D.C. Agrawal, Accountant Member.
As these two appeals filed by two different assessees consisting of similar issues, they are clubbed together, heard together and are being disposed off by this common and consolidated order for the sake of convenience.
IT (SS) A. No. 276/Mum./97
In this case, the assessee has raised the following grounds :-
"1. On the facts, in the circumstances of the case and as per law, the learned assessing officer erred in making an addition of Rs. 15,70,450 towards the alleged on money paid for acquiring flats and shops in Tulsi Shyam Building for assessment year 1990-9 1, on the basis of a declaration submitted by the appellant which although was retracted later.
2. On the facts, in the circumstances of the case and as per law, the learned assessing officer erred in making an addition of Rs. 2,30,000 based on loose papers 38 to 50 of bundle No. 12 found during the search at the business premises of Ws. S.V. Trading Co.
3. On the facts, in the circumstances of the case and as per law, the learned assessing officer erred in making an addition of Rs. 2,70,000 towards interior decoration and household expenses for assessment years 1996-97 and 1997-98,
4. On the facts, in the circumstances of the case and as per law, in making the additions as stated above, the learned assessing officer was not justified in holding a view that the declaration given by the appellant could not be retracted by him and the adverse inference could be drawn against the appellant on the basis of such declaration which was retracted later.
5. The appellant submits that the assessment under Chapter XIV-B of the Income Tax Act, 1961, in the case of M/s. MJS Associates is still pending. If this assessment of the appellant, the any repercussions on this assessment of the appellant, the necessary relief may be given to the appellant accordingly.
6. The learned assessing officer erred in travelling beyond the scope of Chapter XIV-B of the Income Tax Act, 1961, in making the above additions."
The brief facts of the case are that there was a search operation at the business and residential premises of the group of assessee on 10- 10- 1996. Shri Manmohan Singh and Rajender Saini were among those against whom search operation was carried out. During the course of the search at his residential premises, cash of Rs. 4,07,510 was found out of which Rs. 3,50,000 was seized and jewellery valued at Rs. 7,99,097 was found but nothing was seized. In addition to this, there was also a seizure of registers and loose papers contained in four bundles of Annexure-A of panchanama dated 11-10-1996. There was also seizure of loose papers and diaries concerning to business of Sri Manmohan Singh from the business premises of SV Trading Co. and M/s. Vig Automobiles. After the search notice under section 158BC was issued on 26-2-1997 and served on 27-2-1997.
Then notice under section 143(2) was issued on 13-6-1997 and again on 3-10-1997. This is claimed to have been served on the assessee. The return of undisclosed income was filed on 12-9-1997 declaring undisclosed income of Rs. 16,79,270 as under:-
Undisclosed payment made to Smt. Dolly Ghosh, a retiring partner of M/s. Vig Automobiles during the accounting period relevant to the assessment year 1992-93
Unrecorded contributions for chit fund during the accounting period relevant to assessment years 1995-96, 1996-97 & 1997-98 (up to 10- 10 1996)
Rounded off to
The assessing officer had also issued a questionnaire on 16-7-1997. After filing the return of undisclosed income the assessee vide his letter dated 7-10-1997 furnished the information to the assessing officer. The assessing officer pointed out in the assessment order that when statement of the assessee was recorded under section 132(4) on 11-10- 1996 he had admitted undisclosed income of Rs. 20,00,000, which was subsequently revised to As. 30,70,450 in the statement under section 131 (1A) as under :-
Unaccounted income /Investment in Tulsi Shyam Building
Unaccounted Investment in Flat From New Suraj Builders
Unaccounted payment made to Smt. Dolly Ghosh
Unaccounted investment on Renovation and furnishing of Flats at Mahajan Apartments and unaccounted household expenses
In the statement under section 132(4) Rs. 5 lakhs were disclosed out of item No. 1 above, and item Nos. 2, 3 and 4 were disclosed at the same figures.
3. However, in the return of block period the assessee declared out of the four items above only one item i.e., unaccounted payment of Rs. 10,00,000 made to Smt. Dolly Ghosh and retracted the disclosure made in respect of remaining three items. When the assessing officer sought clarification, in respect of items of concealed income retracted by him, and also in respect of NRI gifts received by his family members, investment in flat at Kasturi Tower, cash payment made to Amber Wood Packing Pvt. Ltd. and to Mr. Poly Ila Nair, the assessee filed a letter dated 29-10-1997 to Commissioner (Appeals) explaining investment in flats and shops in Tulsi Shyam Building being item No. 1 of disclosure under section 132(4), (it) house expenditure and interior decoration amounting to Rs. 2,70,000 and (iii) payment to New Suraj Builders amounting Rs, 2,30,000. He also explained investment in flats at Kasturi Towers amounting to Rs. 18,39,000. In addition to this, he filed an affidavit dated 10-9-1997 sworn by him. This affidavit contains the retraction. Since it is a major bone of contention it will be useful to quote it ad verbatim.
I, Sardar Manmohan Singh Vig, son of Late Diwan Singh Vig resident of 7, Mahajan Apartments, Veer Savarkar Marg, Thane (W) do hereby solemnly affirm on oath as under:
1. That during the course of search action against me under section 132 of the Income Tax Act, 1961, which commenced from 10-10-1996 and during the course of subsequent Income Tax Act proceedings, my statements were recorded under section 132(4) and under section 131 (a) of the Income Tax Act, 1961, from time to time.
2. That during the course of recording of the said statement my considerable resistance, I was pressurised and to make certain statements, which were incorrect and not true. In the said statements, I was forced to won up certain amounts as unaccounted investments. I give below the details of such alleged "unaccounted investments" which were recorded in my above mentioned statements as being made by and the said statements being incorrect I hereby withdraw the same
Unaccounted cash payments made to Ws. New Suraj Builders, Thane towards purchase of flat in Audumbar Apartments
(The documents relating to above premises were kept with me as security for payment made by me to M/s. Woodpackers Pvt. Ltd., Nasik a Company belonging to the same group as New Suraj Builders. I repeatedly tried in explain the true facts vide my various answers to questions asked in statement recorded under section 132(4) but to no avail)
Unaccounted expenditure on renovation & furnishing of my residential Flat at Mahajan Apartments and on account of inadequate household expenses & others
(No such expenditure has been incurred by me in the block period and the above amount was included only to round up my declaration to 20 lakhs)
Unaccounted cash payments made to M/s. Mehta Enterprises for purchase of premises at Tulsi Shyam Building by our group amounting to Rs. 31,40,000 My share was recorded as one half i.e., Rs. 15,70,000
(No such payments were made by either me or any other members of my family/group)
3. I again confirm that I have not made any payments as detailed above and the said investments were incorrectly recorded to have been made by me in my statements recorded under section 132(4) and under section 131(1A) of the Income Tax Act, 1961. I therefore withdraw any answer/ statement which is contrary to the contents of my above affidavit.
5. I would have made this affidavit earlier, but for the severe health problems suffered by my partner Shri Rajender Singh Saini. His health suffered a set back during the search proceedings itself and he had to be hospitalized in the middle of search action. This was further complicated by a massiva heart attack which he suffered on 21-11-1996 and for which he had to be admitted first to S.S. Singhania Hospital, Thane and then for further treatment at Jaslok and Hinduja Hospitals, Mumbai. As he was restrained under medical advise from undertaking any activity which would have aggravated his health problems, the matters relating to search proceedings could not be discussed with him.
Affirmed on oath at Thane on this the 10-9-1997."
In brief, the assessee explained to Commissioner (Appeals) and assessing officer that no on-money was paid in respect of acquisition of flats and shops in Tulsi Shyam Building. The entries, according to assessee, page No. 7, bundle No. 14/party No. 6 pertains to original proposals of the group for acquiring six shops and 12 flats in the said building for a sum of Rs. 52,01,000. Later on, only six flats and four shops for a sum of Rs. 20,60,100 and the deal in respect of balance of 8 flats whose consideration was Rs. 31,40,900 was cancelled. The eight flats were to be acquired for our personal residence purposes. It was further submitted before the assessing officer that if rate per sq.ft. is worked out after including alleged on-money then, it would come to Rs. 1,933 per sq.ft. for shops and Rs. 1,262 for flats. The said premises were also got valued from registered valuer to determine the market rate as at December 1999 and according to which market rate was Rs. 800 for shops and Rs. 500 per sq.ft. for flats, which is nearly the same as per declared purchase cost.
Regarding second issue about payment to New Suraj Builders, assessee submitted that no payment of Rs. 2,30,000 has been made to New Suraj Builders. A partner of that concern had required a loan of Rs. 3,00,000 and this request was made to M/s. Amber Wood Packers Pvt. Ltd. in which he is a director. Against that loan, title documents of flat No. 405 were submitted. The said loan was given in 1996 to M/s. Amber Wood Packers.
So no payment was made to New Suraj Builders directly. Regarding household expenditure and interior decoration of Rs. 2,70,000 it was submitted by the assessee that he is an extremely middle class family and their withdrawals including that of the wife are sufficient to cover the household expenditure. The total withdrawal for the block period amounted to Rs. 5,48,084. Therefore, there is no surplus or extra household expenditure.
Regarding delay in retraction, it was submitted that it was on account of severe health problems suffered by his partner Shri Rajender Saini. He has suffered physical set back during the search proceedings itself. He was hospitalized in the middle of search action. He has also suffered a massive heart attack on 21-11-1996 for which he was hospitalized in Singhania Hospital, Jaslok Hospital and Hinduja Hospital. As he was restrained under medical advice from undertaking any activity which would have aggravated his medical problem, the search problem was not discussed with him.
In the affidavit sworn on 10-2-1997 the assessee reiterated all the above contentions. In addition, he stated in affidavit that the said investments were incorrectly recorded in his statements under sections 132(4) and 131(1A) and therefore, he is withdrawing any answer given in the statement which is contrary to the contents of the affidavit.
