9911796707
TMI Blog1999 (6) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... lging to the arguments advanced by the parties, we consider it necessary to refer to the brief facts, as they emerge from the records before us. 3.2. The facts relating to the issue of undisclosed income of Rs. 4,05,840 are that when the appellant was called upon to furnish a return of her undisclosed income by virtue of provision of s. 158BC of the Act, the appellant furnished her return for block period on 6th Feb., 1997. When the appellant was called upon to explain the nature and details of the entries made in document marked as Annexure A-1, the appellant vide her letter dt. 15th Feb., 1997 explained that the entries listed in the documents represented investment in the construction of building named as 'Ved Ashram' and belonging to her husband Dr. B.N. Tripathi. Since appellant's name was appearing against most of the entries in this document, the appellant was asked to show cause as to why the entries against her name should not be considered as having been originated from her and since the amount involved in the building named 'Ved Ashram'. It was proposed that the amount should be taken as appellant's undisclosed investment on account of unexplained investment in the buil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being in service, was not available all the times, he used to give money to the appellant who, in turn, used to pass on the same as and when required to Mr. Pappu. In view of these facts, the appellant's counsel stressed that the money given to Pappu and having been mentioned against appellant's name in the seized documents did not belong to the appellant. According to him, the source of money was Dr. B.N. Tripathi and the appellant had nothing to do with it as far as the onus is concerned. In all these conditions, the assessee's counsel drew our attention to the submissions made before the AO according to which Dr. B.N. Tripathi, while explaining the investment and source thereof in the construction of building 'Ved Ashram' had explained that out of total investment of Rs. 7,41,044 upto October, 1996, the cost of land was Rs. 1,12,660 and the cost of construction was explained as under: Rs. (i) From personal funds. 3,89,859 (ii) Out of funds received against the sale 3,51,185 agreement of house No. 117/48. & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s an under: "Dr. Ved Nath Tripathi, father of above named assessee, is owner of house property No. 117/485, Pandu Nagar, Kanpur, in which his son Dr. B.N. Tripathi and his family is residing. Dr. Ved Nath Tripathi is residing in his ancestral house at Unnao. Keeping in view his age, Dr. Ved Nath Tripathi decided to dispose off his house property No. 117/485, Pandu Nagar, Kanpur so as to avoid any future dispute amongst his two sons and one daughter, after his death. He asked his son Dr. B.N. Tripathi, who is residing in this house property, to sell the house to any customer at reasonable price. Sri P.K. Dubey, Advocate of Banda, who is brother-in-law of Dr. B.N. Tripathi, agreed with Dr. B.N. Tripathi to purchase the house property for a total sum of Rs. 7,50,000 sometimes in December, 1991. Since Sri P.K. Dubey was not having ready cash available to make entire payment at once, and also Dr. Ved Nath Tripathi was not in much haste to sell the property, therefore, Dr. B.N. Tripathi allowed Sri P.K. Dubey to make the payment of sale consideration in parts as and when the money is available with him. From 15th Jan., 1992, to 25th Sept., 1994, Sri P.K. Dubey gave Rs. 3,55,000 in cash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to him, had the money originated from Dr. B.N. Tripathi, then Mr. Pappu could have easily written the name of Dr. B.N. Tripathi or Dr. B.N. Tripathi himself could have handed over the money direct to Mr. Pappu. According to the learned Departmental Representative, Mr. Pappu was not only honest but seems to have been directed by the appellant and Dr. B.N. Tripathi so far as the details in the documents are concerned. Explaining this aspect, the learned Departmental Representative submitted that the appellant and Dr. B.N. Tripathi might have directed Mr. Pappu to keep a record of source funds handed over to him and has not been so, then Mr. Pappu should not have written the name at all. The learned Departmental Representative further submitted that the facts of mentioning of appellant's name and also the name such as "from Ved Pathology" on 29th July, 1993, or such as "from SBI-Ved Pathology" on 22nd Sept., 1993, further goes to show that Mr. Pappu had instructions to record the source from which the money was received by him and, therefore, the appellant cannot plead that the money had not flown from her. Another way of pleading advanced by the learned Departmental Representative w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s received by her from Dr. B.N. Tripathi, who had received the amount against agreement of sale of his father's house, entered into with one Mr. Praduman Kumar Dubey, Advocate, we have seen the details of money recorded in the background marked as Annexure 1 (datewise) and the acknowledgment receipts issued by Dr. B.N. Tripathi for acknowledging the receipt of money from Mr. Praduman Kumar (datewise) and had found that none of the dates mentioned in Annexure A-1 tallies with the dates on which Dr. B.N. Tripathi had claimed and had acknowledged to have received the money. It is also surprising that the receipts of cash received have been issued by Dr. B.N. Tripathi and not by his father. 5.2. The appellant's plea gets belied from further facts that Dr. B.N. Tripathi has not shown receipt of any money from his father either as gift or as a loan. The details on the liability side or the balance sheet of Dr. B.N. Tripathi as on 31st March, 1997, are as under: Liabilities & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Rs. 3,51,158 are same, i.e. "from Usha Tripathi", then if the balance is appellant's money, the whole of it has to be taken as appellant's money. 