1. The appeal was admitted in terms of the following questions :
'(i) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in sustaining additions made in block assessment proceedings under Section 158BD of the Act, irrespective of the fact that the entries were made in the regular books of accounts ?
(ii) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in sustaining addition on account of alleged low withdrawal/gift/opening capital of appellant/inclusion of income of wife, on the basis of statement recorded during the course of search, and without considering the entire material on the record ?
(iii) Whether taking of any 'alternative' ground/plea by the appellant should be treated as confession/admission by the appellant in respect of the main ground/plea ?
(iv) Whether appellant can be said to have forgone/withdrawn the grievances contended in main ground/plea, simply because of taking an alternative ground/plea ?
(v) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in correctly applying the test of human probabilities while sustaining addition on account of gift ?
(vi) Whether gift received by the appellant from his father can be equated with other gifts received from strangers and can be said to be non-genuine by applying the test of human probabilities, particularly when the resources of father are not in dispute ?
(vii) Whether a case of cash credit/gift from stranger or unrelated party can be compared/equated with a case of normal gift received by a son from his father?
(viii) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in placing heavy reliance on the statement recorded during the course of search than the affidavits submitted, which is on higher pedestal, while arriving at the conclusion ?
(ix) Whether tax can be levied on the basis of estimation of income when the estimation is too arbitrary and irrational based on surmises and conjectures ?
(x) Whether, on the facts and circumstances of the case the Tribunal could ignore the documentary evidence, available on the record and place reliance on the purported statement recorded during the course of search, while sustaining additions ?
(xi) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in placing reliance on statement which are not free from doubt and ambiguity and without corroborated with an evidence, while coming to the conclusion ?
(xii) Whether finding arrived at by the Tribunal is not perverse ?, which is not supported by complete document placed on the record by the appellant ?
(xiii) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in sustaining addition in respect of capital and income of wife relying on the sole statement of appellant and his wife irrespective of the fact that wife is being separately assessed and income so added is duly recorded in the books of account of wife ?
(xiv) Whether statement recorded during the course of search can be sole basis of sustaining the addition particularly considering the evidenciary value of these statements recorded in the environment of fear, mental torture, harassment, inconvenience, pressure and other adverse circumstances ?'
2. The search and seizure under Section 132 of the IT Act, 1961, was carried out at the business premises of M/s Rajan Products and residential premises of its partners. At the time of the search cash book and ledger belonging to the assessee were also seized from the premises. Thereafter notice issued under Section 142(1) r/w Section 158BD on 12th Aug., 1998. In compliance of the said notice, the assessee filed 'Nil' return for the block period in question i.e., 1986-87 to 1996-97. He computed total undisclosed income to the tune of Rs. 12,27,958. The assessee has challenged the order of the AO. The Tribunal after considering the material on record, sustained the addition of Rs. 2,28,080 on account of unexplained capital of Smt. Gayatri Devi in the year 1995-96. Second addition of Rs. 1,03,965 sustained on account of unexplained accretion in capital of Smt. Gayatri Devi and alleged bogus cash creditors. Third addition was on account of unexplained capital of Shri Chain Sukh Rathi to the tune of Rs. 1,78,882. Fourth addition was Rs. 5,94,000 on account of low household expenses shown in the block period. Last addition was Rs. 30,000 on account of unexplained gift from father.
3. Learned counsel for the assessee submits that addition on this account is only the basis of material seized during the search and, therefore, there is no justification for addition on account of the capital shown by the wife. Similarly, he submits that the capital amount in the books, assessee had already shown in his business and once entry is made in the regular book of the assessee that cannot be treated as concealed income. He further submits that household expenses has not been shown in the block period as the income was below the taxable limit. So far as gift from father is concerned, father has gifted this amount by cheque and is genuine, therefore, no addition should be made and cannot be assessed as income from undisclosed sources under Section 158BB of the Act.
4. Mrs. Parinitoo, Jain submits that there is material on record of the cash book and ledger of the assessee which was found in the search at the premises of M/s Rajan Products. Notice under Section 158BD was given for assessment of income in the block period. The statement of the assessee and his wife was recorded. She could not satisfy as to how she got this capital income shown.
