Commissioner of Income Tax v. M. S. Aggarwal

15. The Commissioner of Income Tax (Appeals) affirmed the additions made, observing that the respondent /assessee had voluntarily offered the gifts for taxation during the course of search. There was no coercion. The second statement was recorded 40 days after the search in the presence of his counsel. There was corroborative evidence that the said gifts, though paid by cheques, were sham and arranged for as search party had found documents that the respondent/assessee was doing business through benami concerns, which had undisclosed sales turnover of Rs. 26,35,25,144/-, including sales through bank accounts of Rs. 18,80,71,883/-. Respondent/assessee with this unaccounted turnover could have bought the gifts as was accepted by him on two occasions. Interestingly, the respondent/assessee to justify the gifts had stated that the gifts "may" have been made because of assistance given by his forefather to the forefather of the donor. Submission was rejected as hypothetical as the respondent/assessee had used the word "may". Further, it was unlikely that Mr. Rama Pati Singhania would have given a gift to the respondent/assessee, whom he had never met. The respondent/assessee in the first statement did not even know the correct name the donor. If the respondent/assessee had indeed received the gift of the high amount he would have known the name of the donor.

16. The Tribunal in the impugned order dated 19th January, 2003 has deleted the entire addition of Rs. 61,80,000/- including additions made on account of gift of Rs.50,00,000/-. In paragraph 28 of the impugned order the Tribunal records that three questions had arisen for consideration. The first was whether the addition of Rs. 61,80,000/- on account of the gifts and the commission could have been made in the block assessment order, being undisclosed income as defined under Section 158BB of the Act. The second question was whether the admission made by the assessee that the gifts were arranged and an equivalent amount had been paid in cash would constitute conclusive and final evidence against the assessee; and thirdly, if the second question was answered in favour of the respondent/assessee, then whether the respondent/assessee had succeeded in disproving the admission and establishing the genuineness of the gifts.

17. On the first question, the tribunal had held as under:- ―29. The first issue as indicated above concerns the scope and ambit of undisclosed income as contemplated under Chapter XIV –B of the Income-tax Act. Chapter XIV-B consisting of sections 158B to section 158BH was introduced by the Finance Act, 1995 with effect from 1.7.1995 to make procedure of assessment of search cases more effective. The chapter is titled ―Special procedure for assessment of search cases.‖ The scheme of block assessment enacted under this chapter laying down procedure for block assessment proceedings is intended by the legislature to operate simultaneously with the normal and regular scheme of assessment indicated under Chapter XIV of the Income-tax Act. Both the tax schemes are independent of each other and they are not mutually exclusive. Block assessment under Chapter XIV-B is not intended to be a substitute for regular assessment. Its scope and ambit is limited in that sense to materials unearthed during search. It is in addition to regular assessment already made or to be made. Clause (b) of section 158B contains inclusive definition of undisclosed income and reads as under: ―(b)―undisclosed income‖ includes any money, bullion, jewellery or other valuable article or thing or any income based on any entry in the books of account or other documents or transactions, where such money, bullion, jewellery, valuable article, thing, entry in the books of account or other document or transaction represents wholly or partly income or property which has not been or would not have been disclosed for the purposes of this Act { or any expense, deduction or allowance claimed under this Act which is found to be false.}.‖ If we analyse the aforesaid definition, it provides that undisclosed income includes-

(i) Any money, bullion, jewellery or other valuable article or thing or,

(ii) any income based on any entry in the books of account or other documents or transactions;

(iii) such money, bullion, jewellery, valuable article, thing, entry in the books of account or other documents or transactions represents wholly or partly income or property;

(iv) which has not been or would not have been disclosed for the purposes of this act. From the aforesaid analysis of the definition, it clearly emerges that if any asset or any income as recorded in the books or documents has been disclosed or intended to be disclosed to the Income-tax authorities, this would be outside the pale of undisclosed income as defined under clause (b) as above.

30. We may next refer to section 158BB which provides for computation of undisclosed income or block period. The section expressly and unequivocally provides that the undisclosed income has to be computed ―on the basis of evidence found as a result of search... and such other materials or information as are available with the AO and relatable to such evidence.‖ The expression ―relatable to such evidence‖ has been inserted by the Finance Act, 2002 retrospectively w.e.f. 1.7.1995. A bare reading of this provision would indicate that undisclosed income has to be computed on the basis of evidence and material found during search. Any material or evidence available to the Assessing Officer which is not related to the search would not form the basis for computation of undisclosed income.‖

18. On the second question, the tribunal had held as under:- ―31. The issue regarding the jurisdiction of the Assessing Officer to consider the genuineness of the gift transaction and treat such gifts as undisclosed income would be required to be considered in the backdrop of the aforesaid legal position. The facts are undisputed that no evidence has been found during the course of search which may impeach the genuineness of the gifts received by the assessee and his HUF from Shri Rampathi Singhania. No documents or papers have been found during search proving that the gifts are non-genuine. The main stay of the Department‘s case is the statement of the assessee recorded on 25.11.99 and 6.1.2000 admitting the gifts to be nongenuine. First statement dated 25.11.99 is placed in the paper book filed by the Id. Sr. DR at pages 4 to 21. A part of the statement from pages 1 to 10 upto Question No. 19 and Answer thereto has apparently been recorded prior to the commencement of search and is a preliminary statement. Subsequent portion of the statement has apparently been recorded after the commencement of the search proceeding inasmuch as prior to recording Question No. 20, the authorized officer has recorded the title ―statement taken during the course of search.‖ In fact, the Assessing Officer has referred to the statement as preliminary statement at page 5 of the block assessment order. From these facts, it is amply evident that statement of the assessee admitting the gifts to be non-genuine has been recorded before the commencement of the search and cannot conceivably be construed as a statement u/s 132(4) of the Income-tax Act. The decision of Allahabad High Court in R.R. Gavit Vs. Smt. Sher Banu Hasan Daya 161 ITR 793 support the view taken by us. The statement of admission dated 25.11.99, which is the sole basis adopted by the Assessing Officer for bringing the gifts within the purview of undisclosed income u/s 158BB for the purposes of block assessment cannot thus be treated as evidence found as a result of search. We are, therefore, of the view that the genuineness of the gifts cannot possibly be treated as covered within the limited scope and purview of undisclosed income under the block assessment. On this legal ground alone, the impugned addition of undisclosed income treating the gifts as non-genuine is held to be outside the purview of block assessment and liable to be deleted.‖

