ORDER
N.K. Saini, A.M.
1. The appeals for the asst. yrs. 1991-92, 1992-93 and 1993-94 filed by the legal heirs of late Sh. Ravi Dutt Sharma (deceased-assessee) are directed against the separate orders of the CIT(A), Jalandhar, dt. 6th Feb., 1998, 6th Feb., 1998 and
13th Jan., 2000, respectively and the cross-appeal is directed against the order of the CIT(A), dt. 13th Jan., 2000. Some common issues are involved in these appeals and the appeals were heard together so these are being disposed of by this consolidated order for the sake of convenience.
2. The legal heirs of the assessee raised an additional ground common to all the appeals which reads as under :
“The AO has erred in raising the demand towards tax and interest against the legal representatives of the assessee (deceased) in contravention of Sub-section 6 of Section 159 r/w Sub-section (4) of Section 159, and has further erred in not limiting the said liability to the extent to which the estate is capable of meeting the liability”
3. The learned counsel for the assessee submitted that since a question of law is involved, permission for raising the same may be accorded. It was also contended that no fresh enquiry is needed in respect of additional ground as all the facts are already available on the records. The reliance was also placed on the decision of the Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT (1998) 229 ITR 383 (SC).
3.1. In his rival submissions, the learned Departmental Representative strongly opposed the admission of the additional ground and submitted that no such plea was taken before the AO so the additional ground should not be admitted.
3.2. We have heard the learned representatives of both the parties. It is noticed that the Legal question arises from the facts which are already on the record and nothing new is required. In view of that fact, we are of the view that the additional ground raised by the assessee deserves to be admitted. Keeping in view the ratio laid down by the Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT (supra) wherein it has been held that: “Undoubtedly, the Tribunal has the discretion to allow or not to allow a new ground to be raised. But where the Tribunal is only required to consider the question of law arising from facts which are on record in the assessment proceedings, there is no reason why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee.”
4. First, we will take up ITA No. 248/Asr/1998.
In this appeal, the assessee has taken following grounds :
“1. That the order of the CIT(A) is against law and facts of the case.
2. That the CIT(A) has erred in not appreciating the case of the assessee and has erred in initiating reassessment proceedings under Section 148.
3. That the CIT(A) has erred in concurring with the AO in not accepting the income at Rs. 23,820 as declared by the legal heirs of the assessee and has further erred in assessing it at Rs. 1,81,600 as under :
Rs.
(1) Assessment of income from property dealing 60,000 (ii) Addition of Rs. 92,600 as unexplained investment in immovable property 92,600 (iii) Addition on account of estimation of household expenses 24,000 (iv) Addition on account of multi-benefit deposit 5,000 4. That the learned CIT(A) has erred in sustaining levy of interest amounting to Rs. 59,754 and Rs. 91,631 under Sections 234A and 234B respectively. 5. Such other grounds as may be urged at the time of hearing." 5. First, we take up ground No. 3 vide which the income assessed at Rs. 1,81,600 is challenged.
5.1. Briefly stated the facts of the case are that the assessee filed his income-tax return on 20th Nov., 1992 declaring an income of Rs. 23,820 which was assessed under Section 143(1) of the IT Act on 12th Feb., 1993. Thereafter, a search and seizure operations under Section 132 were carried out at the residential premises of the assessee on 26th March, 1993. The assessee, however, expired on 31st March, 1993. Subsequently, reassessment proceedings under Section 147 against the assessee through legal heirs were initiated vide notice under Section 148 dt. 8th Sept., 1993, in pursuance to which the legal heirs filed the return declaring the same income as originally assessed. During the assessment proceedings, the AO noticed that the assessee had shown net income from property dealing at Rs. 23,822 against the gross receipt shown at Rs. 42,019 and no basis of income/expenses shown had been furnished. The AO further noticed that during the course of search operations, a number of conveyance deeds in the form of sale deeds/agreement to sell/general power of attorney involving transfer of immovable property were found/seized from the possession of the assessee. According to the AO in property dealing, the brokerage commission was generally 2 per cent and if the consideration was of substantial amount then the brokerage commission was about 1 per cent. The AO observed that the possession of the conveyance deed by the assessee as a property dealer established that he was having vested interest in such deals. He accordingly, estimated the brokerage earned by the assessee in the following manner:
Seizure memo No./page
Description
Date of document
Amount Rs.
Brokerage as
above Rs
A-8/1 to 3
Sale deed
6-6-1990
1,20,000
2,400 @ 2%
A-8/7 and 8
Agreement
22-10-1990
5,97,246
11,945@ 2%
20-8-1990
2.94,795
5,896 @ 2%
A-8/96 to 100
Agreement
Oct/Nov. 1990
20,00,000
20,000 @ 1%
A- 8/236 and 237
Agreement
20-8-1990
15,00,000
15,000® 1%
Brokerage
55,241
The AO further observed that the commissions earned by the assessee was likely to be more than Rs. 55,241. He estimated the gross income from the commission at Rs. 75,000 and after allowing deduction @ 20 per cent on account of expenses worked out the net income at Rs. 60,000 as against the income shown by the assessee at Rs. 23,820. The AO further noticed that the assessee had shown investment in purchase of plot as well as construction thereof during the accounting year 1990-91 at Rs. 57,000 and Rs. 95,600 respectively. He further noted that the assessee was not maintaining any account books. However, along with return of income a copy of the balance sheet had been filed according to which the opening balance of capital had been shown at Rs, 3,47,010 and from that the investment in the property had been adjusted. The AO after allowing benefit of income of Rs. 60,000 estimated from property dealing made the addition of Rs. 92,600 on account of investment in house property. The AO further noted that the assessee had shown household expenses at Rs. 18,000 with a family of more than five members. He estimated the household expenses at Rs. 24,000 and observed that the entire income from property dealing had been adjusted against the investment in the house property and no savings of past years being available with the assessee. He, therefore, added Rs. 24,000 on account of household expenses The AO also made an addition of Rs. 5,000 on account of multi-benefit deposit purchased on 9th Jan., 1991 in the name of Smt. Soma Devi and Smt. Parveen Kumari wife and daughter respectively of the assessee, treating the same as unexplained investment made by the assessee. In this manner, a total income was assessed at Rs. 1,81,600.
In the first appeal before the learned CIT(A), it was submitted that the balance sheet of the assessee as on 31st March, 1990 had shown the following assets:
Rs.
“Furniture and fixtures
23,400
Loan and advances
2,47,400
Cash in hand
76,210
Total
3,47,010
It was stated that while passing order for the year 1990-91 the AO had not accepted the cash in hand amounting to Rs. 76,210 and made the addition of the same as unexplained cash but the other items i.e. furniture and fixture and loan and advances amounting to Rs. 23,400 and Rs. 2,47,400 respectively remained undisturbed. It was argued that the assessment order of the AO for the asst. yr. 1990-91 was quashed and as such the assessee was in a position to spend the amount of Rs. 18,000 on account of household expenses and also Rs. 1,52,600 on account of price of plot and renovation. It was argued that the investment in plot and construction as well as household expenses were duly explained from the assets in the balance sheet and no addition was called for. It was also stated that the investment of Rs. 5,000 made in the multi-benefit scheme on 9th Jan., 1991 was made by the daughter of the assessee who was married in 1983. Accordingly, it was submitted that no addition was called for. The learned CIT(A) observed that there was no basis for considering that whatever was stated in the balance sheet as on 31st March, 1990 was correct and there was no detail/evidence to substantiate that the assessee was having loan and advances of Rs. 2,47,400 and cash in hand of Rs. 76,210 as on 31st March, 1990. He further observed that cash in hand as on 31st March, 1990 and 31st March, 1991 were not substantially different, so the AO had rightly held that no substantial investment could be explained from such cash balance. With the aforesaid observations, the learned CIT(A) confirmed the action of the AO in treating investment of Rs. 1,52,600 in house property out of the income from current year.
