9911796707
TMI Blog1996 (9) TMI 177X X X X Extracts X X X X X X X X Extracts X X X X ..... es are stated to be carried on by all the brothers. The business consists of manufacture of silver chains and chains made of gilt and iron, etc. Search and seizure operations were carried out in the aforesaid premises on18th April, 1987. During the course of searches following articles were discovered: (1) Silver wires in 17 bundles weighing 41.05 kgs. (2) Silver chain (Purity 80 per cent) weighing 2.35 kgs. (3) Silver wire (Purity 80 per cent) weighing 4 kgs. (4) Silver scrap weighing 17 kgs. In addition, machines used for manufacture of chains were also found. Cash of Rs. 5,715 was found from the residential as well from the business premises. As none of the brothers was present at the time when the searches were carried out, the statement of Smt. Satyawati w/o Shri Kamal Singh was recorded. On the basis of the statement, cash found was held to have been properly explained and no part of it was seized. Subsequently, statement of Shri Rakesh Singh could only be recorded as Prem Singh did not appear in response to the summons issued by the AO. 4. In response to the notice issued to Shri Kamal Singh to explain the source of acquisition of the silver and other articles as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rejected the assessee s explanation in regard to the fine contents of silver in the stock as found in the premises at the time of searches. After having come to this conclusion he proceeded to make an addition of Rs. 2,08,923 on account of unexplained investment in silver wire, silver chains and silver scrap in the hands of Shri Kamal Singh. As the returns for asst. yr. 1988-89 were also filed by Shri Rakesh Singh and Shri Prem Singh the income in their hands were brought to tax on protective basis. In the case of Shri Kamal Singh the expenditure claimed in respect of salary paid to Shri Rakesh Singh and rent and supervision charges paid to Shri Ram Singh, the assessee s father, was disallowed. Income from job receipts was also brought to tax on estimate basis. Another addition on account of unexplained deposits at Rs. 40,500 was also made. The learned CIT(A) after considering the facts held that no addition can be made in the hands of Shri Kamal Singh in the case of unexplained investment in the silver, silver-chains and silver scrap, etc. According to him the assessments on substantive basis have to be made in the hands of S/Shri Rakesh Singh and Prem Singh who admitted that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er chains. The returns filed in the cases of two brothers namely, S/Shri Rakesh Singh and Prem Singh were under the Amnesty Scheme which were accepted. The AOs had no occasion to test the veracity of the statements made in the returns. It is only on discovery made during the course of searches carried on that it came to the notice of the Department that the business actually belongs to Shri Kamal Singh. Interlinked with this question was the investment stated to be assessable in the hands of three brothers. According to the learned authorised representative, in case the statement of affairs for asst. yr. 1986-87 in the hands of two brothers are taken into consideration, the entire stock found at the time of searches stand proved more so when the actual contents of fine metal in the silver is taken into consideration. The AO, argued the learned authorised representative put the purity of silver content at a higher figure than what was warranted. In support of his version reliance was placed on the order of Shri Ram Singh, father of the three brothers, wherein in similar circumstances content of silver was taken to be lesser than the one in the case of the three brothers. Combined wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent, the assessments for asst. yrs. 1987-88 have been finalised in the cases of three brothers accepting their versions in regard to the nature of business carried on by them. In this context one cannot lose sight of the fact that while framing the assessments for asst. yr. 1987-88 the fact of searches being conducted in their premises was before the respective AOs. The assessments have also been framed under s. 143(3) of the Act. The basis for deviating from the finding from asst. yr. 1987-88 as is available in the order for asst. yr. 1988-89 is that in the balance sheet for asst. yrs. 1984-85 and 1985-86 no silver has been disclosed by S/Shri Rakesh Singh and Prem Singh. The manner in which the balance sheets have been drawn clearly show that these are otherwise not in accordance with the accounting norms. These are more or less statement of affairs made by S/Shri Rakesh Singh and Prem Singh. Though doubts can be raised on the way the accounts are made and the income returned, nonetheless this is not sufficient to hold that the entire stock of silver found in the house belonged to Shri Kamal Singh. Specifically so when he was not confronted with the conclusion as drawn on the mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view the addition is not sustainable. Thus, we uphold the order of the learned CIT(A) but on different ground. 