ORDER
N.S. Chopra. A.M.
1. This appeal is directed against order dt. 30th November, 1996, passed by the AO, i.e., Dy. CIT, Spl. Range 24, New Delhi, under s. 158BC (c) of the IT Act for the block period from asst. yrs. 1986-87 to 1996-97 (1st April, 1985 to 17th November, 1995) pursuant to action under s. 132(1) of the Act taken against the appellant on 17th November, 1995. In response to notice issued by the AO under s. 158BC (a), the appellant-assessee declared nil income. Against this the AO computed assessee’s income at Rs. 2,97,16,770 with tax liability @ 60 per cent thereof at Rs. 1,78,30,062. The appellant is engaged in the business of real estate, including builders and developers besides financing business. The sources of income include income from house property and other sources.
2. The assessee has challenged the validity of the assessment and has also contested all the additions aggregating to Rs. 2,97,16,770 as under :
(a) Unaccounted payments 1,50,000 (Para 5 of
Asstt. Order)
(b) Transaction in trial balance as 2,50,10,548 (Para 8)
as not property explained
(c) Unexplained expenses 75,000 (Para 10)
(d) Unaccounted expenses 67,000 (Para 12)
(e) Unexplained expenses 95,000 (Para 15)
(f) Cash receipt and expenses 250 (Para 17)
(g) Cash receipt and expenses 20,680 (Para 17.1)
(h) Unaccounted payments 11,700 (Para 18)
(i) Unaccounted receipts and payments 1,09,478 (Para 19)
(j) Expenses 1,60,000 (Para 21)
(k) Payments against vacation of flat 50,000 (Para 22)
(l) Unexplained cash receipts and expenses 1,23,899 (Para 24)
(m) Unexplained cash receipts and expenses 12,200 (Para 24)
(n) Unexplained cash receipts and expenses 25,704 (Para 24.2)
(o) Purchase of land 50,000 (Para 25)
(p) Transaction regarding purchase of 37,55,316 (Para 26.1)
property
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Total 2,97,16,768
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3. Shri O. P. Sapra, the learned authorised representative for the assessee submitted that the AO has made a number of additions on the basis of mere presumption by invoking the provisions of s. 132(4A) of the Act. He submitted that presumption available under s. 132(4A) is only for the limited purpose of proceedings under ss. 132(5) and 132(11) and cannot be invoked by the AO for making such additions in block assessment under Chapter XIV-B as inserted by the Finance Act, 1995, w.e.f. 1st July, 1995, prescribing special procedure for assessment of such cases by ignoring the provisions of ss. 68, 69, 69A, 69B and 69C of the Act. In support of this proposition, he placed reliance on Allahabad High Court judgment in the case of Pushkar Narain Saraf vs. CIT (1990) 183 ITR 388 (All). He also filed a copy of order dt. 30th January, 1991 of Delhi Bench of the Tribunal in the case of M/s. Rajpal Singh Ram Avtar in ITA No. 2051(Del) 87. Continuing with his submissions he contended that the onus lies on the Department to prove that the assessee actually made some investments if any, recorded in the seized papers and such onus is to be discharged by the Revenue by bringing on record some cogent material and evidence. According to him, mere possession of an asset or a seized paper does not per se establish the ownership of the assessee in relation to such alleged asset/investment. He submitted that the AO has not discharged such onus at all by bringing any material/evidence on record to prove assessee’s ownership of the asset/investments and expenditure is made the basis of addition as assessee’s income. He also relied on various judgments of the High Court, including Addl. CIT vs. Miss Lata Mangeshkar (1974) 97 ITR 696 (Bom). CIT vs. Lal Chand Babu Lal Jain (1985) 151 ITR 360 (Bom), Addl. CIT vs. S. Pichaimanickam Chettiar (1984) 147 ITR 251 (Mad), etc. Shri Sapra contended that the assessee is keeping books of accounts and during search no undisclosed income, assets were found, Inasmuch as the cash and shares, as found, were duly explained and stand accepted by the AO. He submitted that in the absence of any material/evidence brought on record, the additions made are unjustified.
3.1 Shri Sapra then addressed on each and every addition individually, which we will advert later in our order.
3.2 The learned Departmental Representative, Shri Y. K. Ghaiya, on the other hand, contended that it is an admitted fact that the seized papers were found from the possession of the assessee. He submitted that s. 132(4A) clearly provides that any books of accounts/other documents, money, bullion, jewellery found in possession of any person in the case of a search, shall be presumed to be belonging to such person and the contents of books of accounts, documents shall also be presumed to be true. He submitted that provisions of s. 132(4A) are equally available to the Revenue while framing regular assessment. He submitted that the provisions cast a burden on the assessee to rebut the aforesaid statutory provisions of s. 132(4A) and such a rebuttal is not available merely by denial on the part of the assessee but it has to be rebutted on the basis of some cogent material or evidence, which is lacking in this case. He, therefore, submitted that the AO rightly made the impugned additions. The !earned Departmental Representative also addressed on merits of various additions made by the AO.
4. We have heard the learned representatives at length and have carefully gone through the records/paper-book filed by both the parties. Before considering and deciding on merits of individual addition, we are of the considered view that the proposition as canvassed by the learned authorised representative for the assessee Shri Sapra, that presumption under s. 132(4A) is available only for the limited purpose of s. 132(5) /132(11) and not for the purpose of framing assessment under Chapter XIV-B, is well founded. That the provisions of ss. 68, 69, 69A, 69B and 69C are statutory provisions and cannot be given a go bye as is also not done either under the new procedure prescribed for framing of assessment under Chapter XIV-B. As a matter of fact sub-s. (2) of s. 158BB itself provides that, “In computing the undisclosed income of the block period, the provisions of ss. 68, 69, 69A, 69B and 69C shall, so far as may be, apply and references to “financial year” in those sections shall be construed as references to the relevant previous year falling in the block period including the previous year ending with the date of search or of the requisition”.
