ACIT CEN. 21(2), MUMBAI V. Sri. SHANKAR B. POOJARI, MUMBAI

ITSSA 456/MUM/2003

• Counselvise Citation: [2012] 124 COUNSELVISE.COM (IT) 7432 (ITAT-MUMBAI)
• Duration Of Justice: 8 year(s) 11 month(s) 16 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 16-05-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 16-02-2012
• Assessment Year: misc
• Appeal Filed On: 30-05-2003
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A C TEJPAL
• Assessee Lawyers: DR K SHIVRAM; AJAY R SINGH
• Keywords: Unexplained investment; Search and seizure; Document seized; Source of fund; Retrospective amendment; Block assessment; Onus to prove; Retraction; Documents seized
• Section: 69C; 131; 69; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C, MUMBAI BEFORE SHRI N.V.VASUDEVAN(J.M) & SHRI.RAJENDRA (A. M.) IT(SS) 456/MUM/03 (BLOCK PERIOD ENDING ON 24/01/2001) ASSTT. COMMISSIONER OF INCOME-TAX, CIRCLE - 21(2), C-10, 5 TH FLOOR, ROOM NO.508, PRATYAKSHA KAR BHAVAN, B.K.COMPLEX, BANDRA (E), MUMBAI - 400 051 (APPELLANT) VS. SMT. SUSHEELA S. POOJARI, L/H OF SHRI SAHANKAR B. POOJARI, 11, DHARAM PREM APT., NEHRU ROAD, VILE PARLE, MUMBAI - 400 057. PAN: AAAPP 9896 P (RESPONDENT) APPELLANT BY : SHRI A.C.TEJPAL RESPONDENT BY : DR. K.SHIVRAM & SHRI AJAY R. SINGH DATE OF HEARING : 24/04/2012 DATE OF PRONOUNCEMENT : 1 6/05/2012 ORDER PER N.V.VASUDEVAN, J.M THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 21/3/2003 OF CIT(A)-21, MUMBAI RELATING TO THE BLOCK PERIOD END ING 24/1/2001. 2. THE REVENUE HAD BASICALLY RAISED TWO ISSUES IN THIS APPEAL. GROUND NO.1 WAS WITH REGARD TO ADDITION ON ACCOUNT OF UNEX PLAINED CASH LOANS OF RS. 1,54,25,000/- AND INTEREST PAYMENT OF RS. 4,46, 000/- MADE BY THE AO, WHICH WAS DELETED BY THE CIT(A). THE SECOND GROUND WAS REGARDING ADDITION MADE BY THE AO ON ACCOUNT OF UNACCOUNTED SALE ON AN ESTIMATE BASIS. THE APPEAL WAS HEARD BY THE TRIBUNAL ON 17/8/2006 AND A N ORDER DATED 3/10/2006 WAS PASSED BY THE TRIBUNAL. GROUND NO.1 WAS ALLOWED FOR STATISTICAL PURPOSES VIZ., THE ORDER OF CIT(A) WAS SET ASIDE AND THE ISSUE WAS REMANDED TO THE AO FOR FRESH CONSIDERATION. GROUND NO.2 WAS DISMISSED. IT(SS) 456/MUM/03 2 THEREAFTER, THE ASSESSEE FILED MA NO.179/M/07 POINT ING OUT CERTAIN ERRORS IN THE ORDER OF THE TRIBUNAL WITH REGARD TO GROUND NO. 1. THE TRIBUNAL ACCEPTED THE MISCELLANEOUS APPLICATION AND RECALLED ITS ORDE R DATED 3/10/2006 IN SO FAR AS IT RELATED TO THE DECISION ON GROUND NO.1. 3. THEREAFTER THE APPEAL WAS HEARD ON GROUND NO. 1 ON 18/12/2008. BY AN ORDER DATED 22/12/2008 GROUND NO.1 RAISED BY THE REVENUE WAS AGAIN ALLOWED FOR STATISTICAL PURPOSES. THEREAFTER THE ASSESSEE FILED MA NO.262/M/09 POINTING OUT CERTAIN ERRORS IN THE ORDE R OF THE TRIBUNAL DATED 22/12/2008. THE TRIBUNAL BY AN ORDER DATED 23/06/2 009 DISMISSED THE AFORESAID MISCELLANEOUS APPLICATION. THEREUPON THE ASSESSEE FILED A WRIT PETITION NAMELY WT 1661 OF 2009 BEFORE THE HONBLE BOMBAY HIGH COURT. THE HONBLE BOMBAY HIGH COURT BY AN ORDER DATED 5/1 0/2009 SET ASIDE THE ORDER OF THE TRIBUNAL DATED 22/12/2008 AND 23/6/20 09 AND DIRECTED THE TRIBUNAL TO HEAR THE PARTIES DENOVO ACCORDING TO LA W. IT IS IN THESE CIRCUMSTANCES GROUND NO.1 RAISED BY THE REVENUE BEF ORE THE TRIBUNAL IS TAKEN UP FOR CONSIDERATION. 4. GROUND NO.1 RAISED BY THE REVENUE READS AS FOL LOWS: (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF UNEXPLAINED CASH LOANS OF RS. 154.25 LACS AND INTER EST PAYMENT OF RS. 4,46,000/-, RELYING ON THE ASSESSEES STATEMENT AT THE TIME OF SEARCH AND IGNORING THE FACT THAT IN THE STATEMENT RECORDE D U/S. 132(4), THE ASSESSEE HAD SPECIFICALLY GIVEN NAMES AND ADDRESSES OF PERSONS, AMOUNT OF INTEREST AND UTILIZATION OF THIS AMOUNT I N PROPERTY, AS MENTIONED IN THE STATEMENT RECORDED U/S. 132(4) OF I.T. ACT, 1961. 5. THE FACTS MATERIAL FOR ADJUDICATION OF GROUND NO .1 ARE AS FOLLOWS. THE ASSESSEE IS AN INDIVIDUAL. THERE WAS A SEARCH AND SEIZURE OPERATION UNDER SECTION 132 OF THE ACT IN THE CASE OF THE ASSESSEE CARRIED OUT BY THE REVENUE ON 24//1/2001. THERE WAS ALSO A SEA RCH CARRIED OUT IN THE IT(SS) 456/MUM/03 3 CASE OF ONE SHRI RAGHU POOJARI ON 24/1/2001. IN TH E COURSE OF HIS SEARCH A DIARY MARKED A-2 WAS FOUND AND THE SAME WAS SEIZED. PAGE NO.4 OF THIS DIARY SHOWED CERTAIN ACCOUNTS AGAINST THE NAME OF N UMBER OF PERSONS. SHRI RAGHU POOJARI AND THE ASSESSEE WERE ALSO AMONG OTHE RS WHO WERE PARTNERS OF THE FIRM M/S. SHIVSAGAR RESTAURANT. PAGE-4 OF A NNEXURE A-2 IS ENCLOSED AS ANNEXURE-1 TO THIS ORDER. (BEING PG. 44 & 45 PA PER BOOK). THIS DOCUMENTS WAS CONFRONTED TO THE ASSESSEE IN THE COU RSE OF SEARCH OF THE ASSESSE WHICH WAS ALSO CONDUCTED ON THE VERY SAME D AY I.E. 24/01/2001. ON THE BASIS OF ENTRIES IN PAGE-4 OF ANNEXURE A-2 S EIZED FROM THE POSSESSION OF SHRI RAGHU POOJARI. STATEMENT OF THE ASSESSEE W AS RECORDED U/S.132(4) OF THE ACT. THE FOLLOWING WERE QUESTION AND ANSWERS RELEVANT TO THE ISSUE RAISED IN GR.NO.1. Q.2. PLEASE STATE YOUR TRANSACTIONS & BUSINESS DEALING WITH FOLLOWING PERSONS (I) JAYKISHAN (II) JAYANT BHAI (I II) SALIM (IV) RAMESH (V) RAMESH (VI) GANDHI (VI) ANIL (VII)D.RAJ (VIII) AMOLIK SHAH (IX) PAREKH (X) DEVENDRA (XI)SURYAVANSH BHAVE (XII) KIRIT ANS: I HAVE TAKEN FOLLOWING CASH LOAN FROM THE ABOVE M ENTIONED PERSONS NO. NAME AMOUNT OF CASH LOANS (I) JAY KISHAN 13 LAKH (II) JAYANT BHAI 5 LAKH (III) SALIM 4 LAKH (IV) RAMESH 10 LAKH (V) GANDHI 3.25 LAKH (VI) ANIL 70.0 LAKH (VII) D.RAJ LOAN TAKEN BUT I DONT REMEMBER THE AMOUNT OF LOAN FROM D.RAJ (VIII) AMOLIK SHAH 11 LAKH (IX) PAREKH 15 LAKH (X) DEVENDRA 8 LAKH (XI) SURYAVANSHI BHAVE 10 LAKH (XII) KIEIRH 13 LAKH Q.3. PLEASE EXPLAIN FOR WHAT PURPOSE YOU HAVE TAKEN TH E CASH LOAN FROM THE DIFFERENT PERSONS MENTION IN QUESTION NO.2 OF THIS STATEMENT. IT(SS) 456/MUM/03 4 ANS: THE CASH AMOUNT RECEIVED FROM THE DIFFERENT PERS ONS AS MENTIONED IN MY ANSWER TO QUESTION NO.2, I HAVE I NVESTED THE SAME IN PURCHASING 6 SHOPS IN THE NAME SHANKAR R. POOJAR I HUF IN JUHU PRINCES BLDG. LOCATED AT JUHU TARA ROAD, MUMBAI. P ART OF THE CASH AMOUNT HAVE INVESTED FOR FURNISHING OF OUR RESTAURA NT LOCATED AT HILL ROAD, BANDRA AND AT GULMOHAR RD. JVPD SCHEME MUMBAI . Q.4 : PLEASE STATE HAVE YOU TAKEN ANY OTHER CASH LOAN OTHER THAN THE PERSONS STATED IN YOUR ANSWER TO Q. NO.2 OF THIS ST ATEMENT. ANS.: NO I HAVE NOT TAKEN ANY OTHER CASH LOAN FROM OTHE R THAN THE PERSONS MENTIONED IN MY ANSWERS TO Q.NO.2 OF THIS STATEMENT. Q.5: PLEASE STATE AT WHAT RATE OF INTEREST YOU HAVE TA KEN THIS CASH LOAN FROM THE PERSONS MENTIONED IN ANSWER TO Q.NO.2 OF THIS STATEMENT. ANS. I HAVE TAKEN THE CASH LOAN AS I HAVE STATED IN MY ANSWER TO Q.NO.2 OF THIS STATEMENT ON INTEREST AT THE RATE OF 1 % PER MONTH FROM ALL THE PERSON EXCEPT JAYKISHAN FROM WHOM I HA VE TAKEN CASH LOAN AT THE RATE OF 2% PER MONTH. Q.6 PLEASE STATE THE DATE OF TAKING LOAN FROM THE PERS ONS MENTIONED IN ANSWER TO Q.NO. 2 OF HIS STATEMENT AND ALSO STAT E THE AMOUNT OF INTEREST YOU HAVE GIVEN. ANS. I HAVE TAKEN THE CASH LOAN FROM ABOVE MENTIONED PE RSONS OVER A PERIOD OF 1 YEAR. THE REMEMBERED TO ME AT THIS M OMENT & THE SAME I WILL FURNISH LATER ON. THE EXACT DATE OF LOAN TA KEN FROM DIFFERENT PERSON IS NOT REMEMBERED TO ME AT THIS MOMENT. I W ILL TRY TO FURNISH IT LATER. Q.7 PLEASE STATE THE ABOVE CASH LOAN AND THERE FURTHER UTILIZATION AS INVESTMENT IN THE PROPERTY & IN FURNISHING OF THE H OTEL WHETHER ACCOUNTED IN THE BOOKS OF ACCOUNT. ANS. THESE ARE NOT DISCLOSED IN THE BOOKS OF ACCOUNT AN D THERE ARE UNDISCLOSED. Q.8 PLEASE GIVE THE ADDRESS OF THE PERSON FROM WHOM YO U HAVE TAKEN CASH LOAN AS MENTIONED IN ANSWER TO Q.NO.3 OF THIS STATEMENT. ANS. THE ADDRESS OF THE PERSON FROM WHOM I HAVE TAKEN T HE CASH LOANS AS STATED IN ANSWER TO QUESTION NO. 2 OF THIS STATEMENT AS PER MY KNOWLEDGE ARE AS FOLLOWS :- IT(SS) 456/MUM/03 5 SR. NO. NAME ADDRESS & TELEPHONE (I) JAY KISHAN PL NO. 6130030 GROUND FLOOR, CHEDDA NAGAR, CO.OP. SOCIETY, SANTARCRUG (W), MUMBAI (II) JAYANT BHAI JAYANT L. SHAH A G/A, VIVESHWAR PRAKASH, 46, NEHRU ROAD, VILE PARLE (E), MUMBAI TEL NO. (O) 6173516, (R) 6125412 (III) SALIM TEL NO.6141663 (I KNOW ONLY THE PHONE NO.) (IV) RAMESH TEL NO.6141663 C/O. MONGINIS CAKE, NEHRU ROAD, VILE PARLE (E), MUMBAI (V) GANDHI TEL NO.3062051, 6122221 (R) (I KNOW ONLY THE PHONE NO.) (VI) ANIL TEL NO.49446632 (R) 5759822 (I KNOW ONLY THE PHONE NO.) (VII) D. RAJ AS I HAVE ALREADY STATED LOAN AMOUNT TAKEN IS 15% REMEMBERED TO ME AND ADDRESS & TEL NO. ALSO NOT KNOWN TO ME. I WILL FURNISH IT LATER. (VIII) AMOLIK SHAH TEL NO.6129295 GROUND FLOOR SHELU CO.OP SOCIETY DATTATERY ROAD, SANTARUG (W), MUMBAI (IX) PAREKH PAREKH JEWELLER NEHRU RD, VILLE PARLE (E), MUMBAI PH NO. : 6111717 (X) DEVENDRA I DO NOT REMEMBER THE TEL NO. & ADDRESS. I WILL FURNISH IT LATER. (XI) SURYAVANSH BHAVE PH NO. : 8612214 ADDRESS NOT KNOWN TO ME. I WILL FURNISH LATER. (XII) KIRITH PH NO.: 6179661 RAUNAK ESTATE AGENT, M.G. ROAD, VILLE PARLE, MUMBAI Q.9 DURING THE COURSE OF SEARCH AT THE RESIDENT OF SHR I RAGHURAM N. POOJARI A DIARY MARKED AS A.2 WAS FOUND & THE SAME WAS SEIZED. PAGE NO.4 OF THIS DIARY SHOWS CERTAIN AMOUNTS AGAINST A NAME OF NO. OF IT(SS) 456/MUM/03 6 PERSONS. YOU ARE REQUESTED TO EXPLAIN WHAT ARE THE SE AMOUNTS. I AM NOW SHOWING YOU ANNEXURE A-2. PLEASE RESPOND. ANS. I HAVE SEEN THE RELEVANT PAGES OF THE ACCOUNT BOOK MARKED A-2 MENTIONED ABOVE. THE FIGURE AGAINST PARTICULAR IND IVIDUAL REPRESENTS AMOUNT OF INTEREST IN THOUSAND PAYABLE TO THEM IN F OREX. THE FIGURE 6 AGAINST THE NAME JAIKISHAN REPRESENTS INTEREST OF . 26 THOUSAND PAYABLE TO HIM FOR ONE MONTH. ON A CASH BORROWING OF . 13 LAKH. IT MAY BE NOTED THAT I HAVE TAKEN A CASH LOAN FROM JAI KISHAN ON 1.9.2000 OF . 13 LAKH. THE SAME HAS BEEN REFLECTED ON PAGE NO. 2 OF THE NOTE BOOK MARKED A-2. SIMILARLY, THE OTHER FIGURE ALSO REPRESENTS RUPEES IN THOUSAND BEING INTEREST PAYABLE FOR A PAR TICULAR MONTH. Q.10 WHAT IS THE RATE OF INTEREST AT WHICH YOU ARE MAKIN G INTEREST PAYMENTS ON YOUR CASH BORROWINGS AS REFLECTED AT PA GE NO.4 MARKED A-2 SEIZED FROM THE RESIDENT OF SHRI RAGHURAM POOJA RI. ANS. I HAVE GONE THROUGH PAGE NO.4 & NOW I AM ABLE TO R ECALL THAT I HAVE MADE CASH BORROWINGS AT AN INTEREST RATE OF 2% PER MONTH. STATEMENT OF SHRI SHALESH POOJARI RECORDED ON 28.01 .2001. Q.11 AS YOU CAN SEE FROM PAGE NO.4 OF THE ABOVE MENTION ED ANNEXURE, THE TOTAL INTEREST PAYMENT MADE TO ALL TH E 12 LENDERS IS 4,66,000/-. IF A UNIFORM INTEREST RATE OF . 