Jaya S. Shetty v. Assistant Commissioner of Income-tax

Per J.K. Verma, AM - Appellant is an individual. Search operations under section 132(1) of the IT Act, were commenced in his case at various places on 30-10-1995 and continued upto 20-12-1995. The assessee filed a return of "undisclosed income" under section 158BC at Rs. 31,96,963 on 23-9-96. The Assessing Officer completed the assessment on 31-12-1996 on a total "undisclosed income" at Rs. 4,52,27,690 and determined the tax payable at Rs. 2,71,36,614. Aggrieved by this order of the Assessing Officer, the assessee has come in appeal to the Tribunal. The assessee has taken three additional grounds before us. Of these additional grounds, the first one is challenging the legality of the assessment, claiming the order to be time barred and invalid. Ground Nos. 2 & 3 are stated to be clarificatory in respect of original ground Nos. 16 and 31. Being legally permissible, the ld. Departmental Representative had no objection to the admission of the additional grounds of appeal and hence, we proceed to decide this appeal after hearing the ld. counsel for the assessee and the ld. Departmental Representative.

2. The first objection taken by the Id. counsel for the assessee is that the assessment is time-barred. He submitted that in this case the authorisations for searches at various places i.e. business premises of the assessee, his residence in Bombay and in his village were issued and "executed" on 30-10-95. He pointed out that as per section 158BE, the order has to be passed before the end of one year from the end of the month in which the last of the authorisations issued under section 132(1) (which is applicable to this case) was "executed". Thus, this assessment should have been completed latest by 31-10-1996. But since it was completed on 31-12-1996, the order is barred by limitation and hence, it has to be cancelled.

3. The ld. counsel did not press ground Nos. 1 & 2 of the original grounds and hence, they are dismissed.

4. Before starting with each ground of appeal separately, the ld. counsel argued that the assessments in the case of searches conducted between 30-6-1995 and 1-1-1997 had to be completed exclusively as per the procedure prescribed under Chapter XIV-B of the IT Act. He referred to section 158BB(1) and submitted that according to this sub-section the "undisclosed income" had to be assessed "on the basis of evidence found as a result of search or requisition of books of account or documents and such other material or information as are available with the Assessing Officer". . . . The ld. counsel argued that this meant that while framing an assessment order under this Chapter there was no scope for the Assessing Officer to take resort to "hypothecation" or "estimates" or inferences on the basis of his own perceptions. He claimed that if this basic test is applied, there remains no basis whatsoever for the imaginary additions made by the Assessing Officer when the assessee himself had filed a return showing more than Rs. 31 lakhs as his "undisclosed income".

5. In this background, the ld. counsel explained, with reference to ground No. 3 (a) that the business of the assessee is to run a vegetarian restaurant at Nana Chowk, Mumbai called Hotel Shri Krishna. The assessee had not filed return of income for assessment years 1994-95 and 1995-96. Prior to that assessee was being regularly assessed to tax on substantial income. He referred to p. 39 of the paper book which shows assessee’s drawings between assessment years 1986-87 and 1994-95 at about Rs. 2.27 lakh besides other income and hence, if a cash of Rs. 55,960 was found in search at his residence, it was too petty, an amount to be considered as unexplained and as assessee’s undisclosed income. He prayed that this be deleted.

6. Similarly, the silver articles which were valued at Rs. 66,625 by the Assessing Officer at present prices, should have been considered in the background of assessee’s income and assessee’s financial status. In spite of that the assessee himself had surrendered Rs. 25,000 and hence, no addition should have been made.

7. In ground No. 4 the assessee has objected to the addition of Rs. 1 lakh on the basis of 2 blank hundi papers. He referred to pp. 67 and 68 of the paper book, which are the photo copies of those papers. He pointed out that though an amount of Rs. 50,000 is written on each of them, assessee’s signatures are only on the side. Both are undated and do not contain either the name of the lender nor the borrower and hence, Assessing Officer had no basis to presume that they represented loans given or taken by the appellant and represented assessee’s undisclosed income.

8. Similarly, he argued, that the addition of Rs. 3,18,305 (challenged in ground No. 5) was made on the basis of a "shred" of paper found during the course of search (p. 69 of paper book). He pointed out that it only contains date 30-9-1995, "monthly balance" written in Kannad "Bala" which according to Shri Raheja means "Balance" 3,18,305; exp. 2,08,152. Below this is figure of 1,10,153 and below that again there is figure of 79,928. He stated that such pieces of papers were not too unusual to be found in restaurants and could not be ascribed to be assessee’s account. Secondly, it showed only subtractions and no additions. Thirdly, it was a ‘dumb’ document and could not be the basis of such huge additions. He referred to the Tribunal decision in the case of Ashwani Kumar v. ITO [1991] 39 ITD 183 (Delhi) where it is held that no additions can be made on the basis of such dumb pieces of papers. He asserted that his paper also neither bears the name nor signatures of assessee nor is it in his handwriting. He further referred to the decision in the case of Asstt. CIT v. Shailesh Shah [1997] 63 ITD 153 (Bom.) where a similar view has been taken. This paper also does not contain a suggestion that these were assessee’s transactions or assessee’s income or investments. He also referred to the decisions of the Tribunal in the cases of Raj Pal Singh Ram Autar v. ITO [1991] 39 TTJ (Delhi) 544 and Brijlal Roopchand v. ITO [1991] 40 TTJ (Indore) 668 which have consistently held that a piece of paper just containing some figures without names, cannot be the basis for additions to assessee’s income. In any case, they raise a rebuttable presumption and in assessee’s statements recorded during the search, the assessee had denied any knowledge of these entries in the loose paper. Therefore, he prayed, these additions should be deleted.

9. Again, ground No. 6 is an objection against addition of Rs. 2,96,655, made on the basis of a loose paper. The Assessing Officer has dealt with it on page 5, para 4.4(c) of his order. Its copy is on p. 70 of the paper book. This paper also has no names, it is not in assessee’s handwriting. He questioned, how the Assessing Officer had interpreted it as "payments" when no such word is written there and when in the case of a payment, the word "paid" is written as on page 71 of the paper book, which is the reverse side of the same paper. Moreover, the argument of the Assessing Officer that if this amount of "1066" is considered to be payments and hence, the other figures are treated as income, is based only on presumptions without any basis, which is not permissible and hence, should be deleted.

10. Ground No. 7 the assessee has objected to an addition of Rs. 6,76,471 on the basis of a paper (p. 78 of paper book) from which the Assessing Officer has inferred that this was assessee’s investment in diamond jewellery. The ld. counsel submitted that assessee had told in his statement and it was clear from the copies of slips on pp. 72 to 77 dated 20-5-1995, 6-5-1995 and 7-9-1995 that these were only estimates taken but the jewellery was not purchased. However, the Assessing Officer had inferred that these were purchases of diamond jewellery, from undisclosed income. He submitted that no item of this description was found anywhere during the searches nor even diamonds of these weight/description were found during the search. The assessee had throughout denied the purchase of these diamonds and jewellery (assessee’s statement recorded during search on 20-4-1995 p. 356 of paper book) and nobody’s name appears on that paper nor is it in the handwriting of assessee nor any member of his family. He also referred to assessee’s reply - p. 60 of paper book, para 3, where he had stated that nothing like that was purchased and nothing such was found and that it was only intended to be purchased for which the estimates were obtained. The ld. counsel pleaded that the addition made in this regard on the basis of presumptions, hypothesis and subjective inferences be deleted.

11. Ground No. 8 is against an addition of Rs. 22,52,219. The Id. counsel referred to page 6 of the Assessing Officer’s order and pp. 79-80 of the paper book. He submitted that the assessee had explained that these were some notings pertaining to assessee’s horse-racing activities and the amount of Rs. 10,762 showed that assessee had to pay that amount to Mr. Champakbhai (the bookie). Similarly, p. 80 showed that assessee had to pay Rs. 11,760. He had also explained that ‘A’ & ‘C’ indicated the type of races and the code of horses. But since the figures written there were 10,762=16 and 11,760=03 the Assessing Officer inferred that this could be no payments in "paisas" in horse-racing. He further inferred that these were coded figures and the true amounts were Rs. 10,76,216 and Rs. 11,76,003 and added these amounts to assessee’s income. The ld. counsel submitted that these figures, as the papers show, are the totals of a large number of figures which may include some charges for taxes which may be in terms of paisa. Otherwise, the ld. counsel argued, if the horse race winnings or payments could not be in paisas, how could they be in such odd figures as Rs. 10,76,216 and Rs. 11,76,003. He further argued that if the Assessing Officer had accepted one part of the statement of assessee that these were horse racing transactions, he could not, in law and on facts, reject the other part of his statement that these figures were Rs. 10,762.16p. and Rs. 11,760.03 p. He, therefore, claimed that these additions deserve to be deleted.

12. Ground No. 9 is regarding an addition of Rs. 5 lakhs. This is dealt with on p. 7 in para 4.3(g) of asst. order. The ld. counsel referred to pp. 81-82 of the paper book in this regard and pointed out that from the figures of 5,00,000 on p. 82, 68,640 had been deducted. From this balance of 6,31,370 is written. On the reverse side of the page 81 paper book figures written are:—

He submitted that the Assessing Officer had mentioned only the figure of 3,71,720 from this side whereas figure of 3,31,360 on the other side is the balance left after 1,00,000 - J.S. Shetty. Hence, it could not be understood how the amount of Rs. 5 lakhs was added to assessee’s income when only 100,000 was written with his name. Further, he questioned how the Assessing Officer could add Rs. 5 lakhs to assessee’s income when there are deductions from that figure including deduction of 100,000 from 5 lakh. Thus, the ld. counsel submitted, it only leads to the inference that Assessing Officer’s decision to add Rs. 5 lakhs to assessee’s income is without any legal basis and deserves to be deleted.

13. Ground No. 10 deals with the addition of Rs. 4,33,500. This addition has been made on the basis of a slip of paper, photocopy of which is given on p. 92 of the paper book. It shows certain numbers written as under as reproduced by the Assessing officer in his asst. order. (We have seen the photo copy but the captions "Amount" and "Date" mentioned by the Assessing Officer in this order are not there nor are the totals "160" and "273.500" given in the order are given in that paper. The original, which is stated to be in the possession of the department, has not been produced before us)—

The Assessing Officer observed that assessee’s financial status is not so small that he shall record Rs. 20 or 10 and hence, he inferred that these are coded figures as at p. 71 of paper book (supra) and 3 zeros are missing and hence, the total amount is 1,60,000 + 2,73,500 = Rs. 4,33,500 which the assessee has failed to explain and hence, this was added to assessee’s income.