It may be mentioned here that the authorized officer recorded the statement of Shri Manmohan Singh on 10-10-1996. In addition to this, another statement was recorded under-section 131(1A) on 25-10-1996 in the office of ADIT. In the statement under section 132(4) the assessee had made disclosure of Rs. 20,00,000 for the block assessment period. Subsequently in the statement under section 131 (1A) on 25-10-1996, this was revised upward to Rs. 30,70,450 already referred above. The assessing officer in the assessment order considered all the four items of addition, which are also discussed separately as under
(i) ADDITION OF RS. 15,70,450
The assessing officer mentioned that six shops and four flats in Tulsi Shyam Building on Highway Thane were purchased by Shri Manmohan Singh and Rajender Singh, with agreement price of Rs. 20,60,100. They were purchased from M/s. Mehta Enterprises. During the course of statement recorded at the time of search both Mr. Manmohan Singh and Rajender Singh admitted to have paid a sum of Rs. 5,00,000 each, as unaccounted money in respect of above composite transactions. Further statement of Sri Manmohan Singh was also recorded on 25-9-1996 by ADIT (Inv.), Thane, wherein Shri Manmohan was confronted with seized documents particularly page No. 7 of bundle No. 14 of party No. 6 and thereafter he admitted to have paid unaccounted on-money of Rs. 31,40,900 in total, in respect of aforesaid six shops and four flats. The half share of two Manmohan Singh and Rajender Singh each comes to Rs. 15,70,450. For this the assessing officer relied on the statement of Shri Manmohan recorded on 25-10-1996:
"Q- 10. Please go through Page 7, back side, bundle 14 or R-6 dated 11-10-1996 and clarify the entries of Rs. 10,60, 100 and the name mentioned in Urdu ?
Ans.: The name in Urdu is Mehta Enterprises. The amount on left hand side on the Page is Rs. 10,77,600 for 6 shops and Rs. 9,82,500 for 4 flats Rs. 20,60,100
This amount is the price of 6 shops and 4 flats booked in Tulsi Shyam Building, Highway Jn. Eastern Express Highway, Thane (W). These properties were booked with Mehta Enterprises.
Q- 11. Six shops and Six flats were booked in 1989. Please give the details payments made by cheques to Mehta Enterprises.
Ans.: Payments made through cheques have been reflected in books of account.
Q- 12. As per working, the cheque amount of 6 shops and 4 flats comes to Rs. 10,76,000 and Rs. 9,82,000. Total payments comes to Rs. 20,58,000. The price of shops and flats is mentioned at Rs. 20,60, 100. Please give the details of exact amount of cheque payment.
Ans.: After verification of books of account, we will give you exact details of cheque payments.
Q-13 On the same Page No. 7 (back side) datewise payments written as under:
Please confirm whether these details are written in your own handwriting ? Ans.: It is in my own handwriting but I cannot recollect what these figures are. Q- 14 On the left hand side of back side of Page 7 Bundle 14/R-6 following figures are written
The cheque payment of Rs. 20,60, 100 is reduced from Rs. 52,0 1,000 and balance of Rs. 31,40,900 is mentioned. On the right hand side the total payment of Rs. 30,0 1,000 on various dates are mentioned. This shows that the 'On money' payment for purchases of six shops and four flats was Rs. 31,40,900. Please explain whether the on-money payment was Rs. 31,40,900 ?
Ans.: 1 cannot recollect whatever is written in the above mentioned page.
Q- 15 Have you purchased any other properties from Mehta Enterprises than the six shops and four flats in Tulsi Shyam Building ?
Ans. No. We have not purchased any other property from Mehta Enterprises. But I regularly buy steel structure, plate material etc. as and when required for my firms M/s. MJS Associates, M/s. Pal Engg. and Services Pvt. Ltd. from their trading company, India Iron Mart, Shivaji Path, Thane (W).
Q- 16 Give the name of the person you have dealt with the purchases of Tulsi Shyam property ?
Ans.: We haveissued cheques in favourof Mehta Enterprises. I will. submit the name of the person later on.
Q- 17 Please go through back side of Page 7 on which payment details to Mchta Enterprises is mentioned. Datewise payment are written on right hand side. Please consult with Rajinder Singh Saini for investment in Tulsi Shyam Building and explain what is the total amount of on-money paid for purchase of 6 shops and 4 flats in Tulsi Shyam. You are also requested to show the entries of datewise payment to Mehta Enterprises as per page 7 (back side) as narrated in Q. No. 13 in the books of account of your group concerns or your personal books of account ?
Ans.: I have again verified the details on the back side of Page 7 Bundle 14/R-6 and confirm that the datewise payment from 1-5-1989 to 6-4-1990 which comes to Rs. 30,00,000 was paid in cash to M/s. Mehta Enterprises for purchases of 6 shops and 4 flats in Tulsi Shyam Building. Total purchase price was Rs. 52,01,000 out of which cheque payment was Rs. 20,60,100 and the remaining amount Rs. 31,40,900 was cash payment has not been recorded in regular books of account of the group concerns or individual accounts. This amount was unaccounted income of our groups and I am ready to pay tax as per the provision of the Income Tax Act, 1961 for the block period. Uncounted cash payment was made by me on flats. We have already offered Rs. 10,00,000 as unaccounted income on 11-10-1996 during the search at our residence. This Rs. 31.40 Lakhs is inclusive of Rs. 10,00,000."
Regarding the theory of coercion and pressure on the basis of which the admission made under sections 132(4) and 131(1A) was retracted, the assessing officer reasoned that (i) the statement given under sections 132(4) and 131 (1A) were based on seized papers, (it) he did not inform the alleged coercion to higher authorities including CCIT without loss of time. This retraction was done after lapse of 11 months from the date of search action. The delay in retraction was not found to be convincing, (iii) what is done through affidavit is merely a denial and not retraction, (iv) that the disclosure in the admission is based on direct evidence in the form seized papers, (v) the theory that he was negotiating for purchasing 8 more flats given in the retraction affidavit is only an after thought as this was not stated at the time of statement originally taken.
Thus, the assessing officer rejecting the retraction and alleged explanation of the assessee added a sum Rs. 15,70,450 being half of share of unaccounted money as undisclosed income of the assessee.
(ii) CASH PAYMENT TO NEW SURAJ BUILDERS OF RS. 2,30,000 FOR FLAT NO. 405
According to assessing officer pages 48 to 50 of bundle No. 12 of party No. R6, relate to cash payment of Rs. 2,30,000 by Mr. Manmohan Singh to M/s. New Suraj Builders towards cost of flat No. 405 in Audumbar Apartments in Thane. The schedule of payment as reflected from these documents is as under:
The assessing officer pointed out that pp. 38 to 47 are the purchase documents in respect of this flat and document Nos. 48 to 50 are stamp receipts issued by M/s. New Suraj Builders in token of having received Rs. 2,30,000 from the assessee. While answering to q.28 on 11-10-1996, he admitted to have made cash payment of Rs. 2,30,000 to M/s. New Suraj Builders and the said money was his unaccounted income. The said sum was not offered for taxation in the block return. Instead it was explained to the assessing officer that this receipt was given to him by M/s. Amber Wood Packers Pvt. Ltd. This explanation was not accepted by the assessing officer because in the search, stamp receipts from M/s. New Suraj Builders were found in token of receipt of on-money. The assessing officer pointed out that if payment of Rs. 3,00,000 was made to M/s. Wood Packers Pvt. Ltd., then why should it give receipt for Rs. 2,30,000 that too in the month of February and March 1996, whereas alleged payment of Rs. 3,00,000 was made in June 1996. The assessing officer also rejected the allegation of assessee that retraction was made because there was coercion and threat. Accordingly, he treated the sum of Rs. 2,30,000 as unexplained income for the block period.
(iii) SUM OF RS. 270,000 SPENT ON INTERIOR DECORATION AND INAD EQUATE HOUSE HOLD EXPENDITURE
According to the assessing officer, Shri Manmohan Singh in answer to q.28, in the statement recorded under section (sic) voluntarily disclosed Rs. 2,70,000 as undisclosed income being expenditure /investment in interior decoration and household matters. The said disclosure was later retracted vide affidavit dated 10-9-1997. The reason for retraction was again the same - pressure and coercion while recording statement under section 132(4). It is useful to reproduce qs.28 & 29 and their answers recorded on 11 - 10- 1996.
"Q.28 Looking at the cash payment made by you to Mrs. Dolly Ghosh of Rs. 10 lakhs the NRE Gifts received by you & your family members the payment of Rs. 2.30 lakhs paid by you in cash to M/s. New Suraj Builders, Thane and the on-moeny payment of Rs. 5 lakhs made by you for acquiring immovable properties at Tulsi Shyam Bldg. you are requested to offer your comments on the same.
Ans.1 A As regards the on-money payment for purchase of immovable properties at Tulsi-Shyam Building I admit that I have paid Rs. 5 lakhs as onmoney out of my unaccounted income declare the same for the Block period and agree to pay taxes on the same.
As regards the NRE Gifts received by me & my family members, I have to state that I have shown these gifts in my Books of Account and are received from my friends from these NRE Accounts.
Under section 5(ii)(b) of the Gifts Tax Act which are exempt from Gift Tax and accepted by I.T. Deptt.
As regards the Cash payment of Rs. 10 lakhs to Mrs. Dolly Ghosh, I have already admitted having made the payment out of my unaccounted income earlier in this statement. I also confirm having declared this amount of Rs. 10 lakhs for the block assessment period and I conform that I will be paying the tax on the same.
As regards the cash payment of Rs. 2.30 lakhs to M/s. New Suraj Builders, I have not paid any cash to M/s. New Suraj Builders. The flat in Audumbar Apts. is held by me as a guarantee for the funds provided by me for M/s. Wood Packer Ltd., Nasik.
In view of the above statement confirm however now 1 have considered the situation in totality and I hereby admit that I have made a cash payment of Rs. 2.30 lakhs to M/s. New Suraj Builders, Thane towards purchase of flat in Audumbar Apts. I hereby declare the payment of Rs. 2.30 lakhs out of my unaccounted income for the Block assessment period and I agree to pay taxes on the same.
In addition to the above I further declare Rs. 2.70 lakhs being the unaccounted expenditure on renovation and furnishing of the flat inadequate household expenses and small errors of commission and commission in the papers seized in to day's action.
Thus my total disclosure stands at Rs. 20 lakhs for the Block assessment period and I agree to pay the taxes on the same.
Q.29. Do you have any thing more to State?
Ans. No, I do not have anything above is true for the best of my knowledge and belief and is stated without any fear, coercion or pressure brought to bear on me. I have read the above statement and confirm that it is correctly & accurately recorded."
The assessing officer rejected the explanation and retraction on the same ground as in respect of other items and made the impugned addition in the block period.
