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TMI Blog2001 (7) TMI 289X X X X Extracts X X X X X X X X Extracts X X X X ..... 1989, and continued functioning from there till March, 1991 after which the same was shifted to new premises. He also found that during the said period i.e. June, 1989 to March, 1991, SA was working in close co-ordination/common control with the business of Shri Lal Chand Agarwal s family and that the transaction of various business concerns of the family of Shri Lal Chand Agarwal and SA were written in the common Kachi cash books. On the basis of these findings, the AO was satisfied that the undisclosed income based on the transactions appearing in the seized books of account and documents relating to M/s Sugar Agency belonged to the assessee. He, therefore, issued a notice under s. 158BD of the IT Act on 14th Nov., 1996, which was duly served on the assessee on 21st Nov., 1996. In response to the said notice, the assessee filed a return in Form No. 2B for the block period starting from asst. yr. 1986-87 to 1995-96 and upto the date of search, that is, 14th Nov., 1995, declaring a total income at Rs. 6,28,130 and undisclosed income at Rs. Nil. Finally, the assessment was completed by AO under s. 158BD r/w s. 143(3) on 28th May, 1998, computing the total undisclosed income of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otal income of the assessee as shown below: Asst. yr. Credit amount Interest amount Rs. Rs. 1990-91 50,000 4,925 1991-92 - 9,000 1992-93 40,000 14,440 1993-94 - 16,200 1994-95 - 18,000 1995-96 - 18,000 1996-97 - 21,240 6. The learned counsel for the assessee, Shri N.M. Ranka, senior advocate, submitted before us, referring to pp. 2 to 9 of his PB, that the loans taken from Shri Shankar Daga were duly recorded by the assessee in his regular books of account and the confirmations from the said depositor were also furnished before the AO during the assessment proceedings. He, therefore, contended that these cash credits appearing in the regular books of account of the assessee cannot be considered in the special assessment made under s. 158BD in his case. In support of this contention, he cited the decisions Malayil Bankers vs. Asstt. CIT (1999) 152 CTR (Ker) 443 : (1999) 236 ITR 869 (Ker); 1998 TW 358 (Jp) and 1998 TW 510 (Jp). He further submitted that in a case, where the cash credit is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egular books of account as having been received from Shri Shankar Daga was an accommodation entry arranged to introduce undisclosed income of the assessee in the regular books of account. As regards the second cash credit of Rs. 40,000 appearing to the credit of Shri Shankar Daga s account in the books of the assessee on 29th June, 1991, he contended that though no entry in the Kachi cash books was found showing repayment of this amount, the AO made addition in respect of the same because the assessee did not produce Shri Shankar Daga before the AO in the assessment proceedings for examination and this non-cooperation on the part of the assessee in establishing the identity and capacity of the creditor as well as the genuineness of the transaction made the AO to treat this cash credit of Rs. 40,000 as unexplained. As regards the disallowance of interest shown to have been paid by the assessee to Shri Shankar Daga, he contended that this issue is consequential to the issue of addition on account of unexplained/bogus cash credits and once the cash credits are treated as bogus on the basis of material found during the search, interest shown to have been paid on such cash credits has t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sactions recorded in his account bogus. In our opinion, the AO was not justified in treating this deposit/cash credit of Rs. 40,000 as bonus and assessing the same as undisclosed income of the assessee in the absence of entry supporting evidence/material found during the search. The learned Departmental Representative of Revenue has contended before us that Shri Shankar Daga was not produced before the AO by the assessee for examination and in the absence of the same, the identity and capacity of the creditor as well as the genuineness of transaction could not be established. In this regard we may observe that the cash credit entry of Rs. 40,000 was duly recorded by the assessee in his regular books of account and in the absence of any material found during the search indicating that the said cash credit represented undisclosed income of the assessee, the addition on account of the same for assessee s failure to establish the identity and creditworthiness of the creditor as well as the genuineness of the transaction was outside the scope of block assessment made under s. 158BD in the present case in pursuance of the provisions of Chapter XIV-B. We, therefore, direct the AO to delet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d during the search showing a cash payment of Rs. 10,000 on 9th April, 1990, to Shri Jethmal Lalani and on the same date, a cheque of Rs. 10,000 was shown to have been received from the said person in the regular books of account maintained by the assessee. On the basis of this solitary entry relating to Shri Jethmal Lalani, the AO came to the conclusion that all the credit entries appearing in the account of Shri Jethmal Lalani involving a total amount of Rs. 1,00,000 (Rs. 87,000 as per the ledger account extract placed at p. 10 of the assessee s PB), are bogus and represent the undisclosed income of the assessee. He also disallowed the entire interest shown to have been paid by the assessee to Shri Jethmal Lalani in the regular books of account. Considering that the facts relating to this issue as well as the arguments advanced by the learned representatives of both the sides are similar to that involved in the issue raised in ground No. 2.1 discussed and decided in the preceding paras of this order, we also follow the conclusion drawn therein and hold that a sum of Rs. 10,000 alone can be assessed in the hands of the assessee under s. 158BD as undisclosed income of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perusing