Income Tax Appellate Tribunal - Pune
Prashant Baliram Mahajan, Aurangabad vs Assessee on 20 March, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "A", PUNE
Before Shri Shailendra Kumar Yadav, Judicial Member
and Shri R.K. Panda, Accountant Member
ITA No. 1048/PN/2005
(Block Period 01-04-2005 to 21-11-2001 )
ACIT, Central Circle, Aurangabad .. Appellant
Vs.
Shri Prashant Baliram Mahajan,
30, Shrikrupa, Jyotinagar,
Aurangabad. .. Respondent
PAN No.AFBPM9904N
ITA No. 619/PN/2005
(Block Period 01-04-2005 to 21-11-2001 )
Shri Prashant Baliram Mahajan,
30, Shrikripa, Jyoti Nagar,
Aurangabad. .. Appellant
PAN No.AFBPM9904N
Vs.
ACIT, Central, Aurangabad .. Respondent
Assessee by : Shri Sunil Pathak
Revenue by : Smt. M.S. Verma
Date of Hearing : 20-03-2014
Date of Pronouncement : 12-05-2014
ORDER
Per R.K. Panda, AM :
These are cross appeals. The first one is filed by the Revenue and the second file filed by the assessee and are directed against the order dated 28-01-2005 of the CIT(A)-I, Nagpur relating to Block period 01-04-2005 to 21-11-2001, i.e. A.Yrs. 1996-97 to 2002-03. For the sake of convenience, these appeals were heard together and are being disposed of by this common order.
2
2. Facts of the case, in brief, are that the assessee is an individual and was regularly assessed to Income Tax showing income from business under the name and style of his proprietaryship concern of M/s. Megh seeds, rental income and agricultural income. A search and seizure operation u/s.132 of the Income Tax Act was conducted at the residential premises of the assessee on 21-11-2001. Simultaneous search operations were also conducted in the premises of close relatives and associates of the assessee namely, (i) Mr. N.H. Jalkote (Brother-in-law of the assessee) working as Superintendent Engineer, PWD (ii) Mr. M.H. Andure (Brother-in-law of the assessee), (iii) Mr. Baliram B. Mahajan (Father of the assessee) and (iv) residential and business premises of Mr. M.B. Patil (Govt. Contractor). In response to notice u/s.158BC(c) the assessee filed block return in Form No.2B on 15-03-2002 declaring undisclosed income of Rs.68,07,139/-. 2.1 During the course of assessment proceedings the Assessing Officer, based on the statements recorded u/s.132(4) and 131 of the Income Tax Act, 1961 and seized material called for various details from the assessee in the shape of a questionnaire. The Assessing Officer observed that the assessee on the date of search was 37 years old having completed in Diploma in Electronics. Between 1991 to 1998 he was employed with Videocon at Aurangabad drawing salary of Rs.4,500 per month initially which has gone up to Rs.8,500/- per month before leaving the said employment. The assessee is the Managing Director of M/s. Megh Seeds Pvt. Ltd. which is engaged in purchase of seeds in respect of Cotton, Jawar, Bajra, Vegetables etc. which are processed and sold under the company's label. The other 3 Directors of M/s. Megh Seeds Pvt. Ltd. are Mr. M.H. Andure and Mr. Baliram B. Mahajan whose premises were also searched as mentioned earlier. The assessee was showing agricultural income in his return of income. The Assessing Officer further noted that the assessee filed the return of income for A.Yrs. upto 2001-02 before the date of search, the details of which are as under :
A.Y. Date of filing Income shown Nate of income
of return Business Agrl.
1999-2000 31/08/1999 1,49,372/- 65,025/- Prop. of Megh seeds
2000-2001 30/07/2001 1,46,560/- 79,049/- Prop. of Megh seeds
and shop rent
2001-2002 30/07/2001 1,41,400/- 65,870/- Prop. of Megh seeds
and shop rent
2.2 The Assessing Officer confronted the assessee regarding the
various issues cropped up as a result of search in which incriminating documents were seized and also on the basis of the statement recorded u/s.132(4) on 21-11-2001 by the Authorised Officer. The Assessing Officer further noted that during the course of search in the residential premises of Mr. N.H. Jalkote, various diaries were found from his possession with most of the notings in the handwriting of Mr. N.H. Jalkote himself which were also admitted by Mr.Jalkote. Inventory numbers of these diaries are A-67, A-68 and A-71. The Assessing Officer observed from the notings as per these diaries that the notings show date and amount-wise running accounts of various persons including the assessee and the assessee had signed on the relevant pages of the seized diaries on which such running account in the name of the assessee was appearing.
42.3 The Assessing Officer observed that during the course of search the statement of the assessee was recorded u/s.132(4) who categorically accepted the entries appearing in the said diary as belonging to his transactions. In his statement recorded u/s.132(4) the assessee had admitted that he had borrowed an amount of Rs.64 lakhs from Mr. N.H. Jalkote from time to time as per the entries appearing in the running account in his name in the said diaries. He had also given the details of various undisclosed investments made by him with the help of such borrowed funds of Rs.64 lakhs. However, the assessee subsequently retracted the said admission and stated that the said funds of Rs.64 lakhs were his own funds and that he had not borrowed any money from Mr.Jalkote. The Assessing Officer, during the course of block assessment proceedings, asked the assessee to explain the source for various undisclosed investment found as a result of the search. The assessee filed a cash flow statement to explain such undisclosed investment. However, the Assessing Officer found that the following receipts claimed by the assessee in the cash flow statement are not supported by any entries in the seized document or by any independent corroborative evidence produced by the assessee, the details of which are as under :
Sl.No. Particulars Amount
I. Opening cash balance as the beginning of A.Y. 96-97 1,38,993/-
II. Agril. income of the HUF for A.Y.96-97 onwards 3,43,208/-
III. Undisclosed income from 1/4/2001 to the date of 8,00,000/-
search
IV. 8% profit on Contract receipts for A.Y. 99-2000 28,000/-
V. Undisclosed profit for A.Y. 99-2000 15,00,000/-
VI. Undisclosed income on sub-contract for A.Y. 2000- 17,500/-
01
VII. Income from business (diary) from A.Y. 96-97 to 38,29,000/-
97-98
VIII. Gift received from Baliram Mahajan A.Y. 2001-2002 25,000/-
IX. Unsecured loans from M.H. Andure A.Y. 97-98 to 4,37,839/-
99-00 and 1/4/2001 to the date of search
X. M.H. Andure Payable A.Y. 99-2000 3,24,648/-
5
XI. Sanjay Mahajan A.Y. 99-2000 2,00,000/-
XII. Baliram Baswant Mahajan A.Y. 200-01 till search 4,09,417/-
XIII. S.B. Sontakke A.Y. 2001-02 2,000/-
XIV. Current liability A.Y. 99-2000 8,34,679/-
XV. Sundry Creditors 8,28,819/-
XVI. Megh Seeds Pvt. Ltd. - Suspense A.Y. 2001-02 1,54,735/-
XVII. Sundry Receivable 2,12,936/-
XVIII. Sale of fixed assets A.Y. 2000-2001 2,84,000/-
2.4 Rejecting the various explanations given by the assessee the
Assessing Officer determined the undisclosed income of
Rs.85,15,943/- on account of the following additions :
Sr. Para Description Amount (Rs.)
