Shri Prince Rai, Damoh V. Income Tax Officer, Damoh

ITA 145/JAB/2018

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 0149 (ITAT-JABALPUR)
• Duration Of Justice: 3 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-07-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 25-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SWATI AGARWAL
• Assessee Lawyers: H S MODH
• Keywords: Unexplained cash credit; Gift; Business income; Income from undisclosed sources; Search and seizure; Principle of natural justice; Question of law; Corroborative evidences; Valuation report; Set aside
• Section: 143(3); 72; 132

Judgement Text

ITA NO. 145/JAB/2018 (AY 2009-10) PRINCE RAI V. ITO 1 IN THE INCOME TAX APPELLATE TRIBUNAL, JABALPUR BENCH , JABALPUR (SMC) (THROUGH VIDEO CONFERENCING) BEFORE SH. SANJAY ARORA, HON'BLE ACCOUNTANT MEMBER ITA NO.145/JAB/2018 ASSESSMENT YEAR : 2009-10 PRINCE RAI, DAMOH (M.P.) [PAN: AHLPR 7469N] VS. INCOME TAX OFFICER, WARD - DAMOH (M.P.) (APPELLANT) (RESPONDENT) APPELLANT BY SH. H.S. MODH, ADV. RESPONDENT BY SMT. SWATI AGARWAL, SR. DR DATE OF HEARING 14/07/2021 DATE OF PRONOUNCEMENT 22/07/2021 ORDER PER SANJAY ARORA, AM THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-1, JABALPUR ( CIT(A) FOR SHORT) DATED 27/4/2018, DISMISSING THE ASSESSEES APPEAL CONTEST ING HIS ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (THE AC T HEREINAFTER) FOR THE ASSESSMENT YEAR (AY) 2009-10 VIDE ORDER DATED 19/12 /2011. 2. AT THE OUTSET, IT WAS SUBMITTED BY THE LD. COUNS EL FOR THE ASSESSEE, SH. MODH, THAT THE APPELLATE ORDER IS WITHOUT PROPER AP PLICATION OF MIND BY THE FIRST APPELLATE AUTHORITY. THERE HAS BEEN NO CONSIDERATIO N OF THE ASSESSEES REPLIES AND EXPLANATIONS FURNISHED DURING THE ASSESSMENT PR OCEEDINGS FOR WHICH REFERENCE WAS MADE BY HIM TO PGS. 1-2/PB-1, IN THE IMPUGNED ORDER. EVEN THE ASSESSING OFFICER (AO), WHO WAS REQUIRED TO SUBMIT HIS COMMENTS BY THE LD. ITA NO. 145/JAB/2018 (AY 2009-10) PRINCE RAI V. ITO 2 CIT(A) VIDE HIS NOTICE DATED 13/12/2017, HAD NOT FU RNISHED THE SAME. WHERE THEN, HE POSITED, WAS THE HURRY IN DECIDING THE APP EAL EX PARTE THE APPELLANT IN APRIL, 2018, AFTER ONLY TWO NOTICES OF HEARING. IN FACT, HE WAS OUT OF THE COUNTRY AT THE RELEVANT TIME, ADVANCE INFORMATION OF WHICH HAD BEEN GIVEN TO THE OFFICE OF THE LD. CIT(A)/AO. ON BEING ASKED AS TO WHY, EVE N SO, COULD NOT THE ASSESSEE-NOTICEE RESPOND TO THE SAID NOTICES INASMU CH AS IT IS HE WHO IS SERVED THE NOTICE/S OF HEARING, HE WOULD REPLY BY STATING THAT THERE HAD BEEN, AS ASCERTAINED BY HIM FROM THE ASSESSEE, NO SERVICE OF ANY NOTICE OF HEARING. THE MATTER, IT WAS PLEADED BY HIM, BE, IN THE INTEREST OF JUSTICE, RESTORED TO THE FILE OF THE LD. CIT(A) FOR A DECISION AFRESH AFTER PROVIDIN G DUE OPPORTUNITY OF HEARING TO THE ASSESSEE. 3. I HAVE HEARD THE PARTIES, AND PERUSED THE MATERI AL ON RECORD. 