2% IS APPLIED THEN THE TOTAL BORROWING WORKS OUT TO 4.66/0.2 LAKH = 233 LAKH) & 2.33 CRORE. IT THEREFORE, MEANS THAT YOU HAD MADE A CASH BORROWING OF 2.33 CORE FROM ALL THE ABOVE MENTIONED PERSONS. THE BORROWIN G FROM THE PARTICULAR INDIVIDUAL CAN BE WORKED OUT ON SIMILAR TIME AS EXPLAINED ABOVE. YOU REACTIONS. ANS. YES, I HAVE TAKEN CASH LOAN IN THE RANGES OF 2.33 CRORES WHICH ACCORDING TO YOU CAN BE EASILY WORKED OUT FROM THE INTEREST FIGURE. HOWEVER THERE COULD BE SOME INTERNAL VARIATION DUE TO THE FACT THAT SOME INTEREST FIGURE ARE NOT ONLY FOR 1 MONTH BUT A RE CUMULATIVE VALUE FOR MORE MONTH. FOR EXAMPLE IN THE CASE OF JAYANTI BHAI OF 700 LAKH INTEREST OF 2% THE CAPITAL WORKS WORKS OUT IS 41.26 , WHEREAS I HAVE TAKEN LOAN OF 5 LAKH ONLY. THIS AMOUNT IS ARISING DUE TO THE FACT THAT THE INTEREST VALUE OF 97.50 THOUSAND IN THE INTERES T PAYABLE TO JAYANTIBHAI FOR NO. OF MONTHS AND NOT FOR 1 MONTH. BUT OVERALL THE CASH BORROWINGS MADE BY ME ARE IN THE RANGE OF 2.33 CRORES. IT(SS) 456/MUM/03 7 IT CAN BE SEEN FROM THE ABOVE STATEMENT THAT THE NA MES OF THE PERSONS FROM THE ASSESSEE HAS TAKEN CASH LOANS ARE THE NAMES FOU ND IN PAGE-4 OF ANNEXURE A-2. THE ASSESSEE ALSO ADMITTED THAT THE ENTRIES FOUND IN PAGE-4 WERE THE INTEREST PAYABLE ON THE LOANS. THE ASSESS EE ALSO ADMITTED THAT THE FIGURES MENTIONED IN PAGE-4 ARE IN CODES AND HAVE T O BE MULTIPLIED BY THOUSANDS. THE ASSESSEE FURTHER ADMITTED THAT THES E LOANS AS WELL AS INVESTMENTS IN PROPERTY AND FURNISHING OF RESTAURAN T WERE NOT RECORDED IN THE BOOKS OF ACCOUNTS. 6. LATER ON THE ASSESSEE FILED AN AFFIDAVIT BEFORE THE AO ON 5/2/2001(AFFIDAVIT DATED 5/2/2001), WHEREIN THE ASS ESSEE CLAIMED THAT THE STATEMENT GIVEN ON 24/1/2001 WAS NOT GIVEN IN PROPE R STATE OF MIND AND, THEREFORE, THE SAID STATEMENT IS BEING RETRACTED. IN THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE DENIED HAVING AVAILED OF L OANS FROM THE PARTIES REFERRED IN THE STATEMENT UNDER SECTION 132(4) OF T HE ACT. THE AO CALLED UPON THE ASSESSEE TO PRODUCE THE PARTIES BEFORE HIM FOR EXAMINATION. FIVE PARTIES APPEARED BEFORE THE AO AND GAVE STATEMENT R EGARDING THEIR NOT HAVING GIVEN ANY LOAN TO THE ASSESSEE. THE REMAINI NG PARTIES FILED AFFIDAVIT CLAIMING THAT THEY HAVE NOT GIVEN LOAN TO THE ASSES SEE. THE AO HOWEVER, WAS OF THE VIEW THAT THE ASSESSEE HAD SPENT MONIES ON P URCHASE OF PROPERTIES AND RENOVATION ON RESTAURANTS AS STATED IN THE STAT EMENT UNDER SECTION 132(4) OF THE ACT AND THAT THE RETRACTION BY THE AS SESSEE WAS AN AFTER THOUGHT. HE HELD THAT WHEN THE LOAN ARE SAID TO HA VE BEEN NOT TAKEN THEN THE SOURCE OF FUNDS FOR THE AMOUNT INVESTED BY THE ASSESSEE IN PURCHASE OF VARIOUS PROPERTIES AND RENOVATION OF RESTAURANT TOT ALING RS. 1,54,25,000/- REMAINS UNEXPLAINED AND, THEREFORE, AN ADDITION OF THE SAID AMOUNT UNDER SECTION 69 OF THE ACT IS REQUIRED TO BE MADE. THE AO ALSO ADDED A SUM OF RS. 4,66,000/- BEING INTEREST PAID ON THE LOAN AS U NEXPLAINED EXPENDITURE UNDER SECTION 69C OF THE ACT. THE AFORESAID SUMS WERE ADDED AS UNDISCLOSED INCOME OF THE ASSESSEE FOR THE BLOCK PE RIOD. IT(SS) 456/MUM/03 8 7. ON APPEAL BY THE ASSESSEE THE CIT(A) DELETED THE ADDITION MADE BY THE AO. IT WAS ARGUED BY THE ASSESSEE BEFORE THE CIT(A ) THAT THE ADDITIONS WERE MADE ON THE BASIS OF STATEMENT RECORDED AT THE TIME OF SEARCH AND NOT ON THE BASIS OF EVIDENCE FOUND IN THE COURSE OF SEARCH AND , THEREFORE, THE IMPUGNED ADDITION COULD NOT HAVE BEEN MADE UNDER CHAPTER XIV B OF THE ACT. IT WAS ARGUED THAT THE STATEMENT WAS RETRACTED FOR VALID R EASONS AND THE SAME HAS NOT BEEN ACCEPTED BY THE A.O. THE CIT(A) ACCEPTED THE PLEA OF THE ASSESSEE. HE HELD THAT ADDITION CANNOT BE MADE ON THE BASIS O F A STATEMENT. THE CIT(A) ALSO HELD THAT THE PERSONS WHO WERE ALLEGED TO HAVE GIVEN LOANS TO THE ASSESSEE HAVE DENIED HAVING GIVEN SUCH LOANS. THE CIT(A) ALSO WAS OF THE VIEW THAT THERE WAS NO BASIS FOR THE PRESUMPTION RE GARDING FIGURES APPEARING IN THE LOOSE SHEET. FOR ALL THE ABOVE RE ASONS THE CIT(A) DELETED THE ADDITION MADE BY THE AO AGAINST WHICH REVENUE HAS P REFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 8. THE LD. DEPARTMENTAL REPRESENTATIVE HIGHLIGHTED THE FACT THAT IN THE STATEMENT RECORDED U/S. 132(4) OF THE ACT UNDER OAT H, THE ASSESSEE HAS ACCEPTED TO HAVE TAKEN CASH LOANS FROM TWELVE PARTI ES TOTALING TO RS.167.25 LAKHS. HE ALSO HIGHLIGHTED THE FACT THAT IN THE S TATEMENT U/S. 132(4) OF THE ACT, THE ASSESSEE ALSO STATED THE PURPOSE FOR WHICH THESE LOANS WERE TAKEN BY THE ASSESSEE. THE LEARNED DR POINTED OUT THE ASS ESSEES STATEMENT REGARDING INVESTMENT OF THE LOAN AMOUNT IN PURCHASI NG SIX SHOPS IN THE NAME OF SHANKAR POOJARI, HUF IN JUHU PRINCESS BUILD ING LOCATED AT JUHU TARA ROAD, MUMBAI AND THAT PART OF THE CASH AMOUNT WAS INVESTED FOR FURNISHING OF OUR RESTAURANTS LOCATED AT HILL ROAD, BANDRA AND AT GULMOHAR ROAD, JVPD SCHEME MUMBAI. HE BROUGHT TO NOTICE TH E FACT THAT APART FROM THE RETRACTION AFFIDAVIT, THE ASSESSEE FILED HIS RE PLY VIDE LETTER DT.23.3.01 STATING THAT HIS STATEMENT WAS RECORDED BY THE DEPA RTMENT UNDER COERCION AND WITH IMPLIED FORCE. THE LD. DEPARTMENTAL REPRE SENTATIVE SUBMITTED THAT THE RETRACTION OF THE ASSESSEE IS NOT VALID AND THE ASSESSEE HAS FAILED TO IT(SS) 456/MUM/03 9 PROVE THAT HIS STATEMENT U/S. 132(4) WAS RECORDED U NDER COERCION AND DURESS. HE REFERRED TO THE ORDER OF THE CIT(A), W HEREIN THE CIT(A) HAS OBSERVED THAT THIS RETRACTION HAS NOT BEEN PROVED T O HAVE BEEN WRONGLY MADE OR AN AFTERTHOUGHT. THE LD. DEPARTMENTAL REPRESENTA TIVE SUBMITTED THAT THE DEPARTMENT CANNOT BE PUT TO PROVE NEGATIVE AND THAT THE BURDEN OF PROOF IS ON THE ASSESSE TO PROVE