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TMI Blog2006 (1) TMI 184X X X X Extracts X X X X X X X X Extracts X X X X ..... 2A nor the same could be said to be relatable to any evidence found as a result of search or requisition of books of account in terms of section 158BB(1). In that view of the matter, we hold that the same cannot be used as the basis to compute the undisclosed income of the assessee for the block period under Chapter XIV-B. The entire addition made by the Assessing Officer on the basis of the said diaries amounting thus is not sustainable in law and deleting the same, we allow the relevant grounds raised by the assessee in this regard. Addition u/s 69A on account of unexplained cash found during the course of search - As rightly contended by the learned DR before us, statements of Shri Sitaram Kesri and Shri Ahmed Patel were recorded by the Department merely to verify the veracity of the assessee's explanation as regards the cash found in his possession and the addition on account of the said cash was made by invoking the provisions of section 69A and not on the basis of the said statements. In that sense, the said deponents were not the witnesses of the Revenue and the addition having been made on account of unexplained cash not relying on the said statement but by invoking the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion created in section 132A(3) treats the assets requisitioned u/s 132A as assets seized u/s 132(1) and since this deeming fiction has to be extended to its logical end, the assets requisitioned u/s 132A could reasonably be treated as evidence found as a result of search conducted u/s 132(1) which could be a basis for computing the undisclosed income of the assessee for the block period as envisaged in section 158BB(1). We are, therefore, of the considered opinion that the assets requisitioned u/s 132A could very well be used as evidence for computing the undisclosed income of the assessee under Chapter XIV-B for the block period and the contention of the learned counsel for the assessee in this regard relying on the omission to specifically mention such assets as evidence to form the basis of computing the undisclosed income in section 158BB(1) is untenable and cannot be accepted. In the result, the appeal of the assessee is partly allowed. - HON'BLE R.V. EASWAR, VICE PRESIDENT AND P.M. JAGTAP, ACCOUNTANT MEMBER For the Appellant : G.C. Sharma, T.R. Talwar, R.K. Raghavan and Moksh Mahajan, Advs. For the Respondent : Rajnish Kumar, Adv. ORDER Per P.M. Jagtap, Accountant Memb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perintendent, Tihar Jail, Delhi and again on 30-10-1996, 1-11-1996 and 4-11-1996. Thereafter, a notice under section 158BC was issued by the Assessing Officer which was served on the assessee on 9-1-1997 requiring him to file his return of income in the prescribed Form No. 2B. The same, however, remained uncomplied with by the assessee. Even there was no response from the assessee to the notices issued by the Assessing Officer subsequently on 25-3-1997 and 16-6-1997. Finally, a notice under section 158BC was issued by the Assessing Officer on 11-8-1997 along with a notice under section 142(1) intimating the assessee about the additions proposed to be made to his undisclosed income and requiring him to file a reply latest by 19-8-1997. In response to the said notice, a return of income for the block period was filed by the assessee on 14-8-1997 declaring a negative undisclosed income of Rs. 2,38,799. Along with the said return, two letters were also filed by the assessee containing his reply to the various queries raised by the Assessing Officer in his letters issued earlier. After taking into consideration the material found during the course of search and explanation offered by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceipts/deposits/investments found recorded in the seized diaries. 5. During the course of search, certain diaries/note pads were seized by the CBI from the residential premises of the assessee situated at Mandi and Delhi. Copies of the said diaries were subsequently forwarded by the CBI to the Revenue Secretary who, in turn, handed over the same to the Income-tax Department. One of such diaries for calendar year 1988 identified as document No. 02/M-159/96 contained figures pertaining to the financial years 1990-91 to 1993-94. In his statement recorded on oath by the ADIT after the search, the assessee admitted of having written the said diary in his own handwriting. He also identified some of the names of persons written in the said diary in abbreviated form explaining that the said persons were the servants working in his orchard and the amounts written against their names were paid mainly in connection with the said orchard as well as dairy activities. He also made an attempt to explain the other entries appearing in the said diary to some extent. However, as regards the nature of transactions represented by most of such entries found recorded in the said diary, he expressed his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral deposits as recorded in the said diary were also found to be traceable to the bank accounts of the family members of the assessee and their concerns. Moreover, none of the denials made by the assessee as regards the nature of entries found recorded in the diary could be substantiated by him on evidence before the Assessing Officer despite sufficient opportunity. 