Income Tax Appellate Tribunal - Chandigarh
Rameshwar Lal Ahuja vs Assistant Commissioner Of Income Tax on 23 September, 1999
ORDER
B.S. Saluja, J.M.
1. The assessee is in appeal against the assessment order, dt. 26th June, 1997, made under s. 158BC r/w s. 144 of the IT Act, 1961.
2. The learned counsel, on directions of the Tribunal filed revised grounds of appeal.
3. Ground No. 1 relating to passing of ex parte order was not pressed by the learned counsel. Similarly, ground No. 7 relating to investment in vehicles was not pressed. The said grounds are, therefore, rejected.
4. Ground Nos. 2 to 4 relate to additions made on account of unexplained investments in Pushpak Hotel and Hotel Unique.
5. The brief facts are that search and seizure operations under s. 132 were carried out at residential premises of the assessee on 21st June, 1996. The AO issued notice under s. 158BC on 3rd July, 1996, asking the assessee to file return of income of block period from 1st April, 1986 to 20th June, 1996 in Form No. 2-B. However, the assessee did not file any return. The AO issued a further letter, dt. 11th April, 1997, reminding the assessee to file return. AO issued notice under s. 142(1) on 28th May, 1997 along with a detailed questionnaire fixing the date of hearing for 5th June, 1997. AO mentioned in the questionnaire that if no return was filed by the assessee, the assessment would be completed ex parte under s. 144. On 5th June, 1997 the assessee along with Mr. Rajeev Sood, C.A. attended assessment proceedings but no return was filed. AO, therefore, proceeded to make assessment under s. 144.
6. He observed that the assessee, along with his brother, Shri. Wazir Singh had purchased property known as Pushpak Hotel. In this connection AO observed that the assessee had voluntarily made surrender of Rs. 8,25,000 on account of renovation of the rooms and construction of roof, etc. and purchase of building. He further observed that in his reply dt. 5th June, 1997, the assessee had submitted that he purchased the hotel building and made renovation of the building and total consideration was paid at Rs. 7.50 lakhs. He further observed that the assessee had not given any source of investment of the amount of Rs. 7.50 lakhs and, therefore, the entire amount was treated as un-accounted investment. The AO further observed that the said property was referred to the Assistant Valuation Officer (AVO), Patiala to ascertain the correct value of additions/alterations/renovation made into the building. The AVO in his report, dt. 19th July, 1996 has determined the expenditure incurred on additions/alterations/renovation at Rs. 3,61,777. AO, therefore, took the total investment by the assessee and his brother in the acquisition of property and in its further addition/alteration/renovation at Rs. 11,11,777. He observed that the assessee had not been able to give any documentary evidence with regard to investment made in the properties as discussed above. AO, therefore, made an addition of Rs. 5,55,888 as undisclosed income of the assessee.
7. Similarly the AO observed that the assessee is one of the co-owners of building known as Unique Hotel and that he has 1/4th share in that building. The said building was referred to the Valuation Cell, Patiala for determination of fair market value as well as additions/alternations/renovation made in the building. The Valuation Officer in his report dt. 19th July, 1996 determined the total expenditure incurred on the investment/renovation and additions to the building at Rs. 20,03,709. AO observed that investment made by the assessee as his share comes to Rs. 5,00,927. He has mentioned that the assessee was asked to explain the investment made in the building and no specific and explanatory reply was furnished by the assessee. He, therefore, held that the said investment has to be treated to have been made by the assessee out of undisclosed sources of income. In this connection he also observed that the assessee had surrendered Rs. 5 lakhs on this account on behalf of the co-owners. AO, however, made an addition of Rs. 5,00,927 as undisclosed income of the assessee.
8. The learned counsel submitted that the building known as Hotel Pushpak was purchased in 1991. He referred to the copy of agreement placed at p. 15 of the paper-book. The learned counsel further referred to the assessment order dt. 31st January, 1996 made under s. 143(3)/147 (copy placed at pp. 16-19 of the paper-book) and submitted that the AO had gone into the question of investment in purchase of the said property and sources of investment of Rs. 7.50 lakhs were explained to the AO as mentioned at pp. 1-2 of the assessment order. He further submitted that the AO only made an addition of Rs. 5,680 in respect of loan from bank (for which no details were available) and further addition of Rs. 20,000 paid to the seller from undisclosed sources of income. He further referred to the order of the learned CIT(A) dt. 17th September, 1996 placed at pp. 20-21 of the paper-book, whereby he sustained the aforesaid additions of Rs. 5,680 and Rs. 20,000 respectively. He further referred to the valuation report in respect of Pushpak Hotel (pp. 22-23 of the paper-book), wherein value declared by the assessee for his share in the entire property had been shown as Rs. 1,33,095. The Valuation Officer determined the valuation of the property at Rs. 3,61,777. The learned counsel further referred to the letter, dt. 20th August, 1996 written by the assessee and other co-owners to the Asstt. Director of Investigation (copy placed at pp. 66-67 of the paper-book) whereby the assessee and other members of the group made a surrender of Rs. 43 lakhs for the block period on behalf of all the assessees in the group. He referred to the last para of the said letter which is reproduced hereunder for the sake of convenience :
"Thanking you for all your guidance and mature advice and without prejudice to any of our rights if the above is not acceptable by you."