the relevant material on record, including the relevant Kachi cash book, it is observed that the name of M/s SA appears to be more closely related to the entry of Rs. 40,000 recorded in the Kachi cash book. As regards the difference in dates pointed out by the learned counsel for the assessee, it is observed that the date of receipts of cheque from M/s Rajesh Kumar Dinesh Kumar has been specifically mentioned by the AO as 27th Dec., 1989, in his impugned order. From the material on record, it also appears that the assessee never raised this point before the AO during the assessment proceedings which would have facilitated due verification and clarification then and there itself. Moreover, it is evident from the record that the assessee at the relevant time was working in close association with the group concerns of Agarwal family and M/s Rajesh Kumar Dinesh Kumar being one of such group concerns, the time lag of one month in repayment of cash against receipt of cheque cannot be said to be too abnormal to disprove the nexus between the two transactions. As such, considering all the facts and circumstances of the case, we are of the opinion that the nexus between the impugn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evant material on record, it is observed that the AO considered the entire amount of Rs. 90,000 appearing in the account of Smt. Sunheri Devi as undisclosed income of the assessee in spite of the fact that only a sum of Rs. 45,000 was recorded in the incriminating material found during the search. As observed earlier in this order while considering the similar issues, it is not a correct proposition that if a single entry in the account is found to be bogus on the basis of material found during the search, such account is to be treated as bogus in its entirety at least in the block assessment proceedings. Moreover, it appears from the record that the cash paid by the assessee to Smt. Sunheri Devi out of undisclosed income on 28th Jan., 1991, against a cheque, as held by AO, must have in all probabilities been received back by the assessee on 8th Feb., 1991, when the said cheque amount was repaid to Smt. Sunheri Devi. Obvious as it is, if the addition on this count is sustained, the cash amount of Rs. 45,000 has to be treated as available with the assessee out of undisclosed money on 8th Feb., 1991, for utilisation or set off against undisclosed investment/payments made thereafter. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estimated on such sale for the relevant assessment years as under: Asst. yr. Unaccounted sale Profit on unaccounted sale Rs. Rs. 1990-91 46,88,794 56,265 1991-92 30,34,302 36,410 1992-93 2,10,996 2,532 Further, on the basis of maximum annual sale of Rs. 46,88,794, the auditor also worked out the estimated investment of the assessee in such trading activities outside books at Rs. 64,230. Consequently, additions on account of profits at Rs. 64,230. Consequently, additions on account of profits on undisclosed sale and undisclosed money invested in such activities were made to the income of the assessee for the relevant assessment years. The assessee raised ground Nos. 3.1 and 3.2 in the present appeal disputing both these additions. However, ground No. 3.1 relating to the addition on account of undisclosed profits was not pressed by the learned counsel for the assessee before us. 28. As regards the addition on account of estimated investment in the unaccounted trading activities, the learned counsel for the assessee contended that there being no material found during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y observe that ground No. 3.1 disputing the addition on account of undisclosed profits has not been pressed by the learned counsel for the assessee before us meaning thereby that these additions stand confirmed and the same being intangible credit additions, in our opinion the amount added to the income of the assessee on this count is justifiably to be treated as available with the assessee at the relevant time for telescoping against the other income or addition. The AO, is therefore, directed to allow appropriate credit/set off the same while giving effects to this appellate order. 34. Ground Nos. 4 and 4.1 relate to the addition on account of unexplained credits in bank accounts and also in the accounts of certain parties involving a total amount of Rs. 2,30,000 and Rs. 99,226 in asst. yrs. 1990-91 and 1992-93, respectively. 35. After considering the rival submissions and perusing the relevant material on record, it is observed that certain credits pertaining to M/s SA (proprietary concern of the assessee) were found recorded in the Kachi cash book seized from Shri Lal Chand Agarwal. During the assessment proceedings, the AO also found that these transactions are not tallyi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 40. Ground No. 5 and ground No. 5.1 relate to the disallowance of Rs. 4,000, Rs. 6,000, Rs. 5,000 Rs. 4,000, Rs. 4,000 and Rs. 5,000 out of the expenses for asst. yrs. 1991-92 to 1996-97. 41. The learned counsel for the assessee contended that the disallowance of expenses recorded in the regular books of account is beyond the scope of block assessment. Referring to para 6 on p. 22 of AO s order, he contended that the disallowance has been made by the AO on estimated basis without any relevance to the material found during the search. The learned Departmental Representative, on the other hand, relied on the order of the AO. After considering the rival submissions and perusing the relevant material on record, it is observed that the AO partly disallowed expenses claimed by the assessee in the regular books of account, on ad hoc basis for the reason that the same were found to be unvouched and unverifiable. It also appears from record that no incriminating material was found during the search warranting such disallowance. In the case of Express Movers (P) Ltd. vs. Dy. CIT (1997) 59 TTJ (Del) 227 : (1997) 61 ITD 528 (Del), the Delhi Bench of Tribunal has held that since expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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