Delhi High Court
Friends Overseas (P) Ltd. vs Dy. Cit on 17 August, 2001
Equivalent citations: (2001)73TTJ(DEL)367
ORDER
Pramod Kumar, A.M. This appeal, filed by the assessed, is directed against the assessment order dated 29-11-1996, passed by Shri P.C. Mohanty, learned Deputy Commissioner, Special Range 4, New Delhi for the block period ending on 17-11-1995. Although the assessed has listed as many as ten grounds of appeals in the memorandum of appeal, on merits primarily the assessed is aggrieved of assessing officer computing the undisclosed income of Rs. 18,01,600 by making addition on account of (a) unexplained expenditure of Rs. 14,88,754, and (b) holding cash balance of Rs. 3,12,784 as unexplained income of the assessed. Apart from being aggrieved of these additions, the assessed is also aggrieved of levy of surcharge on the tax determined under section 158BA(2)/113 of the Act and also of the very assessment under section 158BC per se.
2. Briefly stated, relevant material facts, so far as above grounds of appeal are concerned, are that the assessed is a private limited company engaged in handicraft export business. On 17-11-1995, a search under section 132 was conducted on the assessed-companys business premises at S11, Green Park Extension, New Delhi and also at the residence of its director at X25, Hauz Khas New Delhi. During the course of this search and seizure operations, one of the documents (Annexure A-11) found at the aforesaid business premises inter aha contained a note, in tabular form, to the following effect :
From (1) CT. (2) Dated (3) @ (4) Amount (5) Paid (6) Rs.
Rs.
Rs.
Nalin 20.04 29-11-1994 9,000 1,80,360.00 1,75,000 "
64.95 6-12-1994 16,350 10,61,932.50 10,62,000 "
17.73 7-12-1994 14,201 2,51,783.73 95,000 1,50,000 6,784 14,94,076.23 14.88,784 Terms as agreed Cash/Cheque As on Due Date (7) (8) (9) (10) Less 3% on immediate payment (Approx. 5000) Cash 8-12-1994 Paid Payment due in 1 month Cash 5-1-1995 5-1-1995 Immediate payment Cash 7-12-1994 6-1-1995 22-12-1994 5-1-1995
3. It may also be mentioned that the aforesaid document also contained, in upper portion, a note giving details of investments in shares, amounting to Rs. 10,21,366.26, held in the names of Smt. Saroj Gupta, Shri Ashwin Gupta, Shri Sanjay Gupta. Smt. Rekha Gupta and Shri Ved Prakash. These details make it clear that payments for all those share investments were made by cheques. It is not in dispute that the persons in whose names investments were made in shares are connected with assessed-company, being directors of the company or family members of such directors. During the course of the block assessment proceedings, the assessed-company has duly explained the investments in shares, and there is no controversy or dispute so far as that part of Annexure All is concerned.
4. However, when the assessed was called upon to explain entries regarding cash transactions of Rs. 1,75,000, Rs. 10,62,000, Rs. 95,000, Rs. 1,50,000 and Rs. 6,784, mentioned in para, 2 above and as contained in the document in question, the assessment submitted as follows :
"The paper showing entries of Rs. 1,75,000, Rs. 10,62,000 and others have no relation with the assessed. The upper portion of the above page was typed in computer by Sanjay Gupta (block assessed) for preparing details of shares held by directors and family members.
The assessed who had in his employment an accountant was also learning computer operations. It is by chance that during practice he filed certain figures to test his ability. To verify whether he has typed correctly, he also took print of it which was seized by Department. However, the figure written in lower portion of the above page has no significance in context of business carried by assessed.
It is usual for person learning basis operation to work or practice in existing file of computer. The practice files worked on by learners should not lead to unimaginable queries.