19. Turing to the third question, the tribunal observed as under:- ―32. We may next consider the facts concerning the gifts received by the assessee and his HUF in the context of definition clause, namely, section 158B(b) which defines the undisclosed income as reproduced above. The important limb of the definition which constitute the basic essence is ―income or property which has not been or would not have been disclosed for the purpose of the act.‖ In the case of L.R. Gupta Vs. Union of India 194 ITR 32, the Delhi High Court while construing the expression undisclosed income as used u/s 132 (1) has held that the income which is hidden from the Department is undisclosed income. In the instant case before us, gifts have been received by the assessee and his HUF by account payees cheques which have been duly deposited into the bank account as reflected at pages 109 and 111 of the first paper book filed by the assessee. From these bank accounts, the assessee and his HUF have issued cheques for making advances to the sister concerns, namely, Haryana Acrylic company Pvt. Ltd. and Mono Acrylic Manufacturing Co. Pvt.Ltd. Both these companies are existing assesses and amounts advanced by the assessee and his HUF have been duly credited in the books of account of the said companies. Copies of bank accounts of these two companies as well as copies of accounts of the assessee in the books of the said companies have been duly furnished during the course of assessment proceedings before the Assessing Officer and are placed in the assessee‘s first paper book at pages 112 to 125. Assessee and his family members are promoters, directors and shareholders in these companies and the amounts advanced by the assessee out of the gifts have been duly entered in their books of account and accepted in their tax assessments. Similarly with regard to source of the gift amount, we find that Shri Rampati Singhania is a leading industrialist belonging to Juggi Lal Kamalapath Singhania family of Kanpur. The donor has sold his property in Bombay for a sum of Rs. 2.75 crores and has received clearance from Income-tax Department in Form No. 34A and 37I for the sale of the property. Further Income-tax as well as Wealth-tax assessment of the donor for the assessment year 2000-2001, during which the gifts in question have been made have been completed after scrutiny in Central Circle, Kanpur by the Officer of the rank of the Joint Commissioner of Income-tax. All such documents were provided to the Assessing Officer during the block assessment proceeding and also form part of the paper book filed before us. Ld. Counsel has drawn our attention to gift deed dated 20th June, 1999 as well as 30th May, 1999 which were executed by the donor as well as the donee and produced during the assessment proceedings before the Assessing Officer. Shri Rampati Singhania has sworn affidavit dated 13.5.1999 and 20.6.1999 much before the search and these affidavits have been filed during the block assessment proceedings and are placed in the first paper book filed before us. From these facts, it is amply evident that the gift transactions are duly disclosed and accounted for in the books of account of the donor as well as the donees. These transactions cannot be considered as secret, hidden or concealed. The surrounding facts and circumstances like routing the transactions through regular banking channels by the donor and the donees and accounting for all the amounts in their respective books of account and further gifts being evidenced by gift deeds as well as the affidavits of the donor provided ample evidence that the transactions are disclosed and accounted for and lie outside the pale of the definition of undisclosed income as contained u/s 158B(b). We feel that the gifts in question have been duly disclosed and reflected in the books of account as well as tax returns of the donor and the donees. Such transactions would clearly fall outside the purview of block assessment. On this ground also, the impugned addition as undisclosed income in the block assessment is liable to be deleted.

33. Thus, the first issue regarding the applicability of section 158B(b) to the gifts in question is decided in favour of the assessee and we hold that the issue of genuineness of the gifts lies beyond the purview of the block assessment.

34. The second and third issue as formulated by us above, arising from the present appeal, are basically concerned with the genuineness of the gifts in question. Without prejudice to our finding that the issue of genuineness of gifts lies outside the purview of block assessment as envisaged under Chapter XIV-B, we proceed to consider this aspect of the controversy also. The sheet anchor of Department case is the admission made by the assessee that the gifts are non-genuine and have been arranged through a Chartered Accountant on payment of commission@ 3% Ld. Counsel was at pains in emphasising that the statement has been procured by the assessee under coercion and pressure and is contrary to CBDT‘s instruction issued in march, 2003 pursuant to Kelkar Committee Report wherein the Committee has acknowledged the prevalence of the practice amongst the search parties to obtain forced confessions of undisclosed income from the assessees. The proposition is well established that admission made by an assessee during search operations constitute substantive evidence in view of sections 17 and 21 of the Evidence Act. However, such admission cannot be considered as conclusive evidence against the assessee. It has been held by the Apex Court in Pullangode Rubber Produce Co. Vs. State of Kerala 91 ITR 18, relied upon by the Id. counsel, ―an admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It is open to the assessee who made the admission to show that it is correct.‖

35. Reference may further be made to the decision of Delhi High Court in S. Arjun Singh Vs. CWT 175 ITR 91, cited by the Id. Counsel where a similar proposition has been laid down. The Punjab & Haryana High Court in Kishan Lal‘s case 88 ITR 293 have taken the same view and observed, ―it is an established principle of law that a party is entitled to show and prove that admission made by him is in fact not correct and true. Such admission raise a presumption against the persons making the admission but such presumption is rebutable.

36. A very heavy onus lay upon the assessee to refute and controvert the admission made at the time of search operation. In the instant case before us, documents and evidence filed by the assessee during the course of assessment proceedings before the Assessing Officer to which reference has been made hereinbefore by us amply established that the gifts in question have been made by Shri Rampati Singhania, a leading industrialist of Kanpur belonging to J.K. Group and such gifts are evidenced by gift deeds duly executed before the date of the search. Source of the gift, creditworthiness of the donor as well as genuineness of the transactions have been established by filing the copies of the bank account of the donor showing credit of sale proceeds of the property as duly reflected in the Income-tax and Wealth –tax assessment of the donor. With regard to the mass of evidence filed by the assessee before the Assessing Officer, the revenue authorities have not been able to assail or refute such evidence while treating the impugned gifts as non-genuine. Even before us, the Id. Sr. DR when called upon to comment upon such evidence fairly conceded that Income-tax and Wealthtax assessment in the case of Shri Rampati Singhania donor have been made by the Joint Commissioner of Income-tax, Central Circle after the search operations accepting the return version.

