9911796707
TMI Blog2006 (8) TMI 239X X X X Extracts X X X X X X X X Extracts X X X X ..... nce' appearing in section 158BB(1) of the Act as substituted by the Finance Act, 2002 with retrospective effect from 1-7-1995." 2. In this appeal the assessee originally filed grounds of appeal running into 24 pages. As these grounds were not in accordance with rule 8 of the Appellate Tribunal Rules, the assessee was directed to file concise grounds of appeal. Finally the assessee filed revised "Summarized ground of appeal" on 8th December, 2003. 3. In this appeal the assessee has disputed various additions made by the Assessing Officer while computing assessee's undisclosed income within the meaning of section 158BC. The learned Assessing Officer has made an elaborate assessment order and for a full appreciation of the facts found by him and his conclusions it is necessary to recount the discussion in the assessment order at some length. We wish to add here that it would be appropriate to refer to the assessment order for a micro view. Facts of the case leading to this appeal as stated in the impugned order of the learned Assessing Officer briefly are that a search under section 132(1) of the Act was conducted on 28th June, 1996 at the residential premises of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was made on application that could be renewed from year to year. L-I vendor could purchase liquor, on payment of Excise Duty, from any distillery. From L-2 vends liquor was sold in retail to consumers. These vends could be taken on auction. L-2 vendor could purchase IMFL only from L-I vends. L-2 licence was given for one year, was not renewable. Every year a fresh auction was conducted. L-2 vendor was not required to pay Excise Duty but had to obtain a permit. From L-13 vend country liquor was sold in wholesale. Such vend was being allotted on application. L-13 vender could purchase country liquor on payment of Excise Duty only from distilleries of Haryana. From L-14A vends liquor was sold in retail to consumers. Those vends could only be taken on auction. L-14 could purchase liquor directly from distillery or from L-13 vendor on payment of Excise Duty. According to the learned Assessing Officer the assessee' succeeded to outbid others every year for obtaining L-2 and L-14 licences in Hansi Circle. The assessee obtained licences in the names of different firms for different Circles in different years. The learned Assessing Officer reached this conclusion, even though the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s certificate of Medical Officer, Government Hospital to that effect. In FIR the assessee had given minute details of the incident, amount of cash stolen, registration number of Maruti Gypsy, the colour of other cars and the names of several persons who had joined Shri Dalip Singh. In the statement the assessee had clearly stated that he was partner in the liquor vend and that Shri Manohar Singh was his cashier. Tape Recorded Conversation 8. On 19th July, 1996 the assessee appeared before the ADIT, Hissar in response to summons. On that occasion the conversation was tape-recorded without the knowledge of the assessee. In that conversation the assessee admitted off the record that he was 40 per cent shareholder in Gupta Wine Place L-I, Hansi and 50 per cent partner in Bawani Khera. He also admitted having 45 per cent share in L-2 and L-14A vends in Hansi. The assessee admitted that he had lost one crore rupees in a particular year out of the total Rs. 2 1/2 crores earned by him and therefore, the assessee was left with only Rs. 1 crore in cash and Rs. 50 lakhs in property. The assessee was asked if he had only 45 per cent share, then who were the other partners but he could not te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... balance in the summary sheet of the next day. As an illustration, the learned Assessing Officer has in para 20 of his order elaborately discussed page 32 of documents marked as D-12 being summary sheet of 11th June, 1996. This summary sheet indicated opening balance of Rs. 62,58,722. According to the statement of Shri Manohar Singh, this amount was arrived at by adding the entire cash received on account of sales of L-1, L-2 and L-14A vends at Hansi, L-2 and L-14A vends at Narnaund, Bawani Khera, Tosham and Jind and after deducting various expenses on account of purchases, excise duty, disbursement of loans, personal expenses of the assessee etc. After opening balance, the summary sheet recorded sale from liquor vends at Hansi and cash received from liquor vends at Bawani Khera, Tosham and Jind etc. expenditure on purchase of liquor and excise duty at Hansi; Licence fee and other day-to-day expenses; cash used for personal expenses of the assessee and cash given by way of loans to various persons. Shri Manohar Singh used to receive daily sale proceeds in cash and tally with sales reports from all Hansi vends. During the course of search proceedings daily sale reports with respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brought cash received from Jind vends and at his instance the entry was made. Similarly entries were found in the seized document in respect of cash received from Bawani Khera vends. These entries showed that cash was being collected from Jind and Bawani Khera vends also. In his cross-examination Shri Manohar Singh stood by this statement that he had made entries with respect to cash receipts from those places at behest of the assessee. According to the learned Assessing Officer there appeared to be no other reasons for Shri Manohar Singh to have made entries with respect to cash received from Jind, Bawani Khera, L-1 vend at Hansi etc. During cross-examination Shri Manohar Singh specifically confirmed that money receipts from Jind and Bawani Khera did not pertain to sales Made at Gupta Wine Place, Hansi to those places but represented the cash received from the business of retail sales of the vends there. Shri Manohar Singh pointed out that cash received on account of sales of Gupta Wine Place was being separately mentioned as "L-1 Sale ke Jama". He further stated that he did not receive daily sale reports from Jind, Bawani Khera or L-1 Hansi. He only received cash in respect of sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Documents D-1 to D-12 indicated that there was a system of centralized purchase. On page 26 of Documents D-10 expenditure on account of purchase of liquor for vends at Hansi and Bawani Khera from the distillery of Yamuna Nagar was debited. It showed purchases of Rs. 3,68,850 on account of Hansi and Rs. 51,000 on account of Bawani Khera from Haryana Distillery, Yamuna Nagar. At the bottom the assessee wrote "Check Kiya Gaya". A more detailed working with respect of this purchase was made on page 1 of Documents D-10. The entries on that page showed that 8 trucks comprising of 600 cases of country liquor each were purchased at the rate of Rs. 51,000 per truck for Hansi and Bawani Khera and after including other expenses including labour expenses for loading etc., the total cost worked out to Rs. 4,24,000. Shri Krishan Lal had already been paid a sum of Rs. 3,50,000 and thereafter he was paid another sum of Rs. 6,24,000 representing Rs. 74,000 on earlier account and Rs. 5,50,000 lump sum advance. Shri Manohar Singh, Cashier who wrote page 26 of Documents 10 explained that Krishan Lal was making purchases and supplying goods to M/s Mittal & Co. Hansi; Shankar Lal & Co., Bawani Khera, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous day. Shri Manohar Singh would tally the cash receipts at night with the daily sale reports and place a tick mark on the rough sheet of cash receipt brought by him. One such rough sheet seized from the residence of Shri Manohar Singh being page 2 to Document D-5 showed cash received from various locations. According to Shri Manohar Singh, after tallying the cash received on the rough sheet with the daily sale report he would prepare the summary sheet of every day next morning. The total cash as per these slips dated 26th June, 1996 enumerated in Para 25 of the impugned order added up to Rs. 6,49,000. As regard the cash out of Rs. 8,35,490 found from the bedroom of Shri Manohar Singh, he stated that Rs. 1,86,490 was cash pertaining to preceding days which he had kept separately in bundles. The learned Assessing Officer found that there was ample evidence to support the fact that cash of Rs. 8,35,000 belonged to the business. First, the cash was found in small bundles, secondly it was wrapped in slips on which details of currency notes and total number of currency notes was written along with aggregate cash amount, name of the vend and signature of the salesmen of the vend. Thirdl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y dated23-5-1997that nowhere in the papers containing documents No. D-2 there appeared any signatures of the assessee. Alleged facts were that the cash was counted by the salesmen and handed over after wrapping them in slips to Shri Manohar Singh. Cash was found from the possession of Shri Manohar Singh. There was no evidence on record that cash was being given to the assessee by Shri Manohar Singh. It was the finding of the Assessing Officer that cash belonged to M/s. Mittal & Co. but there was no reason to treat the assessee as owner of that company. Liquor was the business controlled by the Excise Department and in none of the certificate of the Excise Department and Partnership Deeds etc. the name of the assessee had figured anywhere. He was merely an employee of Mittal & Co. and there was no reason to treat cash of Rs. 8,35,490 as belonging to the assessee. The learned Assessing Officer did not accept the claim of the assessee that he was merely an employee. There were numerous entries on debit side of the summary sheets against which the assessee's name was mentioned e.g. "Rs. 60 lakhs MR Ji Ke Naam Nakad Le Gaye". Moreover, summary sheets were being checked by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the very fact that various persons working as salesmen in the vends of Hansi were shown to be partners in the liquor firms of Hansi, Jind, Bawani Khera, Tosham indicated that there was centralized planning. 15.1 According to the learned Assessing Officer during the course of search at the residence of the assessee in addition to the partnership deeds of several firms handwritten documents comprising names and father's names of the persons made to appear as partners were found. The documents also contained the addresses of such people. At the residence of the assessee copies of licences issued by Excise Authorities; copies of challans of licence fee; documents relating to the running of the business; correspondence with Excise and Police Departments etc. were found. Documents also comprised of court cases on behalf of various firms, announcement by the Collector, Excise of terms and conditions for auctions, new prohibition policy of the State Government after election in 1996; copies of maps of various god owns and various vends etc. were found. The learned Assessing Officer has furnished details of those documents in Annexure 7 to the impugned order. According to him, possessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of currency notes, name of vend and signature of salesmen were written. Shri Manohar Singh clubbed the cash after separating the slips and wrote the details from such slips on a rough sheet. The salesmen had to go back to the vend and keep the vend open till 11 P.M. or so. Next morning by 9.30 to 10 A.M. they brought the remaining cash of previous night along with daily sales report with respect to sale of previous day to Shri Manohar Singh. Daily Sales Reports were written and signed by the salesmen. Shri Manohar Singh carried the daily sales report to his house next evening and tallied the cash written on daily sale reports with the rough sheet prepared on which the cash received on previous night was written. Then he consolidated the entries from all the reports on a single sheet where he wrote the daily cash arrival, daily expenses, daily opening stock, daily sold stock and closing stock of all the vends. Cash was brought by the assessee Shri Mange Ram from Jind, Bawani Khera, Tosham vends. Accordingly entries with respect to sales from L-1 Hansi were also accounted for in summary sheets along with cash receipts. The cash collected in the business was utilized for making paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer has given illustration of such entries in paras 28.1 and 28.2 of the impugned order. The same was corroborated by the statement of Shri Manohar Singh recorded on 19th December, 1996. Shri Manohar Singh was cross-examined by the assessee but no question regarding this issue was put to him. The learned Assessing Officer found from the seized documents that various household expenses were mixed up along with expenditure of the liquor business. Payments made to some other persons as well as cash taken by the assessee himself in person were recorded in the documents including a sum of Rs. 60 lakhs collected by the assessee in cash. The learned Assessing Officer recorded the statement of Shri Shanker, driver of NE car of the assessee bearing No. HR-9B-0004. He admitted to be in employ of the assessee as a driver at monthly pay of Rs. 1,500 and driving the assessee's car and sometimes the assessee's jeep. At