The above fact can also be verified from practice book of Apple Information Technology which was lying in the office at that time. Moreover these entries do not pertain to any business transactions which have nowhere been signed or confirmed by the assessed. "
The assessing officer was not satisfied with the above explanation and, accordingly, he sought further explanation from the assessed. He also mentioned to the assessed that in terms of provisions of section 132(4A) of the Income Tax Act, 1961, the presumption is that the contents of such documents, as may be found in possession of the assessed, are deemed to be true. The assessed broadly reiterated his earlier submissions and enclosed an affidavit from Shri Himanshu Jain, accountant of the assessed, in support of assesseds stand. The assessing officer rejected these arguments of the assessed and, although a little later in the impugned assessment order, observed as follows :
"The contention of the assessed that the above entries were made by learned accountant to practice using the computer cannot be accepted. These entries seem to have been made by someone who is quite conversant in the use of computers. Moreover, these entries have been made in continuation and on the same page as entries pertaining to purchase of shares by various persons of the group. A perusal of papers from Apple Info. Tech. Div submitted by the assessed indicates that these relate to creating and use of file in dbase III plus, whereas, all the unexplained entries have been made in a Word Processor e.g. Word Star etc. dbas, III plus files are used for managing databases and cannot be used for practicing typing and makes the type of tables with rows and figures as has been claimed by the assessed. "
5. In any case, the assessed himself retracted the above statement and produced one Shri Babulal Shiv Bhagwan Goenka, a resident of Bombay and a relative of Shri Ved Prakash. This person was accompanied by Shri Ved Prakash, director of the company, to the assessing officers office. Shri Goenka, by way of prepared written submission which he brought with him, submitted that he is a member of Bombay Diamond Merchants Association and that he has been dealing in sale of diamonds, on commission basis, for last three decades. It was further submitted that he had brought diamonds worth about Rs. 15 lakhs to Delhi and had sold them here. It was during that this (sic) visit to Delhi that Shri Goenka (sic) that he had visited assesseds office and in order to keep details of the sales, he had requested assesseds accountant to type the above transactions and to take the printout. Shri Goenka further stated that he is not assessed to tax. Shri Goenka also filed confirmations of certain individuals who claimed to have been dealing with Shri Goenka, for sale of diamonds on commission basis. Since Shri Goenka was produced before the assessing officer, the assessing officer took this opportunity to examine Shri Goenka on oath and record his statement.
6. In the statement thus recorded by the assessing officer, Shri Goenka stated that he cannot recall names and addresses of persons who had given him diamonds for sale on commission basis. He failed to recall names of persons to whom he sold the diamonds, and to even recall as to who had given him how much money. In fact, his memory failed him in almost all aspects of the matter, so much so that he was able to recall name or location of the hotel he claimed to have stayed in, even the dates of his visit to Delhi, and the date of his visiting the assesseds office. Shri Goenka went to state on oath that "after each transaction I tear off the pieces of paper (evidence in transactions) so that my (recorded) income will be below the taxable limit." Shri Ved Prakash, director of the assessed-company, was all along present but he did not avail specific opportunity, offered to him by the assessing officer, to cross examine Shri Goenka. On the same day and during the course of this very hearing, Shri Ved Prakash was also examined on oath and the assessing officer recorded his statement also. In response to assessing officers question as to how the assessed suddenly deviated from the stand that entries in question were the outcome of accountants practice sessions only, it was submitted that Shri Gupta had initially, suspected that his accountant had typed out these things while practicing on computer, and that mistake was discovered only when he got in touch with Shri Babulal who explained the actual facts. In the backdrop of these facts, the assessing officer came to the conclusion that "even this version of the assessed should only be treated as last desperate measure to evade the responsibility cast by law and he has at best managed a very ill-contrived fictional plot." Accordingly, the assessing officer concluded that the assessed has not satisfactorily discharged the onus of proving that the entries do not pertain to the assessed, and, therefore, the assessing officer added the entire sum of Rs. 14,88,784 as undisclosed income, being unexplained expenditure, of the assessed for the asst. yr, 1995-96 i.e. Assessment Year relevant to the previous year in which payments in question were made.
7. As regards the second addition of Rs. 3,12,784, during the course of search and seizure operations cash of Rs. 4,52,861 was found in assesseds office premises which, according to the assesseds written submission dated 17-10-1996, filed before the assessing officer, was explained as follows :
Block assesseds Ashvin Gupta 78,000 Sanjay Gupta 1,18,000 Saroj Gupta 94,000 Friends Overseas (P) Ltd.