No. No.
1. 7.1 Investment in shares of M/s.Megh Seeds Pvt. Ltd. 50,000/-
2. 7.2 Undisclosed salary from M/s.Megh Seeds Pvt. Ltd. 1,43,000/-
3. 7.3 Investment in two rooms at Padegaon Farm 25,000/-
4. 7.4 Investment in Padegaon Farm 16,17,943/-
5. 7.5 Investment in Shop No.111 at Apna Bazar 1,30,000/-
6. 7.5 Rent from Shop At Apna Bazar 1,72,000/-
7. 7.6 Investment in Renuka Bunglow 24,61,000/-
8. 7.7 Rent from Renuka Bunglow 2,51,000/-
9. 7.8 Investment in fixed deposits 8,70,000/-
10. 7.9 Investment in Agril. Land at Kasarkheda 11,00,000/-
11. 7.10. Investment in Maruti Car & Ambassador 5,89,000/-
12. 7.11 Investment in Mitmita Land 11,07,000/-
TOTAL UNDISCLOSED INCOME 85,15,943/-
3. In appeal the Ld.CIT(A) called for a remand report from the Assessing Officer on the basis of the various details furnished before him. After confronting the same to the assessee the Ld.CIT(A) sustained an amount of Rs.95,334/- on account of alleged receipt of salary from M/s. Megh Seeds Pvt. Ltd., an amount of Rs.8,70,000/- on account of investment in Fixed Deposits, an amount of Rs. 11 lakhs on account of investment in agricultural land at Kasarkheda and an amount of Rs.5,89,000/- towards investment in Maruti car and Ambassador car. He, however, deleted the remaining items. It is pertinent to mention here that the assessee did not press the addition of 6 Rs.50,000/- on account of investment in shares of M/s. Megh Seeds Pvt. Ltd. for which the Ld.CIT(A) confirmed the addition. 3.1 Aggrieved with such part relief given by the CIT(A) the Assessee as well as the Revenue are in appeal before us. ITA No.619/PN/2005 (By Assessee) :
4. Ground of appeal No.1 by the assessee reads as under ;
"1. On the facts and circumstances of the case, the learned Commissioner of income Tax (Appeals)-I, Nagpur, erred when he sustained an addition of Rs.95,334/- towards alleged receipts of the salary from Megh Seeds Pvt. Ltd., which infact was never received by the appellant".
4.1 Facts of the case, in brief, are that the Assessing Officer observed from the statement recorded u/s.132(4) that the assessee was getting salary income from M/s. Megh Seeds Pvt. Ltd. but such salary was not shown by him in his regular return. The Assessing Officer further noted that the assessee has not disclosed the same in his block return. The Assessing Officer therefore concluded that in view of the specific declaration made by the assessee in the statement recorded at the time of search, the above net salary of Rs.95,334/- has to be taxed as undisclosed income of the assessee in respective assessment years. 4.2 Before the CIT(A) it was submitted that the assessee is a Director of the said company since last 5 years. The company is also assessed to Income Tax and filing its return of income along with audited balance sheet and profit and loss account. Referring to the profit and loss account of the said company for the year 1999-2000 to the date of search it was submitted that the company has not debited any Salary to Directors in the profit and loss account and the expenses 7 debited under the head "Salary Expenses" are the "Salary expenses of the staff" of the company. It was submitted that the addition has been made by the AO merely on the basis of the statement recorded u/s.132(4) during the search which was made without knowing the real facts by the assessee. The assessee further submitted that the AO has not allowed standard deduction u/s.16(i) on the alleged salary while making the addition of Rs.1,43,000/-.
4.3 Based on the arguments advanced by the assessee the Ld.CIT(A) called for a remand report from the AO who stated that the salary must have been paid by the company out of its undisclosed income and that is why the assessee had on his own and without any pressure voluntarily stated the fact of earning of salary from M/s. Megh Seeds Pvt. Ltd. which was not disclosed by him. The AO further stated that once an admission is made by the assessee that certain income remained to be disclosed and once this position is accepted by the assessee in the statement recorded u/s.132(4) then by virtue of section 58 of the Indian Evidence Act, such admission fact is not required to be proved. The AO further relied on Question No.14 and 46, Page No.21 of the statement recorded u/s.132(4) dated 21-11- 2001, wherein the assessee had categorically accepted that salary from M/s. Megh Seeds Pvt. Ltd. received by him has not been shown in the return of income filed prior to search.
4.4 Based on the arguments advanced by the assessee the Ld.CIT(A) restricted the addition to Rs.95,334/- as against Rs.1,43,000/- made by the AO by observing as under : 8
"7.7 I have carefully gone through the relevant portion of the assessment order, submission of the appellant, remand report and rejoinder of the appellant and also the arguments made by the learned A.R. and I am inclined to accept the stand taken by the Assessing Officer. Perusal of the statement of the appellant recorded u/s. 132(4) dt. 22-11-2001 (Que. No.20) shows that the appellant had categorically admitted of receiving honorarium of Rs.4,000/- per month from Megh Seeds Pvt. Ltd. for the period April 1999 to March 2000 and of Rs.5,000/- per month for the period April 2000 to October 2001. The said honorarium was treated to have not been declared in the regular return of income. The said statement u/s. 132(4) dt.22-11-2001 has been strongly relied by the appellant to own up the transactions appearing in running account balance of Rs.64,00,000/- appearing in diary A-67, A-68 & A-71 at relevant Que. No.41 & 42 and, therefore, there is no reason to selectively deny admission of salary income given in the said statement. The appellant has been found to give statement u/s. 131 dt. 3-1-2002 and affidavits affirming the contents of the statement given u/s. 132(4). Thus, if there was any error or omission on the part of the appellant in admitting salary income at the time of statement u/s. 132(4), the same could have been corrected in subsequent statement and affidavit. Therefore, the cognizance to the said statement u/s. 132(4) has to be taken in toto and not in piecemeal manner. The admission made by the appellant that the salary income has not been disclosed in his regular return in the statement u/s.132(4) is, therefore, sufficient to hold it as undisclosed income in the block period as per section 58 of the Indian Evidence Act. Further stand of the appellant that the salary to Directors was not debited in the accounts of Megh Seeds Private Limited is not sufficient to negate the admission of receiving honorarium in his statement. In fact, such honorarium being paid to the appellant out of books of account of the company cannot be ruled out after considering the statement u/s. 13 2(4) of the appellant.