THAT THE STATEMENT ON OATH U/S. 132(4) WAS RECORDED UNDER COERCION OR DURESS. THE LD. D.R SUBM ITTED BEFORE US THAT THE STATEMENT MADE BY THE ASSESSEE WAS VERY CATEGORICAL AND THE RETRACTION BY THE ASSESSEE WAS APPARENTLY FOR NO VALID REASON. T HE LD. D.R ALSO RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF VINOD SOLANKI VS. UNION OF INDIA, 233 ELT 157 (SC), WHEREIN IT WAS HE LD THAT MERE RETRACTION OF CONFESSION IS NOT SUFFICIENT TO MAKE CONFESSIONAL S TATEMENT IRRELEVANT. THE COURT HAS TO CONSIDER IMPLICATION OF BOTH CONFESSIO N AND RETRACTION. IT WAS ALSO HELD THAT THE INITIAL BURDEN OF PROVING THE CO NFESSION WAS VOLUNTARY IS ON THE DEPARTMENT. THE LD. D.R FURTHER DREW OUR A TTENTION TO THE RETRACTION AFFIDAVIT WHICH IS AT PAGE 71 & 71A OF THE PAPER BO OK AND SUBMITTED THAT CONFUSED MENTAL STATE IS THE ONLY REASON GIVEN FOR THE RETRACTION AND THERE IS NO ALLEGATION OF ANY COERCION EXERTED BY THE REVENU E AUTHORITIES. FURTHER REFERENCE WAS ALSO MADE TO THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF K.L. PAVUNNI VS. ASST. COLLECTOR EXCISE (1 997) 3 SCC 721 WHEREIN IT WAS HELD THAT CONFESSIONAL STATEMENT RECORDED BY TH E AUTHORITIES EXERCISING POWERS UNDER AN ACT GIVEN VOLUNTARILY WAS ADMISSI BLE IN EVIDENCE. THE LD. D.R ALSO DREW OUR ATTENTION TO THE FACT THAT AS LAT E AS 10/4/2001 THE ASSESSEE WAS EXAMINED BY DDIT (INVESTIGATION), WH EREIN HE GAVE THE DETAILS OF THE VARIOUS PROPERTIES AND FURTHER DID NOT GIVE ANY OTHER STATEMENT IN REPLY TO THE QUERY AS TO WHETHER HE HAS ANYTHING MO RE TO SAY. SIMILARLY THE STATEMENTS WERE RECORDED ON 22/3/2001 & 17/04/2001 BY THE DDIT (INVESTIGATION) AND HE DID NOT CHOOSE TO DENY THE S TATEMENT UNDER SECTION 132(4) OF THE ACT NOR DID HE PLEAD THAT THE STATEME NT WAS OBTAINED BY COERCION. IT(SS) 456/MUM/03 10 9. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS AS WERE MADE BEFORE THE LOWER AUTHORITIES. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE BASIS OF ADDITION IS THE ENTRIES IN ANNEXURE- A-2 SEIZED FROM RAGHURAM POOJARI. IT WAS SUBMITTED THAT THE S EIZED DOCUMENT IS NOT IN THE HAND WRITING OF THE ASSESSE BUT IN THE HAND WRI TING OF RAGHURAM POOJARI. IT WAS ARGUED THAT THE FIGURES MENTIONED IN THE SEI ZED DIARY WERE CONVERTED INTO LAKHS WITHOUT ANY BASIS. IT WAS HIGHLIGHTED T HAT THE ASSESSEE IS NOT EDUCATED AND DID NOT UNDERSTAND THE STATEMENT AND T HEREFORE NO EVIDENTIARY VALUE CAN BE ATTACHED TO THE STATEMENT RECORDED U/S . 132(4) OF THE ACT. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE STATEMENT U/S.132(4) OF THE ACT WAS RETRACTED AT THE EARLIEST OPPORTUNITY. IT WAS POINTED OUT THAT IMMEDIATELY AFTER SEARCH, I.E., ON 26.0.01 THE ASSE SSEE WAS ADMITTED TO THE HOSPITAL FOR HYPERTENSION AND WAS DISCHARGED ON 05. 02.01 ONLY. IT WAS AGAIN ARGUED THAT THERE WAS NO SEIZURE OF VALUEABLES OR A SSETS DURING THE SEARCH PROCEEDINGS. THE TWELVE PARTIES FROM WHOM THE ASSES SEE IS STATED TO HAVE RECEIVED LOANS DID NOT HAVE FINANCIAL CAPACITY. HE ALSO HIGHLIGHTED THE FACT THAT THE CREDITORS OF THE CASH LOAN HAVE DENIED HAV ING ADVANCED ANY AMOUNT OF CASH LOAN TO THE ASSESSEE. HE SUBMITTED THAT THE REVENUE HAS FAILED TO PROVE THAT THE RETRACTION IS NOT BONA FIDE OR AN AF TER-THOUGHT ON THE PART OF THE ASSESSEE. HE STATED THAT THE CASE LAW CITED BY THE REVENUE ARE DISTINGUISHABLE ON FACTS. SEVERAL JUDICIAL PRONOUN CEMENTS WERE ALSO REFERRED TO IN THE WRITTEN NOTE FILED BEFORE US. THE RELEVA NCE TO THE PRESENT CASE WILL BE CONSIDERED LATER. REFERENCE WAS MADE TO CBDT CI RCULAR NO.286/2/2003 DATED 10/3/2002, WHEREIN THE BOARD HAS INSTRUCTED NOT TO BASE ASSESSMENT ON THE BASIS OF STATEMENT DURING THE COURSE OF SEA RCH AND SEIZURE PROCEEDINGS. IT WAS SUBMITTED THAT IN ANY EVENT AM OUNT OF LOANS CAN NOT BE MADE THE INCOME IN THE HANDS OF THE ASSESSEE. HE SU BMITTED THAT IF THE ASSESSEE HAS MADE INVESTMENT U/S.69 OF THE ACT, THE ADDITION CAN NOT BE MADE FOR THE LOAN AMOUNT IN THE HANDS OF THE ASSESS EE. HE SUBMITTED THAT THE ASSESSEE HAS HIMSELF SURRENDERED THE AMOUNT OF THIRTEEN LAKHS AND IT(SS) 456/MUM/03 11 THEREFORE, THIS ENTRY OF THIRTEEN LAKHS SHOULD NOT BE USED AGAINST THE ASESSEE FOR CONVERTING THE OTHER FIGURES INTO LAKHS AGAINST THE ASSESSEE. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE PERUSED THE ORDER OF THE ASSESSING OFFICER AND CIT(A). THE SEAR CH AND SEIZURE ACTION U/S.132 OF THE ACT WAS CARRIED OUT IN THE CASE OF T HE ASSESSEE ON 24.1.OL AND THE STATEMENT ON OATH U/S.132(4) OF THE ACT OF THE ASSESSEE WAS RECORDED ON 24.1.01 AND 25.1.01. IN THE STATEMENT RECORDED THE ASSESSEE ADMITTED HAVING TAKEN CASH LOANS FROM DIFFERENT PERSONS. TH E NAMES OF THE PERSONS FROM THE ASSESSEE HAS TAKEN CASH LOANS ARE THE NAME S FOUND IN PAGE-4 OF ANNEXURE A-2 SEIZED FROM MR.RAGHURAM POOJARI, UNCLE OF THE ASSESSEE. THE ASSESSEE ALSO ADMITTED THAT THE ENTRIES FOUND IN PA GE-4 WERE THE INTEREST PAYABLE ON THE LOANS. THE ASSESSEE ALSO ADMITTED T HAT THE FIGURES MENTIONED IN PAGE-4 ARE IN CODES AND HAVE TO BE MULTIPLIED. THE ASSESSEE FURTHER ADMITTED THAT THESE LOANS AS WELL AS INVESTMENTS IN PROPERTY AND FURNISHING OF RESTAURANT WERE NOT RECORDED IN THE BOOKS OF ACC OUNTS. THE ASSESSEE HAS ACCEPTED THAT THE CASH LOAN WERE TAKEN FROM TWELVE PARTIES DETAILED IN HIS STATEMENT AND THE TOTAL AMOUNT OF LOAN TAKEN BY HIM COMES TO RS.167.25 LAKHS. THE ASSESSEE MADE A SURRENDER