5.6. The appellant claimed that Dr. B.N. Tripathi had no time or was not available all the time-contradicted by appellant's own claim made while explaining the reason for payments made to Dr. B.N. Tripathi for passing on the same to various middlemen the appellant has claimed to have paid a sum of Rs. 20,225 to various middlemen through Dr. B.N. Tripathi. It is not digestible as to how Mr. B.N. Tripathi was claimed to be not available all the times when he could have time to distribute such petty amounts to various middlemen. The appellant's claim is not acceptable. 5.7. In view of above facts and circumstances, we are of the opinion that the total amount of Rs. 4,05,840 represented appellant's undisclosed income having been invested in the building names "Ved Ashram" owned by appellant's husband. II. Ground Nos. (vi) to (xiii) 6. These grounds are against the determination of appellant's undisclosed income of Rs. 2,73,283 on the basis of seized documents marked as Annexure A-2. 6.1. The facts relating to the issue are that the to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... compounders and attendants, etc. through her employee Dr. Parveen Saraswat and her husband Dr. B.N. Tripathi. These two doctors were examined by the AO when they admitted in their statements the fact of receiving of aforesaid amounts for the purposes of paying the same as incentive to various middlemen. The AO however, rejected the appellant's claim of these expenses by observing as under: "The version of the assessee's payments to middlemen cannot be accepted as true on the following reason: (a) The assessee in the letter dt. 26th Feb., 1997, has stated that since the diary was found in the search which is conducted without any prior permission, all the entries in the diary can only be of true state of affairs. This exactly been the case, even the small details of stationery and refreshment are recorded in the diary, why these payments were not recorded under true narration as stated now by the assessee. (b) The assessee stated that since these middlemen did not given any acknowledgment receipt of incentive received by them and therefore, it was not recorded in the regular books of accounts. But there was no excuse to record these payments in the name of Dr. Tripathi and Dr. Sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r hand, supported the findings of the AO. 7. We have considered the rival submissions and the facts and circumstances of the case and, after careful consideration, are of the opinion that there is force in the appellant's claim. It is well settled principle of accountancy that in case a receipt in a document is considered as income, then the expenses recorded against that receipt so far as they are legitimate and are not of personal nature, should be allowed. Such expenses can, however, be disallowed if there is no evidence for having incurred the expenses but this condition applies only when the addition of income is being made on the basis of evidence for having earned the income. When both receipts and expenses are recorded in a document, then if the entries in the documents are relied upon for the purposes of receipts without bringing any further evidence, then the judicial proprietary requires that the document should be relied on with respect to expenses also and the assessee should not be burdened with the onus of bringing evidence for having incurred the expenditure. 7.1. As far as the appellant's case is concerned, it is not the Revenue's case that any of the expenses wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; -------- 1,32,750 Less: Collection charges from August, 1995 61,300 to June, 1996 paid -------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the expenses and, therefore, the expenses should be allowed as business expenditure. The learned Departmental Representative, on the other hand, has supported the order of the AO. 9.1. After having considered the rival submissions and the facts and circumstances of the case, it is revealed from the method adopted for computation of undisclosed income by both the parties that as far as the appellant is concerned, she has taken the gross receipts and the expenditure as actually recorded in documents marked as Annexure A-3 but has taken the quantum of income out of these receipts recorded in regular books of account on estimate basis at 25 per cent. whereas the AO has taken both the amounts, i.e., the amount recorded in the regular books of account as well as the expenditure recorded in document Annexure A-3 on estimate basis and the reason for it, as give, is that there being no receipts after December, 1995, expenditure for the period January to June, 1996 cannot be allowed. This approach of the AO does not seem to be justified because so far as the expenditure recorded in the document is concerned, the same being for the business has to be allowed. Thus, in the entirety of the cir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndisclosed income for three months should be deleted straightaway. 12.1. On merits of the case, the assessee's counsel submitted that there is no material for estimating the appellant's undisclosed income for additional 9 months because, according to him, the undisclosed income as per the provisions of Chapter XIV-B of the Act, has to be determined only on the basis of documents seized during the search. Referring to the observations of the AO contained in pp. 9, 10, 11 of the assessment order, the assessee's counsel submitted that there is no basis for making such an estimate and the so called undisclosed income for additional 9 months is liable to be deleted. In support of this submission he relied on the Tribunal, Allahabad decision in case of Dr. R.M.L. Mehrotra-copy furnished. Referring to para 26 of the Tribunal's order, the appellant's counsel submitted that there is no justification for estimation of undisclosed income for additional 9 months when there is no reference to any such income for this period in any of the seized documents. The learned Departmental Representative, on the other hand, in addition to supporting the findings of the AO., submitted that the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly or partly income or property which has not been or would not have been disclosed for the purposes of this Act." (ii) "158BA. Assessment of undisclosed income as a result of search.