Rajasthan High Court - Jaipur
Redhey Shyam Tanwar vs Asstt. Cit on 16 July, 2001
Equivalent citations: (2002)77TTJ(NULL)505
ORDER
P.M. Jagtap, A.M. This appeal is filed by the assessee against a block assessment order under section 158BD of the Income Tax Act, 1961, for the block period comprising of assessment years 1986-87 to 1995-96 and upto the date of search, that is, 14-11-1995.
2. The facts giving rise to this appeal, in brief, are that a search under section 132(1) was conducted at the residential premises of Shri Lal Chand Agarwal, Shri Prem Chand Agarwal and Shri Dharam Pal Agarwal on 14-11-1995, during which several incriminating documents, books of account, etc. were found and seized. From the examination of the seized record, it was noticed by the assessing officer that the transactions recorded therein also included transactions relating to M/s Sagar Agency (hereinafter referred to as the "SA") a proprietary concern of the assessee. He also found that the said concern started its business from the business premises of M/s Lal Chand Prem Chand, a firm owned by the family of Shri Lal Chand Agarwal situated at 48, New Krishi Upaj Mandi, Bikaner, in June, 1989, and continued functioning from there till March, 1991 after which the same was shifted to new premises. He also found that during the said period i.e. June, 1989 to March, 1991, SA was working in close co-ordination/common control with the business of Shri Lal Chand Agarwal's family and that the transaction of various business concerns of the family of Shri Lal Chand Agarwal and SA were written in the common Kachi cash books. On the basis of these findings, the assessing officer was satisfied that the undisclosed income based on the transactions appearing in the seized books of account and documents relating to M/s Sugar Agency belonged to the assessee. He, therefore, issued a notice under section 158BD of the Income Tax Act on 14-11-1996, which was duly served on the assessee on 21-11-1996. In response to the said notice, the assessee filed a return in Form No. 2B for the block period starting from assessment year 1986-87 to 1995-96 and upto the date of search, that is, 14-11-1995, declaring a total income at Rs. 6,28,130 and undisclosed income at Rs. Nil. Finally, the assessment was completed by assessing officer under section 158BD read with section 143(3) on 28-5-1998, computing the total undisclosed income of the assessee at Rs. 10,37,194 on the basis of transactions relating to the assessee found recorded in the seized material. Aggrieved by the same, the assessee is in appeal before us.
3. Ground No. 1 challenging the validity of the notice as well as the assessment made in this case under section 158BD on different basis, as mentioned in ground Nos. 1.1 to 1.9, was not pressed by the learned counsel for the assessee at the time of hearing before us. Accordingly, the same is dismissed as not pressed.
4. In ground No. 2.1, the assessee has challenged the action of the assessing officer in holding the credits to the account of Shri Shanker Daga as bogus and in assessing the same amounting to Rs. 50,000 and Rs. 40,000 as undisclosed income of the assessee for assessment years 1990-91 and 1992-93, respectively. The assessee has also disputed the disallowance of interest paid to Shri Shanker Daga on the said credits/deposits, amounting to Rs. 4,925, Rs. 9,000 Rs. 14,440, Rs. 16,200 Rs. 18,000, Rs. 18,000 and Rs. 21,240 for the assessment years 1990-91 to 1996-97.
5. From the transactions recorded in the seized Kachi cash books, the assessing officer noticed a modus operandi of introducing undisclosed income in the books of account through which the assessee had taken loans by cheques from different persons and paid back the amounts of such loan in cash simultaneously. He, therefore, came to the conclusion that such cash credits are nothing but the undisclosed income of the assessee introduced in the books of account through a unique modus operandi. In one of the few such instances noticed by the assessing officer, a sum of Rs. 50,000 was shown to have been received by cheque from Shri Shankar Daga on 13-9-1989, by the assessee whereas in Kachi cash book (Exh. A-1/14), a payment of Rs. 50,000 was shown in cash on the same date against which the name of M/s Sugar Agencies was also found to be noted. Considering this transaction recorded in the seized Kachi cash book and in view of the aforesaid modus operandi used by the assessee for introducing undisclosed income in the books of account in the form of cash credits, the assessing officer came to the conclusion that the loans shown in the name of Shri Shankar Daga amounting to Rs. 50,000 and Rs. 40,000 in assessment years 1990-91 and 1992-93 are bogus and, therefore, added the same as well as the interest paid by the assessee to Shri Shankar Daga on the said loans in different years to the total income of the assessee as shown below :
Asst. yr.
