Delhi High Court

Om Prakash Suresh Kumar vs Asstt. Cit on 12 May, 2003

Equivalent citations: (2004) 91 TTJ Del 193

ORDER

Phool Singh, J.M.:

All these appeals of the assesseds from the members of one family/group are directed against block assessment completed by the assessing officer vide separate orders dated 30-4-1997, for the block assessment period 1-4-1986 to 14-4-1996, under section 158BC of the Income Tax Act, 1961 (hereinafter referred to as the "Act"). As all these appeals involve common grounds/issues, the same were heard together and are being disposed of by this common order for the sake of convenience.

2. The family tree furnished by the assessed and appearing at p. 104 of the paper book shall show that head of the family was Om Prsakash Agarwal who died on 31-1-1996, leaving behind his wife Bhagwanti Devi, one of the appellants. Om Prakash was having three sons viz. Suresh Kumar Agarwal, Satish Kumar Agarwal and Naresh Kumar Agarwal; out of whom Naresh Kumar Agarwal died as early as in 1983 leaving behind his wife Smt. Laxmi Agarwal who is also one of the appellants. Suresh Kumar Agarwal and Satish Kumar Agarwal are also appellants before us along with Smt. Santosh Kumari wife of Suresh Kumar Agarwal. There was a firm in the name of M/s Om Prakash Suresh Kumar in which Om Prakash and Suresh Kumar were said to be partners. After the death of Om Prakash, Suresh Kumar became the sole proprietor of that firm and M/s Om Prakash Suresh Kumar is also one of the appellants. Suresh Kumar HUF and Satish Kumar HUF were also partners in a firm Healthways Dairy Products (hereinafter referred to as "HDP"), which was constituted with effect from 1-4-1990, and other two partners of the firm were Rajendra Singh HUF and Surendra. Singh who were from Paras group. All these four were having equal shares of 25 per cent and deriving income from manufacturing and sale of dairy products in the factory of HDP located at Gulawati and its head office was at Connaught Circus, New Delhi.

3. On 14-4-1996, there was a search operation under section 132(l) of the Act, carried out by the department in Om Prakash Suresh Kumar group of cases as well as search was conducted at Connaught Circus office of HDP. From the residence of Suresh Kumar, besides other items/assets, certain papers which were in the nature of duplicate sets of account books concerning the dairy business, giving weekly statement of purchases, sales, debtors, creditors, etc. monthly statement, profits and balance sheets were seized which were inventorised as -Annexs. A3 and A6 of panchnama. So far as other assets recovered at the time of search are concerned, Rs. 85.88 lakhs in cash was found from the business premises of M/s Om Prakash Suresh Kumar. Rs. 13.52 lakhs were recovered from the possession of Smt. Laxmi Agarwal. Cash of Rs. 82,800 was found from the residence of Santosh Kumar and Rs. 72,700 was also recovered from premises No. 58, Bagh Diwar, Fatehpur. Some stock was also detected and seized at two transport companies. It is also to be taken note of that Suresh Kumar was not available on the date of search and his statement was recorded for the first time on 21-6-1996 but his brother Satish Kumar Agarwal was there and he was examined on 14-6-1996 and 19-6-1996. Statements of other assesseds were also recorded at the time of search.

4. The assessing officer having jurisdiction over all these cases of search, issued notices under section 158BC calling upon each of the assesseds including HDP to file return for the block period and each of them complied. It is to be noted that Suresh Kumar Agarwal was partner in M/s Om Prakash Suresh Kumar but after death of his father he become sole proprietor of that concern and it will be in the fitness of things to start with his case.

5. The main plea of Mr. Suresh Kumar Agarwal before assessing officer was that he offered a sum of Rs. l,39,19,648 for taxation on the basis of seized documents which were Annex. A3 and A6. It was submitted that a perusal of these annexures shall reveal that the amount of Rs. 1,39,19,648 was income of M/s HDP but it was actually the income of Suresh Kumar Aggarwal as he was selling the goods outside the books of account to the entire exclusion of all other partners of the firm who did not know the existence of such outside books of account business in the name of the firm. It was Suresh Kumar who was carrying on this business from Delhi and other partners were residing at Gulawati (UP). Suresh Kumar further submitted that this fact can be confirmed from the seized annexure as 93 per cent of the profit appearing in Annex. A3 and A6 was withdrawn by Suresh Kumar from M/s HDP and the same amount was used by Suresh Kumar in the finance business for which an amount of Rs. 85 lakhs had already been offered for taxation in the hands of M/s Om Prakash Suresh Kumar. It was further submitted that entire amount of Rs. 139 lakhs could be substituted for the amount offered as undisclosed income in the return filed by said firm M/s Om Prakash Suresh Kumar and it will not be of much importance as income either can be assessed in the hands of assessed or in the firm M/s Om Prakash Suresh Kumar because rate of tax for both the cases will be 60 per cent and revenue is not to suffer any loss.

6. To substantiate the plea that amount withdrawn by Suresh Kumar from M/s HDP was utilised for finance business, the assessed submitted fund flow statement drawn on the basis of seized material in respect of income from Annex. A3 and A6 and other annexures and deployment of cash in the finance business. It was also contended that assessed was having Rs. 16.03 lakhs as undisclosed income on 1-4-1985 prior to block period also and that amount was initially employed by the assessed for finance business as well as for milk product business carried out by this assessed in undisclosed manner without the knowledge of other partners though in the name of HDP. A rotational chart showing utilisation of income earned at different times for different purposes was also filed. It was submitted that in case the entire income was to be assessed in the hands of the firm, then no undisclosed income be assessed in the hands of M/s Om Prakash Suresh Kumar or in the hands of the assessed.