3.1 THE CASE PUT UP BY THE LD. COUNSEL, SH. MODH, B EFORE ME IS NOT ON THE MERITS OF THE CASE. DIGRESSING FROM THE GROUNDS OF APPEAL (FORMING PART OF FORM 36, I.E., THE MEMO OF APPEAL), HE ARGUED WHICH HE IS WELL ENTITLED TO WITH THE LEAVE OF THE TRIBUNAL (SEE RULES 11 AND 27 OF THE I NCOME TAX (APELLATE TRIBUNAL) RULES, 1963), ON THE IMPUGNED ORDER BEING NOT MAINT AINABLE ON ACCOUNT OF NON- APPLICATION OF MIND AND NON-PROVISION OF PROPER OPP ORTUNITY OF HEARING. AS APPARENT, NOTHING HAS BEEN BROUGHT ON RECORD TO SUB STANTIATE THE SECOND (LATTER) CLAIM/LIMB OF THE ASSESSEES CASE. AS REGARDS THE F ORMER, THE OPERATIVE PART OF THE IMPUGNED ORDER, READ OUT DURING HEARING, READS AS UNDER: THE PRESENT APPEAL IS AGAINST THE ORDER U/S. 143(3 ) OF THE I.T. ACT, 1961 DATED 09/12/2011 PASSED BY THE AO FOR THE ASSESSMENT YEAR 2009-10. I HAVE CAREFULLY PERUSED THE GROUNDS OF APPEAL AND THE ORDER OF THE AO AS ALREADY AVAILA BLE ON RECORDS. THE APPELLANT FAILED TO OFFER ANY EXPLANATION PROPERLY IN SUPPORT OF THE GR OUNDS RAISED IN THIS APPEAL NOR ANY SUPPORTING EVIDENCE WERE PRODUCED DESPITE ADEQUATE OPPORTUNITY HAVING BEEN PROVIDED. SINCE, IN THE INSTANT CASE THE APPELLANT HAS NOT BE ABLE TO SHOW THAT THE DECISION OF THE AO IN MAKING THE IMPUGNED ADDITIONS WAS ARBITRARY, BIA SED, IRRATIONAL, VINDICTIVE OR CAPRICIOUS WITHOUT ANY BASIS. THUS I FIND NO REASON TO INTERFERE WITH THE DECISION OF THE AO. ITA NO. 145/JAB/2018 (AY 2009-10) PRINCE RAI V. ITO 3 THE SAME IS, WITHOUT DOUBT, NOT AN ORDER ON THE MER ITS OF THE CASE, AS IT PURPORTS TO BE (REFER PARA 2/PG. 2, I.E., THE PARA IMMEDIATE LY PRECEDING THAT REPRODUCED HEREINABOVE), EVEN AS OBSERVED BY THE BENCH DURING HEARING. IT DOES NOT SATISFY THE TEST OF SECTION 250(6) OF THE ACT (AGAIN, READ OUT DURING HEARING), WHICH MANDATES THAT THE ORDER OF THE COMMISSIONER (APPEAL S) DISPOSING OF THE APPEAL SHALL BE IN WRITING AND SHALL STATE THE POINTS FOR DETERMINATION, THE DECIS ION THEREON AND THE REASONS FOR THE DECISION . THE PROVISION IS CLEAR AND UNAMBIGUOUS, AND DRAWS NO EXCEPTION FOR AN EX PARTE ORDER. THAT IS, THE REQUIREMENT OF LAW IS IRRESPECTIVE OF THE REPRESENT ATION OR OTHERWISE BEFORE HIM OF EITHER APPELLANT OR THE RESPONDENT OR EVEN BOTH, IN WHICH, LATTER EVENT THE CASE AS SET-UP BY THE PARTY NOT REPRESENTED BEFORE HIM, AT THE EARLIER (ASSESSMENT) STAGE, WOULD HAVE TO BE CONSIDERED, AND NECESSARILY SO, BY HIM. AND WHICH SUMS UP THE ASSESSEES CASE, WHICH IS UNEXCEPTIONAL . THIS IS AS ONLY IN THAT CASE WOULD AN APPELLATE AUTHORITY, IN FURTHER APPEAL, BE ABLE TO KNOW THE BASIS OF HIS ADJUDICATION. IT IS, AS SUCH, INCUMBENT UPON HIM TO , WHILE REVIEWING AN ORDER, EXAMINE THE CASE OF THE ASSESSEE-APPELLANT, I.E., A S SET-UP BEFORE HIM AS WELL AS OR IN THE ALTERNATIVE, I.E., AS THE CASE MAY BE, BE FORE THE ASSESSING AUTHORITY, WHOSE ORDER IS BEING IMPUGNED BEFORE HIM, AND SPECI FY HIS REASONS ON EACH OF THE POINTS ARISING FOR DETERMINATION, AS TO WHY HE CONSIDERS THE LATTERS VIEW AS MERITING ACCEPTANCE AND IS BEING UPHELD, I.E., IN P REFERENCE TO THAT OF THE APPELLANT. THAT ONLY WOULD SHOW HIS CONSIDERATION O F THE ISSUE/S ARISING, AND THE BASIS OF HIS DECISION. FURTHER, HIS ORDER BEING APP EALABLE, IT IS ONLY THEREBY THAT A HIGHER APPELLATE AUTHORITY WOULD, IN FURTHER APPE AL, BE ABLE TO REVIEW HIS ADJUDICATION, ABSENT IN THE INSTANT CASE. THIS IS E VEN MORE RELEVANT WHERE, AS IN THE PRESENT CASE, HE PROCEEDS EX PARTE THE APPELLANT. HOW COULD HE, ONE WONDERS, IN SUCH A CASE, STATE THAT HE IS DISINCLIN ED TO INTERFERE FOR WANT OF ANY CASE SET-UP BEFORE HIM BY THE APPELLANT, AND YET CL AIM THE ADJUDICATION TO BE ON MERITS, AS HE DOES? THAT, IN FACT, MAKES HIS ORDER SELF-CONTRADICTORY. IT CANNOT, ITA NO. 145/JAB/2018 (AY 2009-10) PRINCE RAI V. ITO 4 ACCORDINGLY, BE SAID THAT HE HAS DISPOSED THE ASSES SEES APPEAL ON MERITS, MUCH LESS BY TAKING INTO ACCOUNT ALL THE MATERIALS AND E XPLANATIONS AVAILABLE ON RECORD, WHICH WOULD INCLUDE THAT PRESENTED IN THE A SSESSMENT PROCEEDINGS. 