K.G. BANSAL, A.M. ORDER This appeal arises out of order of CIT(A)-II, New Delhi, passed on 3rd Feb., 2006. corresponding order of assessment was passed by Dy. C I T , Central Circle -III, New Delhi (hereinafter called AO), under provisions of s. 158BC r/w s. 158BD of IT Act, 1961. assessee has taken up four substantive grounds of appeal, fifth being residuary in nature. Ground Nos. 1 and 2 are against findings of learned CIT(A) in which he confirmed action of AO by which sum of Rs. 1,50,30,137 was determined as undisclosed income, when aforesaid income was disclosed in return of income. Therefore, it was mentioned that action of AO was bad in law and against facts of case. Ground No. 3 is against findings of learned CIT(A) in which he confirmed addition of Rs. 1,78,204, made by AO, for commission paid by assessee for obtaining accommodation entries aggregating to Rs. 1,78,20,411 from M/s Friends Portfolio (P) Ltd. (hereinafter called Friends Portfolio). Ground No. 4 is against confirmation of findings of AO regarding charging of interest under s. 158BFA. 2. On perusal of assessment order, it is seen that genesis of issue of notice under s. 158BC r/w s. 158BD of Act was search and seizure operation conducted at premises of Friends Portfolio. In course of search, statements of Shri Manoj Agarwal and other persons were recorded and thereafter assessment was completed in their cases. It was found that all transactions undertaken by Shri Manoj Agarwal through Friends Portfolio and his other concerns were bogus transactions, in nature of merely providing entries without any real physical transactions relatable to those entries. Such entries were taken by number of persons, namely, S/Shri C.P. Khanna, Puneet Khanna, Rajiv Aggarwal, Dhanraj Singh, Harjoot Singh, M/s Ramco Steel (P) Ltd., etc. last named company filed petition to Settlement Commission for settlement of its case in respect of entries taken from Shri Manoj Agarwal. In statement Shri Manoj Agarwal admitted that all entries given by him through Friends Portfolio and his other companies were in nature of accommodation entries, which could be grouped into six categories as under : (i) Long-term capital gain, short-term capital gain, speculation profit, loss on sale and purchase of shares; (ii) Bogus share profits through Friends Portfolio and M/s NITS Softech Ltd.; (iii) Gifts and loans; (iv) Bogus sales through M/s Classic Textiles; (v) Bogus sales and trading in shares through NITS Softech Ltd.; (vi) Bogus sale and purchase of jewellery through M/s Bemco Jewellers (P) Ltd. 2 . 1 It was further deposed by him that insofar as he is concerned, no distinction was made between various kinds of entries and, therefore, he was not aware about correspondmg entries made by beneficiaries in their accounts. It was also deposed that such entries were provided by charging commission and with view to help beneficiaries reduce their income for purpose of payment of tax. It was also found that entries were also provided to assessee through intermediary, Shri Bhushan, as evidenced by fact that this name appeared on all cheques issued to parties where he was intermediary. cheques issued to assessee also contained this name. 2.2 In view of aforesaid information, requisite note was recorded in case of assessee under s. 158BD and notice under s. 158BC was issued on 7th Oct., 2003. assessee filed return on 12th Nov., 2003, declaring undisclosed income of Rs. 27,90,274, as against aggregate amount of Rs. 1,78,20,431 received from Friends Portfolio. In course of hearing, assessee explained to AO that sum of Rs. 1,50,30,137 was offered by him for taxation in return of income for asst. yr. 2000-01 as evidence regarding this income could not be obtained by assessee. sum of Rs. 27,90,274 was offered for taxation in assessment of block period due to lack of evidence. He was required to explain basis of aforesaid bifurcation and state why whole of amount should not be brought to tax in assessment of block period. It was explained that assessee has dealt in shares through Friends Portfolio, for which he received aggregate amount of Rs. 1,78,20,431. facts regarding amount disclosed in return for asst. yr. 2000-01 and in return for block period were reiterated. It was also explained that amount of about Rs. 28 lakhs was offered for taxation in assessment of block period as assessee could not collect details subsequently. It was also explained that income of Rs. 1,50,30,137 was declared in return for asst. yr. 2000-01 as income from other sources , details of which were recorded in books of account. Therefore, it was agitated that income declared in return for asst. yr. 2000-01 could not be brought to tax as undisclosed income of block period. It was also explained that assessee had no connection with either Shri Manoj Aggarwal or Shri Bhushan. transactions with Friends Portfolio were conducted through employees of assessee. No commission was paid either to Shri Manoj Aggarwal, Shri Bhushan or Friends Portfolio. On basis of facts and after considering arguments of assessee, AO came to conclusion that impugned receipts were not backed by any share transactions. In any case no evidence was produced by assessee in respect of actual transactions. Shri Manoj Aggarwal had clearly deposed that he had given accommodation entries for consideration and there was no physical transaction behind any entry given by him or his concerns. assessee was given opportunity to cross-examine Shri Manoj Aggarwal or any other person connected with transaction, which was not availed of by assessee. Therefore, he came to conclusion that entries received from Friends Portfolio through intermediary, Shri Bhushan were nothing but accommodation entries, import of which was not known, in sense that these could be profit entries, loan entries, gift entries or entry of any other nature, falling into one of six categories enumerated above. assessee also did not provide any rational basis for offering part of income in return for asst. yr. 2000-01 and balance in return for block period. Therefore, his conclusion was that after conduct of search and seizure operation in case of Friends Portfolio on 3rd Aug., 2000, assessee tried to show substantial part of income in return for asst. yr. 2000-01, with view to reduce tax liability from rate of 60 per cent to maximum marginal rate of 30 per cent. In absence of any rational explanation or any distinction between entries, he came to conclusion that whole of income of Rs. 1,78,50,431 was taxable in proceedings of block assessment, liable to be taxed @ 60 per cent. 2.3 Shri Manoj Aggarwal had deposed that he used to furnish entries for consideration of commission, being 50 paise per Rs. 100 of amount involved in entry. intermediary also used to charge similar commission. Therefore, AO estimated commission paid by assessee to both these parties @ 1 per cent of amount involved in entries, being Rs. 1,78,204. This amount was brought to tax as income, being unexplained expenditure incurred by assessee. Thus, total undisclosed income of block period was worked out at Rs. 1,79,98,635. 