7. The other plea of the assessed was that entire family was residing in the parental house No. 3174, Gali Sui wali, Morigate, Delhi-6, and since 1993 this assessed shifted to Shalimar Bagh, New Delhi, but entire family members were working with a common interest and for the common business under the common umbrella. Om Prakash was the head of the family and he was carrying on the finance business along with the assessed Suresh Kumar under the banner of M/s Om Prakash Suresh Kumar and the funds were withdrawn from M/s HDP as well as the earlier amount of Rs. 16.03 lakhs was available. The assessed also filed chart of peak credit balance for each financial year for undisclosed amount invested in the finance business from 1-4-1986 to 14-6-1996, showing maximum peak credit balance in every month of financial year 1-4-1992 to 31-3-1993, from which undisclosed income from M/s HDP as per Annex. A3 and A6 was earned and used in finance business to prove that the amount earned by Suresh Kumar from M/s HDP was withdrawn and used for business of finance. For negative peak appearing on 18-7-1990 and 7-8-1990, the assessed submitted that assessed had a balance of Rs. 39 lakhs as profit from 1-4-1990 to 31-7-1991, as is evident from Annex. A3 and from copy of seized balance sheet along with the other amount available and out of which Rs. 8.25 lakhs, which was capital investment for that business, and that was also utilised for finance business, later on. To substantiate the plea that Suresh Kumar was earning undisclosed income from M/s HDP, it was submitted that in October, 1992, the Government of India de-licensed the business of milk and thereafter the profit diminished and M/s HDP was forced to close the said business and that is being corroborated from the peak chart.

8. The contentions of the assessed were considered by the assessing officer and he concluded that assessed had made up the story to establish nexus of funds deployment in' various entities of the group so that entire unaccounted operation of the group was covered by the umbrella being formed on the basis of the papers seized at Annex, A3 and A6 at the assessed's residence. The contention was not found acceptable by the assessing officer on the ground that each entity was a separate assessable person and there was no positive evidence to show the flow of funds generated in M/s HDP, was introduced in the business of M/s Om Prakash Suresh Kumar or Satish Agarwal or Laxmi Agarwal or in the case of assessed. Assessing officer also noted that contention of the assessed that Suresh Kumar had withdrawn Rs. 1.29 crores from M/s HDP was not acceptable since entry in the said Annex. A3 and A6 clearly linked with M/s HDP. Secondly, assessed had not shown any undisclosed income, for the block period based on the entries of A3 and A6. The assessing officer rejected the contention of the assessed and prepared separate peak of investment and interest account in the case of assessed Suresh Kumar and his brother Satish Kumar Agarwal.

9. Assessing officer also noted that Rs. 85.88 lakhs were recovered at 42, Bagh Diwar, Fatehpuri, Delhi-6, and another sum of Rs. 72,700 from the same proprietary concern at 58, Bagh Diwar, Fatehpuri. Another sum of Rs. 82,800 was also found from assessed's residence. He rejected the theory of the assessed that the amount of cash found was the same which Suresh Kumar had withdrawn from M/s HDP as assessed could not prove that whatever amount he had given as debt to different persons, was received back and was available in cash on the date of search. The view taken by the assessing officer is that presumption under the Evidence Act as well as under section 132(4A), is to be drawn against the assessed as he was found in possession of Rs. 87,43,500 and he is to be taken as owner thereof and it remained unexplained. The conclusion drawn by the assessing officer was that entire money found in search belonged to assessed and some amount belonged to M/s Om Prakash Suresh Kumar for which Suresh Kumar alone is assessable, as there was no evidence to link this money to any particular assessment year. As on the date of search, M/s Om Prakash Suresh Kumar was not existing, the whole of the amount is to be treated as belonging to Suresh Kumar under section 69 of the Act. Suresh Kumar failed to prove the link of the amount with M/s Om Prakash Suresh Kumar and thus assessing officer had drawn presumption and made the addition. Assessing Officer made the addition on the basis of peak rotational chart which is appearing at p. 5 of the paper book. On some loose papers mentioned in Annex. Al, the addition of Rs. 4,54,915 was made being the gross profit at 1.25 per cent which was not shown in the regular books. The addition was bifurcated for financial year 1995-96 and 1996-97. Some other amounts were also made in respect of yearwise interest on the basis of pp. 37 and 38 of Annex. Al.

10. Assessing officer also noted that another entity in the name of M/s JMD (India) was detected and that was admitted to be a Benami concern of this assessed. Rs. 51,738 was added as income of that concern in the hands of the assessed. Addition of Rs. 11,24,600 was made on the basis of undisclosed income on account of unexplained stock. Ultimately the addition made in the case of assessed Suresh Kumar, on substantive and protective basis, are reproduced as below :

Suresh Kumar Aggarwal

Amount assessed on substantive basis (Rs.)

Amount assessed on protective basis (Rs.)

(a) Cash found from the premises of OPSK on 14-6-1996

79,24,733

(b) Undisclosed investment in moneylending business including interest

37,35,858

4,54,915

(d) Undisclosed income of JMD

51,738

(e) Undisclosed investment in property in Bulandshahr

5,00,000

(f) Interest income on estimated basis

35,960

(g) Undisclosed investment in stock

11,24,500

(h) Presumed business profits of Healthways Dairy Products on the basis of seized material for items mentioned as a, b & c in HDP

1,49,44,843

(i) Interest on moneylending business assessed substantively in the hands of Mr. Satish Kumar

12,02,500

Sub Total

1,28,77,744

1,61,47,343

11. Satish Kumar Agarwal has also taken the plea that whole of the business belonged to M/s Om Prakash Suresh Kumar but that plea was also rejected. It was concluded by the assessing officer that this assessed was also carrying on separate moneylending business and he worked out the separate peak credit and ultimately an addition of Rs. 85,91,800 was made in the hands of this assessed as undisclosed income.