As regards the addition on account of household expenses at Rs. 24,000 is concerned, the learned CIT(A) upheld the action of the AO. Similarly, the addition of Rs. 5,000 was confirmed by observing that a married daughter would not invest her own funds jointly in the name of her mother specially after
more than seven years of her marriage. In this manner, the learned CIT(A) confirmed the addition of Rs. 1,81,600 and also observed that the AO had already given benefit of the income estimated at Rs. 60,000 while calculating the investment in the immovable property. Accordingly, the learned CIT(A) upheld the income assessed at Rs. 1,81,600.
5.2. The learned counsel for the assessee submitted before us that the AO while estimating the income from property dealing at Rs. 60,000 was not justified because the income was estimated on the basis of sale agreement which did not pertain to the assessee. He further submitted that the assessee had not earned any income of whatsoever nature from the sale agreement and even the AO did not verify this fact from the purchaser as well as the seller, although the legal heirs of the assessee vide their letter dt. 12th March, 1996 explained to the AO that no income was earned. He further submitted that the income disclosed by the assessee by way of P&L a/c was the only real income earned. It was also submitted that no commission income could be earned on the basis of the agreement particularly when the agreements were incomplete.
In respect of sale deed amounting to Rs. 1,20,000, the learned counsel for the assessee submitted that the AO presumed without any basis that the assessee earned an income of 2 per cent. It was stated that the aforesaid deed was in between Sh. Swaran Singh s/o Sh. Chanan Singh (seller) and Smt. Asha Rani W/o Sh. Joginder Pal (purchaser) but the AO did not summon any of them before computing the income earned.
In respect of other sale agreements viz. seizure memo A-9/1996 to 100 and A-8/236-237, the learned counsel for the assessee submitted that the legal heirs of the deceased-assessee vide their reply dt. 12th March, 1996 in pursuance to the questionnaire dt. 8th Feb., 1996 issued by the AO clearly pointed- out that though the said documents were found from the premises of the assessee but the assessee had no link with the same because those related to other persons and the assessee was not having any interest in the said transactions. It was also pointed out that the sons of the assessee S/Sh. Anil Kumar and Anoop Kumar were residing with the assessee and were also partner in the firm M/s Jai Bhagwati Traders, Jalandhar, to whom seizure memo A-9/1996 to 100 related. It was also pointed out that son of the assessee Sh. Anil Kumar was also carrying on the business of property dealing and was regularly assessed to income-tax and the documents found and seized vide memo No. A-8/7 and 8 were executed through Sh. Anil Kumar who was having power of attorney from S. Paramjeet Singh, Tejinder Singh and S. Amritpal Singh, who asked him to sell these plots on their behalf. But since the purchaser did not sign the documents because of the dispute of the railways, therefore, the said transaction did not mature and the unexecuted documents remained with the son of the assessee.
In respect of documents seized vide memo A-8/236-237, it was submitted before the AO that the assessee had signed the documents as a witness because of his good relations with the vendor who himself had been a property dealer. The learned counsel for the assessee vehemently argued that the AO acted most arbitrarily and wrongly in estimating that the assessee must have received commission on the said transaction. Accordingly, it was submitted that there was no justification in estimating the income of the assessee from property dealing at Rs. 60,000.
6. In his rival submissions, the learned Departmental Representative strongly supported the order of the authorities below and submitted that the documents were found from the premises of the assessee and the AO was justified in estimating the income on the basis of those documents because the assessee had not furnished detail in respect of the income disclosed by him in the return of income filed on 20th Nov., 1992.
7. We have heard the learned representatives of both the parties at length and carefully gone through the material available on the records. It appears that the income of the assessee was estimated by the AO on the basis of certain documents found and seized during the search operations. It is also noticed that the AO calculated the commission on the basis of sale agreement. But no evidence was brought on record to establish that the assessee received the income. Even the AO ignored this fact that the documents seized vide Memo. No. A-8/7 and 8 were unsigned and the power of attorney was in the name of Sh. Anil Kumar son of the assessee. Similarly, the AO ignored this fact that the documents seized vide memo No. A-8/1996 to 100 were in respect of sale deed executed between M/s Khem Chand Vijay Kumar, Jalandhar and M/s Jai Bhagwati Traders, Jalandhar. It is pertinent to point out that S/Sh. Anil Kumar and Anoop Singh (sons of the assessee) were partners in the firm M/s Jai Bhagwati Traders, Jalandhar and both the sons were residing with the assessee. So the document pertaining to the sale deed was their document and the AO was not justified in assuming that the assessee earned the income by way of commission for the transaction i.e. sale deed executed on 12th July, 1991. In the instant case, it is also an admitted fact that the assessee filed its income-tax return on 20th Nov., 1992 declaring an income of Rs. 23,820 which was assessed under Section 143(1) of the IT Act on 12th Feb., 1993 and during the processing of the return under Section 143(1), the AO accepted the gross receipt from the commission shown by the assessee at Rs. 42,019. It is also relevant to point out that the AO by his own calculations calculated the brokerage/ commission at Rs. 55,241 but further enhanced the estimate at Rs. 75,000 and allowed a deduction @ 20 per cent on that estimated income. It is not clear how the AO considered that the assessee incurred expenses to the tune of 20 per cent of the total receipts. From the aforesaid discussions, it would be clear that the AO had not brought any concrete evidence/material to establish that the assessee in fact earned a commission of Rs. 75,000 during the course of its business which pertained to the property dealing. In that view of the matter, we are of the view that there was no justification in estimating the income of the assessee at Rs. 60,000 from the property dealing business. The learned CIT(A) while confirming the action of the AO also did not appreciate the facts of the case properly In that view of the matter, the action of the learned CIT(A) is not tenable.
8. The next addition of Rs. 92,600 relates to the investment in immovable property.
8.1. The learned counsel for the assessee submitted that the source of the said investment was reflected by the assessee out of his capital account reflected in the balance sheet, copy of which had been filed by him during his life-time alongwith the original return. The learned counsel further stated that the assessee was having a capital of Rs. 3,47,010 as on 31st March, 1990. He further pointed out that the balance sheet was accepted by the Department because the assessment order of the AO wherein certain additions were made for the asst. yr. 1990-91 was quashed by the learned CIT{A) vide his order dt. 8th Jan, 1998. He further stated that the aforesaid order of the learned CIT(A) was a subject-matter of appeal to the Tribunal Amritsar Bench and the Tribunal Amritsar Bench vide its order dt. 24th April, 2001, upheld the order of the -learned CIT(A). Accordingly, it was submitted that the balance sheet of the assessee as on 31st March, 1990 was in existence and the assessee invested the amount in the property in question out of the funds available to him as on 31st March, 1990. The reliance was also placed on the decision of the Hon’ble Supreme Court in the case of Anantharam Veerasinghaiah & Co. v. CIT (1980) 123 ITR 457 (SC).
8.2. In his rival submissions the learned Departmental Representative strongly supported the order of the authorities below and also submitted that the AO was justified in making the addition because the assessee could not explain the source of investment before the AO.
8.3. After hearing the rival submissions/contentions and perusing the material available on the records, it appears that the assessee vide its balance sheet as on 31st March, 1991 attached to the return of income filed on 8th Sept., 1993 explained the source of investment in the following manners :
“Balance Sheet
Rs.
Rs.
Rs.
Old balance
3,47,010
Furniture and fixtures
23,400
Less: H/exp
18,000
Loan and Adv.
1,08,393
Purchase of Plot
57,000
Cash in hand
68,439
Renovation
95,600
1,70,600
1,76,410
Add net receipts
23,822
2,00,232
2,00,232″
It is also noticed that the assessee also furnished the balance sheet for the year ending 31st March, 1990 along with the return of income filed on 20th Nov., 1992 wherein the particulars furnished were as under :
“Balance Sheet
Rs.
