P.M. Jagtap, A.M. - (1.) THIS appeal is preferred by the assessee against the order of learned CIT(A), Jodhpur, dt. 24th Feb., 1992.
(2.) The only ground raised by the assessee originally in this appeal reads as under : "Under the facts and circumstances of the case the learned CIT(A) has erred in confirming the addition of Rs. 7,82,974 on account of unexplained investment in building, furniture and plant and machinery ignoring the fact that the assessee-firm has not started any income-earning activity during the relevant year and also ignoring the fact that this amount was invested by seven partners in firm who have surrendered Rs. 1,25.000 each on account of such unexplained investment in course of search through the head of the family Shri Ram Sahai the correct name is Ram Swaroop." In this case the original assessment was completed under Section 143(1) by AO on 29th March, 1988, on the basis of return of income filed by the assessee on 31st July, 1987, declaring a loss-of Rs. 9,393. Subsequently, survey under Section 133A was carried out on 27th and 28th Sept., 1988, at the premises of the assessee during which books of account were impounded under Section 131(a). Besides this, search operations were also conducted at the residential premises of the partners of the assessee-firm during which certain incriminating documents were seized. A reference was made by AO to the Departmental Valuer for estimating the value of construction of cinema building owned by the assessee-firm and the DVO estimated the same at Rs. 17,34,000. On the basis of DVO's report as well as material found during the search the assessment was reopened by the AO by issuing notice under Section 148. In response to the said notice the assessee-firm filed its return of income on 22nd March, 1991, which was taken up by AO for further scrutiny by issuing notice under Section 143(2). While examining the books of account of the assessee-firm, the AO found that the assessee has shown the expenditure of Rs. (sic)00,977 on construction of cinema building in the previous year relevant to the asst. yr. 1987-88, whereas the cost of construction as per seized records incurred in the said year was worked out to Rs. 15,20,460. Similarly, it was also found that the assessee has not recorded the entire expenses incurred on furniture and plant and machinery in its regular books of account. The AO, therefore, sought clarification/explanation from the assessee in respect of these unrecorded capital expenses amounting to Rs. 7,19,483, Rs. 34.324 and Rs. 73,034 in building account, furniture account and plant and machinery account, respectively. Before the AO it was explained on behalf of the assessee that the difference between the value as per seized records and as per the regular books of account has been surrendered by its partners of the assessee-firm in their returns of income for asst. yr. 1989-90, in pursuance of Expln. 5 to Section 271(1)(c). This explanation was rejected by AO observing that the surrender made by the partners is not applicable in the case of the assessee-firm and he made the additions of Rs. 7,82,974 in the income of the assessee-firm under Section 69 on account of unexplained investment in the construction of cinema building, furniture and plant and machinery. The matter was carried before the learned CIT(A) who confirmed the additions made by AO on this score considering that there is no material evidence on record to show that the partners of the assessee-firm contributed towards the unexplained investment. Aggrieved by the same, the assessee is in appeal before us.
(3.) WE have heard the arguments of both the sides and also perused the relevant material on record. WE have also gone through the written submission furnished by the learned counsel for the assessee and perused the decisions cited by him in support. It is observed that the explanation of the assessee that the deficiency found regarding the capital expenditure incurred on cinema building has been made good by the partners by surrendering the equivalent amount in their returns of income for asst. yr. 1989-90, was not accepted by the authorities below as there was no material evidence on record to establish that the partners of the assessee-firm in fact had contributed towards the unexplained investment made by the assessee-firm. Moreover, the nexus between the surrender made by the partners of the assessee-firm during asst. yr. 1989-90 could not be established with the capital expenditure found unrecorded in the books of account of the assessee-firrn. While pointing out one instance, the learned counsel for the assessee has submitted before us that Shri Nagarmal, partner of the assessee-firm surrendered Rs. 1,55,000 as his income invested in the firm. In this regard he draw our attention to the copy of relevant assessment order, placed at p. No. 34A and 34B of his paper book. A perusal of the same, however, reveals that the AO did not accept the surrender made by the said partner stating that the undisclosed investment found to be made in the cinema building related to the assessee-firm for asst. yrs. 1987-88 and 1988-89 and, therefore, the surrender made by the partner of the assessee-firm in his individual case for asst. yr. 1989-90 cannot be correlated to the said investment. Under the circumstances we find the contentions of the learned counsel for the assesses raised before us on the basis of surrender made by the partner of the assessee-firm devoid of any merit and the same is, therefore, rejected. The learned counsel for the assessee has relied on the decision of the Hon'ble Supreme Court in the case of Shree Lekha Baneijee v. CIT (1963) 49 ITR 122 (SC). However, as the explanation offered by the assessee in the present case has been rejected by the authorities below on a specific basis the ratio laid down by the Hon'ble Supreme Court in the said case cited by the learned counsel for the assessee cannot be applied in the present case.;