ORDER
M.V. Nayar, A.M.
1. This appeal is by the Revenue against the order of the learned CIT(A), Ranchi dt. 8th Oct., 2004 for the block assessment period 1996-97 to 2001-02 and 1st April, 2001 to 6th Feb., 2002.
2. The grounds taken by the Revenue are as under:
1. For that the learned CIT(A), Ranchi has erred in deleting additions of Rs. 67,01,380 and Rs. 77,02,747 made on account of notings in the seized documents PKC-60 found and seized during the search in the case of the assessee showing outstanding debts regarding amounts receivable from the various parties. The learned CIT(A) has not appreciated that in view of the provisions of Sub-section 4A of Section 132 and Clause (b) of Section 158B the onus is on the assessee to disprove the contents of the documents seized from assessee’s possession.
2. For that the learned CIT(A), Ranchi has erred in allowing relief of Rs. 1,06,90,852 in respect of outstanding debtors found recorded in the seized documents PKS-1 to 126 in respect of Maa Durga Service Station, a proprietorship concern of Smt. Kanchan Khullar without adjudicating the substantive addition made in the hands of Smt. Kanchan Khullar and disregarding the joint submissions made by Sri Ashok Kumar Vig and Smt. Kanchan Khullar before the investigation wing in respect of undisclosed income of the concern M/s Maa Durga Service Station.
3. For that the learned CIT(A), Ranchi has erred in deleting addition of Rs. 2,70,000 in respect of undisclosed deposits made by the assessee in the names of Sunita, Renu & Soni at the HDFC Bank, Jamshedpur ignoring the notings on the seized documents pp. 87 to 98 of PKC-32 and holding the same to be Stri Dhan of the depositors.
4. For that the learned CIT(A) has erred in deleting addition of Rs. 11,000 in respect of the difference in the amount of investment noted in the seized documents pp. 37-45 of SK-I against disclosed investment made ignoring the provisions of Sub-section (4A) of Section 132.
5. For that the learned CIT(A) has erred in deleting addition of Rs. 41,00,000 made under the various heads of expenditure in respect of inflation of expenditure to suppress income ignoring the provisions of Sub-section (4A) of Section 132 laying onus on the assessee to disprove the contents of the seized documents.
3. Briefly stated, facts of the case are that the assessee is engaged in the business of transportation of motor spirit, high speed diesel and other petroleum products of IOC, BPCL and HPCL etc. The assessee has two proprietary concerns in the name and style of M/s Ashoka Petroleum Transport and M/s Bharatiya Oil Company, engaged in transporting and supply of petroleum products to different concerns. A search and seizure operation was conducted in the residential as well as business premises of the assessee at 58, New Baradwari, Sakchi and Burmamines at Jamshedpur on 6th Feb., 2002. The assessee made a disclosure of Rs. 50 lacs. However, the block assessment order, under Section 158BC of the IT Act, was passed by the AO determining the undisclosed income of the assessee at Rs. 3,77,77,483. Aggrieved by the order, the assessee went in appeal before the learned CIT(A), who has deleted the additions on various reasons. Being aggrieved, the Revenue is in appeal before us.
4. The first ground of appeal reads as under:
For that the learned CIT(A), Ranchi has erred in deleting additions of Rs. 67,01,380 and Rs. 77,02,747 made on account of notings in the seized documents PKC-60 found and seized during the search in the case of the assessee showing outstanding debts regarding amounts receivable from the various parties. The learned CIT(A) has not appreciated that in view of the provisions of Sub-section 4A of Section 132 and Clause (b) of Section 158B the onus is on the assessee to disprove the contents of the documents seized from assessee’s possession.
4.1 In this case the AO has made this addition on the basis of the seized documents marked as PKC-60, which is a small Neel Gagan Diary, and observed that there are details of datewise supplies of petroleum products to different parties and datewise payment received by M/s Bhartiya Oil Company. During the course of assessment proceedings, the assessee was required to explain the nature of transactions contained in this diary and to clarify to whom such transactions relate. In reply, the assessee stated that the seized document is merely a diary and worksheets on which no reliance can be placed because no trial balance and P&L a/c can be prepared from the contents of the aforesaid diary. On verification, the entries in the diary reveal that it is a party ledger book in the form of diary which contains the accounts of different parties to whom petroleum products by Bhartiya Oil Company have been supplied indicating amount of bill and datewise payment details. The AO on the basis of entries recorded found that most of the cheque payments have been cleared in the bank account of Bhartiya Oil Company and Maa Durga Service Station. The AO further found on verification of the ledger accounts filed with the return of income of the assessee, does not indicate balances of few parties. Further the seized books of account of Bhartiya Oil Company do not reveal the transactions entered in this diary. The transactions contained in this diary are over and above the transactions disclosed in the return of income. Further it was found that few accounts of the parties recorded are duly disclosed in the return o: income of M/s Bhartiya Oil Company. However, the transactions entered with the following parties during the financial years 2000-01 and 2001-02 have not been disclosed in the return of income of Bhartiya Oil Company as well as in the seized books of account.
