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Khopade Kisanrao Manikrao Vs. Assistant Commissioner of - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Pune
Decided On
Judge
Reported in(2000)74ITD25(Pune.)
AppellantKhopade Kisanrao Manikrao
RespondentAssistant Commissioner of
Excerpt:
1. this appeal by the assessee is directed against the order of asstt.commissioner of income-tax (inv.) cir 2(1), jalgaon, under section 158bc read with section 143 of the income-tax act, 1961 relating to the block period 1-4-1986 to 29-11-1997.2. the assessee, an individual, is primarily involved in carrying on of the business in sale and purchase of agriculture lands and converting thern into plots prior to their sale. his other economic activities involve running; other businesses in proprietary capacity and these are as follows: 1. selling of motor cycle parts, under the name and style of kailash motor cycle, a proprietary concern. 2. selling of wine under the name and style of shri k.m. khopade and co. (wine shop) a proprietary concern. 3. running the kailash lodge and shankaranand.....
Judgment:
1. This appeal by the assessee is directed against the order of Asstt.

Commissioner of Income-tax (Inv.) Cir 2(1), Jalgaon, under Section 158BC read with Section 143 of the Income-tax Act, 1961 relating to the block period 1-4-1986 to 29-11-1997.

2. The assessee, an individual, is primarily involved in carrying on of the business in sale and purchase of agriculture lands and converting thern into plots prior to their sale. His other economic activities involve running; other businesses in proprietary capacity and these are as follows: 1. Selling of Motor Cycle parts, under the name and style of Kailash Motor Cycle, a proprietary concern.

2. Selling of wine under the name and style of Shri K.M. Khopade and Co. (wine shop) a proprietary concern.

3. Running the Kailash Lodge and Shankaranand Lodge, both proprietary concerns.

3. A search and seizure action under Section 132(1) of the Income-tax Actt, 1961 was carried out in the assessee's residential premises situated at 'Kailash' Garud Colony, Deopur, Dhule from 26-11-1996 to 29-11-1996. At the same time, simultaneously, survey action under Section 133A of the Act was also carried on at the following premises from where he operated his business activities.

4. The assessee has maintained separately regular books of account for the above proprietary business concerns and has also subjected them to audit under Section 44AB. As many as 36 grounds have been raised. The same are discussed and disposed off as follows: 5. In Ground No. 1, it has been submitted that the order under Section 158BC of the Act is ab initio bad in law and is required to be quashed, inasmuch as the same is based on notice issued under Section 158BC(a) on 17-2-1997 on which date the learned Asstt. CIT had not acquired jurisdiction over the case, since the notice under Section 158BC(a) is the foundation of Block Assessment and since the same was without jurisdiction, the Block Assessment under appeal may be annulled. At the time of hearing, this ground was not pressed. The same is accordingly dismissed.

6. In Ground No. 2, the assessee has challenged an addition of Rs. 58,59,210 made by the Assessing Officer for different years in respect of undisclosed income alleged to be earned by the assessee from sale of lands. The discussion regarding the said addition is to be found in assessment order at para 9 onwards. During the course of assessment proceedings, the Assessing Officer noted that the assessee was engaged in purchase and sale of lands. He purchased agricultural lands, converted the same into non-agricultural lands, divided them into plots and sold the same at substantial profit. In this way, according to the Assessing Officer, he understated the sale price on stamp paper and evaded the stamp duty also. According to the Assessing Officer there is no set pattern in the undervaluation which varied between 22% to 3496 of the actual consideration. The amount of advances received by the assessee for various Gat Nos. were recorded by the assessee in the registers at Sr. Nos. 89, 90 and 91 seized by the department. The assessee had taken different amounts of advances for other plots in the same Gat No. By way of illustration, the Assessing Officer stated that in respect of Gat No. 6/4, the total sale of land was of 33,629 sq. ft.

and on his own admission, the assessee received Rs. 2,21,948, i.e., at Rs. 6.59 per sq. ft against which Rs. 93,518 were accounted for in the books of account. After scrutiny of register Nos. 89, 90, 91 and 24 it was found by the Assessing Officer that the assessee took advance money from the customers for Gat No. 6/4 amounting to Rs. 3,23,095. This gave a rate of Rs. 6.72 per sq. ft. This showed that the assessee had taken on money which was not reflected in the books of account. The Assessing Officer proposed to follow average rate method of working out the undervaluation of transactions in respect of land in a particular Gat No. According to the Assessing Officer this was to rule out any bias towards the department or to the assessee. The unaccounted consideration was extracted primarily from Bharna Register Nos. 89, 90 and 91 and other relevant material seized by the department. To this the amount accounted for in the fair books of account was added to arrive at the actual real consideration received for the transaction.

This amount was divided by the sq. ft. of land sold to arrive at the average rate per sq. ft. of land transacted in. If different rate came for different year, then to rule out any prejudice all different rates for different years were added and there sum totals were divided by the number of years to arrive at the average rate for a particular Gat number. To arrive at unaccounted consideration, the sq. ft. of land transacted in is then multiplied by the average rate of per sq. ft. The amount already accounted for was substracted from the total consideration to derive unaccounted consideration. In her order, the Assessing Officer stated that this method was the best method because it was extremely difficult to arrive at a uniform rate which would rule out prejudice either in favour or against either the department or the assessee. The Assessing Officer has further stated in her order that due to this method was provided by other assessees in Khopade Group who had provided calculation in respect of Survey No. 566. The Assessing Officer further pointed out in her order that the assessee himself had adopted and pleaded this method as best option.

7. According to the Assessing Officer during the block period, the assessee had transacted in Gat Nos. 105/2AB, 159/3, 159/2A, 10/1, 10/2,485/Al, 5/4,170,18,182/3/79,12/2 and 12/3. The deals in one Gat have been dealt with by more than one assessee in Khopade Group and different rate in different years had been applied. To maintain uniformity application of reasonable and universal rate for whole block period was necessary.

8. Dealing with the individual transaction, the Assessing Officer referred to the statement of Shri Khopade recorded on 29-11 -1996 wherein he had declared that he had to offer Rs. 15,00,000 on account of excess consideration received by him and by his family members from time to time from 1-1-1993 till date. The Assessing Officer gave an opportunity to the assessee in regard to the method proposed but the assessee pleaded the non-applicability of same principle for all transactions. According to the assessee, he had earned extra profit on deals of those plots which were incorporated in Bharna Register and small diary. Since he was in the habit of writing each and every transaction, if he had received any consideration it would have been incorporated in the register and diary. Further, he clarified that some plots were sold for lower price for which reasons were odd seized plot, uneven size, backside of road, bargaining capacity of purchaser, need of money to the seller, plots on which high tension electric wires are passing, plots under notification of MHADA, plots near nalla, or nalla passing through the plot etc. The assessee stated that if he had got extra money entry would have appeared in some diary. At the time of raid everything was under the control of the raiding party and that he had no control. The assessee thus emphatically submitted before the Assessing Officer that he had not received any extra money other than one appearing in diaries or loose papers. The Assessing Officer was not satisfied with the explanation furnished by the assessee. She was of the opinion that it was impossible to think that for plots of same Gat No. the assessee will charge on money and for another will not charge any excess money. Though the quantum of on money charged can vary but it would be unrealistic to accept that the transactions recorded in the loose papers or Bharna Register were only ones in which on money was charged. Since the variation in on money earned had been accepted, according to the Assessing Officer, the average rate method was the best method and she applied the same so as to cover the excess charged from one transaction with lesser amount transacted for another.

9. The assessee had filed a chart with the revised return. Taking up this chart, the Assessing Officer referred to transactions in Gat No.46 and pointed out that there was large variation of sale rates for different plots in same Gat No. The rates varied from Rs. 23.15 per sq.

ft. for plot No. 32 to Rs. 15.15 per sq.ft. for plot No. 40. The transactions in this Gat were done in several years and these were recorded in Register No. 74 and Bharna Register No. 91. These gave average rate of Rs. 18.01 per sq.ft. which was universally applied by the Assessing Officer for all the transactions in the Gat in the block period. The Assessing Officer then calculated the on money for average rate basis for all Gat Nos. yearwise by taking different average rates for different Gats. She did similar working for transactions appearing in books of M/s. Kailash Motor Cycle Agency, a proprietary concern of the assessee. The yearwise summary of undisclosed income for each year was also calculated. Thus a total addition of Rs. 58,29,210 was made which is challenged before us.

10. Shri K.A. Sathe, the learned counsel for the assessee submitted that there is no justification for the substantial addition of Rs. 58,59,210 in the case of the assessee and of Rs. 1,68,46,035 in the entire Group by applying average rate method. He has stated that the said method has been used by the assessee himself in respect of land at Sr. No. 566. The learned counsel further submitted that it is to be noted that the learned Assessing Officer has accepted the extra sales collection in respect of S. No. 566 as shown in Bharna Register. She did not appreciate that the average method was followed by the assessee not for estimating the on money collection but for allocating the total collection for the plots sold from S. No. 566 among the different co-owners for different years. The said land was given for sale on commission basis to Shri Thorat. The gross amount of sale collected from Shri Thorat was shown in Bharna Register from time to time but since plotwise collections were not informed by Shri Thorat, for the sake of accounting among the co-owners average method was followed. But as regards other lands, the Bharna Register showed day-to-day collections, plotwise and no formula was required for showing on money collection by different co-owners. According to the assessee, Bharna Register and other seized material is full record of gross sale collections in respect of all lands sold by the assessee and other members of the Khopade Group.

11. Shri K.A. Sathe further submitted that the background of the Market where the assessee and other members of Khopade Group were operating has to be kept in mind. The land transactions were in and around Dhule which is a backward district in moffusil area. It is not industrially developed. The customers of the assessee were from middle and lower middle class. The development of agricultural land into urban developed land is a slow-process and it takes years before entire land is sold.Unless the development has taken place substantially on a piece of land agreed to be purchased, the land does not command any premium or on money. Land is not commodity having a standardised value like goods of a shopkeeper. Each plot is unique and each deal also is different from other. The price realised is bound to vary depending upon time, demand and supply position. The urgency of buyer or seller, the peculiar defects of lands such as access to road, nearness to nulla, marshy lands, high tension wires passing through the land, odd size of the plot etc. In view of this, it is difficult to find any standard pattern of price or price even in the same survey number. According to the learned counsel, the learned Assessing Officer accepted the fact that there could be variation in the quantum of on money (vide her observations on page 18 of the assessment order) but she felt that it was naive and unrealistic to say that the transactions recorded in Bharna Register were the only ones in which on money was charged. This shows that the learned Assessing Officer had in mind the market pattern in big cities where every plot or flat is sold for on money. It is here that she should have considered the peculiar background of Dhule District where the assessee was operating.

12. Shri K.A. Sathe further submitted that the learned Assessing Officer failed to appreciate that Bharna Registers were meant for assessee's personal purpose and not for disclosing to the Department.

Therefore, there was no motivation for the assessee to record in these Bharna Registers which were written from the beginning and which show day-today position to omit certain transactions of on-money. In the raid, the department has access to all the record, all the books, all the assets of the assessee and income was required to be computed on the basis of this material. The learned counsel further submitted that the assessee and other members of the Khopade Group prepared the cash flow statement in which every bit of money transaction found in seized papers was recorded. The difference between the available funds and the investment was offered as undisclosed income. Thus the cash flow statements were the complete record of undisclosed income of the assessee. According to the learned counsel, it is significant to note that though the learned Assessing Officer thoroughly got the cash flow statements examined she did not find any fault with them. If Bharna Register and cash flow registers were the correct and complete record of the assessee and other members of Khopade Group of the transactions of on money, there was no scope for making any estimate of undisclosed income by applying some formula for lands sold in particular survey not only for the year of sale but for all the years in the Block Period.

The learned counsel emphatically submitted that in the present case, there is no evidence to show that any single rupee more than shown in Bharna Registers or other seized record was earned. A mere doubt or suspicion in this behalf cannot be a substitute for the concrete evidence. Shri K.A. Sathe further submitted that the learned Assessing Officer proceeded to estimate as much as Rs. 1,68,46,035 for the entire group as undisclosed income. She should have made an attempt to point out the destination of that extra money. Even though she was in possession of entire data, no such attempt has been made by her. For this reason also, her estimate of on money collection is unsupported and therefore, uncalled for and deserves to be deleted.

13. Shri Hari Krishan, the learned Senior Departmental Representative strongly supported the order of the Assessing Officer. He tried to demonstrate by reference to copies of various documents like Bharna Registers and also the documents filed by the assessee in various paper books that the assessee was selling plots by receiving on money at a very large scale during the entire period of Block assessment and that almost in all if not all the Gat numbers dealt in by the assessee, he had received on money. He submitted that Bharna Registers were not complete record of the on money earned by the assessee and that the cash flow statement filed by the assessee has defects. Coming to the specific defects, he pointed to page 34 of the Paper Book No. 3 (S. No.170) and submitted that the on money is for 12 plots. He submitted that it impossible to believe that rest of plots were sold without charging on money. The learned D.R. further submitted that there were no transactions recorded in Bharna Register Nos. 89, 90 and 91 during the period from 18-1-1992 to 9-3-1993. No entries prior to 18-8-1988 and after 26-8-1996 were found. Therefore, it cannot be said that these registers recorded entire on money transactions of the assessee. How can the cash flow statement prepared from 13-11-1985 onwards be complete when these Bharna Registers are base for on money received and which are available from 18-8-1988 onwards. He drew our attention to pages 41, 42, 33 of the Paper Book and submitted that these show only advances and pages 1 to 7 of paper Book No. 2 and page 4 shows decrease in on-money but increase in commission payments. Pages 4,5 and 6 show loss. Again referring to Bharna Registers, the learned D.R. stated that the Bharna Registers do not record the advances from which the actual sale price as per sale deed was to be deducted, but these registers were to show that the money received was over and above the sale price recorded in books. For example, pages 93, 87, 89, 80, 85, 81 and 83 and answer of Shri Khopade to question No. 5 were cited (page 89 of the paper Book No. 2). In support of his contention, the learned D.R.further submitted that due cognizance has to be taken of all the exact dates mentioned for receipt of a particular amount of on-money in the Bharna Register etc. In this connection, he cited an example of transaction by G.G. Patel (page 80 of the paper Book No. 3).

Reiterating that cash flow statement is unreliable, he cited the following examples : (b) P. 73 - shows receipt of Rs. 42,000 whereas as per Bharna Register amount received is Rs. 45,000.

(c) P. 74 shows receipt of Rs. 5,000 whereas as per Bharna Register receipt is of Rs. 9,000.

(d) P. 21 for period upto 31-3-1989 there is totalling mistake of Rs. 75,000.

(e) If Bharna Registers are incomplete, cash flow could not be complete.

14. The learned D.R. further submitted that Bharna Registers have overlapping entries, not written in chronological order and are obviously maintained after the transactions were over. In view of the above submissions, the learned D.R. concluded that the assessee was receiving on-money in almost all Gat Nos. on large scale during entire block period; cash flow statements were defective; Bharna Registers were not complete, not written day-to-day in regular course and hence not reliable and that the basis of estimate is not arbitrary as it has reasonable nexus with the record.

15. In support of his contentions, he relied upon the following judgments :State of Kerala v. C. Velukutty (k) Overseas Chinese Cuisine v. Asstt. CIT [1996] 56 ITD 67 (Bom.) (TM).

16. In his rejoinder to the submissions of the learned D.R., Shri K.A.Sathe, reiterated that the assessec was not receiving on money in all Gat Nos. on large scale; that cash flow statements were not defective but for minor mistakes of totalling etc.; that Bharna Registers were complete record of the assessee's transactions outside the books of account and that the basis of estimate by the Assessing Officer was highly arbitrary and unreasonable. He submitted that the assessee did not deny that he received on money. But his contention has been that he received the same only in those transactions which had been covered in cash flow statement which in turn was based on Bharna Registers, diaries, loose papers etc. The assessee has made an honest effort to exhaustively show the entire receipt of on money. According to the learned counsel, the department is trying to estimate, without evidence and on some arbitrary basis more income which the assessee did not earn. The assessee did not receive any on money for example (1) in Gat No. 71/2 Deopur, this was uneven land, no electricity, nallah passing through the land; this was an end piece beyond the developed part of the city; (2) Gat No. 105/A-2-B near Malegaon - an undeveloped area - river passing behind the land; (3) Gat No. 159/3 Mohadi-Dhule - comes within very undeveloped village area of poor section of society; (4) Gat No. 10/1 Mohadi, near Nallah. In the other lands, the on money was mostly not charged in the initial years of development. According to the learned counsel, there is nothing to show that all the plots in same Gat No. could command a premium or on money. It could be charged only in few cases depending on the Special Features of the plot as also the negotiating capacity of the buyer.

17. Coming to page 34 of Paper Book No. 3 referred to by the learned D.R., the learned counsel for the assessee submitted that this page refers to receipts of on money by Shri K.M. Khopade in respect of his own plots. The money earned by others is reflected in their own cases.

18. As regards the contention of the learned D.R. that Bharna Register Nos. 89, 90 and 91 show that they were not maintained from 18-1-1992 to 9-3-1993, the learned counsel for the assessee submitted that it is wrong to presume that cash flow statement is based on Bharna Register Nos. 89, 90 and 91 alone. The details of on money have been collected from other seized registers like Register Nos. 93,14, diary No. 32, loose papers etc. The cash flow statement given on pages 18 to 45 (which are copies of cash flow given to Assessing Officer as per pages 46 to 72) but giving the source of entry of receipt and payment. For example, in the period prior to 18-8-1988, there were entries in the cash flow statement both of receipt of on money and payments. The on money receipt is based on unexplained investment in purchase of land as found from other record as diary No. 32 etc. During 18-1-1992 to 9-3-1993, the on money that is shown to be based on other record in respect of S. Nos. 6/4 and 566. Thus, the fact that there are gaps in Bharna Register Nos. 89, 90 and 91 does not mean that the cash flow statement is incomplete. As regards the contention of the learned D.R.that pages 41, 42 and 33 of the Paper Book shows only advances, the learned counsel for the assessee submitted that the cash flow statement, the on money in respect of transactions where sales have been completed is shown in the year in which the sale is effected.

Bharna Registers 89,90 and 91 and other records only show advances (and not on money) for a particular land. When the advances as per these registers are received but subsequently no sale deed is finalised till the date of raid, such advances are shown as excess money and shown on credit side of cash flow. Where advances received are less than sale price, the entire sale price is reflected in regular book and there was no question of showing any on money. The learned counsel.

19. As regards the contention of the learned D.R. that pages 1 to 7 of Paper Book No. 2 and page 4 shows the decrease in on-money but increase in commission payments, the learned counsel for the assessee submitted that on money is shown as per actuals. In respect of land at S. Nos.

6/4,566 and 170 which were sold through the Agents, the advances received were not noted according to Plot Numbers. Hence, the total advances received per person had to be bifurcated among the co-owners on square foot basis. That is why the entire amount received is reflected between all the co-owners concerned in the Group, the individual receipts are on a formula. The commission payments are actuals - based on seized records. These payments do not relate to the concerned period. Therefore, no relation between receipts and commission payment and no interference is possible that if commission is more on-money should be more.

20. As regards the contention of the learned D.R. that Bharna Registers do not record the advances from which the actual sale price as per sale deed was to be deducted, the contention of the learned counsel for the assessee is that this is not the Assessing Officer's case. The Department is making altogether a new case for which separate legal submissions are made. Page 89 should be read with page 88. Page 87 should be read with page 86. Page 93 should be read with page 92. On pages 88, 86 and 92, the basis of showing sale price is given which is by adopting a formula. Because of this, sale price of a particular individual appears to be less than advance received. But overall receipts of entire plot among all the co-owners is fully shown. The learned counsel Indiratai Nikam and submitted that the Bharna Register is not a record of on money, but also record of advances received from time to time. It was maintained from day-to-day only because there would have been no record of advances. If sale price was shown less than the advances and so reflected in regular books, difference was considered as on money. If advances were less than the sale price, the full sale price would cover the advances and the same would be reflected in regular books and there was no on money. These entries do not prove that Bharna Registers recorded on money received over and above sale price recorded. This is clearly a new case by the learned D.R. not supported by facts and also not made out by the Assessing Officer.

21. Coming to the charge of the learned D.R. that cash flow statement is unreliable, parawise comments of the learned counsel for the assessee alre as follows : (b) There was sale of Rs. 3,000 on 15-6-1990 to this party. The rfret amount of Rs. 42,000 is correctly shown. There is sale deed of Rs. 3,000 on record.

(c) Actually Rs. 9,000 was received on 12-4-1996 (B.R. 90 - P. 96) and Rs. 1,000 on 19-7-1996 (B.R. 90 - P. 101) - total receipt Rs. 10,000. Sale registered of Rs. 5,000. Hence not amount of Rs. 5,000 is shown. The details of advance and sale effected have remained to be shown in inner column.

(d) The details of transactions are fully shown. There is totalling mistake of Rs. 75,000 which requires to be added. But this is not a case of commission.

(e) As stated earlier, Bharna Register is not the only record. Other registers, diaries, loose papers are also taken into account in preparing cash flow. The Assessing Officer had got the cash flow checked and in the assessment order she has not made any adverse comment. The mistakes now shown do not make the cash flow incomplete or unreliable.

22. In response to the charge of the learned D.R. that the Bharna Registers have overlapping entries, etc. the learned counsel for the assessee submitted that for the purpose of cash flow which is the basils of disclosing undisclosed income, full account of seized record has been taken. The fact that there are overlapping entries has been duly men-tioned by the assessee himself. The Bharna Register is written chronologically and from day-to-day and in any case the fact remains that it is part of seized record. The cash flow is not based on material not found in search.

23. Finally, the learned counsel submitted that in this case, the department is a Respondent. Though it can support the orders appealed against, it cannot make out a new case not considered at a lower stage.

In support of this contention, he placed reliance on the decision of the Bombay High Court in the case of CIT v. T.M. Bhum Raddi [1958] 33 ITR 82. The learned counsel further submitted that order passed by the Assessing Officer under Section 158BC is under exclusive jurisdiction.