22,784 Non block assesseds Friends Overseas 43,382 Intraco India 60,044 Ved Prakash & Sons HUF 36,411 4,52,621
8. The assessed had further submitted that cash of various persons and firms was kept in business premises for safe keeping as a robbery had taken place at the residence of the director sometime back and as some renovation work was going on there for sometime. It was claimed that business premises was also considered safer for the reason that it was guarded round the clock by guards at the neighboring offices in the same building. Since, according to the assessing officer, this bland explanation were not supported by any evidence or entries in the books of the assessed, the explanations were rejected by him. He, however, excluded cash said to be belonging to M/s Friends Overseas, M/s Intraco India and M/s Ved Prakash Gupta HUF which was taken up in separate proceedings under section 158BD against these assesseds. The assessing officer also rejected assesseds efforts to update the cash book as ledger was also not found to be up todate. Accordingly, the assessing officer made an addition of unexplained cash on the basis of following calculation :
Rs.
Cash found in assesseds premises 4,52,621 Less : being considered separately in the hands of the following assesseds Friends Overseas 43,382 Intraco India 60,044 Ved Prakash & Sons HUF 36.411 1,39,837 Balance amount remaining unexplained 3,12,784
9. Aggrieved by these two additions amounting to Rs. 14,88,784 and Rs. 3,12,784 respectively, the assessed is in first appeal before us.
10. Rival contentions are conscientiously heard, orders of the authorities below carefully perused, and applicable legal positions duly deliberated upon.
11. It has been pointed out that the search was conducted in respect of, as observed by assessing officer himself in the impugned assessment order, in Friends Group of cases which consisted of (i) Friends Overseas (P) Ltd., (ii) Friends Overseas, (iii) Intraco India, (M Ved Prakash & Sons HUF, (v) Ved Prakash Gupta, (vi) Ashvin Gupta, (vii) Sanjay Gupta and (viii) Saroj Gupta. We have also noticed that Panchnama dated 18-11-1995, in the case on Shri Ved Prakash, Shri Sanjay Gupta, Shri Ashvin Gupta and Smt. Saroj Gupta, inter alia states as follows :
Enclosure 2 Inventory of documents found and seized during the search operations under section 132(1) of the Income Tax Act, 1961 at section 11, Green Park Extension, belonging to Shri Ved Prakash Gupta, on 17-11-1995 Sl. No. Page No. Annexure .................11
1 to 67 A-11 .................
12. The learned counsel has submitted that the document in question, based on which the addition of Rs. 14,88,754 are made, was found from the possession of Shri Ved Prakash Gupta but the addition on account of unexplained expenditure on the basis of this document is made in the hand of the assessed-company. We find that it is not in dispute that Shri Ved Prakash is a director of the assessed-company, he is actively involved with day-to-day management of the company, and that Annexure A-11 is seized from business premises of the assessed-company. We have also noticed that all the books of accounts and expenses vouchers of the assessed-company have also been found from the possession of Shri Ved Prakash. Therefore, it cannot be said that Shri Ved Prakash is a person not connected with the assessed-company at all. As a matter of fact, Shri Ved Prakash has all along attended to the assessment proceedings in connection with this block assessment and given necessary explanations from time to time. It was never the assesseds case that the document in question did not belong to the assessed-company or that the entries regarding expenditure aggregating to Rs. 14,88,754 were not made by employee of the assessed-company. Vide letter dated 7-11-1996, the assessed categorically accepted that the entries in question were made by assessed-companys accountant, though the assessed gave some explanation for these entries which was later retracted by the assessed himself. On 15-11-1996, the assessed again reiterated the same story and submitted that "an affidavit from Mr. Himanshu Jain (accountant of the company) could be enclosed which shall tantamount to the fact that figures in that page were imaginary figures which have by chance led to strange probabilities and problems for the assessed". Later on, however, this statement was retracted by the assessed-company and a new explanation was given Vide letter dated 26-11-1996, the assessed stated that "Shri Babulal ji, who is broker of diamonds, gave these particulars to Himanshu Jain to get it typed on the computer and give its printout back to him." This letter further stated that, "The nature, particulars, significance of various columns of above page is given by Shri Babulal ji in his personal statement (enclosed herewith)." In the accompanying written statement, forwarded by the assessed-company itself, Shri Babu Lal inter alia stated that, "That all the transactions as stated above and appearing in seized documents of my son-in-laws company Friends Overseas (P) Ltd. pertain to me only and nowhere belongs to M/s Friends Overseas (P) Ltd.". This explanation was given in the presence of Shri Ved Prakash and, as duly noted on the statement recorded by the assessing officer, that "Cross-examination was denied by Shri Ved Prakash who thought it was not necessary-Sd/xx (Ved Prakash)". Shri Babu Lal, in this statement, was on record to say that the entries were made by the accountant of the company, though based on inputs supplied by this Shri Babu Lal. We may also reproduce the affidavit dated 14-11-1996, filed by Shri Ved Prakash, in his capacity as director of the assessed-company;
I, Ved Prakash S/o Late Shri Bishan Chand, director of Friends overseas (P) Ltd. S/11, Green Park Extension, New Delhi do hereby solemnly affirm and declare on behalf of the company as under (emphasis, italicised in print, supplied by us ) :
That ours is 100 per cent export unit engaged in export of handicrafts items.