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Name of Parties (2000-01) Rate Amount Total Payment Balance
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Union Enterprises 13.5 8,10,000 - 8,10,000
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Nay Nirman Builders 13.5 15,12,000 2,09,000 13,03,000
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Ravi Hitech 13.5 40,90,500 - 40,90,500
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Sandip Enterprises 13.5 4,97,880 - 4,97,880
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Total 67,01,380
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2001-02
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Union Enterprises 13.5 22,14,000 - 22,14,000
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Nav Nirman Builders 13.5 7,02,000 6,27,000 75,000
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Ravi Hitech 13.5 1,62,000 - 1,62,000
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Sandip Enterprises 13.5 3,24,000 - 3,24,000
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Khosla Steel Industries 9.75 49,27,747 - 49,27,747
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Total 77,02,747
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The AO, however, rejected the explanation of the assessee on the basis that the same are not specific, as the entries contained in the seized diary are not reflected in the seized books of account and return of income. Accordingly, the entire balance of Rs. 67,01,380 and Rs. 77,02,747 are considered to be the undisclosed sundry debtors of Bhartiya Oil Company and were added back to the total income of Ashok Kumar Vig for the asst. yrs. 2001-2002 and 2002-03 respectively. When the matter went before the learned CIT(A), the learned CIT(A) after considering the facts and submissions of the assessee deleted the additions holding as under:
The fourth ground of appeal is that the AO was not right in making addition of Rs. 67,01,380 and Rs. 77,02,747 for the asst. yr. 2001-02 and 2002-03, respectively relying on the seized diary, which cannot be the books of account of the assessee.
It is seen from the assessment order that seized document reflects the name of the party to whom lubricants were supplied and the balance amount and as such, the AO considered the entire balance as undisclosed sundry debtors of Bhartiya Oil Company. The AO has not verified from the parties, as mentioned, as to whether the balance appearing in the seized document were actually remained as ‘Debt’ or it has been paid. No corroborative evidence or paper was found during the course of search and seizure operation to prove that there was a debt of Rs. 67,01,380 and Rs. 77,02,747 during the period 2000-01 and 2001-02, respectively. As the name of parties were available with the AO, the onus lies with him to prove that actually the balance were not paid as well as it could have been cross-checked from party’s ledger account. The AO could have also verified from the books of account that the same had been included in the receipt as the payments were already made during the year and there was no debt. Thus, on the facts and circumstances of the case, the addition of Rs. 67,01,380 and Rs. 77,02,747 made during the asst. yr. 2001-02 and 2002-03, respectively is deleted.
4.2. Shri Arun Kumar, learned Departmental Representative for the Department while assailing the order of the learned CIT(A) submitted that the document marked PKC-60, on the basis of which the additions have been made by the AO, was seized from assessee’s premises. The presumption raised in such cases by virtue of the provisions of Section 132(4A) of the Act are twofold : (i) As the seized document was found from assessee’s possession, hence he is the owner of this document, (ii) The entries found in this seized document are true. Learned Counsel further submitted that the AO confronted the assessee with this document as regards the nature of these entries. The assessee took the stand that this diary marked PKC-60 is merely rough worksheet. No reliance can be placed on such entries to determine undisclosed income. As the assessee failed to explain the entries contained in the seized diary, which were not reflected in the seized books of account and return of income, the entire balance of Rs. 67,01,380 and Rs. 77,02,747 for respective years, were considered to be the undisclosed sundry debtors of Bhartiya Oil Company. He further placed reliance on the decision of Tribunal in the case of Rama Traders v. ITO (1988) 32 ITO (Pat)(TM) 483 : (1988) 25 ITD 599 (Pat)(TM) and argued that the AO was justified in doing so in view of provisions of Section 132(4A) of the Act. Learned Departmental Representative further contended that the learned CIT(A) was not justified in holding that the AO had failed to verify these transactions from books of account of those persons, whose names appear in the said diary, to find out whether any debt was incurred by them to the assessee. It was for the assessee to prove that these transactions did not take place or the income earned therefrom was already declared. He further relied on the decision of the Tribunal in the case of Kollipara Subba Rao v. ITO (1990) 32 ITD 668 (Hyd).
4.3. Shri Vinay Kumar Jalan, learned Authorised Representative appearing for the assessee relied heavily on the order of the learned CIT(A) and submitted that the assessee had explained before the AO the circumstances under which this diary used to be maintained by his employee. Even in the course of his examination under Section 131 of the Act by the AO, the assessee repeated his contention. The assessee had clearly explained to the AO that all transactions entered into were duly recorded in the relevant books of account. The employee recording transactions in his diary is not aware of the finality of those transactions. Learned Authorised Representative referred to pp. 59-61 of the paper book to show that the AO took up the examination of this issue 22 months after filing of block return. He further referred to p. 102 of the paper book to assert that the AO did make enquiry from those persons named in the diary ‘PKC-60’ but they did not confirm that the amounts shown in the said diary against their names were due to the assessee during the said period(s). The AO wanted to coerce these persons but when objected to, he stopped arm-twisting method, yet drew adverse conclusions relying on presumption raised as per the provisions of Section 132(4A) of the Act. Disputing the proposition that the presumption in terms of provisions of Section 132(4A) of the Act is available to the AO while making assessment under Section 143(3)/158BC of the Act, learned Authorised Representative referred to the decision of Tribunal in the case of D.K. Gupta v. Dy. CIT (1998) 60 TTJ (Del) 587 wherein it has been held that the presumption under Section 132 (4A) is not available for the purpose of framing assessment under Chapter XIV-B of the Act. He emphasized that the employee wrote the transactions in the diary marked ‘PKC-60’ for his reference only. A glance of the accounts for financial year 2000-01 and 2001-02 would reveal that there are 4 parties for the first year and one more party for the later year. It further shows rate, amount, payment received and balance. However, it is obvious that for the later year, the amount is quite different in case of respective party with no indication as to how the movement has taken place. Further, the AO has noted that many cheques have been found entered in the books of either Bhartiya Oil Company or M/s Maa Durga Service Station (a sister-concern). Learned Authorised Representative further contended that the AO, while presuming that the balance represents sundry debtors for the respective period, did not consider that the entries also indicate ‘rate’ which indicates that these noting do not indicate sales outside books of account, as understood by the AO. He further argued that for treating these figures as undisclosed income, AO was under obligation to bring positive materials on record. To support his proposition he relied on the decision of Tribunal in the case of Kasat Paper & Pulp Ltd. v. Asstt. CIT (2000) 69 TTJ (Pune) 924 : (2000) 74 ITD 455 (Pune).