3.2 IN CIT V. H.M. ESUFALI H.M. ABDULALI [1973] 90 ITR 271 (SC), THE DECISION RELIED UPON BY THE LD. CIT(A), IT WAS CLAR IFIED THAT AN APPELLATE AUTHORITY CANNOT SUBSTITUTE HIS OWN JUDGMENT IN PLA CE OF THAT OF THE AO UNLESS IT IS SHOWN THAT THE JUDGMENT OF THE AO WAS BIASED, IR RATIONAL, VINDICTIVE OR CAPRICIOUS. THE SAID CASE, EVEN AS POINTED OUT BY S H. MODH, WAS A CASE OF A BEST JUDGMENT ASSESSMENT, SO THAT THERE WAS NO REPRESENT ATION BY OR ON THE ASSESSEES BEHALF BEFORE THE ASSESSING AUTHORITY, WHO ACCORDIN GLY FRAMED THE ASSESSMENT ON THE BASIS OF THE MATERIAL ON RECORD APPLYING HIS BEST JUDGMENT. AS EXPLAINED BY THE HONBLE COURT: IN ESTIMATING ANY ESCAPED TURNOVER, IT IS INEVITABL E THAT THERE IS SOME GUESS-WORK. THE ASSESSING AUTHORITY WHILE MAKING THE BEST JUDGMENT ASSESSMENT, NO DOUBT, SHOULD ARRIVE AT HIS CONCLUSIONS WITHOUT ANY BIAS AND ON A RATION AL BASIS. THAT AUTHORITY SHOULD NOT BE VINDICTIVE OR CAPRICIOUS. IF THE ESTIMATE MADE BY T HE ASSESSING AUTHORITY IS A BONA FIDE ESTIMATE AND IS BASED ON A RATIONAL BASIS, THE FACT THAT THERE IS NO GOOD PROOF IN SUPPORT OF THAT ESTIMATE IS IMMATERIAL. PRIMA FACIE , THE ASSESSING AUTHORITY IS THE BEST JUDGE OF THE SITUATION. IT IS HIS BEST JUDGMENT AND NOT OF ANYON E ELSE. THE HIGH COURT CANNOT SUBSTITUTE ITS BEST JUDGMENT FOR THAT OF THE ASSESSING AUTHORI TY . IN SUCH A CASE, AND EVEN AS AN APPELLATE AUTHORITY IS NOT BOUND BY THE SAID JUDGMENT, AS THE SAME INVARIABLY INVOLVES AN ELEMEN T OF GUESS-WORK, IT WAS CLARIFIED BY THE APEX COURT THAT IT SHALL ACCORD DU E DEFERENCE THERETO UNLESS IT IS SHOWN TO BE ARBITRARY, IRRATIONAL, ETC. INASMUCH AS THE LAW CONTEMPLATES THE BEST JUDGMENT OF THE ASSESSING AUTHORITY AND NOT OF ANY OTHER. AN APPELLATE AUTHORITY WOULD NOT THEREFORE ORDINARILY SUBSTITUTE ITS OWN JUDGMENT FOR THAT OF THE ASSESSING AUTHORITY, UNLESS, AS STATED, IT IS SHOWN TO BE VITIATED, OR WHERE IT IS NOT IN AGREEMENT WITH THE MATERIAL ON RECORD OR IS WITH OUT TAKING ALL AND ONLY THE RELEVANT FACTS INTO ACCOUNT. THIS REPRESENTS TRITE LAW, FOR WHICH REFERENCE MAY BE MADE TO CIT V. DAULAT RAM RAWATMULL [1973] 87 ITR 349 (SC); CIT V. RAYALA ITA NO. 145/JAB/2018 (AY 2009-10) PRINCE RAI V. ITO 5 CORPORATION (P.) LTD . [1995] 215 ITR 883 (MAD). HOW COULD THE SAID LAW APPLY IN THE INSTANT CASE WHERE THERE HAS BEEN, ON THE CO NTRARY, PROPER REPRESENTATION BEFORE THE AO, WHO HAS COMPLETED THE ASSESSMENT U/S . 143(3) CONSIDERING THE MATERIAL ON RECORD AND THE ASSESSEES EXPLANATION/S , NOT CONSIDERED BY THE LD. CIT(A)? THE RELIANCE ON THE SAID JUDGMENT BY HIM IS , CLEARLY, MISCONCEIVED. 