That search at our premises was done on 17-11-1995, and certain papers were seized. (emphasis, italicised in print, supplied by underlining).
That figures of 1,75,000, 10,62,000, 95,000, 1,50,000 & 6,784 appearing at p. 17 and back of it in Annexure A-11 of seized documents found at S 11, Green Park Extn. New Delhi does not pertain to the company, its business or to directors of the company.
That no financial transaction, involving above figures/particulars was never entered into by the company.
Deponent For Friends Overseas (P) Ltd.
Sd/xx Ved Prakash Director I, the above named deponent, do hereby confirm the contents of above affidavit to be true and correct to the best of my information and belief.
Deponent For Friends Overseas (P) Ltd.
Sd/xx Ved Prakash Director New Delhi, dated 14-11-1996
13. The above affidavit, which is categorically made on behalf of the company, makes it clear that, even according to Shri Ved Prakash, certain papers, including Annexure A-11, were seized from the premises of Friends Overseas (P) Ltd. but entries in question, in this document, did not pertain to the company. In effect, thus, the assessed-company has partially disowned the contents of the documents seized from its premises. It was not the assesseds case, even at this stage, that document did not belong to the company or that entries were not made by Shri Himanshu Jain, accountant of the company. Shri Himanshu Jain has separately filed an affidavit (copy placed in the paper-book filed by the assessed) which inter alia confirms that he is an employee of the assessed-company. It is thus clear that while the assessed has not disputed that document was not found in business premises of the assessed-company or that entries were not made by an employee of the assessed-company, the assesseds case is that these entries were not relevant to the business of the assessed and, in support of this stand, the assessed has offered certain explanations which have been rejected, for the detailed reasons set out in the impugned assessment order, by the assessing officer. Unlike a real person, a company does not have the physical existence but a document found in its business premises though with one of its directors, through whom the company functions, can be reasonably said to have been seized from the company, particularly when such a director does not dispute that the document does not belong to the company and his dispute is confined to the claim that some of the entries as not related to the assessed-company. In the case before us, it is an admitted fact that entries in dispute were actually made by an employee of the company. In view of these peculiar facts, we see no substance in the technical objection of the assessed-company that the Annexure A-11 is not relevant to the assessed and that the assessing officer, for this reason alone, should not have made addition in the hands of the assessed-company. The assessed-company, through its director, has already made a sworn statement that the document is found in business premises of the assessed-company and that entries in dispute were made by its employee. Once it is an admitted position that the Annexure A-11 is a document seized from the assessed-company and that disputed entries are made by the employee of the assessed-company, the onus is on the assessed-company to prove that the contents of such a document are not true. The assessed has not even contended that the contents of this document are not true but its case is that contents of this document belong to someone elses business.
14. As we have noted earlier, the assessed has already owned up and explained a part of the Annexure A-11 i.e. so far as investments in shares, by cheques, are concerned. The assessed has, however, disowned entries with regard to cash expenditures, as mentioned in the said document solely on the ground that these entries pertain to one Shri Babu Lal Shiv Bhagwan Goenka. These entries which are reproduced at p. 2 of this order, are fairly comprehensive entries giving complete details of the expenditure. In this view of the matter, this document cannot be said to be a dumb document which, on the contrary, is admittedly quite self-explanatory comprehensive statement of apparently unaccounted cash expenditure. Coming back to assesseds explanation that these entries belong to the aforesaid Shri Goenka, we have observed that Shri Goenkas stand was that he, a member of Bombay Diamond Members Association, had obtained diamonds from ghasias (karigars) in Surat, Bhavnagar and Nausari, etc. and he has successful in selling diamonds weighing 102.72 carats valuing Rs, 14,94,076 to different customers in Delhi. He has then explained the particulars of sales as follows :
Weight (Carats) Sales Consideration MY Commission Commission @ Remarks 20.04 1,08,360 5,360 @ 3% Low Quality 64.95 10,61,932 10,619 @ 1% 17.73 2,51,784 2,517 @ 1% 102.72 18,496 It has been further stated that to keep the exact details of the deal, Shri Goenka had requested Shri Himanshu Jain, accountant of the assessed-company, to type the above transactions and give the printout back to Shri Goenka. The stand of the assessed was that since these entries are now admitted and explained by the aforesaid Shri Goenka, no adverse inference need be taken in the hands of the assessed-company.