10. The fourth ground of appeal pertains to relief allowed on account of addition of Rs. 23,161 made on account of job receipts. The AO has discussed the issue in para 15 of the assessment order for asst. yr. 1988-89. As per the observations made therein, the assessee has declared total receipts of Rs. 96,839 on which gross profit was declared at Rs. 49,305 giving a rate of about 51 per cent. On examination of accounts it was found by the AO that in support of the version he had maintained only cash book and ledger. In regard to the expenses the assessee had issued his own vouchers. After taking into consideration that in the earlier assessment year the income was assessed on estimate basis the receipts were estimated at Rs. 1,20,000 and the addition of Rs. 23,161 was made. On these facts the assessee s version was that as no material was brought on record to show that the job receipts shown were not correct no addition was called for. The learned Departmental Representative, on the other hand, strongly supported the order of the AO. The learned CIT(A) deleted the additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he other hand, Shri Rakesh Singh had his own business for which he had engaged employees of his own. The copy of account as produced before us further show that no monthly remunerations were paid to Shri Rakesh Singh for the services rendered. In the circumstances, we are of the considered view that the addition was rightly sustained by the CIT(A) which we uphold. 15. The last ground raised by Shri Kamal Singh (assessee) relates to confirmation of disallowance of Rs. 24,000 paid in respect of hire charges of machinery and profession charges to his father, Shri Ram Singh. For asst. yr. 1988-89 the assessee claimed deduction of Rs. 24,000 as supervision and hire charges of machinery belonging to Shri Ram Singh, his father. The plea raised was that, as the year was that of raid, the assessee could not devote his full attention to the work for which he had to engage the services of his father who stopped doing his own business. For carrying on the activity the assessee also hired the machines belonging to his father for which as well supervision he was paid Rs. 24,000 as charges. The assessee s version was not accepted by the AO on the ground that the assessee had sufficient machiner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,923 made in the hands of Shri Kamal Singh. While the addition on account of unexplained investment in silver stock was made on substantive basis in the hands of Shri Kamal Singh, half of the amount was added in the hands of the other two brothers, S/Shri Rakesh Singh and Prem Singh, on protective basis. The issue has been discussed in detail in para 9 hereinabove. We have already held that the addition if at all maintainable is to be made in the hands of S/Shri Rakesh Singh and Prem Singh. Therefore, it is quantum of the addition as made which is to be discussed in the hands of the two brothers. The issue in question is whether both the parties had rendered sufficient evidence to explain the acquisition of stock as found in the premises during the course of searches. The articles discovered and seized have been mentioned while discussing the addition in the hands of Shri Kamal Singh, so we need not repeat. The issue in question pertains to the net weight of silver articles as found in the premises. In this regard we find that the value of silver wires in 17 bundles was taken at Rs. 1,41,023 by the approved valuer after holding the purity of silver at 66 per cent and accounting for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... balance sheet of both the assessees as well as the advances as made, we are of the considered view that the stock of entire silver has not been explained satisfactorily by the parties. In the circumstances, the full relief allowed by the learned CIT(A) was not in order. We would sustain an addition of Rs. 25,000 each to be made in the hands of both the parties and uphold the remaining relief as allowed by the learned CIT(A) at Rs. 79,461 and Rs. 79,462, respectively. 21. The second common contention raised relates to relief allowed on account of estimate of business income. From the material placed before us it is found that both the assessees filed returns for asst. yr. 1988-89 declaring income of Rs. 22,000. As explained in the written submissions, Shri Rakesh Singh estimated job income at Rs. 15,000 and Shri Prem Singh at Rs. 22,000. While Shri Rakesh Singh also included the salary income earned from Shri Kamal Singh, the return of Shri Prem Singh showed no such income. The AO estimated the job work income of Shri Rakesh Singh at Rs. 30,000 and that of Shri Prem Singh at Rs. 30,000. The learned CIT(A) confirmed an addition of Rs. 6,000 allowing a relief of Rs. 3,000 in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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