4.1 However, even without the availability of such presumption as contained in s. 132(4A) during the course of assessment proceedings, the initial onus of proving that the assessee was not the owner of seized material is on him as it is not in dispute that the material relied upon by the AO for making the addition was without dispute found and seized from him. Therefore, the learned Departmental Representative is right when he says that burden of proof lies on the assessee. But at the same time we are in agreement with the learned authorised representative for the appellant that before invoking the provisions of ss. 68, 69, 69A, 69B and 69C it will be essential to ensure the fulfilment of all the conditions precedent to the existence of unexplained investments/expenditure, etc., for which the onus lies on the Revenue. The relevant provisions can be invoked only if it is factually found that the assessee has made such investments or incurred such expenditure and it was assessee alone and none else who was the owner of such investments, etc. It will have to be further established by the Revenue that such amounts have not been recorded or/are in excess of the amounts recorded in the books of accounts, if any, maintained by the assessee and the assessee offers no explanation about such amounts or explanation offered is not satisfactory. Only then such amounts are deemed to represent assessee’s income. The facts must be found clearly to bring an item within the aforesaid deeming provisions and it will have to be established by the Revenue that all the above circumstances do factually exist. It has further to be found out that if some expenses have been incurred outside the books of accounts or such expenditure is not fully recorded in the books of accounts, if any, maintained by the assessee, as to whether such unrecorded expenditure represented personal expenditure or pertained to business.
4.2 It is now in the light of aforesaid principles of law that we have to examine various items treated as undisclosed income of the appellant as challenged before us.
5. The first addition is of Rs. 1,50,000 (para 5 of assessment order). Connected with this addition is an addition of Rs. 11,700 (para 18 of AO). These additions were based on page 51 of Annexure 1 of the seized documents (copy at pp. 47-49 of the paper book). It was explained that the assessee is not connected with this document and entries thereon do not indicate any link thereof with the assessee. The explanation rendered was found unacceptable and the AO added the amounts.
5.1 The learned authorised representative, Shri Sapra, reiterated the above submissions before us also. Having heard the learned representatives of the parties and after going through the document in question, there is no doubt in our mind that the assessee is directly linked with the transactions recorded with page 79 of the paper-book clearly indicating the name of the assessee “Devenderji” and also of his brother (Surenderji) vide page 47 of the paper book and both are admittedly living together at the address given on these documents, which was undeniably found from the possession of the assessee.
There is, thus, no plausible explanation coming forth from the assessee. We, therefore, do not find any material whatsoever on record justifying another view. Therefore, these additions of Rs. 1,50,000 and Rs. 11,700 stand confirmed.
6. Next addition is of Rs. 2,50,10,548 (Para 8 of AO). According to the AO following computerised trial balance (TB for short) was found from the possession of the assessee during the course of search :
(a) TB as on 6th April, 1995 (pp. 16 & 17 of Annexure AZ)
(b) TB as on 30th September, 1995 (pp 4-5 of Annexure A1)
(c) TB as on 9th November, 1995 (p. 41 of Annexure 9)
6.1 Photostat copies of above have been placed at pages 49 to 65 of the paper-book filed by the assessee and the learned Departmental Representative has also filed photostat copies of the TBs as on 9th November, 1995, and 30th September, 1995, in the paper book filed.
6.2 The AO has observed that page 41 of Annexure 9 (c above) is a T13 on 9th November, 1995, processed by A. Makhija & Co. which depicts various narrations/ entries along with respective figures and this TB tallies 1,99,540.58, which is coded in two digits/zeros and accordingly actual figure comes to Rs. 1,99,54,058 after removing the decimal between zero and five. In arriving at this conclusion the AO has referred to a debit of Rs. 47.23 shown as “Account GAR 11 Exp. 52 Ishwar Nagar”, which he tallied from page 53 of Annexure Al to the Panchnama of Metropolis Locker No. 701 in the name of the assessee. We may mention here that the assessee has also placed a copy of this paper at page 101 of the paper book which shows payment of various expenses amounting to Rs. 4,723 incurred under the head “Ishwar Nagar”. The AO has then observed as under :
“It clearly establishes that the amount shown as Rs. 47.23 in the trial balance referred to above actually indicates Rs. 4,723 which means that all entries have been suppressed by removing two digits. There are other instances of similar nature which are discussed below :
8.3.1 “A/c CAG 05 Green Park Flat Gopal” shows debit balance of Rs. 16,722. It is a fact that Mr. Gopal Kapoor has been admittedly paid total sum of Rs. 16.80 lacs (13.80 lacs cash + 3 lacs cheques) as per receipt placed on pages 10 and 14 and agreement at pages 11 to 13 of Annexure 1 (Metro Locker). It might be that 7,800 were to be paid later on or might have been short, but receipts in round figure might have been obtained. It means that the said entry of Rs. 16,72,000 is also tallied with above supporting documents.
8.3.2 Shri Kanwar Sain Aggarwal was a tenant on 1st floor of G-42, Green Park who had surrendered his tenancy right for total consideration of Rs. 17.01 lacs excluding cost of furniture at Rs. 50,000 and was paid Rs. 1.60 lacs till 16th October, 1995 vide two receipts placed at S1. Nos. 75 and 76 of Annexure A (Metro Locker). It appears that out of Rs. 17.01 lacs only Rs. 4,00,000 were outstanding as on 9th November, 1995 and balance might have been paid and hence, Rs. 4,00,000 balance was shown as liability in credit side of trial balance.
8.3.3 ‘A/c GAM 06 Madan S-7 A/c’ shows debit balance of Rs. 4,000.00 (coded in two digits). Smt. Madhu Madan was a tenant in S-7, Green Park, who had been paid a part payment of Rs. 4,00,000 (coded as 4,000.00) for vacation of her portion against total consideration of Rs. Lacs.
8.3.4 On the basis of above tallied entries it is conclusively proved that the amounts had been coded in two digits in the trial balance which reflect the true state of financial affairs. Therefore, it is clear that the trial balances represent the figures after omitting two zeros, hence, the maximum amount in the trial balances is Rs. 2.50,105.48 which in fact is Rs. 2,50,10,548. The same is outside the books. In absence of proper explanation the highest amount of trial balances as on 30th September, 1995, is treated to form part of undisclosed income of the assessee as per provisions of s. 132(4A) of the IT Act, 1961 and the same is added as per above discussion for block assessment purposes for the block period F.Y. 1995-96.”