4.4. We have considered the rival submissions of the parties and have also perused the orders of the authorities below along with the paper book filed by the learned Authorised Representative. We find that the AO has made the additions of Rs. 67,01,380 and Rs. 77,02,747 for the asst. yrs. 2001-02 and 2002-03 on the basis of a diary marked ‘PKC-60’, seized from the office of the assessee in the premises of M/s Maa Durga Service Station, a propriety concern of the assessee’s sister-in-law. We further find that the assessee has explained the AO that the diary belonged to his employee, who was working in the office located in the said service station and the record of transactions in the said diary was in the nature of worksheets only where the transactions were completed and subsequently were taken to the books of account. The AO has also confirmed that cheques were received and were found recorded in the books of account of the assessee or that of sister-concern, as was the case. We have perused the document at p. 4 of PKC-60. where these transactions have appeared and there is no indication that this account relates to the assessee or to the sister-concern. The employee was recording transactions relating to both of them. We further find that for the financial year 2000-01, there are four parties, against which name, rate, amount, payment received and balance are duly recorded. And for the subsequent year, apart from these four, one Khosla Steel Industries appeared. On perusal of these transactions we are agreed to the learned Authorised Representative that these were working sheets maintained by the employee and those transactions maturing, have been duly recorded in the books of account. The learned CIT(A) has taken a clear-cut view that the AO did not verify these so-called balances with the parties whose names were found mentioned. Therefore, he deleted the additions.
Further we find that the transactions appeared in the diary marked ‘PKC-60’ do not reveal that they are partywise account as there is no mention of any bill having been raised against the said transactions. The amounts mentioned therein appeared to be a consolidated figure but date on which these amounts are shown as outstanding is not mentioned. In both the years there is only one instance of payment received appears but the date and mode of receipt are not mentioned. The AO has also noted that cheques received as per this diary are duly recorded in the books of account. These accounts cannot be treated as reliable and properly maintained for another reason also. The next year’s accounts give no indication regarding movement of amount. The parties, appearing at 2, 3 and 4 of the chart above, show drastic reduction in the balances but how the payments were accounted for is not forthcoming from these entries. The learned Authorised Representative has invited our attention to the fact that the AO did make enquiry, which the assessee has not disputed. However, the AO has brought on record the result of such an enquiry. The only plausible conclusion, under these circumstances, would be that the findings of such an exercise was favourable to the assessee. Coming to the applicability of provisions of Section 132(4A) of the Act, we find that the assessee has explained the circumstances under which his employee maintained these documents in the premises of M/s Maa Durga Service Centre. Thus, the ownership is not disputed. However, there is no presumption about the earning of income. The assessment is made under Chapter XIV-B of the Act. The AO cannot make addition on the basis of incomplete entries. The onus rests on the Revenue to establish that the assessee was in receipt of money then, the onus would automatically be shifted to the assessee to prove that the money has been disclosed in the account or the same is not liable to tax. In the present case in hand, the AO has not been able to demonstrate with adequate evidence that the assessee received the amounts in two years as alleged. These entries as recorded in ‘PKC-60″ do not clearly reveal that the assessee has earned income. The assessment of undisclosed income is under Chapter XIV-B of the Act and there is no scope of assumption or presumption while making assessment under this chapter. They are dumb documents on which reliance cannot be placed, unless they are corroborated with other evidences. The ratio of the decision in the case of Rama Traders v. ITO (supra) on which the Revenue placed reliance is not applicable to the facts of this case. Also the fact of the case of Kollipara Subba Rao (supra) is distinguishable and thus not applicable. In our considered opinion we see no infirmity in the order of learned CIT(A) in deleting the additions. Accordingly, we uphold the order of the learned CIT(A) and dismiss the ground of appeal of the Revenue.
5. The second ground of appeal taken by the Revenue is against deletion of Rs. 1,06,90,852 in respect of outstanding debtors found recorded in the seized. documents PKS-1 to 126.