9. He submitted that the ADI required time from the date of search to submit his report and that the assessee and other members of the group were called by the ADI on daytoday basis and that surrender letter was prepared in the office of the ADI and conditional surrender was made thanking the ADI for his guidance. The learned counsel stressed on the fact that the aforesaid surrender was a forced surrender and that it was not a voluntary surrender. He submitted that the ADI wanted-high-pitched assessment. He pleaded that the assessee could not have reopened the whole issue in spite of the assessment made under s. 143(3) on 31st January, 1996. He, therefore, pleaded that the surrender made under duress by the assessee and other members of the group ought to be ignored. In this connection the learned counsel relied on the decision of the Hon'ble Supreme Court in the case of Shri. Krishan vs. Kurukshetra University AIR 1976 SC 376, wherein it was observed that the admission made in ignorance of legal rights or under duress was not binding. He further referred to the decision of the Tribunal, Chandigarh Bench in the case of Jagdish Chand Gupta vs. Asstt. CIT (1996) 56 TTJ (Chd) 337 : (1996) 58 ITD 142 (Chd) wherein the Tribunal considered the aforesaid decision of the Hon'ble Supreme Court in para 15 of its orders. He further referred to the decision of the Tribunal, Chandigarh Bench in the case of Baldev Krishan Kapur vs. Asstt. CIT (1999) 65 TTJ (Chd) (TM) 254 : (1999) 8 IT REP 446 (ITAT, Chd.) wherein it has been observed that with reference to statement recorded under s. 132(4) that a legal and proper statement recorded under s. 132(4) could be used as evidence in proceedings under the IT Act and if it could be proved that the statement had been induced by wrong facts, it lost its evidentiary value. It further observed that the addition made solely on the confessional statement from which the said assessee resiled, could not be upheld and that the assessee is within his rights to resile from the statement subsequently. He further referred to the unreported decision of the Tribunal (Amritsar Bench) in the case of Shanker Singh Gurcharan Singh vs. ITO in ITA No. 39/Asr/90 dt. 3rd August, 1995. He referred in particular to para 6 & 7 of the order of the Tribunal, dt. 3rd August, 1995 wherein the aforesaid decision of the Hon'ble Supreme Court has been considered, apart from the decision of the Hon'ble Punjab & Haryana High Court in the case of Krishan Lal Shiv Chand Rai vs. CIT (1973) 88 ITR 293 (P&H). The learned counsel further referred to the reply filed by the assessee in response to questionnaire issued by the AO (copy placed at pp. 10-14 of the paper-book). He referred to para 6 of the said reply, wherein it has been mentioned that the total consideration paid for land and building on which the Hotel Pushpak was set up, was Rs. 7.50 lakhs, and that the break-up of the amount and source of the said investment along with documentary evidence was submitted to the AO at the time of hearing of the case for asst. yr. 1991-92 and in the assessment order dt. 31st January, 1996, the said investment stood explained in toto except for an amount of Rs. 25,680 for which second appeal is pending before the Tribunal. With reference to cost of additions and alterations the assessee submitted that the cost determined by the Distt. Valuation Officer was on the higher side and that on rough estimate the genuine expenses incurred were Rs. 2.25 lakhs and not Rs. 3,61,777 as computed by the Valuation Officer. The assessee submitted that the amount of Rs. 2.25 lakhs was spent from the income generated from Hotel Unique. The learned counsel further referred to p. 13 of the paper-book where in the last para it was mentioned on behalf of the assessee that "in case settlement is not is not possible for any reason, whatsoever, assessees shall be constrained to withdraw their most genuine and reasonable offer which has been made to buy peace". The learned counsel stressed that it was a case of retraction by the assessees from the aforesaid surrender of Rs. 43 lakhs. He again laid stress on the words "Thanking you for all your guidance and mature advice" as used by the assessees in letter of surrender, dt. 20th August, 1996 and submitted that each item was being discussed in the office of ADI. The learned counsel further submitted that the present assessee is a heart patient and that the offer made by the assessee along with other members of the group was in the nature of package and that the surrender was not voluntary and it should not be relied upon.
10. He submitted that having regard to the value of R. 1,33,095 mentioned in the valuation report at pp. 22 & 23 of the paper-book, the total addition in case of two co-owners of Pushpak Hotel could be to the extent of that amount and in the case of the assessee 50 per cent of Rs. 1,33,095 could be added.
11. With reference to investment in Hotel Unique the learned counsel submitted that the purchase and construction of the said property was outside the impugned block period. In this connection he referred to the valuation report, dt. 26th July, 1983 (copy placed at pp. 50-53 of the paper-book). He referred to para 2 at p. 2 of the report, wherein it is mentioned that the total land belonging to the assessees measuring 950 sq.yds. was stated to have been purchased at a consideration of Rs. 95,000 in the year 1975 and that the building complex constructed on an area of land measuring 500 sq.yds. and the rest of the land was lying vacant. It is further mentioned in para 3 that the construction of the building was started in April, 1977 and was completed somewhere in February, 1982. It is also mentioned that the assessee had not maintained any account of expenditure or the vouchers showing cost of materials and labour. The learned counsel further referred to para 4 of the said report, wherein it is mentioned that the inspection of the said building was made in 1983. The learned counsel further referred to the assessment order dt. 20th March, 1989, for asst. yr. 1982-83 in the case of Shri. Wazir Chand (pp. 54-55 of the paper book). He submitted that the learned CIT(A) vide orders dt. 31st October, 1990 (pp. 56-58 of the paper book) had set aside the issue of investment to the file of the AO. He further referred to the assessment order dt. 14th June, 1991 made in the set aside proceedings and submitted that only an addition of Rs. 10,000 was made on account of investment in the said property on agreed basis. The learned counsel further referred to the valuation report now made by the Valuation Officer, Patiala after inspection of the property on 25th June, 1996. He submitted that the assessee had hardly recovered from the shock of search when the inspection of Hotel Unique was made by the Valuation Cell. He pointed out that the present valuation has been made at a figure of Rs. 20,03,709, which included revenue expenditure of Rs. 2.50 lakhs debited by the assessee. In the said report value declared by the assessee for entire property has been mentioned at Rs. 11,23,158. The learned counsel urged that the issues which had become final in regular assessments, were being reopened in the block assessment. He referred to the provisions of s. 158BG, whereunder previous approval of the CIT is required. He submitted that there is no approval of the CIT in this case and that the CIT was required to see that principles of natural justice are followed. The learned Departmental Representative immediately intervened on this point and submitted that the approval of the CIT is there. The learned counsel further referred to the provisions of s. 69 and submitted that the burden is on the Revenue to prove extra investment in hotel Pushpak and Hotel Unique. He submitted that the Department has no material for making the impugned additions. The learned counsel referred to the decision of the Tribunal, Delhi Bench 'B' in the case of Asstt. CIT vs. Sunil Kumar reported in (1998) 7 IT REP 326 (ITAT-Del), wherein it was observed that before invoking the provisions of s. 69/69C, the burden clearly lies on the Revenue to prove that the assessee in fact made any investment in the year under consideration.