It is passed with the concurrence of the CIT. There is no right of appeal to the Department against it. Thus, it is comparable to an order under Section 263. It is held by the Punjab and Haryana High Court in the case of CIT v. Jagadhri Electric Supply & Industrial Co. [1983] 140 ITR 490/[1981] 7 Taxman 56 that in deciding the appeal against order under Section 263, the Tribunal cannot consider the grounds which were available to CIT but not considered by him. According to the learned counsel, it is presumed that such grounds are rejected by CIT. On parity of reasoning in appeal against the order under Section 158BC, the Tribunal has to confine itself to what the Assessing Officer has considered. The Assessing Officer's order cannot be justified on grounds not considered by him. In other jurisdiction of the Assessing Officer. In the present case, the Tribunal cannot consider, in deciding whether the Assessing Officer was justified in estimating on money, factors and material not considered by the Assessing Officer. If the Assessing Officer should have considered certain factors or material before arriving at a conclusion regarding estimate and she has not done it, the order will get vitiated and the estimate will have to be knocked down.

24. The learned counsel for the assessee also distinguished the ratio laid down in the cases relied upon by the learned D.R. On the other hand, he relied on the following decisionsState of Kerala v. C. Velukutty (iv) Rajesh B. Kanakia - [IT Appeal (SS) No. 14 (Bom.) of 1996] dated 21-11-1997.

(v) Sat Pal Pandit & Co. v. Asstt. CIT [1998] 61 TTJ (Asr.) 602 (TM).

25. We have considered the rival submissions and perused the facts on record. The provisions under Chapter XIV-B are the special provisions.

These were brought on the statute book specially and specifically for assessment of undisclosed income detected as a result of search. The assessment made under Section 158BC has to be distinguished from the assessment in the normal circumstances. Though it has to be made in the manner similar to one under Section 143 or 144, the material in block assessment and in regular assessment is different. In a normal assessment when regular books of account are produced, the Assessing Officer has to compute the income on the basis of such books and if these are defective material except the one collected. On the other hand, when search takes place, the entire seized material gives complete picture of the activities of the assessee including all his disclosed and undisclosed assets. In computing the undisclosed income, the Legislature advisedly has required the computation of income under Chapter XIV-B and no reference is made to Section 145. If omission of Section 145 is specific, Section 145 cannot be invoked even by implication. The process of estimation of undisclosed income by estimate of "best assessment" by rejecting the material i.e., seized papers is not permissible, the limited area available to the Assessing Officer is to draw normal inferences from the material on record while appreciating the evidence. The Hon'ble ITAT Mumbai, in the case of Sunder Agencies v. Dy. CIT [1997] 63 ITD 245 at para 22 has held as under : 22...It is abundantly clear from the perusal of the prescription of Section 158BA that within the pale of Chapter XIV-B assessment could be made only in respect of the undisclosed income. Such undisclosed income must come as a result of search. This section does not provide a licence to the revenue for making roving enquiries connected with the completed assessments. It is beyond the power of the Assessing Officer to review the assessments completed unless some direct evidence comes to the knowledge of the department as a result of search which indicates clearly the factum of undisclosed income. Without such evidence of material the Assessing Officer is not empowered to draw any presumption as to the existence of undisclosed income. A presumption is an inference of fact drawn from other known or proved facts. It is the rule of law under which Courts are authorised to draw a particular inference from a particular fact, until and unless the truth of such Chapter XIV-B does not give power to the revenue to draw the presumption in regard to the undisclosed income. The Assessing Officer could proceed on the basis of material detected at the time of search and the evidence gathered.

Thus, there is no scope of presumption in the Statute inasmuch as the provisions under Chapter XIV-B are concerned.N.R. Paper & Board Ltd. v. Dy. CIT [1998] 234 ITR 733/101 Taxman 525, the Hon'ble Gujarat High Court has held that as under: Chapter XIV-B of the Income-tax Act, 1961, lays down a special procedure for assessment of search cases and provides for assessment of undisclosed income as a result of search. Under Section 158BB(1), read with Section 158BC of the Income-tax Act, 1961, what is assessed is the undisclosed income of the block period and not the total income or loss of the previous year required to be assessed in the normal assessment under Section 143(3). This exercise under Section 143(2) and (3) for regular assessment stands in contrast to the exercise of the Assessing Officer under Section 158BB read with Section 158BC(b), where he has to assess only the undisclosed income of the block period on the basis of the evidence found and material available as a result of the search conducted under Section 132 of the Act.

The definition of 'undisclosed income' in Section 158B(b) includes any money, bullion, jewellery or other valuable article or thing or any income based on any entry in the books of account or other documents or transactions, where such asset, entry or other document or transaction representing wholly or partly income or property which has not been or would not have been disclosed for the purposes of the Act. It therefore, follows that what has assessee had already disclosed or would have disclosed is not to be treated as undisclosed income.

The maximum of English Law as propounded by Holroyd, J. prescribes : "It is better than the guilty men should escape rather than one innocent should suffer". The principle of justice requires that no one should be punished on the basis of presumption. Addition should not be made merely on surmises. It should be supported by cogent material and evidence.

26. In the case before us a search took place from 26-11-1996 to 29-11-1996 and statement of Shri Kisanrao Manikrao Khopade, the head of the family was recorded during the course of search and a sum of Rs. 15.00 lakhs was offered by him for taxation. "The search and seizure action is the last weapon in the armory of the department to unearth the unaccounted income". It has been so held [ITA (SS) No. 32/(PN)/1997 dated 4th February, 1998], to which one of us (Judicial Member) was a party. During the course of search, hitherto not disclosed to the Department, some books like Bharna Registers, diaries and loose papers were found on the basis of which the assessee prepared a cash flow statement and disclosed a sum of Rs. 15.00 lakhs. The Assessing Officer's finding and the D.R.'s assertion that the assessee got on money on each and every plot sold and over and above the on money recorded in the Bharna Registers, diaries and loose papers is based on presumption. On our instance, both the Revenue and the assessee have filed full details of the plots sold by the assessee in all the Gats. A perusal of the same reveals that all plots are not of similar size or of similar nature and were located in different localities. Gat No.71/2 Deopur, had uneven land with no electricity, nallah passing through the land and this was the end piece beyond the developed part of the city. Similarly, Gat No. 105/A-2-B near Malegaon was undeveloped area and river passing behind the land. Gat No. 159/3 Mohdi-Dhule comes within very undeveloped village area of poor section of society. Gat No. 10/1 Mohadi, was near nallah. We regular course of on money transactions in plot sales. We do not agree with this argument of the learned D.R. because this argument of the learned D.R. is based on mere presumption and as stated above, the presumption has no place while framing a Block Assessment under the special provisions of Chapter XIV-B. The Block Assessment has to be framed on the basis of seized material which in this case were the Bharna Registers, diaries and loose papers. If no other registers or diaries or loose papers were found in the search, now it cannot be presumed that the assessee might have been getting on money and recording the same in some other books.

The human probability suggests that if he has maintained a personal record, he would not maintain a false record showing receipt of on money in some cases and not showing receipt of any such on money in cases of others. The human probability does not presume that person acts prudently or rationally all the time - J.K. Commercial Corporation Ltd. v. CIT [1969] 72 ITR 296 (All.). The human probability also must be based on honesty of a person and dishonesty cannot be a rule. If a person maintains full record of on money received for himself, it is logical to state that this is honest record of all his deals. We further find that this is not the case of the Assessing Officer that the Bharna Registers were not complete and the learned D.R. cannot be allowed to make altogether a new case than what has been made by the Assessing Officer.

27. We also do not agree with the arguments of the learned D.R. that cash flow statement filed by the assessee with the revised return was not exhaustive and was defective. First of all, it is wrong to presume that cash flow statement is based on Bharna Registers alone. The details of on money have been collected from other sale registers like Register No. 93, 14, diary No. 32, loose papers etc. Thus, the cash flow statement is exhaustive. We have gone through the cash flow statement and find that except two specific defects in the totals i.e., Rs. 40 and Rs. 75,000 there is no other defect. These defects have been admitted by the learned counsel for the assessee as mentioned on page 15 of our order. These two inadvertent omissions in the matter of totalling alone should not lead to a conclusion that the cash flow statement is defective. We further find that in holding that the estimation of on money was necessary, the learned Assessing Officer has not found that the cash flow statement was not exhaustive or defective; she has not held that the Bharna Registers are incomplete. All that she has said is that if on money was received in respect of some plots, it is impossible to believe that it was not received for other plots in the same Gat. She has presumed standardised price for all the 10 years without even considering that the prices in latter years would be higher than in earlier years and further she has not established that there is universal practice of receiving on money as in big cities in sale of flats. She has not examined the possibility that each plot is unique in its features and unless there is special reason, there cannot be any premium.

28. Now we revert to the cases relied upon by the learned D.R. The decisions of the Bombay High Court in the case of A. Moosa & Sons (supra), Bombay Cycle Stores Co. Ltd. (supra) and the decision of Patna High Court in the case of M.A. Rauf (supra) are the decisions in the context of Section 13 of Indian Income-tax Act, 1922 corresponding to Section 145 of the Income-tax Act, 1961. As stated by us earlier, the provisions of Section 145 are not applicable to assessments made under Section 158BC which are special assessments based on search material.

Even otherwise, these decisions lay down the principle regarding the method of estimate. It has been held that if there is a reasonable estimate adopted by the Assessing Officer the fact that there might be another method of estimating the profit is no ground for disturbing the method followed by the Assessing Officer. All the above three cases are distinguishable since they proceed on the facts to assume that some estimate is called for. In the case of the assessee before us, the assessee is disputing that there is any case for estimation of profit.

If there is no case for estimation of profit on the basis of material available, further question regarding reasonableness of the estimate has no relevance.

29. The decision of the Delhi High Court in the case of Raza Sugar Co.

Ltd. (supra) is equally distinguishable. This was a case where the ITO found four instances showing that the sugar manufactured by the assessee was superior to one found in the market and its selling rate in the market was always higher than the normal rate. The four instances were also found which showed that full sale price was not recorded in the books of account. In a case of commodity like sugar which has standardised price in the market and where the facts had established that there was a possibility of assessee having earned on money, the authorities concerned had no difficulty in holding that on money received by the assessee would be estimated on some basis. In the case of the assessee before us, he deals in land which is not the commodity having a standardised price in the market. As stated above, each plot of land has its unique features. Moreover, there is no material to show that there was a premium for each plot sold as possibly there could be such premium in big cities like Bombay, Delhi, etc. The Assessing Officer has also not gathered any material in that behalf. There was therefore, no question of estimating more on money than what has been shown to have been earned by the assessee on the basis of available record found during the search.

30. The decision of the Supreme Court in the case of H.M. Esufali H.M.Abdulali (supra) is also distinguishable. This was a case where the best judgment assessment was permissible under the relevant provisions of Sales-tax Act equivalent to Section 145 of Income-tax Act. The applicability of Section 145 in the context of Block Assessment has already been discussed above. Since recourse under Section 145 is not available for the purpose of Block Assessment, what the Hon'ble Supreme Court held in the context of best judgment assessment where it was permissible, will not be applicable to the facts of the present case.

The Hon'ble Supreme Court on page 276 made a distinction between the best judgment assessment and the assessment based on accounts submitted by an assessee. The Hon'ble Supreme Court has held as under : Some-times there may necessarily or preferably mistake in the accounts maintained by the assessee. There may be even certain unintended or unimportant omissions in those accounts; but yet the accounts may be accepted as genuine and substantially correct. In such cases, assessments are made on the basis of the accounts maintained, even though the Assessing Officer may add back to the accounts price of the items that might have been omitted to be included in the accounts. In such a case assessment made is not a best judgment assessment. It is primarily made on the basis of the accounts maintained by the assessee. But when the Assessing Officer comes to the conclusion that no reliance can be placed on the accounts maintained by the assessee, he proceeds to assess the assessee on the basis of his best judgment.

It was in the context of best judgment that it was held to be justified in the facts of the case before the Supreme Court that the formula adopted by the STO there is no question of such best judgment if we consider the cash flow statement as maintaining true accounts of the undisclosed income. Some few small mistakes have been pointed out by the learned D.R. which the learned counsel for the assessee has accepted (refer page 15 of our order), but there is no material to hold that the cash flow statement is unreliable or incomplete. In such cases as distinguished by the Hon'ble Apex Court, the assessment has to be based on cash flow statement itself making adjustment only for genuine mistakes. The question of best judgment is ruled out and therefore, the application of any formula for estimating income does not arise.

31. Reliance has been placed by both sides on the judgment of the Hon'ble Supreme Court in the case of C. Velukutty (supra). The representative of the assessee submitted that this judgment of the Apex Court supports his case while the department has tried to distinguish the applicability of this case. This was a case where the Head Office of the assessee had recorded sales of goods transferred from Branch Office as also goods purchased from its own Office. A parallel set of accounts was found showing that sales as per the parallel accounts were more by 13596. The Assessing Officer proceeded to compute the sales in Branch account also on the same basis. In this context, the Hon'ble Supreme Court on pages 244 and 245 observed as under : From the discovery of secret documents in the Head Office it does not necessarily follow that a corresponding set of accounts were maintained in the Branch Office, though it is probable that such accounts were maintained. But as the accounts were secret, it is also not improbable that the Branch Office might not have kept parallel accounts, as duplication of such accounts would facilitate discovery of fraud and it would have been though advisable to maintain only one set of all accounts in the Head Office. Be that as it may, the maintenance of secret accounts in the Branch Office cannot be assumed in the circumstances of the case.

The Hon'ble Supreme Court further held that in making best judgment, relevant material must be considered. The estimate that 135%, 20096 or 50096 was not justified, in the case of a Branch Office, it was a capricious surmise unsupported by any relevant material. In our opinion, the above decision of the Supreme Court is an authority for the proposition that existence of material showing receipt of some extra money does not lead to the conclusion that there was a receipt of such extra money in respect transaction for which there is no material on record. The above decision of the Supreme Court is widely regarded as an authority for the proposition that unless there is specific and relevant material available, a wholesale estimate of income cannot be made only on the basis that some suppression of income might have been found from the available record.

32. The decision of the Supreme Court in the case of Sumati Dayal(supra) and Durga Prasad More (supra) have also been relied upon by the Department for the proposition that apparent must be considered as real until it is found that there are reasons to believe that the apparent is not real and the taxing authorities are entitled to look into surrounding circumstances to find out the reality and to apply the test of human probabilities. The assessee does not dispute the principles laid down by the Hon'ble Supreme Court. In fact, the assessee's argument is that by applying the principles of human probabilities there was no reason to disbelieve the assessee's contention that when it had maintained the accounts of all on money received, it was reasonable to presume that it was received only in those transactions which have been found entered into the records maintained and not in other cases where there is no such evidence.

Again applying the principle of human probabilities, one has to find out whether in a backward district of Dhule presumption of earning of on money in case of all the plots for all the years in the Block assessment can be drawn in the absence of any evidence to the contrary.

33. In the case of Bhikaam Chand Jain (supra) decided by the Pune Bench of the Tribunal, the assessee had denied any receipt of on money. There was however, a paper found during the raid which according to the Tribunal suggested possibility of receipt of on money. Thus, there was justification for estimation. When estimation was justified, the basis of estimation was based on actual sale instances and evidence of market value in the form of comparable cases and Valuation Officer's report.

In the case of the assessee before us, when the assessee accepted the receipt of on money in sale of plots where there was actual evidence available, it will not be reasonable to believe that he did receive on money in other sales when there is no evidence to the contrary and other factors regarding on money are not present or not established.

34. In the case of Overseas Chinese Cuisine (supra), it was a case of a hotel and it was found that there was suppression of sales. This was based on a particular method adopted by the Hotel owner in recording the sales. Since the activities were continuously carried on in a hotel, a reasonable conclusion could be drawn that similar suppression of sales could be there in the period under consideration and therefore estimate was called for and the method of estimation also was held to be justified.

This case is also distinguishable on facts. A hotel doing continuous business and having sales of standardised goods can be presumed to have sold goods at the same prices and if suppression is found in some selling instances, similar suppression can be presumed. But in a case of land, where on money cannot be presumed to have been received in all the years for all the lands, it is not possible firstly to state that there is any receipt of on money other than what has been shown and secondly, the standardised formula as used by the Assessing Officer in the present case may be good method of assumption in the case of a hotel or similar trading activity but not in respect of land.

35. In Smt. Amar Kumari (supra) was a case where the assessee had purchased a plot and the question arose regarding unexplained investments in the said purchase under Section 69. It was found that the assessee had purchased plot at a price which was less than 50% of the market price. There was no explanation why it was so less. In the present case, in the first place for each Gat, the market price has been established; no specific material has been gathered as to why a particular sale price has been realised in respect of a particular plot. In fact, there is total absence of material. Moreover, the assessee has maintained full record of the on money. In these circumstances, the facts of the assessee's case are quite distinguishable from those in the case before the Hon'ble Rajasthan High Court.

36. Out of the cases relied upon by the learned counsel for the assessee, we find that the decision of the Bombay Tribunal in the case of Rajesh B. Kanakia (supra) is almost on all fours with the case of the assessee. In this case, before the Bombay Tribunal question similar to the one in the present case arose. The relevant paras of the decision have been read out by the learned counsel for the assessee at the time of hearing. In para 4, it has been brought out that the Assessing Officer on the basis of the material seized had found out that the assessee had earned on money from its three projects; viz.

Tulip, Sunflower and Blue Bell and accordingly calculated receipt of on money. But there was no document or evidence found or seized by the department in respect of rest of the five buildings under construction by the assessee. The Assessing Officer simply by applying the rate taken by him for the other three buildings and basing on presumption that as the five buildings are situated in the same premises the assessee must have earned on money estimated undisclosed income at Rs. 5.37 crores. Thus, the facts of the present assessee's case are similar to those in the case before the Bombay Bench of the Tribunal. The argument of the assessee as well as the department proceeded on similar lines. The decision of the Supreme Court in the case of Sumati Dayal (supra) was also relied upon by the department. The Tribunal, however, disagreed with the contention of the Department as is clear from the discussion in para 13.1 of the order and held that the seized material possibly recorded receipt of on money in respect of different flats/shops, inference to be drawn was that whenever on money was received it was recorded. It was not possible to hold without material that documents are incomplete and then take average and hold that on money was received in respect of each flat. This would tantamount to writing something not available on the material.

37. Even at the cost of repetition, we refer and rely upon the decision of the Bombay Bench Tribunal in the case of Sundar Agencies (supra), in which the Hon'ble Tribunal has held as under : Whether within pale of Chapter XIV-B assessment could be made only in respect of undisclosed income and such undisclosed income must come as a result of search - Held, yes - whether Section 158BC does not provide a licence to Revenue for making roving enquiries connected with completed assessment and is beyond power of Assessing Officer to review assessments completed unless some direct evidence comes to knowledge of Department as a result of search which indicates clearly factum of undisclosed income - Held, yes - whether scheme of Chapter XIV-B gives power to Revenue to draw presumption in regard to undisclosed income - Held, no. 33. In view of the aforesaid decision of the Hon'ble Bombay Bench, the Ahmedabad 'A' Bench of the Tribunal has taken a similar view in the case of Patel Rajesh kumar Kantilal & Co. v. Asstt. CIT [1998] 62 TTJ (Ahd.) 189 to which one of us (Accountant Member), was a party.

39. In the light of above discussion, we hold that estimation of income on sale of plots by the assessee is unwarranted as the basis of the estimation is not only arbitrary but also totally irrational having no nexus with the evidence/material found during the course of search.

This ground is partly allowed. The Assessing Officer is directed to restrict the additions in this regard to the extent of "excess money" actually found to have been charged on the basis of seized material plus the addition of Rs. 75,040 as discussed above.

40. Ground No. 3 : In this ground, it has been stated that the learned Assessing Officer is not justified in making an addition of Rs. 5,86,220 on purchase of plots in respect of Gat No. 46 vide para 11 on page 19 of the assessment order. This addition has been made by the Assessing Officer by applying the average rate as discussed in ground No. 2 above. In Gat No. 46, 34182 sq. ft. plot area was not sold but it was purchased.Thus the value shown in the account books i.e., Rs. 29,397 is of purchase and not of sale. Thus, the undisclosed income determined at Rs. 5,86,220 is not correct and deserves to be deleted because the average rate is applied to sales and not to purchases. In fact, this addition has been made by the Assessing Officer on wrong premise and without appreciating the facts correctly. The same is accordingly deleted.

41. Ground No. 4: In this ground, an addition of Rs. 43,200 for assessment year 1996-97 on account of salary to employees of Kailash Lodge has been challenged. The facts have been discussed by the Assessing Officer in para 12 on page 38 of the Assessment Order.

According to the Assessing Officer 2000] Khopade Kisanrao Manikrao v.Asstt. CIT (Pune) (TM) 51 during the course of survey under Section 133A on the business premises of the assessee situated at Kailash Lodge, the statement of Shri Rameshsing Babasing Rajput, Manager of Kailash Lodge was recorded on 26-11-1996. In his statement in Question No. 4, Shri Rameshsing Babusing Rajput stated that"...the four persons are working in Kailash Lodge including himself and they are drawing the salary as under....

Thus, according to the Assessing Officer the assessee paid salary of Rs. 35,400 (Rs. 2,950 X 12) for A.Y. 1996-97. According to the Assessing Officer the actual salary debited at the end of the year amounted to Rs. 78,600. She thus held that the assessee has debited excess salary to the tune of Rs. 43,200. She accordingly disallowed the salary and added an amount of Rs. 43,200 to the income of the assessee.

42. Shri K.A. Sathe, the learned counsel for the assessee submitted that Shri Rameshsing Babasing Rajput was appointed as a Manager since 15-2-1996 in M/s Kailash Lodge. His statement under Section 133A was recorded on 26-11-1996. Employees work in two shifts i.e. day shift and night shift. There are different employees during day shift and night shift. Besides their regular wages payment of overtime work is also paid. This is confirmed by the Manager in his statement under Section 133A. However, he had told only the names of employees of one shift and was silent on the employees of other shift. He drew our attention to a detailed chart of employees per month placed at page 2 of the paper book No. 1. He also drew our attention to Pagar Patrak Register which was duly maintained by the assessee as per the panchanama. He submitted that whatever the assessee paid as salary has been correctly debited in the books of account and accordingly, there is justification for the impugned addition. The learned D.R. relied upon the order of the learned Assessing Officer.