Rs.
Old balance
3,42,652
Furniture and fixtures
23,400
Less: Drawings
15,000
Loan and Adv.
2,47,400
3,27,652
Cash in hand
76,210
Add: Net profit
19,358
3,47,010
3,47,010″
A plain reading of the aforesaid balance sheet shows that the assessee was having a capital of Rs. 3,47,010 as on 31st March, 1990 which comprises of furniture and fixture, loan and advances and cash in hand to the tune of Rs. 23,400, Rs. 2,47,400 and Rs. 76,210 respectively. On perusing the assessment order for the asst. yr. 1990-91, (placed at pp 17 to 19 of the paper book) it is noticed that the AO had observed as under :
“As such on fairly basis by taking the furniture as being old and loan and advances without details as intangible, the cash in hand shown is treated to be unexplained investment available with the assessee in the absence of satisfactory explanation from assessee’s side with regard to its source.”
From the aforesaid observations of the AO it is crystal clear that he has not doubted the loan and advances and the furniture and fixture shown by the assessee at Rs. 2,47,400 and Rs. 23,400 respectively. It is also pertinent to point out that the assessment order for the preceding assessment year i.e. 1990-91, dt. 27th March, 1996, was quashed by the learned CIT(A) vide his order dt. 8th Jan., 1998, and subsequently this Bench of the Tribunal confirmed the action of the learned CIT(A) vide its order dt. 24th April, 2001. In the aforesaid assessment order, the AO made certain additions in the income of the assessee disclosed vide return filed by the legal heirs on 14th Nov., 1994. Alongwith the return, the aforesaid balance sheet was also annexed. From the abovesaid facts, it can safely be said that the balance sheet as on 31st March, 1990 wherein the capital of the assessee was at Rs. 3,47,010 was in existence. The Hon’ble Supreme Court in the case of Anantharam Veerasinghaiah & Co. v. CIT (supra) held that :
“When an ‘intangible’ addition is made to the book profits during an assessment proceeding it is on the basis that the amount represented by that addition constitutes the undisclosed income of the assessee. That income, although commonly described as ‘intangible’, is as much a part of his real income as that disclosed by his account books. It has the same concrete existence. It could be available to the assessee as the book profits could be.
The secret profits or undisclosed income of the assessee earned in an earlier assessment year constitute a fund, even though concealed, from which the assessee may draw subsequently for meeting expenditure or introducing amounts in his account books.”
In the instant case also, the assessee has reflected the source of investment in immovable property out of its capital account of the earlier years and even if it is presumed that the said investment pertaining to the asst. yr. 1990-91 was unexplained investment then it was the duty of the AO to call for the explanation of the same from the assessee and in case the assessee would not have been able to explain the same that should have been assessed as unexplained income in that preceding year.
Keeping in view the ratio laid down by the Hon’ble Supreme Court in the case of Anantharam Veeiasinghaiah & Co. v. CIT (supra), we are of the view that the AO was not justified in not considering the explanation of the assessee that the investment was made out of funds available to him as on 30th March, 1990. In that view of the matter, we are of the view that the learned CIT(A) was not justified in confirming the action of the AO for making the addition of Rs. 92,600.
9. As regards to the addition of Rs. 24,000 on account of household expenses, we are of the view that the authorities below have not given any cogent reason for estimating the household expenses at Rs. 24,000. On the other hand, the assessee explained vide its balance sheet dt. 31st March, 1991, that the household expenses amounting to Rs. 18,000 were met out, out of the business income amounting to Rs. 23,822.
9.1. As we have already held that the AO had not given any cogent reasons for estimating the household expenses at Rs. 24,000, we are of the view that there was no reason to make the addition in the hands of the assessee when the expenses were fully explained out of the capital of the assessee.
10. Another addition of Rs. 5,000 was made on account of multi-benefit deposit. The explanation of the assessee was that the same were made by Smt. Parveen Kumari, daughter of the assessee on 9th Jan., 1991 in the name of herself and her mother Smt. Soma Devi. The AO made the addition presuming that the assessee made the investment for the same. It is noticed that the AO neither recorded the statement of Smt. Parveen Kumari who made the investment nor of Smt. Soma Devi who was the joint owner of the investment. Accordingly, we find no justification in making addition of Rs. 5,000 in the hands of the assessee.
The AO made this addition only on the basis that a married daughter would not have invested her own funds jointly in the name of her mother, especially after more than 7 years of her marriage. From the aforesaid version of the AO it is crystal clear that he had never stated that the investment was made by the assessee. He only presumed that the daughter of the assessee would not have invested her own funds jointly with her mother. In other words, the AO. had not doubted that the investment was in the name of daughter and wife of the assessee, and the explanation was given that her daughter at her own invested the money in the multi benefit scheme. In view of the above, we do not find any justification in making the addition of Rs. 5,000 in the hands of the assessee.
11. The net result of the above discussions is that the AO was not justified in estimating the income of the assessee at Rs. 1,81,600 and also the learned CIT(A) was not justified in upholding the same.
12. The second ground raised by the legal heirs of the assessee relates to the initiating of assessment proceedings under Section 148.
12.1. This ground was raised before the learned CIT(A) but the same was, rejected on the basis that no written arguments were submitted which the learned CIT(A) asked the legal heirs and the learned counsel of the assessee to furnish. From the above findings of the learned CIT(A), it is clear that the ground was specifically raised but the same was disposed of without considering the merits. In that view of the matter, this issue should go back to the learned CIT(A) but we have already decided the case on merits in favour of the assessee, as discussed in the aforesaid paras, so we do not consider it fair to remand the issue back to the file of the learned CIT(A) for fresh disposal. This ground of appeal is accordingly disposed of.
13. Ground No. 4 relates to the levy of interest under Sections 234A and 234B of the Act.
13.1. The AO is directed to decide the issue in the light of the decision of the Hon’ble Supreme Court in the case of CIT v. Ranchi Club Ltd. (2001) 247 ITR 209 (SC), in case if any, interest is leviable under Sections 234A and 234B of the IT Act.
14. Ground Nos. 1 and 5 are general in nature, hence no specific findings are required.
15. Additional Ground : The additional ground taken by the assessee in this appeal relates to the liability of legal heirs to the extent to which the estate is capable of meeting the liability.
15.1. Since we have deleted the additions on merits, therefore, this ground is of only academic nature and as such no specific findings are given.
16.1TA No. 249/Asr/1998
In this appeal, the assessee has raised following grounds ‘:
“1. That the order of the CIT(A) is against law and facts of the case.
2. That’ the CIT(A) has erred in not appreciating that the reason to initiate reassessment proceedings did not exist and consequently the proceedings initiated under Section 147 are without justification and case is covered by judgment of the Punjab and Haryana High Court in the case or CIT v. Atlas Cycle Industries (1989) 180 ITR 319 (P&H).
3. That the CIT(A) has erred in not accepting the income declared by the legal heirs of the assessee and has further erred in sustaining the assessment at Rs. 92,621 because;
(i) The income from commission has been wrongly and excessively estimated at Rs. 48,000 instead of Rs. 24,648 declared in the return.
(ii) Addition of Rs. 44,621 has been erroneously worked out as unexplained investment by not accepting the explanation of the assessee.
4. That the CIT(A) has erred in concurring with the AO in sustaining the assessment of income at Rs. 92,621 and assessing it to tax of Rs. 27,608 and after levying interest under Section 234A at Rs. 14,907 and under Section 234B at Rs. 26,067 has erred in computing tax liability at Rs. 68,580 and after adjusting amount of Rs. 530 as tax already charged under Section 143(l)(a) has erred in creating additional demand of Rs. 68,050.
