1. In this appeal filed by the assessee against the order of the CIT(A), dt. 13th Sept., 2002, block assessment made by the AO under Section 158BC has been challenged.
2. The block period involved in the present assessment is from 1st April, 1989 to 21st Dec, 1999. The grounds of appeal raised by the assessee are as under : "1. The order of the first appellate authority is not correct either in law or in facts and in both.
2. The first appellate authority failed to consider that the investments made by the appellant in Visakha Precious Stones were duly supported by evidence and, therefore, nothing can be treated as undisclosed investment.
3. The first appellate authority is not justified in treating the investment made by the third parties as undisclosed investment of the appellant especially when the third parties have explained the sources of investment.
4. The first appellate authority failed to consider that the appellant had offered to produce all the creditors in support of his claim of investment and, therefore, the first appellate authority is not justified in doubting the genuineness of the loan transactions.
5. The first appellate authority is not justified in sustaining the addition of Rs. 36,07,720 being the investment in M/s Visakha Precious Stones (P) Ltd. 6. The first appellate authority, in the alternative, should have restricted the additions to Rs. 18,69,000 being amount declared by the appellant under Section 132(4).
7. The first appellate authority failed to consider that income from Liquor Syndicate treated as share of profit is exempt from tax.
8. The first appellate authority is not justified in sustaining the addition of Rs. 2 lakhs being the share of income from Liquor Syndicate.
9. The first appellate authority is not justified in sustaining the levy of surcharge.
10. The appellant craves leave to add, amend or alter any of the above grounds at the time of hearing of the appeal." 3. During the course of hearing before us, the learned Authorised Representative filed written submissions as well paper book in three volumes which consists copies of statement recorded of the assessee, Panchnama, submissions made before the AO, confirmation from various parties, audited P&L a/c of wine vendors and also the copies of the assessment order of M/s Visakha Precious Stones (P) Ltd. (hereinafter called VPSP) comprising in all 1,223 pages. In addition to the paper book, copies of some of the judgments relied on were also filed during the course of hearing.
4. On the other hand, the learned Departmental Representative on behalf of the Revenue did not file any document, but simply relied on the order of the CIT(A).
5. At the outset, the brief facts as gathered by us having the bearing on the issue involved are that search and seizure proceedings were conducted under Section 132 on 21st Dec, 1999. M/s VPSP was a regular assessee and assessment in its case got completed under Section 143(3) for the asst. yr. 1997-98 on 31st March, 2000, i.e., after the search took place at the assessee. The investments in the share capital as well as in the unsecured loans and advances were duly disclosed in the books of account of the VPSP, private limited company, in which the assessee was one of the directors.
6. On 21st Dec, 1999, two statements of the assessee were recorded, one at the beginning of the search and the other at the conclusion of the search, the copies of which are reproduced from pp. 117 to 128 and 129 to 140 of the paper book. The search was concluded on 4th Feb., 2000, when the last Panchnama was executed, copies of the Panchnama are reproduced from pp. 197 to 202 of the paper book. Statements of the assessee were recorded on 5th Feb., 2000 and 10th Feb., 2000, which were presumed by the AO to have been recorded under Section 132(4) of the IT Act. Vide statement dt. 10th Feb., 2000, the assessee made a disclosure of Rs. 30.29 lakhs as unaccounted income for the block period. The relevant portion of the statement is reproduced as under: "17 Q. As per the information available with us you have invested Rs. 6.12 lakhs as share capital and Rs. 31.5 lakhs as unsecured loan towards your investment of 24.5 per cent share in M/s Visakha Precious Stones (P) Ltd. Please state whether these investments are reflected in your books of account and in the returns filed by you and also explain the sources for the same.
A. The above investments are made in the names of various persons including myself. However, some of the investments made in certain persons' names belongs to me only. Such investments are as detailed below: 18 Q. To which period do the above investment, in M/s Visakha Precious (P) Ltd. pertains to A. The above investment of Rs. 18.69 lakhs pertains to the year ended 31st March, 1997.