An amount of Rs. 13,52,000 was found and seized from the custody of Smt. Laxmi Agarwal. Smt. Laxmi Agarwal in her statement deposed that the amount was given by her father-in-law Om Prakash but assessing officer did not believe that version and made the addition in the hands of Smt. Laxmi Agarwal as undisclosed income.

12. Addition in the hands of Bhagwanti Devi and Santosh Kumari was in respect of unexplained jewellery to the extent of Rs. 2,94,725 and Rs. 1,80,832 respectively.

13. It will not be out of place to mention that M/s HDP was also searched and it was assessed in respect of an amount of Rs. 1,39,19,648 based on Annex. A3 and A6. Gross profit on stock-in-hand was assessed at Rs. 2,09,890. Rs. 8.26 lakhs more were added in the hands of that assessed on account of unexplained investment by way of capital in the firm in April, 1990. Rs. 2,40,78,481 was added by the assessing officer on the basis of presumed undisclosed profit after 30-11-1992 till the date of search and Rs. 34,08,800 was added as stock found at the time of search in transport companies.

14. In the case of M/s Om Prakash Suresh Kumar, original return showing undisclosed income of Rs. 80 lakhs was filed but it was revised by the assessed to the extent of Rs. 23.56 lakhs which represented interest on moneylending business, not recorded in the books of account. The assessing officer after rejecting the plea of the assessed made addition of Rs. 80 lakhs as shown by that firm in the original return and later on made addition of Rs. 85,98,500 as peak investment in moneylending business including interest/cash in the name of Suresh Kumar and Rs. 27,35,898 being peak investment in moneylending business in the name of Suresh Kumar and Rs. 13.52 lakhs on account of cash found from Smt. Laxmi Devi of Rs. 77,86,625 on account of cash seized from business premises of M/s Om Prakash Suresh Kumar on protective basis. The substantive addition is Rs. 80 lakhs and on protective basis the amount is Rs. 2,04,73,023. In the case of Suresh Kumar, addition in respect of Rs. 1,28,27,444 was on substantive basis. Now assesseds are in appeal against the block assessment completed by the assessing officer.

15. Assailing the different additions made by assessing officer on substantive basis and on protective basis, in the case of above-referred to assessed, the learned counsel for the assessed gave out the sequence of events to highlight the very source of generation of undisclosed income and cash and other assets found at the time of search. According to learned counsel, M/s Om Prakash Suresh Kumar had two partners viz., M/s Om Prakash (father) and Suresh Kumar (son). The firm was engaged in the business of milk products as well as in moneylending business. Books of account of M/s Om Prakash Suresh Kumar reveled availability of Rs. 16.03 lakhs as on 1-4-1986, and that firm was carrying on the business of moneylending as well as milk product during the block period. Suresh Kumar was able to procure a license to manufacture milk products which was a prime commodity as very restricted number of licenses had been issued to different parties. Suresh Kumar came into agreement with Paras Dairy group and formed a firm in the name of M/s HDP in which Suresh Kumar HUF and Satish Kumar HUF were having 25 per cent shares while two members viz., Rajendra Singh and Surendra Singh also became partners of 25 per cent shares each. The contention of the learned counsel was that amount of any premium at the time of sale over and above the printed price would be taken away by Suresh Kumar HUF to the exclusion of members of Paras Dairy Group. The learned counsel pointed out that Suresh Kumar was dealing with the sale of goods of M/s HDP in Delhi and used to collect payment for sale of goods and also making payment of the same for business of the firm. In this process substantial amount as above was being retained by Suresh Kumar alone for his own benefit to the exclusion of other members of the group. To substantiate this fact, the learned counsel invited our attention to pp. 90 to 96 of the paper book which are admittedly Annex. A3 and A6 recovered from the premises of Suresh Kumar and copies of cash book from 1-6-1992 to 30-11-1992. The learned counsel for the assessed pointed out that page No. 90 would go to show that Rs. 33,91,386 were mentioned as recoverable from Suresh Kumar as on 1-6-1992 and on 30-11-1992, the amount recoverable from Suresh Kumar was Rs. 1,29,00,807 and the learned counsel pointed out that other persons have also taken and returned the amount mentioned in these papers and this was nothing but undisclosed income worked out of Suresh Kumar out of such transactions which were outside the books of account. Total earning is mentioned at p. 96 of the paper book which is Rs. 1,39,19,648 and department has treated this amount as undisclosed income generated out of activities of M/s HDP. The contention of the assessed is that out of Rs. 1.39 crores one of the partners Suresh Kumar had withdrawn Rs. 1.29 lakhs and it supported the very plea of the assessed that Suresh Kumar was alone dealing in under had business transactions and earning the money without involvement of other three partners.