5. Such other grounds as may be urged at the time of hearing.”
17. First, of all, we will take up ground No. 3 which relates to the sustenance of an income at Rs. 92,621.
17.1. The relevant facts relating to this issue in brief are that for the year under consideration the deceased-assessee filed its return of income on 20th Nov., 1992, declaring an income of Rs. 24,650 and the same was assessed under Section 143(l)(a). The assessee expired on 31st March, 1993. The AO issued show-cause notice under Section 148 of the IT Act, 1961 on 8th Sept., 1993 to the legal heirs of the deceased-assessee. In response to that, the legal heirs filed the return on 14th Nov., 1994 declaring the same income i.e. Rs. 24,650. During the assessment proceedings, the AO noticed that the assessee had shown net income from property dealing at Rs. 24,648 (net) against the gross receipt shown at Rs. 43,892. The AO observed that no basis of income/expenses had been furnished by the assessee. Certain indiscriminatory documents like sale deeds, conveyance deeds, agreement to sell/general power of attorney involving transfer of immovable property were found/seized from the possession of the assessee who was working as a property dealer. The assessee denied receipt of commission in respect of sale/other deeds as pointed out by the AO. The AO opined that it was a general practice that payment/receipt of commission at the time of transfer of property from one hand to another generally went unrecorded.
According to him the possession of the conveyance deed as a property dealer established that the assessee had vested interest in such deal. Accordingly, he estimated the income as under :
“Seizure memo No./page
Description
Date of Document
Amount
Brokerage as above
A-8/96 to 100
Sale Deed
12-7-1991
43,48,750
43,487 @1 %
A-8/103 and 104
Sale Agreement
31-1-1992
64,000
1, 080@2%
Brokerage
44,567
In the aforesaid manner, the AO calculated the gross commission earned by the assessee at Rs. 44,567. He further pointed out that it was fair to estimate gross income at Rs. 60,000 since the assessee had not produced accounts books/complete details. Thereafter, he allowed deduction @ 20 per cent on account of expenses and estimated the net income from property dealing at Rs. 48,000 as against the income disclosed by the assessee at Rs. 24,648. The AO further noticed that the assessee had shown an expenditure of Rs. 1,05,200 on account of construction of the house and also had shown a sum of Rs. 18,300 on account of household expenses. The AO estimated the household expenses at Rs. 24,000 considering the size of the assessee’s family. He further noticed that there was a deposit of Rs. 10,000 on 21st May, 1991 in the account of Smt. Soma Rani wife of the deceased-assessee in money multiplier deposit a/c. He, therefore, aggregated the investments/expenditure at Rs. 1,39,200 (Rs. 1,05,200 + Rs. 24,000 + Rs. 10,000). The AO admitted that the assessee had filed a copy of the balance sheet according to which opening balance of capital had been shown at Rs. 2,00,232 from where the amount invested in the property at Rs. 1,05.200 had been shown to have been adjusted. According to the AO the assessee was not in a position to afford to capital built up as shown. He further noted that cash in hand shown at Rs. 68,439 as on 31st March, 1991, being tangible unexplained investment and addition to that extent was made in assessee’s total income in the asst. yr. 1990-91. He further noted that the said cash in hand was utilised during the accounting period 1991-92 at Rs. 46,579 and leaving the cash in hand at Rs. 21,860 as on 31st March, 1992. The AO after allowing the benefit of Rs. 48,000 being the income of current year’s business and cash utilised at Rs. 46,579 against the aggregate of Rs. 1,39,200 being the expenditure on house property, household expenses and investment in money multiplier deposit a/c, the balance investment/expenditure at Rs. 44,621 was treated as unexplained investment/expenditure and as such the same was added to the total income of the assessee. Accordingly, the income of the assessee was assessed at Rs. 92,621.
17.2. In the first appeal before the learned CIT(A) it was submitted that the sale agreement dt. 31st Jan., 1992, was for Rs. 54,000 and the names of the vendor and vendee were mentioned in that agreement. It was explained that on enquires made from vendor and vendee by the legal heirs of the deceased assessee, it was found that the deceased had no interest in that deal. It was also stated that no commission was received in respect of sale deed dt. 12th July, 1991. The learned CIT(A) observed that the assessee had not produced any evidence that no commission was received in respect of the two documents seized during the course of search. In that view of the matter, he upheld the estimated income at Rs. 48,000 from property dealing.
In respect of another addition of Rs. 44,621, the learned CIT(A) had observed that the AO already allowed the benefit of opening cash in hand of Rs. 68,439 to the assessee and had considered the cash available at Rs. 46,579 (opening cash Rs. 68,439 – closing balance Rs. 21,860) and also the income of Rs. 48,000 from the commission. According to him, the addition of Rs. 44,621 (Rs. 1,39,200 – Rs. 48,000 – Rs. 46,579) was rightly made. He further pointed out that whatever was stated in balance sheet as on 31st March, 1991, was not correct state of affairs, particularly, when there was no detail/evidence to substantiate that the assessee was having loan and advances of Rs. 1,08,393 as on 31st March, 1991 and from that asset i.e. loan advances, the investment in the property and withdrawals for household expenses had been made. Accordingly, the addition of Rs. 44,621 was also upheld. As per above discussions, the learned CIT(A) confirmed the action of the AO in assessing the income at Rs. 92,621.
17.3. Being aggrieved, the legal heirs of the assessee are in appeal. The learned counsel for the assessee submitted that the AO had made the addition towards the income of the assessee from the business as property dealer merely on the basis of assumptions, presumption and surmises. It was stated that the AO while making the said additions had even failed to consider the reply dt. 12th March, 1996, filed by the legal heirs of the assessee in pursuance to the questionnaire dt. 8th Feb., 1996. The learned counsel for the assessee submitted that the AO while making the addition of Rs. 48,000 on account of income from property dealing estimated the brokerage on the basis of two seizure memos i.e. A-8/96-100 and A-8/103 and 104 which were sale deed dt. 12th July, 1991, and sale agreement dt. 31st Jan., 1992, respectively. It was submitted that the seizure memo No. A-8/96 to 100 was the copy of the sale deed executed on 12th July, 1991 between M/s Khem Chand Vijay Kumar Metal Industries (P) Ltd. and M/s Jai Bhagwati Traders, Jalandhar. It was submitted that sons of the assessee namely S/Sh. Anil Kumar and Anoop Kumar were partners in the firm M/s Jai Bhagwati Traders and as such the assessee was not concerned at all with the sale deed executed on 12th July, 1991. It was argued that the sons of the assessee were residing with him and the document found was related to the sons and not to the deceased-assessee. In other words, it was stated that the assessee was not having any link with the said sale deed, so there was no occasion in making the addition on the basis of commission earned from the transactions i.e. sale deed executed on 12th July, 1991.
In respect of another document, which was seized vide Memo A-8/103 and 104,
it was stated that the said document which was an agreement of sale of a property dt. 31st Jan., 1992, by one Shri Sohan Lal s/o Shri Banka Ram to Sh. Rakesh Kumar and Sh. Vipin Kumar, in respect of plot measuring 2,100 sq. ft. for Rs. 54,000, it was submitted that the names and addresses of the persons connected with the sale agreement were available with the Department and the AO should have inquired about the same from the said persons which action was not taken by the AO. It was further stated that the legal heirs had inquired at their own end from the said persons and came to the conclusion that the deceased had no interest in the said document.
It was also pleaded that the commission/brokerage were charged on the registered deed and not on the agreements so there was no occasion to estimate the income of the deceased at Rs. 60,000. The learned counsel for the assessee vehemently argued that the AO himself calculated the gross income at Rs. 44,567 as against the gross income shown by the assessee at Rs. 43,892. But later on, the AO enhanced the estimated income at Rs. 60,000 and allowed the expenses @ 20 per cent thereby made the addition of Rs. 48,000. But the aforesaid addition was without any basis and merely based on the surmises and conjectures which is not tenable in the eyes of law.
