PRAMOOD DARDA, Jaipur V. DCIT, Jaipur

ITA 104/JPR/2011

• Counselvise Citation: 10423114 RSA 2011
• Duration Of Justice: 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 07-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VINOD JOHARI
• Assessee Lawyers: G G MUNDRA
• Keywords: Income from undisclosed sources; Search and seizure; Loose papers; Document seized; Documents seized
• Section: 132

Judgement Text

1 ITA 104-11 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH B JAIPUR BEFORE SHRI R.K. GUPTA AND SHRI N.L. KALRA ITA NO. 104/JP/2011 ASSTT. YEAR : 2008-09. SHRI PRAMOD DARDA, VS. THE DCIT, CENTRAL CIRCLE- 2, 403, ROYAL ENSIGN, JAIPUR. PRITHVIRAJ ROAD, JAIPUR. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI G.G. MUNDRA RESPONDENT BY : SHRI VINOD JOHARI DATE OF HEARING : 20.09.2011. DATE OF PRONOUNCEMENT : 21.10.2011. ORDER DATE OF ORDER : 21/10/2011. PER R.K. GUPTA, J.M. THE ONLY ISSUE IN THE APPEAL OF THE ASSESSEE IS AG AINST CONFIRMING THE ADDITION OF RS. 50,36,125/- MADE BY AO ON ACCOUNT OF INCOME ALL EGEDLY DECLARED SHORT OUT OF INCOME SURRENDERED DURING THE COURSE OF SEARCH. 2. THE BRIEF FACTS OF THE CASE DISCUSSED BY LD. CIT (A) IN HIS ORDER IN PARA 2 AND 2.1 AT PAGES 2 TO 4 ARE AS UNDER :- S EARCH AND SEIZURE ACTION WAS CARRIED OUT IN RMC GRO UP, WHERE APPELLANT IS ONE OF THE MEMBER APPELLANT FILED RETURN DECLARI NG TOTAL INCOME OF RS. 9,98,29,729/- INCLUDING THE SURRENDER OF FOLLOWING AMOUNT UNDER DIFFERENT HEADS.: 2 STOCK 9,33,61,239/- JEWELLERY 17,00,000/- INVESTMENT IN RENOVATION OF HOUSE NO 403, ROYAL ENS IGN, PRITHVI RAJ ROAD, JAIPUR 10,00,000/- INVESTMENT IN RENOVATION OF HOUSE NO 344, ANANDPURI , ADARSH NAGAR, JAIPUR 8,00,000/- CASH 10,00,000/- MISCELLANEOUS 5,00,000/- TOTAL 9,83,61,239/- 2.1 A.O. NOTED THAT ANN. A-I OF PANCHNAMA OF RESID ENCE NAMELY 403, ROYAL ENSIGN, BEING DIARY CONTAINED TIME PERIOD-WIS E/DATE-WISE DETAILS OF RECEIPT OF CASH OF UNDISCLOSED SALES AND / OR UNDER BILLING OF SALES AS WELL AS UNDISCLOSED FUNDS RECEIVED IN CASH FROM ONE SH. NIR MAL KUAMR BARDIYA, IN WHOSE CASE ALSO, SEARCH WAS CONDUCTED SIMULTANEOUSL Y. ANN.A-9 OF PANCHNAMA OF. ANOTHER PREMISES OF THE APPELLANT NAM ELY E-1 0, ANAND PUN ALSO CONTAINED ENTRIES IN RESPECT OF RECEIPT OF UND ISCLOSED MONEY/FUNDS FROM SAID SH. NIRMAL KUMAR BARDIAYA ON DIFFERENT DA TES. THUS TOTAL UNDISCLOSED FUNDS OF RS. 16.61 LAKHS WAS RECEIVED B ETWEEN 1.1.06 AND 1.6.2007 FROM NIRMAL KUMAR BARDIYA AS PER ENTRIES C ONTAINED IN A-1. MOREOVER, UNDISCLOSED FUNDS AMOUNTING TO RS. 123 LA KHS WAS RECEIVED AS PER ENTRY CONTAINED IN A-9 FROM 01.05.07 TO 18.8.07 . SOME OF THE ENTRIES WERE OVERLAPPING BETWEEN A - 1 AND A-9 AND NET AMOU NT OF RS. 67 LAKHS WHICH WAS INCREASED TO RS. 87 LAKHS WAS FOUND TO BE THE ADDITIONAL FUND RECEIVED BY THE APPELLANT. THUS TOTAL UNDISCLOSED M ONEY AMOUNTING TO RS. 1748 LAKHS (RS. 1661 + RS 87) WERE RECEIVED BY THE APPELLANT, OUT OF WHICH 684 LAKHS WAS ADMITTED BY SH. NIRMAL KUAMR BARDIYA TO HAVE BEEN GIVEN BY HIM AND SURRENDERED BY HIM. 3 DESCRIPTION AMOUNT (RS.) UNDISCLOSED INCOME AS CONTAINED IN ANN.A- I RS. 16, 61,50,000/- AMOUNT FORMING PART OF A-9 RS. 1,57,00,000/- GROSS TOTAL RS. 18,18,50,000/- LESS:- AMOUNT COMMON IN BOTH ANNEXURE RS. 70,0 0,000/- NET TOTAL RS 17,48,50,000/- A.O. NOTED THAT ON THE OTHER HAND, TOTAL ASSETS DEC LARED AND SURRENDERED INCLUDING STOCK OF SH. NIRMAL KUAMR BARDIYA OF RS. 6,84,53,136/- IS AS FOLLOWS:- S.NO. HEAD