Nathu Ram,Third Member.

On account of difference of opinion between the Members of the Bench, the following questions posed by them have been referred to me by the Hon'ble President as per the provisions of section 255(4) of the Income Tax Act for decision as Third Member:

Question posed by JM:

"Whether, on the facts and circumstances of the case and in law, on the basis of seized documents (page 34 of HS-8) which is the details of the price paid for purchase of flat can presumption be made that the assessee-HUF must have received on money from all the remaining, 15 purchasers of the flats and an addition of undisclosed income of Rs. 42,18,134 be made on estimate under section 158BD of the Act ?"

Question posed by the Accountant Member:

"Whether, on the facts and in the circumstances of the case, the addition of Rs. 42,18,134 on account of on money for the sale of other 15 flats should be deleted or it should be set aside to the assessing officer for redetermination on the basis of per square foot sale price of the flat sold to H.S.. Grewal after adjustment for extra works, floor, period of sale, etc. ?"

2. Before I go into the merits of the questions posed, I would like to venture to recapitulate the facts for proper appreciation as borne out from the records.

2.1. The assessee-HUF owned a plot taken on lease from TISCO in 1961 and constructed thereon 18 flats during the period from 1988 to 1992. The assessee-HUF sold 16 flats therefrom to different parties through agreements of sale entered into with them during the period from 1987 to 1991. One of the flat was sold to Shri H.S. Grewal as per agreement to sell dated 10th June, 1989 for a consideration of Rs. 5,20,750. Sale consideration of 16 flats is shown at Rs. 70,70,750 as per details given below:

Sl. No. Name of buyer Name of buyer Date of execution of agreement of Date of execution of agreement of Asst. Year Asst. Year Disclosed sale, sale consideration Disclosed sale, sale consideration

1.

1.

2.

2.

3.

3.

4.

4.

5.

5.

1. Mr. H.S., Grewal 10-06-1989 1990-91 5,20,750

2. Mr. B. B. Khosla 05-12-1987 1988-89 5,32,250

3. Mr. X. J. Anklesaria 21-01-1988 1988-89 5,16,750

4. Mr. H. Gandhi 22-01-1987 1987-88 5,20,500

5. M/s. Bibar Extrusion 18-07-1988 1989-90 3,65,500

6. Mr. C.P. Shah 22-11-1989 1990-91 4,93,000

7. Mrs. H. Gandhi 28-01-1988 1988-89 3,60,500

8. Mr. N. Khetan 26-02-1990 1990-91 5,21,500

9. Mr. V. Gandhi 30-01-1990 1990-91 3,60,500

10. Mr. K. Gandhi 30-01-1990 1990-91 5,21,500

11. Mr. K. Gandhi 30-01-1990 1990-91 3,65,500

12. Mrs. A. Gandhi 30-01-1990 1990-91 3,65,500

13. Mrs. M.R. Varshnoi 27-02-1991 1991-92 3,76,000

14. Mr. S. Atwal 03-06-1991 1992-93 5,16,750

15. Mr. S.K. Shroff 21-04-1990 1991-92 3,75,000

16. Mr. N.K. Shroff 21-04-1990 1991-92 3,66,250 2.2 A search was conducted by the department on 8th December, 1995 at the residential and business premises of Shri N.D. Kamani, Shri H.S. Grewal, Shri Sanjeev Kapila and members of their family. During the course of search at the residential premises of Shri H.S. Grewal, a bunch of loose-sheets marked as HS-8 was seized from his possession. Page 34 of the bunch of these papers contained details of payments made by Shri H.S. Grewal and his wife against the purchase of a flat from the assessec HUF A photocopy of the said document is marked as Annexure I to the assessment order and the same is reproduced hereunder:

2.2 A search was conducted by the department on 8th December, 1995 at the residential and business premises of Shri N.D. Kamani, Shri H.S. Grewal, Shri Sanjeev Kapila and members of their family. During the course of search at the residential premises of Shri H.S. Grewal, a bunch of loose-sheets marked as HS-8 was seized from his possession. Page 34 of the bunch of these papers contained details of payments made by Shri H.S. Grewal and his wife against the purchase of a flat from the assessec HUF A photocopy of the said document is marked as Annexure I to the assessment order and the same is reproduced hereunder:

Payment for flat Mrs. S. Grewal Chq. 113113 Dt. 8-8-88 Rs. 1,00,000 Annexure Chq. 113914 Dt. 14-11-88 Mr. H. S. Grewal Rs.15,000 Chq.118585 Dt. 16-2-88 Rs. 1,25,000 Chq.118591 Dt. 9-5-88 Rs. 75,000 Chq.136413 Dt. 24-4-89 Rs. 50,000 Chq.149410 Dt. 27-7-90 Rs. 47,500 Rs. 2,97,500 Balance left by chq. Ss 52,500.00 Cash - Paid full amount April 88 = Nov. 88 = .75 19/11/88 Feb. 89 = 60 10/2/89 June 89 = Jan 90 = 3.35 - Paid full Paid for generator Rs. 22,000 - Chq. No. (illegible) Dt. illegible

2.3 The assessing officer noted on perusal of the above document that Shri Grewal and his wife paid Rs. 5,25,000 by cheque to the assessee HUF and an additional amount of Rs. 3,35,000 was paid in cash. The assessing officer noted that the amount received in cash was not disclosed by the assessee HUF in the return filed. Based on the said document, the assessing officer initiated proceedings under section 158BD in thecase of the assessee HUF for the block period 1-4-1985 to 8-12-1995. In the return filed for the block period no undisclosed income was declared.

