Income Tax Appellate Tribunal - Bangalore
Srinivasa Ultrasound Scanning Centre vs Assistant Commissioner Of Income Tax on 31 December, 1997
Equivalent citations: (1998)61TTJ(BANG)619
Order S. Bandyopadhyay, A.M :
Since the issues involved in the appeals filed by the assessee for the two successive years are connected, the appeals have been consolidated and a combined order is being passed for the sake of convenience.
2. The assessee is a firm of 6 partners constituted by a partnership deed date 6-9-1995. The partners are mostly the family members of Dr. B.S. Ramamurthy, a qualified radiologist. Although the HUF of which Dr. Ramamurthy is a coparcener is also a partner in the assessed-firm, he himself however is not a partner in his individual capacity. At the same time again, Dr. Ramamurthy manages the entire affairs of the firm which offers ultrasonography and radiology services to patients and various persons.
3. A search and Search operation was conducted by the Income Tax Department under section 132 of the Income Tax Act, on 6-2-1992, and thereafter on various other dates, the concluding date being 26-2-1992, in the premises of the assessee-firm as well as in the residential premises of Dr. Ramamurthy. It has been contended by the learned counsel for the assessee that the search warrant in that regard was in the name of Dr. Ramamurthy, individual only and that there was no search warrant in the name of the assessee-firm. During the course of the above-mentioned search and seizure proceedings, a bank locker No. 14 with Canara Bank, belonging to and also operated by Dr. Ramamurthy was found out in which cash amount of Rs. 9,30,050 was found and also seized. Further-more, in the residence of Dr. Ramamurthy, another amount of Rs. 1,64,400 was also found out of which a sum of Rs. 49,000 was allowed as belonging to the HUF. The balance amount of Rs. 1,15,400 was also seized. The total amount of cash seizure was thus of Rs. 10,45,450, (Rs. 9,30,050 + 1,15,400).
Seizure of jewellery were also made as under :
(i) Found in the bank locker No. 14 with Canara Bank in the name of Dr. Ramamurthy 510 gms. of gold jewellery valued at Rs. 2,19,271 fully seized.
(ii) gold jewellery at the residence of Dr. Ramamurthy :
(a) 679 gms. of gold jewellery.
(b) 26.22 Carats of diamond.
The total valuation of the entire jewellery including diamonds was Rs. 7,26,585. The entire amount of jewellery was seized as this is stated to have been in excess of what had been returned in the Wealth Tax returns. The total seizure of jewellery was thus of the value of Rs. 9,45,856 (Rs. 2,19,271 + 7,26,585). The entire amount of above-mentioned cash as well as the value of the jewellery was added back in the assessment of the assessee-firm as unexplained cash and jewellery brought to tax under section 69A in its assessment for assessment year 1992-93. With regard to the addition of these amounts in the hands of the firm, the Departmental authorities (including the Commissioner(Appeals)) referred to the sworn statement of Dr. Ramamurthy under section 132(4) as on the date of the search i.e. 6-2-1992 during the course of which he stated that the money represented the income of the firm earned by Dr. Ramamurthy and kept in the bank locker and also at his residence. Although he later on retracted this version and claimed that the money actually belonged to him personally having been earned by him through his professional activities carried on at the assessees premises and elsewhere also, the Department did not accept the contention of the assessee and added back the entire amount as income of the assessee. In doing so, the assessing officer as well as the Commissioner(Appeals) harped on the facts that even immediately after the search also, Dr. Ramamurthy still stated that the money had actually come out of the firms income and also that the partners of the assessee-firm had declared before the Income Tax authorities that the cash seized represented assets of the firm and that the same should be allowed as credit in the assessments of the firm as well as in the individual assessments of the partners thereof. For the same reason again, the jewelleries found both in the bank locker as well as the residential premises of Dr. Ramamurthy were treated as unexplained assets of the assessee-firm and the value thereof was added back.