3.3 THE MATTER MUST, THEREFORE, NECESSARILY TRAVEL BACK TO THE FILE OF THE LD. CIT(A) FOR A CONSIDERATION OF AND A DECISION ON THE MERITS OF THE CASE AFTER ALLOWING A REASONABLE OPPORTUNITY TO THE ASSESSEE T O PRESENT HIS CASE BEFORE HIM. IN FACT, IN THIS CONTEXT, TWO OBSERVATIONS ARE APPO SITE. THE PRINCIPAL ADDITION IN THIS CASE IS ON ACCOUNT OF A VALUATION DIFFERENCE ( OF A STORAGE GODOWN) BASED ON THE REPORT BY THE DEPARTMENTAL VALUATION OFFICER (D VO) TO WHOM REFERENCE WAS MADE BY THE AO DURING ASSESSMENT PROCEEDINGS. VALUATION BEING A TECHNICAL MATTER, WHILE THE AO IS NOT A TECHNICAL P ERSON, THE STATUTE PROVIDES FOR A REFERENCE BY HIM TO THE DVO WHERE HE SEEKS TO VER IFY THE VERACITY OF THE ASSESSEES CLAIM WITH REGARD TO THE COST OF ACQUISI TION/CONSTRUCTION OF AN ASSET INCURRED DURING THE RELEVANT PREVIOUS YEAR (S.142A) . THE LAW ACCORDINGLY OBLIGES AN APPELLATE AUTHORITY (INCLUDING THE TRIBU NAL) TO HEAR THE DVO IN ADJUDICATING AN APPEAL AGITATING AN ADDITION BASED ON HIS VALUATION REPORT. THIS HAS NOT BEEN OBSERVED BY THE LD. CIT(A), WHICH PROC EDURE HE SHALL ACCORDINGLY COMPLY WITH IN THE SET ASIDE PROCEEDINGS, DILATING ON AND ISSUING SPECIFIC FINDING/S QUA EACH ITEM OF VALUATION BEING CONTESTED BY THE ASSE SSEE BEFORE HIM. THE SECOND OBSERVATION/S AGAIN PERTAINS TO THIS ADD ITION. THE ASSESSEE HAS IN HIS SECOND PAPER-BOOK (PB-II) ENCLOSED THE DECIS ION IN SARGAM CINEMA V. CIT [2011] 328 ITR 513 (SC), WHEREBY THE APEX COURT UP HELD THE TRIBUNALS ORDER SETTING ASIDE AN ADDITION BASED ON A VALUATIO N REPORT BY THE DVO AS THE REFERENCE TO HIM BY THE AO WAS WITHOUT REJECTING TH E ASSESSEES BOOKS OF ACCOUNT, INVALIDATING THE REFERENCE, SO THAT THE SA ME COULD NOT BE RELIED UPON. THIS GIVES RISE TO VARIOUS ISSUES, WHICH ARE THEREF ORE BEING HIGHLIGHTED WITH A ITA NO. 145/JAB/2018 (AY 2009-10) PRINCE RAI V. ITO 6 VIEW TO ENSURE THEIR CONSIDERATION AND ADJUDICATION PROPER, SERVING THE PURPOSE OF THE SET-ASIDE. TO BEGIN WITH, THE MATTER ASSUMES RELEVANCE AS THE BOOKS OF ACCOUNT OF THE ASSESSEES FOOD-GRAIN BUSINESS WERE NOT PRODUCED BEFORE THE AO. THE ASSESSEE IS IN HOTEL AND FOOD-GRAIN TRADING BUS INESS AND, AS IT APPEARS, THE STORAGE-GODOWN BEING BUILT IS FOR THIS BUSINESS. NO W, WHILE NON-MAINTENANCE OF BOOKS OF ACCOUNT (WHICH INCLUDES BILLS AND VOUCHERS ) MAY NOT BE CONCLUSIVELY HELD ON THE BASIS OF THE INCOME OF THE SAID BUSINES S FOR THE RELEVANT YEAR HAVING BEEN RETURNED ON PRESUMPTIVE RATE BASIS (U/S. 44AF) , THE FACT OF THE MATTER, EVEN AS OBSERVED BY THE BENCH DURING HEARING, IS THAT TH E BOOKS OF ACCOUNT OF THE SAID BUSINESS WERE NOT PRODUCED BY THE ASSESSEE BEFORE T HE AO IN THE ASSESSMENT PROCEEDINGS. HOW COULD THE BOOKS OF ACCOUNT, NOT PRODUCED AND, T HEREFORE, UNABLE TO BE VERIFIED BY HIM, BE REJECTED BY THE AO ? THERE COULD POSSIBLY BE NO REJECTION (NON-ACCEPTANCE) OF THE SAID BOOKS UNDER SUCH CIRCUMSTANCES? IN FACT, THE QUESTION OF NON-PRODUCTION, THOUGH BAS IC AND INTEGRAL TO REJECTION, IS ITSELF RENDERED SUPERFLUOUS AS THE IN COME OF THE ASSESSEES SAID BUSINESS WAS NEITHER RETURNED NOR, CONSEQUENTLY, AS SESSED ON THE BASIS OF THE BOOKS OF ACCOUNT BUT, AS AFORE-SAID, ON PRESUMPTIVE BASIS. WHERE, THEN, ONE MAY ASK, WAS THE NEED FOR THE ASSESSEE TO PRODUCE THEM, OR FOR THE AO TO CALL FOR AND EXAMINE THEM FOR THE PURPOSE OF PLACING RELIANCE TH EREON FOR DEDUCING THE INCOME OF THE ASSESSEES RELEVANT BUSINESS. AND, WH ERE FOUND TO BEAR DEFECTS, I.E., AS NOT RELIABLE, TO