5.1. In this case the AO while completing the assessment proceeding observed that during the course of Search, the business premises of Maa Durga Service Station, a proprietorship concern of Smt. Kanchan Khullar located at Burma mines, Jamshedpur was covered under Section 132 of the IT Act wherein various incriminating books of account and documents marked as PBS-1 to PBS-126 were found and seized. The AO on verification of these seized books of account marked as PBS-102, 103, 90, 88, 83, 108, 76, 67 and 2 found that these are the party ledgers of Maa Durga Service Station for different financial years which contain the details of credit, sales of petroleum products like diesel and petrol, etc. and payment received from various parties. He further found in the party ledgers filed with the return of income for the respective assessment years that the amount of sundry debtors as on 31st March, 1996, 31st March, 1997, 31st March, 1998, 31st March, 1999, 31st March, 2000 and 31st March, 2001 have not been fully disclosed in the return of income of Maa Durga Service Station. The balances of the sundry debtors as per the above referred seized books of account and the details of sundry debtors disclosed in the balance sheet along with the return of income of the respective assessment year the difference has been calculated at Rs. 3,38,97,338, on the basis of which the AO has concluded the assessment. The relevant portions of the AO’s order is reproduced hereunder for the sake of convenience:
It may be noted that the seized book marked as PBS-2 which is the party ledger for the current financial year 1st April, 2001 to 31st Jan., 2002 contains the accounts of various parties to whom goods have been supplied and payments have been received. The extract of balances of different party ledger accounts contained in PBS-2 has been noted at the seized book marked as PBS-12. The seized book PBS-12 also PBS-35. Further, the sales made from 1st Feb., 2002 to 5th Feb., 2002 have been entered in the seized book marked as PBS-5, which contains the sale details of A’ shift. Similarly, the seized book marked as PBS-10 contains the details of sales made from 1st Feb., 2002 to 5th Feb., 2002 for ‘B’ shift. Over and above, the entries of PBS-12, PBS-5, PBS-10, there are many entries of parties in the seized books marked as PBS-35 to whom sales have been made and payments have been received.
The assessee was specifically asked to explain the referred books of account and differences of sundry debtors during the course of assessment proceedings. The queries made and the replies of learned Authorised Representative have been noted in the order sheets dt. 13th Feb., 2004 and 16th Feb., 2004. In the written reply, the learned Authorised Representative the assessee Sri Vinay K. Jalan has stated that reliance cannot be placed on the seized books referred above as they are nothing but just the work book in the due course of business operation in consolidated form which cannot reveal any disclosed income. The learned Authorised Representative has also submitted that the above seized books and documents are neither complete nor contain complete addresses of the parties nor they denote any transactions, which could reveal undisclosed earnings of the assessee in any form whatsoever.
During the course of assessment proceedings, the learned Authorised Representative of the assessee was also rebutted with the difference in the balances of sundry debtors contained in the aforesaid seized books of account and documents and was required to explain as to whether they have been disclosed in the return of income of Maa Durga Service Station or any other concern of Sri Ashok Kumar Vig. The Authorised Representative of the assessee repeated the same reply without specifying the reasons of difference.
The examination and analysis of the entries contained in the aforesaid seized documents reveal that the assessee has heavily indulged into the business of petroleum products outside the books of account. It is to be noted that the seized books of account referred hereinabove contain the actual transaction of the business and have been very systematically and methodically maintained. The modus operandi of accounting becomes clear from the statement of Sri Nagarmal Jangid, an accountant of Maa Durga Service Station whose statement on oath was recorded under Section 132(4) of the IT. Act 1961 wherein in reply to the question “How books of account of the concern are maintained”, Mr. Jangid has clearly narrated the method of accounting of the current year as well as of the earlier years. He has stated that PBS-5 and PBS-10 are the registers in which cash and credit sales are written by two persons of the concern attending A’ & ‘B’ shifts. The day’s cash balance is handed over by the person attending A ‘ shift to his incumbent who attends ‘B’ shift. With the help of PBS-5 and PBS-10, PBS-48, which is the day’s total cash report, is written. Further, with the help of PBS-5 and PBS-10, bills for credit sales are issued and posted in the party ledger marked as PBS-2. Over and above the cash and credit sales few “ucchanti” cash sales are recorded in the seized book marked as PBS-3 for which bills are not issued. For audit purposes, cash book and ledger is separately written wherein only few accounts of actual ledger PBS-2 are taken and the figures of sundry debtors are maintained in lump sum under a single head of debtors. Cash book of the concern is written on the basis of bank’s statement because daily cash report maintained in PBS-48 is torn after three or four days after the inspection of Mr. Ashok Vig……….
The opening balance which is the closing balances as at 31st March, 2001 of other parties have not been disclosed in the balance sheet as at 31st March, 2001 filed along with return of income. During the course of assessment proceedings, the learned Authorised Representative of the assessee was specifically questioned about the fact, which is contained in the written note sheet of the assessment folder wherein he has stated that PBS-2 is the consolidated account of the concerns of Kanchan Khullar and Ashok Vig. The parties’ balances which have been disclosed in the return of Maa Durga Service Station pertain to Maa Durga Service Station and the other parties balances which have not been accounted for in the balance sheet of Maa Durga Service Station relate to the concerns of Sri Ashok Kumar Vig………..
Thus, it is clear that the differences in the balances of the parties are the undisclosed income of M/s Maa Durga Service Station. The debit balances pertaining to the undisclosed business as on the close of the financial year were found not to be appearing in the balance sheet of the assessee for the relevant financial years. Such undisclosed debtors have been found in respect of various financial years.