4. On the other hand, the assessee contends in this regard that at a later stage of the assessment proceedings, Dr. Ramamurthy had retraced his earlier version. It is also pointed out that Dr. Ramamurthy filed a petition before the Settlement Commission in which he claimed the entire cash amount of Rs. 10,45,450 to be belonging to him and that the Settlement Commission had also directed for inclusion of this amount in his assessment. It is furthermore claimed by the learned counsel for the assessee that a penalty of Rs. 20,000 was also levied on Dr. Ramamurthy on this account. It is, furthermore argued that even the partners of the assessee-firm also filed affidavits both before the Settlement Commission as well as the assessing officer to the effect that they had nothing to do with the seized cash and jewelleries. Reliances have been placed in this connection on a number of decisions in support of the contention of the assessee that in the circumstances the cash and the value of the jewelleries cannot be assessed in the hands of the assessee to which we shall advert presently.
5. It is an undisputed fact that the locker belonged to Dr. Ramamurthy in his individual capacity, that he was paying the rent in respect thereof and that he alone was operating the same. The residential premises of Dr. Ramamurthy where he was staying with his wife cannot also be considered to be falling within the description of business premises of the assessee-firm. Hence, the cash and also the jewellery found during the search cannot be considered to have been under the possession of the assessee-firm, in any manner. As such, it is difficult to say that the Department found the assessee-firm to be the owner of these assets. Apart from certain statements made by Dr. Ramamurthy at the time of search linking up the source of the assets to the income of the firm, there is no other evidence in the hands of the Department to show that these assets actually belonged to the assessee-firm. The learned counsel for the assessee has relied on a decision of Tribunal, Patna Bench in the case of Prabhat Ranjan Sarkar v. ITO (1993) 46 TTJ (Pat)(TM) 582 : (1993) 200 ITR (AT) 50 (Pat)(TM). In this it was held that it is a settled principle that possession is evidence of ownership of any asset and the strength of the presumption of ownership arising from the fact of possession depends in the nature of the property involved and furthermore that this presumption is strongest in the case of cash found in the possession of a person since cash is such property which is transferable by mere delivery of possession. The learned counsel for the assessee has argued in this connection that in as much as neither cash nor jewellery was found in the possession of the assessee-firm, the presumptions under section 132(4A) would also not hold good in the present case. In support of this contention, he has placed reliance on a judgment of the Calcutta High Court in the case of CIT v. Soorajmal Nagarmull (1990) 181 ITR 340 (Cal). The Calcutta High Court held in the said case that there is a prima facie presumption that those who were found in possession of certain articles are the owners thereof, though such presumption can be rebutted by cogent evidences.
6. It has been pointed out by the learned counsel for the assessee that Dr. Ramamurthy was operating a savings bank account No. 9060 with Canara Bank and that the assessee-firm had no account with that particular bank, and furthermore that the amount deposited by Dr. Ramamurthy in the said savings bank account has not been assessed in the hands of the assessee-firm. The learned counsel for the assessee has also sought to place reliance on the judgment of Rajasthan High court in the case of CWT v. Smt. Kalyani Sharma (1995) (Raj) 135 in which case the gold ornament held by that assessee not declared in her return of wealth on the ground that these were held for benefit of her sons and that the same were given to their wives, the claim in that regard being supported by an affidavit of a relative which remained uncontroverted, were finally held to be not belonging to that assessee. In the instant case, it is the contention of the assessee that even at the time of the search, the wife of Dr. Ramamurthy had declared that the gold ornaments belonged to her and that part of the said gold ornaments represented presentations given to the children of Dr. Ramamurthy on different occasions. Furthermore, it has also been represented on behalf of the assessee that the jewellery found in the bank locker was claimed by one old lady viz., Smt. R.A. Rajamma, grandmother of Dr. Ramamurthy as having been belonging to her originally and later on presented by her to the children of Dr. Ramamurthy. An affidavit in that regard was filed by the said old lady before the Settlement Commission and also before the assessing officer. The learned counsel for the assessee contends that this lady was not examined by the assessing officer although she was offered for examination by the assessee. It is also contended that as per CBDT Circular no. 1916 dated 11-5-1994, reported at 120 Taxation (St.) 98, existence of gold ornaments upto the extent of 500 gms. in case of married ladies can be accepted whereas in the instant case 510 gms. of gold ornaments were found in the locker. So far as Mrs. Rama, wife of Dr. Ramamurthy is concerned, it has been stated that she is an Income-tax and Wealth-tax assessee and that she owned up the entire jewellery even during the course of her deposition at the time of the search and filed a letter on 24-12-193 offering to include the value of the entire jewellery in her assets.