19 Q. Please explain the source for the above investment and also state whether these investments are reflected in the books of account of the return of income A. The investment of Rs. 18.69 lakhs discussed above was not reflected in our books of account are in returns of income filed by us. I cannot explain the sources for this investment. I am disclosing this amount of Rs. 18.69 lakhs as my unaccounted income invested as unsecured loans and share capital in M/s Visakha Precious Stones (P) Ltd., during the year 1996-97.
20. Q. What is your investment in M/s Visakha Precious Stones (P) Ltd. in the financial years 1997-98 and 1998-99 A. I have not invested any amount in financial year 1997-98. But in 1998-99, we have invested Rs. 31.5 lakhs as unsecured loans.
However, I have not given any unsecured loan in my individual capacity. Similarly, Sri B. Satyanarayana has also not given any unsecured loan to the company. Excluding we two, the other members of our group have invested out of their own sources.
21 Q. Who are the other members of your group who have invested in the form of unsecured loans in the company What is share of each member A. Right now, I am not able to furnish the details. However, the same shall be submitted in due course.
A. As admitted by me earlier, we have invested Rs. 6.6 lakhs in acquisition of immovable properties in the names of my family members. We have also invested Rs. 18.69 lakhs in various names in the form of unsecured loans and share capital in M/s Visakha Precious Stones (P) Ltd., all of which are not reflected in our books of account or in the returns of income filed by us. Apart from the above, we have earned Rs. 5 lakhs from our liquor business being run in the name of Pendurthy Ganesh Syndicate which is not reflected in the books of account. Accordingly, I am disclosing this amount of Rs. 30.29 lakhs as my unaccounted income for the block period. I promise to file the block returns admitting the same and I shall pay the taxes accordingly." 7. The assessee reiterated the aforesaid declaration vide p. 275 of the paper book by disclosing income of Rs. 2 lakhs in the IT return and binding thereto not to the following effect: "Income admitted roundly to compensate set off to telescope the addition of additions that may be made in the block assessment under any score or scores 2,00,000 This income is admitted by the assessee to purchase peace with the Department to avoid protracted litigation." 8. The affidavit filed by the assessee for retraction (which) is appearing at pp. 113 to 115 of the paper book states as under: "I, Peela Govinda Satyanarayana son of Sri Mahalaxmi Naidu, aged 36 years, resident of Pendurthi, Visakhapatnam District, hereby affirm and state that my residential as well as business premises were subject to search and seizure operations on 21st Dec, 1999. These operations conducted continuously at lengthy time and because of these operation I was mentally shocked and in fact I became demoralised from this shock, and I also became mentally depressed.
Because ours is a middle-class family and we are not so much financially rich as alleged by the search party. However, subsequently on 10th Feb., 2000, some disclosures were taken from me under the influence of pressure exerted by the search party.
These disclosures were not given by me voluntarily and I had to give them only to get over the then situation and to avoid mounting mental tension. The disclosures were given towards certain alleged undisclosed incomes which are never earned by me and in fact major part of the admissions never related or belonged to me.
So, in view of the above facts and circumstances, it can be appreciated that the admissions given by me were not voluntary and not given with free will and sound mind and hence I pray your honour not to take such admissions into consideration while finalising the block assessment. Moreover, I have received notice under Section 158BC of the IT Act, 1961, for filing the block return and hence I have duly filed my block return in response to the said notice and in which I have admitted a round sum income of Rs. 3,00,000 only to purchase peace with the Department and to avoid protracted litigation.
I also pray your honour to kindly give set off or compensate or telescope the addition or additions that may be made in the block assessment under any score or scores against this income in the interests of justice. I also pray your honour not to draw any adverse inference or not to treat as non-compliance of offence for non admission of the alleged income disclosed by me under Section 132(4) of the IT Act before the search party, under the influence of pressure exerted by them, m the interest of justice.