12. The learned Departmental Representative relied heavily on the orders of the AO. He submitted that the assessee did not give any information regarding purchase of Hotel Pushpak and that specific inquiry was made by the AO, when he asked the assessee to explain total investment/sources in connection with building of Hotel Pushpak. He referred to pp. 16-17 of the paper-book and submitted that the assessee mentioned the sources of investment as loans from banks. He submitted that the personal savings of the assessee and his brother Shri. Wazir Singh, amounted to only Rs. 1,88,640. He further submitted that the assessee had no explanation regarding sources for repayment of the bank loans. He stressed that the total investment made in Hotel Pushpak and other properties required explanation of the assessee regarding repayment of bank loans also. On a query from the Bench as to whether the AO made any inquiry regarding repayment of loans, the learned Departmental Representative kept quiet. The learned counsel, however, referred to p. 11 of the paper book, para 6, wherein in his reply the assessee had stated that the total consideration paid for purchase of building was Rs. 7.50 lakhs and break-up of the amount and sources thereof along with documentary evidence was submitted at the time of hearing of the case for asst. yr. 1991-92 and in the order, dt. 31st January, 1996, the same stood explained in toto, except for an amount of Rs. 25,680. He submitted that there was no further query by the AO. The learned Departmental Representative submitted that no return was filed by the assessee in spite of various reminders and that the assessment was completed under s. 144 on the basis of evidence available with the AO. He referred to the provisions of s. 158BB which specify that undisclosed income of the block period shall be the aggregate of the total income of the previous years falling within the block period computed, in accordance with the provisions of Chapter IV, on the basis of evidence found as a result of search ........... and such other materials or information as are available with the AO. He, therefore, submitted that the evidence available with the AO could be direct or indirect. The learned Departmental Representative further referred to the statement of the assessee, wherein in response to query regarding Hotel Pushpak and Hotel Kohinoor, the assessee stated that he was not maintaining any books of account as the turnover in each case was below limitation prescribed in s. 44AA. He also stated that Hotel Pushpak was owned by him and his brother, Shri. Wazir Singh equally. He further referred to a portion of the statement, wherein the assessee submitted that during the year 1986 to 1990, 17 rooms were added in Hotel Unique and in 1994, to 112 rooms were renovated and also reception portion was constructed. He also stated that expenditure incurred on construction of 17 rooms during the period 1986 to 1990 was Rs. 3 lakhs and expenditure on construction of reception portion was Rs. 25,000 to 30,000. He further stated that an amount of Rs. 35,000 was be incurred on repairs and maintenance every year. With reference to the plea of the learned counsel that only an amount of Rs. 1,33,095 was incurred in the renovation of Hotel Pushpak, the learned Departmental Representative submitted that the assessee had mentioned investment of Rs. 2.25 lakhs in the letter of surrender. The learned Departmental Representative further submitted that the assessee had voluntarily filed surrender letter after consulting his advocates. In this connection he submitted that this group is being assisted by leading CAs and advocates. He further submitted that there was no iota of doubt that the surrender letter was not given voluntarily. With reference to the plea of the learned counsel that the surrender order was dictated by the ADI, the learned Departmental Representative submitted that the assessee had not filed any affidavit in this regard. He further submitted that generally there is discussion between assessees and the ADI/AO and, therefore, much should not be read into the words "Thanking you, for all your guidance and mature advice", as mentioned in the surrender letter. The learned Departmental Representative stressed that admission is the best evidence and that the aforesaid surrender letter could be taken into account. In this connection he relied on the decision in the case of Banta Singh Kartar Singh vs. CIT (1980) 125 ITR 239 (P&H) wherein it was observed that "the orders passed in agreement cannot give rise to grievances and the same cannot be agitated in appeal". On a query from the Bench as to whether the Department can go beyond the surrender made by the assessee and still reply on the surrender in part thereby rejecting the surrender in certain items, the learned Departmental Representative submitted that the said surrender letter was not in the nature of a statement. He further submitted that the AO has taken the amount of Rs. 3,61,777 in the case of Hotel Pushpak on the basis of valuation report and that no defect has been pointed out in the said report. He further submitted that in the present case various notices asking the assessee to file the return, were to be issued immediately in view of the limitation period of one year for passing assessment order and that the assessee could have filed the return even declaring nil income, as no penalty under Chapter XIV-B is leviable. He further submitted that the case law relied upon by the learned counsel is distinguishable on facts and that the said decisions are not relevant. In this connection he submitted that the facts in the present case are not disputed. He further submitted that certain FDRs had been encashed by the assessee for repayment of loans and accordingly the case law was not relevant.
13. With reference to investment in construction of Hotel Unique, the learned Departmental Representative referred to the statement of Shri. Bhagat Ram, manager, Hotel Unique. In answer to question No. 3, Shri. Bhagat Ram stated that he joined the Hotel Unique in 1979 and at that time there were 22 rooms and the number of rooms was increased to 34 in 1981. He further stated that the number of rooms was increased to 54 in 1984 and 7 rooms were constructed in 1985-86. He further stated that office room and first floor on office room were constructed in 1993-94. The learned Departmental Representative further referred to the surrender letter and pointed out that the assessee has surrendered an amount of Rs. 5.60 lakhs on account of investment in construction of additional rooms and office block during the block period beginning 1986-87 to 1995-96. He further stressed that the assessee admitted that no books of account were being maintained in respect of investment in construction/renovation of Hotel Unique. He further referred to the two valuation reports in the case of Hotel Unique, copies whereof are placed at pp. 50-53 and 61-63 of the paper book filed by the assessee. He submitted that the first report was required under s. 131(1)(D) in 1983, when the cost of construction excluding cost of land was worked out at Rs. 9,53,400. He submitted that in the second valuation report placed at pp. 61-63 of the paper-book, the value declared by the assessee for the entire property has been mentioned in col. 4.3 at Rs. 11,23,158 and that the total value has been worked out by the Valuation Officer at Rs. 20,03,709. He further submitted that the extra items mentioned in the valuation report at p. 62 are not of revenue nature as the said items include slab projection, etc. He further submitted that the copy of valuation report was sent to the assessee and in case of any violation of principles of natural justice, the issue could be restored to the file of the AO. He submitted that this is a curable defect and the assessment could not be treated as a nulity on this ground alone. The learned Departmental Representative relied on the decisions CIT vs. Ahmedabad Rana Caste Association (1968) 70 ITR 505 (Guj), Director of Inspection of IT & Anr. vs. Pooran Mall & Sons & Anr. (1973) 96 ITR 390 (SC), Kapur Chand Shri. mal vs. CIT (1981) 131 ITR 451 (SC), CIT vs. Salig Ram Prem Nath (1984) 148 ITR 302 (P&H), CIT vs. Salig Ram Prem Nath (1989) 179 ITR 239 (P&H) and Shah Sohonie & Co. vs. State of Rajasthan (1994) 208 ITR 321 (Raj). The learned Departmental Representative further submitted that the case of Shri. Sunil Kumar (supra), as relied upon by the learned counsel, is entirely on different facts and is not applicable. He, therefore, urged that the additions as made by the AO in respect of investments in Hotel Pushpak and Hotel Unique ought to be upheld.
14. The learned counsel in his reply referred to the reply furnished by the assessee as also his statement. He submitted that the assessment had been completed on 31st January, 1996, before search and each item of investment was duly discussed by the AO and the AO was satisfied with reference to the investment of Rs. 7.50 lakhs in Hotel Pushpak, except for an amount of Rs. 25,680. Regarding plea of the learned Departmental Representative about sources of repayment of loans, the learned counsel submitted that AO did not ask the assessee any further questions after reply made by the assessee. He further stressed that photocopies of the relevant documents were not given by the Department to the assessee. In this connection he referred to the order sheet entry, dt. 30th September, 1996 regarding request of the assessee for photocopies. He further submitted that the valuation report was obtained by the AO after search and copy thereof has not been given to the assessee. Regarding surrender letter dt. 20th August, 1996 the learned counsel again stressed that at that point of time search was over and after two months of the search what was the need for surrender. He pointed out that the surrend letter is not signed by any advocate. He again stressed the words "Thanking you for all your guidance". He further stressed that the said surrender letter was a conditional offer which should have been either accepted or rejected by the Department, in toto and that part acceptance of the said surrender was not contemplated. With reference to statement of Shri. Bhagat Ram, manager, Hotel Unique, the learned counsel submitted that only one office room was built on the first floor and addition could be with reference to the said construction. He further submitted that the expenditure has been reflected in the P&L a/c of Hotel Unique. With reference to extra items mentioned in second valuation report (p. 62 of the paper book), the learned counsel submitted that the amount had been spent from 1985 onwards and there had been appreciation in value of rates and that tax could not be levied on such appreciation. He stressed that the best assessment could not be made a tool to punish the assessee. He further submitted that the AO ignored the record which was there and which could have been seen while framing the assessment.
