N. Kumar, J.

1. This is a Revenue's appeal challenging the order passed by the Tribunal deleting the addition of Rs. 41,01,000/- as undisclosed income and levying income tax on the said amount.

2. The assessee is a prastising Chartered Accountant, A search was conducted in his residential premises on 30-11-2000. The diaries maintained by the assessee from 1-4-1990 till 31-7-1997 were found. The said diaries contained recording of various financial transactions. Apart from noting the transactions, at the end of every month the assessee drew up a balance sheet depicting loans received and advances given. The names of the trust were also mentioned. The assessing officer held that the diaries are as good as books of account. According to him, the assessee is doing certain financial transactions which are not recorded in the regular books of account. Treating the diary as books of account, he treated the loans received as cash credits. He found that the peak of the credit on 30-11-1997 was Rs. 87.09 lakhs. After reducing the opening balance of such credit as on the first day of the block period he sought for an explanation from the assessee for the balance cash credit. The assessee filed names and addresses of all the persons. The assessee gave credit only to the loans received by way of cheques and he held that the balance cash credit is not obtained. He accordingly added the same as cash credit under Section 68 of the Act and this amount of Rs. 49.28 lakhs was treated as undisclosed income for the block period. The assessee claimed bad debts amounting to Rs. 43.72 lakhs in respect of 4 persons. However, the assessing authority allowed the bad debts in respect of one Mr. Shankar Nag amounting to Rs. 8.27 lakhs. The balance bad debt amounting to Rs. 37.45 lakhs was not allowed, as they were not proved and also on the ground that he did not make any efforts to recover the loan. Thus whether the amount has become bad debts is not proved. Aggrieved by the said order the assessee preferred an appeal to the Commissioner(Appeals). The appellate authority gave deduction of debt pertaining to a sum of Rs. 8,27,000/- and declared regular income of Rs. 1,62,107/- and held that undisclosed income is Rs. 39,38,900/-. To that extent the appeal was partly allowed confirming the order of the assessing authority. Aggrieved by the same, the assessee preferred an appeal to the Tribunal. The Tribunal held that the assessing authority was not correct in accepting some portion of diary and not accepting the remaining portion. In the absence of existence of material found during search and what is found in the diary the contents of the diary has to be accepted as correct and accordingly addition under Section 68 is not tenable in law. Further the Tribunal held that when once in the Accounts maintained by the assessee all the debts are proved the assessing authority was not justified in adding the same and therefore the Tribunal allowed the appeal and set aside the orders passed by the authorities. Aggrieved by the same, the Revenue is in appeal.

3. The learned counsel appearing for the Revenue assailing the impugned order of the Tribunal, insofar as the transactions as reflected in the books of account is concerned, submits that the assessee has failed to establish the same by examining the persons who lent money and persons who received money. Similarly, the bad debts are not established and therefore the assessing authority was justified in holding that the aforesaid amounts constitute undisclosed income and in levying tax.

4.Per contra, the learned counsel appearing for the assessee supported the impugned order.

5. The appeal was admitted to consider the following substantial questions of law.

"(1) Whether the Tribunal was correct in holding that there is no material found in the block assessment to show ingenuiness of cash credits addition of Rs. 49,28,000/- should be deleted

(2) Whether the Tribunal was correct in holding that after the amendment to Section 36(1)(vii) of the Act with effect from 1.4.1989 the assessee need not prove that the debt has become bad"

The material on record discloses that the assessee has filed his returns promptly. When the premises was searched the diary which he has maintained was seized. The said dairy discloses the money lending transactions that is, amounts received, the amount paid and also the bad debts which is written off by the assessee. The said receipts had two components one received by cheque and another received by cash. The assessing officer has accepted the case of the assessee insofar as the amounts that were covered by cheque. It is the cash component which is held to be not substantiated by examining the persons who lent money and who received the money. The assessing authority has not accepted the writing off of all the debts. It is because of such computation the assessee is found to have not disclosed the income to the extent of Rs. 39,38,900/-. In the appeal proceedings the assessee has produced the certificates of persons who had lent money and who opted for the voluntary disclosure scheme. That clearly discloses that the amounts which had been received by the assessee from those persons who did not account and therefore they did not come forward before the assessing authority to accept the said payment. However, once they opted for the voluntary disclosure scheme, the case of the assessee that he had received money from those persons though not substantiated by producing any acceptable evidence in the light of the subsequent event has to be accepted as correct. That is precisely what the Tribunal has done. The assessing authority though acted on the diaries seized during search has disputed the entries in the said book. If he wants to act on the books and hold that the assessee is liable to pay tax, he cannot accept one portion of the book and refuse to accept the other portion. Either he should take the entire book as a whole and reject it as a whole. Therefore the Tribunal was justified in relying on the account books which is the subject matter of block assessment proceedings. It categorically shows the receipts and payments and also bad debts and in the end of the day that the assessee has stated a loss of Rs. 36,44,000/- and to the total block period it is Rs. 73,72,953/-. There is no income in the hands of the assessee in excess of the income which he has shown in the letter written. The Tribunal declined to accept the case of the Revenue that the assessee had an undisclosed income. Similarly, in the very same account books, the assessee has written off the debts which was due to him. In view of amendment to Section 36(1)(vii) the obligation to prove that it is a bad debt and producing evidence is not required. Therefore, the Tribunal held that once in the very books of accounts of which the Revenue once assessed the assessee it is clearly recited that an amount of Rs. 43,70,000/- lakhs is bad debt till the date of search, it ought to be given a deduction. Therefore, the order passed by the Tribunal is in accordance with law and does not suffer from any infirmity which calls for interference.

6. Accordingly, the substantial questions of law in this appeal are answered in favour of the assessee and against the Revenue. Hence, the appeal is dismissed.