43. We have considered the rival submissions. In our view, the approach of the Assessing Officer is half-way. She simply went by statement of Shri Remeshsing Babasing Rajput without verifying the correct position and without verifying the position from the Pagar Patrak Registers which formed part of the seized material. In view of the submissions of the learned counsel and keeping in view the entries in the Pagar Patrak Registers which formed part of the seized material, we see no justification for the impugned addition. The same is accordingly deleted. This ground accordingly succeeds.

44. Ground No. 5: In this ground, an addition of Rs. 25,000 on account of telephone charges has been challenged. The facts leading to this addition have been discussed by the learned Assessing Officer in para 13 on page 39. The assessee runs a Lodge viz. Shankar Anand lodge. In the said Lodge, Telephone No. 21122 was installed on 24-2-1993. The said lodge was started with effect from 17-10-1991. According to the Assessing Officer the assessee had not shown income from this telephone and she estimated such income at Rs. 25,000.

45. Shri K.A. Sathe, the learned counsel for the assessee submitted that the assessee charges Rs. 2 per call if any visitor uses the same in the Lodge. Whenever local calls are collected they are recorded in the regular books of account. Almost all visitors are villagers and charges are very meager as the lodge building is very old. He drew our attention of the details of telephone bills paid and received which are as follows:Asstt. year Telephone charges Telephone Bal. debited recovered bill paid to P & L a/c1992-93 NIL NIL NIL1993-94 - - -1994-95 820 1,377 5571995-96 98 1,424 1,3261996-97 NIL 1,283 1,2831997-98 NIL 630 630Total: 918 4,714 3,796 He further drew our attention to Ledger Extract of Telephone Bill a/c placed at page Nos. 224 to 227 of the Paper Book No. 1, which gives the above account. Pointing out to the above account, the learned counsel submitted that estimation is based on mere imagination without any basis. If for sake, it is presumed that Rs. 25,000 are received, it means there were 12,500 calls (25,000 divided by two). The minimum charges per call was Rs. 0.80. Thus, 12,500 X 0.80 = 10,000. In fact the assessee has paid Rs. 4,714. The learned D.R. relied upon the order of the Assessing Officer.

46. We have considered the rival submissions and perused the facts on record. We find that the Assessing Officer has made the addition on pure estimate. From the facts stated above, it is noted that the estimate is highly excessive. However, the use of telephone for personal purposes and some charges being not recorded cannot be ruled out. For this, we confirm an addition of Rs. 5,000 and delete the balance amount. This ground succeeds in part.

47. Ground No. 6: In this ground, the addition of Rs. 15,43,000 on account of payments made to different parties from whom agricultural lands were purchased has been challenged. The facts relating to this addition have been discussed in para 16 on pages 39 to 42 of the assessment order.

According to the learned Assessing Officer these payments are not reflected in the regular books of account. He further stated that in reply to Question No. 22 and the statement of the assessce recorded under Section 132(4), the assessee confessed that these payments were unaccounted. The Assessing Officer confronted the assessee with the diaries and later on further examined the diary No. 32. The assessee made a declaration of Rs. 15,73,000 as undisclosed income for the various years and for this, he submitted a cash flow statement. The Assessing Officer was not satisfied with the explanation furnished and added the amount of Rs. 15,43,000 to the total income of the assessee.

48. Shri K.A. Sathe, the learned counsel for the assessee submitted that the above payments were made by various members of the family of the assessee towards purchase of agricultural lands. The said payments were not recorded in the regular books of account. All the assessees have prepared cash flow statements on unaccounted transactions and have included all the above payments in cash flow statement. He drew our attention to the following details of payments made by various assessees belonging to Khopade group which were filed before the Assessing Officer.17-12-1990 1,000 Shri Prakash Parkhe17-1-1992 50,000 Bhanudas Parkhe He submitted that all the above payments are recorded in the cash flow statement of the assessees belonging to Khopade group. He therefore, submitted that there is no justification for the impugned addition. The learned D.R. relied upon the order of the learned Assessing Officer.

49. We have considered the rival submissions and perused the facts on record. We have gone through the cash flow statement and find that it is a comprehensive statement prepared to arrive at surrender of undisclosed income. There is no adverse comment on cash flow statement by the Assessing Officer. It is noted that the payments were made by different members of Khopade group who had been separately assessed to tax. The lands were purchased by them in their individual names and the payments were made by each and every member separately as detailed above. The learned Assessing Officer brushed aside the explanation of the assessee simply ignoring the cash flow statement, according to which, the assessee had surrendered a sum of Rs. 15,73,000. The surrender was for unrecorded payments and accordingly, the Assessing Officer should not have ignored the explanation of the assessee in a summary manner. Since all the above payments stand explained by the cash flow statement which belong to different members of Khopade group who have shown such payments in their cash flow statements, we see no justification for sustaining such addition. This addition is accordingly deleted and the ground raised by the assessee succeeds.

From the above details, it is noted that the payments made to the tune of Rs. 1,99,000 and Rs. 80,000 being prior to the block period cannot be added during this block period. In view of this, the whole addition of Rs. 15,43,000 is deleted.

50. Ground No. 7: In this ground, the addition of Rs. 7,14,934 on account of alleged suppressed sales has been challenged. The facts leading to this addition have been discussed by the Assessing Officer in para 15 on pages 44 to 46 of his order. According to the Assessing Officer the books of M/s. K.M. Khopade and Co. (Wine shop) were inventorised and subsequently impounded as per Annexure A-4. Pages 2 and 2 Sr. Nos. 16 to 35 were deeply scrutinised. On scrutiny of the said books of account, it was noticed that the assessee suppressed the sales and inflated the expenses. She has given the details of such inflation in extenso on pages 44, 45 and 46 of the order. She accordingly made an addition of Rs. 7,14,934.

51. Shri K.A. Sathe, the learned counsel for the assessee submitted that no opportunity was given to the assessee to re-concile the figures. As per the learned counsel, the facts are as under :(A) Asstt. year 1991-92 : F.Y. 1-4-1990 to 31-3-1991 :Gross sales as per books ofaccount of K.M. Khopade & Co.

9,67,712As per audit report 9,67,712 ----------To purchases Foreign liquor 813368.00 Foreign L/F 11 to 30 L/F 34 to 36 L/F 69 to 83 85586.00 ------------To Gross profit 47585.65 By closing stock 250802.20 ------------- ------------- Thus sales shown in Audit report and sales as per books of account are the same. The amount of sales of Rs. 10,57,253 is not appearing anywhere in books of account as stated in assessment order. No clarification was asked for the same and hence there is no excess sales of Rs. 89,541 as stated in assessment order. Copies of a/c sales of liquor are enclosed videpage Nos. 259 to 308.Sales as per sales register (seized) 11,89,643Less: Sales recorded in books of a/c 11,65,953 -------------- Into assessment order on page No. 45 there is arithmetical mistake of Rs. 1,00,000. Actual suppressed sales are of Rs. 23,690 and it had been wrongly taken at Rs. 1,23,690.bundle No. 11, page No. 83 13,53,501Less: Sales accounted in books ofreport suppressed sales 12,08,925 ----------------loose paper bundle No. 11.

16,84,454Less: Sales accounted in books ofaccount as per audit report 15,73,519 ---------------- In Assessment order sales as per audit report have Rs. 15,73,191 whereas actual as per audit report it is at Rs. there is difference of Rs. 328 (15,73,191 - 15,73,519). been taken at 15,73,519. Thus(E): Asstt. year 1996-97Sales as per sales register No. A-1-9 18,06,831Less: sales recorded in books of account 17,84,920 ---------------- In the assessemnt order on page No. 46 sales as per register have been taken at 18,92,521. In fact sales as per sales register are at Rs. 18,06,831.

Thus there is difference of Rs. 85,760 (18,92,591 -18,06,831). Detailed copy of sales register No. A-1/9 is enclosed herewith vide Page Nos.

138 to 138.Sales as per register No. A-1/10 9,25,033Less: Sales shown in return 7,86,790 ---------------- Thus, the sales shown in audit report and the sales as per books of account are the same. The sum of Rs. 10,57,235 is not appearing anywhere in the books of account as stated in the assessment order on page 44. No clarification was asked for the same and hence there is no excess sales of Rs. 89,541 as stated in the assessment order. He drew our attention to the copies of sales of liquor at pages 289 to 303 of the Paper Book and submitted that if the Assessing Officer had given an opportunity everything would have been reconciled and there would have been no occasion for the alleged addition. The learned D.R. relied upon the order of the learned Assessing Officer.

52. We have considered the rival submissions. We find that the extensive calculation given in the assessment order by the Assessing Officer were not confronted to the assessee. It is not known from where the figure of Rs. 10,57,253 was adopted by the Assessing Officer for the period 1-4-1990 to 31-3-1991 i.e. A.Y. 1991-92. In fact, no opportunity was given to the assessee to reconcile the same. After all, the assessee is maintaining regular books of account and the sales of liquor is subject to check by the Excise authority. In all fairness before making an addition, the Assessing Officer ought to have given an opportunity to the assessee to explain the discrepancy in sales, if any. The above facts given by Shri K.A. Sathe, also need verification at the hands of the Assessing Officer. In the circumstances, we deem it fit to restore this issue to the file of the Assessing Officer for fresh adjudication after giving an opportunity of being heard to the assessee.

53. Ground No. 8 : In this ground, the assessee has challenged the disallowance of salary amounting to Rs. 47,998 on the basis of Register Nos. 9,10 and 11 without giving any opportunity to explain the same. It has been stated in the ground that "if opportunity would have granted amount of salary paid would have been reconciled". The facts leading to this addition have been discussed by the Assessing Officer in para 15 on pages 44 to 46 of the assessment order. This ground is corollary to ground No. 7 discussed above. Here also, we find that no opportunity was given to the assessee to explain the facts. Accordingly, we set aside order of the Assessing Officer on this issue and restore the matter back to her file for fresh adjudication after giving an opportunity of being heard to the assessee.

54. Ground No. 9 : In this ground an addition of Rs. 59,272 on account of gross profit for assessment year 1991-92 has been challenged. The facts reading to this addition have been discussed by the Assessing Officer in para 15 on page 44 of the assessment order. This ground is also incidental to ground No. 7 above and since no opportunity was given to explain, this issue is also restored to the file of the Assessing Officer for fresh adjudication after giving an opportunity of being heard to the assessee.

55. Ground No. 10: In this ground an addition of Rs. 5,00,000 on account of expenditure on education of the children of the assessee has been challenged. The facts leading to this addition have been discussed in para 16 on pages 46 to 48 of the assessment order. During the course of assessment proceedings, the Assessing Officer noted that the assessee's children were bright and intelligent persons. His elder son is a doctor who was initially doing the medical course from Belgaum in Karnataka and is now persuing post graduation from some medical college at Mumbai. His younger son Jayendra was studying to become an Architect from Vidyapeeth Pune. His daughter Anita was doing Post Graduation from a College at Jalgaon and his younger daughter was doing Dental Medicine course also from Pune. According to the learned Assessing Officer substantial amounts must have been spent by the assessee on the education of his children. She further points that in reply to question No. 24 in the statement recorded at the time of search, the assessee had unconditionally and voluntarily declared a sum of Rs. 5,00,000 to cover any omissions regarding the expenditure made in the education of his children. She accordingly made an addition of Rs. 5,00,000.

56. Shri K.A. Sathe, the learned counsel for the assessee submitted that there is no justification for the impugned addition. He drew our attention to question No. 24 and submitted that the assessee had nowhere admitted and declared an amount of Rs. 5,00,000 on account of education expenditure for his children. What the assessee had exactly stated in answer to question No. 24 is as follows : For admission to Medical College in respect of my son Dr. Sanjay I have not paid an kind of donation. For his education every year Rs. 35,000 was expended and how much is expended for his maintenance is not known.

For education of daughter Kum. Anita in first year B.D.S. she had paid Rs. 1,00,000 and for second year Rs. 70,000. How much is expended for maintenance is not known. For education for my son Jayendra I have paid Rs. 32,000 on account of fees. How much is expended for maintenance is not remembered. For household expenses I have withdrawn Rs. 5,000 p.m.

The learned counsel submitted that thus from the above, it is clear that there is no admission nor declaration of Rs. 5,00,000 on account of education of children. According to the learned counsel, it is only on assumption and presumption and without pointing out any specific unaccounted expenditure, the addition has been made. He submitted that a detailed explanation was furnished before the Assessing Officer giving the details of expenditure incurred on education of children, placed at page 107 of the Paper Book No. 3. The learned D.R. relied upon the order of the learned Assessing Officer.

57. We have considered the rival submissions and perused the facts on record. As is evident from the reply to question No. 24 on which, the learned Assessing Officer has relied upon, the assessee nowhere made unconditional surrender of Rs. 5,00,000, for the education of his children. We find that a detailed explanation was furnished before the Assessing Officer which has been placed at pages 107 to 110 of the Paper Book No. 3, in which the details of expenses incurred on children's education has been given. It is noted that all the expenses have been debited in the respective books of the children of the assessee or in the books of the assessee himself. The big payments have been made by cheques. The statement of the children who were grown up were also recorded during the course of search and they gave the details of the maintenance expenses. For example in her statement recorded at the time of search, Kum. Kiran Kisanrao Khopade, who had taken education in North Maharashtra University at Jalgaon in M.Sc.

(Microbiology) stated that monthly expenses were of Rs. 1,000 to Rs. 1,200. It is noted that a sum of Rs. 20,000 has been debited on account of her maintenance expenses. The maintenance expenses have been sent to her every month from Dhule to Jalgaon. Taking into consideration the detailed explanation furnished by the assessee, we find that the addition has been made purely on assumption and presumption and at no time the assessee admitted that he had spent over and above than what was recorded in the books of account on account of education of the children of the assessee. Accordingly, we see no justification for the impugned addition. The same is accordingly deleted.

58. Ground No. 11 : In this ground an addition of Rs. 5,00,000 on account of expenditure on marriage of Dr. Sanjay K. Khopade, the son of the assessee has been challenged. The facts leading to this addition have been discussed in para 17 on pages 48 and 49 of the assessment order. Assessee's son Dr. Sanjay married Dr. Kamini on 3-12-1995. The assessee had expended Rs. 64,910 on account of marriage of the son.

During the course of search under Section 132(1) a Video Cassette of their marriage was seized which according to the Assessing Officer was screened from time to time so as to come to the correct conclusion about the expenses on the marriage. The learned Assessing Officer states that Shri K.M. Khopade is an Ex-MLA having his own social and political status in Dhule district and accordingly, the expenditure shown at Rs. 64,910 was on the lower side. The learned Assessing Officer further observed that in the Video Cassette, "it is seen that huge amount has been expended on decoration, buffet dinner, cloth and ornaments. The standard of the wedding was justifying his status." Keeping in view all these facts, the learned Assessing Officer estimated the total marriage expenses at Rs. 5,60,000 and thereby made an addition of Rs. 5,00,000.

59. Shri K.A. Sathe, the learned counsel for the assessee submitted that the assessee's son Dr. Sanjay was married to Dr. Kamini on 3-12-1995. The assessee had expended Rs. 64,910 on account of marriage of his son. Out of this Rs. 60,000 are debited to capital account of Mrs. Kamal Kisnarao Khopade - wife of the assessee. He drew our attention to the detailed account of Mrs. Kamal K. Khooade which is as follows:To Bank commission 250.00 By Bal. B/F 11,08,750.72To L.I.P. 53,330.50 By Net profit 76,204.58To withdrawals 18,000.00 By netTo withdrawals agricultural 4,20,566.69 for marriage income Further Rs. 491 were debited to cash flow statement of Mr. K.M.Khopade. The learned counsel for the assessee submitted that during the assessment proceedings not a single question was asked about marriage expenses of Dr. Sanjay nor any question was asked regarding cassette seized by the department. He submitted that both the groom and bride were Doctors by profession. The marriage was performed in a dignified manner without much lavishness. The learned D.R. relied upon the order of the learned Assessing Officer. He made arrangements for viewing of the cassette seized during the search and accordingly we saw the Video film in the room of the D.R. on 25-8-1998 from 12.00 noon to 1.00 p.m.

in the presence of all the D. Rs, Shri K.A. Sathe and Shri Kisanrao M.Khopade The Video Cassette pertains to reception where simple vegetarian food was served. There was no service of liquor though the assessee is dealing in liquor. Reception was held in a Shamiyana and not in a hotel. During the course of Video show we noted that some persons handed over chandlo to the couple but no credit has been taken by the assessee. In our opinion, the chandlo amount must be a substantial amount keeping in view the status of the assessee. From viewing of the cassette, we find nothing abnormal or lavishness about the marriage ceremony. Both the groom and bride were Doctors by profession and accordingly it had to be a marriage of dignity considering the profession of both. In our opinion, the Assessing Officer has made want on estimate of Rs. 5,00,000 on the marriage.

Keeping in view the fact that it was a marriage of a boy and keeping in view the status of the assessee, in our opinion, it will be fair and reasonable to estimate such expenses at Rs. 1,00,000. The assessee has shown a sum of Rs. 64,910. Thus only an addition of Rs. 1,00,000 minus Rs. 64,910 = Rs. 35,090 is sustained. The assessee will get a relief of Rs. 5,00,000 minus Rs. 35,090 = Rs. 4,64,910. This ground succeeds in part.

60. Ground No. 12 : In this ground, an addition of Rs. 14,47,453 on account of cash seized has been challenged. The facts leading to this addition have been discussed in para 18 on pages 49 to 51 of the assessment order. During the course of 132(1) action, a sum of Rs. 15,75,255 was found in cash. The details of cash found are as follows :2. Rs. 80,000 received from Shri Amrut Ramdas Kuwar, Chairman of Anmol Co-op. Griha Nirman3. Rs. 1,50,000 received from Shri Shaikh, Chairman of Ajan -shah Griha Nirman Society, Dhule.4. Rs. 12,17,453 Cash out of sale proceeds of various plots not recorded in books of a/c.

There is no dispute about the cash of Rs. 1,27,802 which has been accepted by the Assessing Officer. The remaining three amounts have not been accepted by the Assessing Officer and added to the income of the assessee. As regards the cash of Rs. 80,000 received from Shri Amrut Ramdas Kuwar, Chairman of Anmol Co-op. Griha Nirman Society, the Assessing Officer recorded a statement under Section 132(1) of the Act on 21 -8-1997. According to the Assessing Officer in reply to question No. 19 of the said statement Shri Amrut Kuwar stated that he had not handed over the cash of Rs. 80,000 personally to Shri Kisanrao Khopade, nor did he had any documentary proof for the same. No receipt was in his possession to show that this amount had been given to Shri Khopade under the agreement of a deal for the purpose of land for the society.

She recorded a statement of Shri Shaikh under Section 132(1) of the Act but was not satisfied whether Shri Shaikh had handed over a sum of Rs. 1,50,000 to Shri Kisanrao Khopade. According to the Assessing Officer it was a very clumsy and a desperate attempt by the assessee and via him of his associates to help him wriggle out of the admitted declaration and place on record a rationate justifying the bifurcation.

As regards the third amount of Rs. 12,17,453 it was admitted that this was unaccounted cash but the same was declared in the cash flow statement. But the Assessing Officer was not satisfied and accordingly m ade an addition of Rs. 14,47,453 (Rs. 80,000, + Rs. 1,50,000 and Rs. 12,17,453).

61. Shri K.A. Sathe, the learned counsel for the assessee submitted that Shri Amrut Ramdas Kuwar is the Chairman of Anmol Co-op. Griha Nirman Society Ltd. It was proposed to extend the existing housing society and some persons approached to the said Chairman Mr. A.R.Kuwar. In answer to question Nos. 9 and 10 of the Statement recorded under Section 131 on 21-8-1997 (Pages 187 to 189 of the Paper Book No.1), Shri Amrut R. Kuwar stated as follows : 2-3 Govt. employee viz. Sanjay Mohite, Nitin Gaikwad and other members approached and requested to Shri A.R. Kuwar for the purpose of extending the existing housing society and make a proposal for the same. On this requisition Mr. A.R. Kuwar directed them to purchase the plot and bring purchase deed which is required for the said proposal. Accordingly on 23-11-1996 they have paid Rs. 80,000 at Kiran Khopade's house. Copy of proposed purchase deed was already made. The said proposed purchase deed was in respect of S.No. 106/1-A-1, Plot Nos. 9 to 14 in Mehendale Shiwar. Above amount of Rs. 80,000 was paid by them in cash to Miss Kiran Khopade.

In answer to question No. 19, Shri Amrut R. Kuwar had stated as follows : The amount of Rs. 80,000 in cash was paid by two members viz. Nitin Gaikwad and Sanjay Mohite to Miss Kiran Khopade at Kailas, Garud Colony, Dhule. At this time I was not present and hence how Kisanrao Khopade had stated that he had received cash from me is not known.

According to the learned counsel, the root question is whether an amount of Rs. 80,000 was received on 23-11-1996 or not. According to him, the answer is in the affirmative as stated in answer to question Nos. 9 and 10 and also answer to question No. 19. According to the learned counsel, it is totally irrelevant whether cash is paid by Shri Amrut R. Kuwar or by other members viz. Sanjay Mohite or Nitin Gaikwad.

He filed a copy of sale deed in respect of the same. He further submitted that an amount of Rs. 80,000 was duly recorded in the regular books of account.

62. As regards the amount of Rs. 1,50,000 received from Shaikh, Chairman of Ajanshah Griha Nirman Society, Dhule, the learned counsel submitted that it is an admitted fact by both the assessee's witnesses and department and the assessee himself that Shri Shaikh had paid a sum of Rs. 1,50,000 to Shri Kisanrao M. Khopade. The said admission is made by Shri Shaikh into his statement recorded under Section 131 on 30-6-1997 vide answer to question No. NIL on page No. 4. He further submitted that the said amount of Rs. 1,50,000 is appearing in the register maintained by the society and into the statement recorded on page 4. It is stated that the figure was checked from the register and found correct. As regards Rs. 12,17,453, the learned counsel submitted that this is the cash on account of sale proceeds of plots not recorded in the books of account and is appearing in the cash flow statement prepared by the members of the family of the assessee in their respective cash flow statements. He submitted that it is an admitted fact that the assessee had stated that the cash found does not represent the cash received on account of excess consideration received and which is not recorded in the books of account. According to him, the assessee had wrongly made the said admission because the cash found was only on account of excess consideration received on sale of plots and there was no other source of income.