OF UNEXPLAINED CASH LOANS AND INTEREST PAYMENT THEREON DURING THE COURSE OF HIS S TATEMENT RECORDED U/S. 132(4) OF THE ACT. HOWEVER, THE ASSESSEE RETRACTED HIS STATEMENT U/S. 132(4) OF THE ACT VIDE HIS AFFIDAVIT DT.05.02.01. THE ASSE SSEE VIDE HIS REPLY VIDE LETTER DT.23.03.01 STATED THAT HIS STATEMENT WAS RE CORDED BY THE DEPARTMENT UNDER COERCION. THE FIRST ASPECT TO BE CONSIDERED I S AS TO WHETHER THE RETRACTION OF THE ASSESSEE IS BONA TIDE AND VALID R ETRACTION OR NOT. IN THIS REGARD WE ARE OF THE VIEW THAT THE THERE IS NO MATE RIAL OR EVIDENCE BROUGHT ON RECORD BY THE ASSESSEE TO SUGGEST THAT THE STATEMEN T OF THE ASSESSEE RECORDED BY THE REVENUE AUTHORITIES U/S.132(4) OF T HE ACT WAS RECORDED UNDER COERCION OR DURESS ON THE PART OF THE REVENUE AUTHORITIES. IN THE AFFIDAVIT FILED ON 5.2.2001, THE ASSESSEE ALLEGED T HAT HE GAVE THE STATEMENT WHEN HE WAS NOT IN PROPER FRAME OF MIND. THEREAFTE R IN HIS LETTER DATED IT(SS) 456/MUM/03 12 23.3.01, HE HAS CLAIMED THAT THE STATEMENT WAS RECO RDED UNDER COERCION. AS WE HAVE ALREADY SEEN THAT AS LATE AS 10/4/2001 THE ASSESSEE WAS EXAMINED BY DDIT (INVESTIGATION), WHEREIN HE GAVE THE DETAIL S OF THE VARIOUS PROPERTIES AND FURTHER DID NOT GIVE ANY OTHER STATEMENT IN REP LY TO THE QUERY AS TO WHETHER HE HAS ANYTHING MORE TO SAY. SIMILARLY TH E STATEMENTS WERE RECORDED ON 22/3/2001 & 17/04/2001 BY THE DDIT (INV ESTIGATION) AND HE DID NOT CHOOSE TO DENY THE STATEMENT UNDER SECTION 132(4) OF THE ACT NOR DID HE PLEAD THAT THE STATEMENT WAS OBTAINED BY COERCIO N. WE HAVE PERUSED THE CONTENTS OF THE STATEMENT OF THE ASSESSEE DT.24.01. 01 AND 25.01.01. WE FIND THAT THE QUESTIONS WERE LEADING QUESTIONS BUT THAT BY ITSELF WILL NOT MAKE THE STATEMENT ONE GIVEN UNDER UNDUE INFLUENCE OR COERCI ON. MOREOVER THE TIME GAP BETWEEN THE TIME OF ALLEGING COERCION AND THE D ATE OF RECORDING STATEMENT AND THE ABSENCE OF SUCH ALLEGATION IN THE AFFIDAVIT RETRACTING THE STATEMENT U/S.132(4) OF THE ACT, ALSO GOES TO SHOW THAT THE PLEA OF COERCION IS AN AFTERTHOUGHT TO WRIGGLE OUT OF ADMISSION MADE IN THE STATEMENT U/S.132(4) OF THE ACT. 11. IN HIS STATEMENT THE ASSESSEE HAS GIVEN MINUT E DETAILS OF THE CASH LOANS TAKEN FROM TWELVE PARTIES BY FURNISHING THE N AME OF THE CREDITORS AS WELL AS THE AMOUNT OF CASH LOAN TAKEN FROM THEM. IN REPLY TO QUESTION NO.3. THE ASSESSEE HAS STATED ON OATH, THE PURPOSE FOR WH ICH THE CASH LOAN WAS TAKEN FROM DIFFERENT PERSONS AND HAS EXPLAINED THAT THE CASH AMOUNT WAS RECEIVED FROM DIFFERENT PERSONS AS MENTIONED IN HIS ANSWER TO QUESTION NO.2 AND. THAT HE HAS INVESTED THE SAME IN PURCHASE OF S IX SHOPS IN THE NAME SHANKAR R. POOJARI (HUF) IN JUHU, PRINCESS BUILDING LOCATED AT JUHU TARA ROAD, MUMBAI. PART OF THE CASH AMOUNT WAS EXPLAINED AS INVESTED FOR FURNISHING OF RESTAURANTS LOCATED AT HILL ROAD, BAN DRA AND AT GUI MOHAR JVPD SCHEME, MUMBAI. IN REPLY TO QUESTION NO.5, THE ASSESSEE HAS EXPLAINED THE RATE OF INTEREST PAYABLE TO DIFFERENT PERSONS FROM WHOM CASH LOANS WERE TAKEN. QUESTION NO.7 AND REPLY THERETO IS VERY MATERIAL AND THE SAME IS AS FOLLOWS: IT(SS) 456/MUM/03 13 Q.7 PLEASE STATE THE ABOVE CASH LOAN AND THERE FUR THER UTILIZATION AS INVESTMENT IN THE PROPERTY & IN FURNISHING OF TH E HOTEL WHETHER ACCOUNTED IN THE BOOKS OF ACCOUNT. ANS. THESE ARE NOT DISCLOSED IN THE BOOKS OF ACCOU NT AND THERE ARE UNDISCLOSED.IN REPLY TO QUESTION NO.8. THE ASSESSEE HAS GIVEN A COMPLETE ADDRESS AND ALSO THE PHONE NUMBERS OF THE PARTIES FROM WHOM CASH LOAN WERE TAKEN. WE FIND THAT THE QUESTIO N AND ANSWER TO QUESTION NO.11 IS VERY SIGNIFICANT TO DECIDE THE IS SUE IN THIS CASE, WHICH IS REPRODUCED BELOW: QN.11. AS YOU CAN SEE FROM PAGE NO.4 OF THE ABOVE MENTIONED ANNEXURE. THE TOTAL INTEREST PAYMENT MADE TO ALL T HE 12 LENDERS IS RS.466000/-. IF A UNIFORM INTEREST RATE OF 2% IS A PPLIED THEN THE TOTAL BORROWING WORKS OUT TO (RS.4,66/102 LAC = 233 LAK H) RS. 2.33 CRORE. IT THEREFORE MEANS THAT YOU HAD MADE A CAST BORROWI NG OF RS. 2.33 CRORE FROM ALL THE ABOVE MENTIONED PERSONS. THE BO RROWING FROM THE PARTICULAR INDIVIDUAL CAN BE WORKED OUT OR SIMILAR LINE AS EXPLAINED ABOVE. YOUR REACTION. ANS: YES. I HAVE TAKEN CASH LOAN IN THE RANGE OF 2. 33 CRORE WHICH ACCORDING TO YOU CAN BE EASILY WORKED OUT FROM THE INTEREST FIGURE. HOWEVER, THERE COULD BE SOME INTEREST VARIATION DUE TO THE FACT THAT SOME INTEREST FIGURE ARE NOT ONLY FOR ONE MONTH BUT ARE CUMULATIVE VALUE FOR MORE MONTH. FOR EXAMPLE THE CASE OF SAYAN TIBHA IF YOU TAKE INTEREST 2% THE CAPITA! WORKS OUT TO 46.20 WHEREAS I HAVE TAKEN LOAN OF RS.5 LAKH ONLY. THUS, AMOUNT IS ARISING DUE TO T HE FACT THAT THE INTEREST VALUE OF RS.97.50 THOUSAND IS THE INTERE ST PAYABLE TO TAYALIBHA FOR NUMBER OF MONTHS AND NET FOR ONE M ONTH. BUT OVERALL THE CASH BORROWINGS MADE BY ME ARE IN THE RANGE OF 2.33 CRORES. THE ANSWER TO QUESTION NO.7 SHOWS THAT THE INVESTME NTS AS WELL AS THE CASH LOANS WERE NOT DISCLOSED IN THE BOOKS OF ACCOUNTS. THE ANSWER TO QUESTION NO.11 IN THE STATEMENT CLEARLY SHOWS THE BASIS FOR SURRENDER OF AMOUNT AND THE BASIS FOR WORKING OUT THE AMOUNT OF UNPROVED CA SH LOAN RS.1,54,25,000 AND INTEREST THEREON AMOUNTING TO RS.4,46,000. IN T HIS CASE THE STATEMENT OF THE ASSESSEE IS CORROBORATED BY THE CONTENTS OF THE SEIZED DIARY. WE FIND THAT ON ONE PAGE OF THE SEIZED DIARY, THE NAME OF THE CR EDITOR SHRI JAI KISHAN IT(SS) 