15. We have carefully considered the submissions made by both the parties and have perused the orders of the AO. At the outset we would like to deal with the submissions of the learned counsel that the surrender made by the assessee and other members of the group was not made voluntarily and was under duress. The learned counsel has stressed on the words "Thanking you, for all your guidance and mature advice". He has also referred to the reply prepared by the earlier counsel. We have carefully gone through the letter, dt. 2nd August, 1996 which has been signed by the assessee and Shri. Wazir Singh, Smt. Tirath Kaur, Smt. Harbans Kaur and Parveen Ahuja and whereby undisclosed income of Rs. 43 lakhs for the block period has been surrendered to the Department. It is mentioned in the said letter that aforesaid un-disclosed income in declared "with a clear understanding that the group shall be given adjustments/credit for various items listed at p. 1 of the letter". The assessee and the other persons signing the said letter have further stated that "the above declaration is without any coercion, duress and has been made voluntarily on the basic assurance of peace, tranquillity, no further inquiry of debtors/creditors, etc. and in order to make a fresh beginning". The assessee and other members of the group also gave their consent to deal with the assets retained under s. 132(5) in accordance with the provisions of s. 132B. In view of the foregoing, we feel that much cannot be read into the last paragraph of the said letter, whereby the assessee and other members of the group have thanked the ADI for his guidance and mature advice and the same cannot be the basis for coming to the conclusion that the aforesaid surrender has been made under duress. It may be mentioned that some discussion are bound to take place between the assessees and the ADI after search and if after such discussions the assessees had come to the conclusion that they have undisclosed income for the block period, which ought to be surrendered to the Department, such surrender has to be considered as voluntary surrender and without any coercion or duress as mentioned by the assessee and other members of the group. They have also referred to the adage of Mahatama Gandhi, namely, "Mother Earth has provided for everyone's need but not for everyone's greed". We may mention that the case law relied upon by the learned counsel for the proposition that the surrender was made under duress and the same should be ignored, is distinguishable on facts and is not applicable in the present case. Thus we turn down this plea of the learned counsel.
16. Now coming to the undisclosed investment in Hotel Pushpak, it is observed that the AO has made an addition of Rs. 3,61,777 on the basis of valuation report and a further addition of Rs. 7.50 lakhs which was invested by the assessee and his brother Shri. Wazir Singh in purchase of the property known as Hotel Pushpak. It is observed from the assessment order, dt. 31st January, 1996, in the case of the assessee for asst. yr. 1991-92 that this issue was examined by the AO in proceedings under s. 143(3)/147. The assessee gave details explaining break-up of the amount of Rs. 7.50 lakhs and sources thereof. The assessee had shown loans from various banks and personal savings plus loans and gifts from Smt. Tirath Kaur and Smt. Harbans Kaur at Rs. 1,88,640. The AO observed that the assessee had submitted detailed evidence in respect of loans amounting to Rs. 5.50 lakhs and the same were verified and found in order. The AO further examined the personal savings of the assessee and other members of the group and also perused the capital accounts of the donors of gifts and ultimately made an addition of Rs. 25,680 by disbelieving the bank loan of Rs. 11,360 and certain gifts. The said assessment order was passed a few months before the search in the case of assessee and other members of the group. We, therefore, find force in the arguments of the learned counsel that no addition in relation to the amount of Rs. 7.50 lakhs could have been made by the AO. In this connection we may also refer to the provisions of s. 158BB, whereunder aggregate undisclosed income of the block period is to be reduced in cases where assessments under s. 143 or s.144 or s. 147 have been concluded, on the basis of such assessments. Since the question of investment of Rs. 7.50 lakhs in Hotel Pushpak has already been examined in detail in the assessment made under s. 143/147, it is presumed that the AO had gone into all aspects of the said investment and therefore we find no force in the arguments of the learned Departmental Representative that the question of sources of repayment of loans obtained by the assessee from various banks has not been considered and, therefore, the AO had rightly made the addition of Rs. 7.50 lakhs in the present assessment. We feel that there has to be a finality in relation to a particular issue and the investment of Rs. 7.50 lakhs has been properly looked into and the same cannot be reopened under assessment being made for the block period. In any case the said approach is against specific provisions of s. 158BB(1)(a). Now we are left with the remaining addition of Rs. 3,61,777. The learned counsel has pleaded that only an investment of Rs. 1,33,095 is involved and that addition to that extent could be sustained. It is observed from the valuation report placed at pp. 22-23 of the paper book that the value declared by the assessee as mentioned against Col. 4.3 has been stated at Rs. 1,33,095. The Valuation Officer has, however, worked out the value of additions/renovation at Rs. 3,61,777. In the surrender letter the assessee has shown an amount of Rs. 2.25 lakhs on account of renovation of rooms and construction of roof. The assessee has further shown an amount of Rs. 6.00 lakhs on account of FDRs encashed to discharge loans taken for purchase of purposes of building known as Hotel Pushpak. The learned counsel stated that the amount of Rs. 6 lakhs has been taken into consideration while making the addition on account of investment of FDRs. In view of the foregoing we feel that it would be just and fair to restrict the addition on account of renovation of rooms and construction in respect of Hotel Pushpak at Rs. 2.25 lakhs and 50 per cent thereof is Rs. 1,12,500 is sustained as addition in the case of the assessee, the other 50 per cent addition to be made in the case of other co-owner i.e. Shri. Wazir Singh.