3. Aggrieved by aforesaid order, assessee moved appeal before CIT(A). It was mentioned by him that one of findings of AO was that assessee paid cash plus commission for getting accommodation entries by way of cheques of total amount of Rs. 1,78,20,431. He also added sum of Rs. 1,78,204 as estimated commission paid for services rendered by Shri Manoj Aggarwal and others. In this connection, it was represented before him that impugned amount represented profit on share of shares, details of which were not traceable. Therefore, sum of Rs. 1,50,30,137 was shown as income from other sources in return of asst. yr. 2000-01, on which tax was paid. Since details in support of cheques were not traceable, assessee bifurcated amount as aforesaid on basis of his memory. Therefore, his case was that since sum of Rs. 1,50,30,137 had been entered into books of account, declared in return for asst. yr. 2000-01 and tax was paid thereon, therefore, finding of AO that this was done to reduce rate of tax from 60 per cent to maximum marginal rate on this amount w s at best only conjecture as there was no evidence in support of aforesaid finding. In any case, assessee s case was covered under s. 158BB(1)(c)(A), which provides that where due date for filing of return of income has expired, but no return of income has been filed, then, aggregate of income of block period will be reduced by income computed on basis of entries as recorded in books of account and other documents basis of entries as recorded in books of account and other documents maintained in normal course on or before date of search or requisition. Obviously, there is some error in quoting section either by assessee or in recording of learned CIT(A), as aforesaid section does not apply to facts of case. It appears that assessee wanted to refer to s. 158BB(1)(d), to which we shall revert to later on. 3.1 learned CIT(A) considered facts of case and submissions made before him. He referred to definition of term "undisclosed income" given in s. 158B(b) of Act, and pointed out that income or property which has not been or would not have been disclosed, wholly or partly, constitutes undisclosed income. He further mentioned that it was very surprising that details of profit on share transactions aggregating to Rs. 1,50,30,137 were not traceable at end of assessee. If transactions had been recorded in books of account in regular course of business, there would have been no question of non-availability of details of transactions. Therefore, he concluded that disclosure of aforesaid income in return for asst. yr. 2000- 01 was prompted by search in case of Friends Portfolio conducted on 3rd Aug., 2000, but for which assessee would not have shown this income for purposes of Act. In view thereof, he confirmed that aforesaid amount of Rs. 1,50,30,137 was includible in undisclosed income of block period. 3.2 In regard to unexplained expenditure by way of commission amounting to Rs. 1,78,204, he referred to statement of Shri Manoj Aggarwal that he was charging commission @ 50 paise per Rs. 100 from clients for providing accommodation entries and out of this commission he was paying certain amount to intermediary also. Therefore, he confirmed addition made by AO on this count also. 4 . Before us, learned counsel filed written synopsis, furnishing, inter alia, chronology of events, which was important according to him, for determination of issues in this case. These events in tabular form are reproduced below : Sl. Date Event No. 1. 15.3.2000 Advance tax paid Previous year ended in which assessee received cheques from Friends 2. 31.3.2000 Portfolio, deposited in his bank account and shown in books of account. Search at premises of Friends 3. 3.8.2000 Portfolio Due date of filing return under s. 4. 31.8.2000 139(1) for A.Y. 2000-01 Filing of return under s. 139(4) showing income of about Rs. 1.50 crore 5. 5.11.2000 from amounts received from Friends Portfolio as "Income from other sources". Notice issued to assessee 6. 17.10.2003 under s. 158BD (It should be read as s. 158BC) 4.1 It was pointed out by learned counsel that Friends Portfolio or Shri Manoj Aggarwal was not connected with assessee in any manner and assessee had no interest in aforesaid company. However, assessee received certain amounts by way of cheques from Friends Portfolio, details of which are furnished on p. 7 of paper book. These cheques were credited in accounts as Income from other sources" and cheques were deposited in Citi Bank or Central Bank of India. On perusal of p. 7 of paper book, it is seen that this is account from books of assessee with heading "Income from other sources", in which various amounts were credited from 20th Sept., 1999 to 6th March, 2000, aggregating to Rs. 1,50,30,156.75. Citi Bank or Central Bank of India, as case may be, were debited in respect of all entries in this account. Thereafter, learned counsel referred to p. 14 of paper book, which contains list of various bank accounts operated by assessee, and this list includes names of Central Bank of India and Citi Bank as well. On basis of this paper, his case was that aforesaid amount, aggregating to Rs. 1,50,30,156.75 was credited in bank account maintained by assessee. Thereafter, he referred to p. 3 of paper book, which is part of computation of income for asst. yr. 2000-01, which shows interest income of Rs. 4,65,699.78. On basis of declaration of this income, his case was that interest earned on credit balances in various bank accounts, including Central Bank of India and Citi Bank, was offered for taxation and, therefore, bank accounts had been disclosed to Department in return of income. He again referred to this very page, which shows that advance