456/MUM/03 14 AGAINST THE DATE OF 01.09.00 AND ALSO THE AMOUNT OF 13 LAKHS IS MENTIONED. ON THE OTHER PAGE OF THE SEIZED DIARY, THE NAMES OF ALL THE 12 CREDITORS IS MENTIONED AGAINST THE AMOUNT OF INTEREST PAYABLE AN D DIFFERENT RATES OF INTEREST PAYABLE TO THE CREDITORS , IS ALSO MENTION ED AGAINST THEIR RESPECTIVE NAMES. FURTHER, THE AMOUNT OF CASH LOAN RECEIVED FR OM THEM IS ALSO MENTIONED ON THIS PAGE OF SEIZED DIARY WHEREIN THE 12 NAMES AND DETAILS OF CREDITORS ARE MENTIONED. WE FIND AGAINST THE NAME O F SHRI JAI KISHAN THE AMOUNT OF LOAN IS WRITTEN AS 13, WHICH TALLIES W ITH THE AMOUNT OF 13 LAKHS MENTIONED IN ANOTHER PAGE OF SEIZED DIARY. T HIS SHOWS THAT THE FIGURES OF 13 AND OTHER FIGURES MENTIONED IN THE PAGE OF TH E SEIZED DIARY AGAINST THE 12 NAMES OF CREDITORS REPRESENTS THE AMOUNTS IN LAK HS AS STATED BY THE ASSESSEE IN HIS STATEMENT AND THEREFORE, THE CLAIM OF THE ASSESSEE THAT THESE FIGURES CAN NOT BE ASSUMED TO BE IN LAKHS IS NOT SU STAINABLE. IN THIS CASE, THE ASSESSEE HAS EXPLAINED THE INVESTMENT IN PROPER TIES MADE BY HIM FROM THE AMOUNT OF CASH LOANS IN HIS STATEMENT RECORDED U/S.132(4) OF THE ACT. THE INVESTMENT MADE BY HIM AS DISCLOSED IN THE STA TEMENT WAS NOT RETRACTED IN THE AFFIDAVIT OF THE ASSESSEE DATED 05 /02/01. IN OUR VIEW THE CIT(A) HAS WRONGLY CAST THE BURDEN OF SHOWING THAT COERCION WAS NOT USED AT THE TIME OF RECORDING OF THE STATEMENT OF THE ASSES SEE. THE LAW IS SETTLED THAT NO ONE CAN BE CALLED UPON TO PROVE THE NEGATIVE. IN THESE FACTS OF THE CASE, WE HOLD THAT THE ASSESSEE HAS FAILED TO PROVIDE THA T THE STATEMENT OF THE ASSESSEE U/S.132(4) OF THE ACT WAS RECORDED UNDER C OERCION OR DURESS FROM THE REVENUE AUTHORITIES AND HAS FAILED TO BRING AN Y MATERIAL ON RECORD TO SUGGEST THAT THE RETRACTION OF THE ASSESSEE IS BONA TIDE AND VALID. 12. THE NEXT QUESTION THAT ARISES FOR CONSIDERATI ON IS AS TO WHETHER THE STATEMENT U/S.132(4) OF THE ACT CAN BE THE BASIS TO MAKE THE IMPUGNED ADDITION. IN THIS REGARD THE LEGAL POSITION IS THA T ADMISSION BY A PERSON CAN BE USED AGAINST HIM BUT ARE NOT CONCLUSIVE. THE PE RSON WHO MADE THE ADMISSION IS ENTITLED TO SHOW THAT THE ADMISSION IS NOT TRUE/WRONG OR WAS MADE UNDER A MISTAKE. THE ABOVE BEING THE LEGAL PO SITION, THE CASE LAWS IT(SS) 456/MUM/03 15 RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE IN OUR VIEW ARE ACADEMIC AND THEREFORE WE DEEM IT UNNECESSARY TO REFER TO TH OSE CASES. 13. THE QUESTION IS AS TO WHETHER THE ASSESSEE HA S SUCCESSFULLY SHOWN THAT THE ADMISSION WAS WRONG OR WAS MADE UNDER A MI STAKE. THE ADMISSION OF THE ASSESSEE IN HIS STATEMENT U/S.132(4) OF THE ACT AS WE HAVE ALREADY SEEN WAS THAT HE HAD HE HAS INVESTED CASH LOANS TAK EN FROM THE PARTIES WHOSES NAME WAS FOUND IN THE SEIZED DOCUMENT IN PUR CHASE OF SIX SHOPS IN THE NAME SHANKAR R. POOJARI (HUF) IN JUHU, PRINCESS BUILDING LOCATED AT JUHU TARA ROAD, MUMBAI. PART OF THE CASH AMOUNT WAS EXPLAINED AS INVESTED FOR FURNISHING OF RESTAURANTS LOCATED AT H ILL ROAD, BANDRA AND AT GUI MOHAR JVPD SCHEME. THE FURTHER STATEMENT OF THE AS SESSEE WAS THAT NONE OF THESE INVESTMENTS WERE RECORDED IN THE BOOKS OF ACCOUNTS. THE ASSESSEE IN THE COURSE OF ASSESSMENT PROCEEDINGS HAS DENIED HAVING TAKEN CASH LOANS. THERE IS HOWEVER NO DENIAL OF INVESTMENT IN SIX SHOPS IN THE NAME OF HUF AND RENOVATION OF TWO RESTAURANTS. IN ALL THES E INVESTMENTS THE ASSESSEE HAD INTERESTS EITHER AS PARTNER OR KARTHA OR CO-PARCENER OF THE HUF. THE ASSESSEE IS THUS BOUND TO EXPLAIN THAT NO INVESTMENTS WERE MADE AS AFORESAID OR HE HAS TO EXPLAIN TO THE SATISFACTI ON OF THE AO THE SOURCE OF FUNDS FOR HAVING MADE THE AFORESAID INVESTMENT. TH E APPROACH OF THE ASSESSEE HAS BEEN THAT HE DENIED RECEIPT OF ANY CAS H LOAN AND ALSO THE INVESTMENTS. THE DENIAL OF INVESTMENT IN THE SIX S HOPS AND RENOVATION OF THE RESTAURANT IS WITHOUT ANY BASIS. THE INVESTMENT BY THE HUF IN PURCHASE OF SIX SHOPS IS NO DOUBT REFLECTED IN THE BOOKS OF THE HUF BUT THAT IS NOT THE TRUE VALUE AS ADMITTED BY THE ASSESSEE IN HIS STATE MENT. THE QUESTION AND ANSWER TO QUESTION NO.7 WHICH WE HAVE EXTRACTED EAR LIER CLEARLY SHOWS THAT THE INVESTMENT IN PURCHASE OF SHOPS AND RENOVATION OF THE RESTAURANT IS NOT RECORDED IN THE BOOKS. 14. THE ASSESSEE HAS THROUGHOUT PLEADED THAT THE CREDITORS ARE NOT IN A FINANCIAL CAPACITY TO ADVANCE THE AMOUNT OF LOAN TO THE ASSESSEE. THE IT(SS) 456/MUM/03 16 ASSESSING OFFICER HAD REQUESTED THE ASSESSEE TO PRO DUCE THE CREDITORS AND ASSESSEE VIDE LETTER DT.23.1.03 EXPRESSED HIS INABI LITY TO PRODUCE THE SAID PARTIES. SUBSEQUENTLY SUMMONS U/S. 131 OF THE ACT W ERE ISSUED TO THE PARTIES WHOSE ADDRESSES WERE PROVIDED BY THE ASSESS EE. OUT OF THE EIGHT PARTIES TO WHOM SUMMONS WERE ISSUED, 5 PARTIES HAD ATTENDED BEFORE THE ASSESSING OFFICER AND THEIR STATEMENTS WERE RECORDE D ON OATH. FOR REMAINING PARTIES, THE ASSESSEE HAS FILED THEIR AFFIDAVITS CL AIMING THAT THEY HAVE NEVER GIVEN ANY CASH LOANS TO THE ASSESSEE. THE FIVE PART IES WHOSE STATEMENTS WERE RECORDED BY THE ASSESSING OFFICER ALSO DENIED TO HA VE GIVEN ANY CASH LOANS TO THE ASSESSEE OR ANY INTEREST RECEIVED FROM HIM. IN THESE FACTS, IT CAN BE SAFELY CONCLUDED THAT THE ASSESSEE HAS NOT PRODUCED ANY MA TERIAL OR EVIDENCE TO PROVE THE GENUINENESS OF THE CASH LOANS RECEIVED BY HIM FROM THEE 12 CREDITORS. 