ORDER
B.L. Chhibber, A.M.
During the year under appeal, the assessee was a partner in M/s Unique Automobiles, Kolhapur. Besides, he was carrying on finance business. A search under section 132 was carried at the premises of the assessee on 8-3-1995. During the course of search, two diaries No. 27 and 31 were found, besides cash of Rs. 72,150. The assessee has filed xerox copies of these diaries in his paper book. Diary No. 31 is on pp. 131 to 166 and diary No. 27 is on pp. 167 to 220 of paper book. These diaries were maintained by the assessee in respect of his finance broking business. After the search, assessment was. completed by -the assessing officer on an income of Rs. 2,61,45,910 as against declared income of Rs. 5,12,000 under section 143(3) read with section 147 of the Income Tax Act, 1961. On appeal, the learned Commissioner (Appeals) gave partial relief. Aggrieved by the orders,of the authorities below, the assessee is in appeal before this Tribunal. As many as 10 grounds have been raised. The same are discussed and disposed of as follows.
2. First, we take up grounds Nos. 5 to 9 because the main addition has been challenged in these five grounds and ouL decision on these grounds will also have effect on other grounds. During the course of assessment proceedings, the -assessing officer scrutinised the two diaries, i.e., diaries Nos. 27 and 31 and noted that the assessee had given loans to many persons. The contention of the assessee before the assessing officer was that he had acted only as a finance broker for arranging the finance for the borrowers from the lenders. Accordingly, he submitted that this money involved in the finance business was not his, but belonged to third parties, i.e., the lenders and he had received only the brokerage as per diary No. 31. The assessing officer rejected the contention of the assessee. He asked the assessee to prove the lenders and because the assessee did not submit the details of the lenders and their confirmations, the assessing officer held that the entire finance as per the diary belonged to the assessee and accordingly, he made an addition of Rs. 2,52,17,000 in the hands of the assessee on account of unexplained credits in the diary. According to the assessing officer, the burden of proving the creditors was on the assessee and as he had not proved the same, the entire finance was deemed to be belonging to the assessee.
3. The assessee carried the matter to the learned Commissioner (Appeals). It was contended before him that the documents seized themselves indicated that the assessee had arranged the finance from the various lenders and thus, it was not correct on the part of the assessing officer to tax the above sum of Rs. 2,52,17,000 in the hands of the assessee. Further, it was submitted, without prejudice, that if the assessee’s contention is not accepted, the addition may be made only of the peak amount and not.of the entire amounts as per the diary. After hearing the assessee’s representative and after recording the submissions made before him in detail, the Commissioner (Appeals) held that it was not possible for him to agree with the submission that the borrowings of the assessee, if any, can be accepted without the assessee furnishing even the name and address of a single party. He further held that it was not understood as to what had prevented the assessee from producing or furnishing the name and address of even a single creditor before the assessing officer and that even before him, i.e., Commissioner (Appeals), the assessee had not made any attempt to furnish the name and address of any creditor. He, therefore, held that the assessee had failed to discharge the onus and in the circumstances, the assessee’s claim that he was only acting as a mediator could not be accepted. However, the Commissioner (Appeals) agreed with the alternative contention that the addition be restricted only to the peak of the amounts mentioned in diary No. 27 and accordingly, directed the assessing officer to compute the peak of the loans advanced by the assessee as per the details mentioned in diary No. 27. Thus, the Commissioner (Appeals) gave partial relief.
4. Dr. Sunil Pathak, the learned counsel for the assessee, submitted that the fact that the assessee acted in this business only as a finance broker is very much clear from the seized documents themselves. He drew our attention to diary No. 31 which is cash book and submitted that it reflects only the brokerage received by the assessee from the various parties. If this money which is invested in this money-lending business, belonged to the assessee, instead of brokerage he would have received the entire interest and in this diary No. 31 the entries of interest received would have been found. The brokerage in the entire year is around Rs. 3,52,000 while if the assessee had received interest, this amount of interest would have been around 18 per cent (normal market rate of interest) on the total money lent as per diary (determined by the assessing officer at Rs. 2.5 crores approximately) which would have been about Rs. 40 lakhs. Thus, according to the learned counsel, the cash book No. 31 which is seized is itself an evidence in favour of the assessee that he was receiving only the brokerage and not the interest and this fact itself indicates that as a broker he arranged the finance for the borrowers from the lenders and accordingly, the money did not belong to him.