REJECT THEM AND PROCEED T O ESTIMATE THE SAID INCOME ON THE BASIS OF THE MATERIAL AVAILABLE OR OTHERWISE GA THERED BY HIM, AFTER CONFRONTING THE SAME TO THE ASSESSEE. IN THE INSTAN T CASE, THE ASSESSEE HIMSELF DOES SO, I.E., DISREGARDS HIS BOOKS ASSUMING THEM TO BE MAINTAINED, FOR RETURNING INCOME, WHICH HE DOES ON PRESUMPTIVE BASI S, I.E., IN PREFERENCE TO THE RESULTS EXHIBITED BY THE SAID BOOKS. THAT IS, THE CONDUCT OF THE PARTIES, WHICH IS IN CONFORMITY WITH THE LAW, ITSELF EXHIBITS THE UNR ELIABILITY AND, THUS, THE NON- ACCEPTANCE OF THE ACCOUNTS, INDEED THEIR IRRELEVANC E, FOR THE PURPOSE OF ITA NO. 145/JAB/2018 (AY 2009-10) PRINCE RAI V. ITO 7 DETERMINING THE INCOME OF THE ASSESSEES RELEVANT B USINESS. IT MAY ALSO BE BORNE IN MIND THAT IT IS NOT NECESSARY THAT A SPECIFIC OR DER IS TO BE PASSED BY THE AO IN ITS RESPECT, AND WHICH COULD BE IMPLICIT IN HIS ORD ER, EVEN AS EXPLAINED IN, INTER ALIA, CIT V . A. KRISHNASWAMI MUDALIAR [1964] 53 ITR 122, 126 (SC) IN THE FOLLOWING WORDS: NO EXPRESS ORDER WAS RECORDED BY THE INCOME-TAX OFF ICER THAT IN HIS OPINION THE INCOME, PROFITS OR GAINS OF THE BUSINESS COULD NOT PROPERLY BE DEDUCED FROM THE METHOD OF ACCOUNTING EMPLOYED BY THE FIRM, BUT IT IS IMPLICIT IN WHAT IS STATED BY HIM THAT WITHOUT VALUATION OF THE UNEXPIRED EXPLOITATION RIGHTS THE PROFITS OF THE YEAR OF ACCOUNT COULD NOT BE COMPUTED. WITH THIS VIEW, IT APPEARS, THE APPELL ATE ASSISTANT COMMISSIONER AGREED . IN THE INSTANT CASE, THE AO RECORDS A FINDING (AT P ARA 2 OF HIS ORDER), AFTER HEARING THE ASSESSEE (THROUGH HIS COUNSEL, SH. S.K. LALWANI, CA) FROM TIME TO TIME, THAT HE HAS NOT MAINTAINED BOOKS OF ACCOUNT A S HE HAD RETURNED THE INCOME ON PRESUMPTIVE TAX BASIS U/S. 44AF. THE SAME BEING A NON-OBSTANTE PROVISION, THE BUSINESS INCOME (OF THE FOOD-GRAIN TRADING BUSI NESS) WAS ACCEPTED BY HIM AT THE RETURNED SUM OF RS. 3,68,712 (PG. 29/PB-II), WH ICH EXPLAINS THE OBSERVATION HEREINBEFORE OF THE CONDUCT OF THE PARTIES BEING IN CONFORMITY WITH LAW. THE MAINTENANCE OF ACCOUNTS IS ITSELF RENDERED INCONSEQ UENTIAL UNDER SUCH CIRCUMSTANCES, I.E., EVEN ASSUMING THEIR MAINTENANC E, ASSERTED BY THE LD. COUNSEL DURING HEARING. FURTHER, IT MAY BE THAT THE STORAGE -GODOWN IS FOR THE WAREHOUSE BUSINESS, COMMENCED DURING THE PREVIOUS YEAR RELEVA NT TO AY 2010-11 (PG. 34/PB-II), IN WHICH CASE THE AOS STATEMENT, BEING IN RESPECT OF THE FOOD-GRAIN BUSINESS, WOULD NOT BE RELEVANT. IF, AS IT APPEARS, THE SAID BUSINESS DID NOT COMMENCE DURING THE CURRENT YEAR, WITH THE CONSTRUC TION OF THE GODOWN, A PRINCIPAL ASSET OF THIS BUSINESS, HAVING BEEN COMPL ETED IN THE FOLLOWING YEAR, THE QUESTION IS WHETHER THE ISSUE OF ACCEPTANCE OR OTHERWISE OF THE ACCOUNTS, I.E., FOR THE PURPOSE OF DETERMINING BUSINESS INCOME, WHI CH INCLUDES LOSS, WOULD ARISE? THESE AND LIKE QUESTIONS/ISSUES WOULD THEREF ORE NEED TO BE EXAMINED AND DILATED UPON BY THE LD. CIT(A) WHERE A SIMILAR ARGU MENT/S IS MADE BY THE ASSESSEE-APPELLANT BEFORE HIM, ALSO HEARING THE AO IN THE MATTER. ITA NO. 145/JAB/2018 (AY 2009-10) PRINCE RAI V. ITO 8 THE ARGUMENT, RATHER, AND AS SHALL BE PRESENTLY SEE N, GIVES RISE AND HAS OTHER FACETS TO IT. FIRSTLY, ASSUMING THAT THE REFE RENCE IS BAD, COULD THE MATERIAL GATHERED IN