15. IN THESE CIRCUMSTANCES THE QUESTION IS AS TO THE SOURCE OF FUNDS FROM WHERE THE ASSESSEE HAS MADE INVESTMENTS IN TH E PURCHASE OF SIX SHOPS IN THE NAME OF SHANKAR POOJARI (HUF) IN JUHU, PRIN CESS BUILDING LOCATED AT JUHU TARA ROAD, MUMBAI AND FROM WHERE HE HAS INVEST ED IN FURNISHING OF HIS RESTAURANTS LOCATED AT HILL ROAD, BANDRA AND A T GUL MOHAR JVPD SCHEME, MUMBAI. THE ASSESSEE HAS NOT LET IN ANY EVI DENCE TO PROVE THE SOURCE OF FUNDS IN THE PURCHASE OF THE SIX SHOPS AN D IN THE FURNISHING OF HIS RESTAURANTS IN MUMBAI AND THEREFORE, THE AMOUNT OF INVESTMENT IN THE PURCHASE OF SIX SHOPS AND IN FURNISHING OF RESTAURA NTS IS ASSESSABLE IN THE HANDS OF THE ASSESSEE AS UNEXPLAINED INVESTMENT U/S . 69 THE ACT. 16. UNDISCLOSED INCOME HAS BEEN DEFINED IN THE AC T AS FOLLOWS: 158B. IN THIS CHAPTER, UNLESS THE CONTEXT OTHERWIS E REQUIRES,- (B) UNDISCLOSED INCOME INCLUDES ANY MONEY, BULLIO N, 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 MONEY, BULLION, JEWELLERY, VALUABLE ARTICLE, THING, ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENT OR TRANSACTION REPRESENTS WHOLLY OR PARTLY INCOME OR PROPERTY WHICH HAS NOT BEEN OR WOULD NOT HAVE BEEN IT(SS) 456/MUM/03 17 DISCLOSED FOR THE PURPOSES OF THIS ACT, OR ANY EXPE NSE, DEDUCTION OR ALLOWANCE CLAIMED UNDER THIS ACT WHICH IS FOUND TO BE FALSE . THE UNDERLINED PORTION IN THE DEFINITION OF UNDISC LOSED INCOME WAS ADDED BY THE FINANCE ACT, 2002 HAS AMENDED THE DEFINITION OF UNDISCLOSED INCOME IN SECTION 158B(B) W.R.E.F. 1-7-1995 17. EXPLANATION TO SEC. 158 BA (2) INSERTED BY TH E FINANCE (NO. 2) ACT, 1998 WITH RETROSPECTIVE EFFECT FROM JULY 1, 1995, R EADS AS FOLLOWS: EXPLANATION FOR THE REMOVAL OF DOUBTS, IT IS HE REBY DECLARED THAT (A) THE ASSESSMENT MADE UNDER THIS CHAPTER SHALL B E IN ADDITION TO THE REGULAR ASSESSMENT IN RESPECT OF EACH PREVIO US YEAR INCLUDED IN THE BLOCK PERIOD; (B) THE TOTAL UNDISCLOSED INCOME RELATING TO THE B LOCK PERIOD SHALL NOT INCLUDE THE INCOME ASSESSED IN ANY REGULA R 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 INCLUDE D IN THE BLOCK PERIOD. 18. THE PROVISIONS OF SECTION 158BB(1) OF THE ACT LAYS DOWN THE COMPUTATION OF UNDISCLOSED INCOME OF THE BLOCK PERI OD. THE SAME READS AS FOLLOWS: 158BB. COMPUTATION OF UNDISCLOSED INCOME OF THE BL OCK PERIOD.--(1) THE UNDISCLOSED INCOME OF THE BLOCK PERIOD SHALL BE THE AGGREGATE OF THE TOTAL INCOME OF THE PREVIOUS YEARS FALLING WITH IN THE BLOCK PERIOD COMPUTED, **IN ACCORDANCE WITH THE PROVISIONS OF T HIS ACT, ON THE BASIS OF EVIDENCE FOUND AS A RESULT OF SEARCH OR RE QUISITION OF BOOKS OF ACCOUNT OR OTHER DOCUMENTS AND SUCH OTHER MATERIALS OR INFORMATION AS ARE AVAILABLE WITH THE ASSESSING OFFICER AND REL ATABLE TO SUCH EVIDENCE, AS REDUCED BY THE AGGREGATE OF THE TOTAL INCOME, O R, AS THE CASE MAY BE, AS INCREASED BY THE AGGREGATE OF THE L OSSES OF SUCH PREVIOUS YEARS, DETERMINED,-- THE UNDERLINED PORTION IN THE ABOVE PROVISIONS WERE INTRODUCED BY THE FINANCE ACT, 2002, W.R.E.F. 1-7-1995. IT(SS) 456/MUM/03 18 19. PRIOR TO THE AFORESAID AMENDMENTS, THE PROVIS IONS OF SEC.158BB REFERRED TO ONLY EVIDENCE FOUND AS A RESULT OF SEAR CH OR REQUISITION OF BOOKS OF ACCOUNTS OR OTHER DOCUMENTS AND THEREFORE IT WAS INTERPRETED BY COURTS AND TRIBUNALS THAT TWO ELEMENTS HAVE TO BE SATISFIE D BEFORE THE INCOME CAN BE SAID TO BE UNDISCLOSED INCOME: A) THERE SHOULD BE A FACTUM OF NON DISCLOSURE ON T HE PART OF THE ASSESSEE B) SUCH NON DISCLOSURE SHOULD HAVE BEEN DETECTED A S A RESULT OF SEARCH. THE AMENDMENT TO SECTION 158BB WITH RETROSPECTIVE E FFECT FROM JULY 1, 1995, BY ADDING THE WORDS AND SUCH OTHER MATERIALS OR INFORMATION AS ARE AVAILABLE WITH THE ASSESSING OFFICER AND RELATABLE TO SUCH EVIDENCE HAS FURTHER WIDENED THE SCOPE OF MAKING ASSESSMENT OF U NDISCLOSED INCOME. 20. IN MANGERAM MITTAL VS. ACIT 289 ITR 112 (AT) (DEL), THE ITAT EXAMINED THE SCOPE OF THE ABOVE AMENDMENTS TO THE V ARIOUS PROVISIONS OF CHAPTER XIV-B OF THE ACT, FOR MAKING BLOCK ASSESSME NTS, IN THE FOLLOWING WORDS: THE COMPUTATION OF UNDISCLOSED INCOME OF THE BLOCK PERIOD IN A BLOCK ASSESSMENT MUST BE RELATED TO EVIDENCE FOUND AS A R ESULT OF SEARCH PROCEEDINGS. THE FINANCE ACT, 2002, BY THE AMENDMEN T TO SECTION 158BB WITH RETROSPECTIVE EFFECT FROM JULY 1, 1995, ADDED THE WORDS AND RELATABLE TO SUCH EVIDENCE : THE UNDISCLOSED INCOME HAS TO BE COMPUTED ON THE BASIS OF EVIDENCE FOUND AS A RESULT OF SEARCH AND/OR OTHER MATERIALS OR INFORMATION RELATABLE TO SUCH EV IDENCE. AT THE SAME TIME IT CANNOT BE CONCLUDED THAT UNDISCLOSED INCOM E TO BE COMPUTED UNDER THE PROVISIONS OF SECTION 158BC SHOULD BE CON FINED TO THE EVIDENCE FOUND DURING THE COURSE OF THE SEARCH. EVE N AFTER THE AMENDMENT BY THE FINANCE ACT, 2002, WITH RETROSPECT IVE EFFECT FROM JULY 1, 1995, THERE IS SCOPE TO LET IN OTHER MATERI ALS OR INFORMATION GATHERED BY THE ASSESSING OFFICERS DURING THE COURS E OF POST-SEARCH ENQUIRY, BUT SUCH OTHER MATERIALS OR INFORMATION AS NOW CLEARLY MANDATED BY THE LEGISLATURE MUST BE RELATABLE TO EV IDENCE FOUND AS A RESULT OF SEARCH. IT(SS) 456/MUM/03 19 THE INSERTION OF THE WORDS RELATABLE TO SUCH EVIDE NCE BY THE FINANCE ACT, 2002, WITH RETROSPECTIVE EFFECT FROM JULY 1, 1 995, IS INTENDED TO RESTRICT THE SCOPE OF MATERIAL OR INFORMATION THAT MAY BE RELIED UPON BY THE ASSESSING OFFICER BECAUSE IT HAS TO BE RELAT ABLE TO EVIDENCE FOUND AS A RESULT OF SEARCH IN THE FIRST INSTANCE. AS LONG AS