14. Shri Raheja referred us to p. 82 and p. 357 of the paper book which is statement of assessee recorded on 24-11-95. He pointed out that in reply to question 21, referred to by Assessing Officer in his order, the assessee had clearly stated that his paper shows the details of expenses. Later on the assessee has filed an affidavit before us, when we requested him to let us know what is written in "Kannada" language. In that affidavit assessee has affirmed, which was emphasised by the ld. counsel even before filing the affidavit, that the word after 25 "Hasin" is in fact "Jhinga" which means shrimps and the next word after "57" is "Kane" which is a kind of fish. The assessee has affirmed that this paper was seized from his restaurant "Shri Krishna" and is not in his handwriting. In this background, Shri Raheja submitted that firstly there is nothing to infer that this paper pertains to assessee’s transactions and even if the worst is presumed against assessee, it cannot be inferred that it is in coded figures and that it represents Rs. 4,33,500 which is assessee’s concealed income. He prayed that this should be deleted.

15. Ground No. 11 is regarding an addition of Rs. 60,000. Shri Raheja explained that cash of Rs. 90,925 was found in search from assessee’s restaurant. This included an amount of Rs. 55,000 which was in a bundle with which a paper was also found on which "Prakash Bhandari" is written. He says the statement of Manohar Shetty son of assessee was recorded during the search and he had explained, in reply to Q. 11 (pp. 333-34 of the paper book) that this money belonged to one Shri Prakash Bhandari and as per the instructions of his father, was to be handed over to Shri Bhandari. Shri Raheja pleaded that this amount which has been added for the sake of addition should be deleted.

16. Ground No. 12 is against an addition of Rs. 4,99,580. During the course of search some documents were recorded from business premises. They included papers pertaining to a commercial-cum-residential building known as ‘Santhana Towers’, which the assessee was constructing in the village Padubidri in Karnataka. These papers indicated that the assessee had planned to charge 60% of the agreed money in white and "40" as "on money". The assessee agreed to surrender the "on money" income for tax when the building was completed. Three of these papers showed "on money" at Rs. 1,78,560, Rs. 1,66,320 and Rs. 1,54,700 from three different persons. The Assessing Officer, added this amount as undisclosed income of the assessee because, according to him the assessee had not disclosed these amounts in his block period return of income.

Shri Raheja referred to a note (p. 44 of paper book) and explained that, in fact, it was a joint venture with one Shri Vasudev Shetty who has 50% share with assessee. Shri Vasudev Shetty had confirmed in his statement dated 19-12-1995 and it was also seen from some papers (pp. 329-330 and 331 of paper book) that in fact this break up was 60% for without furnishings plus 40% with furnishing. He submitted that the statement of one of these persons Shri Ratnakar Suvarna was recorded by the department and he had confirmed that 60% of the amount was for the flat and another 40% was for furnishings. He submitted that copy of that statement has not supplied to the assessee and requested that it could be obtained and verified from the Deptt. Alternatively, he submitted that since the assessee had agreed in his statement to surrender the "on money" on completion of the project, 50% of the "on money" being assessee’s share, may be assessed in his hands on completion of the project, but there was no basis or justification for adding the entire amount in assessee’s income and that too on the presumption that the assessee has received the entire amount in this block period, when there was no material, no basis and no evidence to support this presumption.

17. In ground No. 13, assessee has challenged the addition of Rs. 3,72,600 made by the Assessing Officer on the basis of some loose sheets found in the business premises. On one side of a paper (p.142 of paper book) only "golden crown" is written and some figures and dates are given, total of which is 1,41,450. On other side of paper (p.143 of paper book) there is description of some crockery and its rates. The Assessing Officer presumed that this was purchase of crockery for Hotel Shri Krishna from undisclosed income. On the basis of these two papers showing crockery, the Assessing Officer presumed that assessee had purchased crockery worth Rs. 1,41,450 and Rs. 2,31,150 and added the total of these figures i.e. Rs. 3,72,600 to assessee’s income because he had stated in his statement that he had purchased some crokery for the hotel. Shri Raheja submitted that the assessee did purchase crockery worth Rs. 16,686 + Rs. 31,310 including an air-conditioner which is noted in the inventory of crockery and air-conditioner found at the time of search (pp. 386-87 of PB). He argued that there would be no sense in not disclosing purchases of crockery because assessee would have got 100% depreciation or total deduction for these purchases. He further pointed out that on the paper at p. 386 the name "golden crown" which is another hotel run by assessee’s wife, is given and hence, there was no legal basis for these additions in assessee’s hands.

18. Ground No. 14 challenges the addition of Rs. 88,75,782 based on two pocket diaries found in the restaurants Shri Raheja referred us to pp.145-46 and pp. 153-174 which are photo copies of the pages of these diaries. He showed that each page (of Annexure 8 i.e. pp. 153-174) has one name. Under that there is one line written giving some figures on each page. Annexure A-4 (pp. 145-146) is another diary which has three written pages giving some names and amounts. On p. 1 of Annexure A-4 names Khatri and then Sivram Shetty and some cheque numbers are written. Against each one amount in lakhs are written which total upto Rs. 9 lakhs. Below them is written "cash 1.5" and "8". On p.1 of Annexure 8 is written as under: "(p. 174 of PB)

On the basis of these diaries the Assessing Officer presumed that assessee had taken loans of Rs. 9 lakhs by cheques and Rs. 9.5 lakhs in cash and had advanced loans of Rs. 88,75,782, which he added to assessee’s income. For raising this presumption he mentioned in the order that since the entries in Annexure 4 are in ‘lakhs’ and since assessee cannot have transactions of small amounts of Rs. 1 or 10 or 25, these figures in Annexure 8 also represent "lakhs". The total of pp. 1 to 21 of Annexure 8 is Rs. 88,75,782 because the figure "1831-887" on p. 22 represents "Rs. 18,31,887" which Assessing Officer interpreted as "paid to Bala" and hence, excluded it.

19. In this background, Shri Raheja argued that in the first instance, it was wrong for the Assessing Officer to presume that these diaries belonged to assessee and reflected his transactions and that there was no basis for this presumption. Secondly, there was no basis to presume that these figures represented loans advanced by the assessee. Thirdly, there was no basis to presume that these figures were in lakhs. The only link sought by the Assessing Officer is "Bala". He submitted that assessee’s balance-sheet would show that assessee has been a borrower. Yet, if ‘KP’ on p. 2 of Annexure 8 is a borrower of loan, then ‘JS’ on p. 1 would also be a borrower of loan and if ‘JS’ stands for the assessee i.e. J.S. Shetty, it would mean that assessee has given loan to himself which is a baseless presumption. Moreover, if ‘Bala’ is the person with whom assessee has loan transactions, then his name would appear only on one page and not on 3 pages. Hence, according to ld. counsel, it may at the most mean that it may belong to a person who has lent money to various persons, including "25" to assessee. He referred to p. 34 of paper book which shows assessee’s borrowings at Rs. 21.90 lakhs as on 31-3-94 and at p. 43 at Rs. 33.40 lakhs on 31-3-1995. With reference to Assessing Officer’s allegation that one of the persons mentioned in the diary was assessee’s partner, he submitted that this further proves that the diary belongs to same person who might have given loan to assessee and assessee’s partner. He further argued that ‘Bala’ may mean balances and not the name of any person. Finally, he submitted that the facts and circumstances show that this might be a diary which might have been left in the restaurant by someone, that it could not be correlated with the diary annexed 4 for interpreting that the figures are in lakhs. He prayed that this addition of Rs. 88,72,782 be deleted.

20. Ground No. 15 is against an addition of Rs. 28,11,600 which addition, again according to Shri Raheja, has been made on the basis of some papers which appear to be an exercise in totalling. Photo copies of these papers, which appear to be page of some diary for noting telephone numbers and addresses, are given on pp.175 to 191 of the PB. The originals have not been produced before us, which are stated to be in the possession of the Deptt. He submitted that the assessee was not aware of any ‘Chit Fund’ referred to in the asst. order. He referred to Qs. 2 & 3 (pp. 63-66 of PB) and pointed out that the assessee had clearly reaffirmed in his statement dated 20-12-1996 that the diary did not belong to him or any member of his family or any employee and that he has stated so in his statement before the A.D.I. also. Shri Raheja argued that when this diary was found, the assessee was not in Bombay and if the diary really belonged to assessee in which he had recorded transactions of more than Rs. 28 lakhs, no one can believe that assessee should have kept such diary in the open in the restaurant. He urged that this baseless addition should be deleted.

21. At this stage, the ld. counsel took up the additional ground of Appeal ‘B’ which is against an addition of Rs. 55,16,000, which are cash credits and included in ground No. 16 of the original grounds of appeal. The Assessing Officer has dealt with this issue on p. 13, para 5.3(a) of his order. He referred to pp. 144-145 of the paper book. He submitted that p. 144 has 12 entries, 10 of which give cheque Nos. and full amounts. Assessee has accepted that these are loans received through cheques. Other figures of ‘1.5’ and ‘8’ are not known. He submitted that, as mentioned in assessmemt order itself, assessee has stated during search itself that first entries through cheques are loans taken by him, that this appears to be written by his ex-Manager Ashok Shetty who has left his service.

Similarly, p. 145 records transactions in full figures like "10,00,000", "5,00,000", "10,000", "31,775", "8225". Hence the figures ‘1.5’ and ‘7.5’ written against Ashok could not be cash loans by assessee at Rs. 1.5 lakhs and Rs. 7.5 lakhs, yet, the Assessing Officer treated all the amounts as loans taken by assessee, not proved by him and hence, Assessing Officer has added them (Rs. 53.50 lakhs) alongwith the interest at Rs. 1.66 lakhs i.e. total Rs. 55,16,000 as assessee’s undisclosed income. The ld. counsel submitted that Ashok Shetty was the "Ex-Manager" of "Hotel Golden Crown" which is written on top of p. 144 of paper book which belongs to assessee’s wife Smt. Prafulla Shetty. He referred to assessee’s statement (pp. 62-65) dated 20-12-95 where assessee has firmly and categorically answered the questions and has firmly denied some loans and accepted some loans. He has also stated that these diaries do not belong to him, that these entries were written by Ashok Shetty and that these books were not recovered from any particular place and out of 14 books, 5/6 belong to M/s. Nidhi Wines and had been admitted by them. The ld. counsel submitted that these diaries and the entries therein cannot be ascribed to assessee and his transactions and hence, the addition of Rs. 55,16,000 is to be deleted.

22. Ground Nos. 17, 18 and 20 are in respect of additions made on the basis of DVO’s report. Ground No. 17 is regarding addition of Rs. 3,80,000 in respect of Hotel Shri Krishna Chhaya. Shri Raheja explained that these were new premises taken by assessee in Khar (Mumbai). The search had started on 30-10-1995 the DVO visited the premises in December 1995. Hence, his report is for period after the "block period" which ends on 30-10-1995 as per sec. 158B(a), which is the date of the ‘commencement’ of the search. Hence, no addition can be made on the basis of DVO’s report. On merits also, he explained that this was not a new hotel/restaurant but was taken over by assessee in a running condition and was only renovated by him which is clear from DVO’s report itself at p. 195 (top) of the paper book. He submitted that the assessee had also stated at the time of search itself that assessee had spent about Rs. 1.5 lakhs on its renovation. This was also confirmed from the statement of Wagle the architect (p. 369 of PB).