7.8 In view of the discussion above, I am to hold that salary income of Rs.1,43,000/- has been rightly assessed as UDI of the appellant by the AO. However, as far as the claim of the appellant goes on allowing standard deduction u/s.16(i) on the said salary, I find merit in such argument. Infact, perusal of the records shows that the AO at Para 7.2 had computed the salary income for the relevant accounting year by allowing deduction u/s.16(i), which inadvertently was omitted to in the computation of total UDI in Para 8 of the assessment order. Accordingly the UDI on account of net salary income is restricted to Rs.95,334/- after allowing standard deduction u/s.16(i) of the I.T. Act. In the result, this ground of appeal is partly allowed".
4.5 Aggrieved with such order of the CIT(A) the assessee is in appeal before us.
5. The Ld. Counsel for the assessee strongly challenged the order of the CIT(A). He submitted that the statement was given under tension during the search and hence the reply was not correct. He 9 submitted that the assessee has not taken any salary from the company and the company has also not debited such salary in its accounts. There is no incriminating evidence found to indicate that the company had paid the salary to the assessee. Therefore, merely on the basis of the reply in the statement, the addition is not justified. Relying on the following decisions he submitted that no addition in block assessment can be made solely on the basis of statements recorded during search :
1. DCIT Vs. Pratap Singh Rajendra Chamola & Co.
(2009) 19 DTR (Chd.)(Trib) 182
2. CIT Vs. Smt. Chitra Devi Soni 214 CTR 128
3. Santosh V.Shetty Vs. ACIT ITA No.213/PN/2005 order dated 11-08-2005
6. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A).
7. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. There is no dispute to the fact that the assessee is a Director of M/s. Megh Seeds Pvt. Ltd. There is also no dispute to the fact that the assessee, in his reply to various questions recorded u/s.132(4) on 21-11-2001, had categorically accepted that salary from M/s. Megh Seeds Pvt. Ltd. received by him has not been shown in the return of income filed prior to search. The assessee has also given a statement u/s.131 dated 03-01-2002 and affidavits confirming the contents of the statement given u/s.132(4). The assessee has not retracted such statement within a reasonable time to show that he has not received such salary from the company. The 10 receipt of salary from a closely held company by the assessee who was the director was within the exclusive knowledge of the assessee. Therefore, in this particular case it is immaterial as to whether any other evidence is found or not. Under these circumstances, the various decisions cited by the Ld. Counsel for the assessee are not applicable to the facts of the present case and are distinguishable. 7.1 In the case of Pratap Singh Rajendra Chamola & Co. (Supra) additions were made on the basis of statement of some third parties such as employees from whom security of Rs.12,000/- each totaling to Rs.20,35,000/- from 170 salesmen was claimed to have been collected by the firm. During the course of search/survey statements of 26 salesmen were recorded who stated that no security deposits had been given by them to the assessee firm. One of the partners of the firm also stated that no such security deposits had indeed been received by the assessee firm from the employees. However, in the fresh proceedings made in pursuance to the direction of the Tribunal, the assessee firm produced 3 salesmen and the partner of the firm for recording their statements. In their fresh statements, the 3 employees categorically accepted that they had given security deposit of Rs.12,000/- each to the assessee firm and their earlier statements have been recorded by the Addl. Director of Income-tax under duress and undue pressure. Affidavits of various other members were also filed wherein they have accepted that they had given security deposit to the assessee firm. It was argued that the statements earlier recorded at the time of search were behind the back of the assessee and no opportunity of cross-examination was granted even during the course 11 of search and the earlier assessment proceedings. Finally, it was argued that there was no evidence found as a result of search to allege that unexplained security deposit had been received by the assessee firm and such security deposit was already shown in the original return filed. It was accordingly argued that in absence of any material found as a result of search and the factum of security deposits having been disclosed by the assessee in the original return no undisclosed income could be brought to tax under Chapter XIVB. Under these circumstances, when the AO made the addition, the Tribunal upheld the order of Ld.CIT(A) by holding that no addition in block assessment can be made solely on the basis of statements recorded during search.
7.2 However, the facts in the instant case are different. The assessee himself has accepted in his statement recorded u/s.132(4) that he was getting salary of Rs.4,000/- per month from April 1999 to March 2000 and Rs.5,000/- per month from April 2000 to October 2001. These facts were within his exclusive knowledge. Therefore, the decision relied on by the Ld. Counsel for the assessee is not applicable to the facts of the case. The facts in other decisions are also distinguishable and not applicable to fats of the present case. In this view of the matter and in view of the detailed reasoning given by the Ld.CIT(A) sustaining an amount of Rs.95,334/- after allowing standard deduction/s.16(1) we find no infirmity in the same. This ground by the assessee is accordingly dismissed.
12
8. Ground of appeal No.2 by the assessee reads as under :
"2. On the facts and circumstances of the case, the learned Commissioner of income Tax (Appeals) also erred when he sustained an addition of Rs.8,70,000/- towards investment in Fixed Deposits in various hands instead of considering the actual quantum of Rs.5,51,645/- offered by the appellant."
8.1 Facts of the case, in brief, are that the AO noted that the assessee in his answer to Question No.25 in his statement recorded u/s.132(4) on 22-11-2001 had stated that fixed deposit of Rs.8,70,000/- were made in the following names :
Name Amount (Rs.)
Smt. Kamlabai Mahajan-Mother 1,00,000/-
Shri Baliram B. Mahajan-Father 2,00,000/-
Mrs. Varsha Mahajan-Wife 70,000/-
Shri Prashant Mahajan-Self 1,80,000/-
Shri Sanjay Mahajan-Brother 1,00,000/-
Shri Baswant Mahajan-Brother 1,50,000/-
Shri Shalani Mahajan-Sister-in-law 1,00,000/-
TOTAL 8,70,000/-
8.2 He noted that in answer to Question No.41 the assessee declared the above investment as his own undisclosed investments and offered the same for taxation. However, during the block assessment proceedings the assessee filed re-conciliation chart in which he claimed that out of the above investments in fixed deposits an amount of Rs.5,51,645/- only was included by him in the undisclosed income shown in his own block return. The remaining amounts were claimed to be considered in the respective hands. However, the assessee did not file the details and proof in respect of such claim for the remaining amount of FDRs. The AO further noted that even during the block assessment proceedings of Mr. Baliram B. Mahajan an amount of fixed deposit of Rs.2 lakhs in the name of Mr. Baliram B. Mahajan was not shown as undisclosed income in his 13 case. The AO, therefore, made addition of Rs.8,70,000/- as undisclosed income of the assessee and added the same in the hands of the assessee on substantive basis.