37. With regard to the addition of Rs. 1,80,000/on account of alleged commission paid by the assessee for arranging the gifts, we have not been told as to whom the alleged commission has been paid. No documents have been found during search operations to the effect that any intermediatory was involved in these transactions. Neither any enquiry has been made by the revenue authorities regarding the identity of the alleged intermediatory who is reportedly a Chartered Accountant. The addition in the block assessment has apparently been made merely on the basis of preliminary statement dated 25.11.1999 and 6.1.2000 which have been disproved by the assessee by filing substantial documentary evidence including gift deeds, copies of bank accounts. Income-tax and Wealth-tax orders of the donor as well as sworn affidavit of the donor. We feel that the assessee has discharged the onus to disprove the admission regarding genuineness of the gift transactions.

38. At this stage, we may refer to the contention of the Id. Sr.DR that there was no occasion or relationship between the donor and the donee for making the gifts in the instant case. In our considered view genuineness of the gift transaction has to be considered on the basis of attendant facts and circumstance of the case like identity of the donor, financial capacity and factum of the transaction. Even though relationship between the donor and the donees as well as the occasion for the gift may be relevant circumstances for adjudication of the issue of genuineness of the transaction yet no inference can be drawn merely on the basis of surmises and conjectures. Relationship or occasion for the gift are not in any case essential elements as engrained in the definition of gift under the Gift Tax Act. The view taken by us is amply reinforced by the decision of Chandigarh Bench of the Tribunal in the case of R.K. Syal Vs. ACIT 66 TTJ 656 cited by the Id. Counsel. In this decision, the Chandigarh Bench held as under: ―The gifts made cannot be rejected merely on the ground that there was no occasion or relationship for making the same. The element close relationship or occasion for making gift do not flow from the definition of gift as given in Sec.[2] (Xii) of the Gift Tax Act. The conditions laid down there are there should be transfer by one person to another of any existing movable or immovable property, the transfer should be voluntary and should be made without consideration of any money.‖

39. At this stage, we may also refer to the observations of the Delhi High Court in the case of CIT Vs. Sunita Vacchani 184 ITR 121 as refereed by the Id. Counsel. The Hon‘ble high Court observed, ―The Tribunal has examined the evidence which was available on the record and has arrived at the aforesaid findings. Even though it may be surprising as to how large sums of money are received by a family in India by way of gifts from strangers from abroad, unless there is something more tangible than suspicion, it will be difficult to regard the moneys received in India from abroad as money representing the income of the assessee in India. On the facts as existing on the records, we are unable to come to the conclusion that any question of law arises. The petition is dismissed.‖

40. Having regard to the aforesaid discussions, we feel that the assessee has succeeded in disapproving the admission regarding the genuineness of transaction and adequate evidence has been brought on record to establish the genuineness of the gifts.‖ Genuineness of the gift of Rs.50,00,000/- made to the respondent/assessee.

20. Before we examine the legal issue relating to difference between regular and block assessment, we would like to examine the aspect of genuineness of the gift, which we would hold is a mixed question of law and fact. Onus to prove that the gifts were genuine would be on the respondent/assessee, the facts being in the exclusive and personal knowledge of the respondent/assessee. If we uphold findings of the Tribunal that the gift was genuine, the legal question whether addition should have been made as undisclosed income in block assessment or as a disallowance in the regular assessment need not be decided. Finding on genuineness of the gift would also form the foundation of facts to answer the issue of regular and block assessment.

21. We would begin by reproducing for clarity entire statement of the respondent/assessee recorded on oath under Section 132(4) of the Act on 25th November, 1999, which is as under:- ―Statement of Shri Mahender Singh Aggarwal s/o Sh. Mangat Ram Aggarwal aged 54 years R/0 2/34 Roop Nagar Delhi recorded on oath during the search and seizure operation u/s 132 of the Income-tax Act, 1961 on 25.11.99 at 2/34 Roop Nagar, Delhi. Sd/-25.11.99 Sd/- 25.11.99 (MS Aggarwal) Pawan K. Kumar IRS Oath Taken Dy. Director of Income tax (Inv) Unit-II, E/2, ARA Centre Jandewalan Extn., New Delhi 110055 Oath Administered Q.[1] Please identify yourself Ans. I am Mahender Singh Aggarwal s/o Sh. Mangat Ram Aggarwal aged 54 years R/o 2/34 Roop Nagar, Delhi. Q.[2] Please give the details of your bank lockers in your name or in the name of your family members? Ans. My wife Smt. Prabha Aggarwal has a locker in Indian Overseas Bank, Model Town, Delhi. I will be giving the key of locker. Second locker is in name of Sanjay Aggarwal and Monica Aggarwal in Punjab National Bank, Subzi Mandi, Delhi locker No. 933. Q.[3] Please give details of your and yours family members‘ immovable properties. Ans. We have following immovable properties:

