1. These cross-appeals-one by the assessee and the other by the Revenue arise out of the order passed by the CIT(A) on 15th March, 2002 in relation to the asst. yr. 1994-95.
2. Since common issue is raised in both the appeals, we are, therefore, proceeding to dispose them of by this consolidated order for the sake of convenience.
3. The first ground of the assessee's appeal, being general, does not call for any adjudication.
4. Ground No. 2 was not pressed by the learned Authorised Representative. The same is, therefore, dismissed.
5. Ground No. 3 of the assessee's appeal and ground No. 1 of the Revenue's appeal deal with the addition made on account of entries in diary.
6. Briefly stated, the facts of these grounds are that a survey was conducted under Section 133A on 3rd and 4th Oct., 1996 at the business premises of M/s Rajasthan Commercial House, in which a diary containing transactions not recorded in the regular books was found. Photocopy of this diary, marked as Annex. 18, was obtained. The partners of the firm submitted that the entries in this diary related to the construction of a boundary wall/room on agricultural land owned by Shri Raj Kumar and his brothers. The AO issued notice under Section 148 in response to which it was stated on behalf of the assessee that the return filed on 31st Jan., 1997 may be treated as in compliance to the notice under Section 148. In respect of entries in the diary, it was stated that the details of the investment of Rs. 64,861 in the boundary wall were contained therein. The source of this amount was explained to be out of withdrawals of Rs. 28,050 from M/s Rajasthan Commercial House and the remaining amount from the amount left by his mother at the time of her death in 1992. A letter dt. 8th Oct., 1996 was filed by the assessee with the Addl. CIT and another letter dt. 5th Nov., 1996 with the CIT, Jaipur, stating that the figures in the original diary were tampered by the Revenue officials by adding zero at the end of the figures or by putting either '1' or some other numerical in the beginning of the figures. Such alterations were in different ink. By way of evidence, photocopies of the diary, stated to be before and after such tampering, were filed with the Addl. CIT. The AO found that while the first page did indicate changes made in the entries, yet the other pages did not suggest so. On page No. 4 of the impugned order, the AO observed that different figures are appearing in both the sets of diary relevant to p. 1 as under: The AO was of the opinion that these changes might have been made by the assessee himself for his own advantage and his earlier record also suggested misbehaviour with survey party. He, therefore, concluded that the entries in this diary were not recorded' in the regular books of account, the total of which comes to (Rs. 7,60,425 + 42,802) Rs. 8,03,225. This amount was treated as unexplained investment for the year in question. The AO further did not agree with the contention that the transactions and the details contained in the diary related to the construction of boundary wall as there was no mention about the material used and that the signatures of Shri Hakim Beg, Jagdish and Hemraj, appearing against the transactions in the diary and explained as of the persons engaged in the construction, were not proved. The AO further took note of the confirmation of Shri Hakim Beg stating receipt of Rs. 56,200 for the construction of boundary wall was on a simple paper without attested signatures. He further observed that these three persons were also not produced for confirming the contention about the entries being related to the construction activity. The AO further referred to the stated investment of Rs. 64,861 whereas the report of approved valuer put the cost at Rs. 72,600. As regards the explanation of the source of Rs. 25,050 being the amount withdrawn from M/s Rajasthan Agency, the AO noted that these withdrawals by the very nature of entries in this regard indicated the household withdrawals.
As regards the explanation for the remaining amount of cash having been left by the mother at her death, the same was also found to be unsubstantiated. He, therefore, took the investment at Rs. 72,600 as per the approved valuer's report in addition to the addition made for the diary by holding that such transactions did not relate to the construction. Resultantly, additions of Rs. 72,600 and Rs. 8,03,228 were made separately by the AO. In the first appeal, it was contended on behalf of the assessee that the diary was taken on 4th Oct., 1996 without Panchnama and returned on 5th Oct., 1996 whereupon the changes in the originally recorded figures were noted and the matter was brought to the notice of the then Addl. CIT. It was further explained that the diary contained transactions in respect of agricultural land and was written by Shri Pushpendra, the brother of the assessee. The contentions made before the AO were reiterated. It was also argued that the narration in this diary clearly evidenced the purchase of 'Chuna' (lime), labour, advances to Mistry, cost of seeds/fertilizers. It was also stated that the cost pertaining to the impugned assessment year recorded originally in the diary was Rs. 54,861. The learned CIT(A) called for the comments from the AO who vide his letter dt. 4th Feb., 2002 replied that the contention of the assessee for tampering of the diary by the Revenue officials was not fully correct. It was also reported that Shri Hakim Beg was not produced to confirm the contents of the so-called confirmation. The learned CIT(A) took up the hearing in the presence of the AO and noted that the contention of the assessee about tampering of figures was correct. He also took note of the admission made by the AO that at least first page of the diary was found to be different. It was further noted that the placing/position of a zero was made in such a manner as the end result came entirely different. He took note of the following entries in this regard: He further took note of the fact that brief narration given against some of the amounts in the diary indicated expenditure on lime against farm. He further noted entries with the narration "cleaning of wheat and fertilizers as DAP and urea against seeds". These pages contained signatures of Hemraj, Hakim Beg and Jagdish. The learned first appellate authority further noted that the AO had not at any stage asked for the production of Shri Hakim Beg or any other person except Shri Pushpendra who had reportedly made these entries in the diary. No summons were found to Have been issued on any person. In the light of these facts, it was concluded that the AO was not justified in making these two additions totalling Rs. 8,75,828 (8,03,228 + 72,600).
