ORDER
PRADEEP PARIKH, A.M. :
The assessee is in appeal before us against the order of the learned CIT(A), dt. 2nd July, 1991, for asst. yr. 1986-87. The first ground in the appeal pertains to the addition of Rs. 70,000 on account of excess stock.
2. The assessee, a registered firm, is engaged in the business of trading in cloth on retail basis. Search operations had taken place on 23rd October, 1986, at the business premises of the assessee-firm and also at the residential premises of Shri Tarachand and his sons. Shri Tarachand is not a partner in the firm, but his family members are partners. In the course of search certain loose papers were found and seized. These loose papers reflected the closing stock of the assessee at Rs. 1,70,771.39 as on 31st March, 1986. However, in its books of account the assessee had shown the closing stock at Rs. 1,00,771.39. The explanation of the assessee for this discrepancy was found to be vague by the AO and hence, the addition of Rs. 70,000 was made. The CIT(A) confirmed the addition.
3. Shri Lajpat Rai, advocate, appeared for the assessee. It was submitted by the learned counsel that since the loose papers, on the basis of which addition was made, was found from the residence of Shri Tarachand, who is not a partner of the firm, provisions of s. 132(7) were attracted and hence, before making the addition, the AO ought to have passed an order under s. 132(7). Since the AO has not fulfilled the requirements of s. 132(7), the addition of Rs. 70,000 deserves to be deleted. His next submission was that since the loose papers did not bear the signatures of the assessee, or of the authorised officer or of any witness as required under r. 112(7), the AO was not supposed to take note of such papers. For this submission, the learned counsel placed reliance on the decision of the Supreme Court in the case of S. P. Gramophone Co. v. CIT (1986) 158 ITR 313 (SC). Reliance was also placed on the decision of the Madras Bench of the Tribunal reported in ITO v. Thangam Aluminium Industries (1990) 88 CTR (Trib) (Mad) (TM) 21. Further, for the proposition that the truthfulness of the contents of the loose papers have remained unproved and hence, cannot be taken note of, reliance was placed on the decision of Punjab & Haryana High Court in ITO v. Mohan Lal Vig & Anr. (1983) 139 ITR 681 (P&H). Finally, it was contended that presumption envisaged under s. 132(4A) are not available for assessment under s. 143(3) and for this reliance was placed on the decision of the Allahabad High Court in Pushkar Narain Sarraf v. CIT (1990) 183 ITR 388 (All). The learned Departmental Representative relied on the orders of the lower authorities.
4. We have duly considered the rival contentions and have perused the material on record. We reject the first argument of the learned counsel as regards the applicability of s. 132(7). This provision pertains to the assets and not to books of account or loose papers. Secondly, they are not found to be in the possession of partners of the assessee-firm. The next contention that as the loose papers do not bear the signature of the assessee, they cannot be taken note of. In our opinion, the reliance of the learned counsel on the Supreme Court decision in S. P. Gramophone Co. v. CIT (supra) is totally ill-founded. In that case, the assessee wanted the Revenue authorities to take note of its P&L a/c and balance sheet which were unsigned. It was in this context the apex Court observed that such unsigned documents cannot be relied upon. The context in the instant case is entirely different and accordingly the Supreme Court decision cited supra is not applicable in this case. It is also contended that as per r. 112(7), the said loose papers should have been signed by the witnesses. Rule 112(7) does not require the witnesses to sign each and every paper or document found during the search, but are required to sign the list of things seized in the course of search. Thus, this submission of the learned counsel also is not relevant.
5. One important contention has been raised by the learned counsel in his submissions before us. It was contended that presumption under s. 132(4A) cannot be availed of while making order under s. 143(3). It is true that the Bangalore Bench of the Tribunal in 45 ITD 12, relying on the Allahabad decision in the case of Pushkar Narain Sarraf (supra), held as follows :
“Appearing as it does in the faxciculus (sic) of section dealing with the powers of the taxing authorities regarding production of evidence etc., and forming as it does a part of s. 132 dealing with search and seizure, the presumption contained in s. 132(4A) could only be regarded as being relevant in the context of an order to be passed under s. 132(5) of the Act.”
6. There is no dispute over the above principle. The presumptions under s. 132(4A) would be available to the Department while estimating the undisclosed income under s. 132(5). However, the order under s. 132(5) is only a summary order to determine the likely tax liability of the assessee and accordingly to retain the seized assets. The final income obviously has to be determined under s. 143(3) of the Act. In the course of assessment proceedings under s. 143(3), the AO cannot, per se, make addition by taking recourse to the presumptions, because they are rebuttable presumptions. If the assessee is able to rebut the presumptions to the satisfaction of the AO, then no addition would be made. However, if the assessee, after having afforded an opportunity, fails to avail of the same, or while availing the same, the evidence in rebuttal is found to be unsatisfactory, then, there is no other recourse left, but to make use of the presumptions under s. 132(4A), which, if seen deeply, is hardly anything but a common sense approach.
7. In the instance case, the assessee has placed a letter dt. 15th March, 1989 on record (pp. 61-62 of the paper book) received from the AO enquiring about certain discrepancies in account books. This letter does not speak anything about the alleged discrepancy in the closing stock, and hence, the assessees reply dt. 16th March, 1989 (p. 63 of paper book) also mentions nothing about it. However, this specific plea of not having granted adequate opportunity in respect of closing stock, unrecorded purchases, etc., was raised before the CIT(A). The CIT(A) has recorded a finding to the effect that as per order-sheet entry dt. 21st December, 1987, the assessee was confronted on this count and the said entry is signed by the assessee. The CIT(A), therefore, rejected the plea of the assessee. This fact has not been disputed by the assessee. Further, before both the authorities below, the assessee has tried to explain away the difference by saying that it was merely a rough estimation on the loose paper seized. The CIT(A) rejected the explanation by observing that the stock in the loose paper mentions about the quantity also and the same is prepared on the last day of the accounting year. This fact is also not disputed by the assessee before us. Thus, in our considered opinion, the addition is well justified and no interference is called for. It may be mentioned that none of the decisions cited by the learned counsel is helpful to the assessee.
8. The next ground relates to the addition of Rs. 13,197 on account of alleged purchases made out of the books. This addition is also based on certain loose papers seized from the business premises of the assessee during the search. In respect of these papers also, the assessee has not brought any evidence on record to show that the said papers and the contents thereof do not belong to it. The assessees explanation that the papers may have been dropped by some customers appears to be quite bald and without any merit. Thus, in respect of this addition also, no interference is necessary. We sustain the same.
9. In the result, the appeal is dismissed.