I hereby declare and state that the above information is true and correct to the best of my knowledge and belief." 9. The AO did not agree with the retraction made by the assessee. The assessee has also filed the confirmations of the various persons who had invested in the share capital and unsecured loans of the company as stipulated under paras 8 and 9 of the assessment order. The AO made the following additions in the undisclosed income returned by the assessee and completed assessment on an income of Rs. 49,67,720 under Section 158BC of the IT Act.1. Undisclosed income introduced in the form of share capitaland unsecured loans in different names during the financialyears relevant to the asst. yr. 1997-98 as discussed in paras7 to 10 of this order 36,07,7202. Undisclosed income earned from share of profit of in liquorsyndicate during the year 1999 as discussed in para numbers11 to 13 of this order 5,00,0003. Investments made in the names of assessee's brother, Sri P.Krishna Apparao, during the year relevant to the asst. yr.1997-98 as discussed in para No. 15 6,60,000" 10. When the matter went before the CIT(A), the CIT(A) also confirmed the addition so far it relates to Rs. 36,07,720 is concerned holding that the statement recorded on 10th Feb., 2000, to be a statement recorded under Section 132(4) and it can be used as a piece of evidence and AO has rightly relied on it. The additions in respect of share profit in liquor syndicate was reduced to Rs. 2,00,000 from Rs. 5,00,000 and deleted the addition of Rs. 6,60,000 holding that the assessee was living (in) joint family consisting of 3 brothers and sons regarded Sri P. Krishna Apparao was available in the same house it cannot be said to be the investment made by the assessee. Thus, the CIT(A) also did not accept the statement of the assessee, dt. 10th Feb., 2000 in toto.
11. Being aggrieved, the assessee came in appeal before us. The main issue in the present appeal centers around the legal and factual merits of the impugned additions of Rs. 36,07,720 and Rs. 2,00,000 from the liquor syndicate confirmed by the CIT(A).
12. In respect of grounds No. 1 to 6 which relate to the addition of Rs. 36,07,720, the assessee contended that the statement of the assessee was recorded after the conclusion of the search. The search was concluded on 4th Feb., 2000, when the prohibitory order was lifted, therefore, the statement recorded after the search cannot be regarded to be statement recorded under Section 132(4) during the course of search proceedings. The assessee was compelled under coercion to make such statement by the ADI while there is no power under Section 132 for calling the assessee after the conclusion of the search and recording of his statement. The statement so recorded cannot be used as a piece of evidence against the assessee. Even, confessional statement recorded by the IT authorities under coercion and pressure does not constitute admissible evidence in support of non-genuineness of the investment made by the assessee and other persons in the company. The assessee has invested only a sum of Rs. 5,37,320, the rest of the investments were not made by the assessee but were made by the other people, none of whom was related to the assessee. These investments were duly disclosed in the books of the company, VPSP Ltd., who was a regular assessee, and in the case of the company, these investments were duly considered while framing the assessment under Section 143(3) of the IT Act. These investments, therefore, cannot be regarded to be the undisclosed income in view of the definition of the undisclosed income given under Section 158B(b) of the IT Act. The very basis of the information of the Department was investments recorded in the books of account of VPSP Ltd. in which the assessee was a director, therefore, the additions made on the basis of the investments made as undisclosed income are outside the scope of Chapter XIV-B of the IT Act. Although the search and seizure has taken place in the premises of the assessee, but no material was found relating (to) this investments which may prove that all investments were made by the assessee and the same was undisclosed investment. The assessee even during the course of assessment proceedings filed the confirmations from the various parties who made the investments in the private limited company and whose investments were held to be the investments of the assessee. He (has) drawn our attention towards pp. 283 to 1223 of the paper book which show the confirmations from the various parties who has invested funds in VPSP by way of DDs. The assessee has also explained the source of the investment made by him amounting to Rs. 5,37,500 in the aforesaid company. The assessee has taken loan from various persons, the confirmations of which along with their land-holding and proof for the sale of crops were duly filed before the AO, the copy of which are available from pp. 289 to 488 of the paper book. These evidences furnished by the assessee in support of the genuineness of the transaction have not been controverted by the Revenue authorities, while holding that the investments in the company related to the assessee. The Revenue has only relied on the statement of the assessee recorded on 10th Feb., 2000, i.e., after the completion of the search.