As regards to the investment amounting to Rs. 1,05,200 on account of house construction, the learned counsel for the assessee submitted that the investment was made out of the funds available with the assessee at Rs. 2,00,232 as per balance sheet dt. 31st March, 1991. It was also argued that the AO has not given any cogent reason for estimating the household expenses at Rs. 24,000 as against the household expenses shown by the assessee at Rs. 18,300. It was submitted that for the preceding year, the household expenses shown by the assessee were at Rs. 18,000 whereas for the year under consideration, the assessee had shown the household expenses at Rs. 18,300 which was reasonable considering the living standard of the assessee.
In respect of investment of Rs. 10,000 in money multiplier deposit a/c, the learned counsel for the assessee submitted that the amount in the aforesaid investment was made by the wife of the assessee from her own savings and the AO did not bother even to record her statement to verify the facts. It was accordingly submitted that the assessee was not linked with that investment, so there was no justification in treating the same in the hands of the assessee. It was also submitted that the assessee was having a cash in hand of Rs. 64,839 as on 31st March, 1991 and utilised a sum of Rs. 46,579 to meet out the construction in the house property and as such a sum of Rs. 21,860 remained with him as on 31st March, 1992. The learned counsel for the assessee vehemently argued that all the explanation were given before the AO as well as the learned CIT(A) but the authorities below did not appreciate the facts properly and, therefore, were not justified in making the addition of Rs. 44,621 considering the same as unexplained investment in houseproperty, money multiplier deposit a/c and on account of household expenses. It was prayed that the addition made by the AO and consequently sustained by the learned CIT(A) deserves to be deleted on the basis of factual position.
17.4. In his rival submissions, the learned Departmental Representative strongly supported the orders of the authorities below and also submitted that the
assessee has not given proper explanation, so the addition made by the AO was justified and the learned CIT(A) rightly confirmed the addition.
17.5. We have heard the learned representatives of both the parties at length and carefully gone through the material available on the records. As regards the addition on account of income from property dealing is concerned, the AO estimated the same at Rs. 44,567 on the basis of sale deed dt. 12th July, 1991, and sale agreement dt. 31st Jan., 1992. It is noticed that the assessee had shown the gross receipts at Rs. 43,892. It is also noticed that it was disclosed to the AO that sale deed dt. 12th July, 1991, was related to the firm M/s Jai Bhagwati Traders, in which both the sons of the assessee were partners. The AO had not brought anything on record to establish that the assessee, in fact, earned the commission on that sale deed, particularly, when Sh. Anil Kumar son of the deceased-assessee was also doing the business of property dealing. We also find some force in this contention of the learned counsel for the assessee that no commission is charged on sale agreement and the commission can only be charged when deal matures. It is also relevant to point out that the AO himself calculated the gross receipts from the brokerage at Rs. 44,567 but enhanced the same at Rs. 60,000. It is noticed that the AO had not given any cogent reason for allowing the deduction on account of expenses @ 20 per cent. In that view of the matter, it appears that the AO estimated the income from property dealing at Rs. 48,000 without any basis and the same deserves to be deleted.
As regards, the investment in the money multiplier deposit amounting to Rs. 10,000 is concerned, it is an admitted fact that the investment was in the name of Smt. Soma Devi, wife of the deceased-assessee and the AO had not brought anything on record to establish that the assessee himself made the investment in the name of his wife particularly when the AO failed to verify the investment from Smt. Soma Devi. Accordingly, we are of the view that there was no justification in making addition in the hands of the assessee on account of investment in money multiplier deposit a/c.
As regards, the estimate of household expenses at Rs. 24,000 is concerned, the AO did not give any reason to justify his estimate. It is also undisputed fact that the assessee was having a capital of Rs. 2,00,232 as on 31st March, 1991. From that capital the assessee explained the investment by way of balance sheet dt. 31st March, 1992 in the following manner:
“Balance Sheet
Rs.
Rs.
Rs.
Old balance
2,00,232
Furniture and fixture
23,400
Less :
O.B.C. 3,517
720
House construction
1,05,200
Loans and advances
55,400
Household expenses
18,300
Cash in hand
21,860
1,23,500
76,732
Add : Net receipts
26,648
1,01,380
1,01,380″
From the above narrated facts, it is clear that the assessee duly explained the investment made on account of construction in the house property as well as to meet out the household expenses amounting to Rs. 1,05,200 and Rs. 18,300 respectively. In the preceding year i.e. in ITA No. 248/Asr/1998 for the asst. yr. 1991-92, we have already held that the AO was not justified in not considering the explanation of the assessee that the investment was made out of funds available to him, by keeping in view the ratio laid down by the Hon’ble Supreme Court in the case of Anantbaram Veerasinghaiah & Co. v. CIT (supra). Our findings given in aforesaid para 8 will apply mutatis mutandis to the facts of the present issue also.
Considering the entire facts as discussed above, we are of the view that there was no justification in estimating the income of the assessee at Rs. 92,621 and accordingly we set aside the order of the authorities below on this issue.
18. Ground Nos. 1 and 5 raised by the assessee are general in nature, hence no specific findings are required.
19. Ground No. 4 relates to the levy of interest under Sections 234A and 234B of the IT Act.
The findings given by us vide para 13.1 in ITA No. 248/Asr/1998 for the asst. yr.
1991-92 will also apply to this ground.
20. The 2nd ground raised by the legal heirs of the assessee relates to the
initiating of assessment proceedings under Section 147.
At the same time, the additional ground taken by the assessee in this appeal
relates to the liability of legal heirs to the extent to which the estate of the
deceased is capable of meeting the liability.
20.1. Since we have deleted the additions on merits and, therefore, these two
grounds are of only academic nature and as such no specific findings are given.
21. ITA No. 151/Asr/2000 : Asst. yr. 1993-94
The Department has taken following grounds in this appeal:
“1. That on the facts and in the circumstances of the case, the learned CIT(A) has erred in deleting the addition on account of brokerage income of Rs. 4,80,000.”
21.1. The brief facts relating to this case are that the deceased-assessee late Sh. R.D. Sharma was a property dealer, a search and seizure operations took place at his residence on 26th March, 1993. A statement of late Sh. R.D. Sharma, was recorded under Section 132(4) in which a surrender of Rs. 5 lacs had been made. During the search operations, late Sh. R.D. Sharma developed pain in the chest and was shifted to the hospital where he expired on 31st March, 1993. The return for the financial year ending on 31st March, 1993, i.e., for the asst. year 1993-94 was filed by the legal heirs of the deceased-assessee declaring estimated income of Rs. 50,000 out of his property dealing business. The AO however, estimated the income from property dealings at Rs. 4,80,000 and also made the additions of Rs,.40,000 on account of investment in plot at Doaba College Chowk, Jalandhar and Rs. 90,000 on account of plot at Village Chack Husana, Jalandhar, Rs. 63,570 on account of investment in construction of house property and Rs. 10,800 on account of cash found at the time of search. In this manner, the total income of the deceased-assessee was assessed at Rs. 6,84,370. The AO while passing the assessment order dt. 27th March, 1996, at the total income of Rs. 6,84,370 mentioned that the assessee was asked to explain as to why an amount of Rs. 5,00,000 surrendered during the course of search operations while giving the statement on oath, had not been disclosed in the return for the assessment year under consideration. It was submitted before the AO that the statement was given with disturbed mind. However, the AO concluded that in view of the surrendered income being less than the income worked out at Rs. 6,84.370, as such no further addition on account of surrender was made.