1. House at 2/34, Roop Nagar, Delhi Anscestral property

2. Godown at Khasra No. 53. Siraspur, Delhi

3. Factory Rajasthan Udyog Nagar,Delhi

4. Factory at Vill.- Bad Malik In my name Delhi Acrylic In name of Haryana Acrylic Sonepat, Haryana.

5. Factory at Village Dhaturi Distt. Sonepat, Haryana

6. Land at Near Vill Bhondsi Gurgaon (One Acre) In name of Delhi Acrylic

7. Plot (200 Sq. Yards) in Narela Housing Scheme There is not other immovable property my name or in name of my family members or our business concerns. Q.4. Have your or your family members received and gift during the last ten years? Ans. I have received a gift of Rs. 50,00,000/- in Indian rupees from Sh. Kamla Pati Singhania R/o. Kamla Tower, Kanpur UP in this year. Q.[5] How do your know Sh. Kamlapati Singhania? Ans. I know him through our chartered accountant Sh. V.K. Goyal of V.K. Goyal & Co. (CA) – Sixth Floor Amba Deep Building, New Delhi. Q.[6] What is the source of livelihood of Sh. Kamlapati Singhania? Ans. He is industrialist of J.K. Group of companies based in Kanpur and he is the chairman of J.K. Synthetic and J.K. Cement. Q.[7] Have you ever met Sh. Kamlapati Singhania? Ans. No, never Q.[8] Have you given any gift to any person during the last ten years? Ans. No, never Q.[9] Have you or your family members given any gift to Sh. Kamlapati Singhania or his family members? Ans. No, never. Q10. Can you give any reason which prompted Sh. Kamlapati Singhania to give this gift to you? Ans. I don‘t know the reason. Q.11 Do you want us to accept that Sh. Kamlapati Singhania has given you a gift of Rs. 50,00,000/without knowing you, without any relationship and without any basis. Please comment. I would like to explain to your that if you give a false statement you are liable to be prosecuted. Ans. This gift was arranged by my CA Sh. V.K. Goyal for 3% commission. Besides this I have given Rs. 50,00,000/- incase to Sh. V.K. Goyal. Q.12 Do you maintain any books of accounts? If yes, please tell where are the same lying. Ans. Books of accounts for my business concern are maintained. All the books of my companies/business concerns are lying in office located here at ground floor 2/34, Roop Nagar, Delhi. Following are the business concerns.

1. Delhi Acrylic Manufacturing Co. Pvt. Ltd., 28, Rajasthan, Udyog Nagar Director:

(i) Sanjay

(ii) Prabha

2. Haryana Acrylic Manufacturing Co. Pvt. Ltd. 20th Mile Jatheri Road, Vill. Bralmalik Sonepat, Haryana Director: (1) Sanjay Aggarwal (2) Prabha Aggarwal (3) Bhupender Nath R/o.C-186, Pushpanjali Enclave

3. Mono Acrylic Manufacturing Co. Pvt. Ltd 53, Gurudwara Road, Siraspur, Delhi Director: (1) Manish Aggarwal (2) Sanjay Aggarwal

4. M.S. Marble & Granite Co. Pvt. Ltd., 28, Rajasthan Udyog Nagar, Delhi Director: (1) S.S. Garg, Manager (2) Bhupender Nath

5. Acry Monomour Pvt. Ltd. Vill. Dhaturi, Sonepat, Haryana Director: (1) Sanjay Aggarwal (2) Manish Aggarwal Q13 What are your source of income? Ans. Investment in shares of the companies mentioned in answer to the Question no. 12 is the only source of my income. Q.14 Give full details of your family members, age, occupation residence and their source of income. Also state their income tax particulars, if any. Age Occupatio n Source of income Myself M.S. Aggarwal 2/34, Roop Nagar Age -54 yrs. Business Wife Prabha Aggarwal Age 45 yrs Business Salary from Delhi Acrylic Son Sanjay Aggarwal 31 yrs. -- do -- Salary from Haryana Acrylic Daughter in law Monica Aggarwal 29 yrs House wife NIL Son Manish Aggarwal 24 yrs Business Salary from Mona Acrylic Daughter in law Ritu Aggarwal w/o. Sh.Manish Aggarwal 21 yrs. Housewife M.S. Aggarwal (myself), Prabha Aggarwal, Sanjay Aggarwal and Manish Aggarwal are assessed to tax. Other income tax particulars I will given later on.

2. Haryana Acrylic -- do -- Current

3. Mona Acrylic -- do -- Current

4. M.S. Marbles Canara Bank, Subzi Mandi, Delhi Current

5. Acry Monomers India Bank Phara Ganj -- do --

6. M.S. Aggarwal Indian Overseas Saving Bank, Model Town

(ii) IOB Roop Nagar

7. Sanjay Aggarwal IOB Roop Nagar Saving

8. Monica Aggarwal -- do -- Saving

9. Prabha Aggarwal IOB Model Town -- do --

10. Sanjay Aggarwal Punjab National Bank, -- do -- & Monica Aggarwal Ghanta Ghar

11. Manish Aggarwal IOB Model Town -- do --

12. Haryana Acrylic Mft. Co. Pvt. Ltd. Canara Bank, 15-A, Opp. Birla Mill, Kamal Nagar FDRs - There is no FDR in my name or in the name of my family members or business concerns. Investment in shares - Neither my family member nor me have ever invested in shares of any company except our family companies. We have following vehicles:-

1. DL1CF 1695 Esteem Haryana Acrylic‘s a/c.

2. DL 8C 9495 Opel Delhi Acrylic‘s a/c.

3. 4738 Zen Mona Acrylic‘s a/c.

4. 3721 M.V. --

5. 2658 M.V. -- There is no other investment in my name or in the name of my family member.

22. Second statement on oath of the respondent/assessee under Section 131 of the Act was recorded on 29th December, 1999, in the presence of Mr. Vinay Kumar Goel, Chartered Accountant. Relevant portion of this statement reads:- “Statement of Shri M.S. Aggarwal s/o Sh. M.R Aggarwal R/o 2/34 Roop Nagar New Delhi recorded on oath during the proceedings u/s. 131 of the I.T. Act 1961 on 29.12.1999 at Room No. 267, ARA Centre Jhandewalan Extn. New Delhi in the presence of his AR, Sh. Vinay Kumar Goyal, CA. I hereby under take to state the truth and only truth In the name of God Sd/-29.12.99(3.40pm) (MS Aggarwal) Oath Taken Sd/- 29.12.99 Pawan K. Kumar IRS Dy.Director of Income tax E/2, ARA Centre Jandewalan Extn., New Delhi -110055 Oath Administrator Oath Administered Q.[1] Please identify yourself. Ans. I am Mahender Singh Aggarwal S/o Sh. Mangat Ram Aggarwal aged 54 years r/o 2/34 Roop Nagar, New Delhi Q.[2] Please explain whether the income tax return for the last financial year has been filed or not by you. Ans. After consulting my tax consultant, I submit that it has not been filed. Q.[3] Please explain whether any wealth tax return has ever been filed by you. Ans. After consulting my tax consultant, I submit that during last two — three years, no wealth tax return has been filed. Q.[4] Please furnish the list of all bank accounts held in India and aboard by you, your family member and business concerns in which you or your family members have business interest, or are partners, directors or sole proprietor. Ans. The complete list I will submit latest by 05.01.2000. Q.[5] Please furnish the list of business concerns started or controlled by you or your family members, the particulars of which have not been disclosed to department so far. Ans. I will furnish the exhaustive list of all the entities lastest by 05.01.2000 positively.