Credit amount Interest amount Rs.
Rs.
1990-91 50,000 4,925 1991-92
-
9,000 1992-93 40,000 14,440 1993-94
-
16,200 1994-95
-
18,000 1995-96
-
18,000 1996-97
-
21,240
6. The learned counsel for the assessee, Shri N.M. Ranka, senior advocate, submitted before us, referring to pages 2 to 9 of his PB, that the loans taken from Shri Shankar Daga were duly recorded by the assessee in his regular books of account and the confirmations from the said depositor were also furnished before the assessing officer during the assessment proceedings. He, therefore, contended that these cash credits appearing in the regular books of account of the assessee cannot be considered in the special assessment made under section 158BD in his case. In support of this contention, he cited the decisions Malayil Bankers v. Asstt. CIT (1999) 236 ITR 869 (Ker). He further submitted that in a case, where the cash credit is found to be bogus on the basis of material found during search, the same to that extent only can be considered as undisclosed income in the block assessment, as held in the cases Microland Ltd. v. Asstt. CIT (1998) 67 ITD 446 (Bang), Jaya S. Shetty v. Asstt. CIT (1999) 69 ITD 336 (Mumbai). In this regard, he submitted that an entry of Rs. 50,000 showing cash payment on 13-9-1989, was found recorded in the seized Kachi cash books, but no such entry corresponding to a loan of Rs. 40,000 taken from the said depositor Shri Shankar Daga on 29-6-1991, was found in the seized Kachi cash books. He, therefore, contended that in the absence of such entry in the material found during the search, the assessing officer was not justified in treating the said credit amount of Rs. 40,000 as undisclosed income of the assessee in a special assessment made under section 158BD. As regards the disallowance of interest on the alleged bogus deposits, he submitted that nothing was found during the search indicating that such interest paid by the assessee to the depositor has been received back by the assessee. He, therefore, contended that these additions based on assumptions and presumptions cannot be made in a special assessment under section 158BD.
7. The learned Departmental Representative of revenue, on the other hand, submitted that the assessing officer had elaborately discussed this issue on p. 15 of his order and the modus operandi for introducing the undisclosed income in the regular books of account has also been explained by the assessing officer in para No. 3.0 on p. 13 of his impugned order. He also submitted that in the Kachi cash books seized under section 132(1) (Ann.A-1 to A-30) unaccounted transactions of four persons including the assessee were found recorded and the department sorted out the transactions relating to the assessee on the basis of notings made in the said Kachi cash books. He further submitted that an entry showing payment of Rs. 50,000 to Shri Shankar Daga in cash was found recorded in the Kachi cash book on 13-9-1989, and on the same date a cheque of Rs. 50,000 received by the assessee from Shri Shankar Daga was found in the regular books of accounts maintained by the assessee. According to him, these entries clearly show that the cash credit of Rs. 50,000 shown by the assessee in the regular books of account as having been received from Shri Shankar Daga was an accommodation entry arranged to introduce undisclosed income of the assessee in the regular books of account. As regards the second cash credit of Rs. 40,000 appearing to the credit of Shri Shankar Daga's account in the books of the assessee on 29-6-1991, he contended that though no entry in the Kachi cash books was found showing repayment of this amount, the assessing officer made addition in respect of the same because the assessee did not produce Shri Shankar Daga before the assessing officer in the assessment proceedings for examination and this non-cooperation on the part of the assessee in establishing the identity and capacity of the creditor as well as the genuineness of the transaction made the assessing officer to treat this cash credit of Rs. 40,000 as unexplained. As regards the disallowance of interest shown to have been paid by the assessee to Shri Shankar Daga, he contended that this issue is consequential to the issue of addition on account of unexplained/bogus cash credits and once the cash credits are treated as bogus on the basis of material found during the search, interest shown to have been paid on such cash credits has to be disallowed even if nothing was found during the search showing that the interest amounts were received back by the assessee.