Statement recorded after the completion of the search cannot be considered as statement under Section 132(4) of the IT Act.
13. Our attention was drawn towards the statements of the assessee recorded on 21st Dec, 1999, 5th Feb., 2000 and 10th Feb., 2000, and it was vehemently submitted that it is only the statement dt. 10th Feb., 2000, on which the Revenue compelled the assessee to agree that the amount of investments in the company, belonged to him and it represented undisclosed income of the assessee. Prior to that, no such question or answer relating to these investments was ever asked. Thus, the Authorised Representative also referred to the affidavit of the assessee retracting the disclosure made in statement dt. 10th Feb., 2000, stating that the admission has been procured under coercion and pressure. Kelkar Committee report reported in (2002) 258 ITR (St) 40 was also referred wherein the committee has made critical practices adopted by the Departmental officers in obtaining post confession from the assessee during the course of search operation. Finance Minister has also observed in the Budget Speech for the financial year 2003-04 that in view of the recommendations of the Kelkar Committee it has been decided that no confession statement shall be obtained during search and seizure operations. The Board has also in its letter No. F.287/2/2003(Inv.), dt. 10th March, 2003, pointed out that in the past confessions, if not based on credible evidence, are later on retracted by the assessee and, therefore, the Board has advised that no attempt should be made to obtain confession for the undisclosed income, and the AO should rely upon the evidences gathered during the course of search or thereafter while framing relevant assessment order. In the case of the assessee no such evidences were obtained by the Revenue during the course of the search or while framing the assessment order. In the alternative, it was submitted that if the contention of the assessee regarding the admission having been obtained under coercion and pressure is not accepted, it is well accepted proposition of law that admission is not conclusive and the assessee is fully entitled to rebut and controvert the admission by adducing documents and evidence on record. For this, reliance was placed on the decision of Hon'ble Supreme Court in the case of Pullangode Rubber Produce Co. Ltd. v.State of Kerala and Anr. andSwam Singh and Ratan Singh v. State of Punjab , wherein it has been held that a confession of an accused would need corroboration to convict the accused. Decision of the Delhi High Court in the case of S.Arjun Singh v. CWT was also referred for the proposition that an admission is an important piece of evidenc; it is not conclusive and it is open to the assessee to show that it is incorrect. Reliance was also placed on the following decisions: (iii) Karam Chand v. Asstt. CIT (2000) 68 TTJ (Chd) 789 : (2000) 73ITD 434 (Chd) ' (iv) Asstt. CIT v. Sushilla Devi Agarwal (1994) 49 TTJ (Ahd) 663 : (1994) 50 ITD 524 (Ahd).
14. The provisions of Section 158BB which lays down the mode of computation of undisclosed income of the block period were also referred for the contention that undisclosed income has to be computed on the basis of evidences found during search. No documents or evidence or record have been found by the IT authorities during the course of search which impeach the genuineness of the investments made in M/s VPSP and also that these investments belong to the assessee. The investments were duly entered in the books of account of the company, M/s VPSP, and this fact has not been disputed by the AO. The assessment under this chapter is not in substitution of a regular assessment the additions were already made in the hands of the company under Section 68 of the IT Act and it cannot be added again treating it to be the undisclosed income of the assessee. Thus, it was vehemently submitted that the additions made must be deleted. Even on merit, the assessee has discharged his burden of proof by adducing evidence about the identity, capacity and genuineness of the transaction. The AO did not bother to call any of the parties whose confirmations were filed by the assessee. No addition can be made merely on suspicion however strong it may be.
