M/s Orma Marble Palaces (P) Ltd., Cochin V. ACIT, Ernakulam

CO 36/COCH/2005

• Counselvise Citation: [2010] 122 COUNSELVISE.COM (IT) 4869 (ITAT-COCHIN)
• Duration Of Justice: 5 year(s) 4 month(s) 25 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 22-06-2010
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 05-05-2010
• Assessment Year: misc
• Appeal Filed On: 28-01-2005
• Court: TRIBUNAL
• Department Lawyers: A K THATTAICIT
• Assessee Lawyers: P J BABU
• Keywords: Unexplained investment; Gift; Corroborative evidences; Assessment record; Block assessment; Bogus loan
• Section: 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.VIJAYAKUMARAN & SHRI SANJAY ARORA I.T. (S&S) A.NO. 139 /COCH/200 4 BLOCK PERIOD:1990 - 91 TO 1999 - 2000 (UPTO 02-03-2000) THE ASST. COMMISSIONER OF INCOME-TAX,CIRCLE-1(2), ERNAKULAM. VS. M/S. ORMA MARBLE PALACE (P) LTD., ANGAMALLY. PAN 46-031-CN-9600 (APPELLANT) ( RESPONDENT ) & C.O.NO.36/COCH/2005 (ARISING OUT OF I.T.(S&S)A.NO.139/COCH/2004 ) BLOCK PERIOD:1990 - 91 TO 1999 - 2000(UPTO 02 - 03 - 2000 ) M/S. ORMA MARBLE PALACE (P) LTD., ANGAMALLY. PAN 46-031-CN-9600 VS. THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-1(2), ERNAKULAM. ( CROSS OBJECTOR ) (RESPONDENT) REVENUE BY SHRI A.K.THATTAI,CIT.,DR ASSESSEE BY SHRI P.J. BABU, C.A. O R D E R PER N.VIJAYAKUMARAN,J.M: THIS APPEAL AND THE CROSS OBJECTION ARE FILED BY T HE REVENUE AND THE ASSESSEE RESPECTIVELY. BOTH ARE FI LED AGAINST THE ORDER OF THE LD. CIT(APPEALS)-V, KOCHI, DATED 22-09-2004 AND THEY ARISE OUT OF THE ASSESSMENT COM PLETED U/S.158BC(C) OF THE I.T.ACT,1961. IT(S&S)A NO. 139/COCH/2004 & C.O.NO.36/COCH/2005 2 2. LET US FIRST TAKE UP THE APPEAL FILED BY THE DEP ARTMENT. THE REVENUE HAS RAISED AS MANY AS 10 GROUNDS. OUT O F THAT, GROUND NOS. 1 AND 10 ARE GENERAL IN NATURE AND AS S UCH NO ADJUDICATION IS CALLED FOR. THE REMAINING GROUNDS ARE IN RESPECT OF 2. DELETION OF ADDITION OF RS.1,00,000/- FROM THE E XCESS STOCK DETECTED AMOUNTING TO RS.20,61,480/-; 3. RESTRICTING THE UNACCOUNTED INVESTMENT I N LAND AND BUILDING; 4. SCALING DOWN THE BOGUS NRE GIFT AND LOAN FROM RS.27,82,912/ TO RS.84,000/-; 5. DELETION OF ADDITION ON ACCOUNT OF INVEST MENT OF RS.10 LAKHS WITH REGARD TO DEVELOPMENT OF LAND; 6. DELETION OF ADDITION ON ACCOUNT OF UNDER INVOICING OF SALES; 7. DELETION OF ADDITION OF UNACCOUNTED PURCH ASE AND CORRESPONDING UNACCOUNTABLE SALES (RS. 28,66,305/- AND RS.25,00,000/-); 8. DELETION OF UNDISCLOSED INTEREST INCOME AMOUNTING TO RS.6,66,800/-; AND 9. DELETION OF SURCHARGE LEVIED U/S.113 OF THE I.T.ACT. IT(S&S)A NO. 139/COCH/2004 & C.O.NO.36/COCH/2005 3 3. THE FACTS OF THE CASE AS GATHERED FROM THE ORDER S OF THE INCOME-TAX AUTHORITIES ARE THAT THE ASSESSEE IS A C OMPANY IN WHICH PUBLIC ARE NOT SUBSTANTIALLY INTERESTED. IT WAS INCORPORATED ON 10-11-1994 AND REGISTERED ON 17-11- 1994. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MARBLE A ND GRANITE. THOUGH THE ASSESSEE STARTED TO PURCHASE T HE MARBLE AND GRANITE IN DECEMBER 1994, THE SALE WAS S TARTED ONLY AFTER 01-04-1995. 4. A SEARCH UNDER SECTION 132 WAS CONDUCTED ON 02- 03- 2000 AT THE PREMISES OF THE ASSESSEE AND ORMA GROU P OF CONCERNS AS WELL AS AT THE RESIDENCE OF THE DIRECT ORS. DURING THE COURSE OF SEARCH CERTAIN INCRIMINATING D OCUMENTS WERE FOUND AND SEIZED. ACCORDINGLY NOTICE U/S.158 BC WAS ISSUED ON 8-6-2001 AND BLOCK ASSESSMENT RETURN WAS FILED ON 3-8-2001 DECLARING THE UNDISCLOSED INCOME AT RS.84,000/-. AFTER SCRUTINY OF THE SEIZED MATERIAL S, THE ASSESSING OFFICER FRAMED THE ASSESSMENT ON 28-3-200 2 DETERMINING THE UNDISCLOSED INCOME AT RS.1,35,64,73 0/-, BY MAKING VARIOUS ADDITIONS, WHICH WE WILL DISCUSS IN SERIATIM. 5. DELETION OF ADDITION OF RS.1,00,000/- FROM THE EXCESS STOCK DETECTED AMOUNTING TO RS.20,61,480/-: IN IT(S&S)A NO. 139/COCH/2004 & C.O.NO.36/COCH/2005 4 THE PRE-ASSESSMENT NOTICE, THE ASSESSING OFFICER DE TERMINED THE EXCESS STOCK AT RS.56,65,500/-. ON BEHALF OF T HE ASSESSEE, ELABORATE ARGUMENTS WERE MADE IN RESPECT OF VALUATION OF EXCESS STOCK BEFORE THE ASSESSING OFFI CER. THE ASSESSING OFFICER TAKING INTO CONSIDERATION THE SUB MISSIONS OF THE ASSESSEE ADOPTED THE RATE OF MARBLE SLABS, G RANITE SLABS AND MARBLE TILES @ RS.250/-, 6.50 AND 220/- P ER SQ.MTS. AND THUS WORKED OUT AT RS.20,61,480/-. THE ASSESSING OFFICER HAD MADE AN ADDITION OF RS.28,66, 305/- U/S.69 IN RESPECT OF UNEXPLAINED INVESTMENT IN PURC HASES FOR THE ASSESSMENT YEAR 1995-96. HE WAS OF THE VI EW THAT SOME PART OF EXCESS STOCK FOUND NOW HAS BEEN INCLUD ED THEREIN AND ACCORDINGLY ESTIMATED THE SAME AT RS.10,00,000/- AND DEDUCTED THE SAME FROM THE SUM O F RS.20,61,480/-. THUS ADDITION ON THIS COUNT WAS ON LY RS.10,61,480/-. WHILE MAKING THE VALUATION OF MAR BLE AND GRANITE, THE ASSESSING OFFICER CONSIDERED THE OBJEC TIONS OF THE ASSESSEE WITH REGARD TO THE BROKERAGE, CRACKS, ETC. 5.1 ON APPEAL, THE LD. CIT(APPEALS) FOUND THAT THE ASSESSEE HAS NOT CHALLENGED THE QUANTITY OF EXCESS STOCK DET ERMINED IN RESPECT OF MARBLE SLABS, GRANITE SLABS AND TILES SO ALSO THE RATE ADOPTED BY THE ASSESSING OFFICER. BUT THE ONLY IT(S&S)A NO. 139/COCH/2004 & C.O.NO.36/COCH/2005 5 GRIEVANCE BEFORE THE LD. CIT(APPEALS) WAS THAT THE ASSESSING OFFICER HAS NOT GRANTED ANY CREDIT IN RE SPECT OF BROKEN MATERIAL AND REGARDING THE MEASUREMENT OF MUTILATED BROKEN AND CRACKED PIECES. THE LD. CIT( APPEALS) WAS OF THE OPINION THAT NO SUCH OBJECTION WAS TAKE N BY THE ASSESSEE AT THE TIME OF MEASUREMENT OR EVEN AFTER T HE SEARCH BEFORE THE INVESTIGATING WING. FURTHER, T HE LD. CIT(APPEALS) OPINED THAT FROM THE RECORDS IT IS NOT KNOWN WHETHER SUCH CREDIT FOR BREAKAGE AND CRACKS WERE GI VEN OR NOT. CONSIDERING THE TOTALITY OF THE FACTS AND CIR CUMSTANCES OF THE CASE AND THAT OF THE TOTAL TURNOVER, THE LD. CIT(APPEALS) GAVE A LUMP SUM RELIEF TO THE EXTENT O F RS. 1,00,000/- AND SUSTAINED THE BALANCE ADDITION OF RS.19,61,480/-. 