It is thus contended that in the circumstances, neither the cash nor the jewellery amounts can be added back in the hands of the assessee-firm.
7. When we examine the facts of the present case, we find that the Departmental contention regarding includibility of the cash amount as well as the value of the jewellery in the assessment of the assessee-firm is rather very weak. If we trace the seriality of the depositions given by Dr. Ramamurthy at the time of the search and thereafter, we find that in answer to question No. 7 at the stage of the preliminary deposition under section 132(4) on 6-2-1992 itself, Dr. Ramamurthy had made the following statement :
"After understanding your provisions of the above sections, I voluntarily offer for assessment, the following undisclosed income for the assessment year 1992-93.
Rs.(1)
Cash kept in the locker No. 14 of Canara Bank 7,00,000 (2) Cash at home as stated above 80,000 (3) Jewellery in the locker 800 x 450 3,60,000 If after physical verification if there is any variations those figures may be adopted.
I am wealth-tax assessee if on verification any other asset belonging to me, if found not included in my Wealth Tax returns, I would offer the same also for assessment under the relevant provisions of income-tax and wealth-tax".
It would thus appear that at the initial stage of the search before even the locker was opened, Dr. Ramamurthy disclosed before the Department that he was having certain amount of cash and also jewellery in the said locker and that he would voluntarily offer for assessment, the undisclosed income in respect of such cash and jewellery. It is important to note that at that stage he had not linked up the assessee-firm with the said cash and jewellery. In the assessment order, the assessing officer did not make any mention of this important portion of the deposition of Dr. Ramamurthy, although the Commissioner (Appeals) was fair enough to mention the same, at the same time brushing aside veracity of this initial statement.
8. When the statement under section 132(4) at 3.30 p.m. on the same date i.e. 6-2-1992, after counting of the cash found in the locker was taken in answer to question No. 9, Dr. Ramamurthy replied as below :
"Yes the above asset has been earned during the course of my professional practice in Srinivasa Ultra Sound Scanning Centre. I therefore offer the entire income of Rs. 13,20,302 for assessment in the hands of the said firm."
The Department takes clue from this particular statement for Dr. Ramamurthy which was later on followed up for some time. It is, however, worth noting in this connection that Dr. Ramamurthy stated that the above asset had been earned during the course of his professional practice. It would, therefore, appear to us that at the initial stage, what was stated by Dr. Ramamurthy that the entire cash and jewellery found in the locker belonged to him was correct. It is at a later stage of the search and seizure proceeding only when he might have been induced by the search party to come up with a disclosure concerning the assessee-firm that he stated that he would offer the entire amount of undisclosed income in the hands of the firm. In this connection, we find enough force in the contention of the learned counsel for the assessee that when the search was only on Dr. Ramamurthy in his individual capacity and he was also being questioned under section 132(4) in his individual capacity, he did not have any authority to offer any income on behalf of the firm of which he was not at all a partner in individual capacity. The other partners of the firm were not at all brought into picture. Although at a later stage they also declared before the Income Tax authorities that the cash seized represented the income of the assessee-firm, it is worth noting during the course of the assessment proceedings, Dr. Ramamurthy as well as all the partners of the assessee-firm retracted their earlier versions. In this connection, the reliance placed by the learned counsel for the assessee on a judgment of the Tribunal, Ahmedabad Bench in the case of Asstt. CIT v. Mrs. Sushila Devi S. Agarwal (1994) 49 TTJ (Ahd-Trib) 599 : (1994) 50 ITD 524 (Ahd-Trib) appears to be quite strong. In that case, the Tribunal held that the assessing officer was not justified in drawing adverse inference against the assessee or her husband simply on account of the fact that the assessee had retracted from the statement given by her on the search date.