PURSUANCE THEREOF, BE RELIED UPON BY TH E AO, OF COURSE AFTER CONFRONTING THE ASSESSEE THEREWITH? THIS QUESTION A RISES AS IT IS WELL-SETTLED THAT THE VALIDITY OF AN ASSESSMENT IS NOT IMPACTED BY TH AT OF THE MATERIAL GATHERING PROCESS, WHICH CAN, SUBJECT TO THE ADHERENCE TO THE PRINCIPLES OF NATURAL JUSTICE, AS FURNISHING REASONABLE OPPORTUNITY OF REBUTTAL TO THE ASSESSEE, BE RELIED UPON FOR THE PURPOSE OF ASSESSMENT. IN POORAN MAL V. DIRECTOR OF INSPECTION (INV.) [1974] 93 ITR 505 (SC), A DECISION BY THE LARGER BE NCH OF THE APEX COURT, IT WAS EXPLAINED THAT THE TEST OF ADMISSIBILITY OF EVI DENCE LIES IN ITS RELEVANCY. AS SUCH, UNLESS THERE IS AN EXPRESS OR NECESSARILY IMP LIED PROHIBITION IN THE CONSTITUTION OR OTHER LAW, EVIDENCE OBTAINED AS A R ESULT OF AN ILLEGAL SEARCH OR SEIZURE IS NOT LIABLE TO BE SHUT OUT. ACCORDINGLY, IT WAS HELD THAT EVEN THOUGH THE SEARCH AND SEIZURE MAY BE IN CONTRAVENTION OF SECTI ON 132 OF THE ACT, STILL THE MATERIAL OBTAINED THEREBY IS LIABLE TO BE USED SUBJ ECT TO LAW BEFORE THE INCOME- TAX AUTHORITIES AGAINST THE PERSON FROM WHOSE CUSTO DY IT IS SEIZED AND, THEREFORE, NO WRIT OF PROHIBITION IN RESTRAINT FOR SUCH USE CA N BE GRANTED. THIS STANDS REITERATED BY IT IN DR. PRATAP SINGH & ANR. V. DIRECTOR OF ENFORCEMENT [1985] 155 ITR 166 (SC) . THIS ASPECT WOULD THEREFORE, WHERE ASSUMED, HAVE T O BE CONSIDERED AND ANSWERED AFTER HEARING THE PARTIES. THERE IS YET ANOTHER ASPECT OF THE MATTER, WHICH IS SUES FORTH FROM THE FOREGOING: WHETHER A REJECTION OF ACCOUNTS HAS TO N ECESSARILY PRECEDE A REFERENCE TO THE DVO U/S. 142A. THAT IS, ASSUMING I TS APPLICABILITY AND, FURTHER, THAT THERE HAS BEEN NO IMPLIED REJECTION IN THE INS TANT CASE. THIS IS DEEMED PERTINENT AS THERE IS NOTHING IN THE PROVISION OF L AW AS WELL AS THE CLEAR ENUNCIATION OF LAW BY THE APEX COURT PER ITS DECISI ONS TO SO SUGGEST. AN ADDITION, AS IN THE INSTANT CASE, MAY ENSUE IN CASE THE EXCESS COST (AS DETERMINED BY THE VO), I.E., WHERE SO, IS, IN THE OPINION OF T HE AO, UNEXPLAINED AS TO ITS ITA NO. 145/JAB/2018 (AY 2009-10) PRINCE RAI V. ITO 9 NATURE AND SOURCE (OR TO THE EXTENT IT IS SO) BY TH E ASSESSEE. THE SAME IS ESSENTIALLY A RULE OF EVIDENCE (SS. 69/69A), AS IS THE CASE FOR SEC. 68, WHEREBY AN UNEXPLAINED CREDIT IN THE ASSEESSEES ACCOUNTS IS D EEMED AS INCOME, AND WHICH WAS UPHELD BY THE COURTS EVEN IN THE ABSENCE OF A C ODIFIED LAW, I.E., UNDER THE 1922 ACT. REFER, INTER ALIA, KALE KHAN MOHD. HANIF V. CIT [1963] 50 ITR 1 (SC), A DECISION BY A LARGER BENCH OF THE APEX COUR T AFFIRMING THE DECISION BY THE HONBLE JURISDICTIONAL HIGH COURT. IT STANDS EX PLAINED THEREIN THAT THE ONUS OF PROVING THE SOURCE OF MONEY FOUND TO HAVE BEEN R ECEIVED BY THE ASSESSEE IS ON HIM. A CREDIT ENTRY/S IN HIS ACCOUNTS IS BY ITSE LF A PROOF OF THE ASSESSEE BEING IN RECEIPT OF TAXABLE INCOME, WHICH THEREFORE HAS T O BE SHOWN AS TAX-EXEMPT OR OTHERWISE PROVED AS TO ITS NATURE AND SOURCE FOR IT TO BE NOT REGARDED AS SUCH. WHAT, THEREFORE, AN ASSESSEE IS IN SUBSTANCE BEING CALLED UPON TO IN SUCH A CASE ESTABLISH IS THE TRUTH OF HIS ACCOUNTS, I.E., PROVE THE SAME QUA THE RELEVANT ENTRIES IN THE ACCOUNTS NOTHING MORE AND NOTHING LESS. TH AT IS, THE TRUTH OF HIS ACCOUNTS IS TO BE PROVED