17. Now taking up the addition made and account of investment in Hotel Unique, it is observed that the AO has made an addition on the basis of valuation report whereby the Valuation Officer worked out the value of investment, renovation and additions in the said building at Rs. 20,03,709. The AO added an amount of Rs. 5,00,927 as undisclosed income of the assessee, his share being 1/4th. In this connection the learned counsel submitted that the construction of the building known as Hotel Unique falls outside the purview of block period from 1st April, 1986 to 20th June, 1996. In this connection he referred to the assessment order dt. 14th June, 1991 for asst. yr. 1982-83 in the case of the assessee. In this connection he also referred to the valuation report placed at pp. 50-53 of the paper book whereby the cost of construction of the structure, excluding the cost of land, as on 31st January, 1932 was worked out at Rs. 9,53,400. He referred to p. 1 of the said report, wherein it is mentioned that "the building known as Unique Hotel is four storeyed RCC framed structure situated in Lakkar Bazar, Shimla". He further referred to the para 3 of the valuation report wherein it is mentioned that the assessee stated that "the construction was started in April, 1977 and completed somewhere in February, 1982". He has further stressed that the AO examined the said valuation report while making the assessment for asst. yr. 1982-83, and in which an addition of only Rs. 10,000 was made regarding investment in the said property. It may be mentioned that the original assessment for asst. yr. 1982-83 had been set aside by the CIT(A) vide order dt. 31st October, 1990 and the second assessment was thus completed on 14th June, 1991. In view of the foregoing the learned counsel has pleaded that no addition in respect of investment in Hotel Unique is called for. However, it is observed from the statement of the assessee recorded on 25th June, 1996 under s. 131, that he stated that there are 62 rooms in Hotel Unique and during the years 1986 to 1990, 17 rooms were added. No further stated that in 1994, 11 to 12 rooms were renovated and also reception portion was constructed. He also stated that the expenditure incurred on construction of 17 rooms during 1986-90 was Rs. 3 lakhs and expenditure on construction of reception portion was Rs. 25,000 to 30,000. He further stated that about Rs. 35,000 was being spent every year on repair and maintenance. It is also observed from the letter of surrender that the assessee surrendered an amount of Rs. 5.60 lakhs on account of investment in construction of additional rooms and office block during the block period from 1986-87 to 1995-96. A perusal of the valuation report also shows that the value declared by the assessee for the impugned property as mentioned against Col. 4.3 was Rs. 11,23,158. The Valuation Officer has valued the property at Rs. 20,03,709. In the valuation report filed by the assessee (pp. 45-47 of 2nd paper-book) the property has been assessed at Rs. 17,03,338. Thus there is difference of Rs. 8,80,551 in the value declared by the assessee and the valuation made by the Valuation Officer, and a difference of Rs. 6,80,180 V-a-V 2nd report. In view of the foregoing facts it is difficult to accept the plea of the learned counsel that the additions made in the buildings known as Hotel Unique are outside the purview of the block period. The learned counsel had also referred to the chart of repairs etc. in Hotel Unique and that the repairs were of the order of Rs. 1,90,640. In view of the statement of the assessee, earlier assessment order for 1982-83 and other documents placed in the paper-book, we feel that the amount of Rs. 5.60 lakhs as declared by the assessee in the letter of surrender can be safely taken as further investment made in Hotel Unique, during the block period. No evidence has been brought on record by the Department to show any investment after the asst. yr. 1982-83 and before asst. yr. 1986-87. Thus we sustain the addition of Rs. 5.60 lakhs as undisclosed investment of the assessee in Hotel Unique. Since the assessee has 1/4th share in the said property, in the case of the assessee an addition of Rs. 1.40 lakhs is sustained.
18. Ground No. 5 raised by the assessee relates to an addition of Rs. 7 lakhs on account of low household expenses.
19. The AO observed that assessee's family comprises of his wife, two daughters and two sons. He further observed that children of assessee have completed their schooling and that the assessee maintains a high standard of living and holds a good social status. He further stated that children had studied in reputed schools of Shimla where handsome fees was charged. He also observed that the assessee also maintained vehicles for personal use of his children as well for business. He, therefore, estimated the total expenses on household from 1st April, 1986 to 20th June, 1996 at Rs. 7 lakhs and held that the said expenses had been made by the assessee out of his undisclosed income. AO also referred to the letter of surrender wherein the assessee had surrendered an amount of Rs. 9 lakhs for both brothers' families. He held that the said surrender was not sufficient. He, therefore, made an addition of Rs. 7 lakhs in the case of the assessee.
20. The learned counsel submitted that the Department did not find any material during search on the basis of which the impugned addition of Rs. 7 lakhs has been made on account of household expenses. He submitted that the addition could only be made on the basis of evidence found during search. In this connection he referred to the provisions of s. 158BB. The learned counsel also referred to the decision of the Tribunal, Jaipur Bench, 7 IT REP 435, wherein the Tribunal observed in para 14 that "the withdrawal shown by the assessee has not been taken into consideration by the AO at all. He made his estimate on the basis of presumption and by mentioning that the assessee has been enjoying luxurious life and has acquired all kinds of household goods to make his life comfortable. In our considered view this is not a way to estimate the household expenses. The AO should have brought evidence on record if he is going to make such an estimate. No material was with him to make the estimation and in assessment completed under s. 158BC such estimates are not permissible. Therefore, the addition on account of household expenses is hereby deleted". The learned counsel further submitted that the assessee had been making regular withdrawals from Hotel Unique and that the same could have been taken into consideration. He referred to the chart of withdrawal made by the assessee during the block period. In the said chart withdrawals have been shown from Hotel Unique and from Beauty Palace, proprietary concern of the assessee. The position of withdrawals shown by the assessee from the said two sources is as under :
---------------------------------------------
Assessment year Amount of
withdrawal
(Rs.)
---------------------------------------------
1986-87 25,000
1987-88 34,475
1988-89 22,500
1989-90 30,000
1990-91 28,100
1991-92 36,604
1992-93 26,088
1993-94 20,500
1994-95 31,100
1995-96 86,140
---------------------------------------------
21. The learned counsel submitted that the AO has proceeded on assumptions that the assessee was maintaining a very high standard of living but he has not brought anything on record to prove his contention. The learned counsel urged that the aforesaid withdrawals were sufficient in the case of the assessee who was leading a frugal life. He, therefore, urged that the impugned addition ought to be deleted.
22. The learned Departmental Representative relied heavily on the orders of the AO. He submitted that the withdrawals shown by the assessee from Hotel Unique and Beauty Palace do not match the living style of the assessee and that income has been hidden by the assessee from the Department. The learned Departmental Representative further referred to the cash flow statement and submitted that whatever income from the firm was being retained, was going into capital account of the assessee. He further referred to p. 68 of the paper-book and statement of net cash generation of Hotel Unique Group, and pointed out that household expenses from 1986-87 to 1990-91 @ Rs. 2,500 per month have been shown at Rs. 3 lakhs and from 1991-92 to 1995-96 household expenses @ Rs. 5,000 per month have been shown at Rs. 6 lakhs. He submitted that these figures are for the two families i.e. the assessee and his brother, Shri. Wazir Singh. The learned Departmental Representative also relied on the decisions in the case of CST vs. H. M. Esufali H. M. Abdulali (1973) 90 ITR 271 (SC), Smt. Vindoor Bai vs. CED (1981) 132 ITR 421 (All) and the decision of the Tribunal in the case of Parikh Foods vs. Dy. CIT (1998) 64 ITD 396 (Pune), wherein it has been observed that undisclosed income would include every income which is hidden from the Department, whether detected as a result of search of not ?
23. The learned counsel in his reply submitted that the withdrawals made by the assessee from Hotel Unique and Beauty Palace, are genuine withdrawals and the assessee was not indulging in lavish living. He submitted that even cooking range was not found. The learned counsel referred to the decision of the Tribunal, Mumbai Bench in the case of Sunder Agencies vs. Dy. CIT (1997) 59 TTJ (Mumbai) 610 : (1997) 63 ITD 245 (Mumbai), wherein it has been observed that scheme of Chapter XIV-B does not give power to Revenue to draw presumption in regard to undisclosed income. These observations have been made in the context of estimate of sales promotion expenses.