the same time, the name of Shri Shanker appeared as a partner in the liquor firms of L2 and L14A vends in Bawani Khera/Tosham for 1996-97. The assessee was confronted with these facts. In his statement the assessee stated that he was merely an employee and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19 of Annexure A-5 wherein the stock position had been worked out in relation to various dates in the handwriting of the assessee himself. The learned Assessing Officer has given the example of page 10 of Annexure A-5 in para 29 of the impugned order. The statement of Shri Manohar Singh was also to the effect that the assessee was receiving daily stock position reports and he himself was taking stock position of the business every now and then. This established that the assessee was engaged in the control and management of every aspect of the business. Statements of Shop Owners 19. On the date of search one Shri Ishwar Singh was found present at the premises of M/s. Gupta Wine Place, Hansi. He stated that the premises belong to his elder brother Shri Sajjan Kumar, who had let it out to the assessee. Subsequently statement of Shri Sajjan Kumar was recorded on 2nd August, 1996. Shri Sajjan Kumar admitted that the building had been let out to the assessee who was operating the liquor business under the name and style of M/s. Gupta Wine Place. He further stated that he was not aware of the constitution of the firm called Gupta Wine Place but the fact was that the assessee was the rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... village or when Shri Dalip went to Barsi Gate vend to collect rent payment on the direction of the assessee. Similarly Shri Shiv Ram, resident of Gosai Gate, Bye Bass, Hansi stated on oath that he had let out two shops at Gosai Gate belonging to him at an annual rent of Rs. 8,000 to the assessee for the last few years. Rent arrangement was finalized by the assessee only. Likewise two shops situated at G.T. Road, Hansi given on rent to M/s. Mittal & Co. belonged to Smt. Mohinder Kaur, mother of Sardar Manohar Singh, Cashier of the assessee. It was stated that those premises were taken on rent by the assessee. In the statement recorded on 23rd July, 1996 the assessee was confronted with the various statements given by landlords of various properties from where liquor business was being conducted. The assessee denied having rented any shop and claimed that he was merely an employee. In the statement on oath the assessee stated that he had never signed any rent receipt. The learned Assessing Officer noted that this statement of the assessee was contrary to FIR lodged by the assessee himself on 15th April, 1996. Furthermore, a rent receipt issued by Shri Nihal Singh in respect of the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Statute) 187. It was experience of the department that associations of persons specifically constituted to take auction contracts for sale of liquor were difficult to be tracked thereafter. Real persons took licence in benami names and floated front associations of persons for short period. Ex parte assessments made against such association of persons did not result into collection of the taxes due to the public exchequer. In such a state of affairs the defence of the assessee entirely based on Excise Department's records was not of much consequence. In that respect the learned Assessing Officer recorded statement of Shri R.K. Daggar, who was posted as ETO at Hissar from May, 1994 to June 1996. He stated that he was in-charge of the whole of the Hissar District. In Hissar District there were six Excise Circles and each one of them was under an Excise Inspector. He stated that he was present at the time of auction at Hissar for financial years 1995-96 and 1996-97 held in March, 1996 and March, 1997 respectively and that he personally saw Shri Mange Ram call the bids on behalf of those firms who ultimately became the successful bidder. This statement was recorded in the presenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the successful bidder in the matter of surety of the partner on Rs. 50 affidavit. For 1995-96 a surety bond of Rs. 1 crore was given by one Shri Anil Kumar, son of Shri Chhabil Dass, resident of Rajli and Shri Subhash Chander, s/o Shri Jagan Nath r/o Uklana. Both persons were close relatives of Shri Mange Ram and assisting him in his business. Shri Anil Kumar was assessee's brother-in-laws. The assessee had purchased land at Yeti Nagar, Hansi, in the names of his three brothers-in-law. For this purpose the learned Assessing Officer referred to the statement of Smt. Prem Lata, wife of the assessee. Shri Subhash Chander was the nephew of the assessee and he was actively involved in the business of the assessee as a Munim and used to maintain his books of account. He was also in-charge of checking the various liquor vends. Lot of documents seized from the residence of the assessee were in the handwriting of Shri Subhash Chander. The assessee had purchased plot at Yeti Nagar in the name of Shri Subhash Chancier and shown him as partner in liquor concerns such as Mange Ram & Company, Hansi 1992-93 and M/s. Ved Prakash Darshan Singh & Co. 1996-97. Many of the applications written ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly bread. Shri Shankar Lal was a driver by profession and used to drive the assessee's NE Car HR-93-0004. After he came to know the fact that he was shown as a partner in a liquor concern, he left the employment. He was earlier employed as deriver with M/s. Jamna Dass Chhabil Dass, Hansi. Thereafter he was unemployed. The Income-tax Inspector visited his house and found Shri Shankar Lal living in misery. Shri Ashok Kumar too was unemployed at the time of enquiry. The conditions of his house and family were pathetic. It was really very sad to learn that he was shown as a partner in a liquor concern that was auctioned at a bid of Rs. 4 crores. Income-tax Inspector visited his residence also and found him living in misery. Shri Pushkar was Arora by cast and working as daily wager with M/s. Manchan Medical Hall in Hansi. Income-tax Inspector visited his premises also and likewise found him living in misery. The learned Assessing Officer found that as in the case of M/s. Shankar Lal & Co., Bawani Khera/Tosham liquor vends, similar position obtained in respect of other firms as enumerated in para 43 of the impugned order. The learned Assessing Officer went through the Excise records ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the category of salesmen/partners and their cross-examination by the assessee it emerged that all the persons categorically denied having any interest in liquor vends as partner/owner and all of them categorically stated that Shri Mange Ram was the real owner and they were only employees. They were employed by the assessee and salary was fixed by the assessee only. Salary was being paid by Shri Manohar Singh at the directions of the assessee for which diary was given to them and their salary account was written on that diary. Many of them produced the diary, which was impounded. All of them denied having made investment in liquor business. All of them stated that their signatures were obtained either by the assessee or by Shri Subhash Munim. They had signed because they did not want to loose their employment and many of them being illiterate did not understand what was written on the documents. Their photographs were taken on the pretext that the same were required for security of cash at vends. Later on those photographs were submitted to the Excise Department as of the partners of the successful bidder concerns. Enquiries made revealed that those persons were not men of means an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er/bidder to form a new concern. Financial Status 25. The learned Assessing Officer made enquiries as to financial capacity of the assessee. He found that the assessee had been taking liquor contracts since 1980. On the date of search he was found living in luxury in a big and well furnished house No. 835/14, Yeti Nagar, Hansi. There were six air-conditioners, colour televisions, VCR, table-tennis table, fridge, sofas, telephones etc. The assessee was owning NE 118 car for his personal use for which purpose a driver was employed. The assessee's monthly phone bills varied from Rs. 8,000 to Rs. 10,000. The assessee was found spending considerable money on purchase of fruits from fruit vender Shri Ashok Kumar. The assessee had three children. His son was studying in one of the most expensive boarding school in Ambala and his daughter was studying in an expensive girls school. The assessee was found to be having a number of immovable properties. From the papers seized from the residence of the assessee it appeared that the assessee had extended loans of Rs. 2 to 3 crores to various persons in the vicinity. In addition, the assessee had invested several crores in liquor business a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the accounts as per the directions of Satpal. In the initial stages of statement Shri Satpal claimed that he was a partner in business at Hansi and in the same breath he stated that he was an employee of M/s. Mittal & Co., Hansi at a monthly salary of Rs. 1,500. Satpal was in no position to state the details regarding the writing of books of account, names of other partners, amounts of security deposit/licence fee, quantum of sale, stock, rules and bye laws of function of liquor vends, salary and employment of salesmen. Shri Satpal therefore in no manner could substantiate his initial statement that he was a partner in business at Hansi in financial year 1996-97. Significantly on the date of search i.e., 28th June, 1996 Satpal was found working at G.T. Road, Hansi L-2 vend and in the statement he merely stated that he was an employee drawing a salary of Rs. 1,000 per month and in reply to a specific question he denied having any share in the liquor vend. While the assessee contended that he was having a grocery shop at Village Dhanauri, his wife Smt. Prem Lata deposed that she along with her husband had left the Village Dhanauri after 3-4 years of their marriage in 1979 for Rania ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ign tour by his daughter were found and the assessee admitted that his daughter visited Singapore and Malaysia on her educational tour. Regarding source of educational tour the assessee stated that these were made out of reward amount of Rs. 1,00,000 received from Shri Satpal. In his statement recorded on 30th July, 1996 Shri Satpal not only stated that he was an employee but also denied having given any salary/reward, award etc., to the assessee. On denial by Shri Satpal, the assessee changed his stand in his statement dated 10th June, 1997. He stated that the amount was given to him by Sri Chander Bhan who was his contractor. The assessee in his preliminary statement had stated that partnership deeds of M/s. Ashok Kumar & Co., Sirsa, Chander Bhan Om Prakash & Co., Hansi and M/s. Gupta & Co. found at his residence during search were left by Shri Ashok Kumar, Chander Bhan and Shri Gupta respectively whose full name and address were not known to him. But in his subsequent statement he changed his earlier version and stated that those documents had been left behind at his residence by Shri Satpal. Shri Satpal denied any connection with those partnership deeds and thereafter the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the following criteria:- (1) Investment in security The learned Assessing Officer noted that various liquor contracts in Haryana were being sold by auction in the month of March every year for the following financial year. The successful bidder was required to deposit 1/6th of the licence fee as security. The learned Assessing Officer therefore, held that in the absence of any explanation the security deposit made by the assessee in advance in the initial year was required to be assessed as assessee's unexplained investment. Any accretion in the amount of advance security deposit in subsequent year(s) was required to be assessed as the assessee's unexplained investment of that year(s). (2) Investment in licence fee After security deposit the remaining licence fee was required to be deposited by the assessee in 11 equal monthly instalments by 20th day of every month. The learned Assessing Officer held that the assessee must have paid those monthly instalments from out of cash generated on sale of liquor every month. He therefore, held that no addition on that count was called for. At the same time, the assessee must have made an initial investment in purchase of l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en by the assessee in respective assessment years as enumerated by us in the earlier paragraphs. The learned Assessing Officer adopted actual quota lifted by the assessee as per Excise record as the starting point. The Assessing Officer has made fairly elaborate working of the assessee's undisclosed business income running from pages 57 to 73 of the impugned order. As a result of those elaborate calculations the learned Assessing Officer has assessed the assessee's undisclosed business income over various assessment years in the block assessment period in the following manner:- Assessment year 1991-92 Security deposit and other expenses for M/s. Gupta & Co., Hansi made in March, 