8.3 Before CIT(A) it was submitted that the AO relied only on the statement u/s.132(4) of the assessee while making the addition of Rs.8,70,000/-. However, nothing has been brought on record to prove that the assessee has made investments over and above Rs.5,51,645/- which was offered by him in the block return. It was further submitted that nothing was found in the seized material to prove that the assessee had made investments of Rs.8,70,000/- as stated by him in his statement recorded u/s.132(4). 8.4 Based on the arguments advanced by the assessee the Ld.CIT(A) called for a remand report from the AO. After confronting the same to the assessee and after considering the submissions made by the AO, the Ld.CIT(A) upheld the addition made by the AO. While doing so, he observed that the assessee vide Question No.25 in his statement recorded u/s.132(4) had categorically specified the amount of fixed deposits in the specific names of his family members amounting to Rs.8.70 lakhs. In his reply to Question No.41 the assessee had admitted the investments of Rs.8.70 lakhs as his undisclosed investment. He observed that Mr. Baliram B. Mahajan has not offered the amount of Rs.2 lakhs in his block return. Since the cash flow statement of Mr. Baliram B. Mahajan was rejected by him, therefore, the investment remained unexplained in his hands also. Since the assessee had owned up investments in such fixed deposits as unexplained and offered the same as undisclosed income 14 in his statement recorded u/s.132(4), therefore, it is sufficient evidence as per section 58 of the Evidence Act. He accordingly upheld the addition made by the AO.
8.5 Aggrieved with such order of the CIT(A) the assessee is in appeal before us.
9. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We find the assessee in the instant case has admitted the fixed deposits of Rs.8,70,000/- as his undisclosed income and offered the same to tax. However, during the assessment proceedings he admitted the fixed deposits totaling to Rs.5,51,645/- only as belonging to him as undisclosed income and treated the remaining fixed deposits as deposits in the hands of the respective investors. However, the assessee has not proved with any corroborative evidence regarding the source of income of the various family members in whose name the remaining deposits were made. Since the assessee in his statement recorded u/s.132(4) during the course of search had owned up the deposits of Rs.8,70,000/- as his undisclosed income and nothing was brought before us to substantiate that deposits over and above Rs.5,51,645/- were made by the various family members out of their own known source of income, therefore, we find no infirmity in the order of the CIT(A) sustaining the addition of Rs.8,70,000/-. Accordingly, the same is upheld. This ground by the assessee is accordingly dismissed.
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10. Ground of appeal No.3 by the assessee reads as under :
"3. The Ld.CIT(A) also erred when he sustained an addition of Rs.11,00,000/- on account of investment in Agricultural Land at Kasarkheda and ignored the actual value of investment offered by the appellant at Rs.1,75,000/-."
10.1 Facts of the case, in brief, are that the AO noted from Question No. 25 of the statement recorded u/s.132(4) dated 22-11-2001 that the assessee had stated the investment of Rs.11 lakhs was made in the agricultural land of 10 acres in the joint names of his wife Varsha Mahajan and his brother Sanjay Mahan and that this investment was not disclosed. In Question No.41 he declared the above investment as his undisclosed investment and offered the same for taxation. However, during the block assessment proceedings the assessee filed reconciliation chart in which he claimed that the actual investment in the purchase of agricultural land at Village Kasarkheda was of Rs.3,30,000/- only. It was further argued that as per the purchase deed made in the joint names, his own investment in respect of share of his wife in the said land was Rs.1,75,000/- only. He accordingly claimed that only an amount of Rs.1,75,000/- can be treated as undisclosed income of the assessee for the block period. Since the assessee did not file the copy of the purchase deed nor filed any evidence to show that the remaining part of the investment in this land was made by his brother Sanjay Mahajan or anybody else the AO made addition of Rs.11 lakhs as undisclosed income of the assessee on substantive basis.
10.2 Before the CIT(A) the assessee reiterated the same arguments as made before the AO. It was submitted that although the assessee had accepted that the investment of Rs.11 lakhs was made in the 16 agricultural land at Kasarkheda, the cost of the said land is only Rs.3,50,000/-. The investment of the assessee in respect of share of his wife in the said land was Rs.1,75,000/- only. It was argued that apart from admission in statement u/s.132(4) no other evidence was found, therefore, the addition made by the AO should be deleted. 10.3 Based on the arguments advanced by the assessee the Ld.CIT(A) called for a remand report from the AO, who stated that the assessee neither filed the copy of the purchase deed nor filed any evidence to show that the remaining part of the investment in this land was made by his brother Sanjay Mahajan or anybody else. Since the assessee had made a specific declaration u/s.132(4) for Rs.11 lakhs the addition was justified. The assessee in his reply to the remand report stated that although he had stated to have invested Rs.11 lakhs in Kasarkheda land but after verification of records it was found that the actual investment was only Rs.3,50,000/- which was in the joint names of his wife Varsha Mahajan and his brother Sanjay Mahajan. Since nothing incriminating was found during the course of search other than the statement u/s.132(4) it was argued that no addition should be made.
10.4 However, the Ld.CIT(A) was also not convinced with the arguments advanced by the assessee and upheld the addition made by AO by observing as under :
12.6 The submission of the appellant, Remand Report of the A.O. and rejoinder submitted by the appellant were duly considered. I find that the view taken by the Assessing Officer is correct. Examination of the statement of the appellant u/s. 132(4) dated 22.11.2001 at Q. No. 25 shows that he had admitted of making investment of Rs.11 lacs in the agriculture land at Kasarkheda in the joint of his wife Ms. Varsha Mahajan and his younger brother Shri Sanjay Mahajan. Further at Q. No. 41 of the said statement, the appellant had also admitted such investment as 17 unexplained and offered as UDI. However, in the block return, it is seen that the appellant has taken the investment in the agriculture land at Rs.3,50,000 based on the registered value and accordingly offered 50% of the said investment in the name of his wife at Rs.1,75,000 as UDI.
Enquiry was made from the AR as to whether the remaining 50% of investment by Shri Sanjay Mahajan was ever declared as UDI. The AR in response has stated that no such income was offered as UDI since no block assessment proceedings were initiated against him. 12.7 It is pertinent to mention here that Shri P.B.Mahajan in his block return has owned up the other investments made in the name of Shri Sanjay Mahajan such as Renuka property, discussed in ground no. 4 of this appellate order and therefore, it is imperative that the investment in Kasarkheda land in the name of Shri Sanjay Mahajan ought to have been declared by the appellant. In other words, the stand of the appellant is not consistent with the statement u/s 132(4) and therefore, deserves to be rejected. The purchase deed of the said agriculture land produced before me was examined and it is observed that an irrigated agriculture land admeasuring 4.07 hectres was bought at a lumpsum price of Rs. 3.33 lacs which works out to Rs. 0.83 lac per hectare. Considering the nature of the agriculture land falling in Nanded District, the registered value of the property appears to be undervalued when linked with the statement given by the appellant u/s 132(4). In fact, the appellant in the said statement had stated the actual quantum of investment, which represented the true and correct market value of the said property. I am, therefore, in agreement with the finding of the AO in holding that a sum of Rs.11 lacs represented unaccounted investment in the said agriculture property to be assessed as UDI in the hands of the appellant. Accordingly the action of the AO in making such addition is hereby confirmed." 10.5 Aggrieved with such order of the CIT(A) the assessee is in appeal before us.
