ORDER
Hari Om Maratha, J.M.
1. This appeal of the assessee arises from the order of the CIT(A), Jodhpur, rendered for the block period consisting of asst. yrs. 1997-98 to 2003-04 (i.e., from 1st April, 1996 to 20th Dec., 2002) dt. 23rd Dec., 2005.
2. In brief, the relevant facts of this case are that a search under Section 132(1) of the IT Act, 1961 (hereinafter referred to as ‘the Act’ for short) was conducted on 20th Dec., 2002, in the case of Singhvi group of Jodhpur. The foUowing premises were covered in this search:
1. Residence of Shri Vimal Raj Singhvi, his wife Smt. Asha Singhvi, Shri Rahul Singhvi, his wife Smt. Payal Singhvi, Shri Vishan Singhvi, his wife Smt. Rohni Singhvi. All these persons are residing in joint family at Moti Chowk.
2. Residence of Shri Vijay Raj Khariwal, Plot No. 5, Paota ‘B Road’, Jodhpur. Shri Vijay Raj Khariwal is the manager (finance) of M/s Chemicals & Minerals Industries (P) Ltd., Jodhpur.
3. Office-cum-factory premises of M/s Chemicals & Minerals Industries (P) Ltd., 29(1), Light Industrial Area, Jodhpur.
3. The assessee has been residing in a joint family house situated in Moti Chowk, Jodhpur, along with his wife Smt. Asha Singhvi, Shri Rahul Singhvi and his wife Smt. Payal Singhvi, Shri Vishant Singhvi and his wife Smt. Rohini Singhvi. During this search various incriminating evidences were found and seized from the searched place(s). The assessee derives income from salary, share of profit from firms and income from other sources.
4. During search a loose paper marked No. 1 of Annex. A-l, of the Panchnama, found at the residence of the assessee on 20th Dec., 2002, was seized by the search party. As per this seized paper it was revealed that some sale transactions are recorded on it. This is a paper of ‘Kalpa-Taru Theatres, Shastri Nagar, ‘E’ Sector, Jodhpur. Some of the writings are in indirect manner, i.e., in coded language. Three plots were agreed to be purchased by the assessee- one in his own name, one in his wife Smt. Asha Singhvi and one in the name of assessee’s HUF; from Shri Parag Munot and the HUF of Mafatraj P. Munot, for a total consideration of Rs. 2.05 crores (two crores and five lakhs). According to the assessee, the stamp duty and registration fees totalling to Rs. 23,91,770 was to be borne by the sellers. In the loose paper (+) and (-) amounts are found mentioned. As per the assessee (-) amounts represent the amount of registration, which was agreed to be borne by the seller; but the entire amount was paid by the assessee before the registration of the sale deeds in question. In other words, the meaning of symbol (+) represented the amount towards purchase price (i.e. consideration of sale) and (-) symbol represented the expenses leviable for stamp duty and other ancillary expenses. According to the assessee it was decided that total agreed sale amount of Rs. 2.05 crores would be paid and out of which Rs. 30,75,000 approximately, shall be registration charges, etc., whether it sufficed or not. The registration charges were to be borne by the seller. The registry of plot Nos. 64 and 65, for which this deal was finalized was to be made on total consideration of Rs. 2.05 crores.
5. The AO found that the total consideration for the purchase of property in question was Rs. 2.05 crores, in the following manner:
No. Consideration Seller
Plot No. 64 93.25 lakhs Parag Munot
Plot No. 65 81.00 lakhs Mafat Raj Munot
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174.25 lakhs
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The sale was executed after the date of search. The loose paper is a sort of agreement or memorandum executed between the parties and duly signed by them. According to the learned AO the payment with (+ve) sign represents payment by cheques and with (-) sign represents payment in cash. Thus as per the AO, the assessee paid Rs. 174.25 lakhs through cheque and Rs. 30.75 lakhs in cash. The payment details are found recorded on this loose paper as under:
Payment details
Date Amount (+) Amount (-)
12-11-2002 50 10.75
30-12-2002 20 10.00
30-1-2003 15 10.00Agreement of sale
28-2-2003 20
25-3-2003 69.25
———- ———-
174.25 30.75
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On the back side of this paper it is mentioned that cheques of Rs. 25 lakhs each issued by Shri Vimal Raj (individual) and M/s Vimal Raj Singhvi (HUF) were to be returned back and replaced by fresh cheques of Indusind Bank. Shri Shyam Ji Agarwal, the power of attorney holder on behalf of the seller has acknowledged receipt of cheques of Indusind Bank on 11th Nov., 2002. Cash amount of Rs. 1,25,000 was given to him on the date of agreement, mentioned in paper as on 10th Nov., 2002 (duly received by him) and balance of first instalment of cash i.e., Rs. 9,50,000 was to be given on llth Nov., 2002.