63. The learned D.R. Strongly supported the order of the learned Assessing Officer. He submitted that mere admission by way of two parties Mr. Nitin Gaikwad and Mr. Sanjay Mohite without any documentary evidence is of no assistance to the assessee and in the absence of any documentary evidence, the Assessing Officer was justified in holding that the amounts belonged to the assessee.

64. We have considered the rival submissions and perused the facts on record. We have gone through the statement of Shri Kuwar and Shri Shaikh. In their statements, both of them have confirmed that the amounts were paid by them and they have explained the circumstances in which the amounts reached them. The amounts were duly entered in the ledger i.e., Khatavni, a copy of which was supplied to us and which was examined by the learned D.R. In our opinion, the assessee who surrendered a sum of Rs. 15.00 lakhs will not make the clumsy effort as stated by the learned Assessing Officer for denying tax on the paultry amount of Rs. 80,000 and Rs. 1,50,000. It is also a fact that the plots were sold by two Societies viz. Anmol Co-op. Griha Nirman Society and Ajanshah Griha Nirman Society, Dhule and the final agreements entered into with the societies further support that the assessee did have dealings with the societies and the plots were subsequently handed over to the society.

Under the circumstances, in our opinion, in view of the confirmation pf both the members and in view of the detailed submissions of the learned counsel, we see no justification for the impugned additions of Rs. 80,000 and Rs. 1,50,000. As regards the amount of Rs. 12,17,453, it appears in the cash flow statement prepared by the members who are dealing in plots but the Assessing Officer did not bother to go into the detailed cash flow statement and made the impugned addition without giving any cogetit reasons. Since the amount of Rs. 12,17,453 stands duly accounted for in the cash flow statement, we see no justification for the impugned addition. This ground accordingly succeeds and the assessee gets relief of Rs. 14,47,453.

65. Ground No. 13 - In this ground an addition of Rs. 3,38,685 on account of alleged unexplained investment in flat No. 601 Oshiwara, Andheri, hfrs been challenged. The facts leading to this addition have been discussed In para 19 on page 51 of the assessment order. The Assessing Officer noted that the assessee had invested a sum of Rs. 8,38,685 in flat No. 601 Oshiwara, Andheri. A sum of Rs. 5,00,000 was taken as loan from M.H.F.D,C and for the balance of Rs. 3,38,685 the assessee had no explanation. She accordingly made an addition of Rs. 3,38,685 to the income of the assessment in the assessment year 1996-97. Shri K.A. Sathe, the learned counsel for the assessee submitted that the flat was purchased fromi M.H.A.D.A. for a sum of Rs. 8,38,685. For purchase of this flat, a loan of Rs. 5,00,000 was taken from M.H.F.D.C. and the balance amount is debited to M/s. Kailas Motor Cycle Agency, a proprietary concern of the assessee. On page 147 of Ledger, details of payments are given which afe as follows:Date Amount Mode of payment Where debited L/F12-3-1994 10,000 D.D. No. 27758 Kailas Motor Cycle 200 Agency, Prop. K.M.26-7-1995 75,000 D.D. No. 16657 -do- 1475-2-1992 2,38,685 D.D. No. 036074 -do- 14719-2-1996 15,000 D.D. No. 036313 -do- 147 3,38,685 The above demand drafts are debited to Bombay Housing Area Development Board, Mumbai. He further submitted that in the balance-sheet filed for 1-4-1996 to 29-11-1996 on page No. 10, Rs. 8,38,685 was shown on asset side in the name and style of M/s. Bombay Housing Area Development Board, Mumbai. He further drew our attention to the extract of Ledger a/c on page 136 which is as follows :By Bal. c/f 8,38,685 To D.D. No. 37806 38,854(29-11-1996) (13-5-1996) The learned D.R. relied upon the order of the learned Assessing Officer.

66. We have considered the rival submissions. In view of the submissions made by the learned counsel for the assessee detailed above and after verifying the whole position, we hold that there is no justification for the impugned addition. The investment stands debited in the books of account and stands explained. This ground of the assessee therefore, succeeds and the addition of Rs. 3,38,685 is deleted.

Learned A.C. IT. (Inv.) had erred in adding Rs. 1,70,000 and Rs. 2,70,000 on account of investments made by Shri Sanjay K. Khopade and Kiran K. Khopade respectively in the flats at Mumbai even though the same are accounted for in regular books of account maintained by them (Ref. para No. 20 and page No. 52).

Hence addition of Rs. 1,70,000 and Rs. 2,70,000 made on protective basis be deleted.

The facts leading to these two additions have been discussed by the Assessing Officer in para 20 on page No. 52 of the assessment order.

According to the Assessing Officer in the statement recorded under Section 132(4) of the Income-tax Act, 1961 on 29-11-1996 vide reply to question No. 44, the assessee had claimed to have purchased flats at Mumbai in the name of his son Shri Sanjay K. Khopade and Smt. Anita K.Khopade. According to the Assessing Officer the aforesaid flats purchased in the name of these two children were actually the flats purchased by the assessee out of his black money. She added these two amounts in the name of the abovenoted two members of the family on substantive basis in their respective assessments and on protective basis in the hands of the assessee. Thus, the following additions have been made.(a) Rs. 1,70,000 Protective addition on account of investment made by Sanjay Khopade in purchase of flat at Mumbai.(b) Rs. 2,70,000 Protective addition on account of investment made by Miss Kiran Khopade in flat at Mumbai.

68. Shri K.A. Sathe, the learned counsel for the assessee submitted that Dr. Sanjay Kisanrao Khopade, the son of the assessee is assessed to Income-tax and he is also maintaining regular books of account. Dr.

Sanjay Khopade had purchased a flat No. 102 in Sahyadri Co-op. Housing Society, Oshiwara, Mumbai. The total cost of the flat is Rs. 2,70,000 and sources of investments are as under :Rs. 1,00,000 By taking loan from L.I.C. of IndiaRs. 1,70,000 Out of regular income, details ofDate of Amount Mode of C.B. No.L/FNo.payment payment17-10-1992 15,000 By depositing into 104 44 Bank of India, Dhule12-5-1993 67,500 By D.D. No. 018713 23 461-10-1993 87,500 By D.D. No. 022891 109 464-1-1994 1,00,000 Cheque No. 13623 - 46 L.I.C. of India The learned counsel submitted that during the assessment proceedings, not a single question was raised. Similarly, Miss Kiran K. Khopade also purchased a flat bearing No. 103 in Sahyadri Co-op. Housing Society at Mumbai. The total investment made in the said flat is Rs. 2,70,000. The payment of Rs. 2,70,000 is accounted for in the regular books of account. Details of payments are as follows :Date Amount Mode of payment C.B. No. L/F No.22-3-1993 35,000 Cash deposited into 12 20 Bank of Maharashtra27-8-1993 90,000 D.D. No. 21752 of 23 16 Central Bank of India,28-6-1994 1,30,000 D.D. No. 30395 of 25 15 Central Bank of India, The learned counsel therefore, submitted that there is no justification for the two impugned additions. The learned D.R. relied upon the observations of the learned Assessing Officer.

69. We have considered the rival submissions and perused the facts on record. Both Dr. Sanjay and Miss Kiran Khopade are major members of the family of the assessee and as stated above, they purchased two flats on their own after making investments from out of their respective books of account. Both of them are assessed to income-tax and it is wrong on the part of the Assessing Officer to treat them as dependant children of the assessee. In view of the submissions of the learned counsel and in view of the facts stated above, we hold that there is no justification for the impugned additions of Rs. 1,70,000 and Rs. 2,70,000. The same are accordingly deleted. This ground therefore, succeeds.

Learned A.C.I.T. (Inv.) had erred in making addition oi Rs. 8,00,000 on account of advance paid to the land owners without pointing out name of the land-owner, when it is paid etc. Thus addition is made only on the basis of declaration made under Section 132(4) which itself is vague. It is not pointed out in which debtors name it is in the seized papers (Ref. para 21 on pages 52 and 53).

The facts leading to this addition have been discussed by the Assessing Officer in para 21 on pages 52 and 53 of the assessment order. In answer to question No. 51, the assessee had made disclosure of debtors totalling to Rs. 15,73,000 out of which Rs. 8,00,000 were declared on his own a/c. According to the Assessing Officer the basis of the assessee's declaration and in the absence of any explanation which could justify the claims that the advances given to the landlord owner making them his debtor as he had to receive land from them once the deal has been finalised could not be accepted. She accordingly made an addition of Rs. 8,00,000.

71. Shri K.A. Sathe, the learned counsel for the assessee submitted that in fact, in question No. 51 a reference has been made to question No. 22 in which the assessee had made disclosure of Rs. 14,43,000 on account of unaccounted debtors with names, i.e. names of debtors and the amount paid is given. Whereas, in question No. 51 again the same question is repeated and disclosure is made in the hands of different family members without pointing out the names of debtors. The amount declared in question No. 22 and in answer to question No. 51 is the same and hence it is a disclosure of the same amount. This being an apparent mistake additions cannot be made that too without pointing out names of debtors. He further submitted that the assessee along with his family members debited the same amount in their respective cash books.

He therefore, submitted that there is no justification for the impugned addition. The learned D.R. relied upon the order of the learned Assessing Officer".

72. After considering the facts of the case, we hold that the addition made by the Assessing Officer is on wrong appreciation of facts. The amount of Rs. 8,00,000 which is part of total unaccounted debtors of Rs. 14,43,000 has been declared by the assessee in his cash flow statement and accordingly there is no justification for the impugned addition. The same is accordingly deleted. This ground therefore, succeeds.

73. Ground No. 16- In this ground, an addition of Rs. 5,00,000 on account of advance to landowners has been challenged. The facts leading to this addition have been discussed by the Assessing Officer in para 22 on page 53 of the assessment order. According to the Assessing Officer the assessee had paid a sum of Rs. 5,00,000 as advance to landowners and had also subsequently made admission of the same amount in account of advances paid to the landowners. The Assessing Officer made the addition stating that "as the explanation put by the assessee are not satisfactory and the cash flow statement filed does not throw light on the expenditure incurred or investments made out of the acknowledged undisclosed income filed by the assessee".

74. Shri K.A. Sathe, the learned counsel for the assessee, drew our attention to answer to question No. 17 which reads as under : In this regard I have to state that whatever excess consideration received by me and my family members in respect of land sale purchase business is not reflected in the income tax return filed.

At this movement it is not possible for me to assess out the quantum of such type of excess receipt or to prove the destination of the same.

However, I have to state that till date an amount of Rs. 15,00,000 on account of such excess consideration is received by me and my family members in the said land, sale purchase business. Also I clearly state that whatever cash found and seized at my residence also does not represent the abovesaid excess consideration. I thus voluntarily offered the amount of Rs. 15,00,000 being excess consideration received as under :5,00,000 Shri K.M. Khopade Advance to landowners4,00,000 Mrs. Kamal K. Khopade -do-2,00,000 Shri K.M. Khopade Investment in closing stock of land The learned counsel submitted that thus from the answer to question No.17 it is clear that what the assessee had disclosed is excess cash on account of sale of plots which is not recoded in the books of account and which is offered for taxation in cash flow statement. It is therefore, submitted that there is no justification for the impugned addition. The learned D.R. relied upon the order of the Assessing Officer.

75. We have considered the rival submissions and perused the facts on record. It is not understood as to how excess cash received on account of cash sale can become advance to land owners and investment in the stock of land. In fact, the Assessing Officer has made the impugned addition on a very vague basis without giving the names of landowners and without appreciating the facts as stated above. Accordingly, we see no justification for the impugned addition. The same is accordingly deleted.

76. Ground No. 17 - In this ground an addition of Rs. 2,00,000 on account of investment in closing stock has been challenged. The facts leading to this addition have been discussed in para 22 on page 53 of the assessment order. The facts of this ground are the same as stated in ground No. 16 supra. What the assessee had disclosed is excess cash received on account of sale proceeds of plots and not investment in closing stock. As the excess cash received on account of plots is already taxed, the same cannot be taxed twice again as a closing stock of Rs. 2,00,000. The addition made by the Assessing Officer is accordingly deleted. This ground therefore, succeeds.

77. Ground No. 18-In this ground an addition of Rs. 11,680 being alleged unaccounted money received on sale of plot No. 36 has been challenged. The facts leading to this addition have been discussed in para 23 on page 53 of the assessment order. We have heard both the parties and find that in fact this transaction does not belong to the assessee but belongs to his son Dr. Sanjay Khopade who has already offered the said amount of Rs. 11,680 for taxation. This ground accordingly succeeds and addition of Rs. 11,680 is deleted.

78. Ground No. 19 - In this ground an addition of Rs. 2,000 received on 14-8-1984 from Damu Tanaji Bagul on account of sale proceeds of plot not recorded in books of account has been challenged. We find that the receipt of Rs. 2,000 is dated 14-8-1984. The same being beyond the Block Period cannot be added as income of the assessee. This ground accordingly succeeds and the addition of Rs. 2,000 is deleted.

79. Ground No. 20 -In this ground an addition of Rs. 6,25,000 on account of FDRs kept by Hede family members had been challenged. The facts leading to this addition have been discussed by the Assessing Officer in para 24 on pages 54 to 56 of the assessment order. During the course of assessment, on scrutiny of page 16 of diary No. 33, the Assessing Officer noted that the following transactions had been entered into by the assessee :2. Shri Ganesh Kisan Rs. 50,000 11-7-1995 Hede3. Shri Kisan Jagannath Rs. 75,000 11-7-1995 Hede4. Shri Shashikant Rs. 75,000 11-7-1995 K. Hede According to the Assessing Officer the assessee had purchased land from the above persons. Shri Jagannath Erappa Hede had filed an affidavit dated 7-9-1997 before the Assessing Officer and had admitted that he had received advances against the agreement to sale of agricultural land bearing S. Nos. 88/1 and 91/1 of Mahindale Shiwar, Dhule.

According to the Assessing Officer the above transaction do no find place in the regular books of account. The above monies were FDRs with Rajawade Mandal Peoples Co-op. Bank in the name of the Hede and his family members. In the affidavit Shri Jagannath Errappa Hede owned up the FDRs but the Assessing Officer rejected the contents of the affidavit and as the entries appear in diary No. 33 found at the residence of the assessee held that the above FDRs belong to the assessee. She accordingly made the impugned addition.

80. Shri K.A. Sathe, the learned counsel for the assessee submitted that the learned Assessing Officer had simply asked vide her letter dated 30-6-1997 to explain the transactions on page No. 16 of Diary No.33. Accordingly, a reply was submitted on 30-7-1997 vide letter dated 29-7-1997 vide page Nos. 9, 10 and 11. In the said letter all these transactions were explained and further Hede submitted affidavits to this effect. He submitted that the learned Assessing Officer is not justified in stating that the above transactions do not find place in the regular books of account because in fact all the payments made to Hede family appear both in the regular books of account and cash flow statement submitted along with revised return. Following are the payments which are appearing in regular books of account:Payment by whom To whom payment Date Amountmade is made1. Mrs. Kamal Bhima Jagannath 7-7-1995 46,000 K. Khopade Hede2. Kisanrao Kishan Jagannath 7-7-1995 46,000 M. Khopade Hede3. Kisanrao Jagannath Hede 7-7-1995 76,000 M. Khopade4. Kisanrao Jagannath Hede 29-7-1995 45,000 M. Khopade Besides the above, the following payments were made which were out of the unaccounted profit of plots etc. hence appearing in cash flow statement :Payment by whom To whom payment Date Amountpaid is made1. Mrs. Kamal Jagannath Hede 25-8-1995 75,000 K. Khopade4.

-do- -do- 25-1-1996 30,000 2,15,0005. Kishanrao Kisan Hede 29-7-1995 2,500 M. Khopade7. Sanjay Kis- Jagannath Hede 25-8-1995 75,000 anrao Khopade8. -do- -do- 25-8-1995 75,000 3,70,500 Thus, the appellant had entered these transactions in the telephone diary i.e., No. 33. It was incorporated on page No. 16 of diary No. 33 in order to have some security known for the payments made against agreement to purchase land and which can be attached before judgment if Hede refuses to execute the sale. According to the learned counsel, the assessee himself had entered into agreement with Hede regarding S. Nos.

88/1 and 91/1 and hence was knowing. Since deal with Hede was not complete, the assessee had kept record of the said FDRs. Shri Hari Krishan, the learned D.R. strongly supported the order of the Assessing Officer. He submitted that details of these FDRs were found at page 16 of the diary No. 33 found at the residence of the assessee at the time of search. The onus was on the assessee to prove that the above deposits actually belonged to Hede family and not the assessee.

According, to the learned D.R., this onus was not discharged and hence, the Assessing Officer was justified in making the impugned addition.

81. We have considered the rival submissions and perused the facts on record. The fact that the lands were sold by Hede family to the assessee is not disputed. It is also a fact that the assessee entered into an agreement to sale and accordingly made the above payment to Hede family to purchase the FDRs with Rajawada Mandal Peoples Co-op.

Bank. At the time of search, the FDRs were with the Hede family and not with the assessee. What was found at the assessee's residence was only the entries about the above fixed deposits on page 16 of diary No. 33.

We find force in the contention of the learned counsel that since the deal with Hede family was not complete the assessee had kept a record of the said FDRs for safeguarding his interest. It is further noted that Shri Jagannath Errappa Hede filed duly sworn affidavit placed at page 59 of the paper book. We have gone through the contents of the affidavit and find that the fixed deposits are owned up by Shri Jagannath Errappa Hede as belonging to him and his family members.

Nothing has been placed on record by the Assessing Officer to rebut the contents of this affidavit. It is now well settled that if no effort is made to controvert the contents of the affidavit, the same have to be accepted as true - Mehta Parikh & Co. v. CIT [1956] 30 ITR 181 (SC).

Accordingly, we do not agree with the contention of the learned D.R.that the assessee was unable to discharge the primary onus which lay upon him. If the Assessing Officer was not satisfied with the contents of the sworn affidavit, he could have cross examined Shri Jagannath Errappa Hede. In view of the above discussions, we see no justification for the impugned addition of Rs. 6,25,000. The same is accordingly deleted. This ground is therefore, allowed.

82. Ground Nos. 21, 22, 23 and 24: These grounds pertain to common issue, i.e. a sum of Rs. 2,00,000 kept by the assessee with M/s.

Sindkheda Taluka Sahakari Karkhana Ltd. on account of deposit. The facts leading to this consolidated addition which comprises of four additions of Rs. 50,000 each have been discussed by the A.O. in para 24 on pages 56 to 58 of the assessment order. During the course of search, it was noted that four FDRs of Rs. 50,000 each with Sindkheda Taluka Sah. Sakhar Karkhana were standing in the name of the following persons : The assessee's explanation on this was that the sugar factory was in need of money and in fact a cheque of Rs. 2,00,000 was obtained from the Chairman Mr. Deshmukh as a security of the above four FDRs. In fact this cheque was found in the possession of the assessee. The assessee had in reply to question No. 30 stated in this regard that"....Dr. H.Deshmukh was the Chairman of the factory, he was in need of money to start the factory. He had met me 5-6 times and had requested for arranging Rs. 2,00,000 as deposit in his factory. It was only in his request that I had arranged the amount from the above mentioned person." In question No. 31 of the statement recorded under Section 132(4) the assessee was asked to explain the sources of Rs. 2,00,000.

In reply, the assessee had given the following sources : The statement of Shri Deshmukh was recorded which is placed at page 73 of the paper Book No. 4. The Assessing Officer also called Shri Dilip Kisanrao Kholawale and Shri Bharat Shripati Yernale and recorded their statements under Section 132(4). The statement of Shri Kholawale is placed at page 66 of the Paper Book No. 4 and the statement of Shri Yernale is placed at page 56 of the paper book No. 4. According to the assessee Rs. 50,000 paid by him were accounted for in his cash flow statement. Similarly, Rs. 50,000 paid by Shri Jayendra Khopade was also accounted for in his respective cash flow statement. It was explained that both Shri Kholawale and Yernale had deposited Rs. 50,000 with the assessee out of their savings and the assessee had deposited these amounts with the aforesaid Sugar Mill on behalf of two creditors. From the statement of the two creditors, the Assessing Officer noted that they were both closely related to the assessee and they were not in a position to have the amounts of Rs. 50,000 each to advance as cash credit to the Sugar Mill. Shri Kholawale was a milk man while Yernale was working in Shankaranand Lodge owned by the assessee. She accordingly made an addition of Rs. 2,00,000 to the income of the assessee.

83. Shri K.A. Sathe, the learned counsel for the assessee submitted that the FDR of Rs. 50,000 kept by the assessee with Sindkheda Sahakari Karkhana Ltd. was unaccounted and hence covered in cash flow statement and accordingly, no addition is called for in this regard. Similarly, the FDR of Rs. 50,000 kept by Shri Jayendra K. Khopade, the son of the assessee with the said Mill belongs to assessee's son Mr. Jayendra K.Khopade who is assessed in his right and who offered it for taxation in his cash flow statement. As regards Rs. 50,000 in the name of Shri Kholawale, Shri K.A. Sathe drew our attention to the statement recorded under Section 131 of Shri Dilip Kisanrao Kholawale who admitted that he had kept the FDR on the request of the assessee. However, as the said factory was not returning the amount the assessee had obtained post-dated cheque of Rs. 2,00,000 from Dr. Hemant Deshmukh, who was the Chairman of the said Karkhana. The learned counsel submitted that Shri Dilip Kisanrao Kholawale had admitted in his statement recorded under Section 131 vide answer to question Nos. 17, 18, 20 that he had saved the amount and admitted that he had paid Rs. 50,000 to K.M. Khopade for deposit with the said Karkhana. Similarly, Shri Bharat Shripati Yernale had kept Rs. 50,000 as a deposit with said factory on the request from the assessee counsel for the assessee, the assessee had discharged the burden by producing two depositors viz-, Mr. Dilip Kisanrao Kholawale and Mr. Bharat Shripati Yernale. He submitted that psychologically seeking if the assessee has offered lakhs of rupees in his cash flow statement and the cash flow statement of his family members, he would not have given symbolic story as held by the Assessing Officer.