2.4 The assessing officer noted that the assessee disclosed sale proceeds of the flat sold to H.S. Grewal at Rs. 5.25 lakhs but the assessee also received an amount of Rs. 3.35 lakhs in cash. Thus, the total sale proceeds from the flat sold to Shri Grewal came to Rs. 8.60 lakhs. The amount received in cash to the extent of Rs. 3.35 lakhs worked out to 40% of the total sale proceeds which the assessee failed to disclose. Having regard to the total sale consideration of sixteen flats at Rs. 70,77,750, he worked out the amount received in cash over and above the apparent consideration Lit Rs. 47,18,500.

The assessing officer confronted 'the assessee with such facts and made known his intention to compute the undisclosed income on account of "on money" received on sale of sixteen flats at Rs. 47,18,500 based on the said document seized. The assessee HUF in reply submitted that the said document has no connection with the assessee regarding the remark "cash paid full amount" and it does not say anything regarding the payment to whom and for what purpose. It was contended that the presumption made that all the entries in the said document relate to the sale of 1 fats is not correct. It was rather claimed that the document did not relate to the purchase of the said flat. Moreover, the assessing officer had examined certain buyers during the course of regular assessment proceedings and he did not find any excess sale proceeds received. Further during the course of search no unexplained investment was found. Neither any documentary evidence was recovered reflecting the acceptance of "on money". Moreover, the assessing officer has referred to prevailing practice of charging such "on money". Such presumption is based on hearsay and is not correct. The assessee further furnished details of the consideration received on the sale of flat from Shri H.S. Grewal and denied having received any "on money" either from Shri Grewal or say other buyers of flats.

2.5 The assessing officer noted that four payments shown to have beer made by Shri Grewal and two payments by Mrs. Grewal as per the seized document are exactly the same with cheque number, dates and amounts as shown by the assessee HUF in its accounts. By the time Shri Grewal had written the details of payments made against the said flat on the seized document, Rs. 52,500 was still payable to the assessee HUF. Subsequently Shri Grewal paid Rs. 28,250 and Mrs. Grewal paid Rs. 20,000 totalling to Rs. 48,250 on 30-3-1992 as against the amount payable by cheque at Rs. 52,500 as mentioned in the seized document. Thus, the total payment through cheque made was at Rs. 5,20,750 by Grewal to the assessee HUF 2.5 The assessing officer noted that four payments shown to have beer made by Shri Grewal and two payments by Mrs. Grewal as per the seized document are exactly the same with cheque number, dates and amounts as shown by the assessee HUF in its accounts. By the time Shri Grewal had written the details of payments made against the said flat on the seized document, Rs. 52,500 was still payable to the assessee HUF. Subsequently Shri Grewal paid Rs. 28,250 and Mrs. Grewal paid Rs. 20,000 totalling to Rs. 48,250 on 30-3-1992 as against the amount payable by cheque at Rs. 52,500 as mentioned in the seized document. Thus, the total payment through cheque made was at Rs. 5,20,750 by Grewal to the assessee HUF 2.6 The assessing officer further noted that after the payments recorded in cash in the seized document Rs. 22,000 was paid by cheque for generator installed in the building. Besides this, there are no other transactions recorded in the seized document. The assessing officer noted that along with the said cash payments, the words "paid full amount" are written twice once against the word "cash" and another against the total payment of cash of Rs. 3.35. The entries made therefore leave no scope for any doubt that the same have been written in relation to any transactions other than the purchase of flat by Shri Grewal from the assessee HUE This document is thus a clinching evidence of payment of cash of Rs. 3,35,000 against the purchase of flat by Shri Grewal to the assessee HUF over and above the apparent consideration paid through cheque and duly disclosed by the assessee HUE 2.6 The assessing officer further noted that after the payments recorded in cash in the seized document Rs. 22,000 was paid by cheque for generator installed in the building. Besides this, there are no other transactions recorded in the seized document. The assessing officer noted that along with the said cash payments, the words "paid full amount" are written twice once against the word "cash" and another against the total payment of cash of Rs. 3.35. The entries made therefore leave no scope for any doubt that the same have been written in relation to any transactions other than the purchase of flat by Shri Grewal from the assessee HUE This document is thus a clinching evidence of payment of cash of Rs. 3,35,000 against the purchase of flat by Shri Grewal to the assessee HUF over and above the apparent consideration paid through cheque and duly disclosed by the assessee HUE 2.7 The assessing officer also noted that Shri Grewal is a business associate of the assessee HUF being a major shareholder in M/s. Arc Horn Global System Pvt. Ltd. and partner in M/s. Arc Horn Leasing Co. for a long time and despite being business associate, the assessee HUF has taken cash payment of Rs. 3.35 lacs from Shri Grewal from sale of flat as ."on money". The flat sold to Shri Grewal is no better than that sold to others. He also noted that Shri Grewal spent about Rs. 75,000 on improvement of the flat after its purchase. He further noted that even after inclusion of the cash payment received the sale rate worked out to about Rs. 400 per sq. ft. Dharamchand Mansion is situated in the heart of city of Jamshedpur and is the best commercial and residential area. The assessee HUF has shown the sale of flats of Rs. 225 per sq. ft. He also noted that the cost of construction shown at about Rs. 175 per sq. ft. has been found to be reasonable by the department. With these observations, the assessing officer computed the undisclosed income on account of 'on money" received on sale of 15 flats at Rs. 45,53,134 spread over various years as per the details below:

