ORDER
C.L. Bokolia, A.M.
1. This appeal is preferred by the assessee against the order passed by the AO for the block period ending 9th Aug., 1995. A search under s. 132 of the IT Act, 1961 was carried out at the residential and business premises of the assessee which was concluded on 9th Aug., 1995 and some incriminating documents and valuables were seized. After examining this material the AO started assessment proceedings under Chapter XIV-B of the IT Act, 1961. The assessee filed return of income declaring undisclosed income of Rs. 30,50,000. The AO, however, completed the assessment on an undisclosed income of Rs. 64,96,000. The assessee has come up before us by taking various grounds of appeal which are being discussed and decided as under :
2. First ground of appeal taken by the assessee is against the addition of undisclosed cash found at the time of search amounting to Rs. 5,69,000. During the course of search carried out at the residence of the assessee 9/8, East Patel Nagar, the cash amounting to Rs. 77,200 was found, Another cash amounting to Rs. 5,45,000 was found from the premises 44/72, West Punjabi Bagh, New Delhi. The AO added an amount of Rs. 5,69,000 as unexplained cash while completing the block assessment.
3. In this connection the learned authorized representative argued that Rs. 69,000 were withdrawn from M/s Remy Industries where the appellant is partner and in support of this copy of cash book ledger account in the books of Remy Industries were placed on record. It was submitted before the AO that the amount in question was remitted through courier on 7th Aug., 1995, the AO has not accepted the claim on the ground that theory of withdrawal of Rs. 69,000 from the books of Remy Industries is an after-thought and it has not been proved conclusively that any amount was sent by M/s Remy Industries. The AO also held the cash as unexplained on the ground that at the time of search Shri R.P. Monga himself surrendered Rs. 5,50,000 as unexplained cash in his statement recorded under Section 132(4) of the IT Act, 1961. The learned AO, however, after disbelieving the submissions of the assessee at the various stages made the addition of Rs. 5,69,000. The learned authorised representative submitted that, before the carrying on search, assessee was relieved by the hospital wherein he was going on treatment for acute -hypertension, diabetes, etc. and he was not in a state of perfect health when the statement at the time of search was recorded. This statement cannot be accepted as proper and reasonable basis for making any addition because it has no corroborative evidence to support.
4. The learned Departmental Representative fully relied upon the arguments of the AO and also submitted that the assessee himself disclosed this amount in the composite disclosure during the course of search and also through letter filed on behalf of the appellant. Under these circumstances this addition deserves to be upheld.
5. We have heard the rival parties and have perused the material placed on record and reliance placed upon. From the assessment order it is very much clear that residential premises of the appellant is only at East Patel Nagar wherefrom an amount of Rs. 77,200 was found, The AO also confirms that this amount includes Rs. 17,400 which was found from the possession of the daughter of the assessee who is independently assessed to tax. Besides, all the members of the assessee family are being subjected to tax and are enjoying a reasonably good economic standard of living. Therefore, this cannot be said that the assessee was not keeping any ready money for the use for emergency. Therefore, we feel that another Rs. 20,000 of the balance amount are presumably be treated as kept for such emergency. Under the circumstances out of Rs. . 77,200 we feel that it would be reasonable and justified if the balance amount of Rs. 40,000 should be treated as unexplained income.
6. Coming to the amount of cash found from West Punjabi Bagh premises it is observed that at this premises Shri Anil Monga, son of the assessee lives and where also situated offices of other family concerns. It is undoubtedly clear that assessee is not residing at Punjabi Bagh residence and son of the assessee who is actually residing there is also assessed to tax independently. We are, therefore, of the opinion that even though this is part of the composite surrender made by the AO, this cash cannot be added in the hands of the appellant because neither it was found nor seized from the possession of the appellant. If at all this addition requires to be made, it can only be in the hands of Shri Anil Monga, son of the appellant, and the other family concerns operating from that premises. We feel that addition of this amount in the hands of the appellant is unjustified. We, therefore, sustain the addition of Rs. 40,000 alone and allow relief of Rs. 5,29,000.
7. Next ground of appeal is in regard to addition of Rs. 39,62,000 under the head unexplained investment in properties. During the course of search a loose paper at page No. 15 of Annex. A-3 was found and seized.. This document is placed at pp. 189 and 190 of the paper book. This is a hand written letter by Shri Anil Monga to his father, the appellant, on the letter pad of AKM Engineering Industries. This reflects some difference between the father and son in regard to investment in the immovable property. Part of the contents of this letter reads, “I do agree that you had given me total amount to the tune of Rs. thirty lakhs from 1986 to December 1994. There is no misunderstanding with regard to the total amount communicated….”. After this there are details of investment in the various properties giving the identity of the property and the investment made therein. This is the basis wherefrom the enquiries were conducted in regard to the investment in immovable properties. The AO also asked the assessee to file valuation reports of these properties. Assessee on the other hand filed details that unexplained portion in the investment of these properties works out to Rs. 25,52,000. The AO after obtaining the details disbelieved the same and higher of the two figures mentioned at p. 15 of Annex. A-3 and/or valuation report filed by the assessee was adopted for the addition of unexplained investment in the properties which worked out to Rs. 39,62,000 and hence this addition.
8. The authorized representative of the assessee submitted that the assessee has offered the total amount in the investment of these properties and hence declared Rs, thirty lakhs while filing the return under Chapter XIV-B. The action of the AO in adopting the higher of the two figures is most unreasonable because of the fact that valuation is after all an estimate whereas the assessee has surrendered the actual amount involved in the investment in all these properties. Therefore, the offer of the assessee should be accepted as genuine and reasonable.
9. The learned Departmental Representative on the other hand strongly relied upon the order passed by the learned AO and accordingly submitted that the same deserves to be upheld.
10. We have heard the rival parties and perused the material relevant to the dispute in question. It is undisputed that this matter arose from the letter written by Anil Monga to his father in January, 1995 and was seized at the time of search. In this connection we would like to refer the provision of Section 132(4A) which reads :
“Where any books of account, other documents, money, bullion, jewellery or other valuable articles or things are/or is found in the possession or control of any person in the course of a search it may be presumed –
(i) ****
(ii) that the contents of such books of account and other documents are true.”
11. This document is very authentic in the sense that genesis of this is out of confrontation and disbelief between the father and the son and gives the details of each and every property where unexplained investment was made. This was found during the course of search and authenticity of this document is not being doubted or challenged. Now coming to the assessment under Chapter XIV-B, computation of undisclosed income of the block period has to be worked out under Section 158BB which reads –
“. . . On the basis of evidence found as a result of search or requisition of books of account or documents and such other material or information as are available with the assessee. …..”.
While making the addition of Rs. 39,62,000 the AO had no other document or material in his possession except the letter written by Mr. Anil Monga. Under these circumstances and keeping in view the legal position we are of the opinion that action of the AO in making an addition of Rs. 39,62,000 instead of Rs. thirty lakhs is unjustified and unreasonable, Keeping in view the totality of facts and circumstances of this case we restrict the addition to Rs. thirty lakhs only.
12. The next ground of appeal taken by the appellant is against addition of Rs. one lakh on account of unexplained investment in household items. This addition was made by the AO after considering the durable household goods found at the time of search, wherein the assessee himself surrendered Rs. one lakh as unexplained and unaccounted investment in various items. This surrender was further confirmed by the authorised representative of the appellant vide letter dt. 26th Oct., 1995. During the course of assessment proceedings the assessee explained that household items are covered as belonging to Uttranchal Leasing Ltd. and M/s Anil Locks Ltd. and also partly duly shown in the balance sheet of the family members. The assessee also submitted the list of articles mentioned in the balance-sheet of Uttranchal Leasing Ltd. and M/s Anil Locks Ltd., copy of which is also filed before us vide page Nos. 193 to 201 of the paper book. Before completing the proceedings the AO, however, asked the assessee to file reconciliation statement with reference to the balance sheet of various companies to which the material claimed 10 be belonging and the items of goods found at the residence in the course of search. The assessee, however, failed to file any such reconciliation till the conclusion of final proceedings of the assessment. The AO, therefore, keeping in view the surrender made at the time of search made an addition of Rs. one lakh as unexplained investment in the durable household goods.
13. The learned authorized representative again repeated the same arguments which were put forth before the AO.
On the other hand the learned Departmental Representative strongly relied upon the assessment order.
14. We have examined the facts of this ground of appeal and are of the opinion that the assessee himself surrendered the investment of such items amounting to Rs. 1 lakh and also failed to substantiate the statement that such items belonged to the group companies of the family. Keeping in view the totality of facts and circumstances of this case we feel that additions made by the AO are reasonable and justified. Therefore, we decline to interfere on this account.
15. The next ground of appeal is in regard to addition of Rs. 50,000 on account of discrepancy in loose papers. The assessee himself has returned Rs. 50,000 as part of unexplained investment and included this amount while filing the return for block assessment period. We, therefore, uphold this addition.
16. The next ground of appeal is regarding addition of Rs. 9,90,000 representing gifts received from various parties. In this connection the learned authorized representative submitted that the amount of gift received by the assessee and various family members was disclosed by filing the regular assessment returns and also part of the balance sheet filed along with the return of income much before the operations under Section 132 started. It was, therefore, submitted that these items are not covered in the Chapter XIV-B while completing the block assessment and hence this addition is highly unjustified. It was also argued that even for the purpose of assessment under Chapter XIV-B this item was discussed in the case of various family members especially R.P. Monga HUF and therefore this addition cannot be made at two different places because one source of income cannot be added in more than one hands.
17. We have heard the rival parties and have also examined the documents relied upon. In this connection the Tribunal order in the case of R.P. Monga & Sons ITA No. 5269/Delhi/1996 dt. 29th Nov., 2000, is worth mentioning. This issue was discussed and decided in the concluding paragraph of the order wherein, even on merits, this addition was deleted. In regard to this addition we also hold the similar view. Since the receipt of gifts have always been shown in the balance sheet filed along with the return of income/wealth and duly considered by the AO while completing the assessment, same cannot be considered as unexplained under Chapter XIV-B of the Act. This addition is, therefore, deleted.
18. The next ground of appeal taken by the appellant is in regard to the addition of Rs. 8,25,000 on account of unexplained investment in jewellery. During the course of search proceedings and the statement recorded of R.P. Monga, the appellant surrendered Rs. 20 lakhs as unexplained investment in jewellery which would be disclosed in the hands of different members of the family. The disclosure of unexplained investment in jewellery was, however, only of Rs. 11,75,000 details of which are Rs. 1,11,000 in the hands of Shakuntla Monga and Rs. 10,64,000 in the hands of Smt. Rati Monga. When the assessee was asked to explain the difference of surrender, the assessee’s argument was that – (1) this asset did not belong to him; and (2) the surrender of Rs. 20 lakhs was under the misapprehension that the jewellery to this extent was purchased out of unexplained resources. It was also argued that jewellery in question belonged to the lady members of the family who are independently assessed to tax and as per their own valuation they have surrendered the amount of undisclosed valuation. No part of the jewellery belongs to the appellant and therefore he has not disclosed any such amount.
19. After hearing the rival parties and perusing the material we are of the opinion that the jewellery actually belonged to Smt. Shakuntla Monga and Rati Monga and no part of the jewellery belonged to the appellant and as a head of the family during the course of search proceedings he estimated the undisclosed part to round Rs. 20 lakhs. This is not corroborated by any evidence or inventory of jewellery. It is also a matter on record that both Smt. Shakuntla Monga and Smt. Rati Monga are assessed to income-tax as well as wealth-tax and surrender has been made by them and accepted in, their hands. If any discrepancy is there, the same requires to be explained by them and assessed in their hands and definitely not in the hands of the appellant. Under these circumstances we are of the considered opinion that this addition cannot be sustained.
20. The result is that the appeal filed by the assessee is partly allowed.
Diva Singh, J.M.
I have gone through the draft order of my learned brother and after going through the same, I am unable to persuade myself to concur with a part of it for the reasons given hereafter.
2. Before alluding to the difference of opinion, I would like to state that I concur with the reasons and finding of my learned brother in para 5 of the draft order whereby the addition made by the AO to the extent of Rs. 40,000 has been sustained.
3. I also concur with the reasons and finding given by my learned brother from paras 7 to 11 of the draft order pertaining to the addition made to the tune of Rs. 39,62,000 by the AO and sustained to the extent of Rs. 30,00,000 in the proposed order.
4. Paras 12 to 14 of the draft order dealing with the addition of Rs. 1 lakh on account of unexplained investment on household items are also concurred with by me.
5. I concur with the finding relating to the addition of Rs. 9,90,000 representing gifts received from various parties. For arriving at the same conclusion, I would like to state my reasons separately. Before the Tribunal, the authorized representative of the assessee has placed reliance on the order of the Tribunal in the case of R.P. Monga & Sons (supra), wherein the Tribunal has examined the aspect of identity, capacity and genuineness and apart from this, the Tribunal therein has also deleted addition on account of the fact that the same had already been disclosed in the regular income-tax and wealth-tax assessments of the assessee. I would like to make it clear that the additions made by the AO on this count deserve to be deleted only because they have already been reflected in the regular income-tax and wealth-tax assessments of the assessee. As such, the issue is not examined from the aspect of identity, capacity and genuineness and I am of the view that it is not required to be examined from this aspect in the present appeal as the amount is clearly outside the definition of “undisclosed income” as envisaged in Chapter XIV-B of the IT Act.
6, My conclusions and findings with regard to the finding arrived at by my learned brother vide para 6 of the draft order pertaining to the addition of Rs. 5,29,000 made by the AO is different. It is so because of the difference in appreciation of facts placed before us. The conclusion arrived at in the draft order is based on the following finding in the said paragraph :
“It is undoubtedly clear that assessee is not residing at Punjabi Bagh residence and son of the assessee who is actually residing there is also assessed to tax independently.”
7. Thus, the finding arrived at in the draft order was that the amount wag neither found nor seized from the possession of the assessee. This finding is not supported by the evidence placed on record before us which has not been rebutted at all by the assessee before us. A perusal of the paper book pp. 38 to 41 filed by the assessee before us, shows that in the statement of Shri R.P. Monga recorded under Section 132 of the IT Act, 1961 on oath on 30th Aug., 1995, the assessee stated as under :
Q.1. Please identify yourself.
Ans. I am Mr. R.P. Monga S/o Late Shri Hari Chand Monga R/o Madan Gate, Aligarh, U.P., I am partner in R.P. Locks Co. and M/s Remy Industries. In M/s R.P. Locks Co. I am representative of Anil Locks Ltd.
Q.2. What is your source of income ?
Ans. I am partner in the following firms :
1. Remy Industries 60 per cent drawing salary of I do not know,
2. Anil Lock Ltd. – I am director and as regards to salary I do not remember.
3. I am not drawing any salary from R.P. Locks Co. I am representing Anil Locks Ltd. in this concern.
4. Property income from 44/72 Punjabi Bagh from M/s Uttranchal Leasing Ltd., M/s R.P. Lock Co. and M/s Monga Sales Exports (P) Ltd. I do not remember the monthly rent from this property.
I am the 100 per cent owner of this property. The plot of this property was purchased in 1974 for Rs. 27,000 measuring 1100 sq. yards and it was constructed from 1980 to 1982 and the total cost of investment is recorded in the books of account.
(Emphasis, italicized in print, supplied)
5. I am prop. of M/s R.P.M. Industries, Noida. This concern is manufacturing lock parts like lever, locking bolts, keys etc. Apart from the above I am having income from interest, dividend and directors fee, etc. LIC units and agriculture income of Rs. 8,000 to Rs. 9,000 per year.
O.3. Please furnish the income-tax particulars.
Ans. My income-tax GIR No. 479-R Ward 11(5) and my file have been transferred to Circle 11 (3) and my GIR No. 39-R. As regards wealth-tax return I do not remember.
Q.4……………..”
8. The answer to question No. 2 in 2.4 above shows that R.P. Monga categorically and in unequivocal terms states that he is the 100 per cent owner of the property 44/72, Punjabi Bagh where M/s Uttranchal Leasing Ltd., M/s R.P. Lock Co. and M/s Monga Sales Exports (P) Ltd. are functioning. Thus, the factual finding relied upon to arrive at the conclusion in the proposed draft order of my learned brother is not supported by documentary evidence and as such, I am unable to agree with the said conclusion. Thus, the conclusion that the amount was neither found nor seized from the possession of the assessee is not substantiated by the evidence on facts.
9. Apart from this, it has to be borne in mind that the assessee on behalf of himself and the family members and family concerns of the assessee has made a “composite surrender” on account of which the search and seizure operation of the Revenue were concluded. Search was conducted on 9th Aug., 1995, at the residences and business premises of the assessee and his family members and related concerns in Delhi and Aligarh. Due to some trouble, the search in Aligarh had to be suspended and could be resumed only on 21st Aug., 1995. Composite surrender was made by the assessee on 30th Aug., 1995.
10. Having gone through this composite surrender statement and keeping the tenor and nature of this disclosure, I am of the opinion that in order to ensure that the principles of justice are fully met, the issue should be restored back to the file of the At) to ascertain the status of the surrendered amount. It may be pertinent to state here that under the provisions of the Act, the Tribunal is the final fact-finding body and to delete or uphold the addition without keeping the factual background and the circumstances under which it is made on behalf of whom it is made etc. would be highly inappropriate. I am of the opinion that an attitude of adhocism would seriously jeopardise and compromise the interests of justice. Being conscious of the fact that the assessment should, under all circumstances, be made in the correct hands, the principle has been enunciated in case of ITO v. Ch. Atchaiah (1996) 218 ITR 239 (SC) by their Lordships of the Supreme Court, track should not be lost of the fact that the assessee has himself come out to make a surrender on account of his family members and family concerns. Accordingly, the AO is directed to come to a finding after pertaining the fate of the assessments made in the hands of the family members and other related concerns. A perusal of the arguments put forth by the assessee before the AO as well as before us shows that the assessee has tried to put forth a case that the amount pertains to M/s Uttranchal Leasing Ltd. The books of account of M/s Uttranchal Leasing Ltd. were neither found nor seized at the time of search. Nevertheless, the issue requires examination. Accordingly, the ground raised by the assessee pertaining to this addition is restored back to the AO.
11. Before parting, I would also like to address an argument put forth by the authorized representative of the assessee which has been stated at pp. 2 and 3 of the draft order proposed by my learned brother in the second half paragraph of p. 3. To recapitulate the issue, it may be pertinent to reproduce the same here:
“… The learned authorized representative submitted that just before the carrying on search, assessee was relieved by the hospital wherein he was going on treatment for acute hypertension, diabetes, etc. and he was not in a state of perfect health when the statement at the time of search was recorded. This statement cannot be accepted as proper and reasonable basis for making any addition because it has no corroborative evidence to support.”
12. This argument of the authorized representative has not been considered in the draft order. I am of the opinion that the argument that during the relevant point of time the assessee had just been discharged from the hospital is a reasonable argument in normal circumstances to put forth the contention that the frame of mind was not proper. But in the context of the present case, this argument loses weight in the face of certain categorical facts where the authorized representative of the assessee even after a gap of two and a half months odd abide by this statement of composite surrender. There are no mitigating circumstances to show that the surrender/admission made by the assessee was retracted at the earliest point of time with corroborative evidence.
13. In the present case, the retraction is most definitely neither immediate nor is it corroborated with any evidence. Admission is a very important piece of evidence and to brush it aside whimsically would distort the whole purpose of the provisions. In order to allow a withdrawal or a retraction of the same conclusively, there must be mitigating circumstances making out a case for such retraction, a fact which is completely absent in the facts and circumstances of the case before us. To allow a retraction without any cogent material by shifting the onus on the Revenue to give corroborated evidence to support the addition made on the basis of a surrender made by the assessee would amount to making a mockery and travesty of the search and seizure operations. The assessee having estopped the Revenue by its composite surrender cannot be allowed to go back on its “promise” held out by him. The “promise” here would mean the composite surrender on the initiation to abide by it which ‘induced’ the search and seizure party to stop hunting for evidence and accept the surrendered amount. To ask the Revenue to substantiate the surrendered amount with corroborative evidence after a lapse of time would be a most unfair and inequitable approach. As then the case of the assessee would take the aura of Promissory Estoppel and be dictated by the principles of equity and justice. Nevertheless, the matter requires a ‘composite approach’ to this composite surrender and thus deserves to be restored back to the file of the AO to ascertain the fate of the appeals of the related family members and concerns and decide the issue in accordance with law. This would violate the principles of promissory estoppel and have very grave and serious consequences and ramifications.
14. Similarly due to the aforementioned reasons, I am of the opinion that the issue pertaining to the addition of Rs. 8,25,000 on account of unexplained investment in jewellery also deserves to be restored back to the file of the AO to decide after ascertaining the position of the assessments in the hands of the ladies on this count. The arguments before us that the jewellery does not belong to the assessee in the present case has to be appreciated in the context that as a result of search, surrender has been made by the assessee and merely because the surrender has been made on account of jewellery should not lead to the presumption that it has to belong to the ladies only as it is not the prerogative of only ladies to own jewellery. Jewellery can be owned by the assessee himself also, the same may be bought so as to ultimately, gift to some lady family member, but a presumption cannot be drawn that an item of jewellery per se belongs to the ladies only. Any finding given by us in the present appeal without the full facts of the case and the fate of the appeals of the family members would be a finding in vacuum. Accordingly, the issue is restored back with the above directions. Ordered accordingly.
15. In the result, the appeal filed by the assessee is treated to be partly allowed for statistical purposes.
REFERENCE UNDER SECTION 255(4) OF THE IT ACT, 1961
As there is difference of opinion amongst the Members of the Bench, therefore, we formulate the following points of difference and refer the same under Section 255(4) of the IT Act, 1961 to the Hon’ble President, Tribunal for consideration and necessary action:
1. “Whether, on the facts and circumstances of this case, would it be reasonable and justified to assess the cash seized from 49/72 Punjabi Bagh where Mr. Anil Monga s/o the assessee resides and M/s Monga Sales Exports (P) Ltd., M/s Uttranchal Leasing Ltd. and M/s R.P. Lock Co. are functioning, in the hands of the assessee or the matter be restored to the file of the AO?
2. Whether, on the facts and circumstances of this case, value of gold and silver ornaments of Rs. 8,75,000 be added in the hands of the assessee merely on the basis of statement recorded under Section 132(4) of the Act where the assessee surrendered Rs. 20,00,000 out of which the ladies of the family have disclosed Rs. 11,75,000 as unexplained investment only, or the matter be restored to the file of the AO?”
Phool Singh, J.M. (As Third Member)
There being difference of opinion between the Members who originally heard the appeal, the following points of difference were referred to the Hon’ble President of the Tribunal under Section 255(4) of the IT Act, 1961 and the Hon’ble President has appointed me to express my opinion as Third Member on the same.
“Whether, on the facts and circumstances of this case, would it be reasonable and justified to assess the cash seized from 49/72 Punjabi Bagh, where Mr. Anil Monga s/o the assessee resides, and M/s Monga Sales Exports (P) Ltd., M/s Uttranchal Leasing Ltd. and M/s R.P. Lock Co. are functioning, in the hands of the assessee or the matter be restored to the file of the AO?
2. Whether, on the facts and circumstances of this case, value of gold and silver ornaments of Rs. 8,75,000 be added in the hands of the assessee merely on the basis of statement recorded under Section 132(4) of the Act where the assessee surrendered Rs. 20,00,000 out of which the ladies of the family have disclosed Rs. 11,75,000 as unexplained investment only, or the matter be restored to the file of the AO?”
2. Relevant facts are that a search under Section 132 of the IT Act, 1961 (hereinafter referred to as the “Act”) was carried out at the residence and business premises of the assessee and other related concerns which was concluded on 9th Aug., 1995 and some incriminating documents and valuables were found and seized. The assessee in pursuance of the notice under Section 158BC of the Act filed return at undisclosed income of Rs. 30.50 lakhs and assessment was completed at an undisclosed income of Rs. 64.96 lakhs. Aggrieved by the aforesaid assessment order appeal was preferred before the Tribunal under Chapter XIV-B of the Act.
3. First ground involved before the Tribunal related to addition of undisclosed cash of Rs. 5.69 lakhs found at the time of search. Out of this Rs. 77,200 was found from residence of assessee bearing No. 9/8, East Patel Nagar, New Delhi and remaining amount of Rs. 5.45 lakhs was found from the premises No. 44/72 West Punjabi Bagh, New Delhi. The AO treated whole of the amount as unexplained.
4. So far as cash found at the residence of assessee, the AO did not believe the version of assessee that Rs. 69,000 were withdrawn from M/s S.R. Industries where the assessee was partner and sent to him through courier on 7th Aug., 1995. The AO treated whole of the amount as undisclosed income. The Tribunal, however, treated Rs. 17,400 belonging to the daughter of the assessee and further concluded that Rs. 20,000 may be available with the assessee. Rs. 40,000 were treated to be unexplained. Both the learned Members agreed on this. The remaining amount of Rs. 5.45 lakhs which was found at 44/72 West Punjabi Bagh, the learned A.M. concluded that assessee was not residing at house No. 44/72 West Punjabi Bagh but it was the son of the assessee who was residing there and that son was assessed to tax independently. It was further observed that this amount could not be added in the hands of the assessee merely on account of surrender which was composite surrender made by the assessee and if addition was required the same could be made in the hands of Sh. Anil Monga son of the assessee. The amount was deleted. As against it, the learned J.M. was of the view that assessee had made composite surrender on behalf of himself and the family members. The statement of the assessee was quite specific and the plea of the assessee required further verification at the level of the AO who was to give categorical finding as to in whose hands recovered amount from West Punjabi Bagh residence was to be added and matter was set aside. This observation gave rise to the difference of opinion.
5. The second difference of opinion between the learned Members occurred in respect of addition towards cost of jewellery. The assessee in his statement admitted that there was unexplained investment worth Rs. 20 lakhs made in the purchase of jewellery. He agreed to surrender this amount of Rs. 20 lakhs as undisclosed income. Before AO, the plea of the assessee was that jewellery found at the time of search belonged to Smt. Shakuntla Monga and Smt. Rati Monga. Addition of Rs. 11.75 lakhs had been made in the hands of these two ladies as undisclosed income and there was no other jewellery found at the time of search. The AO admitted that already these two ladies had made disclosure of Rs. 11.75 lakhs jewellery as their undisclosed income but there remained difference of Rs. 8.25 lakhs out of disclosure made by assessee in his statement that there was undisclosed jewellery worth Rs. 20 lakhs and that has not been explained and the AO made the addition of Rs. 8.25 lakhs in the hands of the assessee.
6. The assessee came in appeal before the Tribunal and learned AM did find force in the submission of the assessee and noted that already Smt. Shakuntla Monga and Smt. Rati Monga had made disclosure of Rs. 11.75 lakhs as undisclosed jewellery and there is nothing on record to conclude that any part of jewellery belonged to the assessee. Further, he noted that there was no material on record to indicate that jewellery worth Rs. 8.25 lakhs was found at the time of search which may belong to assessee. He was also of the view that if there was any jewellery then the consideration of that undisclosed jewellery could be made in the hands of Smt. Shakuntla Monga and Smt. Rati Monga as both of them were income-tax assessees. The learned J.M. on the contrary to it, following her views in respect of first addition on account of cash, restored this issue also to the file of AO to find out as to in whose hands the amount of Rs. 8.25 lakhs is to be made and that too after going through the assessments of those two ladies. This again resulted into difference of opinion and both the points have come before me as Third Member.
7. Learned counsel for the assessee Shri C.S. Aggarwal argued that very genesis of both the additions is statement of assessee recorded on 30th Aug., 1995, although the search was already over and DDI was not authorised to record statement after search. Copy of statement of R.P. Monga recorded on 30th Aug., 1995, had been furnished and relevant para pointed out by the learned counsel is in respect of surrender of cash & unexplained investment in jewellery made by R.P. Monga on that date. In respect of cash found at two places, the assessee R.P. Monga had stated as under:
“Unexplained cash found and seized from 44/72, Punjabi Bagh and 9/8, East Patel Nagar Delhi amounting to Rs. 5,50,000 in words Rs. Five Lakhs Fifty thousands.”
8. His statement in respect of unexplained investment in jewellery is as under:
“Unexplained investment made in jewellery found from possession of my family members Rs. 20,00,000 in words Rs. twenty lakhs.”
9. The leaned counsel submitted that statement of a person is not to be made basis for an addition in the absence of any corroborative evidence and in this connection the learned counsel relied upon the decision of Tribunal, Chandigarh Bench, in the case of Smt. Neena Syal v. Asstt CIT (2000) 69 TTJ (Chd) 516 : (1999) 70 ITD 62 (Chd) and that of Tribunal, Chandigarh Bench, in the case of Baldev Krishan Kapur v. Asstt. CIT (1999) 65 TTJ (Chd)(TM) 254 : (2000) 245 ITR 102 (Chd)(TM) in which it was concluded on the basis of reasoning of Hon’ble Supreme Court in the case of Nagubai Ammal v. B. Shama Rao AIR 1956 SC 593 and other cases that admission by assessee was not conclusive and once confession had been retracted by assessee that could not form basis for addition to income. Learned counsel further submitted that house No. 44/72 West Punjabi Bagh was in occupation of three concerns i.e., M/s Uttranchal Leasing Ltd., M/s R.P. Lock Co. and M/s Monga Sales Exports (P) Ltd. and assessee being owner of the said property was deriving rental income. If any amount was found in that premises, owner of the house could not be made liable to explain the source. Best person to explain were the tenants and in this case those tenants had given out the source of the amount available in that premises. In this connection my attention was drawn to page No. 156 of the paper book which is the explanation given by the assessee in respect of cash of Rs. 5.45 lakhs found at 44/72 West Punjabi Bagh. It was submitted that M/s Uttranchal Leasing Ltd. was having a cash balance of Rs. 6,41,430.92 as on 8th Aug., 1995 and that was the sum available as per cash book, copy of which is appearing at page No. 160 of the paper book. The contention is that once assessee had come with explanation and AO had not recorded categorical finding that explanation was false or not corroborated by evidence, the amount which was found in the property owned by the assessee but under tenancy of tenants, the addition was totally unwarranted.
10. About jewellery the learned counsel submitted that assessee no doubt had given statement surrendering Rs. 20 lakhs towards unexplained investment in the jewellery but that was mere estimate and the total jewellery found at the time of search was in respect of two ladies viz., Mrs. Rati Monga and Mrs. Shakuntla Monga. The AO has also added the amount of unexplained jewellery found in the said search operation in the hands of these two ladies. Copy of assessment order of Mrs. Rati Monga for block asst. yrs. 1986-87 to 1995-96 is filed by the assessee in which the AO had taken note of the total jewellery found from her possession at Rs. 15,34,820 out of which Rs. 3,23,092 was treated by him as explained on the basis of declaration made by Smt. Rati Monga in her wealth-tax return and rest of jewellery worth Rs. 11,63,106 was treated as unexplained investment by this lady and addition was made in her hands. Addition of Rs. 1,11,122 was made in the hands of Smt. Shakuntla Monga as is evident from copy of her block assessment order for asst. yrs. 1986-87 to 1995-96. The contention is that whatever jewellery was found as unexplained the same stands assessed in the hands of these two ladies. There is no other material which may show that any jewellery remained to be explained which could be added in the hands of assessee while the statement of assessee which had been taken as basis for addition stands fully explained and that was not the correct preposition for AO to make the addition of remaining Rs. 8.25 lakhs in the hands of assessee particularly when there was no jewellery available or found during the search except those which stand assessed in the hands of two ladies. The learned JM had made an issue, without any issue, by setting aside the matter to the file of AO when everything is clear as whatever jewellery was found in the search, the same stands assessed in the hands of ladies from whose possession the same was found and seized and statement of the assessee stands fully explained and that makes clear that there was no jewellery of Rs. 8.25 lakhs and statement was merely on the basis of estimate which proved false as per search. The addition was rightly deleted by the learned AM. 11. The learned Departmental Representative as against it has placed reliance on the order of learned JM and submitted that addition could be made on the basis of admission alone and for that reliance has been placed by the learned Departmental Representative on the decision of Tribunal Delhi ‘C’ Bench in the case of Surendra M. Khandhar v. Asstt. CIT (2001) 71 TTJ (Mumbai) 366 in which it was observed by the Bench that once assessee agreed to offer peak of its accounts as undisclosed income then assessee cannot be allowed to resile from the same. Other citation referred to by the learned Departmental Representative is that of Hon’ble Kerala High Court in the case of V. Kunhambu & Sons v. CIT (1996) 219 ITR 235 (Ker) in which Their Lordships held that assessment on the basis of voluntary statement was valid. The contention of the learned Departmental Representative is that assessee surrendered Rs. 5.45 lakhs treating the cash found as unexplained and also admitted in his statement that he had invested unexplained income to the extent of Rs. 20 lakhs for acquiring jewellery and thus addition was based on the statement which was given in perfect state of health and there was no coercion or undue influence subjected by the Department and thus addition was rightly made and learned J.M. was more than fair to restore the matter although it was a case where addition should have been confirmed and thus order of learned J.M. should be confirmed.