16. Next plea of the learned counsel is that entire income of Rs. 1.39 lakhs was earned by the group till 30-11-1992, and there is no other evidence recovered during the search operation conducted at both the groups to show that the group either of M/s Om Prakash Suresh Kumar or M/s HDP earned any undisclosed income because nothing was detected at the time of search to that effect. Further, it was submitted that the premium, being earned by the assessed came to an end, as Government of India vide notification dated 9-6-2002, copy appearing at pp. 110 and 111 of the paper book, delicensed the very business which was resulting in earning of premium. Learned counsel pointed out that no doubt, M/s Om Prakash Suresh Kumar was engaged in the business of moneylending and milk products but entire group of M/s Om Prakash Suresh Kumar and his family members were working under a common umbrella though using different names for accounting purposes. Factually, its entire undisclosed income belonged to the family under control of late Shri Om Prakash. Initially the volume of moneylending was not more than Rs. 16 lakhs which was the amount of capital available to M/s Om Prakash Suresh Kumar, before the block period but later on the volume increased and for this the learned counsel referred to page No. 100 the copy of peak credit balances as per rotational cash book and it is prepared on the basis of seized material recovered at the time of search. Referring to this, the learned counsel submitted that up to financial year 1991-92 the peak was not more than Rs. 15.54 lakhs and it increased to Rs. 46.08 lakhs and it gets corroboration from the amount withdrawn in cash by Suresh Kumar from M/s HDP. Right hand side entries show the amount withdrawn by Suresh Kumar and up to 30-11-1992, the- same was Rs. 1.29 crores. The amount of peak credit never exceeded this amount but the family members of this group were engaged in the business of moneylending and were getting the amount back. The contention is that as soon as Suresh Kumar withdrew money from M/s HDP, the volume of moneylending business increased substantially. The other circumstances referred to by the learned counsel is that there was no other material detected by the search party which may show that assessed group was in any way engaged in any other undisclosed activity during the block period which could generate undisclosed income for investment in moneylending business. The sources can be either business income, sale of property acquired earlier or criminal activities like theft, etc. The search generally, the learned counsel contended, disclose the source if the magnitude of the activity as large as in this case. Here the moneylending was at a higher volume and the assessed is able to link the source of investment in the moneylending. Again to substantiate this factual position, the learned counsel pointed out that after 30-11-1992, there was no earning of undisclosed income out of premium and the business of moneylending also reduced substantially. The department has also found that Rs. 3.5 lakhs was the amount due to the group from debtors and the remaining amount of the assessed group which was withdrawn from M/s HDP, was detected from different premises in cash and that also go to show that assessed group had withdrawn the amount from M/s HDP. Had there been any undisclosed investment then evidence in any manner for the same would have been found. Absence of the same and physical availability of cash proved that the undisclosed income from dairy business was the source of cash found at the time of search. The learned counsel pointed out that by no stretch of imagination, it could be presumed that the undisclosed income of Rs. 1.29 crores earned by the group till November, 1992, was consumed as household expenses and other investments made thereafter and moneylending business was out of some other source or represented some other income though no such evidence was found at the time of search.

17. The learned counsel posed a questionif the amount of Rs. 1.29 crores withdrawn by Suresh Kumar from M/s HDP had not been invested in the moneylending business, then where this amount had gone? If the amount returned by the borrowers in moneylending business before the date of search was not the same amount which was recovered at the time of search, then where else Suresh Kumar and his family members had kept that amount or invested the same? No such evidence has come about investment or keeping the money somewhere else. Further, there is no material found at the time of search to prove that assessed group was having any other source to generate this income except withdrawal from M/s HDP. The learned counsel also contended that moneylending business was undertaken by Om Prakash in the name of different family members as per his choice by using the family hotchpotch fund and interest in the said business which is Rs. 23.56 lakhs and odd as worked out at page No. 86 of the paper book should be assessed in the hands of M/s Om Prakash Suresh Kumar. The learned counsel also submitted that assessing officer had worked out different peak and investment in the case of Suresh Kumar, Satish Kumar but the fact remains that business was of one family under different names of the family members. To substantiate this fact the learned counsel also referred to the statement of Smt. Laxmi Agarwal who is admittedly wife of Naresh Kumar (deceased son of Om Prakash)who stated in the statement recorded on the date of search that the amount of Rs. 13.52 lakhs recovered from her house, was the same which was given by her father-in-law Om Prakash from time-to-time during his lifetime. Relevant portions of the statement are appearing at pp. 75 and 78 of the paper book.

18. Learned counsel also pointed out that paper No. 80 is the statement of affairs as on 14-6-1996, as reproduced below :

(A) Undisclosed Taxable Income (OPSK)

Amount (Rs.)

Utilisation

Amount (Rs.)

Interest income from financing (OPSK)

23,56,500

Car booking (PAL) (Mr. Suresh Kumar

21,062

Cash in hand available (OPSK)

1,01,87,400

JMD (Capital A/c) (Mr. Suresh Kumar

9,01,738

Profit in cash available from undisclosed business in the name of Healthways Dairy Products as on 30-11-1992 (A3/A6) (Proprietor OPSK who is the sole beneficiary)

1,39,19,648

Healthways Dairy Products (undisclosed business in the name of M/s HDP) (Proprietorship DPSK, who is the sole beneficiary capital account)

8,26,425

Gross profit on sale of stocks of Healthways Dairy Products (30-11-1992) (proprietor OPSK who is the sole beneficiary) (Rs. 37,75,000 @ 5.56 per cent

2,09,890

Jewellery (Mrs. Santosh Kumari through Mr. Suresh Kumar)

1,80,832

Total (A)

1,64,86,038

Drafts (OPSK) Household

2,05,150

(B) Undisclosed taxable income (SK)

items/withdrawals (OPSK)

2,30,000

Profit from JHD

Sundry Creditors (OPSK)

45,821

(Proprietorship of Mr. Suresh Kumar)

51,738

Credit bills for sales pending realisation (OPSK)

5,32,806

Business income Annex. A-9 Loose papers (Sh. Suresh Kumar)

4,50,000

Other utilisations/stocks etc. (OPSK Group)

50,43,418

Total (B)

5,01,738

Jitan Electricals (OPSK) (Money/ending)

3,50,000

Cash balance as on 14-6-1997 as per books of account of M/s Om Prakash Suresh Kumar (OPSK)

7,35,967

Unexplained stocks in hand (OPSK)

6,20,060

Sale proceeds of 95 kg.

10,000

Jewellery (Mrs.