11. The Ld. Counsel for the assessee reiterated the same arguments as made before the AO and CIT(A). He submitted that the statement was given under tension and hence the figure was incorrectly reported by him in the statement. He submitted that in absence of any incriminating evidence the addition was not justified. He submitted that as per the purchase deed the consideration was only Rs.3.3 lakhs. Relying on various decisions he submitted that no addition can be made in the block assessment only by placing reliance on the statement of the assessee. In his alternate contention, it was submitted that since the land has been purchased jointly by Mrs. 18 Varsha Mahajan and Sanjay Mahajan, therefore, at the most, half the share of his wife could be added in the hands of the assessee. The assessee also relied on following decisions :
1. DCIT Vs. Pratap Singh Rajendra Chamola & Co.
(2009) 19 DTR (Chd.)(Trib) 182
2. CIT Vs. Smt. Chitra Devi Soni 214 CTR 128
3. Santosh V.Shetty Vs. ACIT ITA No.213/PN/2005 order dated 11-08-2005
12. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A).
13. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. There is no dispute to the fact that the assessee in his statement recorded u/s.132(4) had categorically stated that investment of Rs.11 lakhs was made towards purchase of agricultural land of 10 Acres in the joint names of his wife Varsha Mahajan and his brother Sanjay Mahajan. Since this investment was not disclosed he declared the said investment as his undisclosed income and offered the same for taxation. However, the assessee during the assessment proceedings stated that the cost of land was Rs.3,50,000/- only and he has invested only an amount of Rs.1,75,000/- being the investment by his wife. It is the submission of the Ld. Counsel for the assessee that the remaining amount was invested by Mr. Sanjay Mahajan, his brother. We find the Assessing Officer rejected the above contention of the assessee on the ground that during the course of assessment proceedings the assessee had neither filed the purchase deed nor filed any evidence to show that the 19 remaining part of the investment in this land was made by his brother Sanjay Mahajan or anybody else. We find the Ld.CIT(A) upheld the action of the Assessing Officer on the ground that no such undisclosed income was declared by Sanjay Mahajan, brother of the assessee and the assessee has declared in his statement u/s.132(4) about such undisclosed investment. We find apart from the admission in the statement recorded u/s.132(4), there is no other material found during the course of search regarding the investment at Rs.11.00 lakhs as against Rs.3.50 lakhs stated by the assessee during the assessment proceedings. From the paper book filed before us duly certified by assessee we find the copy of the sale deed evidencing purchase of Kasarkheda land by Mrs. Varsha Mahajan and Sanjay Mahajan was filed before the Assessing Officer. The Assessing Officer has not conducted any further investigation despite the same being filed before him. Therefore, the finding given by the Assessing Officer that the assessee had not filed the copy of the purchase deed is not correct.
13.1 Since the assessee in the instant case has stated that he has not paid more than (Rs.3,50,000/- towards the purchase of the land (which as per the sale deed was Rs.3,33,000/-), therefore, in absence of any incriminating material found during the course of search to show that the assessee has paid Rs.11 lakhs and since no further investigation has been done by the Assessing Officer from the sellers to find out as to whether they have received any extra money over and above what is stated in the sale deed, we direct the Assessing Officer 20 to treat Rs.3,50,000/- as the undisclosed investment as against Rs.11.00 lakhs.
13.2 So far as the argument of the Ld. Counsel for the assessee that only 50% of the investment be treated as undisclosed investment being share of investment of his wife, we find the same cannot be accepted. We find Mr. Sanjay Mahajan has not filed the return disclosing his share of investment. Therefore, it is only assessee's money which has been invested towards purchase of such land. We, therefore, hold that the investment of Rs.3,50,000/- be held as undisclosed income in the hands of the assessee. The ground raised by the assessee is accordingly partly allowed.
14. Ground of appeal No.4 by the assessee reads as under :
"4. On the facts and circumstances of the case, the learned Commissioner of income Tax (Appeals) erred when he upheld an addition of Rs.5,89,000/- to the total undisclosed income of the appellant towards investment in Maruti Car and Ambassador Car instead of sustaining the actual investment at Rs.5,61,276/- offered by the appellant."
14.1 After hearing both the sides, we find the assessee had made investment towards purchase of Maruti and Ambassador cars amounting to Rs.5.89 lakhs and offered the said investment for taxation as his undisclosed income. However, during the course of assessment proceedings, the actual investment in the 2 cars was shown at Rs.5,61,276/-. Since the assessee did not produce any evidence in respect of his claim the Assessing Officer treated the investment of Rs.5.89 lakhs as undisclosed income of the assessee on substantive basis.
2114.2 Before CIT(A) it was submitted that the assessee had made investment of Rs.2,40,276/- for purchase of Maruti car and Rs.3,21,000/- towards Ambassador car and has accordingly reflected the said investments in his cash flow statement. Therefore, the total investment in the said car comes to Rs.5,61,276/- and not Rs.5,89,000/- as determined by the Assessing Officer.
15. Based on the arguments advanced by the assessee the Ld.CIT(A) called for a remand report from the Assessing Officer who reiterated the same reasonings. Based on the remand report of the Assessing Officer and submission of the assessee the Ld.CIT(A) upheld the addition made by the Assessing Officer by holding as under :
"13.4 I have considered the submission of the appellant, Remand Report of the A.O. and rejoinder submitted by the appellant and I find no force in the arguments of the learned A.R. as he could not substantiate the sources reflected in the cash flow statement nor could he submit evidences proving that the correct investment of the appellant in Maruti and Ambassador Car is Rs. 5,61,2767/-. I may add here that the unexplained investment in Maruti car of Rs. 265000 which has been offered to tax in the block return incorporates the entry of Rs. 2 lacs towards car advance appearing in the name of Shri P.B.Mahajan at page 27 OL of seized diary A-67. Therefore in consideration in of the entry appearing in page 27 OL as also the admission of the appellant u/s 132(4), I am of the view that the addition of Rs.5,89,000/- as unexplained investments in the cars is fully justified and hence confirmed.. In the result, this ground of appeal is dismissed."
15.1 Aggrieved with such order of the CIT(A) the assessee is in appeal before us.
16. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We find on the basis of 22 the admission by the assessee during the course of search in his statement recorded u/s.132(4), the Assessing Officer made addition of Rs.5,89,000/- towards investment in the two cars. Although the assessee states that the investment in the two cars is only Rs.5,61,276/-, however, the same was neither substantiated with cogent evidence before the Assessing Officer nor the CIT(A) or even before us. In this view of the matter and in view of the detailed reasoning given by the CIT(A) on this issue, we find no infirmity in the same. Accordingly, this ground by the assessee is dismissed.
17. Grounds of appeal Nos. 5, 6 and 7 being general in nature are dismissed.
Grounds in ITA No.1048/PN/2005 (By Revenue) :
18. Grounds of appeal No. 1 and 2 by the Revenue reads as under :
"1. On the facts and in the circumstances, CIT(A) is not justified in directing to convert the addition of Rs.11,07,000/- as UDI in respect of Mitmita land made in the case of the assessee on protective basis to an addition on substantive basis.