In the instant case, it might be a fact that the cash amount found in the locker as well as the jewelleries found therein had come out of the earnings of Dr. Ramamurthy from the firm. It would, however, be obvious that Dr. Ramamurthy, being the managing partner of the firm, had surreptitiously taken out a portion of the firms income and appropriated the same for himself either with or without the knowledge of other partners. In any case, although the ultimate source of the money might be the assessee-firm, it is Dr. Ramamurthy alone who was thereafter in receipt of the money not by way of distribution of the profits of the firm but by appropriating a portion of the earnings therefrom as he himself was the managing partner as well as the main radiologist looking after the business of the firm. In cases of this type, the income has certainly got to be assessed in the hands of that person who appropriates the income and not in the hands of the firm in whose books the income has not been recorded and there being no evidence anywhere to show that the income was ultimately to be distributed amongst all the partners of the assessee-firm.
In this connection, however, we would like to discuss the contention of the learned counsel for the assessee about the amount having been assessed in the hands of Dr. Ramamurthy by an order of the Settlement Commission. The Settlement Commission in its final order date 10-8-1994, stated as below :
"We would make it clear that by accepting the offer (the offer of income of Rs. 10,45,450 made by Dr. Ramamurthy in his settlement application), we are not giving any finding that the unaccounted cash found with the applicant during the search belonged to the applicant in his individual capacity and does not represent the unaccounted income of the firm of SUSC."
So that the decision of the Settlement Commission, the facts stand that the cash of Rs. 9,30,050 was found in the bank locker of Dr. Ramamurthy and so is the position of jewellery worth Rs. 2,19,271. Apart from the version of Dr. Ramamurthy at one stage of the search, there is no other evidence in the hands of the Department to show that this amount actually represented the income of the assessee-firm. Furthermore, even if the source of the income might have been the assessee-firm as we have discussed earlier, on account of appropriation by Dr. Ramamurthy of the said income for his personal purpose, the amount has got to be considered as belonging to Dr. Ramamurthy alone. Taking into consideration all these facts, therefore, we must come to the conclusion that there is no scope for treating either the amount of cash or even the value of the jewellery under consideration as undisclosed income of the assessee-firm. This is more so in case of the cash in as much the entire amount of cash has already suffered tax in the hands of Dr. Ramamurthy by virtue of the order of the Settlement Commission. Although the Settlement Commission might not have come to a clear finding as to actual ownership of money, the same amount cannot suffer tax in the hands of two different persons. Furthermore, the Department has sought to tax the amounts under section 69A without discharging its onus of proving that the assessee-firm is actually the owner of the amounts. The basic facts relating to the possession of the amounts as well as the jewellery clearly militate against the Departmental version of the assessee-firm being owner of the cash as well as the jewellery.
9. So far as the cash amount in the residence of Dr. Ramamurthy is concerned, the same consideration as in the case of the other amount of cash found in the locker would follow. This amount has already been taxed in the hands of Dr. Ramamurthy by virtue of the order of the Settlement Commission. There is no evidence anywhere to show the assessee-firm and not Dr. Ramamurthy himself was the owner of the amount. Even the amount was also found in possession of Dr. Ramamurthy at his residence. All these facts do not allow us even any hesitation to uphold the Departmental contention of considering the amount to be the undisclosed income of the assessee-firm.
10. We have already held that the jewellery found in the locker belonging to Dr. Ramamurthy cannot be assessed in the hands of the assessee-firm.
Whether the version of the grandmother of Dr. Ramamurthy is correct or not is completely different consideration. We would not venture on expressing any opinion on the acceptability of the contention of the said old lady. For the reasonings discussed by us as above, the value of the jewellery cannot be assessed in the hands of the assessee-firm under section 69A.
11. If this is the position with regard to the jewellery found in the bank locker of Dr. Ramamurthy, the Departmental case with regard to the jewellery found in the residential premises of Dr. Ramamurthy is even weaker. All along and even during the course of the search and seizure proceedings also, the wife of Dr. Ramamurthy had been contending that the jewellery belonged to her. She also offered certain explanation about the ownership of the jewellery like some portion of it being belonging to her children. We are not going into the controversy of whether the jewellery really belongs to the wife of Dr. Ramamurthy or her children or even whether the jewellery stands explained in her hands. In any case, we find that there is no connection between the jewellery found in the residential premises of Dr. Ramamurthy and the assessee-firm and, therefore, the question of including the value of the jewellery in the assessment of the assessee-firm cannot arise at all.