7. Shri Sapra, the learned authorised representative for the assessee at the very outset submitted that the debit of Rs. 47.23 shown in the TB on 9th November, 1995, is a punching mistake while feeding the data in the computer by the appellant who is not well versed in the use of computer. It was an honest punching mistake according to Shri Sapra, particularly when the amount of Rs. 4,723 represented expenditure incurred in connection with Ishwar Nagar property, which did not even belong to the appellant when it actually belongs to a private limited company, namely, Raj Hans, Sales Pvt. Ltd. in which assessee’s brothers are directors and even other expenses mentioned therein is of revenue nature. He further made grievance of the fact that the AO in the course of assessment proceedings did not put to the assessee the above specific item of Rs. 47.23 and also his suspicion and misgivings about other items referred to by him in the assessment order, as reproduced above, before drawing adverse inference against the assessee resulting in the impugned addition. He submitted that a bona fide mistake as of punching Rs. 4,723 as Rs. 47.23 did not permit the AO to assume of entires in various TBs were codified as such, thus, leading to an addition of this proportion. Continuing with his submissions, Shri Sapra submitted that as regards “A/c CAG 05 Green Park Flat Gopal” showing debit balance of Rs. 16,722 the AO had merely gone by suspicion and surmises when he himself has observed that “it might be that Rs. 7,800 were to be paid later on or might have been short but receipts in round figures might have been obtained”. Shri Sapra submitted that it was explained that the payment of Rs. 16,80.000 against purchase of first floor of K-52, Green Park property, vide para 13 of letter dt. 1st August, 1996, filed before the AO (paper-book pages 7 to 17), which was found recorded in the account books seized during search and the AO himself has accepted the same and, therefore, no room was left for any suspicion on the part of the AO. Similarly, with regard to the surrender of tenancy right of Kanwar Sain Aggarwal, a tenant of first floor of G-42, Green Park, for total consideration of Rs. 17.01 lacs, the AO had acted on surmises/ conjectures when he says that it appears) that out of Rs. 17.01 lacs only Rs. 4.00 lacs were outstanding on 19th November, 1995, and the balance might have been paid and hence. Rs. 4.00 lacs was shown as liability in the TB. Shri Sapra drew our attention to assessee’s explanation vide para 5 of his letter dt. 26th August, 1995 (paper-book pages 18 to 23), and also to letter dt. 28th August, 1996 (paper-book page 24-25), by which the assessee explained that his brother Kailash and Sanjeev Gupta were the owners of the said property and complete details of the payments of Rs. 2,10,000 actually paid were furnished and this explanation has been accepted by the AO himself vide para 22.1 of the assessment order in the following words :
“22.1 However, it is verified that the assessee did not get vacant possession of the said property and Shri Kanwar Sain Aggarwal still remains in the aforesaid property and there is no other evidence by which it can be seen that some more payment has been made by the assessee, therefore, no further addition is made on this issue.
8. Therefore, Shri Sapra contended that in view of above findings given by the AO himself, question of any presumption on his part to say that out of Rs. 17.01 lacs only Rs. 4.00 lacs was outstanding as on 9th November, 1995, and balance might have been paid, did not arise. He further submitted that even the seized papers do not show that the assessee has paid more than Rs. 2.10 lacs to Kanwar Sain Aggarwal. Shri Sapra further brought to our notice that even the tenancy rights had not eventually been surrendered by Kanwar Sain, as has been confirmed by the AO in para 22.1 of the impugned order, as reproduced above.
9. Regarding “A/c GAM 06 Madan S-7 A/c” showing debit balance of Rs. 4,000 (alleged to be coded in two digits) against Smt. Madhu Madan, a tenant of S-7, Green Park, the learned authorised representative explained that the tenant had been paid Rs. 6.00 lacs as per details given in para 8 of assessee’s letter dt. 1st August, 1996 (supra), and such payments were duly recorded in the seized books of the owner of the property, i.e., Amit Gaurav and Ashish Gupta, minor children of Shri S. K. Gupta, assessee’s brother separately assessed and therefore, presumption of the AO that Madhu Madan had paid a part of payment of Rs. 4 lacs to the assessee was not justified. The amount of Rs. 4,000 as per TB, according to Shri Sapra, is on account of expenditure incurred by the assessee on behalf of Madhu Madan. It was, therefore, emphatically argued that the AO was not justified in holding that it was conclusively proved by him that the amount had been coded in two digits in the TB. The learned authorised representative took us through the assessee’s letter dt. 22nd August, 1996, para 1 (already referred to above) whereby the appellant had explained the nature of his business, i.e., estate agent and developers during the course of which he had to incur various expenses, such as relating to registration, mutation of properties, visiting various authorities like DDA/MCD for his family properties and also his clients. Similarly, he is required to deal regularly with contractors/employees and is often required to indicate, petty expenses on ad hoc basis which are finally settled on submissions of final bills on imprest account. Sometimes there are petty pay-offs for liaison work, entertainment for which no supporting vouchers are available, though incurring of such expenditure is necessary in the nature of assessee’s business. This imprest account was sorted out and ledgerised in regular books of accounts from time to time on settlement of an account for expenditure on imprest account. Shri Sapra further took us through various items appearing in the computerised TB along with supporting documentary evidence (pages 30 to 38 of TB) also photocopies of imprest ledger which has been seized, as Annexure A2, along with TBs, copies of relevant pages placed at pages 110 to 129 of the paper book and impressed upon us that various figures indicated in the TBs were not at all codified figures. He submitted that an insignificant and unintentional mistake as punching Rs. 47.23 instead of Rs. 4,723 could not afford a valid basis for the monumental addition made when, on the other hand, other figures as supported by evidence on record indicated an altogether different picture. This, according to him, is not justified. According to him, an insignificant mistake could not entitle the AO to make the impugned addition. He relied on (1970) 76 ITR 718 (SC) (sic).
9.1 On the other hand, the learned Departmental Representative relied on findings given by the AO and submitted that admittedly Rs. 47.23 is Rs. 4,723 and, therefore, this was sufficient for the AO to conclude that the figures in the TB were codified.
10. We have heard the learned representatives carefully and at length. We have also gone through the relevant records, including copies of trial balance seized during search, as also various other documents. We are of the considered view that the inference drawn by the AO that figure in the TBs are codified, is not correct notwithstanding the fact that Rs. 47.23 is actually Rs. 4,723. Our reasons for reaching this conclusion are :
(i) The explanation is that there occurred a punching mistake while feeding Rs. 4,723 in the computer when it was punched as 47.23. The mistake is unintentional and bona fide when we take into account details relating to Rs. 4,723 as per paper book page 101, having also been seized during the course of search, which indicates that the amount represents expenses incurred on a property at Ishwar Nagar, which does not belong to the appellant but to Raj Hans Sales Pvt. Ltd., also engaged in real estate business owned by other members of the assessee’s family. Such expenses are cartage, petrol, bricks, cement, sweets incurred on 28th, 29th and 30th October. It appears that the assessee fed the data into the computer reflected in the various trial balances which not only pertained to him and his own business but also pertained to various members of his family and/or various concerns, in which the appellant and/or his family members are interested. We are informed that all members of assessee’s family and various connected concerns are separately assessed to income-tax.