2. On the facts and in the circumstances, CIT(A) is not justified in holding that the addition of Rs.11,07,000/- as UDI in respect of Mitmita land to be made on substantive basis in the case of assessee and not in the case of Shri N.H. Jalkote."
18.1 The Assessing Officer has discussed the issue at Para 7.11 of his order which reads as under :
"(i) It is found that in view of the entries in the seized diaries of Shri N. H Jalkote the investment of Rs.34,34,000/- in Mitmata land was admitted and surrendered by Shri M. H. Andure in answer to question no. 51 of his statement u/s.132(4). However., during the block assessment proceedings in his case, Shri M.H. Andure claimed that he had invested Rs.16,30,000/ only in Mitmita land and the remaining amount was contributed by Shri Prashant Mahajan and Shri Gopal Gorte. In the reconciliation statement and the cash flow statement filed by Shri M.H. Andure in his own case, it was claimed by him that the amount of Rs.11,70,000/- was contributed by Shri P.B. 23 Mahajan and Rs.5,07,000/- was contributed by Shri Gopal Gorte. In the reconciliation statement filed by Shri M.H. Andure, he had shown total sources of Rs.33,07,000/- only for the cost of land of Rs.34,29,773/-. Thus the source for difference of Rs.l,22,773/- was not explained. However, during the block assessment proceedings of the assessee Shri Prashai Mahajan, he has claimed that the amount of Rs.11,07,201/-
was contributed for the cost of Mitmita Land. Thus even the contribution shown by the assessee does not tally with the contribution of Shri Prashant Mahajan as claimed in the case of Shri M.H. Andure. The confirmation of Shri Gopal Gorte for his contribution of Rs.5,07,000/- was filed by Shri N.H.Jalkote in his own case. The creditworthiness of Shri Gopal Gorte and the genuineness of his investment have been neither proved in any of the three cases.
(ii) The reference to the Mitmita land was found on page no. 24 and page 23 (OL) of diary A-71 of Shri Jalkote. The entry on page no. 24 of diary A-71 shows the total cost of Mitmita land as on 16/10/98 was Rs.34,29,773/- out of which Rs. 30.00 Lakhs was paid by Shri N.H. Jalkote. Shri Jalkote has written as " self paid " against the entry of Rs.30 Lakhs. The entry for "
difference of Rs.4,29,773/- or say Rs.4.30 Lakhs " dated 16/10/98 was marked with two asteric ( * * ) for the sake of identification. The same mark of identification i.e. (* *) also appears on page 23(OL) of diary A-71 in respect of entry of Rs. 4.30 Lakhs deducted from the running account of Shri M.H. Andure, the assessee with a narration " Mitmita difference".
This shows that the cost of land to the extent of Rs.30.00 Lakhs was paid by Shri N.H. Jalkote and the remaining cost of Rs.4.30 Lakhs was borne by Shri N.H. Jalkote through the said running account. Hence, the amount of Rs.34.30 Lakhs has been separately taxed in the hands of Shri N.H. Jalkote on substantive basis in his block assessment order.
(iii) During the course of search in the case of assessee, nothing was found about the investment in Mitmita Land. However, in view of the claim made by the assessee that he had contributed Rs.11,07,000/- for the investment in the land and that the said amount is included in the undisclosed income shown by him in his own block return, the amount of Rs.11,07,000/- is taxed in the hands of the assessee, Shri Prashant Mahajan on protective basis."
The AO accordingly made addition of Rs.11,07,000/- to the total income as undisclosed income of the assessee.
18.2 Before CIT(A) the assessee submitted that the total cost of Mitmita Land as per statement of Mr. M.H. Andure, brother-in-law of the assessee, is Rs.34,34,000/-. It was further pointed out that the said 24 land was surrendered by him in his statement recorded u/s.132 (4), but later on while filing the Block Return, it was submitted that the total cost of the said land is 33,07,000/- only, to which contribution was made by following persons :
The assessee Rs.11,07,000/-
Mr.M.H. Andure Rs.16,30,000/-
Mr. Gopal Gorte Rs.5,70,000/-
------------------
TOTAL Rs.33,07,000/-
------------------
It was accordingly argued that the assessee has rightly offered Rs.11,07,000/- towards his undisclosed share in the said land in his Block Return.
18.3 It was further submitted that the Assessing Officer has also added Rs.23.23 Lacs in the hands of Shri. M. H. Andure, on "Protective Basis" towards his share & Share of Shri. Gopal Gorte, for investment in the said land and Rs.11,07,000/- being share of the assessee, on "Protective Basis" in the hands of assessee. It was argued that the Assessing Officer has erred in treating the aforesaid investment of Rs.11,07,000/- in the hands of the assessee on "Protective Basis" instead of "Substantive Basis". 18.4 Based on the arguments advanced by the assessee the Ld.CIT(A) held that the sum of Rs.11.07 lakhs needs to be taxed as undisclosed income in the hands of the assessee on substantive basis. The relevant observations of the Ld.CIT(A) reads as under :
"14.4 I have examined the submissions of the appellant, Remand Report of the Assessing Officer with supporting documents. I find that there is no merit in the arguments of the learned A.R. It is a fact that all the relevant property documents i.e., Purchase Deed, 7/12 extracts etc. are in the name of the appellant alongwith other 3 25 persons and, therefore, Shri N.H.Jalkote had no nexus in the investment of such property. I would like to refer to the appellate order in the case of Shri N.H.Jalkote, ground No.4 wherein I have given clear finding that the investment in the Mitmita land cannot be taxed as UDI in his hand on account of detailed reason mentioned in the order. Therefore, relying on the said appellate order of Shri N.H.Jalkote, it is imperative that the unexplained investment in the said property had to be taxed on substantive basis in the hands of the appellant and other co-owners of the said property. The Assessing Officer has no where proved that the appellant is benamidar of Mr. Jalkote. In view of the fact that title papers of the property are in the name of the appellant which has been offered as his undisclosed investment in the block return, I am inclined to hold that a sum of Rs. 11.07 lacs needs to be taxed as UDI in the hands of the appellant on substantive basis."
18.5 Aggrieved with such order of the CIT(A) the Revenue is in appeal before us.
19. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We find from the various details furnished by the assessee during the assessment proceedings as well as appeal proceedings that all relevant property documents, i.e. the purchase deed, 7/12 extracts etc are in the name of the assessee along with 3 persons. We find Mr. M.H. Andure during his statement recorded u/s.132(4) has admitted in his answer to Question No.51 regarding his investment of 34.34 lakhs in Mitmita land. However, during the block assessment proceedings Mr.Andure claimed that he had invested Rs.16.40 lakhs only in Mitmita Land and the remaining amount was contributed by Mr. Prashant Mahajan and Mr. Gopal Gorte. We find the assessee during assessment proceeding has claimed that he had contributed an amount of Rs.11,07,201/- towards his contribution for Mitmita Land. Vide order of even date in the case of Mr. N.H. Jalkote we have already held that such investments, which stand in the name of different persons and admitted by them to 26 be out of their own sources, cannot be added in the hands of Mr. Jalkote on substantive basis and has to be added in the hands of the respective persons on substantive basis. In this view of the matter and in view of the detailed reasoning given by Ld.CIT(A) on this issue we find no infirmity in the same. Accordingly, the same is upheld. This ground by the Revenue is accordingly dismissed.