1,92,091

Ghee declared stock found short (OPSK)

Bhagwanti Devi (OPSK)

Capital in M/s Om Prakash Suresh Kumar (1-4-1985 (OPSK)

16,03,000

Total (C)

23,48,967

Grand total (A+B+C)

1,93,36,743

Undisclosed taxable income of the group

Total fund available

1,93,36,743

Less : Funds not taxable as per 'C' above :

1. Explained cash in hand as on 14-6-1996, in the books of OPSK

7,35,967

2. Funds Available before 1-4-1986 as per seized books from 1-4-1985 (OPSK)

16,03,000

3. Sale proceeds of declared stock of Ghee (OPSK)

10,000

23,48,967

Net taxable income :

1,69,87,776

19. Learned counsel submitted that whole of the cash found, the amount of jewellery in respect of Suresh Kumar, Bhagwanti Devi and the amount of other stock, etc. stands covered in the above referred to statement of affairs. The amount of capital of OPSK as on 1-4-1985, Rs. 16.03 lakhs is not taxable in the block assessment and the same is the case in respect of Rs. 7,35,967 which was cash balance as on 14-4-1997, as per books of OPSK. The contention is that net taxable income of whole of the group comes to Rs. 1,69,87,776 and the same may be assessed.

20. About other grounds of Rs. 5 lakhs in the case of Suresh Kumar as envisaged in third ground of his appeal, the learned counsel mentioned that assessing officer had added this amount as investment made by Suresh Kumar in the purchase of property. The contention is that no property was purchased as the sale-deed was later on cancelled. The necessary affidavit of the alleged seller and other documents are appearing at pp. 126 to 132 of the paper book.

21. The fourth ground in the appeal of Suresh Kumar relates to investment in stock but that is taken care of as is apparent from the statement of affairs reproduced above. About protective addition in the case of Suresh Kumar of Rs. 1,61,47,343 the learned counsel submitted that already amount of Rs. 1,41,18,418 has been confirmed substantially in the hands of M/s HDP by Tribunal Delhi Bench "A" in IT(SS) 129/Del/1997

22. About the appeal of Satish Kumar, the learned counsel pointed out that whole of the amount invested by him in moneylending was nothing but the same amount which was withdrawn by Suresh Kumar from M/s HDP. Same is the case in respect of Smt. Laxmi Agarwal, Smt. Bhagwanti Devi and Satish Kumar. Counsel stated that amount invested in jewellery was financed from undisclosed income of the group and stands fully covered by the statement of affairs appearing at page No. 80. The contention of the learned counsel for the assessed in respect of M/s. OPSK is that Rs. 80 lakhs were shown undisclosed income originally and the same was on the factual position that the amount was earned by Suresh Kumar, partner of this firm from M/s HDP and also as interest on moneylending business out of the funds so withdrawn by Suresh Kumar. The contention is that whole of this amount should be taxed here though it stands taxed in the name of M/s HDP and confirmed by the Bench. About protective addition, the learned counsel submitted that already the grounds taken in the case of Suresh Kumar Satish Kumar will take care of it.

23. As against it, the learned departmental Representative placed reliance on the order of assessing officer and pointed out that it is wrong on the part of the learned counsel for the assessed to argue that whole of the amount invested in moneylending business was the amount withdrawn by Suresh Kumar from M/s HDP or that the family members of Om Prakash were working under any umbrella and for any interest of the family.. The learned departmental Representative pointed out that Mr. Satish Kumar was examined on the date of search and he was specifically asked to give out the source of investment in the moneylending. Page No. 53 contained the reply of Satish Kumar in which he stated that he had given Rs. 13 lakhs to India Dairy & Allied Products Ltd., after taking loan from the market and same was returned after receiving back the amount. Not only this, on p. 54 Satish Kumar again stated that he was collecting money from the market and did not give the names of those persons for the safety of their interest. He further stated that he was earning 10 per cent to 20 per cent of the interest. Learned departmental Representative also pointed out that other copy of statement of Satish Kumar is appearing at page No. 23 onwards of the paper book filed by the department. Satish Kumar was specifically put, to question about the amount recovered from the premises of M/s OPSK. He could not say anything about the same and specifically mentioned that he had no knowledge about the said amount nor he ever handled any amount so detected. The learned departmental Representative pointed out that if there was any business of the family members for common interest, then Satish Kumar must have given all the factual position on the date of search. It is also mentioned that case of the assessed was that Rs. 16.03 lakhs, which was available on 1-4-1986, was invested in the business of milk products and moneylending then it could not be argued that Rs. 1.29 crores taken by Suresh Kumar, were invested.

24. The other argument of the learned departmental Representative is that once Rs. 16.03 lakhs were invested as stated by the assessed in business of milk products and moneylending then cash book/peak chart compiled on the basis of availability of the moneylending business cannot be considered as fully credible. Next contention of the learned departmental Representative is that contention of the assessed that business loose slips containing moneylending business were found from the premises of different assesses, mentioning their independent names only and not of other family members. The learned departmental Representative also pointed out that assessed is proceeding with presumption that the amount which was given to different borrowers was received back and the same was available at the time of search, is not to be believed in the absence of any material on record.

25. The next alternative plea raised by the learned departmental Representative was that if the plea of the assessed that Suresh Kumar had introduced money withdrawn from M/s HDP in the moneylending business to the extent of peak then where the balance amount had been invested, has not been proved on record by the assessed.

26. Lastly, the learned departmental Representative pointed out that law is very clear and presumption under section 132(4A) is to be drawn that the possession of the cash is with its owner and assessed has not been able to rebut that presumption. Merely saying that the money belonged to M/s OPSK is not sufficient. Statement of Smt. Laxmi Aggarwal was also referred to by the learned departmental Representative as she did not mention that cash found belonged to Om Prakash.

27. In rejoinder, the learned counsel tried to meet all the contentions of the learned departmental Representative. The learned counsel pointed out that assessed, right from first day, contended that the undisclosed business of milk products belonged to M/s OPSK and not to M/s HDP. The moment return of M/s OPSK filed undisclosed income was shown. It is also pointed out by the learned counsel that M/s OPSK was engaged in the business of milk products and moneylending. Out of the amount of Rs. 16.03 lakhs a sum of Rs. 8.26 lakhs was invested for short period as capital investment in M/s HDP and also for undisclosed milk products business in the very beginning and as soon as Suresh Kumar started withdrawing heavy amount, volume of moneylending business increased.