8. We have considered the rival submissions and also perused the relevant material on records. It is observed that an entry showing a cash payment of Rs. 50,000 to Shri Shankar Daga was found recorded in the Kachi cash book (Ann. A-1/14) on 13-9-1989. On the other hand, in a ledger account of Shri Shankar Daga maintained by the assessee in the regular books of account, a cheque of Rs. 50,000 was found credited on the same date- In our opinion, this clear and direct nexus between the cash payment found recorded in the Kachi cash book and the cheque receipt recorded in the regular books of account in the name of the same person and on the same date explicitly shows that the cheque of Rs. 50,000 was received by the assessee against the cash payment made to Shri Shankar Daga, in order to introduce the undisclosed income in the regular books of account in the form of cash credit. Although the relevant cash credit entry was recorded by the assessee in the regular books of account, the same was never declared by him as his income and the fact that the said cash credit of Rs. 50,000 was bogus, revealed only from the entry recorded in the material. found during the search, which culminated in unearthing the undisclosed income of the assessee. It is thus clear that the fact that the cash credit of Rs. 50,000 appearing in the regular books of account of the assessee represented by undisclosed income of the assessee came to light from the material found during the course of search and that being the position, we are of the view that the assessing officer was fully justified in assessing such undisclosed income in the hands of the assessee in accordance with the special provisions of Chapter XIV-B.
9. As regards the additions of Rs. 40,000 in respect of other cash credit entry appearing in the books of account of the assessee on 29-6-1991, in the name of Shri Shankar Daga, we find that nothing was found during the search showing that the said amount of Rs. 40,000 was paid by the assessee to Shri Shankar Daga in cash out of his undisclosed income. It is observed that the assessing officer treated this cash credit of Rs. 40,000 as undisclosed income of the assessee on the assumption that one bogus entry in the account of Shri Shankar Daga renders all the transactions recorded in his account bogus. In our opinion, the assessing officer was not justified in treating this deposit/cash credit of Rs. 40,000 as bonus and assessing the same as undisclosed income of the assessee in the absence of entry supporting evidence/material found during the search. The learned Departmental Representative of revenue has contended before us that Shri Shankar Daga was not produced before the assessing officer by the assessee for examination and in the absence of the same, the identity and capacity of the creditor as well as the genuineness of transaction could not be established. In this regard we may observe that the cash credit entry of Rs. 40,000 was duly recorded by the assessee in his regular books of account and in the absence of any material found during the search indicating that the said cash credit represented undisclosed income of the assessee, the addition on account of the same for assessee's failure to establish the identity and creditworthiness of the creditor as well as the genuineness of the transaction was outside the scope of block assessment made under section 158BD in the present case in pursuance of the provisions of Chapter XIV-B. We, therefore, direct the assessing officer to delete the same.
10. As regards, the disallowance of interest paid by the assessee to Shri Shankar Daga on the impugned cash credit amounts, we agree with the learned Departmental Representative that this disallowance is consequential inasmuch as if the corresponding credit/deposit is found to be bogus and treated as undisclosed income of the assessee on the basis of material found during the search, the interest paid on such cash credit/deposit is liable to be disallowed in the block assessment made under section 158BD even in the absence of any material found during search showing specifically that the said interest was received back by the assessee in cash. As already mentioned, the undisclosed income of the assessee in the form of bogus cash credit/deposit came to light from the material found during the course of search and in these circumstances, we are of the view that the disallowance of interest attributable to such bogus deposit/cash credit is only a consequence which also arises directly from the material found during the search. In that view of the matter and considering the facts of the case, we sustain the disallowance of interest made by the assessing officer to the extent to which it is attributable to the deposit of Rs. 50,000 in the name of Shri Shankar Daga, held to be the undisclosed income of the assessee.
11. In ground No. 2.2, the assessee has challenged the action of the assessing officer in treating all the credit entries appearing in the account of Shri Jethmal Lalani as bogus and holding such credits amounting to Rs. 35,000, Rs. 35,000 and Rs. 30,000 as undisclosed income of the assessee for assessment years 1990-91, 1991-92 and 1993-94, respectively. The assessee has also disputed the disallowance of claim of interest amounting to Rs. 1,627, Rs. 8,452, Rs. 6,464, Rs. 7,651, Rs. 9,214 and Rs. 9,300 claimed to have been paid by the assessee to Shri Jethmal Lalani on the alleged bogus credits/deposits during the assessment years 1990-91 to 1995-96.