20. Grounds of appeal No. 3 and 4 by the Revenue reads as under :
"3. On the facts and in the circumstances, CIT(A) is not justified in directing to convert the addition of Rs.24.61 lakhs as UDI in respect of investment in Renuka Property made in the case of the assessee on protective basis to an addition on substantive basis.
4. On the facts and in the circumstances, the (A) is not justified in holding that the addition of Rs.25.50 lakhs as UDI in respect of investment in Renuka property to be made on substantive basis in the case of the assessee and not in the case of Shri N.H. Jalkote."
20.1 Facts of the case, in brief are that during the course of search the statement of the assessee was recorded by the authorised officer u/s. 132(4). The assessee in answer to question no. 29 & 30 has stated that he had purchased ready built bunglow Renuka, admeasuring 1200 sq.mt., constructed in the name of his brother Sanjay from Shri B.B. Patil for Rs. 24,00,000/- in the year 1998. The assessee further stated that although said investment has been made in the name of Sanjay Mahajan, actual investment belongs to him, The assessee was therefore asked to state the source of investment and whether the same has been disclosed in the regular returns filed. In answer to question no.30, the assessee stated that his own investment in the said bunglow is Rs.14,00,000/- and remaining Rs.10,00,000/- were taken in cash from the following persons :
27
Parents Rs. 5,00,000/-
Father-in-law,Shri Suryakant Gorte Rs. 1,50,000/-
Cousin brother Laxmikant mahajan Rs. 1,00,000/-
Gajanan Gunal Gunde (brother-in-law) Rs. 1,00,000/-
Friend Shri Nalaji Patil Rs. 1,50,000/-
20.2 In the statement recorded u/s. 132(4), the assessee clarified that he had not disclosed the above investment of Rs.24,00,000/- and above borrowings of Rs.10,00,000/- in the returns filed by him and he is unable to explain his own contribution of Rs.14,00,000/-. Therefore, he surrendered undisclosed investment of Rs.14,00,000/- during search. However, during the block assessment proceedings, the assessee claimed that he has included the amount of Rs.24,61,000/- in respect of this bunglow as his undisclosed income in the block return. The undisclosed income relate to AY.1999-2000. However, the AO found that the property Renuka was purchased in the name of Shri Sanjay B. Mahajan from Shri Satish Dattraya Vaidya as per purchase deed dated 12/4/99 and not from Shri B.B. Patil as stated by the assessee in the answer to question nos. 29 & 30.
20.3 The AO referred to the Block Assessment order of Shri N.H. Jalkote, wherein it was found that the investment in Renuka property is reflected in the seized diaries of Shri Jalkote. On page no. 16 of A- 72 seized from Shri N.H. Jalkote, the entry in respect of Renuka appears at item no. (C) being the third transaction recorded there. The cost of this property is shown at Rs.25.50 Lakhs, out of which Rs.17.00 Lakhs is stated to be "Already written in A/c" and the remaining Rs.8.50 Lakhs is stated to be "balance to write + registration expenditure", The narration "Rs.17.00 Already written 28 A/c" reconciles with the following two entries appearing in the running account of Shri M.B. Patil :
Page No. 14 of A-71 Rs.15.00 " Vaidya - Sanjay "
Page No .6 of A-71 Rs. 2.00 " Vaidya 2/3/99 -
NHJ has paid everything of Vaidya"
20.4 The AO observed that the above two figures are in lakhs and they aggregate to Rs.17.00 Lakhs and they are deducted from the running account of Shri M.B. Patil. Hence, the narration dated 24/3/99 shows that Rs.17.00 Lakhs are already written in the account. The balance payable of Rs.8,50,000/- in respect of Renuka property is included in the figure of Rs.51.76 lakhs recorded on page 16 of A-72 as under :
"39.46 + 8.50 registration Renuka Mah
-51.76 + Renuka registration expenses"
20.5 The Assessing Officer further noted that amount of Rs.51.76 lakhs is deducted from the running account of Shri M.B. Patil on page 5(OL) of A-71 seized from Shri N.H. Jalkote. This shows that the aggregate amount of Rs.25.50 Lakhs, being the total of Rs.17.00 lakhs for payment to Shri Vaidya for Renuka Property, and Rs.8.50 lakhs being the balance for Renuka property written at transactions marked 'c' on page 16 of A-7, was financed by Shri N.H, Jalkote out of his own unaccounted funds through the running account of Shri M.B. Patil. In view of this the amount of Rs.25.50 lakhs in respect of Renuka Property was included in the amount of Rs.33.47 lakhs and taxed in the hands of Shri Jalkote as his undisclosed income on substantive basis. As the assessee Shri P.B. Mahajan had shown the undisclosed income of Rs.24,61,000/- in respect of Renuka property 29 purchased in the name of his brother Shri Sanjay, the Assessing Officer taxed the amount of Rs.24,61,000/- in the hands of the assessee Shri Prashant Mahajan on protective basis. 20.6 Before the CIT(A) the assessee submitted that during the course of statement recorded u/s 132 (4) of Income Tax Act, 1961 the assessee while answering to Q.Nos. 29 & 30 has stated that he had purchased ready built Bunglow "Renuka" admeasuring 1200 sq.ft. built up area in the name of his brother Sanjay Mahajan at total cost of Rs. 24,00,000/- in the year 1998. It was further stated that the assessee had also clarified that although the said investment has been made in the name of Sanjay Mahajan, actual investment belongs to him. Based on the said fact the assessee had shown the investment in said Bunglow amounting to Rs.24,61,000/- in his Block Return as his undisclosed investment.
20.7 It was further pointed out that in document A-72 Pg. 16 seized from the residence of Shri N. H. Jalkote, the details about the investment in Renuka Property was reflected. The cost of the said property was shown at Rs.25.50 lacs. The said amount of Rs. 25.50 was deducted from the running account of Shri M. B. Patil, appearing on Pg.No. 14 of A-71 Rs. 15.00 & Pg. No. 6 of A-71 Rs.2.00 & the balance amount of Rs.8.50 lacs was included in the consolidated figure of Rs.51.76 lacs recorded on Pg. 5 (OL) of A-71 in the account of Shri. M. B. Patil. It was further stated that the said transactions recorded in the running account of Shri. M. B. Patil, clearly shows that the assessee was having business relationship with Shri. M. B. Patil. It is obvious that the transactions pertains to them which is 30 accepted by Mr. M. B. Patil and the assessee during their statements u/s 132 (4) and u/s 131 of Income Tax Act as well as in reply to various questionnaire issued by the Assessing Officer during block Assessment proceedings.
20.8 It was submitted that said transaction was written by Mr. N. H. Jalkote on request from the assessee and Mr. M. B. Patil. It was further argued that the Assessing Officer has wrongly presumed the said transactions to be belonging to Mr. N.H. Jalkote and added the cost of Renuka Bunglow amounting to Rs. 25.50 lacs to the total undisclosed income of Shri. N. H. Jalkote on "substantive basis"
which is included in total addition of Rs. 33.47 lacs in the hands of the later. It was further argued that the said Bunglow was never possessed & owned by Mr. N. H. Jalkote. Hence he is not financially concerned with the said transactions. It was argued that the assessee being owner of the said property has also offered Rs.2,50,000/-
towards undisclosed Rental income from the said property. It was pointed out that the Assessing Officer has accepted the same and retained the same on "substantive basis". It was further submitted that law is well settled that income should belong to the real owner of the property and not somebody else. If according to the Assessing Officer the "Renuka Bunglow" is not of assessee then how he has assessed the rental income from the said Bunglow in the hands of the assessee. It was stated that by assessing rental income of Bunglow in the hands of the assessee the Assessing Officer indirectly accepted the fact that the said Bunglow belongs to the assessee and hence source of investment should have also been of the Assessee.31
20.9 The assessee also drew the attention of the Ld.CIT(A) regarding the statement of Shri Sanjay Mahajan recorded u/s.131. It was further argued that the Assessing Officer has also not considered the fact that the property documents, i.e. Original Purchase Deed, P/R Card, Property Tax Receipt, NOC from CIDCO etc. are in the name of original owner i.e. Shri Sanjay Mahajan and Shri N.H.Jalkote is no where concerned with the said property.
20.10 Based on the arguments advanced by the assessee the Ld.CIT(A) held that the unexplained investment of Rs.25.50 lakhs in the Renuka property has to be retained as undisclosed income in the hands of the assessee on substantive basis. The relevant observations of the Ld.CIT(A) reads as under :
"9.10 I have duly considered the relevant part of the Assessment Order, submission of the appellant, Remand Report of the Assessing Officer and rejoinder of the appellant and also the arguments made by the learned A.R. I find that there is force in the arguments of the learned A.R. It is a fact that all the relevant property documents i.e., Purchase Deed, P.R. Card, Tax Receipts etc. are not in the name of Mr. Jalkote, the same are in the name brother of the appellant Shri Sanjay Mahajan. The appellant has admitted investment in the said property in his statement recorded u/s. 132 (4) of the Income Tax Act, 1961 and accordingly he has also offered the said investment in the block return filed by him. The Assessing Officer has nowhere proved that brother of the appellant is "benamidar" of the said property. The Assessing Officer has only relied on the entries made in the diaries seized from the residence of Mr. Jalkote. But he has not considered the judicially accepted fact that statement recorded u/s. 132(4) has great evidential value and as the appellant has admitted in his statement u/s.132(4) that investment in the said property has been made by him out of his undisclosed income. Moreover it is also a fact that the Assessing Officer has assessed rental income from the said property on Substantive Basis which would mean that the AO treats the appellant as the rightful legal owner of the said property. This action of the AO, therefore, contradicts his finding in taxing the investment in the said property on protective basis. Here I would also like to make reference to my findings given on Ground No. 6 of the appellate order in the case of Shri N.H. Jalkote wherein his unexplained investment of Rs.25.50 lacs in Renuka property assessed as his UDI has been deleted. I have also held that the said unexplained investment needed to be taxed as UDI in the hands of the appellant on account of specific reasons mentioned therein. Therefore, following my appellate order in the case of Shri N.H. Jalkote, I find that the appellant has offered unexplained investment at Rs.24.61 lacs and, therefore, there appears 32 a short disclosure of Rs.89,000/- which needs to be added to the total unexplained investment of Rs.24.61 lacs offered by the appellant. A show cause notice for such enhancement of undisclosed income in the hands of the appellant was served on the appellant and the AR has admitted to such discrepancy noted above. Accordingly, the unexplained investment of Rs.25.50 lacs in Renuka property is retained as UDI in the hands of the appellant on substantive basis".
20.11 Aggrieved with such order of the CIT(A) the Revenue is in appeal before us.
21. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. From the various details furnished by the assessee during assessment proceedings as well as appeal proceedings it is noticed that all relevant property documents, i.e. purchase deed, P.R. card, tax receipts etc are not in the name of Mr. Jalkote and the same are in the name of brother of the assessee Mr.Sanjay Mahajan. This factual finding given by the Ld.CIT(A) could not be controverted by the Ld. Departmental Representative. We further fund the assessee during the course of his statement recorded u/s.132(4) had categorically admitted that he had not disclosed the investment of the property in the name of his brother Sanjay Mahajan and the real investment belongs to him. Further, the finding given by Ld.CIT(A) that the rental income of this property has been assessed in the hands of the assessee on substantive basis could not be controverted by the Ld. Departmental Representative. In view of the above and in view of the detailed reasoning given by the Ld.CIT(A) while holding that the unexplained investment of Rs.25.50 lakhs in Renuka property has to be treated as undisclosed income in the hands of the assessee on substantive basis, we find no infirmity in 33 the same. Accordingly, the same is upheld. The grounds raised by the Revenue are accordingly dismissed.
22. Grounds of appeal No.5 by the Revenue reads as under :
"5. On the facts and in the circumstances, the CIT(A) is not justified in deleting the surcharge levied on the tax on undisclosed income".
22.1 After hearing both sides we find the search in the instant case took place on 21-11-2001. The surcharge levied by the Assessing Officer on tax computed on undisclosed income was deleted by Ld.CIT(A) by relying on various decisions. We find the Hon'ble Supreme Court in the case of CIT Vs. Rajiv Bhatara reported in 310 ITR 105 has held that even in respect of search prior to Ist June, 2002, the provisions of the Finance Act, 2001 would be applicable and surcharge would be leviable on tax payable u/s.113. Accordingly, we set aside the order of Ld.CIT(A) on this issue and the ground raised by the Revenue is allowed.
23. Grounds of appeal No. 6 and 7 being general in nature are dismissed.
24. In the result, the appeal filed by the assessee as well as the Revenue are partly allowed.
Pronounced in the Open court on 12-05-2014.
Sd/- Sd/-
(SHAILENDRA KUMAR YADAV) (R.K. PANDA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Pune, dated : 12th May, 2014
Satish
34
Copy of the order is forwarded to :
1. The Assessee
2. The Department
3. The CIT(A)-I, Nagpur
4. The CIT-I, Nagpur
5. D.R. "A" Bench, Pune
6. Guard File
By order
// True Copy //
Senior Private Secretary,
Income Tax Appellate Tribunal, Pune