84. Shri Hari Krishan, the learned Departmental Representative strongly supported the order of the Assessing Officer. He also drew our attention to the statement of Shri Kholawale and Yernale and submitted that these persons were not men of means, that the cheque of Rs. 2,00,000 was found at the time of search at the residence of the assessee and the assessee was the defacto owner of these deposits. He therefore, submitted that so far as the two additions of Rs. 50,000 each in the name of Kholawale and Yernale, the same deserve to be upheld.85. We have considered the rival submissions and perused the facts on record. The FDRs of Rs. 50,000 kept with the aforesaid Karkhana dated 13-9-1994 in the name of the assessee is admittedly unaccounted and since it is covered in the cash flow statement, there is no justification for the addition of Rs. 50,000. So far as the FDR of Rs. 50,000 kept by Jayendra Khopade with the aforesaid Sugar Mill, we hold that this deposit belongs to the son of the assessee in his name and since he too offered it for taxation in his cash flow statement, there is no justification for the impugned addition. Accordingly, the two additions of Rs. 50,000 aggregating to Rs. 1,00,000 are deleted. As regards the other depositors viz., in the name of Mr. Dilip Kisanrao Kholawale shows that the deposits belong to the above two persons and not to the assessee. We have gone through the statement of two depositors referred to supra. We do not agree with the contention of the Assessing Officer that the two depositors were men of no means. As regards Shri Bharat Shripati Yernale who was the manager in Shankaranand Lodge, Dhule he was getting the salary of Rs. 1,350 per month. He owns 25 acres of land along with his brother. During his statement, he did admit that "the amount of Rs. 50,000 was paid on 13-9-1994 to Shri Deshmukh Saheb. The said amount is not received back by him. I had given the said amount in cash." He further states that the amount of Rs. 50,000 was paid to Shri Deshmukh on the say of Bhau (Shri Kisanrao Khopade). Shri Kisanrao Khopade directed him to give that amount. He also submitted that he knew Shri Hemant Deshmukh who was an M.L.A. Similarly, we have perused the statement of Shri Dilip Kisanrao Kholawale. He is in milk business and earning Rs. 20,000 to Rs. 25,000 per year. In answer to question No. 6, he states that "I am holding agricultural land at Shevte, I take Jowar crop therein." In answer to question No. 13 he states that "I have sold 3 acres of land.

I sold it in the year 1990-91. It is Gat No. 189. It is sold to Laxman Gaikwad. 2 Acres land is sold in the year 1990." From the above statement, it is amply clear that he is a man of stock. In answer to question No. 21, he admitted that he had paid an amount of Rs. 50,000 to Sidhkheda Sahakari Sakhar Karkhana in the year 1994. He also submitted that an amount was given in the shop i.e., Kailas Motor Cycle which belongs to the assessee. Simply because, he paid the Cash amount in the shop of the assessee does not make the assessee owner of the amount of Rs. 50,000. In our opinion, the assessee, by producing both the creditors viz., Shri Dilip Kisanrao Kholawale and Shri Bharat Shripati Yernale, discharged the primary onus which lay upon him.

Coupled with these, the evidence that their names appear in the books of Sugar Mill before the search go to prove that the deposits belong to the Shri Dilip Kisanrao Kholawale and Shri Bharat Shripati Yernale and not to the assessee. Accordingly, we delete the entire addition of Rs. 2,00,000. These grounds accordingly succeed.

86. Ground No. 25 : In this ground an addition of Rs. 1,10,550 made on account of value of gold ornaments has been challenged. The facts leading to this addition have been discussed by the Assessing Officer in para 25 on page Nos. 59 to 62 of the assessment order. The details of gold ornaments found and seized of various members are as follows:Name of Gold ornament Seized ValueMember found in gms(1) Kisanrao 11 Patil 576.640 2,99,852 52,000 Manikrao 1 Biscuit 100.000 Khopade 676.640 676.640 3,51,852(2) Mrs. Kamal Patil 2 51.660 26,863 Kisanrao Bangles-4 53.802 27,977 Khopade Ncckless-1 37.720 19,614 Chapalhar-2 67.107 34,8953. Sanjay K. Chain 63.369 32,951 Khopade (1-with Summary of the gold ornaments, forund during search action is as follows : Khopade 676.640 3,51,852(2) Mrs.Kamal Kisanrao Khopade 358.389 1,86,359(3) Sanjay Kisanrao Khopade 175.128 91,066(4) Miss Anita K. Khopade 125.144 65,056(5) Mrs. Shalini Sanjay Khopade 197.584 1,02,741 1635.310 8,50,335Add: silver 5,558 8,55,893 The above details are as per the panchanama made during the course of search. From the above details, it is noted that the gold ornaments owned by the assessee weigh at 676.640 grams (net). Out of this, 422.500 grams shown in the wealth-tax return have been accepted and balance of 254.140 grams (676.640 minus 422.500) valued at Rs. 1,10,550 have been added to the income of the assessee. The explanation of the assessee before the Assessing Officer that in fact, the balance of 300 grams (30 tolas) were received by the assessee in the month of December, 1995 from his father viz. Manikrao Narayanrao Khopade who died on 21-1-1996. In this regard, the statement of Mr. Arun Manikrao Khopade brother of the assessee was recorded under Section 131 on 20-8-1997. In answer to question No. 13 he had stated that his father was having one gof which is in possession of his wife and a piece of gold and kada of gold was given to Mr. Kisanrao Khopade which was told by his father. The Assessing Officer did not accept the statement of the brother of the assessee on the ground there was no person at the time when the father handed over the ornaments before his death, to the assessee though the said statement is confirmed by Mr. Arun Manikrao Khopade in the cross examination taken by the assessee and he further stated that gof (thin chain) which was owned by his mother was given to his wife. Further, the statement of other brothers were also recorded.

But the Assessing Officer was not satisfied and added the amount of Rs. 1,10,550 to the income of the assessee. On page 61 of the assessment order, the Assessing Officer has referred to the substantive addition made in the hands of the assessee in respect of jewellery of Sanjay (Son), Kiran (Daughter), Anita (Daughter) and protective additions on account of jewellery belonging to Kamal (wife).

87. Shri K.A. Sathe, the learned counsel for the assessee submitted that there is no justification for the addition of Rs. 1,10,550. The assessee had given sufficient evidence to the effect that he had got some jewellery from his father before the later's death and further in support of this, the assessee had produced his brothers for examination before the Assessing Officer who had all supported the contention of the assessee that he had received about 30 tolas of gold from his father before his death.

88. The learned D.R. strongly supported the order of the Assessing Officer. He submitted that the story that the assessee got about 30 tolas of gold from his father is a concocted story and the statement given by the assessee and his brothers do not inspire any confidence.

Therefore, he submitted that the addition of Rs. 1,10,550 deserves to be upheld.89. We have considered the rival submissions and perused the facts on record. We have gone through the statements of the brothers of the assessee and after perusing the same, we do not find any force in the contention of the learned D.R. that the fact that the assessee got some jewellery from his father before the later's death is a concocted story. It is a fact that the father of the assessee died on 21-1-1996.

It is customary in the Indian Society that the jewellery is inherited by the sons. There is nothing unusual about it. We accept the statement of the assessee which is supported by the statements of his brothers that he got jewellery (a piece of gold and kada of gold) weighing about 30 tolas from his father before the later's death. We accordingly delete the addition of Rs. 1,10,550. Though the Assessing Officer states that she is making a substantive addition on account of jewellery of three members of the family in the hands of the assessee and protective addition in the case of jewellery belonging to Smt.

Kamal, we do not find that such additions have been made. However, we will discuss this issue in the individual cases of the family members.

This ground accordingly succeeds and the addition of Rs.l,10,550 is deleted.

90. Ground No. 26: In this ground an addition of Rs. 2,25,000 on account of value of Shankaranand Lodge has been challenged. The facts leading to this addition have been discussed in para 27 on pages 62 to 65 of the assessment order. The Assessing Officer noted that the assessee purchased the Shankaranand Lodge in the Assessment year 1991-92. He states that "on going through the old records of the assessee, it is seen that no investment has been shown in Shankaranand Lodge.... Therefore, it is presumed that the amount of investment is unaccounted". She referred the matter for valuation of this property to the D.V.O. who valued this property at Rs. 2,25,000. She accordingly made an addition of Rs. 2,25,000.

91. Shri K.A. Sathe, the learned counsel for the assessee submitted that the assessee had purchased the said Lodge building on 31 -5-1990 and the cost of acquisition was debited in M/s. K.M.K. and Co. (Wine Shop) during 1-4-1990 to 31 -3-1991 having L/F 193 in the name and style of Navin Ghar Khardi Khate, Tembhekar Building C.T.S. No. 1460, Galli No. 2 Peth, Dhule and the same is appearing in balance-sheet as on 31-3-1991 to 29-11-1996.

He filed the following extract of account of building viz., Shankaranand LodeeL/F 193.31-5-1990 To Cash 10,000 31-3-1991 By Bal. 2,25,000 B/F The learned counsel submitted that no explanation regarding sources of investment was asked during the assessment proceedings.

92. The learned Departmental Representative submitted that the matter may be restored back to the file of the Assessing Officer for verification of investment in the said lodge.

93. We have considered the rival submissions and perused the facts on record. We find that the Assessing Officer has simply presumed that the assessee has purchased the said lodge with undisclosed income. That is not the position as explained by the learned counsel in the above para.

It has been stated before us that the purchase price has been debited in the books of M/s. K.M.K and Co. (Wine shop) at L/F No. 193. We accordingly restore this issue to the file of the Assessing Officer who may verify the contention of the assessee that the purchase price of the lodge was duly debited and accounted for in the books of account as detailed supra. If the contention of the assessee is found true after verification no addition would be called for.

94. Ground No. 27 : In this ground an addition of Rs. 2,95,000 on account of investment in Vawdekar Sadan has been challenged. The facts leading to this addition are more or less identical to those discussed in ground No. 26 about in respect of Shankaranand Lodge and have been discussed in para 27 on pages 62 to 65 of the assessment order by the Assessing Officer. The Assessing Officer noted that the assessee had purchased Vawdekar Sadan in Assessment year 1989-90. She referred the valuation of this Sadan to the D.V.O., who valued at Rs. 2,95,000. The Assessing Officer states that "on going through the old records of the assessee, it is seen that no investment has been shown in Vawdekar Sadan. Therefore, it is presumed that the amount of investment is unaccounted" and added the same to the undisclosed income for Assessment year 1989-90.

95. Shri K.A. Sathe, the learned counsel for the assessee submitted that the said building viz., Vawdekar Sadan was purchased by the assessee on 30-6-1988 and the cost was debited to the account of M/s.

Kailas Motor Cycle Agencies. He drew our attention to the account extract of the same in Ledger for 1-4-1988 to 31-3-1989 which is as follows :30-6-1988 To Cash 2,95,000 31-3-1989 By Bal. 3,06,849.50 C.B. 252 B/F 96. We have considered the rival submissions. From the extract given above, it is noted that the assessee has accounted the sum of Rs. 3,06,849 in the books of M/s. Kailas Motor Cycle Agencies, a proprietary concern, as against Rs. 2,95,000 valued by the D.V.O. and the value adopted by the Assessing Officer. However, since the Assessing Officer did not verify the above extract which gives a picture of the investment, the matter is referred back to the Assessing Officer. If the contentions of the assessee are correct and borne from the books of account, no addition would be called for on this account.

97. Ground No. 28: In this ground an addition of Rs. 6,15,000 on account of construction of house at 25 Garud Colony, Deopur, Dhule has been challenged. The facts leading to this addition have been discussed by the Assessing Officer in para 27 on pages 62 to 65 of the assessment order and are identical to those discussed in respect of Shankaranand Lodge and Vawdekar Sadan. The assessee constructed his residential house i.e., Bungalow No. 25, Garud Colony, Deopur,Dhule in assessment year 1993-94. The Assessing Officer referred the matter to the D.V.O.who estimated the cost of construction at Rs. 6,15,000. The Assessing Officer presumed that the assessee had not shown the cost of construction in his books of account and that the cost of construction was met out of undisclosed income. She accordingly made the addition of Rs. 6,15,000 in the assessment year 1993-94.

98. Shri K.A. Sathe, the learned counsel for the assessee submitted that the assessee had constructed a house and has maintained day-to-day construction a/c and all construction expenses are supported by the vouchers. From the said vouchers only copies of bills of material purchased were submitted to the Departmental Valuer. Further, yearwise break up of construction was given from the said construction a/c to the Departmental Valuer. No opportunity was given to the assessee before making reference to the D.V.O. to produce the detailed construction account of house building. The assessee was not asked to produce either the books of account maintained in respect of construction of house nor was asked to submit his valuation report.

According to the learned counsel, the department was in possession of cash book of construction account which was impounded vide Panchanama Annexure 'A' Sr. Page No. at Sr. No. 76 A-77 i.e., Delux A/c book cash book plot etc. total pages 111, written pages 111. The details of expenses incurred for construction of house property are as follows :Asstt. Accounting Confirmed total L/F No.year year of Kailas1985-86 5-11-83 to 24-10-84 23,401 23,401 Motor Cycle1986-87 25-10-84 to 12-11-85 58,100 81,5011989-90 23-10-87 to 31-3-89 15,000 2,90,025 871990-91 1-4-89 to 31-3-90 50,000 3,40,025 1071991-92 1-4-90 to 31-3-91 Nil 3,40,025 1161992-93 1-4-91 to 31-3-92 26,960 3,66,985 1041993-94 1-4-92 to 31-3-93 86,000 4,52,985 (1) During assessment year 1992-93 Rs. 10,000 is debited to capital a/c in M/s. K.M.K. & Co. L/F 138.

(2) During assessment year 1993-94 Mrs. Kamal Kisanrao Khopade had expended Rs. 39,000 for construction of the said house which is appearing on L/F 69 under the head Shri Kisanrao M. Khopade Navin Ghar Bandhani Khate Garud Colony.

(3) During assessment year 1993-94 Rs. 27,000 are debited to K.M. Khopade Capital a/c for construction purposes, in M/s. Details of withdrawals are as follows : Kailas Lodge L/F 68.Date Amount (4) During assessment year 1993-94 Rs. 10,000 are debited into M/s.

Shankaranand Lodge. Details of which are as follows :Date Amount (5) Certain construction expenses were incurred but were not recorded in books of account but are found in loose papers at the time of action under Section 132 and hence the same are covered in cash flow statement, details of which are as follows:Amount Particulars BND Page Asstt.

Thus total construction expenses are as follows :(1) Upto assessment year 1993-94 Rs. 4,52,985.27(2) As per loose papers Rs. 2,47,968.00 Rs. 7,00,953.27 99. Shri K.A. Sathe, the learned counsel for the assessee submitted that the assessee accounted for a sum of Rs. 7,00,953 as against Rs. 6,15,000 adopted by the D.V.O. Since all the investments were recorded in the books of account, there was no justification for the impugned addition of Rs. 6,15,000.

100. The learned Departmental Representative submitted that the matter may be referred back to the Assessing Officer for verification of the different entries in the books pertaining to the cost of construction.

101. We have considered the rival submissions and perused the facts on record. In our opinion, the Assessing Officer is not justified in making the impugned addition of Rs. 6,15,000 simply on presumption. She has simply presumed that the assessee has constructed a Bungalow No.25, Garud Colony, Deopur, Dhule, out of unaccounted income, which is not true. The valuation given by the D.V.O. is Rs. 6,15,000 whereas as per the details given by the assessee, the total cost has been shown as per books at Rs. 7,00,953. Accordingly, we hold that there is no justification for the impugned addition, if on verification, it is found by the Assessing Officer that the assessee has debited the various items of expenditure in his books of account as detailed in the submissions of the learned counsel cited supra. Before we proceed to next ground, we would like to mention and make it clear that for any of the three buildings viz., (1) Shankaranand Lodge, (2) Vawdekar Sadan and (3) bungalow No. 25, Garud Colony, Deopur, Dhule, the valuation made by the D.V.O. and the cost shown by the assessee tally or in the last case, it is more. Even though there is some difference the same cannot be added to the income of the assessee as the same cannot be termed as "undisclosed income" within the meaning of Section 158B. In this we are supported by the decision of this Bench in the case of Parekh Foods Ltd. v. Dy. CIT [1998] 64 ITD 396, Kasal Textiles (P.) Ltd. v. Asstt. CIT [1998] 66 ITD 510 and Ghodawat Pan Masala Products (P.) Ltd. [IT (SS) Appeal No. 68 (Pune) of 1996 dated 21-1-1999].

102. Ground No. 29 - In this ground an addition of Rs. 10,30,840 on account of land cost, furniture, fixtures, household etc., has been challenged. The facts leading to this addition have been discussed in para 27 on pages 64 and 65 of the assessment order. The Assessing Officer states in her order that whenever the assessee was asked to explain certain investment or expenditure, he has very conveniently said that the expenditure is incorporated in the cash flow statement.

However, since no investment has been shown in the cost of land, furniture, fixtures, household etc. it is "presumed" that the amount of cash incorporated as undisclosed income in the cash flow statement must have been spent for the above mentioned expenditure. Thereafter, she assumes that "the assessee must have spent a sum of Rs. 10,30,840 on cost of land, furniture, fixtures, household expenses etc. and proceeded to make an addition of Rs. 10,30,840. Shri Sathe, the learned counsel for the assessee submitted that the land i.e., plot on which house is constructed at 25, Garud Colony, Dhule was purchased for Rs. 22,000 on 2-12-1983 which is beyond block period i.e., prior to 13-11-1985 and which is appearing in the balance-sheet as on 31-3-1991.

On 31-3-1992 it is transferred to construction a/c on L/F 104 of M/s.

Kailas Motor Cycle Agency. Hence, addition on account of land cost cannot be added. Shri Sathe further submitted that the addition on account of furniture, fixtures, household expenses etc. cannot be made without pointing out any specific evidence. T.V., V.C.R., A.C. are debited in regular books of account and the said information was called at 5.45 p.m. on 17-11-1997 and was asked to submit within two hours, hence the same was submitted on 17-11-1997 at 7.45 p.m. But the Assessing Officer did not bother to verify the same.

103. The learned D.R. submitted that this matter may be referred back to the Assessing Officer as sufficient opportunity was not given to the assessee.

104. We have considered the rival submissions and perused the facts on record. As regards the investment in plot on which house is constructed at 25, Garud Colony, Deopur, Dhule, the same was purchased prior to 13-11-1985 and accordingly falls beyond the Block period. Accordingly, we hold that no addition is called for on this account. So far as the addition on account of T.V., V.C.R., A.C. etc. and other household expenses are concerned, from the submissions of the learned counsel, it is evident that adequate opportunity was not given to the assessee.

Only two hour's time was given which was very short period for collecting such huge information. The evidence has been placed before us at page 117 of the Paper Book No. 3. We therefore, set aside the orders of the Assessing Officer on this issue and refer it back with the direction that the assessee may be provided adequate opportunity to explain the sources of the assets like the ones given in the assessment order.

105. Ground No. 30- In this ground an addition of Rs. 21,67,240 on account of contravention of Section 40A(3) has been challenged. The facts leading to this addition have been discussed in para 29 on pages 67 to 70 of the assessment order. The Assessing Officer noted that the assessee had made cash payments exceeding Rs. 10,000 in contravention of provisions of Section 40A(3) of the Act. The details of such payments have been given by the Assessing Officer at pages 67 to 70.

According to her, the assessee could not give any plausible explanation why the payments were made in contravention of provisions of Section 40A(3) of the Act. She accordingly made an addition of Rs. 21,67,240 being aggregate of such payment.

106. Before us, Shri K.A. Sathe, the learned counsel has given explanation for each and every entry. We are of the opinion that we need not go into the details of such payments and the explanation given by the assessee because it is a legal question. In our opinion, such a disallowance cannot be considered as undisclosed income within the ambit of Chapter XIV-B. The genuineness of the transactions is not disputed before us. In our considered opinion, this cannot be treated as undisclosed income since all the particulars were before the Assessing Officer. The disallowance, if any, should only be made in the course of regular assessment proceedings. In this, we are supported by the order of this Bench in the case of Shree Vastu Construction [IT (SS) Appeal No. 32 (Pune) of 1997 dated 4-2-1998]. Accordingly, we delete the addition of Rs. 21,67,240.

107. Ground No. 31 - In this ground an addition of Rs. 4,91,120 on account of agricultural income has been challenged. The facts leading to this addition have been discussed in para 30 on pages 71 to 73 of the assessment order. The Assessing Officer has stated that the amount of Rs. 4,91,120 is the difference between the old return and revised block assessment return. In fact, this is not the position. After hearing both the sides, we find that there is a misunderstanding in following the entries in regular books of account.Assessment Gross receipts Expenses of Net shownyear of sale proceeds agricultural in return of agricultural1987-88 28,616 - 28,6161988-89 41,375 14,942 26,4331989-90 65,417 24,253 41,1641990-91 42,344 13,646 28,6981991-92 59,960 37,960 22,0001992-93 58,131 26,899 31,2321993-94 1,11,271 38,873 72,3981994-95 2,50,167 58,182 1,91,9851995-96 2,95,186 74,300 2,20,8861996-97 3,86,442 79,247 3,07,195 Thus, the addition has been made for the expenditure incurred. In our opinion, such an addition cannot be made because there is no finding whether the agricultural income has been inflated or any other income has been inflated. We accordingly delete the addition of Rs. 4,91,120.

108. Ground No. 32 -In this ground an addition of Rs. 1,68,725 on account of cost of acquisition of agricultural land has been challenged. The facts leading to this addition have been discussed in para 32 on pages 72 and 73 of the assessment order. The addition (sic).