7. The Assessing Officer, therefore, rejected the explanation offered by the assessee as regards the nature of transactions/entries found recorded in the said diary and ascertained such nature on the basis of analysis of each and every entry appearing in the said diary with reference to the narration contained therein as well as his own examination and enquiries conducted in the matter. Accordingly, he found that the total receipts amounting to Rs. 4,66,70,698 were recorded in the said diary and the assessee having failed to explain the same, he treated the said amount as the undisclosed income of the assessee representing unexplained receipts. Similarly, he held that the other entries found recorded in the said diary represented the unexplained investment/deposits made by the assessee to the tune of Rs. 9,48,53,000 whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any relation with the entries appearing in the seized diary. This categorical denial of the concerned persons stated to be identified with the names appearing in the seized diaries in the abbreviated form, however, was not found to be reliable by the Assessing Officer and relying on his own analysis, examination and interpretation of the entries found recorded in the relevant seized diaries, he proceeded to hold that the entries found recorded in the relevant seized diary were the actual financial transactions of the assessee representing his undisclosed income/unaccounted investments for the block period. Accordingly, a total addition of Rs. 48,86,40,368 was made by the Assessing Officer to the undisclosed income of the assessee on account of unexplained investment/receipts/deposits on the basis of the relevant seized documents representing diaries/note pads as given below:- Document No. Amount (Rs.) 02/M-159/96 14,15,23,698 03/M-160/96 1,78,593 85/M-242/96 9,00,000 92/M-249/96 7,90,00,000 89/M-246/96 26,70,38,077 Total 48,86,40,368 9. The learned counsel for the assessee at the outset submitted before us that all the aforesaid documents representing diaries/note pads on the basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioned under section 132A, was not sustainable in law in view of the specific provisions contained in sub-section (1) of section 158BB. He contended that the said provisions are substantive provisions providing specifically the mode of computation of undisclosed income of the block period only on the basis of evidence found as a result of search or requisition of books of account or other documents. He submitted that the Panchnamas prepared by the Income Tax Department clearly show that the aforesaid diaries were not found by the Income Tax Department and there being nothing on record to show that the copies of the said diaries were requisitioned by the Income Tax Department under section 132A, the same could not be used as evidence against the assessee for the purpose of computing his undisclosed income for the block period. 11. The learned DR, on the other hand, admitted that the diaries in question were seized from the residence of the assessee by the CBI and copies thereof were forwarded by them to the Department through the Revenue Secretary without there being any authorization issued under section 132A. He, however, contended that the said diaries could still be used as evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sides i.e. Income Tax Department and CBI at the premises of the assessee from 4.30 pm on 16-8-1996 to 3.30 am on 17-8-1996 and thus the act of finding the evidence was physically performed simultaneously by the CBI as well as by the Income-tax Department. He contended that the departmental officers thus must have found the diaries during the course of search in all probabilities and since the same were to be seized by the CBI, they were not taken into consideration in the panchnama prepared by the Income Tax Department. He submitted that the expression used in the statute is as a result of search and not during the course of search which widens the scope in terms of period as well as in other practical terms. He reiterated that panchnama is not a conclusive proof to establish what exactly was found during the course of search and if there is other-evidence or there are circumstances to show that the diaries were found as a result of search conducted by the department under section 132, the panchnama becomes irrelevant. 