From the above facts, the AO inferred that when the assessee has complied with all the terms of this agreement, the cheques of Rs. 25 lakhs each issued by Shri Vimal Raj Singhvi (individual) and M/s Vimal Raj Singhvi (HUF) were duly issued on the dates mentioned therein and were duly replaced by cheques of Indusind Bank letter as per the terms mentioned in the said letter and the cash payment of Rs. 1.25 lakhs was duly made by Shri Vimal Raj Singhvi (individual) to Shri Shyam Agarwal which has been accepted by both, therefore, when all the terms as appearing in Exhibit-1 of Annex. A-l were complied with both in letters and spirits, it gives rise to preponderance of probability on the basis of the circumstantial evidence found at the time of search that remaining terms of the said letter should have also been complied with, the AO observed that the amount of Rs. 9,50,000, that was to be paid on llth Nov., 2002 to Shri Shyam Ji Agarwal must also have been paid on llth Nov., 2002.
6. According to AO, since the search took place on 20th Dec., 2002, the assessee tried to cover up the transaction already made by paying Rs. 9,50,000 by demand draft on 27th Dec., 2002, in lieu of payment made in cash on llth Nov., 2002. This is considered by AO as an afterthought, as the writing on this paper is clear, unambiguous and reveals that payment of Rs. 9,50,000 was made and received on llth Nov., 2002, along with cheques of Indusind Bank of Rs. 25 lakhs each replaced by cheques of SBBJ of equal amounts. The AO further noted that the assessee has claimed (that) payment of Rs. 1,25,000 was made out of personal cash book but such cash book was neither found during the course of search nor was produced during the course of these proceedings. The assessee could not establish any direct link between the amount withdrawn in cash and payment made to seller. In the backdrop of these facts, the AO held that the payment of Rs. 9,50,000 was made in cash on llth Nov., 2002, as per Annex. ‘A’. The total payment of Rs. 10,75,000 was not found recorded in the books, and therefore, the AO added Rs. 10,75,000 under Section 69 of the Act.
7. The learned CIT(A) agreed with the learned AO and concluded that the signs (+) and (-) stood for payments by cheque and in cash because this view found support from the seized paper Annex. A-l/1, itself, that amount of Rs. 10.75 lakhs written below (-) sign was to be paid in cash. Thus he confirmed the addition of Rs. 10,75,000 as unexplained investment under Section 69 of the Act. The assessee has assailed this addition before us.
8. We have heard the rival submissions and perused the evidence on record.
9. The learned Authorised Representative Shri N.R. Mertia, has vehemently argued before us that both the authorities below have wrongly construed loose paper Annex. A-l/1, to come to the conclusion that the impugned investment is an unexplained one. According to him, the writings on Annex. A-l/1 are quite clear and apparent. He has referred to his lengthy paper book to explain that the amount mentioned below (-) sign represents registration charges and not cash payments as has been observed by the learned CIT(A) and the learned AO.
10. On the other hand, the learned senior Departmental Representative, Shri Meena, has clamoured that the writings on Annex. A-l/1 are self-explanatory and speak volumes in favour of the findings of the Department that the payments below (-) sign depict cash payments.
11. We have carefully treaded through the orders of the learned AO and the learned CIT(A). We have macroscopically as well as microscopically circumspected Annex. A-l/1, which is a part of the assessment order. There is no dispute with regard to total consideration of sale amount of Rs. 2.05 crores (two crores and five lakhs). As per this seized paper this fact is quite obvious. Under (-) sign total amount of Rs. 30 lakhs and 75 thousands has been written. In case we accept the version of the assessee, Rs. 30,75,000 was carved out for registration charges. Now let us see what is the position after the registration of the sale deeds, which took place on 13th June, 2003. As per sworn affidavit of Shri Shyam Aggarwal, power of attorney (POA) of the seller Shri Mafat Raj Munot and family, the sellers agreed to sell their plot Nos. 64 and 65 at a total consideration of Rs. 2.05 crores, inclusive of registry charges, which included stamp duty and registration fees. Meaning thereby Rs. 23,91,770 (as per page No. 9 of the assessee paper book, which gives a summary of total cost involved in these sales) were borne by the sellers. According to this affidavit a phone call was made to an advocate, who roughly gave registration charges as Rs. 30.75 lakhs for registration fees and stamp duty, etc. at the rate of 15 per cent. According to Mr. Shyam Aggarwal Rs. 1,25,000 was given to him as a token money against the total sale consideration. A sum of Rs. 9,50,000 was agreed to be paid on 11th Nov., 2002 but was actually paid on 27th Dec., 2002, through demand draft.