5.2 THE REVENUE IS CHALLENGING THE MEAGRE RELIEF GRANTED TO THE ASSESSEE WHEREAS THE ASSESSEE CHALLE NGES THE SUSTENANCE OF ADDITION OF RS.19,61,480/- BY WAY OF CROSS OBJECTION. 5.3 FIRST WE TAKE THE CROSS OBJECTION FILED BY THE ASSESSEE UNDER THIS ADDITION. THE HONBLE KERALA H IGH COURT IN OP NO.4274/99 APPOINTED ONE ADVOCATE/COMMISSIONE R TO IT(S&S)A NO. 139/COCH/2004 & C.O.NO.36/COCH/2005 6 TAKE AN INDEPENDENT MEASUREMENT IN THE CASE OF A SI STER CONCERN NAMED M/S. ORMA MARBLE PALACE, KOTTAYAM. THE LD. ADVOCATE/COMMISSIONER HAS FILED THE REPORT STAT ING THAT IF BREAKAGE ALLOWANCE IS GRANTED, THERE IS NO SCOPE FOR SUSPICION OF EXCESS QUANTITY IN EITHER LORRY. THI S REPORT IS AVAILABLE IN PAGE 6 OF ASSESSEES PAPER BOOK. ON THE BASIS OF THE INSPECTION REPORT FILED BY THE LD. COMMISSIONER/ADVOCATE THE HONBLE HIGH COURT FOUND THAT THERE WAS NO MATERIAL DIFFERENCE IN THE MEASUREMENT AND RELEASED THE GRANITES, WHICH WAS DETAINED EARLIER B Y THE SALES-TAX INTELLIGENCE SQUAD. IN THE PRESENT CASE ALSO THERE IS NO EXCESS STOCK FOUND BY THE SALES-TAX DEP ARTMENT. AS IN THE CASED OF ANOTHER MEASUREMENT ALSO, THE BR EAKAGE ALLOWANCE WAS UPTO 35% GIVEN AS EVIDENCED UNDER ASSESSEES PAPER BOOK PAGE 15. 5.4 THE MARBLE IS A NATURAL PRODUCT AVAILABLE IN T HE MARBLE QUARRY. IT HAS TO BE EXCAVATED FROM THE EA RTH IN WHICH IT IS EMBEDDED. WHILE EXCAVATING, THE MARBL E HAS TO BE EXCAVATED AS IT COMES OUT AND THEN IT REQUIRES T O BE POLISHED AND GRAINS IF ANY HAS TO BE REMOVED AS IMP URITIES. WHILE SO THE RAW MARBLE WILL BE SOLD IN THE MARKET. THE PURCHASERS WILL TAKE THE MARBLE AS SUCH AND THE ACT UAL IT(S&S)A NO. 139/COCH/2004 & C.O.NO.36/COCH/2005 7 MEASUREMENT CAN BE ARRIVED OUT ONLY AFTER IT WAS CU T INTO MARKETABLE SEIZED. IN MARKET, THE BIGGER SIZE W ILL FETCH GOOD SALE VALUE. IF ANY DEFECT IS FOUND THAT DEFE CTS WILL BE REMOVED BY CUTTING OUT THAT DEFECT PORTION. HENCE , IN THE CASE OF MARBLE PURCHASE, THE EXACT MEASUREMENT IS N OT PRACTICALLY POSSIBLE. HENCE, WE ARE OF THE FIRM V IEW AND IN THE ABSENCE OF ANY ADDITION TO THE EXCESS STOCK BY THE SALE TAX AUTHORITIES; WE REVERSE THE FINDING OF THE AUTH ORITIES AND DIRECT THE ASSESSING OFFICER TO ALLOW THE BREAK AGE ALLOWANCE AT 25%, UNDER THE ABOVE FACTS AND CIRCUMS TANCES. IN THE RESULT, THE ISSUE IS PARTLY ALLOWED IN FAVOU R OF THE ASSESSEE AND IN VIEW OF THE ABOVE FINDING THE GROUN D OF THE DEPARTMENT ON THE ISSUE OF EXCESS STOCK IS LIABLE T O BE DISMISSED AND ACCORDINGLY DISMISSED. 6. RESTRICTING THE UNACCOUNTED INVESTMENT IN LAND AND BUILDING: DURING THE COURSE OF SEARCH, FOUR DOCUMENTS REGARDING THE AGREEMENT TO PURCHASE AND SALE OF IMM OVABLE PROPERTIES WERE SEIZED FROM THE BUSINESS PREMISES O F THE ASSESSEE. THE FIRST AND SECOND DOCUMENTS RELATED T O PURCHASE AND SALE OF IMMOVABLE PROPERTIES WHEREIN O NE PARTY WAS SHRI KA RAJAN, AN EMPLOYEE OF THE ASSESSE E. THE ASSESSEE DENIED HAVING ANY CONNECTION WITH THE DOCU MENTS. IT(S&S)A NO. 139/COCH/2004 & C.O.NO.36/COCH/2005 8 THE ASSESSING OFFICER FOUND THAT THESE TWO DOCUMENT S WERE SALE AGREEMENTS BETWEEN SHRI KA RAJAN AND SHRI VARG HESE AND THE AGREEMENTS WERE IN RESPECT OF EXCHANGE OF PROPERTIES BY EACH OTHER. IT WAS THE SUBMISSION O F THE ASSESSEE THAT AS PER THE AGREEMENT TO SALE, THE TWO PROPERTIES EXCHANGE RS.51,000/- AND RS.50,000/- AS ADVANCE, BUT THESE WERE NOT MATERIALIZED AND LATER ON CANCELLED AND ADVANCES WERE RETURNED. THE 3 RD AGREEMENT WAS BETWEEN SHRI LONAPPAN AND SHRI DAVIS AND AN AMO UNT OF RS.1,00,000/- IN CASH WAS PAID BY SHRI DAVIS. S HRI DAVIS WAS THE EMPLOYEE OF THE ASSESSEE. IT IS STATED THA T THIS AGREEMENT WAS CANCELLED. THE 4 TH AGREEMENT WAS BETWEEN SMT. SHYLA SUNNY AND SHRI KA RAJAN, SHRI RAJAN WAS THE PURCHASER AND AN AMOUNT OF RS.50,000/- WAS PAID BEI NG ADVANCE. ACCORDING TO THE ASSESSING OFFICER SHRI RAJAN AND SHRI DAVIS BEING THE EMPLOYEES OF THE ASSESSEE AND HAVING NO MEANS TO PURCHASE THE PROPERTY, THEY WERE BENAMIES OF THE ASSESSEE AND THEY ACTED ON BEHALF O F THE ASSESSEE. THE ASSESSING OFFICER FOUND THAT TOTAL IN VESTMENTS IN THE PROPERTIES WERE TO THE EXTENT OF RS.17,04,49 0/-. HE WAS ALSO OF THE VIEW THAT THE ASSESSEE MIGHT HAVE G IVEN SOME AMOUNT FOR LENDING THEIR NAMES TO THE TRANSACT IONS AND EXPENSES MIGHT HAVE INCURRED FOR MAKING THE IT(S&S)A NO. 139/COCH/2004 & C.O.NO.36/COCH/2005 9 AGREEMENTS IN WRITING. THEREFORE, THE ASSESSING OF FICER ESTIMATED SUCH EXPENSES AT 10% OF THE INVESTMENTS A ND AS SUCH ADDED A SUM OF RS.1,70,449/- TO THE TOTAL INVE STMENTS, AND THUS DETERMINED THE UNEXPLAINED INVESTMENTS IN LAND AND PROPERTIES AT RS.18,74,939/-. 6.1 ON APPEAL, THE LD. CIT(APPEALS) WAS OF THE VIEW THAT THE ONUS IS ON THE ASSESSEE TO EXPLAIN THAT THE ASS ESSEE HAS NO CONNECTION WITH THESE DOCUMENTS AND THEY DID NOT ACT ON BEHALF OF THE ASSESSEE. IT WAS THE CONTENTION OF THE ASSESSEE THAT WHATEVER DOCUMENTS WERE SEIZED ON THI S COUNT WAS ONLY AGREEMENT TO PURCHASE AND NOT ORIGIN AL SALE DEED. THE LD. CIT(APPEALS) FOUND THAT IT WAS THE PRESUMPTION OF THE ASSESSING OFFICER THAT ALL THESE AGREEMENTS WERE FINALLY MATERIALIZED. THE ASSESSIN G OFFICER DID NOT MAKE ANY EFFORT SO AS TO VERIFY WHETHER THE ALLEGED TRANSACTION HAS BEEN GOT MATERIALIZED AND REGISTERE D LATER ON. THEREFORE, ACCORDING TO THE LD. CIT(APPEALS), THE AMOUNTS PAID BEING ADVANCE AMOUNTING TO RS.1,51,00 0/- SHOULD BE TAKEN AS UNEXPLAINED INVESTMENT IN THE HA NDS OF THE ASSESSEE. IT(S&S)A NO. 139/COCH/2004 & C.O.NO.36/COCH/2005 10 6.2 AGAINST THE ABOVE FINDING, I.E. RESTRICTING TH E ADDITION TO RS.1,51,000/- BEING THE UNEXPLAINED INVESTMENTS IN LAND AND PROPERTY, BY THE LD. CIT(AP PEALS), THE DEPARTMENT IS IN APPEAL BEFORE THE TRIBUNAL. HOWEVER, IN THE CROSS OBJECTION, THE ASSESSEE ONLY SUPPORTS THE FINDINGS OF THE LD. CIT(APPEALS). 