Before us, learned authoriesed Representative submitted that the assessment made by the assessing officer is biased because he was the ADI investigation when the search was carried out and now he is the assessing officer. For this proposition he relied on the decision of Hon'ble Supreme Court in 268 ITR 1 (sic). According to learned AR the assessing officer was interested in the case to make it a success because it was search case and there was a desire in him to make a successful assessment. On this ground, he submitted that assessment be set aside. Secondly, learned authorised representative submitted that the flats and shops and Tulsi Shyarn Building were valued by approved valuer during the course of assessment proceedings and their report indicates that market rate of the flats and shops at that time was in the vicinity of recorded rate at which shops and flats were purchased. In order to highlight his point, he referred to page 62 of the APB, which shows the rates adopted by approved valuer in the vicinity of date of purchases of flats and shops in Tulsi Shyam Building. Thirdly, learned authorised representative also submitted that Municipal authorities had carried out their own valuation for the purposes of stamp duty and they found the value of one shop at Rs. 2,20,000 as against 1,88,000 shown by the assessee in the purchase documents. This shows that market value was near about the same and not the one which would have come after taking into account on-money allegedly paid by the assessee to the owner of said building for purchases of shops/flats. The next argument of learned AR was the assessing officer did not record any statement of the seller as to whether he had received any on money or not. Also no assessment of the settler by including on money has been made. Further, the assessing officer did not refer the shops and flats to DVO of the department to determine the market rate of the shops and flats as on the date of purchase. The assessing officer also did not consider the case of Manmohan Singh (HUF) which also purchased such shops and flats in the same building. The learned AR relied on the decision of Tribunal in the case of Manmohan Singh Vig (HUF) in (IT(SS) Appeal No. 129 (Mum.) of 2000), wherein the Tribunal deleted a sum of Rs. 18,39,000 alleged to have been paid by the HUF in cash to one Shri Dinesh Rajgore, for sale of flat No. 401 in Kasturi Tower, that flat was sold in the name of Manmohan Singh Vig's wife for which a sum Rs. 30,39,000 was received by Raj Gore. Out of this, a sum of 12,00,000 was paid by cheques and remaining Rs. 18,39,000 was paid him in cash. Since the transaction did not go through Shri Raj Gore stated that entire sum of Rs. 30.39 lakhs was returned back. The Tribunal deleted the addition from the hands of HUF on the ground that transaction was being done in the name of Smt. Amarjit Kaur Vig and, therefore, the impugned addition could not be made in the hands of HUF. The next argument taken by the learned authorised representative referred to q.15 and its answer recorded on 25-10-1996 wherein Manmohan Singh stated that he has not purchased any other property from Mehta Enterprises but he buys steel structure and plate material etc. for his firms M/s. M.J. Associates, Pal Engg. Services Pvt. Ltd. etc. Regarding alleged payment of Rs. 2,30,000 learned AR relied on answer to q.17 by Mr. Manmohan wherein he denied to have made any payment towards on-money. He referred to question and answer which was as under:-
"Q. 17. Payment of Rs. 2,30,000 in the month of February/March 1996 to Ws. New Suraj Builders, Thane for the above flat in Audumbar Apts.
Ans. Yes, I State and confirm that I have not made any cash payment to M/s. New Suraj Builders, Thane in the month of February/March 1996 for the above flat in Audumbar Apts."
The learned authorised also referred to letter written by the assessee to the commissioner of Income Tax on 29-10-1997 explaining why the figure of 31,40,900 was figuring in the seized documents as he was intending to purchase additional 8 flats for the consideration equivalent to that sum and the total of the two came to Rs. 52,01,000. Thus according to learned AR, as explained in this letter, sum of Rs. 52,01,000 consisted of additional sum for purchase of 8 flats, which did not materialize. He referred to that letter extensively. We, therefore, for the sake of convenience reproduce the same as under:-
The Hon. Comm. of I tax,
In the matter of Shri Manmohan Singh Vig
Objections in respect of draft assessment
order for the block period
I thank you for the opportunity granted to me by your honour, to put forth my objections in respect of the draft assessment order for the block period. I submit the same as under:-
1. Investment in flat & shops - Tulsi Shyam Rs. 15,70,450
Sir, as the matter has already been discussed at length in the draft assessment Order, I restrict myself to only certain salient points to substantiate my claims.
A. No 'On Money' was paid in respect of the acquisition of the said promises. The entries referred to on page No. 7 bundle No. 14/R-6 pertain to our groups original proposal for acquiring 6 shops and 12 flats in the said building for a sum of Rs. 52,0 1,000. Later on only 6 shops and 4 flats were acquired for a sum of Rs. 20,60,000 and the deal in respect of balance 8 flats, whose consideration was Rs, 31,40,900 was cancelled. The 8 flats were to be acquired by us for our personal residences. The entries have been explained in detail in my statement recorded on 22.20.07.
B. Even if for a moment the alleged 'on money' component is included, as the cost spent on acquisition of premises actually purchased then the rate per sq. feet of the premises acquired in 1989 works out as under:
Premises Area Actual rate Rate per Sq.feet
Per sq. feet after including
Shops (6) 1407 Sq.Ft, Rs. 765 Rs. 1,923
Flat (4) 1965 Sq. Ft. Rs. 500 Rs. 1,262
Sir, the market rate of the said premises in 1989 was nowhere near the rate per sq. feet arriving at after including the alleged 'On Money' component. I have got the said premises valued from a registered valuer to determine the market rate as at December 1989 and the said rate as per his report dated 23-10-1997 is Rs. 800 per Sq. feet for the shops and Rs. 500 per Sq. feet for the flats. A copy of the valuation report is enclosed.
I. therefore humbly to your honour to direct deletion of the addition proposed on this count.
2. Payment to M/s. New Suraj Builders Rs. 2,30,300
As has been already submitted by me on record, I have not made any payment to M/s. New Suraj Builders of Thane.
Shri Raut, a partner of M/s. New Suraj Builders is known to me and had requested me for a loan of Rs. 3,00,000 to M/s. Ambad Wood Packers Pvt. Ltd., a company in which he is a Director. Documents and stamped payment receipts in respect of flat No. 405 being developed by M/s. New Suraj Builders. I could arrange for funds only in July 1996 when I gave the loan of Rs. 3,00,000 to M/s. Ambad Wood Packers Pvt. Ltd. Against the already deposited security documents in respect of said flat No.
Shri Jagganath L. Raut, a partner of M/s. Suraj Builders has independently confirmed the above vide his affidavit dated 27-10-1997 filed with the assessing officer (Copy enclosed)
1. therefore humbly pray to your honour to direct delection of the addition proposed on this count.
2. Household expenses & Interior Decoration of House Rs. 2,70,000 Sir, my admission on the above count has been given under pressure and compulsion. I have purchased my residential flat in 1973 and whatever furniture exists is made immediately after purchase except for certain repairs from time to time.
As far household expenses are concerned, I alongwith my family adhere to extremely middle class standards of living and my wife's withdrawals for household expenses are sufficient to cover my family's expenses for household purposes. My and my wife's withdrawals for the block period have been submitted on record yearwise and the same total Rs. 5,48,084 for the entire block period. I humbly submit that the same are adequate for the purpose.
I hereby humbly pray to your honour to direct deletion of the addition proposed on this count also."
Regarding retraction learned AR explained that his partner was ill. He was to be hospitalized, he drew our attention to this communication in this regard to the assessing officer as under:
"5. Delayed Retraction :
Sir, as far as the fact of my retraction at a late stage is concerned, I submit that the same is on account of severe health problems suffered by my partner Shri Rajender Singh Saini. His health suffered a set back during the search proceedings itself and he had to be hospitalized in the middle of search action. This was further complicated by a massive heart attack for which he was first admitted at S.S. Singhania Hospital, Thane and then for further treatment at Jaslok and Hinduja Hospitals, Mumbai. As he was restrained under medical advice from undertaking any activity which would have aggravated his health problems, the matter relating to search proceedings could not be discussed with him. Hence, there was a delay in my retraction which may please be considered in view of the genuine circumstances."
Finally, learned counsel for the assessee reiterated the arguments taken by him before the assessing officer that there was a pressure and coercion while recording the statement on 11-10-1996 and 25-10-1996. According to him, it was not a voluntary statement but was given under the duress and fear of being taxed heavily if he did not disclose some thing at that time. The statement was recorded after 24 hours of the search at 1.45 PM. So there was a long period since the search was started. According to learned counsel for the assessee, there are several officers who surrounded the assessee and the assessee has no option but to make some surrender. In respect of other additions, learned authorised representative repeated the same arguments which were taken before assessing officer in particular on his theory that there was pressure and coercion.
In support of his arguments learned authorised representative relied on a large number of decisions, which are given hereunder for the sake of natural justice.
"Case laws pressed by AR
1. Jaya S. Shetty v. Assistant Commissioner (1999) 69 ITD 336/64TTJ (Mum.) 551
Undisclosed income under Chapter XIV-B has to be determined on the basis of evidence, documents, material and information found during search and it has to be authentic, reliable and verifiable information and additions based on conjectures and surmises or estimates and presumption not supported by any evidence documents, etc., founding search, have to be deleted.
2. Chander Mohan Mehta v. Assistant Commissioner (Investigation) ( 1999) 65 TTJ (Pune)327
assessing officer has to prove, on the basis of the evidence or material found as a result of search or as available with the assessing officer, that assessee has undisclosed income chargeable to tax under section 158BA.
3. Patel Rajesh Kumar Kantilal & Co. v. Assistant Commissioner (1998) 62 TTJ (Ahd.) 189
assessing officer cannot make additions on pure presumptions and assumptions while passing an order under section 158BC,
4. Indore Construction (P) Ltd. v. Asstt. Commissioner (1999) 71 ITD 128 (Indore)
No addition could be made in any of the assessment year of the block period regarding which no material or information was available with the assessing officer.
5. Pankaj Dahyabhai Patel (HUF) v. Assistant Commissioner (1999) 63 TTJ (Ahd.) 790
Merely because the block assessment is required to be framed under Chapter XIV-B, relating to undisclosed income, no right is given to the assessing officer to make assessment arbitrarily or contrary to the information available on record.
6. Harakchand N. Jain v. Assistant Commissioner (1998) 61 TTJ (Mum.) 223
No addition can be made in any of the assessment year of the block period regarding which no material or information is available with the assessing officer at the time of block assessment.
7. Nilesh R. Shah v. Assistant Commissioner (2002) 253 ITR 34 (Chennai - Trib.)
Addition on account of cash credit can be undisclosed income 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.
Where there was no information, material or document with the assessing officer to show that cash credit was not genuine, the assessing officer was not justified in treating the cash credit as undisclosed income.
8. Janta Tiles v. Assistant Commissioner (2000) 66 TTJ (Pune) (sic)
Search and seizure - Block assessment - Computation of undisclosed income - Disallowance under section 40A(3) cannot be made in the course of block assessment - Further, undisclosed income would include only those income based on the entries in the accounts or documents which would not have been disclosed by the assessee -The entries recorded in the regularbooks of account cannot be said to have been not disclosed by the assessee - Entire addition deleted.
9. Kasat Paper & Pulp Ltd. v. Assistant Commissioner(2000) 74 ITD 455 (Pune)
The concept of undisclosed income under Chapter XIV-B is akin to concept of concealed income and, therefore, the assessing officer must bring positive material on record to prove falsity of entries in books of account and books of account could not be rejected in a light-hearted manner on mere suspicion and surmises howsoever grave.