Since the assessee is carrying out transactions outside the books of account and has not submitted the balance sheet and P&L a/c of the undisclosed business, such undisclosed sundry debtors represent undisclosed assets and are therefore, treated as undisclosed income of the assessee as at the end of the relevant year. In the normal course of such unaccounted business the balances would have been realized by the assessee and rotated in the business, therefore, the additions in respect of subsequent financial years are restricted to the undisclosed total of sundry debtors exceeding the undisclosed income already assessed in the prior years in respect of sundry debtors.
The additions to the total undisclosed income on account of undisclosed sundry debtors are, therefore, worked out to Rs. 1,06,90,852. Accordingly, the sundry debtors accrued to the respective assessment years totalling to Rs. 1,06,90,852 has been added back by the AO to the undisclosed income on substantive basis in the hands of Smt. Kanchan Khullar. Further after taking into consideration the submissions made by Sri Ashok Kumar Vig and Smt. Kanchan Khullar, the undisclosed sundry debtors of Maa Durga Service Station is considered protectively to be the income of Sri Ashok Kumar Vig and accordingly the same was added back to the total income of Sri Ashok Kumar Vig on protective basis. In appeal the learned CIT(A) while deleting the addition has held as under:
The fifth ground of appeal in this case is that the AO was not right in making the addition of Rs. 1,06,90,852 on protective basis when the substantive addition has been made in the hands of Smt. Kanchan Khullar.
I have carefully considered the appellant’s contention as well as gone through the assessment order. The AO has totally relied on the seized documents marked PBS-1 to 126 as well as written submission dt. 23th April, 2002 of the appellant and Smt. Kanchan Khullar. It is seen that Maa Durga Service Station was the proprietorship concern of Smt. Kanchan Khullar. No statement on oath was recorded under Section 132(4) of Smt. Kanchan Khullar as well as the appellant. As the business in the name and style of M/s Maa Durga Service Station belongs to Smt. Kanchan Khullar and nothing has been brought on record to prove that the concern belong to the appellant, except a letter, the protective addition made by the AO is not sustainable and rightly added substantively in the hands of Smt. Kanchan Khullar in order under Section 158BC of the IT Act. Thus, the addition, made on protective basis in the hands of the appellant is deleted.
5.2. learned Departmental Representative while assailing the order of the learned CIT(A) supported the order of the AO and submitted that the AO has made the addition of Rs. 1,06,90,852 on the basis of documents seized from M/s Maa Durga Service Station, a proprietary business of Ms. Kanchan Khullar on substantive basis in her hand. However, the AO also made protective addition of this amount in the hand of the respondent assessee for the reason that both these persons in their written submission dt. 23rd April, 2002 to the DDIT (Inv.), Jamshedpur stated that undisclosed income in respect of M/s Maa Durga Service Station belonged to the respondent assessee. He further contended that the very same learned CIT(A) deleted the substantive addition of the like amount in the case of Ms. Kanchan Khullar as well holding that the AO never proved that the seized material really belonged to her. No consideration was made for the fact that these documents were seized from her premises. Further learned CIT(A) gave no credence to the letter-dated 23rd April, 2002 given by them to the investigating officer.
He pleaded that the addition of the said amount is required to be confirmed either in the hands of the assessee or in the hands of Ms. Khullar. It is intimated that appeal against Ms. Khullar is also pending in the Tribunal.
5.3. On the other hand, the learned Authorised Representative for the assessee, submitted that the substantive addition were made in the hands of Ms. Kanchan Khullar on the basis of seized documents marked PKS-1 to 26 in respect of Maa Durga Service Station, her proprietary concern. It is further stated that the AO had miserably failed to prove as to how and on what basis he construed the notings to be sundry debtors and how the protective orders were passed in the hands of the assessee. He relied upon the case of Tribunal Bangalore Bench in Asstt. CIT v. Late AS. Sengoda Gounder (2002) 77 TTJ (Bang) 587: (2002) 82 ITD 829 (Bang) wherein it has been held that “two parallel assessments, one protective and other substantive are justified when there is a doubt as to the exact assessment year to which the income relates in the case of the same assessee or when there is a doubt as regards the identity of the assessee to whom such income belongs”. In this matter there is no doubt over the ownership of these documents. He, therefore pleaded that the protective assessment has been rightly deleted by the learned CIT(A).
5.4. We have considered the rival submissions of the parties and perused the materials available on records. We have also perused the orders of authorities below including the paper book filed by the learned Counsel for the assessee. It is not in dispute that the documents relied upon to determine undisclosed income of Rs. 1,06,90,852 were found in possession of Ms. Kanchan Khullar from the business premises of her proprietary concern ‘M/s Maa Durga Service Station. The AO has given a clear finding in this regard. Therefore, the aforesaid undisclosed income as determined from seized documents has been added in her hands on substantive basis. Subsequently, the same has been deleted by the learned CIT(A) as no undisclosed asset could be located as a result of the search The reason for protectively assessing the same undisclosed income in the respondent’s hand is his written submission to the DDIT (Inv.), Jamshedpur that any undisclosed income of the service station should be assessed in his hands. We are of the considered view that the protective assessment does not survive as the basis of determination of undisclosed income i.e. seized documents were found from the business premises of Ms. Kanchan Khullar and, therefore, any undisclosed income computed therefrom can be assessed in her hands alone. The AO did not transfer the proceedings in respect of these seized documents in the hands of the assessee respondent under Section 158BD of the Act. Further, the assessee respondent did not include any undisclosed income computed from the seized documents under reference in his block return in Form 2B. Therefore, the protective assessment of this income cannot be sustained in the hands of the assessee respondent. Accordingly, the decision of the learned CIT(A) in this regard is upheld and the Revenue’s ground of appeal is dismissed. Before parting with this ground, we would like to make it clear that our observation in respect of this ground would not prejudice the Revenue’s stand in the case of Ms. Kanchan Khullar pending before Tribunal on merit.