12. After considering the rival submissions and perusing the relevant material on record, it is observed that the facts in which the assessing officer treated the credit entries appearing in the account of Shri Jethmal Lalani as bogus representing the undisclosed income of the assessee are similar to the issue involved in ground No. 2.4 relating to the deposits from Shri Shankar Daga inasmuch as only one entry was found recorded in the material found during the search showing a cash payment of Rs. 10,000 on 9-4-1990, to Shri Jethmal Lalani and on the same date, a cheque of Rs. 10,000 was shown to have been received from the said person in the regular books of account maintained by the assessee. On the basis of this solitary entry relating to Shri Jethmal Lalani, the assessing officer came to the conclusion that all the credit entries appearing in the account of Shri Jethmal Lalani involving a total amount of Rs. 1,00,000 (Rs. 87,000 as per the ledger account extract placed at page 10 of the assessee's PB), are bogus and represent the undisclosed income of the assessee. He also disallowed the entire interest shown to have been paid by the assessee to Shri Jethmal Lalani in the regular books of account. Considering that the facts relating to this issue as well as the arguments advanced by the learned representatives of both the sides are similar to that involved in the issue raised in ground No. 2.1 discussed and decided in the preceding paras of this order, we also follow the conclusion drawn therein and hold that a sum of Rs. 10,000 alone can be assessed in the hands of the assessee under section 158BD as undisclosed income of the assessee as a result of search. We also hold that the disallowance of interest is sustainable only to the extent of which it is attributed to the said amount of Rs. 10,000 held to be the undisclosed income of the assessee. We order accordingly.
13. Ground No. 2.3 relating to the alleged bogus credit of Rs. 40,000 in the account of Shri K.L. Tanwar was also (sic not) pressed by the learned counsel for the assessee at the time of hearing before us. Accordingly, the same is dismissed as not pressed.
14. In Ground No. 2A the assessee has challenged the action of the assessing officer in holding the credit to the account of M/s Rajesh Kumar Dinesh Kumar as bogus and treating the same amounting to Rs. 40,000 as undisclosed income of the assessee.
15. After considering the rival submissions and perusing the relevant material on record, it is observed that the fact involved in this issue are similar to the facts involved in the issue raised in ground No. 2.1 and 2.2 discussed and decided hereinabove. The learned counsel for the assessee, however, has contended that in the case of cash credit entry of Rs. 40,000 appearing in the account of M/s Rajesh Kumar Dinesh Kumar, the nexus of the same with the entry appearing in the seized Kachi cash book remains unproved. In this regard, he drew our attention towards page No. 49 of the relevant Kachi cash book (Ann. A-1/30) to point out that the name of M/s SA is noted against the entry of Rs. 5,600 appearing immediately above the entry of Rs. 40,000. He also pointed out that the cash payment of Rs. 40,000 is shown to have been made on 27-12-1989, as per the said Kachi cash book whereas as per the assessee's regular books of account, the cheque of Rs. 40,000 was received and credited to the account of M/s Rajesh Kumar Dinesh Kumar on 27-11-1989. The learned Departmental Representative, on the other hand, clarified that the name of SA, a proprietary concern of the assessee, is noted immediately above the entry of Rs. 40,000 in the relevant Kachi cash book in red ink and simultaneously the name of LP (Lalchand Premchand) is noted above the entry of Rs. 20,000 relating to M/s Bikaner Mills. He, therefore, contended that the said entry of Rs. 40,000 very much relates to the corresponding cash credit entry appearing in the account of M/s Rajesh Kumar Dinesh Kumar in the assessee's books.
16. After considering the rival submissions and perusing the relevant material on record, including the relevant Kachi cash book, it is observed that the name of M/s SA appears to be more closely related to the entry of Rs. 40,000 recorded in the Kachi cash book. As regards the difference in dates pointed out by the learned counsel for the assessee, it is observed that the date of receipts of cheque from M/s Rajesh Kumar Dinesh Kumar has been specifically mentioned by the assessing officer as 27-12-1989, in his impugned order. From the material on record, it also appears that the assessee never raised this point before the assessing officer during the assessment proceedings which would have facilitated due verification and clarification then and there itself.