15. In respect of ground Nos. 7 and 8 which relate to the additions of Rs. 2,00,000 in wine business, it was submitted that the assessee has already returned a sum of Rs. 2,00,000 and this income should be set off by telescoping against the income returned by the assessee for which our attention was drawn to the computation statement as well as the affidavit of the assessee which is appearing at p. 115 of the paper book. No evidence or material was found which may prove that the assessee has earned this income.
16. In respect of ground No. 9 relating to the levy of surcharge, it was submitted that Section 113 has been amended and the surcharge has to be levied w.e.f. 1st June, 2002. In this case, the search has taken place on 21st Dec, 1999, therefore, no surcharge can be levied. When the Bench pointed out that this issue is pending before the Special Bench, Hyderabad, for adjudication, the learned Authorised Representative was fair enough to concede and requested this Tribunal that this ground of appeal can be kept in abeyance and be disposed of as and when the Special Bench decides this issue, as a finding to this effect may be given in the order so that assessee or Revenue can file miscellaneous petition before this Tribunal.
17. The learned Departmental Representative, on the other hand, merely relied on the order of the CIT(A).
18. We have carefully considered the rival submissions and also gone through the facts and evidences on record as contained in the paper book filed before us during the course of hearing. We have also gone through the legal luminaries cited before us. In our view, there are following three basic issues which are to be decided for disposal of ground Nos. 1 to 6: (i) Whether the statement given by the assessee on 10th Feb., 2000, can be regarded to be the one recorded under Section 132(4) of the IT Act (ii) Whether the impugned addition of Rs. 36,07,720 treating the investments in the share capital, loan and advance in M/s VPSP in which the assessee, is one of the directors are not genuine. These relates to the assessee and whether these investments fall within the ambit of undisclosed income as defined under Section 158B(b) and are covered for the purpose of block assessment under Chapter XIV-B of the IT Act, 1961 (iii) Whether the admission made by the assessee in the statement disclosing the investment in M/s VPSP as his unaccounted income constituted conclusive and final evidence against the assessee and (iv) if answer to question No. 3 (is in) negative, whether the assessee has succeeded in disproving the admission and establishing genuineness of the investments in question Chapter XIV-B consisting of Section 158B to Section 158BH was introduced by the Finance Act, 1995, w.e.f. 1st July, 1995, to make procedure of assessment of search cases more effective. The chapter is titled "Special procedure for assessment of search cases." The scheme of block assessment enacted under this chapter laying down procedure for block assessment proceedings is intended by the legislature to operate simultaneously with the normal and regular scheme of assessment indicated under Chapter XIV of the IT Act. Both the tax schemes are independent of each other and they are not mutually exclusive. Block assessment under Chapter XIV-B is not intended to be a substitute for regular assessment. Its scope and ambit is limited in that sense to materials unearthed during search. It is in addition to regular assessment already made or to be made. Clause (b) of Section 158B contains inclusive definition of undisclosed income and reads as under: "(b) "undisclosed income" includes any money, bullion, jewellery or other valuable article or thing or any income based on any entry in the books of account or other documents or transactions, where such money, bullion, jewellery, valuable articles, thing, entry in the books of account or other document or transaction represents wholly or partly income or property which has not been or would not have been disclosed for the purposes of this Act (or any expense, deduction or allowance claimed under this Act which is found to be false)".
If we analyse the aforesaid definition, it provides that undisclosed income includes: (i) Any money, bullion, jewellery or other valuable article or thing, or; (ii) Any income based on any entry in the books of account or other documents or transactions; (iii) Such money, bullion, jewellery, valuable article, thing, entry in the books of account or other documents or transactions represents wholly or partly income or property; (iv) Which has not been or would not have been disclosed for the purposes of this Act.
From the aforesaid analysis of the definition, it clearly emerges that if any asset or any income as recorded in the books or documents has been disclosed or intended to be disclosed to the IT authorities, this would be outside the pale of undisclosed income as defined under Clause (b) as above.