13. The learned DR further contended that the said diaries were very much available when the officers of the Income Tax Department conducted their search at the resi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he learned counsel for the assessee also submitted that the said diaries, in any case, cannot be said to be relatable to the cash found and seized by the Income Tax Department because no entry in the said diaries was directly relatable to such cash and no such attempt was made even by the Assessing Officer to relate any of the entries in the diaries to the cash found and seized. According to him, the very fact that no set off was given by the Assessing Officer while making the addition on account of diary against the cash found and seized fortifies that there was no relation between the entries in the diary and cash found. He further submitted that the entire additions were made by the Assessing Officer on the basis of entries in the diary under section 69 which clearly means that the said entries were treated by him as representing other investments and not cash. He contended that the said diaries thus, by no means, can be said to be relatable to the cash found and seized by the Income Tax Department. He also pointed out that the cash found during the course of search was treated as income of the assessee for the year during which it was found whereas the entries in the diary were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be accepted. In support of his contention, the learned counsel for the assessee relied on the decision of Hon'ble Supreme Court in the case of CIT v. Tarsem Kumar [1986] 161 ITR 505. 17. We have considered the rival submissions in the light of material available on record. It is by now well settled that the assessment made under Chapter XIV-B is in addition to the regular assessment and such special assessment needs to be restricted to compute the undisclosed income based on the evidence found as a result of search or requisition of books of account etc. and such other material or information as are available with the Assessing Officer and relatable to such evidence. The combined reading of the provisions of sections 158B(b), 158BA and 158BB shows that the Assessing Officer has to prove, on the basis of evidence found as a result of search and such other material or information as are available with him and relatable to such evidence, that assessee had the undisclosed income chargeable to tax in the block assessment. Section 158BB contains the provisions relating to the computation of undisclosed income of the block period and as provided in sub-section (1) of the said section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n were not requisitioned by the Department under section 132A inasmuch as no such requisition admittedly was issued in the context of the said diaries. 20. During the course of the search, the said diaries were seized by the CBI and this undisputed position is also evident from their search list giving details of property seized by Police Officers acting under the provision of section 103 or 165 of the Criminal Procedure Code. A copy of the said list placed on record before us also shows that the same was signed and sealed by the CBI Officers alone without there being any signature of the Income Tax officials. It is also observed that the following note was given in the said search note prepared by the CBI:- Total cash of Rs. 2,45,28,844 was found during the search and as such the income-tax authorities were informed. Shri Amitabh Shukla, ADIT (Inv.), Unit-V(3), E-2, ARA Centre, Jhandewalan Extension, New Delhi along with his team arrived at the premises 4.30 PM on 16-8-1996 and started their formalities for seizing the cash. They have prepared separate recovery memo for recovery/seizure of the cash copy of which is enclosed herewith. 21. As is evident from the aforesaid observatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in whose case the warrant of authorization has been issued; 24. As is evident from the aforesaid provisions, the panchnama is not only recognized in the statute, but a lot of importance is assigned to it by treating the conclusion of search as recorded in the last panchnama drawn as a deemed execution of search warrant for the purpose of determining the time limit available to complete the block assessment. Moreover, rule 112 of the Income Tax Rules, 1961 prescribes a manner and method in which a search and seizure operation is to be conducted as well as the recording of events and preparation of documents during the course of such operation. It appears that all these requirements of rule 112 have been incorporated in the panchnama going by the contents of the standard form used for this purpose. In these circumstances, we find the objection raised by the learned DR regarding the legal sanctity of the panchnama to be unsustainable. In our opinion, the panchnama, on the other hand, assumes a vital significance to examine and ascertain the manner and method in which the search and seizure operation under section 132 is conducted as well as the outcome of the said operation. 25. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e purpose of computing undisclosed income of the assessee going by the inclusive definition given in section 158B(b) which has a wide scope and ambit. In this regard, the case of CIT v. Shamlal Balram Gurbani [2001] 249 ITR 501 (Bom.) can usefully be referred to. In the said case, a search was conducted at the residential premises of the assessee on 25-3-1996. A notice under section 158BC was issued for the block period 1-4-1985 to 25-3-1996. It was found that the assessee had not filed his returns of income for assessment years 1993-94, 1994-95 and 1995-96. Hence, the Assessing Officer treated the income of these three years as the undisclosed income of the assessee for the block period relying, inter alia, on the provisions of section 158B(ib). The Tribunal came to the conclusion that the findings of the Assessing Officer regarding undisclosed