1. This is an appeal by the Revenue, arising out of a block assessment order under Section 158BC of the Act for the block period of 1988-89 to 1998-99.
2. The facts in brief relating to this appeal are that action under Section 132(1) of the Act was taken in the case of Sh. Anand Raj Jain on 6th Nov., 1997. The house searched by the Department was also occupied by the sons of Sh. Anand Raj Jain including this assessee, namely, Dr. M.L. Jain. During the course of this search operation, various incriminating documents/articles were found and seized by the Department. The books of account as per Annex.-A and A-l were share certificates and debentures were found and seized. These books, IVPs and KVPs, share certificates allegedly belonged to this assessee. A statement of Sh. M.L. Jain was recorded on 6th Nov., 1997, wherein he accepted that these documents actually belonged to him. Thus, block assessment was made by the AO wherein various additions were made. The CIT(A), however, deleted various additions. Hence, this appeal.
3. The first issue has been raised in relation to addition for short cash of Rs. 2,87,800. This issue has been dealt by learned AO on p. 8 in para 15. The AO made an addition of Rs. 2,87,800 on the basis of the statement made by the assessee recorded under Section 132(4) of the Act. It is an undisputed fact that no such cash was found or seized during the course of search. The CIT(A) deleted this addition on the reasoning that under Section 69A of the Act no (sic) addition can be made if the assessee is found to be the owner of any money, bullion, jewellery or other valuable articles and also that such money, bullion, jewellery or other valuable articles are not recorded in the books of account maintained by the assessee. In this case, a cash of Rs. 3,100 was found as a result of search, which also stood explained.
4. We have heard the rival submissions and perused the evidence on record.
5. ...(sic) of the available records clearly establishes that no such cash was found during the course of search. This addition is solely based on the statement of the assessee recorded under Section 132(4) of the Act. It is a well established position of law that a statement recorded during search does not tantamount to any money, bullion, jewellery or other valuable articles found during the course of search.
Therefore, there is no reason to interfere in the finding of CIT(A) in this regard. This deletion is in order. Therefore, ground No. (i) is dismissed.
6. In ground No. (ii), the Department has challenged the deletion of an addition of Rs. 2,754 being the notional interest for investment in KVPs by Madhubala Jain. The AO found that the assessee had given a sum of Rs. 50,000 as a loan without interest to his wife; out of amount of loan she purchased KVPs. The AO made this addition because he was of the opinion that the assessee had invested his own money in the name of his wife. The AO worked out interest @ 15 per cent on an amount of Rs. 62,250 for the period from 20th Jan., 1997 to 30th March, 1997, and made the impugned addition. The CIT(A) deleted this addition.
7. After hearing both the parties and circumspecting the available records, it is found that this amount in relation to which notional interest has been added by the AO had been duly disclosed by the assessee in his books of account. Obviously, this impugned amount cannot be a subject-matter of addition in block assessment orders.
Learned CIT(A) correctly deleted this addition and the same is hereby confirmed. This ground is also dismissed.
8. Ground No. (iii) pertains to addition of Rs. 2,50,000 in respect of shares for asst. yrs. 1990-91 to 1997-98. The AO has discussed this issue at p. 11 onwards. The share certificates/debentures, detailed in document F-3 of the Panchnama, dt. 6th Nov., .1997, and share certificates as per document A-4 were found at the locker No. 53 of Punjab National Bank, Chopasni Road, Jodhpur, during the search from the residential house of the assessee. These shares were in the names of the assessee as well as other members of his family and also outsiders. The assessee explained that all these shares/debentures are recorded in the books of account of the respective persons. However, the AO found on examination of the books of account that certain shares, as many as 191 in number and detailed at pp. 11 to 15 of the assessment order, were not recorded in the respective books of account.
He, therefore, prepared, a year-wise break-up of unexplained income in shares/debentures, on the basis of their face value as under: 9. In his statement recorded on 6th Nov., 1997, Sh. M.L. Jain stated in reply to question No. 13 that the investment in these shares was made from his undisclosed money and, therefore, he surrendered Rs. 2,50,000, as his undisclosed income. The AO accordingly, added these amounts in respective years as stated above.
