorded in the diary or book but in the case in hand the assessee himself had admitted in his statement about incurring of such expenses or investment thereof out of undisclosed income. The AO also relied upon the decision of Tribunal Madras Bench in the case of T. S.Krishna Swami vs. Asstt. CIT (1998) 65 ITD 188 (Mad) in which the Tribunal has concluded that admission made on oath under s. 132(4) though retracted later on will be sufficient if it is proved that such statement was voluntarily given and not under any coercion or duress.
The AO concluded that assessee made the admission in view of the documentary evidence and admitted about undisclosed income. The AO distinguished the case of CIT vs. Soorji Vallabdass & Co. (1962) 46 ITR 144 (SC) and other cases relied upon by the assessee and concluded that Rs. 22,18,744 based on the annexure "C" of auditor's report was to be treated as undisclosed income and he made the addition thereof.
21. The learned counsel for the assessee challenging the addition submitted that assessee was forced to make surrender of Rs. 20 lakhs otherwise when there was no penalty or interest then why assessee will be going to make a surrender of Rs. 20 lakhs. In this connection our attention was drawn to office note appearing at p. 18 of the assessment indicating therein that no interest or penalty can be levied in the case of assessee as per Notification issued by CBDT. Second point of the learned counsel for the assessee was that as soon as first opportunity came, the assessee made the retraction on 25th September, 1997, when the first reply filed by the assessee in pursuance to the notice issued by the Department. The learned counsel submitted that an amount of Rs. 6 lakhs in shown as surrender by the assessee in respect of unexplained jewellery. In this connection it was submitted that jewellery detected at the time of search belonged to his mother, wife and his minor children as well as some jewellery was belonging to him.
The assessee's mother and wife were income-tax assesses and jewellery shown by the mother and wife was already being shown by them in their wealth-tax return even prior to the date of search and thus there was no occasion for the assessee to surrender huge amount of Rs. 6 lakhs on account of unexplained jewellery. The wealth-tax assessment order of assessee's mother and wife for asst. yr. 1991-92 were also referred to and also the Approved Valuer's report in respect of jewellery of Smt.
Sunita Jain and Smt. Vimla Jain mother and wife of assessee respectively, which are appearing at pp. 178 to 179 of the paper-book as well as of assessee himself which is appearing at p. 180. The contention of the learned counsel for the assessee is that this amount of Rs. 6 lakhs would not have been surrendered by the assessee but for fear, misconception and misguidance. About, other points the learned counsel submitted that assessee had given out all the details of commission so received and there was no justification for making any surrender of Rs. 10 lakhs as unaccounted commission received by the assessee. The contention of the learned counsel is that there was no question of any surrender of this amount of Rs. 10 lakhs while all the transactions relating to purchase and sale of land as well as immovable properties were duly found recorded.
22. The other plea of the learned counsel for the assessee was that only five days were left with the AO to complete the assessment order after receipt of special audit report and this a case of hurried assessment and assessee was not given opportunity by AO to explain each and every document on the basis of which alleged surrender was made by him. It was pleaded that matter may be restored back to the file of AO who may give an opportunity to the assessee to explain each and every paper. Again it was contended that surrender alone is not to be made basis for making addition unless the same stands corroborated by material evidence and in the case in hand no such corroborative evidence has been brought by the Department particularly when surrender stands retracted by the assessee subsequently. The plea is that the amount of addition be deleted and in alternative the matter may be restored back to the file of AO.23. As against it the learned Departmental Representative pointed out that amount of surrender has rightly been made the basis for making the addition of undisclosed income by the AO as each and every amount mentioned in Annexure "C" of auditor's report stands corroborated by admission of assessee made during statement recorded from time to time and for that he has invited our attention to the different admissions made by assessee in the statement recorded during 2nd January, 1997 to 18th February, 1997, and copies thereof had also been complied by the learned Departmental Representative in his paper-book. The plea of the Departmental Representative is that it is not a case of mere admission but that admission was made by the assessee when he was not able to explain the entries of different types of seized material found at the time of search. In this connection he further referred to Annexure "C" of the auditor's report which contains the details of different annexures as well as the brief particulars as to how the assessee admitted and surrendered the amount and on the basis of which it was pleaded that assessee himself had come for making surrender and the admission of the assessee duly coupled with the seized material was sufficient for making the addition and assessee under the guidance of legal experts tried to wriggle out from the said unequivocal admission and he cannot be allowed to do so and addition has rightly been made.
The case laws relied upon by the learned AO in the assessment order have been reiterated by the learned Departmental Representative to substantiate the plea that admission being not proved to have been under coercion or duress, can be safely be made the basis for addition.