5. After examining the facts, the AO has added the following additions on account of unexplained household expenses :
PeriodAsst. yr.Amount given
per annum fo
r H.H expenses
to his wife
Rs.Amount
withdrawn for
H.H expenses
at Kanpui
Rs.Undisclosed 'ncome Rs.1986-871987-8830,00018,00048,0001987-881988-8930,00018,00048,0001988-891989-9030,00018,00048,0001989-901990-9130,00018,00048,0001990-911991-9236,00024,00060,0001991-921992-9336,00024,00060,0001992-931993-9442,00030,00072,0001993-941994-9542,00030,00072,0001994-951995-9648,000-48,0001995-961996-9748,000-48,0001996-971997-9842,000-42,000(1-4-1996 to 25-9-1996)
6. The statement to this effect has been recorded and Mrs. Gayatri Devi has stated in her statement that she used to receive Rs. 4,000 to Rs. 6,000 or Rs. 7,000 per month from her husband to meet out the household expenses. Considering her statement and also the expenses, the Tribunal has sustained the addition on account of undisclosed household expenses to the tune of Rs. 1,000 per month for asst. yrs. 1986-87 to 1989-90 and Rs. 1,500 per month for the asst. yrs. 1990-91 to 1993-94, Considering the facts on record, we see no reason to interfere in the finding of Tribunal on this account and no material has been shown that this finding is perverse.
7. The other addition has been made in respect of unexplained capital of Smt. Gayatri Devi. The capital of Rs. 2,28,080 has been introduced in the name of Smt. Gayatri Devi, wife of the assessee. This addition has been made on the basis of statement of Smt. Gayatri Devi Rathi, wife of assessee, which was recorded during the search in the year 1995-96 as she could not explain the source. The only source, which can be visualized is that amount has been received from her husband or husband has introduced this amount in the name of his wife Smt. Gayatri Devi. Therefore, again we see no perversity in the finding of Tribunal. The Tribunal has rightly added this amount of Rs. 2,28,080 in the income of the assessee.
8. Third item relates to addition of Rs. 1,03,965. This amount pertains to asst. yrs. 1996-97, 1997-98. This is a accretion of the capital introduced in the name of his wife i.e. Rs. 2,28,080. As the amount of Rs. 2,28,080 has been treated the amount of assessee, this addition is consequential and consequential addition will have to be sustained in the hands of the assessee.
9. The next addition is on account of unexplained capital in the name of Chain Sukh Rathi i.e., assessee to the tune of Rs. 1,78,882. Chain Sukh Rathi has introduced this capital in the asst. yr. 1995-96 and no source has been established that this amount should be treated out of disclosed income. The Tribunal has rightly sustained this addition also in the hands of the assessee.
10. Last addition pertains to Rs. 30,000. The assessee has shown the gift from his father. It is true that Rs. 30,000 has been paid by cheque by his father, but there is no occasion for the father to gift this amount to the son. This amount also rightly treated as undisclosed income of the assessee, which has been received in the name of gift from his father. Consequently the addition made by the AO and affirmed by the Tribunal is confirmed.
11. Mr. Jhanwar, learned counsel for the assessee submits that in view of the provisions of Section 158BB the income should be computed in accordance with the provisions of this Act and the income exempted to that extent should not be taxed.
12. The reading of Section 158BB is as under :
'Computation of undisclosed income of the block period : (sic) Amendment has been made by inserting the following words 'in accordance with the provisions of this Act, on the basis of evidence found as a result of search or requisition of books of account or other documents and such other materials or information as are available with the AO and relatable to such evidence'.'
13. When some material was seized connecting the concealed income, the ITO can compute the income on that basis but that should be computed and taxed in accordance with the provisions of Act, 1961. Therefore, the tax exemption limit has to be kept in mind and to that extent, income not chargeable to tax, tax should not be, charged on that part of the income.
We agree with Mr. Jhanwar that concealed income should be computed in cases of search in accordance with provision of Section 158BB and after computing the total concealed income, it should be taxed as per the rates specified for the concealed income, in each year.
14. The questions proposed are answered accordingly. The appeal is disposed of with the above directions.