income were not based on any material found in the search operations and therefore, there was no reason for treating the said income as undisclosed income for the purpose of Chapter XIV-B. On Revenue's appeal, the Hon'ble Bombay High Court observed that they do not find any reason to interfere with the finding of facts recorded by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... early means that there should be a cause-effect relationship between the search action and the evidence found inasmuch as the finding of evidence should be the effect of search action which should be the cause resulting in the outcome in the form of evidence. It is, therefore, necessary to find out whether such cause-effect relationship can be established in the present case. 28. As already observed, there was nothing either in the panchnamas prepared by the Income-tax authorities or in the search g note prepared by the CBI to even indicate or suggest that the diaries in question were found by the Income Tax Department during the course of search under section 132. The said diaries, in fact, were handed over by the Director of CBI to the Revenue Secretary under his D.O. letter No. 37/NP/DCIB/96 dated 26-9-1996 which reads as follows:- Dear Shri Singh, I am enclosing herewith photocopies of Sukh Ram's diaries with the request that Income Tax, Enforcement Directorate and Customs may also give helping hand in the investigation. We spoke about it. With regards, Yours sincerely, (Joginder Singh) Shri N.K. Singh, Secretary (Revenue), Ministry of Finance, Govt. of India, New Delhi Enc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gation. Having regard to all these facts and circumstances of the case, it is difficult to say that there was any cause-effect relationship between the copies of the diaries coming to the possession of the Income Tax Department and their search operation under section 132 and the said evidence, therefore, cannot be considered as found as a result of search even if wide meaning is given to the expression as a result of search used in the statute as sought by the learned DR. 30. Before us, heavy reliance has been placed by the learned DR on the amendment made in section 158BB(1) by the Finance Act, 2002 with retrospective effect from 1-7-1995 to contend that even the other material or information as are available with the Assessing Officer and relatable to the evidence found as a result of search also can be used as evidence for computing the undisclosed income of the assessee for the block period. It is true that these provisions amended with retrospective effect are required to be taken into consideration by us in the present appellate proceedings which are extension of the assessment proceedings keeping in view the decision of Hon'ble Bombay High Court in the case of CIT v. Mr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the said diaries amounting to Rs. 48.86 crores thus is not sustainable in law and deleting the same, we allow the relevant grounds raised by the assessee in this regard. 33. Before us, detailed arguments have also been advanced by the learned representatives of both the sides on the issues relating to the addition made by the Assessing Officer on the basis of entries found recorded in the relevant seized diaries on merits. However, keeping in view our decision on the preliminary issue rendered above holding that the said diaries could not be used as evidence for the purpose of computing undisclosed income of the assessee and thereby deleting the entire additions made on the basis of the said diaries, we do not deem it necessary or expedient to consider and decide the issues relating to the said additions on merits since the same have been rendered only of academic nature. 34. Ground No. 8 relates to the addition of Rs. 3,61,80,414 made by the Assessing Officer under section 69A on account of unexplained cash found during the course of search from the residence of the assessee. 35. During the course of search, a cash of Rs. 2,45,28,844 (Rs. 2.45 crores) and Rs. 1,16,15,570 (Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso made available to the assessee by the ADIT. Taking into consideration all the facts of the case as well as the different stand taken by the assessee at different stages and keeping in view the presumption available to be drawn against the assessee under section 132(4A), the Assessing Officer came to a conclusion that the assessee has not been able to explain the cash found from his possession and treating the same as unexplained, he made the addition of Rs. 3,61,80,414 to the undisclosed income of the assessee under section 69A. 36. The learned counsel for the assessee submitted before us that the cash found from the residence of the assessee situated at New Delhi and Mandi was explained by him as belonging to the Congress Party. He submitted that this explanation of the assessee, however, was not accepted by the Assessing Officer relying on the statements of Shri Sitaram Kesri and Shri Ahmed Patel recorded by ADIT (Inv.) wherein the said two deponents had denied that any cash belonging to the Congress Party was kept with the assessee. He contended that these statements of Shri Sitaram Kesri and Shri Ahmed Patel were recorded by the ADIT (Inv.) behind the back of the assessee a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... search conducted by the Income Tax Department under section 132(1) and not that of any other authority including CBI. He also contended that requisition of documentary evidence alone is contemplated under section 132A and not the cash and if at all the cash is requisitioned under the said provision, the same cannot be used as basis for computing the undisclosed income for the block period as per the specific provisions contained in section 158BB(1). 