2.7 The assessing officer also noted that Shri Grewal is a business associate of the assessee HUF being a major shareholder in M/s. Arc Horn Global System Pvt. Ltd. and partner in M/s. Arc Horn Leasing Co. for a long time and despite being business associate, the assessee HUF has taken cash payment of Rs. 3.35 lacs from Shri Grewal from sale of flat as ."on money". The flat sold to Shri Grewal is no better than that sold to others. He also noted that Shri Grewal spent about Rs. 75,000 on improvement of the flat after its purchase. He further noted that even after inclusion of the cash payment received the sale rate worked out to about Rs. 400 per sq. ft. Dharamchand Mansion is situated in the heart of city of Jamshedpur and is the best commercial and residential area. The assessee HUF has shown the sale of flats of Rs. 225 per sq. ft. He also noted that the cost of construction shown at about Rs. 175 per sq. ft. has been found to be reasonable by the department. With these observations, the assessing officer computed the undisclosed income on account of 'on money" received on sale of 15 flats at Rs. 45,53,134 spread over various years as per the details below:

Assessment year Undisclosed income Undisclosed income 1987-88 3,34,839 1988-89 9,06,735 1989-90 2,35,127 1990-91 20,25,276 1991-92 7,18,730 1992-93 3,32,427 45,53,134 2.8 The assessing officer added therein the income disclosed for the assessment year 1995-96 at Rs. 83,890 thereby computing the total undisclosed income at Rs. 45,37,024 and raised the tax liability thereon @60 per cent Rs. 27,82,212.

2.8 The assessing officer added therein the income disclosed for the assessment year 1995-96 at Rs. 83,890 thereby computing the total undisclosed income at Rs. 45,37,024 and raised the tax liability thereon @60 per cent Rs. 27,82,212.

3. The learned Judicial Member placing reliance on certain decisions and analysing the entries recorded in the seized document has come to the conclusion that the said document seized from Shri Grewal is genuine and it proves that the assessee HUF received "on money" of Rs. 3.35 lacs from Shri Grewal. This can well be said as undisclosed income in the hands of the assessee HUF as contemplated in section 15813(b) [wrongly written as section 158(1)(b)] of the Income Tax Act and the same is liable to be taxed as per provisions of Chapter XIV-B. He, however, did not approve the action of the assessing officer in estimating the undisclosed income on account of money received from other buyers of Rs. 42,18,134 being a guess work without any material evidence in support. He, therefore, sustained the undisclosed income computed at Rs. 3,35,000 thereby granting relief of Rs. 42,18,134.

4. The learned Accountant Member has concurred with the view taken by the learned Judicial Member in sustaining the undisclosed income computed at Rs. 3.35 lakhs. He has, however, dissented from the finding given by the learned Judicial Member on deletion of the remaining addition of Rs. 42,18,134 made on account of undisclosed sale price of other fifteen flats on the basis of the seized document and the reasoning given in support is as under:

That the learned J.M. has already held in the proposed order that the seized document manifestly established the receipt of "on money of" Rs. 3.35 lakhs from Shri Grewal and the same was undisclosed income of the assessee as contemplated under section 158B(b) of the Income Tax Act. The other fifteen flats were part of the same building and the same project. They were also similar in quality and construction. It is also admitted that Shri H.S. Grewal was close business associate of the assessee HUF. The assessee had taken "on money" from Shri Grewal. There is no reason to hold that it would not receive "on money" from other buyers.

That the document seized from Shri Grewal is a reliable and concrete evidence to the effect that the assessee must have received undisclosed sale price from other flat buyers and it was too much to insist for similar documentary evidence about the payment of "on money" from other flat buyers.

That the proof of payment of "on money" for one flat sold to Shri Grewal established the fact that the books of account maintained by the assessee HUF were not reliable and correct and therefore application of provisions of section 145 and estimate of sale price of other flats on the basis of the sale price of flat sold to Shri Grewal was proper and justified.

That the assessing officer while completing the regular assessment for the assessment year 1992-93 accepted the investments made in construction of flats and sale proceeds disclosed. Since the said document establishing payment of "on money" was seized after the original assessment, the finding given therein about sale price of flats is of no consequence.