- (1) Notwithstanding anything contained in any other provisions of this Act, where after the 30th June, 1995 a search is initiated under s. 132 or books of account, other documents or any assets are requisitioned under s. 132A in the case of any person, then, the AO shall proceed to assess the undisclosed income in accordance with the provisions of this Chapter." (iii) "158BB. Computation of disclosed income of the block period.- (1) The undisclosed income of the block period shall be the aggregate 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 AO 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, (2) In computing the undisclosed income of the block period, the provisions of ss. 68, 69, 69A, 69B and 69C shall, so far as may be, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s "relevant previous year" shall be read [s. 158B(2)] (v) That undisclosed income is to be determined in the manner laid down in the provisions of s. 158BB and the provisions of ss. 142, 143(2), 143(3) and 144 [s. 158BC(b)] so far as may be are applicable. (vi) That in case of search prior to 1st Jan., 1997, interest under s. 234A/B/C and penalties under ss. 271A, 271B and 271(1)(c) are not to be levied [s. 158BB]. (vii) The other provisions of the Act, except the provisions which are made unapplicable by this Chapter, shall apply [s. 158BH], 13.2. The outcome of the above analysis is that there are other provisions of the Act subject to the exceptions provided in Chapter XIV-B which are applicable to the assessments for block period also, though, of course, subject to our observations hereinafter. 14. As per the provisions of s. 158BC, the undisclosed income is the income which is found recorded in the documents or books of account found during the search and it is found that the income so recorded has either not been disclosed, if the return of income has already been furnished or if the return has not been furnished, then the same would not have been disclosed though, of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of s. 158BB, which lay down the procedure for determining the undisclosed income. To give effect to the provisions of this section, one has first to determine the total income inclusive of undisclosed income, though of course, not on the basis of the documents and books of account found during the search but also on the basis of other documents and information available with the AO and, consequently. What we mean is that the undisclosed income cannot be determined without the application of provisions other than the provisions of Chapter XIV-B of the Act and then to reduce the same by the assessed or returned income for that year. The section itself makes clear that the total income has to be computed under Chapter XIV of the Act. 14.3. It is further observed that while determining the total income for an assessment year, income determined under all heads of income has to be aggregated before deducting assessed or returned income because if it is not so then in some cases, though the income, which has not been disclosed or assessed but has found recorded in the documents or books of account, there may be no undisclosed income. For example, if an assessee had been asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; Rs. Business income 1,00,000 Income under the head 'Capital gain' 50,000 --------- Total 1,50,000 Less: Income already assessed Business income 1,00,000 Capital gain &n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... --------- Total 50,000 Less: Income already assessed 1,00,000 Undisclosed income minus Rs. 50,000 i.e. Nil (i-ii) since the provisions of s. 158B do not specify the deduction of assessed or returned income on the basis of heads under which it has been assessed or returned, the deduction has to be allowed of the total assessed or returned income irrespective of the head under which it has been assessed or returned. 14.4. From the above example, it is clear that an assessee, who had disclosed capital gain of Rs. 25,000 (in case of A) is assessed on undisclosed income of Rs. 25,000 only but the assessee who had not disclosed any capital gain (case of B) out of capital gain of Rs. 50,000 goes scot free. Was such an intention of the legislature? Or, can provisions be interpret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above discussion and the decisions of the Hon'ble Supreme Court, we are unable to accept the theory put forward by the appellant that while determining the undisclosed income Chapter XIV-B of the Act the provisions other than the provisions of Chapter XIV-B are not applicable. However, our conclusion is subject to the exception that so far as the provision of s. 145 are concerned, they are not applicable. This view is based on the following observations: (i) The absence of reference to provisions of s. 145 in s. 158BC-laying down the procedure for block assessment-supports our view that the legislature had never intended to apply the provisions of s. 145 to the assessments for block period. Had it not been so, then the legislature would have stated the applicability of provisions of s. 145, as stated in the application of other provisions. (ii) Secondly, the provisions of s. 158B clearly specify that the undisclosed income shall be the aggregate of the total income of previous year falling within the block period computed, in accordance with the provisions of Chapter N of the Act and reduced by the aggregate of total income already assessed or declared in any pending return and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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