UNDER WHICH AMOUNT SURRENDERED AMOUNT (RS.) NAME OF THE ASSESSEE IN WHOSE HANDS DECLARATION MADE & A.Y. 1 STOCK 9,33,61,239/- SH. PRAMOD DARDA, PROP. M/S P.D. GEMS, JAIPUR A.Y 2008-09 2 JEWELLERY 17,00,000/- SH. PRAMOD DARDA, PROP. MIS P.D. GEMS, JAIPUR A.Y2008- 09 3 RENOVATION IN HOUSE NO. 344, ADARSH NAGAR, JAIPUR 8,00,000/- SH. PRAMOD DARDA, PROP. M/S P.D. GEMS, JAIPUR A.Y 2008- 09 4 RENOVATION IN HOUSE NO. 403, ROYAL ENSIGN JAIPUR 10,00,000/- SH. PRAMOD DARDA, PROP. MIS P.D. GEMS, JAIPUR A.Y 2008- 09 5 CASH L0,00,000/- SH. PRAMOD DARDA, PROP. M/S P.D. GEMS, JAIPUR A.Y 2008- 09 6 MISC. EXPENSES 5,00,000/- SH. PRAMOD DARDA, PROP. M/S P.D. GEMS, JAIPUR A.Y 2008- 09 7 STOCK 30,00,000/- M/S RAJ RATAN JEWELERS PVT. LTD, JAIPUR. A.Y 2008-09 (TO BE CONSIDERED SEPARATELY) 8 TOTAL 10,13,61,239/- 9 STOCK 6,84,53,136/- SH. NIRMAL KUMAR BARDIA A.Y 2008-09 10 GRAND TOTAL RS. 16.98,14,375/- 4 THUS AS AGAINST A TOTAL FUNDS OF RS. 17,48,50,000/- AS PER SEIZED DOCUMENTS/LOOSE PAPERS, ASSETS WORTH RS. 16,98,14,3 75/- ALONE HAVE BEEN DECLARED BY THE APPELLANT AS WELL AS SH. NIRMAL KUA MR BARDIYA. A.O. NOTED THAT AFTER EXCLUSION OF THE AMOUNT DECLA RED AND SURRENDERED BY THE SAID SH. NIRMAL KUAMR BARDIYA FROM THE TOTAL FU NDS AS MENTIONED IN THE SAID ANN. (A-I & A-9), A SUM OF RS. 10,63,97,364/- IS UNDISCLOSED INCOME OF THE APPELLANT. AS AGAINST THIS AMOUNT/FUND OF RS. 10,63,97,364/-, ASSETS WROTH RS. 10,13,61,239/- ALONE HAVE BEEN DECLARED BY THE APPE LLANT, THEREBY THE A.O. ADDED THE BALANCE RS. 50,36,125/-, AS UNDISCLOSED I NCOME OF THE APPELLANT. 3. DETAILED WRITTEN SUBMISSIONS WERE FILED BEFORE L D. CIT (A) WHICH ARE RECORDED IN PARA 2.2 OF HIS ORDER ARE AS SUNDER :- THE GROUND NO. 1 OF APPEAL RELATES TO OBJECTING THE ACTION F LD. A.O. IN WORKING OUT ON BASIS OF SEIZED PAPERS INCOME SUR RENDERED BY THE APPELLANT DURING THE COURSE OF SEARCH AT RS.10,63,9 7,364/- AS AGAINST RS.IO,13,61,239/- CALCULATED AND DECLARED BY THE AP PELLANT AND WHICH WAS ALSO ACCEPTED BY THE INVESTIGATION WING OF THE DEPA RTMENT ON THE BASIS OF ASSETS AND EXPENDITURE THEORY AND THEREBY HOLDING T HAT THE APPELLANT HAS DECLARED HIS INCOME SHORT BY RS.5036125/- AND IN NF AKING ADDITION OF SAID RS.5036125/- TO THE INCOME OF THE APPELLANT. IT IS HELD IN VARIOUS JUDGMENTS OF COURTS AND TRIBU NAL THAT WHEREIN IN COURSE OF SEARCH DETAILS OF ALL THE TRANSACTIONS AND ACTIVITIES ARE NOT AVAILABLE THAN, FOR DETERMINING THE UNDISCLOSED INC OME THE ASSETS AND EXPENDITURE THEORY IS MOST APPROPRIATE (REFER MUSTA Q AHMED VS. ACIT (1999) XXII T. W. 25 (2000) 66 TTJ 305, 311-12). IN THE CASE OF ASSESSEE THIS THEORY WAS ACCEPTED AND ADOPTED IN COURSE OF S EARCH AND ALSO ADOPTED IN ASSESSMENT PROCEEDINGS BY LD. A.O. THUS ONCE THI S THEORY IS ADOPTED FOR DETERMINING UNDISCLOSED INCOME THEN THERE CAN BE NO FURTHER ADDITION OF UNDISCLOSED. INCOME ON SEIZED PAPER(S), BECAUSE AL L THE TRANSACTIONS ULTIMATELY RESULTS EITHER IN AN ASSET OR AN EXPENDI TURE. IN CASE ANY FURTHER 5 ADDITION AS UNDISCLOSED INCOME IS MADE ON THE BASIS OF ANY SEIZED PAPER THE SAME DO NOT CORRESPOND TO ANY ASSET OR EXPENDITURE AND THEREFORE THE SAME CANNOT BE SUSTAINED IN LAW. IN CASE OF MUSTAQ AHMED THE HONBLE ITAT, JAIPUR BENCH, JAIPUR HELD AS UNDER: - ALTHOUGH THE ASSESSMENT OF EXACT QUANTUM OF UNDISC LOSED INCOME IN SUCH CASES WHERE COMPLETE RECORDS OF UNACCOUNTED TRANSACTIONS ARE NOT FOUND, IS DIFFICULT BUT ONE HAS TO RESORT T O BEST JUDGMENT