- (1.) THE assessee has preferred this appeal proposing following substantial questions of law : "(i) Whether the order passed by the learned Tribunal is perverse being self -contradictory ? (ii) Whether liability under the IT Act, 1961 can be foisted on an assessee when the issue regarding the receipt of money is yet to be adjudicated upon by competent Court where that issue is pending ? (iii) Whether the IT authorities should have awaited the final adjudication on the issue regarding the alleged receipt of money, the amount of which is being sought to be added to the income of the assessee ? (iv) Whether the addition to the assessee's income can be made on the basis of presumptions, conjectures and surmises ? (v) Whether corroboration of funds leading to the addition of an amount to the assessee's income is put on the basis of certain entries in a diary of a third person who has specifically denied on oath giving the payment ? (vi) Whether the learned Tribunal erred by deciding the issue without referring to the material on record -
(2.) THE assessee was working as a stenographer in Chandigarh Administration. A search was conducted at the premises of the then Chief Engineer, Mr. K.K. Jerath. The assessee was working as personal assistant to the said chief engineer. His premises were also searched. Certain loose slips were found during search relating to expenditure incurred by him for renovation of his ancestral house. His explanation was that the slips represented estimates likely to be incurred. He did not carry out renovation for want of funds but constructed a retaining wall. He further explained that out of expenditure of Rs. 30,608, a sum of Rs. 17,000 was received from his son who was running a cloth shop at Baddi and a sum of Rs. 13,608 was received out of sale proceeds of agricultural produce and trees. He owned 33 kanals of agricultural land in District Hamirpur (HP). The AO made addition of Rs. 95,050, taking into account payments made by one Suresh Sharma, liaison agent for the companies supplying electricity goods to Chandigarh Administration, from where a daily cash book showing payments to the appellant -assessee datewise, was found.
(3.) ON appeal, the CIT(A) sustained the addition of Rs. 79,325 but gave a relief of Rs. 15,675. The Tribunal upheld the view taken by the CIT(A) with the following observations : "7.......In this case, diary of Shri Suresh Sharma was found indicating payments of illegal gratification to the assessee. The question for our consideration is as to whether on the basis of the documents found at the time of search and the diary found with Shri Suresh Sharma could be the basis for making the addition in the hands of the assessee on account of illegal gratification. The learned counsel has filed affidavit of the assessee in support of the claim that no criminal charges have so far been framed against the assessee and that the assessee had been reinstated in the absence of any evidence against him. The assessee has thereafter retired from services. In our considered view, the addition of Rs. 79,325 made by the AO is based on loose papers found at the premises of the assessee coupled with the entries in the diary of Shri Suresh Sharma. The diary of Shri Suresh Sharma indicates various payments to have been made to the assessee. Though, no addition is justified on the basis of mere writings on the loose papers, yet in this case, expenditure recorded on the loose papers found at the time of search, is further corroborated by the entries made in the diary of Shri Suresh Sharma. Shri Jagdish Mitter, S.E., has admitted the entries in the diary of Shri Suresh Sharma relating to him as correct. The mere fact that there is no progress in the criminal proceedings against the assessee, does not disprove the correctness of the entries made in the diary of Shri Suresh Sharma. The diary was found in the course of the search and it cannot be presumed that Shri Suresh Sharma would have recorded the payments in the name of the assessee for no rhyme or reason. Since the diary was found in the course of search, the entries made in such diary are presumed to be correct unless otherwise proved. The assessee has simply denied the receipt of the amounts indicated in the diary. Whereas in the criminal case, a strong burden is to be discharged by the prosecution to establish the guilt of the assessee, in the income -tax proceedings the addition could be justified on the basis of entries of third party coupled with the recording of the detailed expenditure on the papers found in the course of search. Taking the totality of the facts and circumstances of this case into consideration, we are of the view that the AO was justified to make the addition on account of unexplained investment in the renovation of house property which has been presumed to have been made out of the illegal gratification. Whether the illegal gratification was received by the assessee or not, may have to be decided in criminal proceedings. For the purpose of income -tax proceedings, the material, in our view, is sufficient to fasten the tax liabilities upon the assessee." Only contention raised by the learned counsel for the appellant is that criminal proceedings in a corruption case are pending and the decision taken by the authorities of addition to the income of the appellant may be in conflict with the decision taken in criminal case.;