15. We may first reproduce some of the assessing officers questions and replies thereto by Shri Goenka, as recorded in his statement on 26-11-1996.
Q. No. 5.
Have you ever undertaken any other trading of diamonds etc. apart from this one occasion ?
Ans.
No. This transaction was done by me on commission basis. I have not done any such transaction again or before. Q. No. 9 To whom did you sell the diamonds ? Ans. I do not remember their names as the matter is already two years old.
** Q. No. 15 You have just stated that you did kind of transaction only once is your lifetime, but in your letter of 26-11-1996, your have stated that it was a hereditary and ancestral business of yours. Please explain.
Ans.
I had never done such big deals ever. However, I have done many small transactions of Rs, 5,000 to Rs. 10,000 at a commission of 1 per cent thereof.
** Q. No. 17 Do you maintain any books for this kind of small or big transaction ?
Ans.
I do not maintain any books. After each transaction, I tear off the pieces of paper so that my income will be below taxable limit.
** Q. No. 19 That means (that you have not given any receipts to the buyers of such diamonds) you have no evidence for the so-called sales of diamonds ?
And.
I do not have any documentary evidence as the business is basically on trust.
** Q. No. 24 Do you mean to say that they (Ghasias or Karigars in Surat, Bhavnagar or Palampur, etc.) just handed over the diamonds worth Rs. 13 lakhs to you and allowed a month to collect the money, without even obtaining a receipt from you ?
Ans.
Yes. This kind of business is being run on trust and they normally give credit for 30-60 days.
Q. No. 28Can you give the addresses of all the persons from Surat/Palampur/Bhavnagar, etc.) who gave diamonds to you) ?
Ans.
No I cannot give their addresses etc. as they have been introduced to me through some broker.
16. It is clear from the above deposition of Shri Goenka that, according to him, it was first time that he was doing such a transaction and even this alleged transaction was not supported by any proof, books of accounts or even other corroborative evidence. It is also a matter of record that Shri Goenka was not in a position to identify the specific sources of his obtaining diamonds, the names or addresses of his customers or vendors. It is, therefore, not at all possible to accept bland statements of Shri Goenka, particularly when the same are not supported by any evidence of any kind whatsoever. The replies given by Shri Goenka are clearly evasive and unsatisfactory. We have noticed that the assessed-company has claimed that these entries do not belong to the assessed-company, even though these entries are admittedly made by accountant of the company, proximately because these entries are owned up by Shri Goenka. However, since such owning up of entries by Shri Goenka is not supported by books of accounts, evidence or even satisfactory details, we reject the same. We have already seen that the assessed has given untrue explanations, even supported by admittedly false affidavits, that the disputed entries in Annexure A-11 are imaginary figures. When confronted with this fact, Shri Ved Prakash in his recorded disposition dated 26-11-1996, admitted as follows :
"I was quite worried about the entries and initially I suspected that my accountant, who was learning, could have typed out these things which he was practicing on the computer. Later on I discover the name of Babulal ji and on contacting him I found out the truth. "
17. We may, in this regard, refer to the dictum known as falsus in uno, falsus in omnibus (false in one thing, false in everything) which has been referred to, with approval, by the Honble Calcutta in the case of Amal Kumar Chakraborty v. CIT (1994) 207 ITR 376 (Cal). In this case, Honble Calcutta High Court has observed that, "Here, we go by the dictum falsus in uno, faIsus in omnibus. Though applicable in criminal law, it is a sound principle to apply in taxation when the matter is one of finding of fact on the basis of statements of witness and their judicial evaluation. It is seen that in 1975, the assessed gave a false statement by stating that he had no connection with the bank deposits. Later, he makes a volte face and says that the deposits are from money supposedly declared in 1971. Therefore, the later statements of the assessed could not be held to be credible as the source of deposits." It is clear that, in the present case also, the assessed-company has given knowingly and admittedly false explanations for the entries. Merely based on his suspicion that the imaginary entries may have been made by the accountant, while practicing on the computer, the assessed gave a categorical statement, supported by an affidavit, that disputed entries are imaginary entries made by the accountant while practicing on the computer. These facts only show poor credibility of the assessed-company and persons who have made statements in their support, Himanshu Jain has already given two conflicting affidavits both of which are placed on record. In any case, Annexure A-11 is not properly explained by Shri Goenkas version for several reasons. We find that column 1 therein which states From Nalin is not at all explained. We have also noticed that this statement apparently relates to purchase transactions