23. Ground No. 18 is against an addition of Rs. 64,79,000 on the basis of allegations of assessee’s undisclosed investment in assessee’s Bungalow "Shri Krishna Chhaya" at his native village Bantakal, P.O. Shirva, Distt. Udipi in Karnataka. Shri Raheja stated that the Valuation Officer visited this place only on 4-12-96 and the assessment was completed on 31-12-96. This would indicate that there was hardly any time with the Valuation Officer to consider assessee’s reply, to apply his mind, to give his report and for the Assessing Officer to apply his mind before adopting the valuation at Rs. 89,14,000 + Rs. 20,00,000 on his own estimate and making the huge addition of Rs. 64,79,000. He pointed out that assessee’s objections are contained on pp. 27-29 and 31-33 of the PB. He argued that the report of the Valuation Officer was only in advisory capacity and not binding on the Assessing Officer; yet, the Assessing Officer had adopted the valuation without considering assessee’s objections and has simply rejected assessee’s explanations. On p. 27 the assessee had objected to the application of the Delhi Schedule rates, but they have been simply brushed aside. He submitted that there was no justification of applying Delhi Schedule rates in a village in Karnataka. In this context, he referred to Tribunal decisions in the cases of Smt. Rekha Devi v. Asstt. CIT [1995] 78 Taxman 30 (JP) (Mag.), Patel Enterprises v. Asstt. CIT 53 TTJ (Bang.) 279, ITO v. Tek Chand [1995] 52 ITD 197 (JP), ITO v. Pitamber Industries (P.) Ltd. [1992] 42 ITD 373 (Delhi) and also in the case of CIT v. Vrindavan Chitra Mandir [1994] 209 ITR 520/ 73 Taxman 673 (All.) where it has been consistently held that the valuation reports based on State schedule rates have to prevail over the reports based on Delhi Rate Schedule and that if the reports of two separate independent valuers are nearer each other, they have to be adopted against higher report based on Delhi Rate Schedule. The ld. counsel further stated that assessee’s investments in properties were recorded in the books of accounts, they are supported by bills and vouchers and were shown in assessee’s balance sheet ending on 31-3-1993. Yet, since the report of the Registered valuer was given estimating higher investment, the assessee had surrendered an amount of Rs. 12.5 lakhs to be assessed as undisclosed income. He further stated that nothing was found in the search to indicate that the assessee had, in fact, made higher investments than discussed. He urged that the additions made on the basis of guesswork by AO/VO should be deleted.

24. Ground No. 20 is against an addition of Rs. 5,27,000 which was made for alleged undisclosed investment in assessee’s apartment. The ld. counsel referred to p. 36 of the paper book where a comparative chart has been given and claimed that if the discrepancies and differences pointed out by assessee are considered, nothing would remain for the additions. He pointed out that assessee had given explanation regarding investments in T.V. and interior decoration, etc. (pp. 360-61). Moreover, the flat belongs to 3 persons and even if there remains something unexplained, the entire addition cannot be made in the income of the assessee.

25. In ground No. 21 the assessee has objected to addition of Rs. 4,48,000 for alleged undisclosed investments in Hotel Shri Krishna. He submitted that the expenses/investments in the hotel were all supported with bills, but the DVO/AO never asked for them. He repeated that DVO’s report is in advisory capacity and the Assessing Officer should have applied his mind. In the absence of this, the addition deserve to be deleted, particularly when here also the expenditure was on renovation (p. 35 of PB) in a running hotel.

26. Ground No. 19 is against addition of Rs. 3,51,000 for alleged undisclosed investment in Santhana Towers (supra). He submitted that it was wrong to infer that assessee had made investment of Rs. 3,51,000 when the details were furnished by Vasudev Shetty, whose statement was recorded by Deptt. He pointed out that pp. 373 to 379 would show that Rs. 91,000 was invested by one Jaya Kalachur Shetty who is a different person, Rs. 6 lakhs by Vasudev Shetty and so on. Assessee had invested Rs. 60,000 by selling timber obtained from demolition of old house and not by sale of old house, as mentioned by the Assessing Officer.

27. Ground No. 22 is against an addition of Rs. 10,81,719. The Assessing Officer prepared a statement of assessee’s investments/expenses and their resources for the block period. He found that assessee had tried to prove the sources of his income/investments in the block period including assessment years 1994-95 and 1995-96. He observed that during search some incriminating documents were found. Hence, he refused to give credit for the withdrawals during assessment years 1994-95 and 1995-96 amounting to Rs. 1,22,719 and Rs. 9,59,000 respectively i.e. Rs. 10,81,719 because assessee had not filed the returns of income for these years. The ld. counsel urged that there was no rational basis for these additions. According to him, firstly no incriminating documents were found in search. Secondly, as per p. 39 of paper book withdrawals were not for personal expenses but for business personal drawings are separate. He argued that when the Assessing Officer was making estimated additions for income, there was no justification for making additions for investments also from the same estimated income. He pointed out that all these withdrawals and investments/expenses are recorded in the books of account found during search and hence, there was no scope for making additions on the basis of these entries. Further, when the Assessing Officer was treating the income for assessment years 1994-95 and 1995-96 as undisclosed income, at least assessee should be given credit for the withdrawals/investments shown from those books of account.

28. Ground No. 23 is against addition of Rs. 5,50,000. Assessee’s mother Smt. Jaljala Shetty had explained to the search party that she had agriculture income which was utilised for the construction of the Bungalow "Shri Krishna Chhaya’ in village Bantakal. The Assessing Officer did not accept that and added this amount also to the income of the assessee. The ld. counsel referred to assessee’s ground No. 18 where allegation of investment of more than Rs. 1 crore in the bungalow was challenged by the assessee. He drew our attention to p. 291 of paper book which is the statement of Smt. Jaljala and pointed out that the lady is 65 years old, she is uneducated/illiterate and had to affix her thumb impression for signatures and, yet, she had given all the details regarding the agricultural activities and income and there was no basis for this addition in assessee’s income. He also referred to p. 297, which is a certificate from the Tehsildar to the effect that her agriculture income was about Rs. 80,000 p.a.

29. Ground No. 24 is against addition of Rs. 4,50,000. The assessee has explained it with the help of purchase deed of the agricultural land which was purchased in 1974. But the Assessing Officer has added it because the assessee had not been showing income from agriculture. The ld. counsel submitted that assessee was under a bona fide belief that agricultural income was not taxable; but since he has proved the source, this amount may not be added to his income.

30. In ground No. 25, assessee has challenged the addition of Rs. 7,79,468 for alleged low withdrawals. Shri Raheja submitted that the assessee had shown his own withdrawals at about Rs. 4 lakhs in 10 years and the husband and wife together had withdrawals of Rs. 7,25,600 in this period. Hence, there was no justification or basis for estimation house hold expenses @ Rs. 20,000 p.m. He relied on the Tribunal decision in the case of Raj Kumar Jain v. Asstt. CIT [1994] 50 ITD 1 (All.) (TM) where it was held that in the absence of material or record for higher expenditure, the household expenses disclosed by assessee had to be accepted.

31. Ground No. 26 is against addition of Rs. 37,45,852. The assessee has a savings account No. 6468 in the Malabar Hill Branch of Syndicate Bank. It showed total deposits of Rs. 54,15,852. According to the Assessing Officer, the assessee could explain the deposits to the tune of Rs. 16,70,000 only and hence, he added the balance as assessee’s undisclosed income. Shri Rajeha referred to p. 304 of the paper book which is the summary of the account and p. 33 of the assessment order. He pointed out that the Assessing Officer had accepted only 6 items in his order including only two loans (total Rs. 5 lakhs) from Khatris. He referred and correlated in great detail the loans and the names and pointed out with reference to pp. 312 to 317 and pp. 319 to 327 of the paper book that all these loans (deposits in lakhs) totalling to Rs. 39,40,000 had been confirmed by the creditors — Khatris, and yet, the Assessing Officer accepted only the last two items and gave no basis for rejecting the others. Shri Raheja submitted that only Rs. 1.45 lakhs in the name of Esszee Marketing & Trading was not confirmed. But if the Assessing Officer had required, that could also be confirmed. The Assessing Officer himself has written that finally the credit balance in this account was only Rs. 5,255 and hence, when assessee’s investments were being added, and when assessee had confirmed all these loans, there was no basis for these additions.

32. Ground No. 27 is against an addition of Rs. 8,87,687 in the bank account in Syndicate Bank at Shirva village. The ld. counsel explained that these were total deposits of Rs. 13,56,687 in this account. The Assessing Officer accepted only Rs. 4.75 lakhs which were transferred from Syndicate Bank, Malabar Hill account and treated the entire balance as unexplained. The ld. counsel submitted that Rs. 4 lakhs were loan from Shetty Motor Stores (p. 43 of paper book) and two amounts of Rs. 1,99,493 and Rs. 1,99,493 was transfer of Rs. 2 lakhs each (after deducting commission) from Bank of India and Bank of Baroda. He submitted that no opportunity was given by the Assessing Officer to explain this and hence, these baseless additions deserve to be deleted.

33. Ground No. 28 is against addition of Rs. 12,00,000 and Rs. 20,00,000 for taking over tenancy rights. The Assessing Officer had made these huge additions on the presumption that assessee had paid these amounts for the transfer of tenancy rights in BMC properties to two sons of assessee viz., Manohar J. Shetty and Mohan J. Shetty respectively. Shri Raheja submitted that both the tenants of BMC had transferred their tenancy rights with the approval of BMC and had stated that they had charged no money and, in fact, Shri R.R. Malsha had even sworn an affidavit and hence, the Assessing Officer could not make additions on the basis of presumptions and on the basis of Newspaper reports, that too in Accommodation Times which cannot be said to be a reputed paper. Further, the Assessing Officer had admitted that these were in favour of assessee’s sons, who were majors, whose statements were recorded, and there could be no presumption that the investment was made by the assessee. Hence, he prayed that these additions should be deleted.

34. Ground No. 29 was not pressed being petty and hence, it is dismissed.

35. Ground No. 30 is against the observation of the Assessing Officer that credits in the name of M/s. Chandrashekhar Hegde Children Education Trust, amounting to Rs. 6 lakhs is not proved. The ld. counsel submitted that the Assessing Officer himself had written that assessee had filed confirmation from the Trust and that this amount is credited in assessee’s Malabar Hill Syndicate Bank account and, yet, he has rejected it only on the ground that the Manager of the Trust was not produced. He submitted that as per the decision in the cases of Nathu Ram Prem Chand v. CIT [1963] 49 ITR 561 (All.) and Munnalal Murlidhar v. Commissioner Of Income-Tax, U.P [1971] 79 ITR 540 (All.), it is the duty of the Assessing Officer to summon the creditor to prove the credits even if the assessee does not specifically request. He submitted, that the Assessing Officer has not made separate addition for this as it was included in deposits of Syndicate Bank which were added by Assessing Officer. Yet, he submitted that in this background there remained no basis for rejecting the source of deposits in that bank account and hence, this should be one more reason for deleting the additions made on account of deposits in the bank account.