That it is apparent from the provisions of section 158B(b) that undisclosed income includes any income based on any document representing income which had not been or would not have been disclosed for the purpose of the Act. Clearly the seized document represented the income which had not been or would not have been disclosed for the purposes of the Act. It would be wrong to give a restrictive meaning to the provisions of section 158B(b) and to say that it will cover only the undisclosed sale price in respect of the flat sold to Shri Grewal and that it will not cover undisclosed sale price of other flats for which no such evidence has been found in search. The meaning of undisclosed income given in section 158B(b) is inclusive and wide as is seen from the words "based on other documents and transactions" used therein and it will cover all matters to which the seized document would be relevant directly or indirectly. When the seized document is relevant to the flat sold to Shri Grewal, it would be fairly relevant to the other similar flats sold to other buyers. The as-sessee HUF lias not disclosed part of the sale price charged in respect of sale of other flats as well.

That Chapter XIV-B has to be read along with sections 132, 147. Chapter IV and all other relevant provisions of the Act as is clear from the provisions of sections 158BB, 158BH and 158BC. Thus, the addition which should have been made in the assessment under section 143(3)/147 could be made in the block assessment as well. Thus the entire Chapter XIV-B has to be given a logical just and fair interpretation and not in a manner which denies the Revenue what it could have got under other provisions of the Act. It is thus clearly a case of concealment of income detected as a result of search and seizure under section 132 of the Income Tax Act.

That one of the grounds taken for deleting the addition of Rs. 42,18,134 in the proposed order is that there would be fantastic profit after making such addition. According to the learned A.M. the profit margin differ from case to case and transaction to transaction depending upon various factors. Moreover, the price of land where the building was located must be very high. The land was acquired at low price but its market value of the time of sale of flat was high. Thus the profit of land was also embodied in the profit of sale of flats. If the assessee had sold land only it would have made fantastic profit. Since the land was used for developing and constructing the flats, the profit of land merged with the profit on sale of flats. Combined profit would therefore naturally be much higher.

4.1 The learned Accountant Member has further observed that the assessing officer had a closed mind in determining the total sale price on the basis of 40 per cent "on money". He, however, has not discussed the complete details like the total constructed area, floor, extra work, timing of sale, etc. of each flat. As the sale consideration vary from flat to flat, the constructed area may also be varying. It would therefore be proper and appropriate for determining the sale price per sq. ft. based on the total consideration paid by Shri Grewal. The assessing officer was thus held not justified in determining total sale price taking 40 per cent as payment of "on money" in cash. The proper and just course would have been to determine the total sale price on the basis of the per sq. ft. sale rate discovered from the seized document. Further, necessary adjustments for the floor on which each flat was located, time of sale agreement, extra work, if any, was required to be made. The assessing officer should have also obtained complete details of each flat and then determined the total sale price after giving sufficient and reasonable opportunity to the assessee in the matter.. With such observations lie has restored the matter relating to the addition of Rs. 42,18,134 to the assessing officer for redetermination after complying with the directions given.

5. The learned counsel for the assessee Shri S.B. Gadodia reiterated the submissions made before the lower authorities and further submitted that the undisclosed income has been computed on the basis of a paper found on search at the residence of Shri H.S. Grewal. Though the said paper shows the details of the payment made through cheque to the assessee HUF by Shri Grewal and his wife but there is nothing to show that Shri Grewal made cash payment to the assessee HUF of Rs. 3.35 lacs over and above that disclosed. The said paper did give details of certain figures total of which is 3.35 but there is nothing to show that 3.35 represent Rs. 3.35 lacs and this was paid by Shri Grewal to the assessee HUF So far as these figures are concerned, it is a dumb document and no adverse inference could be drawn therefrom unless corroborated by any independent evidence. According to the learned counsel, there is no such corroborative evidence found to suggest that Shri Grewal made payment in cash of Rs. 3.35 lakhs as "on money" to the assessee HUF for purchase of flat. He also pointed out that Shri Grewal has denied having made any such cash payment to the assessee HUF. Moreover, presumption under section 132(4A) s also not available in the case of the assessee about the contents of the said document as the same was not recovered from the premises of the assessee HUF and in support, he placed reliance on Rama Trading v. First ITO (1988) 25 ITD 599 (Pat) (TM). The assessee has also not admitted having received the said cash amount of Rs. 3.35 lakhs from Shri Grewal. Moreover, though the residence of Karta of HUF was also searched along with others, but no incriminating material relating to the construction and sale of the said flats was found. The learned counsel, therefore, pleaded that the addition made of Rs. 3.35 lacs based on such document is neither justified nor valid.

5.1 As regards the addition made of Rs. 42,18,134 relating to the other fifteen flats sold, the learned counsel has submitted that for determination of undisclosed income, (here is no scope for presumption, surmises and conjectures. The assessing officer cannot presume undisclosed income for assessment purposes under the special provisions of Chapter XIV-B. Under this Chapter only undisclosed income found as a result of search and seizure can be taxed. The scheme of Chapter XW-B does not give powers to the assessing officer to draw presumption in regard to the undisclosed income. In this regard he has referred to paras 18 to 23 of the Tribunal's order in the case of Sunder Agencies (supra).

5.2 The learned counsel has further pointed out that the assessing officer has himself 'observed in para 18 of the assessment order that though this is a case of presumption in the case of other buyers but the presumption is very strong in view of the discussions made. The learned counsel submitted that it is settled law that no income can be taxed as undisclosed income only on the basis of presumption, howsoever strong the presumption may be. As regards the fifteen flats no material evidence was found during search at the business or residential premises of the assessee. In the absence of any document, books of account, material and/or evidence found in the course of search relating to payment of "on money" in respect of fifteen flats, no undisclosed income could be computed for taxation under the special provisions of Chapter XIV-B.