12. We are dealing with a search case in which Annex. A-l/1 was found, on the basis of which the impugned addition has been made. As per the learned Authorised Representative the amount of money written below (+) sign indicates the sale consideration and below (-) sign indicates the expenses which include stamp paper and other sundry ancillary expenses. Upto 20th Dec., 2002, the assessee had paid Rs. 50 lakhs by cheque and Rs. 1,25,000 in cash. Under the (-) sign, the assessee had to pay Rs. 10,75,000 towards “registration charges and stamp duty expenses” (in short registry charges). The next payment was to be made on 30th Dec., 2002. Since the search took place on 20th Dec., 2002, before the second payment, we are concerned with the payments, which stood exchanged until that date. There is no dispute with regard to payment of Rs. 50 lakhs, which was admittedly paid through cheque. The dispute hinges around the payment of Rs. 10,75,000, which is shown under (-) sign upto 20th Dec., 2002. According to assessee only Rs. 1,25,000 was paid in cash that too from withdrawals already made and the same was given as a token money. The balance of Rs. 9,50,000 due to be paid on llth Nov., 2002, was actually not paid in cash on llth Nov., 2002. The case of the Revenue is that when the assessee has honoured all the conditions of this memorandum (agreement), the term of payment of Rs. 9,50,000 must have also been adhered to by the assessee, in all its probabilities. We are aware that in a block assessment, addition on the basis of probabilities and presumption are beyond the scope of Chapter XIV-B of the Act. The addition in the block assessment can be made, only and only on the basis of seized material/evidences.
13. In the given case, except guesswork or presumption of fact there is no evidence on record, which could be stated to have been found during search, with regard to the payment of Rs. 9,50,000 in cash as has been alleged. Not a single question was put to the assessee in this regard by the search party, while recording the statement under Section 132(4) of the Act. The statement of Shri Shyam Aggarwal, the power of attorney, recorded by the Department is entirely in conformity with the claim of the assessee. Rather, a duly sworn-in affidavit has also been filed by Shri Shyam Aggarwal, which remained uncontroverted by the Department.
14. The version of the Revenue is solely based (on) presumptions raised on the seized paper, and that too on account of probabilities. The Department even failed to ask from the assessee on this important aspect. It seems that the raiding party was satisfied about the veracity of the claim of the assessee. The contention of the assessee that the deal was finalised with a stipulation that the ‘registry-expenses’ shall be borne by the seller himself, stands corroborated by the fact that in the registration deeds, this fact is found mentioned. The seller has sent these demand drafts towards the purchase of stamp paper. The power of attorney, Shri Shyam Agarwal has filed his affidavit to that effect. The letters of the sellers and separate receipts dt. 24th May, 2003, for the drafts in the favour of the Registration Department, Government of Rajasthan, send by the sellers from Mumbai for the purchase of non-judicial stamps, vindicate the stand of the assessee. The version of Shri Shyam Agarwal that he consulted about the approximate charges of registration @ 15 per cent from one advocate cannot be easily brushed aside. This is a normal behaviour in such circumstances. The assessee had not disputed the total sale consideration. The sellers and the purchasers (i.e., the ‘assessee’) have accepted this fact as a truth. They could not be deviated from their stand that registration charges were to be borne by the sellers and the same rather stands proved on record also. Hence, in these circumstances, the scale tips in the favour of the assessee. It is a settled rule of law that when two opinions can be formed on a set of facts, the one favouring the assessee has to be accepted. The receipt of Rs. 1,25,000 by Shri Parag Munot has been acknowledged and shown in the cash book dt. 10th Nov., 2002, a copy of which is placed on page No. 44 of the paper book. The amount of Rs. 9,50,000 agreed to be paid on llth Nov., 2002, was paid on 27th Dec., 2002, vide demand draft. Thus, how the contention of the assessee can be overlooked. When the assessee has paid major portion of the sale consideration through cheques and the parties have shown the sale consideration of Rs. 2,05,000 in the sale deeds, it would be unjust to disbelieve the version of the assessee. Moreover, there is no proof that the assessee had paid in cash, over and above what is found recorded on this loose paper, or that the amount of Rs. 10,75,000 is unexplained money of the assessee, particularly, when the same stands explained. Mere suspicion cannot be made a basis of addition. We may refer to the decision of the Hon’ble jurisdictional High Court in the cases of CIT v. R.Y. Durlabhji and Jayanti Lal Patel v. Asstt. CIT , in support of the above proposition of law. Therefore, we have to delete this amount from addition in the total undisclosed income of the assessee.