36. The additional ground ‘C’ against an addition of Rs. 7 lakhs in the summary of addition on p. 38 of the assessment order. The Assessing Officer has added this amount merely with the observation "Towards investment in flat No. 201". Shri Raheja submitted that there was no discussion in the assessment order on this issue. However, he explained earlier a reference was made to this flat. He submitted that it belonged to assessee’s brother, his nephew and niece were staying there and the statement of Ashok Shetty son of Krishna Shetty was recorded on 30-10-1995, that Shri Ashok Shetty had confirmed that the flat belonged to his father. Again, assessee had also confirmed in his statement dated 15-11-1995 that his brother Krishna Shetty had invested Rs. 5 lakhs in that flat. Hence, there was no basis for this addition.

37. Ground No. 31 is general regarding summary of additions of Rs. 2,02,71,726.

38. In ground No. 32 assessee has objected to the fact that besides the above mentioned additions of Rs. 2,02,71,726 the Assessing Officer had worked out on the basis of pure guess work that the assessee had generated undisclosed income of Rs. 2,29,94,048 from Shri Krishna Restaurant. He submitted, that the assessee had himself shown GP @ 46% to 58% from this restaurant which was not a posh or high class restaurant and hence, this estimate made by Assessing Officer deserves to be cancelled.

39. In ground No. 33 the assessee has challenged the power of Assessing Officer to estimate income while completing assessment under section 158BC of the I.T. Act. He submitted and argued that the Assessing Officer could not make an estimate; he had to assess the income only on the basis of evidence or material found in search. Further, even in the estimates the Assessing Officer had committed patent errors in as much as, while he had included Rs. 37,45,853 as income in computation of Rs. 2,02,71,726 on p. 38 of the assessment order, he had also included the same amount in expenditure on p. 42. Thus, according to the ld. counsel for the assessee even as per Assessing Officer’s own working the addition could not have been more than Rs. 3,23,47,641 for which the ld. counsel has filed a computation of income which can be assessed on the basis of estimates of income made by the Assessing Officer and on the basis of expenditure and investments estimated by him.

(b) In his reply the ld. Departmental Representative, while dealing with assessee’s assertion that the assessment was time barred referred to section 158BE and para 1 of assessment order. He pointed out that the search continued till 20-12-1995 and hence, according to section 158BE, the assessment could be completed by the end of December, 1996, i.e. by 31-12-96. Since the assessment had actually been completed on 31-12-96, it could not be said to be barred by time. According to him, if a search continues for a long time, every time a fresh authorisation is not issued. If a new warrant is issued, it could be a new search. Hence, when a search is closed a Panchanama is drawn. It was done on 28-12-95 and hence, that is the date when the authorisation was executed. Every time during the continuation of search on the next entry on the next day the same warrant is shown. When Panchanama is drawn at the close of the search, the warrant can be said to be finally executed and thereafter the search party cannot enter the premises without a fresh authorisation. The ld. Departmental Representative relied on Venkataramaiah Law decision and reiterated that the language of Panchanama also shows that it was only on 28-12-95 that the final Panchanama was drawn and the last of the authorisations executed. Hence, according to the ld. Departmental Representative the assessment was completed well in time and is not time-barred. The ld. Departmental Representative has filed before us a copy of Board’s Circular dated 14-8-95 where this issue has been clarified.

40. Regarding the argument of assessee’s counsel that the Assessing Officer could assess income only on the basis of material or evidence found during search, he submitted that according to section 158BB(1), in addition to the words like documents seized, books seized, evidence found, it also mentions "information" as are available with the Assessing Officer. This means that Assessing Officer can make additions on the basis of information also. The ld. D.R. heavily relied on the decision of the Tribunal in the case of Dr. Ashok K. Gandhi (copy filed), where additions made on the basis of low household expenses were sustained though no evidence or proof was found during the search.

41. Regarding reference to the case of Ashwani Kumar ( supra) made by the ld. authorised representative, Shri Jha referred to p.185 of the report where it is written "As regards slip found. . . .". He argued that in that case there was nothing to show that it was found from the physical possession of the assessee. He submitted that in the instant case it was found from two places, viz. (i ) Bed room of his residence (ii) Hotel office of the assessee and not the place where customers sit. This would show that the papers were found from the possession or control of the assessee and hence, the ratio of Ashwani Kumar’s case (supra) does not apply. The ld. D.R. went ahead with the submissions that the legal presumption under section 132(4A) was in favour of the Deptt. and it was for the assessee to rebut it. The assessee could not get away merely by stating that he did not remember the events or details etc. He referred to the decision of the Supreme Court in the case of Sumati Dayal v. Commissioner Of Income Tax, Bangalore. [1995] 214 ITR 801/ 80 Taxman 89 where according to the D.R., the documents were not dumb but barking documents and, yet, the apex court relied on the circumstantial evidence and not on the documents. He submitted that the documents had to be seen in the light of the circumstances and not in themselves. Referring to the valuation report pertaining to ground Nos. 17, 18, 20 and 21 and assessee’s argument that the opinion of the DVO was only advisory, he referred to the case of Smt. Amar Kumari Surana v. CIT [1997] 226 ITR 344/[1996] 89 Taxman 544 (Raj.) where DVO’s valuation was upheld. He also referred to the decision in the case of K. P. Varghese v. ITO [1981] 131 ITR 597/ 7 Taxman 13 (SC) where in the last para of the head-note it was indicated that if the Deptt. has established that some consideration other than the one stipulated in the sale deed had passed, revenue was not required to establish what exact consideration was received. He pointed out that in assessee’s case, he by his own conduct was contradicting what his valuer had said. The assessee had shown undisclosed investment in the Bantkal property at Rs. 6.65 lakhs. But in assessment proceedings further surrendered Rs. 5.50 lakhs. Thus, he surrendered a further amount of Rs. 5.50 lakhs + Rs. 6.65 lakhs = Rs. 12.15 lakhs against the valuation of the bungalow given at Rs. 32.20 lakhs by his valuer. This shows that assessee’s own valuer is not reliable. The ld. D.R. submits that once it is established that assessee had invested more than what was accounted for, then what amount had to be added could be estimated as per decision in K.P. Varghese’s case, here the Assessing Officer had gone by the opinion of the valuation officer. He further submitted during the search no supporting evidence to support the estimate of Registered valuer was found.

42. Regarding the cash credit additions, he referred to the decision in the case of CIT v. Biju Patnaik [1986] 160 ITR 674/ 26 Taxman 324 (SC) and submitted that in assessee’s case nobody was produced to prove the genuineness, credit worthiness of the donors of the creditor trust. He also referred to the Supreme Court decision in the case of Sreelekha Banerjee v. CIT [1963] 49 ITR 112 , Roshan Di Hatti v. CIT [1997] 107 ITR 938 and Commissioner Of Income Tax, U.P v. Devi Prasad Vishwanath Prasad [1969] 72 ITR 194 to support the case of the revenue. Further, referring to the case of CIT v. Jhaverbhai Bihari Lal & Co. [1986] 160 ITR 634/[1985] 21 Taxman 238 (Pat.) at p. 641, he submitted that the burden of proving that earlier additions had been ploughed back, was on assessee.

43. Regarding ground No. 3 he argued that since there were no entries in account books, the Assessing Officer was justified in adding Rs. 55,950 to assessee’s income. Similarly in the absence of any proof the amount of Rs. 66,625 for silver articles was rightly added against Rs. 25,000 declared by the assessee.

44. Regarding ground No. 4 he submitted that two blank Hundies of Rs. 50,000 each bearing assessee’s signatures were found. The assessee stated that he did not remember whose hundies they were. The assessee could have filled any name in them even if his signatures were as a witness, he has to prove who was the drawer and who was the drawee.

45. For the addition of Rs. 3,18,305, challenged in ground No. 5, the ld. D.R. submitted that the papers were found from the bed-room of the assessee and he has already argued for inferences to be drawn from the circumstances.

46. Regarding ground No. 6 pertaining to additions of Rs. 2,96,655 the ld. D.R. referred to para 4.3(a) on pp. 5-6 of the assessment order, which shows that initially the assessee accepted them to be donations and hotel expenses but later on contradicted himself and said that he did not remember what they were and then denied any connection of those papers with assessee or his business. Hence, if they were not found recorded in assessee’s books of account, the revenue was justified in treating it as assessee’s unaccounted income.

47. With regard to ground No. 7 challenging addition of Rs. 6,76,471 for diamond jewellery, he submitted that the slips found from assessee’s bed-room gave the details upto 3 decimal points, making charges, weight etc. and hence, they could not be considered to be mere estimates. Hence, he prayed, no weight should be given to the statement of the assessee.

48. For ground No. 8 regarding income from horse racing, he submitted that the assessee had admitted to participating to horse-races, paper from Champakbhai was found. Hence, the question was only regarding decoding the figures and estimating the income. He submitted that any reasonable estimate could be made.

49. In ground No. 9 the assessee had challenged the addition of Rs. 5 lakhs. But, the ld. D.R. submitted, this was on the basis of a paper found during search and which showed deduction for some expenses. The assessee had failed to discharge the onus of proving that it did not pertain to him and hence, the Assessing Officer was justified.

50. Regarding ground No. 10 against addition of Rs. 4,33,500 the ld. D.R. submitted that the ground taken was different from what was argued by the ld. counsel for the assessee. In the ground of appeal the assessee had only challenged the figure being decoded, but the addition being made was not challenged. The ld. counsel, on the other hand, argued that ‘Kane’ and ‘Jhinga’ represented variety of fish and on that basis the figure of Rs. 4,335 should be accepted. He submitted that the names as Jhinga or Kane hardly mattered. However, it could not be accepted that they represented only petty expenses of Rs. 4,335.

51. Regarding ground Nos. 11, 12 and 13, the ld. D.R. referred to and relied on the assessment order and submitted that the reasons and basis for additions given by Assessing Officer were just and plausible.

52. The ld. D.R. then dealt in detail with ground No. 14 where addition of Rs. 88,75,782 is challenged. He submitted that it was based on a pocket diary found in assessee’s restaurant. He claimed that it was not found lying in the restaurant but was found in the office of the restaurant. According to him, this diary gives names of various persons in abbreviated form like J.S. i.e. the assessee, Bala who is assessee’s joint venture partner, K.P. who is K.P. Shetty. He relied on the arguments of the Assessing Officer on pp. 16-17 of the order, where he has shown that the diary in fact belonged to the assessee and that the figures written there were in coded form. As per the arguments of Shri Raheja that if Bala was a borrower, his name should have not appeared at 3 places, he submitted that it was only a memoranda record and not a formal accounts book and hence, each transaction has to be separately noted. As for the contention that the assessee was a heavy borrower and these could be the borrowings, he claimed that in that case the assessee should have proved the genuineness of these cash credits.

53. Regarding ground No. 15 for addition of Rs. 28,11,600 the ld. D.R. referred to para 5.5 of assessment order and pointed out that no details were furnished by the assessee, although some names could be clearly decoded as P.J. for Prafulla Shetty wife of assessee, Goal for Golden Crown restaurant run by assessee’s wife etc. and hence, in the absence of satisfactory explanations coming from assessee, the Assessing Officer was justified in drawing presumptions against the assessee for making these additions.

54. For addl. ground B regarding Rs. 55,16,000, the ld. D.R. assailed that a perusal of pp. 144-145 of the P.B. filed by assessee would leave no doubt at all regarding the correctness of Assessing Officer’s inferences and this addition. He claimed that the name of Ashok Shetty was written. He is the nephew of assessee and was also assessee’s Manager. The transactions of Rs. 9 lakh received by cheque are admitted by assessee, only the cash of Rs. 53,50,000 and interest of Rs. 1,66,000 is not admitted. He argued that it was a clear document and addition on this basis was fully justified.

55. For ground Nos. 17, 18, 19, 20, 21 and 22, he submitted that he has already given arguments and for the rest he relied on the order of the Assessing Officer. For ground No. 23 challenging addition of Rs. 5.50 lakhs, explained by assessee as his mother’s agriculture income, he submitted that her income from agriculture was not sufficient to maintain such a huge bungalow and servants. There were no accounts or record to support assessee’s claim. Similarly, assessee’s claim for his own agriculture income of Rs. 4.50 lakhs (ground No. 23), the ld. D.R. submitted, was not supported with any evidence, and when the assessee had never been showing income from agriculture in the past, assessee’s claim in this period now could not be accepted.

56. For addition of Rs. 7,79,468 for low house-hold withdrawals (ground No. 25), the ld. D.R. strongly supported the order of the Assessing Officer and relied on the decision of the ITAT in the case of Dr. Ashok Gandhi (copy filed before us) to canvass that when addition of Rs. 4 lakhs in that case could be sustained when the household withdrawals were inadequate, in appellants case also it should be confirmed.

57. With reference to addition of Rs. 37,45,852 challenged in ground No. 26, the ld. D.R. submitted that the Assessing Officer had already been considerate in adding only Rs. 37,45,852 when the unexplained deposits in Bank were Rs. 54,15,852 because he himself gave allowance for the investments in house considered to be covered by withdrawals from these deposits. Similar arguments were taken by the ld. D.R. to support Assessing Officer’s order with reference to ground No. 27.

58. Regarding the additions made by the Assessing Officer for allegedly getting tenancy rights by paying money amounting to Rs. 12,00,000 + Rs. 20,00,000, the ld. D.R. referred to the Special Bench decision of the Tribunal in the case of Cadell Weaving where it had been accepted that huge payments are received on surrendering of tenancy rights. He argued that if the seller was the tenant of the B.M.C., why should he not have surrendered the building back to the BMC instead of the assessee. The only and inevitable conclusion is that it should have been done in return of some substantial amount of money, which in a posh locality like Nana Chowk in Mumbai, would have been the amount estimated by the Assessing Officer. He again referred to the case of Sumati Dayal (supra) and also to the decision in the case of Cit v. Durga Prasad More [1971] 82 ITR 540 (SC) where the Supreme Court had held that the Departmental Officers could not be expected to work with blinkers on their eyes. Ground No. 29 has not been pressed and he had already dealt with contentions pertaining to Rs. 6 lakh loan from the Trust raised in ground No. 30.

59. Ground No. 31 is against the summary of additions with reference to which the additional ground ‘C’ for addition of Rs. 7,00,000 has been taken. The ld. D.R. submitted that house No. 201 was stated to be belonging to assessee’s brother Shri Krishna Shetty. But he is living in the village. No details were given about it when they were asked. The search party found that the wall between the assessee’s house and this house is broken, making the two into one big unit. There is nothing to show who and why broke the wall and met the expenditure. Therefore, the Assessing Officer was justified in inferring that the assessee was the real owner of this house and had made investments in it which were not disclosed. Regarding the estimate of income generated from the restaurant at Rs. 2,29,94,048, he explained that it was for a period of 10 years and looking to the popularity of assessee’s restaurant with regard to the South Indian vegetarian food, was not much. He pointed out that the Assessing Officer had given a very graphic description and had made the estimate in a very logical and scientific manner by working out the total capacity of the restaurant in terms of chairs, expected occupancy and the average amount of bill per person. He submitted that Shri Raheja’s comparison of Menu & prices with other posh restaurants was not proper because that price was in respect of pizzas which may be only side attractions in assessee’s restaurant. For other he relied on the order of the Assessing Officer.

60. In his rejoinder, the Id. counsel first took up the allegations of non-co-operation and non-filing of returns and required information in time. He submitted that the search was concluded on 28-12-1995. The assessee expected that the revenue would supply the copies of various documents, statements etc., seized during the search. But when they were not supplied, assessee made a request to the A.C.I.T. vide letter dated 26-2-1996 (p. 2 of PB) to supply these copies stating in the letter that a request for this had already been made to the ADI, copy of which was enclosed. But nothing was heard. Meanwhile assessee’s father was ill and expired on 27-7-1996. Thereafter, again on 26-8-1996 through an authorised person and again on 29-8-1996 through assessee’s C.A. (pp. 3 & 4) requests were made to supply copies of statements of six persons, including assessee’s, which were recorded during the search. Yet, on 29-8-1996 the Assessing Officer issued the first notice and as recorded on p. 2 of the assessment order, the first inspection was allowed only on 13-9-1996. The assessee supplied all the information which he could supply and there is nothing to show that assessee did not co-operate.

61. For the allegation that no books of accounts were maintained by the assessee, he referred to p. 5 line 5 of the assessment order which says that cash book was not written upto the date of search, which means that books of account were maintained and the show-cause notice also required the assessee to explain the books of account.

62. Coming to the legality and validity of the order the Id. counsel referred to the decision of the Chennai Bench of ITAT in the case of Shanta Kumar c/o Kirti Kumar Kalidas & Co., a copy of which has been filed before us, and drawing our attention to para 9 of that order submitted that the Tribunal in that case had quashed the assessment order in a similar search case because the CIT had not given an opportunity of being heard to the assessee before approving the assessment order as required under section 158BG. So far its legality with the time limit was concerned, the Id. authorised representative argued that "execution" takes place once and not several times, e.g. sale or a person who is executed. He argued that the ‘authorisation’ was ‘executed’ as soon as it was served on the person whose premises were to be searched and thereafter it was only a procedural matter. He distinguished it from section 132(5) where the time limit started from the date of seizure, i.e. 120 days from the date on which the assets etc. were seized and not from the date when the ‘authorisation’ for the search was executed, which has now been introduced by section 158BE. With reference to Board’s circular cited by the Id. D.R. he submitted that this only shows that there was doubt in the minds of departmental authorities also which the Board has sought to clarify, but that circular is not binding on the ITAT. He also referred to provisions of sections 158BA and 158BB and pointed out that there was no basis given by the Assessing Officer for the computation of undisclosed income. He also pointed out that whereas the show-cause notice (p. 13 of PB) dt. 29-8-1996 the Assessing Officer had asked why income from Shri Krishna Vegetarian Restaurant should not be assessed for Asstt. Years 1992-93 to 1996-97, at figures which total upto Rs. 87,54,000 approximately; the Assessing Officer has assessed it at Rs. 4,52,27,690.

63. For the estimate of income from restaurant he clarified that it was renovated in 1993 after which its capacity and income had increased. This would mean that not only the estimate was highly exaggerated but that it could not be uniformly spread over for 10 years period. Regarding places of discovery of various slips of paper diaries etc., he submitted that neither it was correct nor was there any evidence to show that they were found from the room or office or restaurant of the Hotel etc. He referred to assessee’s reply to Qs. 10 & 11 on p.150 of paper book where assessee has specifically told the search party that these books including diaries A-4 and A-8 were discovered from room No. 8 of the 1st floor of the Hotel where people coming from his village to Bombay stay. Regarding presumption under section 132(4A), he submitted that the presumption is against "such person" from whom they have been discovered and not against the assessee. In this case the assessee was not present when these documents, diaries etc., were discovered by the search party. He claimed that no person "K.P. Shetty" is known to the assessee. Regarding the case of Smt. Amar Kumari Surana (supra) he submitted that in that case the valuation was not disputed but in assessee’s case the valuation by the Valuation Officer is being disputed by the assessee. Regarding assessee’s own declaration disproving the correctness of registered valuer’s report, he submitted that it is not correct to say that assessee has admitted so, but it only meant that in order to buy peace, assessee had made the disclosure equal to his amount estimated by the registered valuer. Regarding the loans he submitted that assessee was not required to prove the source of the credit. Once, assessee had given the names, addresses, GIR Nos. and confirmation letters from the creditors, except in one case he had discharged his onus. He submitted that the Assessing Officer in his questionnaire had never required the assessee to produce the parties. Regarding telescoping of income referred to by the Id. D.R. and cases e.g. CIT v. Tyaryamal Balchand [1987] 165 ITR 453/ 32 Taxman 64 (Raj.) he submitted that when assessee himself is surrendering certain amounts as his income from undisclosed sources, which is being assessed as such, there was no scope for making separate additions in respect of those amounts. Regarding additions for jewellery, he submitted, when in the entire searches no jewellery of that description was found, the department could not make additions on presumptions. As for income from races, if one part of assessee’s statement that these transactions were about horse racing, was accepted there was no basis for rejecting other part of the same statement. With reference to additions on the basis of od Diary, where only "1" was written on the page of J.S. Shetty (p. 82 of PB) there was no basis in making additions in respect of entries against various other ‘initials’ in that diary and that too in terms of lakhs of rupees. With reference to assessee’s statement that the crockery was purchased (p. 138) it would mean that the inventorised crockery of about Rs. 37,000 was purchased and not the purchase of crockery of more than Rs. 3 lakhs. With reference to the Tribunal’s decision in the case of Dr. Ashok Gandhi, he pointed out from the copy of the order in that case that there these additions for low household expenses were not seriously challenged, whereas in the instant case he was seriously challenging these additions. As for the unaccounted bank account, he submitted that the bank account was unaccounted but its sources of deposits were accounted for, being from Bombay. Regarding tenancy rights, he submitted that if the tenancy rights carried so much of value, why did BMC, the land-lord, kept quite and not claim more money for permitting the transfer. Moreover, admittedly, the tenancy rights were taken by the major sons of assessee and not the assessee and hence, no addition could be made in the case of the assessee. Regarding flat No. 201, he submitted that Shri Krishna Shetty is assesssee’s brother and the wall was broken to enable brothers to live together. If the Assessing Officer required confirmation it could have been obtained from assessee’s brother.