24. We have carefully considered the rival submissions on this issue and have perused the orders of the AO. We have also perused the relevant documents placed in the paper book to which our attention has been invited during the course of hearing. We have also seen the case law relied upon by both the parties. We feel that the decision of the Tribunal in the case of Sunder Agencies (supra) is distinguishable on facts and is of no help to the assessee. We feel that the decision of the Tribunal, Pune Bench in the case of Parikh Foods (supra) is relevant to the point at issue. It is observed from p. 68 of the paper-book that the assessee and other members of the group have themselves indicated expenditure @ Rs. 2,500 per month during asst. yrs. 1986-87 to 1990-91 and expenditure @ Rs. 5,000 per month during asst. yrs. 1991-92 to 1995-96. We have also seen the chart of withdrawals made by the assessee from Hotel Unique and Beauty Palace and we feel that the average withdrawals indicated in the said chart, except in the asst. yr. 1995-96, are not sufficient to cover the household expenses. We, therefore, feel that it will be just and fair to make an addition of Rs. 6 lakhs for the block period in the case of the assessee on account of household expenses. The withdrawals made by the assessee from Hotel Unique and Beauty Palace during the block period, as indicated in the chart and reproduced in the foregoing part of this order should, however, be adjusted against the addition of Rs. 6 lakhs. The AO is directed to allow appropriate relief to the assessee on the said basis.
25. Ground No. 6 raised by the assessee relates to an addition of Rs. 2 lakhs on account of marriage expenses.
26. The AO observed that the assessee had solemnised the marriage of his daughter during the block period. He asked the assessee to explain the expenditure made on the marriage. AO observed that so explicit reply was furnished by the assessee. Keeping in view the statute of the assessee he estimated the expenditure at Rs. 2 lakhs and held that the same had been made by the assessee out of undisclosed income.
27. The learned counsel submitted that issue or marriage expenses falls outside the purview of block assessment. He submitted that the AO did not find any evidence during the course of search regarding marriage expenses. He further submitted that there was a serious accident in one of the close relations of the assessee, a few days before the marriage of his daughter and, therefore, the marriage was solemnised in simple way. He further submitted that in the system of marriage "Pishoria marriage" no dowry is given to the daughter. He, therefore, urged that the addition of Rs. 2 lakhs in uncalled for.
28. The learned Departmental Representative relied on the orders of the AO. He further referred to the questionnaire issued by the AO wherein marriage expenses were estimated at Rs. 5 lakhs. He further submitted that the assessee did not give any reply to this issue. He further referred to p. 68 of the paper-book and submitted that the assessee himself had shown an expenditure of Rs. 1.93 lakhs on two marriages.
29. The learned counsel in his reply submitted that the marriage was simple. He further submitted that jewellery given in the said marriage was out of Istri Dhan of the wife of the assessee.
30. have carefully considered the rival submissions on this issue and have perused the orders of the AO as also the various documents placed in the paper-book to which our attention was invited during the course of hearing. We feel that on the facts and circumstances of the case it would be just and fair to sustain an addition of Rs. 1 lakh on account of marriage expenses. The assessee gets a relief of Rs. 1 lakh.
31. Ground No. 8 raised by the assessee relates to an addition of Rs. 3,16,372 (figure as corrected by the counsel) on account of un explained investment in stock.
32. The AO observed that survey under s. 133A was conducted on the business premises of the assessee i.e. Beauty Palace. He further observed that detailed stock inventory was prepared and total stock of Rs. 8,38,695 was found as against stock of Rs. 5,22,323 worked out as on 21st June, 1996, as per books of account. He, therefore, observed that excess stock of Rs. 3,16,372 was found. AO asked the assessee to explain the difference in stock. He observed that no explanation was given by the assessee during the survey operation or during the course of assessment proceedings. He further observed that the assessee has, however, made a surrender of Rs. 1 lakh on account of excess stock as per letter, dt. 20th August, 1996. AO held that the surrender was not true and full. He, therefore, treated the entire difference in stock of Rs. 3,16,372 as investment made out of undisclosed sources and made an addition.
33. The learned counsel referred to pp. 35-40 of the paper-book where list of articles found during the course of search from business premises of Beauty Palace is placed. He submitted that the sale price indicated against each item represents a tag price mentioned on each article and the total of all the articles as mentioned at p. 40 works out of Rs. 8,38,695. The learned counsel submitted that the tag price was approximately 25 per cent to 30 per cent higher than the cost price, because of bargaining indulged in by the customers. He, therefore, urged that at least 25 per cent of the amount i.e. Rs. 2,09,673 ought to be reduced. He submitted that the resultant figure would be approximately Rs. 1,07,000. On a query from the Bench the learned counsel submitted that the assessee was not maintaining any stock register.
34. learned Departmental Representative relied on the orders of the AO. He further submitted that the sale price was only mentioned at pp. 35 & 39 of the paper-book and the same was not mentioned on other pages. He further submitted that in every case involving stock, there is undervaluation. He further submitted that where the price tags were not there, it was for the assessee to charge any price.
35. In the alternative the learned Departmental Representative submitted that relief @ 20 per cent with reference to total of Rs. 4,35,960 mentioned at p. 39 of the paper book, could be allowed. He further pointed out that in the asst. yr. 1995-96, gross profit rate shown by the assessee ranged between 18-20 per cent.
36. We have carefully considered the submissions made by both the parties on this issue and have perused the assessment order as also various documents placed in the paper-book to which reference was made during the course of hearing. We feel that the submissions made by the learned counsel have force. The objections of the learned Departmental Representative that the sale price is only mentioned at pp. 35-39 and not on other pages, has no merit, as the pages are in continuation. It is not the case of the Department that at other pages only cost price has been mentioned. Thus on the facts and circumstances of the case, we feel that the assessee should be allowed rebate of 25 per cent on total stock of Rs. 8,38,695. The resultant difference would work out to about Rs. 1,07,000. The addition of Rs. 1,07,000 is, therefore, sustained. The AO may allow appropriate relief to the assessee on the said basis.
37. Ground No. 9 raised by the assessee relates to an addition of Rs. 13,19,563 on account of investment in FDRs, RDs, etc.
38. AO observed that during the course of search, total investments in the form of FDRs, NSCs, etc. valued at Rs. 9,17,745 and Rs. 4,01,818 were found. He further observed that the entire FDRs, NSCs and RDs were seized. He further observed that the assessee did not give any specific reply during the course of search and during the assessment proceedings. He referred to the letter of surrender made by the assessee at Rs. 43 lakhs in hands of different concerns, in which the assessee admitted to cover the investment made in FDRs, NSCs and RDs etc. The AO observed that the assessee had not given detailed bifurcation of investment yearwise. He also observed that the assessee had not even denied the ownership of these movable assets worth Rs. 13,19,563. He also observed that the assessee had admitted that he was not maintaining books of account for his business concern. He further observed that the surrender may strengthen the decision that FDRs, NSCs and RDs had been made from year to year out of undisclosed income. He, therefore, made an addition of Rs. 13,19,563 under s. 69 of the IT Act, 1961.