15. The other effective ground of this appeal is contained in ground No. 4 (4.1, 4.2, 4.3 and 4.4), which relates to sustained addition of Rs. 5,96,280 made on account of undisclosed household expenses.
16. The assessee while replying question No. 12 in his statement recorded on 20th Dec., 2002, said that monthly household expenditure of his family was about Rs. 30,000, which do not include salary given to servants because salary to servants is paid by his company. The family of the assessee consists of nine members, including two children. The learned AO recorded statement of Smt. Rohini Singhvi, daughter-in-law of the assessee, in which she accepted to have undertaken a foreign trip to Seychelles along with her husband for honeymoon. The AO has observed that all the modern amenities were found in the house of the assessee. The expenditure incurred on foreign trip was not found reflected in the books of account, therefore, he estimated the household expenses, for the block period as under:
S. Asst. yr. Household Household Difference
No. expenses estimated expenses actually
household shown
1. 1997-98 Rs. 2,40,000 Rs. 1,61,000 Rs. 79,000
2. 1998-99 Rs. 2,40,000 Rs. 1,61,619 Rs. 78,381
3. 1999-2000 Rs. 3,00,000 Rs. 1,77,000 Rs. 1,23,000
4. 2000-01 Rs. 3,00,000 Rs. 2,24,000 Rs. 76,000
5. 2001-02 Rs. 3,60,000 Rs. 2,35,010 Rs. 1,24,990
6. 2002-03 Rs. 3,60,000 Rs. 2,75,090 Rs. 84,910
7. 2003-04 up to Rs. 2,70,000 Rs. 1,61,080 Rs. 1,08,920
date of search
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Rs. 5,96,280
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And thus he added excess household expenses of Rs. 5,96,280 in the block period. This addition was sustained by the learned CIT(A).
17. We have heard the rival submissions and perused the evidence on record.
18. We agree with the Department that the assessee has stated that his family’s monthly expenses were Rs. 30,000 but the AO himself has estimated the same ranging between 20,000 per month to 30,000 per month for the asst. yrs. 1997-98 to 2003-04, upto the date of search. We don’t agree with the learned Authorised Representative that this figure of Rs. 30,000 was overwritten by the search party or the Department. But we find force in the submission of the learned Authorised Representative that only on the basis of a general statement of the assessee which is suddenly taken during search, cannot alone be made a basis for any such addition towards household expenses, which is a very specific expenditure and cannot be immediately told without referring to the records. The amount of Rs. 30,000 mentioned by the assessee was disputed, during assessment proceedings, by mentioning that he had stated only Rs. 20,000 and in the statements, there is an overwriting. We may ignore this contention of the learned Authorised Representative because, there is no such evidence on record and the assessee did not take further action against the same as per law. But otherwise, we agree with the learned Authorised Representative that the learned AO himself has taken a different estimated figure of monthly expenses for the different assessment years of the block period. From the statement of Smt. Rohini Singhvi recorded under Section 132(4) on 20th Dec., 2002, the clear fact emerges that it is the wife of the assessee Smt. Asha Singhvi who was the person in control of household expenses. Smt. Asha Singhvi, in turn, stated that the expenses are contributed by various members of the joint family. In these facts, when we take the cumulative effect of these evidences, we can safely state that the addition in question is not based on the seized material. The household expenses cannot be rested on the gadgets or furnitures, etc., found in the house of the assessee during search. This is the consistent view of this Bench. As far the expenditure on the foreign trip is concerned it is found recorded in the books. Hence, we are of the considered opinion, that no addition on account of undisclosed household expenses is warranted in the block assessment on the basis of estimations. Therefore, we delete the entire addition, so made. This ground of appeals stands allowed.
19. Ground Nos. 1 and 2 were not really pressed and ground No. 5, has become infructuous in view of our findings given on merits of the case and ground Nos. 6 and 7 are general in nature. Therefore, ground Nos. 1, 2, 5,6 and 7 stand dismissed.
20. In the result, the appeal of the assessee is partly allowed.