tax of Rs. 53.00 lakhs was paid by assessee and on this basis, his case was that aforesaid transactions, leading to income of Rs. 1,50,30,137, had been disclosed in return of income. At this juncture, we may also refer to p. 6 of paper book, which shows receipts of other amounts of Rs. 27,90,447 from Friends Portfolio, which was credited to account of Odiswi and debited to ICICI Bank and ANZ Grindlays Bank between 19th June, 1999 to 10th Aug., 1999. Both these bank accounts do not find any mention in list of bank accounts operated by assessee and placed at p. 14 of paper book. It may also be pointed out that in statement of income, on p. 3, after deducting TDS, assessee had shown liability of Rs. 97,65,048. After deducting advance tax paid of Rs. 53.00 lakhs, sum of Rs. 44,65,048 was still payable, which was paid on 31st Oct., 2000 as per copy of challan placed in paper book on p. 10. date of this payment is after date of search in case of Friends Portfolio and due date of filing return under s. 139(1) in case of assessee. tax payable on impugned income of about Rs. 1.50 crores amounts to about Rs. 49.50 lakhs. Therefore, it transpires that in respect of impugned income of about Rs. 1.50 crores, advance tax was not paid and liability was satisfied by making payment of Rs. 50.00 lakhs on 30th Oct., 2000. 4.2 Coming to legal arguments, learned counsel referred to provisions contained in s. 158B(b), which has been reproduced by learned CIT(A) on p. 6 of his order. For sake of ready reference definition of undisclosed income is reproduced overleaf : " Undisclosed income includes any money, bullion, jewellery or other valuable article or thing or any income based on any entry in books of account or other documents or transactions, where such money, bullion, account or other documents or transactions, where such money, bullion, jewellery, valuable article, thing, entry in 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 purpose of this Act (or any expenses, deduction or allowance claimed under this Act which is found to be false)." In context of aforesaid definition, it was pointed out that income had been disclosed in return of income for asst. yr. 2000-01, as evidenced by p. 2 of paper book. This income had also been credited to P&L a/c for year ended on 31st March, 2000 as other income, as evidenced by P&L a/c, placed on p. 4 of paper book. Therefore, it was argued that income does not fall in ambit of "undisclosed income", as defined in s. 158B(b), When it was pointed out that while income was earned over period of time and advance tax payable by assessee fell short by amount roughly equal to tax on impugned income, it was clarified that advance tax paid by assessee cannot be allocated to this or that part of total income. income subject to advance tax was estimated at lower figure as assessee chose to pay interest under ss. 234B and 234C. 4.3 learned counsel took up number of arguments to support his case and first argument was that since amounts had been credited in bank accounts, interest from which was offered for taxation, entries appeared in books of account, and advance tax was partly paid on income liable to be taxed in asst. yr. 2000-01, therefore, income could not be termed as undisclosed income of block period. 4.4 second argument was based upon provisions contained in s. 158BA(3). This sub-section, inter alia, provides that in case in which due date for filing of return of income under sub-s. (1) of s. 139 for any previous year has not expired and such income or transactions relating to such income have been recorded on or before date of search in books of account or other documents maintained in normal course relating to such previous year, said income shall not be included in block period subject to satisfaction of AO on proof furnished by assessee. On basis of this sub-section, case of learned counsel was that income of block period has to be computed in accordance with provisions of Chapter XIV-B, as provided in sub-s. (1) of s. 158BA. Sub-s. (3) provides that where due date of filing return has not expired and income has been recorded in books of account maintained in normal course relating to such previous year, then, such income shall not be included in block period. Since all ingredients of this sub-section stand satisfied, AO ought to have excluded impugned income in assessment of undisclosed income of block period. It was pointed out that income had been recorded in books of account as well as in bank pass books. latter should be held to be other documents maintained in normal course relating to previous year. 4 . 5 third argument of learned counsel was that in any case, machinery section relating to computation of undisclosed income fails in respect of impugned income, as provided in s. 158BB(1)(d) and, therefore, it could not have been included in assessment of block period. It may be pointed out that sub-s. (1) of s. 158BB provides for machinery regarding computation of undisclosed income. According to this sub-section, aggregate of total income of previous year falling within block period has to be computed in accordance with provisions of this Act and on basis of evidence found as result of search and such other materials or information as are available with AO and relating to such evidence. Thereafter, amounts mentioned in cls. (a) to (f) have to be reduced if such amounts are incomes and added in case such amounts are losses from or to total income computed earlier. Clause (d) provides that where due date of filing of return of income under sub-s. (1) of s. 139 has not expired on date of search, then, income on basis of entries relating to such income or transactions as recorded in books of account and other documents maintained in normal course on or before date of search has to be reduced from aggregate of total income mentioned above. case of learned counsel was that due date of filing return in case of assessee was 31st Aug., 2000, and search had taken place on 3rd Aug., 2000. Therefore, on date of search, due date for filing return had not expired. impugned income had been recorded in books of account and also in bank pass books maintained in normal course. Therefore, impugned income had to be deducted from aggregate of total income of previous year for working out undisclosed income of block period. If same is done, inference will be that undisclosed income is nil insofar as impugned income is concerned. 