12. On these grounds therefore, we delete the entire addition of Rs. 10,45,450 being cash found and seized at different places and also in respect of the amount of Rs. 9,45,856 being the value of jewellery found in the bank locker as well as in the residence of Dr. Ramamurthy.
13. In the above-mentioned bank locker, a scrap of paper stating as under was found and seized:
"2 lakhs" 19-2-1991 The assessing officer, in the assessment order of the assessee-firm for assessment year 1991-92, came to the conclusion that Dr. Ramamurthy must have taken out an amount of Rs. 2 lakhs from the above-mentioned locker on 19-2-1992. He, therefore, made an addition of Rs. 2 lakhs in the assessment of the firm for that year. The learned counsel for the assessee strongly argues in this connection that even the word "rupees" was not mentioned against the figure of 2 lakhs. He contends that hence, there is no scope for the Department to come to the conclusion that there had really been withdrawal of Rs. 2 lakhs from the bank locker by Dr. Ramamurthy. In this connection, reliance has been placed on the number of decisions as are being discussed below:
Firstly, the judgment of the Tribunal, Delhi Bench D in the case of Smt. Shanti Devi v. Asstt. CIT (1994) 49 ITD 402 (Del), has been brought to our notice. In that case, it was held that the contents of loose paper-sheet found during the search of the assessees premises under section 132 could not form basis for reopening of the assessment under section 147 even though the assessee denied any link or connection with the said papersheet in the sworn affidavit and the assessing officer did nothing to establish its connection with the assessee. Another judgment of Tribunal, Ahmedabad Bench in the case of ITO v. Gurubachan Singh J. Juneja (1996) 54 TTJ (Ahd-Trib)(TM) 1 : (1995) 216 ITR 99 (AT) has also been relied upon. In that case also, it was held that mere finding of loose sheets during a search without linking the connection thereof with the business of the assessee could not form any basis for making any addition to the sales of the assessees business.
We completely agree with the argument of the learned counsel for the assessee that simply finding this loose sheet of paper recording an entry of 2 lakhs on a particular date cannot lead to the incontrovertible decision that Dr. Ramamurthy had actually withdrawan an amount of Rs. 2 lakhs from his bank locker under consideration. Even if that be so, we have already held above that contents of the bank locker do not have any connection with the income of the assessee-firm. Hence, there is no scope at all for adding up any amount in the hands of the firm on account of finding of this loose sheet. We therefore, delete the addition of this amount of Rs. 2 lakhs from the assessment of the assesseefirm for the assessment year 1991-92.
14. The assessing officer found out that scanning charges accounted for by the assessee-firm for assessment year 1991-92 were to the extent of Rs. 8,53,620 which included Rs. 1,40,335 received from two nursing homes which Dr. Ramamurthy, partner of the assessee-firm, visited during business hours on behalf of the assessee-firm. Excluding this amount, the collections from scanning worked out to Rs. 7,13,285 i.e., approximately at the figure of Rs. 1,950 per day. The assessing officer considered this to be too low, as against their reputation of the assessee-firm and the brisk business it had developed for the last two years.
During the source of his deposition on the date of the search, being 6-2-1992, Dr. Ramamurthy, the managing partner of the assessee-firm replied in answer to question No. 5 as below :
"Srinivasa Ultrasound Scanning Centre was started on 12-3-1986. Initially for about three years the business was not that brisk and I was issuing receipts to all patients for the fees received. For the last two years, I have a very busy schedule and during this period on an average collection to the extent of Rs. 2,000 to Rs. 3,000 per day is not being accounted for. No receipts are issued in respect of these collections. This may be Rs. 60,000 to Rs. 70,000 for a month."
Statement was also recorded from Smt. B.S. Gayathri, an employee of the assessee-firm who worked as receptionist and collected the fees from the patients. On the date of the search being 6-2-1992, she admitted that she was not issuing receipts for all the collections made by her from the patients, that she handed over the money collected without bills also to Dr. Ramamurthy at the end of the day and further that this type of collection without issuing of bills varied from Rs. 2,000 to Rs. 3,000 per day.