64. Since the ld. authorised representative had taken up some new points in the rejoinder, the ld. D.R. sought permission to answer them, which was allowed. He referred to p. 351 of P.B. where in reply to Q. 2 assessee himself has stated that he had not maintained books of account for Hotel Shri Krishna. Regarding objection and Chennai ITAT decision quashing the order for no opportunity being given by the CIT before approving the order, he submitted that as per the scheme of the I.T. Act, wherever the legislature intended that an opportunity of being heard should be given, e.g. in penalty provisions or formerly under section 144B proceedings, it was specifically provided in the Act and hence, the Tribunal was not justified in holding that when the Act provided for approval of the orders by the CIT, he was legally bound to give an opportunity of being heard to the assessee and his failure to do so would invalidate the assessment order. He argued that if it were to be so interpreted then when action under section 132(1) (for search) is taken against the assessee, it would imply that before issue of authorisation of a search, the CIT should give assessee an opportunity of being heard, otherwise search proceedings would become invalid.

65. We have carefully considered the detailed and learned arguments advanced from both the sides with relevant references to the very comprehensive paper book, and have perused the orders of the Assessing Officer and the material on record. At the outset we may mention that we would be taking up the first ground of appeal pertaining to the legality of the assessment order at a later stage; first we would deal with various grounds of appeal challenging the additions made to assessee’s declared income in the block period. However, we may observe that we find ourselves in full agreement with Shri Raheja inasmuch as the income under Chapter XIVB has to be computed as per section 158BB (1) on the basis of "evidence found as a result of search or requisition of books of accounts or documents and such other materials or information as are available with the Assessing Officer. . . .". Section 158BA(1) starts with a non-obstante clause and precludes the assessment of undisclosed income in any other manner than "in accordance with the provisions of this Chapter." It is this test which we shall be mainly applying while deciding the correctness justification and the extent of additions made by the Assessing Officer.

66. Ground No. 2 was not pressed. It is dismissed.

67. Ground No. 3(a ) is regarding cash of Rs. 55,950 found at the residence. Taking into account the extent of assessee’s withdrawals in 10 years and the fact that this amount was found at home and may not require entry in regular books of accounts, as none were maintained for home, this addition is deleted.

Similarly, the addition of Rs. 41,625 on the basis of silver-ware valued at current rate deserves to be deleted looking to the status and income of assessee’s family including the agricultural income. Ground No. 3(b) is, thus, allowed.

68. We have looked at the "Hundies". Since neither the name of the drawer is signed or given nor of the drawee, assessee’s signature as witness do not prove that the assessee had either taken or given some hundi loans against them. In fact, even if the assessee fills the name of any person either as drawer or as drawee or both, he cannot enforce recovery of money from anybody. This addition of Rs. 1,00,000 is deleted. Ground No. 4 is, thus, allowed.

69. The addition of Rs. 3,18,305 has been made on the basis of a piece of paper found in the restaurant. A perusal of various statements of assessee and assessee’s nephew Ashok Shetty shows that when the search started at various premises, assessee was not in Bombay but in Tirupathi. Hence, this paper cannot be said to have been found from the possession or control of the assessee. Hence, even if at all the provisions of section 132(4A) are applicable to assessment of income under Chapter XIVB, no presumption to the effect that it should be assessee’s transactions or assessee’s handwriting can be drawn against assessee. Moreover, we agree with the arguments of Shri Raheja that if this paper represented assessee’s transactions in cash, it should not have been left lying in the restaurant and that too when assessee was outside Bombay. Thus, ground No. 5 is allowed. We agree that the case law cited by ld. counsel for assessee is applicable to the facts and circumstances of the case.

70. Similarly, the addition of Rs. 2,96,655 based on a similar paper is deleted for similar reasons are given in para 70 above. Accordingly ground No. 6 is allowed.

71. A careful consideration of arguments of Shri Raheja & Shri Jha lead us to conclude that the addition of Rs. 6,76,471 for alleged investments in diamond jewellery cannot be sustained. The first and foremost reason is that this is the case of a search in which assessee’s residence, including residence in the native village were searched and no jewellery of this description was found. Hence, even if the worst presumption is drawn against the assessee on the basis of the papers found at his place, it may mean that assessee might have purchased the jewellery but might have also sold it and its proceeds, even if undisclosed income this Chapter XIVB, are put in other assets like bank deposits, or investments in buildings etc., which assessee has declared in his returns for the block period or which is covered by other additions made by the Assessing Officer. This addition is, therefore, deleted. Ground No. 7 is, thus, allowed.

72. The addition of Rs. 22,52,219 has been made on the basis of some papers, stated to be papers regarding horse-racing. We agree with Sri Raheja that it would not be legally justified to accept assessee’s statement to the effect that they represent assessee’s horse-racing transactions but not to accept other parts of the statement and to hold that these transactions were written in codes, representing winnings in lakhs of rupees. Even according to the presumption under section 132(4A) if it is accepted that these were written in assessee’s handwriting, although assessee has denied it, yet, the presumption would also be that whatever is written there is correct and there would be no justification in presuming that the figures written as paisas could not be paisas. Even if Assessing Officers inference that horse racing could not be in paisas is accepted, as rightly pointed out by assessee’s counsel, even then the figures are as "1076216" and "1176003" which would again be such odd figures as would not represent horse-race winnings, and that the figures in paisas could be on account of some tax charges on the tickets on percentage basis. Therefore, we hold that though the additions may be upheld as no satisfactory explanation has been given by the assessee, the amount may be put at Rs. 22,522.19P against Rs. 22,52,219 added by the Assessing Officer. Thus, ground No. 8 is partly allowed.

73. In ground No. 9 the addition of Rs. 5 lakhs has been challenged. Whereas we agree with the ld. counsel for the assessee that this whole amount cannot be added in assessee’s hands, we are unable to agree that it should not be related to assessee. The paper has been found at the premises of the assessee and an amount of Rs. 1 lakh is shown deducted from Rs. 4,31,360 against which assessee’s name is written. This would show that assessee had received Rs. 1 lakh which he is not able to explain. Hence, addition of an amount of Rs. 1 lakh is upheld. The assessee gets a relief of Rs. 4 lakhs.

74. The addition of Rs. 4,33,500 has been made on the basis of a paper found in assessee’s Shri Krishna Vegetarian Restaurant. Hence assessee’s explanation that ‘Kane’ and ‘Hasin’ are types of fish and the paper might be showing either the weight or quantity of fish has no relevance, because in that case it should not have been found in the vegetarian restaurant. Moreover, the dates mentioned are also not in quick or regular succession. They are 19-10-1994, 7-2-1995, 16-2-1995, 6-3-1995, 24-3-1995, 22-4-1995. It cannot be believed that the fish would have been purchased at such long intervals. The assessee had admitted in his statement that they might represent some expenses. We are satisfied that this pertains to assessee’s transactions and hence we agree with the Assessing Officer and the ld. D.R. and uphold the additions. This ground is dismissed.

75. Ground No. 11 regarding addition of Rs. 60,000 has to be allowed in assessee’s favour when we consider that assessee’s son Manohar had stated that this amount had to be handed over to someone and the name of "Prakash Bhandari" was written on the paper with which the amount of Rs. 55,000 was found in the bundle. This addition is deleted and the ground is allowed.

76. Next dispute is ground No. 12 is against the addition of Rs. 4,99,580 pertaining to investments and on money charged on sale of flats. We agree with the ld. D.R. that taking into account various similar cases which have come before us and several of which have been reported in various journals, we cannot keep our eyes closed to the practice of charging on money and hence, 40 per cent of the amount has to be considered as representing the "on money". However, since this is stated to be a joint venture with Vasudev Shetty, which facts was confirmed by him and since, according to the ld. counsel for assessee, no assessment of joint venture has been made, we hold that only assessee’s share which is 50 per cent out of this 40 per cent may be assessed as assessee’s income. We have taken note of the fact that assessee had agreed to surrender this amount. We uphold Shri Raheja’s contention that assessee’s agreement was to get his share assessed and his statement should not be read to mean that he had surrendered the entire amount in the joint venture to be assessed as his income alone. This ground is, thus, partly allowed.

77. Regarding the addition of Rs. 3,72,600 for alleged purchase of crockery, we agree with the submissions of the ld. counsel for the assessee that the papers on the basis of which this addition has been made, can at best be said to be some estimates. In fact, as mentioned by us while dealing with the arguments in para 17 of this order, on one side of the paper "Golden crown" is written and some figures totalling to Rs. 1,41,450 is given with some dates. On the other side of the paper some description of different type of crockery items is given with rates. Thus, firstly it cannot be said that these were purchases made by the assessee. Secondly, no such crockery was found during the search. Lastly, even if the worst inferences are drawn, the name "Golden Crown" which is stated to be the restaurant of assessee’s wife, would establish that it does not pertain to assessee. Accordingly, ground, No. 13 is allowed.

78. We have given our anxious consideration to ground No. 14 pertaining to addition of Rs. 88,75,782. We have applied our minds to the rival submissions. While we find a lot of substance in the explanations and arguments given by the ld. counsel for the assessee, we find that the stand taken by the Assessing Officer is not only illogical but inconsistent. On the one hand he has taken the view that the figures of "1831=887" and "370=782" (detail of all entries in Annexure 8 given in the assessment order on p.16) would mean Rs. 18,31,887 and Rs. 3,70,782 respectively, on the other hand, he has sated that all the figures have to be multiplied by one lakh. If this is done, the figures of Rs. 18,31,387 would become Rs. 18,31,88,700 and the figure of Rs. 3,70,782 would become Rs. 3,70,78,200. In that case the total of the transaction, excluding 1831.887 would not be 88,75,782 lakhs but would be about Rs. 4,25,82,200. It would be too naive to believe that a note book having transactions in about more than 22.56 crores would be lying unattended in the restaurant. The more plausible explanation is that "Bala" represents "balance" because except on p. 22, which appears to be the final page, it is written below the amount on page belonging to other persons, e.g. J.S. on p.1 and KP on p. 2. Thus it may show the balance; may be, of payment from or to them. However, since J.S. i.e. assessee’s own name is there, it appears that the diary does not belong to assessee but to someone who has either given money or taken money from assessee. Since Bala ‘17’ is written below ‘25’ and since on the Top of p.1 "42" is written, it indicates that the assessee should have taken a loan of "42" out of which "25" is paid back by assessee and balance of "17" remains. Regarding decoding of these figures, looking to various names like "Francis", "Bajaganna" etc. on one side against whom .20 and .20 is written and that the full figures of Rs. 3,70,782 are written against "Deepakbhai", we infer that these figures should be multiplied with "thousand". In that case, the figure ‘42’ becomes Rs. 42,000 being a loan taken by assessee out of which he returned Rs. 25,000 and balance of Rs. 17,000 is still there. Since the assessee has not explained the source or the genuineness of this loan and since assessee’s name "JS" does appear in the book or diary found from his restaurant, we would hold that the amount of Rs. 42,000 should be added to assessee’s undisclosed income. The balance amount i.e. Rs. 88,33,782 is deleted. Ground No. 14, is thus, partly allowed.