5. The learned counsel thereafter drew our attention to diary No. 27 and submitted that this diary is a ledger giving the accounts of various borrowers. In these accounts, the assessee has written the initials of the lenders, the amounts borrowed from them and also the due dates of repayments. If he had not taken these amounts from the lenders, there was no reason from him to write these initials of the lenders in these accounts. This fact, according to the learned counsel, itself indicates that he had borrowed money from these various persons.
6. According to the learned counsel, both these diaries are considered by the department as true, genuine and correct documents under section 132(4A) and if that be so, the diary No. 27 gives, on one hand, the ledger accounts of the borrowers and in the same accounts, the amounts taken from the lenders are mentioned. If the department considers the diary as genuine, there is no reason for it to doubt these entries in the diaries regarding the lenders. He submitted that the principle of law is that under section 132(4A) the document found in search is genuine vis-a-vis the entire contents thereof and the department is not justified in holding a view that only a part of the content, i.e., the name of the borrower is correct and not the name of the lender. Hence, in this case, on the facts, the entire diary has to be considered as genuine, true and correct document and if that is so, the fact that the initials of the lenders are mentioned in the accounts of the borrowers, they are to be considered as genuine. For this proposition, the learned counsel placed reliance on the decisions of this Tribunal in the case of Chander Mohan Mehta v. Assistant Commissioner (1999) 71 ITD 245 (Pune) and Shri Mahavir Nagari Sahakari Pat Sanstha, Kolhapur, PCAS News Letter April, 2000-8. Reliance was also placed on the decision of this Tribunal in the case of Hotel Kiran (copy submitted) and on the following decisions
(i) Kantilal & Bros. v. Assistant Commissioner (1995) 52 ITD 412 (Pune),-
(ii) Income Tax Officer v. Ghansyambhai R. Thakkar (1996) 56 TTJ (Ahd) 460;
(iii) White Lily Estate (P) Ltd. v. Assistant Commissioner (2000) 68 TTJ (Del) 59;
(iv) India Seed House v. Assistant Commissioner (2000) 69 TTJ (Del) 241.
7. During the course of hearing, the learned counsel drew our attention to charts on pp. 125 to 136 of the paper book which is an analysis of the diaries Nos. 27 and 31. In these charts, the reconciliation is made between the two -diaries in the following manner. The brokerage amount as appearing in diary No. 31 on the various days is tallied with the exact transactions of the money provided to the borrowers from the lenders as per the diary No. 27. The relevant page numbers are also given and the brokerage charged for the renewal of the borrowings is also tallied vis-a-vis the various accounts. This exercise itself indicates that for all these transactions as per the diary No. 27 which is a ledger, the assessee has received only the brokerage indicating thereby that he acted only as a broker and not a financer.
8. The learned counsel further submitted that the fact that the assessee acted only as a broker is also accepted by the assessing officer in the sense that in the assessment order he has taxed only the brokerage as per diary No. 31. If he has considered this money as belonging to the assessee, the entire interest on the finance provided to the borrowers should have been considered as the assessee’s income. But, on the other hand, the assessing officer has taxed only the brokerage in the hands of the assessee and, therefore, the learned counsel submitted that it was totally incorrect on the part of the assessing officer, or for that matter the Commissioner (Appeals), to hold a view that this finance provided as per diary No. 27 was actually belonging to the assessee. The learned counsel further drew our attention to the statements given by the assessee at the time of search, wherein he himself had admitted that the figures in the ledger are coded (pp. 91, 92 or 99), that he acted only as a broker (pp. 102, 103) and his commission was to the tune of 10 to 15 paisa. The learned counsel further pointed out that if this entire money belonged to the assessee, he would have been a much richer person. On the other hand, he was staying in a small flat and his balance sheet also did not reveal large amount of assets as on 31-3-1995. He drew our attention to a tentative balance sheet as on that date which was prepared giving the details of his assets and liabilities and as per which his capital was hardly to the extent of Rs. 11.19 lakhs. The learned counsel concluded that the Commissioner (Appeals) erred in rejecting the contentions of the assessee and the only relief which the Commissioner (Appeals) has given is to tax such credits as per the diary on peak credit basis. In view of the reasons given supra, it was submitted by the learned counsel that both the assessing officer as well as the Commissioner (Appeals) were not justified in making addition of this amount as per the diary and the addition of Rs. 2,52,17,000 is not justified on facts and in law.