as it refers to amounts paid whereas, according to Shri Goenka, this statement is statement of sales made by him. It appears that what has been described, in first row, as 3 per cent commission by Shri Goenka is in fact 3 per cent cash discount on Purchases, as evident from calculations in the chart because but for the fact that 3 per cent figure related to cash discount amount paid would not have been reduced by 3 Per cent as against the amount shown in amount due column-It needs no elaboration that the amount of commission is not to be reduced for working out amount paid. Thus Shri Goenkas explanation is not acceptable from any Point of view. In any case, there is no evidence, books of accounts or any other details in support of the bland statements made by Shri Goenka. It is also an admitted position that entries in question have been made by an employee of the company but the assessed-company is not forthcoming about the true details of the transactions which have been so entered by an employee of the company. Keeping in view of these facts as also entirety of this case, we reject the explanations of the assessed-company that the disputed entries belong to Shri Goenka and support the action of the assessing officer in coming to the conclusion that "even this version of the assessed should only be treated as last desperate measure to evade the responsibility cast by law and he has at best managed a very ill-contrived fictional plot."
18. We may now turn to the judicial precedents relied upon by the assessed. As far as the orders passed by the co-ordinate benches in the cases of Ved Prakash Sanjay Kumar v. Assistant Commissioner (2000) 66 TTJ (Chd) 442 and Suman Dhanji Zalte v. Assn. CIT (2000) 68 TTJ (Pune) 273 are concerned, these cases pertain to the proceedings under section 158BD and, accordingly, ratio of these cases has no application in assessment under section 158BC which is impugned in appeal before us. It cannot be in dispute that where search has been conducted under section 132, the block assessment is to be completed under section 158BC of the Act. The question of assessing officers satisfaction, for the purposes of section 158BD, is only applicable for the cases where the undisclosed income belongs to a person other than the person with respect to whom search under section 132 was made. Since, in the case before us, search was conducted on the assessed-company, we are of the considered view that learned counsels submissions about assessing officers satisfaction as a pre-requisite for assessment are not really relevant. The learned counsel has referred to a large number of cases in support of the proposition that loose papers have no evidentiary value and that no additions can be made on the basis of such papers unless there is some corroborative evidence but even this proposition has no application on the facts of this case, particularly as there is no dispute about the document actually belonging to the company and the same having been prepared by an employee of the company but the only dispute is confined to assesseds explanation with regard to some of the entries. The assessed-company has not only owned up the document but the assessed has even explained all the cheque transactions reflected in the document; the assesseds problem is only parting information about the detailed cash transactions mentioned in the seized document. At the cost of repetition though, we must point out that complete details, up to last paisa and including dates of payments, about certain cash and cheque transactions are given in the aforesaid seized document and, therefore, this seized document cannot be described as a dumb document. The large number of decisions cited by the assessed are, therefore, not applicable on the facts of this case.
19. Learned counsel for the assessed has submitted that in view of Honble Supreme Courts decision in the case of CIT v. Daulat Ram Rawat Mull 1972 CTR (SC) 411 : (1973) 87 TTJ 349 (SC), even if in the opinion of the assessing officer entries in annexures could not be related to Shri Babu Lal, there cannot be addition in the case of the assessed. It is also submitted that the claim of Shri Babu Lal or justification about various entries in the annexure to the satisfaction of the assessing officer has no basis or relevance to the assessed as additions in block assessments could only be made on the basis of evidence or material and not on the basis of presumptions, surmises and conjectures, However, we find that statutory presumption under section 132(4A) is that contents of the seized documents are true, though it is open to assessed to rebut these presumptions on any acceptable basis. Since assesseds rebuttal is, for the detailed reasons set out above, rejected on merits, the assessing officer is fully justified in taking a presumption that the contents of document, termed as Annexure A-1, are true. In any event part of entries are properly explained by the assessed while the remaining entries unambiguously indicate expenditure of Rs. 14,88,784 on account of certain purchases. As far as the judgment of Honble Supreme Court, in the case of Daulat Ram Rawat Mull (supra) is concerned, it has no application on the facts of this case which relate to statutory presumption under section 132(4A) of the Income Tax Act.