24. We have considered the rival submissions and perused the records.
Following is the statement by which the assessee admitted undisclosed income during statement recorded from time to time : ------------------------------------------------------------------------Annexure Page Date of AmountBrief particulars of income No. ------------------------------------------------------------------------ A-4 20 03-01-1997 46,500.00 Certain expenses incurred out A-4 21 03-01-1997 8,397.00 Back side of p. 21 certain A-4 55 03-01-1997 2,000.00 Investment in shares & 56 A-4 109 03-01-1997 7,400.00 Expenses relating to Electric 1 repairs and cables at B-7, Anand Niketan. A-4 112 03-01-1997 7,157.00 Purchase of Godrej Almirah. A-4 115 03-01-1997 2,100.00 Cash memo of Pradeep Radio & bill/cash memo of jewellery purchased. "I have already declared a sum of Rs. 6,00,000.00 asmy undisclosed income not part of surrender of Rs. 20 lakhs. A-45 24 18-02-1997 5,000.00 Entries on this page could not be explained and hence offered as part of undisclosed income.
not be explained. To be taken aspart of total disclosure offigures mentioned. One instance was shown. Agreed that thereSanjay & Associates not accounted for inbooks of accounts. Hence A-50 22 12-02-1997 267,592.00 Two entries of the sum of Rs. 1,21,000.00 on 30-09-1996 and 25. We have gone through the statement of the assessee which was admittedly recorded at 9 days in between 2nd January, 1997 to 18th February, 1997. On 2nd January, 1997 the assessee was shown the documents showing the explanation of Rs. 46,500 and Rs. 8,397 appearing at pp. 20 and 21 of Annexure A-4. He admitted that these expenses were incurred by him out of his undisclosed income. On that very day he admitted that other expenses appearing in different pages of Annesure A-4 amounting to Rs. 2,000, Rs. 7,400, Rs. 7,157 and Rs. 2,100 were spent out of undisclosed income. These admissions are quite specific and based on the seized material.
26. On 9th January, 1997, the assessee admitted that Rs. 6 lakhs was invested by him out of the undisclosed income in purchase of jewellery.
A substantial sum of Rs. 10 lakhs was admitted by him on 18th February, 1997, on the basis of entries recorded in a diary which he deciphered correctly and explained that Rs. 10 lakhs may be taken as undisclosed income. This statement was recorded on 18th February, 1997, much after the date of search and that was the last date of statement which actually recorded on nine dates. The plea of the assessee that these statements were out of fear, misconception or misguidance, is not tenable in view of the fact that statement of assessee was not recorded during search or any particular date but his statement was recorded on nine dates running between 2nd January, 1997 to 18th February, 1997.
The legal consequence under such circumstances will be that plea of assessee that he gave the admissions out of fear and misconception or misguidance is baseless and cannot be attached any credibility. We may refer the ratio of Tribunal Madras Bench in the case of T. S.Kumaraswami vs. Asstt. CIT (supra) also referred to by the AO in the assessment order in which it has been rightly concluded that statement of assessee if not proved to have been made or given under coercion or duress can be made the basis for addition. Apart from this it is not a case of admission alone but here admission of assessee was made when he stood cornered by authorities in respect of seized material. He was not able to explain, then only he came forward to cover all the seized material in the garb of surrender of Rs. 20 lakhs. The special auditors who had audited the books of assessee concluded that such an addition should be Rs. 22,18,744 and that too based on the admission of the assessee duly coupled with the seized material and thus addition was justified.
27. About the plea of the assessee that jewellery belonged to his mother, wife, himself and two daughters, it may be noted that whole of the jewellery was worth Rs. 11,35,542 during search operations.
Admittedly wife and mother of the assessee were income-tax/wealth-tax assessees and both of them as per detail filed by the assessee were assessed to less than Rs. 5 lakhs of jewellery and assessee has also filed copies of valuer's report appearing at pp. 178 to 179 in respect of valuation of jewellery of these ladies dt. 29th November, 1996. He had not filed copies of wealth-tax returns of these two ladies. The amount of Rs. 6 lakhs was surrendered as jewellery purchased out of undisclosed income by the assessee which gives a latitude to the assessee that remaining amount of Rs. 5,36,342 was the amount of jewellery of his wife and mother and rest stands undisclosed investment made by the assessee which was rightly surrendered by him when cornered by IT authorities. In the same way the addition of s. 10 lakhs in respect of commission stands surrendered by the assessee on 18th February, 1989 when he was cornered about the diary containing different types of commission received but not recorded in the books of account. Ultimately the assessee admitted that Rs. 10 lakhs out of unaccounted commission received be treated as part of Rs. 20 lakhs surrendered amount. So no other explanation can be entertained now in view of this specific admission of the assessee which is binding. No doubt admission can be proved to be made under false notions but in the case in hand the assessee had not come forward to explain that any expenditure appearing in Annexure "C" was not justified or admission made by him was in anyway falsely made.
28. On the basis of our discussion and the circumstances we are of the considered view that addition was rightly made by the AO and the argument of the learned counsel for the assessee for its deletion are not tenable and we confirm the finding that addition of Rs. 22,18,744 had rightly been made and the same stands confirmed.