(ii) As regards the other three instances quoted by the AO in paras 8.3.1, 8.3.2 and 8.3.3, we are in agreement with Shri Sapra that the AO has merely gone by suspicion, surmises and conjectures. Suspicion, however strong, cannot replace evidence. In view of the documentary evidence led by the assessee before the AO that he had paid a total sum of Rs. 16.80 lacs, which has also been accepted by the AO, it did not entitle the AO to infer in para 8.3.1 that Rs. 7,800 might have been paid later on or might have been short. The amount of Rs. 16,722 appearing on debit side of T.B. against account “Green Park Flat G. Pal” it was explained in the course of arguments that the same represented expenditure incurred by the assessee on account of commission and other incidental expenses in respect of purchase of property from Gopal Kapoor mentioned in TB as GPAL, the owner of the property. It is also pertinent to point out here that on the one hand the AO is treating all the items appearing in the trial balance as outside the account books and at the same time has tried to compare/tally with the recorded transaction as per seized books. This is self contradictory.
(iii) As regards Kanwar Sain Aggarwal, a tenant of FF of G-42, Green Park, the AO has himself recorded a finding in para 22.1 that he has verified that the assessee did not get vacant possession of the said property and Kanwar Sain still retains the property and that there is no other evidence by which it can be Verified that some more payments have been made by the assessee. After having recorded such a categorical finding the AO was not justified to assume that of amount of Rs. 17.01 lacs, only Rs. 4.00 lacs was outstanding as on 9th November, 1995, and the balance might have been paid, as observed by him in para 8.3.2. Our attention was also invited to page 126 of paper-book which is copy of account of Kanwar Sain appearing in the seized imprest ledger where the following entries appear :
Cash (torn notes) 100×22 = 2,200
50×36 = 1,800
It is the submission of Shri Sapra that admittedly cash amount of Rs. 1,60.000 was paid out of Rs. 2.10 to Kanwar Sain, as per details given in assessee’s letter dt. 22nd August, 1996, the relevant portion being at page 22 of the paper-book. It was explained that out of the said cash paid, Kanwar Sain has given back Rs. 4,000 on account of torn notes to the assessee, which appear on the credit side of the TB against name of Kanwar Sain. The learned Departmental Representative could not controvert the above facts/evidence. The explanation given is, thus, plausible as strengthened by the evidence at page 126 of paper book, as already mentioned above.
(iv) Regarding Rs. 4,000 in the account of Madan 8-7, there is nothing on record to prove the assumption of the AO that Madhu Madan, a tenant of 8-7, Green Park, had paid part payment of Rs. 4 lacs (coded 4000.00) for vacating her portion. On the other hand, the assessee vide letter dt. 1st August, 1996 (page 9 of paper-book) had explained to the AO that she had been paid Rs. 6 lacs on two different dates before the date of search and payments made are duly recorded in the seized books which has also been accepted by the AO. The AO neither recorded the statement of Madhu Madan nor did he require the assessee to produce her. On these facts and under these circumstances the explanation rendered by the appellant Is plausible and, therefore, acceptable. We are also informed that property in question did not belong to the assessee but is owned by children of his brother, Shri S. K. Gupta, who are existing assessees in their own right.
10.1 Coming to the instances quoted by the assessee before the AO to prove that figures in trial balances are not coded, as alleged, as per details at paper book page 30, 31 and 38, we consider it necessary to discuss a few of them;
(a) In the TB on 30th September, 1995 (paper-book page 59), and TB of 9th November, 1995 (paper-book page 51), there is a debit of Sharwanji Loan a/c – Rs. 4,000. The same figure appeared in the imprest ledger at page 112 of PB. The assessee had also filed an affidavit before the AO (paper-book page 45) confirming the loan advanced. He is in service as senior assistant in the Office of the XEN, Ranjit Sager Dam, Pathankot. This remains uncontroverted before the AO, as also before us. Therefore, the affidavit has to be accepted as correct. This demolishes AO’s basis of inference against the assessee when he made the addition under discussion.
(b) In TB on 9th November, 1995, there is debit of Rs. 10,000.00 in the account of Sushil Rattan, which has been treated as Rs. 10 lacs by the AO following his assumption that a decimal has been inserted to hoodwink the Department. A perusal of paper book page 116, which is imprest ledger account of this very party, revealed that it represents balance b/d Rs. 5,000 plus Rs. 2,900 representing purchase of cement vide Bill No. 34784, dt. 23rd June, 1995, besides certain other expenses. A copy of this bill is at page 33 of PB and shows that it was issued by M/s. Dasmal Gian Chand, B-25, Pralhad Market, Karol Bagh, in respect of 20 bags of non-levy ACC cement @Rs. 145 per bag or Rs. 2,900. Now here is documentary evidence as seized from the assessee which again demolishes the basis adopted by the AO in making the impugned addition under dispute. Sushil Rattan is admittedly a contractor working for the assessee. He is assessed to income-tax by the same AO, as observed at page 23 of the assessment order. All this remains uncontroverted.
(c) In the TB on 30th September, 1995, there is a debit of Rs. 1,800 in “GP Flat GPAL A/c”, which also appears in seized imprest ledger (paper-book 113) which reads as under :
“A/c of K52, G Pal A/c
Commission paid to A. Sharma 1 per cent commission Rs. 1,800.00”
It was explained that vide receipt, paper-book page 105, issued by Gopal Kapoor, a payment of Rs. 1,80,000 was made towards advance money and part payment for sale of his Ground Floor flat, K-52, Green Park, on which commission @ 1 per cent is Rs. 1,800 was paid to Shri A. Sharma, a broker which also appears in the TB. This again fully supports assessee’s stand and equally negates AO’s inference.
(d) In TB dt. 9th November, 1995, one item of Rs. 500.00 is shown in Ved loan a/c (paper book page 118), is copy of imprest ledger account in the name of Deepti Mukesh account expenses indicating Ved cash – 500.00 (Chattarpur Mandir Petrol). Accordingly, there could be no expenses on petrol of a magnitude of Rs. 50,000 by any stretch of imagination, as is inferred by the AO when he read Rs. 500.00 as Rs. 50,000.