10. India Seed House v. Assistant Commissioner (2000) 69 TTJ (Delhi) (TM) 241
In case of block assessment no addition can be made merely on the basis of statement recorded at the time of search which stands fully proved to be incorrect in view of the material itself which was seized at the time of search.
11. Pranav Construction Co. v. Assistant Commissioner ( 1998) 3 DTC 719 (Mum. -Trib): (1998) 61 TTJ (Mum. - Trib.) 145
It was held that the admission cannot be read as an Act of Parliament and that it has to be read in the context fairly and reasonably. The burden of incurring the expenditure can be discharged either by direct evidence or if such evidence is not available the assessee can always point out to circumstancial evidence supporting the claim. Thus, statement recorded under section 132(4) cannot be made use of for purpose of precluding assessee from claiming expenditure for earning income which assessee forgot to claim while making statement disclosing income.
12. Ganga Saran & Sons (P) Ltd. v. Income Tax Officer (1981) 130 ITR 1 (SC): Income Tax Officer v. Nawab Mir Barkat Ali Khan Bahadur (1974) 97 ITR 239 (SC)
Belief should not be arbitrary or irrational but based on relevant and material reasons.
13. S. Narayanappa v. CIT (1967) 63 ITR 219 (SC)
Belief must be in good faith, and cannot merely be a pretence.
14. Madhya Pradesh Industries Ltd. v. ITO (1970) 77 ITR 268 (SC)
Absence of evidence to prove existence of Income Tax Officer's belief that income has escaped assessment, will invalidate reassessment.
15. Maynak Poddar (HUF) v. Wealth Tax Officer (2003) 181 CTR (Cal.) 362
If in law an item is not taxable, no amount of admission or misapprehension can make it taxable. The taxability or the authority to impose tax is independent of admission. Neither there can be any waiver of the right by the assessee. The department cannot rely upon any such admission or misapprehension if it is not otherwise taxable.
This question was dealt with by this court in Bhaskar Mitters case ( 1994) 73 Taxman 437, at paragraph 8 at page 442. In this decision, this court observed:'An assessee is liable to pay tax only upon such income as can be in law included in his total income and which can be lawfully assessed under the Act. The law empowers the Income Tax Officer to assess the income of an assessee according to law and determine the tax payable thereon. In doing so, he cannot assess an assessee on an amount, which is not taxable in law, even if the same is shown by an assessee. There is no estoppel by conduct against law nor is there any waiver of the legal right as much as the legal liability to be assessed otherwise than according to the mandate of the law (sic). It is always open to an assessee to take the plea that the figure, though shown in his return of total income, is not taxable in law.
16. Jt. CIT v. Gramophone Co. of India Ltd. (2003) 87 ITD 88
The question of any estimate of sale price so as to bring to tax the notional income, which is neither received nor alleged to have been received, is clearly beyond the scope for the scope of legal provisions. The burden is on the revenue to show that there is an understatement of consideration.... Moreover, to throw the burden of showing that there is no understatement of consideration, on the assessee would be to cast an impossible burden upon him to establish a negative, namely that he did not receive any consideration beyond that declared by him. In any case, the assessing officer cannot step into the shoes of the assessee to decide at what price he should sell his assets, unless the transaction itself is claimed to be collusive or colourable device.
17. CIT, West Bengal v. Anwar Ali 76 ITR 696
It would be perfectly legitimate to say that the mere fact that the explanation of the assessee is false does not necessarily give rise to the inference that the disputed amount represents income. It cannot be said that the finding given in the assessment proceedings for determining or computing the tax is conclusive. However, it is good evidence. Before penalty can be imposed the entirety of circumstances must reasonably point to the conclusion that the disputed amount represented income and that the assessee had consciously concealed the particulars of his income or had deliberately furnished inaccurate particulars. As no satisfactory evidence had been produced by the department to establish that the amount in question represented the income of the assessee, the Tribunal held that no penalty could be imposed.
18. Krishan Lal Shiv Chand Rai v. CIT, Patiala 88 ITR 293
The burden was on the department positively to prove that the assessee had actually concealed his income and the amounts in question were assessee's undisclosed income. Surrender by the assessee could have been for more than one reason in spite of the fact that it was not his income and that fact alone could not be the basis for levying penalty.
19. Shri Krishna v. Kurukshetra University AIR (1956) SC 376
The Hon'ble Supreme Court held, if the original statement suffers from any effect, the person is entitled to go back on the statement already made by making correct statement.
Any statement made in the ignorance of law, the legal rights or under duress cannot bind the maker of the admission.
(Evidence Act, 1872, section 3 - Fraud - Proof)
Where a person on whom fraud is committed is in a position to discover the truth by due diligence, fraud is not proved. It is neither a case of suggestion falsi, or suppression.
20. Deepchand & Co. v. Assistant Commissioner (1995) 51 TTJ (Bom.) 421
Income - Addition - No supporting evidence to confirm the addition except statements of two partners recorded at the time of search -Statements recorded during search continuing for more than two days and two nights cannot be considered to be free, fearless and voluntary - There is considerable force in assessee's contention that statements were recorded under pressure and force - Retraction of statements supported by proper evidence - Additions cannot be sustained on merits.
21. K. Moidu v. Assistant Commissioner (2002) 81 ITD 242 (Cochin) (TM)
There is no scope for general estimations in a block assessment in the absence of specific and speaking materials. In a block assessment, generally estimated additions cannot be justified.
22. Mrs. Purnima Beri v. Dy. CIT (2002) 82 ITD 137/1 (Asr.) (TM) (Mag.)
Where assessing officer held that there was a cash payment over and above cheque payment for purchase of certain shares by assessee on basis of statement of two persons, who later retracted their statements, in absence of cogent evidence, addition was not justified.
23. Nattu v. State of Uttar Pradesh AIR 1956 SC 56
The Supreme Court observed that the prolonged custody may stamp the contemporary statements so obtained as in voluntary one and the intrinsic value of such statement may be vitiated.
24. Pullangode Rubber Produce Co. v. State of Kerala (1973) 91 ITR 18 (SC)
Entries made by the assessee in the account-books treating a portion of the general expenditure as expenses towards immature plants and capitalizing such portion amount to an admission that the amount in question was laid or expended for the cultivation, upkeep or maintenance of immature plants from which no agriculture income was derived during the previous year for the purpose of Explanation (2) to section 5 of the Kerala Agriculture Income Tax Act, 1950. Such admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It is open to the assessee who made the admission to show that it is incorrect and the assessee should be given a proper opportunity to show that the books of account do not disclose the correct state of facts."
As against this learned departmental Representative submitted that there was no pressure or coercion as alleged by the assessee. The search is carried out in a cordial atmosphere in the presence of witnesses. Whenever required, the assistance of CA is also allowed. There is practically no hindrance in the personal comforts of the inmates of the house searched. Even after statement of 11-10-1996 another statement was recorded in the office of the ADI. It is believed that assessee must have regained his compose within next 14 days of the search and would have spoken truth before the ADI under section 131 (1A). Further the statements so recorded on 11-10-1996 and 25-10-1996 are no blind and bald statements. They were supported by seized documents. In fact assessee was confronted on them and in response; he had admitted to have made payment of on-money. The seized document, showed details of payments. No complaint was made to higher authorities about alleged coercion or pressure. The alleged retraction was after a gap of 11 months. In fact it is a denial of original statements given on 11-10-1996 and 25-10-1996. No material has been submitted by the assessee as to how the original statements admitting payment of on money was incorrect. The learned DR relied on- decisions in Assn. CIT v. Laxmanbhai J. Patel (2001) 77 ITD 166 (Rajkot), Ramesh T Salve v. Assn. CIT (2000) 75 ITD 75 (Mum.), Greenview Restaurent v. Asstt. CIT (2003) 263 ITR 1691 (Gauhati). The learned departmental also denied that there was any bias. He also submitted that valuation reports obtained by the assessee from approved valuer are only self serving documents, It does not lead to the conclusion that no on- money was paid on the face of seized documents and admission by the assessee. He also sought to invoke provisions of section 132(4A) wherein presumption is raised about truthfulness of contents of documents seized in the search. Since it was a rebuttable presumption and assessee has not discharged the onus to rebut the presumption, it will hold good and payment of on-money on purchase of shops and flats have to be believed. The learned departmental representative also submitted that comparable cases are not really comparable because element of on-money was not considered in those alleged comparable cases. Regarding interior decoration and expenditure made therein learned departmental representative submitted that it was very much visible during the search. It was pointed out to the assessee during the search and only thereafter disclosure on that account was made. Regarding payment of Rs. 2,30,000 learned DR submitted that stamps are the strongest evidence that sum of Rs. 2,30,000 was paid in cash. According to him, no further evidence was required.
We have heard rival submission and considered the material and case laws cited by the parties. We find that the case laws cited by the learned counsel for the assessee were not at all related to the facts of the case in hand. Entire argument of learned counsel for the assessee revolves around pressure and coercion allegedly exercised by the officers of the department compelling the assessee to make disclosure. Let us examine whether such pressure or coercion can be exercised by the authorized officers and his party compelling the assessee to make disclosure in the search. When the search party enters the premises of the assessee they carry with them two independent witnesses. There are often members or officers from different parts of the department accompanying the search party. There are also members from other organizations which are called to support the search parties in discharge of their duty. Warrant is shown to the assessee concerned or to the inmate of the premises. After the search is over, the panchanama is drawn in the presence of the witness and panchanama contains a column as to any special event took place during the course of search. If it happened it is required to be recorded in panchanama. If there is any pressure or coercion, assessee is at liberty to report the matter to the higher authorities. Entire event relating to alleged pressure or coercion can be reported either to higher authorities in the investigation wing or even to CBDT. The fact that such report was never made by the assessee for 11 months, indicates that there was really no pressure or coerion. It was apparently an afterthought so to support the alleged retraction. When really such an event takes place, the witnesses also come forward and support the allegation of the assessee. There is nothing of this sort in the present case. Further, we find that, after the end of the search, after 14 to 15 days, the assessee attends the proceedings before ADI and enhances the disclosure of on-money payment from 20,00,000 to 31,40,900. This is the strong evidence against the theory of pressure or coercion if there was any, assessee would not have come forward to enhance the disclosure. Further the fact that assessee has practically kept quite for 11 months and did not respond to the letters/ notices issued by the assessing officer to him on 26-2-1997 and 13-6-1997 shows that factors of pressure or coercion were not present even after the search. There was nothing which would have prevented the assessee to report to the assessing officer or to the higher authorities. He not only did not act at his own but also did not respond to the notices till September 1997, when he wrote the affidavit. Thus, the conduct of the assessee clearly shows that the theory of pressure or coercion is only an after thought just to support the retraction. We are in agreement with assessing officer and learned departmental representative that what was retracted subsequently was only a denial. No material was produced before the assessing officer or even before us, which would have indicated actual payment and which would have explained the entries in the seized documents in favour of the assessee. In fact the payment of on-money in addition to the recorded price is a very private affair between the two parties to such transactions. No third person not close to the parties can be privy to the on-money transactions. If an assessee states on oath that he paid on-money, then it has to be believed. This is more so when, there are documents found in search, which showed that additional money was paid over and above the recorded price.