9.18 means the payments Rs. 9,18,000/- have been made for import. Similarly on page-2 one entry Capital Plastic 25,000/- is on LHS which means rs. 25,000/-has been recd from M/s. Capital Plastic. On page -7 LHS there is on entry of Advista 150 it means Rs. 1,50,000 have been received from Advistas 150 it means Rs.1,50,000 have been received from Advistas. Annexure A-39 This probably relates to the details of payments made for purchases which have not been reflected in my regular books of a/cs and some pages from pages No. 15 onward pertain to M/s. Universal Enterprises which has not filed any return of income so far. The exact details shall be known once my employee who has written it shall came and explain. Annexure A-40, A-42 and A-46 These are relating to the cash transactions which are not reflected in our regular books of accounts. However, some entry may be reflected in our regular books of accounts which I cannot point out at this moment. The LHS (Half page) reflects the receipts and the other half show payments made. Annexure A-41 This diary contains details of stock purchase/and sold item-wise as well as container wise. Annexure A-43 This diary seems to contain partywise account of goods sold and payments received. Annexure A-44 It contains entries relating to some of our companies as well as others. It appears to be a ledger account. Annexure A-45 It relates to Universal Enterprises' details appears to be of consignment/container's detail. These diaries are in the hand writing of some of my key employees namely Tarun Kumar, Mr. Mishra and Sh.Bhushan who may be able to completely explain the contents. Q.13 Whether this kind of memoranda records containing the detail of unaccounted transactions is being maintained in computers as well? Ans. As far as I remember these records are not kept on computers. Q.14 Pl. furnish the name and address of the banks wherein the entities which have not been disclosed to department, maintain their bank A/cs. Ans, Mainly the accounts are maintained in following two bank 1 lnddian Bank, DBG Road Pahar Ganj, New Delhi.

2. Indian Overseas Bank, Model Town, Delhi However, complete name of entities and bank A/cs will be furnished on 05.01.2000. A.15 Pl. explain the nature of business activities carried out by different business concerns owned and controlled by your and your family members. Ans. All my entities broadly are engaged in import of acrylic sheet, poly carbonate sheets, vinyls and sale thereof, manufacturing of acrylic sheets and there fabrication and exports of fabricated items.

23. The respondent/assessee‘s third statement on oath, under Section 131 of the Act, recorded on 6th January, 2000 on the aspect of gifts is as relevant and significant as the statement on 25th November, 1999. This statement reads:- “The statement is in continuation of the statement temporarily concluded on 29.12.1999

24. The first attempt and retraction came in the letter dated 13th March, 2002 filed by the assessee during the course of the block assessment proceedings. Till then no specific communication was written to retract and withdraw the admission and confession that the gifts were bogus and procured by paying cash.

25. The Tribunal, in our opinion, has incorrectly observed and held that initial and first question and answers on gift, with reference to the statement recorded on 25th November, 1999, were at the preliminary stage and before the search, and question No. 20 onwards form part of the statement recorded during the search. The said finding of the Tribunal is fallacious and unacceptable. It ignores the first portion or the preamble before the statement was recorded, which reads as under: ―Statement of Shri Mahender Singh Aggarwal s/o Sh. Mangat Ram Aggarwal aged 54 years R/0 2/34 Roop Nagar Delhi recorded on oath during the search and seizure operation u/s 132 of the Income-tax Act, 1961 on 25.11.99 at 2.34 Roop Nagar, Delhi.‖

26. Clearly questions no. 4 to 11 quoted above and recorded on 25th November, 1999 were made during the course of search and seizure operation. These were recorded after the search warrant was enforced and executed. After recording answers to the first 19 questions, there was a time gap. Therefore signatures were affixed. The recording of the statement subsequently continued from question No. 20 onwards. In this situation, before question no. 20 the words "statement taken during the course of search" were again recorded. We fail to understand how the tribunal came to the conclusion that questions after question no. 20 were recorded during the course of search, while the first 19 questions were preliminary in nature and were recorded before the search had commenced. This was not pleaded before the Assessing Officer or Commissioner of Income Tax (Appeals). The search had commenced the moment various officers, including the Deputy Director of Income Tax (Investigation Unit 2) had reached the residence of the respondent/assessee and had shown and executed the search warrant.

27. The Tribunal in the impugned order correctly records that the admissions were compelling. However, thereafter the Tribunal observed that the statements should be ignored and would not be accepted, as the assessee had been able to rebut the admissions as the gifts were made by Mr. Rama Pati Singhania a leading industrialist from a well known family of Kanpur who had sold a property worth Rs. 2,75,00,000/- in Bombay. The sale of property and gifts were declared by Mr. Rama Pati Singhania in his Income Tax returns, which were filed on record. Gift deeds dated 20th June, 1999 as well as 30th May, 1999 executed by the donor as well as the donee were produced before their assessing officer. Affidavits dated 13th May, 1999 and 20th June, 1999, sworn by Mr. Rama Pati Singhania much before the search, were also placed on record during the block assessment proceedings. The transactions were therefore not hidden and concealed but were duly disclosed in the books of account of the donor and donee.

28. On the aspect of genuineness of the gift, we would observe that the Tribunal has missed the core issue and question that had arisen for consideration and required an answer. There was no dispute and challenge that the purported gifts were made through bank transactions and donor and his financial status was known. The issue was whether the gifts were arranged and bogus, in the sense that the respondent/assessee had paid cash to procure the gifts from an unrelated person with whom he had no personal relations, love and affection as was admitted by the respondent/assessee in his two statements, before taking a u-turn after two years in 2002. This core issue has been overlooked and ignored by the Tribunal to hold that the gift was genuine.

29. Gift as defined in Section 122 of the Transfer of Property Act means voluntary transfer of existing movable or immovable property made without consideration by the person called donor to another called the donee. Three important and essential characteristics of gifts are that it should be voluntary, it should be ―without consideration‖ and there should be acceptance by the donee. Expression ―without consideration‖ was explained and elucidated in Kumari Sonia Bhatia versus State of U.P. and Others, (1981) 2 SCC 585, which exposition need not be referred to in detail in view of the limited legal issue that arises in the present case, albeit it is beyond cavil that the gift must be voluntary and ―without consideration‖. Asokan versus Lakshmikutty and Others, (2007) 13 SCC 210, reiterates that absence of consideration is an essential element of gift and that concept of payment of consideration in whatsoever form is unknown. Therefore, when there are cross-transactions in form of payment of cash for issue of cheque, in the absence of explanation, there would be consideration and the transaction/transfer would not be a genuine gift but a sham and camouflage. Genuine gifts received during the current year were un-taxable, but sham and bogus gifts would fall foul and attract correction and taxation under Section 68 of the Act. In State of Karnataka versus J. Jayalalitha and Others, (2017) 6 SCC 263, Ghose, J. in paragraph 213 of the said citation had referred to Section 68 of the Act and relied on Sumati Dayal versus Commissioner of Income Tax, Bangalore, 1995 Supp (2) SCC 453, to observe that payment by way of cheques may not per se be of consequence in all cases and circumstances. When genuineness of the transaction was examined, the assessee must justify the cash credit by explaining the nature and reason of the transaction, otherwise Section 68 of the Act could be invoked even when there was evidence that the money was received by cheque or though bank transaction. This would not ipso facto determine and decide whether the transaction was genuine and truly a gift. It was observed:- ―215. In Yash Pal Goel v. CIT (Appeals) [Yash Pal Goel v. CIT (Appeals), 2009 SCC OnLine P&H 664: (2009) 310 ITR 75], Kusum Lata Thakral v. CIT [Kusum Lata Thakral v. CIT, 2009 SCC OnLine P&H 7276: (2010) 327 ITR 424], CIT v. Sandeep Goyal [CIT v. Sandeep Goyal, 2014 SCC OnLine P&H 24763: (2014) 369 ITR 471 (P&H)] and ITO v. Mukesh Bhanubhai Shah [ITO v. Mukesh Bhanubhai Shah, 2009 SCC OnLine ITAT 1489: (2009) 318 ITR (AT) 394 (Bom)], the common issue was with regard to applicability of Section 68 of the Income Tax Act, 1961 vis-à-vis receipts which were claimed by the assessees to be by way of gifts and thus exempted from income tax. In all these cases, the assessees were asked to provide explanation to bring the receipts within the purview of gifts exempted from income tax and the AO on an in-depth scrutiny thereof had concluded that the transactions were only smoke screen/subterfuge to avoid income tax. The decision in Sumati Dayal [Sumati Dayal v. CIT, 1995 Supp (2) SCC 453], with reference to Section 68 of the Income Tax Act was relied upon. Further, the significant aspects of creditworthiness of donors and genuineness of the transactions were highlighted. The relationship between the donors and the assessee was also examined so as to furnish an acceptable reason or justification for such gift out of natural love and affection.

216. It was emphasised that to examine the genuineness of a gift, the test of human probability was very appropriate. It was reiterated that a gift cannot be accepted as such to be genuine merely because the amount has come by way of cheque or draft through banking channels unless the identity of the donor, his creditworthiness, relationship with the donee and the occasion was proved. Unless the recipient proved the genuineness of the transaction, the same could be very well treated as an accommodation entry of the assessee's own money, which was not disclosed for the purpose of taxation.

217. In all, however, the process undertaken by the Income Tax Authorities under Section 68 of the Act is only to determine as to whether the receipt is an income from undisclosed sources or not and is unrelated to the lawfulness of the sources or of the receipt. Thus, even if a receipt claimed as a gift is after the scrutiny of the Income Tax Authorities construed to be income from undisclosed sources and is subjected to income tax, it would not for the purposes of a charge under Section 13(1)(e) of the Act be sufficient to hold that it was from a lawful source in the absence of any independent and satisfactory evidence to that effect.‖

30. It is in this context that the statements on oath made by the respondent- assessee on two occasions, i.e. 25th November, 1999 and 6th January, 2000 become relevant and significant.

31. Section 114 of the Evidence Act states that Courts may presume existence of certain facts having regard to common course of natural events, human conduct and public and private business in relation to facts of a particular case. Illustration clause (e) states that judicial and official acts could be presumed were regularly performed. Thus, there would be a presumption as to the admission recorded, though the presumption is not absolute. Similarly, Section 57 of the Evidence Act states that Courts could take judicial notice of facts enumerated therein, albeit the list is not exhaustive. Judicial pronouncements hold that doctrine of judicial notice is wide and would include matters of common and general knowledge including facts that had acquired universal notoriety and have regular occurrence. It is in this context that observations made in the Kelkar Report regarding use of threats and compulsion to extract admissions, etc. and adverse observations in some judicial pronouncements would be relevant. Judicial notice of pernicious practice of procuring gifts could also be taken. However, it would be incorrect to apply presumption under Section 114 of the Evidence Act or the facts that could be judicially noticed, as affirmative or negative universal principles cast in stone. The factual background, i.e. facts and circumstances, matter and would be compelling.

32. Confessions are important for when voluntarily made there is a presumption that no person would make a statement against his interest unless it is true. Therefore, courts have to be cautious and careful that the confession recorded was voluntarily and not obtained under coercion and by force and wrongful inducement. Force and coercion are not synonymous and cannot be mixed and equated with mere anxiety and stress due to search and seizure operations, or inducement propelled by remorse and atonement to make an admission and confess a wrong. Motive of the person making the admission to gain indulgence, advantage or avoid evil of a temporal nature, cannot be treated as equivalent to inducement, coercion or fraud. Whether a confession is voluntary or induced by force, threat, coercion and wrongful inducement would primarily be one of fact, albeit any judicial verdict and decision on the issue must take all relevant facts and circumstances of the case into consideration and should not be guided by mere pre-ordained impressions. Factors like time of retraction, nature and manner of retraction etc. are relevant. Mere retraction does not make or proves that the admission was obtained by inducement, threat etc. Further, prudence requires that the court would examine the truthfulness and correctness of the admission when admissions are accepted and relied. Corroboration by attending circumstances may be justified.[See K.T.M.S. Mohd. and Another versus Union of India, (1992) 3 SCC 178, Telstar Travels Private Limited and Others Versus Enforcement Directorate, (2013) 9 SCC 549, Adambhai Sulemanbhai Ajmeri and Others versus State of Gujarat, (2014) 7 SCC 716 and Seeni Nainar Mohammed versus State, (2017) 13 SCC 685)].

33. In the present case, the respondent-assessee had stated that he had paid cash to convert his unaccounted money to procure the gift. This admission and confession was made in two statements after a time gap of nearly forty days. It would be difficult, if not impossible, to get direct evidence to ascertain and vouch for the truth or falsity of this inculpatory admission. The answer would largely depend on inference founded on surrounding circumstances, antecedent and subsequent. In the facts of the present case, the surrounding circumstances compellingly affirm that the gift was procured and not a genuine one. These circumstances are as under:-

(i) Gift of Rs.50,00,000/- was a substantial amount of money in

1999.

(ii) There is no evidence or material or even an effective attempt to show that the respondent-assessee and Mr. Rama Pati Singhania were extremely close friends. Blood relationship is not claimed.

(iii) The respondent-assessee before the Commissioner of Income

Tax (Appeals) had stated that their forefathers may have helped forefathers of Mr. Rama Pati Singhania, a vague statement which in fact admits and accepts that the respondent-assessee did not personally know Mr. Rama Pati Singhania.

(iv) The respondent-assessee‘s retraction was nearly two years after he had admitted having procured or arranged the gifts.

(v) Statement dated 6th January, 2000 admitting that the gift was bogus and not genuine was made by the respondent-assessee in the presence of the Chartered Accountant.

(vi) The respondent-assessee does not claim that the statement recorded on 6th January, 2000 was extracted and given under force, threat or coercion.

34. A gift is given out of natural love and affection to a person who is close to the donor or for the purposes of charity. Plea of charity has not been raised in this case. There is no evidence or even an indication as to how the respondent-assessee knew the donor, a well known businessman, who gave the gift to the respondent-assessee. In view of the aforesaid discussion, we have no hesitation in holding that the gift in question of Rs.50,00,000/- purportedly received by the respondent/assessee from Mr. Rama Pati Singhania was a procured one and the admissions/confession made as recorded in the statements dated 25th November, 1999 and 6th January, 2000 are trustworthy, true and correct. Finding of the Tribunal on accepting the gift as genuine is contrary to law being perverse and contrary to facts and material on record. Whether addition of Rs.50 lacs would have been made as undisclosed income in the block assessment order or should have been made in the regular assessment order

35. Chapter XIV-B relating to procedure for assessment in search cases was introduced with effect from 1st July, 1995 by Finance Act, 1995. The provisions of this Chapter have undergone several amendments, including some with retrospective effect from 1st July, 1995 by Finance Act, 2002. This has resulted in confusion and divergent interpretation of provisions of the said Chapter. Initially undisclosed income relating to the block period was taxed at 60% as prescribed under Section 113, with immunity from specified interest and penalty contemplated under Section 158BF on the undisclosed income. This had no bearing on tax, interest and penalty payable on normal/regular assessment, even if pending and when the assessment was subsequent to the search. Legal position underwent a change with enactment of Section 158BFA by way of the Income Tax (Amendment) Act, 1997 with effect from 1st January, 1997, in respect of searches under Section 132 or requisition under Section 132A on or after 1st January,1997. New provision of Section 158BFA had authorised levy of interest and penalty in certain cases. Conflicting and different stands taken pre and post enactment of section 158BFA by the Revenue have also contributed to the said confusion, which have resulted in somewhat conflicting judicial pronouncements.

36. The relevant provisions of Chapter XIV-B, namely, Section 158B clause(b), 158BA, 158BB and 158BC, including amendments made vide Finance Act, 2002 with retrospective effect from 1st July, 1995, read as under:- ―Section 158B. In this Chapter, unless the context otherwise requires,xxx (b) ―undisclosed income‖ includes any money, bullion, jewellery or other valuable article or thing or any income based on any entry in the books of account or other documents or transactions, where such money, bullion, jewellery, valuable article, thing, entry in the books of account or other document or transaction represents wholly or partly income or property which has not been or would not have been disclosed for the purposes of this Act, or any expense, deduction or allowance claimed under this Act which is found to be false. (underlined portion was inserted by Finance Act, 2002 w.r.e.f. 1st July,

1995) xxx 158-BA. Assessment of undisclosed income as a result of search.—(1) Notwithstanding anything contained in any other provisions of this Act, where after the 30th day of June, 1995 a search is initiated under Section 132 or books of account, other documents or any assets are requisitioned under Section 132-A in the case of any person, then, the Assessing Officer shall proceed to assess the undisclosed income in accordance with the provisions of this Chapter. (2) The total undisclosed income relating to the block period shall be charged to tax, at the rate specified in Section 113, as income of the block period irrespective of the previous year or years to which such income relates and irrespective of the fact whether regular assessment for any one or more of the relevant assessment years is pending or not. Explanation.—For the removal of doubts, it is hereby declared that— (a) the assessment made under this Chapter shall be in addition to the regular assessment in respect of each previous year included in the block period; (b) the total undisclosed income relating to the block period shall not include the income assessed in any regular assessment as income of such block period;