19. We may next refer to Section 158BB which provides for computation of undisclosed income of block period. The section expressly and unequivocally provides that the undisclosed income has to be computed "on the basis of evidence found as a result of search... and such other materials or information as are available with the AO and relatable to such evidence". The expression "relatable to such evidence" has been inserted by the Finance Act, 2002, retrospectively, w.e.f. 1st July, 1995. A bare reading of this provision would indicate that undisclosed income has to be computed on the basis of evidence and material found during search. Any material or evidence available to the AO which is not related to the search would not form the basis for computation of undisclosed income.
20. The issue regarding jurisdiction of the AO to consider the genuineness of the investment transactions in VPSP and treating such investments as undisclosed income would be required to be considered in the backdrop of the aforesaid legal position. The facts are undisputed that no evidences have been found during the course of search which may impeach the genuineness of the loans and advances received by the assessee and the investments made by the assessee and other persons in the company, M/s VPSP. No documents or papers have been found during search proving that the investments made by the assessee in VPSP were not genuine and the investments made by the other persons in VPSP were representing the income of the assessee.
21. The main basis on which the additions have been made in the case of the assessee is the statement of the assessee recorded on 10th Feb., 2000, admitting Rs. 30.29 lakhs as the unaccounted income for the block period which consists of Rs. 6.6 lakhs invested in the names of family members Rs. 18.69 lakhs in various names in the form of unsecured loans and share capital in VPSP, and Rs. 05 lakhs from liguor business being run in the name, Pendurthi Wine Syndicate. This statement was also recorded subsequent to the conclusion of the search. This is an undisputed fact that the search in this case concluded on 4th Feb., 2000, when the Panchnama was executed. The AO referred to the statement as if the statement has been recorded during the course of the search.
For the applicability of Section 132(4), it is essential that the statement must be recorded during the course of the search. The statement of admission dt. 10th Feb., 2000, is the sole basis adopted by the AO for bringing the unsecured investment by way of unsecured loans and share capital in VPSP within the purview of undisclosed income.
22. Jurisdictional High Court in the case of CIT v. Shri Ramada Motor Transport has taken a view that statement recorded during the course of search under Section 132(4) can be used in evidence in subsequent proceedings initiated against such person under the Act. The question of examining any person by the authorised officer arises only when he finds such person in possession of any undisclosed asset or books of account. But in this case, it is an admitted fact that on the days of search the Department was not able to find any unaccounted money, unaccounted bullion nor any valuable article or things nor any documents or any such incriminating material either from the premises of the company or from the premises of the assessee. Even the statement from the assessee admitting the income was also recorded subsequent to the search. Therefore, such statement is outside the ambit of Section 132(4). Our aforesaid view has also been duly supported by another judgment of Hon'ble Andhra Pradesh High Court in Asstt. CIT v. Yeera Nagabhusanam . We are, therefore, of the view that the investment in the various names in the form of unsecured loan in M/s VPSP who was a regular assessee cannot possibly be treated as gathered within the limited scope and purview of undisclosed income under the block assessment. On this legal ground alone, the impugned addition of undisclosed income treating the investments made by the various persons in the form of unsecured loan and share capital to be the income of the assessee is held to be outside the purview of block assessment and is liable to be deleted.
23. We may next consider the facts concerning to the investments made by the assessee and by the various persons in the form of unsecured loans and share capital in M/s VPSP treating to be the income of the assessee. In the context of the definition clause namely--Section 158B(b) which defines the undisclosed income as reproduced above, the important limb of the definition which constitutes the basic essence is "income or property which has not been or would not have been disclosed for the purpose of the Act." In the case of L.R. Gupta v. Union of India (1992) 194 ITR 32 (Del), the Delhi High Court while constituting the expression undisclosed income as used under Section 132(1) has held that income which is hidden from the Department is undisclosed income.