15. A survey was also conducted in the premises of the assessee on 8-2-1992 (after the search had been over on 6-2-1992). It came to light in the survey that the collection of the day are to the tune of Rs. 13,035 and that the bills had been issued only for Rs. 11,795. Dr. Ramamurthy admitted this fact in his statement on 18-2-1992. He, however, pleaded that the collections on a normal working day would not be of this order since the backlog of 6-2-1992, the day of the search was cleared on 8-2-1992.
In the course of the search, it was also found out that Dr. Ramamurthy used to obtain the print out of daily collections on the computer and destroy the same at the end of the day after having seen them. Some torn pages of daily collection sheets dated 1-5-1991, were found in his bedroom. On the reverse of such sheet the following noting was found :
10,435.00 4,684.50 5,750.00 Dr. Ramamurthy admitted in his statement on 6-2-1992, that collections of 1-5-1991, were of the order of Rs. 10,435 but that only an amount of Rs. 4,684.50 had been reflected in the cash book and that the balance of Rs. 5,750 was not accounted for. On 18-2-1992, however, he tried to explain that the collections mentioned at Rs. 10,435 on the reverse of the computer sheet did not represent the actual amount received on that date, that collection in respect of some of the patients would have been really on a future date and receipts were issued for the same on such future dates and that in some cases the patients did not turn up at all for collection of the report and ultimately no payments were received in such cases. The assessing officer did not accept this contention by stating that in a private nursing home like the assessees, scanning is done only after fees are fully paid. Ultimately the assessing officer placed much emphasis on the statement made by Dr. Ramamurthy on 6-2-1992, that during the last two years, collections to the extent of Rs. 60,000 to Rs. 70,000 per month had not been accounted for. He also stated that this was corroborated by the statement of Smt. B.S. Gayathri. He relied on a judgment of Patna High Court in the case of Bhimraj Pannalal v. CIT (1957) 32 ITR 289 (Pat) in which it was observed that even an isolated transaction might show the kind of things which were going on and hence the Tribunal was entitled to come to the conclusion from that incident, though only one, that there must have been other similar incidents. Finally, the assessing officer concluded that the assessee had not disclosed an amount of Rs. 8 lakhs in its books and made addition of this amount of Rs. 8 lakhs to the business income of the assessee for assessment year 1991-92.
16. In the assessment order for assessment year 1992-93 also the assessing officer made similar discussions. He, however, finally stated that although additional income of Rs. 8 lakhs from business source was liable to be added back in the hands of the assessee-firm, in as much as however, separate additions had been made in respect of the cash found at Rs. 10,45,450 and that Dr. Ramamurthy had approached the Settlement Commission challenging ownership of the firm therein, the said addition of Rs. 8 lakhs was not being made in the hands of the firm for the time being. The assessing officer furthermore stated that if the value of the seized assets brought to tax in the hands of the firm be deleted from the assessment of the assessee-firm (under the orders of the Settlement Commission), then the addition of Rs. 8 lakhs discussed by him above would have to be added to the income declared by the assessee-firm and brought to tax.
17. The learned counsel for the assessee has strongly contended that the Departmental versions on this issue are not at all correct. It is claimed that receipt numbers were being allotted through the computer to the case of each patient and that the receipts from each patient had been incorporated in the regular books of account of the assessee. He furthermore asserted that the computer sheets had been verified by the Departmental officers with the books of account mentioned by the assessee and the entries in the books were found to be tallying and correct. The learned counsel for the assessee claimed that at the time of the passing the assessment order, the assessing officer clearly omitted this verification aspect. As regards the alleged discrepancy found on the day of the survey being 8-2-1992, learned counsel for the a3sessee strongly contends that the assessment order never says that the computer sheet examined during the survey contained unaccounted receipts.
In any case, it is strongly contended by the learned counsel for the assessee that the findings during the course of the survey taking place in a subsequent year cannot form a basis for making an addition in the assessment for an earlier year. In support of this contention, he has placed reliance on the following two judgments :
(i) CWT v. Amichand C. Shah (HUF) (1996) 218 ITR 659 (Guj) and
(ii) Smt. Neerja Birla v. Asstt. CIT (1997) 59 TTJ (Mumbai-Trib) 246 : (1997) 62 ITD 39 (Mumbai-Trib).