10. The CIT(A), however, deleted this addition by giving his finding in para 18 of his order.
11. We have heard the rival submissions and perused the evidence on record.
12. The undisputed facts of the case which are culled out by us are that the investment made in the purchase of these shares/debentures stood duly disclosed in the books of account maintained by the assessee. These shares were purchased prior to the date of search. The assessee had disclosed in a chart the respective shares disclosed in the regular books of different family members, the copies of which are placed at pp. 121 to 126 of the paper book. It has been submitted that the name of Grapco Granites Ltd. was changed to Grapco Industries Ltd., which is evident from the page No. 34 of the paper book. Likewise, names of Perfect Spinners Ltd., changed to G.T.N. Textiles Ltd. and Ginny Filaments Ltd., is only taken as Finni Filament Ltd. The Pownex Ltd. had merged with G.K.N. Ltd. So, the perusal of the whole records clearly contradicts the surrender made by the assessee and on the contrary the retracted stand fully substantiated by the available evidence on record. Therefore, the shares/debentures are fully verifiable from books of account of the assessee after ignoring the mistakes in calculation and wrong consideration or misconception of facts with regard to name of companies, etc. The impugned deletion is in order and warrants no interference at our hands. Therefore, this ground of appeal also fails and hence dismissed.
13. The ground No. (iv) relates to an addition of Rs. 9,450 added on account of notional interest in asst. yr. 1998-99 of the block period, in relation to FDRs taken by Smt. Madhubala Jain, the wife of the assessee. The AO found that the assessee had given a sum of Rs. 90,000 to his wife who in turn, had purchased two FDRs worth Rs. 45,000 each.
In the same manner, as was done by the AO in relation to investment in KVPs, which is discussed while dealing with ground No. (ii). Without going into much details, the facts being almost identical to that of ground No. (ii), we dismiss this ground also as no notional income can be taxed as undisclosed income of the assessee.
14. The next ground pertains to addition of Rs. 1,84,045 in asst. yrs.
1988-89 to 1998-99 on the basis of simple estimates as nothing was found during the search to indicate any unexplained household investment.
15. After considering the rival submissions and perusing the evidence on record, we are of the considered opinion that when no incriminating document had been found during the course of search which could indicate any unexplained household expenses, no addition can be made on estimate basis in the block assessment. The learned Authorised Representative has placed reliance on various decisions, but when the provisions of the Act are very much clear on this issue, there is no need of any decision to fall back upon but in order to strengthen our finding, we draw support from these decisions also. Consequently, this ground of appeal is dismissed.
16. Ground No. (vi) is in relation to deletion of addition made on account of gifts received by Smt. Madhubala Jam, the wife of the assessee. The AO made additions of Rs. 24,000, Rs. 22,000 and Rs. 97,000 for asst. yrs. 1988-89, 1989-90 and 1990-91, respectively. The evidence found during the course of search was that Smt. Madhubala Jain had received these gifts in different years. The gift deeds duly executed were found from the lockers. These gifts are admittedly, also verifiable from the balance sheets of block period of different family members submitted before the AO. The learned Departmental Representative has not disputed the above facts. The AO made these additions on the basis of statements recorded during search from the assesses and his wife.
17. We have carefully considered the rival submissions vis-a-vis the available evidence on record. Admittedly, the documents relating to these gifts were found during the course of search. These documents indicated that the assessee's wife had received these gifts. However, in her statement, she could not fully explain the impugned gifts and rather stated that she had received small amounts on various occasions.
The gifts received by Smt. Madhubala Jain are also reflected in the respective balance sheets of the makers of these gifts. The respective amounts of gifts are debited in the books of account of the donors. In these circumstances, the statements recorded under Section 132(4) of the Act that too during the search proceedings when the atmosphere is surcharged usually and when the documentary evidence justifies the claim of the assessee, no such addition can be made in relation to these gifts in the hands of this assessee in the block assessments.
Therefore, in our considered opinion, the learned CIT(A) has correctly deleted this addition. Thus, ground No. (vi) is dismissed.
18. Vide ground Nos. (vii) and (viii), the CIT(A) deleted the addition of income which was already shown in the regular books of account or which was below taxable limit or where there was no tax liability after allowing rebate under Section 88 of the Act. The AO has discussed this issue at page No. 23 and para No. 29 of his order. The learned CIT(A) has discussed this issue at p. 19 in para 31.
19. We have heard the rival submissions and perused the evidence available on record.
20. It goes without saying that an undisclosed income does not include and cannot include an income already disclosed in the regular books of account or any income for a particular assessment year which is below taxable limit or that when there is no tax liability after allowing rebate under Section 88. The definition of "undisclosed income" given in the Act is very clear in this regard. Reliance can be placed on various decisions but the decision of the jurisdictional High Court in Chain Sukh Rathi v. CIT & Am. is particularly