20. In view of our above finding that the explanations given by the assessed~ company, about the entries in Annexure A-11 extracted in para 2 of this order, are not satisfactory, and in view of the presumption under section 132(4A) of the Income Tax Act, we support the assessing officers action of making an addition of Rs. 14,88,754 on account of unexplained expenditure.
21. We now take up the addition of Rs. 3,12,784 made by the assessing officer on account of unexplained cash found at the time of search. One of the pleas of the learned counsel of the assessed is that the above addition does not take into account the additions separately made in the hands of other block assesseds, on account of cash found from the assessed-companys premises and claimed to be belonging to these block assesseds. It is submitted that, as a result of the above lapse, double additions are made in the hands of the block assesseds. Our attention is also invited to the appellate orders in the case of some of the block assesseds where such double additions have been made. Having heard learned Departmental Representative on this aspect of the matter, we deem it fit and proper to restore the matter to the file of the assessing officer to pass fresh orders on this issue after taking into account assesseds submissions and to delete dual additions, if any. Since the assessed has also been submitted that the assessing officer did not allow the assessed an opportunity to complete the cash book, and we see merit in this submission of the assessed, we also direct the assessing officer to provide an opportunity to the assessed-company to complete its cash book, on the basis of supporting evidence which may be produced by the assessed, and exclude the cash balance that may be attributed to such properly updated cash book till the date of search. Accordingly, this issue is restored to the file of the assessing officer for fresh adjudication.
22. In the result, so far as assesseds ground of appeal against the addition of Rs. 3,12,784 on account of explained cash, is concerned, the same is allowed for statistical purposes.
23. The only other ground surviving for our adjudication is the levy of surcharge on the tax computed under section 113 of the Income Tax Act. Learned counsels (sic) is that the assessing officer has erred in charging 15 per cent surcharge as income of the block period is liable to be assessed at flat rate of 60 per cent, without taking into account the surcharge as laid down in the finance Acts. It has been submitted that as per special provisions of section 158BA(2)/113, tax is to be charged @ 60 per cent without any exemption or slab rates. It is further stated that block assessment comprise of 10 years and there being different rate of surcharge and in most of these years there was no surcharge, it is not possible to levy the surcharge. On the other hand, learned Departmental Representative has invited our attention to second proviso to section 2(7) of the Finance Act according to which levy of surcharge on income-tax computed as per provisions of section 113 has been contemplated. It is also submitted that in view of the clear provisions of the Finance Act for levy of surcharge on the taxes as determined under section 113, there is no scope of examining rationale of surcharge or the rates of surcharge applicable to various years covered by the block assessment. We find that second proviso to section 7(2) of the Finance Act, 1995, specifically provides that, "the amount of income-tax computed in accordance with the provisions of section 112 or 113 shall be increased in the case of a domestic company by a surcharge as provided in Para E of Part III to First Schedule". It is thus clear that the legislature clearly intended applicability of surcharge even on tax computed under section 113 of the Income Tax Act. In this view of the matter, we see no substance in submissions of the assessed and, accordingly, reject the same.
24. Accordingly, assesseds ground of appeal against levy of surcharge, on income-tax computed under section 113, is dismissed.
25. The assessed has also taken a plea that the block assessment under section 158 PC is not valid as the same is not on the basis of any document seized from the assessed-company and if any other information is used and applied, the assessment has to be made under section 158BD after assessing officers recording reasons and arriving at the satisfaction as per mandate of section 158BD. As we have already held that seized documents admittedly belonged to the company and were processed by its employees, we see no substance in this plea. In any case, once a search under section 132 is conducted on the assessed-company, assessment under section 158BC is to be framed and section 158BD has no application in the matter. We, therefore, see no substance in this ground of appeal also.
26. In the result, the appeal is partly allowed for statistical purposes.