21.2. In the first appeal before the learned CIT(A) it was argued that the AO estimated the income from the brokerage/commission on the basis of certain copies of agreements and slips of papers, although there was no such evidence that the deceased had received any brokerage income on the alleged transaction. It was argued that after the death of Sh. R.D. Sharma, the legal heirs had merely inherited one residential house, cash of Rs. 22,400 and Kisan Vikas Patra of Rs. 27,436. It was argued that if any brokerage income had been received by late Sh. R.D. Sharma, the same should have been found by the legal heirs. It was stated that the parties whose names were reflected in the agreement should have been called by the AO to examine whether any brokerage had been paid by them to the deceased-assessee. It was pointed out that request to this fact was made to the AO but the same was not accepted. It was argued that the deceased-assessee was carrying out property business as broker and the copies of the purchase deeds were left by prospective sellers with him for future deals. In respect of the slip of papers, it was stated that the same might have represented the hypothetical calculation when either the prospective purchaser or prospective seller who were considering the prospective sale or purchase price. It was requested to the learned CIT(A) that the concerned parties should have been examined to arrive at truth about the agreements.
In that view of the matter, the learned CIT(A) directed the AO vide letter dt. 9th June, 1998, to call for the purchasers and sellers whose names were reflected in the seized agreements to ascertain that late Sh. R.D. Sharma was party to those transactions and whether any brokerage was paid to him or not. In response to the aforesaid directions, the AO pointed out vide letter No. 443 dt. 14th Oct., 1999, that either the addresses of the parties were; not reflected in the seized documents or even names and addresses were not mentioned. However, the AO reported that in few cases where the names and addresses were mentioned summons were issued, but those were not complied with, only one Sh. Parveen Kumar appeared but he denied that any deal had matured in respect of agreements. When the learned counsel was confronted with the aforesaid report of the AO dt. 14th Oct., 1999, it was argued that the AO had not brought anything on record to show that any brokerage was actually received by late Sh. R.D. Sharrna.
21.3. After considering the arguments and the report of the AO the learned CIT(A) observed that the AO concluded on the basis of documents and agreements found and seized during the search operations that late Sh. R.D. Sharma had earned brokerage income of Rs. 5,77,684, the AO estimated the brokerage income for the whole year at Rs. 6,00,000 and after allowing expenses @ 20 per cent estimated the brokerage at Rs. 4,80,000. He further observed that the investigation carried out by the AO during the appellate proceedings had shown that the AO had not properly made the investigation and apparently had not taken up his job in right spirit. The learned GIT(A) concluded that in the light of the report submitted by the AO the inference drawn in the assessment order were not supported with any evidence. In that view of the matter, the estimate brokerage income of Rs. 4,80,000 was deleted.
21.4. Now the Department is in appeal against the deletion of addition of Rs. 4,80,000. The learned Departmental Representative supported the order of the AO but failed to rebut the findings of the learned CIT(A).
21.5. In his rival submissions, the learned counsel for the assessee reiterated the arguments placed before the authorities below and strongly supported the order of the learned CIT(A).
21.6. We have heard the representatives of both the parties and perused the orders of the authorities below. In the instant case, it appears that the AO estimated the income of the deceased Sh. R.D. Sharma on the basis of certain documents pertaining to sale agreements or sale deeds. It is undisputed fact that the learned CIT(A) asked the AO to verify from the persons whose names were mentioned in the seized documents to verify whether any brokerage was paid to the deceased-assessee Sh. R.D. Sharma but the AO failed to comply with the directions of the learned CIT(A), even mentioned in his report dt. 14th Oct., 1999, that in certain cases names and addresses were not mentioned, in others where the names and addresses were mentioned, nobody came forward to make statement that any commission was paid to the deceased-assessee. In the aforesaid report, the AO admitted that only one person namely Sh. Parveen Kumar appeared but he denied that any deal had matured in respect of agreements. From the above discussed facts, it appears that the estimate of the AO was without any basis. In other words, the AO estimated the income at Rs. 4,80,000 on the basis of surmises and conjectures only.
Considering the entire facts of the case, we are of the view that the learned CIT(A) was justified in deleting the addition made by the AO Accordingly, we are inclined not to interfere with the findings of the learned CIT(A). In that view of the matter, we find no merit on the ground raised by the Department.
22. Now, we take up appeal of the assessee in ITA No. 129/Asr/2000; asst. yr. 1993-94. The assessee has raised following grounds in this appeal:
“1. That the order of the CIT(A) is against law and facts of the case.
2 That the CIT(A) has erred in concurring with the AO in making addition of Rs. 40,000 as investment in the shop, at Doaba College Chowk, Jalandhar, which had been made by the son of the deceased who is existing assessee and this investment has been considered in his case while framing his assessment under Section 143(3).
3. That the CIT(A) has erred in concurring with the AO in estimating the investment of Rs. 90,000 in respect of the plot at Village Chak Husana, Jalandhar, which belonged to one Sh. Kartar Chand who sold it to Sh. Anil Kumar Tiwari s/o Sh. Mahadev Tiwari, EF 75, Mandi Fenton Ganj, Jalandhar.
4. That the CIT(A) has erred in concurring with the AO in making addition of Rs. 63,570 on the construction of the house.
5. That the CIT(A) has erred in concurring with the AO in making addition of cash of Rs. 10,800 found during the course of search out of total cash found at Rs. 22,400.
6. That the CIT(A) has erred in concurring with the AO in making addition of Rs. 25,000 by estimating household expenses.
7. Such other grounds as may be urged at the time of hearing.”
23. Ground Nos. 1 and 7 raised by the legal heirs of the deceased-assessee are general in nature, so do not require any comments on our part.
24. Ground Nos. 2 relates to the addition of Rs. 40,000 pertaining to the investment in the shop at Doaba College Chowk, Jalandhar.
24.1. For making this addition, the AO observed that the deceased-assessee in his statement under Section 132(4) admitted having purchased one shop at Doaba College Chowk, Jalandhar, for Rs. 35,000 but the source of acquisition had not been furnished. In the absence of same the value of the said plot was estimated at Rs. 40,000 and added to the income of the deceased-assessee as unexplained investment.
24.2. The learned CIT(A) confirmed the addition by observing that nothing was pointed out to show that the investment was not made by late Sh. R.D. Sharma.
Before us, the learned counsel for the assessee submitted that the authorities below have not appreciated the facts properly because it was pointed out that the said shop at Doaba College Chowk, Jalandhar was purchased by Sh. Anoop Kumar son of the deceased-assessee. Reference was made to page No. 14 of the paper book which is a copy of the agreement for the purchase of property at Doaba College Chowk, Jalandhar. It was pointed out that the addition was made in the hands of Sh. Anoop Kumar while framing the assessment under Section 143(3) for the asst. yr. 1993-94. It was also pointed out that the AO while making the addition in the hands of the deceased-assessee had said that admission was made in the statement recorded under Section 132(4). He brought our attention towards page Nos. 15 to 18 of the paper book which pertain to the statement recorded under Section 132(4) and argued that no such statement was given by the deceased-assessee. Accordingly, it was submitted that the addition was made without any basis and the same deserves to be deleted.
24.3. In his rival submissions, the learned Departmental Representative strongly supported the orders of the authorities below.
24.4. We have heard both the parties and perused the material available on the records. On going through the statement recorded under Section 132(4), it is noticed that the AO asked the deceased-assessee eight questions [the statement under Section 132(4) is available at pp. 15 to 18 of the assessee’s paper book]. None of the eight questions was related to the plot/shop situated at Doaba College Chowk, Jalandhar. Even nothing is mentioned in the statement that the deceased-assessee admitted having purchased one shop for Rs. 35,000. On that score alone, the addition made by the AO deserves to be deleted.