6.3 WE HEARD RIVAL SUBMISSIONS AND PERUSED THE ENT IRE MATERIALS AVAILABLE ON RECORD. ON APPRECIATION OF THE FACTS AND MATERIALS, THE LD. CIT(APPEALS) OPINED THAT THE ALLEGED AGREEMENT FOR SALE COULD NOT BE TRANSFORMED INTO A CTUAL SALES AND THE AMOUNTS MENTIONED IN AGREEMENTS WERE REALLY PASSED ON THE OTHER PARTIES. IT WAS THE ASSUMPTI ON AND PRESUMPTION OF THE ASSESSING OFFICER ON HALF BECKED FACT AND QUANTIFIED THE UNEXPLAINED INVESTMENT BASED ON THE AMOUNT MENTIONED IN THE AGREEMENT. ACCORDINGLY HE WAS OF THE VIEW THAT AS ON THE DATE OF SEARCH FALLING TO WHICH THE BLOCK ASSESSMENT RELATES, THERE IS NO EVIDENCE TO SAY THA T THE PAYMENTS WERE MADE AS PER THE RATE MENTIONED IN THE AGREEMENT EXCEPT THE ADVANCE PAYMENTS MADE. NO COGNIZANCE CAN BE TAKEN ON THE FUTURE PAYMENT FOR T HE PURPOSE OF BLOCK ASSESSMENT. IN VIEW OF THIS, THE L D. CIT(APPEALS) HELD THAT THE ADVANCES ALONE MENTIONED IN IT(S&S)A NO. 139/COCH/2004 & C.O.NO.36/COCH/2005 11 THESE AGREEMENT SHOULD CONSTITUTE MATERIAL FOR DETE RMINING THE UNEXPLAINED INVESTMENT AND THUS DETERMINED THE UNEXPLAINED INVESTMENT AT RS.1,51,000/- (RS. 1,00,0 00/-, RS.50,000/- AND RS.1000/- IN RESPECT OF THE EXCHANG E OF IMMOVABLE PROPERTIES), UNDER THIS HEAD. WE FULLY AGREE WITH THE VIEW OF THE LD. CIT(APPEALS). THE REVENU E HAS NOT BROUGHT IN ANY EVIDENCE TO THE EFFECT THAT THE AGRE EMENTS ENTERED INTO HAVE BEEN TRANSFORMED INTO THE ACTUAL SALES. THIS BEING THE FACTUAL POSITION, WE FIND NO REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(APPEALS) . 7. SCALING DOWN THE BOGUS NRE GIFT AND LOAN FROM RS.27,82,912/ TO RS.84,000/-: DURING THE COURSE OF SEARCH, INSTANCES OF NRE GIFTS AMOUNTING TO RS.23, 27,427/- WERE FOUND AND THE DETAILS OF WHICH WERE CONFRONTE D WITH THE ASSESSEE. THE ASSESSEE SUBMITTED THAT AN AMOU NT OF RS.15,19,000/- WAS TREATED AS INCOME BY VARIOUS DIR ECTORS AND M/S. ORMA AGENCIES. AN AMOUNT OF RS.50,000/- HAS BEEN DECLARED BY THE ASSESSEE IN ITS BLOCK ASSESSME NT RETURN. THE BALANCE AMOUNT OF RS.8,08,427/- WERE T HE LOANS RECEIVED DURING THE BLOCK PERIOD. ON THE DIR ECTION OF THE ASSESSING OFFICER, ASSESSEE FURNISHED THE DETAI LS OF THE PERSONS AND CONFIRMATION LETTERS. IT WAS THE SUBMISSION OF IT(S&S)A NO. 139/COCH/2004 & C.O.NO.36/COCH/2005 12 THE ASSESSEE THAT THOSE PERSONS WERE FRIENDS AND RE LATIVES AND NO INTEREST WAS PAID. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT THE ARGUMENTS OF THE ASSESSEE AND TR EATED THE CREDITS TOTALING RS.8,08,427/- AS INCOME OF THE ASSESSEE U/S.68 OF THE ACT, IN ADDITION TO RS.15,19,000/- BE ING GIFTS DECLARED IN THE BLOCK RETURNS OF THE DIRECTORS, ETC . FURTHER THE ASSESSING OFFICER ESTIMATED THE EXPENSES PAYABL E TO AGENTS @ 20% OF RS.15,19,000/- AMOUNTING TO RS.3,03,800/- AND 20% OF THE LOAN AMOUNT OF RS.8,08 ,127/- (FOR ARRANGING BOGUS LOANS) AMOUNTING TO RS.1,51,68 5/-. THUS, THE ASSESSING OFFICER MADE AN ADDITION OF RS.27,82,912/- U/S.68. 7.1 AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(APPEALS). THE LD. COUNSEL F OR THE ASSESSEE REITERATED THE VERY SAME SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER, I.E. AN AMOUNT OF RS.15,69,0 00/- HAS ALREADY BEEN OFFERED IN THE BLOCK ASSESSMENT OF THE RESPECTIVE RECIPIENTS OF THE GIFT AND THE DETAILS O F LOAN OF RS.7,58,427/- AND CONFIRMATION LETTERS WERE FILED B EFORE THE ASSESSING OFFICER. IT WAS THE FURTHER SUBMISSION OF THE ASSESSEE THAT AN AMOUNT OF RS.84,000/- WAS RECEIVED BY THE ASSESSEE AS GIFT AND THE SAME HAS BEEN OFFERED IN T HE BLOCK IT(S&S)A NO. 139/COCH/2004 & C.O.NO.36/COCH/2005 13 ASSESSMENT. CONSIDERING THE SUBMISSIONS OF THE AS SESSEE AND THE ASSESSEE BEING A CORPORATE ENTITY DULY INCO RPORATED, THE LD. CIT(APPEALS) ACCEPTED THE VERSION OF THE A SSESSEE AND HELD THAT THERE WAS NO UNEXPLAINED INVESTMENTS IN THE HANDS OF THE ASSESSEE EXCEPT RS.84,000/- WHICH HAS ALREADY BEEN OFFERED IN THE BLOCK RETURN. THEREFORE, THE LD . CIT(APPEALS) DELETED THE ENTIRE ADDITION OF RS.27,8 2,912/- AND ALLOWED THE APPEAL OF THE ASSESSEE ON THIS COUN T. 7.2 THE DEPARTMENT IS AGGRIEVED BY THE ABOVE FINDI NGS OF THE LD. CIT(APPEALS). IN THE CROSS OBJECTION, TH E ASSESSEE SUPPORTS THE ORDER OF THE LD. CIT(APPEALS) ON THIS POINT. 7.3 HAVING CONSIDERED THE RIVAL SUBMISSIONS, WE ARE OF THE VIEW THAT THE LD. CIT(APPEALS) AFTER EXAMINING THE RECORDS AND THE STATEMENTS OF THE ASSESSEE AND CONSIDERING THE FACT THAT THE ASSESSEE IS A CORPORATE ENTITY DULY INCORP ORATED, AND THE FACT THAT THE ALLEGED AMOUNTS OF GIFT HAS A LREADY BEEN OFFERED IN THE BLOCK ASSESSMENT OF THE RESPEC TIVE RECIPIENTS AND THE ASSESSEE HAS RECEIVED ONLY A SUM OF RS.84,000/- WHICH HAS BEEN OFFERED IN THE BLOCK ASSESSMENT, ALLOWED THE CLAIM OF THE ASSESSEE, TO W HICH WE IT(S&S)A NO. 139/COCH/2004 & C.O.NO.36/COCH/2005 14 FIND NO FAULT. THUS, THE FINDINGS OF THE LD. CIT( APPEALS) ON THIS ISSUE IS UPHELD. 8. DELETION OF ADDITION ON ACCOUNT OF INVESTMENT OF RS .10 LAKHS WITH REGARD TO DEVELOPMENT OF LAND: THE ASSESSING OFFICER NOTICED THAT FIVE DIRECTORS OF THE ASSESSEE COMPANY PURCHASED 85.806 CENTS OF LAND AT KOTHAKULANGARA. ON THIS PROPERTY, ASSESSEE CONSTRUCTED ITS OFFICE BUILDING, WHICH WAS BELONGING TO THE DIRECTORS IN THEIR INDIVIDUAL CAPA CITY. ACCORDING TO THE ASSESSING OFFICER, THE LAND WAS IN A LOW LYING AREA FROM THE ROAD, I.E. IT WAS 22 FT. DEEP F ROM THE ROAD LEVEL WHEN IT WAS PURCHASED IN 1994 AND THEREF ORE HE WAS OF THE VIEW THAT THE ASSESSEE WOULD HAVE SPENT AN AMOUNT OF RS.10 LAKHS FOR BRINGING THE LOW LAND TO THE ROAD LEVEL. THEREFORE, THE ASSESSING OFFICER ASSESSED AN AMOUNT OF RS. 10,00,000/- AS UNDISCLOSED INVESTMENT. ON APPEAL, IT WAS CONTENDED THAT ESTIMATION MADE BY THE ASSESS ING OFFICER WAS ON MISCONCEIVED FACTS. IT WAS THE SUB MISSION OF THE ASSESSEE THAT NEITHER THE ASSESSEE NOR ITS D IRECTORS INCURRED ANY EXPENDITURE AS ALLEGED BY THE ASSESSIN G OFFICER AND NO MATERIAL WAS SEIZED BY THE AUTHORITIES TO SUBSTANTIATE THE CONCLUSION DRAWN BY THE ASSESSING OFFICER. CONSIDERING THE FACTS OF THE CASE IN ITS ENTIRETY, THE LD. IT(S&S)A NO. 139/COCH/2004 & C.O.NO.36/COCH/2005 15 CIT(APPEALS) OPINED THAT IT WAS THE IMAGINATION OF THE ASSESSING OFFICER. NO MATERIAL WAS SEIZED DURING THE COURSE OF SEARCH TO SUBSTANTIATE THE STAND OF THE A SSESSING OFFICER. THIS BEING THE FACTUAL POSITION, THE LD. CIT(APPEALS) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER ON THIS POINT. HENCE, THE DEPARTMENT CHALLENGES THE FINDI NGS OF THE ASSESSING OFFICER WHEREAS THE ASSESSEE SUPPORTS THE ACTION OF THE LD. CIT(APPEALS) BY WAY OF CROSS OBJE CTION. 