Considering the entire material on record, the learned CIT(A) concluded that unexplained investment was to be considered in the construction activity at the agricultural land as well as for expenses on agriculture, in relation to which the entries were recorded in the diary. He further noted that the valuer's report gave the figure of Rs. 72,600. He, therefore, held that total expenditure of construction and for agriculture, such as, fertilizer, seeds, etc. be fairly estimated at Rs. 1,40,000. He, therefore, sustained the addition to this level while deleting the two additions made by the AO amounting to Rs. 8,75,828. Both the sides have come up in appeal against their respective stands.
7. We have heard both the sides and perused the relevant material on record. It is observed that the total of the entries in the diary in respect of investment in the boundary wall was to the tune of Rs. 64,861. The contention of the assessee explaining the source being the withdrawals of Rs. 28,050 from M/s Rajasthan Commercial House and the remaining amount having emanated from the amount left by his mother at the time of her death cannot be accepted. Insofar as the amount of Rs. 28,050 is concerned, we shall discuss the same with reference to ground No. 2 of the Revenue's appeal infra which deals with the addition on account of household expenses. As regards the remaining amount, no evidence worth the name has been placed on record, either before the authorities below or before us, indicating the assessee's mother having left any cash at the time of her death, which was utilised in the construction. Insofar as the contention of the assessee regarding the tampering of entries is concerned, the same has been established by way of partial admission by the AO and the contents of the first appellate authority's order extracted above, which indicate that the alterations were made to the figures but the subsequent figures resulting therefrom remained unchanged. For example, entry at p. 4, as tampered to 322000, does not give the result of 40200 when 800 is added or subtracted from it. Thus, it is clear that the entries so altered cannot be considered as reliable evidence for determining the quantum of income. The report of the approved valuer indicated investment at Rs. 72,600 in construction. When the other segments of the entries in the diary, being the expenses for agricultural operation, are also considered, in our considered opinion the learned CIT(A) justifiably adopted this figure at Rs. 1,40,000. This amount represents the additions on account of investment in the construction as well as other expenses noted in the diary. We, therefore, uphold the impugned order on this score.
8. The last effective ground of the assessee's appeal about the charging of interest under Sections 234A, 234B and 234C, being consequential, is disposed of accordingly.
9. The only other ground of Revenue's appeal, which survives for our consideration, is the deletion of addition of Rs. 16,950 made by the AO on account of inadequate withdrawals for household expenses.
10. The assessee has shown total withdrawals at Rs. 43,050, inclusive of the above discussed amount of Rs. 28,050. The AO estimated the household expenses at Rs. 5,000 per month and made an addition of Rs. 16,950 (60,000 - 43,050). The learned CIT(A) did not sustain any addition on this count on the ground that the amount of Rs. 28,050 was considered as available to the assessee for household expenses.
11. Having heard both the sides and perused the relevant material on record, we observe that this finding of the learned first appellate authority is not sustainable on the ground that the amount of Rs. 28,050 stood considered in the household expenses declared by the assessee before the AO also, as the figure of Rs. 43,050 taken note of by the AO comprised of this amount of Rs. 28,050 also. It is noted from the assessment order that the AO based his finding for estimating household expenses at Rs. 5,000 per month on the basis of the finding of the learned CIT(A) in the case of assessee's brother, Shri Pushpendra Pokharna, to the effect that the household expenses could not have been less than Rs. 5,000 per month. No material has been placed on record to show that this finding has been reversed or modified in the subsequent appellate proceedings. We are, therefore, of the considered opinion that the estimate of household expenses made by the AO is justified at Rs. 5,000 per month and the sustenance of the addition to the tune of Rs. 16,590 as originally made by the AO is warranted. By setting aside the impugned order, we restore the finding of the AO on this count.
12. In the result, the appeal of the Revenue is partly allowed and that of the assessee is dismissed.