109. Shri K.A. Sathe, the learned counsel for the assessee has filed the following details of the land purchased by the assessee and his family members from time to time.Date of Situation S.No. Area Amount Where valuepurchase A G is debited8-2-1972 Dhule 307/1 & 8 14 15,000 Kailas Motor 306/1 3 38 Cycle Agency3-4-1974 Dhule 153 5 06 33,000 -do- 48,00010-10-1974 Deopur, 133 11 12 8,000 -do- Dhule12-2-1968 Dhule 4721+2 7 11 6,300 -do-9-8-1984 Laling, 132/1 2 0021-7-1988 Pachora 35/1- 0 20 88,725 -do- B-25-4-1973 Dhule 374 4 13 5,000 Capital a/c5-4-1973 Dhule 374 4 13 in M/s Kailas Motor Cycle Shri Sathe submitted that the lands except one purchased on 21-7-1988 fall outside the block period. He submitted that if proper opportunity had been given, the purchase deeds would have been furnished. The learned D.R. submitted that though from the submissions of the learned counsel, it appears that the purchase of lands is outside the block period but this matter was not considered by the Assessing Officer as the assessee did not file the details before the Assessing Officer. He, therefore, requested that the matter may be restored back to the file of the Assessing Officer.

110. We have considered the rival submissions. We restore this issue to the file of the Assessing Officer. From the details given above, it is noticed that the lands except the one purchased on 21-7-1988 fall beyond the block period. But the cost of that land at Rs. 88,725, according to the assessee, has been debited in the books of account.

The whole issue needs verification at the end of the Assessing Officer.

Accordingly, we restore this issue to the file of the Assessing Officer.

111. Ground No. 33 - In this ground, the assessee has challenged the addition of Rs. 29,366 in the accounts of creditors of wine shop. The facts leading to this addition have been discussed by the Assessing Officer in para 34 on page 74 of the assessment order. At the time of hearing, the assessee only disputed the addition of Rs. 20,686 i.e., the difference in the account of Soni Traders, Jalgaon. Accordingly, the addition of Rs. 8,680 is confirmed. According to the Assessing Officer there was a difference of Rs. 20,686 as per the extract debit and as per assessee's record. Shri Sathe the learned counsel for the assessee submitted that Bill No. 1637, dated 26-11-1996 of Rs. 20,686 of M/s. Soni Traders was received after search action under Section 132. When action under Section 132 was going on, neither the goods nor the bill were received. However, the same was received after 26-11-1996, i.e., on 27-11-1996 and was recorded in books of account on 27-11-1996 by crediting Soni Traders a/c and debiting purchase account.

Hence the difference stands explained. The learned D.R. submitted that the contention of the assessee needs to be verified at the Assessing Officer level.

112. After hearing both the parties, we remit this issue to the file of the Assessing Officer for verification. If the explanation found by the assessee is borne out from the record, then no addition would be called for.

113. Ground No. 34 - In this ground an addition of Rs. 23,141 on account of excess cash has been challenged. The facts leading to this addition have been discussed in last para on page 74, of the assessment order. According to the Assessing Officer during the course of search, the excess cash of Rs. 23,141 was found in the business permises of the assessee. According to the Assessing Officer no explanation was offered for this excess amount and accordingly she treated this amount as assessee's income from undisclosed sources. Shri K.A. Sathe, the learned counsel for the assessee submitted that no such cash was found during the course of search. He drew our attention to the panchnama in support of his contention that if the cash had been found, it would have found place in the panchnama. He submitted the details of cash found at the business premises of Shri K.M. Khopade at the time of action under Section 132(1) which are as follows : Name of the concern Cash found He therefore, submitted that there is no justification for the impugned addition. The learned D.R. relied upon the order of the Assessing Officer.

114. After hearing both the sides, we see no justification in the impugned addition as no such cash amounting to Rs. 23,141 was found at the time of search. The only cash amounting to Rs. 1,525 was found in four concerns of the assessee as detailed above and this cash stands duly accounted for. This ground accordingly succeeds and the addition of Rs. 23,141 is deleted.

115. Ground No. 35 - In this ground an addition of Rs. 500 on account of bank interest on S.B. a/c of HUF has been challenged. The HUF of the assessee received an amount of Rs. 25,000 from Shri Ghanashyam Pandurang Lokare and the same was deposited in the Saving Bank account of the assessee. The HUF earned interest of Rs. 500. The Assessing Officer did not accept the genuineness of the gift, as also the status of the HUF of the assessee. Vide our order in IT (SS) A. No. 272 /(PN)/1997, dated 23-10-1998 in the case of Kisanrao Manikrao Khopade (HUF) we have accepted the status of the HUF of the assessee as also the genuineness of gift of Rs. 25,000. Accordingly, there is no justification for the impugned addition of Rs. 500. This ground accordingly, succeeds and the addition of Rs. 500 is deleted.

The appellant craves leave to add, to amend or alter above grounds of appeal.

Obviously this ground is general in nature and calls for no comments.

117. Vide letter dated 24-7-1998 the assessee has raised the additional ground No. 37 with regard to the addition o Rs. 3,00,000 on account ot excess closing stock of plot.

118. Shri K.A. Sathe, the learned counsel submitted that this ground was remained inadvertently to be raised which appears on para 21 on pages 52 to 53 of the assessment order. In fact in the said para there is another addition of Rs. 8,00,000 which is raised in ground No. 15.

As there were so many grounds and additions, through oversight the said ground remained to be raised. He therefore, requested to grant permission to raise the same.

119. After hearing both the paties, we also find that since this ground relates to vital controversy, the same is allowed to be raised and accordingly it is admitted.

120. The facts leading to the addition fo Rs. 3,10,000 have been mentioned in para 21 on pages 52 and 53 of the assessment order. The addition of Rs. 3,10,000 has been made by the Assessing Officer on account of excess stock of plot. The basis given by the Assessing Officer is disclosure made by the assessee in answer to question No. 51 of the statement recorded during the course of search.

In an answer to question No. 22 you have stated that payments which you have made to persons of Rs 14,43,000 is not recorded in books of account. Further you have disclosed Rs. 1,00,000 for omissions in answer to Question No. 23. Besides this an answer to Question No. 26 you have stated that you have no explanation regarding excess cash found of Rs. 12,17,453. Further in an answer to Q. Nos. 42 and 43 you have expressed that there is difference of Rs. 3,00,739 and shortage of stock Rs. 10,000. Please explain the same.

Today myself and my family members does not have any explanation regarding the same. Hence, I am disclosing following :Sr. Name of Members For For For TotalNo. cash debtors stock5. Kiran K. Khopade 1,00,000 1,71,000 - 2,71,000 12,17,000 15,73,000 3,10,000 31,00,000 He submitted that on perusal of question and answer reproduced supra, there is no reference of disclosure to question asked. Disclosure of stock of Rs. 3,10,000 is obtained on the basis of answer to question Nos. 42 and 43. In fact, no such stock was disclosed either in answer Nos. 42 and 43. Question No. 42 states as follows : In your office/shop of M/s. K.M. Khopade and Co. inventory of closing stock was taken on that basis it appears that as per inventory in your shop stock of Rs. 5,77,694 is found whereas as per your Trading a/c stock comes to Rs. 2,76,955. It means there is excess stock of Rs. 3,00,739. What you have to stay on this Answer to question No. 42: In reference to Question No. 421 intend to state that I make a disclosure of the said excess stock, if their is any mistake the same may be rectified." According to the learned counsel, in fact, the excess stock found in shop premises is of liquor and which is offered and taxed for assessment year 1997-98 on page 43 of the assessment order. Thus, there is no relation of stock disclosed in question No. 42 and the stock disclosed in question No. 51 i.e., of closing stock of plots. According to the learned counsel, it amounts to double addition. He further drew our attention to question and answer No. 43 which reads as follows : Question No. 43 : When inventory of stock was taken in the shop, viz., Kailas Motor Cycle Agency, Dhule it was found that as per your trading a/c stock comes to Rs. 2,86,110.

Whereas stock as per inventory comes to Rs. 2,42,580. It means that there is shortage of Rs. 26,530. What you want to say on this According to the learned counsel, this declaration has been accepted and admitted and taxed for assessment year 1997-98. He concluded that both in the answer and question Nos. 42 and 43 what is declared is excess stock of liquor and spare parts respectively and not excess stock of plots. The learned D.R. relied upon the order of the Assessing Officer.

122. We have considered the rival submissions. From the questions and answers reproduced supra, it is evident that the learned Assessing Officer mis-read this issue. The declarations were in respect of stock of liquor and spare parts and not in respect of stock of plots. In fact there is nothing like stock of plot. Under the circumstances, we see no justification in the impugned addition. The same is accordingly deleted.

124. After going through the proposed order of my learned Brother very carefully, I have not been able to persuade myself to agree with the conclusion reached by him in respect of Ground No. 2 which relate to the addition of Rs. 58,59,210 on account of excess money charged by the assessee on the sale of plots in the block period for the reasons given by me hereafter.

125. The conclusion arrived at by my learned Brother is that there is no scope of estimation of undisclosed income under the provisions of Chapter XIV-B and the facts of the case. This conclusion is based on the following reasons : (a) The Legislature has not made the provisions of Section 145 applicable to search cases assessable under Chapter XIV-B. Though Sections 143 and 144 are made applicable by Section 158BC specifically, there is no reference to Section 145. Hence, Section 145 cannot be invoked even by implication.

(b) In the absence of application of Section 145 there is no scope of estimation of undisclosed income under Section 143.

(c) The seized materials consisting of Bharna Register, Diaries and Loose Papers are the complete record of unaccounted transactions and therefore, the undisclosed income has to be restricted to the amounts mentioned in the seized material regarding excess money charged by the assessee on the sale of plots. According to him, this is the record which was maintained by him for his personal knowledge and information and therefore, according to the human probabilities, it is to be considered as true and correct of his undisclosed income.

(d) No defect has been found in the cash flow statement prepared by the assessee on the basis of the entries in the Bharna Register, diaries and loose-papers except the minor discrepancy.

(1) Whether there is any scope of estimation of undisclosed income under the provisions of Chapter XIV-B. (2) If yes, is there any justification for making estimate of the undisclosed income on the facts of the case (3) If yes, then what should be the quantum of estimate of the undisclosed income The facts of the case have already been narrated in the proposed order and therefore need not be repeated again. However, I would refer to the necessary facts as and when necessary in my order.

127. After close reading of the provisions contained in Chapter XIV-B and Sections 143 and 145,1 am of the view that provisions of Section 145 are applicable to the assessment of undisclosed income. Section 158BH is the residuary section which provides as under :- 158BH : save as otherwise provided in this Chapter, all other provisions of this Act shall apply to assessment made under this Chapter.

128. The bare reading of this section clearly shows that all the provisions of this Act would apply except those provisions which are made specifically inapplicable. Wherever necessary, the Legislature has provided for non-application of some of the provisions of Income-tax Act. For example, Sub-section (zv) of Section 158BB provides that losses brought forward from the previous year under Chapter VI or unabsorbed depreciation under Section 32(2) shall not be set off against the undisclosed income, but may be carried forward for set off in regular assessment. Similarly, Section 158BF provides that no interest under Section 234A, 234B or 234C or no penalty under Section 271, 271A or 27IB shall be levied or imposed upon the assessee in respect of undisclosed income. However, there is no provision for exclusion of Section 145. Therefore, in my considered opinion, the provisions of Section 145 has to be applied while making assessment of undisclosed income by virtue of the provisions of Section 158BH. If the contention of the assessee is accepted in this regard, then it would create anomalies. For example, where glaring and patent mistake is committed by the Assessing Officer in his assessment order, he would not be able to rectify the same since Section 154, which also deals with the assessment, has not been made applicable specifically.

Similarly, there may be a case where seized material may contain unaccounted receipts which may be exempt from taxation under Section 10. In such situation, assessee would be debarred from claiming exemption as the department would be able to take the plea that Section 10 has not been made applicable to Chapter XIV-B. Any construction of the statute which create anomalies and frustrate the object of the Act should be avoided and Court should adopt the harmonious construction where there is any ambiguity. In the present case, there is no ambiguity since Section 158BH is very clear on this point.

129. This controversy can be considered from another angle. Section 158BB provides for computation of undisclosed income in accordance with the provisions of Chapter IV. Chapter IV provides computation of income under various heads. One of the Heads is "profits and gains of business or profession". Section 145 provides the manner of computation of income chargeable under the Head "profits and gains of business or profession" and "income from other sources". Therefore, the computation of business income has to be made in the manner provided in Section 145 and not in any other manner unless provided for specifically. That is the reason, perhaps, the Legislature did not think it necessary to include the applicability of Section 145 in Section 158BC. This aspect of the matter had arisen long back before the full Bench of the Lahore High Court in the case of Seth Gurmukh Singh v. CIT [1944] 12 ITR 393.

The majority view was written by Justice Din Mohammad wherein it was held that while making assessment under Section 23(3) of the Income-tax Act, 1922 [Similar to Section 143(3) of 1961 Act], recourse to Section 13 could be taken by the Assessing Officer. This was one of the 5 propositions laid down by him. This majority view has been approved by the Apex Court in the case of Dhakeswari Cotton Mills Ltd. v. CIT [1954] 26 ITR 775 though such controversy was not before the Apex Court.

In view of the above discussion, I am inclined to take the view that Section 145 can be applied to Chapter XIV-B and consequently, the Assessing Officer can make reasonable estimate having rational with the materials on the record.

130. Even assuming that provisions of Section 145 cannot be applied to Chapter XIV-B and the assessment of undisclosed income is to be made in accordance with the provisions of Section 143 which are made specifically applicable to Chapter XIV-B, I am still of the opinion that estimate can be made of the undisclosed income even under Section 143(3). In fact, this issue is covered by two well celebrated judgments of the Hon'ble Supreme Court. The first decision is in the case of Dhakeswari Cotton Mills Ltd. (supra) delivered by larger Bench of five Judges. The Court was concerned about the powers of the Income-tax Officer under Section 23(3) of Indian Income-tax Act, 1922 which is similar to Section 143(3) of 1961 Act. At page 782, their Lordships observed as under :- In making an assessment under Section 23(3) of the Indian Income-tax Act, the Income-tax Officer is not fettered by technical rules of evidence and pleadings and he is entitled to act on material which may not be accepted as evidence in a court of law, but the Income-tax Officer is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all.

There must be something more than bare suspicion to support the assessment under Section 23(3). The rule of law on this subject has been fairly and rightly stated by the Lahore High Court in the case of Seth Gurmukh Singh v. CIT [1944] 12 ITR 393.

The above observations show that estimate should not be made of pure guess and there must be something more than mere suspicion. This has been made crystal clear in the subsequent judgment of the Supreme Court in the case of Raghubar Mandal Harihar Mandal v. State of Bihar [1957] 8 STC 770. At page 778, following observations were made by their Lordships :- No doubt it is true than when the returns and the books of account are rejected, the Assessing Officer must make an estimate and to that extent he must make a guess; but the estimate must be related to some evidence or material and it must be something more than mere suspicion. To use the words of Lord Russell of Killowen again, "he must make what he honestly believes to be a fair estimate of the proper figure of assessment" and for this purpose he must take into consideration such materials as the Assessing Officer has before him, including the assessee's circumstances, knowledge of previous returns and all other matters which the Assessing Officer thinks will assist him in arriving at a fair and proper estimate. In the case under our consideration, the Assessing Officer did not do so and that is where the grievance of the assessee arises.

The aforesaid observations clearly show that estimate can be made while making assessment under Section 23(3). It is made clear that the Apex Court was concerned with the powers of the Sales-tax Officer under Section 10(2)(b) of Bihar Sales-tax Act, 1944 which were similar to the provisions contained in Section 23(3) of the Income-tax Act, 1922. This has been made clear by their Lordships in that judgment at page 774 of the Report. Hence, the ratio laid down by their Lordships in that case is applicable to the assessments being made under Section 143(3) of 1961 Act as such provisions are similar to provisions of Section 23(3) of 1922 Act. These two decisions of the Apex Court would cover the controversy before us and any decision taking a contrary view has to be ignored. Therefore, it is not necessary for me to discuss or distinguish the case law referred to by the parties and my learned Brother in his proposed order. It would be also useful to note that my Id. Brother has himself estimated the unaccounted expenditure on the marriage of the son of the assessee (para 60 of his order). In view of the above, I am inclined to take the view that estimate of undisclosed income can be made under the provisions of the Chapter XIV-B either by applying provisions of Section 143(3) or Section 145(2) as it was in force at the time of assessment.

131. After having heard that estimate of undisclosed income is permissible under the provisions of Chapter XIV-B, the next question is whether there is any justification for making the estimate. To answer this question, it will be necessary to go through the material placed before the Bench. The material seized from the premises of the assessee in the course of search comprised of Bharna Registers, diaries and loose-papers. In the Bharna Registers, the assessee had recorded the amounts received by him against the sale of plots from time to time.

There is a serious controversy between the parties regarding this Bharna Register. It is the case of the assessee that this Register is a complete record regarding receipts of unaccounted sale consideration of the plots sold by him during the block period. The basis of the argument of the assessee that such record was regularly maintained for his personal knowledge and information and according to the test of human probabilities, it should be accepted as complete record. Other the other hand, it is the case of the Revenue that Bharna Register is merely a compilation of unrecorded sale consideration and not a complete record of such unaccounted transactions. The basis of this argument of the Revenue is that this Register is not maintained in the chronological order. Further, it is the plea of the Revenue that this Register does not record the payments made by assessee out of unaccounted money. No cash book had been maintained by the assessee in respect of unaccounted transactions and therefore, it is difficult to believe the contention of the assessee that the seized material is the complete record of unaccounted transactions. After considering the arguments of both the parties, my Id. Brother has accepted the plea of the assessee and the rejected stand of the Revenue in para 27 of his order on the ground that argument of the Revenue is based on presumptions. With all due respect, I am unable to agree with such view. The original seized records were produced by Revenue in the course of hearing. The perusal of the same compelled me to take the contrary view. It is found that it was not maintained in the normal course as is apparent from the facts that it was not written in chronological order. In my considered view, if any record is maintained regularly, it must be in the chronological order. For the benefit of ray order, I would illustrate it by examples.

In Bharna Register No. 89 at page 2 on the right hand side, the first item is Rs. 7,500 dated 27th May, 1995 but the subsequent two items of Rs. 1,500 and Rs. 4,000 are date 18-12-1993 and 13-12-1993. At page 6, on the right hand side, the 3rd item is Rs. 300 dated 7-7-1995 while the 5th item is dated 15th Jan., 1994. At page 46, on the left hand side, the first item of Rs. 1,000 is dated 12thJan., 1994, while the second item of Rs. 200 is dated Dec. 1993. Thereafter, the entries are for the month of February, March and June 94 and then suddenly at page 47, the entry of Rs. 1,000 is dated 17th Dec, 1992 and Rs. 1,000 dated 2nd Feb., 1993 and thereafter the entries are for the year 94 on the left hand side. Then again on the right hand side, there is entry of Rs. 5,000 dated 27th Dec, 1993. Page 49 starts with the entries pertaining to March, April, June 1995 but the last two entries are dated 16th April, 1994 and 19th April, 1994 for Rs. 1,000 each.

Similarly in the Bharna Register No. 90 at page 47, the first entry is of Rs. 1,000 dated 12-1-1994 while the second entry of Rs. 200 is dated 8th Dec, 1993. Thereafter entries are for the month of March and June 1994 and then again on right hand side the entries are for the year 1993 ie., Rs. 250 dated 2nd July 1993, Rs. 1,100 dated 13th July, 1993, Rs. 1,000 dated 10th July, 1993 and Rs. 500 dated 2nd August, 1993.

Thereafter at page 48, there is entry of Rs. 1,000 dated 17/18 December, 1992 and thereafter there are entries for 1993-94 and again on right hand side, the entries for 1993 are recorded. At page 56, on right hand side there is entry of Rs. 700 dated 18th June, 1994 and thereafter there is entry of Rs. 2,000 dated 25th, January 1993.

Similarly, in Bharna Register No. 91, there are entries dated 1st October, 1988, then 10th November, 1988, then again 11th October, 1988 and 25-10-1988. Similarly, there is entry on 3rd August, 1989 in the middle of entries of July 1989.

132. The above entries are given by me by way of illustration to show that such entries in the Bharna Register were made from some other records and the only inference that can be drawn is that such registers were not maintained in the normal course. It appears there were certain other records from which the entries were made in the Bharna Register.

The other records might not have been found in the course of search due to various reasons including the destruction of the same by the assessee. It is not the case of the assessee that he ever maintained a cash book of unaccounted transactions of receipts and payments in the normal course. Had it been so, I would have agreed to the view that no addition other than the one recorded in such cash book could be made.

But in the present case, no regular record is maintained by the assessee either of the receipts or of payments. As discussed above, Bharna Register is merely a compilation of certain receipts and cannot be considered as regular record of all the unaccounted receipts. As far as payments are concerned, no record is maintained at all. Only certain entries are found in diaries and loose-papers. Therefore, it cannot be said that seized record is the complete record of the transactions made by the assessee outside the regular books of account.

133. Now I shall deal with the cash flow furnished by the assessee before the lower authorities and also before us. It is the case of the assessee that this cash flow contains of the unaccounted receipts and payments in the block period which was prepared on the basis of seized material. According to the assessee, no defect has been found by the Assessing Officer in this cash flow. On the other hand, the case of the Revenue is that this cash flow is not the part of seized material and again is a mere compilation of the transactions contained in the seized material. Therefore, for the same reasons, such cash flow cannot be considered as true and correct state of unaccounted transactions. The learned D.R. has brought to our notice the discrepancy of Rs. 75,000 in the cash flow at page 21 of the paper book No. 2 which has been admitted by the Id. counsel for the assessee and has also agreed for the addition to this extent. My Id. brother has also sustained the addition on this account. Still, he has accepted the correctness of the cash flow considering the aforesaid defect as insignificant. The sum of Rs. 75,000 is not a small amount. It raises serious doubts about the correctness of such cash-flow and indicates clearly that there was still unaccounted money outside the cash flow prepared by the assessee.