39. Referring to a copy of the charge-sheet prepared by the CBI in assessee's case on 9-6-1997 placed on record, he pointed out that the main allegation of the CBI against the assessee was that the assessee in his capacity as public servant during the period from 20-6-1991 to 16-8-1996 had amassed huge assets/investments abusing his official position as a public servant. He submitted that the assessee thus was alleged to be in possession of the assets disproportionate to his known sources of income and the unknown source of such investment was alleged to be illegal gratification or bribe taken by the assessee by abusing his official capacity as a public servant. He submitted that there being nothing found during the course of search ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said deponents available to the assessee for cross-examination and there was no such requirement in law. He pointed out that the copies of the statements of the said deponents recorded by ADIT (Inv.) nevertheless were handed over by him to the assessee as specifically mentioned in the assessment order. 41. The learned DR further submitted that the cash was found from the residential premises of the assessee and having accepted the possession of the said cash in his statement recorded on oath, the onus was clearly on the assessee to explain satisfactorily the source of the said cash and substantiate such explanation by producing the supporting evidence. He submitted that there was, however, a failure on the part of the assessee to discharge this onus lay on him and the said cash, therefore, was rightly treated as unexplained by the Assessing Officer. He contended that the presumption available to be drawn against the assessee under section 132(4A) is strongest in respect of cash as held by Hon'ble Supreme Court in the case of Chuharmal v. CIT [1988] 172 ITR 250 and the assessee having failed to explain the cash found from his possession, the addition made by the Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ck period' given in section 158B(a) and contended that if at all there is any mistake in the block period taken by the Assessing Officer for the purpose of assessment under section 158BC, the Tribunal can rectify such mistake by taking the block period as per law after considering the exact date of search which is to be F taken as the last date of the block period. Relying on the decision of Hon'ble Supreme Court in the case of CIT v. J.H. Gotla [1985] 156 ITR 323 (339 relevant), he contended that workable interpretation of the statutory provisions is to be adopted. He also contended that any mistake in adopting the block period on the part of the Assessing Officer is a procedural irregularity which can be corrected by the Tribunal. He further contended that similarly the addition of cash made by the Assessing Officer in the block assessment without specifying the relevant assessment year is only procedural error which can be corrected by the Tribunal keeping in view the provisions of section 69A which clearly specifies that addition on account of unexplained cash has to be made in the year in which the assessee was found to be owner thereof. 43. As regards the contention o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee was seized by the Income Tax Department whereas the cash of Rs. 1.16 crores found in the Mandi House was initially seized by the CBI which was subsequently requisitioned by the Income Tax g Department under section 132A. At the time of search, the assessee along with his wife was out of country on a tour to USA/UK and his daughter Mrs. Ritu Sharma was present at his Delhi house. She pleaded a complete ignorance about the cash as well as other valuables found from the house of the assessee after breaking open the locks. After his return from USA/UK to India, the assessee was arrested and put in Tihar Jail. His statement was recorded on 9-10-1996 in the room of the Superintendent of Tihar Jail and in the said statement, he denied of having any knowledge about the cash found from his residence stating that such cash was not available in his house when he left India for a visit to USA/UK. In his subsequent statement recorded on 30-10-1996, 1-11-1996 and 4-11-1996, the assessee, however, went back on this stand taken in the earlier statement stating that the same was wrongly made by him in a perplexed state of mind. In this statement, he accepted the possession of the cash found f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e properly invoked by the Assessing Officer, it would be proper to first deal with the various legal contentions raised by the learned counsel for the assessee before us challenging the addition of the said cash in the hands of the assessee. 