4 . 6 fourth ground taken up by learned counsel to support his argument was that order under s. 143(3) r/w s. 147 was passed in this case on 31st March, 2006, in which impugned amount was taxed. In this connection, he referred to provision contained in Expln. (b) below sub-s. (2) of s. 158BA, which provides that undisclosed income shall not include income assessed in any regular assessment. It may be mentioned here that Expln. (c) of same sub-section further provides that income assessed under Chapter XIV-B, being undisclosed income, shall not be included in regular assessment of any previous year of block period. 5 . Coming to decided cases, reliance was placed on decision of Hon ble Tribunal, Jaipur Bench, in case of Om Prakash Sharma vs. Dy. CIT (2004) 83 TTJ (Jp) 246. In that case search and seizure operation was carried out on 25th Feb., 2000 and, therefore, previous year consisting of period 1st April, 1999 to 31st March., 2000 had not expired. Consequently, return for relevant assessment year had not become due. AO presumed that assessee would not have filed return but for search, for which there was no evidence on record. assessee had maintained record of transactions in diary in crude manner and such record had been maintained for long time. return of income was filed disclosing interest income of Rs. 1,31,900 on loans advanced by assessee. Hon ble Tribunal came to conclusion that since there was no basis for presumption of AO and assessee had been maintaining diary over number of years, there was no material on basis of which it could be said that assessee would not have filed return of income if search had not taken place. It may be added that facts of our case are different from facts of that case. reason is that question here is whether assessee would have disclosed impugned income in return of income for relevant previous year if search had not been conducted, particularly in situation where impugned income was not part of regular income. It may also be added that impugned income was part of regular income. It may also be added that impugned income was entered in books of account and material question before us is whether such income was recorded in books prior to date of search or after date of search. 5.1 learned counsel also relied on decision of Hon ble Tribunal, Jodhpur Bench, in case of Dy. CIT vs. M.L. Jain (2005) 96 TTJ (Jd) 362. In that case, assessee was found in possession of certain shares in course of search and seizure operation. It was explained that all shares were recorded in books of account of respective persons. However, assessee made surrender of Rs. 2.50 lakhs on this account and AO added aforesaid amount to undisclosed income. learned CIT(A) deleted aforesaid addition. Hon ble Tribunal came to conclusion that since shares were fully verifiable from books of account, surrender was made under misconception of facts. Therefore, order of learned CIT(A) was upheld. We have considered facts of our case in light of ratio of that case. In that case, shares standing in names of number of persons, were duly disclosed in their books of account. shares were purchased much earlier than conducting of search and seizure operation. Therefore, Hon ble Tribunal came to conclusion that surrender was made on misconception of facts and consequently deleted addition. As mentioned earlier, material question before us would be whether impugned income had been recorded in books of account or not before date of search even though it was shown in return of income filed under s. 139(4). 5.2 learned counsel also furnished brief synopsis, in which number of other cases were relied upon. mention was made regarding decision of Hon ble Gauhati High Court in case of Dr. (Mrs.) Alka Goswami vs. CIT (2004) 190 CTR (Gau) 214 : (2004) 268 ITR 178 (Gau). In that case, AO included income for asst. yr. 1995-96, for which previous year had not ended on date of search, and which was covered by advance tax paid by assessee. Hon ble Court held that income covered by payment of advance tax would be income disclosed to Revenue and it could not be said to be undisclosed income of block period. In this case, impugned income was not covered by payment of advance tax and, therefore, learned counsel fairly conceded that ratio of that case is not applicable in this case. However, it was argued that assessee had paid advance tax, which could not be referred to this or that income and, therefore, impugned income should be deemed to have been covered by payment of advance tax, meaning thereby that self-assessment tax should be taken as paid in respect of other income, which was regular income of assessee. On consideration of aforesaid judgment of Hon ble Gauhati High Court, we are of view that aforesaid argument of assessee cannot be accepted for simple reason that tax payable on impugned income was roughly same amount as t h e self-assessment tax paid by him at time of filing of belated return. Therefore, on rational consideration of facts, it will have to be held that advance tax was not paid in respect of impugned income. 5.3 mention was also made of decision of Hon ble Tribunal, Delhi Bench "E", in case of M.S. Aggarwal vs. Dy. CIT (2004) 83 TTJ (Del) 692 : (2004) 90 ITD 80 (Del). facts of that case were that during course of search on 25th Nov., 1999 at residential as well as business premises, some documents and records were seized. Prior to commencement of search, assessee admitted in statement that gifts received by him and his HUF, aggregating to Rs. 60 lakhs, were bogus as they were arranged through chartered accountant against payment of cash. This statement was affirmed again on 6th Jan., 2000. assessee filed return for block period in which aforesaid gifts were not included. AO added aforesaid gifts in undisclosed income. Hon ble Tribunal pointed out that assessment under Chapter XIV-B was not in substitution of regular assessment. assessment was limited to material unearthed during course of search. Therefore, it emerges that if any asset or income, etc. is recorded in books or documents and has been disclosed or is intended to be disclosed to Revenue, then, such income will not form undisclosed income, as defined under s. 158B(b). As no evidence was found in course of search, which might impeach genuineness of gifts received by assessee and his HUF, same cannot form part of undisclosed income or subject-matter of its computation under s. 158BB. On consideration of ratio of that case, we find that if no material is found in course of search, then, there could be no question of computation of undisclosed income. However, in instant case, substantial evidence was found in course of search of Friends Portfolio, which led to conclusion that transactions of assessee with it were bogus. Therefore, question here is materially different from question in case of M.S. Aggarwal (supra). 