9. WE HEARD THE PARTIES TO THE DISPUTE. THE LD. CIT(APPEALS) WAS OF THE VIEW THAT THE ASSESSING OFF ICER HAS PROCEEDED PURELY ON IMAGINATION AND SURMISE. THER E IS NO EVIDENCE EITHER IN THE SEIZED MATERIAL OR OTHERWISE TO SUPPORT THE FINDING. IT IS WELL ESTABLISHED PRIN CIPLE THAT IN BLOCK ASSESSMENT PROCEEDINGS, THE ESTIMATED ADDITIO NS COULD BE MADE ON THE BASIS OF MATERIALS FOUND DURIN G THE COURSE OF SEARCH OR CORROBORATIVE MATERIALS COLLECT ED. IN THE PRESENT CASE, THIS IS NOT THE POSITION. HENCE , WE UPHOLD THE FINDINGS OF THE FIRST APPELLATE AUTHORIT Y AND DISMISS THIS GROUND OF THE REVENUE. 10. DELETION OF ADDITION ON ACCOUNT OF UNDER INVOICING OF SALES: ON SCRUTINY OF INCRIMINATING DOCUMENTS FOUND IN IT(S&S)A NO. 139/COCH/2004 & C.O.NO.36/COCH/2005 16 THE COURSE OF SEARCH RELATING TO THE ASSESSMENT YEA R 2000- 01, THE ASSESSING OFFICER WAS OF THE VIEW THAT THER E WAS SUPPRESSION OF SALE TO THE EXTENT OF 10% ON THE DIS CLOSED SALES AND ACCORDINGLY HE ESTIMATED THE SAME, WHICH IS AS UNDER: ACCOUNTING PERIOD DISCLOSED SALES TURNOVER UNDISCLOSED SALES TURNOVER/UNDISCLOSED INCOME(ESTIMATED AS ABOVE) 1 - 4 - 1995 TO 31 - 3 - 19 96 RS .1,00,39,015 RS.10,03,902 1 - 4 - 1996 TO 31 - 3 - 19 97 RS.1,38,38,319 RS.13,8 3,83 2 1 - 4 - 1997 TO 31 - 3 - 19 98 RS.1,98,39,703 RS.19,8 3,9 70 1 - 4 - 1998 TO 31 - 3 - 19 99 RS.2,69,74,641 RS.26,97 , 464 1 - 4 - 1999 TO 31 - 3 - 20 00 RS.1,98,17,561 RS.19,81 , 756 (ASPER THE SALES REGISTER MARKED AMA - 12) RS.90,50,924 10.1 THE ASSESSEE MADE ELABORATE SUBMISSIONS ON TH IS POINT. THE CRUX OF THE ARGUMENTS IS THAT ONLY GRO SS PROFIT OF SUCH SALES CAN BE CONSIDERED AS UNDISCLOSED INCO ME. IF SUCH UNDISCLOSED SALES ARE TREATED AS INCOME, THEN CORRESPONDING GP RATE AFTER INCORPORATING SUCH SALE S IN THE TRADING ACCOUNT WILL BE ABNORMAL. NO SUPPRESSION IN SALES WAS TRACED IN THE EARLIER YEARS AND THAT THE ONLY SUPPRESSION WAS IN THE ASSESSMENT YEAR 2000-01 AND AS SUCH NO SUPPRESSION CAN BE ESTIMATED IN RELATION TO THOSE IT(S&S)A NO. 139/COCH/2004 & C.O.NO.36/COCH/2005 17 YEARS. HOWEVER, THE ASSESSING OFFICER REJECTED TH E ARGUMENTS OF THE ASSESSEE ON THE GROUND THAT UNDER INVOICING OF SALE BILLS IS MADE IN RESPECT OF EVERY SALES DISCLOSED. ALL THE CORRESPONDING COST OF PURCHASE , FREIGHT AND OTHER ADMINISTRATIVE EXPENSES HAVE ALREADY BEEN ACCOUNTED FOR IN THE COST OF PURCHASE, FREIGHT AND OTHER ADMINISTRATIVE EXPENSES HAVE ALREADY BEEN ACCOUNTED FOR IN THE REGULAR TRADING ACCOUNT AND ABNORMAL ACTIVITY R ESULTS IN ABNORMAL PROFITS, AND SUCH RESULTS CANNOT BE SEEN A LONG WITH THE NORMAL TRADING ACCOUNT. THE ASSESSING OF FICER FURTHER HELD THAT AT THE TIME OF SEARCH AT THE RESI DENCE OF THE DIRECTORS A LARGE NUMBER OF COSTLY GADGETS AND OTHER HOUSEHOLD APPLIANCES ARE ACQUIRED BY THE ASSESSEE O VER THE YEARS, WHICH ARE NOT DISCLOSED. OBVIOUSLY, THESE ACQUISITIONS ARE OUT OF THE UNDISCLOSED INCOME OF T HOSE YEARS. FURTHER, IT IS ALSO SEEN THAT THE HOUSEHOL D WITHDRAWALS DECLARED BY THE DIRECTORS AND THEIR FAM ILY ARE MUCH BELOW THE DISCLOSED WITHDRAWALS. THIS ALSO S HOWS THAT ASSESSEE HAD UNDISCLOSED FUNDS AVAILABLE IN AL L THESE YEARS. SUCH UNDISCLOSED INCOME HAS COME OUT FROM T HE UNDISCLOSED BUSINESS ACTIVITIES ONLY. FURTHER, UND ISCLOSED INVESTMENTS HAVE BEEN MADE IN ALL THE YEARS IN PURC HASE OF LAND, CONSTRUCTION AND DEVELOPMENT OF LAND. IN TH IS VIEW OF IT(S&S)A NO. 139/COCH/2004 & C.O.NO.36/COCH/2005 18 THE MATTER, THE ASSESSING OFFICER HELD THAT THE EST IMATION OF SUPPRESSION IN THESE YEARS IS IN ORDER. 10.2 AGGRIEVED BY THE ABOVE FINDING OF THE ASSESSI NG OFFICER, ASSESSEE TOOK UP THE MATTER IN APPEAL BEFO RE THE LD. CIT(APPEALS) AND CONTENDED THAT THE ESTIMATION OF ALLEGED UNDER INVOICING OF SALES IS WITHOUT ANY BASIS AND E VIDENCES BORN ON THE ASSESSMENT RECORDS AVAILABLE WITH THE A SSESSING OFFICER EMERGING FROM SEIZED MATERIAL. IN THE COM PLETION OF BLOCK ASSESSMENT UNDER CHAPTER XIV B, THE ASSESSING OFFICER HAS NO POWER TO ESTIMATE THE INCOME ON AND ABOVE TH E AVAILABLE SEIZED INCRIMINATING SUPPORTING EVIDENCES . SUCH ESTIMATION CAN BE JUSTIFIED ONLY IN THE YEAR FOR WH ICH CERTAIN DOCUMENTARY EVIDENCE HAS BEEN FOUND AT THE TIME OF SEARCH AND NOT FOR THE EARLIER OR LATER YEARS. HENCE, TH E ENTIRE ESTIMATION ON ACCOUNT OF UNDER INVOICING OF SALES I S ARBITRARY AND IRRATIONAL. FURTHER THE ASSESSING OFFICER IS NOT JUSTIFIED IN THE EYE OF LAW FOR THE APPLICATION OF PROVISIONS OF CHAPTER X IV B OF THE I.T.ACT. HENCE, THE ENTIRE ADDITION ON ACCOUNT OF UNDER INVOICING OF SALES IS NOT SUSTAINABLE. FURTHER THE REPORTED SALES TO TJ FRANCIS, CK ABDUL HAMEED, TRP CHANDRAN, ARP SEN, SHRI JOSHI PAUL AND CT THANKACHA N ARE RELATING TO THE ORMA GRANITE PALACE, ANGAMALY AND N OT IT(S&S)A NO. 139/COCH/2004 & C.O.NO.36/COCH/2005 19 CONNECTED WITH THE ASSESSEE COMPANY IN ANY MANNER. THE SALES TO BEEMAPALLY IS ALSO RELATING TO M/S. NEW OR MA MARBLE PALACE, KUMARANALLOOR AND IT HAS NO CONNECTION WITH THE ASSESSEE COMPANY. THE ASSESSING OFFICER HAS NEVER TRACED ANY SUPPRESSION OF SALES RELATING TO ASSESSEE COMPA NY DURING THE BLOCK ASSESSMENT PROCEEDINGS. IT WAS T HE CONTENTION THAT THE STATEMENTS COLLECTED FROM THE E MPLOYEES WERE UNDER DURESS