M. V. R. Prasad, A.M. - (1.) THE appellant, Smt. Rajrani Gupta, runs a sex and health clinic named "M/s Kayakalp International" and a beauty clinic named "Monalisa". Her husband, Dr. Sohanlal Gupta, is a dental surgeon. Her son, Dr. Arunkumar Gupta, is also a qualified doctor, being a Bachelor of Ayurvedic Medicines & Surgery (B.A.M.S.). Her daughter-in-law, Dr. Renu Gupta, is also a qualified doctor and has the same qualifications as that of her husband, Dr. Arunkumar Gupta. THEre is another entity called "Dr. Sohanlal Gupta (HUF)" in which all the abovementioned persons are members. THE entire family was residing at Bathinda, Punjab, upto mid-July 1991. Because of the terrorist activity in the State of Punjab, they moved to Bombay in 1991, where the appellant has been running the aforesaid sex and health and beauty clinics. Her family members have also been working with her as salaried employees. She has set up three branches of her sex and health clinic in Mumbai. THE first one was set up at Borivali in 1991, the second one at Charni Road in May 1995 and the third one at Dadar in November, 1995. A search was conducted at the residential and business premises of the appellant on 26th March, 1996. During the search, the following cash was found : JUDGEMENT_11447_TLIT0_19990.htm A substantial portion of the above cash, excluding a small portion, was offered to tax as the unexplained income of the appellant.
(2.) During the search, it was also noticed that the appellant and her abovementioned family members received substantial gifts from certain non-residents out of their NRE Accounts in different years, in the names of the aforesaid family members of the appellant and also in the name of the appellant herself. Apart from the gifts from the non-resident Indians, the family members of the appellant had also received other domestic gifts, and the details of the gifts received in different financial years are recorded by the AO at p. 5 of his order, which are as follows : JUDGEMENT_11447_TLIT0_19991.htm The details of the non-residents who allegedly made the gifts are given by the AO at p. 6 of his order and they are as follows : JUDGEMENT_11447_TLIT0_19992.htm The AO also noticed that a large number of flats have been acquired between 1991 and 1996 in the names of the different family members and the details of such properties acquired and their values are given by the AO at p. 17 of his order and they are as follows : JUDGEMENT_11447_TLIT0_19993.htm The AO was of the view that the abovementioned gifts received by the appellant and the family members were not properly explained and so he brought them to tax as the income of the appellant and the other family members to the extent he regarded them as unexplained. Similarly, he was of the view that there was investment in the abovementioned properties outside the books of account and he brought that unexplained investment also to tax as the income of the respective family members, Apart from that, he also brought to tax certain unexplained loans recorded in the books as the income of the appellant and the other family members. Apart from that, the search party noticed certain patients' registers in which the visits of the patients, the nature of the disease treated and the fee collected are recorded and on the basis of such patients' registers, the AO concluded that all the fees received were not recorded in the books and accordingly he estimated the professional income of the appellant as follows : JUDGEMENT_11447_TLIT0_19994.htm Apart from the above additions, the AO also made certain miscellaneous additions which will be referred to in due course. The learned counsel for the assessee assailed all the additions made and they are dealt with hereunder. The gist of the first ground of appeal is that the AO erred in making an addition of Rs. 1,24,360 under s. 69 as unexplained cash. In the block return filed by the appellant, she had worked out the excess cash as under : JUDGEMENT_11447_TLIT0_19995.htm It may be observed that the appellant worked out the above excess cash of Rs. 46,75,640 on the basis of the cash balances reflected in the cash books of the different family members, inclusive of the grand-daughter of the appellant, Aakanksha. After working out the unexplained cash at the above figure of Rs. 46,75,640, an amount of Rs. 39,74,375 was offered as the income of the appellant and the balance of Rs. 7,01,265 was offered in the assessment of Dr. Sohanlal Gupta. The AO has not raised any dispute about the allocation of the excess cash between the appellant and her husband. He has, however, mentioned that the cash balance in the cash books seized during the raid at Kayakalp International stood only at Rs. 1,37,373 as against the amount of Rs. 1,83,428 taken credit of by the appellant in the above computation for working out the excess cash. He has also mentioned that the appellant surrendered, in the deposition taken from her under s. 132(4) at the time of search, an amount of Rs. 48,00,000 as against the income offered in the block returns filed by the appellant and her husband on this account of Rs. 46,75,640. He was of the view that there was no reason for the appellant to resile from the position of Rs. 48 lakhs offered during the search. He also observed that the appellant did not furnish the details of the entries made in the respective cash books for the period from the date of the last entry as on the date of the search to 26th March, 1996. Accordingly, he brought the impugned amount of Rs. 1,24,360 as the income of the appellant on account of unexplained cash under s. 69 of the IT Act over and above the amount offered by her.
(3.) THE learned counsel for the appellant pleaded before us that the entries in the respective cash books were not upto-date as on the date of the search, but subsequently the cash books were made upto-date by incorporating the necessary entries in them on the basis of the patients' registers which were found and seized during the search. Thus, as the entries were made on the basis of the seized material, there is no question of any manipulation in the matter and so there is no reason at all for the impugned addition of Rs. 1,24,360.;