It is undisputed that the assessee is head of Vig group with several business concerns. He has been negotiating with M/s. Mehta Enterprises and also other builders for purchase of immovable properties. He has extensive knowledge of business, he enjoys confidence and trust of all other family members as well as Sri Rajender Singh Saini. It is corroborated by the fact that ill health of Sri Rajender Singh Saini has been cited as one of the reasons for delayed retraction. Thus, when Shri Manmohan Singh in the statement recorded under section 132(4) on 11-10-1996 categorically and unequivocally states that a sum of Rs. 5,00,000 each was paid as on-money (which was revised upward subsequently in the statement under section 131(1A) on 25-10-1996 to Rs. 15,70,450 each), that a sum of Rs. 10 lakhs was paid to Dolly Ghosh which was an unaccounted income, that a cash payment of Rs. 2,30,000 was paid to M/s. New Suraj Builders towards purchase of flats in Adumber apartments, that a sum of Rs. 2.70 lakhs was unaccounted expenditure on renovation and furnishing of flat thus, totalling to Rs. 20 lakhs is his unaccounted income, then such statement has to be believed (revised upward in the statement under section 131(1A)). Shri Manmohan Singh, while explaining page No. 7 relating to payment of on-money on purchase of shops and flats in Tulsi Shyam Building in response to q. 13, clearly stated that those figures were in his own handwriting. In response to q. 14 asking for details, he said that he could not recollect. There was nothing at that time, no idea or whisper to suggest that sum of Rs. 31,40,900 was the sum for purchase of additional flats, which was so stated subsequently in the letter dated 29-10-1997 addressed to the commissioner of Income Tax Thane. But when the officer recording the statement advised him to consult Shri Rajender Singh Saini regarding investment in Tulsi Shyam Building and then state as to whether they are recorded in the books of account or not, Shri Manmohan Singh could not withhold the truth for long and stated in response to q. 17 that out of Rs. 52,01,000 remaining amount that is Rs. 31,40,900 was the cash payment not recorded in the regular books. He clearly said that a sum of Rs. 31,40,900 was unaccounted income of his group and he is ready to pay tax as per provisions of Income Tax Act. Regarding the contention in retraction that sum of Rs. 31,40,900 was in respect of intended purchase of additional 8 flats in Tulsi Shyam Building. We are of the view that it is liable to reject out right because there is no support for this claim and it is coming too late. Had it been a fact nothing prevented Shri Manmohan Singh to state so when his statement is being recorded on 11-10-1996 and 25-10-1996. Nothing also prevented the assessee to respond to the notice issued by the assessing officer under section 158BC immediately after receipt thereof on 27-2-1997 and disclose the true facts. The fact that he kept quite for another 7 months demolishes theory of intended purchase of additional 8 flats. Further the seized document shows his working which is reproduced in q. 14, extracted in para of this order. The sum 20,60,100 being recorded price of 6 shops and 4 flats is subtracted from 52,01,000. The details of the payment is shown on same document i.e., page No. 7 bundle No. 4 party No. R6, which is also annexed on page 1 of APB. A perusal of this document shows that all these sums are accompanied with dates. The amounts seem to have been paid in instalments such as Rs. 12.01 lakhs on 1-5-1989, 4 on 26-5-1989, 4 lakhs on 12-7-1989, 2 on 12-8-1989, 1.50 lakhs on 4-11-1989, .50 lakh date not legible, 1 lakh on 9-12-1989, 1 lakh on 2-1-1990, 2 lakhs on 30-1-1990 and 2 lakhs on 6-4-1990. If sum of Rs. 31,40,900 was the money intended to be paid for purchase of additional flats, there was no need to mention instalments and dates. There is also one mention about Rs. 20,60, 100 being the recorded purchase price. This sum is bifurcated in two amounts 10,77,600 and 9,82,500. These are purchase price of 6 shops and 4 flats. That document is written in Urdu. If the assessee wanted to purchase another 8 flats then purchase price thereof would have been maximum Rs. 20,00,000 (double of Rs. 9,82,500, and rounded, as it is the purchase price of 4 flats). The sum of Rs. 31,40,900 is far more and therefore, this cannot be intended purchase price of additional 8 flats. From this, analysis also, the theory of the assessee has to be rejected. More so no documentary evidence has been furnished in support of his intention of purchase of 8 more flats. We believe that document No. 7 referred above, pertains only to the transactions relating 6 shops and 4 flats and not intended additional 8 flats.
Now, we deal with the case laws cited by the learned counsel for the assessee. At the outset, we express our appreciation for the learned counsel for the assessee for sorting out so many decisions but unfortunately none of them are relevant to the point in issue and it has unnecessarily consumed our time and space in the order. We find that cases at Sr. Nos. 1 to 7 are on the proposition that addition in block assessment cannot be made on the basis of mere assumptions or without having support of any evidence or documents found in the search. We have already highlighted above, that the assessment has been made on the basis of documents and admission of the assessee under section 132(4). We find no infirmity in the action of assessing officer and therefore, these case laws are out of the point. Citation No. 8 is for the proposition that what falls in the regular assessment cannot be brought to tax in block assessment. No dispute. But this is not the case here. Citation No. 9 is for estimating income in block assessment. Not applicable. Citation No. 10 is also not applicable because assessee could not prove with material evidence that admission made by him of undisclosed income was incorrect. Citation No. 11 would be applicable when expenditure etc. is claimed from the undisclosed income in block assessment. Citation Nos. 12 to 14 are in relation to reopening of assessment. Citation No. 15 is for the proposition that if an item is not taxable in law, it cannot be taxed. This is also not applicable. Citation No. 16 is about estimation of sale price. In the present case, admission by the assessee is supported by the seized documents. Citation Nos. 17 and 18 are on imposition of penalty. Citation No. 19 relates to when a person discovers the truth after statement is made. As already held, there is no discovery of truth/ fact/ evidence. The retraction was mere denial. In Citation No. 20 the retraction was supported by proper evidence. Citation No. 21 relates to general estimation of income in block assessment. In Citation No. 22 there was no evidence to support the admission. Citation No. 23 is about prolonged custody. It has no application. Citation No. 24 is for allowing the assessee to give opportunity to produce evidence against the statement given. No dispute but no evidence has been given.
We now deal with the arguments made by the learned Counsel of the assessee. According to him there is a bias when same officer acting as an ADI acted as assessing officer. He would ensure search against the assessee to be successful by making high pitched assessment and ignoring the submissions made by the assessee. We do not agree. We do not think that the officer went at his own to the particular ward/circle where the case of the assessee was assessed. No such material has been placed before us so as to infer that it was this officer who managed his posting to that ward to do the assessment of this assessee. In our view this must have been a sheer coincidence. Even otherwise posting is done by the commissioner of Income Tax. We do not believe that he was also biased against the assessee so as to post the same officer to that ward/circle. Further the block assessment is finalized after the approval of the commissioner of Income Tax. The assessee has submitted written arguments before him. They have been reproduced above. The CIT has dealt with this letter according to law. We too, do not find any substance in that letter. Further, in Union of India v. Vipan Kumar Jain (2003) 260 ITR 1' Hon'ble Supreme Court held that there is no question of imputing or presuming a bias when action under section 132 is followed by assessment. The assessing officer is required to assess the income on the basis of facts found. There is nothing inherently unconstitutional in permitting the assessing officer to gather the information and to assess the value of information himself. The courts cannot read in limitations to the jurisdiction of the assessing officer in absence of a challenge to the provisions itself. The question of bias has to be decided on the facts of each case. The bias is not established merely because the authorized officer and the assessing officer are the same. If the assessee is able to establish that the assessing officer was in fact biased in the sense that he was involved or interested in his personal capacity in the outcome of the assessment or in the procedure of the assessment no doubt it would be a good ground for setting aside the assessment. We therefore reject this contention.
Next argument of learned Counsel of the assessee is that his approved valuer and also the valuer of the local authorities for stamp duty purposes had found out the market rates of the properties and they were in the vicinity of the rates in which he had purchased the shops and the flats. Therefore, his recorded price is correct and therefore, it should be believed that he has not paid any on-money. We have no option but to reject this argument. No such document was found in the search. Approved Valuer's report is obtained in October, 1997. It is not contemporary. It is only a self-serving exercise. The working if any done by the Municipal Authorities was for the purposes of levying stamp duty. They had no occasion to look into the statements of the assessee and seized documents. The purpose and procedure of Income-tax and stamp duty are different. Their valuation cannot undo the inference drawn on the basis of seized documents and statements recorded under section 132(4). If at all, these valuations may only have some persuasive value and how much, it depends on facts of each case. In the present case, in our opinion they do not have even that persuasive value in light of the seized documents.
About the argument of the learned Counsel of the assessee that no enquiries were done from the seller of the property by the assessing officer, we are of the view that the admission and disclosure made by the assessee had practically persuaded the ADI not to make any enquiry. The result of such enquiries is authentic only when they are conducted along with the search without loss of time. Passage of time gives opportunities to the concerned parties to create, destroy, manipulate, and arrange evidence to suit them. Reality and Truth are often lost in the delayed action. In the present case the assessing officer or the ADI did not investigate further, as the matter had practically come to a close after the admission and disclosure by the assessee. If the assessing officer had taken any action even after admission and disclosure he would have been alleged for harassment. The thought of further investigation would arise only after the retraction. And it is done after 11 months of the search. Investigation in such matter after lapse of so many months is an exercise in futility. We therefore reject this argument also.
We now turn to the submission of learned counsel for the assessee with regarding to alleged retraction of admission and declaration made by Shri Manmohan Singh. There are two aspects of the submission. One is whether it is open to the assessee to retract to admission and declaration made in the statement recorded under section 132(4) and whether the declaration /admission so made in the statement can be effectively and successfully retracted.