On perusal of the said cash flow, it is found that discrepancy of Rs. 75,000 is not the only discrepancy, but there are certain other discrepancies which lead to the conclusion that the cash flow is not the correct affairs of the unaccounted transactions. Pages 22 and 23 (Paper Book No. 2) of such cash flow deals with the unaccounted transactions for the financial year 1989-90. It is found that all the payments on the right hand side amounting to Rs. 1,12,250 were made prior to 31st December, 1989. On the left hand side, the assessee had shown the opening cash balance and the unaccounted sale consideration of plot received during this year. There are two entries of Rs. 15,191 and Rs. 16,559 in respect of unaccounted sale consideration of plots pertaining to survey No. 6/4 but no date is mentioned against these amounts. Giving benefit of doubt to the assessee that these sums were also received prior to 31st December, 1989, the total amount received upto 31-12-1989 (including the opening cash balance) comes to Rs. 97,305. This clearly shows that assessee had made excess payments than what was available with him. Further, it appears that there is a total mistake of about Rs. 10,000 on the right hand side since exact total comes to Rs. 1,51,431 against shown by the assessee at Rs. 1,61,241.

Because of these discrepancies, the cash balance shown by the assessee at Rs. 39,181 cannot be accepted as correct.

Further, it is found that assessee had shown undisclosed cash receipts amounting to Rs. 12,735 for the period from 13 November, 1985 to 2 November, 1986 as per page No. 18 of the said paper-book. It appears that assessee had shown such receipts equivalent to the unaccounted payments shown on the right hand side. That also clearly shows that there was no basis with the assessee for showing the undisclosed cash and was taken merely on assumption basis. Similar is the position for undisclosed cash receipts of Rs. 1,07,559 for the period 3-11-1986 to 22-10-1987 appearing at page 19 and for Rs. 1,34,390 and Rs. 75,000 for the period 23-10-1987 to 31-3-1987 appearing at page 21. These three instances clearly show that there was availability of unaccounted cash receipts outside the Bharna Registers or Diaries or loose-papers found in the course of search. This leads to the only conclusion that the seized material is not the complete record of unaccounted transactions.

In view of the above discussions, I am inclined to take the view that the seized material is not the complete record of unaccounted transactions and the assessee had certain other record of unaccounted transactions which was not found in the course of search. May be the said record might have been destroyed in the past or kept at a place to which the department had no knowledge. Whatever may be the case, one thing is clear from the cash flow that there were unaccounted transactions which do not find place in the seized record.

134. Having held that the seized record is not the complete record of unaccounted transactions, the question which arises is whether these facts justify the estimation of undisclosed income. It is well settled law that what is apparent is the real state of affairs and the onus to prove that apparent was not real is on the party who claims it to be so. Reference can be made to the Supreme Court decision in the case of CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349. In the present case, the dispute is about the sale consideration of the plots sold by the assessee in the block period. What is apparent state of affair is the consideration of sale shown in the sale agreements/deeds and recorded by the assessee in his regular books of account. Therefore, the burden lies on the department to prove that it is false or unaccounted. In the present case, there are enough materials in the form of seized record to prove that sale consideration shown by the assessee in his regular books of account and the sale agreements/deeds were false and incorrect. The assessee himself has also admitted this fact by offering the amount of undisclosed income in his return under Section 158BC.Therefore, in my opinion, the onus which lies on the Revenue has been discharged. Since the sale consideration recorded in the sale deeds/ agreements and in the regular books of account have been proved to be false, in my opinion, the Assessing Officer justified in making the estimate under Section 143(3)/145 in accordance with the guidelines given by the Apex Court in the case of Dhakeswari Cotton Mills Ltd. (supra) and in the case of Raghubar Mandal Harihar Mandal (supra) as discussed by us in earlier part of the order. This view is also fortified by the decision of the Supreme Court in the case of H.M.Esufali H.M. Abdulali (supra). It has been contended on behalf of the assessee that case law relied upon by the Id. senior D.R. where the estimate was justified related to cases where articles sold were standard articles while in the present case, it is the land which has been sold which is not of the standard quality in respect of each plot and those cases, therefore, are distinguishable. In my opinion, such aspect of the argument cannot be accepted. Once a fact has been proved to be in existence, the presumption to the existence of such fact can be raised backward and forward as held by the President as 3rd Member in the case of Overseas Chinese Cuisine (supra). It has been held thereon that if a particular habit or bad habit of manipulating the sale bills was found to be existing, then the same state of things could be presumed in respect of other transactions. Even according to the test of human probabilities, as approved by the Hon'ble Supreme Court in the case of Sumati Dayal (supra), no man of prudence would sell similar items at similar place having great disparity. No doubt, there may be certain variations on account of mitigating circumstances, which have to be proved by the assessee. Perusal of the record shows that there is a great disparity in the prices of plots in respect of transactions where seized material is available and for transactions where no record is available even though such transactions are made within the short period/interval. This can be proved by some examples.

In Survey No. 46, the assessee had sold 5 plots in assessment year 1989-90 at the rate of Rs. 5 per sq.ft. as per sale agreement/deed.

While as per the seized record, it has been found that assessee had charged excess amounts in respect of 4 plots. It has also been found that excess money is considerably very high as compared to the price shown in the documents. For instance, the excess money for plot Nos. 7, 8 and 51 were Rs. 12,555 Rs. 15,348 and Rs. 18,533 respectively as against agreed price of Rs. 8,91-0, Rs. 9,405 and Rs. 8,745 respectively. Similarly, in Survey No. 18 assessee had sold half of the plot No. 71 to Shri Prakash Nigam and other half of the plot to Shri Ramesh Patil on the same date of 17th February, 1992 at apparent consideration of Rs. 1,125 each. However, as per seized record it is found that he had charged excess money of Rs. 6,375 (more than 5 times) from Shri Prakash Nigam. It is impossible to believe that assessee would not have charged excess money for other half of the plot No. 71 which was similarly situated and sold on the same date. According to the test of human probabilities, the assessee must have charged excess money in respect of the other plots. If there was any mitigating circumstances, it was for the assessee to prove. But, as far as the question of estimation is concerned, there is enough material on the record to justify the same.

135. Now the last question for my consideration is what should be the quantum of the estimate. As discussed earlier, the estimate must have nexus with the material found and cannot be made arbitrary or on pure guess, suspicion or surmises. It has also to be taken into consideration that each year is an independent year and therefore, estimate has to be made in respect of the material found pertaining to each year. It has also been held by this Bench in the case of Shree Vastu Construction (supra) that each project or land in respect of which plots have been sold is an independent project or land and there must be some independent material in respect of each project/land to justify the estimation because there may be different circumstances prevailing in respect of each land/ project. The addition cannot be made in respect of 'A' building where there is no material, merely on the ground that material regarding charging of "on money" is available in respect of 'B' building. In the present case, admittedly, there is no material whatsoever of charging excess money in respect of four lands bearing Gat numbers 71 /2 at Deopur, 105/ A-2-B near Malegaon, 159/3 at Mohadi (Dhule) and 10/1 at Mohadi. Following the aforesaid decisions of this Bench mentioned above, it is held that no addition can be made in respect of such lands.

136. In respect of lands bearing Gat/Survey Nos. 566, 6/4, 106/2B, 170 and 82/1+2, there is no dispute about the fact that all the plots in these lands were sold through brokers and all the money received by the assessee from them is duly recorded in the seized material and taken into consideration by the assessee and his family members while filing the return of undisclosed income. The only point to be clarified is that these lands belonged to assessee as well as members of his family and therefore, the entire consideration was apportioned between the assessee and his family members on the basis of their holdings.

Therefore, question of making any estimate in respect of these lands does not arise.

137. Regarding the other lands, I am of the view that basis adopted by the Assessing Officer is erroneous. Each year is an independent year.

The quantum of sale consideration would certainly differ from year to year depending on the surrounding circumstances prevailing in each year. Therefore, the average rate arrived at by the Assessing Officer by taking into consideration the prices of the years together cannot be accepted. Even the price of one land cannot be clubbed with the price of another land. Each land has to be considered separately on the basis of material available in respect of such land. If there is no material of excess money in respect of any year of a particular land, then also, in my view no addition can be made for that year for such land. The reason is that there might not be any premiums in the earlier years and prices might have shot up in subsequent years due to various factors.

However, if there is material available in the seized record in respect of a year, for a particular land, then in my view the estimate has to be made in respect of plots sold in that year on the basis of average price of the plots sold of such land in that year. Estimate has to be made independently for each year and for each land. However, I find force in the submission of the Id. counsel of the assessee that some discount has to be made for mitigating circumstances such as irregular size of plot, ditches in th e land, vicinity to nullah etc. and location of the plot etc. etc. These facts would have to be taken into consideration by the Assessing Officer for discounting the estimate in respect of such plot. It has been pointed out by my learned Brother that it is not necessary to charge excess money in every case and has justified his point by observing that assessee would not charge excess money from a Government servant. I have no dispute with such view.

However, it has to be established by the assessee that there existed mitigating circumstances as discussed by me earlier. I may also add one more example where the purchaser of the plot or building may be an old tenant from whom the assessee might not be able to get extra amount.

138. Before parting with my order, it is necessary to mention that in the course of hearing, the Id. counsel for the assessee has pointed out various factual mistakes which had resulted in computation of higher average sale consideration and the Id. senior D.R. also admitted about such factual mistake, but he had requested us to restore the matter to the file of the Assessing Officer for verification.

139. In view of the above discussion, I set aside the order of the Assessing Officer on this issue and restore the matter to his file for fresh adjudication of estimate in the light of guidance given above.

The Assessing Officer is also directed to rectify the mistakes as pointed out by the Id. counsel for the assessee before us. The assessee is also directed to show before the Assessing Officer all such mistakes for verification. The assessee shall also be at liberty to lead evidence before the Assessing Officer in respect of mitigating circumstances, if any, in respect of the plots sold by him. Assessing Officer shall also give proper opportunity to the assessee for producing such evidence or material. Ground No. 2 is accordingly allowed for statistical purposes.

As a consequence of this order, no separate addition sustained by us on account of unaccounted expenditure on marriage of assessee's son is called for as the addition in respect of Ground No. 2 would cover the same. For the similar reasons, the addition of Rs. 5,000 sustained for Ground No. 5 would be unwarranted.

140. Except as stated above, I agree with the proposed order. ORDER UNDER SECTION 255(4) OF THE INCOME-TAX ACT, 1961 1. As there is a difference of opinion between the Accountant Member and the Judicial Member, the matter is being referred to the President of the Income-tax Appellate Tribunal with a request that the following questions may be referred to a Third Member or to pass such orders as the President may desire : (1) Whether on the facts and circumstances of the case, the provisions of Section 145 can be applied while assessing the undisclosed income on sale of plots under Chapter XIV-B of the Income-tax Act, 1961 (2) If the answer to question No. 1 is in the negative, whether there is any scope of estimation of undisclosed income under Chapter XIV-B by applying the provisions of Section 143 of the Income-tax Act, 1961 1. As a result of difference of opinion between the Accountant Member and the Judicial Member in the appeal of the assessee, the disputed issues have been referred to me for a decision in accordance with Section 255(4). The disputed issues are as under :- 1. Whether on the facts and circumstances of the case, the provisions of Section 145 can be applied while assessing the undisclosed income on sale of plots under Chapter XIV-B of the Income-tax Act, 1961 2. If the answer to question No. 1 is in the negative, whether there is any scope of estimation of undisclosed income under Chapter XIV-B, by applying the provisions of Section 143 of the Income-tax Act, 1961 2. The relevant facts in this case are that the assessee is an individual residing at 25, "Kailash", Garud Colony, Deopure, Dhule. His main business is in the purchase and sale of land. The assessee mainly purchases agricultural land and after converting the land into plots, sells the same. The other activities of business include resale of motor cycle parts, sale of wine and running of lodges. Several additions were made by the Assessing Officer, which have been dealt with by the learned Accountant Member by a detailed order. The difference of opinion between the learned AM and the learned JM is relating to the computation of undisclosed income in respect of the sale of land. During the course of search it was found that the assessee had been receiving 'on money' on the sale of plots. The material was found in the shape of Bharna Registers, diaries and loose papers. It is the claim of the assessee that in the Bharna Registers the assessee had recorded all the amounts received by him against the sale of plots from time to time. That the said register is complete record regarding the receipts of unaccounted sale consideration of the plots sold by him during the block period. Whereas the learned AM has accepted the said claim of the assessee, the learned JM has rejected the contention by pointing out that the register was not maintained in chronological order and that it does not record all the payments.

Whereas the learned AM has held that Chapter XIV-B is an independent code for assessment of undisclosed income and provisions of Section 145 are not attracted in this case, the learned JM has held that in computing the income from profits and gains of income all the relevant provisions of the Act are attracted. In this connection he has also referred to Section 158BH which provides that all other provisions of the Act shall apply to the assessment made under the Chapter. It has further been held that even without the aid of Section 145 the Assessing Officer has the power to estimate the income under Section 143(3) with reference to the material available to him.

3. The learned counsel for the assessee contended that Section 158B(&) has been incorporated for the limited purpose to assess the undisclosed income. Whatever material is found during the course of the search, assessment has got to be based only on such material. It was contended that Section 158BC(fc) specifically incorporates Sections 143 and 144, but Section 145 has deliberately been omitted and therefore the said section cannot be invoked in block assessment proceedings. It was further contended that Section 158BH providing that all other provisions of the Act shall apply to assessment made under this chapter means that only such provisions as are attracted after the assessment is made are made applicable. For example, Section 154 is applicable after the assessment is made and therefore such a provision will apply, stated the learned counsel. It was further contended that Section 145 is a provision applicable in making regular assessment, i.e., before the assessment is made and therefore by virtue of Section 158BH it cannot be said that there is a mandate for application of Section 145 in block assessment proceedings. It was further contended that Section 158BC provides for determination of undisclosed income in the manner laid down in Section 158BB and it also provides that the provisions of Section 142, Sub-sections (2) and (3) of Section 143 and Section 144 shall so far as may be applied. The learned counsel contended that there is no general application of Section 143 and Section 144, but only a limited application to the extent these provisions may be applicable. It was contended that Section 144 will be attracted provided the conditions for making the assessment under Section 144 exist. Say for example non-compliance of notices etc. If the said conditions do not exist the Assessing Officer cannot invoke the manner of assessment under Section 144. Referring to the material found during the course of search, the learned counsel contended that the assessee was maintaining a record for his personal use and therefore keeping in view the human probabilities it must be held that all the transactions recorded in the registers represented the entire black money of the assessee and therefore, there was no scope for estimation of the same.

It was further contended that the Assessing Officer has assessed an additional amount of more than Rs. 58 lakhs on account of 'on money' but the money is not reflected in the form of any assets or investments. The learned counsel contended that in the case of search assessments the entire findings are to be based on the material found and that there is no scope for estimation of income. Relying upon the decision of the Gujarat High Court in the case of N.R. Paper & Board Ltd. (supra) it was contended that Chapter XIV-B assessment is a special type assessment than the regular assessment and therefore the decisions relating to the regular assessment relied upon by the learned JM are inapplicable. For the same reasons the decisions of the Supreme Court referred to by the JM in the case of Dhakeswari Cotton Mills Ltd. (supra) and in the case of Raghubar Mandal Harihar Mandal (supra) are inapplicable it was contended. Reliance was also placed on the following decisions in support of the contention that the assessment of undisclosed income under Chapter XIV-B and regular assessment are two separate procedures and that the assessment under Chapter XIV-B is meant only for making the assessment of undisclosed income on the basis of material:- 4. Referring to the Third Member decision of the Bombay Bench of the Tribunal in the case of Overseas Chinese Cuisine (supra) it was contended that the same was distinguishable on facts. With regard to the finding of the learned JM that some material could have been destroyed, it was contended that such a finding is based purely on guesswork and not on any material.

5. The learned Departmental Representative on the other hand contended that Section 158BB provides a procedure for assessment of undisclosed income in a search case. It is a fallacy to call Chapter XIV-B as a self-contained code, contended the learned DR. It was pointed out that there is no charging section and therefore, it cannot be said to be self-contained code by itself. It was contended that all the provisions of the Act are applicable with some modifications in some of the provisions of the Act. It was further contended that the job of the Assessing Officer is not only to compute the income but also to assess the same. There is a distinction between the word "assess" and "compute". The powers of the Assessing Officer are not limited to computation of income but for making an assessment of undisclosed income. In the process of assessment an element of estimation by the Assessing Officer is bound to be there. Referring to Section 158BH the learned DR contended that all the provisions of the Act are applicable in respect of the assessment made under the Chapter. It was contended that the section authorizes application of all the provisions of the Act in making the assessment as well as the provisions applicable after making the assessment. The section refers to the assessment in its entirety i.e., that is before and after the assessment. It was further contended that it is a well established principle of interpretation that the provisions of the Act should be interpreted in order to avoid unreasonable results and that there should be rational construction of the provisions of the Act. In this connection reliance was placed on the decisions of the Supreme Court in the case of CIT v. National Taj Traders [1980] 121 ITR 535/[979] 2 Taxman 546 and in the case of K.P.Varghese v. CIT [1981] 131 ITR 597/7 Taxman 13. It was further contended that it is the duty of the Officer to compute the undisclosed income. If the assessee does not file a return the Assessing Officer has to make an assessment. In making the assessment provisions of Section 145 would be attracted if the books of account maintained by the assessee are defective or are incomplete. The learned DR further pointed out that the Section 158BA lays down the procedure for assessment of undisclosed income and the non obstante clause applies to such provisions which have been specifically incorporated, or which come in conflict with the provisions of Chapter XIV-B. Referring to Section 158BB(2) it was contended that a special reference has been made to Sections 68, 69, 69A, 69B and 69C for the purpose of identifying previous year as the financial year is adopted as the previous year under the said provisions of the Act. Referring to Section 158BB(2) it was contended that the Legislature has incorporated the reference to Sections 142, 143 and 144 to clarify, the procedure to be followed for making the assessment and that Section 158BH covers all the provisions of the Act which were applicable for making the assessment.

6. It was contended that the decision of the Gujarat High Court in the case of N.R. Paper & Board Ltd. (supra) cited by the learned counsel for the assessee does not help the assessee. The regular assessment and the assessment of undisclosed income are two separate assessments is not disputed. However, there is nothing in the decision indicating that Section 145 is not applicable to block assessments.

7. It was further contended that the controversy as to whether Section 145 was applicable in this case or not may not be crucial once it is accepted that under Section 143(3) the Assessing Officer has the power to make an assessment and that making the assessment includes the power to estimate. The Assessing Officer having the power to estimate the controversy boils down to as to whether there was material to estimate the income for assessment, contended the learned Departmental Representative.

8. The learned DR further contended that the claim of the assessee that Bharna Register was regularly maintained to record the unaccounted transactions is not based on facts. It was contended that wherever the assessee received the entire 'on money' the same was not recorded in the Bharna Register. Wherever the transaction was to be referred on future date, i.e., in such cases where part of the money was to be received, the transactions were found to have been recorded. It was further pointed out that it has been established that some entries had not been made in the register. The learned DR further pointed out that the affidavit filed by the assessee before the Assessing Officer confirms that the Bharna Register did not disclose the complete 'on money' transactions in regard to sale of plots of land. It was further contended that in the circumstances of the case it was not necessary to have the direct evidence of 'on money' receipt in respect of the sale of plots in respect of which no such transactions have been recorded.

Referring to the finding of the JM in Para No. 132 the learned DR pointed out that some of the defects in the Bharna Register have been pointed out as instances and the same are only illustrative. Reliance was placed on the decision of the Supreme Court in the case of Calcutta Co. Ltd. v. CIT [1959] 37 ITR 1 in support of the contention that the Assessing Officer is empowered to make an estimate of income. Referring to the method to be adopted for determination of the income, the learned DR pointed out that the learned JM had given appropriate directions for fair estimation of income on the basis of relevant considerations. Reliance was also placed on the decision of the Ahmedabad Bench of the Tribunal in the case of Abhishek Corporation v.Dy. CIT [1999] 63 TTJ (Ahd.) 651 in support of the contention that when there is evidence of receipt of 'on money' the Assessing Officer is justified in estimating its quantum. Reliance was also placed on the decision of the Ahmedabad Bench of the Tribunal in the case of Nareshkumar B. Agarwal v. Asstt. CIT [1999] 104 Taxman 222 (Mag.) in support of the contention that an estimate of income is permissible in block assessment proceedings. Reliance was also placed on the decision of the Supreme Court in the case of State of Haryana v. Jasmer Singh AIR 1997 SC 1788 in support of the contention that in making an assessment there is bound to be an element of guess work. Relying upon the decision of the Bombay Bench of the Tribunal in the case of Overseas Chinese Cuisine (supra), the learned DR contended that once it was found that the assessee had received 'on money' it was permissible to estimate the same by going forward as well as backwards. It was accordingly contended that the view expressed by the learned JM being most reasonable may be adopted.

9. In counter reply the learned counsel for the assessee admitted that estimation of undisclosed income in certain cases may be permissible but there can be no assumption of earning of income. It was contended that in this case it has been assumed that the assessee has earned the income in respect of all the plots, which is not permissible in law.

The learned counsel for the assessee agreed in principle that while making an assessment under Section 143(3) an estimate of income may be permissible but in this case, according to him, there is no evidence and therefore the estimation of income is not warranted.

10. I have given my careful consideration to the rival contentions.

Whereas two questions have been framed to identify the difference of opinion amongst the Hon'ble Members of the Bench, the sum and substance of the dispute is as to whether the Assessing Officer in making a block assessment under Chapter XIV-B is empowered to make estimation of undisclosed income. Whereas the learned AM has totally ruled out such a power being vested in the Assessing Officer, the learned JM has held that such a power cannot be excluded from the process of assessment of undisclosed income. He has however clarified that such a power can be exercised only when circumstances for the exercise of the same exist.

11. Before I advert to the issue at hand, it will be useful to reproduce the relevant provisions of the Act.

(1) Notwithstanding anything contained in any other provisions of this Act, where after the 30th day of June, 1995 a search is initialed under Section 132 or books of account, other documents or any assets are requestioned under Section 132A in the case of any person, then, the Assessing Officer shall proceed to assess the undisclosed income in accordance with the provisions of this Chapter.