5.4 learned counsel had also relied on decision of Hon ble Madras High Court in case of Asstt. CIT vs. A.R. Enterprises (2005) 194 CTR (Mad) 44 : (2005) 274 ITR 110 (Mad). issue in that case again was regarding computation of undisclosed income when assessee had paid advance tax. Hon ble Court came to conclusion that income covered by payment of advance tax would be income disclosed to Revenue, which cannot be treated as undisclosed income for relevant assessment year. However, as mentioned earlier, facts of instant case are somewhat different, as advance tax was not paid on undisclosed income, computed by AO. Certain other cases were also cited on same issue, which are not discussed as ratio is same as in cases of A.R. Enterprises and Dr. (Mrs.) Alka Goswami (supra). 6 . As against aforesaid, learned Departmental Representative pointed out that search and seizure operation was conducted in case of Friends Portfolio on 3rd Aug., 2000. due date for filing return in case of assessee was 31st Aug., 2000. assessee filed return of income on 30th Nov., 2000. question to be decided in this case is whether impugned income declared by assessee in return filed on 30th Nov., 2000 would have been disclosed to Revenue if search had not taken place in that case. He stressed that all surrounding circumstances lead to only one conclusion, namely, that this income was not intended to be shown to Revenue. In this connection, it was pointed out that owner of Friends Portfolio was merely furnishing accommodation entries and he was not conducting any business whatsoever. In this connection, he referred to detailed discussion in assessment order regarding background of case, in which it was pointed out that Shri Manoj Aggarwal clearly deposed to effect that he was carrying on business of providing accommodation book entries regarding bogus long-term capital gain, short-term capital gain, book entries regarding bogus long-term capital gain, short-term capital gain, profit, loans and advances, gifts, purchase bills, and sale and purchase bills of jewellery. Such entries are obviously taken with view to evade income-tax. This was key reason for holding that income would not have been disclosed to Revenue. It was further pointed out that there is peculiar position in this case, namely, that assessee had taken entries aggregating to about Rs. 1.70 crores, out of which entries aggregating to Rs. 1.50 crores were entered in books of account and disclosed in return of income, but entries aggregating to Rs. 20 lakhs were declared in block period return. In spite of repeated questioning about aforesaid bifurcation and basis thereof, no explanation was given. Therefore, it is clear that impugned entries were made in books after search and seizure operation to extent those could be made with view to reduce incidence of taxation from 60 per cent to 30 per cent. He also pointed out that case of assessee is that impugned income was earned out of share transactions. If explanation is taken on face value, then, income should have been declared under head "Profits and gains of business or profession" or under head "Capital gains", while it has been shown under head "Income from other sources". entries made in books do not show transactions on which profits were made under specious plea that details of transactions were not available. His case was that no actual transaction had taken place and, therefore, there was no question of any details of transactions available with assessee. Having learnt about search and seizure operation in case of Friends Portfolio, assessee was cornered and therefore, declared part of income in block return and part in return filed under s. 139(4). income returned in latter return was not covered by payment of advance tax, which clearly leads to inference that income was not intended to be shown to Revenue. It was stressed that if income had been included in books of account on 31st March., 2000, there could not have been such huge gap between income returned and income covered by payment of advance tax. Therefore, it was agitated that if totality of circumstances is taken into account along with t h e conduct of assessee, there was inescapable conclusion that impugned income was not intended to be shown to Revenue. 6 . 1 In aforesaid connection, he relied on decision of Hon ble Bombay High Court in case of Gordhandas Hargovandas & Anr. vs. CIT (1979) 12 CTR (Bom) 19 : (1980) 126 ITR 560 (Bom). question before ITO, AAC and Tribunal was whether addition of sum of Rs. 1,91,984 in case of Gordhan Das and Rs. 1,81,772 in case of Dharam Das was justified as income from other sources. number of credits were found in personal accounts of these two brothers. Their case was that credits represented sale proceeds of ornaments inherited by them. ITO did not accept that assessees had inherited ornaments or that such ornaments had actually been sold. Therefore, his conclusion was that unaccounted income was being shown in guise of gold ornaments inherited by assessee. This conclusion was confirmed by AAC and Tribunal. Hon ble High Court held that two amounts represented assessee s income from undisclosed sources in absence of any proof that amounts related to any earlier previous year. In this connection, it was pointed out that assessee cannot be heard to say that it is for Revenue to bring some material or evidence on record to suggest affirmatively that cash amount was equivalent of some goods or gold and must be attributable to particular year in question. If sum is found to have been received by assessee, onus of proving source is on him. Further, if he disputes liability to tax, it is for him to show that receipt was not income or that it was exempt from tax under some provision of Act. We find that ratio of that case is not applicable to facts of this case. In this case, source of money is Friends Portfolio and assessee is not disputing that receipts are in nature of income, although there is no evidence about nature of transactions with that party. question before us is whether impugned income is liable to be taxed as undisclosed income of block period, as agitated by Revenue or as income liable to tax under other provisions of Act, as agitated by learned counsel. 