24.5. We have also perused the agreement, dt. 2nd Feb., 1993, in between Sh. Nand Kishore son of Shri Chanaya Lal and Shri Anoop Kumar son of Shri Ravi Dutt placed at p. 14 of the paper book, which clearly shows that the deal pertaining to the aforesaid plot was with Shri Anoop Kumar and not with the deceased-assessee. It is worthwhile to mention here that the sale price of the property was settled at Rs. 30,000 as per Clause 1 of the agreement dt. 2nd Feb., 1993. The A.O. while framing the assessment under Section 143(3) of the IT Act, in respect of Shri Anoop Kumar vide his order dt. 27th March, 1996, added a sum of Rs. 1,00,000 on account of investment in property/UTI Scheme, etc. In that addition the AO clearly mentioned about the property purchased for Rs. 30,000 involving total investment of Rs. 33,000. This fact is clear from p. 12 of the paper book which is a part of the assessment order in respect of Shri Anoop Kumar, placed at pp. 9 to 13 of the paper book. It is also relevant to point out that the same AO i.e. Shri Sardul Singh framed assessment under Section 143(3) in both the cases, i.e., in the case of Shri Anoop Kumar as well as in the case of deceased Sh. R.D. Sharma through his legal heirs on the same date, i.e., 27th March, 1996. From the above narrated facts, it is apparently clear that the addition made was without any basis and was bad in law. Therefore, the addition made is not sustainable. Accordingly, we delete the addition of Rs. 40,000.
25. The next ground relates to the addition on account of investment in respect of plot at Village Chak Husana, Jalandhar.
25.1. For making this addition, the AO pointed out that as per Annexure A-8/205 to 208, the assessee entered into an agreement for sale of plot measuring 1800 sq. ft. situated at Village Chak Husana, Jalandhar for its sale in May, 1993. The AO estimated the cost of the plot at Rs. 90,000 and made the addition in the hands of the assessee.
25.2. The learned CIT(A) confirmed the addition by observing that although in para 2(v) of the grounds of appeal, the estimate of Rs. 90,000 has been disputed but nothing was brought on record to support the grounds of appeal. Therefore, the addition of Rs. 90,000 was upheld for this investment.
25.3. Before us, the learned counsel for the assessee, Sh. Ravish Sood, submitted that the AO while framing the assessment of the assessee had made an addition of Rs. 90,000 by holding that the assessee had purchased a plot measuring 1,800 sq. ft. (8 Marias–144 sq. ft.) situated at Village Chak Husana, Jalandhar, on the basis of an agreement of sale dt. 17th March, 1993, executed between the assessee and one Shri Sushil Kumar Gupta son of Shri Mittar Pal, r/o H No. 322, Gali No. 6-A, Central Town, Jalandhar. It was submitted that the aforesaid agreement had remained incomplete as the same was not signed by the aforesaid Shri Sushil Kumar Gupta (the alleged purchaser). It was argued that the aforesaid property was a part of Khasra No. 9-11-12-30/2 bounded as under:
East Others
West Others
North Road
South Abadi
was owned by one Sh. Kartar Chand s/o Sh. Diwan Chand, r/o B-IX/461, Santokhpura, Jalandhar. It was pleaded that the deceased-assessee was a property dealer to whom Sh. Kartar Chand (the owner) expressed his intention to sell the aforesaid property and asked the deceased-assessee to look for some customer, on that basis, the deceased-assessee got a customer namely Sh. Sushil Kumar Gupta, who was ready to purchase the said property @ Rs. 20,000 per Maria. The assessee made up his mind that instead of directly introducing the said purchaser to the seller Sh. Kartar Chand for which he would only be entitled to commission on the said transaction, the deceased-assessee decided to purchase the said property from Sh. Kartar Chand and thereupon sell it to the said prospective customer namely Sh. Sushil Kumar Gupta, as this would lead to more, profits. It was submitted that in lieu of aforesaid arrangement, an agreement was prepared and signed by the assessee, but the same was not signed by Sh. Sushil Gupta, because the later asked the assessee to show to him the title of the said property. After that Sh. Ravi Dutt Sharma (deceased-assessee) approached the owner of that property Sh. Kartar Chand who told that he had already found a customer namely Sh. Anil Kumar Tiwari s/o Sh. Mahadev Tiwari, r/o EF-75, Mandi Fentonganj, Jalandhar, and he had already received total payment of Rs. 90,000 as the sale consideration from the said buyer; He further told the assessee that even the stamp papers for giving effect to the said sale transaction had been purchased on 16th March, 1993. The learned counsel for the assessee drew our attention towards page Nos. 23 and 24 of the paper book which is a registered sale deed of the said property and argued that the property in question was owned by Sh. Kartar Chand and was sold to Sh. Anil Kumar Tiwari vide registered sale deed No. 11,482, dt. 24th March, 1993. It was accordingly submitted that the deceased-assessee was not in a position to sell the aforesaid property because the same was not owned by him and how could the AO by any stretch of mind make any addition in the hands of the assessee on account of “unexplained investment” towards purchase of any property which had never been purchased. The learned counsel for the assessee vehemently argued that the complete details as regards name and addresses of seller as well as of purchaser namely Sh. Kartar Chand and Sh. Sushil Kumar Gupta respectively were available before the authorities below, the particulars of the property in question were also available on the record but the authorities below had net taken the recourse to the examination of the said parties to verify the truth. Therefore, there was no justification in making the addition of Rs. 90,000 in the hands of the assessee.
25.4. In his rival submissions, the learned Departmental Representative strongly supported the order of the authorities below and also submitted that during search and seizure operations, the sale agreement was seized from the premises of the assessee and on that basis, the AO was justified in making the addition and consequently, the learned CIT(A) rightly upheld the action of the AO because no proper explanation was furnished before him.
25.5. We have heard the learned representatives of both the parties and also perused the material available on the records. It appears that the controversy related to the property measuring 1800 sq. ft. situated at Village Chack Husasna, Jalandhar which was part of Khasra No. 9-11-12-30/2 and was bounded on east and west by other, on north the road and south by Abadi. It is not in dispute that the property mentioned in the sale agreement in between Sh. R.D. Sharma, the deceased-assessee and Sh. Sushil Kumar Gupta, the alleged purchaser [copy available at page Nos. 19 and 20 (English version at pp. 21 and 22) of the paper book) and in the sale deed No. 11482 in between Sh. Kartar Chand and Sh. Anil Kumar Tiwari was the same. It is also noticed that the agreement dt. 17th March, 1993, was not signed by Sh. Sushil Kumar Gupta, so it cannot be held that the said agreement was a complete agreement. It is also noticed that the same property i.e. plot measuring 1,800 sq. ft. (which was a part of Khasra No. 9-11-12-30/2) was sold by Sh. Kartar Chand on 18th March, 1993. It seems that the addition was made by the AO on the basis of the agreement dt. 17th March, 1993, which was incomplete agreement because the second party had not signed the same. But the AO nowhere brought on record that there was any sale deed in the name of the deceased-assessee to prove him the owner of the said property. On the other hand, registered deed No. 11482 in between Sh. Kartar Chand (the seller) and Sh. Anil Kumar Tiwari (the purchaser) was registered and was written by Shri Brij Mohan, deed writer, Jalandhar, licence No. 146 of 1982. From the above facts, it is clear that the owner of the property was Sh. Kartar Chand and the same was sold to Sh. Anil Kumar Tiwari and not to Sh. Sushil Kumar Gupta. We find substantial force in this contention of the learned counsel for the assessee that the deceased-assessee in the capacity of a property dealer approached the owner of the property who was ready to sell the same through him, but later on sold the same property to another person Sh. Anil Kumar Tiwari. The AO had not brought anything on record to prove ownership in the name of Sh, R.D. Sharma, the deceased-assessee and if a person is not the owner how can he sell the property.
In that view of the matter, we are of the view that the addition made in the hands of the assessee was not correct. Accordingly, we delete the same.
26. Ground No. 4 raised by the assessee relates to the addition of Rs. 63,570 on account of construction in the house property.