In this case, the assessee and various persons invested the money in the form of unsecured loans and share capital in M/s VPSP which were duly deposited in the account of the company and were duly considered in the regular assessment of the company. This is undisputed that these investments were duly disclosed in the books of account of VPSP regularly maintained, which was a regular assessee and the assessee is a director therein. Even these deposits were duly considered in the hands of the company, which is apparent from the copy of the assessment order passed under Section 143(3) on 31st March, 2000, after the search operation has taken place in the case of the assessee. Confirmations from all the persons on unsecured loans and share capital invested in M/s VPSP were duly filed before the AO in the case of the assessee.
Their evidence of their holding and the source of the amount were also filed. The assessee has invested only a sum of Rs. 5,37,500 and Rs. 4,49,820 as unsecured loans, and Rs. 87,500, as contribution to the share capital. The assessee has duly filed the sources from where the amount was received along with DD number and the date and also details where the cash has been received only for a sum of Rs. 87,500 from nine persons detailed at pp. 283 to 287 of the paper book. The amounts were given in the bank account of the company and were duly disclosed in the audited balance sheet of the company. The AO has examined these unsecured loans and share capital under Section 68 only when he could know through the regular books of account of the company. Thus, from these facts it is explicitly evident that the investments in the share capital and unsecured loans were duly disclosed and accounted for in the books of the company, in which the assessee was a director. These transactions cannot be considered as secret, hidden or concealed. In our opinion, these investments are outside the definition as contained under Section 158B(b), and cannot be assessed under this chapter.
Proceedings under this chapter cannot be a substitute of proceedings under Sections 148 or 143(3). Our aforesaid view is duly supported by the decision in the case of Sunder Agencies v. Dy. CIT (1997) 59 TTJ (Mumbai) 610 : (1997) 63 ITD 245 (Mumbai).
24. We also find force in the submission of the learned Authorised Representative that the additions were already made in the regular assessment in the books of the company and cannot be added again treating to be undisclosed income in the hands of the assessee. On this ground also, the impugned addition in the block assessment is liable to be deleted. Thus, we set aside the order of CIT(A) and that of AO on this issue allowing the ground Nos. 1 to 6 of the assessee and delete the addition of Rs. 36,07,720.
25. Now, coming to the genuineness of the investments of Rs. 18.69 lakhs in various names in the form of unsecured loans and share capital in M/s VPSP, without prejudice to our aforesaid finding that this issue is outside the purview of the block assessment on the facts of this case, we proceed to consider this aspect of the controversy also. The sole sword of the Department case is the admission made by the assessee in the statement given on 10th Feb., 2000, that the assessee invested a sum of Rs. 18.69 lakhs in various names in the form of unsecured loans and share capital in M/s VPSP which not reflected in his books of account or in the returned income filed by him. The learned Authorised Representative was at pain in emphasising that the statement has been procured from the assessee under the coercion and pressure and is contrary to the CBDT's instructions issued in March, 2003, pursuant to Kelkar Committee's report, wherein the committee acknowledged the prevalence of the practice amongst the search parties to obtain forced confession of undisclosed income from the assessee. The proposition is well-settled that the admission made by the assessee during the course of search operation constitutes substantiated evidence in view of Sections 17 to 21 of the Evidence Act, but such admission cannot be considered to be the conclusive evidence against the assessee. It has been held by the apex Court in the Pullangode Rubber Produce Company Ltd. (supra), relied upon by the Authorised Representative that, "an admission is extremely important piece of evidence, but cannot be said that it is conclusive. It is open to the assessee who made the admission to show that it is incorrect." 26. Preferring further the decision made by the Delhi High Court in the case of Sardar A. Singh (supra) where similar proposition was laid down, the Punjab & Haryana High Court in the case of Krishna Shiv Chand Roy have also taken the same view and observed that: "It is established principle of law that a party is entitled to show and prove that admissions made in fact are not true. Such admission raises presumption against the persons making the admission, but such presumption is rebuttable".