It may however, be noted in this connection that both these judgments as above relate to the power of the Commissioner Wealth Tax /Commissioner in terms of the provisions of section 25(2) of the Wealth Tax Act or 263 of the Income Tax Act to revise Wealth Tax and Income Tax assessments. Hence, these judgments cannot be considered to be authorities on the issue whether the findings with respect to the business affairs of an assessee can be taken into consideration for determining its income in an earlier year.
The learned counsel for the assessee has also relied on a judgment of the Allahabad High Court in the case of Delhi Iron Syndicate (P) Ltd. v. CST (1969) Tax LR 1775. In that case, it was decided that suppression detected in a subsequent year cannot be made the basis for an addition in an earlier year on presumed similar suppression. The learned counsel for the assessee has furthermore contended that addition cannot be made on the basis of a statement of the receptionist viz., Smt Gayathri who was not allowed to be examined by the assessing officer at the assessment stage. In this connection, two further judgments have also been relied upon by the learned counsel for the assessee in trying to argue that even if some amount of unaccounted receipts be found out by the Department, it does not mean that the entire amount without deducting the expenses relating thereto must be subjected to tax :
(i) CIT v. S.M. Sameer (1993) 201 ITR 608 (Cal) and
(ii) Asstt. CIT v. S. Dungarnath (1994) 51 ITD 515 (Bang-Trib).
18. We cannot fully agree with the contention on behalf of the assessee that there is no scope for the Department to place reliance on the admission made by the managing partner. Dr. Ramamurthy about some portions of the collection charges being kept outside the books of the assessee. This is a statement made directly by the managing partner, although during the course of the search and seizure proceeding. There is no indication anywhere that he made this statement under coercion or threat. Although Smt. Gayathri was not allowed by the Departmental authorities to be cross-examined, at the same time again, she gave almost the similar version as Dr. Ramamurthy as on the date of search itself. The Departmental authorities would therefore be at liberty to draw adverse inference from the admission on the part of Dr. Ramamurthy. So far as however the findings of the survey taking place on 8-2-1992, is concerned, the discrepancies seen to be minor and that too was also explained. The recordings on the reverse side of the torn page of computer sheet might also be tried to be explained by the assessee. What was therefore necessary for the Department to have gone deep into the matter and examined the entries in the computer sheet fully with the books of account maintained by the assessee to find out the existence of some unrecorded earnings. The learned counsel for the assessee strongly argues that this exercise was actually done by the assessing officer and nothing adverse could be found out. The orders of the lower authorities however do not say so. In the circumstances, therefore, we are constrained to restore the matter back to the file of the assessing officer for making further examinations in a deep manner. If the contention of the assessee about verification having already been done, be found to be correct, that fact also should be noted by the assessing officer. In any case, so far as the matter relating to addition of undisclosed business income in the hands of the assessee-firm for both the years is concerned, we ultimately set aside the orders of the lower authorities and remit the matter back to the file of the assessing officer for conducting fresh examinations and inquiries on this issue after affording the assessee appropriate opportunities to represent its case.
19. For assessment year 1991-92 inauguration expenses of Rs. 58,653 have been disallowed and also added back. The expenses were incurred in connection with setting up of the business of the assessee at its new premises at Shankarmutt Road. The learned counsel for the assessee relies on the following two decisions to justify the case of allowance of such inauguration expenses:
(i) Delhi Cloth & General Mills Co. Ltd. v. CIT (1994) 208 ITR 785 (Del); and
(ii) CIT v. Aluminium Industries Ltd. (1995) 214 ITR 541 (Ker).
We agree with the contentions of the assessee on this issue in principle that inauguration expenses have got to be considered to be part of the normal business expenses of the assessee and are to be allowed. However, the detailed break-up of the expenses as given in the assessment order shows that an amount of Rs. 37,700 related to catering expenses. Such expenses are clearly of the nature of entertainment expenses and are, therefore, required to be disallowed, except for the amount of Rs. 5,000. We, therefore, direct that disallowance in this regard be restricted to the amount of Rs. 32,700 only (Rs. 37,500 - Rs. 5000) and delete the balance disallowance.
20. In the result, the appeals filed by the assessee are partially allowed to the above-mentioned extent only.