5.3 He has also pointed out that the assessing officer issued notices under section 131/133(6) to the purchasers of fifteen flats to find out payment made, if any, of "on money" for purchase of their respective flats but they have denied having made any such payment to the assessee HUF nor any material evidence was found at the residence of the assessee during the course of search relating to sale of fifteen flats. Moreover, the assessing officer has himself in the assessment order mentioned that such addition is being made only on the basis of presumption. This in fact is outside the scope of Chapter XIV-B and the undisclosed income has to be necessarily based on material evidence found during the course of search. He has further pointed out that under the scheme of Chapter XIV-B the very heavy tax rate of 60 per cent is provided which is abnormally high in comparison to the normal rate of tax payable on regular assessment and for levy of such heavy tax the undisclosed income has to be proved beyond doubt on the basis of the material evidence found as a result of search or gathered during investigation. There being no material evidence found or seized during search, the undisclosed income computed by the assessing officer in respect of fifteen flats is without jurisdiction looking to the plain reading of Chapter XIV-B.

5.4 The learned counsel has further mentioned that regular assessment in respect of the flats constructed was made by the assessing officer and during the course of regular assessment proceedings the purchasers of flats were examined on oath under section 131 and assessment was completed after making detailed scrutiny. The said assessment order is still subsisting which has neither been reopened nor cancelled by the Commissioner. The assessing officer also found the profit shown from the flat sold as reasonable. Having done so. addition could be made under Chapter XIV-B only on the basis of presumption.

5.5 The learned counsel has further contended that the assessing officer had not re-examined the flat owners under section 131 in the block assessment proceedings nor any opportunity was given to the assessee to cross examine them. The presumption of the assessing officer that fifteen flat owners must have paid "on money" is not sustainable in law. In support the learned counsel has placed reliance on the Tribunal's decision in the case of Ravish Kumar Kapadia v. Asstt. CIT (1994) 49 TTJ (Ahd-Trib) 13 wherein it has been held that examination of all flat owners by the assessing officer is essential to ascertain the payment of "on money" made by them and an opportunity to cross-examine the flat owners has to be given to the assessee.

5.6 It has further been contended by the learned counsel that the said paper seized from the premises of Shri H.S. Grewal and his statement recorded cannot be made the basis for computing the undisclosed income on account of "on money" in respect of other fifteen flats because the assessing officer has not examined Shri Grewal in the assessment proceedings of assessee HUF nor any opportunity was given to the assessee to cross-examine him. Unless the said document is brought in the assessment records of the assessee and genuineness of the same is proved by examining Shri Grewal and opportunity given to the assessee to cross examine him, the same cannot be used as evidence against the assessee HUF Moreover, the said paper seized is also uncorroborated so far as the cash payment is concerned.

5.7 The learned counsel has also pointed out that admittedly the plot on which the building was constructed is a lease-hold and the assessee carried out only this construction activity. No such activity was carried out either before or after. The revenue has tried to justify the market rate at Rs. 400 per sq. ft. on the ground that realisation of price of land was also included in sale consideration of flats. He contended that market price of land be taken separately and considered for capital gain tax.

5.8 The learned counsel has also pointed out that the cost of construction shown by the assessee was Rs. 175 per sq. ft. and the sale rate was at Rs. 225 per sq. ft. The assessing officer himself recorded on page 8 of the assessment order that nothing was found during search on the basis of which cost of construction or sale price of flat could be doubted. When the assessing officer has accepted the cost of constriction he should have also accepted the sale price of the flats because nothing was found during search to suggest that any part of the sale price was not disclosed. Moreover, the issue relating to construction of flats and their sale was considered by the assessing officer in his order for the assessment year 1992-93 and therein the average profit calculated at 29.76% was found better in comparison to other builders. If the addition made by the assessing officer is sustained then there would be fantastic profit which cannot be conceived off. Moreover, the building was constructed on lease-hold land.

5.9 The learned counsel has further placed reliance on Income Tax Officer v. Smt. Harbans Kaur (1993) 45 ITD 470 (Del), Miss Lata Mangeshkars case (supra) and submitted that the undisclosed income computed of Rs. 42,18,134 in respect of fifteen flats is neither valid nor justified in the absence of any material evidence found as a result of search or/and the learned Judicial Member for the detailed reasons given in his order was justified in deleting the same.