(c) the income assessed in this Chapter shall not be included in the regular assessment of every previous year included in the block period. (3) Where the assessee proves to the satisfaction of the Assessing officer that any part of income referred to in sub-section (1) relates to an assessment year for which the previous year has not ended or the date of filing the return of income under sub-section (1) of Section 139 for any previous year has not expired, and such income or the transactions relating to such income are recorded on or before the date of the search or requisition in the books of account or other documents maintained in the normal course relating to such previous years, the said income shall not be included in the block period. (underlined portion was inserted by Finance Act (No.2), 1998 w.r.e.f. 1st July, 1995) xxx 158-BB. Computation of undisclosed income of the block period.—(1) The undisclosed income of the block period shall be the aggregate of the total income of the previous years falling within the block period computed, in accordance with the provisions of this Act, on the basis of evidence ‗found as a result of search‘ or requisition of books of account or other documents and such other materials or information as are available with the Assessing Officer and relatable to such evidence, as reduced by the aggregate of the total income, or as the case may be, as increased by the aggregate of the losses of such previous years, determined,— (a) where assessments under Section 143 or Section 144 or Section 147 have been concluded prior to the date of commencement of the search or the date of requisition, on the basis of such assessments; (b) where returns of income have been filed under Section 139 or in response to a notice issued under subsection (1) of Section 142 or Section 148 but assessments have not been made till the date of search or requisition, on the basis of the income disclosed in such returns;

(c) where the due date for filing a return of income has expired, but no return of income has been filed,— (A) on the basis of entries as recorded in the books of account and other documents maintained in the normal course on or before the date of the search or requisition where such entries result in computation of loss for any previous year falling in the block period; or (B) on the basis of entries as recorded in the books of account and other documents maintained in the normal course on or before the date of the search or requisition where such income does not exceed the maximum amount not chargeable to tax for any previous year falling in the block period; (ca) where the due date for filing a return of income has expired, but no return of income has been filed, as nil, in cases not falling under clause (c);

(d) where the previous year has not ended or the date of filing the return of income under sub-section (1) of Section 139 has not expired, on the basis of entries relating to such income or transactions as recorded in the books of account and other documents maintained in the normal course on or before the date of the search or requisition relating to such previous years; (e) where any order of settlement has been made under sub-section (4) of Section 245-D, on the basis of such order; (f) where an assessment of undisclosed income had been made earlier under clause (c) of Section 158-BC, on the basis of such assessment. Explanation.—For the purposes of determination of undisclosed income,— (a) the total income or loss of each previous year shall, for the purpose of aggregation, be taken as the total income or loss computed in accordance with the provisions of this Act without giving effect to set off of brought forward losses under Chapter VI or unabsorbed depreciation under sub-section (2) of Section 32: Provided that in computing deductions under Chapter VI-A for the purposes of the said aggregation, effect shall be given to set off of brought forward losses under Chapter VI or unabsorbed depreciation under subsection (2) of Section 32; (b) of a firm, returned income and total income assessed for each of the previous years falling within the block period shall be income determined before allowing deduction of salary, interest, commission, bonus or remuneration by whatever name called: Provided that undisclosed income of the firm so determined shall not be chargeable to tax in the hands of the partners, whether on allocation or on account of enhancement;

(c) assessment under Section 143 includes determination of income under sub-section (1) or subsection (1-B) of Section 143. (2) In computing the undisclosed income of the block period, the provisions of Sections 68, 69, 69-A, 69-B and 69-C shall, so far as may be, apply and references to ―financial year‖ in those sections shall be construed as references to the relevant previous year falling in the block period including the previous year ending with the date of search or of the requisition. (3) The burden of proving to the satisfaction of the Assessing Officer that any undisclosed income had already been disclosed in any return of income filed by the assessee before the commencement of search or of the requisition, as the case may be, shall be on the assessee. (4) For the purpose of assessment under this Chapter, losses brought forward from the previous year under Chapter VI or unabsorbed depreciation under subsection (2) of Section 32 shall not be set off against the undisclosed income determined in the block assessment under this Chapter, but may be carried forward for being set off in the regular assessments. (underlined portion was inserted by Finance Act, 2002 w.r.e.f. 1st July, 1995. Prior to its substitution, clause (c) read as under, ―(c) where the due date for filing a return of income has expired but no return of income has been filed, as nil‖) xxx 158-BC. Procedure for block assessment.—Where any search has been conducted under Section 132 or books of account, other documents or assets are requisitioned under Section 132-A, in the case of any person, then,— (a) the Assessing Officer shall—

(i) in respect of search initiated or books of account or other documents or any assets requisitioned after the 30th day of June, 1995 but before the 1st day of January, 1997, serve a notice to such person requiring him to furnish within such time not being less than fifteen days;

(ii) in respect of search initiated or books of account or other documents or any assets requisitioned on or after the 1st day of January, 1997 serve a notice to such person requiring him to furnish within such time not being less than fifteen days but not more than forty five days, as may be specified in the notice a return in the prescribed form and verified in the same manner as a return under clause (i) of sub-section (1) of Section 142, setting forth his total income including the undisclosed income for the block period: Provided that no notice under Section 148 is required to be issued for the purpose of proceeding under this Chapter: Provided further that a person who has furnished a return under this clause shall not be entitled to file a revised return; (b) the Assessing Officer shall proceed to determine the undisclosed income of the block period in the manner laid down in Section 158-BB and the provisions of Section 142, sub-sections (2) and (3) of Section 143, Section 144 and Section 145 shall, so far as may be, apply;

(c) the Assessing Officer, on determination of the undisclosed income of the block period in accordance with this Chapter, shall pass an order of assessment and determine the tax payable by him on the basis of such assessment.‖

37. In Commissioner of Income Tax, Delhi-II versus Ravi Kant Jain, [2001] 250 ITR 141 (Delhi), after referring to sub-section (1) to Section 158BA, which starts with a non obstante clause, it was observed that block assessment under Chapter XIV-B was in addition to the regular assessment in respect of each previous year. Income assessed in block assessment does not form part of regular assessment. Further, procedure under Chapter XIV- B was intended to provide for a mode of taxing undisclosed income detected as a result of search and was not a substitute for a regular assessment. Assessment for the block period could only be done on the basis of the evidence found as a result of search or requisitioning the books of account or documents or such other information available with the assessing officer. Legal position on scope and ambit of undisclosed income has been elucidated and explained by the Supreme Court in Assistant Commissioner of Income Tax, Chennai versus A.R. Enterprises, (2013) 3 SCC 196, which specifically made reference to the expression ‗which has not been or would not have been disclosed‘ for the purpose of the said Act. Referring to the latter portion of Section 158B(b), it was observed as under:-