47. First of all, the learned counsel for the assessee has contended that there was no source of income found during the course of search or even thereafter from which the assessee could have earned the cash found from his residence. He has contended that the only source from which the said cash could have been earned by the assessee was the amount received by him as bribe or illegal gratification as alleged even by the CBI in their charge sheet. His contention in this regard is that the said cash found from the residence of the assessee thus represented bribe/illegal gratification received by the assessee and if this source is accepted, no income from this source could be assessed in the hands of the assessee because the said cash would be liable for confiscation by the Government having overriding title thereon leaving the assessee with no income from the source of bribe/illegal gratification. In this regard, we may observe that the cash foun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity of the rule of diversion of income by an overriding title is whether such obligation is in the nature of a charge on the source i.e. the profit earning apparatus itself and only in such cases where the source of earning income is charged with an overriding title, the same can be considered as diversion of income by overriding title. This aspect has been elaborately explained by the Hon'ble Supreme Court in the case of CIT v. Sitaldas Tirathdas [1961] 41 ITR 367 as follows:- In our opinion, the true test is whether the amount sought to be deducted, in truth, never reached the assessee as his income. Obligations, no doubt, there are in every case, but it is the nature of the obligation, which is the decisive fact. There is a difference between an amount, which a person is obliged to apply out of his income and an amount, which by the nature of the obligation cannot be said to be a part of the income of the assessee. Where by the obligation income is diverted before it reaches the assessee, it is deductible, but where the income is required to be applied to discharge an obligation after such income reaches the assessee, the same consequences, in law, does not follow. It is th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hen subsequently handed over to the Income Tax Department as per requisition made under section 132A. His first objection in this regard is that the cash seized by the CBI from assessee's Mandi house was requisitioned by the Income Tax Department on 17-8-1996 and since the said date was beyond the block period ending on 16-8-1996, addition could not be made in respect of the said cash treating it as unexplained under section 69A in the assessment completed by the Assessing Officer under section 158BC for the block period ending on 16-8-1996. However, as rightly pointed out by the learned DR from the relevant documentary evidence, the said cash was found and seized from the Mandi residence of the assessee by the CBI on 16-8-1996 itself and the assessee thus was found to be the owner of the said cash on that date itself notwithstanding the date on which the said cash was handed over by the CBI to the Income Tax Department as per the requisition made under section 132A. The said cash was added by the Assessing Officer to the total income of the assessee under section 69A read with section 132(4A) and since the assessee was found to be the owner of the said cash during the course o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of account or other documents and such other materials or information as are available with the Assessing Officer and relatable to such evidence], as reduced by the aggregate of the total income, or as the case may be, as increased by the aggregate of the losses of such previous years, determined. 53. A perusal of the aforesaid provisions no doubt shows that the cash or any other asset requisitioned by the Income Tax Department under section 132A is not specified as evidence on the basis of which undisclosed income of the assessee has to be computed for the block period. However, the other relevant provisions of sections 158BC, 158BAand 132A relating to the block assessment do specifically refer to the assets requisitioned under section 132A as is evident from the said provisions which are reproduced below for the benefit of this order:- 158BC. Where any search has been conducted under section 132 or books of account, other documents or assets are requisitioned under section 132A, in the case of any person, then,- (a) .............. (b) ............... (c) ............... (d) ............... 158BA. (1) Notwithstanding anything contained in any other provisions of this Act, wherea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ords the authorised officer occurring in any of the aforesaid sub-sections (4A) to (14), the words the requisitioning officer were substituted.] . 