27. No doubt, heavy onus lies on the assessee to refute and controvert the admission at the time of search operation. In the instant case before us, documents and evidence filed by the assessee during the course of assessment proceedings before the AO to which the reference has been made, amply established that this statement of the assessee was not recorded during the course of search proceedings and, therefore, cannot be regard to be an important piece of evidence. Even then, the assessee filed ample evidence by way of confirmations from the various parties who has invested the fund and also their source of investment from whom the parties have taken loan for investment purposes.
28. Not only this, the assessee has also requested the AO during the course of the assessment proceedings that if the AO desires he can produce the respective persons. The AO ignoring all these evidences, merely relied on the statement recorded on 10th Feb., 2000 (not during the course of search proceedings) and made the additions in the hands of the assessee. The AO even did not bother to issue summons or to call the parties to verify genuineness of the transactions of advancing the loans by the various parties to the assessee and the company. Even the AO ignored the very fact that this amount was duly disclosed in the regular books of account of the company and it cannot be regarded to be undisclosed income in view of the definition given under Section 158B(b) of the IT Act. In our opinion, the assessee has duly discharged his burden, shifting the burden on the AO for bringing the evidences on record so that the statement of the assessee could be corroborated.
Part of the additions made on the basis of the statement were deleted by the CIT(A) and even the AO did not accept the statement of the assessee dt. 10th Feb., 2000, because in the statement, the assessee disclosed only Rs. 18.69 lakhs as investments made in various names his unaccounted income while the AO added Rs. 36,07,720 in this regard.
29. Thus, in view of the aforesaid discussion and the totality of facts, we set aside the order of CIT(A) on this account and delete the addition of Rs. 36,07,720.
30. Now, coming to ground Nos. 7 and 8, the facts relating to these grounds are that the assessee's father in his statement dt. 21st Dec, 1979, stated that he and his sons are having shares in certain wine shops which formed a syndicate. There are 12 shops under the control of this syndicate. During the course of search certain documents giving the vouching of combined sales and purchases relating to 12 liquor shops were seized. The assessee offered in his statement dt. 10th Feb., 2000, Rs. 5 lakhs to be his share income from such syndicate but in the return the income was not shown but the statements were retracted. It was also submitted that this represented regular income and the syndicate represents a number of firms and the income had been admitted in the hands of respective firms. The share income so received be exempt from tax. The AO made the addition of Rs. 5 lakhs. The CIT(A) reduced the income on the basis of actual profit and sale account for 4 months by estimating for 9 1/2 months to Rs. 2 lakhs. Before us, the assessee reiterated the plea taken before CIT(A) and also vehemently submitted that the income must be telescoped and set off against the income returned by the assessee. The learned Departmental Representative relied on the order of the CIT(A). After carefully considering the submissions of both the sides, we find that the assessee has returned a sum of Rs. 2,00,000 as undisclosed income in the following manner: "Income admitted roundly to compensate set off and to telescope the addition of additions that may be made in the block assessment under any score or scores 2,00,000 This income is admitted by the assessee to purchase peace with the Department to avoid protracted litigation." 31. But, in the affidavit, the copy of which is available at p. 1155, the undisclosed income was estimated Rs. 3,00,000. From the perusal of the affidavit and computation of incomes we are of the firm view that the assessee must be given set off and telescoping of this income against the returned income as no other undisclosed income was found during the course of search and seizure. But from the return, we find the income disclosed by the assessee is fallen at Rs. 2,00,000 not Rs. 3,00,000 as shown in the affidavit; we, therefore, allow the set off and telescoping of wine income to the extent of Rs. 1,00,000. Thus, the assessee gets a relief of Rs. 1,00,000.
32. Coming to the last ground relating to the imposition of surcharge, we find that this issue is pending before Tribunal, Special Bench, Hyderabad. We, therefore, direct that after the coming of the decision of Special Bench, the assessee can move the miscellaneous application although for the time being, we are dismissing this ground of the assessee for statistical purposes only.