Moreover, it is evident from the record that the assessee at the relevant time was working in close association with the group concerns of Agarwal family and M/s Rajesh Kumar Dinesh Kumar being one of such group concerns, the time lag of one month in repayment of cash against receipt of cheque cannot be said to be too abnormal to disprove the nexus between the two transactions. As such, considering all the facts and circumstances of the case, we are of the opinion that the nexus between the impugned cash credit entry and the incriminating record found during the search stands reasonably established. In that view of the matter, and following our conclusion drawn in respect of ground No. 2.1 and 2.2 in the preceding paras of this order involving similar issue, we hold that the assessing officer was fully justified in holding that the bogus cash credit/deposit of Rs. 40,000 in the name of M/s Rakesh Kumar Dinesh Kumar represented the undisclosed income of the assessee. We, therefore, uphold his impugned order on this issue.
17. In ground No. 2.5 the assessee has challenged the action of the assessing officer in treating the credit of Rs. 90,000 in the account of Smt. Sunheri Devi as an accommodation entry and assessing the said amount as undisclosed income of the assessee.
18. It was noticed by the assessing officer that a cheque of Rs. 90,000 received from Smt. Sunheri Devi was credited to her ledger account on 28-1-1991, in the regular books of account maintained by the assessee. Further, repayment of this amount was also found to be shown in the assessee's books by two separate cheques of Rs. 45,000 each on 30-1-1991, and 8-2-1991. On the other hand, an entry showing cash credit of Rs. 45,000 was also found recorded on 8-2-1991, in the Kachi cash book (Ann. A-1/2) on 8-2-1991, with the narration indicating receipt of the said amount against cheque of SA. On the basis of these entries, the assessing officer came to the conclusion that the credit of Rs. 90,000 appearing in the account of Smt. Sunheri Devi was an accommodation entry and, therefore, the same was treated as undisclosed income of the assessee.
19. The learned counsel for the assessee reiterated the similar arguments before us while contending that only a sum of Rs. 45,000 can be considered as undisclosed income of the assessee in the block assessment. He also submitted that the assessing officer was patently wrong in treating the amount of Rs. 90,000 received from Smt. Sunheri Devi as loan/deposit, because in fact the assessee had given an advance of Rs. 90,000 by cheque to the said lady and the said advance was received back by the assessee in two instalments of Rs. 45,000 each on 30-1-1991, and 8-2-1991.
20. The learned Departmental Representative on the other hand, advanced the same arguments as raised in respect of ground Nos. 2.1, 2.2 and 2.4.
21. After considering the rival submissions and perusing the relevant material on record, it is observed that the assessing officer considered the entire amount of Rs. 90,000 appearing in the account of Smt. Sunheri Devi as undisclosed income of the assessee in spite of the fact that only a sum of Rs. 45,000 was recorded in the incriminating material found during the search. As observed earlier in this order while considering the similar issues, it is not a correct proposition that if a single entry in the account is found to be bogus on the basis of material found during the search, such account is to be treated as bogus in its entirety at least in the block assessment proceedings. Moreover, it appears from the record that the cash paid by the assessee to Smt. Sunheri Devi out of undisclosed income on 28-1-1991, against a cheque, as held by assessing officer, must have in all probabilities been received back by the assessee on 8-2-1991, when the said cheque amount was repaid to Smt. Sunheri Devi. Obvious as it is, if the addition on this count is sustained, the cash amount of Rs. 45,000 has to be treated as available with the assessee out of undisclosed money on 8-2-1991, for utilisation or set off against undisclosed investment/payments made thereafter.
22. At the time of hearing before us, the learned counsel for the assessee has contended that the factual position of the case is contrary to what has been stated by the assessing officer in his order. Clarifying further, he has submitted that the assessee in fact, had given Rs. 90,000 by cheque to Smt. Sunheri Devi on 28-1-1991, and the said amount was received back by two cheques of Rs. 45,000 each on 30-1-1991, and 3-2-1991. In our opinion, this contradiction pointed out by the learned counsel for the assessee is going to have material impact on the fate of this issue inasmuch as in that case, both the entries appearing in the regular books and seized material, being credit entries showing receipt of amount, the apparent nexus between them, as inferred by the assessing officer, may take different shape requiring the reconsideration of this issue entirely on a different footing. In that view of the matter, we find it just and proper to restore back this issue to the file of the assessing officer for verifying the factual position from the relevant record and for deciding the same afresh on the basis of findings of such verification. Needless to observe that the assessing officer shall provide sufficient opportunity to the assessee of being heard on this issue.
23. In ground No. 2.6, the assessee has sought the addition in respect of cash credit entries to be made on the basis of peak credit.