9. Shri K. Srinivasan, the learned departmental Representative, strongly supported the orders of the authorities below. He submitted that the burden is on the assessee to prove the creditors, i.e., their identity, capacity and genuineness of the transaction and it is only if this burden is discharged by the assessee, addition can be deleted. In this case, as the assessee had not discharged the above burden, the addition is rightly made by the assessing officer and confirmed by the Commissioner (Appeals). In support of his above proposition, he relied upon various case law which are in respect of cash credits and in particular to the decision of the Calcutta High Court in the case of Shankar Industries v. CIT (1978) 114 ITR 689 (Cal). As regards the credits appearing in the seized documents, he submitted that if the assessee does not discharge the above burden, the addition on account of credits appearing in these documents can be sustained in view of the decision in the case of Pushkar Narian Saraf v. CIT (1990) 183 ITR 388 (All), wherein it was held that the presumption under section 132(4A) is applicable only to the proceedings under section 132(5) and not to the assessment and, therefore, the credits appearing in the seized books cannot be considered as genuine merely because of the presumption under section 132(4A). He further submitted that the assessee has acted as a helping hand or a conduit pipe for the circulation of the black money and hence, the impugned addition is very much justified. He also relied upon the judgment of the Hon’ble Supreme Court in the case of Sumati Dayal v. CIT (1995) 214 ITR 801 (SC), and submitted that all surrounding circumstances should be taken into consideration and if that exercise is done, the entire addition in the hands of the assessee is justified. The learned departmental Representative submitted that the reliance placed by the learned counsel for the assessee on the decisions of this Tribunal in the cases of Chander Mohan Mehta (supra), Shri Mahavir Nagari Sahakah Pat Sanstha, Kolhapur (supra) and Hotel Kiran (supra) was not relevant as those cases pertained to block assessments under Chapter XIV-B of the Income Tax Act. Lastly, he submitted that the assessee had filed petition to the Settlement Commission in which he himself had disclosed some income from this business and the petition was rejected by the Settlement Commission on the ground that the assessee had not divulged the details about the credits. Thus, if the assessee himself had accepted particular addition before the Settlement Commission, there was no reason as to why the addition made by the assessing officer on the same facts be deleted.
10. We have considered the rival submissions and perused the facts on record. The whole case of the revenue is based on the two diaries seized during the course of search operations. These two diaries were produced before us by the learned departmental Representative and we have perused the same. It is an admitted fact that these diaries were maintained by the assessee in respect of his finance business and income from which was not disclosed to the department till the date of search by the assessee. Diary No. 31 is a cash book maintained virtually monthwise from March, 1994 and it indicates the various receipts and expenses incurred by the assessee in his business of finance broking. For example, reference to p. 139 would show the amount of brokerage received by the assessee from various persons on the left side and on the right side are written the various expenses incurred in the course of finance business. This page is for the mon-4-1994. The assessee, as a broker, was arranging the finance for various persons (borrowers) and the amounts were obtained from the various parties (lenders). The amounts were generally taken by the borrowers for a short period of say 3 months and which, if necessary, was being extended. The assessee was charging brokerage only to the borrowers and not to the lenders. His brokerage was to the tune of about 10 to 15 paise per month for Rs. 100 arranged for the borrower. If this money which is invested in this money-lending business belonged to the assessee, instead of brokerage he would have received the entire interest and in this diary No. 31, the entries of interest received would have been found. The brokerage in the entire year is around Rs. 3,52,000, while if the assessee had received the interest, this amount of interest would have been around 18 per cent (normal rate of interest) which would have been about Rs. 40 lakhs. Thus, diary No. 31, which is seized is itself an evidence in favour of the assessee that he was receiving only brokerage and hot the interest and this fact itself indicates that as a broker he arranged the finance for the borrower from the lender and, accordingly, the money did not belong to him.
11. On perusal, we find that diary No. 27 is a ledger giving the accounts of various borrowers. It contains the accounts of the various borrowers and in the same accounts, the assessee has mentioned the names of the lenders in the coded form (initials). As against these names are written the amounts again in code form (for example, 100 indicates Rs. 1 lakh). The due dates on which the borrowers have to repay the amounts are also mentioned and if there are extensions sought by the borrowers, the extended dates also are mentioned clearly. Some of such accounts which have been fully settled have been scratched. If the assessee had not taken these amounts from the lenders, there was no reason for him to write these initials of the lenders in these accounts. This fact itself indicates that he had borrowed the money from these various persons.