28. About the statement of Satish Kumar, the learned counsel submitted that statement recorded at the time of search are not conclusive and assessed has all rights to prove that statement so made was not correct on the basis of material as well as facts and circumstances. For this, the learned counsel pointed out to the decision of Pullangode Rubber Produce Co. Ltd. v. State of Kerala (1973) 91 ITR 18 (SC), wherein it was observed by Their Lordships that admission is an extremely best piece of evidence but it cannot be said that it is conclusive. It is open to the assessed who made the admission to show that it is incorrect. Some other case law to the same effect are in the cases of R.P. Locks Co. v. Dy. CIT (2000) 67 TTJ (Del) 588, India Seed House v. Asstt. CIT (2000) 69 TTJ (Del) (TM) 241, S. Arjun Singh v. CWT (1989) 175 ITR 91 (Del) in which it was laid down that admission is an important piece of evidence but it is not conclusive and it is open to the assessed to show that it is incorrect.

29. Relying upon the case law, the learned counsel pointed out that it is also to be noted that Satish Kumar simply stated to have borrowed funds from market and M/s OPSK is also one of the persons in the market. It is not stated by him that he has earned any undisclosed income himself. Further, from the factual background and the material recovered at the time of search as well as the peak chart prepared by the assessed and the statement of affairs compiled by the assessed on the basis of seized material, it is clear that as soon as Suresh Kumar was withdrawing funds from M/s HDP the volume of moneylending business was increasing. So, assessed group is able to show that statement of Satish Kumar was not so damaging.

30. Learned counsel also pointed out that it is rightly argued by assessed that amount lent by different family members was received back before the time of search as the assessing officer himself has worked out the peak on the basis of seized material. In case the amount had not returned, the whole of the amount so given to different borrowers must have been taken into consideration in making addition but assessing officer has worked out the summary of cash transaction and in case of Satish Kumar it is at pp. 105 to 109 which is showing the date on which loan was given and date of receipt back. The learned counsel also pointed out that as per material available with the department, at the time of search, only Rs. 3.5 lakhs was not received back and rest of the amount was received as per the said date. About the next plea of the learned Departmental Representative that where the balance amount had been invested by the assessed, the learned counsel pointed out that it is not the case of assessed group that whole of the amount withdrawn from M/s HDP was used in moneylending business. It was being given to selected parties as and when required by them and after ascertaining the very creditworthiness and capacity to return. The remaining amount remained with the group in cash.

31. About presumption under section 132(4A), the learned counsel pointed out that presumption is rebuttable as laid down in the case of Sondhi Transport Co. v. State of U.P. AIR 1986 SC 1099 and in the case reported as Mansukhlal Nanjibhai Patel v. Dy. CIT (2001) 251 ITR 341 (Guj) and other case law referred in the reply filed by the learned counsel for the assessed. The contention is that this plea was fully rebutted as assessed had been able to prove that Suresh Kumar has withdrawn the amount from M/s HDP and utilised it in moneylending business. The statement of Smt. Laxmi Aggarwal is specific that she was given the amount by her father in law Om Prakash and that is more than sufficient evidence to conclude that amount was actually that of Suresh Kumar and his father. The contention is that whole of the additions are to be deleted.

32. We have heard the learned representatives of both the parties and also perused the material to which our attention was drawn during the course of hearing by them.

33. At the very beginning, it is to be pointed out that M/s OPSK was found carrying on the business of moneylending from 1985 onwards and Suresh Kumar in his statement recorded on various dates had stated that Rs. 16.03 lakhs were available to that firm prior to 1-4-1986, prior to block assessment period as was evident from A7 and A8, material seized from the assessed and this fact has not been controverter by the department. Further, the peak credit as given out by the assessed up to 4-3-1992 goes to reveal that it was less than Rs. 16.03 lakhs. The peak material as appearing at page No. 100 of the paper book for the period up to 4-3-1992, are as under :

Amount (Rs.)

Peak credit up to 18-7-1990

11,94,423

Peak credit financial year 1990-91 on 7-8-1990

15,54,423

Peak credit financial year 1991-92 on 4-3-1992

10,18,423

34. The next contention of the assessed is that in 1990 Suresh Kumar HUF along with Satish Kumar HUF entered into partnership with two members of Paras Group viz., Rajendra Singh and Surehdra Singh and each of them was having 25 per cent share and the firm started milk business in the name of M/s HDP. It is also on record that during search operation carried out in both the groups Annex. A3 and A6 were recovered from the house of Suresh Kumar and copies thereof are appearing at pp. 90 to 96 along with copy of balance sheet as on 30-11-1992 which is paper No. 97 of the paper book. The undisclosed income of Rs. 1,39,19,648 based on Annex. A3 and A6 had been added in the hands of M/s HDP along with the addition of Rs. 2,09,890 on account of gross profit on sale of stock-in-hand as on 30-11-1992. A perusal of Annex. A3 and A6 shall reveal that Suresh Kumar had withdrawn a sum of Rs. 1,29,00,847 from the above referred to undisclosed income of M/s HDP till 30-11-1992. On the basis of photocopies of the seized material A3 and A6, copies appearing from pp. 9 to 96 of the paper book the following were the details by the end of each month withdrawn by Suresh Kumar from M/s HDP

up to the date

Amount (Rs.)

1-6-1992

33,91,386

30-6-1992

53,18,262

31-7-1992

93,94,518

31-8-1992

83,31,537

30-9-1992

64,18,957

31-10-1992

44,82,207

31-11-1992

1,29,00,847

35. It is not disputed by the department that entries in the said Annex. A3 and A6 are in any way not believable because addition of undisclosed income is based on the entries of these seized material. It is well settled principle that in case any addition is going to be made on the basis of any document, then due credit is to be given to the entries of both the sides viz., debit and credit. If we apply this analogy to read these seized Annex. A3 and A6 then Rs. 1,29,00,847 had already been shown as withdrawn by Suresh Kumar. Full credit to all these entries, which are mentioned in seized material is to be given. It is not in dispute that Suresh Kumar has not been shown to have withdrawn Rs. 1,29,00,847 out of the undisclosed income.