24. After considering the rival submissions and perusing the relevant material on record, we direct the assessing officer to work out the peak credit in respect of addition sustained by us for all the years under consideration after adjusting debit entries, if any, and accordingly make addition to the extent of peak credit on the basis of such working.
25. Ground Nos. 3 and 3.1 were not pressed by the learned counsel for the assessee at the time of hearing before us. Accordingly, the same are dismissed as not pressed.
26. In ground No. 3.2 the assessee has disputed the addition of Rs. 64,230 made by the assessing officer on account of unexplained investment in trading activities outside the books.
27. From the material found during the search, it was noticed by the assessing officer that the assessee was doing numerous trading transactions outside the regular books of accounts. From the Kachi cash books seized during the search, the unaccounted sales of the assessee was worked out by the auditor and profit at the rate of 1.2 per cent was also estimated on such sale for the relevant assessment years as under :
Asst. yr.
Unaccounted sale Profit on unaccounted sale Rs.
Rs.
1990-91 46,88,794 56,265 1991-92 30,34,302 36,410 1992-93 2,10,996 2,532 Further, on the basis of maximum annual sale of Rs. 46,88,794, the auditor also worked out the estimated investment of the assessee in such trading activities outside books at Rs. 64,230. Consequently, additions on account of profits at Rs. 64,230, Consequently, additions on account of profits on undisclosed sale and undisclosed money invested in such activities were made to the income of the assessee for the relevant assessment years. The assessee raised ground Nos. 3.1 and 3.2 in the present appeal disputing both these additions. However, ground No. 3.1 relating to the addition on account of undisclosed profits was not pressed by the learned counsel for the assessee before us.
28. As regards the addition on account of estimated investment in the unaccounted trading activities, the learned counsel for the assessee contended that there being no material found during the search showing such investment, the addition made by the assessing officer on this count was outside the scope of special assessment made in this case under section 158BD.
29. The learned Departmental Representative, on the other hand, submitted that ground Nos. 3 and 3.1 of the present appeal disputing the quantum of unaccounted sale and profit thereon have not been pressed by the learned counsel for the assessee. He, therefore, contended that the present issue of undisclosed investment in such business, being interconnected with the aforesaid issues stands automatically decided against the assessee, Referring to page 20 of assessing officer's order, he contended that the assessee's investment in trading activities outside, books was worked out by the auditor as per accepted accounting principles and the assessing officer was fully justified in relying on the same while making the addition on this count.
30. After considering the rival submissions and perusing the relevant material on record, it is observed that although sufficient material was found during the search showing that the assessee was carrying on the trading activities outside books, nothing was found showing explicitly the that assessee had made any investment in such activities. In this regard, we may observe that the existence of the said activities, even though accepted by the assessee, does not automatically lead to a conclusion that certain investment was made by the assessee in such activities and in the absence of any incriminating material found during the search, neither the estimation of quantum of such investment, nor the addition of the same in the present case was called for.
31. It is a settled position of law that section 69 casts heavy burden on the revenue to establish that the assessee, in fact, had made the investment and in the block assessment, the same needs to be established on the basis of material found during the search. As such, considering all the facts of the case and for the aforesaid reasons, we are of the opinion that the assessing officer was not justified in estimating the amount of investment and making addition thereof to the income of the assessee de hors the material found during the search. We, therefore, delete the same.
32. In ground No. 3.3, the assessee has sought that the additions sustained, if any, on account of issues raised in ground No. 3.1 and 3.2 telescoped against other income.
33. In this regard, we may observe that ground No. 3.1 disputing the addition on account of undisclosed profits has not been pressed by the learned counsel for the assessee before us meaning thereby that these additions stand confirmed and the same being intangible credit additions, in our opinion the amount added to the income of the assessee on this count is justifiably to be treated as available with the assessee at the relevant time for telescoping against the other income or addition. The assessing officer, is therefore, directed to allow appropriate credit/set off the same while giving effects to this appellate order.
34. Ground Nos. 4 and 4.1 relate to the addition on account of unexplained credits in bank accounts and also in the accounts of certain parties involving a total amount of Rs. 2,30,000 and Rs. 99,226 in assessment years 1990-91 and 1992-93, respectively.