6. The learned departmental Representative Smt. Anita Sinha on the other hand placed heavy reliance on the order of the assessing officer as well as the order of the learned A.M. She has further submitted that the said document seized from the residence of Shri H.S. Grewal give complete details of payments made by him to the assessee HUF through cheque as well as in cash. He evidently paid to the assessee HUF Rs. 5,20,750 through cheque and Rs. 3,35,000 in cash. The seized document proves beyond doubt that the assessee HUF received cash payment as "on money" over and above the apparent sale consideration from the flat buyers and it is based on such document that the assessing officer has computed the undisclosed income on account of "on money" from the flat buyers. She further submitted that the land on which the said flats were constructed was on lease for thirty years from TISCO and the lease agreement was renewable as per its terms. Looking to the land rate and cost of construction the sale rate worked out based on the seized document at Rs. 400 per sq. ft. is fully justified and looking from this angle, the undisclosed income computed is neither unreasonable nor unjustified. She further relied on the order of the learned A.M. and advanced elaborate arguments in support thereof. She further, placing reliance on the decision of the reasonble Supreme Court in the case of Cit v. Durga Prasad More (1971) 82 ITR 540 (SC), submitted that looking to the documents seized, surrounding circumstances and human probabilities the addition made is justified. However, that needs recomputation as per the observations made by the learned Accountant Member. She, therefore, submitted that the view taken by the learned A.M. is correct and the same deserves to be confirmed.

7. I have carefully gone through the orders of the learned Brothers and have also considered the facts and rival submissions made before me. I find that the assessee HUF acquired the plot of land measuring 12467 sq. ft. on lease-hold from Tata Iron & Steel Co. Ltd., Jamshedpur on 1-3-1961 for a period of thirty years on payment of annual lease rent of Rs. 87.55 with an option to renew the lease for a further period of thirty years. The assessee HUF constructed 18 flats thereon during the period from 1988 to 1991 on the total cost of Rs.64,33,178 as per the details given below:

Assessment year Amount invested 1989-90 Rs. 24,18,829.85 1990-91 Rs. 9,18,487.63 1991-92 Rs. 15,63,250.35 1992-93 Rs, 15,32,611.02 7.1 The assessee got a report from the registered valuer on the cost of construction of property in which the cost of construction was estimated at Rs. 65,31,230. The assessee sold sixteen flats for a consideration of Rs. 70,77,750 as per details given earlier.

7.1 The assessee got a report from the registered valuer on the cost of construction of property in which the cost of construction was estimated at Rs. 65,31,230. The assessee sold sixteen flats for a consideration of Rs. 70,77,750 as per details given earlier.

7.2 The assessing officer considered the profit element in construction of the, property in the assessment year 1992-93. The assessing officer noted that the assessee maintained books of account relating to the construction and sale of flats. He also scrutinised the entries made in the books of account. Entries in the books of account were co-related with the entries in the bank pass book both on credit and debit side. The receipt evidenced by the credit side entries in the pass book on account of the flats sold to various parties and such receipts were found to be through account payee cheques. The flats were sold as per the agreement reduced in writing on properly stamped papers. According to the assessing officer, majority of the purchasers were duly summoned under section 131 of the Income Tax Act on different dates and solemn confirmation of the individual purchasers were duly recorded. Entries in the books of account were correlated with the entries on the credit side of the bank pass book and the same were further cross-checked for reference to the investigative process under section 131 of the Income Tax Act. The assessing officer found no discrepancy relating to the receipts shown oil account of sale of flats. The assessing officer also noted that entries on the debit side were also verifiable from the bank pass book and were further substantiated by subsidiary evidence in the form of bills and vouchers. The assessing officer, therefore, found the construction account prima facie as correct.

7.3 The assessing officer in the assessment order for assessment year 1992-93 also noted that net profit rate for different assessment years on the project was as under:

Assessment year Net profit rate Net profit rate 1989-90 21.6% 1990-91 23.8% 1991-92 11.11% 1992-93 50.7% 7.4 The average profit rate for all the years worked out to 29.7 per cent. The assessing officer noted that the net profit rate disclosed was reasonable as compared with comparable cases of similar nature. Copy of the assessment order from the assessment year 1992-93 referred to above, is placed at pages 1 to 11 of the paper book.

7.4 The average profit rate for all the years worked out to 29.7 per cent. The assessing officer noted that the net profit rate disclosed was reasonable as compared with comparable cases of similar nature. Copy of the assessment order from the assessment year 1992-93 referred to above, is placed at pages 1 to 11 of the paper book.

7.5 I also note that the total built up area is about 36,610.20 sq. ft. and the parking space on the ground floor at 3566 sq. ft. It is also noted that the super floor area in each flat was at 1400/1500/2100sq. ft. and accordingly, consideration received varied.

7.6. The department conducted search at the business as well as residential premises of Shri N.D. Kamani. H.S. Grewal, Sanjeev Kapila and members of their family on 8th December, 1995 and during the course of search the aforesaid document was found and seized from the residence of Shri H.S. Grewal. No search was conducted in the case of the assessee HUF there being no separate search warrant issued. However, search as mentioned above was carried at the residence of Shri N.D. Kamani, Karta of the HUF It is not in dispute that no incriminating evidence was found and seized from the residential premises of the Karta of the HUF Shri N.D. Kamani during the course of search. The assessing officer based on the said document seized from the residence of Shri H.S. Grewal initiated proceedings in the case of the assessee HUF under section 158BD of the Income Tax Act.