ASSESSMENT IN SUCH CASES. THERE MAY BE MANY METHODS OF DETERMINATION OF UNDISCLOSED INCOME BY ESTIMATION B UT ONE HAS TO FIND OUT THE BEST METHOD WHICH WOULD BE MORE NEARER TO THE REAL STATE OF AFFAIRS. IN CASE OF SEARCHES WHERE ALL BEL ONGING TO ASSESSEE ARE BEING CAUGHT BY THE DEPARTMENT, IT IS MORE RATI ONAL AND APPROPRIATE TO DETERMINE THE INCOME ON THE BASIS OF ASSETS/EXPENDITURE THEORY WHICH DULY APPROVED IN AC COUNTANCY WHEN THE DEPARTMENT HAS CAUGHT EVERY ASSET AND EXPE NDITURE PERTAINING TO THE ASSESSEE BY TAKING RECOURSE TO TH E PROVISION OF SECTION 132. WE THUS ALLOW GROUND NO. 2(I)) OF THE ASSESSEE BY HOLDING THAT THE UNDISCLOSED INCOME BE DETERMINED O N THE BASIS OF ASSETS AND EXPENDITURE ONLY INSTEAD OF MAKING ANY A DDITION ON ACCOUNT OF UNDER BILLING, JOB WORK AND SUPPRESSION OF SALES. IN VIEW OF THE ABOVE JUDGMENT THE LD. A.O. HAVING A DOPTED THE ASSET & EXPENDITURE THEORY FOR DETERMINING UNDISCLOSED IN COME CANNOT ADOPT THE BASIS OF SEIZED PAPER FOR DETERMINING THE UNDISCLOS ED INCOME. THE LD. A.O. HIMSELF HAS IDENTIFIED AND ASCERTAINED EXTENT OF UN DISCLOSED STOCK, UNDISCLOSED ASSETS AS ALSO ALL KINDS OF UNDISCLOSED EXPENDITURE THEN THERE WAS NO JUSTIFICATION IN PRESUMING THAT THERE IS SOM E MORE UNDISCLOSED INCOME. THUS THE ABOVE ADDITION OF RS. 50,36,125/- MADE BY LD. A.O. IN UNDISCLOSED INCOME OF APPELLANT IS WRONG AND BAD IN LAW AND DESERVES TO BE DELETED. 4. THE LD. CIT (A) AFTER CONSIDERING THE ORDER OF A O AND SUBMISSIONS OF THE ASSESSEE CONFIRMED THE ADDITION BY GIVING HIS FINDING IN PAR A 2.3 OF HIS ORDER ARE AS UNDER :- 6 2.3 I HAVE CONSIDERED THE SUBMISSION OF THE ID. A. R AND HAVE PERUSED THE MATERIAL ON RECORD. UNDISPUTED FACTS AR E THAT DURING THE COURSE OF SEARCH AND SEIZURE OPERATION, VARIOUS ASS ETS AS WELL AS INCRIMINATING DOCUMENTS WERE FOUND. THE APPELLANT H AS SURRENDERED FINALLY THE AMOUNT OF RS. 9,83,61,239/-ON THE BASIS OF VARIOUS UNDISCLOSED ASSETS INCLUDING MAINLY THE EXCESS STOC K FOUND ( RS. 9.33 CRORE), EXCESS JEWELLERY FOUND (RS. 17 IAKHS), EXCESS CASH FOUND ( RS. 10 LAKHS) AND INVESTMENT IN RENOVATION OF HOU SE AT 403, ROYAL ENSIGN AND 344, ADARSH NAGAR, (RS. 18 LAKHS) ALONGW ITH MISC. UNRECORDED EXPENSES (RS. 5 LAKHS) IN THE RETURN OF INCOME SO FILED. THE A.O. HAS WORKED OUT THE UNACCOUNTED INCOME FROM THE SEIZED DOCUMENT, WHICH COMES TO FINALLY RS. 10,63,97,364/- .THIS WORKING OF THE A.O. IS DONE BY CONSIDERING VARIOUS ENTRIES IN THE SEIZED DOCUMENTS AND THE EXPLANATION OF THE ENTRIES IS ALS O SUPPORTED BY THE STATEMENT OF SH. PRAMOD DARDA. THE ONLY ISSUE TO BE CONSIDERED IS WHETHER THE INCOME REFLECTED IN THE SEIZED DOCUMENT S IS TO BE TAKEN OR THE INCOME SURRENDERED BY THE ASSESSEE ON THE BA SIS OF UNDISCLOSED ASSETS FOUND DURING THE COURSE OF SEARC H IS TO BE TAKEN. THE A.R OF THE APPELLANT, AFTER RELYING ON THE DECI SIONS OF HONBLE ITAT HAS ARGUED THAT INCOME AS FOUND ON THE BASIS O F UNDISCLOSED ASSETS MAY BE TAKEN WHICH WAS ADMITTED AND DECLARED BY THE APPELLANT. THE CASES REFERRED BY THE A.R DISTINGUIS HABLE WITH THE FACTS OF INSTANT CASE OF THE APPELLANT. IN THOSE CA SES, AS THE DETERMINATION OF UNDISCLOSED INCOME ON THE BASIS OF SEIZED DOCUMENTS WAS NOT POSSIBLE, ACCORDINGLY HONBLE TRI BUNAL HELD THAT THE UNDISCLOSED INCOME MAY BE DETERMINED ON THE BAS IS OF ASSETS AND EXPENDITURE. IN THE INSTANT CASE, THE A.O. HAS CLEA RLY BROUGHT OUT AND DETERMINED THE UNDISCLOSED INCOME OF THE APPELLANT ON THE BASIS OF SEIZED DOCUMENTS AND ACCORDINGLY RATIO DECENDI OF C ASE REFERRED BY 7 THE A.R IS NOT APPLICABLE IN THE INSTANT CASE. THE A.O. WAS JUSTIFIED IN DETERMINING THE UNDISCLOSED INCOME ON THE BASIS OF SEIZED DOCUMENTS. IT IS NOT THE CASE OF THE APPELLANT THAT THE UNDISCLOSED INCOME SO DETERMINED IS INCORRECT. AS UNDISCLOSED I NCOME DETERMINED BY THE A.O. ON THE BASIS OF SEIZED DOCUM ENTS IS FOUND TO BE MORE THAN THE UNDISCLOSED INCOME SHOWN IN THE RE TURN BY THE APPELLANT ON THE BASIS OF ASSETS THEORY, THE A.O. W AS JUSTIFIED IN MAKING ADDITION OF RS. 50,36,125/- AND THE SAME IS HEREBY CONFIRMED. 5. NOW THE ASSESSEE IS IN APPEAL HERE BEFORE THE TR IBUNAL. 6. THE CONTENTION RAISED BEFORE THE LOWER AUTHORITI ES WERE REITERATED BY LD. A/R. ATTENTION OF THE BENCH WAS DRAWN ON ANNEXURES FOUND DURING THE COURSE OF SEARCH ON WHICH BASIS THE SURRENDER WAS AGREED UPON BETWEEN T HE DEPARTMENT AND THE ASSESSEE, AND ASSESSEE HAS DECLARED MORE THAN THE AGREED AMOUNT W HILE FILING THE RETURN OF INCOME. WRITTEN SUBMISSIONS HAVE ALSO BEEN FILED BY LD. A/R OF THE ASSESSEE AND THEY HAVE BEEN EXPLAINED ALSO. ATTENTION OF THE BENCH WAS DRAWN O N VARIOUS EVIDENCES PLACED ON THE PAPER BOOK. 7. ON THE OTHER HAND, THE LD. D/R ALSO FILED A BRIE F WRITTEN NOTE AND IT IS STATED THAT AO HAS EXAMINED THE SEARCH MATERIAL MINUTELY AND TH EREAFTER IT WAS FOUND THAT SURRENDER WAS MADE LESS BY RS. 50 LACS OR ODD AND THE SAME HA S BEEN ADDED. THEREFORE, THE ORDER OF AO WHICH IS CONFIRMED BY LD. CIT (A) DOES NOT SU FFER FROM ANY INFIRMITY. ATTENTION OF THE BENCH WAS DRAWN ON THE FINDING OF AO WHICH W AS CONFIRMED BY LD. CIT (A). 8. IN REJOINDER, THE LD. COUNSEL OF THE ASSESSEE ST ATED THAT IT IS WRONG TO SUGGEST THAT THERE WERE FEW ENTRIES. THE ANNEXURES FOUND DURING THE COURSE OF SEARCH HAVE THOUSANDS OF ENTRIES AND AFTER CONSIDERING ALL THE ENTRIES TH EN IT WAS AGREED UPON THAT INCOME SHOULD 8 BE DEDUCED ON THE BASIS OF ASSETS AND EXPENDITURE T HEORY AND AFTER MAKING THE VALUATION OF STOCK WHICH WERE THE ASSETS OF THE ASSESSEE AND THEREAFTER ESTIMATING THE EXPENDITURE, A NET FIGURE OF INCOME WAS ARRIVED AT AND THE SAME WA S OFFERED BY THE ASSESSEE. IT WAS ALSO SUBMITTED THAT ASSESSEE HAS OFFERED MORE INCOME, TH EREFORE, AO CANNOT MAKE ANY DEPARTURE. THE ENTRIES CHOSEN BY THE AO DO NOT REL ATE TO THE STOCK. THE ENTRIES ARE MORE AND AO HIMSELF HAS REDUCED THE AMOUNT SHOWN BY ASSE SSEE AND REMAINING HAS BEEN ADDED. IF THE DEPARTMENT MAKES DEPARTURE FROM THE AGREEMENT ENTERED BETWEEN THE ASSESSEE AND SEARCH PARTY THEN ENTIRE SEARCH MATERI AL HAS TO BE TAKEN INTO CONSIDERATION AND NOT ONLY FEW ITEMS. IT IS NOT POSSIBLE TO GO T HROUGH THE ENTIRE RECORD NOW AND, THEREFORE, THE CALCULATION MADE BY THE SEARCH PARTY AND AGREED UPON BY THE ASSESSEE, WHICH IS BASED ON THE ASSETS AND EXPENDITURE THEORY HAS TO BE ACCEPTED. ACCORDINGLY IT WAS SUBMITTED THAT ADDITION MADE AND CONFIRMED BY T HE LOWER AUTHORITIES IS NOT JUSTIFIED AND THE SAME SHOULD BE DELETED. 9. WE HAVE HEARD RIVAL SUBMISSIONS AND CONSIDER THE M CAREFULLY. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING THE MATERIAL ON RECORD , WE FIND THAT ASSESSEE DESERVES TO SUCCEED IN HIS APPEAL. THOUGH AT THE COST OF REPET ITION, THE BRIEF FACTS OF THE CASE AND THE ARGUMENTS OF LD. A/R MENTIONED IN THE WRITTEN SUBMI SSIONS ARE AS UNDER :- THE ASSESSEE IS AN INDIVIDUAL CARRYING ON BUSINESS IN GEMS & STONES, DIAMONDS, SET JEWELLERY ETC. IN THE NAME & STYLE OF M/S P.D. GEMS AS ITS PROPRIETOR. THE ASSESSEE IS ALSO A DIRECTOR AND MAJOR SHAREHOLDER IN M/S RAJ RATAN JEWELLERS P. LTD. A SEARCH U/S 132 OF I. T. ACT, 61 TOOK PLACE AT RESIDENCE AND BUSINESS PREMISES OF ASSESSEE ON 2 3-08-2007. IN SEARCH VARIOUS LOOSE PAPERS, DIARIES AND OTHER DOCUMENTS W ERE FOUND AND SEIZED (INVENTORY P.B. PAGE 15 17) WHICH CONTAINED INCOM PLETE AND HAPHAZARD NOTINGS ALLEGED AS TRANSACTIONS OF UNDISCLOSED SALE S AND/OR UNDER BILLING OF 9 SALES AS WELL AS OF UNDISCLOSED FUNDS. IN COURSE OF SEARCH IT WAS GATHERED BY AUTHORIZED OFFICERS THAT SEIZED PAPERS, DIARIES ETC . DO NOT CONTAIN COMPLETE DETAILS OF ALL THE TRANSACTIONS AND ACTIVITIES OF A SSESSEE AND THERE ARE DUPLICATION OF ENTRIES & NOTINGS AND ALSO TRANSACTI ONS RECORDED IN REGULAR BOOKS OF ACCOUNTS ARE ALSO PARTLY FULLY NOTED IN SE IZED PAPERS. IN THESE CIRCUMSTANCES IN COURSE OF SEARCH IT WAS THOUGHT FI T BY AUTHORIZED OFFICERS AND BY ASSESSEE WHO INTENDED TO SURRENDER HIS UNDIS CLOSED INCOME TO DETERMINE UNDISCLOSED INCOME BY ASSETS AND EXPENDIT URE THEORY. THE WORKING OF UNDISCLOSED INCOME WAS MADE AS UNDER: - TOTAL VALUE OF STOCK FOUND DURING THE COURSE OF SEA RCH AS VALUED BY DEPT. VALUER RS. 17,18,73,000 LESS: VALUE OF STOCK AS PER BOOKS OF ACCOUNTS RS. 1,00,58,625 BALANCE UNDISCLOSED STOCK RS. 16,18,14,375 LESS: AMOUNT RECEIVED FROM SHRI NIRMAL KUMAR BARDIA FOR PURCHASE OF STOCK (5,97,53,136 + 87,00,000) = 6,84, 53,136/- TAKEN AS PART OF STOCK FOUND IN SEARCH. RS. 6,84,53,136 THIS AMOUNT IS DECLARED BY SHRI NIRMAL KUMAR BARDIA AS HIS UNDISCLOSED INCOME (IN CASE OF NIRMAL KUMAR BARDIYA SIMULTANEOUSLY SEARCH TOOK PLACE ON 230807 AND IN STATEMENT RECORDED U/S 132(4) HE ADMITTED THIS AMOUNT (P.B. P AGE 143 167). IN ASSESSMENT COMPLETED IN CASE OF NIRMAL KUM AR BARDIYA FOR A.Y. 200809 THE SAME WAS ASSESSED IN H IS HANDS AS UNDISCLOSED INCOME.) VALUE OF UNDISCLOSED STOCK ASSESSABLE IN THE HANDS OF ASSESSEE RS. 9,33,61,239 THE PARTICULARS/DETAILS OF TOTAL UNDISCLOSED INCOM E OF THE ASSESSEE WAS WORKED OUT IN COURSE OF SEARCH AS UNDER: - A. ON ACCOUNT OF STOCK AS ABOVE RS. 9,33,61,239 RENOVATION IN HOUSE NO. 344A RS. 8,00,000 RENOVATION IN ROYAL ENSIGN RS. 10,00,000 JEWELLERY RS. 6,00,000 OTHER MISC. RS. 5,00,000 RS. 9,62,61,239 B. ON ACCOUNT OF EXCESS STOCK OF RAJ RATAN JEWELLER S PVT. LTD. RS. 30,00,000 RS. 9,92,61,239 10 THE ASSESSEE IN COURSE OF SEARCH IN A STATEMENT U/S 132 (4) SURRENDERED THE ABOVE SAID UNDISCLOSED INCOME (P.B. PAGE 114). IN THE RETURN OF INCOME THE ASSESSEE DECLARED THE ABOVE UN DISCLOSED INCOME SO ADMITTED AND FURTHER DECLARED UNDISCLOSED INVESTMEN T IN JEWELLERY AT RS. 17,00,000/- AS AGAINST RS. 6,00,000/- DECLARED AND AN AMOUNT OF RS. 10,00,000/- UNEXPLAINED CASH WAS ALSO DECLARED AND THUS TOTAL UNDISCLOSED INCOME OF RS. 10,13,61,239/- WAS INCLUDED IN RETURN OF INCOME WHICH WAS BASED ON ASSETS AND EXPENDITURE THEORY. SUBMISSIONS OF ASSESSEE IT IS SUBMITTED THAT FROM THE FACTS NARRATED ABOVE, FROM STATEMENT OF ASSESSEE MADE U/S 132(4) AND FROM ASSESSMENT ORDER IT WILL BE FOUND THAT VARIOUS NOTINGS IN VARIOUS SEIZED PAPER WERE NOT CO NSIDERED IN ASSESSMENT AT ALL AND EVEN THE ALLEGED FUNDS RECEIVED FROM NIR MAL KUMAR BARDIYA AS NOTED IN ANN. A1 WERE NOT TREATED AS SUCH TO BE AS SESSED AS UNDISCLOSED INCOME OF ASSESSEE AND SO ALSO NOTINGS IN ANN. A9 A FEW OF WHICH ARE ALLEGED THAT OF FUNDS RECEIVED FROM NIRMAL KUMAR BA RDIYA AS SUCH WAS TREATED AS UNDISCLOSED INCOME. THE UNDISCLOSED INCO ME OF ASSESSEE WAS DETERMINED ON ASSETS & EXPENDITURE THEORY AND THERE FORE TALLYING OF UNDISCLOSED INCOME OF ASSESSEE WITH ALLEGED FUNDS R ECEIVED FROM NIRMAL KUMAR BARDIYA BY LD. A.O. IS WRONG AND UNWARRANTED. THE UNDISCLOSED INCOME OF ASSESSEE IN ASSESSMENT WAS TAKEN AS DECLA RED BY ASSESSEE ON ASSETS AND EXPENDITURE THEORY AND SO FURTHER ADDITI ON MADE BY A.O. TAKING BASIS OF THAT TOTAL UNDISCLOSED INCOME OF ASSESSEE SHOULD NOT HAVE BEEN LESS THAN ALLEGED FUND RECEIVED FROM NIRMAL KUMAR BARDIY A REDUCED BY FUNDS OWNED BY AND ASSESSED IN THE HANDS OF NIRMAL KUMAR BARDIYA IS WRONG IN LAW. IT IS HELD IN VARIOUS JUDGEMENTS OF COURTS AND TRIB UNAL THAT WHEREIN IN COURSE OF SEARCH DETAILS OF ALL THE TRANSACTIONS AND ACTIVITIES ARE NOT 11 AVAILABLE THAN FOR DETERMINING THE UNDISCLOSED INCO ME THE ASSETS AND EXPENDITURE THEORY IS MOST APPROPRIATE (REFER MUSTAQ AHMED VS. ACIT (1999) XXII T.W. 25 (2000) 66 TTJ 305, 311-12) . IN THE CASE OF ASSESSEE THIS THEORY WAS ACCEPTED AND ADOPTED IN COURSE OF S EARCH AND ALSO ADOPTED IN ASSESSMENT PROCEEDINGS BY LD. A.O. THUS ONCE THI S THEORY IS ADOPTED FOR DETERMINING UNDISCLOSED INCOME THEN THERE CAN BE NO FURTHER ADDITION OF UNDISCLOSED INCOME ON SEIZED PAPER(S), BECAUSE ALL THE TRANSACTIONS ULTIMATELY RESULTS EITHER IN AN ASSET OR AN EXPENDI TURE. IN CASE ANY FURTHER ADDITION AS UNDISCLOSED INCOME IS MADE ON THE BASIS OF ANY SEIZED PAPER THE SAME DO NOT CORRESPOND TO ANY ASSET OR EXPENDITURE AND THEREFORE THE SAME CANNOT BE SUSTAINED IN LAW. IN CASE OF MUSTAQ AHMED THE HON'BLE ITAT, JAIPUR BENCH, JAIPUR HELD AS UNDER: - ALTHOUGH THE ASSESSMENT OF EXACT QUANTUM OF UNDISC LOSED INCOME IN SUCH CASES WHERE COMPLETE RECORDS OF UNACCOUNTED TRANSACTIONS ARE NOT FOUND, IS DIFFICULT BUT ONE HAS TO RESORT T O BEST JUDGEMENT ASSESSMENT IN SUCH CASES. THERE MAY BE MANY METHODS OF DETERMINATION OF UNDISCLOSED INCOME BY ESTIMATION B UT ONE HAS TO FIND OUT THE BEST METHOD WHICH WOULD BE MORE NEARER TO THE REAL STATE OF AFFAIRS. IN CASE OF SEARCHES WHERE ALL BEL ONGING TO ASSESSEE ARE BEING CAUGHT BY THE DEPARTMENT, IT IS MORE RATI ONAL AND APPROPRIATE TO DETERMINE THE INCOME ON THE BASIS OF ASSETS/EXPENDITURE THEORY WHICH DULY APPROVED IN ACCOUNTANCYWHEN THE DEPARTMENT HAS CAUGHT EVERY ASSET AND EXPENDITURE PERTAINING TO THE ASSESSEE BY TAKIN G RECOURSE TO THE PROVISION OF SECTION 132. WE THUS ALLOW GROUND NO. 2(I) OF THE ASSESSEE BY HOLDING THAT THE UNDISCLOSED INCOME BE DETERMINED ON THE BASIS OF ASSETS AND EXPENDITURE ONLY INSTEAD OF MAKING ANY ADDITION ON ACCOUNT OF UNDER BILLING, JOB WORK AND SUPPRESSION OF SALES. IN VIEW OF THE ABOVE JUDGEMENT THE LD. A.O. HAVING ADOPTED THE ASSET & EXPENDITURE THEORY FOR DETERMINING UNDISCLO SED INCOME CANNOT ADOPT THE BASIS OF SEIZED PAPER FOR DETERMINING THE UNDISCLOSED INCOME. THE LD. A.O. HIMSELF HAS IDENTIFIED AND ASCERTAINED EXT ENT OF UNDISCLOSED STOCK, UNDISCLOSED ASSETS AS ALSO ALL KINDS OF UNDISCLOSED EXPENDITURE THEN THERE 12 WAS NO JUSTIFICATION IN PRESUMING THAT THERE IS SOM E MORE UNDISCLOSED INCOME. 10. AFTER CONSIDERING THE ORDERS OF THE AO, LD. CIT (A) AND THE SUBMISSIONS OF THE ASSESSEE, IT IS SEEN THAT DURING THE COURSE OF SEAR CH VARIOUS INCRIMINATING DOCUMENTS AND OTHER EVIDENCES WERE FOUND AND STATEMENT OF THE ASS ESSEE WAS RECORDED. DURING THE RECORDING OF STATEMENT VARIOUS QUESTIONS WERE PUT A ND THE ASSESSEE ADMITTED THAT WHATEVER THE ENTRIES ARE SHOWN IN THE NAME OF NB THEY RELATE TO INVESTMENT IN STOCKS. THEREAFTER THE STOCK INVENTORY WAS PREPARED AND PRO PER VALUATION WAS MADE. COPY OF STATEMENT IS PLACED AT PAPER BOOK PAGES 1 TO 14. C OPY OF INVENTORY OF A/C BOOK ETC. AND SEIZED MATERIAL IMPOUNDED ARE PLACED AT PAGES 15 TO 142. A COPY OF STATEMENT OF SHRI NIRMAL KUMAR BARDIYA (NB) SON OF SHRI SAGAR MAL BAR DIYA IS ALSO PLACED ON RECORD AT PAGES 143 TO 161. IN THIS STATEMENT SHRI NIRMAL KU MAR BARDIYA HAS ADMITTED THAT CERTAIN ENTRIES FOUND IN THE SEIZED MATERIAL RELATE TO HIM WHICH WERE TOTALING TO RS. 6.67 CRORES AND THIS AMOUNT HAS BEEN SHOWN BY SHRI NIRMAL KUMAR BARDIYA IN HIS RETURN OF INCOME AS ADMITTED DURING RECORDING OF HIS STATEMENT. TAX ON THIS AMOUNT HAS BEEN DULY PAID. REGARDING VARIOUS OTHER ENTRIES WHICH WERE OF RS. 1 6,98,14,375 RS. 6.67 CRORES HAVE BEEN ADMITTED BY ASSESSEE THAT THESE ARE HIS OWN EN TRIES AND ALL THESE AMOUNTS HAVE BEEN INVESTED IN STOCKS. THEREAFTER AS STATED ABOVE, TH E VALUATION OF STOCK FOUND AT THE PREMISES OF ASSESSEE WAS MADE AND ON THE BASIS OF V ALUATION, THE ASSESSEE MADE SURRENDER OF HIS INCOME WHICH WAS NOT DISCLOSED EARLIER. THE VALUATION OF JEWELLERY, VALUATION OF STOCK AT OTHER PREMISES WAS ALSO MADE AND ON THE BA SIS OF VALUATION AND AFTER ESTIMATING THE EXPENSES, SURRENDER OF UNDISCLOSED INCOME WAS M ADE BY THE ASSESSEE WHICH WAS OF RS. 9,92,61,239/-. IN THIS FIGURE THE AMOUNT OF RS . 9.33 CRORES OR ODD RELATES TO THE 13 VALUATION OF STOCK FOUND DURING THE COURSE OF SEARC H, RS. 8 LACS RELATE TO EXPENSES IN RENOVATION OF HOUSE NO. 344A AND RS. 10 LACS IN REN OVATION OF ROYAL ENSIGN FLAT, RS. 6 LACS OF JEWELLERY AND RS. 5 LACS OF OTHER MISC. EXP ENSES ESTIMATED AT THE TIME OF SEARCH AND RS. 30 LACS ON ACCOUNT OF EXCESS STOCK OF M/S. RAJ RATAN JEWELLERS PVT. LTD. THEREAFTER, ASSESSEE FILED RETURN OF INCOME OF RS. 10,13,61,239/-. IN THIS RETURN THE ASSESSEE HAS DISCLOSED JEWELLERY OF RS. 17 LACS AGA INST RS. 6 LACS DECLARED AT THE TIME OF SEARCH AND RS. 10 LACS ON ACCOUNT OF UNEXPLAINED CA SH WHICH WAS NOT ADMITTED AT THE TIME OF SEARCH. THEREAFTER DURING THE COURSE OF ASSESSME NT PROCEEDINGS, THE AO EXAMINED THE SEARCH MATERIAL ONCE AGAIN AND FOUND THAT THE TOTAL OF ENTRIES IN THE NAME OF NB IS OF RS. 17,48,50,500 AND NOT OF RS. 16,98,14,375/-. TH E AO HAS EXTENSIVELY EXAMINED THE SEARCH MATERIAL AND THEREAFTER THIS FIGURE WAS ARRI VED AT BY HIM. THE ASSESSEE WAS GIVEN AN OPPORTUNITY TO EXPLAIN THIS ENTRY AND IT WAS ALS O STATED THAT WHY THIS AMOUNT OF RS. 50 LACS SHOULD NOT BE ADDED IN THE INCOME AS THE SURRE NDER HAS BEEN MADE SHORT BY THIS AMOUNT. REPLY WAS FILED THAT THE SURRENDER WAS NOT MADE ON THE BASIS OF ENTRIES RECORDED IN THE SEIZED MATERIAL BUT WAS MADE ON THE BASIS OF ASSETS AND EXPENDITURE THEORY. THE VALUATION OF ALL THE ASSETS I.E. STOCK, JEWELLERY, RENOVATION OF HOUSE AND STOCK AT OTHER PLACES WAS VALUED AND THEREAFTER THE EXPENSES OF TH E FIRM WAS ALSO ESTIMATED AND AFTER MAKING VALUATION OF THE UNDISCLOSED ASSETS AND EXPE NDITURE THE SURRENDER WAS MADE WHICH WAS AGREED UPON BY THE SEARCH PARTY AND ASSES SEE RELIGIOUSLY HAS DECLARED THE SURRENDERED AMOUNT. OVER AND ABOVE THE SURRENDER AM OUNT, THE ASSESSEE HAS MADE SURRENDER OF RS. 21 LACS MORE. THEREFORE, THERE IS NO QUESTION OF EXAMINING THE RECORDS ONCE AGAIN. HOWEVER, THE AO WAS NOT SATISFIED AND HE ADDED THE SHORT AMOUNT OF RS. 50,36,125/- TO THE TOTAL INCOME OF THE ASSESSEE. T HE LD. CIT (A) ALSO CONFIRMED THE ACTION OF THE AO. 14 12. AFTER GOING THROUGH THE SUBMISSIONS OF THE LD. A/R AS WELL AS OF LD. D/R, WE FIND THAT THE APPROACH OF THE AO CANNOT BE APPROVED. THE AO HAS MADE DEPARTURE FROM THE DISCLOSURES MADE ON THE BASIS OF ASSETS AND EXPENDI TURE THEORY ADOPTED BY THE SEARCH PARTY AND AGREED BY THE ASSESSEE AT THE TIME OF SEA RCH. IT IS AMPLY PROVED THAT SEARCH PARTY WAS NOT HAVING ANY OBJECTION BECAUSE THERE IS NOTHI NG ON RECORD THAT SEARCH PARTY HAS SUGGESTED TO MAKE ENQUIRY ABOUT ALL THE SEARCH MATE RIAL AND THEN INCOME OF THE ASSESSEE SHOULD BE ARRIVED AT. THE FIGURE ARRIVED AT ON THE BASIS OF ASSETS AND EXPENDITURE THEORY WAS ADMITTED IN THE STATEMENT RECORDED AND THE SAME WAS ALSO SHOWN BY THE ASSESSEE. DUE TAX WAS PAID ON THIS AMOUNT. OVER AND ABOVE, AN AMOUNT OF RS. 21 LACS ON ACCOUNT OF JEWELLERY AND ON ACCOUNT OF CASH WAS ALSO SHOWN IN THE RETURN FILED BY ASSESSEE. IT MAY BE CORRECT THAT ENTRIES NOTED IN THE SEARCH MAT ERIAL WERE OF RS. 17.48 CRORES OR ODD BUT THE FACT IS THAT THE VALUATION OF STOCK WAS MAD E BY THE SEARCH PARTY ITSELF AND WHATEVER THE VALUATION OF STOCK WAS MADE THAT HAS BEEN SURRE NDERED BY THE ASSESSEE. IT IS ALSO A FACT THAT NO OTHER ASSETS OR CASH (MOVEABLE OR IMMOVABLE ) WERE FOUND IN POSSESSION OF ASSESSEE. // IT MAY BE POSSIBLE THAT AMOUNT OF RS. 17.48 CROR ES MAY BE INVESTED IN THE STOCK AND STOCK VALUATION MAY BE LESSER BUT THE FACT REMA INS THAT WHATEVER THE STOCK FOUND DURING THE COURSE OF SEARCH THAT ONLY CAN BE TAKEN INTO CONSIDERATION. THERE MAY BE SOME LOSSES OR DECREASES IN VALUE OF STOCK ALSO. IF TOTA L OF ENTRIES I.E. RS. 17.48 LACS ARE TAKEN INTO CONSIDERATION THEN IN THAT WAY LOSS SUFFERED I N THE STOCK SHOULD ALSO BE SET OFF AND AFTER SETTING OFF OF LOSS THE FIGURE ARRIVED AT BY VALUATION PARTY HAS TO BE ADOPTED. ASSESSEE HAS NOT DOUBTED THE VALUATION OF STOCK MAD E DURING THE COURSE OF SEARCH AS WHATEVER THE VALUATION WAS MADE BY THE SEARCH PARTY THAT HAS BEEN ACCEPTED BY THE ASSESSEE AS IT IS. THEREFORE, IN OUR CONSIDERED VIE W, THE AO SHOULD NOT HAVE MADE 15 DEPARTURE FROM THE THEORY AGREED BY THE ASSESSEE DU RING THE COURSE OF SEARCH. THE BASIS OF UNDISCLOSED INCOME WAS ADOPTED ON ASSETS AND EXP ENDITURE THEORY AND THIS IS WELL ACCEPTABLE THEORY AS HELD IN CASE OF MUSTAQ AHMED, 66 TTJ 305. IT IS ALSO WORTH NOTING HERE THAT THE AO, WHO HAD MADE RE-TOTALING OF THE E NTRIES MADE IN THE NAME OF NB WHICH WERE OF RS. 17.48 CRORES HAS HIMSELF REDUCED THE AMOUNT DISCLOSED BY NB AND DISCLOSED BY ASSESSEE WHICH WAS DISCLOSED ON THE BA SIS OF VALUATION OF CLOSING STOCK. THEREFORE, IT IS AMPLY CLEAR THAT WHATEVER THE ENTR IES WERE MADE IN THE NAME OF NB THAT AMOUNT WAS INVESTED IN THE STOCK AND STOCK VALUATIO N HAS ALREADY BEEN ARRIVED AT BY THE SEARCH PARTY WHICH IS UNDISPUTED. THEREFORE, IN OU R CONSIDERED VIEW, IF THE ACTION OF THE AO IS SUSTAINED THAT WILL TANTAMOUNT TO DOUBLE ADDI TION WHICH IS NOT JUSTIFIABLE. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, WE DELETE THE ADD ITION MADE AND SUSTAINED BY LD. CIT (A). 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. 14. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 21 .10.2011. SD/- SD/- ( N.L. KALRA ) ( R.K. GUPTA ) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR, D/- COPY FORWARDED TO :- SHRI PRAMOD DARDA, JAIPUR. THE DCIT, CC-2, JAIPUR. THE CIT (A) THE CIT THE D/R GUARD FILE (ITA NO. 104/JP/2011) BY ORDER, AR ITAT JAIPUR. 16