12. It is noted that both these diaries are considered by the department as true, genuine and correct documents under section 132(4A) and if that be so, the diary No. 27 gives, on one hand, the ledger accounts of the borrowers and in the same accounts, the amounts taken from the lenders are mentioned. When the department considers the diary as genuine, there is no reason for the department to doubt these entries in the diaries regarding the lenders. The principle of law is that under section 132(4A) the document found in search is genuine vis-a-vis the entire contents thereof and the revenue is not justified in holding a view that only a part of the content, i.e., the name of the borrower, is correct and not the name of the lender. Hence, in this case, on the facts, the entire diary has to be considered as genuine, true and correct document and if that is so, the fact that the initials of the lenders are mentioned in the accounts of the borrowers, they are to be considered as genuine. For this proposition, we find support from our decision in the case of Chander Mohan Mehta (supra). In the case of Chander Mohan Mehta (supra) some loose papers were found during the course of search which contained entries of loans raised and the amounts returned and this Tribunal held as follows :
“However, the loose papers considered along with the statement recorded under section 131 could certainly be considered as “relevant material having evidentiary value. The statement explained the nature and details of the transactions. It was on the basis of this statement that the assessing officer inferred that assessee was engaged in money-lending activity. Therefore, the evidentiary value attached to the loose papers was only because of this statement. In these circumstances, this statement had to be considered and accepted as a whole if the assessing officer wanted to use it in evidence. The assessing officer could not be allowed to blow hot and cold simultaneously. The revenue could not be permitted to use that part of the statement which was beneficial to it and reject the other part of the statement which was detrimental to it.”
In T.S. Kumarasamy v. Asstt. CIT (1998) 65 ITD 188 (Mad), the Madras B-Bench of the Tribunal has held that as per section 132(4A) the entries of loans recorded in the account books found in search operations under section 132 have to be accepted as true and, therefore, it was not open to the assessing officer to say that the entries relating to the loans in the account books were untrue or false warranting addition. Accordingly, we hold that the entries made in the two seized diaries reflected the true nature of the business of the assessee that he was only a finance broker; that he was arranging loans from the lenders to the borrowers and in the process, he was getting only brokerage.
13. It will also be worthwhile to refer to the statements given by the assessee at the time of search wherein he himself had admitted that the figures in the ledger are coded (pp. 91, 92 and 99) that he acted only as a broker (pp. 102, 103) and his commission was to the tune of 10 to 15 paisa. If the assessee had not clarified the coded form of transactions in the diary No. 27, the revenue would not have been able to decipher the exact amounts of transactions from diary No. 27 and hence additions could not have been made to the tune of Rs. 2,52,17,000 on account of the notings in the diary. As held by this Tribunal in the case of Chander Mohan Mehta (supra), the statement has to be considered and accepted as a whole and revenue could not be permitted to use that part of the statement which was beneficial to it and reject other part of the statement which was detrimental to it.
14. In ITO v. Ghanshyambhai R. Thakkar (supra), the Ahmedabad Bench of the Tribunal has held that the statement of the assessee during survey under section 131 has to be read in its entirety. Since the department has capitalised on the statement of the assessee, then the entire statement must be considered and not part thereof, because in the same statement the assessee had mentioned that he was acting only as a finance broker and the finance was arranged by him for the borrowers from the lenders.
15. As regards the application of section 68, we are of the view that on the facts of the case, addition cannot be made under section 68 in the hands of the assessee. Provisions of section 68 provide that where the explanation offered by the assessee is not satisfactory, the sum so credited may be charged to income-tax as income of the assessee of that previous year. The word “may” gives discretion to the assessing officer to assess in the hands of the assessee. It should be exercised judicially considering the facts and circumstances of each case. If the facts of the case indicate that such cash credits could not be considered as income of the assessee, then he shall not make addition in this regard. Reference can be made to the recent decision of the Hon’ble Supreme Court in the case of CIT v. Smt. P.K. Noorjahan (1999) 237 ITR 570 (SC). In that case, the Supreme Court was considering the provisions of section 69. According to that judgment, the word “may” appearing in section 69 conferred discretion on the assessing officer to treat the unexplained investment as income of the assessee. In that case, the assessee who was of 20 years of age, had invested a sum of Rs. 34,628 in purchase of the property, which could not be explained by her satisfactorily. Accordingly, the assessing officer made an addition of Rs. 32,628 after giving credit of Rs. 2,000. The addition was confirmed by the Appellate Assistant Commissioner, but the Tribunal deleted the addition as, according to it, it was not possible for the assessee to earn such amount. According to the Tribunal, the assessing officer had not exercised the discretion properly keeping in view the facts of that case. The said decision of the Tribunal has been upheld by the Hon’ble Supreme Court.