36. The case of the assessed group is that Suresh Kumar alone was dealing with the sale of milk products which was having a premium on it and all operations were being conducted by him alone from Delhi office of M/s HDP to the exclusion of all the three other partners of M/s HDP. This fact gets corroboration from the admission of Rajendra Singh another partner and who was from Paras group. His statement was recorded by assessing officer on 19-6-1997, and copy thereof is appearing at pp. 87 to 89 of the paper book. He was shown seized material Annex. A3 and A6 as well as month-wise details of P&L a/c as well as balance sheet copy of which is appearing at page No. 97 of the paper book and was asked to explain as to whether these were the duplicate sets of books of account for the period June, 1992 to Nov., 1992. His answer is quite specific that these did not relate to M/s HDP. He brought the account books of the relevant period of M/s HDP and those entries of Annex. A3 and A6 and, P&L a/c, etc. were not appearing in the books of account. No other question was put by the learned assessing officer to this partner Rajendra. Singh. No other partner was also examined and rightly so as one of the partner admitting that it was he who was indulging in earning undisclosed income out of that underhand transaction earning premium on the sale of milk products to the exclusion of others. Suresh Kumar specifically admitted at the very beginning as is evident from his copy of statement dated 22-7-1996, appearing from pp. 26 to 31 of the paper book. He has specifically mentioned that the cash found at the time of search was out of business of trading and dairy products and moneylending business. Further, explanation was also given during the statement recorded during the course of assessment proceedings and copy thereof are appearing from pp. I to 5 of the paper book and in this statement dated 20-6-1997, the assessed Suresh Kumar has specifically pointed out that the amount was generated from the business of milk trading. During his statement before assessing officer, same was the plea.

37. Further, it is to be noted that we have already mentioned the peak credits as arrived on the basis of seized material up to 4-3-1992, and the same did not exceed Rs. 16.03 lakhs. The assessed Suresh Kumar had started drawing money from M/s HDP from 1992 onwards and the volume of moneylending business increased accordingly as is evident from the copy of peak credit balances appearing at p. 100 of paper book which also contained the amount withdrawn in cash by Suresh Kumar from M/s HDP. To appreciate the argument it will be in the fitness of things to reproduce the same as below

up to

Amount

1-6-1992

33,91,386

30-6-1992

53,18,262

31-7-1992

93,94,518

31-8-1992

75,38,872

30-9-1992

64,18,957

31-10-1992

44,82,207

31-11-1992

1,29,00,847

38. The plea of the assessed stands corroborated from the abovereferred to monthly peak credit for financial year 1992-93. The maximum peak of Rs. 45,08,832 was in the month of November, 1992 and admittedly by that time the assessed Suresh Kumar had withdrawn Rs. 1.29 crores. The contention of the learned departmental Representative that the amount withdrawn by Suresh Kumar was not the same which was seized during search operation, cannot be allowed to sustain as it is to be noted that department had made extensive search in the case of Suresh Kumar and his family members as well as in the case of M/s HDP. Not a single document or any sort of evidence has come in the possession of the department to show that Suresh Kumar and his family members were having any other source to generate the funds. Secondly, the circumstances indicate that as soon as Suresh Kumar was withdrawing cash from M/s HDP there was corresponding substantial increase in the quantum of moneylending business and admittedly the business of earning undisclosed income in M/s HDP came to an end by the month of November, 1992, as after that the Government of India delicensed the milk business which was source of earning undisclosed income. After that volume of moneylending business also substantially fell down and even came to nil.

39. From the above discussion it is to be concluded that seized material is to be read as a whole and in case department is treating undisclosed income of Rs. 1.40 crores on the basis of Annex. A3 and A6 as well as balance sheet, then the other entries appearing in Annexs. A3 and A6 showing that Suresh Kumar had withdrawn Rs. 1.29 crores out of undisclosed income has to be believed as it stands mentioned in the very said documents. It cannot be overlooked. Second, the department has not brought anything on record to show that assessed and his family members were having another source to generate funds invested in the moneylending business. Thirdly, the substantial evidence also supported the case of the assessed that as soon as Suresh Kumar started withdrawing funds from undisclosed income of M/s HDP which was in his exclusive control, the volume of moneylending business stands substantially increased as is evident from the entries appearing at p. 100 which has been reproduced above.

40. The other plea of the assessed is that whole of the moneylending business was being conducted by M/s OPSK in the name of different family members and the same should be treated in the hands of M/s OPSK and not individually. To substantiate this plea, the assessed had placed reliance on the statement of Smt. Laxmi Aggarwal from whom an amount of Rs. 13.52 lakhs in cash were recovered. Secondly, it was pointed out that Suresh Kumar and other family members had also stated about the same thing. As against it, the learned departmental Representative has referred to the statement of Satish Kumar who in the initial statement recorded at the time of search had stated that he was borrowing funds from market. To meet this plea, the learned counsel for the assessed submitted that statement recorded at the time of search are not conclusive and assessed can prove it to be incorrect. This contention of the learned counsel is well supported by.the ratio of decision referred to by the learned counsel and we have also referred in para, containing the argument of the learned counsel. The ratio of this case law is that an admission is extremely important piece of evidence but the same cannot be treated as conclusive. It is always open to the assessed who made the admission to show that it is incorrect. The contention of the learned counsel about the statement of Satish Kumar appears to be reasonable as at the time of search it is normally the tendency of the person, being searched, to give vague answer to avoid payment of income-tax. However, after the search and receipt of photocopies of seized material, it is quite evident that money which was being withdrawn by Suresh Kumar from M/s HDP to the exclusion of other partners of that firm, was being utilised in the moneylending business as per finding recorded above. Apart from it, if Satish Kumar stated that he was borrowing the funds from market then M/s OPSK was also another entity available in the market and in case he has taken money from M/s OPSK for investment in the moneylending business then statement of Satish Kumar cannot be taken as totally incorrect. Under these circumstances where there is lot of evidence, circumstantial as well as factual, that Suresh Kumar was having sufficient amount withdrawn from M/s HDP and admittedly no family member was having another source to generate funds then statement of Satish Kumar that he was borrowing funds from market, will not be so much damaging to the case of the assessed group. The conclusion will be that assessed group was carrying on the moneylending 'business in the name of different family members out of the funds being withdrawn by Suresh Kumar from M/s HDP as found noted in the Annexs. A3 and A6 referred to above.