BY THE DEPARTMENT AND THEREFORE T HE SAME WERE NOT ACCEPTABLE BEFORE THE EYE OF LAW. TH E STATEMENT OF SHRI ELDHO, CASHIER OF M/S. NEW ORMA M ARBLE PALACE WAS CONTRADICTED IN HIS CROSS EXAMINATION. THE CASE OF NC MANOJ KUMAR RELATES TO M/S. ORMA GRANITE PALA CE AND NOT CONNECTED WITH THE ASSESSEE COMPANY. THE CASE OF SHRI PO ANTONY RELATES TO ORMA MARBLE PALACE, MANJOOR AN D NOWHERE CONNECTED WITH THE ASSESSEE COMPANY. ACCOR DING TO THE ASSESSEE, THE ACTUAL SALE SUPPRESSION DURING THE ASSESSMENT YEAR 2000-01 IS AS FOLLOWS: A) SALE ON 1-3-2000(RS.2,20,442 RS.1,06,000) RS.1,14 ,442.00 B) SALE TO PA KURIAKOSE RS.1,41,564.00 C) SALE TO DR. MURALI RS.1,03,550.00 D) SALE TO ARP SEN (RS.8700 - RS.6983.20) RS. 1,716.80 TOTAL RS.3,61,272.80 =========== IT(S&S)A NO. 139/COCH/2004 & C.O.NO.36/COCH/2005 20 FURTHER THE ESTIMATED SUPPRESSION FOR THE ASSESSMEN T YEARS 1995-96 TO 1999-2000 IS WITHOUT ANY MATERIAL EVIDEN CE ON RECORD. SUCH PRESUMPTIVE ESTIMATION IS NOT PERMIT TED UNDER BLOCK ASSESSMENT. TO THIS PROPOSITION, THE ASSESSEE RELIED ON THE FOLLOWING DECISIONS: 1. DAMANI (HUF) VS. DY. CIT (1999)70 ITD 77 (PAT); 2. SUNDER AGENCIES VS. DY.CIT - 61 TR 245; AND 3. NR PAPER MILLS CASE IN 234 ITR 733. 10.3 THE LD. CIT(APPEALS) AFTER EXAMINING THE CASE AND TAKING INTO CONSIDERATION THE AVERMENTS MADE BEFORE HIM, WAS OF THE VIEW THAT THE STATEMENTS OF THE EMPLOYEE S CANNOT BE TAKEN AS EVIDENCE UNLESS THEY ARE CORROBO RATED WITH SOME EVIDENCE. FURTHER, INSTANCES GIVEN BY TH E ASSESSING OFFICER WAS OF THE SISTER CONCERNS OF THE ASSESSEE AND NOT THAT OF THE ASSESSEE. THE ASSESSING OFFIC ER SHOULD HAVE RESTRICTED THE MATERIAL RELATING TO THE ASSESS EE FOR DETERMINING THE UNDISCLOSED INCOME AND NOT THAT OF THE GROUP CONCERNS. THE INSTANCES OF UNDER INVOICING OF SALES FOUND BY THE ASSESSING OFFICER WAS PERTAINING TO TH E ASSESSMENT YEAR 2000-01 (PART PERIOD) AND NOT FOR A NY OF THE EARLIER ASSESSMENT YEARS PERTAINED TO THE BLOCK IT(S&S)A NO. 139/COCH/2004 & C.O.NO.36/COCH/2005 21 ASSESSMENT PERIOD. THE ASSESSEE ITSELF HAS ACCEPT ED UNDER INVOICING OF SALES TO THE EXTENT OF RS.3,61,272.80. IN ADDITION TO THIS, THERE WAS ANOTHER INSTANCE IN AMA -14, SHEET NO.36, AMOUNTING TO RS.5.65,533/-. THE LD. CIT(APPEALS) WAS OF THE OPINION THAT THE ASSESSEE H AS NOT EXPLAINED SATISFACTORILY THIS AMOUNT AND AS SUCH TH IS AMOUNT IS TO BE TAKEN AS SALE SUPPRESSED IN TERMS OF VALUE WHICH LEADS QUANTIFICATION OF UNDISCLOSED INCOME. WITH REGARD TO ANOTHER DOCUMENT WHICH SHOWED AN AMOUNT OF RS.1,80,000/- APPEARING IN THE NAME OF LIJO SAKA, THE LD. COUNSEL FOR THE ASSESSEE ARGUED THAT IT WAS THE EXP ENDITURE INCURRED IN RESPECT OF PURCHASE OF BUILDING MATERIA L ELECTRIC FITTING, TELEPHONE CHARGES, ETC. AND IN ANY WAY THI S IS CONNECTED WITH THE REGULAR PURCHASE OF MARBLE AND GRANITE. THE LD. CIT(APPEALS) ACCEPTED THIS VERSION OF THE A SSESSEE ON THE GROUND THAT IT IS NOT POSSIBLE TO BRING MARB LE OR GRANITE WITHOUT ANY C FORM PURCHASES UNDER THE KS T ACT. IN VIEW OF THESE FINDINGS, THE LD. CIT(APPEALS) SUS TAINED THE ADDITION ON ACCOUNT OF UNDER INVOICING OF SALES TO RS.9,26,893/- ( RS.3,61,272.80 + RS.5.65,533/-), EXCLUSIVELY FOR THE ASSESSMENT YEAR 2000-01. IT(S&S)A NO. 139/COCH/2004 & C.O.NO.36/COCH/2005 22 10.4 WITH REGARD TO THE ISSUE OF WHETHER THE ABOVE INSTANCES OF UNDER INVOICING OF SALE FOUND RELATING TO ASSESSMENT YEAR 2000-01 CAN BE MADE A BASIS FOR ESTIMATING THE UNDISCLOSED INCOME FOR THE EARLIER ASSESSMENT YEARS, THE LD. CIT(APPEALS) RELYING ON A SERIES OF DECISIONS OF DIFFERENT BENCHES OF THE TRIBUNAL A ND THAT OF HIGH COURTS, WHICH HAS BEEN DISCUSSED IN PAGES 14 T O 20 OF HIS APPELLATE ORDER, THE LD. CIT(APPEALS) WAS OF TH E VIEW THAT NO UNDISCLOSED INCOME CAN BE ESTIMATED FOR THE ASSESSMENT YEARS 1996-97 TO 1999-2000 AS NO TANGIBL E MATERIAL IS AVAILABLE ON RECORD IN RESPECT OF THESE YEARS. THE UNDER INVOICING OF SALE COULD BE RESTRICTED TO THE ACTUAL DETECTION IN THE INCRIMINATING DOCUMENTS FOUND IN T HE SEARCH. IN THE INSTANT CASES, THERE WAS NO DETECT ION OF UNDER INVOICING OF SALES AND NO CORROBORATIVE EVIDE NCE WAS GATHERED BY THE ASSESSING OFFICER TO SUBSTANTIATE H IS STAND. IN THIS VIEW OF THE MATTER, THE LD. CIT(APPEALS) DE LETED THE ADDITION IN RESPECT OF THE ASSESSMENT YEARS 1996-9 7 TO 1999-2000. 10.5 AGAINST THE ABOVE FINDINGS OF THE LD. CIT(APPE ALS), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL WHILE THE IT(S&S)A NO. 139/COCH/2004 & C.O.NO.36/COCH/2005 23 ASSESSEE IS IN CROSS OBJECTION AGAINST THE SUSTENAN CE OF ADDITION OF RS.9,26,893/-. 11. WE HAVE HEARD RIVAL SUBMISSIONS. WE HAVE ALSO GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AN D PERUSED THE MATERIALS. THE ISSUE HAS BEEN DEALT W ITH AT LENGTH BY THE LD. CIT(APPEALS). THOSE FACTS ARE N OT DISPUTED. THE ADDITIONS FOR THE ASSESSMENT YEARS 1996-97 TO 1999-2000 HAVE BEEN MADE BY THE ASSESSING OFFICE R WITHOUT ANY MATERIALS SEIZED DURING THE COURSE OF S EARCH. IN RESPECT OF THE ASSESSMENT YEAR 2000-01, THE ASSE SSEE ITSELF HAS ACCEPTED THAT THERE WAS UNDER INVOICING OF SALES TO RS.9,26,893/- ( RS.3,61,272.80 + RS.5.65,533/-). THIS BEING THE FACTUAL POSITION, FOLLOWING THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. JK NARAYANAN 293 ITR 220 WHEREIN IT HAS BEEN HELD THAT ADDITION TO THE UNDISCLOSED INCOME CAN BE MADE ONLY ON THE BASIS OF SEARCH MATERIALS AND IN THE ABSENCE OF SUC H MATERIALS, THERE CANNOT BE ANY ADDITION TO THE UNDISCLOSED INC OME, WE UPHOLD THE FINDINGS OF THE LD. CIT(APPEALS), ON THI S ISSUE. 