7.7 As per the said document, the assessee received payment through cheque from Shri Grewal of Rs. 5,20,750 as per the details of payments recorded therein. The entries made in the said document of Rs. 5,20,750 are verifiable from the books of account of the assessee HUF Further, Shri Grewal also paid Rs. 22,000 through cheque of the assessee HUF for generator and the payment received on this account has not been denied by the assessee HUF In between the entries of payments through cheque of Rs. 5,20,750 and payment for generator of Rs. 22,000 through cheque there are entries in the said document as per details given of cash payment of 3.35. Shri Grewal in the statement recorded confirmed that 3.35 figure is in lacs. When first set and last set of entries through cheques are verifiable from the books of the assessee HUF, the cash payment entries have to be taken as correct, the same being part of the same document. This document has thus been considered and found to be genuine. Though Shri Grewal has not admitted having made cash payment of Rs. 3.35 lacs to the assessee HUF and the assessee HUF has also denied having received such cash payment but based on the aforecited document, the addition made to the extent of Rs. 3.35 lacs on account of undisclosed income in the hands of the assessec HUF has been sustained by the learned Judicial Member with which the learned Accountant Member has also concurred.

7.8 Thus the controversy before me for consideration relates to the undisclosed income computed of Rs. 42,18,134 on account of "on money" alleged to have been received from the remaining fifteen flat buyers. The assessing officer based on the aforecited document held the view that the assessee HUF received 60 per cent of the sale consideration of each flat through cheque and 40 per cent was taken in cash as "on money" which has neither been accounted for in the books of account nor disclosed to the departments for taxation. According to the learned counsel, the buyers were summoned under section 131 during the course of proceedings for the assessment year 1992-93 and none of them admitted having paid any "on money" to the assessee HUF. The assessing officer rather accepted the book results wherein cost of construction of the building as well as the sale consideration of the flats were accounted for. During the course of search no incriminating material was recovered either from the assessee HUF or from its Karta. Further, during the course of block assessment proceedings also the assessing officer called upon the flat buyers under section 131/133(6) of the Income Tax Act and none of them gave any damaging evidence. He also referred to the confirmation filed by Smt. Varsha Gandhi who purchased one of the flats and the same is placed at pages 25 and 26 of the paper book. She confirmed that she made payment for the flat purchased at Rs. 3,66,500 through cheques as per details given therein. She has also made a reference to the summons under section 131 from the assessing officer during proceedings for the assessment year 1992-93 and explanation recorded thereof on 25-3-1993. Moreover, I was given to understand that the department has not taken any action in the hands of' said fifteen flat buyers whereas action has been taken in the case of Shri H.S. Grewal based on the said document. The position so stated by the learned counsel has not been disputed or controverted by the learned Departmental Representative. It is thus evident from the records that there is no evidence gathered by the assessing officer as a result of search or through investigation direction or indirectly to establish that the said fifteen flat buyers paid "on money" at 40 per cent of the total consideration or the assessee HUF received such "on money" from the said fifteen flat buyers.

7.9. In Sunder Agencies' case (supra) it has been held by the Tribunal that it is beyond power of the assessing officer to review assessments already completed unless some direct evidence come to the knowledge of the department as a result of search which indicates clearly factum of undisclosed income. In the present case the only evidence found as a result of search was with regard to cash payment of Rs. 3.35 lacs made by Shri H.S. Grewal to the assessee HUF over and above the apparent consideration paid at Rs. 5,20,750 through cheque and the undisclosed income computed based on this evidence has been sustained but so far as other fifteen flats are concerned there is no material evidence found during search proving receipt of "on money" from the buyers. Moreover, in the assessment completed under section 143(3) for the assessment year 1992-93 the assessing officer has already accepted the accounts relating to the said fifteen flats and there being no material evidence found during the course of search it is beyond the power of the assessing officer to review the position already accepted.

7.10 The assessing officer has computed the undisclosed incomerelating to the said fifteen flats at Rs. 42,18,134 only on presumption that the assessee HUF might have received "on money" from fifteen flat buyers also when he has taken Rs. 3.35 lacs as "on money" from Shri H. S. Grewal looking to the location and there being prevalent practice of receiving "on money" in property transactions. Thus, the undisclosed income computed is solely based on presumption and not on any concrete material. The Tribunal in the aforecited case of Sunder Agencies has also field the view that scheme of Chapter XIV-B gives no power to the Revenue to draw presumption in regard to undisclosed income. Further, in the case of W.D. Estate (P) Ltd. (supra) the addition sustained by the Commissioner (Appeals) partly influenced by a report of the Finance Ministry wherein a notorious practice of payment of black money in real estate transaction in metropolitan city of Bombay was discussed, was deleted by the Tribunal treating the addition being on hear say evidence.