6.2 learned Departmental Representative also relied on decision of Hon ble Supreme Court in case of CIT vs. Durga Prasad More 1973 CTR (SC) 500 : (1971) 82 ITR 540 (SC). facts of that case were that assessee, acting as trustee of trust created by his wife, purchased residential property for sum of Rs. 1.85 lakhs. It was claimed that income from property should not be taxed in his hands and for this purpose he relied on deed of conveyance in his favour executed by his wife about year ago. In deed, it was, inter alia, stated that sum of Rs. 2 lakhs was lying in hands of her father-in-law as her Stridhan. There was no evidence regarding her independent source of income. ITO taxed income from property in his hands. This decision was affirmed by Tribunal. Subsequently, after lapse of about 16 years, plea of trust was revived again by assessee, which was rejected by Tribunal. On reference, High Court held that finding of Tribunal was not correct when it held that property was not trust property. Hon ble Supreme Court, reversing decision of Hon ble High Court, pointed out that it could not be said that finding of Tribunal was devoid of reality or it was not based on evidence or it was otherwise vitiated. In this connection, it was pointed out that while apparent state of affairs may be considered as real until it was shown that there were reasons to believe that apparent was not real, however, in case where party relies on self-serving recitals in document, it was for him to establish truth of recital. Revenue can look into surrounding circumstances to find out reality of recital. On basis of this decision, case of learned Departmental Representative was that assessee cannot rely on mere entries made by him in his books of account to claim that income was intended to be shown to Revenue. AO was well in his right to examine attendant circumstances and decide whether income was intended to be shown to Revenue. If attendant circumstances are taken into account, it will be seen that there was no intention to declare income and, therefore, AO rightly added amount in undisclosed income. learned CIT(A) also passed very well reasoned order upholding decision of AO. Therefore, it was agitated that decision of learned CIT(A) ought to be upheld on facts and in circumstances of case. 7. In rejoinder, learned counsel referred to p. 1 of paper book, being belated return filed for asst. yr. 2000-01 on 30th Nov., 2000. Thereafter, he referred to para 1.2 of order of AO, in which it was mentioned that proceedings of block assessment were completed in case of Friends Portfolio on 29th Aug., 2002, in which it was established that they were merely giving accommodation book entries to various parties. His case was that return filed by assessee was prior to completion of assessment in case of Friends Portfolio as well as issue of notice under s. 158BC to assessee. assessee had made entries in books of account much earlier. There could be no presumption that assessee came to know about search in case of Friends Portfolio on or about date of search. Therefore, return was bona fide and part of income declared therein could not be assessed as undisclosed income of block period. It was also mentioned by him that learned Departmental Representative had not made any comments about applicability of ss. 158BA and 158BB. 8 . burden of argument of learned counsel was that impugned income did not fall within ambit of definition of term "undisclosed income", furnished in s. 158BB(b) of Act. Before proceeding with argument, it may be pointed out that this section, regarding definition of undisclosed income, is similar to s. 5 of Act regarding "scope of total income" in content insofar as scope of undisclosed income is concerned. Thus, it is clear that any income which falls beyond ambit of aforesaid definition, cannot be made subject-matter of assessment under Chapter XIV-B. This definition has been reproduced in para 4.2 of this order (supra). definition is inclusive and includes in its ambit, inter alia, any income based on any entry in books of account or other documents or transaction which has not been or would not have been disclosed for purpose of this Act. Thus, any disclosed income or any income which was intended to be disclosed for purpose of this Act cannot be included in undisclosed income. case of learned counsel was that income has been shown in return of income for asst. yr. 2000-01, as evidenced at p. 2 of paper book. It is seen that return was filed on 30th Nov., 2000, after date of search in case of Friends Portfolio on 3rd Aug., 2000. Further, case of learned counsel was that this income has been entered in books of account in ledger account with head "Income from other sources". On perusal of this account, it is seen that aforesaid account has been credited and bank accounts have been debited. Numbers of various cheques received from Friends Portfolio have also been mentioned. bank accounts were maintained with Citi Bank and Central Bank of India, interest from which was also included in return of income. On perusal of p. 14 of paper book, it is seen that assessee operated accounts with three banks, namely, Central Bank of India, Bank of Madura and Citi Bank, with more than one type of account with Central Bank of India and Citi Bank, interest from which was disclosed in return filed on 30th Nov., 2000. However, learned counsel did not clarify whether all these accounts were old accounts or accounts in which aforesaid cheques deposited were operated for first time in relevant previous year. It is also seen that there were other cheques received from Friends Portfolio, which were credited in ICICI Bank and ANZ Grindlays Bank between 19th June, 1999 to 10th Aug., 1999, which were not disclosed to Department as these names do not appear on p. 14 of paper book. entries in ledger account showing income from other sources start from 20th Sept., 1999, roughly 10 days after last entry of credit of Rs. 2,55,834 in account of ANZ Grindlays Bank. learned counsel has not thrown any light about distinction between entries relatable to period from 19th June, 1999 to 10th Aug., 1999, on one hand and from period 20th Sept., 1999 to 6th March, 2000, on other. It is also seen that assessee did not pay advance tax on income credited under head "Income from other sources" while such income was received periodically between 20th Sept., 1999 to 6th March, 2000. On other hand, burden of argument of learned Departmental Representative is that all attendant circumstances lead to conclusion that impugned account was inserted in books after search in case of Friends Portfolio. In coming to conclusion in matter, surrounding circumstances cannot be ignored in light of decision of Hon ble Supreme Court in case of Durga Prasad More (supra). 9 . Having considered rival submissions, we are of view that facts do not lead to conclusion that on date of search income had been disclosed to Revenue or it was intended to be disclosed in sense that either taxes relatable to income were paid in advance on prescribed dates or transactions were entered in books of account maintained in normal course before date of search. This view gets strengthened by fact that details of transactions were not entered in books. If transactions had been entered in normal course, references would have made to actual transactions, their nature and amount of profit involved therein. amounts were summarily entered as receipts in impugned account. Further, similar receipts in period 19th June, 1999 to 10th Aug., 1999 were not entered in books of account and cheques were deposited in accounts which were not disclosed to Revenue. We also do not know whether accounts of Central Bank of India and Citi Bank, in which cheques were deposited, had been disclosed to Revenue before date of search. All these facts lead to very clear conclusion that impugned amounts were inserted in books after search in case of Friends Portfolio. It was also pointed out by learned counsel that assessee received notice under s. 158BC of Act on 17th Oct., 2003. Therefore, he came to know about search in case of Friends Portfolio only on that date. It was also argued that there is no presumption that assessee came to know about search in case of Friends Portfolio on or about 3rd Aug., 2000. We have considered this matter also, but we do not find any force in these submissions and arguments. reason is that assessee had received cheques of substantial amounts aggregating to Rs. 1,78,20,411 from Friends Portfolio. Such transactions could not have been conducted merely through employees of assessee without express authorization from assessee. It is not case where some minor amounts were received or expended by assessee in course of business through employees, where presumption could be that he was not in knowledge of such receipts or expenditure. First of all, transactions were not in normal course of business as clearly pointed out by Shri Manoj Aggarwal. transactions were obviously undertaken either for laundering of money by making false entries in books of account or for suppression of income. Such transactions could have been done only on express directions of assessee and after discussing matter with Shri Manoj Agarwal. Therefore, there was clear design in undertaking these transactions, purpose of which could only be concealment of income or laundering of income. It is clear that income or transactions had not been disclosed to Revenue on or before date of search. It is also clear that income or transactions would not have been disclosed but for search. Thus, case of assessee is clearly covered in definition of "undisclosed income". It may be added that whole situation has to be viewed as on date of search and subsequent discussion, dealing with other provision will highlight importance of date of search. 9.1 Having come to conclusion that impugned income falls within ambit of undisclosed income, we may now examine whether case of assessee is saved by sub-s. (3) of s. 158BA. facts of case are that on date of search in case of Friends Portfolio, previous year relevant to asst. yr. 2000-01 had ended, but return of income had not become due and it became due on 31st Aug., 2000 i.e., after 28 days of search of premises of Friends Portfolio. aforesaid sub-section provides that if income or transactions relating to income are recorded on or before date of search in books of account or other documents maintained in normal course, and assessee proves aforesaid facts to satisfaction of AO, then, said income shall not be included in undisclosed income. This sub- section contains two prerequisites, namely, (i) transactions relating to such income are recorded on or before date of search in books of account or other documents maintained in normal course, and (ii) aforesaid fact is proved to satisfaction of AO. case of learned counsel was that all ingredients of this sub-section are satisfied and, therefore, AO ought to have excluded impugned income in assessing undisclosed income of block period. It has already been discussed that certain transactions were not recorded in books of account. However, such transactions were shown as undisclosed income in return of block period. Certain other transactions were recorded in books of account, but it is not proved that these transactions were recorded before date of search. We have also seen that nature of entries made in ledger account is such that entries cannot be said to have been made in normal course because transactions leading to income have not been recorded therein. entries are merely in nature of credits and debits, unsupported by any bills or vouchers. It was case of assessee that advance tax was paid, which also is not correct. Therefore, it cannot be said that any of ingredients of section were proved by assessee before AO. In view thereof, AO could not have recorded satisfaction that such ingredients had been satisfied and thereby excluded impugned income from undisclosed income. Thus, we are of view that provisions of aforesaid sub-section do not come to aid of assessee. 9 . 2 It was also argued that case of assessee is saved by provision contained in cl. (d) of sub-s. (1) of s. 158BB. This clause, inter alia, deals with situation where date of filing of return under sub-s. (1) of s. 139 has not expired on date of search. It is provided that income on basis of entries relating to such income or transactions, as recorded in books of account or other documents maintained in normal course on or before date of search, shall be deducted from aggregate of total income computed under main sub-s. (1) of s. 158BB. contents of this section are somewhat analogous to sub-s. (3) of s. 158BA. prerequisites for deducting income from total income are that transactions are recorded in books of account and other documents maintained in normal course on or before date of search. We have seen that overwhelming evidence regarding recording of these transactions in books of account is against assessee and all circumstances lead to only conclusion that entries were inserted in books after date of search in case of Friends Portfolio. Therefore, we are of view that provisions of this clause also do not come to aid of assessee. 9.3 learned counsel has also argued that impugned income was included in assessment order passed on 31st March, 2006 under s. 143(3) r/w s. 147. In this connection, reference was made to Expln. (b) under sub-s. (2) of s. 158BA. Explanation provides that total undisclosed income relating t o block period shall not include income assessed in any regular assessment as income of such block period. In view of fact that impugned income was assessed under s. 147, albeit after completing block assessment on or about 31st Oct., 2005, same cannot be included in undisclosed income of block period. It was pointed out in para 4.6 (supra) that Expln. (c) provides that income assessed in this chapter shall not be included in regular assessment of any previous year. Having considered arguments of learned counsel on this issue, we are of view that these two Explanations have to be read harmoniously and Expln. (b) cannot be read in isolation of other Expln. (c). If that is done, it will transpire that it will first have to be determined whether income falls within ambit of "undisclosed to be determined whether income falls within ambit of "undisclosed income" under Chapter XIV-B. provisions of this chapter have overriding effect as s. 158BA contains non obstante clause. If that is done on assessment of income under this chapter, same shall not be assessed again in regular assessment of any previous year. However, if income does not fall within ambit of term "undisclosed income", then, it shall be assessed in regular assessment and upon doing so, it shall not be included in undisclosed income under Chapter XIV-B. We have discussed cases earlier which lead to clear inference that assessment under Chapter XIV-B and regular assessment are two parallel proceedings, independent of each other. What falls within scope of Chapter XIV-B cannot be made subject-matter of regular assessment and vice versa. We have seen that impugned income is subject-matter of assessment under Chapter XIV-B and, therefore, it could not have been assessed in regular assessment. However, that does not lead to inference that impugned income should not be assessed under Chapter XIV-B, as it has been assessed in regular assessment. proper course in such case would be to exclude undisclosed income from regular assessment. Therefore, even these provisions do not advance case of assessee. 9.4 Having considered rival arguments and case law on issue, we are of view that AO had rightly assessed impugned income as undisclosed income of assessee. Consequently, learned CIT(A) had also rightly upheld order of AO on this issue. Therefore, ground nos. 1 and 2 of appeal are dismissed. At same time, we are also of view that this income should not have been assessed in regular assessment notwithstanding fact that assessee had disclosed income voluntarily in return for asst. yr. 2000-01. learned CIT(A) has given finding that tax paid on this income in this assessment year should be considered as tax paid on undisclosed income. However, we are of view that this income cannot be assessed in regular assessment. Therefore, AO is also directed to exclude this income from regular assessment. 10. Ground No. 3 is against finding of learned CIT(A) to effect that AO was right in making addition of Rs. 1,78,204, being commission paid by assessee for obtaining accommodation entries. case of learned counsel before us was that there is no evidence on record to support this finding of learned CIT(A). We have considered this matter also. Shri Manoj Aggarwal, owner of Friends Portfolio, had clearly deposed to effect that he was issuing cheques in lieu of cash receipts from various parties, which could have been entered by them in any manner i.e., as gifts, loans, income, etc. He had further deposed that he was charging commission @ 5 0 paise per Rs. 100 involved in entries. He had also deposed that commission was paid to intermediary and in this case Shri Bhushan was intermediary. AO had granted opportunity to assessee to cross-examine Shri Aggarwal, Shri Bhushan or any other person involved in impugned transactions. Surprisingly, assessee chose not to cross-examine any of persons involved in transactions. Therefore, it cannot be said by any stretch of imagination that there was no evidence on record for making addition, albeit on estimated basis, in respect of expenditure incurred by way of commission on procuring aforesaid entries amounting to Rs. 1,78,20,431. AO has made addition in respect of expenditure @ 1 per cent of amount involved in all entries. To our mind, estimate is reasonable and, therefore, we do not see any reason to interfere with findings of learned CIT(A) in this matter. Thus, this ground is also dismissed. 1 1 . Ground No. 4 is against finding of learned CIT(A) that assessee was liable to pay interest under s. 158BFA for default of late filing of return for block period. No particular argument was made by learned counsel before us in this matter. AO has recorded that notice under s. 158BC dt. 7th Oct., 2003 was served on assessee, in response to which return was filed on 12th Nov., 2003. return was required to be filed within 30 days of receipt of notice. Thus, there was delay in filing return. It was also mentioned in order that interest be charged under s. 158BFA(1). learned CIT(A) confirmed levy of interest by pointing out that it is mandatory as per statute and AO had no discretion in matter. Looking to these facts and absence of any argument from learned counsel, we do not see any reason to interfere with order of learned CIT(A) in this matter also. 12. In result, appeal of assessee is dismissed. *** RAGHAV BAHL v. DEPUTY COMMISSIONER OF INCOME TAX