6. The next ground of appeal filed by the Revenue is regarding the deletion of Rs. 2,70,000 by the learned CIT(A), Ranchi in respect of undisclosed deposit made by the assessee in the names of Sunita, Renu & Soni in the HDFC Bank, Jamshedpur, holding the same to be the Stridhan of the depositors.
6.1. In this case also the AO has made the addition on the basis of seized documents marked as PKC-32 at pp. 87 to 98 observing that Mr. Ashok Kumar Vig has made deposits in the name of Sunita, Renu & Sonia at HDFC Bank, Jamshedpur as under:
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Date Name Receipt No. Amount (Rs.) -------------------------------------------------------------- 7.9.2000 Sunita SDCC/LD/8/214 30,000 -------------------------------------------------------------- 7.9.2000 Renu SDCC7LD/8/215 30,000 -------------------------------------------------------------- 7.9.2000 Sonia SDCC/LD/8/216 30,000 -------------------------------------------------------------- 21.9.2000 Renu SDCC/LD/8/223 30,000 -------------------------------------------------------------- 21.9.2000 Renu SDCC/LD/8/224 30,000 -------------------------------------------------------------- 21.9.2000 Sunita SDCC/LD/8/225 30,000 -------------------------------------------------------------- 21.9.2000 Sunita SDCC/LD/8/226 30,000 -------------------------------------------------------------- 21.9.2000 Sonia SDGC/LD/8/227 30,000 -------------------------------------------------------------- 21.9.2000 Sonia SDCC/LD/8/228 30,000 --------------------------------------------------------------
When asked for, the assessee has stated that it belongs to the Stridhan. However, the contention of the assessee was rejected by the AO on the ground that the assessee failed to adduce any documentary evidences to corroborate his submission. Accordingly, the entire deposit of Rs. 2,70,000 is considered as his undisclosed income of Sri Ashok Kumar Vig and added back to his total income for the asst. yr. 2001-2002. Aggrieved by the order, the assessee respondent went in appeal before the learned CIT(A) and the learned CIT(A) deleted the addition in full observing as under:
I have carefully considered the appellant’s contention as well as gone through the assessment order. It is seen from the details of investment mentioned in the order that the deposits were made Sunita, Renu and Sonia. The AO relied on the seized document marked PKC-32, pp. 87-98. The AO has himself mentioned the persons in whose name the deposits stand. No fixed deposits were found in course of search and seizure operation. No corroborative evidence was brought as a result of search to hold that the deposits were made by the appellant. To make any addition as undisclosed investment, the onus is on the Revenue to prove that the investment had been made by the appellant and it was the appellant alone and none else who was the owner of such investments without proving the same, the AO added the deposits, which were in the name of some other persons. Thus, the addition of Rs. 2,70,000 is deleted.
6.2. The learned Departmental Representative for the Department relied on the order of the AO, whereas the learned Authorised Representative for the assessee supported the order of learned CIT(A).
6.3. We have considered the submissions and facts of the case. We have also perused the orders of authorities below along with the paper book filed by the learned Counsel for the assessee. We find that the assessee respondent has explained regarding these investments before the AO that these are ‘Stridhan’. The learned CIT(A) took the view that the fixed deposits were not found in the search. The onus is on the AO to bring material evidence to prove that the assessee respondent has made these investments. In that view of the matter, we are of the view that the observation of learned CIT(A) does not need any clarification as because this being ‘Block assessment’ proceeding, the Revenue has failed to discharge the onus which lies on them. Accordingly, the order of the learned CIT(A) is upheld and the ground of appeal of the Revenue is dismissed.
7. The next ground of appeal taken by the Revenue states as under:
For that the learned CIT(A) has erred in deleting addition of Rs. 11,000 in respect of the difference in the amount of investment noted in the seized documents pp. 37-45 of SK-I against disclosed investment made ignoring the provisions of Sub-section (4A) of Section 132.
7.1. Briefly stated, facts relating to the issue are that the AO has made this addition of Rs. 11,000 as difference in the amount of investment on the basis of the seized documents marked SK-1 at pp. 37 to 45 which are the xerox copy of the sale deed. The AO found that Sri Ashok Kumar Vig has purchased a flat from Chandra Prakash Gandhi on 23rd Dec, 2000 for a consideration amount of Rs. 3,90,000 . He has further incurred expenses on account of corporation tax and stamp duty for Rs. 31,200. Thus, the total investment over the flats at New Delhi works out to Rs. 4,21,000. But in the return Sri Ashok Kumar Vig has shown advance in the name of Sri Chandra Prakash Gandhi for Rs. 4,10,000 only. Thus there is a difference of Rs. 11,000. Accordingly, the AO treated the difference of Rs. 11,000 as undisclosed investment of Sri Ashok Kumar Vig and added back to his total undisclosed income for the asst. yr. 2001-02. Aggrieved by the order the assessee went in appeal before the learned CIT(A) and the learned CIT(A) while deleting the addition observed as under:
I have carefully considered the appellant’s contention. The appellant stated before me that Rs. 11,000 was outstanding. In my view, the AO could have confirmed the actual payment made by the appellant, as the name of the person to whom payment was made was available with the AO. However, since the quantum of undisclosed investment is of meager amount, the addition of Rs. 11,000 is deleted.
7.2. Before us, the learned Departmental Representative strongly relied on the order of the AO whereas the learned Authorised Representative for the assessee relied heavily on the order of the learned CIT(A).
7.3. We have heard the submissions of the rival parties and perused the materials available on record. We find that the AO while making the addition has failed to confirm the actual payment made by the assessee with the person to whom the payment was made. The assessee has also not denied regarding the documents so referred and has duly explained. We, therefore, do not find any reason to interfere with the order of the learned CIT(A). Accordingly, the same is upheld.
8. The last ground of appeal taken by the Revenue is against deletion of Rs. 41,00,000 made under various heads of expenditure in respect of inflation of expenditure to suppress income.
8.1. The facts relating to the issue are that the AO while making the addition on verification of the seized book marked as PKC-41 which is the general ledger of Ashoka Petroleum Transport for the financial year 2000-01, observed that the account of different expenditure incurred under various heads which have been claimed by the assessee in the P&L a/c of Ashoka Petroleum Transport for the relevant asst. yr. 2001-02. On examination of the expenditure account contained in the general ledger and their verification with the items of expenditure claimed under the various head of P&L a/c of the respective assessment years the AO found that there are substantial difference. The seized book of account on the basis of which P&L a/c has been prepared does not contain full details of entries of expenditure. Moreover, the figures of various expenditure accounts have been manipulated according to the convenience to reduce the net profit rate. The heads of following accounts are discussed briefly:
Hire Tanker : Page 52 of the seized book contains the account of hire tanker charges. As per this account, total expenditure incurred is Rs. 23,54,487. Expenditure of Rs. 7,61,439 have been transferred from purchase register. Further, at the bottom grand total has been written in pencil at Rs. 23,54,487. However, in the P&L a/c, the expenditure has been claimed at Rs. 38,54,487. Thus, there is an inflated round figure of Rs. 15,00,000 in the P&L a/c. Meaning thereby that the assessee has inflated the expenditure in the round figure to reduce his net profit.
Repair and maintenance : Page 15 of the seized book reveals total expenditure under the head repairing expenses account at Rs. 6,07,629. An expenditure of Rs. 4,59,512 has been entered as transfer from purchase register. Thus, the total expenditure has been worked out at Rs. 10,72,141. However, in the P&L a/c filed for the respective assessment year, expenditure of Rs. 26,72,141 has been claimed. Thus, the assessee has inflated round figure of expenditure of Rs. 16,00,000 to reduce the net profit of the concern.
Tyre, tubes and flaps : Page 50 of the seized book contains the account of tyre, tubes and flaps expenses. As per purchase register, the total expenditure under this head has been worked out at Rs. 28,05,389. However, in the P&L a/c, an expenditure of Rs. 33,05,389 has been claimed. Thus, there is an increase of round figure of Rs. 5,00,000 in the P&L a/c.
Fooding expenses : Page 8 of the seized book contains the account of fooding expenses. As per this account, total expenditure has been Worked out at Rs. 3,11,682 . However, in the P&L a/c, expenses of Rs. 5,11,682 has been claimed inflating a round figure of expenditure of Rs. 2,00,000.
Rent, tax, insurance expenses : Page 22 of the seized book PKC containing this account reveals that total expenditure comes to Rs. 2,71,401 on which expenditure transferred from bank ledger for Rs. 20,81,410 has been added and thus grand total has been worked out at Rs. 23,52,811 . However, in the P&L a/c, a sum of Rs. 25,52,811 has been claimed inflating a round figure expenditure of Rs. 2,00,000.
Staff salary : Page 42 of the seized book PKC-41 contains this account wherein grand total has been written in pencil for Rs. 5,41,420. However, in the P&L a/c, expenditure of Rs. 6,41,420 has been claimed inflating the expenses by Rs. 1,00,000.
During the course of assessment proceedings, the learned Authorised Representative of the assessee was pointed out to this fact and was specifically required to explain the nature of difference. In reply he has stated that it is a partial account, which cannot be relied upon. The assessee has filed his P&L a/c duly audited and PKC-41 is not the final account of the assessee. Hire charges paid for the tankers were directly made from the control of Sri Ashok Kumar Vig were not taken into account into this ledger. He has further stated that expenses incurred at the place of operation of business have not been accounted for in the aforesaid ledger. The reason for non-accounting in this ledger is because these payments were made directly by Sri Ashok Kumar Vig. However, the AO rejected the claims of the learned Authorised Representative on the ground that the ledger accounts contained in the seized book marked as PKC referred hereinabove clearly indicate that the expenses have been intentionally inflated in the P&L a/c to reduce the tax liability. Accordingly, the entire excess expenditures of Rs. 41,00,000 claimed under the aforesaid heads worked out as undisclosed income of assessee and has added to the total income. In appeal the learned CIT(A) while deleting the addition observed as under:
The seventeenth ground of appeal in this case is that the AO was not right in treating the partial account to be full account and without any evidence in support of the same, the AO has made extraordinary addition of Rs. 41 lakhs under various heads discussed in pp. 20, 21 and 22 of the assessment order. It has also been stated that the AO disregarded the explanation of the assessee and made an aggregation on the assessee charging him for ciphering out of the fund from his regular assessment by inflating expenses in order to carry out undisclosed business. The appellant further stated that the AO did not locate any undisclosed business of the assessee even after the search and seizure operation was carried out.