THERE IS AN EVIDENCE OF UNDISCLOSED INCOME OF THE ASSESSEE, THA T WOULD BE SUFFICIENT TO CLOTHE THE ASSESSING OFFICER WITH THE POWERS TO ADD TO SUCH EVIDENCE ANY FURTHER MATERIAL OR INFORMATION T HAT MAY BE PERTINENT OR NECESSARY TO REACH A LOGICAL CONCLUSIO N BUT THERE HAS TO BE A CERTAIN AND SPECIFIC NEXUS BETWEEN THE EVIDENCE F OUND AS A RESULT OF SEARCH AND UNDISCLOSED INCOME PROPOSED TO BE ASSESS ED IN THE BLOCK ASSESSMENT UNDER SECTION 158BC. AT THE SAME TIME IT CANNOT BE HELD THAT CONCLUSIVE EVIDENCE OF UNDISCLOSED INCOME SHOU LD BE FOUND DURING THE COURSE OF SEARCH ACTION ITSELF AND NOTHI NG FURTHER CAN BE ADDED OR SUPPLEMENTED BY WAY OF SUBSEQUENT ENQUIRY. THERE SHOULD BE, IN THE FIRST INSTANCE, EVIDENCE FOUND AS A RESULT OF SEARCH OR REQUISITION OF BOOKS OF ACCOUNT OR OTHER DOCUMENTS THAT MAY CONSTITUTE THE BASIS OF COMPUTATION OF UNDISCLOSED INCOME. THAT EVIDENCE MAY NOT BE CONCLUSIVE TO ARRIVE AT THE F INDING OF UNDISCLOSED INCOME AND THE ASSESSING OFFICER MAY SUPPLEMENT IT WITH MATERIALS OR INFORMATION THAT HE MAY GATHER OR THAT MAY BE OTHERWISE AVAILABLE WITH HIM AT THE TIME OF COMPUTATION OF UNDISCLOSED INCOME OF THE BLOCK PERIOD. THE EXPRESSION RELATABLE APPEARING IN SECTION 158BB(1) PERMITS THE ASSESSING OFFICER TO BRING MATERIAL ON RECORD AS MAY BE REQUIRED FOR COMPUTATION OF UNDISCLOSED INCOME IN R ELATION TO EVIDENCE FOUND AS A RESULT OF SEARCH. ALL MATERIA LS OR INFORMATION GATHERED BY THE ASSESSING OFFICER OR RECEIVED BY TH E ASSESSING OFFICER IN THE PROCESS OF COMPUTATION OF UNDISCLOSED INCOME ON THE BASIS OF EVIDENCE WOULD CONSTITUTE MATERIALS OR INFORMATIO N RELATABLE TO SUCH EVIDENCE. 21. IN THE PRESENT CASE, THERE WAS MATERIAL FOUND IN THE COURSE OF SEARCH VIZ., ANNEXURE A-2. THIS HAS BEEN ADMITTED BY THE ASSESSEE AS CONTAINING ENTRIES RELATING TO TRANSACTIONS IN WHICH HE WAS IN VOLVED. TILL DATE THAT FACT REMAINS UNCONTROVERTED. THE STATEMENT OF THE ASSES SEE CLEARLY ADMITS UNDISCLOSED INVESTMENTS IN PURCHASE OF SHOPS AND RE NOVATION OF RESTAURANTS. THEREFORE IT CANNOT BE SAID THAT UNDI SCLOSED INCOME IS BEING DETERMINED WITHOUT THERE BEING ANY MATERIAL FOUND I N THE COURSE OF SEARCH. THE FACT REMAINS THAT THE SIX SHOPS HAVE BEEN PURCH ASED IN THE NAME OF THE HUF. THE FACT THAT THERE WERE RENOVATIONS TO THE T WO RESTAURANTS IS NOT ALSO IT(SS) 456/MUM/03 20 NOT DISPUTED BY THE ASSESSEE. IN SUCH CIRCUMSTANCE S, WE ARE OF THE VIEW THAT THE ADDITION IN QUESTION CANNOT BE SAID TO BE BEYOND THE PURVIEW OF CHAPTER XIV-B OF THE ACT. 22. AS A RESULT OF STATUTORY AMENDMENTS DISCUSSED ABOVE, IT IS POSSIBLE FOR THE AO TO MAKE POST SEARCH ENQUIRIES TO ESTABLISH E XISTENCE OF UNDISCLOSED INCOME. THE RESTRICTION AS WE HAVE ALREADY EXPLAIN ED ABOVE IS THAT ANY UNDISCLOSED INCOME DISCOVERED BY THE ASSESSING OFFI CER ENTIRELY ON THE BASIS OF MATERIAL OR INFORMATION GATHERED BY HIM ON HIS O WN WITHOUT THERE BEING ANY RELATIONSHIP WHATSOEVER WITH AN EVIDENCE FOUND AS A RESULT OF SEARCH, CANNOT FORM PART OF UNDISCLOSED INCOME TO BE BROUGH T TO BLOCK ASSESSMENT UNDER THE PROVISIONS OF SECTION 158BC. 23. IT IS IN THIS CONTEXT THAT WE FIND THAT THE AS SESSEE IN A LETTER DATED 7.1.2003 WHICH WAS A REPLY TO NOTICE U/S.143(2) OF THE ACT CALLING FOR SEVERAL DETAILS. IN THIS LETTER THE ASSESSEE HAS EXPLAINED PURCHASE OF SHOP NO.17, 18, 12 AND 13 IN JUHU PRINCES CO-OP. HOUSING SOCIET Y IN THE NAME OF SHANKAR RAM POOJARI HUF. THE ASSESSING OFFICER HAS MADE THE ADDITION OF 154.25 LAKHS U/S.69 OF THE ACT AS UNEXPLAINED INVES TMENTS IN THE PURCHASE OF PROPERTIES AND THEIR RENOVATION ON THE BASIS OF THE STATEMENT ON OATH OF THE ASSESSEE RECORDED U/S. 132(4) OF THE ACT. AS A LREADY STATED THERE WAS NO DENIAL OF THE FACTUM OF INVESTMENT IN SIX SHOPS BY THE HUF AND RENOVATION OF RESTAURANTS. NEVERTHELESS, WE ARE OF THE VIEW THAT THE AO SHOULD HAVE MADE FURTHER INVESTIGATION OR ENQUIRY AND BROUGHT ON REC ORD DETAILS OF THE SIX SHOPS CLAIMED TO HAVE BEEN PURCHASED BY THE ASSESSE E AND ALSO IN FURNISHING OF RESTAURANTS BY THE ASSESSEE. THE QUAN TUM OF INVESTMENTS IS NOT IN DOUBT AND NO FURTHER PROOF IS REQUIRED AS TH E STATEMENT AND THE SEIZED DOCUMENTS SUFFICIENTLY THROW LIGHT ON THE QUANTUM O F EXPENDITURE. THE AO SHOULD CARRY OUT POST SEARCH ENQUIRY ONLY FOR THE P URPOSE OF CORROBORATION. ON EXISTENCE OF CORROBORATIVE EVIDENCE REGARDING PU RCHASE OF SIX SHOPS AND RENOVATION AND FURNISHING OF RESTAURANTS AS STAT ED IN HIS STATEMENT ABOVE, IT(SS) 456/MUM/03 21 THEN THE ADDITION ON ACCOUNT OF UNEXPLAINED INVES TMENTS CAN BE MADE ON THE BASIS OF THE STATEMENT OF THE ASSESSEE RECORDED U/S. 132(4) OF THE ACT. WE ACCORDINGLY SET ASIDE THE ORDER OF CIT(A) ON THE ISSUE AND RESTORE THE SAME TO THE FILE OF THE ASSESSING OFFICER WITH DIRE CTION TO RE-DECIDE THE ISSUE ON MERITS AFTER ALLOWING DUE OPPORTUNITY OF HEARING TO THE ASSESSE IN THE LIGHT OF THE DIRECTIONS AND FINDINGS GIVEN ABOVE. WE DI RECT ACCORDINGLY. GR.NO.1 RAISED BY THE REVENUE IS THUS ALLOWED FOR STATISTIC AL PURPOSES. 24. IN THE RESULT THE APPEAL BY THE REVENUE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON T HE 16 TH DAY OF MAY 2012 SD/- SD/- (RAJENDRA) (N.V.VASUDEVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 16 TH MAY 2012 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.RC BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR, I TAT, MUMBAI BENCHES MUMBAI. VM.