39. learned counsel referred to p. 10 of the paper-book, where a copy of reply of the assessee is placed. In para 3 the assessee stated that FDRs and RDs amounting to 4,01,808 were from income of Hotel Unique, Beauty Palace and savings from rental income received from Hotel Unique. The assessee further stated that the said position shall be explained by way of cash flow statement for the entire block period. The assessee further submitted that delay in preparing the said statement was attributable to non cooperating attitude of the banks from where necessary information was required. The assessee also mentioned that non-receipt of photocopies of FDRs, RDs, etc. from the Department was also hampering the compilation of the cash flow on year to year basis. The assessee requested the AO to provide copies of FDR receipts, etc. The learned counsel submitted that in view of the said circumstances, the assessee could not have submitted the reply. The learned counsel further referred to the chart showing the details of FDRs of assessee and other members of the group (pp. 29-33 of the paper-book). He submitted that the FDRs at Sl. Nos. 1, 2, 3, 4, & 6 belong to Shri. Parveen Ahuja, another assessee in this group. He submitted that no addition could be made in respect of FDRs of others. He further pointed out that FDR at sl. No. 5 related to Mrs. Renu Kukreja, daughter of the assessee. The learned counsel further submitted that all persons mentioned in the said list, except Mrs. Renu Kukreja, are separate assessees. He submitted that approximately FDRs in respect of other persons amounted to Rs. 4,65,268 and that the said amount could not be added in the hands of the assessee. He further submitted that Mrs. Renu Kukreja, is a married daughter and no addition in relation to her FDR could be made in the hands of the assessee. The learned counsel further referred to p. 33 of the paper-book, where details of saving bank deposits have been given. He further referred to p. 34 of the paper-book, where details of total income returned/assessed for the block period have been given. He submitted that the total assessed income in the block period amounts to Rs. 12,37,259 and that the assessee ought to be given the benefit of income already returned/assessed. In this connection he referred to items 14-28 (pp. 30-32 of the paper-book) and deposits at Sl. Nos. 1 to 8 mentioned at p. 33 of the paper-book. He further submitted that the figures relating to these investments as mentioned in the chart accompanying the letter of surrender, are wrong and that the ADI wanted computation on the said basis.
40. The learned Departmental Representative submitted that the assessee cannot claim the benefit of entire assessed income of Rs. 12,37,000 towards amount of FDRs. He submitted that the expenditure out of assessed income of Rs. 12,37,000 is also required to be considered. He further referred to the provisions of s. 158BB and submitted that the assessed income of earlier years is to be reduced out of undisclosed income. He further submitted that the benefit could be only with reference to disclosed assets. He further submitted that the benefit as claimed by the assessee could only be with reference to one item i.e., either with reference to amount of FDRs or with reference to household expenses. He further submitted that such benefit should only be in relation to year of search. In this connection he also submitted that the assessee has not disclosed receipts/expenses and it is a case of no accounts hence no set off should be allowed to the assessee as pleaded. He further submitted that the assessee has not disclosed any interest income on the FDRs.
41. The learned counsel in his reply agreed that the undisclosed income may be computed and assessed income of Rs. 12,37,000 be reduced from such undisclosed income. He further submitted that interest income has been shown, but could not be corelated in the absence of photocopies of the relevant documents.
42. We have considered the submissions made by both the parties on this issue and have perused the assessment order as also various documents placed in the paper-book to which our attention was invited during the course of hearing. It is observed from the chart showing details of FDRs, etc. placed at pp. 29 to 33 of the paper-book that various FDRs relate to other assessees of this group. It is observed from the written submissions filed before the Tribunal (p. 12 of the compilation) that such FDRs, NSCs, NSS/UTI units) relating to other assessees amount to Rs. 3,37,942. The learned Departmental Representative did not dispute the abovementioned details filed on behalf of the assessee. In view of the foregoing we feel that no addition can be sustained in relation to FDRs, NSCs, etc. which belong to other assessees in this group, in the hands of the assessee. The addition of Rs. 13,19,563 is, therefore, to be reduced by an amount of Rs. 3,37,942 as mentioned by the assessee. The AO may verify the figures relating to such FDRs, NSCs, etc. belonging to other assessees. The next question is as to whether the assessee is entitled to any benefit out of the income returned/assessed in the block period in relation to the investments in FDRs, etc. We feel that the submissions made by the learned counsel in this regard have some force as the amount invested in the FDRs from year to year is given out of the returned/assessed income. Thus, we feel that it will be just and fair to allocate an amount of Rs. 1.50 lakhs on account of interest, etc. which is embedded in the investment in FDRs. Thus out of the balance amount of Rs. 9,81,621 which remains after deduction of amount of Rs. 3,37,942 mentioned above, a further relief of Rs. 1.50 lakhs, is allowed. The addition to the extent of Rs. 8,31,621 is, therefore, examined, in relation to investment in FDRs, etc.
43. Ground No. 10, raised by the assessee relates to addition of Rs. 10,77,980 on account of certain deposits in banks and FDRs.
44. The AO observed in para 13 of his orders that during post-search investigation and enquiries, detailed information was called from all the banks in which the assessee and his family members had accounts. He observed that the information showed that loans was sanctioned to Smt. Harbans Kaur for purchase of vehicles after giving equal amount of deposit to the bank in the form of FDRs, shares and margin money. He further observed that the said amounts invested in the banks were out of undisclosed income. He further observed that Shri. Arun, another son of the assessee had also obtained bank loan which was released to him when he deposited collateral security of the same amount. He held that the said deposit was also made by the assessee out of his undisclosed income. He also observed that loan amount for both the vehicles was released in 1996 and that the assessee has surrendered only one Maruti vehicle and Gypsy of 1991 make. He held that the aforesaid two vehicles were purchased only after 1996 when the assessee received the loan amount. He further observed that the entire investments made by the assessee either in his own name or in the names of his sons, is to be added as undisclosed income of the assessee under s. 69. The AO has mentioned the details of various amounts in relation to loans raised from the banks against vehicles, margin money for purchase of new vehicle, FDRs, etc. aggregating to Rs. 10,77,980. This entire amount was added by the AO towards the undisclosed income of the assessee. The learned counsel pointed out that amount of Rs. 1,57,309 mentioned by the AO against item No. 1 should read as Rs. 1,26,787. In this connection he referred to the certificate of income dt. 31st December, 1998 filed before us. The learned counsel did not contest the amount of Rs. 43,999 mentioned against item No. 2 as margin money for the purpose of new vehicles. He further pointed out that item No. 4 mentioned at p. 33 of the paper-book i.e., Rs. 49,800 matches with item No. 7 mentioned in the assessment order. He further pointed out that similarly item No. 5 mentioned at p. 33 of the paper book i.e., FDR No. 77/49 for Rs. 34,048 has again been mentioned by the AO as item No. 8 at p. 7 of the assessment order. In view of the foregoing he submitted that various amounts mentioned at p. 7 of the assessment order, are out of FDRs, NSCs, etc. in relation to which separate addition has already been made. He pleaded that it is a case of double addition. He, therefore, urged that except for addition of Rs. 1,26,787 plus Rs. 43,999 as mentioned at p. 6 of the assessment order, the remaining additions ought to be deleted.
45. The learned Departmental Representative relied on the orders. He submitted that it is not a case of double addition as claimed by the learned counsel.
46. We have carefully considered the submissions made by both the parties on this issue and have perused the assessment order as also other documents to which our attention was invited during the course of hearing. We feel that the submission made by the learned counsel have some force as the items pointed out above give impression of duplication of addition. In view of the foregoing facts we sustain the addition of Rs. 1,70,786 as conceded by the learned counsel. With reference to item Nos. 3 to 12 at p. 7 of the assessment order, we direct the AO to verify the factual position and delete those items which have already been covered in the addition of Rs. 13,19,563 as made by the AO vide para. 6 of the orders. He may allow appropriate relief of the assessee on the said basis. He may also allow reasonable opportunity of being heard to the assessee in this connection.