12. DELETION OF ADDITION OF UNACCOUNTED PURCHASE AND CORRESPONDING UNACCOUNTED SALES (RS. 28,66,305/- AN D IT(S&S)A NO. 139/COCH/2004 & C.O.NO.36/COCH/2005 24 RS.25,00,000/-): ACCORDING TO THE ASSESSING OFFICER, THE ASSESSEE WAS ENGAGED IN UN-ACCOUNTED PURCHASES AND SALES IS ESTABLISHED FROM THE SEIZED DOCUMENT AMA-14 SHE ET NO.36. THE ASSESSEE STATED THIS SHEET CONTAINED E NTRIES REGARDING MATERIALS PURCHASED FOR CONSTRUCTION OF B UILDING. IT FURTHER STATED THAT ALTHOUGH THESE EXPENSES WERE UNACCOUNTED, THIS DO NOT RELATE TO THE PURCHASE OF TRADING ITEMS LIKE MARBLE OR GRANITE. THE ASSESSING OFFIC ER FOUND THAT SUCH EXPENSES INCLUDE AN ITEM OF RS.1,80,000/- UNDER THE NAME C/O LIJO SAKA. SAKA STANDS FOR M/S.SAKA G RANITES, BIJAPUR, A REGULAR SUPPLIER OF GRANITES TO THE ASSE SSEE. FURTHER, IN THE VERY SAME SHEET UNACCOUNTED SALES I N CASH TOTALING TO RS.5,65,533/- WAS FOUND. THE ASSESSEE HAS NOT FILED ANY EXPLANATION IN THIS REGARD. THE ASSESS ING OFFICER FOUND THAT THERE WAS A SEIZURE OF CASH AMOUNTING TO RS.8,15,000/- BY POLICE ON 6-8-1999 FROM ONE SHRI Y OONUS SALIM, SON OF SHRI C.P. ABDULLAH, C/O. CEE PEE MARB LES & GRANITES, VELIMUKKU, MALAPPURAM DIST. WHILE HE WAS TRAVELLING IN A FORD CAR WHICH WAS REGISTERED IN TH E NAME OF M/S. ORMA MARBLE PALACE PVT. LTD. SHRI YOONUS SALI M DID NOT OFFER ANY EXPLANATION AND THEREFORE IT WAS SEIZ ED AND DEPOSITED IN THE COURT BY THE POLICE. IN THE MEANTI ME ASSESSEE CLAIMED OWNERSHIP OF THE AMOUNT CONTENDING THAT IT(S&S)A NO. 139/COCH/2004 & C.O.NO.36/COCH/2005 25 THE MONEY IN QUESTION WAS SENT WITH SHRI YOONUS FOR PAYING TO BANGALORE PARTIES AGAINST PURCHASES MADE FROM TH EM. THE ASSESSING OFFICER DID NOT ACCEPT THE CONTENTION S PUT FORTH BY THE ASSESSEE. FURTHER, THE ASSESSING OFF ICER FOUND THAT MARBLE WORTH RS. 6 LAKHS WAS SOLD TO BIMAPALLY MOSQUE, TRIVANDRUM, WHICH IS FULLY UNACCOUNTED. D URING THE COURSE OF SEARCH, TWO SPUS WERE SEIZED AND ON G OING THROUGH THE SAME CERTAIN ENTRIES WERE FOUND WHICH W ERE NOT ACCOUNTED AND THE ASSESSEE WAS ASKED TO EXPLAIN THE SAME. THE ASSESSEE HAD STATED THAT THE AMOUNT OF RS.1,41, 564/- MARKED AS RECEIPTS FROM STERLING IS ACTUALLY UNACCO UNTED SALES TO THAT PARTY WHICH IS NAMED AS PA KURIAKOSE, GOLD SUPER MARKET, ANGMALLY AND THE ASSESSEE HAD RECEIVE D OF RS.1,42,019/- AS CASH AND GOLD AGAINST THIS SALE. THE ASSESSEE OFFERED THAT THIS AMOUNT MAY BE TREATED AS UNACCOUNTED SALES. SIMILARLY THERE WAS AN ACCOUNT OF DR. MURALI, CHALAKUDY, IN CPU AMOUNTING TO RS.1,03,550/ -, WHICH WAS STATED AS UNACCOUNTED SALES BY THE ASSESS EE. 12.1 FURTHER, ON A PERUSAL OF THE BALANCE SHEET AS ON 30- 8-1995 FURNISHED BY THE ASSESSEE COMPANY TO THE SBT , ANGMALLY, THERE WAS A LIABILITY ITEM OF RS.35 LAKHS UNDER THE HEAD RESERVES & SURPLUS. WHEN THIS WAS CONFRONTED WITH IT(S&S)A NO. 139/COCH/2004 & C.O.NO.36/COCH/2005 26 THE ASSESSEE, IT WAS REPLIED THAT THE BALANCE SHEET WAS PREPARED AS PER THE REQUEST OF THE BANK AUTHORITIES TO OBTAIN BANK LOAN. THE SURPLUS WAS A NOTIONAL FIGU RE AND IT WAS NOT CORRECT. THE BALANCE SHEET SHOWED CORRESPO NDING ASSETS WHICH INCLUDED CLOSING STOCK AT RS.60,20,485 /- AND CASH & DD BALANCE OF RS.10,96,196/-. THE ASSESSIN G OFFICER WAS OF THE VIEW THAT PART OF THIS STOCK AND CASH WAS UNDISCLOSED AND IT WAS TO COVER SUCH UNDISCLOSED ST OCK AND CASH THAT THE LIABILITY OF RS.35 LAKHS THE EXCESS A SSET WOULD HAVE BEEN OF AN IDENTICAL AMOUNT. THUS, THIS CRED IT ENTRY OF RS.35 LAKHS SHOULD REPRESENT INCOME OF THE ASSES SEE U/S.68 OF THE ACT. AS PER THE BALANCE-SHEET, OPENI NG STOCK WAS RS.38 LAKHS I.E. TO SAY THE CLOSING STOCK AS ON 31-3- 1994 WAS IN FACT RS.38 LAKHS. BUT THE CLOSING STOC K AS PER REGULAR BOOKS OF THE ASSESSEE IS ONLY RS.9,33,695/- . THE ASSESSEE HAS DECLARED IN THE BANK THAT THE CLOSING STOCK AS ON 31-3-1995 (OPENING BALANCE AS ON 1-4-1995) WAS R S.38 LAKHS. FROM THE ABOVE FACTS, THE ASSESSING OFFICE R WAS OF THE VIEW THAT THE PURCHASES MADE BY THE ASSESSEE FI RM IN THE ASSESSMENT YEAR 1995-96 WAS TO THE TUNE OF RS.3 8 LAKHS AND NOTHING LESS. FROM THIS, THE DECLARED PURCHA SE PRICE OF RS.9,33,695/- WAS DEDUCTED AND THE BALANCE AMOUN T OF RS.28,66,305/- WAS TREATED AS ASSESSEES UNEXPLAINED IT(S&S)A NO. 139/COCH/2004 & C.O.NO.36/COCH/2005 27 INVESTMENT IN PURCHASES FOR THE ASSESSMENT YEAR 1995-96, U/S.68 OF THE ACT. 12.2 THE ASSESSING OFFICER ALSO FOUND THAT THE ASSE SSEE WAS ENGAGED IN A PARALLEL TRADING IN UNDISCLOSED PU RCHASE AND SALES EVERY YEAR BY RE-INVESTING THE SALE PROCE EDINGS. ON AN ESTIMATE OF SUCH SALES IN EACH YEAR, THE, THE ASSESSING OFFICER ESTIMATED RS. 20 LAKHS EXCEPT FOR THE ASSESSMENT YEAR 1995-96, IN WHICH YEAR ONLY INVESTM ENT IN PURCHASES WERE MADE, AND CONSIDERING THE GROSS PROF IT EARNED WAS AT 25%, THE UNDISCLOSED INCOME IN THESE YEARS, I.E. FOR THE ASSESSMENT YEARS 1996-97 TO 2000-01 WO RKED OUT AT RS. 5 LAKHS IN EACH YEAR. 12.3 THUS, THE ASSESSING OFFICER ESTIMATED THE UNDISCLOSED INCOME CORRESPONDING TO UNDISCLOSED SAL ES AT RS.25,00,000/- AND UNEXPLAINED INVESTMENT IN PURCHA SES AT RS.28,66,305/- IN ASSESSMENT YEAR 1995-96. AGAIN ST THIS ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(APPEALS). 12.4 BEFORE THE CIT(APPEALS), THE ASSESSEE CONTEND ED THAT THERE WAS NO CORROBORATING MATERIALS FOR THE S O-CALLED IT(S&S)A NO. 139/COCH/2004 & C.O.NO.36/COCH/2005 28 ADDITION. THE BALANCE-SHEET WHICH WAS SUBMITTED T O THE BANK WAS ONLY TO PROCURE OD OF RS.60 LAKHS. THIS MATERIAL WAS NOT DETECTED DURING THE SEARCH. THEREFORE, TH IS CANNOT BE A BASIS FOR BLOCK ASSESSMENT. THE ASSESSEE HAS M ADE AN ELABORATIVE ARGUMENT BEFORE THE CIT(APPEALS), WHICH HAS BEEN REPRODUCED AT PAGES 24 AND 25 OF THE OF THE IM PUGNED ORDER OF THE CIT(APPEALS). 12.5 THE LD. CIT(APPEALS) AFTER CONSIDERING THE LE NGTHY ARGUMENTS ADVANCED BEFORE HIM, DELETED THE ENTIRE A DDITION OF RS.28,66,305/- AND RS.25,00,000/-. THE REASONS FOR SUCH DELETION ARE THAT THE ASSESSEE COMMENCED ITS B USINESS IN DECEMBER 1994. THEREFORE, THE ASSESSEE CONTINUE D THE BUSINESS ONLY FOR THREE MONTHS FOR THE ASSESSMENT Y EAR 1995-96. DURING DECEMBER 1994 TO MARCH 1995, THE ASSESSEE HAS MADE PURCHASES ONLY AND THERE WAS NO S ALE. THE EFFECTED PURCHASES DURING THIS PERIOD WERE TO T HE TUNE OF APPROXIMATELY RS.10 LAKHS. THEREFORE, THE OPEN ING STOCK FOR THE FINANCIAL YEAR 1995-96 SHOULD BE RS. 10 LAK HS. FROM 1-4-1995 TO 30-8-1995, TOTAL PURCHASES WERE OF RS.3 2.08 LAKHS AGAINST WHICH THERE WAS A SALE OF RS.21.92 LA KHS. IN THE BALANCE-SHEET FILED BEFORE THE BANK, ASSESSEE H AS SHOWN THE CLOSING STOCK AT RS.38 LAKHS. THUS, IT IS CLE AR THAT THE IT(S&S)A NO. 139/COCH/2004 & C.O.NO.36/COCH/2005 29 OPENING STOCK AS ON 1-4-195 WAS ARTIFICIALLY INFLAT ED BY APPROXIMATELY RS.28 LAKHS. THE BALANCE-SHEET FOR T HE PERIOD ENDING 30-8-1995 SHOWED A CLOSING STOCK AT RS.60.20 LAKHS ON THE ASSET ASIDE WHEREAS THE FIGURE FOR RESERVE A ND SURPLUS SHOWN IN THE BALANCE-SHEET WAS OF RS.35 LAK HS. THE LD. CIT(APPEALS) WAS OF THE VIEW THAT THIS WAS SHOW N AS BALANCING FIGURE IN ORDER TO TALLY THE BALANCE-SHEE T. THE BANK AUTHORITIES HAVE NOT MADE ANY PHYSICAL VERIFIC ATION OF STOCK. THEREFORE, THE LD. CIT(APPEALS) WAS OF THE VIEW THAT THERE WAS NO LITTLE CHANCE TO HOLD THAT THE ASSESSE E HAD A CLOSING STOCK OF RS.60 LAKHS AS ON 30-8-1995. THE ONLY REMOTE POSSIBILITY CAN BE IMAGINED THAT THE ASSESSE E MIGHT HAVE INTRODUCED ITS OWN UNACCOUNTED MONEY AND MADE UNACCOUNTED PURCHASE IN ORDER TO HAVE STOCK OF RS.6 0 LAKHS, BUT THERE IS NO MATERIAL TO SUPPORT THIS FACT. TH ERE IS NO PLACE OF SUCH IMAGINATION WITHOUT ANY CORROBORATION . FURTHER, IT IS ALSO NOT POSSIBLE TO IMAGINE A SURPL US AND RESERVE OF RS.35 LAKHS SHOWN IN THE BALANCE SHEET A S THE ASSESSEE HAD HARDLY DONE BUSINESS DURING THIS PERIO D. THEREFORE, THE LD. CIT(APPEALS) ACCEPTED THE ARGUM ENT OF THE ASSESSEE HELD THAT THE DOCUMENTS SUBMITTED WITH SBT WAS FABRICATED IN ORDER TO PROCURE THE OD LIMIT OF RS.60 LAKHS. IT(S&S)A NO. 139/COCH/2004 & C.O.NO.36/COCH/2005 30 12.6 AT THIS STAGE, THE LD. CIT(APPEALS) TRAVELLED THROUGH THE DECISIONS OF THE VARIOUS COURTS SO AS T O BRING TO TAX THE IMPUGNED AMOUNT, AS HAS BEEN DONE BY THE ASSESSING OFFICER. HOWEVER, THE LD. CIT(APPEALS) W AS OF THE CONSIDERED VIEW THAT NO INCOME CAN BE TAXED UNDER I NCOME TAX UNLESS AND UNTIL IT HAS ARISEN IN REALITY OR DE EMED AS LEGAL FICTION BY ENACTMENT. THE LD. CIT(APPEALS) FURTHER OBSERVED THAT THE HONBLE SUPREME COURT IN PLETHORA OF CASES HAS HELD THAT MERE ENTRY IN THE BOOKS OF ACCO UNTS DOES NOT CREATE ANY INCOME AS SUCH. IN THE CASE OF SU TLEJ COTTON MILL VS. CIT -116 ITR -1 (SC), IT HAS BEEN H ELD THAT THE WAY IN WHICH THE ENTRIES ARE MADE BY AN ASSESSE E IN HIS BOOKS OF ACCOUNTS IS NOT DETERMINATIVE OF THE QUEST ION WHETHER THE ASSESSEE HAS EARNED PROFIT OR SUFFERED ANY LOSS. WHAT IS NECESSARY TO BE CONSIDERED IS THE TRUE NATU RE OF THE TRANSACTION AND WHETHER IN FACT IS HAS RESULT PROFI T OR LOSS TO THE ASSESSEE. TAKING THE PRINCIPLES LAID BY THE A PEX COURT IN THIS DECISION AND DECISIONS OF OTHER HIGH COUR TS, WHICH HAVE BEEN DISCUSSED IN THE APPELLATE ORDER, THE LD. CIT(APPEALS) FINALLY DELETED THE ADDITION OF RS.28, 66,305/-. 12.7 WITH REGARD TO THE ESTIMATION OF UNDISCLOSED INCOME BASED ON THE UNACCOUNTED PURCHASES, RS.5 LAK HS IT(S&S)A NO. 139/COCH/2004 & C.O.NO.36/COCH/2005 31 EACH IN THE ASSESSMENT YEARS 10996-97 TO 2000-01, T HE LD. CIT(APPEALS) WAS OF THE OPINION THAT THE ASSESSING OFFICER HAS MADE A PRESUMPTION ON A PRESUMPTION WITHOUT ANY EVIDENCE. ACCORDINGLY TO THE LD. CIT(APPEALS) TH E FINDING OF THE ASSESSING OFFICER WAS ON A GUESS WORK AND CO NJECTURE WHICH WAS TOTALLY UNWARRANTED AND UNCALLED FOR, FOR THE BLOCK ASSESSMENT. ACCORDINGLY, THE LD. CIT(APPEALS) DEL ETED THE ADDITION OF RS.25,00,000/- ALSO. 12.8 AGAINST THESE DELETIONS OF ADDITIONS MADE BY THE CIT(APPEALS), THE DEPARTMENT IS IN APPEAL BEFORE TH E TRIBUNAL WHEREAS THE ASSESSEE SUPPORTS THE ORDER OF THE LD. CIT(APPEALS) BY WAY OF ITS CROSS OBJECTION. 13. WE HEARD RIVAL SUBMISSIONS. THE LD. COUNSEL FO R THE ASSESSEE REITERATED THE SAME SUBMISSIONS, WHICH WER E ADVANCED BEFORE THE AUTHORITIES. THE LD. DR SUPPOR TED THE ORDER OF THE ASSESSING OFFICER AND RELIED ON THE RE ASONS ADDUCED IN THE ASSESSMENT ORDER. WE FIND THAT TH E LD. CIT(APPEALS) HAS DELETED THE ADDITION OF RS.28,66, 305/- RELYING ON THE DECISION OF THE HONBLE SUPREME COUR T IN THE CASE OF SUTLEJ COTTON MILL VS. CIT -116 ITR -1 (SC), CIT VS. YUNUS KUNJU -189 ITR 672 (KER.), CIT VS. VIGHYAN IT(S&S)A NO. 139/COCH/2004 & C.O.NO.36/COCH/2005 32 CHEMICAL INDUSTRIES -200 ITR 137 (ALL) AND CIT VS. GOPAL RICE MILLS -211 ITR 492 (ALL). FURTHER THE CIT(APPEALS) FOUND THAT ISSUE FINDS ITS ORIGIN FROM THE DOCUMENT RECOVERED FROM BANK IN POST SEARCH ENQUIRY . HENCE, THE LD. CIT(APPEALS) WAS OF THE VIEW THAT TH IS COULD NOT BE SAID A REVELATION OR DISCOVERY OF SEARCH AND THEREFORE, THE ASSESSING OFFICER DETERMINED THE UND ISCLOSED INCOME ON EXTRANEOUS DOCUMENT WHICH HAS NOT DIRECTL Y BEEN FOUND DURING THE SEARCH. THEREFORE, THE LD. FIRST A PPELLATE AUTHORITY WAS OF THE VIEW THAT THE DOCUMENT REFERRE D BY THE ASSESSING OFFICER DOES NOT FALL WITHIN THE DOMAIN O F BLOCK ASSESSMENT. TO THIS PROPOSITION THE LD. CIT(APPEA LS) RELIED ON THE FOLLOWING DECISIONS: A) CIT VS. SHAW WALLACE & CO.LTD. -248 ITR 81; B) NR PAPER & VOARD LTD. VS. DY.CIT -234 ITR 733; C) MALAYIL BANKERS V. ACIT-236 ITR 869; AND D) CIT VS. RAVI KANT JAIN -250 ITR 141. SINCE THE FINDINGS OF THE LD. CIT(APPEALS) IS BASED ON APPRECIATION OF FACTS AND THE PRINCIPLES ENUNCIATED BY DIFFERENT HIGH COURTS AND THAT OF HONBLE SUPREME C OURT, WE UPHOLD THE FINDINGS OF THE LD. CIT(APPEALS) ON THIS SCORE. IT(S&S)A NO. 139/COCH/2004 & C.O.NO.36/COCH/2005 33 13.1 WITH REGARD TO THE OTHER ISSUE, DELETION OF A DDITION OF RS.25,00,000/-, THE ADDITION HAS BEEN MADE BY TH E ASSESSING OFFICER ON THE BASIS OF PRESUMPTIONS WITH OUT ANY EVIDENCE. ACCORDING TO THE LD. CIT(APPEALS), SUCH GUESS WORK AND CONJECTURE IS TOTALLY UNWARRANTED AND UNCA LLED FOR BLOCK ASSESSMENT. THIS BEING THE FACTUAL