7.11 Another question that needs consideration is whether the undisclosed income could be estimated on account of "on money" from fifteen flats buyers based on the said document recovered from Shri H.S. Grewal invoking the provisions of section 145 of the Income Tax Act. Section 145 provides the method of accounting. According to this section income chargeable under the head "Profits and gains of business or profession "or 1ncome from other sources" is to be computed in accordance with the method of accounting regularly employed by the assessee. When accounts are correct and complete but method employed is such that income cannot properly be deducted therefrom, computation is to be made on such basis, and in such manner as the assessing officer may determine. Where the assessing officer is not satisfied about correctness or completeness of accounts, or where no method of accounting has been regularly employed, the assessing officer is empowered to make assessment in the manner provided in section 144. As mentioned above, the assessing officer while completing the regular assessment for the assessment year 1992-93 has accepted the books of account maintained as correct. However, the document seized from Shri H.S. Grewal did indicate that the assessee received Rs. 3.35 lakhs in cash as "on money" on sale of flat to him and this amount was not accounted for in the books of account. It could, therefore, be said that so far as the said amount of Rs. 3.35 lakhs is concerned the books of account maintained were not correct and complete and the assessing officer could resort to assessment of income estimate invoking the provisions of section 145 of the Income Tax Act hut I such an action could only be taken at the most while completing the regular assessment. Admittedly the present proceedings involved ate block assessment proceedings undei Chaptei-XIV-B of the Income Tax Act and not the regular assessment proceedings. It is also mentioned here that Chapter XIV-B is a code in itself providing for special procedure for assessment of search cases and as per sub-section (2) of section 158BB, in computing undisclosed income for the block period provisions of sections 68,69,69A, 69B and 69C may be applied but nowhere it is provided in this Chapter that provisions of section 145 would be applicable in computing the undisclosed income in the block assessment and there being no such provision made no undisclosed income could be computed on estimate basis invoking the provisions of section 145 based on the said document relating to the flat solds to Shri H. S. Grewal in respect of remaining fifteen flats sold to others. Further, when specific addition is made based on the said document, there could be no addition made on estimate basis based on the same documents.

7.12 As regards the question whether such addition could be made in the normal course as per provisions of section 147, read with section 148, of the Income Tax Act, it is mentioned that section 147 provides that if the assessing officer had reason to believe that any income chargeable to tax has escaped assessment for any assessment year he may, subject to the provisions of sections 148 to 153 assess or re-assess such income and also any other income chargeable to tax which has escaped assessment and which comes to his knowledge subsequently in the course of proceedings under this section or recompute the loss or the depreciation allowance or any other allowance, as the case may be for the assessment year concerned. Thus, for assessing an escaped income under section 147 the assessing officer must have reason to believe that any income chargeable to tax has escaped assessment. So far as the flat sold to Shri H.S. Grewal it is established from the seized document that cash of Rs. 3.35 lacs was paid to the assessee HUF over and above the apparent consideration and based on such evidence action under section 147 could validly be taken. However, there is no such material evidence found during the course of search about the "on money" paid by the remaining fifteen flat buyers to the assessee HUF or the assessee HUF receiving any "on money" from therein. The assessing officer during the course of regular assessment proceedings for the assessment year 1992-93 examined the flat buyers under the provisions of section 131 of the Income Tax Act but no incriminating material came on record from their cross-examination. Further, during the course of block assessment proceedings also the assessing officer again made an effort to ascertain from the remaining fifteen flat buyers the "on money" paid, if any, to the assessee HUF by way of summons under section 131 or, enquiry letters under section 133(6) of the Income Tax Act but to no restilt. The search conducted at the premises of the Karta of the HUF also did not reveal the fact of "on money," received if any from the said fifteen flat buyers. Further, the document seized from Shri Grewal no doubt raised the presumption that the assessee HUF might have similarly received "on money" from the other flat buyers but the presumption howsoever strong may be, cannot take the place of evidence or is no substitute of evidence. This should have however prompted the assessing officer to make deep and proper enquiry/investigation but as is evident from above, the investigation/enquiry made by the assessing officer from the other fifteen flat buyers has not produced any result in the direction of proving that the assessee HUF received any "on money" from other flat buyers also. In this view of the matter, no action could be taken under section 147 to make any addition to the income declared on account of the fifteen flats sold.

7.13 According to the assessing officer, the assessee HUF sold flat to Shri Grewal for a total consideration of Rs. 8.60 lacs as per the seized document and the per square feet sale rate on this basis comes to Rs. 400 whereas the sale rate charged from other flat buyers is Rs. 225 per sq. ft. The flats are claimed to be situated in a very good locality and the quality of construction of flats sold to other buyers was not different from that sold to Shri H.S. Grewal. It is also noted that the assessee has shown the cost of construction approximately at Rs. 175 per sq. ft. Though the profit rate varied from year to year as per details given above, the average profit rate comes to about 29 per cent. The sale rate as worked out at Rs. 400 per sq. ft. in the case of Shri H.S. Grewal claimed to include element of land cost and looking to that the value worked out at Rs. 400 per sq. ft. was fairly reasonable. It is pointed out in this context that the land on which these flats have been constructed was taken on lease by the assessee HUF from TISCO in 1961 for a period of thirty years on annual lease rent of Rs. 87.55. Lease period expired in March 1991 and according to the learned counsel the lease has not been renewed for a further period. Most of these flats were agreed to be sold during the period from 1987 to 1990 and at that time there was no certainty that lease agreement shall be renewed beyond 1991. Under such circumstances, the assessee HUF could not get substantial price for the land while agreeing to sell the flats.

7.14 On due consideration of all the facts and circumstances discussed and the ratio of various decisions cited, I agree with the view taken by the learned J.M. that the undisclosed income commuted of Rs. 42,18,134 in respect of the remaining fifteen flats sold is not justified and the same has been rightly deleted.

8. The matter now shall go to the regular Bench for decision on the basis of majority opinion.