(e) Rs. 2,300 appears in TB dt. 9th November, 1995, as also in TB of 30th September, 1995, on the debit side in Rajokri account. This account also appears in the seized imprest ledger (paper-book page 112) is the name of Rajokri Exp. Delhi a/c which shows balance b/d 2,300.00 (Regd. exp. old). Affidavit of Devi Dayal dt, 11th November, 1996, filed before the AO (page 41 paper-book) affirming that he is a regular income-tax payer, Ward No. 15(1), and that he had purchased agricultural land at village Rajokri and that he had requested the assessee to get the said property mutated in his favour in MC/Tehsil records, for which a sum of Rs. 2,300 was spent by the assessee as payable by Devi Dayal as on 17th November, 1995. These facts supported by affidavit of Devi Dayal also remain uncontroverted. We are informed that Devi Dayal is presently assessed with the same AO.
(f) Rs. 1,000.00 as credit in Titoo a/c in TB dt. 9th November 1995, which also appears in seized imprest ledger (paper-book 129) where it is mentioned amount of Rs. 1,000.00 represented “for inverter repair payable M-15 G.K.” For inverter repair the amount obviously could not be Rs. 1 lac, as is inferred by the AO, as against Rs. 1,000 shown by the assessee.
(g) Rs. 4000 in TB dt. 9th November, 1995, also appears in imprest ledger, page 126 of paper-book which represents return of torn notes received back from Kanwar Sain, as discussed earlier, which again lends support to assessee’s case against allegation of codification of figures by the AO.
(h) Rs. 4,000.00 on credit sade of TB dt. 6th April, 1995 (paper-book page 64), in the name of Manju as on 30th September, 1995 (page 58 of paper-book) and 9th November, 1995 (page 53 of PB). Manju has filed her affidavit before the AO (PB page 43) confirming having advanced this amount to the assessee. She is regularly assessed to income-tax in Ward 19(4), New Delhi, GIR No. 14088. This remains uncontroverted.
10.1A Same is the position with regard to Rs. 2,541.14 appearing on credit side of TB on 9th November, 1995, against BPA Loan A/c. Braham Prakash Agarwal has confirmed this. He has filed his affidavit (PB 46-A); he is assessed to tax [Ward 20(6)].
10.2 Such examples can be multiplied. Therefore, the facts mentioned above supported by documentary independent evidence have neither been disapproved nor controverted by the Revenue.
10.3 On a careful analysis of facts and circumstances as also evidence on record, as discussed above, we agree with the learned authorised representative for the assessee, Shri Sapra, that there was no conclusive instance available with the AO with the exception of Rs. 47.23, as mentioned in para 8.3 of the assessment order, which we have on the basis of evidence on record, held that it was a punching mistake, justifying the inference drawn by the AO against the assessee. On the other hand, dozens of instances, some of which are mentioned above, on the contrary come successfully to assessee’s rescue.
10.4 It was further pointed out by Shri Sapra that Page 14 of Annexure – 6(G-25), as seized, shows certain figures as on 14th November, 1995 (page 133 of PB) where the assessee has mentioned figures in short but on the top of it, it was indicated in thousands or lacs and such figures have been duly accepted by the AO after considering assessee’s explanation dt. 22nd August, 1996 (Para 2 PB 18 to 23). There is yet another seized paper (PB page 99, Annexure A-45) which mentions some figure on the left hand side, which are codified but all of them appear in the trial balance as found in full figures, as is evident from the following by way of illustration :
———————————————————————–
Sl Description Figures Figures in full in trial
No. mentioned at balance of 9th November,
page 99 of PB 1995 (PB 50-53)
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1. Anil S. Nagar 5.00 5,000 (PB 51)
2. Ajay Sonepat 4.00 4,000 (PB 51)
3. Manju 4.00 4,000 (PB 52)
4. Marwah 20.00 20,000 (PB 52)
5. Narela 25.00 25,000 (PB 52)
6. Naresh 5.00 5,000 (PB 52)
7. SKG 7.00 7,000 (PB 52)
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We, cannot, therefore, imagine that having already put the above figures in code, (paper-book 99), the assessee would further codify the same in computer by mentioning such figures in the trial balance. It, on the other hand, conclusively proves the case of the appellant that the figures in TB are not codified, as alleged. All the same, the next issued which arises, is what should be the undisclosed income on the basis of trial balance as on 30th September, 1995, which gives the maximum total of Rs. 2,50,105.48 The AO without being specific on any particular entry merely called upon the assessee to explain the nature of transactions and how the same have been recorded in the books of accounts and why these should not be added as assessee’s undisclosed income vide letter dt. 19th July, 1996. He did not examine the assessee either. The assessee filed his replies on 1st August, 22nd August, 28th August, 1st November, 14th November and 15th November, 1996 (paper-book 7 to 46), which we have already discussed in our foregoing paragraphs. The assessee also explained a few entries in support of his contentions. Yet the assessee has not explained all the items which he should have having been called upon to do so by the AO. This being a search case and the assessee having been called upon to do so by the AO. This being a search case and the assessee having not been in a position to explain all the debit/credit entries, we hold that while the AO was not justified to take totals of TB a on 30th September, 1995, because the later TB of 9th November, 1995 which tallied at Rs. 1,99,559.58 only, the following enties aggregating to Rs. 11,541.14 stand accepted and the balance of Rs. 1,88,018 represents undisclosed income of the assessee :
"Manju 4,000.00
BPA Loan A/c 2,541.14
Ku. Suman 4,000.00
Titu 1,000.00
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11,541.00
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Therefore, we uphold addition of Rs. 1,88,018 only out of addition of Rs. 2,52,00,000 made by the AO.
11. Next addition is of Rs. 75,000 (Para 10 of assessment order) on the basis of a paper, i.e., page No. 13 of Annexure A6 (paper-book page 66). The addition was made with the following observations :
"Unaccounted expenses Rs. 75,000
The seized paper shows sundry expenses for different items like Mithai, cloth, milk curd totalling to Rs. 75,000. These expenses are also not reflected in the regular book of accounts and there is no satisfactory reply why these expenses are not recorded in the regular books of accounts, therefore, the same are treated to have been incurred out of his undisclosed income from undisclosed sources and are added in the undisclosed income for block assessment purposes.”