54. Keeping in view the reference made to the asset requisitioned under section 132A in the aforesaid provisions, which are charging in nature, it appears that the omission of such assets in the provisions contained in sub-section (1) of section 158BB which are computation provisions, is inadvertent and since such inadvertent omission is giving rise to absurd results, we have to adopt the reasonable interpretation which is workable as held by Hon'ble Supreme Court in the case of J.H. Gotla. Moreover, as per the provisions contained in sub-section (3) of section 132A, the assets requisitioned under section 132A are treated as assets seized under section 132(1) for the purpose of the provisions of sub-sections (4A) to (14) of section 132 as well as for section 132B. This deeming fiction created in section 132A(3) treats the assets requisitioned under section 132A as assets seized under section 132(1) and since this deeming fiction has to be extended to its logical end, the assets requisitioned under section 132A could reasonably be tre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same belonged to Congress (I) Party. Nothing, however, was brought on record by him to support and substantiate the said explanation. On the other hand, the statements of Shri Sitaram Kesri and Shri Ahmed Patel, President and Treasurer of the Congress (I) Party were recorded by the ADIT (Inv.) and in these statements, the deponents have denied categorically of having any involvement of the Congress (I) Party in the cash found in the possession of the assessee. As rightly contended by the learned DR before us, statements of Shri Sitaram Kesri and Shri Ahmed Patel were recorded by the Department merely to verify the veracity of the assessee's explanation as regards the cash found in his possession and the addition on account of the said cash was made by invoking the provisions of section 69A and not on the basis of the said statements. In that sense, the said deponents were not the witnesses of the Revenue and the addition having been made on account of unexplained cash not relying on the said statement but by invoking the provisions of section 69A, there was no legal requirement to allow an opportunity to the assessee to cross-examine the said deponents. Nevertheless, the cop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dditions made by the Assessing Officer to the undisclosed income of the assessee on estimated basis have been challenged by him in the following grounds:- Ground No. Particulars Amount (In Rs.) 3(ii) 11 Estimated value of furniture, fittings etc. 25,00,000 3(iii) 12 Estimated household expenses over and above shown by the assessee 1,50,00,000 3(iv) 13 Estimated foreign travel/medical expenses over and above shown by the assessee 15,00,000 3(v) 14 Investment/income relating to dairy farm 15,00,000 60. We have heard the arguments of both the sides and also perused the relevant material on record. It is observed that the aforesaid four additions were made by the Assessing Officer to the undisclosed income of the assessee for the block period on the basis of following observations recorded in his impugned order:- Household Expenses Based on the entries recorded in document No. M-161/96 wherein record of household expenses for the period January 1993 to June 1993 to the tune of Rs. 9,41,727 was found. On an average it comes to Rs. 1,50,000 per month. The minor variation may be due to estimation of expense and also fluctuations over a period of time. Further document No. 01/M-158/96 reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25 lakhs as unexplained expenditure under this head taxable for the block period. Unexplained expenditure on account of foreign travelling and medical expenses. The assessee filed a reply dated 18-8-1997 in which it was explained that all the foreign travel expenses and medical expenses have been reimbursed by the Govt. and hence no expenses have been incurred by the assessee. In view of the failure of the assessee to furnish any information along with relevant evidences in support of his contentions, I estimate an expense of Rs. 15,00,000 as unexplained expenditure and add the same to the income of assessee for the block period. The estimate is justified in view of the fact that a copy of full passport was given to the assessee where in a number of entries relating to foreign visits have been made during the block period. The assessee had failed to furnished any cogent explanation in support of the entries in the passport and rather submitted a casual reply stating that all foreign visits expenses were borne by the Government. Unexplained investments and income from dairy activity at Mandi The assessee filed a reply dated 18-8-1997 in response to the show-cause notice proposing an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rniture. Moreover, all these estimations were made by the Assessing Officer arbitrarily without giving any basis whatsoever in support of the same. 62. As already discussed in the earlier part of this order, the special assessment under Chapter XIV-B is intended to make assessment of the undisclosed income of the assessee for the block period on the basis of evidence found as a result of search or requisition of books of account etc. under section 132A and its scope and ambit is thus limited in that sense to the materials unearthed during the search. There should be direct evidence found as a result of search for the purpose of computation of undisclosed income. No ad hoc addition or addition contrary to the material found as a result of search is permissible. The quantum of addition need to be restrained to accord with the material found. In the case of Jaya S. Shetty v. Asstt. CIT [1999] 69 ITD 336, Mumbai Bench of ITAT deleted the additions