26.1. For making this addition, the AO mentioned that as per page 5 of seizure memo A-2 there was a detail of amount incurred on the construction of the house for 26th and 27th Sept., 1992 pertaining to items like cement, brick, Saria, etc., for Rs. 25,000, Rs. 9,500 and Rs. 29,070, aggregating to Rs. 63,570. He further observed that no explanation with regard to source of investment had been explained by the assessee and accordingly addition was made on account of unexplained investment. The learned CIT(A) confirmed the addition by observing as under:
“(C) The AO estimated investment of Rs. 63,570 on the construction of house on the basis of seized material showing purchase of cement, bricks and Saria in September, 1992 for amounts totaling Rs. 63,570. Although this addition is also disputed in ground No. 2(vi) of grounds of appeal but nothing was pointed out in support of the contention and so this estimate is also upheld.”
26.2. The learned counsel for the assessee submitted before us that the AO made the addition on the basis of diary marked as Annexure A-2 by placing reliance on page No. 5 wherein the said expenditures were mentioned. It was pleaded that the AO failed to adduce any further evidence to corroborate that the said annexure and the said notings pertained to the assessee. It was submitted that the notings in the said diary were not in the handwriting of the assessee. It was pointed out that the said diary was relating to the year 1989 and at page No. 10 the name of the assessee was reflected which stands as under:
“Ravi Dutt Sharma,
H.No. 148/A Aman Nagar,
Jalandhar.”
The learned counsel further submitted that from the aforesaid notings it was clear that the diary did not belong to the assessee because no person would mention his own name and address in the list of the persons acquainted to him -in his own diary. It was pointed out that at p. 6 of the said diary, it was noted that an amount of Rs. 700 was utilised towards liquor but the deceased-assessee was a staunch ‘Brahamin’ where one had to be a teetotaler not by choice rather by their religion which showed that the diary did not belong to the deceased-assessee. It was argued that the deceased-assessee could only have explained as to whom the said diary belonged to, however, unluckily as he was no more, the legal heirs were unable to find out the actual owner of the said diary. Alternatively, it was submitted that the AO failed to appreciate the fact that the legal heirs of the assessee had filed income-tax return, declaring commission income from property dealing at Rs. 50,000 and further the assessee had cash in hand amounting to Rs. 21,800 as on 1st April, 1992 (as per the balance sheet as on 31st March, 1992, which was filed by the deceased during his life-time along with the return for the asst. yr. 1992-93). Accordingly, it was submitted that if it is presumed that the said expenditure had been incurred by the assessee, then the AO had failed to appreciate that keeping in view the cash in hand available with the assessee as on 1st April, 1992 and the income of current years from the property dealing as reflected in his income-tax return for the year under consideration the said expenditure stood duly explained out of the said sources so available with the assessee. The learned counsel for the assessee drew our attention towards p. 5 of the aforesaid diary which is placed at pp. 25 to 34 of the paper book and submitted that the plain reading of the same would reveal that the expenditures aggregating to Rs. 29,070 towards various items like bricks, cement, sand, etc. had been reflected and in the bottom of the said page the details as regards the source and the utilisation of the amount towards the purchase of the said items had been reflected. However, the AO had gravely erred in adding up the total expenditure reflected on the top of the said page aggregating to Rs. 29,070 and utilisation of the same reflected at the bottom of the page aggregating to Rs. 34,500 + Rs. 9,500 + Rs. 25,000). According to the learned counsel for the assessee that even by placing reliance on the said p. No. 5 of Annexure A-2, the addition could only be restricted to Rs. 29,070. He also submitted that on the same page i.e. p No. 5 on the said diary at the bottom cash available after meeting out the said expenditure had been mentioned at Rs. 35,000 and the amount should also be considered as cash available with the assessee.
26.3. In his rival submission, the learned Departmental Representative strongly supported the orders of the authorities below.
26.4. We have heard both the parties at length. After going through the various notings in the said diary seized by the Department which is placed at page Nos. 25 to 32 of the paper book, we are of the view that in the said diary some addresses were mentioned. It is not on the record whether the diary actually belonged to the deceased-assessee. It appears that proper explanation was not furnished before the AO, It was also the alternate contention of the learned counsel for the assessee that the expenditure mentioned at page No. 5 of the said diary were aggregating to Rs. 29,070 only and the assessee was in a position to meet out the same from his income disclosed by the legal heirs at Rs. 50,000 and out of the cash in hand available as on 1st April, 1992. Considering the entire facts of the present case and to meet the ends of natural justice, we think it appropriate to remand this issue back to the file of the AO with the direction to decide the same afresh. The AO is also directed to afford reasonable opportunity of being heard to the legal heirs of the deceased-assessee to defend their case. This ground of appeal is disposed of in the manner stated above.
27. Vide ground No. 6, the grievance of the assessee relates to the addition of cash of Rs. 10,800 found during the course of search out of total cash found at Rs. 22,400.
27.1. For making this addition, the AO mentioned that during the search operation of assessee’s residence cash amounting to Rs. 10800 was found for which no explanation had been adduced and as such the same was treated as unexplained investment of the assessee.
27.2. The learned CIT(A) confirmed the addition by mentioning that this addition had not been disputed.
27.3. The learned counsel for the assessee submitted that the learned CIT(A) did not consider the reply of the legal heirs of the deceased-assessee during the appellate proceedings. It was submitted that in written submission, it was contended before the learned CIT(A) that the Department did not consider the deceased capable of keeping the cash of Rs. 22,400 and that was why cash of Rs. 10,000 was seized out of the above amount and still the AO made the addition of the entire cash found to his income and also to the income of his son. Our attention was drawn towards page No. 27 of the paper book wherein the contention was as under:
“The status of the family was evident from the assets found and seized during the course of extensive search and seizure and the Department did not consider the deceased capable of keeping cash of Rs. 24,200 and that is why cash of Rs. 10,000 was seized out of the above amount and still further the AO made addition of the entire cash found to his income and also to the income of his son :
Rs.
Addition in case of the deceased
10,800
Addition in case of son Anil Kumar
11,600
Total
22,400
27.4. On the other hand, the learned Departmental Representative submitted that the assessee did not dispute this addition before the learned CIT(A) so there was no occasion to discuss the same in this appeal.
27.5. It appears that the contention of the assessee was not considered by the learned CIT(A) and one of the contentions was that the AO had made the addition of the entire cash found to the income of the deceased-assessee as well as to the income of his son. Considering that fact alone, we deem it appropriate to restore this issue to the file of the AO to verify the fact whether the same addition has been made in the two hands i.e. in the hands of the deceased-assessee as well as in the hands of his son namely Sh. Anil Kumar The AO is directed to give an opportunity of being heard to the legal heirs of the assessee and the legal heirs are free to adduce any evidence in support of their contention.
28. The last ground raised by the assessee i.e. ground No. 6 relates to the addition of Rs. 25,000 by estimating household expenses.
28.1. The learned CIT(A) mentioned in his order as under :
“(E) The AO had estimated the household expenses of the family at Rs. 25,000 taking into account that the family consisted of more than five members. Although, the AO had not made any separate addition for this taking into account the income from property but the estimate was disputed by the appellant in para 2(iv) of the grounds of appeal. Nothing was pointed out against the estimate of Rs. 25,000. Considering the facts of the case, the estimate of Rs. 25,000 for the whole year for the household expenses cannot be considered as excessive and the same is upheld.”
28.2. We have heard the learned representatives of both the parties on this issue and also perused the order of the authorities below. It is noticed that the AO had not made any separate addition for this amount taking into account income from the property dealing. In that view of the matter we are unable to understand why the assessee is aggrieved because no such addition has been made. In that view of the matter, we do not find any merit in this ground of the assessee and accordingly the same is dismissed because no such addition has been made by the AO.
29. In the result, the appeals of the assessee bearing ITA Nos. 248 and 249/Asr/1998 are allowed while ITA No. 129/Asr/2000 is partly allowed and the appeal of the Department in IT Appeal No. 151/Asr/2000 is dismissed.