POSITION, FOLLOWING THE DECISION OF THEE HONBLE MADRAS HIGH COURT IN T HE CASE OF CIT VS. JK NARAYANAN 293 ITR 220, WE UPHOLDING THE ORODER OF THE LD. CIT(APPEALS) ON THIS COUNT ALSO. 14. DELETION OF UNDISCLOSED INTEREST INCOME AMOUNTING T O RS.6,66,800/-: DURING THE COURSE OF SEARCH, A DIARY NAMED ESSAR COLLECTION BOOK WAS FOUND AT THE BUSINESS PRE MISES OF THE ASSESSEE, WHICH WAS NAMED AS AMA-1. IN THIS DIARY SOME ENTRIES WERE FOUND. THE ASSESSEE EXPLAINED THAT THEY ARE PETTY LOANS GIVEN TO TEMPORARY AND CASUAL WORKERS. THE CONTENT IN THE DIARY IS IN SHORT FORM, WHICH IS REPRODUCED HEREUNDER: AMOUNT RS. PS. AMOUNT RS. PS. PAGE A P.J. 15.50 STANDSFOR P.JOHNY 1550 1 B T.C. 9.00 T.CHACKO 900 5 C DR 5.00 ROY DEVASSY 500 10 D C 8.00 CHERIAN 800 15 E T 2.50 THAMPI 250 20 F S 3.00 SATYAN 300 21 IT(S&S)A NO. 139/COCH/2004 & C.O.NO.36/COCH/2005 34 G GC 3.00 G.CHACKOCHAN 390 25 H RK 0.90 RAJENDRAN 90 30 I K 2.00 KANNAN 200 35 J PAINTS 0.50 JOSEPH 50 40 K BK 0.75 BABY 5 0 45 L KC 14.00 KUMARAN 1400 55 M SA 2.50 SANTHOSH 250 - [LEFT SIDE IS SHOWING THE ACTUAL ENTRY IN DIARY AND RIGHT SIDE IS EXPANDED FORM BY THE ASSESSEE] 14.1 ACCORDING TO THE AO, AGAINST THE AMOUNT, INTE REST WAS ALSO MENTIONED. FOR THE SAKE OF CONVENIENCE, THE DETAILS OF ACCOUNT OF M/S. PJ ARE REPRODUCED BELOW: M/S.P.J. DATE AMOUNT BALANCE RS. PS. RS. PS. 15.50 2-11-1999 INT.0.31 3-12-1999 INT.0.31 5-01-2000 INT.0.31 4-02-2000 INT.0.31 14.2 THE ASSESSING OFFICER WAS OF THE VIEW THAT TH E AMOUNT MENTIONED REGARD LOAN AS WELL AS INTEREST IS IN CODED FORM AND IT HAS TO BE READ WITH SOME ADDITIONAL ZER O TO BE ADDED ALONG WITH THE AMOUNT. THE ASSESSING OFFIC ER IT(S&S)A NO. 139/COCH/2004 & C.O.NO.36/COCH/2005 35 DECODED THE AMOUNT WITH ADDITION OF FOUR ZEROS THAT IS IN LAKHS. IN OTHER WORDS, IT IS TO BE READ IN LAKHS ACCORDING TO THE ASSESSING OFFICER. ON THE OTHER HAND, ASSESSE E DECODED IT IN HUNDRED. ACCORDING TO THE ASSESSING OFFICER, IF IT WAS IN HUNDRED, THERE WAS NO REASON WHY IT SHOULD BE CODED FORM. ACCORDING TO THE ASSESSING OFFICER, IF IT IS IN THO USAND, IT NEED NOT BE IN CODED FORM AS THE PRINCIPLE AMOUNT B ECOMES ONLY 15,500 FOR 15.50 AND THE INTEREST 310 FOR 0.31 . THEREFORE, THE ASSESSING OFFICER DECODED THE AMOUNT IN LAKHS HOLDING THAT THE AMOUNT RS.15.50 IN THE CASE OF M/S.PJ SHOULD BE READ AS RS.15,50,000 AND THE INTEREST AMO UNT SHOULD BE READ AS RS.3,100 FOR 0.31. THUS, THE AO DECODED THE ENTIRE AMOUNT AND DETERMINED THE INTEREST FOR F IVE MONTHS @ 24% AT RS.6,66,500/-, WHICH WAS TREATED AS UNDISCLOSED INTEREST INCOME AND ADDED THE SAME TO T HE ASSESSMENT YEAR 2000-01. 14.3 BEFORE THE CIT(APPEALS), IT WAS THE CONTENTIO N OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE ASSESSING OFFICER COULD NOT DECODE THE AMOUNT AT HIS SWEET WILL WITHO UT ANY CORROBORATING MATERIAL. THE ASSESSEE HAD OBTAINED OD OF RS.60 LAKHS FROM SBT AND IF THE ASSESSEE HAD A FUND OF IT(S&S)A NO. 139/COCH/2004 & C.O.NO.36/COCH/2005 36 RS.66 LAKHS, THERE WAS NO NECESSITY TO THE ASSESSEE FOR PROCURING A LOAN FROM SBT. 14.4 THE LD. CIT(APPEALS) AFTER APPRECIATING THE FINDINGS OF THE ASSESSING OFFICER AND CONSIDERING T HE SUBMISSIONS OF THE ASSESSEE THOUGH ACCEPTED THE FIN DING OF THE ASSESSING OFFICER THAT IF THE FIGURE WAS IN HUN DRED OR IN THOUSAND, NO PURPOSE WOULD BE SERVED BY PUTTING IT IN CODES. BUT, ACCORDING TO THE LD. CIT(APPEALS) IF THE ASSES SING OFFICER IS GIVEN THE POWER TO DECODE THE CODED AMO UNT IN TERMS OF THE FIGURE WHICH IS PLATABLE TO HIM, IT MA Y LEAD TO ARBITRARY AND INJUDICIOUS CONCLUSION WHICH MAY NOT BE ACCEPTABLE IN THE EYE OF LAW. BUT AT THE SAME TIM E, THE LD. CIT(APPEALS) ACCEPTED THE CONTENTION OF THE ASSESSE E THAT IF THE ASSESSEE HAD SUCH A HUGE FUND, THEN NO PRUDENT BUSINESS MAN WILL DEPEND ON THE BANK FOR OD. IN T HE ABSENCE OF ANY EVIDENCE, THE LD. CIT(APPEALS)WAS OF THE VIEW THAT UNLESS AND UNTIL THE VERSION OF THE ASSES SEE IS DISPROVED WITH COGENT EVIDENCE, THE SAME HAS TO BE ACCEPTED AND ACCORDINGLY DELETED THE ADDITION MADE BY THE ASSESSING OFFICER ON THIS COUNT. HENCE, THE REVEN UE IS AGGRIEVED AND IN THE CROSS OBJECTION THE ASSESSEE S UPPORTS THE STAND OF THE LD. CIT(APPEALS). IT(S&S)A NO. 139/COCH/2004 & C.O.NO.36/COCH/2005 37 15. HAVING CONSIDERED THE RIVAL SUBMISSIONS, WE FIN D THAT THE LD. CIT(APPEALS) AFTER LOOKING INTO THE WHOLE E PISODE AND APPRECIATING THE FACTS OF THE CASE DELETED THE ADDI TION OF RS.6,66,500/- ON ACCOUNT OF UNDISCLOSED INTEREST IN COME, WITH WHICH WE AGREE AND AFFIRM. WE ALSO FULLY AGRE E WITH THE REASONINGS OF THE LD. CIT(APPEALS). HENCE, O N THIS GROUND ALSO REVENUE FAILS. 16. THE LAST POINT FOR OUR CONSIDERATION THE REVENU ES APPEAL IS IN RESPECT OF DELETION OF SURCHARGE LEVIED U/S.113 OF THE I.T.ACT. WHILE FRAMING THE ASSESSMENT, THE ASSESSING OFFICER HAS LEVIED SURCHARGE. IN APPEAL, THE CIT( APPEALS), THE ASSESSEE CONTENDED THAT AS PER THE AMENDED PROV ISION OF SECTION 113 FOR LEVYING SURCHARGE ON THE TAX DETERM INED UNDER BLOCK ASSESSMENT WAS ONLY IN RESPECT OF THE S EARCHES CONDUCTED FROM 1 ST JUNE 2002 AND NOT BEFORE THAT. THIS ISSUE IS NOW COVERED AGAINST THE ASSESSEE BY THE DE CISION OF THE HONBLE APEX COURT IN THE CASE OF CIT VS. RAJIV BHATARA - 310 ITR 105. RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT, WE SET ASIDE THE ORDER O F THE LD. CIT(APPEALS) ON THIS ISSUE AND ALLOW THE APPEAL OF THE DEPARTMENT IN RESPECT OF LEVY OF SURCHARGE U/S.113 OF THE ACT. IT(S&S)A NO. 139/COCH/2004 & C.O.NO.36/COCH/2005 38 17. THE APPEAL OF THE REVENUE AND THE CROSS OBJECT ION OF THE ASSESSEE ARE PARTLY ALLOWED. SD/- SD/- (SANJAY ARORA) (N.VIJAYKUMA RAN ) ACCOUNTANT MEMBER JUDICIAL M EMBER ERNAKULAM, DATED THE 22 ND JUNE,2010. PM. COPY FORWARDED TO: 1. THE ACIT.,CIRCLE-1(2), ERNAKULAM. 2. M/S. ORMA MARBLE PALACE (P) LTD.,KOTHAKULANGARA, AN GAMALLY. 3. CIT(A)-V, KOCHI. 4. CIT, KOCHI. 5. D.R.