DESPITE THE ENTRIES TO THA T EFFECT THEREIN (REFER: CIT V. S. KAMARAJA PANDIAN [1984] 150 ITR 703 (MAD)). THE PLEA AS TO THE NON- MAINTAINABILITY OF AN ADDITION U/S. 68, I.E., QUA A CREDIT ENTRY/S, IN VIEW OF THE ACCOUNTS BEING NOT ACCEPTED, AND THE INCOME OF THE ASSESSEEES BUSINESS BEING DETERMINED BY ESTIMATION (WITH REFERENCE TO THE MAT ERIAL GATHERED BY AND AVAILABLE WITH THE AO), WAS ACCORDINGLY REJECTED BY THE APEX COURT; IT HOLDING THAT THE AMOUNTS OF THE CASH CREDITS COULD BE ASSES SED TO TAX AS INCOME FROM UNDISCLOSED SOURCES IN ADDITION TO THE BUSINESS INC OME COMPUTED BY ESTIMATE. THE TAXING AUTHORITIES, IT EXPLAINED, WERE NOT PREC LUDED FROM TREATING THE AMOUNTS OF THE CREDIT ENTRIES AS INCOME FROM UNDISC LOSED SOURCES SIMPLY BECAUSE THE ENTRIES APPEARED IN THE BOOKS OF THE BU SINESS WHOSE INCOME THEY HAD PREVIOUSLY COMPUTED ON A PERCENTAGE BASIS. REFE RENCE IN THIS CONTEXT MAY WITH PROFIT BE ALSO MADE TO THE DECISION IN CIT V. DEVI PRASAD VISHWANATH PRASAD [1969] 72 ITR 194 (SC). THE POSITION, AS APPARENT, WOULD BE AKIN TO, ITA NO. 145/JAB/2018 (AY 2009-10) PRINCE RAI V. ITO 10 SAY, THAT OF A DISALLOWANCE OF AN EXPENDITURE FOR W ANT OF GENUINENESS DESPITE THE ASSESSEES ACCOUNTS BEARING AN ENTRY IN ITS RESPECT . THIS ASPECT STANDS ALSO CLARIFIED BY THE APEX COURT IN A. KRISHNASWAMI MUDALIAR (SUPRA) IN THE FOLLOWING WORDS: IF, THEREFORE, THERE IS A SYSTEM OF ACCOUNTING REGU LARLY EMPLOYED AND BY APPROPRIATE ADJUSTMENTS FROM THE ACCOUNTS MAINTAINED TAXABLE PR OFIT MAY PROPERLY BE DEDUCED, THE INCOME-TAX OFFICER IS BOUND TO COMPUTE THE PROFITS IN ACCORDANCE WITH THE METHOD OF ACCOUNTING. BUT WHERE IN THE OPINION OF THE INCOME- TAX OFFICER THE PROFITS CANNOT PROPERLY BE DEDUCED FROM THE SYSTEM ACCOUNTING ADOP TED BY THE ASSESSEE IT IS OPEN TO HIM TO ADOPT A MORE SUITABLE BASIS FOR COMPUTATION OF T HE TRUE PROFITS. (PG. 129) WHAT IS BEING NOT ACCEPTED IN SUCH A CASE IS THE TR UTH OF THE ACCOUNTS WITH REGARD TO THE RELEVANT EXPENDITURE IN THE ABSENCE O F PROOF NOTHING MORE AND NOTHING LESS, AND WHICH IS ACCORDINGLY DISALLOWED, NEUTRALIZING ITS IMPACT ON THE PROFIT FOR THE YEAR AS PER ACCOUNTS. IN CASE OF AN ADDITION U/S. 69A, AS IN THE INSTANT CASE, ON THE OTHER HAND, THE STATUTE ITSELF ACCORDS CREDENCE TO THE ASSESSEE S ACCOUNTS TO THE EXTENT OF THE COST DEBITED THEREIN. IT IS THE EXCESS COST, I.E., WITH REFERENCE TO THE COST DEBITED IN THE ASSESSEES ACCOUNTS, AND FOR WHICH (ADDITION AL COST) THE REVENUE HAS EVIDENCE (AS IN THE FORM OF THE PHYSICAL INSPECTION AND VALUATION REPORT OF THE RELEVANT ASSET) IN ITS POSSESSION, WHICH IS TO BE E XPLAINED AS TO ITS SOURCE. WHERE, THEN, IS THE QUESTION OF REJECTION (NON-ACCE PTANCE) OF THE ASSESSEES ACCOUNTS, WHICH RATHER FORM A PART OF HIS EXPLANATI ON, AND ARE BEING IN FACT RECEIVED AND ACCEPTED IN EVIDENCE, I.E., TO THE EXT ENT OF THE COST REFLECTED THEREIN. WHY, IN A PARTICULAR CASE, AS IN SEC. 69, NO PART OF THE COST IS REFLECTED IN ACCOUNTS, AS, FOR EXAMPLE, WHERE THE ASSET IS A PER SONAL ASSET AND, THUS, DOES NOT FIND MENTION AND REFLECTION IN THE ACCOUNTS OF THE ASSESSEES BUSINESS. THAT IS TO SAY, THE COST MET BY THE ASSESSEE, OR OTHERWISE PRO VED TO HAVE BEEN INCURRED, OR EVEN NOT INCURRED BY THE ASSESSEE, AS IN THE CASE O F GIFT, INHERITANCE, ETC., AND IRRESPECTIVE OF ITS REFLECTION IN HIS ACCOUNTS, WHE RE MAINTAINED, FORMS PART OF THE ASSESSEES EXPLANATION, AND IT IS ONLY THE BALANCE, EXCESS COST, WHICH IS ITA NO. 145/JAB/2018 (AY 2009-10) PRINCE RAI V. ITO 11 UNEXPLAINED WITH ANY EVIDENCE, FOR WHICH THE RULE O F EVIDENCE (SS. 69/69A) DEEMS IT TO BE HIS INCOME FOR THE RELEVANT YEAR. WHERE, THEN, ONE MAY ASK, IS THE QUESTION, I.E., FOR INVOCATION OF THIS RULE OF EVID ENCE, OF THE REJECTION OF THE BOOKS OF ACCOUNT OF THE ASSESSEES BUSINESS, WHICH MAY NOT EVEN BE MAINTAINED OR EVEN NOT BEAR THE SAID COST, AND WHICH (REJECTIO N) IS FOR THE PURPOSE OF PROPERLY DEDUCING THE BUSINESS INCOME, WHICH IS NOT A CONCOMITANT OF THE SAID INVOCATION, AND MAY EVEN BE INDEPENDENT OF IT ? WHY, THE BUSINESS ITSELF MAY NOT HAVE COMMENCED, AS IN THE CASE OF WAREHOUSE BUSINES S IN THE INSTANT CASE. THE QUESTION BEGS AN ANSWER BEFORE THE DECISION IN SARGAM CINEMA (SUPRA) HOLDING A REFERENCE WITHOUT REJECTION OF ACCOUNTS AS BAD, C OULD BE RELIED UPON. AS SEEN, THE CLEAR AND SETTLED LAW DOES NOT REQUIRE THE REJECTION OF ACCOUNTS AND, WHERE SO, IS DEEMED IRRELEVANT WHERE SPECIFIC ADJUSTMENTS TO THE RETURNED INCOME ARE MADE ON THE BASIS OF THE SATISF ACTION OF THE RELEVANT PROVISIONS OF LAW, EVEN THOUGH THE SAID ADJUSTMENTS PERTAIN TO THE ENTRIES IN THOSE ACCOUNTS, WHILE FOR AN ADDITION U/S. 69/69A T HE ACCOUNTS ARE IN FACT BEING ACCEPTED TO THE EXTENT OF THE RELEVANT ENTRIES THER EIN. THE SAID DECISION DOES NOT CITE THE PRECISE QUESTION OF LAW RAISED BEFORE IT F OR BEING ANSWERED, AND INDEED THAT ADMITTED AND ANSWERED BY THE HONBLE COURT. FU RTHER STILL, THE JUDGMENT IS SANS ANY DISCUSSION OF OR ON THE LAW IN THE MATTER OR R EFERENCE TO ANY PRECEDENTS. THE ISSUE THAT THEREFORE ARISES FOR BEI NG ANSWERED FIRST IS IF, IN VIEW OF THE CLEAR PROVISIONS OF LAW AND THE SCHEME OF TH E ACT, AND AS FURTHER EXPLAINED AND EXPOUNDED BY THE APEX COURT PER ITS S EVERAL DECISIONS, INCLUDING BY ITS LARGER BENCHES, COULD THE SAID JUDGMENT BE REGARDED AS A COMPLETE STATEMENT OF LAW IN THE MATTER AND, WHERE CONSIDERE D SO, THE BASIS THEREOF, AS ALSO THE SPECIFICATION OF THE SAID STATEMENT. BEFORE PARTING, IT MAY BE CLARIFIED THAT THE VARIOU S ISSUES DISCUSSED WITH REFERENCE TO THE INVALIDITY OF THE AOS REFERENCE T O THE DVO ARE ONLY WITH A VIEW TO EMPHASIZE THE SEVERAL ASPECTS/DIMENSIONS OF THE MATTER ON WHICH, ITA NO. 145/JAB/2018 (AY 2009-10) PRINCE RAI V. ITO 12 THEREFORE, ADJUDICATION, WHERE SOUGHT, MAY BE REQUI RED UPON CONSIDERING ALL THE FACTUAL AND LEGAL ASPECTS, INCLUDING THOSE, NOT DISCUSSED, AS ARE AGITATED OR OTHERWISE DEEMED RELEVANT, PER A SPEAKING ORDER. NO FINAL OPINION IN THE MATTER IS EXPRESSED OR MAY BE CONSTRUED AS SUCH. THAT IS, IS A CASE OF AN OPEN SET ASIDE. 3.4 I DECIDE ACCORDINGLY. 4. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON JULY 22, 2021 SD /- (SANJAY ARORA) A CCOUNTANT MEMBER DATED: 22/07/2021 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT: SHRI PRINCE RAI, RAI CHAURAHA, MAAGA NJ WARD, DAMOH (M.P.) 2. THE RESPONDENT: INCOME TAX OFFICER, WARD DAMOH, DAM OH (M.P) 3. THE PR. CIT-1, JABALPUR 4. THE CIT(A)-1, JABALPUR 5. THE SR. DR, ITAT, JABALPUR 6. GUARD FILE