P.C.Kailash Chand Jain, CHENNAI V. ACIT, Kumbakonam

CO 75/CHNY/2011

• Counselvise Citation: [2011] 122 COUNSELVISE.COM (IT) 6376 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 27 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 16-08-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 20-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR I VIJAYAKUMAR
• Assessee Lawyers: LAKSHMICHAND NAHATA
• Keywords: Unexplained investment
• Section: 142(1); 133A; 148; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH C : CHENNAI [BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER] I.T.A NOS. 651 TO 655/MDS/2011 ASSESSMENT YEARS : 2003-04 TO 2007-08 THE ACIT KUMBAKONAM VS SHRI P.C.KAILASH CHAND JAIN 18/5 GANDHIJ ROAD MAYILADUTHURAI 609 001 [PAN - BJMPK1554P] (APPELLANT) (RESPONDENT) C.O. NOS. 71 TO 75/MDS/2011 ASSESSMENT YEARS : 2003-04 TO 2007-08 SHRI P.C.KAILASH CHAND JAIN 18/5 GANDHIJ ROAD MAYILADUTHURAI 609 001 VS THE ACIT KUMBAKONAM (CROSS OBJECTOR) (RESPONDENT) DEPARTMENT BY : DR.I.VIJAYAKUMAR, CIT/DR ASSESSEE BY : SHRI LAKSHMICHAND NAHATA, CA DATE OF HEARING : 20-07-2011 DATE OF PRONOUNCEMENT : 16-08-2011 O R D E R PER BENCH: THIS IS A BUNCH OF FIVE APPEALS BY THE REVENUE AND THE CORRESPONDING CROSS OBJECTIONS BY THE ASSESSEE, FOR ASSESSMENT YEARS 2003-04 TO 2007-08, WHICH ARISE OUT OF A COMMON OR DER OF THE LD. ITA 651 TO 655/11 & CO 71 TO 75/11 :- 2 -: CIT(A), TIRUCHIRAPALLI, DATED 21.1.2011. IN ALL TH ESE MATTERS, EXACTLY IDENTICAL ISSUES ARE INVOLVED, THEREFORE, FOR THE S AKE OF CONVENIENCE AND BREVITY, WE PROCEED TO DECIDE THEM BY A COMMON ORDER. 2. TO UNDERSTAND THE EXACT NATURE OF ISSUES INVOLVE D IN THESE APPEALS, WE WOULD NARRATE THE FACTS OF REVENUES AP PEAL IN I.T.A.NO. 651/MDS/2011, FOR ASSESSMENT YEAR 2003-04. WHILE DISCUSSING THE FACTS OF THIS YEAR, WE WOULD NARRATE THE COMMON FAC TS FOR ALL THE YEARS UNDER APPEAL. 3. THE ASSESSEE IS DOING THE BUSINESS OF PAWN BROKIN G, MONEY LENDING AND PURCHASE/SALE OF JEWELLERY. A SURVEY U /S 133A OF THE ACT WAS CONDUCTED IN THIS CASE ON 22.3.2007. THE ASSES SEE DID NOT FILE RETURN OF INCOME FOR ASSESSMENT YEAR 2003-04, THERE FORE, A NOTICE U/S 148 WAS ISSUED ON 16.11.2007. DURING SURVEY BOOKS OF ACCOUNT OF THE ASSESSEE WERE IMPOUNDED U/S 133(3) OF THE ACT. AFT ER A DILLY-DALLY THE ASSESSMENT WAS FRAMED U/S 144 AS PER THE PROCEDURE LAID DOWN BY THE LAW. THE ASSESSEE WAS DOING MONEY LENDING BUSI NESS IN THE NAME OF SRI MAHARAJ KAILASH BENEFIT FUND. THE ASSESS EE HAS NOT MAINTAINED ANY REGULAR BOOKS OF ACCOUNT. DURING TH E COURSE OF SURVEY, IT WAS NOTICED THAT HE WAS MAINTAINING A DIARY IN WHICH HE HAD NOTED DOWN THE DETAILS RELATING TO HIS BUSINESS ACTIVITIE S. AS PER THIS DIARY, ITA 651 TO 655/11 & CO 71 TO 75/11 :- 3 -: ON 1.11.2006, CERTAIN FIGURES WERE NOTED DOWN. A STATEMENT OF THE ASSESSEE WAS RECORDED WITH REFERENCE TO THE NOTINGS ON THE DIARY. HE STATED THAT DECIMAL POINTS IN THE FIGURES HAVE TO B E IGNORED LIKE; A FIGURE OF ` 10.00 HAS TO BE READ AS ` 1000. AS ON 21.3.2006, TOTAL INVESTMENT IN THIS WAY WAS FOUND TO BE OF ` 2,96,60,320/- WHICH ALSO INCLUDED INTEREST EARNED FROM MONEY LENDING BUSINES S, PURCHASE OF JEWELLERY, INVESTMENT IN CHIT, AMOUNT LENT AGAINST JEWELLERY, AMOUNT LENT AGAINST PRONOTES ETC. IT WAS NOTICED THAT T HE ASSESSEE HAD INVESTED A SUM OF ` 77,74,170/- AGAINST PRONOTES AND HAD ALSO MADE AN INVESTMENT OF ` 72,95,235/- IN JEWELLERY. LIKEWISE, TOTAL AMOUNT LENT AGAINST PAWNED JEWELLERY WAS FOUND AT ` 59.21 LAKHS. INVESTMENT IN A PROPERTY AT CHENNAI TO THE TUNE OF ` 49.7 LAKHS WAS ALSO NOTICED. THE ASSESSING OFFICER ACCEPTED THE SOURCE OF ` 23 LAKHS AS THE EXPLAINED SOURCE OF INVESTMENT FROM THE TOTAL AMOU NT CLAIMED TO HAVE BEEN DECLARED IN VDIS. AFTER CONSIDERING THE HOUSE HOLD EXPENSES AND OTHER EXPENSES, THE ASSESSING OFFICER HAS FINALLY W ORKED OUT THE UNACCOUNTED INVESTMENT PERTAINING TO ASSESSMENT YEA RS 2003-04 TO 2007-08 AS UNDER: ASSESSMENT YEAR AMOUNT ( ` ) 2003-04 70,00,000 2004-05 71,00,000 2005-06 71,00,000 2006-07 75,00,000 2007-08 75,00,000 ITA 651 TO 655/11 & CO 71 TO 75/11 :- 4 -: 4. ON APPEAL, THE LD. CIT(A) HAS REDUCED THE ADDITIONS BY QUANTIFYING THE TOTAL INVESTMENT AS UNDER: PAWN BROKING ADVANCES - ` 59,21,660 STOCK OF JEWELLERY - ` 21,67,308 PRONOTES - ` 30,00,000 TOTAL - ` 1,10,88,968 LESS: BANK LOAN - ` 10,00,000 NET ASSETS - ` 1,00,88,968 LESS: CAPITAL ACCUMULATED - ` 25,00,000 TOTAL INVESTMENTS - ` 75,88,968 5. THE LD. CIT(A) HAS ALSO DIRECTED THE ASSESSING OFFI CER TO APPORTION THIS AMOUNT OF UNEXPLAINED INVESTMENT, I N FIVE YEARS STARTING FROM ASSESSMENT YEAR 2003-04. NOW, THE R EVENUE IS AGGRIEVED AND HAS RAISED THE FOLLOWING COMMON GROUN DS: 1. THE ORDER OF THE LEARNED C.I.T.(APPEALS) IS C ONTRARY TO THE LAW, FACTS AND CIRCUMSTANCES OF THE CASE. 2 . THE ASSESSEE FAILED TO FURNISH ANY INFORMATION SOUGHT U/S 142(1) OF THE INCOME TAX ACT, 1961 AND FAILED TO FU RNISH ANY EXPLANATION WITH REGARD TO INCRIMINATING MATERI AL IMPOUNDED DURING SURVEY. THE ASSESSEE FAILED TO PRO DUCE BOOKS OF ACCOUNTS AND OTHER CORROBORATING EVIDENCE IN SUPPORT OF HIS CONTENTION DURING THE COURSE OF ASSE SSMENT. THE C.I.T.(APPEALS) ALLOWED RELIEF FOR THE ASSESSEE EITHER WITHOUT ANY BASIS OR ON THE BASIS OF MATERIAL FURNI SHED WHICH WAS SUBMITTED FOR THE FIRST TIME BEFORE HIM D URING THE APPEAL PROCEEDINGS. THUS, EITHER THE ORDER IS BAD I N LAW, IF IT IS TAKEN THAT RELIEF HAS BEEN ALLOWED WITHOUT AN Y EVIDENCE IN SUPPORT OF THE SAME OR ON ACCOUNT OF VI OLATION OF RULE 46A OF THE INCOME TAX RULES. 3. THE C.I.T.(APPEALS) OUGHT TO HAVE CONFIRMED THE ADDITIONS ON ACCOUNT OF UNEXPLAINED INVESTMENT IN JEWELLERY T O THE EXTENT OF ` 72,95,235/- WHEN CORROBORATING EVIDENCE WAS FOUND DURING THE COURSE OF SURVEY IN THE FORM OF CO DED NOTINGS. THE C.I.T.(APPEALS) FAILED TO TAKE NOTE OF THE FACT THAT THE ASSESSEE ADMITTED DURING THE SURVEY THAT I N THE DIARY, ` 10,000/- HAS BEEN WRITTEN AS 100.00. THE ITA 651 TO 655/11 & CO 71 TO 75/11 :- 5 -: UNACCOUNTED PURCHASE HAS BEEN WRITTEN AS ` 72,952.35. THE C.I.T.(APPEALS) OUGHT TO HAVE CONFIRMED THIS AD DITION IN ABSENCE OF ANY EXPLANATION COMING FROM ASSESSEE TO THE SOURCE OF THE SAME. 4. THE C.I.T.(APPEALS) OUGHT TO HAVE CONFIRMED THE AMOUNT ADVANCED ON PRONOTES TO THE EXTENT OF ` 77,74,170/-. THIS FIGURE WAS ALSO AVAILABLE IN THE NOTINGS OF THE DIA RY. NO EXPLANATION WAS FURNISHED. THE C.I.T.(APPEALS) OUGH T TO HAVE CONFIRMED ADDITION WITH REGARD TO AMOUNT LENT ON PRONOTES ON THE BASIS OF ADMISSIONS MADE DURING THE COURSE OF SURVEY EXPLAINING THE MANNER OF EXPRESSIN G ACTUAL AMOUNT IN A CODED FORM IN ABSENCE OF ANY EXPLANATION COMING FROM ASSESSEE TO THE SOURCE OF T HE SAME. 5. THE C.I.T.(APPEALS) OUGHT TO HAVE CONFIRMED THE INVESTMENT IN CHIT TO THE EXTENT OF ` 3,45 ,530/ -. 6. THE C.I.T.(APPEALS) OUGHT NOT TO HAVE ACCEPTED T HE EXPLANATION OF THE ASSESSEE WITH REGARD TO CAPITAL ACCUMULATED TO THE EXTENT OF ` 25 LAKHS WITHOUT CORRESPONDING INCOME BEING OFFERED FOR TAX IN THE E ARLIER YEARS AND WITHOUT ANY BASIS AND ONLY ON ASSUMPTIONS AND SURMISES. 7. THE LEARNED C.I.T.(APPEALS) OUGHT TO HAVE CONFIR MED THE ADDITION OF ` 49.73 LAKHS BEING UNACCOUNTED INVESTMENT IN PURCHASE OF RESIDENTIAL PROPERTY AT CHENNAI IN ABSE NCE OF ANY EXPLANATION COMING FROM ASSESSEE TO THE SOURCE OF THE SAME. 8. ANY OTHER GROUND THAT MAY BE ADDUCED DURING THE COU RSE OF APPEAL PROCEEDINGS. 6. IN THE CROSS OBJECTION, THE ASSESSEE HAS RAISED FOL LOWING SAMPLE GROUNDS WHICH ARE IDENTICAL IN EACH CASE: THE ORDER OF THE LEARNED CIT(APPEAL) IS UNJUST AN D INCORRECT. THE ORDER IS AGAINST THE PRINCIPLE OF NATURAL JUSTI CE. THE LEARNED CIT (APPEAL) ERRED IN IGNORING THE POIN TS THAT HAS PRODUCED BEFORE HIM IN CONNECTION WITH SOURCE OF IN VESTMENT. ITA 651 TO 655/11 & CO 71 TO 75/11 :- 6 -: 1. THE LEARNED CIT (APPEAL) OUGHT TO HAVE DELETED THE ENTIRE ADDITIONS WHICH WERE MADE ON ASSUMPTIONS AND NOT ON FACTS AND EVIDENCES. 2. THE LEARNED CIT (APPEAL) OUGHT TO HAVE APPRECIAT ED THAT ITO HAS NOT CONSIDERED THE ENTIRE SOURCES WHICH ASSESSE E HAS PRODUCED AND THEREBY DENYING RULES OF NATURAL JUSTI CE. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE ADVANC ED AT THE TIME OF HEARING OF OBJECTION PETITION, WE PRAY THE HON'BLE ITAT TO DELETE THE ENTIRE I ADDITIONS. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE CAREFULLY PERUSED THE RECORDS. AFTER COGITATING THE FACTS, EVIDENCE AND OTHER MATERIAL ON RECORD, WE HAVE BEEN ABLE TO CULL OUT THE FACTS THAT THE ASSESSEE HAD, AS PER THE ASSESSING OFFICER, MADE IN VESTMENT OF ` 2.96 CRORES IN RESPECT OF PURCHASE OF JEWELLERY/ PROPER TY. WHEN ASKED TO DO THE ASSESSEE EXPLAINED THE SOURCE(S) OF THE INVE STMENTS BUT THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE EXPLAN ATION OF THE ASSESSEE REGARDING THE SOURCE THEREOF, HENCE, HE HA S ADDED THE ENTIRE SUM OF INVESTMENT IN DIFFERENT ASSESSMENT YE ARS VIZ. ASSESSMENT YEARS 2003-04 TO 2007-08. IT IS AN UNDISPUTED FAC T THAT DURING THE SURVEY, A DIARY WAS FOUND WHICH WAS SEIZED. THE LD. CIT(A) HAS SUBSTANTIALLY DELETED THE ADDITION. ACCORDING TO T HE LD.CIT/DR, DR.I.VIJAYAKUMAR, THE IMPUGNED DELETION IS NOT SUPP ORTED BY ANY EVIDENCE; OR IN ANY OTHER CASE IT IS BASED ON MAT ERIAL FURNISHED FOR THE FIRST TIME BEFORE HIM. IN SO FAR AS THE DELE TION OF THE ADDITION OF ` 72,95,235/-, OUT OF THE TOTAL ADDITION MADE ON ACC OUNT OF ITA 651 TO 655/11 & CO 71 TO 75/11 :- 7 -: UNEXPLAINED INVESTMENT IN JEWELLERY IS CONCERNED, T HE RELEVANT FACTS ARE THAT DURING SURVEY, BOOKS OF ACCOUNT, DOCUMENTS AND DIARIES WERE IMPOUNDED. THE ASSESSEE WAS NOT MAINTAINING REGULA R BOOKS OF ACCOUNT. HE WAS RECORDING BUSINESS TRANSACTIONS IN A DIARY. THIS DIARY IS STATED TO BE IN RELATION TO THE BUSINESS TRANSACTIONS DONE BY THE ASSESSEE. THE ASSESSEE EXPLAINED THAT HE AND OTHER MEMBERS OF THE FAMILY HAD SOLD DIAMONDS AND REALIZED THE SALE PROCEEDS WHICH WERE INVESTED IN THE IMPUGNED INVESTMENTS INCLUDING THE INVESTMENT IN GOLD JEWELLERY. ACCORDING TO ASSESSEE, THESE WERE DECLARED TO CIT UNDER VDIS ALSO. THE TABLE AS EXTRACTED BY THE ITO IN PARAGRAPH 4 OF HIS ORDER IS AS UNDER: P ARTICU L AR S AS ON AS O N 23 / 10 / 2005 2 3 / 10 / 2006 CAS H 60 1 . 65 CAS H 4 23. 00 R E D E MPTI O N 9 2 ,78 1 . 10 G 1 3 1 , 487 . 60 OF P AW N JE WE L S INT E R EST 29 , 03 8. 05 P 7 2 , 59 2 . 35 SALE S 100 , 124.30 K 8 , 946 . 30 P 74,058 .10 P 77 , 74 1. 7 0 C HIT 3 , 455 . 30 29 6 , 6 0 3.2 0 285 , 006 . 45 25 0 . 00 100 . 00 260 . 00 3 1 0 . 00 29 5 , 525 . 4 5 676 . 75 29 6 , 603 .2 0 ITA 651 TO 655/11 & CO 71 TO 75/11 :- 8 -: 8. BASED ON THE ABOVE STATEMENT, THE ASSESSING OFFICE R HAS INFERRED THAT TOTAL INVESTMENT BY THE ASSESSEE DURI NG THESE YEARS IS ` 2,96,60,320/-. HE HAS FURTHER MADE AN ADDITION OF ` 4 LAKHS ON ACCOUNT OF WITHDRAWALS, BUT GRANTING DEDUCTION OF ` 9 LAKHS FOR INTEREST, HE HAS APPORTIONED A SUM OF ` 2,91,66,260/- FOR FIVE YEARS. WITH REFERENCE TO THE ABOVE TABULAR STATEMENT, BASE D ON THE DOCUMENTS FOUND DURING SURVEY, THE EXPLANATION OF T HE LD.AR IS THAT ENTIRE ASSESSMENT IS BASED ON THIS STATEMENT WHICH IS, IN FACT, A CASH FLOW STATEMENT AND NOT BALANCE SHEETS AS ON 23.10 .2005 AND 23.10.2006 AS HAS BEEN OBSERVED BY THE ASSESSING OF FICER. THIS SUBMISSION WAS FOUND TO BE CORRECT BY THE LD. CIT(A ). BEFORE US SIMILAR ARGUMENTS WERE ADVANCED BY BOTH THE PARTIES . WE ARE ALSO UNABLE TO ACCEPT THE CONCLUSION OF THE ASSESSING OF FICER TO TREAT THE ABOVE TABULAR STATEMENT AS BALANCE SHEETS AS ON 23.10.2005 AND 23.10.2006, RATHER IT CAN BE TREATED AS A CASH FLOW STATEMENT. IF THIS STATEMENT IS READ AS A CASH FLOW STATEMENT, IT WOUL D GIVE OPENING BALANCE, LOAN ON PAWN JEWELS REDEEMED, PRONOTES RED EEMED, SALES AND INTEREST. THIS STATEMENT WILL ALSO EXHIBIT ADV ANCES MADE TOWARDS PAWN LOANS, PRONOTES SO ALSO TOWARDS THE PURCHASES MADE. IN SUCH CIRCUMSTANCES, THE OVERALL PICTURE, AS DEPICTED BY THE CASH FLOW STATEMENT, WOULD BE AS UNDER: ITA 651 TO 655/11 & CO 71 TO 75/11 :- 9 -: CASH FLOW STATEMENT 23/10/2006 OPENING BALANCE 60,165 PAWN LOAN ADVANCED 1,31,48,780 LOAN ON PAWN JEWEL REDEEMED 92,78,110 PRONOTE ADVANCES 77,74,170 PRONOTES REDEEMED 74,05,810 PURCHASES 72,95,235 SALES 1,00,12,430 EXPENSES 8,94,630 INTEREST 29,03,805 CHIT CONTRIBUTIONS 3,45,530 OTHERS 25,000 10,000 26,000 31,000 CLOSING BALANCE 42,300 2,96,60,320 2,95,92,645 67,675 9. FROM THE RECORDS BEFORE US, WE CAN CULL OUT THE T OTAL INVESTMENTS, AS PER THE INVENTORY OF THE PAWN LOANS AND INVENTORY OF STOCK, AS ON 22.3.2007, THE DATE OF SURVEY, BE AS UNDER: 1. TOTAL ADVANCE AS PER PAWN REGISTERS ` 59,21,660 2. STOCK OF GOLD JEWELS (TRADING) 2451 GRAMS 3. STOCK OF SILVER JEWELS (TRADING) 16.804 KGS 4. PRONOTE ADVANCE FIXED AT ` 30,00,000 10. THE SUBMISSION OF THE LD.AR BEFORE US IS THAT TH E STOCKS IF VALUED AT MARKET PRICE, WILL GIVE A VALUE OF ` 18,37,950/- FOR GOLD AND ` 3,29,358/- FOR SILVER AND THE TOTAL VALUE OF STOCK AS ON 22.3.2007 WILL BE ` 21,67,308/-. IT WAS ARGUED THAT THE ASSESSEE HAD STATED DURING SURVEY THAT THE JEWELS WERE REPLEDGED WITH BANK FOR RAISING LOANS TO THE TUNE OF ` 25 LAKHS. IN OUR CONSIDERED OPINION, THESE FACTS HAVE TO ITA 651 TO 655/11 & CO 71 TO 75/11 :- 10 - : BE ACCEPTED TO BE CORRECT WHICH ARE BASICALLY CULLE D OUT FROM THE INCRIMINATING EVIDENCE AND THERE IS NO CONTRARY EVI DENCE WITH THE ASSESSING OFFICER IN THIS REGARD. IT WAS ARGUED TH AT THE ASSESSEE HAD FILED RETURN OF INCOME FOR THE YEAR ENDED 31.3.2003 AND DISCLOSED THE AVAILABILITY OF FUNDS FOR INVESTMENT IN HIS BALANCE SHEET WHICH ACCOMPANIED THE RETURN AT ` 11,86,966/-. THE FACT THAT THE ASSESSEE HAD DECLARED SUBSTANTIAL INCOME IN VDIS AND HAS PAI D DUE TAXES THEREON AND HAS SOLD DIAMONDS FOR A TOTAL SUM OF ` 61,21,450/- IN HIS NAME AND FOR ` 37,31,450/- IN THE NAMES OF OTHER MEMBERS OF HIS FAMILY WHO HAD MADE SIMILAR DECLARATIONS UNDER VDIS AND ALL THESE ALONGWITH ACCRETION OF INCOME FROM 1993-94 TO 2004- 05 AFTER CONSIDERING THE INVESTMENT OF ` 47 LAKHS IN THE PROPERTY AT CHENNAI. WE HAVE CIRCUMSPECTED THE ENTIRE RECORD AND THE SUB MISSIONS OF THE PARTIES AND HAVE FOUND THAT THE ASSESSING OFFICER H AS NOT DISPUTED THAT THE ASSESSEE AND OTHER MEMBERS OF HIS FAMILY HAD MA DE DECLARATION(S) UNDER VDIS AND WITHOUT DISPUTING THI S WITH THE HELP OF EVIDENCE, THE ASSESSING OFFICER HAS TO ACCEPT THIS CLAIM OF THE ASSESSEE TO BE CORRECT WHICH IS SUBJECT TO VERIFICATION WITH REFERENCE TO THE CERTIFICATE ISSUED U/S 97 OF THE VDIS BY THE LD. CI T(A). IF THIS CASH FLOW STATEMENT IS ACCEPTED TO BE CORRECT, AS WE ARE ACCEPTING IT TO BE CORRECT, THE INVESTMENT IN CHENNAI PROPERTY STANDS EXPLAINED HENCE, INCLUDING THE PURCHASE OF GOLD JEWELLERY, ADVANCE T OWARD PAWN LOANS ITA 651 TO 655/11 & CO 71 TO 75/11 :- 11 - : ETC ALSO STAND EXPLAINED. WE HAVE FOUND IT FOR A F ACT THAT THE ASSESSING OFFICER HAS BEEN HARPING ON THE NOTING MA DE IN THE DIARY AND IS NOT WRONG IN DOING SO AT THE SAME TIME HE HA S NO RIGHT TO CONSIDER THIS DIARY AS A BALANCE SHEET FOR TWO DI FFERENT DATES AS HE HAS DONE. THIS ACTION OF THE ASSESSING OFFICER IS UNJUSTIFIED AND UNCALLED FOR AND CANNOT BE ACCEPTED. THIS STATEMEN T HAS TO BE TREATED AS A CASH FLOW STATEMENT ALTHOUGH IT MAY NOT HAVE B EEN PROPERLY MADE, YET, WHEN THE ASSESSING OFFICER IS RELYING ON THIS VERY DOCUMENT, HE HAS TO RELY ON THE SAME IN ITS CORRECT PERSPECTIVE. AS HAS BEEN RIGHTLY POINTED OUT BY THE LD.AR AND WHICH HAS ALSO ACCEPTED BY THE LD. CIT(A) THAT FROM THE SAME DIARY IT IS EV IDENT THAT THE ASSESSEE USED TO DRAW A CASH FLOW STATEMENT ONLY AT INTERVALS OF HIS CHOICE AND THEY ARE NOT BALANCE SHEETS AS HAS BEEN CAPITULATED BY THE ASSESSING OFFICER. IN THIS REGARD, ENTRIES FOR JUN E 2006 WHICH CAN BE TABULATED ARE AS UNDER: CASH FLOW STATEMENT 24/06/2006 OPENING BALANCE 60,165 PAWN LOAN ADVANCED 6,75,540 LOAN ON PAWN JEWEL REDEEMED 7,49,020 PRONOTE ADVANCES 10,60,035 PRONOTES REDEEMED 4,52,945 PURCHASES 9,64,960 SALES 9,57,470 EXPENSES 79,570 INTEREST 21,15,075 CHIT CONTRIBUTIONS 17,280 OTHERS 15,235 60,440 BANK 1,80,000 49,755 BANK 1,77,000 ACHI 30,000 CLOSING BALANCE 1,07,310 33,06,930 33,06,930 ITA 651 TO 655/11 & CO 71 TO 75/11 :- 12 - : 11. THUS, OUR ABOVE CONCLUSION GETS CORROBORATED FROM T HE VERY DIARY WHICH WAS FOUND AND SEIZED DURING SURVEY PROC EEDINGS. IN THE REGISTER PERTAINING TO PAWN LOANS AND THE INVENTORY OF THE STOCK-IN- TRADE MADE DURING SURVEY ALSO SUPPORTS THE CONTENTI ON OF THE ASSESSEE. IN ANY CASE, WHATEVER WAS FOUND DURING S URVEY IS AN EVIDENCE AGAINST THE ASSESSEE WHICH CAN BE USED AS A MATERIAL TO MAKE ADDITION/ASSESSMENT TO TAX IN ASSESSEES HAND S IN CONNECTION WITH ANY INVESTMENT SO FOUND. BUT NO ADDITION CAN BE MADE ON SIMPLY ON SURMISES AND CONJECTURES AND ILLEGAL INFERENCES DRAWN THEREFROM. 12. REGARDING DIAMONDS ALLEGEDLY PURCHASED WITH REFEREN CE TO ASSESSMENT YEAR 2003-04, IS STATED TO BE OUT OF TRA NSACTIONS OF SALE OF DIAMONDS MADE IN 2000 TO SOME JEWELERS WHICH WAS LA TER CANCELLED IN THE MONTH OF APRIL OR MAY 2002. THE SUM PAYABLE BY THE JEWELERS TOWARDS OLD SALES IS FOUND TO SET OFF AGAINST THIS BILL. THUS, HOW THESE TRANSACTIONS CAN BE EQUATED WITH INVESTMENTS HAVING BEEN MADE BY THE ASSESSEE. THUS, THE FINAL SCENARIO WHICH WILL EMERGE FROM THE INVESTIGATION MADE ON THE DATE OF SURVEY REGARDING INVESTMENT WILL BE AS UNDER: PAWN BROKING ADVANCES 59,21,660 STOCK OF JEWELLERY 21,67,308 PRONOTES 30,00,000 TOTAL 1,10,88,968 LESS: BANK LOAN 10,00,000 NET ASSETS 1,00,88,968 ITA 651 TO 655/11 & CO 71 TO 75/11 :- 13 - : 13. THE ASSESSEE IS A MONEY LENDER AND IS CHARGING INTE REST @ 24% PER ANNUM. THE ASSESSEE HAD A TOTAL CAPITAL AS ON 31.3.1993 OF ` 11,86,966/-. THIS BUSINESS WOULD HAVE DEFINITELY R ESULTED IN INCREASE OF THE CAPITAL AS ON 31.3.2003. THE LD. CIT(A) HAS WORKED OUT THIS CAPITAL AT ` 25 LAKHS BY TAKING ONLY HALF OF THE PRINCIPAL CAPI TAL BY APPLYING THE RATE OF 24% OF INTEREST PER ANNUM FOR 10 YEARS. AS ON 31.3.2003 THE NET ASSETS SO FOUND AND AS IS EVIDENT FROM THE ABOVE TABLE ARE ` 1,00,88,968/- AND RESULTANTLY, THE LD. CIT(A) HAS DIRECTED TO ASSESS THE REMAINING ` 75,88,968/- AS INCOME IN FIVE YEARS IN EQUAL AMOUNTS. THE DEPARTMENT HAS DISPUTED THIS ACTION O F THE LD. CIT(A) WHEREAS THE ASSESSEE HAS ASSAILED EVEN THIS ADDITIO N. 14. AFTER HEARING BOTH SIDES, WE ARE UNABLE TO UNDERST AND AS TO WHY THE LD. CIT(A) HAS WORKED OUT HIS FIGURE BY TAK ING 50% OF THE PRINCIPAL WHEN THE 100% OF THE PRINCIPAL HAS BEEN T REATED TO BE AVAILABLE AS ON 31.3.1993, THE LD. CIT(A) SHOULD HA VE WORKED OUT THE AVAILABILITY OF CAPITAL AT THE SAME RATES WHICH WOU LD COME TO ` 50 LAKHS INSTEAD OF ` 25 LAKHS. ANOTHER ARGUMENT OF THE LD.AR IS THAT T HE ASSESSING OFFICER HAS NOT CONSIDERED AND SO AS THE LD. CIT(A) THE INVESTMENT CLAIMED IN THE NAME OF OTHER MEMBERS OF THE FAMILY. MOREOVER, IT WAS VEHEMENTLY ARGUED THAT THE ENTIRE ADDITION IS BASED ON CONJECTURES AND SURMISES. WE ARE IN AGREEMENT W ITH THE LD.AR THAT A STATEMENT RECORDED DURING SURVEY HAS NO EVIDENTIA RY VALUE IN VIEW OF ITA 651 TO 655/11 & CO 71 TO 75/11 :- 14 - : THE DECISION OF THE HON'BLE MADRAS HIGH COURT REN DERED IN THE CASE OF CIT VS S.KHADER KHAN SON, 300 ITR 157. THE FACT THAT THE ASSESSEE AS WELL AS THE OTHER MEMBERS OF HIS FAMILY HAD FILE D A DECLARATION UNDER VDIS OF 1997 AND PAID THE TAX DUE OR ` 23 LAKHS HAS NOT BEEN DISPUTED BY THE DEPARTMENT. THE ASSESSEE AND OTHER MEMBERS OF HIS FAMILY HAD DECLARED INCOME OF ABOUT ` 80 LAKHS WHICH WERE FORMED INTO JEWELLERY, ADVANCES, CASH BALANCE, ETC. OUT O F THIS AMOUNT, THE ASSESSEE HAS STATED TO SPENT ` 47 LAKHS AS ADVANCE FOR PURCHASE OF PROPERTY IN CHENNAI, BALANCE AMOUNT WAS AVAILABLE W ITH HIM FOR HIS BUSINESS PURPOSES. HE WAS DOING MONEY LENDING AND OTHER RELATED BUSINESS FROM ASSESSMENT YEAR 1997-98 TILL DATE. I N THIS BUSINESS, ALONGWITH THE ASSESSEE HIS OTHER MEMBERS OF THE FAM ILY WERE INVOLVED, SO IT CANNOT BE RULED OUT THAT THE MONIES ACCUMULAT ED OVER THE YEARS WOULD HAVE BEEN INVESTED IN VARIOUS FORMS. THE ASS ESSING OFFICER HAS NOT CONTROVERTED OR DENIED THE DECLARATION OF THE INCOME IN VDIS BY THE ASSESSEE AND OTHER MEMBERS OF HIS FAMILY. THUS , IN OUR CONSIDERED OPINION, SIMPLY RELYING ON THE DIARY IN HIS OWN WAY AND MAKING A HIGH PITCH ASSESSMENT BY SPREADING IT IN FIVE YEARS IS AGAINST ALL KNOWN CANNONS OF LAW. THE ASSESSING OFFICER IS WRONG IN BRINGING THE ENTIRE AMOUNT TO TAX IN ASSESSEES HANDS ALONE AND NOT CONSIDERING THE SAME IN THE HANDS OF OTHER MEMBERS OF HIS FAMIL Y. IF WE CONFIRM THIS ADDITION IT WILL BE A WRONG PRECEDENT WHERE AN Y ADDITION CAN BE ITA 651 TO 655/11 & CO 71 TO 75/11 :- 15 - : MADE BASED ON A DOCUMENT FOUND DURING SURVEY BY CON STRUING THE WRITING THEREOF IN A PARTICULAR MANNER BY THE ASSES SING OFFICER BASED ON HIS SURMISES AND CONJECTURES AND SUCH HIGH PITCH ADDITIONS WOULD BE THE PURPOSE OF FISCAL LOSS. ACCORDINGLY, WE ARE SATISFIED THAT THE ENTIRE INVESTMENTS STAND EXPLAINED ON RECORD. THER EFORE, WE MODIFY THE ORDER OF THE LD. CIT(A) BY ACCEPTING THE VDIS D ECLARATIONS NOT ONLY IN THE HANDS OF THE ASSESSEE BUT ALSO BY OTHER MEM BERS OF HIS FAMILY. WE SET ASIDE THE FINDINGS OF THE LD. CIT(A) WHERE HE HAS MADE ESTIMATIONS IN HIS OWN WAY BY IGNORING THE AVAILAB ILITY OF FUNDS WITH THE ENTIRE FAMILY. CONSEQUENTLY, WE DISMISS THE AP PEALS OF THE REVENUE AND ALLOW THE CROSS OBJECTIONS OF THE ASSES SEE. 15. IN THE RESULT, ALL THE APPEALS FILED BY THE REVEN UE ARE DISMISSED WHEREAS THE CROSS OBJECTIONS OF THE ASSESSEE ARE AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16-08-2011. SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (HARI OM MARATHA) JUDICIAL MEMBER DATED: 16 TH AUGUST, 2011 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR