M/s. Kunvarji Commodities Brokers Pvt.Ltd., Ahmedabad V. The ACIT.,Cent.Circle-1(1), Ahmedabad

CO 315/AHD/2010

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 0312 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 4 month(s) 24 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 19-03-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 23-02-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 25-10-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S N SOPARKAR
• Keywords: Income from undisclosed sources; Search and seizure; Loose papers; Document seized; Transactions in derivatives; Question of law; Corroborative evidences; Retraction; Documents seized; Bonafide mistake
• Section: 142(1); 132

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI KUL BHARAT, JUDICIAL MEMBER ITA/IT(SS)A/CO NO. AY APPELLANT RESPONDENT IT(SS)A NOS. 615 TO 618/AHD/2010 2005-06 2006-07 2007-08 2008-09 ACIT, CENTRAL CIRCLE 1(1) AHMEDABAD M/S. KUNVARJI FINANCE PVT. LTD., 310, SHYAMAK COMPLEX, NR. KAMDHENU COMPLEX, AMBAWADI, AHMEDABAD PAN : AAACK 8759 R CO NOS. 250 TO 253/AHD/2010 2005-06 TO 2008-09 ASSESSEE REVENUE IT(SS)A NOS. 677 TO 680/AHD/2010 2005-06 TO 2008-09 REVENUE M/S. KUNVARJI COMMODITIES BROKERS PVT LTD. PAN : AABCD 9219 N CO NOS. 313 TO 315/AHD/2010 2005-06 2006-07 2007-08 ASSESSEE REVENUE IT(SS)A NOS. 813 & 814/AHD/2010 2006-07 2007-08 REVENUE SHRI JAYPRAKASH R. THAKKAR, PROP. SURESHKUMAR & CO., 11/1, MARKET YARD, BHABHAR (NG) PAN : ABPPT 6783 P CO NOS. 342 & 343/AHD/2010 2006-07 2007-08 ASSESSEE REVENUE IT(SS)A NOS. 815 TO 817/AHD/2010 2005-06 2006-07 2007-08 REVENUE SHRI PRAKASH HIRALAL THAKKAR, A-501, PALAK AVENUE, JODHPUR, SATELLITE, AHMEDABAD PAN : ABPPT 2321 K CO NOS. 344 TO 346/AHD/2010 2005 - 06 2006-07 2007-08 ASSESSEE REVENUE IT(SS)A NO. 301/AHD/2011 2006-07 REVENUE MEENABEN M PARIKH, B-2, ASHWAMEGH AVENUE, MITHAKHALI SIX ROADS, NAVRANGPURA, AHMEDABAD PAN : ACSPP 0205 B IT(SS)A NO. 302/AHD/2011 2006-07 REVENUE JAY M PARIKH, B-506, KALASAGAR FLAT, JODHPUR CHAR RASTA, SATELLITE, AHMEDABAD PAN : AMRPP 5803 H IT(SS)A NOS. 615 TO 618, 677 TO 680, 813-817 OF 201 0 IT(SS)A 301 & 302/2011 & & CO250 TO 253 OF 2010 CO 313 TO 315, 342 TO 346 OF 2010 KUNVARJI FINANCE PVT LTD & GROUP 27CASES 2 REVENUE BY : SHRI SUBHASH BAINS, CIT-DR ASSESSEE(S) BY : SHRI S.N. SOPARKAR, AR / // / DATE OF HEARING : 23 & 25 /02/2015 !'# / // / DATE OF PRONOUNCEMENT: 19/03/2015 $% $% $% $%/ // / O R D E R PER BENCH : THIS BUNCH OF APPEALS BY THE REVENUE AND CROSS-OBJE CTIONS BY DIFFERENT ASSESSEES HAVE BEEN FILED AGAINST THE SEP ARATE ORDERS OF LEARNED CIT(A)-I, AHMEDABAD. SINCE THESE APPEALS & CROSS-O BJECTIONS INVOLVE COMMON ISSUES, THESE WERE HEARD TOGETHER AND ARE BE ING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. IT(SS)A NO.615/AHD/2010 : AY 2005-06 (BY REVENUE) 2. IN THIS APPEAL BY THE REVENUE FOLLOWING GROUNDS WERE RAISED:- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS I N DELETING THE ADDITION OF RS.2,87,75,583/- MADE ON ACCOUNT OF SUPPRESSION OF PROFIT BY THE ASSESSEE COMPANY BY WAY OF CLIENT CODE MODIFICATION BY THE B ROKERS IN A LARGE NUMBER OF COMMODITY TRANSACTIONS. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN ACCEPTING THE VIEW OF THE APPELLANT THAT THE DISCLOSURE AT THE TIME OF SEARCH HAD NO BASIS TO BE ACCEPTED. 3. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE AO WAS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE A.O. 5. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE CIT(A) BE SET ASIDE AND THAT OF THE A.O. BE RESTORED TO THE ABOVE EXTENT. IT(SS)A NOS. 615 TO 618, 677 TO 680, 813-817 OF 201 0 IT(SS)A 301 & 302/2011 & & CO250 TO 253 OF 2010 CO 313 TO 315, 342 TO 346 OF 2010 KUNVARJI FINANCE PVT LTD & GROUP 27CASES 3 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE-COMP ANY IS ENGAGED IN THE BUSINESS OF SHARE TRADING; F&O TRANSACTIONS IN SHAR ES AND SECURITIES, COMMODITY TRADING, SPECULATION IN SHARES AND COMMOD ITIES ETC. THE ASSESSEE-COMPANY IS PART OF GROUP OF COMPANIES WHIC H INCLUDE KUNWARJI COMMODITY BROKERS PVT LTD (KCBPL FOR SHORT) AND KUN WARJI FINSTOCK PVT LTD (KFPL FOR SHORT). THE COMPANY KCBPL IS A REGIST ERED BROKER IN COMMODITY EXCHANGES WHILE THE COMPANY KFPL IS A REG ISTERED BROKER IN SHARE MARKET. IN THE CASE OF KUNWARJI GROUP OF CASE S, A SEARCH U/S 132(1) WAS CARRIED OUT ON 25.03.2008. AT PARAGRAPH 1 OF T HE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS STATED THAT DURING THE COURSE OF SEARCH VARIOUS BOOKS OF ACCOUNT AND DOCUMENTS AS PER ANNEXURES A1 TO A65 OF THE PANCHNAMA WERE SEIZED FROM THE MAIN OFFICE PREMISES OF THIS G ROUP AND SURVEYS WERE ALSO CARRIED OUT IN THE COMPANIES OF THIS GROUP. SE ARCHES WERE SIMULTANEOUSLY CARRIED OUT AT THE RESIDENTIAL PREMI SES OF THE DIRECTORS SHRI NAYAN THAKKAR, SHRI KUNAL SHAH AND SMT. RUJUTA SHET H AND THEIR STATEMENTS WERE RECORDED. DURING THE COURSE OF ASS ESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT KCBPL HAS DONE C LIENT CODE MODIFICATIONS FOR UNUSUALLY HIGH NUMBERS OF TIME. T HEREFORE, THE ASSESSING OFFICER DREW INFERENCE THAT THE MODIFICATION OF THE CLIENT CODE HAD BEEN RESORTED TO WITH MALAFIDE INTENTION AND FOR THE PUR POSE OF TRANSFERRING THE PROFIT/LOSS FROM ONE CLIENT TO ANOTHER, THOUGH HE A DMITTED IN THE ASSESSMENT ORDER THAT THERE ARE POSSIBILITIES OF COMMITTING MI STAKES THAT MAY REQUIRE MODIFICATION OF CLIENT CODE. HOWEVER, HE WAS OF TH E OPINION THAT THE ASSESSEE-COMPANY AND KCBPL ARE THE GROUP CONCERNS A ND SINCE THERE WAS UNUSUALLY HIGH NUMBER OF CLIENT CODE MODIFICATIONS IN THE CASE OF THE ASSESSEE, HE WAS OF THE OPINION THAT THE CLIENT COD E MODIFICATION WAS NOT THE BONA FIDE MISTAKE BUT IT WAS DONE WITH THE INTENTION OF TRANS FERRING THE PROFIT FROM ONE CLIENT TO ANOTHER. HE, THEREFORE, WORKED OUT THE NOTIONAL IT(SS)A NOS. 615 TO 618, 677 TO 680, 813-817 OF 201 0 IT(SS)A 301 & 302/2011 & & CO250 TO 253 OF 2010 CO 313 TO 315, 342 TO 346 OF 2010 KUNVARJI FINANCE PVT LTD & GROUP 27CASES 4 PROFIT/LOSS WHICH COULD HAVE BEEN OCCURRED TO THE A SSESSEE HAD THE CLIENT CODE WAS NOT MODIFIED. AS PER HIS WORKING, IF THE CLIENT CODE WOULD HAVE NOT BEEN MODIFIED, THEN DURING THE ACCOUNTING YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE W OULD HAVE EARNED EXTRA PROFIT OF RS.2,87,75,583/-. ACCORDINGLY, HE MADE T HE ADDITION OF RS.2,87,75,583/- ON ACCOUNT OF SUPPRESSED PROFIT. T HE LD. CIT(A) DELETED THE ADDITION WITH THE FOLLOWING FINDINGS:- 4.11 I HAVE GIVEN A VERY CAREFUL CONSIDERATION TO THE VARIOUS REASONS GIVEN BY THE ASSESSING OFFICER FOR HIS CONCLUSION THAT TH E CLIENT CODE MODIFICATIONS WERE DELIBERATELY AND MALA FIDE CARRIED OUT WITH A VIEW TO TRANSFER THE PROFITS SO AS TO REDUCE THE INCIDENCE OF TAX IN THE CASE OF KUNWARJI GROUP. I HAVE ALSO CONSIDERED THE DETAILED SUBMISSIONS MADE BEFORE ME ON BEHALF OF THE APPELLANT COMPANY AND HAVE ALSO GONE THROUGH THE VARIOUS JUDI CIAL PRONOUNCEMENTS CITED BEFORE ME. AT THE VERY OUTSET, IT MAY BE STAT ED THAT THE HUGE ADDITIONS MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT YEA RS UNDER APPEAL ON THE BASIS OF CLIENT CODE MODIFICATIONS HAVE NO REFERENC E TO ANY SEIZED MATERIAL. THESE ADDITIONS HAVE BEEN MADE BY THE ASSESSING OFF ICER ENTIRELY ON THE BASIS OF CERTAIN POST-SEARCH ENQUIRIES MADE FROM THE COMM ODITY EXCHANGES. THESE ENQUIRIES REVEALED THAT KUNWARJI COMMODITY BROKERS PVT. LIMITED (KCBPL), WHICH IS ENGAGED IN THE BUSINESS OF BROKER AGE ON COMMODITY EXCHANGES, HAS CARRIED OUT CLIENT CODE MODIFICATION S. THERE IS NO OTHER MATERIAL OR EVIDENCE TO SUPPORT THE ADDITIONS MADE BY THE ASSESSING OFFICER AND THE ASSESSING OFFICER HAS DRAWN HIS OWN INFEREN CES FROM THE CLIENT CODE MODIFICATIONS. FURTHER, THE ADDITIONS MADE BY THE A SSESSING OFFICER ARE ON THE BASIS OF CERTAIN ASSUMPTIONS. THE MAIN BASIS OF THE ASSESSING OFFICER FOR MAKING THE ADDITIONS IS THAT LARGE NUMBER OF CLIENT CODE MODIFICATIONS WERE CARRIED OUT BY KCBPL AND SUCH MODIFICATIONS DURING THE FOUR ASSESSMENT YEARS UNDER APPEAL COME TO 36,161. THE ASSESSEE EXP LAINED TO THE ASSESSING OFFICER AS ALSO BEFORE ME THAT THE TOTAL TRADES CON DUCTED BY KCBPL ON BEHALF OF VARIOUS CLIENTS INCLUDING ENTITIES OF KUNWARJI G ROUP, DURING THE PREVIOUS YEAR'S RELEVANT TO THE FOUR ASSESSMENT YEARS STAN D AT 38,58,645. THUS, THE CLIENT CODE MODIFICATIONS COME TO 0.94%. THE ASSESS EE FURTHER EXPLAINED THAT OUT OF THE CLIENT CODE MODIFICATIONS CARRIED OUT, 1 5,310 MODIFICATIONS WERE DONE BY THE CLIENTS/TRADERS THEMSELVES THROUGH DIRE CT CONNECTIVITY WITH THE COMMODITY EXCHANGES TO WHICH THEY HAD ACCESS. THUS, THE CLIENT CODE MODIFICATIONS CARRIED OUT DIRECTLY BY THE TRADERS C OME TO 45% OF SUCH MODIFICATIONS, WHICH MEANS THAT THE PERCENTAGE OF M ODIFICATIONS CARRIED OUT BY KCBPL WOULD BE AROUND 0.5%. IT WAS FURTHER EXPL AINED WITH SUPPORTING EVIDENCE THAT ONE TRADING ORDER NORMALLY COMPRISES OF MORE THAN ONE TRADE, IT(SS)A NOS. 615 TO 618, 677 TO 680, 813-817 OF 201 0 IT(SS)A 301 & 302/2011 & & CO250 TO 253 OF 2010 CO 313 TO 315, 342 TO 346 OF 2010 KUNVARJI FINANCE PVT LTD & GROUP 27CASES 5 WHICH WOULD FURTHER REDUCE THE PERCENTAGE OF MODIFI CATIONS TO A NEGLIGENT FIGURE. THIS POINT HAS BEEN EXPLAINED AT PAGE-35 OF THE STATEMENT OF FACTS WITH REFERENCE TO TRANSACTIONS AT MCX. THE TOTAL NU MBER OF TRADES IN MCX IS 26,69,129 AND THE TOTAL NUMBER OF TRADES MODIFIE D STANDS AT 15,678. THE NUMBER OF ORDERS MODIFIED IS ONLY 5,915, WHICH COME S TO 0.22% OF THE TOTAL NUMBER OF TRADES. IT HAS BEEN POINTED OUT ON BEH ALF OF THE APPELLANT THAT THE POSITION REGARDING TRANSACTIONS IN NCDEX WOULD ALSO BE SIMILAR BUT THE BREAK-UP IS NOT AVAILABLE FROM NCDEX. COPIES OF C IRCULARS ISSUED BY MCX HAVE BEEN FILED, WHICH SHOW THAT CLIENT CODE MODIFI CATIONS WITH A VIEW TO RECTIFY PUNCHING ERRORS IS PERMISSIBLE TO THE EXTEN T OF 1%. IF SUCH MODIFICATIONS ARE MORE THAN 1% BUT LESS THAN OR EQU AL TO 5%, NOMINAL PENALTY OF RS. 500 IS LEVIABLE. IN THE PRESENT CAS E, IF ALL THE FACTS ARE OBJECTIVELY ANALYSED, IT IS SEEN THAT EFFECTIVELY T HE CLIENT CODE MODIFICATIONS CAN BE SAID TO BE AROUND 0.5% FOR THE ASSESSMENT YE ARS UNDER APPEAL. THEREFORE, I SEE NO JUSTIFICATION IN THE ASSUMPTION OF THE ASSESSING OFFICER THAT LARGE NUMBERS OF CLIENT CODE MODIFICATIONS WER E CARRIED OUT. FOR THE SAME REASON, THERE IS HARDLY ANY BASIS FOR THE ASSU MPTION ON THE PART OF THE ASSESSING OFFICER THAT THE CLIENT CODE MODIFICATION S WERE CARRIED OUT IN LARGE NUMBERS WITH THE MOTIVE OF TRANSFERRING PROFITS. T HE ASSESSING OFFICER HAS FAILED TO BRING ANY MATERIAL OR EVIDENCE ON RECORD TO EVEN REMOTELY SUGGEST THAT THE ASSESSEES OF THIS GROUP RESORTED TO DELIBE RATE CLIENT CODE MODIFICATIONS WITH A VIEW TO REDUCE INCIDENCE OF TA X. 4.12 FURTHER, WHATEVER MODIFICATIONS HAVE BEEN CARR IED OUT, THE REASONS FOR SUE-MODIFICATIONS WERE THOROUGHLY EXPLAINED BEFORE THE ASSESSING OFFICER AS ALSO BEFORE ME. THE ASSESSEE'S EXPLANATION HAS BEEN SUMMARISED UNDER SIX POINTS AT PAGES - 42 TO 43 OF THE STATEMENT OF FACT S. THESE REASONS ARE CONVINCING AND OBVIOUSLY, THE CLIENT CODE MODIFICAT IONS HAVE BEEN CARRIED OUT TO RECTIFY GENUINE PUNCHING ERRORS. IF SUCH GENUINE ERRORS ARE NOT RECTIFIED, AND THE TRANSACTIONS ALLOWED TO CONTINUE IN THE NAM E OF WRONG CLIENTS, IT WOULD RESULT INTO A CHAOTIC SITUATION. THEREFORE, I SEE NO MERIT IN THE CONCLUSION DRAWN BY THE ASSESSING OFFICER THAT CLIE NT CODE MODIFICATIONS WERE CARRIED OUT WITH A VIEW TO TRANSFER PROFITS. T HIS VIEW IS FURTHER STRENGTHENED BY THE FACT THAT THE ADDITIONS MADE BY THE ASSESSING OFFICER ARE ENTIRELY IN THE NATURE OF 'NOTIONAL PROFIT' AND NOT 'REAL INCOME', WHICH HAS ALSO BEEN TERMED AS 'NOTIONAL' BY THE ASSESSING OFF ICER HIMSELF IN THE NOTICE U/S. 142(1) ISSUED BY HIM. (I) THE ASSESSING OFFICER HAS CALCULATED THE ALLEGE D SUPPRESSED PROFITS ON A FURTHER ASSUMPTION THAT THE OPEN POSITION IN A LL CONTRACTS TO BUY OR SELL ARE SQUARED OFF AT THE EXPIRY PRICES OF THE CONTRACT. IN OTHER WORDS, THE ASSESSING OFFICER ASSUMED THAT THE TRANS ACTIONS WOULD BE FINALISED AT THE EXPIRY DATE AND ACCORDINGLY, HE CA LCULATED THE ASSUMED IT(SS)A NOS. 615 TO 618, 677 TO 680, 813-817 OF 201 0 IT(SS)A 301 & 302/2011 & & CO250 TO 253 OF 2010 CO 313 TO 315, 342 TO 346 OF 2010 KUNVARJI FINANCE PVT LTD & GROUP 27CASES 6 PROFIT ON THE BASIS OF THE PRICES .OF THE COMMODITY PREVAILING AT THE EXPIRY DATE. APPARENTLY THIS IS A HYPOTHETICAL EXER CISE. (II) THE ASSESSING OFFICER COMPLETELY IGNORED THE C ORRECT FACTUAL POSITION THAT THE CLIENT CODE MODIFICATIONS WERE, I N MOST OF THE CASES, CARRIED OUT WITHIN A FEW MINUTES OR IN ALL CASES BY THE END OF THE SAME DAY, AS CLIENT CODE MODIFICATION IS NOT PERMITTED B EYOND THAT DAY. (III) ON THE OTHER HAND, THE EXPIRY PRICE IS A PRIC E WHICH PREVAILED ON THE DAY ON WHICH THE CONTRACT EXPIRES AND HAS TO BE SQUARE OFF. WHEN THE MODIFICATION HAS BEEN DONE, WITHIN A FEW MINUTE S OR ON THE SAME DAY, IT IS BEYOND COMPREHENSION AS TO HOW RELEVANT CONTRACT IS ASSUMED TO BE OPEN TILL EXPIRY DATE AND HOW THE EXP IRY PRICES CAN BE ADOPTED FOR CALCULATING THE SO CALLED SUPPRESSED PR OFITS. (IV) THE TRADING PARTIES COULD NOT HAVE BEEN AW ARE OF THE EXPIRY PRICE AND THEREFORE, NO MOTIVE CAN BE IMPUTED THAT THE MODIFICATIONS WERE CARRIED OUT WITH A VIEW TO AVOID TAX. THERE IS NO MATERIAL WHATSOEVER TO SUPPORT THE CONCLUSION DRAWN BY THE A SSESSING OFFICER THAT CLIENT CODE MODIFICATIONS WERE CARRIED OUT MAL A FIDE WITH A VIEW TO TRANSFER PROFITS. SUCH ASSUMPTION IS TOTALLY ILL OGICAL FOR THE SIMPLE REASON THAT EVEN IF FOR THE SAKE ARGUMENT IT IS ASS UMED THAT PROFITS WERE TRANSFERRED FROM ONE CLIENT TO ANOTHER, THERE CAN BE NO MOTIVE FOR SUCH TRANSFER BECAUSE IF SUCH ASSUMED PROFIT IS TRA NSFERRED WITHIN THE GROUP, THE TRANSFEREE ENTITY WILL HAVE TO PAY THE T AX. ON THE OTHER HAND, IF THE PROFIT IS TRANSFERRED TO SOME OUTSIDE CLIENT, IT WOULD AMOUNT TO A SITUATION WHERE A SUM OF RS. 100 IS FOR EGONE BY THE APPELLANT COMPANY TO AVOID PAYMENT OF TAX OF RS. 30 TO 35. THE METHODOLOGY ADOPTED BY THE ASSESSING OFFICER FOR CA LCULATING NOTIONAL AND HYPOTHETICAL PROFITS GIVES RISE TO SEVERAL CRUC IAL QUESTIONS WHICH REMAIN UNANSWERED AND THIS POINT WAS THOROUGHLY EXP LAINED BY THE . ASSESSEE AT-PAGES -14 TO 19 OF THE REPLY DATED 23RD NOVEMBER, 2009 FILED BEFORE THE ASSESSING OFFICER. THESE ANOMALIES IN THE PRESUMPTIONS OF THE ASSESSING OFFICER HAVE ALSO BEE N EXPLAINED AT PAGES - 45 TO 50 OF THE STATEMENT OF FACTS. 4.13 ANOTHER FACTOR WHICH CANNOT BE IGNORED IS THAT ALL TRANSACTIONS AT THE COMMODITIES EXCHANGES HAVE BEEN DULY ACCOUNTED IN T HE BOOKS OF ACCOUNT MAINTAINED BY THE CONCERNED PARTIES. SUCH PROFITS/L OSS HAS BEEN DULY ACCOUNTED WHENEVER THE TRANSACTIONS HAVE BEEN CLOSE D. THUS, WHATEVER PROFITS HAVE BEEN GENERATED ON ACCOUNTING OF ACTUAL TRADE, HAVE BEEN OFFERED AND BROUGHT TO THE CHARGE OF TAX IN THE CASES OF CO NCERNED ASSESSEES. ALL THE POINTS RAISED BY THE ASSESSING OFFICER DURING THE C OURSE OF ASSESSMENT PROCEEDINGS HAVE BEEN DULY AND PROPERLY REPLIED TO BY VARIOUS LETTERS FILED BY IT(SS)A NOS. 615 TO 618, 677 TO 680, 813-817 OF 201 0 IT(SS)A 301 & 302/2011 & & CO250 TO 253 OF 2010 CO 313 TO 315, 342 TO 346 OF 2010 KUNVARJI FINANCE PVT LTD & GROUP 27CASES 7 THE ASSESSEE AS ENUMERATED AT PAGES 57 TO 66 OF THE STATEMENT OF FACTS WHICH HAVE BEEN REPRODUCED SUPRA. 4.14 CONSIDERING THE ENTIRE FACTS AND THE LEGAL POS ITION, I HAVE NO HESITATION IN HOLDING THAT THE ADDITIONS MADE BY THE ASSESSING OFFICER IN THE FOUR ASSESSMENT YEARS UNDER APPEAL ON ACCOUNT OF CLIENT CODE MODIFICATIONS ARE WITHOUT ANY BASIS AND ACCORDINGLY THESE ADDITIONS A RE DELETED. 4. THE REVENUE, AGGRIEVED WITH THE ORDER OF THE LD. CIT(A), IS IN APPEAL BEFORE US. 5. AT THE TIME OF HEARING BEFORE US, THE LD. CIT-DR ARGUED AT LENGTH. HE STATED THAT THE ASSESSEE AND THE BROKER I.E. KCBPL ARE THE GROUP CONCERNS AND THEREFORE, IT WAS VERY EASY FOR THE ASSESSEE TO MODIFY THE CLIENT CODE AND TRANSFER THE PROFIT TO SOME OTHER PERSON AS AGAINST THE ASSESSEE. HE ALSO STATED THAT THE KCBPL HAS MISUSED THE FACILITY ALLO WED BY THE STOCK EXCHANGE FOR CORRECTING THE BONAFIDE MISTAKE FOR TH E PURPOSE OF TRANSFERRING THE PROFIT FROM ASSESSEE TO OTHERS. THE CLIENT CODE OF THE ASSESSEE WERE MODIFIED BY THE BROKER I.E. KCBPL WITH THE MALAFIDE INTENTION TO HELP THE ASSESSEE TO SUPPRESS THE PROFIT. HE STATED THAT TH E ASSESSING OFFICER HAS DISCUSSED ALL THE FACTS IN DETAILS AND THE LD. CIT( A) HAS NOT CONSIDERED THESE FACTS CORRECTLY. THE MODIFICATIONS OF THE CLIENT C ODE WERE UNUSUALLY HIGH NUMBERS AND THERE CANNOT BE BONAFIDE MISTAKE IN THO USANDS OF CASES. HE FURTHER SUBMITTED THAT THIS IS A SEARCH CASE AND DU RING THE COURSE OF SEARCH, SHRI NAYAN THAKKAR HAS DISCLOSED THE INCOME OF RS.1 2 CRORES. HOWEVER, WHEN THE RETURN OF INCOME WAS FILED, THE INCOME SUR RENDERED DURING THE COURSE OF SEARCH WAS NOT OFFERED FOR THE PURPOSE OF TAXATION. THAT THE ASSESSING OFFICER NOTICED THAT THE SUPPRESSION OF T HE PROFIT WAS MORE THAN RS. 12 CRORES AND THEREFORE, HE DID NOT MAKE ADDITI ON OF RS.12 CRORES I.E., THE INCOME DISCLOSED BY THE ASSESSEE DURING THE COURSE OF SEARCH BUT MADE THE ADDITION OF THE CORRECT AMOUNT SUPPRESSED BY THE AS SESSEE. HE, THEREFORE, IT(SS)A NOS. 615 TO 618, 677 TO 680, 813-817 OF 201 0 IT(SS)A 301 & 302/2011 & & CO250 TO 253 OF 2010 CO 313 TO 315, 342 TO 346 OF 2010 KUNVARJI FINANCE PVT LTD & GROUP 27CASES 8 SUBMITTED THAT CONSIDERING THE TOTALITY OF THE FACT S, THE ADDITION MADE BY THE ASSESSING OFFICER DESERVES TO BE SUSTAINED AND THER EFORE, THE ORDER OF THE LD. CIT(A) SHOULD BE REVERSED AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED. 6. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER H AND, RELIED UPON THE ORDER OF THE CIT(A). HE SUBMITTED THAT THE CLIENT CODE MODIFICATIONS WERE NOT UNUSUALLY VERY HIGH AS ALLEGED BY THE ASSESSING OFFICER. HE REFERRED TO THE TOTAL NUMBER OF TRADES IN BOTH THE EXCHANGES AN D THE NUMBER OF CLIENT CODE MODIFICATIONS WHICH READ AS UNDER:- DATA SHOWING TRADES DETAILS OF KCBPL FOR THE PERIO D 2004-05 TO 2007-08 AT NCDEX & MCX NUMBER OF TOTAL TRADES : 3858645 NUMBER OF MODIFIED TRADES : 36161 % OF MODIFIED TRADES TO TOTAL TRADES : 0.94% HE FURTHER SUBMITTED THAT IF ONE LOOKS AT THE TOTA L NUMBERS OF CLIENT CODE MODIFICATIONS IN FOUR YEARS, IT IS 36161 AND O NE MAY PRESUME THAT CLIENT CODE MODIFICATION IS UNUSUALLY HIGH; BUT IF IT IS LOOKED IN COMPARISON TO TOTAL NUMBER OF TRADE TRANSACTIONS, IT WOULD BE CLEAR THAT THE TOTAL NUMBER OF TRADE TRANSACTIONS WERE MORE THAN 38 LACS AND TH E PERCENTAGE OF THE CLIENT CODE MODIFICATIONS WITH REFERENCE TO TOTAL NUMBER O F TRADE WAS LESS THAN 1% I.E. 0.94%. HE REFERRED TO THE CIRCULAR ISSUED BY MCX AND POINTED OUT THAT THE CLIENT CODE MODIFICATION UPTO 1% IS PERMITTED B Y THE MCX AND IF THERE IS CLIENT CODE MODIFICATION GREATER THAN 1% BUT LESS T HAN 5%, THEN PENALTY OF RS.500/- IS LEVIED AND IF IT IS BETWEEN 5-10%, THEN PENALTY OF RS.1000/- IS LEVIED. HE, THEREFORE, SUBMITTED THAT CLIENT CODE M ODIFICATION UPTO 1% IS NOT UNUSUALLY HIGH BUT IS MINIMUM WHICH OCCURS IN THIS LINE OF TRADE. HE FURTHER POINTED OUT THAT THE COMMODITY EXCHANGE IS A NEW CONCEPT AND HAS STARTED RECENTLY. HE ALSO POINTED OUT THAT THE BROK ERS AND HIS STAFF WERE ALSO IT(SS)A NOS. 615 TO 618, 677 TO 680, 813-817 OF 201 0 IT(SS)A 301 & 302/2011 & & CO250 TO 253 OF 2010 CO 313 TO 315, 342 TO 346 OF 2010 KUNVARJI FINANCE PVT LTD & GROUP 27CASES 9 NEW IN THIS LINE OF TRADE AND THEREFORE, A BONAFIDE ERROR WHILE PUNCHING THE TRANSACTIONS OR THE CLIENT CODE USUALLY TAKES PLACE AND THE COMMODITY EXCHANGE PERMITS THE MODIFICATION OF CLIENT CODE ON THE SAME DAY. HE REFERRED TO THE TIME OF THE CLIENT CODE MODIFICATIO N AND POINTED OUT THAT THE CLIENT CODE MODIFICATION IS USUALLY DONE WITHIN FEW MINUTES AND IN ANY CASE BEFORE THE END OF THE DAY. HE SUBMITTED THAT THE PR ESUMPTION OF THE ASSESSING OFFICER THAT THE CLIENT CODE MODIFICATION S WERE DONE WITH THE MALAFIDE INTENTION OF SUPPRESSING THE PROFIT COULD HAVE SOME BASIS HAD THE CLIENT CODE MODIFICATION DONE AFTER A CONSIDERABLE GAP OF TIME BETWEEN THE ENTERING OF THE TRANSACTIONS AND THE MODIFICATION O F THE CLIENT CODE. SINCE THE CLIENT CODE MODIFICATION IS DONE ON THE SAME DAY, T HE ASSESSEE OR THE BROKER IS NOT AWARE ABOUT THE OUTCOME OF SUCH TRANSACTIONS . DESPITE THE MODIFICATION OF THE CLIENT CODE WITH THE COMMODITY EXCHANGE SAME DAY, THE ASSESSING OFFICER WORKED OUT NOTIONAL PROFIT/LOSS T ILL THE DATE OF ACTUAL TERMINATION OF THE TRANSACTIONS. HE, THEREFORE, SU BMITTED THAT THE PRESUMPTION MADE BY THE ASSESSING OFFICER FACTUALLY , LOGICALLY AS WELL AS LEGALLY INCORRECT. IN SUPPORT OF THIS CONTENTION, H E RELIED UPON THE DECISION OF ITAT, AHMEDABAD BENCH IN THE CASE OF ACIT VS. HI NA NITIN PARIKH, REPORTED IN [2013] 144 ITD 157 (AHMEDABAD - TRIB.). HE ALSO SUBMITTED THAT THE ABOVE DECISION OF THE ITAT, AHMEDABAD BENCH IS UPHELD BY THE JURISDICTIONAL HIGH COURT WHICH IS REPORTED IN [201 4] 43 TAXMANN.COM 317 (GUJARAT), IN THE CASE OF CIT VS. PRUDENT FINANCE ( P.) LTD. HE, THEREFORE, SUBMITTED THAT THE ORDER OF THE CIT(A) SHOULD BE SU STAINED. 7. WITH REFERENCE TO DISCLOSURE OF INCOME OF RS.12 CRORES IS CONCERNED, HE STATED THAT DURING THE COURSE OF SEARCH, WHILE R ECORDING THE STATEMENT OF SHRI NAYAN THAKKAR, IT WAS STATED BY THE AUTHORIZED OFFICER THAT VARIOUS PAPERS AND DOCUMENTS SEIZED FROM THE ASSESSEES PRE MISES SHOW VARIOUS IT(SS)A NOS. 615 TO 618, 677 TO 680, 813-817 OF 201 0 IT(SS)A 301 & 302/2011 & & CO250 TO 253 OF 2010 CO 313 TO 315, 342 TO 346 OF 2010 KUNVARJI FINANCE PVT LTD & GROUP 27CASES 10 DEFECTS AND DISCREPANCIES. THE ASSESSEE, BELIEVING THIS ASSERTION MADE BY THE AUTHORIZED OFFICER, OFFERED THE INCOME OF RS.12 CRORES IN THE GROUP CONCERN. HOWEVER, AFTER THE RECEIPT OF SEIZED DOCU MENTS, THE ASSESSEE FOUND THAT THERE WAS NOT A SINGLE DEFECT OR DISCREPANCY I N THE BOOKS OF ACCOUNTS; THEREFORE, NO INCOME WAS OFFERED IN THE RETURN OF I NCOME. HE FURTHER SUBMITTED THAT THERE IS A SEPARATE GROUND RAISED BY THE REVENUE WITH REGARD TO DISCLOSURE OF INCOME BY THE ASSESSEE AT THE TIME OF SEARCH AND THEREFORE, HE WILL BE MAKING HIS SUBMISSIONS IN DETAILS WHILE GROUND NO.2 OF THE REVENUES APPEAL COULD BE CONSIDERED. BUT, SO FAR A S THE ADDITION MADE ON ACCOUNT OF ALLEGED SUPPRESSION OF INCOME BY WAY OF CLIENT CODE MODIFICATION IS CONCERNED, THE SAME NEEDS TO BE ADJUDICATED ON T HE BASIS OF FACTS RELATING TO CLIENT CODE MODIFICATION AND NOT ON THE BASIS OF THE DISCLOSURE MADE AT THE TIME OF SEARCH ON THE BASIS OF INCORRECT FACTS STATED BY THE AUTHORIZED OFFICER. 8. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BO TH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. THE ASSESSI NG OFFICER BELIEVED THE CLIENT CODE MODIFICATION TO BE MALAFIDE BECAUSE IN HIS OPINION THE CLIENT CODE MODIFICATION WAS FOR UNUSUALLY HIGH NUMBER OF CASES. THEREFORE, FIRST THING TO BE DECIDED IS WHETHER THERE WAS THE CLIENT CODE MODIFICATION FOR UNUSUALLY HIGH NUMBER OF CASES. THE COMMODITY EXCHA NGE I.E. MCX VIDE CIRCULAR NO.MCX/T&S/032/2007 DATED 22.01.2007, ISSU ED GUIDELINES WITH REGARD TO THE CLIENT CODE MODIFICATION, WHICH READS AS UNDER:- CIRCULAR NO. MCX/T&S/032/2007 JANUARY 22, 2007 CLIENT CODE MODIFICATIONS IN TERMS OF PROVISIONS OF THE RULES, BYE-LAWS AND B USINESS RULES OF THE EXCHANGE, THE MEMBERS OF THE EXCHANGE ARE NOTIFIED AS UNDER: IT(SS)A NOS. 615 TO 618, 677 TO 680, 813-817 OF 201 0 IT(SS)A 301 & 302/2011 & & CO250 TO 253 OF 2010 CO 313 TO 315, 342 TO 346 OF 2010 KUNVARJI FINANCE PVT LTD & GROUP 27CASES 11 FORWARD MARKETS COMMISSION (FMC) VIDE ITS LETTER NO . 6/3/2006/MKT-II (VOL III) DATED DECEMBER 20, 2006 AND JANUARY 5, 2007 HA S DIRECTED AS UNDER. A. THE FACILITY OF CLIENT CODE MODIFICATIONS INTRA- DAY ARE ALLOWED. B. THE MEMBERS ARE ALSO ALLOWED TO CHANGE THEIR CLI ENT CODES BETWEEN 5:00 P.M. TO 5:15 P.M., IN CASE OF THE CONTRACTS TRADED TILL 5:0 0 P.M. AND BETWEEN 11:30 P.M. TO 11:45 P.M. FOR THE CONTRACTS TRADED TILL 11:30 P.M. ON ALL THE TRADING DAYS FROM MONDAYS TO FRIDAYS AND ON SATURDAYS THE SAME SHALL BE ALLOWED BETWEEN 2:00 P.M. TO 2:15 P.M. C. HOWEVER, ON THE DAYS WHEN TRADING IN COMMODITIE S TAKES PLACE TILL 11:55 P.M. THE CLIENT CODE MODIFICATION WILL BE ALLOWED ONLY U PTO 12:00 P.M. D. AT ALL TIMES, PROPRIETARY TRADES SHALL NOT BE AL LOWED TO BE MODIFIED AS CLIENT TRADES AND CLIENT TRADES SHALL NOT BE ALLOWED TO BE MODIFIED AS PROPRIETARY TRADES. E. IN ORDER TO ENSURE THAT CLIENT CODES ARE ENTERE D WITH ALERTNESS AND CARE, A PENALTY ON THE CLIENT CODE CHANGES MADE ON A DAILY BASIS SH ALL BE IMPOSED AS UNDER: S. NO PERCENTAGE OF CLIENT CODE CHANGED TO TOTAL ORDERS (MATCHED) ON A DAILY BASIS PENALTY (RS.) 1 LESS THAN OR EQUAL TO 1% NIL 2 GREATER THAN 1% BUT LESS THAN OR EQUAL TO 5% 500 3 GREATER THAN 5% BUT LESS THAN OR EQUAL TO 10% 1000 4 GREATER THAN 10% 10000 F. IT IS CLARIFIED THAT THE FACILITY OF CLIENT COD E MODIFICATION IS ALLOWED AS AN INTERIM MEASURE ONLY UPTO MARCH 31, 2007 AND AFTER THIS DAT E THE SAID FACILITY WILL BE COMPLETELY STOPPED. WITH REFERENCE TO POINT C. AS REFERRED ABOVE, MEMBE RS MAY PLEASE NOTE THAT THE CLIENT CODE MODIFICATIONS WILL BE ALLOWED ONLY UPTO 11:55 P.M. IN INTERNATIONAL REFERENCEABLE COMMODITIES (I.E. COMMODITIES TRADED UPTO 11:55 P.M.) MEMBERS ARE REQUESTED TO TAKE NOTE OF THE FMC DIREC TIVES AND ENSURE STRICT COMPLIANCE. FROM THE ABOVE, IT IS EVIDENT THAT CLIENT CODE MOD IFICATION IS PERMITTED INTRA-DAY, I.E. ON THE SAME DAY. AS PER COMMODITY EXCHANGE, IF CLIENT CODE MODIFICATION IS UPTO 1% OF THE TOTAL OR DERS, THERE IS NO PENALTY AND IF IT IS GREATER THAN 1% BUT LESS THAN 5%, THE PENALTY IS RS.500/-. IF IT IS GREATER THAN 5% BUT LESS THAN 10%, PENALTY IS RS.10 00/- AND IF IT IS GREATER THAN 10%, THEN PENALTY IS RS.10,000/-. FROM THE A BOVE, THE ONLY INFERENCE THAT CAN BE DRAWN IS THAT AS PER MCX, THE CLIENT CO DE MODIFICATION UPTO 1% IT(SS)A NOS. 615 TO 618, 677 TO 680, 813-817 OF 201 0 IT(SS)A 301 & 302/2011 & & CO250 TO 253 OF 2010 CO 313 TO 315, 342 TO 346 OF 2010 KUNVARJI FINANCE PVT LTD & GROUP 27CASES 12 IS ABSOLUTELY NORMAL AND THEREFORE, THE BROKER IS P ERMITTED TO MODIFY THE CLIENT CODE UPTO 1% WITHOUT PAYING ANY PENALTY. EV EN CLIENT CODE MODIFICATION UPTO 5% IS NOT CONSIDERED UNUSUALLY HI GH BECAUSE THAT IS ALSO PERMITTED WITH THE TOKEN PENALTY OF RS.500/-. IN T HE CONTEXT OF THE CIRCULAR ISSUED BY COMMODITY EXCHANGE, LET US EXAMINE WHETHE R THE CLIENT CODE MODIFICATION DONE BY THE BROKER I.E. KCBPL IS UNUSU ALLY HIGH. AT PAGE NO.16 ON PARAGRAPH NO.4.3, THE CIT(A) HAS GIVEN THE NUMBER OF TRANSACTIONS ENTERED INTO BY THE ASSESSEE FOR THE P ERIOD 2004-05 TO 2007-08 AND THE NUMBER OF CLIENT CODE MODIFICATION AND PERC ENTAGE THEREOF. WE HAVE ALSO REPRODUCED THE SAME AT PARAGRAPH NO.6 OF OUR ORDER. FROM THE SAID DETAILS, IT IS EVIDENT THAT THE CLIENT CODE MO DIFICATION WAS DONE IN FOUR YEARS 36,161 TIMES. AS AN ABSOLUTE FIGURE, THE CLI ENT CODE MODIFICATION MAY LOOK VERY HIGH, BUT IF WE LOOK IT AT IN TERMS OF TO TAL TRANSACTIONS, IT IS ONLY 0.94%. THE TOTAL NUMBER OF TRADE TRANSACTIONS IS 38 .58 LACS AND THE CLIENT CODE MODIFICATION IS ONLY 36,161. THEREFORE, THE CL IENT CODE MODIFICATION IS LESS THAN 1% OF THE TOTAL TRADING TRANSACTIONS. AS PER CIRCULAR OF COMMODITY EXCHANGE, CLIENT CODE MODIFICATION UPTO 1% IS QUITE NORMAL AND IS PERMITTED WITHOUT ANY PENALTY. THAT THE ASSESSING OFFICER HA S NOT GIVEN ANY REASON ON WHAT BASIS HE PRESUMED THE CLIENT CODE MODIFICAT IONS TO BE UNUSUALLY HIGH. IN THE LIGHT OF THE MCX CIRCULAR, WE ARE OF THE OPINION THAT THE CLIENT CODE MODIFICATION WAS QUITE NOMINAL AND NOT UNUSUAL LY HIGH AS ALLEGED BY THE ASSESSING OFFICER. 9. THE ASSESSING OFFICER HELD THE CLIENT CODE MODIF ICATIONS TO BE MALAFIDE WITH THE INTENTION TO TRANSFER THE PROFIT TO OTHER PERSON BY MODIFYING THE CLIENT CODE SO AS TO AVOID THE PAYMEN T OF TAX. FROM THE CIRCULAR OF THE COMMODITY EXCHANGE, IT IS EVIDENT T HAT CLIENT CODE MODIFICATION IS PERMITTED ON THE SAME DAY. THEREFO RE, WE ARE UNABLE TO FIND IT(SS)A NOS. 615 TO 618, 677 TO 680, 813-817 OF 201 0 IT(SS)A 301 & 302/2011 & & CO250 TO 253 OF 2010 CO 313 TO 315, 342 TO 346 OF 2010 KUNVARJI FINANCE PVT LTD & GROUP 27CASES 13 OUT ANY JUSTIFICATION FOR THE ALLEGATION OF THE ASS ESSING OFFICER THAT THE CLIENT CODE MODIFICATION WAS WITH THE MALAFIDE INTENTION. WHEN THE CLIENT CODE WAS MODIFIED ON THE SAME DAY, THERE CANNOT BE ANY M ALAFIDE INTENTION. HAD CLIENT MODIFICATION DONE AFTER THE TRANSACTIONS PER IOD WHEN THE PRICE OF THE COMMODITY HAS ALREADY CHANGED, THEN PERHAPS THERE C OULD HAVE BEEN SOME BASIS TO PRESUME THAT CLIENT CODE MODIFICATION IS I NTENTIONAL. HOWEVER, WHEN THE CLIENT CODE MODIFICATION IS DONE ON THE SA ME DAY, IN OUR OPINION, THERE WAS NO BASIS OR JUSTIFICATION TO HOLD THE SAM E TO BE MALAFIDE. 10. MOREOVER, THE LD. ASSESSING OFFICER HAS COMPUTE D THE NOTIONAL PROFIT/LOSS TILL THE TRANSACTIONS PERIOD AND NOT TI LL THE PERIOD BY WHICH THE CLIENT CODE MODIFICATION TOOK PLACE. EVEN IF THE VI EW OF THE REVENUE IS ACCEPTED THAT THE CLIENT CODE MODIFICATION WAS WITH MALAFIDE INTENTION, THEN THE PROFIT OR LOSS ACCRUED TILL THE CLIENT CODE MOD IFICATION CAN BE CONSIDERED IN THE CASE OF THE ASSESSEE BUT BY NO STRETCH OF IM AGINATION THE PROFIT/LOSS ARISING AFTER THE CLIENT CODE MODIFICATION CAN BE C ONSIDERED IN THE HANDS OF THE ASSESSEE. 11. THE LD. CIT(A) IN PARAGRAPH 4.13 OF HIS ORDER H AS ALSO RECORDED THE FINDINGS THAT ALL TRANSACTIONS AT THE COMMODITIES EXCHANGES HAVE BEEN DULY ACCOUNTED IN THE BOOKS OF ACCOUNT MAINTAINED BY THE CONCERNED PARTIES. SUCH PROFITS/LOSS HAS BEEN DULY ACCOUNTED WHENEVER THE T RANSACTIONS HAVE BEEN CLOSED. THUS, WHATEVER PROFITS HAVE BEEN GENERATED OR ACCOU NTING OF ACTUAL TRADE, HAVE BEEN OFFERED AND BROUGHT TO THE CHARGE OF TAX IN THE CAS ES OF CONCERNED ASSESSEES. THESE FINDINGS OF FACT RECORDED BY THE LD. CIT(A) HAS NOT BEEN CONTROVERTED BY THE REVENUE AT THE TIME OF HEARING BEFORE US. WHEN THE TRANSACTION HAS BEEN DULY ACCOUNTED FOR AND THE PROFIT/LOSS HAS ACCRUED TO THE CONCERNED PARTIES IN WHOSE NAMES TRANSACTIONS HAVE BEEN CLOSED, THERE CANNOT BE ANY BASIS OR JUSTIFICATION FOR CONSIDERING THOSE PROFIT/LOSS IN THE CASE OF THE ASSESSEE ON IT(SS)A NOS. 615 TO 618, 677 TO 680, 813-817 OF 201 0 IT(SS)A 301 & 302/2011 & & CO250 TO 253 OF 2010 CO 313 TO 315, 342 TO 346 OF 2010 KUNVARJI FINANCE PVT LTD & GROUP 27CASES 14 THE BASIS OF MERE PRESUMPTION OR SUSPICION. IT IS NOT THE CASE OF THE REVENUE THAT SUCH ALLEGED PROFIT HAS ACTUALLY BEEN RECEIVED BY THE ASSESSEE. IN VIEW OF THE TOTALITY OF THE ABOVE FACTS, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE CIT(A) IN THIS REGARD AND THE SAME IS SUSTAINED; AND GROUND NOS. 1 AND 3 OF THE REVENUES APPEAL ARE REJ ECTED. 12. GROUND NO.2 OF THE REVENUES APPEAL IS WITH REG ARD TO THE CLAIM OF THE REVENUE THAT THE CIT(A) OUGHT TO HAVE DIRECTED FOR THE ADDITION IN RESPECT OF THE INCOME DISCLOSED BY THE ASSESSEE AT THE TIME OF SEARCH. 13. IT IS SUBMITTED BY THE LD. DEPARTMENTAL REPRESE NTATIVE THAT DURING THE COURSE OF SEARCH, STATEMENT OF SHRI NAYAN THAKKAR W AS RECORDED. HE IS THE DIRECTOR OF THE ASSESSEE-COMPANY. IN HIS STATEMENT DATED 25.03.2008, HE DISCLOSED THE UNACCOUNTED INCOME OF RS.12 CRORES. T HAT ON 10.04.2008, HE FURNISHED A LETTER BEFORE THE ASSISTANT DIRECTOR OF INCOME-TAX IN WHICH HE GAVE THE BREAK-UP OF RS.12 CRORES, WHICH READS AS U NDER:- (A) M/S. KUNVARJI FINANCE PVT LTD. - RS.8,00,00, 000 (B) INDIVIDUALS AND OTHER GROUP ENTITIES LIKE NAYAN THAKKAR, - RS. 4,00,00,0000 CHETAN THAKKAR ETC. _______________ __ RS.12, 00,00,000 ============== THUS, IN CLEAR TERMS, HE DISCLOSED SUM OF RS.8 CRO RES AS UNACCOUNTED INCOME OF THE ASSESSEE. THIS LETTER DATED 10.04.200 8 WAS FILED AFTER THE CONCLUSION OF THE SEARCH. THAT TILL THE FILING OF T HE RETURN OF INCOME, THE DISCLOSURE MADE AT THE TIME OF SEARCH WAS NOT RETRA CTED. HOWEVER, IN THE RETURN OF INCOME, THE UNDISCLOSED INCOME DECLARED A T THE TIME OF SEARCH WAS NOT OFFERED; THEREFORE, THE ADDITION FOR UNDISC LOSED INCOME DECLARED AT THE TIME OF SEARCH OUGHT TO HAVE BEEN SUSTAINED BY CIT(A). THAT THE IT(SS)A NOS. 615 TO 618, 677 TO 680, 813-817 OF 201 0 IT(SS)A 301 & 302/2011 & & CO250 TO 253 OF 2010 CO 313 TO 315, 342 TO 346 OF 2010 KUNVARJI FINANCE PVT LTD & GROUP 27CASES 15 ASSESSING OFFICER WORKED OUT THE ADDITION ON ACCOUN T OF CLIENT CODE MODIFICATION. SINCE THE ADDITION WORKED OUT DUE TO CLIENT MODE MODIFICATION WAS MORE THAN RS. 8 CRORES, NO SEPARAT E ADDITION FOR UNDISCLOSED INCOME DECLARED AT THE TIME OF SEARCH W AS MADE. HOWEVER, WHEN THE CIT(A) DELETED THE ADDITION MADE BY THE AS SESSING OFFICER ON ACCOUNT OF CLIENT CODE MODIFICATION, HE OUGHT TO HA VE SUSTAINED THE ADDITION FOR UNDISCLOSED INCOME DECLARED BY THE ASSESSEE AT THE TIME OF SEARCH. HE, THEREFORE, SUBMITTED THAT IF THE ITAT SUSTAIN THE A DDITION FOR CLIENT CODE MODIFICATION, THEN NO ADDITION ON ACCOUNT OF UNDISC LOSED INCOME DECLARED BY THE ASSESSEE AT THE TIME OF SEARCH WOULD BE CALL ED FOR; OTHERWISE THE ITAT SHOULD SUSTAIN THE ADDITION OF RS.8 CRORES WHICH WA S VOLUNTARILY DECLARED BY SHRI NAYAN THAKKAR AT THE TIME OF SEARCH WITHOUT ANY PRESSURE OR COERCION FROM THE DEPARTMENT. IN SUPPORT OF THIS CO NTENTION, HE RELIED UPON THE FOLLOWING DECISIONS:- (I) RAMESCHANDRA & CO. VS. CIT : (1988) 168 ITR 375 (B OM.) (II) RAMESH T. SALVE VS. ACIT : (2000) 75 ITD 75 (MUM.) (III) DR. S.C. GUPTA VS. CIT : (2001) 248 ITR 782 (IV) GARIBDAS CHANDRIKA PRASAD VS. CIT : 230 ITR 771 (MP ) (V) HOTEL KIRAN VS. CIT : 82 ITD 453 (PUNE) 14. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, STATED THAT DURING THE COURSE OF SEARCH, STATEMENT OF SHRI NAYAN THAKK AR WAS RECORDED FOR ALMOST 36 HOURS. HIS GRANDFATHER WAS ILL AND WAS H OSPITALIZED. THEREFORE, SHRI NAYAN THAKKAR WAS PHYSICALLY AND MENTALLY PERT URBED. THE AUTHORIZED OFFICER WHO RECORDED HIS STATEMENT HAS T OLD HIM THAT THE VARIOUS PAPERS AND DOCUMENTS SEIZED FROM THEIR OFFICE PREMI SES AS PER ANNEXURE-1 INDICATED VARIOUS DEFECTS AND DISCREPANCIES. HE WA S ASKED TO EXPLAIN THE SAME WITHOUT GIVING THE COPY OF SUCH ANNEXURE-1. I N THAT BACKGROUND, HE OFFERED SOME ADDITIONAL INCOME. HOWEVER, DURING TH E COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE VIDE LETTER DATED 27.03.2 009 REQUESTED FOR IT(SS)A NOS. 615 TO 618, 677 TO 680, 813-817 OF 201 0 IT(SS)A 301 & 302/2011 & & CO250 TO 253 OF 2010 CO 313 TO 315, 342 TO 346 OF 2010 KUNVARJI FINANCE PVT LTD & GROUP 27CASES 16 SUPPLYING OF THE ANNEXURE-1. THE ASSESSING OFFICER VIDE REPLY DATED 27.08.2009 CONFIRMED THAT THERE IS NO ANNEXURE-1 BU T ONLY ANNEXURE-A WHICH WAS INADVERTENTLY MENTIONED AS ANNEXURE-1. T HAT WHEN THE ASSESSEE RECEIVED THE PHOTOCOPIES OF ALL THE SEIZED DOCUMENT S, THE ASSESSEE VERIFIED THOSE DOCUMENTS WITH THE BOOKS OF ACCOUNTS AND FOUN D THAT THERE IS NOT A SINGLE DISCREPANCY IN THE ASSESSEES SEIZED BOOKS O F ACCOUNTS. SINCE THERE WAS NO DISCREPANCY IN THE ASSESSEES BOOKS OF ACCOU NTS AND THE SEIZED DOCUMENTS, THE ASSESSEE DID NOT OFFER ANY UNDISCLOS ED INCOME. FROM THESE FACTS, IT IS EVIDENT THAT DISCLOSURE MADE BY THE AS SESSEE AT THE TIME OF SEARCH WAS ERRONEOUS, BASED UPON INCORRECT FACTS CONVEYED BY THE AUTHORIZED OFFICER WHO WAS RECORDED HIS STATEMENT. HE, THEREF ORE, SUBMITTED THAT THE ORDER OF THE CIT(A) IS FULLY JUSTIFIED AND THE SAME SHOULD BE SUSTAINED. IN SUPPORT OF THIS CONTENTION, HE RELIED UPON THE FOLL OWING DECISIONS:- (I) KAILASHBEN MANHARLAL CHOKSHI VS. CIT : (2010) 328 I TR 411 (GUJ) (II) CIT VS. K. BHUVANENDRA AND OTHERS (2008) 303 ITR 23 5 (MAD.) (III) DCIT VS. RATAN CORPORATION: (2005) 145 TAXMAN 503 ( GUJ.) (IV) CIT VS. RADHE ASSOCIATES : (2013) 37 TAXMANN.COM 33 6 (GUJ.) 15. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BO TH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. THE FACTS OF THE CA SE ARE THAT A SEARCH AND SEIZURE ACTION WAS CONDUCTED ON THE KUNWARJI GROUP ON 25. 03.2008. THE ASSESSEE- COMPANY IS ONE OF THE GROUP CONCERNS BELONGING TO K UNWARJI GROUP. DURING THE COURSE OF SEARCH, STATEMENT OF SHRI NAYAN THAKKAR, WHO IS DIRECTOR OF THE ASSESSEE- COMPANY, WAS RECORDED IN WHICH HE ADMITTED UNACCOUN TED INCOME OF RS.12 CRORES IN THE CASE OF GROUP CONCERNS. ON 10 TH APRIL 2008, HE FILED A LETTER ADDRESSED TO ASSISTANT DIRECTOR OF INCOME-TAX IN WHICH HE REITER ATED THE UNDISCLOSED INCOME OF RS.12 CRORES AND IN THE BREAK-UP, OFFERED INCOME OF RS.8 CRORES IN THE HANDS OF THE ASSESSEE AND BALANCE RS.4 CRORES IN THE HANDS OF IN DIVIDUALS AND OTHER GROUP ENTITIES. IN THE RETURN OF INCOME, NO UNDISCLOSED I NCOME WAS OFFERED FOR TAXATION AS WAS ADMITTED IN THE STATEMENT DURING THE COURSE OF SEARCH. HOWEVER, AN IT(SS)A NOS. 615 TO 618, 677 TO 680, 813-817 OF 201 0 IT(SS)A 301 & 302/2011 & & CO250 TO 253 OF 2010 CO 313 TO 315, 342 TO 346 OF 2010 KUNVARJI FINANCE PVT LTD & GROUP 27CASES 17 AFFIDAVIT WAS FURNISHED RETRACTING THE STATEMENT GIV EN AT THE TIME OF SEARCH. THE ASSESSING OFFICER DID NOT ACCEPT THE ASSESSEES AFF IDAVIT AND THE SUBMISSIONS MADE DURING THE COURSE OF ASSESSMENT PROCEEDINGS; HOWEVER , SINCE THE TOTAL ADDITION MADE BY HIM WAS MORE THAN UNDISCLOSED INCOME OFFERE D IN THE STATEMENT, HE DID NOT MADE ANY ADDITION IN RESPECT OF INCOME DISCLOSE D AT THE TIME OF SEARCH. THE RELEVANT FINDING OF THE ASSESSING OFFICER READS AS UNDER:- IN VIEW OF THE ABOVE, THE CLAIMS MADE BY THE ASSES SEE IN HIS AFFIDAVIT AND SUBMISSIONS MADE DURING THE COURSE OF ASSESSMENT PR OCEEDINGS ARE NOT ACCEPTABLE AND IT IS HEREBY REJECTED. HOWEVER, SINCE THE TOTAL SUPPRESSION OF PROFITS, WHICH REFLECTS THE IRREGULARITIES IN THE BUSINESS AFFAIRS OF THE COMPANY AND DISCREPANCY IN INCOME, AND WORKED OUT FOR DIFFERENT YEARS (A.Y. 20 05-06 TO 2008-09) IS RS.17.71 CRORES, WHICH IS IN EXCESS OF THE AMOUNT OF RS.12 C RORES VOLUNTARILY DISCLOSED BY THE KUNWARJI GROUP, NO SEPARATE ADDITION IS BEING MAD E ON THIS ISSUE IN THE CASE OF THE ASSESSEE. THE CIT(A) WAS OF THE OPINION THAT NO ADDITION IS REQUIRED TO BE MADE ON ACCOUNT OF DISCLOSURE MADE AT THE TIME OF SEARCH. T HE RELEVANT FINDING OF THE CIT(A) IN THIS REGARD READS AS UNDER:- 3.6 I HAVE GIVEN A CAREFUL CONSIDERATION TO THE FAC TS HAVING BEARING ON THIS ISSUE AND THE SUBMISSIONS MADE ON BEHALF OF THE APPELLANT COMPANY. THERE IS NO DISPUTE THAT DURING THE COURSE OF SEARCH SHRI NAYAN THAKKAR DISCLOSED INCOME OF RS.1.2 CRORE AND THIS DISCLOSURE WAS SUBSEQUENTLY CONFIRME D BY FILING A LETTER WHEREIN THE AMOUNT OF DISCLOSURE WAS ALSO BIFURCATED. HOWEVER, ALL THE RELEVANT FACTS WHICH HAVE BEEN BROUGHT TO MY NOTICE IN THE STATEMENT OF FACTS AND ALSO DURING THE COURSE OF THE HEARING SHOW THAT WHEN THE STATEMENT OF SHRI NAYAN THAKKAR WAS BEING RECORDED DURING THE COURSE OF SEARCH, NO SPEC IFIC INCRIMINATING PAPERS OR DOCUMENTS WERE AVAILABLE AND WERE CONFRONTED TO HIM . AS A MATTER OF FACT, VOLUMINOUS RECORDS IN THE FORM OF LOOSE PAPERS, DOC UMENTS, BOOKS OF ACCOUNT AND DIGITAL RECORD WERE FOUND AND SEIZED, THE CONTENTS OF WHICH WERE NEVER ASCERTAINED AT THE TIME OF SEARCH NOR THE ASSESSEES OF THIS GRO UP WERE SPECIFICALLY INFORMED ABOUT SUCH CONTENTS. IT IS TRUE THAT THE SEARCH CON TINUED NON-STOP FOR A PERIOD OF. 36 HOURS AND THE STATEMENT OF SHRI NAYAN THAKKAR WAS C OMMENCED AT ABOUT 11 O'CLOCK IN THE NIGHT AND CONTINUED UPTO 5.00 AM NEX T DAY. I HAVE ALSO OBSERVED THAT AT THE TIME OF RECORDING THE STATEMENT U/S 132 (4), THE DEPARTMENTAL AUTHORITIES REFERRED TO ANNEXURE-I, WHICH WAS MADE THE BASIS OF DISCLOSURE. HOWEVER, THERE SEEMED TO BE LACK OF CLARITY AND UNCERTAINTY WITH R ESPECT TO 'ANNEXURE-A'. SUBSEQUENTLY, IT WAS INFORMED TO THE ASSESSEE THAT THE SAID ANNEXURE-L SHOULD BE CONSTRUED AS ANNEXURE-A AND THAT THE SAID ANNEXURE- A CONTAINED A LIST OF 65 ITEMS OF BOOKS/ DOCUMENTS/ PAPERS. IT IS ALSO OBSER VED THAT ON THE BASIS OF THIS ANNEXURE-A, STATEMENT U/S 132(4) WAS RECORDED; HOWE VER, THE SAID ANNEXURE WAS IT(SS)A NOS. 615 TO 618, 677 TO 680, 813-817 OF 201 0 IT(SS)A 301 & 302/2011 & & CO250 TO 253 OF 2010 CO 313 TO 315, 342 TO 346 OF 2010 KUNVARJI FINANCE PVT LTD & GROUP 27CASES 18 NOT MADE THE BASIS OF ADDITION. MOREOVER, THE ASSES SING OFFICER HAS NOT BEEN ABLE TO DEAL WITH THE CONTENTS OF AFFIDAVIT IN A CONVINCING MANNER. REGARDING THE DELAY IN RETRACTION, THE FACTS AND CIRCUMSTANCES HAVE BEEN E XPLAINED BEFORE ME IN DETAIL. THE APPELLANT COMPANY WAS NEVER ALLOWED ADEQUATE OPPORT UNITY TO INSPECT AND GO THROUGH THE VOLUMINOUS SEIZED RECORDS AND EVEN THE COPY OF THE STATEMENT RECORDED ON 25/26TH MARCH 2008 WAS GIVEN TO THE APPELLANT CO MPANY ON 20TH MARCH, 2009 AFTER ONE YEAR OF THE SEARCH. MOREOVER, I HAVE ALSO VERIFIED THE CONTENT OF THE LETTER DATED 10-04-2008, ADDRESSED BY SHRI NAYAN THAKKAR T O THE ASST. DIRECTOR OF INCOME-TAX. IN THE SAID LETTER, HE HAS CLEARLY STAT ED THAT HE WAS ALLOWED INSPECTION OF SEIZED MATERIAL ONLY FOR ABOUT 3 HOURS AND THAT F OR PROPER VERIFICATION OF THE SAME, THE COPIES THERE OF MAY BE PROVIDED. HE HAS A LSO STATED THAT THE DISCLOSURE WAS MADE ON ACCOUNT OF CERTAIN IRREGULARITIES, DEFECT A ND MISTAKES IN RECORD KEEPING AND BUSINESS AFFAIRS. HOWEVER, THERE IS NOTHING ON RECO RD TO PROVE THAT THERE WAS ANY SUCH IRREGULARITY, DEFECT OR MISTAKE EITHER IN THE RECORD KEEPING OR SEIZED MATERIAL. THE ENTIRE POSITION WAS ALSO EXPLAINED BEFORE THE A SSESSING OFFICER BY FILING DETAILED LETTER DATED 2ND SEPTEMBER, 2009. DURING THE COURSE OF ENTIRE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS BEEN UNABLE TO REFER TO ANY SEIZED MATERIAL, ON THE BASIS OF WHICH UNACCOUNTED INCOME COULD BE P ROVED OR ESTABLISHED. IT PROVES THAT WHATEVER ADDITIONS HAVE BEEN MADE BY THE ASSES SING OFFICER ARE NOT BASED UPON ANY SEIZED DOCUMENTS AND THE SAME HAVE BEEN MA DE ON THE BASIS OF VARIOUS DATA COLLECTED BY THE DEPARTMENT FROM COMMODITY EXC HANGES WHICH REFLECTED CLIENT CODE MODIFICATIONS. 3.7 FROM THE ABOVE REFERRED .LETTER DATED 2ND SEPTE MBER, 2009 ADDRESSED TO THE ASSESSING OFFICER AND THE STATEMENT RECORDED U/S. 1 32(4), WHICH I HAVE PERUSED, IT BECOMES CLEAR THAT THE DISCLOSURE WAS OBTAINED BY T HE AUTHORIZED OFFICER ON ACCOUNT OF THE FOLLOWING FOUR COUNTS : (1) ANNEXURE-1 (2) SEIZED MATERIAL 'A-6, KACHHA BOOKS SERIATED FRO M A-18 TO A-29'. (3) OTHER IRREGULARITIES / DISCREPANCIES (4) CLIENT CODE MODIFICATION. IT IS AN ADMITTED FACT THAT NO ADDITION HAS BEEN MA DE IN THE ASSESSMENT ORDER ON ACCOUNT OF THE FIRST THREE ASPECTS. IT IS ALSO AN A DMITTED FACT THAT THE CODE MODIFICATION DETAILS WERE NOT AVAILABLE AND NOT CON FRONTED AT THE TIME OF SEARCH. CODE MODIFICATION DETAILS WERE OBTAINED BY THE DEPA RTMENT FROM THE COMMODITY EXCHANGES IN POST SEARCH INQUIRIES AND NO SUCH DETA ILS WERE CONFRONTED AT THE TIME OF SEARCH OPERATIONS AND ACCORDINGLY, THE BASIS OF THE DISCLOSURE DID NOT EXIST. SO FAR AS THE FIRST THREE ASPECTS ARE CONCERNED, EVEN THE ASSESSING OFFICER HAS ADMITTED THAT THERE IS NO SUCH QUANTUM OF DISCLOSURE ON THE BASIS OF THE SEIZED MATERIAL, ALLEGED INCRIMINATING DOCUMENTS OR ANNEXURE-1. SO FAR AS CODE MODIFICATION IS CONCERNED, IT HAS BE EN DEALT WITH BY ME ON MERITS WHILE DEALING WITH THE GROUNDS RELATING TO THE ADDI TION. ACCORDINGLY, THE STATEMENT RECORDED U/S. 132(4) HAD NO BASIS OF ARRIVING AT TH E DISCLOSURE OF RS.12 CRORES WHICH DID NOT CONTAIN ANY YEAR OR WHICH DID NOT EVEN REFE R TO ANY ASSETS AND IT IS A KNOWN IT(SS)A NOS. 615 TO 618, 677 TO 680, 813-817 OF 201 0 IT(SS)A 301 & 302/2011 & & CO250 TO 253 OF 2010 CO 313 TO 315, 342 TO 346 OF 2010 KUNVARJI FINANCE PVT LTD & GROUP 27CASES 19 FACT THAT ANY UNDISCLOSED INCOME FOUND DURING THE C OURSE OF SEARCH SHOULD ALSO SIMULTANEOUSLY BE REFLECTED IN SOME VALUABLES, ASSE TS OR EXPENDITURE. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS NOT MAD E ANY SPECIFIC ADDITION ON ACCOUNT OF STATEMENT RECORDED U/S.132(4) OF THE I.T . ACT. IN SPITE OF EXHAUSTIVE INQUIRIES AT THE TIME OF SEARCH AND DURING THE POST SEARCH INQUIRES AND ALSO AT THE TIME OF ASSESSMENT PROCEEDINGS NO UNDISCLOSED ASSET S OR EXPENDITURE WERE EVER FOUND OUT OR REFERRED TO WHICH CAN CORRESPOND TO TH E ALLEGED UNDISCLOSED INCOME AND ACCORDINGLY, THE VIEW OF THE APPELLANT THAT THE DISCLOSURE AT THE TIME OF SEARCH HAD NO BASIS HAS TO BE ACCEPTED. 16. THE REVENUE AGGRIEVED WITH THE ORDER OF THE CIT (A) IS IN APPEAL BEFORE US. 17. BEFORE COMING TO THE FACTUAL ARGUMENTS OF BOTH THE SIDES, IT WOULD BE MORE APPROPRIATE TO FIRST DISCUSS THE JUDICIAL PRON OUNCEMENTS RELIED UPON BY THE LD. CIT-DR AS WELL AS LD. COUNSEL FOR THE AS SESSEE. THE FIRST DECISION RELIED UPON BY THE LD. CIT-DR WAS A BOMBAY HIGH COU RT DECISION IN THE CASE OF RAMESCHANDRA & CO. VS. CIT, (1988) 168 ITR 375 (BOM.). IN THE SAID CASE, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER CAME ACROSS THE DISCREPANCY IN SARKI ACCOUNT. HE ASKED THE ASSESSEE FOR EXPLANATION. IN RESPONSE, THE ASSESSEE FILED A LETT ER SUBMITTING THAT THE DISCREPANCY COULD NOT BE EXPLAINED AND VALUE THEREO F COULD BE ADDED TO THE FIRMS INCOME. THEREAFTER, THE ASSESSING OFFICER MADE THE ADDITION OF RS.18,052/-. THE ASSESSEE FILED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. THE AAC ADMITTED THE APPEAL AND DELETED THE ADDITIO N. ON APPEAL BY THE REVENUE, THE TRIBUNAL HELD THAT AAC WAS WRONG IN EN TERTAINING THE APPEAL. ON A REFERENCE, THE HONBLE HIGH COURT HAS HELD THAT THE APPELLATE ASSISTANT COMMISSIONER HAD NO JURISDICTION TO CONSIDER THE GR OUND OF APPEAL AGAINST THE ADDITION OF RS.18,052 RELATING TO ALLEGED SUPPRESSE D SALES OF SARKI. 18. IN THE CASE OF DR. S.C. GUPTA VS. CIT, (2001) 248 ITR 782, THE HONBLE ALLAHABAD HIGH COURT HAS HELD AS UNDER:- IT(SS)A NOS. 615 TO 618, 677 TO 680, 813-817 OF 201 0 IT(SS)A 301 & 302/2011 & & CO250 TO 253 OF 2010 CO 313 TO 315, 342 TO 346 OF 2010 KUNVARJI FINANCE PVT LTD & GROUP 27CASES 20 THAT A STATEMENT MADE VOLUNTARILY BY THE ASSESSEE COULD FORM THE BASIS OF ASSESSMENT. THE MERE FACT THAT THE ASSESSEE RETRAC TED THE STATEMENT COULD NOT MAKE THE STATEMENT UNACCEPTABLE. THE BURDEN LAY ON THE ASSESSEE TO ESTABLISH THAT THE ADMISSION MADE IN THE STATEMENT AT THE TIM E OF SURVEY WAS WRONG AND IN FACT THERE WAS NO ADDITIONAL INCOME. THUS BU RDEN WAS NOT EVEN ATTEMPTED TO BE DISCHARGED. THE ORDER OF THE TRIBUN AL WAS BASED ON FACTS AND NO QUESTION OF LAW AROSE FROM IT. 19. IN THE CASE OF GARIBDAS CHANDRIKA PRASAD VS. CI T, 230 ITR 771 (MP), HEIR LORDSHIPS OF MADHYA PRADESH HIGH COURT HAS HEL D AS UNDER:- THAT AS PER THE FINDINGS RECORDED BY THE THREE AUT HORITIES, I.E. THE INCOME-TAX OFFICER, THE APPELLATE ASSISTANT COMMISSIONER AND T HE TRIBUNAL, THE ASSESSEE FAILED TO SHOW THAT U WAS AN INDIVIDUAL PERSON, WHO WAS ALSO DOING THE MONEY LENDING BUSINESS AND THEREAFTER THE AFFIDAVIT WAS PRODUCED TO JUSTIFY THE UNDISCLOSED INCOME OF THE ASSESSEE. ALL THE AUT HORITIES BELOW HAD FOUND THAT THERE WAS A CONTRADICTION BETWEEN THE STATEMEN T RECORDED ON OATH OF U AND THE SUBSEQUENT AFFIDAVIT FILED BY HIM. A PERUSA L OF THE RECORD SHOWED THAT THE AFFIDAVIT OF U FILED BY THE ASSESSEE WAS NOTHIN G BUT AN AFTERTHOUGHT AND JUST TO COVER UP THE UNDISCLOSED INCOME. THE AUTHOR ITIES BELOW AFTER CONSIDERING THE AFFIDAVIT AND STATEMENT FOUND THAT THE AFFIDAVIT DID NOT INSPIRE ANY CONFIDENCE. IN THIS VIEW OF THE MATTER, IT WAS NOT NECESSARY TO EXAMINE U ON HIS AFFIDAVIT. THE STATEMENT GIVEN BY U WAS ON OATH AFTER THE RAID WAS ON RECORD AND THEREAFTER IT APPEARED THAT U WANTED TO CHANGE HIS STAND IN ORDER TO OBLIGE THE ASSESSEE. THE TRIBUNAL WAS RIGHT IN ARRIVING AT THE CONCLUSION THAT THE MONEY-LENDING BUSINESS CARR IED ON BY U BELONGED TO THE ASSESSEE-FIRM. 20. IN THE CASE OF KAILASHBEN MANHARLAL CHOKSHI VS. CIT, (2010) 328 ITR 411 (GUJ), THE HONBLE JURISDICTIONAL HIGH COURT HE LD AS UNDER:- THAT THE STATEMENT OF THE ASSESSEE WAS RECORDED UN DER SECTION 132(4) OF THE ACT AT MIDNIGHT. IN NORMAL CIRCUMSTANCES, IT WAS TO O MUCH TO GIVE ANY CREDIT TO THE STATEMENT RECORDED AT SUCH ODD HOURS. THE PERSON WOULD NOT BE IN A POSITION TO MAKE ANY CORRECT OR CONSCIOUS DISC LOSURE IN A STATEMENT IF SUCH STATEMENT WAS RECORDED AT SUCH ODD HOURS. THE ASSESSEE HAD GIVEN PROPER EXPLANATION FOR ALL THE ITEMS UNDER WHICH DI SCLOSURE WAS SOUGHT TO BE OBTAINED FROM THE ASSESSEE. IT(SS)A NOS. 615 TO 618, 677 TO 680, 813-817 OF 201 0 IT(SS)A 301 & 302/2011 & & CO250 TO 253 OF 2010 CO 313 TO 315, 342 TO 346 OF 2010 KUNVARJI FINANCE PVT LTD & GROUP 27CASES 21 21. IN THE CASE OF CIT VS. K. BHUVANENDRAN AND OTHE RS, (2008) 303 ITR 235 (MAD.), THE HONBLE MADRAS HIGH COURT HAS HELD AS UNDER:- DISMISSING THE APPEAL, THAT THE TRIBUNAL HAD FOUND THAT THERE WAS NON EVIDENCE OR MATERIAL FOUND DURING THE COURSE OF SEA RCH OPERATIONS. THE STATEMENT RECORDED FROM THE ASSESSEE WAS SUBSEQUENT LY RETRACTED AND REBUTTED. FURTHERMORE, THE STATEMENT WAS NOT RELATA BLE TO ANY SEIZED MATERIAL. THEREFORE, EVEN THE STATEMENT COULD NOT B E THE BASIS FOR MAKING ANY ADDITION. WHEN THE SALE DEED DISCLOSES A SALE CONSI DERATION, IT SI FOR THE REVENUE TO SHOW THAT WHAT WAS DISCLOSED IN THE SALE DEED IS NOT THE CORRECT SALE CONSIDERATION. IN THIS CASE THE REVENUE COULD NOT BRING ON RECORD ANY MATERIAL TO SHOW THAT THE ASSESSEE HAD PAID ON-MONE Y OF RS.23,00,000. THE REASONS GIVEN BY THE TRIBUNAL WERE BASED ON VALID M ATERIAL. THE DELETION OF ADDITION WAS JUSTIFIED. 22. IN THE CASE OF DCIT VS. RATAN CORPORATION, (200 5) 145 TAXMAN 503 (GUJ.), THE HONBLE JURISDICTIONAL HIGH COURT H ELD AS UNDER:- AS NOTICED HEREINBEFORE, THE TRIBUNAL HAS OBSERVED THAT, IN LIGHT OF THE RETRACTION BY SHRI PRAVINBHAI RUPAWALA FROM THE STA TEMENT, IT WAS THE DUTY OF THE ASSESSING OFFICER TO MAKE FURTHER INQUIRY IN RESPECT OF SHOP OWNERS. IN THE ASSESSMENT ORDER, IN PARAGRAPH NO.6(1), WHILE R EFERRING TO THE EXPLANATION TENDERED BY THE ASSESSEE, THE ASSESSING OFFICER HAS REFERRED TO ONE OF THE LOOSE PAPERS SEIZED DURING THE SEARCH AN D SEIZURE OPERATION UNDER SECTION 132 OF THE ACT AND RECORDED THAT THE EXPLAN ATION WAS IN CONTRADICTION TO THE NOTINGS IN THE SEIZED DOCUMENT THAT THESE RE LATE TO RATAN MARKET PROJECT CONTAINING NAMES OF SHOP HOLDERS, AMOUNT RE CEIVED FROM THEM, CONSTRUCTION ACCOUNT WITH SHOW-WISE DETAILS. IT IS, THUS, APPARENT THAT WHEN THE TRIBUNAL REFERS TO THE DUTY OF THE ASSESSING OF FICER TO MAKE FURTHER INQUIRIES IN RESPECT OF THE SHOP OWNERS, IT IS IN T HIS CONTEXT. THE TRIBUNAL HAS ALSO, AS NOTICED HEREINBEFORE, FOUND THAT ALL THE S EIZED PAPERS DO NOT RELATE TO RATAN MARKET PROJECT. IN THESE CIRCUMSTANCES, IT IS NOT POSSIBLE TO ACCEPT THE CONTENTION RAISED ON BEHALF OF THE APPELLANT THAT T HE TRIBUNAL HAD OMITTED TO CONSIDER OTHER MATERIAL. 23. IN THE CASE OF CIT VS. RADHE ASSOCIATES, (2013 ) 37 TAXMANN.COM 336 (GUJ.), THE HONBLE JURISDICTIONAL HIGH COURT HELD AS UNDER:- 3. WE HAVE HEARD MS. PAURAMI SHETH, LEARNED COUNS EL FOR THE REVENUE AND CONSIDERED THE IMPUGNED JUDGMENT AND ORDER PASSED B Y THE LEARNED ITAT AS WELL AS THE ORDER OF ASSESSMENT PASSED BY THE AO. IT(SS)A NOS. 615 TO 618, 677 TO 680, 813-817 OF 201 0 IT(SS)A 301 & 302/2011 & & CO250 TO 253 OF 2010 CO 313 TO 315, 342 TO 346 OF 2010 KUNVARJI FINANCE PVT LTD & GROUP 27CASES 22 AT THE OUTSET IT IS REQUIRED TO BE NOTED THAT THOUG H IN THE ORDER, THE AO HAD MENTIONED THAT THERE IS CLINCHING DOCUMENTARY EVIDE NCE WITH RESPECT TO RECEIPT OF ON-MONEY, THE AO HAS NOT MENTIONED AS TO WHAT WERE THOSE CLINCHING DOCUMENTARY EVIDENCES. BY MAKING THE AFOR ESAID ADDITION, NOWHERE IT IS MENTIONED BY THE AO THAT WHAT WAS THE NATURE OF CLINCHING DOCUMENTARY EVIDENCE ON THE BASIS OF WHICH THE AO H AS COME TO THE CONCLUSION THAT THE ASSESSEE HAS RECEIVED RS.1,45,3 7,500/- AS ON-MONEY WITH RESPECT TO THE OFFICE-CUM-SHOP AS WELL AS THE SHOPS IN GANESH PLAZA. IT APPEARS THAT WHILE PASSING THE ORDER OF ASSESSMENT, THE AO HAS SOLELY RELIED UPON THE STATEMENT OF THE ASSESSEE WHICH HAS BEEN S UBSEQUENTLY RETRACTED AND THE QUESTION ANSWERS RECORDED WHILE RECORDING THE S TATEMENT OF THE WORKING PARTNER ON 01.05.1996. 3.1 THE ISSUE INVOLVED IN THE PRESENT APPEAL IS SQ UARELY COVERED BY THE DECISION OF THE MADRAS HIGH COURT IN THE CASE OF K. BHUVANENDRAN (SUPRA); THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF BALAJI WIRE (P.) LTD. (SUPRA) AS WELL AS THIS COURT IN THE CASE OF CIT V. MAULIKKUMAR K. SHAH [2008] 307 ITR 137. 4. CONSIDERING THE AFORESAID FACTS AND CIRCUMSTANCE S AND THE REASONING GIVEN BY THE ITAT AND THE AFORESAID THREE DECISIONS, WE S EE NO REASON TO INTERFERE WITH THE IMPUGNED JUDGMENT AND ORDER PASSED BY THE LEARNED ITAT IN DELETING THE ADDITION OF RS.1,45,37,500/- AS UNACCO UNTED INCOME AS ON- MONEY ALLEGED TO HAVE BEEN RECEIVED BY THE ASSESSE E. THE DECISION OF THE ITAT IS ON APPRECIATION OF MATERIAL ON RECORD AND O N FACTS. NO SUBSTANTIAL QUESTION OF LAW ARISE IN THE PRESENT APPEAL. HENCE, PRESENT TAX APPEAL DESERVES TO BE DISMISSED AND IS, ACCORDINGLY, DISMI SSED. 24. NOW WE REVERT BACK TO THE FACTS OF THE ASSESSEE S CASE UNDER THE APPEAL BEFORE US SO AS TO REACH TO THE CONCLUSION T HAT THE RATIO OF WHICH OF THE ABOVE DECISIONS WOULD BE APPLICABLE TO THE FACT S OF THE ASSESSEES CASE. XEROX COPY OF THE STATEMENT OF SHRI NAYAN THAKKAR I S PLACED AT PAGE NO.296 ONWARDS OF THE ASSESSEES PAPER-BOOK. FROM THE FIRS T PAGE OF THE SAID STATEMENT, IT IS CLEAR THAT THE STATEMENT BEGAN ON 25 TH MARCH 2008 AT 11.30 PM. THUS, RECORDING OF THE STATEMENT WAS STARTED AT ALMOST MIDNIGHT OF 25 TH MARCH 2008. FROM THE LAST PAGE OF THE STATEMENT, IT IS EVIDENT THAT IT WAS CONCLUDED ON 26 TH MARCH 2008. NO TIME WAS MENTIONED ON THE CONCLUSI ON OF IT(SS)A NOS. 615 TO 618, 677 TO 680, 813-817 OF 201 0 IT(SS)A 301 & 302/2011 & & CO250 TO 253 OF 2010 CO 313 TO 315, 342 TO 346 OF 2010 KUNVARJI FINANCE PVT LTD & GROUP 27CASES 23 THE STATEMENT. HOWEVER, THE STATEMENT IS RUNNING IN TO 10 PAGES, THEREFORE, IT CAN SAFELY BE INFERRED THAT IT WAS CONCLUDED ON THE EARLY HOURS OF 26 TH MARCH 2008. IN THE CASE OF KAILASHBEN MANHARLAL CHOKSHI ( SUPRA), THE HONBLE JURISDICTIONAL HIGH COURT HELD THAT IF A STATEMENT IS RECORDED AT MIDNIGHT, MUCH CREDENCE CANNOT BE GIVEN TO SUCH STATEMENT BEC AUSE THE PERSON WOULD NOT BE IN A POSITION TO MAKE ANY CORRECT OR CONSCIO US DISCLOSURE IN A STATEMENT RECORDED AT ODD HOURS. THE RATIO OF THE A BOVE DECISION OF THE JURISDICTIONAL HIGH COURT WOULD BE SQUARELY APPLICA BLE TO THE FACTS OF THE ASSESSEES CASE BECAUSE THE STATEMENT WAS RECORDED AT THE MIDNIGHT OF 25 TH AND 26 TH MARCH 2008. 25. THE REVENUE HAS HEAVILY RELIED UPON THE QUESTIO N NO.21 AND ANSWER THERETO IN THE STATEMENT OF SHRI NAYAN THAKKAR, WHI CH READS AS UNDER:- 'Q.21 I AM SHOWING YOU VARIOUS PAPERS AND DOCUMENTS WHICH HAVE BEEN SEIZED FROM YOUR OFFICE PREMISE AS PER ANNEXURE-1, IN WHICH VARIOUS DEFECTS AND DISCREPANCIES ARE OBSERVED. YOU ARE REQUESTED T O EXPLAIN THE SAME. ALSO, IT IS SEEN THAT CLIENT CODE MODIFICATIONS HAVE BEEN UNDERTAKEN BY YOUR COMPANY. YOU ARE REQUESTED TO EXPLAIN THE SAME. I A M PARTICULARLY SHOWING A-6, KACHHA BOOKS SERIALLED FROM A-18 TO A-29. YOU ARE REQUESTED TO GO THROUGH SEIZED DOCUMENTS /PAPERS AND EXPLAIN THE SA ME? ANS. I HAVE CAREFULLY GONE THROUGH THE SEIZED DO CUMENTS /PAPERS SHOWN TO BE BY YOU AND UNDERSTOOD THE CONTENTS. THESE ARE RE LATED TO MY TRADING AS WELL AS CLIENTS, WHOSE COMPLETE DETAILS ARE MAINTAI NED IN MY OFFICE SITUATED AT 310, SHYAMAK COMPLEX, AMBAWADI, AHMEDABAD & KUNWARJ I HOUSE, AMBAWADI, AHMEDABAD. I HAVE ALSO CAREFULLY GONE THR OUGH VARIOUS DISCREPANCIES DEFECTS POINTED OUT BY YOU. LOOKING I NTO THE VARIOUS DISCREPANCIES AS WELL AS UNRECORDED TRANSACTIONS IN MY REGULAR BOOKS AND INCOME, I ADMIT UNACCOUNTED INCOME OF RS.12 CRORES (RUPEES TWELVE CRORES) ON WHICH, TAX WORKS OUT RS.4 CRORES (RUPEES FOUR CR ORES) APPROXIMATELY, WHICH I AM READY TO PAY. THIS ADMITTED INCOME IS IN ADDITION TO THE REGULAR INCOME EARNED DURING THE LAST SIX YEARS, INCLUDING THE CURRENT YEAR. I FURTHER REQUEST YOU TO GRANT ME SOMETIME TO PAY T HE AFORESAID TAX. I FURTHER PROMISE YOU THAT THE AFORESAID TAX WILL BE PAID WIT HOUT FAIL. THIS DISCLOSURE AND ADDITIONAL INCOME OF RS.12 CRORES IS MADE AFTER CONSULTING MR. KUNAL S. SHAH, MRS. JAYANABEN N. THAKKAR AND SMT. RUJUTA D. SHETH, WHO ARE IT(SS)A NOS. 615 TO 618, 677 TO 680, 813-817 OF 201 0 IT(SS)A 301 & 302/2011 & & CO250 TO 253 OF 2010 CO 313 TO 315, 342 TO 346 OF 2010 KUNVARJI FINANCE PVT LTD & GROUP 27CASES 24 DIRECTORS OF KUNVARJI COMMODITIES BROKERS PVT. LTD. THE ADMITTED UNACCOUNTED INCOME PERTAINS TO KUNVARJI COMMODITIES BROKERS PVT. LTD., KUNVARJI FINSTOCK PVT. LTD., KUNVARJI FINANCE PVT. LTD., KUNVARJI COMMODITIES PVT. LTD.' 26. FROM THE ABOVE, IT IS EVIDENT THAT THE AUTHORIZ ED OFFICER WHO WAS RECORDING THE STATEMENT INFORMED SHRI NAYAN THAKKAR THAT VARIOUS PAPERS AND DOCUMENTS HAVE BEEN SEIZED FROM THEIR OFFICE WH ICH ARE LISTED IN ANNEXURE-1. FROM SUCH PAPERS AND DOCUMENTS, VARIOU S DISCREPANCIES AND DEFECTS HAVE BEEN OBSERVED. HE HAS ALSO STATED ABOU T THE CLIENT MODE MODIFICATION. IN RESPONSE TO THESE INPUTS FROM THE AUTHORIZED OFFICER SHRI NAYAN THAKKAR ADMITTED UNACCOUNTED INCOME OF RS.12 CRORES. THE STATEMENT HAS TO BE READ AS A WHOLE; THE UNACCOUNTE D INCOME WAS OFFERED IN RESPONSE TO THE INFORMATION GIVEN BY THE AUTHORIZED OFFICER THAT VARIOUS DEFECTS AND DISCREPANCIES WERE OBSERVED IN THE SEIZ ED DOCUMENTS. NOW THE QUESTION REMAINS WHETHER THERE WERE ANY DEFECT AND DISCREPANCY IN THE SEIZED DOCUMENTS AS PER ANNEXURE-1. IT WAS STATED BY THE LD. COUNSEL THAT THERE WAS NO ANNEXURE-1 AT ALL, AND IN RESPONSE TO THE ASSESSEES LETTER DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OF FICER ADMITTED THESE FACTS VIDE LETTER DATED 27.08.2009 BY THE DEPUTY CO MMISSIONER OF INCOME- TAX WHICH READS AS UNDER:- OFFICE OF THE DY. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-1(1) , 3FD FLOOR, AAYAKAR BHAVAN, ASHRAM ROAD, AHMEDABAD - PHONE: [phone] NO.DCIT/CC1(1)/AHD/KUNVARJI/2009-10 DATE: 27.08.2009 TO: THE PRINCIPAL OFFICER KUNVARJI FINANCE PVL. LTD. 310, SHYAMAK COMPLEX, NR. KAMDHENU COMPLEX, AMBAWADI, AHMEDABAD IT(SS)A NOS. 615 TO 618, 677 TO 680, 813-817 OF 201 0 IT(SS)A 301 & 302/2011 & & CO250 TO 253 OF 2010 CO 313 TO 315, 342 TO 346 OF 2010 KUNVARJI FINANCE PVT LTD & GROUP 27CASES 25 SIR, SUB: CLARIFICATION ON CERTAIN CLAIMS MADE BY YOU IN THE AFFIDAVIT FILED ALONGWITH RETURN OF INCOME OF A.Y.2002-03 TO 2008-0 9 -REG. REF: 1. AFFIDAVIT ALONGWITH RETURNS FILED BY YOU FO R A.Y.2002-03 TO 2008-09 2. YOUR LETTER DATED 27.03.2009 FILED ON 30.03.2009 YOU HAVE CLAIMED IN THE AFFIDAVIT FILED WITH THE RE TURN OF INCOME THAT YOU HAVE NOT BEEN PROVIDED WITH THE COPIES OF ANNEX URE-1, WHICH HAS BEEN MENTIONED IN QUESTION NO.21 OF STATEMENT OF SHRI NA YAN THAKKAR RECORDED IN THE COURSE OF HIS STATEMENT AT 310, SHYAMAK COMP LEX, AHMEDABAD ON 25 & 26.03.2008. 2. FROM THE PLAIN READING OF THE STATEMENT, IT IS CLEAR THAT THE AUTHORISED OFFICER IS REFERRING TO THE DOCUMENTS / PAPER / ELE CTRONIC MEDIA SEIZED AS PER THE LIST WHICH IS AN ANNEXURE TO THE PANCHNAMA. THE ANNEXURE-1 REFERRED ABOVE PERTAINS TO ANNEXURE A, CONTAINING PAGES NUMB ER 1 TO 3 AND CONTAINING LIST OF 65 ITEMS OF BOOKS / DOCUMENTS / PAPER ELECTRONIC MEDIA FOUND AND SEIZED FROM OFFICE PREMISES. WHILE RECORD ING THE STATEMENT, THE ANNEXURE-A IS INADVERTENTLY REFERRED AS ANNEXURE-1. IF ANY DOCUMENT / PAPERS IS MADE PART OF STATEMENT THEN THE QUESTION OF SEIZING THE SAME DOES NOT ARISE AT ALL. IT BECOMES PART OF THE STATEMENT. IN THE STATEMENT IT IS SPECIFICALLY REFERRED AS SEIZED ANNEXURE. THE QUEST ION POSED TO THE ASSESSEE WAS BASED ON THE SEIZED DOCUMENTS / BOOKS AS PER AN NEXURE-A. IF IT WERE TO BE PART OF THE STATEMENT THEN THE QUESTION OF SAME BEING REFERRED AS SEIZED ANNEXURE-1 DOES NOT ARISE AT ALL. HENCE, IT IS CLAR IFIED THAT THE SEIZED ANNEXURE-1 IS NOTHING BUT SEIZED ANNEXURE-A. 3. FURTHER, THE SEIZED DOCUMENTS HAD BEEN PROVIDED TO YOU ON 06.08.2008 AS PER EVIDENCE FORWARDED BY INVESTIGATI ON WING. THUS CLAIMS MADE BY YOU IN YOUR AFFIDAVIT ARE WITHOUT ANY BASIS AND ARE FACTUALLY INCORRECT. THIS IS FOR YOUR INFORMATION AND RECORD. YOURS FAITHFULLY, SD/- (GAURAV BATHAM) DY. COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE 1(1), AHMEDABAD 27. THUS, THERE WAS NO ANNEXURE-1 AS REFERRED TO IN QUESTION NO.21. STILL THE QUESTION REMAINS WHETHER THERE WERE ANY DEFECTS OR DISCREPANCIES IN THE SEIZED PAPERS AND DOCUMENTS AS MENTIONED BY THE OFF ICER RECORDING THE STATEMENT VIDE QUESTION NO.21. IN THE ASSESSMENT O RDER, THE ASSESSING IT(SS)A NOS. 615 TO 618, 677 TO 680, 813-817 OF 201 0 IT(SS)A 301 & 302/2011 & & CO250 TO 253 OF 2010 CO 313 TO 315, 342 TO 346 OF 2010 KUNVARJI FINANCE PVT LTD & GROUP 27CASES 26 OFFICER HAS NOT POINTED OUT ANY DEFECT OR DISCREPAN CY IN ANY OF THE SEIZED DOCUMENTS FROM THE BUSINESS PREMISES OF THE ASSESSE E. THE ADDITION MADE BY THE ASSESSING OFFICER IS ON ACCOUNT OF CLIENT CO DE MODIFICATION WHICH HAS ALSO BEEN COMPUTED ON THE BASIS OF INFORMATION COLL ECTED FROM THE COMMODITY EXCHANGE IN POST SEARCH ENQUIRY. THE CIT (A) HAS FOUND THE ADDITION ON ACCOUNT OF CLIENT CODE MODIFICATION TO BE UNTENABLE AND WHILE DISPOSING OF GROUND NO.1 OF THE REVENUS APPEAL, WE HAVE CONCURRED WITH THE FINDINGS OF THE CIT(A). NO DEFECTS OR DISCREPA NCIES IN ANY OF THE SEIZED DOCUMENTS HAVE BEEN POINTED OUT BY THE ASSESSING OF FICER IN THE ASSESSMENT ORDER OR BY THE LD. DR AT THE TIME OF HE ARING BEFORE US. DURING THE COURSE OF SEARCH ALSO THE OFFICER RECORDING THE STATEMENT OF SHRI NAYAN THAKKAR HAS NOT SPECIFIED ANY DISCREPANCY OR DEFECT IN ANY OF THE SEIZED DOCUMENTS BUT MADE A GENERAL STATEMENT THAT THERE W ERE DEFECTS AND DISCREPANCIES IN THE VARIOUS DOCUMENTS SEIZED FROM THE ASSESSEES PREMISES. SUCH ASSERTION BY THE AUTHORIZE OFFICER IS FOUND TO BE FACTUALLY INCORRECT. IN THE AFFIDAVIT OF SHRI NAYAN THAKKAR FURNISHED BEFOR E THE ASSESSING OFFICER THESE FACTS HAVE BEEN CLARIFIED. HE STATED THAT AFT ER GETTING THE PHOTOCOPY OF THE SEIZED DOCUMENTS AND THEIR VERIFICATION WITH RE FERENCE TO THE BOOKS OF ACCOUNTS, SINCE NO DISCREPANCY WAS NOTICED, NO UNDI SCLOSED INCOME WAS OFFERED IN THE RETURN OF INCOME. IF THERE WAS ANY DISCREPANCY OR DEFECT IN THE ASSESSEES BOOKS OF ACCOUNTS OR THE SEIZED DOCU MENTS INDICATING ANY UNDISCLOSED INCOME, THE ASSESSING OFFICER OUGHT TO HAVE MENTIONED THE SAME IN THE ASSESSMENT ORDER. IN THE CASE OF KAILAS HBEN MANHARLAL CHOKSHI (SUPRA), THE HONBLE JURISDICTIONAL HIGH COURT HAS NOTICED THAT WHEN DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE H AS GIVEN THE PROPER EXPLANATION FOR INVESTMENT IN VARIOUS PROPERTIES, T HE ADDITION CANNOT BE MADE ON THE BASIS OF STATEMENT MADE AT ODD HOURS. S IMILARLY, IN THE CASE OF RATAN CORPORATION (SUPRA), THE HONBLE JURISDICTION AL HIGH COURT REITERATED IT(SS)A NOS. 615 TO 618, 677 TO 680, 813-817 OF 201 0 IT(SS)A 301 & 302/2011 & & CO250 TO 253 OF 2010 CO 313 TO 315, 342 TO 346 OF 2010 KUNVARJI FINANCE PVT LTD & GROUP 27CASES 27 THAT WHEN THE STATEMENT MADE DURING THE COURSE OF S EARCH HAS BEEN RETRACTED, THEN IT IS DUTY OF THE ASSESSING OFFICER TO MAKE FURTHER INQUIRIES. SIMILAR VIEW IS EXPRESSED BY THEIR LORDSHIPS OF HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF RADHE ASSOCIATES (SUPRA), WHER EIN THE ASSESSING OFFICER HAS MADE THE ADDITION BY MENTIONING THAT THERE WERE CLINCHING DOCUMENTARY EVIDENCES WITH RESPECT TO RECEIPT OF ON -MONEY. HOWEVER, THESE CLINCHING DOCUMENTARY EVIDENCES WERE NOT SPEC IFIED. IN THE CASE UNDER APPEAL BEFORE US ALSO, WE FIND THAT THE OFFICER REC ORDING THE STATEMENT OF SHRI NAYAN THAKKAR HAS MENTIONED THAT VARIOUS DEFEC TS AND DISCREPANCIES HAVE BEEN OBSERVED FROM THE PAPERS AND DOCUMENTS SE IZED FROM THE ASSESSEES PREMISES. HOWEVER, ANY DEFECTS OR DISCRE PANCIES WERE NOT SPECIFIED. IN VIEW OF THE ABOVE, WE ARE OF THE OPI NION THAT ON THE FACTS OF THE ASSESSEES CASE THE DECISIONS OF THE HONBLE JURISD ICTIONAL HIGH COURT IN THE CASES OF KAILASHBEN MANHARLAL CHOKSHI, RATAN CORPOR ATION AND RADHE ASSOCIATES WOULD BE SQUARELY APPLICABLE. THE FACTS IN THE OTHER CASES RELIED UPON BY THE LD. DR ARE ALTOGETHER DIFFERENT. MOREOV ER, WHEN THERE IS A DECISION OF HONBLE JURISDICTIONAL HIGH COURT, IT W OULD BE BINDING UPON THE ITAT FUNCTIONING WITHIN THE JURISDICTION OF GUJARAT HIGH COURT. IN VIEW OF ABOVE, WE, RESPECTFULLY FOLLOWING THE DECISIONS OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASES OF KAILASHBEN MANHARLAL CHO KSHI (SUPRA), RATAN CORPORATION (SUPRA) AND RADHE ASSOCIATES (SUPRA), U PHOLD THE ORDER OF THE CIT(A) AND REJECT GROUND NO.2 OF THE REVENUES APPE AL. 28. GROUND NOS. 4 & 5 OF THE REVENUES APPEAL ARE O F GENERAL NATURE AND NEED NO SEPARATE ADJUDICATION. IT(SS)A NOS. 616 TO 618/AHD/2010 : AY 2006-07, 2007 -08 & 2008-09 (BY REVENUE) 29. IN THE APPEALS BY THE REVENUE FOR ASSESSMENT YE ARS 2006-07, 2007-08 AND 2008-09 VIDE IT(SS)A NOS. 616 TO 618/AHD/2010, IDENTICAL GROUNDS ARE IT(SS)A NOS. 615 TO 618, 677 TO 680, 813-817 OF 201 0 IT(SS)A 301 & 302/2011 & & CO250 TO 253 OF 2010 CO 313 TO 315, 342 TO 346 OF 2010 KUNVARJI FINANCE PVT LTD & GROUP 27CASES 28 RAISED. THEREFORE, FOR THE DETAILED DISCUSSION IN I T(SS)A NO.615/AHD/2010 FOR ASSESSMENT YEAR 2005-06, THE REVENUES APPEALS FOR ASSESSMENT YEARS 2006-07, 2007-08 AND 2008-09 ARE ALSO DISMISSED. CO NOS. 250 TO 253/AHD/2010 : AY 2005-06 TO 2008-09 (BY ASSESSEE) 30. AT THE TIME OF HEARING BEFORE US, THE LD. COUNS EL DID NOT PRESS THE CROSS-OBJECTIONS AND ACCORDINGLY, THE SAME ARE REJE CTED. IT(SS)A NOS. 677 TO 680/AHD/2010 : AY 2005-06 TO 20 08-09 (BY REVENUE) 31. IN ALL THESE APPEALS, COMMON GROUNDS ARE RAISED , AND THEREFORE, ALL THESE APPEALS WERE HEARD TOGETHER. 32. GROUND NOS. 1 & 3 OF THE REVENUES APPEALS IN A LL THE YEARS UNDER CONSIDERATION ARE WITH REGARD TO THE DELETION OF TH E ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF CLIENT CODE MODIFIC ATION. THESE GROUNDS ARE IDENTICAL TO GROUND NOS. 1 & 3 OF THE REVENUES APP EAL IN THE CASE OF M/S. KUNVARJI FINANCE PVT LTD. VIDE IT(SS)A NO.615/AHD/2 010 FOR ASSESSMENT YEAR 2005-06. THEREFORE, FOR THE DETAILED DISCUSSI ON IN THE CASE OF M/S. KUNVARJI FINANCE PVT LTD IN IT(SS)A NO.615/AHD/2010 (SUPRA) FOR ASSESSMENT YEAR 2005-06, WE DO NOT FIND ANY JUSTIF ICATION TO INTERFERE WITH THE ORDER OF THE CIT(A) IN THIS REGARD. ACCORDINGL Y, GROUND NOS. 1 & 3 OF THE REVENUES APPEALS ARE REJECTED. 33. GROUND NO.2 OF THE REVENUES APPEAL IS WITH RE GARD TO THE ADDITION WHICH SHOULD HAVE BEEN SUSTAINED ON ACCOUNT OF DISC LOSURE OF INCOME IN THE STATEMENT RECORDED AT THE TIME OF SEARCH. THIS GROU ND IS ALSO IDENTICAL TO THE GROUND NO.2 OF THE REVENUES APPEAL IN THE CASE OF M/S. KUNVARJI FINANCE PVT LTD. VIDE IT(SS)A NO.615/AHD/2010 FOR ASSESSMEN T YEAR 2005-06. IT(SS)A NOS. 615 TO 618, 677 TO 680, 813-817 OF 201 0 IT(SS)A 301 & 302/2011 & & CO250 TO 253 OF 2010 CO 313 TO 315, 342 TO 346 OF 2010 KUNVARJI FINANCE PVT LTD & GROUP 27CASES 29 THEREFORE, FOR THE DETAILED DISCUSSION IN THE CASE OF M/S. KUNVARJI FINANCE PVT LTD IN IT(SS)A NO.615/AHD/2010 FOR ASSESSMENT Y EAR 2005-06, WE DO NOT FIND ANY MERIT IN THE GROUND NO.2 OF THE REVENU ES APPEAL AND THE SAME IS REJECTED. 34. GROUND NOS. 4 & 5 OF THE REVENUES APPEAL ARE O F GENERAL NATURE AND NEED NO SEPARATE ADJUDICATION. CO NOS. 313 TO315/AHD/2010 : AY 2005-06 TO 2007-08 (BY ASSESSEE) 35. THE CROSS-OBJECTIONS WERE NOT PRESSED BY THE LD . COUNSEL AT THE TIME OF HEARING AND ACCORDINGLY, THE SAME ARE REJECTED. IT(SS)A NOS.813 & 814/AHD/2010 : AY 2006-07 & 2007- 08 (BY REVENUE) 36. THE ONLY GROUND RAISED IN THESE APPEALS IS AGAI NST THE DELETION OF THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT O F CLIENT CODE MODIFICATION. THIS GROUND IS IDENTICAL TO GROUND NO S. 1 & 3 OF THE REVENUES APPEAL IN THE CASE OF M/S. KUNVARJI FINAN CE PVT LTD. VIDE IT(SS)A NO.615/AHD/2010 FOR ASSESSMENT YEAR 2005-06. THERE FORE, FOR THE DETAILED DISCUSSION IN THE CASE OF M/S. KUNVARJI FINANCE PVT LTD IN IT(SS)A NO.615/AHD/2010 (SUPRA) FOR ASSESSMENT YEAR 2005-06 , WE DO NOT FIND ANY MERIT IN THIS GROUND AND THE SAME IS REJECTED. CO NOS. 342 & 343/AHD/2010 : AY 2006-07 & 2007-08 ( BY ASSESSEE) 37. AT THE TIME OF HEARING BEFORE US, THE CROSS OBJ ECTIONS WERE NOT PRESSED AND ACCORDINGLY, THE SAME ARE REJECTED. IT(SS)A NOS.815 TO 817/AHD/2010 : AY 2005-06 TO 200 7-08 (BY REVENUE) 38. THE ONLY GROUND RAISED IN THESE APPEALS IS AGAI NST THE DELETION OF THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT O F CLIENT CODE IT(SS)A NOS. 615 TO 618, 677 TO 680, 813-817 OF 201 0 IT(SS)A 301 & 302/2011 & & CO250 TO 253 OF 2010 CO 313 TO 315, 342 TO 346 OF 2010 KUNVARJI FINANCE PVT LTD & GROUP 27CASES 30 MODIFICATION. THIS GROUND IS IDENTICAL TO GROUND NO S. 1 & 3 OF THE REVENUES APPEAL IN THE CASE OF M/S. KUNVARJI FINAN CE PVT LTD. VIDE IT(SS)A NO.615/AHD/2010 FOR ASSESSMENT YEAR 2005-06. THERE FORE, FOR THE DETAILED DISCUSSION IN THE CASE OF M/S. KUNVARJI FINANCE PVT LTD IN IT(SS)A NO.615/AHD/2010 (SUPRA) FOR ASSESSMENT YEAR 2005-06 , WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL AND THE SAME IS REJE CTED. CO NOS. 344 TO 346/AHD/2010 : AY 2005-06 TO 2007-08 (BY ASSESSEE) 39. AT THE TIME OF HEARING BEFORE US, THE CROSS OBJ ECTIONS WERE NOT PRESSED AND ACCORDINGLY, THE SAME ARE REJECTED. IT(SS)A NO.301/AHD/2011 : AY 2006-07 (BY REVENUE) [ MEENABEN M. PARIKH] 40. THE ONLY GROUND RAISED IN THIS APPEAL IS AGAINS T THE DELETION OF THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT O F CLIENT CODE MODIFICATION. THIS GROUND IS IDENTICAL TO GROUND NO S. 1 & 3 OF THE REVENUES APPEAL IN THE CASE OF M/S. KUNVARJI FINAN CE PVT LTD. VIDE IT(SS)A NO.615/AHD/2010 FOR ASSESSMENT YEAR 2005-06. THERE FORE, FOR THE DETAILED DISCUSSION IN THE CASE OF M/S. KUNVARJI FINANCE PVT LTD IN IT(SS)A NO.615/AHD/2010 (SUPRA) FOR ASSESSMENT YEAR 2005-06 , WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE REVENUE AND ACCORDINGLY, THE SAME IS REJECTED. IT(SS)A NO.302/AHD/2011 : AY 2006-07 (BY REVENUE) [ JAY M. PARIKH] 41. THE ONLY GROUND RAISED IN THIS APPEAL IS AGAINS T THE DELETION OF THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT O F CLIENT CODE MODIFICATION. THIS GROUND IS IDENTICAL TO GROUND NO S. 1 & 3 OF THE REVENUES APPEAL IN THE CASE OF M/S. KUNVARJI FINAN CE PVT LTD. VIDE IT(SS)A NO.615/AHD/2010 FOR ASSESSMENT YEAR 2005-06. THERE FORE, FOR THE DETAILED IT(SS)A NOS. 615 TO 618, 677 TO 680, 813-817 OF 201 0 IT(SS)A 301 & 302/2011 & & CO250 TO 253 OF 2010 CO 313 TO 315, 342 TO 346 OF 2010 KUNVARJI FINANCE PVT LTD & GROUP 27CASES 31 DISCUSSION IN THE CASE OF M/S. KUNVARJI FINANCE PVT LTD IN IT(SS)A NO.615/AHD/2010 (SUPRA) FOR ASSESSMENT YEAR 2005-06 , WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE REVENUE AND ACCORDINGLY, THE SAME IS REJECTED. 42. IN THE COMBINED RESULT, ALL THE APPEALS FILED B Y THE REVENUE AND CROSS-OBJECTIONS BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 19 TH MARCH, 2015 AT AHMEDABAD. SD/- SD/- (KUL BHARAT) JUDICIAL MEMBER (G.D. AGRAWAL) VICE-PRESIDENT (AZ, LZ & BZ) AHMEDABAD; DATED 19/03/2015 BIJU T., PS $% &' ($'# $% &' ($'# $% &' ($'# $% &' ($'#/ COPY OF THE ORDER FORWARDED TO : 1. )* / THE APPELLANT 2. &+)* / THE RESPONDENT. 3. ,, - / CONCERNED CIT 4. - ( ) / THE CIT(A) - I , AHMEDABAD 5. '01 & , , / DR, ITAT, AHMEDABAD 6. 123 4 / GUARD FILE . $% $% $% $% / BY ORDER, TRUE COPY 5 55 5/ // / ,6 ,6 ,6 ,6 ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD