2. The assessee had surrendered Rs.27,53,939 as undisclosed income on 10.06.1998, before Investigation Wing, Agra. On being asked to file the details of this undisclosed income the assessee submitted that the surrender was made under duress. The assessee had deposited the sum of Rs.27,53,339 in Nova Scotia Bank, New Delhi by way of drafts- one for Rs. 15,19,600 as obtained after withdrawal from the bank account and the balance drafts of Rs. 12,33,799/-, as obtained after withdrawal from the cash book. Hie first was accepted by the Assessing Officer but the second one was not accepted as he had not accepted the veracity of the cash book on the ground that the books of account had been rejected u/s. 145 of the LT. Act and he thus had made the addition of Rs,12,33,799.
3. The CIT(A) confirmed the action of the Assessing Officer. He brought additional reasoning on record that in the computerized cash book, which was shown at the time of assessment proceedings, the opening balance of Rs.7,04,684 was claimed but the same appeared to have continued till 20th November after which on 24.11.97,05. 12.97,12. 12.97 and finally on 16.12.1997 cash is claimed to be withdrawn from cash book to make various drafts. He noticed that firstly, that no reference was made about cash book, withdrawals used (cash) to make the drafts during statement recorded on 24.03.98 by the Investigation wing and secondly it could not be expected that an amount of approximately Rs.7 lakhs cash claimed to be on the opening day of the year would be idle and intact in the boos of account to be used for purchasing bank drafts from such balance in November or December, 1997, i.e., after about eight months. The cash balance must have been used for some other purpose. The assessee’s explanation was found to be a handy explanation to support the purchases of the drafts, which came to the notice of the department after about six months of their purchase.
4. In appeal before the Tribunal, there struck a difference of opinion beetween the two members. The Id. AM found that the assessee had purchased the drafts for Rs.12,33,799 after cash withdrawal from the cash book; that the assessee had given specific dates of withdrawals from the cash book and had also explained as to how the cash was built up in the cash book; and that the AO erred in not accepting the claim of the assessee only because the books of accounts have been rejected u/s. 145 of the I.T. Act and not the cashbook; that the provisions of section 145 are invoked only when the purchases and sales are found un-vouched or expenses are unverifiable; that the CIT(A) proceeded without any material in his possession and only on the basis of presumption that the cash cannot be kept idle and it might have been utilized elsewhere; that the leartfed CIT(A) has erred in not believing the entries in the regular cash book and proceeded simply on presumption; that the assessee had filed complete details of the drafts purchased and had also produced the cash book before the lower authorities; that the CIT(A) has also erred in giving his finding without any basis and by referring to the surrender made by the assessee under duress before the Investigation Wing, which surrender was not made through any statement recorded u/s. 132(4) of the I.T. Act. Reliance was placed on the case of Pullangode Rubber Produce Co. Ltd. vs. State of Kerala & Another, 91 ITR-18(SC), wherein it was held that though an admission is an extremely important piece of evidence but it cannot be said that it is conclusive and it is open to the person who made the admission to show that it is incorrect; that the assessee on the basis of documents had proved that the admission made before the Investigation wing through letter was incorrect on the basis of documentary evidence in the shape of cash book; that the assessee had filed complete details of withdrawals from cash book before purchasing drafts; that the genuineness of withdrawals from regular cash book cannot be doubted on the ground that books were rejected u/s. 145 or cash withdrawn might have been utilized elsewhere without bringing any material on record.. He however, directed the AO to verify whether the amount invested in purchase of drafts was withdrawn from the regular cash book. If he finds that the cash has been withdrawn from the cash book maintained by the assessee before purchase of drafts, no addition is called for.
9. On consideration of the facts and the circumstances of the case the surrender alone as such cannot be the basis of making the addition and even the AO has not proceeded on that basis and made addition only of the amount which was not explained and the surrender to the extent explained to be from withdrawals from bank for purchase of drafts. The surrender on which assessment is based has no conclusive evidentiary value or binding force as the A.O. himself did not accept the amount of surrender and reduced it Rs.12,33,999 from 27,53,993. The surrender was not made in the course of any statement under section 132(4), and therefore, the letter written by the assessee by itself may not be treated as representing the income unless supported by probative evidence against the assessee. Even in respect of a search and survey, the Board directed in letter F.No.286/2/2003. IT(INV) dt 10.03.2003 that no attempt should be made to obtain confession and assessment should be based on the basis of material gathered. On the contrary surrender once made has to be shown as wrongly been made with supporting evidence in view of the Allahabad High Court in (1990) 184ITR 404 holding that erroneous admission by assessee cannot be a foundation for assessment. The assessee stated that the withdrawals have been made as stated by CIT(A) and the assessee had stated that the cash withdrawn was used for drafts deposited with bank. This reply was to specific question to explain the investment of money withdrawn in cash and the information regarding cash withdrawals can only be on the basis of cash book.
10. When a part of the surrender can be accepted on proper explanation the rest can also be allowed to be explained. The assessee’s claim that balance was from cash withdrawals from cash book has to be tested on the facts appearing in the case. For that test it would be necessary that cash book be examined. Both members agree to that effect – the Accountant Member stating that if cash is found withdrawn it should be excepted whereas the Judicial Member directs to verify as to how the cash was generated in the cash book. In my opinion the later course appear to be more reasonable as the cash availability is to be examined with reference to entries made therein.
11. On the facts and circumstances of the case the Assessing Officer can be directed to verify if the amount of Rs.l2;33,799/ – invested in purchase of draft was withdrawn from the regular cash book after verification of entries of cash withdrawals. In the peculiar facts of the case it would first be necessary to establish availability of funds in the cash book. There is no contra finding on the second issue of professional income in the peculiar facts and circumstances past history of the assessee and as a third member no opinion can be expressed in absence of a difference on the issue.