1991 - Rs. 80,95,000 Assessment year 1992-93 Initial investment in purchase of liquor M/s. Gupta & Co., Hansi (L-14) - Rs. 2,66,250 Profit of Gupta & Co., Hansi (L-14) - - Rs. 18,84,250 Security deposit in March, 1992 for M/s. Mange Ram & Co., Hansi L-14 & other expenses - Rs. 26,89,600 The learned Assessing Officer however, did not make separate addition of Rs. 26,89,600 as above mentioned having regard to the availability of funds to the tune of Rs. 80,95,000 brought for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o., Sirsa (L-2) - Rs. 53,13,700 Other connected expenses - Rs. 7,00,000 Thus the learned Assessing Officer estimated investment in security deposit during the month of March, 1994 at Rs. 2,83,44,200. He reduced therefrom the brought forward assessed investment of Rs. 90,79,000 and accordingly made for assessment year 1995-96 addition of Rs. 1,92,65,200 only. The total undisclosed investment as of March, 1995 amounted to Rs. 2,83,44,200. Assessment year 1996-97 Initial investment in purchase of liquor Chander Bhan Om Prakash & Co., Hansi (L-14) -Rs. 7,04,640 Profit of above concern - Rs. 38,30,900 Initial investment in purchase of liquor Chander Bhan Om Prakash & Co., Hansi (L-2) - Rs. 28,18,200 Profit of above concern - Rs. 56,86,860 Initial investment in purchase of liquor at Ashok Kumar & Co., Sirsa (L-14) - Rs. 10,21,186 Profit of above concern - Rs. 45,48,385 Initial investment in purchase of liquor at Ashok Kumar & Co., Sirsa (L-2) - Rs. 70,72,679 Profit of above concern - Rs. 1,42,16,780 Initial investment in purchase of liquor at Gupta Wine Palace, Hansi - Rs. 1,39,63,614 Profit of above concern - Rs. 8,40,316 The learned Assessing Officer h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the time of search the assessee was found residing in House No. 835/14, Yeti Nagar, Hansi. In the statement recorded during the course of search the assessee stated that the house belonged to Shri Baldev Singh, resident of House No. 118, Block-2, Sirsa and that he was a tenant paying a rent of Rs. 400 per month. Local enquiries revealed that no such Baldev Singh ever lived in any capacity in House No. 118, Block-2, Sirsa. That house belonged to Shri Chaudhary Ram s/o Shri Varam Chand Kamboj who was an agriculturist. Shri Baldev Singh was ultimately found to be resident of Dhani Leharwali, Rania, District Sirsa. In the statement recorded under section 131 on 15th July, 1996 Shri Baldev Singh denied having any immovable property other than agricultural lands and the residential house in the village Leharwali Dhani Rani. He categorically stated that he did not have any immovable property in Tehsil Hansi. He stated that he knew the assessee as a friend since 1978 but never had any business transaction with the assessee. Shri Baldev Singh flatly denied any ownership interest in House No. 835/14, Yeti Nagar, Hansi. The learned Assessing Officer found that there was plenty of other evid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentary evidence to support this claim. Neither any purchase deed nor any rent agreement or rent receipt was produced by the assessee. According to the assessee he was paying a rent of Rs. 400 per month. The house was double storied, covered area 342 sq. meters, located in posh area and involved investment of Rs. 16 lakhs. It was impossible for such house being let out at a meagre rent of Rs. 400. The house was fitted with six ACs and those were also according to the assessee, covered by the rent of Rs. 400 per month. The learned Assessing Officer referred the property to the Departmental Valuation Officer who estimated cost of construction at Rs. 15,91,613. The assessee was requested to furnish account of cost of construction but the assessee did not produce any particulars relating to cost of construction. The assessee also did not refute the findings in the valuation report relating to cost of construction. Based on the valuation report the learned Assessing Officer assessed undisclosed investment in this house at Rs. 4,78,608 for assessment year 1994-95; Rs. 7,95,816 for assessment year 1995-96 and Rs. 3,97,908 for assessment year 1996-97. (B) House No. 1637-UE, Hissar As alr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resh. The learned Assessing Officer made reference to the Departmental Valuation Cell and the Valuation Officer estimated cost of construction at Rs. 6,46,175. The learned Assessing Officer therefore, treated investment of this property as unexplained investment of the assessee. He has assessed cost of construction at Rs. 6,46,175 as valued by the Departmental Valuation Cell and added thereto cost of land estimated at Rs. 2 lakhs on the basis of local enquiries and treated these amounts as undisclosed investment of the assessee for assessment year 1995-96. (D) Plot No. 1490, Sector 46, Gurgaon Enquiry from Estate Officer, HUDA, Gurgaon revealed that the plot above named was purchased in the name of the assessee himself for which the following payments were made by the assessee to HUDA:- 16-4-1996 Rs. 66,528 15-5-1996 Rs. 99,792 20-6-1996 Rs. 12,600 Total Rs. 1,78,920 During the course of proceedings under section 158BC the assessee could not explain source of this investment. The learned Assessing Officer therefore, assessed a sum of Rs. 1,78,920 as undisclosed investment of the assessee for assessment year 1997-98. (E) Investment in plots in Yeti Nagar, Hansi The lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o recorded on oath. He could not tell names of actual owners of those plots. The names of the purchasers could not be found in the voters list. Shri Ram Dhari stated that Shri Satish and Shri Subhash, brothers-in-law, of the assessee approached him for the aforesaid conveyance deeds. The learned Assessing Officer recollected that in the statement given Shri Devinder Singh had also stated that he had been approached by Shri Ram Dhari for preparing drawing 835/14, Yeti Nagar. Moreover, Shri Manohar Singh's statement was recorded on 21st April, 1997 whereby he had stated that certain earth work was carried out in those plots of land for which payment was made from liquor vends on instructions of the assessee. Based on all this material the learned Assessing Officer held that these 7 plots of land had been purchased by the assessee himself in benami names. Thereafter local enquiries were made to find out the market rates of land in Yeti Nagar at the relevant point of time because it was a common practice to make registration deeds at suppressed sale value. Based on such enquiries the learned Assessing Officer estimated the total investment in these plots from undisclosed sources at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f proceedings under section 158BC the learned Assessing Officer asked the assessee to furnish the details of household expenses as well as other expenses made by him during the block period. A specific questionnaire was addressed to him under letter dated 5th December, 1996. The assessee was asked to furnish the details by 10th January, 1997 and when that was not done on 24th January, 1997 it was again impressed upon the assessee to furnish the details. However, no such details were filed. The learned Assessing Officer held that in the absence of particulars being filed by the assessee, his household expenses and other expenses were required to be estimated keeping in view the social and financial status of the assessee; schools/colleges where the children were studying; household and luxury items found at the residence of the assessee; and other factors including certain documents found and seized during the course of search proceedings. The learned Assessing Officer noted that the assessee was a big wine contractor of Hansi having liquor contracts in Haryana State and some places at Rajasthan. He was the owner of several immovable properties. At the time of search on his residenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one truck HR-39-1544 for business purposes. That vehicle was registered in the name of Shri Subhash Munim who was nephew of the assessee and his accountant. Shri Subhash Munim was also shown as a partner in some of the benami concerns as well as owner of some benami plots in Yeti Nagar, Hansi. Shri Himmat Singh employed as a driver of the vehicle aforesaid, stated that he was assessee's employee for which purpose a salary diary had been issued to him under the signature of the assessee. That diary in original was produced and impounded by the Assessing, Officer. Shri Himmat Singh stated that he was assigned the job of carrying liquor stock to the various vends in Hansi, Sirsa, Loharu and also to bring cash from Sirsa. Statement of another driver Shri Beli Ram employed by the assessee for driving NE car also confirmed that Tata 609 belonged to the assessee. Based on this material, the learned Assessing Officer estimated an undisclosed investment of Rs. 5 lakhs in this truck for assessment year 1996-97. For Premier 113 NE he made an addition of Rs. 3,50,000 as unexplained investment for assessment year 1996-97. Cash credits 33. The assessee submitted copies of balance sheets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt year 1992-93 and Rs. 2,20,000 for assessment year 1996-97. Gifts 34. The learned Assessing Officer found that for financial year 1994-95 the assessee had shown gifts of Rs. 30,000 from Shri Satish Kumar and Rs.30,000 from Shri Subhash Chander. The learned Assessing Officer wrote a letter to the assessee to produce these persons to establish the genuineness of the gifts. The assessee was not only not able to produce those persons, he could not even explain his relationship with the alleged donors and the occasion on which the gifts were allegedly given to the assessee. Even the details like date of gift, mode of gift could not be furnished. In the absence of satisfactory explanation, the learned Assessing Officer assessed a sum of Rs. 60,000 as representing assessee's income for assessment year 1995-96. Cash seized 35. During the course of search cash Rs. 1,10,640 was found at 835/14, Yeti Nagar, Hansi out of which Rs. 1,05,000 was seized. Subsequently the assessee stated that the cash was accumulated as earnings from his grocery shop in Village Dhanori, Jind. The assessee stated that his monthly income from shop was Rs. 300 to Rs. 400 per month and the cash was accumulat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 and 6 of documents A-4 and page 7 of document A-5 in para 81 of the impugned order. Pages 4 and 6 of documents A-4 were seized from the pocket of Shri Mange Ram himself during the course of search. It contained record of receipt and payment of cash for financial years 1995-96 and 1996-97. The account was in the name of the assessee and English translation thereof is as follows: Shri Mange Ram Ji 1995-96 12,00,000.00. 1-4-1995 5,00,000.00 23-9-1995 10,00,000.00. 9-4-1995 4,00,000.00 12-1-1996 3,00,045.00. 14-4-1995 1,00,000.00 26-1-1996 25,00,045 5,00,000.00 15-2-1996 (15,00,000.00) 15,91,077.00 31-3-1996 25,91,122 Balance Deposit (4,91,077 Interest up to 31st July, 1996 11,00,000 Profit for 1995-96 being 25% of 44) 40,91,122 40,91,122.00 1996-97 25,91,122.00 Balance from 1995-96 15,00,000.00 22-3-1996 15,00,000.00 26-3-1996 15,99,830.00 6-4-1996 (16,00,000.00 found short by 170.) 10,75,000.00 12-4-1996 75,000.00 21-4-1996 10,00,000.00 15-5-1996 93,40,952 Sikar Shop 1,40,00,000 Capital 99,09,555.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usible reply. It was clear that the assessee was avoiding to give correct reply on those seized papers. The learned Assessing Officer therefore, held that the assessee introduced a sum of Rs. 12 lakhs as on 1-4-1995 as his investment. Thereafter the assessee made further deposits of Rs. 13,00,045. He earned profit of Rs. 11 lakhs and interest of Rs. 4,91,077. Thus there was suppressed receipts of Rs. 28,91,122 for financial year 1995-96. As there were contra entries of withdrawals the learned Assessing Officer held that the assessee was entitled to get deduction of Rs. 15 lakhs against receipt of that amount on 22nd March, 1996. As regards entry of Rs. 15 lakhs dated 26th March, 1996 the learned Assessing Officer treated the same as unexplained investment of the assessee. Thus on the basis of this paper the learned Assessing Officer worked out an undisclosed income of Rs. 55,91,122 for assessment year 1996-97. 39. For assessment year 1997-98 (Financial year 1996-97) the learned Assessing Officer found from those documents that the assessee made an investment of Rs. 37,50,000. That investment also remained unexplained. The learned Assessing Officer added earning on this investment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to explain the entries on this document as well as page 27 of document D-9 seized from the residence of Shri Manohar Singh and the statement of Shri Manohar Singh thereon. In reply dated23rd May, 1997the assessee merely reiterated that the paper contained rough calculations. According to the learned Assessing Officer the assessee had admitted in tape recorded conversation that those were coded entries. It could not therefore, be treated as rough calculations. In the course of tape recorded conversation the assessee had admitted that the entry had been by written by the assessee in his own hands. It was therefore, apparent that the assessee was avoiding to give a clear-cut reply in relation to the entries. From various documents it was seen that the assessee was advancing cash loans from out of available cash. The learned Assessing Officer therefore, held that the assessee out of the cash received of various vends located at Hansi, Jind, Tosham, Bawani Khera, advanced a cash loan of Rs. 70 lakhs to Haryana Tube, Hansi as a loan. The learned Assessing Officer held that the other entries also on page 7 of document A-5 represented loans and advances given by the assessee to different ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not co-operative towards cross-examination and squandered most of the opportunities. Affidavits 43. In the petition before the CIT, the assessee filed copies of 34 affidavits. Some of them from the persons whose statements had been recorded by the learned Assessing Officer and cross-examination was done by the assessee. The learned Assessing Officer found that some of the affidavits were undated, the Oath Commissioner had also not mentioned any particular number or date, the affidavits filed were only photo copies and originals were not produced. Some of the affidavits bore the date much earlier than last date of hearing i.e., 24th June, 1997and there was no reason as to why the affidavits were not produced during the course of hearing accorded to the assessee. In some of the affidavits the deponents had not been identified before attestation by Oath Commissioner. All the affidavits were unauthenticated. No corroborative evidence was furnished by the assessee to substantiate the contents of those affidavits. The learned Assessing Officer therefore, held that the affidavits filed had no evidentiary value and did not merit consideration. Without prejudice the learned Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with cash bundles. (7) List of important documents found from residence. (8) List of partners in various firms. (9) List of persons who were shown as partners with addresses at Dhanauri and Yeti Nagar. (10) Gist of statements of salesmen/partners. (11) Chronology of cross-examination of witnesses. (12) List of partnership deeds found from the residence of the assessee. (13) Order sheet and observation of the CIT with reference to petition filed by the assessee on 24th June, 1997. 45. Aggrieved by the aforesaid order under section 158BC the assessee filed appeal before the Tribunal on 23rd July, 1997. After a large number of adjournments sought by the assessee the appeal was heard by Division Bench comprising of Shri Vimal Gandhi, Hon'ble President as Judicial Member and Shri B.R. Jain as Accountant Member on 3-8-2005, 4-8-2005, 8-8-2005 and 19-8-2005. Thereafter the Hon'ble Accountant Member prepared a draft of the proposed order on assessee's appeal. However, after considerable discussion the Members of the Division Bench could not arrive at an agreed order on assessee's appeal. During the course of discussion the Hon'ble Accountant Member consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on on question of jurisdiction. He requested us to determine the question of jurisdiction for hearing and disposal of the assessee's appeal. 47. After hearing the parties we turned down the assessee's objections in regard to jurisdiction of the Special Bench by a separate order in writing pronounced in the open court on that day. Thereupon Shri Krishan Mahajan, the learned advocate requested for further time to prepare arguments. The request of Shri Krishan Mahajan was strongly objected to by the learned CIT DR. After consideration, the hearing was adjourned to 7th April, 2006. On7th April, 2006 the assessee filed a letter that as the amount of time required by Shri Mahajan for representing assessee's case had not been granted, the assessee had reengaged Shri K. Sampath to represent the assessee and argue his case. The assessee, inter alia, stated that even otherwise Shri Sampath only had in past argued the assessee's case and he will continue doing so. On 7th April, 2006 we heard the concluding arguments from both the sides. The learned CIT DR submitted that she had already filed her written submissions also. Although written submissions from the assessee also had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reated must be strictly construed and there was no room for any intendment or supply of deficiency in respect of a special provision of the Act. The learned counsel argued that there was a plethora of case law to the effect that an assessment under Chapter XIV-B has to be restricted to evidence found during the course of the search. He referred to the decisions in Sunder Agencies v. Dy. CIT [1997] 63 ITD 245 (Mum.); Indore Construction (P.) Ltd. v. Asstt. CIT [1999] 71 ITD 128 (Indore); P.K. Ganeshwar v. Dy. CIT [2002] 80 ITD 429 (Chennai); Morarjee Goculdas Spg. & Wvg.Co.Ltd. v. Dy. CIT [2005] 95 ITD 1 (Mum.) (TM); Napar Drugs (P.) Ltd v. Dy. CIT [2006] 98 ITD 285 (Delhi) (TM)/84 TTJ (Mum.) 151 (sic) and GMS Technologies Ltd. v. Dy. CIT [2005] 93 TTJ (Delhi) 218. The learned counsel argued that a Third Member decision of the Tribunal had the same strength as that of a Special Bench and therefore, equal binding force. In support of this argument, he placed reliance on the judgment of Delhi High Court in the case of P.C. Puri v. CIT [1985] 151 ITR 584. The learned counsel also placed reliance on High Court judgments in N.R. Paper & Board Ltd. v. Dy. CIT [1998] 234 ITR 733 (Guj.); CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of search proceedings. She argued that the statements constituted evidence and any further enquiries conducted in relation to contents thereof would amount to material relatable to evidence found during the course of the search. On the contrary if an admission was made during the course of the search, retraction thereof would not be a material relatable to evidence found during the course of the search. She argued that an item of income to be assessed in block assessment under section 158BC must have a link with something found during the course of the search. It was not necessary that a complete working of undisclosed income or conclusive evidence in relation to undisclosed income should be found during the course of search itself. It was open to the Assessing Officer to supplement evidence found or material gathered at the time of search by subsequent enquiry. It was also open to the Assessing Officer to make an estimate of an undisclosed income after consideration of the material that came to light during the course of search and seizure. In support of these contentions, the learned CIT DR placed reliance on the Tribunal's decisions in ITO v. Sadhu Ram Gupta [1998] 66 ITD 44 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its were filed in response to the Assessing Officer's own enquiries and initiatives. Hence the relevant material was illegally kept out from being considered by the Assessing Officer. 54. The learned counsel further argued that the cross-examination of the Excise Inspector Shri Anil Sharma clearly showed that the Excise Inspector stated again and again that the excise record was correct and excise record did not anywhere mention the assessee Shri Mange Ram's name as licensee of any of the allotted or auctioned liquor vends. The Excise Inspector further stated in his cross-examination that those whose names came on the licences issued by the Haryana Excise Department as successful bidders were "shareholders". He also pointed out that in his experience during his posting at Hansi the excise record was correct. Further, it was mandatory for any person to have receipt of Rs. 50,000 in his hand before he could participate in the bid as nobody could bid under the Excise Department's rules without such a receipt. According to Shri Anil Sharma there was no case where a person could get entry ticket to the auction without the receipt of Rs. 50,000 in his name. On that basis, Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fidavits of these persons on record and the same had to be duly deposited in the department against an official receipt dated June 24, 1997. The date of passing the impugned order was June 27,1997. The impugned order even though passed subsequent to the deposit of those affidavits did not mention anywhere and did not consider their probative value especially when serious allegations had been made about the illegal conduct of the Assessing Officer himself. It was the duty of the Assessing Officer to consider that material and to decide whether to declare those witnesses hostile or not in order to get at the truth for a fair and valid assessment. 56. According to the learned counsel, the Assessing Officer incorrectly held that the assessee Shri Mange Ram was the actual controlling hand of the entire liquor business since the ultimate destination of income and the control of finance was in his hands. The Assessing Officer completely ignored the May 26, 1997cross examination of Shri Manohar Singh wherein he had taken names of various people (and not only that of Shri Mange Ram) who used to bring cash from the various vends to him. He had stated that the cash from the vends at Bawani K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arise at all. That negated the entire basis of the assessment order based on the statement of Shri Manohar Singh. 57. The learned counsel further argued that the Assessing Officer had relied on the statements of the salesmen Pushkar, Jaibeer and Jagdish to show that the assessee was the actual controller of the liquor business at Hansi. The Assessing Officer had ignored completely the affidavits of Jaibeer and Jagdish put on the record on June 23, 1997. The affidavit of Jaibeer stated that he was working as an employee at the Hansi vend along with Shri Mange Ram, the assessee and that the earlier statement given by him was under severe pressure. Similarly Jagdish had given an affidavit retracting his earlier statement and stating that Shri Mange Ram was an employee along with him at the Hansi vend. In his cross-examination the salesman Pushkar stated that he could not tell who were the shareholders of Hansi vend in 1996-97. Further more, 53 witnesses were never summoned for cross-examination despite an application given for their summoning duly filed on23 June, 1997. 58. The learned counsel con tended that the Assessing Officer had ignored the material contradiction in the evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hould be taken in the presence of the accused or in the presence of his Pleader. The Explanation under section 273 of the Code clearly stated that accused included a person against whom a complaint had been made and who was to be discharged when nothing was found against him (section 118). Thus the assessee in this case was a person against whom a complaint had been made or an information laid and hence fell under the category of an accused entitled to the benefit of section 273 Cr.PC. The entire evidence in the assessment inquiry proceedings had been taken in violation of section 273 Cr. PC and hence could not constitute a valid and legal basis for conducting the proceedings against the assessee. 61. During the course of hearing before us the learned counsel objected to additions made for several years on account of security deposits, investments, net profits, casual expenses and such others to the income for various years. The addition on account of security deposit for the different firms had been made on the basis of the information elicited by the Assessing Officer during post search enquiries with regard to several firms, namely, Gupta & Co., Mittal & Co., Mange Ram & Co., G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis of assumption and presumption after culling out some basic information from the excise department. Admittedly all such evidences including the computation of stock position, sales, initial investment for such business was based on hypothetical projections. There was not an iota of evidence recovered during the search to support any of those estimates and projections. Purchases of the order as estimated could never be in cash. The Assessing Officer had over simplified the issue. Even elementary enquiries from bank on this point had not been made. That was not the law for block assessment. It was required to be based on actuals. In actual fact the Assessing Officer deliberately did not proceed against the partnership firms. The aspect of benami was only a presumption of the Assessing Officer. The Assessing Officer never thought it fit and proper to summon the firms with their books of account. Part of the secondary records were recovered from the premises of Manohar Singh. Manohar Singh had confirmed the expenses of the firm in his cross-examination. With that enquiry against the assessee's role ought to have come to end. 62. The learned counsel further argued that the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e telescoped. 63. Regarding the properties alleged to be held by the assessee the learned counsel argued that the Assessing Officer had prefixed his narration with the remarks "During the course of search enquiries". It was, therefore, clear that the entire addition had proceeded only on the basis of search enquiries and not on the basis of any recovery of documents found during the search. It was a well established principle that a block assessment was not meant for making an estimation in such manner. The enquiry could culminate in an addition only if the information flowed out of search. The house at Rania had been purchased on 28-11-1988 for Rs. 18,000 with stamp duty charges of Rs. 2,250. The Assessing Officer went on to add that after purchase the old structure was demolished and a new construction was carried out on that place. The search had not drawn out any paper or documents which could suggest the demolition of the structure and the construction of new one at this place. The Assessing Officer had made the addition on the basis of valuation report obtained after the search which was again not permissible in law. (Refer Indore Construction (P.) Ltd. v. Asstt. CIT [1999] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unsel argued that at the time of search no document with regard to that property was recovered. It was only during enquiries that Assessing Officer found House No. 1637, UE-II, Hissar in the name of the assessee's wife. He thereafter obtained information from the original owner, Pushpa Devi that she had sold that property on24-2-1994to the wife of the assessee for Rs. 3.75 lakhs with stamp duty charges of Rs. 58,125. It was noteworthy that even this witness did not confirm or even make a mention of the fact that it was assessee who had paid the amount or that it was on his behalf that the registration was done in the name of his wife. Smt. Prem Lata had her own sources of income and further funds which had been provided to her by her father and her brothers. She also had her istridhan. The Assessing Officer further went to exaggerate the value of the property by making a reference to Valuation Officer. Such a reference was not permissible in block assessment. Regarding Sunder Hotel Building the learned counsel argued that it was also during post search enquiries, gathered that another property was in the name of Smt. Prem Lata. Here again the Assessing Officer blindly made a re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of the paragraphs there was any mention or reference, of recovery of any material during the search which could go to show that any unexplained monies from whatever source had been expended on children's education. At the end of para 72 the Assessing Officer had drawn a chart where the educational expenses were estimated on account of dress, books, travel, pocket money etc. In a block assessment said estimation had no place. In the latter part of para 72 the Assessing Officer stated that, "documents impounded from Shri Ashok Kumar, Hansi during assessment are regarding fruit purchased by the assessee". Clearly those documents had not been recovered during search of the assessee. There was a discussion of telephone expenses later again in para 73. The Assessing Officer mentioned that the telephone number installed in the residence of the assessee was noted in the Panchnama during search but went on to add that the telephone was not in the name of the assessee but stood in the name of one Shri Ram Nath Ghumla. That being the case and no voucher or document having been recovered with regard to that telephone as belonging to the assessee during the search, no addition on that ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nary balance sheet was examined when filed with a regular return. By its very nature the block assessment took in its hold only such balance sheets which were the basis of seized material. Those three additions were not such which were discovered during the search, and therefore, could not had been taken into cognizance for completing the block assessment. The Assessing Officer had relied upon the Apex Court decision in Sreelekha Banerjee v. CIT [1963] 49 ITR 112. That case was not a case of block assessment. The onus on the assessee to prove the identity, creditworthiness and genuineness of transactions in a block assessment could extend only to such cash credit as are ferreted out by search operation. For assessment year 1995-96 the Assessing Officer added Rs. 60,000 on account of two gifts received from Satish Kumar and Subhash Chander. The factum of those gifts had been noticed from the details in the capital account filed during the assessment proceedings. In such circumstances the evidence as collected was not germane to the block assessment. 66. The CIT DR argued that in the instant case the learned Assessing Officer had painstakingly conducted elaborate enquiry and he had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... argued that the statements were originally given by those persons before various Income-tax authorities who were in law entitled to record their statements. The statements thus recorded constituted valuable evidence admissible in law. Some of the statements were in the nature of admission/confession. There was not an iota of material brought on record except wild allegations that the statements as recorded by various Income-tax authorities had not been given in a free and congenial manner. Those statements had been recorded by different Income-tax authorities at difference places at different point of time. The assessee had alleged that the department had crafted a conspiracy against him. There was no reason as to why so many officers of the department should proceed against the assessee by adopting unjust and unfair means oblivious of their office and duty. That way it would be easy for any tax evader on being caught to allege a conspiracy. The fact of the matter was that none of those officers had any interest in the assessee except to discharge of their official functions and duties. In support of this contention, the learned CIT DR relied upon a large number of Court pronouncem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents. She further argued that self-serving documents/statements being relied upon by the assessee were required to be corroborated, otherwise the same were liable to be ignored. She relied upon the judgment of the Hon'ble Supreme Court in the case of CIT v. Durga Prasad More [1971] 82 ITR 540 that it was neither a rule of prudence nor a rule of law that the statement made in an affidavit which remains uncontroverted must invariably be accepted as true and reliable. 68. The learned CIT DR argued that the assessee was unnecessarily harping on the fact that his name had not been mentioned as licencee in the vends allotted or auctioned to him by Haryana Excise Department. The affidavits of the parties insofar as the same mentioned that the assessee was not a licencee did not help the assessee. The fact of the matter was whether or not it was the assessee who was the real owner. The learned CIT DR argued that the statements of the parties had to be considered in totality and it was the outcome of the entire material gathered by the Assessing Officer that was required to be seen. 69. The learned CIT DR strongly opposed the objections of the assessee against post search enquiries ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 973] 90 ITR 271. 71. In his rejoinder the learned counsel for the assessee argued that as far as the statements of the assessee Shri Mange Ram were concerned, there was no retraction. The statements of the assessee after search were recorded not under section 132 but under section 131 of the Act. The statements recorded under section 131 were therefore, not in continuation of the search. Accordingly only the statements recorded during the course of search could be used for the purpose of block assessment. The assessment under section 158BC was aimed at utilization of evidence found as a result of search. That implied that the material was available before search commenced and thereafter found or discovered during the course of search. That could not be said of the statement recorded during the course of the search and in no case the statement recorded after the search. Be that as it may there was no retraction at any point of time from the assessee. The learned counsel pointed out that the reliance placed by the learned DR on the visiting card of the assessee was not correct as appearing on page 226 of the departmental paper book. Telephone No. 50497 noted on the visiting card was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad been made in the first instance as in the case of the assessee security deposits and licence fee had been paid by persons other than the assessee himself. Unless the department first could establish that the licence fee was paid or security deposit was paid by the assessee only, there did not arise any question of assessment of an undisclosed income in the case of the assessee. Lastly, the learned counsel reiterated that the additions in the, course of Block Assessment, were required to be made only on the basis of evidence found during the course of search. For that purpose he relied upon the judgments in CIT v. Ravi Kant Jain [2001] 250 ITR 141 (Delhi); CIT v. Rajendra Prasad Gutpa [2001] 248 ITR 350 (Raj.) and CIT v. Smt. Usha Tripathi [2001] 249 ITR 4 (All). The learned counsel also urged that we should delete all the additions made by the Assessing Officer on the basis of wild guess or estimates. Reference was made to Chitra Devi v. Asstt. CIT [2002] 77 TTJ (Jodh.) 640; Bajrang Textiles v. Dy. CIT [2004] 3 SOT 115 (Jodh.) and Pankaj Dahyabhai Patel (HUF)v. Asstt. CIT [1999] 63 TTJ (Ahd.) 790. The learned counsel also objected to the additions made on the basis of department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or information as are available with the Assessing Officer and relatable to such evidence. As prima facie during the course of search against that assessee no evidence, material or information was found or discovered during the course of or as a result of the search, the Tribunal did not have an occasion to indepth analyze the meaning and scope of the phraseology, "such other materials or information as are available with the Assessing Officer and relatable to such evidence". 74. In the case of Napar Drugs (P.) Ltd. v. Dy. CIT [2006] 98 ITD 285 (Delhi) the Third Member was concerned with the question of inferences that could be drawn from the evidence and material found during the course of search and enquiries made subsequently. Thus the discussion in that judgment is restricted to the facts and circumstances of that case alone. As Hon'ble President has now specifically referred to us to look into the meaning and scope of the phraseology, we propose to go into this aspect in greater detail. 75. The Finance Act of 1995 inserted a new Chapter XIV-B in the Income-tax Act. It provided a new concept for assessment in relation to searches conducted under section 132 of the Act or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n cases where a search was initiated or requisition under section 132 was executed on or after 1-7-1997, a time-limit of two years has to be reckoned with instead of one year. Prior to insertion of Chapter XIV-B, the estimate of the undisclosed income was being made in a summary manner under section 132(5) and 132(7). Chapter XIV-B has substituted the earlier provisions of section 132(5) and with an extension of scope. Soon after the enactment of the provisions of Chapter XIV-B, a controversy arose as to whether the block assessment was a substitute of regular assessment order or the block assessment was in addition to regular assessments. This controversy or doubt has been set at rest by clarification in the Memorandum explaining the provisions of Finance (No. 2) Bill, 1998 in the following words:- "To set at rest the controversy as to whether block assessment subsumes the regular assessments or independent of the latter, the Bill proposes to clarify that block assessment shall be made in addition to the regular assessment of previous years included in the block period. Further, it proposes to provide that income assessed in regular assessment shall not be included in the block ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Bom.) and CIT v. Ravi Kant Jain [2001] 250 ITR 141 (Delhi). 77. As a matter of fact the debate as to whether the computation of undisclosed income in an order under section 158BC should be restricted to the undisclosed income discovered as a result of search only stands already concluded by the amendment to section 158BB by the Finance Act, 2002 with retrospective effect from 1-7-1995. Prior to the amendment the provisions of section 158BB(1) stood as under:- "158BB.(1) The 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 or requisition of books of account or documents and such other materials or information as are available with the Assessing Officer ...." After amendment with retrospective effect the provisions of section 158BB(1) are required to be read as under:- "158BB.(1) The 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 this Act, on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ajasthan High Court have explained the gamut of block assessment in the following words:- "We are of the opinion that so far as the contention of learned counsel for the appellant that the Assessing Officer has necessary jurisdiction to resort to best judgment assessment in proceedings under section 158BB, the correctness of it cannot be doubted. However, under the scheme of the provisions for block assessment, it is apparent that it relates to assessment of 'undisclosed income' of the assessee excluding the income subjected to regular assessment in pursuance of the returns filed by the assessee for such period. It is also apparent from the perusal of section 158BB that the returns are also required to be filed in pursuance of the notice under section 158BC(a) and the assessment is to be framed on that basis in the light of material that has come into possession of the assessing authority during the course of search which is the foundation of the proceedings That being so, the correctness or otherwise of the returns filed in pursuance of the notice under section 158BC(a) has to be examined with reference to the material in the possession of the assessing authority h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in the return but deductions have been claimed wrongly and undisclosed income. The Assessing Officer while dealing with regular assessment is free to examine the veracity of the return as well as the claims made by the assessee with regard to exemption and/or deduction. Those can be considered under section 143(3) of the said Act of 1961, whereas the third income being 'the undisclosed income' is taxed and by way of block assessment resulting in search and seizure. Such block assessment is made under section 158BA. The logic behind the two different modes of assessment, according to us, is that concealment of income and claiming deduction or exemption of taxes in respect of a disclosed income cannot be treated at par. The former is an offence which goes to the root of the matter and the other is on the basis of the causes shown by the assessee where the Assessing Officer is free to accept the justification shown or reject the same. The said two types of cases cannot be treated at par." 82. In the case of CIT v. Dr. M.K.E. Memon [2001] 248 ITR 310 (Bom.) the assessee, a doctor by profession, had income mainly from examination fee charged for issuing medical fitness certif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e adverse impact of the Gulf war. In the present matter, the Assessing Officer has not considered the fact that the fees of the professional in the ordinary course could not have remained static for the entire period commencing from April 1, 1986, to December 11, 1996. The Assessing Officer has also not considered that the assessee used to take a deposit of a fixed amount from each candidate. That on screening, if the assessee found the candidate to be unfit he used to retain Rs. 100 and return the balance amount. It is pointed out to us that if on a preliminary examination a candidate was suffering from a serious ailment then there was no necessity of the candidate undergoing further tests and in which event the assessee used to retain Rs. 100 and return the balance amount. None of the explanations have been considered by the Assessing Officer and, therefore, the Tribunal held that the estimation of income by the Assessing Officer was without any evidence/basis. This is a pure finding of fact. We also agree with the said finding." 83. In the case of CIT v. Ravi Kant Jain [2001] 250 ITR 141 (Delhi), the assessee was engaged in the business of earning commission for making arrangem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on this document the Assessing Officer proceeded to assess undisclosed turnover of the assessee for the entire block period and an addition of Rs. 3.40 crores was made. On these facts Hon'ble Bombay High Court held as under:- "It is well-settled that in cases where material is detected after search and seizure operations are carried out, the Assessing Officer is required to determine the undisclosed income. In such cases additions are generally based on estimates. In matters of estimation some amount of latitude is required to be shown to the Assessing Officer particularly when relevant documents are not forthcoming. However, it does not mean that the Assessing Officer can arrive at any figure without any basis by adopting an arbitrary method of calculation. In the present matter, A3, A4 and A6 nowhere records the turnover of the assessee as found by the Tribunal and yet on the wrong basis of the incoming and outgoing cash transactions, the Assessing Officer has arrived at the turnover. Moreover, the peak investment was Rs. 40,14,806 for three months. However, there is no material seized to justify any figure to be included for a period earlier to the said period of three ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sits were found in the regular cash books maintained by the assessee. When the entries were found in the books of the assessee, the assessee could not explain the genuineness of the deposits, this amount was never disclosed, it is an undisclosed income of the assessee. The Tribunal has committed an error in holding that as the entries were found in the regular books of account, therefore, it cannot be treated as undisclosed income. The view is contrary to the provisions of Chapter XIV-B of the Income-tax Act, 1961. In Chapter XIV-B of the Act, special provisions for assessment in search cases have been given and if any amount of income has not been taxed and during the course of search, if some 'undisclosed' income is found on the basis of material seized, that should be treated as undisclosed income as per the scheme of special assessment under the aforesaid Chapter." Similar view has been taken by Hon'ble Rajasthan High Court in the case of CIT v. Ajay Kumar Sharma [2003] 259 ITR 240 where the assessee had not filed the returns of income that had already fallen due until the date of search proceedings. On these facts Hon'ble Rajasthan High Court held that merel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he date of search and not subsequent to it. The object underlined in sub-section (3) is very clear. If the intention of the assessee is to pay normal rate of tax, he would disclose all the income/transaction in his/her books of account. But if his/her intention is to evade the tax, then he/she would not disclose the income/transaction in his/her books of account thereby will enjoy the income without paying any tax on it. It is only when he/she is subjected to search operation, he/she would make entry in his/her books subsequent to date of search to avoid higher rate of tax at 60 per cent. Such entry, i.e., an entry made subsequent to the date of search is of consequence. It is for this reason that the words used in section 158B(b) 'would not have been disclosed' are very significant. This clearly has a nexus with the intention of the assessee in dealing with his/her property." The Hon'ble High Court, therefore, held that it was a clear case of income from undisclosed sources that would not have been disclosed for the purposes of the Act, the income in question had to be taxed as per the provisions applicable to block assessment read with section 113 of the Act treating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le opinion, it is not necessary that during the course of the search foolproof material/evidence indicating undisclosed income should be found. That is not the true interpretation of the judgment of the Hon'ble jurisdictional High Court in the case of Ravi Kant Jain. As long as during the course of the search certain material/evidence that may lead to a legitimate enquiry into the genuineness of the transaction alleged by an assessee and undisclosed income is detected as a result of such legitimate enquiry during the course of proceedings under section 158BC it would amount to income computed, 'on the basis of evidence found as a result of search or requisition of books of account or other documents and such other materials or information as are available with the Assessing Officer and relatable to such evidence' within the meaning of section 158BB(1) of the Act. It is important to bear in mind that computation of income under section 158BC to be made not exclusively on the basis of evidence found as a result of search but such other materials or information also available with the Assessing Officer relatable to that evidence." Indeed there should not be any doubt on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e which has not been or would not have been disclosed for the purposes of the Act. The words, "which has not been or would not have been disclosed" are the key words that control assessment of undisclosed income as a result of search. It, therefore, follows that it is not every article or thing or every piece of information found during the course of search that can be called "evidence found as a result of search". It is only that which has not been or would not have been disclosed alone constitutes evidence found as a result of search. Thus, at every point where any money, bullion, jewellery or other valuable articles or thing is found during the course of search the question is required to be answered, does it constitute what has not been or would not have been disclosed for the purposes of the Income-tax Act. There is not much problem in arriving at what has not been disclosed in relation to the returns of income that have already been filed as on the date of the search in question. If any money, bullion, jewellery or other valuable article or thing or any income is required to be disclosed for the purposes of Income-tax Act in any return of income but not disclosed, this would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the Income-tax Act have a dual character. They are both agencies of investigation made into the incomes of assessees and they are also quasi-judicial authorities assessing the liabilities of the assessees to payment of income-tax. Under section 142(2) of the Act the Income-tax Officer may make such enquiry as he considers necessary for the purpose of obtaining full information in respect of the income or loss of an assessee. Under section 143(3) of the Act, the Income-tax Officer does not only hear such evidence as the assessee may produce or as he may require to be produced, but also takes into consideration 'all relevant material which he has gathered' for the purpose of making an assessment. While the word 'evidence' may recall the oral and documentary evidence as may be admissible under the Indian Evidence Act, the use of the word 'material' shows that the Income-tax Officer not being a court can rely upon material which may not be strictly evidence admissible under the Indian Evidence Act for the purpose of making an order of assessment. Courts often take judicial notice of certain facts which need not be proved, while administrative and quasi-judici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r information in any manner he likes and utilise it against the assessee even if it does not in all respects satisfy the requirements of the Indian Evidence Act. The very nature of the proceedings conducted by him necessitates the use of such media for collecting information as he may not like to disclose to the assessee, and he is perfectly within his right if on enquiry by the assessee he refuses to disclose the source of his information. But if he makes up his mind to reject the evidence of the assessee on any grounds which appeal to him to be sufficient for that purpose, it is but fair and just that he should acquaint the assessee with those grounds so as to enable him to disabuse his mind, if possible, by explaining them away as baseless or untenable. It is, however, impossible to hold that if once the assessee under sub-section (3) of section 23 leads evidence, whether reliable or unreliable or produces any document, whether genuine or fictitious, the Income-tax Officer must base his decision on that evidence unless he is in a position to, bring on the record any definite evidence to the contrary." 94. Reference in this respect may be made also to judgments in Gopinath Naik ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of law on this subject has, in our opinion, been fairly and rightly stated by the Lahore High Court in the case of Seth Gurmukh Singh v. Commissioner of Income tax, Punjab. In this case we are of the opinion that the Tribunal violated certain fundamental rules of justice in reaching its conclusions. Firstly, it did not disclose to the assessee what information had been supplied to it by the departmental representative. Next, it did not give any opportunity to the company to rebut the material furnished to it by him, and lastly, it declined to take all the material that the assessee wanted to produce in support of its case. The result is that the assessee had not had a fair hearing. The estimate of the gross rate of profit on sales, both by the Income-tax Officer and the Tribunal, seems to be based on surmises, suspicions and conjectures." Reference in this respect may also be made to the judgments in the case of Omar Salay Mohamed Sait v. CIT [1959] 37 ITR 151 (SC); Umacharan Shaw & Bros. v. CIT [1959] 37 ITR 271 (SC) and a host of High Courts judgments thereafter. In nutshell, while the Assessing Officer is not bound by rules of evidence, he is bound by the principles of na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gathered by the Assessing Officer to reasonably reconstruct the whole picture would be materials or information relatable to such evidence. It, therefore, follows that while it is not open to the Assessing Officer to investigate new items of undisclosed income, he is entitled to collect further materials or information so as to bring to the logical conclusion evidence found as a result of search. The expression "materials" or "information" are of wider import than "evidence" and as far as the admissibility of such materials and information is concerned, there is no distinction to be drawn between the assessment under the regular provisions of the Act and block assessment. The burden of proof, however, on the Assessing Officer may be greater in block assessment proceedings than in regular assessment proceedings, in view of the fact that while regular assessment is made of income, block assessment is made of undisclosed income. While completing the block assessment the Assessing Officer can include in his computation of undisclosed income only that undisclosed income that the assessee did not disclose in any income-tax proceedings the assessee was bound to do so or the income that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation relatable to such evidence, First and foremost in this regard is assessment of undisclosed income made by the Assessing Officer from assessment year 1993-94 to assessment year 1997-98 on account of the assessee having carried on the business of IMFL and country liquor. The learned Assessing Officer has annexed to impugned Block assessment order Annexure-7 enlisting documents related to business found at the residence of the assessee. These included partnership deeds of the firms, such as M/s. Mittal & Co., M/s. Shankar Lal & Co., M/s. Gupta & Co., M/s. Chander Bhan Om Prakash & Co. and M/s. Ashok Kumar & Co. According to the learned counsel for the assessee none of these partnership deeds mentioned the assessee as either partner or proprietor of those firms. Hence discovery of these partnership deeds at the residence of the assessee did not amount to an evidence found at the residence of the assessee. According to the Assessing Officer discovery of so many partnership deeds at the residence of the assessee was a pointer towards the ownership interest of the assessee in liquor business of those firms. Non-mention of the assessee's name in those deeds was only to be expecte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found at the residence of the assessee. Copies of various announcement of excise policy, news items, copies of various maps of godowns and various vends were also found at the residence of the assessee. From the residence of the assessee a stock chart and the working of stock done by the assessee himself in his own hand writing were found. The assessee calculated stock position as on14-6-1996with respect to country liquor vends. There were 7 truck loads available, 9 truck loads were due to be received from Yamunanagar distillery and 7 truck loads were to be received from Hissar. That stock was required to be sold by30th June, 1996being the last date of license. There were other documents found wherein the stock position of various liquor vends on various dates were worked out in the hand writing of the assessee himself. We see substance in the contention of the learned Assessing Officer that discovery of all these documents during the course of search at the residential premises of the assessee was evidence towards the assessee carrying out liquor business. 98. Besides, the Assessing Officer has also relied upon the various facts found during the course of the search. On search o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses pointed to the assessee as residing in the house owned by him. According to the learned Assessing Officer in the preliminary statement recorded during the course of the search the assessee and his wife denied having any immovable property. It became clear that like liquor business, the assessee had also acquired immovable properties in benami names. Accordingly the Assessing Officer carried out extensive enquiry and has brought to assessment a number of undisclosed investments in immovable properties made by the assessee in benami names of his wife, his relatives and persons belonging to his home village Dhaneri. The learned Assessing Officer has, however, not relied upon any seized document or any statement recorded during the course of assessment proceedings or any other informations/material gathered during the course of search proceedings itself and admittedly the enquiries in respect of a number of other immovable properties were made by the Assessing Officer only during the course of post search enquiry. We shall revert to this aspect and various other additions made by the Assessing Officer while considering the question of quantification of undisclosed income of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ument that assessee's name does not appear anywhere is hardly a defence. At this juncture it may be pointed out that the Assessing Officer has recorded the statements of certain officers of the Excise Department with a view to demonstrate that excise records cannot be taken as sacrosanct. At the cost of repetition we may again point out here that in an income-tax assessment proceedings and as we have seen even in the block assessment proceedings under section 158BC, the Assessing Officer is not fettered by the technical rules of evidence. 102. During the course of hearing before us it has been vehemently argued on behalf of the assessee that the impugned order under section 158BC has been made by the Assessing Officer in collusion with a liquor contractor who was rival of the liquor contractor with whom the assessee was employed. For that purpose the Assessing Officer pressurized the witnesses and forced them to tender evidence against the assessee. Suitable statements from Shri Manohar Singh were obtained after promising him favourable treatment in his income-tax assessment proceedings in lieu of his testimony against the assessee. Fact of the matter was that Shri Manohar Sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not been brought on record. There is ample authority, as enumerated in paragraph 68 of this order that in such circumstances it is open to rely upon the first statement and to ignore the subsequent statement. Further we may mention here that it is not as if the entire case of the Assessing Officer is based upon these statements alone. In the instant case he has brought on record numerous facts and circumstances and as we have noted earlier the law on the subject is that when several facts and circumstances are brought together each may lend to or subtract from the colour of other facts and circumstances and it is the cumulative weight of all the facts and circumstances and the total picture as emerging that is required to be seen. 103. On a comprehensive consideration of the impugned order under section 158BC and its annexures, the material relied upon by the Assessing Officer as referred to in the impugned order and as enumerated in the annexures thereto, on perusal of the paper books we are of the view that viewing the picture in totality, a conclusion can be drawn with reasonable certainty that the assessee Shri Mange Ram was not an employee of any liquor contractor but was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evious years, the time by which the incomes from such sources become assessable, such persons are not traceable. At the time of assessment in these cases, either the accounts are not available or they are grossly incorrect or incomplete. Thus, even if assessments could be made on ex parte basis, it becomes almost impossible to collect the tax found due, either because it becomes difficult to establish the identity of the persons and trace them or because of the fact that the persons in whose names contracts are taken are men of no means." [170 ITR (Statute) 187] 104. The learned Assessing Officer has supported his assumptions in this regard by recording the statements of Shri R.K Daggar, who was posted as ETO at Hissar from May, 1994 to June, 1996 and Shri Anil Sharma, who was posted as Excise Inspector, Hansi Circle. Both these persons were concerned officers for the period 1994 to 1996. The learned Assessing Officer also wrote a letter to DETC, Hissar. Particulars of information supplied by them have been discussed by the learned Assessing Officer and briefly enumerated by us in paragraphs 21 and 22 of this order. During the course of hearing before us the learned counsel for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 158BD of the Act. On consideration we do not see much substance in these contentions. The provisions of section 158BD are intended to apply where the person from whom any books of account, other documents or asset seized during the course of a search is other than the person to whom any undisclosed income is ascribed on account of such seizure and if the Assessing Officer having jurisdiction over the person searched is also other than the Assessing Officer having jurisdiction over the persons to whom undisclosed income belongs then certain procedure is envisaged. In the instant case both the assessee as well as Shri Manohar Singh were assessed in the jurisdiction of one and the same Assessing Officer. The assessee having been himself subject to search operation under section 132 had already been served with a notice under section 158BC. Under these circumstances there was no requirement to initiate parallel proceedings under section 158BD in relation to material seized from Shri Manohar Singh, more so when the Assessing Officer was already seized with the assessment of the very same undisclosed income on the basis of evidence found as a result of search in the case of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material point of time, more so when one of the two is supposed to be cashier. If other things such as, house where the assessee resided, equipments, gadgets and other things installed, overall standard of living, various investments in immovable and movable properties as brought out in the impugned order are taken into account, then the disparity in the amount of cash found at the residences of Shri Manohar Singh and the assessee gets reduced to insignificance. As to the documents found at the premises of Shri Manohar Singh, the learned Assessing Officer found that the summary sheets written on daily basis were equivalent to loose pages of the cash book of the business. These summary sheets were prepared by Shri Manohar, Singh on the basis of various loose papers handed over to him on daily basis by salesmen of various liquor vends. On the left hand side column of each summary sheet, first entry is opening cash balance followed by all cash receipts on account of sales of the day etc. On the right hand side outgoings purchases/expenses, loans given etc. are written. Significantly the household expenses of the assessee also find mention as outgoing on the right hand side of these s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lected against sale of liquor at various vends on day-to-day basis. For example, the cash of Rs. 75,000 in the slip dated26-6-1996consisted of cash of Barsi Gate vend as was clear from the narration "English Wine". The learned Assessing Officer has discussed in the impugned order elaborately the entire modus operandi as regards purchase of liquor, sale of liquor at various vends, cash collection of the vends and the accounting done in respect of those transactions. The assessee's hand on summary sheets shows that the assessee was exercising control over daily business transactions through these summary sheets. Some of these summary sheets bore the name of the assessee against cash handed over to him. Shri Manohar Singh explained that after 10-15 days the documents were being handed over to the assessee and that was the reason that daily sale reports and summary sheets of 10-15 days immediately preceding the date of search only were found from the residence of Shri Manohar Singh. It was stated that the assessee in turn passed on the papers to his Munim. From the documents seized at the residence of the assessee the learned Assessing Officer further found that the assessee was ke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the impugned order in any context, was afforded to the assessee and thereafter either nothing contrary to the earlier statements emerged from the cross-examination by the assessee or in most cases the assessee did not even come forward to cross-examine the concerned persons. According to the learned Assessing Officer even the lengthy cross-examination of Shri Manohar Singh, who gave graphic account of the assessee's business modus operandi with reference to cash and documents found at his residence, the cross-examination taken by the assessee which lasted two days, did not result into any material so as to dilute the impact of the statement of Shri Manohar Singh as originally recorded. Similarly, the learned Assessing Officer confronted the assessee with various seized documents. The assessee did not reply to many of the significant aspects of the seized documents or he gave evasive reply and kept on changing his stand in regard thereto from time to time. 107. The learned Assessing Officer has placed reliance on a police FIR lodged by the assessee himself on 15-4-1996. In the FIR the assessee stated that he had taken vends at Hansi for the financial year 1996-97 in the benami ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration number of Maruti Gypsy, the colour of other cars and names of several persons who came along with Sardar Dalip Singh and, therefore, how could the assessee commit any error so as to call himself the owner of business in the name of M/s. Mittal & Co. As to the notings made by him on the documents found from the residence of Shri Manohar Singh, the assessee stated that he was doing so at the behest of Shri Sat Pal, partner. Shri Sat Pal in turn claimed to be an employee of the assessee and even a daily sales report bearing signature of Shri Sat Pal was found amongst the seized documents. The assessee could not even explain as to how the household expenses of the assessee found place in the summary sheets found at the residence of the assessee. Even salary of the driver of a car bearing No. HR-9B-0004 was found debited in summary sheets. The driver in his statement specifically stated that he was employed by the assessee to drive the assessee's car and sometimes the assessee's jeep. At the same time the name of the driver Shanker was found as a partner in liquor firms of L-2 and L-14A vends in Bawani Khera/Tosham for 1996-97. Expenditure on Sunder Hotel being constructe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ouse at a monthly rent of Rs. 400. When Shri Baldev Singh was contacted he denied ownership of the property as well as the air-conditioners. When assessee was confronted with the statement of Shri Baldev Singh, he shifted his stand and stated that the air-conditioners were provided by Shri Sat Pal. In his statement Shri Sat Pal deposed that he had no car, no house nor any agricultural income and he was staying in night at liquor vend because he had no residential house to stay. In the preliminary statement the assessee stated that none of his family members had gone on foreign tour. Later on, he admitted that his daughter had visited Singapore and Malaysia on her educational tour. Regarding source of educational tour the assessee stated that he had been given a reward of Rs. one lakh by Shri Sat Pal. In his statement recorded on 30th July, 1996 Shri Sat Pal stated that he was only an employee and denied having given any salary/reward or award to the assessee. On denial by Shri Sat Pal the assessee changed his statement on 10th June, 1997and stated that the amount was given to him by Shri Chander Bhan. As to the partnership deeds found at his residence the assessee had in his prelim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nses for Hansi were taken in the name of the firm M/s. Mange Ram & Co. All these circumstances are suggestive of the assessee's involvement in liquor trade as a big time operator. 110. During the course of hearing before us the learned counsel for the assessee vehemently argued that no attempt whatsoever was made by the Assessing Officer to enquire into the various partnership firms and the books of account of those partnership firms. The Assessing Officer should have based his assessment on the basis of books of account and other records of various firms rather than proceeding to estimate business income on the basis of formulas devised by him for that purpose. On consideration of the matter we see no merit in these contentions. During the course of search as well as during the course of enquiry thereafter, the learned Assessing Officer has made time consuming efforts to track the partners as mentioned in the excise records for various liquor licenses. With considerable efforts, the learned Assessing Officer could record the statements on oath/solemn affirmation of a large number of such partners and also afforded the assessee an opportunity to cross-examine them. A large num ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ., M/s. Mittal & Co., M/s. Gupta & Co., Gupta Wine Place, M/s. Chander Bhan Om Prakash & Co. etc. We find that the Assessing Officer has brought on record considerable material to support his conclusion that the assessee was carrying out similar business during the period relevant to assessment year 1997-98 at Bawani Khera/Tosham in the name of the concern M/s. Shanker Lal & Co. At the same time we are of the view that the finding of the learned Assessing Officer that assessee carried on the business during the previous year relevant to assessment year 1996-97 in the name of a concern M/s. Ashok Kumar & Co., Sirsa and during the previous year. relevant to assessment year 1997-98 in the name of M/s. Ved Prakash Darshan Singh & Co., Jind is based on relatively thin material. In respect of M/s. Ved Prakash Darshan Singh & Co., Jind the Income-tax Authorities did not even find, unlike other concerns, copy of partnership deed during the course of the search at the residential premises of the assessee. As respects Ashok Kumar & Co., Sirs a, copy of partnership deed was found during the course of the search at the residential premises of the assessee. However, in both the cases of Ashok K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing that almost the entire material or information gathered by the Assessing Officer by way of post search enquiry constitutes materials or information relatable to evidence found as a result of search to the effect that the assessee was carrying out an entirely undisclosed liquor business in the names of various concerns during the block period. The material or information gathered by the learned Assessing Officer on such aspects, as purchases of desi liquor and IMFL, security deposits and license fee paid for various authorizations from Excise Department, assessee's investments in immovable properties, acquisition of movable assets, household expenses etc. are all material or information that were essential for the Assessing Officer to compute the assessee's undisclosed income from his undisclosed liquor business in the names of various concerns during the block period. We also accept that in spite of so much bf material and information having been gathered by the learned Assessing Officer, the Assessing Officer found himself obliged to resort to certain estimate and guess work in the absence of books of account or accounts kept in any other manner or any other relevant e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and information, for the purposes of estimation of income either incomings should be added up and treated as the source whence outgoings were made or the outgoings in aggregate should be treated as the indication of income. The assessment of both, even though legally permissible is, therefore, often required to be avoided so as to arrive at a just and fair assessment. Conscious of this basic aspect the learned Assessing Officer has himself allowed the assessee credit of the assessee's security deposits in an earlier year and assessed in the subsequent year only incremental accretion in the security deposits made in the names of various concerns. However, he has not followed the same approach in respect of other items of investments and expenditure. In our opinion, for the purpose of a just and fair assessment of the assessee's undisclosed income, only the incremental accretion in the assessee's investments/assets/ expenditure should be assessed in a subsequent year with the rider that the funds wasted in household expenses or blocked in immovable and movable assets would obviously be not available for fresh investments or expenditure in the subsequent years. (ii) The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned Assessing Officer has made certain additions on account of seized documents. The same have been discussed by the learned Assessing Officer in paragraph 81 of the impugned order. We find that the additions made by the learned Assessing Officer are based entirely upon his interpretation of entries made in the seized documents. Based on the document A-4, pages 4 and 6, seized from the pocket of the assessee himself during the course of the search, the learned Assessing Officer has worked out an addition of Rs. 55,91,122 for assessment year 1996-97 and Rs. 41,38,260 for assessment year 1997-98. In addition, the learned Assessing Officer has made an addition of Rs. 1,67,60,000 as the assessee's income from undisclosed sources for assessment year 1996-97. Similarly, based on document A-5, page 7, the learned Assessing Officer has made an addition of Rs. 2,55,00,000 for assessment year 1997-98. Thus, huge additions have been made by the learned Assessing Officer on the basis of the seized documents. He has, however, not been able to corroborate his interpretation of these seized documents by any material or information gathered by him during post search enquiry. There is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer has assessed undisclosed income from assessment year 1987-88. He does not have any evidence found as a result of search or any material or information relatable to such evidence gathered subsequently as respects the assessee's liquor business prior to assessment year 1991-92. We are, therefore, of the view that assessment of undisclosed income over and above undisclosed income as per return under section 158BC filed by the assessee himself for assessment years 1987-88, 1988-89, 1989-90 and 1990-91 is not called for. The additions made by the learned Assessing Officer in relation to those assessment years are, therefore, deleted. (v) On the basis of considerable material brought on record by the learned Assessing Officer in relation to residential House No. 835/14, Yeti Nagar, Hansi and after having heard at length the arguments of the parties in relation thereto, as elaborately discussed by us in the earlier part of this order, we uphold the assessment of undisclosed investment in that house property as a component of assessee's undisclosed business income for assessment years 1994-95, 1995-96 and 1996-97. We also uphold the findings of the learned Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same has of course to be included while working out the assessee's business income based on investments, acquisitions and expenditure. 114. We now proceed to determine the assessee's undisclosed income of the block period keeping in view the various observations made by us and modifications noted by us in paragraph 113 above. Here we repeat that we have already restored the question of the assessee's undisclosed income, if any, in respect of liquor business named and styled as M/s. Ashok Kumar & Co., Sirsa for assessment years 1995-96 and 1996-97 and in the name of M/s. Ved Parkash Darshan Singh & Co., Jind for assessment years 1996-97 and 1997-98, to the file of the learned Assessing Officer for decision afresh. Subject to such further income, if any, as the Assessing Officer may henceforth determine in this behalf, the assessee's undisclosed income for block period is computed as under:- Assessment Year 1987-88 (Rs.) Undisclosed income as per return filed under section 158BC 16,800 Assessment Year 1988-89 Undisclosed income as per return filed under section 158BC 16,929 Assessment Year 1989-90 Undisclosed income as per return filed u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansi. 2,41,070 Total: 1,13,62,333 Less: Security deposit assessed for Assessment year 1991-92 80,75,000 Less: Assessed income of assessment year 1993-94 after excluding household expenses & Investment in house at Rania. 11,93,010 92,68,010 (-) 92,68,010 20,94,323 Note: No separate profit from M/s. Gupta & Co. L-2, L-13 and L-14, Hansi is assessed as the same is treated to have been included in various investments and expenditure during the year. Assessment Year 1995-96 Security deposit for M/s. Chander Bhan Om Parkash & Co. L-14, Hansi. 1,10,71,700 Security deposit of M/s. Chander Bhan Om Parkash & Co. L-2, Hansi. 20,57,900 License fee of M/s. Chander Bhan Om Parkash & Co. L-13, Hansi. 1,50,000 Investment in License fee of M/s. Gupta Wine Palace, L-1, Hansi. 5,00,000 House-hold expenses as per paragraph 74 of impugned order. 2,41,000 Investment in construction of house at Yeti Nagar, Hansi, as per para 66.3 of the impugned order. 7,95,816 Investment in initial purchase of liquor at M/s. Mittal & Co. L-14, Hansi, as per para 60 of the impugned order. 6,07,145 Investment in initial purchase of liquor at M/s. Mitta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 after excluding house-hold expenses & investment in immovable property. 4,72,590 Undisclosed income for assessment year 1995-96 after excluding house hold expenses & investment in immovable properties. 1,76,66,231 2,95,57,331 (-) 2,95,57,331 1,08,95,031 Note: No separate business profit from business at Gupta Wine Palace, L-1, Hansi; M/s. Mittal & Co. L-2 and L-13, Hansi is assessed as the same is treated to have been included in various investments and expenditure during the year. Assessment year 1997-98 (Up to 28-6-1996 only) Undisclosed house-hold expenses as per para 74 of the impugned order. 1,54,000 Cash found at the residence. 1,10,640 Cash found at the residence of Shri Manohar Singh 8,35,490 Investment in house-hold gadgets found at the time of search, as per paragraph 75 of the impugned order. 1,50,000 Investment in plot No. 1490/46, Gurgaon. 1,78,920 Initial investment in purchase of liquor at M/s. Mittal & Co. L.-14, Hansi. 7,13,250 Initial investment in purchase of liquor at M/s. Mittal & Co. L-2, Hansi. 11,65,233 Initial investment in purchase of liquor at M/s. Shanker Lal & Co. L-14, Bawani Khera. 3,78,536 In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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