Regarding the first issue, we are of the view that by its declaration and acts the assessee intentionally caused/ made the departmental authorities to believe the declaration made by the assessee to be true and induced them to act upon such belief. In our view it is not open to the assessee to change the stand it has already taken and thus cause the situation in his favour by inducing the department not to investigate or enquire into the matter on the seized documents. It is not open to the assessee to turn around of the said declaration. This is based on maxim, allegans contria non est audiendus (a person alleging contradictory facts should not be heard). In Pickard v. Sears (1837) 6 Ad & El 469, 474. It has been held that where a person'by his words or conduct wilfully causes another to believe the existence of a certain state of things and induces him to act on that belief, so as to alter his own previous position, the former is concluded from averring against the latter qua different state of things as existing at the same'. In the celebrated book titled 'Administrative Law by Sir William Wade (eighth edition by Wade and Forsyth-Oxford University Press), the legal position has been explained at p. 242 as under:
"The basic principle of estoppel is that a person who by some statement or representation of fact causes another to act to his detriment in reliance on the truth of it is not allowed to deny it later, even though it is wrong. Justice here prevails over truth. Estoppel is often described as a rule of evidence, but more correctly it is a principle of law. As a principle of common law it applies only to representations about past or present facts."
In Evidence Act also, it is clearly laid down in section 115 thereof, that when one person has by his declaration or act or omission, intentionally caused or permitted another person to believe a thing to be true and to act upon such belief neither he nor his representative shall be allowed, in any suit or proceeding between himself and such person or his representative to deny the true of that thing. Section 115 of the Evidence Act also incorporates a statutory principle of common law that a person alleging contradictory facts should not be heard. If the assessee had not made the said declaration, or statement the departmental authorities could have continued and could have investigated the entire matter on the basis of various documents seized during the course of search such as investigating into M/s. Mehta Enterprises, working out the market value of the shops and flats through DVO or recording the statements of other connected persons etc. or sending the documents to the Forensic Experts. By making the disclosure of additional sum of Rs. 31,40,900 being on money paid over and above the purchase price for purchasing shops and flats in Tulsi Shyam Building, the assessee effectively prevented the department from carrying its further investigation by making them to believe that Rs. 31,40,900 is the unaccounted money paid on purchase of flats and shops, which will be disclosed by the assessee in block return. By seeking to retract, the assessee wants it to be placed at an advantageous position at a point of time when he was before giving statement under section 132(4). However, with passage of time, the evidence which the department could have collected may no longer available; they might be manipulated, fabricated or destroyed. Further, the power of ADI to investigate is far wide and intense as compared to the power of assessing officer. By making the declaration before the ADI and admitting concealment and thereafter retracting it before the assessing officer, means practically closing the investigation by the investigation wing of the department. This cannot be acceptable. Thus, in our view retraction sought to be made by the assessee after several months of declaration and admission under section 132(4) is only a well thought out device to shut the department from collecting the evidence to unearth unaccounted income. Further the explanation given by the assessee is that delay in retraction was caused on account of illness of partner Shri Rajender Singh Saini. On this, we are of view that this explanation has no force because even though Shri Rajender Singh Saini may be in hospital but nothing prevented the assessee from clarifying the facts immediately after search, if what was stated before the officers was factually incorrect. The affidavit so filed by the assessee after 11 months does not contain anything spectacular, some thing which could have been discovered after lapse of time. There were no such contents in the affidavit which could have only been obtained at a later date or could not have been obtained just immediately after the search. In fact to our understanding, the affidavit of Shri Manmohan Singh is only a bald denial and nothing else. It does not contain any new evidence, fact or material. There is nothing in this affidavit to rebut the contents of the seized documents as shown on page 7 bundle No. 14 of party R6. Thus, such affidavit or even the letter written to the commissioner of Income Tax can neither negate the declaration of disclosure given on oath by the assessee nor can it become the basis of retraction of the declaration made under section 132(4). When we compare the fact situations in two cases, one when the statement under section 132(4) was recorded and the other when the retraction was tendered, we find that, in the former, there is very little time and scope of artificiality, or stating falsity, the assessee is not in a frame of mind where he could create some explanation which is not true. Only possibility is that he may, state something or some facts of which he may not be aware. Whatever spontaneous answers come they are mostly true unless, proved with acceptable facts otherwise. When the statement is given that on- money has been paid, it should be accepted as true because it is in the very personal knowledge of the assessee. What he knows only he can state. Once he states on oath, some thing personal and only known to him it must be true. About facts and events like this, only he is privy and he also knows the consequences of stating the truth that he has to pay taxes thereon on such disclosure, then the truth becomes an inseparable ingredient of the disclosure. On the other hand, falsity has no legs to stand. When the assessee is compelled to state something, then the assessee knows, and also the officers present and recording the statement, that such statements are withdrawn the next day or immediately at the earliest available opportunity. Here the time is the essence. It is the deciding factor. The delay is the life support to the belief that whatever is stated is true. More delay affirms such belief. Inordinate delay in retraction establishes, that it was a truth and nothing else but truth. This is when there is no evidence found in the search about payment of on-money. And revenue is on a solid wicket to tax that on-money component. When there is evidence found in the search about payment of on-money, and there is also an admission under section 132(4) given on oath, then no amount of bald retraction, quickly or delayed, can make a turn around, unless there are strong acceptable evidence to rebut whatever was stated. in the present case the delay in retraction was inordinate. The explanation for delay was far from convincing. What he stated 11 months after he could have stated next day of the search. There was no need for consultation, if whole thing was false. As a matter of fact it was not. Therefore, entire set of submissions relating to retraction deserves to be rejected.
We derive support from various judicial pronoucements. In Surjit Singh Chhabra v. Union of India ( 1997) 1 SCC 508/509, it was held that custom officers are not police officer and the confession made before them, though retracted, binds the petitioner. Similarly in T.S. Kumarasamy v. Assistant Commissioner (1998) 65 ITD 188 (Mad.), it was held that Income Tax officers are not police officers, they do not use unfair means or third degree methods in recording statement on oath. Therefore such statements and oaths cannot be retracted unless it is proved by legally acceptable evidence that such admission /confession or oath was not voluntarily tendered or was under coercion or duress. In the present case no such evidence has been produced or even shown to have existed. In V. Kunhambu & Sons v. CIT (1996) 219 ITR 235 (Ker), the Honble Kerala High Court held that where assessment has been on the statement of the assessee and no case has been made out that such statement was made under a mistaken belief of facts or law, statement being a voluntary one, then there is no scope for the assessee to challenge the correctness of the assessment made on the basis of such statements. In Hotel Kiran v. Assistant Commissioner (2002) 82 ITD 453, the Pune Bench of the Tribunal held that where during the course of search, assessee made some admission, he debars the authorized officers from making further investigation. Therefore, in their wisdom the Legislature has provided that such statement can be used in evidence and the assessment can be made on that basis. In Hiralal Maganlal & Co. v. Dy. CIT (IT (SS) Appeal No. 117 (Mum.) of 1996), the Tribunal reported in ITD, it was held as under:
"35. Respectfully following the judicial authorities on the subject, we hold as under:
(i) Statements in the nature of declarations covered by the provisions of section 115 of the Evidence Act, are binding on the declarant. They can neither be retracted nor do they require any corroboration. Such declarations can form the sole basis for assessment. The declaration made by Shri Prataprai Sanghvi, partner in the assessee-firm through his statement recorded under section 132(4) of the Income Tax Act, 1961 falls squarely within the ambit of section 115 of the Evidence Act and hence the same was neither open to retraction nor required any further corroboration. The assessing officer could therefore base the impugned addition on the said declaration.
(ii) Statements which are not in the nature of declarations under section 115 of the Evidence Act are also binding and can form the sole basis for assessment if they are not effectively retracted. Effective retraction is possible in two situations. First situation is where it is not voluntarily made. A statement, however, cannot be said to be involuntarily made merely because it is subsequently sought to be retracted. It is also to be remembered that the law of evidence presumes regularity and correctness of the official actions unless proved otherwise and hence the said principle will also govern the statement recorded by a public official and this is more particularly so when it is recorded in pursuance of the statutory provisions of law. The provisions of sub-section (4) of section 132 also create rebuttable presumption in favour of the statements recorded there-undcr and authorize their use in evidence in any proceeding under the Income Tax Act. The burden is therefore squarely on the person who alleges that the statement was not made voluntarily to prove that it was involuntarily made or made under coercion or undue influence or that it was made under mistaken belief or was obtained by fraud or misrepresentation. Mere allegation will not suffice. Second situation is where the person seeking to retract proves, by leading cogent and reliable evidence, the erroneous or incorrect nature of the facts stated or confessed at the earliest possible opportunity. In the case before us, it has been held above that, the assessee has squarely failed to satisfactorily discharge the burden that the confessional statement made by Shri Prataprai Sanghvi under section 132(4) was involuntarily made or made under coercion or undue influence or was made under mistaken belief or obtained by fraud or misrepresentation. Rather, the evidence available on record shows that it was voluntarily made by Shri Sanghvi with due care and caution and after necessary consultations with all concerned. Besides, there has been inordinate delay, which has not been substantiated, on the part of the assessee to retract from the confessional statement. Retraction is also not supported by any independent or reliable evidence to prove the incorrect nature of the facts confessed in the statement. The confessional statement of Shri Prataprai Sanghvi is also corroborated by other evidence. For these reasons also, the assessing officer was therefore, in our view, justified in basing the impugned addition on the basis of confessional statement maintained at the time of search.
(iii) A confessional statement, which is not in the nature of declaration under section 115 of the Evidence Act, continues to have evidentiary value even after its retraction. However, such retracted confession / statement needs corroboration if it has been successfully retracted. As held above, the case of the assessee before us does not fall under this category."
In this regard, it may be pointed out that assessee had in the statement under section 132(4) and another disclosure of Rs. 10 lakhs being payment made to one Mrs. Dolly Ghosh under section 131 (1A). Mrs. Dolly Ghosh was a partner in M/s. Vig Automobiles. She resigned from 1-3-1993 and received Rs. 10 lakhs from Shri Manmohan Singh for relinquishing her right in the partnership M/s. Vig Automobiles. During the course of search, at the residential premises of Mrs. Dolly Ghosh, a memorandum of understanding dated 25-7-1991 signed by her and Shri Manmohan Singh was found. When Shri Manmohan Singh was confronted with this MOU, he admitted to have paid Rs. 10 lakhs in cash to her for resigning from the partnership. The payment was admitted to be unaccounted. Shri Manmohan Singh thus disclosed a sum of Rs. 10 lakhs for block period. This sum was offered in block return also. From this it is clear that whatever he has stated under section 132(4) and admitted as his concealed income was based on documentary evidence confronted to him. There was no disclosure or admission which was not found supported with evidence. The disclosure of Rs. 31,40,900 being on-money for shops and flats in Tulsi Shyam Building was based on document No. 7 bundle No. 14 party R6. Disclosure of Rs. 2,30,000 as based on stamped receipts. The disclosure of Rs. 2,70,000 was based on inspection of the house during the course of search showing freshly carried out renovations etc. On the other hand, the retraction was based on no evidence. In view of the above, we reject the contention of the learned counsel for the assessee that there was any coercion or pressure or duress while recording statement under section 132(2)/131(1A) and also assessee's retraction subsequently and uphold the order of the assessing officer made on the basis of seized documents as well as disclosure and admission made under section 132(4) and further enhanced under section 131(1A). As a result, addition of Rs. 15,70,450 being on-money paid for acquiring flats and shops in Tulsi Shyam Building, sum of Rs. 2,30,000 based on loose paper Nos. 48 to 50 being stamped receipts and Rs. 2,70,000 being unaccounted expenditure on renovation and interior decoration covered in ground Nos. 1, 2, 3 in assessee's appeal are confirmed.
Ground No. 4 is also rejected as we have already held that the declaration and admission made by the assessee are valid. It cannot be undone by retraction.
Ground No. 5. It is not explained as to how the case of M/s. M.J.S. Associates would be relevant for the disposal of this appeal. No rational nexus or connection between the two has been shown. Addition in the present case has been made on the basis of seized documents and admission of the assessee under sections 132(4)and 131(1A). The payment of unaccounted money was made by the assessee and therefore those were rightly taxed. This ground is therefore rejected.
Ground No. 6 is that assessing officer travelled beyond the scope of Chapter XIV-B. It is not explained how. Since it is a general allegation without support of any evidence or argument, it deserves to be rejected.
In the result, the appeal of the assessee is dismissed. IT (SS) A NO. 279/MUM/97
In this case, the assessee raised the following grounds:
'1. On the facts, in the circumstances of the case and as per law, the learned assessing officer erred in holding that the gifts of Rs. 4,38,000 received by the appellant were not genuine, He further erred in presuming that the appellant had paid a commission of Rs. 62,000 for arranging these gifts. Accordingly, he erred in making an addition of Rs. 5 lakhs as undiscovered income of the appellant for assessment years 1994-95 and 1995-96.
2. On the facts, in the circumstances of the case and as per law, the learned assessing officer erred in making an addition of Rs. 4 lakhs merely on a presumption that the appellant had paid the above sum as 'on money' for purchasing the flat No. 13, Mahavir Shikar, Mulund. He was further not justified in basing this addition on the declaration made by the appellant, which was later retracted.
3. On the facts, in the circumstances of the case and as per law, thelearned assessing officer erred in making an addition of Rs. 15,70,450 towards the alleged 'on money' paid for acquiring flats and shops in Tulsi Shyam Building for assessment year 1990-91 on the basis of a declaration submitted by the appellant which although was retracted later.
4. On the facts, in the circumstances of the case and as per law, the learned assessing officer erred in making an addition of Rs. 18,50,000 towards the alleged on-money which is presumed to be paid by the appellant to Shri Mahesh, towards purchase of a flat of Lok Group, Muland.
Further, the learned assessing officer was not justified in making this addition on the basis of a declaration which was later retracted by the appellant.
5. On the facts, in the circumstances of the case and as per law, the learned assessing officer erred in making an addition of Rs. 1,09,000 towards the unexplained business expenditure of the appellant and by M/s. Raj Engg. Co., because even after accepting that the addition was warranted under section 69C and the expenditure being incurred for business purposes, had to be allowed as a deduction while computing the undisclosed income and according by no addition on this account was called for.
6. On the facts, and as per law, in making an addition as stated above, the learned assessing officer was not justified in holding a view that the declaration given by the appellant could not be retracted by him and the adverse inference could be drawn against the appellant on the basis of such declaration which was retracted later.
7. The learned assessing officer erred in travelling beyond the scope of Chapter XIV-B of the Income Tax Act, 1961 in making the above additions"
The case was fixed on several occasions. Vide his letter dated 21-1-2004, the assessee sought adjournment on the ground that certain documents relating to appeal are not traceable. Vide his letter dated 15-10-2004, the assessee further sought adjournment on the same grounds. The assessee sought another adjournment on the same grounds vide his letter dated 23-9-2004. However, vide his letter dated 23-11-2004, there was another request for adjournment on the ground that his appeal and the appeal of Mr. Manmohan Singh Vig be heard together as facts of the matter are similar. Now, on 12-9-2005, another adjournment is sought on the ground that the assessee is in the process of engaging a counsel. On all other occasions, adjournments were granted. This appeal was also consolidated with the appeal of Mr. Manmohan Singh Vig as requested, which was also fixed along with this appeal. After going through all the applications for adjournment, we are of the view that the assessee is not interested in pursuing this appeal. No documents as claimed earlier, as being searched, are filed. The learned counsel Shri V.K. Bindal appearing on behalf of Mr. Manmohan Singh Vig submitted that case may be decided on the basis of arguments taken by him in Manmohan Singh (HUF)s case (supra). We, therefore, proceed accordingly.
The facts of the case are elaborated in the case of Mr. Manmohan Singh Vig (IT SS Appeal No. 276 (Mum.) of 1997). Briefly, a search and seizure operation was carried out at the premises of Saini/Narang/Vig group of cases on 10-10-1996. The assessee Shri Rajender Singh Saini is one of them. Notice under section 158BC was issued to the assessee on 26-2-1997 and served on 27-2-1997. Notices under section 143(2)/142(c) were issued on 13-6-1997 and 3-10-1997 and were duly served on the assessee. A detailed questionnaire was also issued to the assessee on 16-7-1997. The return for block was filed on 12-9-1997 disclosing following undisclosed income:
Gold jewellery of approx. 6102.600 grams
Cash found at residence and in bank locker
Plot purchased at New Panvel, being plot Nos. 5 & 7
Investment in deposit with Suman Motels
Amount spent on interior decoration of residential flats at Mahavir Shikhar, Mulund
The assessee furnished detailed information on 2-10-1997 as called by the assessing officer on 16-7-1997. During the course of search proceedings, the assessee admitted following undisclosed income under section 132(4):
Unaccounted investment in gold jewellery
NRI Gift with commission
Investment in immovable properties
Investment in flat and cine work
Renovation of home
Unaccounted investment in FDR
Regarding NRI gift (ground No. 1), the authorised officers had recorded the statement of assessee under section 132(4), wherein the assessee had admitted to have paid a sum of Rs. 5 lakhs for getting NRI gift of Rs. 4,38,000 and Rs. 62,000 being commission to the broker.
Relevant questions and answers recorded under section 132(4) from the statement of the assessee is as under:
"I have already gone on record and I once again confirm that the gifts which have been claimed to have been received from NRE a/c. of one, Mr. H.D. Shah are actually my own unaccounted income. I have purchased these gifts by paying 15 per cent commission to the broker. Cash was paid to the broker who gave me draft in exchange of cash. I am ready to pay tax on unaccounted amount of Rs. 4,38,000 + Rs. 62,000 commission given of Rs. 5,00,000. In his statement Shri Rajender Singh Saini has also stated that he does not know the business address and residential address of Mr. H.D. Shah. He also stated that he does not know the nature of business activity of Mr. H.D. Shah and even he does not know full name of Shri H.D. Shah."
Vide his letter dated 2-10-1997, the assessee stated that he was pressurized and compelled to give statement under section 132(4) and under section 131 (1A). As the gift is genuine, it was not disclosed as his income in the block return. An affidavit dated 10-9-1997 was also filed. The assessing officer considered the affidavit of the assessee, his letters dated 2-10-1997 and 17-10-1997 and rejected contention of the assessee by observing as under:
"(i) On perusal of the statement of Shri Rajender Singh Saini it is seen that the authorised officers never pressurised and compelled him to make a particular statement. The statement was totally voluntary and spontaneous. There does not appear to be a single word which indicates pressure, coercion and undue influence exercised on the assessee.
(ii) If the assessee felt that his statement was recorded by pressurising and undue influence or coercion, he should have informed Higher Authorities including Chief Commissioner of Income Tax, Commissioner of Income Tax, Director of Income Tax (Inv.), Deputy Director of Income Tax (Inv.) and assessing officer without further loss of time, which has not been done by the assessee. The affidavit indicating retractions has been filed first time only along with the return of income filed on 12-9-1997 i.e., after laps of around 11 months from the date of search action. The reason for the delay in intimating retraction is stated to be on account of his severe health problem. Even if accepted the fact that Shri Rajinder Singh Saini was not keeping good health after the search action and also suffered heart attack, on 21-11-1996, still the delay of 11 months in submitting the affidavit is not justifiable.
(iii) The total and bold denial of what has been stated in the previous statement cannot be said to be statement of retraction and it will be merely plea of denial."
Regarding addition of Rs. 4 lakhs being payment of 'on money' for purchase of flat No. 13, Mahavir Shikhar, Mulund (Gr. No. 2). In the statement under section 132(4), the assessee admitted in response to question No. 37, to have paid on money of Rs. 4 lakhs on purchase of above-said flat at Mulund. This was in addition to cost of flat. The disclosure was confirmed in answer to question No. 71. The relevant question and answers are reproduced below:
"Q No. 71: Do you want to clarify anything related to statement recorded of 10-10-1996 and 11-10-1996 ?
Ans. No. I have made the statement after going through the documents, papers, diaries, etc., found from my residence. I have made admission of unaccounted income earned by me and my business concerns without any pressure, coercion or threats. I have made this admission of unaccounted income after consultation with my advocate Shri T.K. Suchdev. I have read the statement and understood properly and then signed in the presence of advocate."
Thereafter the impugned addition of Rs. 4 lakhs was made. Regarding addition of Rs. 15,70,450 being payment of on-money in respect of 6 shops and 4 flats in Tulsi Shyam Building, Thane (ground No. 3), in response to question Nos. 37 and 66, the assessee admitted to have paid on-money of Rs. 5 lakhs on purchase of shops/flats. In the statement, the assessee also admitted to have paid, jointly on-money on purchase of 6 shops and 4 flats in Tulsi Shyam Building, Thane to the extent of Rs. 31,40,900. It was divided equally and half of it was added in the case of Shri Manmohan Singh Vig and half being Rs. 15,70,450 is added in the case of Shri Rajendra Sing. This issue was elaborately discussed by the assessing officer in the case of Shri Manmohan Singh, whose appeal is decided simultaneously along with this appeal. The statement of Shri Rajender Singh was also recorded under section 131(1A) on 26-10-1996. Relevant question and answer are as under:
"Q. No. 3: On 10-10-1996 and 11-10-1996 you and Shri Manmohan Singh Vig have admitted that Rs. 10 lakhs were paid as "on money" for purchase of 6 shops and 4 flats in Tulsi Shyam Building at Thane. However, statement of Shri Manmohan Singh Vig was recorded in your presence on 25-10-1996 on the entries made in the seized diary of bundle No. 14/R-6 written in handwriting of Shri Manmohan Singh Vig. Shri Manmohan Singh Vig has admitted that Rs. 31,40,900 was paid in cash for purchase of the above properties and the cash payment has not been recorded in any of the group concerns or individual accounts. I am showing you copy of Statement of Shri Manmohan Singh Vig, particularly Q. Nos. 10 to 17 of statement dated 25-10-1996. Please go through the same and explain whether the facts regarding payment of 'on money'of Rs. 31,40,900 for purchase of the properties in Tulsi Shyam Building are correct or not ?