79. In ground No. 15 the assessee has objected to the addition of Rs. 28,11,600 which is again based on some figures found noted in a Diary we find that there is nothing to show that this diary was found from the possession or control of the assessee. Secondly, the assessee has denied it twice, including during the search before ADI also, where he stated that the Diary did not belong to him or any member of his family or any employee. We have already mentioned that the original, which is in the possession of the Deptt., has not been produced before us. From the photo copies, we cannot agree with the ld. DR that its entries clearly prove that they belong to assessee because when we see these photo copies, we do not find them to be so clear except some dates written in a vertical columns and some illegible scribblings. Hence, we are not prepared to accept that these represent assessee’s undisclosed income to the tune of Rs. 28,11,600. We have also taken not of the argument that the assessee was not in Bombay when this diary was discovered. There is nothing to prove the exact place from where it was discovered. We are of the opinion, that this is nothing but a dumb-diary and, in accordance with the ratios of various decisions cited before us, no adverse inference can be drawn against the assessee on the basis of this diary. The addition of Rs. 28,11,600 is, therefore, deleted. Ground No. 15 is allowed.

80. Addl. ground B challenges addition of Rs. 55,16,000. As already mentioned, this is based on 3 pages of a Diary, Annexure A 4. On the one hand assessee has stated that he did not know the various parties like Bihari or Popular Automobiles, but he has owned the loans taken through cheques from Khatris. We would, therefore, uphold Assessing Officer’s view that this diary records the transactions of loans taken by assessee from various parties, only cheque transactions of which are recorded by the assessee in regular books/bank accounts and other loans are unrecorded and unexplained. We agree with the Assessing Officer that when "1.5" and "8" are written as cash and below the figures in lakhs, they are nothing but cash receipts of Rs. 1.5 lakhs and Rs. 8 lakhs respectively.

Hence, this addition of Rs. 9.5 lakhs is confirmed. Similarly, in the absence of any explanation from assessee and in view the exact workings of interest amounts and period of interest noted in full figures the amounts of Rs. 10 lakhs and Rs. 5 lakhs in the name of Popular Automobile has to be upheld.

Similarly, Rs. 3,50,000 in the name of ‘Brother-in-law’ is clearly written and has to be confirmed. However, the remaining 3 entries cannot be interpreted in the same manner. The figure of "3,00,000" on top of p. 3 of Diary is scored out, and even the calculation of "9000" supposed to be interest is scored out. Similarly, below that against "Bihari 15", the alleged figure of interest at Rs. 1,01,250 is scored out to the extent that it makes the figure almost illegible. Below that "paid" is scored out. Further, below that against "Ashok S." it is 1.5 and below that ‘7.5’ is encircled. It has been stated by the assessee’s counsel that this Ashok Shetty was assessee’s Manager and had written these entries. This has not been contradicted by the revenue. In this background, we would hold that first two transactions mentioned above, cannot be inferred to mean that these transactions had materialised. Similarly, we would not believe that Rs. 1.5 lakh or Rs. 7.5 lakhs should have been taken as a loan from assessee’s Manager Ashok Shetty. It is very likely that the cash loans should have been either received or repaid through Ashok Shetty. Consequently, while we confirm the additions of Rs. 9.5 lakhs + Rs. 15 lakhs + Rs. 3.5 lakhs being cash loans in the list and loans in the names of Popular Automobiles and ‘Brother-in-law’ = Rs. 28,00,000 and also uphold the disallowance of interest thereon, we delete the additions of Rs. 3 lakhs + Rs. 15 lakhs + Rs. 7.5 lakhs = Rs. 25,50,000 and the interest thereon. Accordingly, this additional ground No. B is partly allowed. We do not agree with the ld. counsel for the assessee that if the assessee had really taken these loans, he should have accounted for them so as to enhance the cost of his hotel. As stated by the Assessing Officer, if the loans are from undisclosed sources, which the assessee does not want to or cannot disclose, he cannot show them to increase the capital cost of his hotel.

81. Regarding the addition of Rs. 3,80,000 alleged to be investment in the "Shri Krishna Chhaya" restaurant in Khar, we agree with the arguments of Shri Raheja. There is nothing to show that when the assessee has himself declared an investment in renovating running Bar and Restaurant which was taken over by him, the entire expenditure as estimated by the DVO at Rs. 3,80,000 should have been made by the assessee himself in the block period itself. We are of the opinion that the arguments of the ld. D.R. and Assessing Officer cannot be upheld in the absence of any specific evidence regarding the period and the amounts of expenditure, merely on estimate basis. This addition is deleted and ground No. 17 is allowed.

82. Ground No. 18 is against estimated cost of the village bungalow at Rs. 1,09,14,000 by the Assessing Officer and consequent addition of Rs. 64,79,000 as undisclosed income of the assessee. In view of the ratio of decision in the cases cited by Shri Raheja, which we have already mentioned, we agree with him that it would not be reasonable to apply the Delhi Schedule rates in a remote village the address of which is given as under :

Village Bantkal,

P.O. Shirva, Disstt. Udipi, Karnataka.

Moreover, it has been stated that the expenses were recorded in assessee’s books of account and it has been shown in assessee’s Balance - Sheet 1993. We also agree that assessee’s surrender of Rs. 12.15 lakhs to bring its cost at par with the valuation of the two Registered Valuers, should not be interpreted to mean that the cost had not been correctly recorded or that he himself did not trust his valuers. We agree with Shri Raheja that instead of challenging the correctness of valuation of the Registered valuers, it was a better part of discretion to surrender an amount of Rs. 12.15 lakhs, apart from which there should have been no alternative available to the assessee. In this background, in our opinion, it would be reasonable to accept the valuation of the Bantkal Bungalow as estimated by the registered valuers. Of course, the amount which the assessee himself surrendered as his undisclosed income has to be assessed as such. We may also mention that we find no justification for the Assessing Officer’s action to estimate the value of land, statue of deities and other decorations at Rs. 20 lakhs in a village where assessee and his parents had agricultural lands. After having considered all these factors, we are of the opinion that the cost/investment in the bungalow may be accepted as certified by the registered valuers and the addition of Rs. 64,79,000 be deleted. We would also like to re-emphasis what we had stated in para 4 of this order that while assessing the income under this Chapter XIVB, there is little scope for determining the undisclosed income on the basis of presumptions, hypotheses and estimates. In our opinion, the valuation given by the DVO is nothing more than this. There is no such evidence document or information found during search which would entitle the Assessing Officer to estimate the investment in the bungalow at Rs. 1,09,00,000 lakhs against Rs. 44,35,000 declared by he assessee including his declaration of "undisclosed income" invested in it. Accordingly, ground No. 18 is allowed.

83. For similar reasons as are given in para Nos. 82 & 83 above, the estimated additions of Rs. 5,27,000 challenged in ground No. 20 and Rs. 11,46,000 challenged in ground No. 21 for alleged undisclosed investments in renovation of assessee’s residential flat Blue Bird and Hotel Shri Krishna respectively, are directed to be deleted. We may mention that while reaching these decisions we have taken into account the facts mentioned in the grounds of appeal and arguments of Shri Raheja also. Accordingly, ground Nos. 20 and 21 are also allowed.

84. For ground No. 19, we have perused the various documents/statements of assessee and Vasudev Shetty and also the arguments of Shri Raheja already mentioned in the preceding part of this order. The assessee has challenged the addition of Rs. 3,51,000 for alleged investment of assessee in the "Santana Towers". Pp. 373-375 of the paper book show that the investment of Rs. 91,000 was by Shri Jaya Shetty Kalachur, who is stated to be a different person from the assessee. Rs. 6 lakhs are admitted by Vasudev Shetty in his statement. Assessee’s investment remains at only Rs. 60,000 which he has sought to explain with the sale of Timber of his old house. However, no evidence for this claim is produced before us. We would, therefore, uphold the addition to the extent of Rs. 60,000 only. Assessee gets a relief of Rs. 2,91,000. Ground No. 19 is, thus, partly allowed.

85. It is seen that the addition of Rs. 10,81,719 challenged in ground No. 22 is total of two figures - Rs. 1,22,719 for Assessment Year 1994-95 and Rs. 9,59,000 for Assessment Year 1995-96. They were claimed to be assessee’s withdrawals and as at p. 39 of the paper book were stated to be withdrawals for business, and not for personal drawings. The Assessing Officer has added these amounts because the assessee did not file his returns of income for these two years and hence, they could not be verified. We have seen that since assessee had not filed his returns of income for these two years, he has himself treated income of Rs. 7,02,712 for the Assessment year 1994-95 and Rs. 6,31,159 for Assessment year 1995-96 as his undisclosed income as per provisions of section 158BB(1)(c). When the whole income of these years has been treated as "undisclosed income" there is, we feel, no justification, for further adding the amounts withdrawn from the books of account of these years. We agree with Shri Raheja that no incriminating documents, as alleged by Assessing Officer while making these additions have been produced before us and hence, we cannot uphold these additions on the basis of such allegations. Addition of Rs. 10,81,719 is, therefore, deleted. Ground No. 22 is allowed.

86. The addition of Rs. 5,50,000 challenged in ground No. 23, in our view, cannot be sustained. The Assessing Officer has made this addition disbelieving the statement of assessee’s mother Smt. Jaljala Shetty. We find no rational basis for Assessing Officer’s rejection of her statement that she does have agricultural income. We have gone through the statement of Smt. Jaljala Shetty recorded on 30-10-1995 i.e. the day search started. It appears to have been recorded in the village and it cannot be believed that an uneducated lady, 65 years of age, could have been tutored to give such a confident, clear and detailed statement as she has done. In fact, we feel that in the atmosphere and circumstances in which her statement was recorded by the search party, even well-educated and knowledgeable persons should have faltered. Her statements exude confidence and it has to be accepted that she does have agricultural income, the specific details of which she knows. Hence, the addition of Rs. 5,50,000, being her contribution from her agricultural income in the construction of the bungalow in the village etc., has to be deleted. Ground No. 23 is thus allowed.

87. However, assessee’s explanation to exclude Rs. 4,50,000 as his agricultural income cannot be accepted. Even if it is accepted that he did have agricultural income, since he had never disclosed income from agriculture, this amount has to be treated as undisclosed income in terms of sections 158B(a) and 158BB(1). This addition is, confirmed and ground No. 24 is dismissed.