41. The other point was that amount withdrawn by Suresh Kumar from M/s HDP was more than Rs. 1.29 crores then volume of moneylending business was not exceeding Rs. 68 lakhs as worked out in the peak statement. In this connection the learned counsel was justified in contending that money cannot be thrown to any one who comes to demand. Persons of credibility are to be chosen and then only amount can be given to suitable person who has capacity to return the amount of loan along with interest. Whatever amount was given, the same was given to correct person and remaining amount remained with them. In the same way as peak credit reveals there was no moneylending business after 1995 and it is not the case of the department that during search operation any document was found showing the amount due from different persons except a document revealing an amount of debt outstanding to the extent of Rs. 3.50 lakhs. If this is the fact and department is not in possession of any evidence to note that on the date of search on 14-6-1996, the assessed group was having outstanding debt to different persons, then the amount of loan given in earlier year is to be taken as returned by the debtors and the same amount was found in cash by the search party during the search operation from business premises of M/s OPSK as well as from the residence of Suresh Kumar, Smt. Laxmi Aggarwal and Satish Kumar. The availability of physical cash at the time of search as well as the peak chart proving that volume of moneylending increased along with the withdrawal from M/s HDP by Suresh Kumar supports the contention of the assessed that the seized amount was the same and the same was being rotated on different times in different business and in the name of different family members.

42. From page No. 80 of the paper book of the assessed which is statement of affairs as on the date of search and as reproduced in para 18 above, admittedly Rs. 23,26,500 has been shown by M/s OPSK as interest income from moneylending business of that firm. Rs. 1,39,19,648 is undisclosed profit in the business being carried out by M/s HDP as on 30-11-1992, which is based on Annexs. A3 and A6 and out of that Rs. 1.29 crore approximately had been siphoned off by Suresh Kumar. The gross profit of Rs. 2,09,890 is included as earned by M/s HDP on sale of stock. The assessed group, particularly Suresh Kumar has shown profit of Rs. 51,738 from M/s JMD, a Benami firm and Rs. 4.50 lakhs as income from loose papers. So far as utilisation of the amount is concerned, the said chart reveals that the available cash in hand recovered at the time of search. All the heads under which different additions have been made are compiled by the assessed and department is not in a position to challenge the same. The amount of Rs. 23,48,967 are not taxable as Rs. 16.03 lakhs was capital in M/s OPSK as on 1-4-1985, Rs. 7,35,967 was the cash balance in M/s OPSK as on the date of search. Rs. 10,000 was sale proceeds of some 95 kg. ghee. So this amount of Rs. 23,48,967 is to be excluded and assessed group had worked out the net taxable income of Rs. 1,69,87,786 and the same is to be taxed in the hands of M/s OPSK as that firm alone was dealing in all the moneylending business. That firm is no more in existence after the death of Om Prakash which took place prior to the date of search and admittedly Suresh Kumar is the sole proprietor of that firm. The revenue is not going to suffer as rate of tax is identical in the case of individual as well as in the case of firm in block assessment year. The conclusion will be that assessed Suresh Kumar is to be taxed at an undisclosed income of Rs. 1,69,87,776 and that takes care of the unexplained jewellery in the case of Smt. Bhagwanti Devi and that of Smt. Santosh Kumari. It is also including the unexplained stock, etc. The statement of affairs reproduced above is to be taken as correct. Under these circumstances there remains nothing more to be added in the hands of different persons including Satish Kumar for moneylending business.

43. On the basis of above, the conclusion is that Rs. 1,69,87,776 is treated as undisclosed income and that is to be taxed in the hands of Suresh Kumar who was the person generating the undisclosed income from M/s HDP. The addition in the hands of others namely, M/s Om Prakash Suresh Kumar; Satish Kumar, Bhagwanti Devi, Santosh Kumari and Laxmi Devi stand deleted as most of the amounts are on protective basis in their cases. Already the amounts of Rs. 1,39,19,648 and Rs. 2,09,890 stand assessed in the hands of M/s HDP and Tribunal vide its order dated 29-9-2000, in ITA No. 129/Del/1997 confirmed the said addition. In that appeal the plea of M/s HDP that undisclosed income did not belong to it but belonged to Suresh Kumar and his firm M/s OPSK, was rejected by the Tribunal and accepted by the assessed group. Suresh Kumar shall get automatic telescoping adjustment of that two amounts but remaining amount shall stand assessed in the hands of assessed Suresh Kumar who is sole proprietor of M/s OPSK.

44. In the case of Suresh Kumar there is another addition of Rs. 5 lakhs in respect of purchase of property in Bulandshahr. The contention of the assessed is that property was individually purchased by him and sale deed was later on cancelled. He filed copies of such documents as well as affidavit of seller appearing at pp. 126 to 130. The assessing officer noted that no evidence was filed to this effect by him. The matter stands restored back to the file of assessing officer who will examine the issue afresh in view of the evidence filed before us. Ordered accordingly.

45. All the appeals stand disposed of accordingly.