Ans. I have gone through the statement of Shri Manmohan Singh Vig, particularly question Nos. 10 to 17 and answers thereto recorded on 25-10-1996 and also the entries made on page No. 7 of bundle No. 14/R6 and I confirm that we have paid'on money'of Rs. 31,40,900 for purchase of properties in Tulsi Shyam Building. The'on money' was paid in cash and datewise payments in lakhs are also mentioned on page No. 7 (Backside).
I confirm that I have paid my share of unaccounted income i.e., 50 percent and I am ready to pay tax on this unaccounted cash payment. The 'on money'was paid out of unaccounted income."
But, no disclosure of this sum was made by the assessee in the block return of income merely on the ground that there was pressure/ coercion exercised by the authorised officers. This ground was discussed in detail in the case of Shri Manmohan Singh Vig and rejected.
After hearing the learned counsel for the assessee of Shri Manmohan Singh and considering material on record, we are of the view that the facts of this case are identical with the facts of the same issue in the case of Shri Manmohan Singh Vig and we are inclined to follow our order for deciding this issue in this case also.
Regarding payment of on-money of Rs. 18,50,000 towards purchase of flat of Lok group at Mulund (ground No. 4): During the course of search, a diary containing pages 1 to 42 was found which showed the payment of Rs. 18,50,000 to Mr. Mahesh. In the statement recorded under section 132(4), the assessee had admitted such payments. The relevant question and answers are as under:
"Q. No. 54: Please go through page No. 1 of the same diary marked as bundle No. 2 in which date wise payments to Mahesh is mentioned and explain the nature, purpose and source of payment with a specified amount on each date ?
Ans. I have made payment to Shri Mahesh in cash on the following dates for purchase of flats from Shri Mahesh:
The payment of Rs. 18,50,000 were made out of my unaccounted income earned from our business concern.
G.No. 55 : Please give the complete details of flats for which payments were made to Mr. Mahesh ?
Ans. Shri Mahesh is a broker to whom payments have been for flats to be built by LOK Group of builders. 1 have received money back from Mr. Mahesh.
0. No. 62 : Please summarise the unaccounted payments/investments mentioned in your own -handwriting which is marked at bundle 3 No. 2 ?
Ans. 1 confirm that diary seized at bundle No. 2 I written in my own handwriting and summary of unaccounted payment /investment is as under:
Inv. In flats
Payment to employees
Scrap sales /receipt
I would like to have gone on record that these investments were made out of my unaccounted income generated in business and not recorded in books of account and on which no taxes were paid.
Q. No. 71 : Do you want to clarify anything related to statement recorded on 10-10-1996 & 11-10-1996 ?
Ans. I have made the statement after going through documents, papers, diary etc., found from my residence. I have made admission of unaccounted income earned by me and my business concerns without any pressure, coercion or threats. 1 have made this admission of unaccounted income after consultation with my advocate Shri T.K. Suchdev, 1 have read the statements and understood properly and then signed in the presence of my advocate.
Q. No. 2 of statement dated 26-10-1996: I am showing you copy of your statements dated 10-1-1996 & 11-10-1996 in general and particularly question answer Nos. 46 to 62 please again go through your statement and clarify whether you have any other explanations for the entries made in diary namely FAG red spiral diary seized as per bundle 2 /R- 1 on 11-10-1996 on page Nos. 1, 3, 5, 6, 7, 8, 9, 40 & 42?
Ans. I have gone through the Red FAG Spiral diary seized as bundle on 2/ R- 1 on 11 - 10- 1996 on the pages mentioned in the questions. I have gone through my statement recorded on 10-10-1996 and 11-10-1996 in relation to above diary and I confirm that I have made total payment of Rs. 28,49,000 for investments in flat payment for civil works and for commission payments. All these payments and investments were made out of unaccounted income which is not recorded in the books of account of any of my business concerns or personal books of account. I again confirm that whatever were stated by me on 10- 10- 1996 and 11 - 10- 1996 regarding entries made in this diary are correct & true and I again confirm to pay tax on the unaccounted investment/payment as mentioned in reply to Q. Nos. 46 to 62 dated 11 - 10- 1996.
I want to modify Q. No. 46 that sale proceeds of scraps for Rs. 93,264 as mentioned on page No. 5 of the diary has not been recorded in the books of account, however, this amount was used for making payments as mentioned in the same diary."
However, while filing the return, no such disclosure was made. It was explained to the assessing officer that (t) there was a pressure/ coercion from the authorised officers, (it) all the entries in the diary pertained to either sister concern M/s. Raj Engg. Co. or to M /s. S.V. Fabricators. There was no personal investment, (iii) It is not possible to have transaction of on-money in real estate spread off such a long period of time, (iv) the figures are in thousands and not in lakhs in the documents also, hence the figure will work out to Rs. 1,85,000 and not Rs. 18,50,000, (v) He was hospitalized due to heart ailment and hence could not remember. The assessing officer rejected all the submissions of the assessee and also his affidavit by observing as under:
'On perusal of the statements of Mr. Rajender Singh Saini on various occasions it is noticed that the authorised officers never pressurised and compelled to make a particular statement. His statement was totally voluntary and spontaneous and based on a particular seized paper, on the basis of which the assessee has categorically admitted unaccounted payment of Rs. 18,50,000 during the statement under section 132(4). There does not appear to be a single word in the statement which indicate coercion or undue influence exercised on the assessee.
(ii) If the assessee felt that his statement was recorded by pressurising and exercising undue influence or coercion, he should have informed about this to the higher authorities including Chief Commissioner of Income-Tax, Commissioner of Income-Tax, Deputy Director of Income-Tax (Inv.) and the assessing officer without further lapse of time, which has not been done by the assessee. The Affidavit indicating retraction has been filed only along with the return of income filed on 12-9-1997, i.e., after the lapse of around 11 months from the date of search action. The reason for delay in intimating retraction is stated to be on account of severe health problem faced by the assessee and he suffered heart attack also on 21-11-1996. Even accepting these facts to be correct, still the delay of 11 months in submitting the Affidavit of retraction is not justifiable, in any way.
(iii) The total and bold denial of what has been stated in the previous statement cannot be said to be a statement of retraction and it will be merely a plea of denial.
(iv) The assessee's statement that he was pressurised to sign the statement wherein it is stated that he has made investment in LOK GROUP cannot be accepted by any stretch of imagination, because the authorised officers were absolutely having no knowledge about the LOK GROUP investment made by the assessee. It is the assessee himself Who took the name of LOK GROUP and nowhere in the seized material the name of LOK GROUP appears. As such, the reality came from the mouth of the assessee himself while recording his statement.
(v) As regards the assessee's contention that the figures on this page are in thousands and not in lakhs, it is worthwhile to reproduce below assessee's answer to Q. No. 61 wherein he has categorically stated that the payment in lakhs are shown in major investments in property only and payments for other allied expenditure are in thousands.'
And made the impugned addition of Rs. 18,50,000.
Regarding addition of Rs. 1,09,000 being unexplained business expenditure (ground No. 5), in the diary in bundle 2 / R- 1 seized in the search, and written in the handwriting of assessee, certain payments were found recorded on pages 3, 7, 8 and 40. Shri Rajender Singh, admitting that they are outside the books, explained the payments as under:
Payment to bank staff people
Commission to Mr. A. Sen
Commission to Mr. C.K. Chaudhry
Fees to Mr. Sejpal
According to the assessing officer, the assessee stated that the above payments are out of books of account and out of unaccounted income and he offered to disclose the same for the block period. This amount was not disclosed in the return on the ground that it pertained to M/s. Raj Engg. Co. The assessing officer was not satisfied and made the impugned addition.
We have heard the rival submissions and considered the facts and materials on record including the statements, replies of assessee and reasonings of the assessing officer for making the additions. We have also considered the submissions of learned counsel for the assessee of Shri Manmohan Singh given in that appeal before us and who submitted to adopt his arguments in the present case also. After considering the material and also the case laws cited in the case of Shri Manmohan Singh, we are of the view that issue simply boils down to the point that whether statement given under section 132(4) has to be used against the assessee or retraction is given weightage and additions be deleted. The issue has been considered in detail in the case of Shri Manmohan Singh Vig (HUF) (supra) by this Tribunal. Following that order, we hold that:
1 . What was retracted subsequently was only a denial. No material evidence was furnished so as to discharge onus cast on the assessee by virtue of statement recorded under sections 132(4) and 131(1A),
2. Presumption raised under section 132(4A) is not rebutted by the assessee by submitting cogent evidence. Hence, the statement given under sections 132(4) and 131 (1 A) hold their evidentiary value.
3. No material has been submitted to show that there was any pressure or coercion was exercised while recording the statements under sections 132(4) and 131(1A). No complaint was filed immediately after search or recording of statement under section 13 1 (1 A) to show that there was any pressure or coercion. Statement under section 132(4) was recorded before witnesses. Hence, there is a presumption that there was no pressure/ coercion unless proved.
4. Disclosure was enhanced during statement under section 131 (1A) as compared to be given under section 132(4). Hence, the theory of pressure or coercion applied during recording of statement under section 132(4) is not acceptable.
5. The assessee is silent for about 11 months. No letter/ correspondence was sent immediately after recording of statement under section 132(4). Hence, theory of pressure or coercion is only an afterthought.
6. Disclosure of several items were based on documents found in the search. These documents were explained under sections 132(4) and 131(1A). Hence, there is a strong reason to believe that statement under sections 132(4)/131(1A) reveal correct state of affairs and retraction has to be ignored.
Thus, following the decision of Tribunal in Manmohan Singh Vig (HUF)'s case (supra), we hold that the retraction or rather denial is not established by any material/ evidence and hence the same cannot be substituted for admission made by the assessee under sections 132(4) and 131(1A) and supported by documentary evidence found in the search. This is the position in respect of all the impugned additions made by the assessing officer. Hence, the additions made are confirmed. No evidence has been furnished to show as to how the case of the assessee does not fall under Chapter XIV-B. We reject this contention. We reject all the grounds raised by the assessee in this regard.
In result, the appeal of assessee is dismissed.