(2) The total undisclosed income relating to the block period shall be charged to tax, at the rate specified in Section 113, as income of the block period irrespective of the previous year or years to which such income relates and irrespective of the fact whether regular assessment for any one or more of the relevant assessment years is pending or not.

(a) the assessment made under this Chapter shall be in addition to the regular assessment in respect of each previous year included in the block period; (b) the total undisclosed income relating to the block period shall not include the income assessed in any regular assessment as income of such block period; (c) the income assessed in this Chapter shall not be included in the regular assessment of any previous year included in the block period.

(3) Where the assessee proves to the satisfaction of the Assessing Officer that any part of income referred to in Sub-section (1) relates to an assessment year for which the previous year has not ended or the date of filing the return of income under Sub-section (1) of Section 139 for any previous year has not expired and such income or the transactions relating to such income are recorded on or before the date of the search or requisition in the books of account or other documents maintained in the normal course relating to such previous years, the said income stvall not be included in.

the block period.

(1) The undisclosed income of the block period shall be the aggregate of the total income of the previous year falling within the block period computed, in accordance with the provisions of Chapter IV, on the basis of evidence found as a result of search or requisition of books of account or documents and such other materials or information as are available with Assessing Officer, as reduced by the aggregate of the total income, or as the case may be, as increased by the aggregate of the losses of such previous years, determined- (2) In computing the undisclosed income of the block period, the provisions of Sections 68, 69, 69A, 69B and 69C shall, so far as may be, apply and references to "financial year" in those sections shall be construed as references to the relevant previous year falling in the block period including the previous year ending with the date of search or of the requisition.

(3) The burden of proving to the satisfaction of the Assessing Officer that any undisclosed income had already been disclosed in any return of income filed by the assessee before the commencement of search or of the requisition, as the case may be, shall be on the assessee.

(4) For the purpose of assessment under this Chapter, losses brought forward from the previous year under Chapter VI or unabsorbed depreciation under Sub-section (2) of Section 32 shall not be set off against the undisclosed income determined in the block assess-ment under this Chapter, but may be carried forward for being set off in the regular assessments.

Where any search has been conducted under Section 132 or books of account, other documents or assets are requisitioned under Section 132A, in the case of any person, then- (b) The Assessing Officer shall proceed to determine the undisclosed income of the block period in the manner laid down in Section 158BB and the provisions of Section 142, Sub-sections (2) and (3) of Section 143 and Section 144 shall, so far as may be, apply; No interest under the provisions of Section 234A, 234B or 234C or penalty under the provisions of clause (c) of Sub-section (1) of Section 271 or Section 271A or Section 27IB shall be levied or imposed upon the assessee in respect of the undisclosed income determined in the block assessment.

Save as otherwise provided in this Chapter, all other provisions of this Act shall apply to assessment made under this Chapter.

(3) On the day specified in the notice issued under Sub-section (2), or as soon afterwards as may be, after hearing such evidence as the assessee may produce and such other evidence as the Assessing Officer may require on specified points and after taking into account all relevant material which he has gathered- (a) in a case where no assessment has been made under Sub-section (1), the Assessing Officer shall, by an order in writing, make an assessment of the total income or loss of the assessee and determine the sum payable by him or refundable to him on the basis of such assessment; (b) in a case where an assessment has been made under Sub-section (1), if either such assessment has been objected to by the assessee by an application under clause (a) of Sub-section (2) or the Assessing Officer is of opinion that such assessment is incorrect, inadequate or incomplete in any material respect, the Assessing Officer shall, by an order in writing, make a fresh assessment of the total income or loss of the assessee and determine the sum payable by him or refundable to him on the basis of such assessment.

(a) fails to make the return required under Sub-section (1) of Section 139 and has not make a return or a revised return under Sub-section (4) or Sub-section (5) of that section, or the Assessing Officer, after taking into account all relevant material which the Assessing Officer has gathered, shall, after giving the assessee an opportunity of being heard, make the assessment of the total income or loss to the best of his judgment and determine the sum payable by the assessee on the basis of such assessment; 145. (1) Income chargeable under the head "Profits and gains of business or profession" or "Income from other sources" shall be computed in accordance with the method of accounting regularly employed by the assessee : Provided that in any case where the accounts are correct and complete to the satisfaction of the Assessing Officer but the method employed in such that, in the opinion of the Assessing Officer, the income cannot properly be deduced therefrom, then the computation shall be made upon such basis and in such manner as the Assessing Officer may determine : Provided further that where no method of accounting is regularly employed by the assessee, any income by way of interest on securities shall be chargeable to tax as the income the previous year in which such interest is due to the assessee : Provided also that nothing contained in this sub-section shall preclude an assessee from being charged to income-tax in respect of any interest on securities received by him in a previous year if such interest had not been charged to income-tax for any earlier previous year; (2) Where the Assessing Officer is not satisfied about the correctness or the completeness of the accounts of the assessee, or where no method of accounting has been regularly employed by the assessee, the Assessing Officer may make an assessment in the manner provided in Section 144.

20. Section 158BC(b) provides the manner of assessment of undisclosed income. It provides that the assessment is to be made in the manner laid down in Section 158BB and the provisions of Section 142, sub-sections-(2) and (3) of Section 143 and Section 144 shall, so far as may be, apply.

21. Section 158BB provides that the undisclosed income of the block period shall be computed in accordance with the provisions of Chapter IV, on the basis of evidence found as a result of search or requisition of books of account or documents and such other materials or information as are available with the Assessing Officer.

22. Reading Section 158BB and Section 158BC(b) in conjunction with each other, it becomes abundantly clear that the Assessing Officer has to compute the undisclosed income in accordance with the provisions of Chapter IV and that assessment is to be based on the evidence found as a result of search or requisition of books of account or documents and such other material or information as are available with the Assessing Officer. Now in making the assessment, provisions of Section 143(3) have been specifically made available to the Assessing Officer. Section 143(3) empowers the Assessing Officer to make an assessment of income on the basis of the material which has been gathered by him. Similarly, Section 144 of the Act has been specifically made applicable in the case of block assessments.

23. The contention of the learned counsel for the assessee as to the applicability of Section 144 that it can be invoked only wherever there is failure of the assessee in complying with the notices etc. and that the manner of assessment provided under Section 144 cannot be resorted to without such failure, deserves serious consideration. But in my opinion the issue in this case is out of context and therefore, it is not necessary for me to deal with this at this stage. It is not disputed that the Assessing Officer has all the powers of making the block assessment as are available to him in making the regular assessment under Section 143(3). In these circumstances the word "assessment" assumes importance. Section 143(3) has been made applicable for making the block assessment under Chapter XIV-B. Section 143 (3) has been reproduced in Para 16 of this order. The process of assessment under Section 15 8BC read with Section 158BBisnot merely computation of income but a process of evaluation of evidence and material found during the course of the search and derived from the books of account, documents and other information. There is no doubt that the Assessing Officer does not have the power to make an arbitrary assessment. He cannot base his assessment merely on suspicion, conjectures or guesswork or on irrelevant or inadmissible material. The language of Section 143(3) as also Section 158BB makes it abundantly clear that the assessment to be made by the Assessing Officer should be based on evidence before the Officer. The word "evidence" has to be construed in a comprehensive sense and it includes circumstantial evidence. It is well settled principle of law that the material or evidence on which the taxing authorities may base the assessment is not confined to direct testimony by witnesses. It may be reiterated that the word used in Section 143/ Section 158BB is evidence. However, in making assessment the Assessing Officer does not act merely on what is technically described as evidence in the Indian Evidence Act. It is observed from Section 143(3) that the Assessing Officer can base his assessment not only on the evidence found during the course of the search but also on the material gathered by him. It is now well settled that the Assessing Officer is not f attered by technical rules of evidence and the like and that he may act on material which may not strictly speaking be accepted as evidence in a Court of law. Such evidence need not necessarily be direct evidence. It may be circumstantial evidence or assessment based on preponderance of probabilities judged by human conduct. For instance, the past history of the case, living style of the assessee and general conditions of the market in the particular trade will constitute relevant material for the purposes of assessment. The Assessing Officer will be entitled to conclude that the assessee is carrying on some undisclosed business on the basis of the factors like unexplained Bank deposits or assessee's failure to prove the source from which certain investments have been made or meager drawings of an assessee for household expenses.

Similarly, the profits of a business may be estimated by disallowing excessive claims for deductions such as wastage etc. The Assessing Officer, as already pointed out, may base his assessment on the past history of the case. He is also entitled to rely upon comparable cases.

The books of account maintained in the regular course of business are relevant and constitute a very good piece of evidence of their contents. Their probative value would further depend on the manner of their maintenance. For example, a regular bound and serially page numbered account book will inspire greater confidence than a loose leaf account book. The maintenance of books of account in a chronological order will also inspire greater confidence. On the other hand, if the books of account are not regularly maintained or are not maintained in chronological order, such books of account cannot be taken as a authentic piece of evidence. In the evaluation of books of account the provisions of Section 145 may become relevant. If the books of account are maintained in the regular course and the Assessing Officer is satisfied that all the transactions relating to the undisclosed income are recorded in the books of account in a chronological manner, then the Assessing Officer may compute the income in accordance with such books of account. However, as provided under Section 145, if the books of account are not correct and complete, then the Assessing Officer has the power to make an assessment to the best of his judgment.

24. The difference of opinion in this case between the learned AM and the learned JM as to whether Section 145 is applicable in this case or not may be inconsequential in so far as Section 143 itself empowers the Officer to ignore or reject the account books without invoking the powers under Section 145. The Andhra Pradesh High Court in the case of Pendurthi Venkiah v. CIT [1955] 28 ITR 749 have expressed the same view.

25. Their Lordships of the Madras High Court in the case of Sree Shanmugar Mills Ltd. v. CIT [1974] 96 ITR 411 have also taken the same view. In this case it was held as under :- Section 13 deals with the method of accounting and not with books of account. The impropriety of the method of accounting should be distinguished from the falsity and unreliability of the books of account. While a method of accounting may be rejected under the proviso to Section 13, the account books can be rejected in exercise of the power under Section 23(3), for the power to reject the accounts is inherent in the power to call for evidence in support of the return and investigate the same. Section 13 can operate only in cases where the books of account are accepted as correct in regard to the transactions recorded therein and when the books of account are held to be false and incorrect, they cannot form the basis for computing the true income under Section 13. It may be pointed out that Section 13 of the 1922 Act corresponds to Section 145 of the 1961 Act and Section 23(3) of 1922 Act corresponds to Section 143(3) of 1961 Act.

26. The Assessing Officer power of making the assessment includes the power to make an estimate of income is also established by the decisions of the Supreme Court in the case of Dhakeswari Cotton Mills Ltd. (supra) and in the case of Raghubar Mandal Harihar Mandal(supra).

This view is also established from the decision of the Supreme Court in the case of H.M. Esufali H.M. Abdulali (supra).

27. Thus the power of the Assessing Officer to make an assessment based on relevant material is also enshrined in Section 143(3). If there is material on record to establish that the assessee has charged 'on money' in regard to land deals which is not recorded in the regular books of account, it is permissible for the Assessing Officer to make an assessment on the basis of such material. The Assessing Officer might not get the entire material in regard to the undisclosed transactions, in such cases there is nothing wrong in estimating the undisclosed income in respect of such transactions which are not recorded in the diaries, documents or other papers. This principle is supported by the decision of the Supreme Court in the case of H.M.Esufali H.M. Abdulali (supra). In this case the Assessing Officer had detected sales for 19 days as not having been entered in the books of account. The Assessing Officer estimated the turnover for the entire year based on the undisclosed sales for the period of 19 days. Their Lordships of the Supreme Court upheld the estimation of income as competent. Similarly, in the case of Overseas Chinese Cuisine (supra) the Bombay Bench of the Tribunal held that when there was evidence of suppressed sales for three months, the Assessing Officer was entitled to adopt the basis of unaccounted sales throughout the year on the basis of such material. The Tribunal further held that the said material could be utilized for estimation of unaccounted sales in earlier years as well as in subsequent assessment years.

28. The crucial fact in this case is that the receipt of 'on money' in respect of the land deals has not only been established but even admitted by the assessee. As rightly held by the learned JM, once it is established that the assessee had received 'on money' in respect of the land deals which were not recorded in the regular course of business, it was for the assessee to establish that no 'on money' was received in respect of some of the deals. It had been argued before the Bench as well as before me that it was not necessary that in all cases the assessee would have received 'on money'. In certain circumstances no 'on money' might have been received by the assessee. As already pointed out, when evidence has been found of assessee having recorded only part of the money received in respect of the land deals and the other part not having been recorded in the regular books of account, it is for the assessee to establish as to under what circumstances such 'on money' was not charged in respect of some of the land deals. I agree with the finding of the learned JM that apparent is real unless contrary is proved. In this case the consideration received by the assessee in respect of the land transactions was recorded in the sale deeds. The consideration recorded in the sale deeds was apparent and it was therefore for the revenue to establish the contrary. However, in this case, on the basis of the material found during the course of search and on the basis of the admission of the assessee that 'on money' was received, it has been established that what is apparent does not reflect the true state of affairs. Therefore, the burden that rested with the Department stands discharged. The onus has shifted to the assessee. It is in these circumstances that the assessee is required to discharge the onus for establishing that in respect of certain deals no 'on money' had been received.

29. In this case the learned AM has recorded a finding that seized material consisting of Bharna Register, diaries and loose papers are the complete record of unaccounted transactions and therefore, undisclosed income has to be restricted to the amounts mentioned in the seized material regarding excess money charged by the assessee on the sale of plots. According to him the assessee had maintained these records for his personal knowledge and information and therefore it is to be considered true and correct state of affairs of the undisclosed income. He has also pointed out that no defect has been found in the cash flow statement. The learned JM has elaborately dealt with this issue in Para Nos. 131, 132, 133 and 134. The learned JM has taken care to give clear directions to the Assessing Officer so as to make a fair assessment of the undisclosed income. On the basis of the findings recorded by the learned JM which have not been rebutted by any evidence, I agree with the reasoning as well as the conclusion of the learned JM that the Bharna Register is not the complete record of the payments of unaccounted money of the assessee. The Bharna Register not having been maintained in the regular course nor in chronological order, I hold that the computation of undisclosed income need not be limited to the transactions recorded in such books of account and documents. I concur with the findings, reasoning and the conclusion of the learned JM in this regard.

30. Having come to the conclusion that the Assessing Officer has sufficient powers under Section 143(3) read with Section 158BC to reject the books of account and base his assessment on relevant material and circumstantial evidence, it would not have been necessary for me to consider as to whether Section 145 is attracted in the case of block assessments made under Chapter XIV-B. However, since the issue has been raised, discussed and dealt with by learned Brothers, I consider it my duty to advert to this issue also.

31. Section 158BH reproduced in para No. 15 of this order provides "save as otherwise provided in the Chapter, all other provisions of the Act shall apply to assessment made under the Chapter". The learned counsel for the assessee argued that the section authorizes applicability of such provisions of the Act as are applicable after the assessment is made. It was stated that once the assessment is made, then provisions of Section 154, Section 156, Section 220 and other provisions for the recovery of tax etc. will be applicable. It was contended that the words used in Section 158BH are "assessment made under this Chapter". According to the learned counsel, the language of section does not make other provisions of the Act applicable for purposes of making the assessment. The interpretation advanced by the learned counsel for the assessee is not well founded. The Legislature has used the words "save as otherwise provided in this Chapter". In Chapter XIV-B there is no reference to any of the provisions of the Act as are applicable after the making of the assessment. That being so, then the words "save as otherwise provided in this Chapter" in Section 158BH are rendered redundant. It is well settled that the Legislature does not use superfluous words in a statute. Their Lordships of the Supreme Court in the case of National Taj Traders (supra) held as under :- The principle that a fiscal statute should be construed strictly is applicable only lto taxing provisions such a charging provision or a provision imposing penalty and not to those parts of the statute which contain machinery provisions.

In this case it was further held that "a provision of the Act must be construed with reference to the context and other clauses thereof so that the construction to be put on a particular provision makes a consistent enactment of the whole statute. This would be more so if literal construction of a particular clause leads to manifestly absurd or anomalous results which could not have been intended by the Legislature." 32. Similarly, in the case of K.P Varghese (supra) their Lordships of the Supreme Court held as under :- A statutory provision must be so construed, if possible, that absurdity and mischief may be avoided. Where the plain literal interpretation of a statutory provision produces a manifestly absurd and unjust result which could never have been intended by the Legislature, the court may modify the language used by the Legislature or even do some violence to it, so as to achieve the obvious intention of the Legislature and as produce a rational construction.

33. Applying the aforementioned principles of interpretation to Section 158BH, I am of the considered view that the said section makes all the provisions of the Act other than those for which a provision is made under Chapter XIV-B as applicable for making the assessment as well as other provisions of the Act which are applicable after the assessment is made. In that view of the matter, Section 145 of the Income-tax Act, which provides for making the assessment of profits and gains of business or profession in accordance with the method of accounting adopted by the assessee, can also be invoked in making the block assessment. Section 145 can be invoked for determining the income as per the method of accounting adopted by the assessee even for undisclosed income. Now if the books of account of the undisclosed income are incomplete or incorrect, then the Assessing Officer may resort to make the assessment in the manner as provided under Section 144. Section 144 authorizes an assessment to the best of the judgment of the Assessing Officer. It is nobody's case that Section 145 empowers the Assessing Officer to make an arbitrary assessment or an assessment based on surmises or conjectures. The assessment has got to be based on relevant material and in the case of the search, the material might have been found as a result of search or from the books of account or other information gathered by the Assessing Officer.

34. Section 158BH refers to all the provisions of the Act and not only the provisions as are applicable after making of the assessment is also clear from the fact that there is no reference of certain provisions of the Act which have an important bearing on the determination of the income under Chapter XIV-B. For example, the provision for exemption under Section 10 of the Act, there is no reference of this provision under Chapter XIV-B. If the interpretation advanced on behalf of the assessee is accepted, then it may not be possible for the Assessing Officer to grant exemption of income under Section 10 of the Act. The said interpretation will render the scheme of assessment of undisclosed income as unworkable, which would not have been intended by the Legislature. Keeping in view the entire scheme of the Act, I am of the considered view that the interpretation advanced on behalf of the revenue that Section 158BH refers to all the provisions of the Act, is more reasonable and logical and accordingly I hold that Section 145 of the Act can be invoked in making block assessment under Chapter XIV-B of the Act should be facts and circumstances of a case warrant such application.

35. Before I wind up I would like to deal with the suggestion made by the learned DR. that the powers of the Third Member in a reference under Section 255(4) is confined to the questions regarding the points of dispute contained in the reference. In my considered view this contention is not well founded. The Third Member derives his powers from Section 255(4) which reads as under :- (4) If the members of a Bench differ in opinion on any point, the point shall be decided according to the opinion of the majority, if there is a majority, but if the members are equally divided, they shall state the point or points on which they differ and the case shall be referred by the President of the Appellate Tribunal for hearing on such point or points by one or more of the other members of the Appellate Tribunal and such point or points shall be decided according to the opinion of the majority of the members of the Appellate Tribunal who have heard the case, including those who first heard it.

36. A plain reading of the section does not leave me in doubt that the jurisdiction of the Third Member is in regard to the point of difference and the framing of the question for a reference under Section 255(4) need not be equated with a reference to the Hon'ble High Court under Section 256. Under Section 256 the Hon'ble High Court, till, recently, had advisory jurisdiction in regard to any question of law arising out of the order of the Tribunal and referred to the Hon'ble High Court for its opinion. In the case of the reference under Section 255(4) to the Third Member, the object is to resolve the difference in opinion on any point which arises in the course of deciding of an appeal. Therefore the jurisdiction of the Third Member is not limited to the language of the question(s) framed in the reference but it extends to the entire sum and substance of opinion on the specified point(s). The questions are framed in accordance with rules for identifying the dispute but it is well settled principle of law that the rules cannot restrict the scope of the powers conferred under the statute. Therefore the rules do not have the effect of curbing the scope of powers of Third Member conferred upon him under Section 255(4). The Supreme Court in the case of Saiyad Mohammad Bakar El-Edroos v. Abdulhabib Hasan Arab JT 1998 (3) SC 76, 81 held that "procedural law is not to defeat the very object which is sought to be achieved and that it is always subservient to the substantive law. As nothing can be given by a procedural law what is not sought to be given by a substantive law, similarly nothing can be taken away by the procedural law what is given by the substantive law. Section 255(4) confers the power of reference to the Third Member in regard to the dispute arising between two Members of the Bench. Therefore, the rules cannot restrict the scope of the powers of the Third Member to the question(s) framed under the Rules. I am therefore of the considered view that once the issue is identified in the reference, the Third Member has the power to consider the entire material, the reasoning and the conclusions recorded by the Learned Members as well as the contentions advanced on behalf of the parties and record his findings in such a manner that the difference of opinion amongst the Members can be decided by a majority view. In my humble opinion it is not necessary for the Third Member to restrict himself to the language of the questions framed de hors the context, reasoning and the findings recorded by the respective Members in regard to the point of dispute. I hold accordingly.

37. In the final analysis I hold that the provisions of Section 145 can be applied while assessing the undisclosed income on sale of plots under Chapter XIV-B of the Income-tax Act, 1961.1 further hold that there is scope for estimation of undisclosed income under Chapter XIV-B by applying the provisions of Section 143 of the Income-tax Act, 1961.

38. Now the records may be placed before the regular Bench for passing consequential orders on the basis of the majority view.

1. The learned Judicial Member, Shri M.A. Bakshi, sitting as Third Member by his opinion dated 2-9-1999 has concurred with the views of the Judicial Member and has held as under :- In the final analysis, I hold that the provisions of Section 145 can be applied while assessing the undisclosed income on sale of plots under Chapter XIV-B of the Income-tax Act, 1961. I further hold that there is scope for estimation of undisclosed income under Chapter XIV-B by applying the provisions of Section 143 of the Income-tax Act, 1961.

In accordance with the majority view, the matter regarding computation of undisclosed income on the sale of land is restored to the file of the Assessing Officer who shall recompute the same in accordance with the directions given in the order of Judicial Member in para 138 of his order in the assessee's case. The appeal is allowed in part.


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