based on conjectures and surmises or estimates and presumption not supported by any evidence, documents etc. found as a result of search. In the case of Ramesh Chand Modi, the Jaipur Bench of ITAT has held that no addition can be made in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade by the assessee alongwith the relevant and material details altogether and proceeded to make the impugned additions on estimated basis without even rebutting the explanation offered by the assessee. It clearly shows that the said additions were made by him arbitrarily and there being no basis whatsoever given by him, the same are not sustainable even on merits also. 64. As such, considering all the facts of the case as well as keeping in view the judicial pronouncements discussed above, we hold that the additions in question made by the Assessing Officer on estimated basis are not sustainable either in law or on facts and deleting the same, we allow the relevant grounds raised by the assessee challenging the said additions. 65. In ground No. 9, the assessee has challenged the additions of Rs. 32,59,016 made by the Assessing Officer on account of alleged unexplained investment made in the immovable properties. 66. As mentioned by the Assessing Officer in his assessment order, it was found by him during the course of post-search enquiries that the assessee has made substantial investment in the following immovable properties: (i) D-42, Kaushambi, Ghaziabad. (ii) Flat at Nav Sansa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the assessment of assessee's undisclosed income for the block period. As regards the fourth property being Apple Orchard at Village Surath, Mandi, the Assessing Officer found that the concrete stairs constructed at the said property was not disclosed by the assessee and the investment made in the said construction as valued by the DVO at Rs. 74,012 was added by him to the total income of the assessee treating the same as unexplained. Accordingly, a total addition of Rs. 32,59,016 was made by the Assessing Officer to the total undisclosed income of the assessee on account of unexplained investment in immovable properties. 67. Before us, the main contention raised by the learned counsel for the assessee is that there was no evidence whatsoever found as a result of search showing any unexplained investment made by the assessee in the four immovable properties in question. He has contended that the additions made by the Assessing Officer on this issue merely on the basis of post-search enquiries without there being any evidence found as a result of search were beyond the scope of the block assessment. The learned DR, on the other hand, has not been able to dispute this position ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e defendant as per the Court order. The Assessing Officer, however, did not find the explanation of the assessee to be satisfactory for the reason that the relevant details were not filed by the assessee. He, therefore, estimated such expenses at Rs. 5 lakhs and added the same to the undisclosed income of the assessee treating it as unexplained. 70. We have heard the arguments of both the sides on this issue and also perused the relevant material on record. It is observed that the amount of Rs. 27,37,500 received by the assessee by way of award in defamation suit in UK was duly disclosed by him in his return of income filed regularly for assessment year 1996-97 and this fact is not in dispute. It is also not in dispute that no evidence was found as a result of search to show that this receipt claimed to be exempt by the assessee in his return of income was not eligible for such exemption. In these circumstances, the examination of the assessee's claim for exemption was the subject-matter of regular assessment and not the block assessment. As held by the Hon'ble Calcutta High Court in the case of Bhagwati Prasad Kedia v. CIT [2001] 248 ITR 562, the Assessing Officer was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e additions made by the Assessing Officer on these counts and allow ground No. 10 of the assessee's appeal. 71. As regards the addition of Rs. 16,96,871 made by the Assessing Officer under section 68, it is observed that the assessee was found to have maintained seven bank accounts during the course of block assessment proceedings. On examination of the said accounts, it was further noticed by the Assessing Officer that various amounts were credited in the said accounts. He, therefore, required the assessee to explain the said credits appearing on the different dates falling within the block period. The assessee, however, failed to explain the same to the satisfaction of the Assessing Officer and consequently, the amount of such credits totalling to Rs. 16,96,871 was added by the Assessing Officer to the undisclosed income of the assessee under section 68 treating the same as unexplained. 72. Before us, the learned counsel for the assessee has challenged this addition made by the Assessing Officer under section 68 by raising two-fold contentions. His first contention was that this addition made by the Assessing Officer was not based on any evidence found as a result of search b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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