The AO added an amount of Rs. 41 lakhs as there was a difference between the amount shown in P&L a/c and amount shown in seized document marked PKC-41 under the head Hire tanker, repair and maintenance, tyre tubes and flaps, fooding expenses, rent tax and insurance and staff salary.
I have carefully considered the appellant’s contention as well as the observation of the AO The AO has placed reliance on the seized book PKC-41, which is the general ledger of M/s Ashok Petroleum Transport. The AO pointed out the difference under different heads of expenses claimed in the P&L a/c and the seized document as per query No. 8 entered in the order sheet dt. 16th Feb., 2004. The appellant replied that he filed his P&L a/c duly audited whereas PKC-41 is not the final account. It has also been stated before the AO that hire charges paid for the tanker directly from the control of the appellant not taken into account into this ledger and hence, it was stated that partial account cannot be relied upon. S repair and maintenance, Tyre tubes and flaps, fooding expenses, rent, taxes and insurances, staff salary, etc. which have been paid at the operation of business has not been accounted for in this ledger. The appellant also submitted that the reason for non-accounting in this ledger was because the payments were made directly by the appellant which is substantiated by the fact that some figured amount was disbursed by him from his house which was not incorporated in this ledger and these amounts were incorporated in final accounts which were prepared after that. From the assessment order, it appears that the A.O. has not controverted the contention of the appellant by bringing any corroborative evidence. The AO should have examined each and every expense. He could have verified the expenses, particularly the difference in expenses claimed in P&L a/c and as per seized document under the head ‘Rent, tax and insurance’ which could easily be verified, as entire transaction was made with the Government organization. Similarly, staff salary could also be verified from the pay-roll register and if he would have found that the entries made in the seized document is correct and there is inflation of expenses to reduce the net profit, the addition would have been sustained. The AO did not take any pain to establish that actually there is a difference by bringing material on record. Onus was on the AO to prove that the appellant had inflated the expenses in the manner presumed. On the facts and circumstances, I am of the view that the addition has been made without any material on record and without any corroborative evidence and as such, addition of Rs. 41,00,000 is deleted.
8.2 Sri Arun Kumar, learned special counsel supported the order of the AO.
8.3 On the other hand, Sri Vinay K. Jalan, learned Authorised Representative while relying on the order of the learned CIT(A) submitted that these payments were directly made by Sri Ashok Vig through the bank account. In course of his submission before the learned CTT(A), it was explained further that the transactions were through the disclosed bank account of ICICI bank contained in the Sch. J of the balance sheet filed along with the return of income. The following extracts of the debits in the bank account was explained:
——————————————————————————–
Cheque No. & date Drawn on Amount Head under Relevant
which debited seized
document
referred
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507710 dt. 13-11-2000 Har Narayan Singhdeo 15,00,000 Hire Tanker A/c Counterfoil of
cheques
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507713 dt. 15-11 2000 Aswani body builders 16,00,000 Repair and --do--
maintenance
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507715 dt. 16-12-2000 Jain tyre dealers 5,00,000 Tyres, Tubes --do--
and Flap a/c
--------------------------------------------------------------------------------------
507718 dt. 23 12 2000 Janta Caterers 2,00,000 Fooding --do--
expenses
--------------------------------------------------------------------------------------
507719 dt. 10-01-2001 Oriental Insurance 2,00,000 Rent, tax and --do--
Insurance
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507724 dt. 18 01-2001 Aftab Alam 60,000 Salary a/c --do--
--------------------------------------------------------------------------------------
507727 dt. 27-01-2001 Jhangir Hussain 40,000 Salary a/c --do--
--------------------------------------------------------------------------------------
Total 41,00,000
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It is further contended that the expenditure of Rs. 41,00,000 identified by the AO as inflated expenses in the return of income, as not recorded in the seized documents , is factually incorrect. The counterfoils of the cheque books from where these payments were made are also under seizure vide Annex. ‘A’. He therefore pleaded that the ground of appeal in this regard deserved to be dismissed.
8.4. We have considered the rival submissions of the patties and perused the materials available on record including the paper book filed by the learned Counsel for the assessee. We find that the AC) while completing the assessment, has not considered the payments made by the assessee through chequer; as pointed out during the course of hearing. The assessee has given the same explanations before the lower authorities also. It is apparently clear that the cheques were drawn on “on account”, which was duly reflected in the audited accounts. The learned Departmental Representative has not been able to controvert the submissions made by the learned Counsel for the assessee in this regard. Therefore, we see no infirmity or illegality in the order of the learned CIT(A). Accordingly, the order of the learned CIT(A) is upheld and the ground of appeal taken by the Revenue is dismissed.
9. In the result the appeal of the Revenue stands dismissed.