16. In the present case, it has been established on record that the deposits in the seized diaries were in coded figures and coded names and these were uncoded by the assessee himself. The fact that the assessee acted as a finance broker is also accepted by the assessing officer in the sense that in the assessment order he has taxed only the brokerage as per diary No. 31. If he has considered this money as belonging to the assessee, the entire interest on the finance provided to the borrowers should have been considered as the assessee’s income. But, on the other hand, the assessing officer has taxed only the brokerage in the hands of the assessee and, therefore, it was totally incorrect on the part of the assessing officer or the Commissioner (Appeals) to hold a view that this finance provided as per the diary No. 27 was actually belonging to the assessee.
17. Coming to the arguments of the learned departmental Representative we find that the case law relied upon by him were in the context of cash credits in general and the principle laid down in these case law that it is the burden on the assessee to prove the identity, capacity of the creditor and the genuineness of the transaction is not disputed. But, the moot point in this case is that the diaries which the department has made the basis for making the addition themselves reveal these creditors and also the fact that the assessee is only a broker. Thus, if the assessing officer has relied on these diaries for making the addition, then the reliance should be on the complete contents thereof and not only a portion of these diaries and as the diaries themselves reveal that the assessee has provided money to the borrowers by taking-it from the lenders, this fact must be accepted because the diaries are considered as genuine documents under section 132(4A).
18. As regards the reliance placed by the learned departmental Representative on the decision in the case of Pushkar Narain Saraf (supra), it may be stated that this decision has already been considered by this Tribunal in the case of Mahavir Nagari Pat Sanstha (supra) and it has been properly distinguished. Even otherwise, this decision does not help the revenue at all in overcoming the proposition that if the diary is considered as genuine it should be considered entirely and not partly. Had the assessee not taken this money from the lenders, their names in the accounts of the borrowers could not have figured. This itself shows that the assessee obtained the finance from the lenders and gave it to the borrowers. The reliance placed by the learned departmental Representative on the decision of the Hon’ble Supreme Court in Sumati Dayal (supra) is also misplaced, because in the present case the surrounding circumstances are the seized diaries which reflect the true affairs of the business of the assessee.
19. The contention of the learned departmental Representative that the assessee had offered a higher income before the Settlement Commission and hence, this appeal be rejected was exactly similar to the contention in the case of Mahavir Nagari Sahakari Pat Sanstha (supra) and in the last para of that case, this Tribunal has dealt with this issue and rejected the contention of the department on the reasoning that the department cannot bind the assessee with his admission before the Settlement Commission now in this proceeding. Thus, in this case also the admission of the assessee before the Settlement Commission does not come in his way of getting the relief. The argument of the learned departmental Representative that the assessee has acted as a helping hand/conduit pipe for the persons having black money and hence, the addition should not be deleted cannot be accepted because by making this argument, the learned departmental Representative himself has admitted that the assessee was only a broker in between for passing the finance from one person to the other. This further shows that the money did not belong to the assessee and hence the addition is not justified.
20. In the light of above discussion, we do not find any justification for the impugned addition of Rs. 2,52,17,000 and the same is accordingly deleted.
Grounds Nos. 1 and 2:
21. These grounds relate to the addition of Rs. 18,900 on account of shares which were in the names of third parties and which were found at the time of search at the assessee’s premises. During the search, certain shares of the value of Rs. 18,900 were found which were in the names of different persons as given on p. 8 of the assessment order. These certificates were found along with the blank transfer forms. When called upon to explain, the assessee submitted that these shareholders had given these shares to the assessee for sale. They were assessee’s friends and because the assessee was in the finance business, Ir they had handed over these shares for sale through the share brokers known to the assessee. The confirmations to this effect from ‘these persons were submitted to the assessing officer but he did not accept the contention of the assessee and made the above addition of Rs. 18,900 in the hands of the assessee on the reasoning that the assessee purchased these shares from these persons.