12. After considering whole of the matter as well as material on record I am of the definite view that there was no justification for restoring the issue back to the file of AO. So far as amount of cash is concerned, the statement of assessee is quite specific that he had made composite surrender in respect of the amount seized from two houses. It is also admitted by assessee that he was owner of house No. 44/72 West Punjabi Bagh from where Rs. 5.45 lakhs were found and seized. The assessee further admitted that there were three concerns which were carrying on business and it is his son who is residing along with his family. Once the assessee himself gave out in his statement that property No. 44/72 is in occupation of tenants and amount of Rs. 5.45 lakhs was found therefrom, the said amount could not be taken as belonging to assessee even though assessee gave statement of composite surrender of Rs. 5.5 lakhs. The important aspect of the matter is that assessee came with an explanation that amount found at the time of search belonged to Uttranchal leasing Co. and that fact was duly corroborated by ledger and cash entries. That explanation has not been found incorrect or false by the AO. In the absence of such specific finding the explanation was bona fide one. Their Lordships of Supreme Court in the case of Nagubai Animal (supra) have observed as under :
“An admission is not conclusive as to the truth of the matter stated therein. It is only a piece of evidence, the evidence the weight to be attached to which must depend on the circumstances under which it is made. It can be shown to be erroneous or untrue, so long as the person to whom it was made has not acted upon it to his detriment, when it might become conclusive by way of estoppel.”
13. This reasoning is fully applicable to the facts of the present case. Assessee no doubt made the composite surrender and later on came with explanation that, amount belonged to other concerns, but AO had not recorded any specific finding and thus admission stands proved untrue to the extent of explanation of Rs. 5.45 lakhs recovered from 44/72 West Punjabi Bagh residence. Addition, if any, is to be made in the hands of the person who is in occupation of that premises and learned AM was justified in observing that even if there is addition the same could be made in the hands of son of the assessee who was looking after the three concerns which were carrying on their business in property No. 44/72 West Punjabi Bagh. Merely because assessee was owner of the property and he had given composite statement as observed by the learned JM also the addition could not be made when assessee explained the same and AO did not find it untrue. There was no justification for restoring the matter back to the file of AO as it was the duty of the AO to record categorical finding in the case of the assessee as well as in the case of son of assessee which has not been done and thus addition was rightly directed to be deleted by the learned AM.
14. So far as amount of Rs. 8.25 lakhs on account of unexplained investment in jewellery is concerned, the addition has rightly been deleted by the learned AM because at the very beginning statement was given by the assessee which was merely an estimate jewellery which was found during search belonged to two ladies and AO himself has held Smt. Shakuntla Monga and Smt. Rati Monga as owner of the jewellery. The amount of unexplained investment in the jewellery stands assessed in the hands of these two ladies as is apparent from the copies of block assessment orders of these two ladies. From perusal of assessment, the stand of the AO is specific that whatever unexplained jewellery was found the same belonged to two ladies in whose hands block assessment is framed. There is no other jewellery except which stands assessed in the hands of these two ladies. Now remains the mere statement which was based on estimate and in the absence of any jewellery no addition was warranted in the hands of assessee. Learned AM was justified in observing that even if any addition was warranted that could be made in the hands of two ladies who were found owners of the jewellery as per the stand taken by the AO himself by making addition in respect of unexplained investment in jewellery by these two ladies. The AO nowhere records that assessee had made unexplained investment in jewellery found at the time of search or he was owner of any piece of jewellery. In the absence of such concrete finding no addition is warranted. In view of this, I concur with the view taken by the learned AM on both the points of difference in question.
15. The matter will now go to the regular Bench for deciding the appeal according to law.
Sikandar Khan, AM.
This appeal was filed by the assessee against block assessment under Section 158BC(g). There was difference of opinion between the members who heard the appeal. The case was referred to the Hon’ble President under Section 255(4) who nominated Third Member to hear the appeal as Third Member. The learned Third Member passed order on 17th Jan., 2002.
2. The learned Third Member gave his opinion on the following difference between the members of the Division Bench :
“1. Whether, on the facts and in the circumstances of the case, would it be reasonable and justified to assess the cash seized from 44/72 Punjabi Bagh where Mr. Anil Monga, s/o the assessee resides and M/s Monga Sales Exports (P) Ltd., M/s Uttranchal Leasing Ltd. and M/s R.P. Lock Co. are functioning, in the hands of the assessee or the matter be restored to the file of the AO.
2. Whether, on the facts and circumstances of this case, value of gold and silver ornaments of Rs. 8,75,000 be added in the hands of the assessee merely on the basis of statement recorded under Section 132(4) of the Act where the assessee surrendered Rs. 20,00,000 out of which the ladies of the family have disclosed Rs. 11,75,000 as unexplained investment only or the matter be restored to the file of the AO.”
3. The learned Third Member concurred with the view of the learned AM on both the above points. Accordingly, the addition on account of unexplained cash stands reduced by Rs. 5,29,000 and the addition on account of unexplained investment in jewellery stands deleted.
4. As regards other additions disputed in the appeal, there was no difference of opinion between the members and therefore the order proposed by the learned AM would stand as final. As per this order the addition of Rs. 39,62,000 on account of unexplained investment in property stands restricted to Rs. 30 lakhs only, the addition of Rs. 1 lakh on account of unexplained investment in household items stands confirmed, the addition of Rs. 50,000 on account of discrepancy in loose paper as per return stands confirmed and the addition of Rs. 9,90,000 on account of bogus gift stands deleted.
5. In the result, the appeal stands disposed of accordingly.