35. After considering the rival submissions and perusing the relevant material on record, it is observed that certain credits pertaining to M/s SA (proprietary concern of the assessee) were found recorded in the Kachi cash book seized from Shri Lal Chand Agarwal. During the assessment proceedings, the assessing officer also found that these transactions are not tallying with the regular books of M/s SA. He, therefore, sought that the onus to explain these entries/transactions lies on the person from whom the Kachi cash books were seized. This plea of the assessee was not accepted by the assessing officer and he proceeded to make the addition under section 68 considering that there was conclusive proof to establish that the said transactions belonged to the assessee.
36. Before us, the learned counsel for the assessee made an attempt to explain all the impugned credit entries/transactions with the help of corresponding entries in the regular books of account as well as in the seized record. The learned Departmental Representative, however, objected for entertaining this plea of the assessee at this stage and contended that if at all the Tribunal is in favour of entertaining this plea of the assessee, the assessing officer should be given an opportunity to examine the assessee's explanation in respect, of the impugned cash credit entries as the same was not offered before the assessing officer in the assessment proceedings. After considering the facts of the case as also the impugned order of the assessing officer, we find force in the contention of the learned Departmental Representative and accordingly restore back this issue to the file of the assessing officer for considering and deciding the same afresh after giving sufficient opportunity to the assessee of being heard.
37. In ground No. 4.2 the assessee has challenged the action of the assessing officer in making the additions, which are disputed on merits also in ground Nos. 4 and 4.1 discussed above, on the ground that the same is without show-cause notice, on wrong premises and in violation of principles of natural justice.
38. We have already restored back the issue of impugned additions disputed by the assessee on merits also, while disposing of ground Nos. 4 and 4.1 in the preceding paras of this order with a specific direction to provide sufficient opportunity to the assessee of being heard. In the result, we are of the view that the grievance of the assessee projected in this ground also stands addressed/resolved.
39. As regards ground No. 4.2 seeking benefits of telescoping and addition on the basis of peak credit working, we direct the assessing officer to consider this aspect as per the directions given by us in para No. 24 of this order in respect of ground No. 2.6, after deciding the issue of addition on account of unexplained cash credit afresh on merits.
40. Ground No. 5 and ground No. 5.1 relate to the disallowance of Rs. 4,000, Rs. 6,000, Rs. 5,000 Rs. 4,000, Rs. 4,000 and Rs. 5,000 Out of the expenses for assessment years 1991-92 to 1996-97.
41. The learned counsel for the assessee contended that the disallowance of expenses recorded in the regular books of account is beyond the scope of block assessment. Referring to para 6 on page 22 of assessing officer's order, he contended that the disallowance has been made by the assessing officer on estimated basis without any relevance to the material found during the search. The learned Departmental Representative, on the other hand, relied on the order of the assessing officer. After considering the rival submissions and perusing the relevant material on record, it is observed that the assessing officer partly disallowed expenses claimed by the assessee in the regular books of account, on ad hoc basis for the reason that the same were found to be unvouched and unverifiable. It also appears from record that no incriminating material was found during the search warranting such disallowance. In the case of Express Movers (P) Ltd. v. Dy. CIT (1997) 61 ITD 528 (Del), the Delhi Bench of Tribunal has held that since expenses incurred by the assessee were duly recorded in regular books of account and no incriminating document was found during search indicating that assessee had in any manner inflated expenses, no ad hoc disallowance out of such expenditure could be made in the block assessment. In the case of Ms. Pooja Bhatt v. Asstt. CIT (2000) 66 TTJ (Mumbai) 817, the Mumbai Bench of Tribunal has held that disallowance out of motor expenses on estimated basis is not justified in block assessment in the absence of material or evidence found during the search. In the case of Rajendra Kumar Kedia v. Dy. CIT 22 TW 506 (Jp), the Jaipur Bench of Tribunal has held that expenses claimed in P&L A/c cannot be disallowed in block assessment and cannot be treated as undisclosed income.
42. As such respectfully following the aforesaid decision of the Tribunal and considering the facts of the case, we hold that the assessing officer was not justified in making the disallowance out of expenses recorded by the assessee in regular books of account, in the absence of any incriminating material/evidence found during search and accordingly deleted the same.
43. The issue raised in ground No. 6 relating to the peak credit working, telescoping effects, etc. has already been considered and adjudicated by us at the appropriate place while disposing of the relevant ground on merits.
44. Ground No. 7 is general seeking no specific decision on our part.
45. In the result, this appeal of the assessee is partly allowed as indicated above.