47. Ground No. 11 raised by the assessee relates to addition of Rs. 1,20,000 on account of investment in purchase of land.
48. The AO observed that the assessee had purchased land from Smt. Sarla Devi for Rs. 1,20,000 and that the assessee, when confronted, could not explain the sources. He also observed that the assessee has surrendered this amount of Rs. 1,20,000. He, therefore, made the impugned addition.
49. The learned counsel submitted that the title deed for purchase of said land was in the name of the assessee and other co-owners, which the addition has been made in the case of the assessee. He referred to p. 44 of the paper-book, where a copy of the sale deed is placed. He pointed out that in para 1 of the sale deed the names of other co-owners i.e. Shri. Wazir Singh, Smt. Tirath Kaur and Smt. Harbans Kaur have been mentioned. He, therefore, urged that only an addition of Rs. 30,000 being 1/4th share of the assessee, be made.
50. learned Departmental Representative though relied on the orders did not controvert the aforesaid sale deed.
51. We have carefully considered the rival submissions on this issue and in view of the facts emerging before us, we sustain an addition of Rs. 30,000 in the hands of the assessee. The balance of the addition may be made by the AO in the hands of other assessees.
52. Ground No. 12 raised by the assessee relates to an addition of Rs. 5,61,000 on account of cash found during the course of search.
53. The AO observed that cash amounting to Rs. 5,61,000 was found during the course of search out of which Rs. 5.50 lakhs were seized. He further observed that on being confronted the assessee stated that the said cash was unaccounted receipt from Hotel Unique, Hotel Pushpak, Hotel Kohinoor and Beauty Palace. The AO further observed that during the course of assessment proceedings the assessee did not furnish any other explanation in relation to the said cash. He also observed that no books of account have been maintained by the assessee. He, therefore, treated the amount of Rs. 5,61,000 as undisclosed income of the assessee.
54. The learned counsel invited our attention to the reply filed by the assessee (p. 10 of paper-book), wherein the assessee mentioned that cash flow for the entire block period is under compilation to explain the source of cash in hand and shall be furnished to you (AO) in due course of time. He further referred to p. 64-65 of the paper-book, where a copy of cash flow is placed. He, further submitted that time at which the search was conducted i.e. the month of June, was the peak month for visitors to Shimla and therefore, the assessee was keeping with him cash receipts of about Rs. 2 lakhs from Hotel Unique. He submitted that the assessee had no time to go to the bank and retained the cash with him. In this connection he also referred to the assessment made in the case of Hotel Unique, where cash receipts have been estimated at Rs. 3 lakhs and protective assessment has been made. On a query from the Bench as to whether the assessee had any bank transactions, the learned counsel submitted that nothing was deposited in the bank during this period. He further pointed out that similarly the assessee had cash receipts from Beauty Palace aggregating Rs. 1,50,000. He further submitted that items Nos. 3 & 4 shown in the cash flow amounting to Rs. 31,000 on account of household expenses and commission payable to Khans of Hotel Unique are not pressed. He further submitted that the amount of Rs. 70,000 shown against item No. 5 of the cash flow statement, was Istri Dhan of Smt. Harbans Kaur, wife of the assessee and who is separately assessed. He further submitted that the amount of Rs. 1 lakh shown against item No. 6 pertained to Shri. Parveen Ahuja who was doing lottery business from 1st April, 1988 to 1993. He further submitted that Shri. Parveen Ahuja is separately assessed. He further submitted that the assessee and other persons were living jointing but were separately assessed. He also pointed out that copy of Panchnama was not given to the assessee.
55. The learned Departmental Representative relied heavily on the orders. He further submitted that p. 64 of the paper-book was not given to the AO at any time. He also submitted that the reply at p. 10 of the paper-book is very vague. He further submitted that the assessee was maintaining bank accounts and had also invested in FDRs for earning interest. He further submitted that the assessee was living in a rented accommodation and there was not much security and thus the assessee could not keep the business receipts for such a long time. He further, submitted that M/s. Beauty Palace had only an amount of Rs. 1,380 as cash in hand and that no books of accounts were produced. He further pointed out that Smt. Harbans Kaur in alleged to be keeping Rs. 70,000 when she had invested only an amount of Rs. 10,000 to 15,000 in FDRs. He further submitted that similarly Shri. Parveen Ahuja, could not possibly be in a position to earn Rs. 1 lakh. In this connection he also pointed out that there were withdrawals of Rs. 16,500 by Shri. Parveen Ahuja during this period.
56. We have carefully considered the rival submissions on this issue and have perused the assessment order and other relevant documents to which reference was made during the course of hearing. We feel that the submissions made by the learned counsel have some force and it cannot be ruled out that the assessee had some cash receipts in hand from Hotel Unique and Beauty Palace.
57. The assessee has claimed cash receipts from these two sources at Rs. 3.50 lakhs. We feel that it will be just and fair to estimate the cash receipts from these two sources, which were lying with the assessee, at 2 lakhs. The learned counsel has already conceded an amount of Rs. 31,000. It is further observed that Smt. Harbans Kaur and Shri. Parveen Ahuja, are separate assessees in this group. The learned Departmental Representative has not been able to controvert that the case of Rs. 70,000 relates to Smt. Harbans Kaur and that of Rs. 1 lakh relates to Shri. Parveen Ahuja. We feel that these amounts can be separately considered by the AO in the hands of Smt. Harbans Kaur and Shri. Parveen Ahuja. We thus sustain the addition of Rs. 1,81,000 and delete the balance of addition in the case of assessee.
58. Ground Nos. 13 & 14 raised by the assessee relate to giving lesser credit of income already disclosed for block period and making of additions without application of mind.
59. In this case the AO has computed total undisclosed income of the assessee for block period at Rs. 56,21,730. He reduced the said income by an amount of Rs. 5,80,470 on the basis of income returned by the assessee for the block period. The net undisclosed income has been taken at Rs. 50,41,260.
60. During the course of hearing the learned Departmental Representative pointed out that ground Nos. 13 and 14 taken by the assessee in the revised grounds of appeal, are new grounds. He submitted that the Tribunal asked the assessee only to modify the grounds as the earlier grounds were lengthy and argumentative. He further submitted that the AO has already given credit with reference to the income already disclosed by the assessee. The learned counsel submitted that benefit of earlier years' income as assessed has to be allowed by the AO.
61. We have carefully considered the submissions made by both the parties on these grounds. We feel that in terms of provisions of s. 158BB the AO has to reduce the income already assessed in assessment years falling within the block period out of total undisclosed income as new sustained by the Tribunal. Further the AO has to allow relief of the assessee in terms of provisions of s. 158BB(1)(b), if any, admissible to the assessee.
62. Accordingly the AO is directed to allow appropriate relief to the assessee in the light of the provisions of cls. (a) & (b) of s. 158BB(1).
63. In the result the appeal is allowed in part.