88. Regarding the additions for a unadequate household expenses, while we agree that in Dr. Ashok Gandhi’s case the additions were not seriously contested and in the case of Raj Kumar Jain (supra) there was no material to substantiate the additions, we find that in the instant case the Assessing Officer has brought material and "information", gathered during search, in his assessment order. The description of the life style of the assessee and the expenditure which the assessee and the family should have incurred on two operations of assessee’s wife, would normally lead to the belief that the assessee’s family should be incurring expenses of Rs. 20,000 p.m. However, we notice that Assessing Officer’s description includes these expenses and the education of assessee’s son in the Medical College on the basis of facts as they stood at the time of search. It cannot be said that the assessee should have been incurring similar expenses in all the 10 years of the block period. We have also considered that the price index was much lower in 1985-86 (relevant for Assessment year 1986-87) and should have increased gradually. We would, therefore, consider it reasonable if assessee’s average expenditure for the family is reduced by about Rs. 5,000 p.m. out of which assessee’s shares, as per Assessing Officer’s bifurcation would be Rs. 2,500 on this basis, we would allow a relief of Rs. 3,20,000 to the assessee in round figures. Thus, ground No. 25 is, partly allowed.

89. The next ground No. 26 is regarding addition of Rs. 37,45,852. We agree with assessee’s ld. counsel that the action of the Assessing Officer is not consistent. There is no reason why he should not have accepted the genuineness of the credit in the name of Shri B.K. Khatri, mentioned on p. 304 of the paper book and not on the top of that page. Similarly, when the assessee had given confirmations from all the parties except from Esszee Marketing regarding Rs. 1,45,000, there is no reason why some of them should be accepted while others, several of them from the same group, should not be accepted. We are unable to agree with the ld. D.R. that the Assessing Officer had already given concession to the assessee. The question is not of giving concession but deciding the genuineness of the cash credits hence we order that all the cash credits involved in this amount of Rs. 37,45,852 except Rs. 1,45,000 in the name of Esszee Marketing be accepted as genuine. We would restore the issue of deciding the genuineness of the cash credit of Rs. 1,45,000 in the name of Esszee Marketing to the file of the Assessing Officer to give assessee a fresh opportunity to prove its genuineness and to decide it afresh. Accordingly, while assessee gets a relief of Rs. 36,00,852, the question of deciding the genuineness of cash credit of Rs. 1,45,000 in the name of Esszee Marketing is set aside to be decided afresh. Accordingly, ground No. 26 is partly allowed.

90. Regarding Ground No. 27 challenging an addition of Rs. 4.57 lakhs, we are of the opinion that it would be in the interest of justice if we accept the reasonable suggestion of Shri Raheja that the assessee may be given a fresh opportunity to explain the deposits in the bank account in the Shirva Village, which he has sought to explain before us, as he claims that sufficient time was not given to him to prove it before the Assessing Officer. We, therefore, set aside the order of the Assessing Officer on this issue also with the direction that he shall give a reasonable opportunity to the assessee to prove his case and to redecide the issue afresh according to law.

91. Although ground No. 28 is regarding addition of Rs. 12,00,000 and Rs. 20,00,000, we feel that the order of the Assessing Officer has got hardly any merit in it. The first and foremost factor which closes the issue is that the Assessing Officer has admitted in his order that the tenancy rights of the two concerned properties are in the names of assessee’s two major sons individually. There is no evidence or material on record to establish or even to indicate that assessee has acquired those rights for himself or has made any payments to acquire the rights in the name of his major sons.

In this background, the arguments of the ld. D.R. to the effect that it is a common knowledge that huge amounts are being paid to acquire tenancy rights and his reference to the Supreme Court decisions in the cases of Durga Prasad More ( supra) and Sumati Dayal (supra) lose all their relevance. We, therefore, do not consider it necessary to give our decision on other arguments advanced before us. We hold that these amounts of Rs. 12,00,000 and Rs. 20,00,000 cannot be added in the hands of the assessee on the facts and in the circumstances brought before us. These additions totalling Rs. 32,00,000 are, therefore, deleted. Ground No. 28 is allowed.

92. Ground No. 29 was not pressed and hence, it is dismissed.

93. Ground No. 30 regarding cash credits of Rs. 6 lakhs in the name of Chandrashekhar Hegde Children’s Trust has to be decided in assessee’s favour. The assessee has filed before us a copy of the confirmation of this loan from that Trust (p. 327 of PB) giving its PAN, address and argued that payments have been received through cheques, giving their dates. We agree with the ld. counsel for the assessee that unless there was some material or evidence with the Assessing Officer to hold that the Trust is not genuine or non existent, there was no justification for adding the cash credits to the income of the assessee on the ground that the creditworthiness of the donors of the Trust is not established. Taking into account the case law cited by the ld. counsel and his arguments we delete the addition. Ground No. 30 is, thus, allowed.

94. In Addl. ground No. ‘C’ the ld. counsel for the assessee explained, that assessee has objected to the addition of Rs. 7 lakhs for alleged undisclosed investment in flat No. 201. We find that the contention of the ld. counsel is correct that there is no discussion or basis given for this addition. The Assessing Officer has only written "Towards investment in flat No. 201 Rs. 7,00,000." On this basis alone the addition deserves to be deleted. Yet, the ld. counsel has reimposed his arguments with the material on record to the effect that both assessee and his nephew had separately stated that this flat belongs to Shri Krishna Shetty brother of assessee and father of Ashok Shetty. There is no evidence or material to show that this house was purchased by assessee or is registered in his name. Hence, this addition of Rs. 7,00,000 which has been incorporated in the list of alleged unexplained expenditure on p. 38 of assessment order is deleted. This Addl. Ground No. ‘C’ is also allowed.

95. In our opinion, ground No. 31 challenging the computation of income at Rs. 2,02,71,726 is otiose, and it is not proper to allege that this is "further addition" made to the income of the assessee. We find that it is almost a summary of various additions made by the Assessing Officer with which we have already dealt and allowed relief to the assessee.

Hence, we reject this ground as such and direct that the Assessing Officer shall give effect to our orders on the basis of various items included in this figure and ignore this figure as a separate item. This ground No. 31 is rejected as mentioned above.

96. We have seen that ground No. 32 dealing with estimation of income generated from Shri Krishna Restaurant at Rs. 2,29,94,048 is also otiose because the Assessing Officer has not made addition to assessee’s income on the basis of this estimate. However, since he has ignored this figure on the ground that the figure of Rs. 4,57,79,396 being computation of undisclosed income on expenditure, investments and deposits basis is higher than that figure computed on the basis of "undisclosed income" and higher figure has to be chosen, he is likely to revert to this figure if after the reliefs given by us the figure of computation on the basis of "undisclosed income" becomes higher. We would, therefore, deal with this ground specifically : we may state even at the cost of repetition that not only the language of section 158B(1) and section 158BB(1) is clear but by now a large number of Tribunal decisions have been reported to the effect that the undisclosed income under this Chapter has to be determined on the basis of evidence, documents, material and information found during search. Section 158BA(1) starts with the non obstante clause excluding the operation of all other provisions of the Income-tax Act for computation of income. Section 158BB(2) permits application of provisions of sections 68, 69, 69A, 69B and 69C but not of proviso to sub-clause 145(1) or application of section 145(2). The "information" is not what the ld. DR wanted us to accept i.e. any imaginary or unfounded information which the Assessing Officer may claim Assessing Officer had got; it has to be authentic, reliable and verifiable information. In this background, we find that except for giving the prices of assessee’s own Menu-Card in the Hotel Shri Krishna and that too from the A.C. Room, the Assessing Officer has worked out all other figures on imaginary basis. Not even one of those items like restaurant being a very popular one fully crowded on all days, running from 7. A.M to 1. A.M. in the Morning, average amount of bill per seat etc. is substantiated with any document of piece of evidence or material found during search. We would, therefore, hold that even if the computation of "undisclosed income" on the basis of "unexplained expenditure, investments and deposits" works out to less than estimated income from the restaurant, the income estimated by the Assessing Officer has to be ignored. Thus, while on the one hand we direct that the estimate of income from Hotel Shri Krishna at Rs. 2,29,94,048 be cancelled, on the other we direct that the total "undisclosed income" under Chapter XIVB in assessee’s case shall be assessed on the basis of the provisions contained in that chapter and from the assessment done by the Assessing Officer which is challenged before us there shall be deleted the amounts which have been directed to be deleted by us, and in respect of which relief has been given by us.

97. In the light of what we have mentioned above in para 97 above, ground No. 33 becomes infructuous and is dismissed as such.

98. Now coming to assessee’s objection regarding the legality of the assessment order, we have not been able to agree with the arguments of Shri Raheja. The meaning of "executed" both according to Law Lexicons and simple dictionaries like Concise Oxford Dictionary and Chamber’s Dictionary is to the effect that when a work task, or duty assigned is completed. Thus, in the present context, it cannot be said that the task which was assigned to the Authorised Officer was only to serve the authorisation on the assessee. In our view, the CIT or DI had given a "warrant of authorisation for search" which was executed when the search was completed and that was on 28-12-1995. Hence, the assessment order passed on 31-12-1996 is in time. Similarly, regarding the assessment order becoming illegal because no opportunity was given to the assessee by the CIT before granting approval to the assessment order, we feel that the arguments as advanced by the ld. DR. before us were not advanced before the Chennai Bench of the ITAT. We agree with the ld. DR that wherever the Legislature considered it necessary to provide an opportunity to the assessee, such provisions were incorporated in the IT Act, examples of a few of which have been given by Shri Jha and noted by us in this order. In our opinion, no court, much less the ITAT can add some words in or exclude some words in any section of the Statute when the meaning of the words from that section is clear. Therefore, this objection is also rejected. Similarly regarding the objection of Shri Raheja that while show-cause notice was given for 5 years, the assessment has been made for 10 years, we may state that it is very clear from the scheme of Chapter XIVB of the Act that in a case like assessee’s where a search under section 132(1) was conducted by the IT Department the Assessing Officer is bound to frame the assessment order for a block period of 10 years and it is immaterial for how many assessment years he requires the assessee to explain the details in the first instance. Therefore, this objection is also rejected. However, so far as Shri Raheja’s arguments regarding the basis on which the assessment order Chapter XIVB can be framed is concerned, we have already agreed with him in its order that the assessment can be made only on the basis of any evidence, documents, material or information found during the search. We have, therefore, deleted all such additions which we felt were based on conjectures and surmises or estimates and presumptions not supported by any evidence, documents etc., found in the search. Thus assessee’s objections on legal grounds are partly allowed.

99. Before we part, we would like to put a word of appreciation on record regarding the assistance given to us, by both Shri Raheja, the ld. counsel for the assessee and Shri Jha, the ld. Representative for the Revenue, with their learned and analytical arguments and with their references to the relevant case law.

100. With these observations, we partly allow the appeal filed by the assessee.