11.1 The learned authorised representative explained that wedding of daughter of assessee’s sister-in-law was celebrated in March, 1995, and the figures noted in the seized paper represented estimated expenditure on items noted therein and this was to be shared by various relations indicated on the left hand side of the document itself, including Rs. 25,000 in the name of the appellant. It was, therefore, contended that addition made is not justified.
11.2 Heard. It is noted that assessee’s share is indicated at Rs. 25,000 in this very seized paper. This is admittedly not recorded in assessee’s books. Therefore, addition of Rs. 25,000 is retained as relevant for asst. yr 1985-86 under s. 69C of the IT Act. Relief Rs. 50,000.
12. Addition of Rs. 67,000 (para 12 of assessment order) is based on seized paper (Annexure A6, page 7 – PB page 68). This has been added with the following observations :
“12. Unaccounted expenses Rs. 67,000.
This paper shows the receipts and expenses to the tune of Rs. 67,000 and Rs. 57,000 respectively in the account of Ishwar Ji upto 31st May, 1995. These entries are also not reflected in the regular books of account and no satisfactory explanation has been given that why these were not recorded in the regular books of accounts. Rs. 67,000 being the peak in this account is treated to form part of undisclosed income of the assessee and is added in the undisclosed income for block assessment purposes.”
12.1 During the course of hearing of the appeal, we found no satisfactory explanation forthcoming form the assessee as no arguments were either advanced. As such the addition is confirmed as pertained to asst. yr. 1996-97, as against the account Ishwarji the words upto 30th May, 1995, are written.
13. Addition of Rs. 95,000 (para 15 of AO) is on the basis of Annexure A-1, page 18-19 and has been made with the following observations :
“Expenses to the tune of Rs. 85,000
Page No. 18 is the estimate for electricity charges to the tune of Rs. 32,500 but in the bottom this estimate has been finalised along with other final account for expenses totalling to Rs. 95,000. This fact is further corroborated with the entries on page 19. No satisfactory explanation is there for these expenses which the not reflected in the regular books of accounts. Therefore, the same is treated to have been incurred out of his undisclosed income from undisclosed sources and is added in the undisclosed income for the block assessment purposes for block period.”
13.1 Shri Sapra took us through copy of the above seized paper (paper-book page 70). This paper is captioned “Estimate” and contains details of various expenses under the head “Electricity charges in respect of Shop No. 2, Royal Jeweller, M-15, GK-I, New Delhi upto 31st March, 1995” wherein details of units of electricity consumption, its rate, reading and the total has been worked out at Rs. 32,500. Below this account there is another account under the caption “final account” which contains certain figures with narrative like, Goggals, MCDE Pack, Telephone bill, etc., and this account also includes aforesaid Rs. 32,500, total coming to Rs. 95,000. This has been reduced to Rs. 70,000 on account of a cheque for Rs. 25,000, the net receivable being shown at Rs. 70,000.
13.2 Before the AO the assessee in his letter dt. 1st August, 1996, explained that these are only the estimates in connection with negotiations with the tenant, Royal Jewellers, but the transaction did not take place. There is another seized paper (page 72 of PB) where the same entries stand recorded under the head “Account of Shri Raj Kumar” owner of Royal Jewellers. The AO found the explanation unacceptable. He added the amount of Rs. 95,000.
13.3 Both the learned representatives are head and relevant record seen. We also find the explanation given as unacceptable. The hand written calculation (page 18) under the head ‘final a/c’ are the exact account wherefrom a payment of Rs. 25,000 by cheque has been received and the balance Rs. 70,000 has been shown as recoverable, as is corroborated by the transaction recorded at page 19 of Annexure I of the seized record. Even explanation regarding cheque for Rs. 25,000 is not forthcoming. We confirm addition of Rs. 95,000.
14. Addition of Rs. 250 (page 17 of assessment order) is confirmed, there being no explanation.
15. Addition of Rs. 20,680 is on account of expenses incurred in respect of Shanker Market property (details at page 76 of paper-book) as not recorded in the books. The learned authorised representative explained that the AO had not confronted this paper (page 52 of Annexure A1(to the assessee nor it finds any mention in the show cause notice dt. 19th July, 1996 (page 122 of PB). He explained that the property in question belongs to M/s. Tulec Builders (P) Ltd., an independent assessee, of which the appellant is a director. On these facts and under these circumstances we find no justification for the impugned addition. It is deleted.
16. Rs. 1,09,471 stands added (page 19 of order) and is based on Annexure A1, page 71 (Paper book 80). The AO has observed as under
“Unaccounted receipts and payments – Rs. 10,89,471.
This seized paper is a FAX copy of an account showing the expenses of Rs. 95,165 and loans to the tune of Rs. 9,80,000 along with this, there is a mention of interest payment to the of Rs. 10,000. The assessee was requested to explain the entries on this seizedd paper. Vide para 19 of his reply dt. 1st August, 1996, the assessee has explained the loan account of Rs. 9,80,000. The confirmations have also been filed. Intimation is being passed on to other AOs. However, rest of the expenditure remains unexplained and treated to have been incurred out of undisclosed income from undisclosed sources and added in the undisclosed income of the assessee for the block assessment purposes for the block period.
Additions Rs. 1,09,471.”
16.1 The AO in the absence of satisfactory explanation from the assessee added Rs. 95,165 plus Rs. 14,306. The explanation of the assessee before the AO, as also before us that the expenditure of Rs. 95,165 related to a company in which the assessee is a director and the payment stand recorded in the books of the company. Regarding interest of Rs. 14,306, it is explained that the said company was asked to pay 24 per cent. per annum coming to Rs. 14,306. However, the company paid 17 per cent.
16.2 Parties are heard. There is no doubt that the assessee did not file any evidence in support of recording of expenditure of Rs. 95,165 in the boooks of the company of whic he is a director. Therefore, addition of Rs. 95,165 is held justified.
16.3 However, addition of Rs. 14,306 being interest is not justified, since the AO has on verification accepted the genuineness of the loan and interest thereon @ 17 per cent, as provided in the books of the company there is, therefore, no material to hold that the interest charged was 24 per cent. when actually 17 per cent. was paid. Relief Rs. 14,306.
17. Rs. 1,60,000 (para 21 of assessment order). This is based on page 73-74 of Annexure A-1 (PB pages 82 and 82A). The AO has observed as under :
“Expenses to the tune of Rs. 1,60,000
These papers are relating to sundry expenses to the tune of Rs. 10,600 on some specific occasion with respect to the items like sweets, dry fruit, etc. delivered through their driver and other persons. These amounts are not recorded in the regular books of accounts, therefore, the same are added in the undisclosed income from undisclosed sources of the assessee for the block assessment purposes for the block period.”
17.1 Shri Sapra, the learned authorised representative at the outset submitted that of figure at page 82, is Rs. 10,600 and the AO has also mentioned himself to this effect in para 21 of the order itself, but by oversight took the amount Rs. 1,60,000. We find the contention of Shri Sapra correct and, therefore, acceptable. Shri Sapra has drawn our attention to para 6 of letter dt. 22nd August, 1996, of the assessee (paper book page 18-23) wherein the assessee has fully explained the contents of page 73. He explained that it contained rough working of bonus proposed at the time of Diwali to employees of the assessee as also to various concerns, like Gupta Properties, a proprietorship concern. He submitted that these items duly stand recorded in assessee’s books (copy of cash book at page 136 of PB). He has further given reference of cheque numbers, date, amount, bank from where he has withdrawn Rs. 9,500, which is recorded in the books.
17.2 Heard. We find the explanation plausible as also backed up by evidence. The Departmental Representative could not controvert these submissions. The assumption that there are unrecorded entries is not correct since page 82A records the names of various persons to whom the assessee plans to give Diwali gift. There is no material with the AO to conclude that the assessee actually incurred the expenditure of Rs. 5,700 (without recording in his books).
Relief – Rs. 1,60,000.
18. Addition of Rs. 50,000 is based on receipt of the tenant at pages 48 to 52 of Annexure A-4, being the difference between the amount of the receipts and the entries recorded in the books of accounts. The AO found receipts indicating payment of Rs. 2,10,000 to the tenant for vacating the property, out of which only Rs. 1,60,000 was found recorded. He, therefore, added Rs. 50,000.
18.1 Shri Sapra, the learned authorised representative, submitted that payment of Rs. 2,10,000 is not disputed but the assessee was yet to record payment of Rs. 50,000 while he had acequate cash balance on 15th November, 1995, i.e., more than Rs. 5 lacs. It was contended that Rs. 50,000 was paid out of cash in hand. However, Shri Sapra accepted that the said payment has been made before 15th November, 1995, i.e., the date upto which cash book was written. Obviously, therefore, payment of Rs. 50,000 though made, is not found recorded in books of accounts. On these facts and under these circumstances, we hold the addtion made is justified. The addition is confirmed.
19. Addition of Rs. 1,23,899 (para 24 of assessment order) is based on Annexure A-1, page 85-87 (paper-book page 89 to 94). The AO took the view that expenditure recorded in the seized paper are not recorded in regular books of the assessee. He treated the same as representing assessee’s undisclosed income.
19.1 Shri Sapra, the learned authorised representative, period out that Sushil Ratan Gupta is the proprietor in M/s. SRG Construction and was doing repair work for M/s Tulec Buildwell (P) Ltd., which owns property No. 18A, Shanker Market and also in respect of Karol Bagh property of M/s. Shagun Developers Pvt. Ltd., where the assessee is director in both the concerns. Sushil Rattan Gupta, according to Shri Sapra, used to come to the assessee with details of estimated expenditure for repairs/construction work either estimated or actually incurred and pages 89, 91 and 93 were the details of such repairs and are in the hands of Shri Sushil Rattan Gupta. He submitted that nothing was done by Shri Sushil Rattan for the appellant as explained in letter dt. 1st August, 1996 to the AO (paper-book pages 1 to 17). To satisfy ourselves we called upon the assessee to explain and prove TDS figure of Rs. 2,000 appearing in seized paper at page 90 of the PB. The assessee filed Form No. 26C and Form No. 16A and also produced originals thereof. He also filed photocopies thereof, as also given to the learned Departmental Representative, which clearly goes to prove that TDS was made by M/s Tulip Buildwell Pvt. Ltd. from SRG Construction, of which Shri Sushil Rattan Gupta is the sole proprietor. This evidence conclusively proves that the appellant had nothing to do with the expenditure in question when Tulip Buildwell deducted TDS and gave certificate to this effect to SRG Construction. The addition of Rs. 1,23,899 is deleted.
20. Next addition of Rs. 12,200 (Para 24.1 of order) is interconnected with copy of document at page 90 discussed above. Therefore, it is deleted.
20.1 It may be clarified that balance b/f at Rs. 1,66,664 in seized paper at page 91 of paper-book is from seized paper PB 90 and the AO had added the difference between totals of Rs. 1,28,864 and Rs. 1,16,664 as appearing in the seized paper. This paper is also in the hands of Sushil Rattan Gupta. The addition of Rs. 12,200 is deleted.
21. Next addition of Rs. 25,704 (para 24.2 of assessment order) is based on seized paper (PB 93). The AO added this amount as not recorded in books of accounts. The learned authorised representative for the assessee accepts that this paper is in assessee’s hand, on the top of which it is mentioned (final account 4th October, 1995) but it was not possible to explain its precise nature. This being the position, we hold that there being no explanation, the addition made is justified. It is confirmed.
22. Next addition of Rs. 50,000 is based on page 89-91 of Annexure A-45 (PB 95-98), vide para 25 of the order as under :
“The question of purchase of 22 Kanals land is a question of fact. This property is still in possession of Shri A. K. Aggarwal, the original owner and no registry has been executed in favour of Smt. Shanti Devi. In the absence of specific evidence regarding the total payment for this land, the total payment cannot be said to have been passed to the vendor. However, as per page 10 of Annexure A-1 seized from the residential premises G-25, Green Park, New Delhi, it appears that only Rs. 50,000 has been paid in advance towards this prospective deals. This amount of payment is not reflected in the books of accounts of the assessee and no satisfactory explanation is submitted. Therefore, Rs. 50,000 is treated to have been paid out of his undisclosed income from undisclosed sources and is added in the undisclosed income for block assessment purposes for the block period (Addition Rs. 50,000).”
22.1 The learned authorised representative argued that the above addition has been made on the basis of an unsigned and undated agreement to sell (paper-book 97-98) between the owner of agricultural land at village Kanwarshika, Shri Ashok Kumar Agarwal and Smt. Shanti Devi, who is mother-in-law of assessee’s brother Shri S. K. Gupta. In the course of assessment proceedings, a letter of Shanti Devi, dt. 1st November, 1996 (PB page 138) was filed before the AO denying to have purchased the land in question. The AO has himself noted in para 22 as above that the property is still in possession of Shri Ashok Agarwal and no registration has been executed in Shanti Devi’s favour. As such we find no ground justifying the addition made. It is deleted.
23. Next addition is of Rs. 37,55,316 (para 26 of order). This is based on seized paper pages 98-99 of Annexure A-45 with the following observations :
“Page 99 bears the caption per month and first column gives regarding certain names against which amounts in units and double digits are mentioned. Out of these names a few names are appearing in the trial balances mentioned in earlier paragraphs and these amounts do not go in thousands. The middle column of this paper shows rent receivable or rent estimate per month from three properties which comes out to Rs. 1,00,000 per month. The last column gives certain calculations of plus minus where the maximum amount is mentioned at Rs. 37,55,316. The assessee was requested to explain the entry in this page. The explanation of the assessee is kept on record. The assessee has not entered any expenditure or any receipt mentioned on this page. According to him these are rough jottings and estimate calculations may be during some discussions and/or planning for hiring out the property on rent. But the things could not materialise as per their discussions on the details mentioned on this paper. Also, according to assessee, no such transaction has been entered into either by him or members of his group of cases.
23.1 Assessee’s explanation is not acceptable as this paper clearly indicates that the rent for these properties is specifically mentioned. The assessee was under obligation to show who is the recipient of this rent by virtue of provisions of s. 132(4A) of the IT Act, 1961. The assessee is deemed to be the owner of this paper and beneficiary of this transaction. Therefore, rent of Rs. 12 lacs is added at least for one year covered in the block period. Simultaneously, it is also observed that in the right 3rd column of the page, the maximum amount has been arrived at Rs. 37,55,316. After a good amount of calculation, it cannot be a simple estimated or projected figure. The assessee was under obligation to explain exactly what these figures cannot. In absence of specific explanation, the amount of Rs. 37,55,316 is treated to represent a part of assessee’s undisclosed income from undisclosed sources and added to the undisclosed income of the assessee for block assessment purposes for the block period.”
23.1A The learned authorised representative for the assessee invited our attention to letter dt. 1st August, 1996 (para 25 thereof), placed at page 15 of paper-book by which the assessee gave the following explanation :
“The paper contains certain rough jottings. It bears caption “per month” jotting at best reveal the discussion and/or planning for hiring out the properties on rent. But the discussion/planning could not be given effect so far.
The property at Serial No. 1 appears to be 18A, Shankar Market, Connaught Place, which was purchased for Rs. 8,10,000 as per registered sale deed and is duly entered into the books of account. It is still lying vacant.
As regards the property K-52, Green Park, New Delhi the assessee acted only as an estate agent and got a commission of Rs. 22,000. However, the property deal was partly financed by the assessee and a payment of Rs. 16.80 lakhs was made to the owner which was ultimately recovered from the buyer of the property. Since the property was sold out, there was no question of earning any rent.
As regards Shrivalik, the assessee has nothing to do with its as the property is owned by Shri Dinkar Consultant. He is a regular taxpayer. The assessee being an estate agent, the matter regarding renting out of the property out of the property appears to have been discussed. I understand that no deal has materialised so far and the property is still lying vacant.”
23.1B. Yet by another letter dt. 1st November, 1996 (page 26 of paper book para 2), the assessee had reiterated before the AO that the rough jottings had no relevance to any transaction actually entered into as they were scored out. Shri Sapra contended that the property No. CP 18A denotes Flat 18A, Shankar Market, Connaught Place owned by M/s Tulip Buildwell (P) Ltd., in which the assesee is a director and the same is duly accounted for in the books of the said Tulip and the property is still vacant. As regards K-52, Green Park, it is a flat at K-52, Green Park for which the assessee had acted as an estate agent earning a commission of Rs. 22,000 after the search and the same is duly recorded in its account books. As regards Shivalik, this property was owned by assessee’s friend Dinkar, who is a consultants and is regularly assessed to income-tax. It appears that Dinkar had discussion with the assessee about renting out his property but did not materialise and the property is still lying vacant. Shri Sapra submitted that the AO has not controverted the assessee’s contentions and has also not brought any material on record before inferring that the properties had actually been let out and it was assessee alone who had let them out enjoying rental income. He submitted that there was no justificatin for the inference drawn against the assessee merely becase the paper was found from the assessee, who has explained the nature of notings thereon, thus, dicharging initial onus cast upon him when he gave full facts about the ownership of the property. Shri Sapra submitted that the AO did nothing to controvert the explanation which was admittedly open to verification. He submitted that the properties admittedly do not belong to the assessee and the AO had no material with him to foist their ownership on the assessee. In these circumstances Shri Sapra submitted, the AO was wholly wrong in adding rent of Rs. 12 lakhs even for one year covered in the block period though such addition was not separately made being covered by addition of Rs. 37,55,316, about which also Shri Sapra vehemently contentded that it was based on some rough calculation/projections, which too had been scroed off. Shri Sapra submitted, in the nature of assessee’s business, which is real estate, quite a few people come to discuss about various proposals relating to their properties with the assessee when some calculations are made. Such calculations/projections do not mean anything unless there is any independent material to hold the same as representing assessee’s unrecorded income/expenditure. No such material has been brought on record and, therefore, it cannot be said that the Revenue has discharged its onus under s. 69 of IT Act. In reply the learned Departmental Representative supported the AO.
23.2 We have heard the learned representatives at length and have also seen copy of the document in question (paper-book page 99) and explanation given by the assessee. We are in agreement with Shri Sapra that in the absence of any material, much less evidence on record to establish that the properties indicated in the seized paper, are owned by assessee and stood let out thereby yielding a rent of Rs. 12 lakhs in the hands of the assessee, could not be assumed and assessed as his income. It is not established nor is there any evidence that the properties belonged to the assessee and he has let them out yielding the alleged income. Regarding Rs. 37,55,316 we agree with Shri Sapra that they are jottings which could not, per se, be held out against the assessee and the amount added as his income when the explanation offered by the assessee had not been controverted. The inference drawn by the AO against the assessee is not supported by any material/evidence. We, therefore, delete addition of Rs. 37,55,316.
24. The appeal is partly allowed as indicated above.