22. After hearing both the parties, we do not find any justification for the impugned addition. The assessing officer has no evidence to show that the assessee purchased these shares from these persons. Simply having the share certificates along with transfer forms did not indicate that the assessee’ had acquired these shares. There is no evidence with the revenue to show that what these persons contended was wrong. All these persons had specifically given confirmations that they had handed over the shares to the assessee for sale in the market and these shares were not sold to the assessee. These confirmations are noted by the assessing officer in the top para on p. 9 of his order and also a few samples were submitted before us which were duly perused. Accordingly, we hold that the impugned addition of Rs. 18,900 is not warranted. The same is accordingly deleted. These two grounds accordingly succeed.
Ground No. 3:
23. This ground reads as under:
“On the facts and in law, the learned Commissioner (Appeals) erred in confirming the addition of Rs. 2 lakhs on account of furniture/fixtures. The Commissioner (Appeals) ought to have accepted that the furniture and fixtures were old and no such addition was justified.”
Certain documents seized from the assessee’s premises at the time of search revealed that the assessee had made investment of a flat in Arihant Gardens (part of which was used as office premises) and purchase of household article/furniture. In the statement recorded at the time of search under section 132(4A) of the Act, the assessee admitted that he had made investment of Rs. 1,50,000 in office furniture and Rs. 60,000 in household furniture, which was not disclosed in the return of income. Therefore, in the said statement under section 132(4), the assessee had offered an amount of Rs. 2,00,000 as his additional income for the assessment year 1995-96. However, this amount was not offered by the assessee in the return of income filed by him for the assessment year 1995-96. The assessing officer has noted in this connection in the assessment order that the documents seized at the time of search clearly revealed that the assessee had made some investment in purchase of office as well as household furniture, since he purchased the flat in 1993. When asked about the same at the time of search, the assessee had himself admitted that such investment was of Rs. 2 lakhs. In the absence of any evidence with regard to the exact details of investments, the assessing officer found it fit to go alongwith the statement made by the assessee and made an addition of Rs. 2,00,000 to the income declared by the assessee for the reason that such investment was not disclosed in the return of income.
24. On appeal, the Commissioner (Appeals) confirmed the addition observing as under:
“I have considered the argument putforth on -behalf of the appellant, but do not find any merit in the same. As regards the authorized representative’s statement that the furniture was of such a nominal value that even the department did not consider it worthwhile to make an inventory, I am in total disagreement with the same. The department did not obviously make an inventory, because the appellant made a disclosure of Rs. 2 lakhs in this regard. The appellant cannot be allowed to get away in these matters by first making a disclosure, so as to prevent the department from making investigation in the Manner and then retract the disclosure. It is not known what was in the mind of the appellant, when he made the disclosure of Rs. 2 lakhs in respect of these items. The assessing officer’s action of restricting the addition to the amount of disclosure made by the appellant, in these circumstances, cannot be considered to be unreasonable. There being definite evidence of investment in furniture and the appellant having himself disclosed a sum of Rs. 2 lakhs earlier, I find no reason to interfere with the action of the assessing officer in this regard and confirm the addition made by him. The grounds of appeal are accordingly dismissed.
25. Dr. Sunil Pathak, the learned counsel for the assessee, submitted that because the assessee had declared investment in furniture and fixture of Rs. 2 lakhs, the quantum of such investment is not disputed at this stage, although there was no such investment to this extent in furniture and fixtures. However, he submitted that the assessee had the undisclosed income of Rs. 3,52,000 available with himself from the brokerage and which has been found from the diaries seized and also accepted by the assessing officer and the assessee. In view of this availability of income, furniture is considered to be made from this income and as this brokerage of Rs. 3,52,000 is already taxed, the set off for the addition on account of furniture and fixtures may be given. He, therefore, submitted that no addition is warranted on this account and in support of this contention, he placed reliance on the decision of this Tribunal in the case of Kasat Paper & Pulp Ltd. v. Asstt. CIT (2000) 74 ITD 455 (Pun e).
26. The learned departmental Representative distinguishing the decision in the case of Kasat Paper & Pulp Ltd. (supra), submitted that set off can be allowed only in block assessment and not in a regular assessment.
27. We have considered the rival submissions. It is noted that the flat was purchased by the assessee in the year 1993. Undisclosed income on account of brokerage to the tune of Rs. 3,52,000 is based on the entries in the seized diaries which pertained to the assessment year under appeal, i.e., assessment year 1995-96. It cannot be believed that when the flat was purchased in 1993, the assessee waited to furnish it two years thereafter and further the assessee made a categorical statement in his statement recorded under section 132(4) that he had made investment of Rs. 1,50,000 in office furniture and Rs. 50,000 in household furniture which was not disclosed in the return of income. Therefore, in the said statement under section 132(4) the assessee had offered an amount of Rs. 2 lakhs as his additional income for the assessment year under appeal, i.e., assessment year 1995-96. In our opinion, the assessee ought to have honoured his statement and offered this amount for taxation in the year under appeal. The case of Kasat Paper & Pulp Ltd. (supra) pertains to block assessment and is not applicable to the facts of the case of the assessee. The other cases relied upon by the learned counsel are also of no assistance because in those cases benefit was given for some intangible additions made in the earlier years. (CIT v. Ram Sanehi Gian Chand (1972) 86 ITR 724 (P&H), CIT v. Sahu Brothers (1978) 115 ITR 438 (MP) and CIT v. Taryamal Balachand (1987) 165 ITR 453 (Raj)). In the present case, the assessee is asking for set off against income of the current year which cannot be allowed because it cannot be presumed that by the time the assessee put furniture and fixtures he had earned undisclosed income to the tune of Rs. 3,52,000. This ground accordingly fails and is dismissed.
Ground No. 4:
28. This ground relates to addition of Rs. 96,620 on account of interest payable to various parties. Diary No. 31 which is in the form of a cash book revealed the total receipts of Rs. 4,77,512 as against which the assessee had shown brokerage income of Rs. 3,62,869. The assessee was asked to reconcile these figures and the reconciliation is reproduced by the Commissioner (Appeals) in para 19 of his order. He accepted all these contentions except that interest of Rs. 95,620 was received by the assessee on account of the lenders and the same was credited in his diaries. Accordingly, he sustained an addition of Rs. 95,620.
29. The learned counsel for the assessee submitted that in his finance business, the assessee sometimes has to collect the interest payable by the borrowers to the lenders. Such interest collected appeared in his diary No. 31 and the relevant entries for payment of such interest to the lenders were also appearing in the same diary as per details given on p. 222. Against these payments of interest, the initials of the lenders appeared in the diary. During the course of hearing, another chart was given furnishing the exact details of the pages of the diary and also the entries of interest received which could be deciphered from the diary. He therefore, submitted that when the diary itself reveals the payment of interest to these persons, there is no reason for the assessing officer or the Commissioner (Appeals) to hold a view that these payments are bogus.
30. The learned departmental Representative relied upon the orders of the authorities below.
31. We have considered the rival submissions. In our opinion, if the receipt side is considered correct, then the payment side in diary No. 31 has to be considered as equally correct as per the decisions of this Tribunal in the cases of Hotel Kiran (supra) or Chander Mohan Mehta (supra). We, therefore, hold that as these entries of payments appeared in the diary, the interest of Rs. 95,620 is wrongly taxed in the hands of the assessee. This ground accordingly succeeds.
Additional ground:
32. The assessee has moved the following additional ground:
“On the facts, in the circumstances of the case and as per law, the appellant requests for allowing the deduction of the business expenses as per the diaries seized during search, while computing the income from the business of finance brokerage.
33. The learned counsel for the assessee submitted that the entire receipts of Rs. 3,52,869 of brokerage as income had been offered by the assessee, while diary No. 31 itself revealed that the assessee had incurred certain business expenses. The brokerage after considering these expenses should have been offered for tax. Thus, the assessee committed a mistake of offering the entire receipts as income for tax. He, therefore, requested that the additional ground be admitted in view of Bombay High Court judgment in Ahemedabad Electricity Co. Ltd. v. CIT (1992) 199 ITR 351 (Bom)(FB) and the Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT (1998) 229 ITR 383 (SC).
34. After hearing the parties, we do admit the additional ground, but do not find any merit in the same. The assessee himself offered an amount of Rs. 3,52,869 as undisclosed income on the basis of the entries in the seized diaries and now it is too late during the day to ask the assessing officer to go through the seized material again and find out the veracity of the entries again and further to find out which items are relating to the business income and which are relating to non-business income. Accordingly, we reject the additional ground.
35. In the result, the appeal is allowed in part.