Appeal Details
Counselvise Citation
[2011] 134 COUNSELVISE.COM (IT) 5262 (ITAT-CHENNAI)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
2 year(s) 9 month(s) 11 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
18-04-2011
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
A
Next Hearing Date
10-02-2011
Assessment Year
2006-2007
Appeal Filed On
07-07-2008
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH C : CHENNAI [BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER] I.T.A.NO.1482/MDS/2008 ASSESSMENT YEAR : 2006-07 THE ACIT CENTRAL CIRCLE-III(2) CHENNAI VS SHRI A. LALITH KUMAR GALADA 10, NAGESWARAN ROAD T. NAGAR CHENNAI 600 017 [PAN - ACWPG1589L] (APPELLANT) (RESPONDENT) C.O.NO.13/MDS/2009 ASSESSMENT YEAR : 2006-07 SHRI A. LALITH KUMAR GALADA 10, NAGESWARAN ROAD T. NAGAR CHENNAI 600 017 VS THE ACIT CENTRAL CIRCLE-III(2) CHENNAI (CROSS OBJECTOR) (RESPONDENT) I.T.A.NOS.1483 & 1484/MDS/2008 ASSESSMENT YEARS : 2006-07 & 2004-05 THE ACIT CENTRAL CIRCLE-III(2) CHENNAI VS SHRI A. SURENDRA KUMAR GALADA 10, NAGESWARAN ROAD T. NAGAR CHENNAI 600 017 [PAN - AASPS3816Q] (APPELLANT) (RESPONDENT) ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 2 -: C.O.NOS.14 &15/MDS/2009 ASSESSMENT YEAR : 2006-07 & 2004-05 SHRI A. SURENDRA KUMAR GALADA 10, NAGESWARAN ROAD, T. NAGAR CHENNAI 600 017 VS THE ACIT CENTRAL CIRCLE-III(2) CHENNAI (CROSS OBJECTOR) (RESPONDENT) I.T.A.NO.1485/MDS/2008 ASSESSMENT YEAR : 2006-07 THE ACIT CENTRAL CIRCLE-III(2) CHENNAI VS SHRI ABIRCHAND GALADA (HUF) 10, NAGESWARAN ROAD, T. NAGAR CHENNAI [PAN - AAAHA3567L] (APPELLANT) (RESPONDENT) C.O.NO.23/MDS/2009 ASSESSMENT YEAR : 2006-07 SHRI ABIRCHAND GALADA (HUF) 10, NAGESWARAN ROAD CHENNAI VS THE ACIT CENTRAL CIRCLE-III(2) CHENNAI (CROSS OBJECTOR) (RESPONDENT) I.T.A.NOS.1293 & 1294/MDS/2009 ASSESSMENT YEARS : 2004-05 & 2005-06 SHRI ABIRCHAND GALADA (HUF) BY KARTHA SHRI SURENDRA KUMAR GALADA PROP. OF M/S T.B JEWELLERY 10, NAGESWARAN ROAD T. NAGAR CHENNAI VS THE ACIT CENTRAL CIRCLE-III(2) CHENNAI [PAN - AAAHA3567L] (APPELLANT) (RESPONDENT) ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 3 -: ASSESSEE BY : SHRI V. RAMACHANDRAN DEPARTMENT BY : SHRI SHAJI P. JACOB O R D E R PER BENCH: THE ABOVE CAPTIONED BUNCH OF TEN CASES ARE BEING DISPOSED OF BY A COMMON ORDER AS THE FACTS AND ISSUES INVOLVED THEREIN ARE SO INTERTWINED THAT IT WOULD BE CONVENIENT AND EASY TO DO SO. I.T.A.NO. 1483/MDS/08 & C.O. NO. 14/MDS/09 IN THE C ASE OF SHRI A.SURENDRA KUMAR GALADA 2. APPEAL BY THE REVENUE AND THE CROSS OBJECTION B Y THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE LD. CIT(A) DATED 2.4.2008, PERTAINING TO ASSESSMENT YEAR 2006-07. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE SHRI A.SURENDRA KUMAR GALADA, IS A PROPRIETOR OF TWO CON CERNS, NAMELY, S.J. INTERNATIONAL AND GOLDEN MOMENTS JEWELLERY. H E IS ALSO THE KARTHA OF ABIRCHAND GALADA(HUF). ABIRCHAND GALADA( HUF) IS THE PROPRIETOR OF A BUSINESS KNOWN AS T.B. JEWELLERY, CHENNAI. A SEARCH AND SEIZURE OPERATION U/S 132 OF THE INCOME-TAX ACT , 1961 (HEREINAFTER REFERRED TO AS 'THE ACT' FOR SHORT) WAS CONDUCTED O N 19.5.2005, IN THE CASE OF THIS ASSESSEE. ONE DAY BEFORE THE SEARCH (O N 19.5.2005), A ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 4 -: SURVEY OPERATION U/S 133A OF THE ACT WAS CARRIED OU T AT THE BUSINESS- CUM-RESIDENT PREMISES OF SHRI SURENDRA KUMAR GALADA . DURING THE SURVEY PROCEEDINGS, IT WAS FOUND THAT THE ASSESSEE AND HIS FAMILY MEMBERS WERE IN POSSESSION OF UNACCOUNTED GOLD JEWE LLERY, SILVER JEWELLERY, DIAMOND STUDDED JEWELLERY, LOOSE DIAMOND S AND CASH. ACCORDINGLY, THE SURVEY OPERATION WAS FOLLOWED BY S EARCH OPERATION AS STATED ABOVE. ON 19.5.2005 ITSELF SURVEY OPERATION S U/S 133A WERE SIMULTANEOUSLY CARRIED AT TWO OTHER PREMISES WHICH ARE AS UNDER: (A) NO.10, NAGESWARA RAO ROAD, T. NAGAR, CHENNAI 17 . THIS IS THE PREMISE OF M/S T.B. JEWELLERY, WHICH IS THE PROPRIETORSHIP CONCERN OF A.ABIRCHAND GALADA(HUF), THE KARTA BEING MR.SURENDER K.GALADA AND SHRI LALIT H KUMAR GALADA IS THE COPACERNER IN THE HUF AND (B) NO.4, SEETHAMMAL COLONY EXTENSION, II MAIN ROAD , TEYNAMPET, CHENNAI 18. AT THIS PREMISE, FOUR PROPRIETORSHIP CONCERNS NAMEL Y M/S GOLDEN MOMENT JEWELLERY (PROP. MR.SURENDER KUMAR GALADA) M/S S.J INTERNATIONAL (PROP. MR. SURENDER KUMAR GALADA), M/S A.G INTERNATIONAL (PROP . MR.ABHISHEK GALADA) AND M/S L.G INTERNATIONAL(PROP. MR.LALITH KUMAR GALADA) HAVE THEIR OFFICES. 4. THIS SURVEY OPERATION RESULTED INTO IMPOUNDING OF V ARIOUS INCRIMINATING DOCUMENTS INCLUDING BOOKS OF ACCOUNT AND OTHER FILES/DATA TAKEN FROM THE COMPUTER AT THE OFFICE OF M/S T.B JEWELLERY. CONSEQUENT TO THESE OPERATIONS, A NOTICE U/S 153A, DATED 10.2.2006, WAS ISSUED AND SERVED ON THE ASSESSEE ON 17.2.2006. WHEN THIS NOTICE WAS NOT COMPLIED WITH, A NOTICE U/S 142(1) DATED 12.9.2007, ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 5 -: WAS ISSUED WHICH WAS SERVED ON THE ASSESSEE ON 21.9 .2007. THEREAFTER, THE ASSESSEE FILED HIS RETURN OF INCOME ON 27.9.2007 ADMITTING INCOME OF ` 2,72,813/- AFTER SET OFF OF LOSSES OF ` 7,51,545/- AS PER THE ORIGINAL RETURN FILED ON 29.10.2004. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT ON 20.6.2007 AT A TOTAL I NCOME OF ` 13,900,186/- BY MAKING FOLLOWING ADDITIONS: EXCESS GOLD JEWELLERY FOUND AT THE TIME OF SEARCH AT THE RESIDENCE ` 40,70,375 EXCESS STOCK OF GOLD JEWELLERY AT THE PREMISES OF PROPRIETARY CONCERN GOLDEN MOMENTS ` 75,69,499 EXCESS STOCK OF DIAMONDS FOUND AT THE PREMISES OF PROPRIETARY CONCERN GOLDEN MOMENTS ` 12,00,000 UNDISCLOSED FIXED ASSETS ` 24,894 DISALLOWANCE FOR CONTRAVENTION OF SEE. 40(A)(IA) ` 52,301 GROSS PROFIT FROM UNDISCLOSED JEWELLERY BUSINESS ` 1,26,797 CAPITAL INTRODUCED IN THE PROPRIETARY BUSINESS OF GOLDEN MOMENTS JEWELLERY ` 400,000 5. IN FIRST APPEAL, THE ASSESSEE WAS SUCCESSFUL IN GE TTING PART RELIEF, HENCE, BOTH THE PARTIES ARE AGGRIEVED. THE REVENUE HAS FILED APPEAL AND THE ASSESSEE HAS FILED CROSS OBJECTION B EFORE US. IN REVENUES APPEAL, THE FOLLOWING GROUNDS HAVE BEEN RAISED: 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO LAW AND FACTS OF THE CASE. ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 6 -: 2. THE LEARNED CIT(A) ERRED IN DELETING THE ADDITIO N TO THE EXTENT OF ` 37,81,271/ BEING ADDITION MADE TOWARDS UNDISCLOSED INVESTMENT IN GOLD JEWELLERY . 2.1. THE CIT(A) FAILED TO APPRECIATE THE FACT THAT THE LAST WEALTH TAX FILED WAS FOR THE ASSESSMENT YEAR 1986-8 7 AND THE SAME WAS NOT SHOWN IN THE OPENING BALANCE I N ANY OF THE TRIAL BALANCE FILED FOR THE SUBSEQUENT Y EARS. 2.2. THE ID CIT(A) ERRED IN ALLOWING THE CLAIM OF T HE ASSESSEE SIMPLY BASED ON THE SOCIO-ECONOMIC STATUS OF THE ASSESSEE WHILE THE SAME IS NOT SUPPORTED BY ADMISSION IN THEIR RESPECTIVE BALANCE SHEETS. 3. THE LD CIT(A) ERRED IN ALLOWING THE CLAIM OF THE ASSESSEE REGARDING JEWELLERY RECEIVED FROM THE ACHA RI SHRI.HIMANSHU, BUT NOT ACCOUNTED IN RESPECT OF DISCREPANCY NOTED IN THE CLOSING STOCK. 3.1 THE LD CIT(A) OUGHT TO HAVE APPRECIATED THE FAC T THAT ENTRY UPDATED AFTER SEARCH WILL HAVE NO BEARING ON THE DETERMINATION OF CLOSING STOCK. 3.2 THE ID CIT(A) ERRED IN NOT CONSIDERING THE FACT THE ASSESSING OFFICER HAS ALREADY TAKEN INTO ACCOUNT TH E ENTRY FOUND UNDER 'ALLOY' WHILE DETERMINING THE STO CK. 3.3. THE RELIANCE OF CIT(A) ON JEWELLERY RECEIVED FROM MR.HIMANGSHU NOT BOOKED AS THE ENTRIES HAD NOT BEEN UPDATED THOUGH THE BILL WAS AVAILABLE AND HAD BEEN NOTED BY THE SEARCH PARTY' IS MISREPRESENTED AND NO T SUPPORTED BY ANY POST SEARCH REPORT. 3.4. THE ID CIT(A) ERRED IN ALLOWING TELESCOPING OF THE INCOME ADMITTED IN THE EARLIER YEARS AGAINST THE VA LUE OF UNACCOUNTED INVESTMENT IN GOLD JEWELLERY. 3.5 THE LD CIT(A) OUGHT TO HAVE APPRECIATED THE F ACT THAT ASSESSEE HIMSELF HAS ADMITTED RECEIPT OF ` 7.74 LAKHS ONLY DURING ENTIRE FY 2004-05 AND IT IS NOT L IKELY THAT HE WOULD HAVE RECEIVED THE ENTIRE SUM BEFORE 19.05.2005, THE DATE OF SEARCH. ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 7 -: 4. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 6. IN THE CROSS OBJECTION, FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSESSEE: 1. THE COMMISSIONER OF INCOME-TAX(APPEALS) ERRED N NOT DELETING THE ENTIRE ADDITION OF ` 40,70,375/-. HE ERRED IN CONFIRMING THE ADDITION TO THE EXTENT OF ` 2,89,104/-. THE ENTIRE ADDITION OUGHT TO HAVE BEEN DELETED. 2. THE COMMISSIONER OF INCOME-TAX(APPEALS) ERRED I N CONFIRMING THE ADDITION OF ` 24,48,880/- OUT OF THE TOTAL ADDITION OF ` 75,69,499/-. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS) ERRED IN WORKING OUT THE QUANTUM OF EXCESS STOCK AT ` 45,88,037/- AND CONFIRMING THE ADDITION ON THIS ACCOUNT AMOUNTING TO ` 24,48,880/-. THE ENTIRE ADDITION OUGHT TO HAVE BEEN DELETED. 4. THE COMMISSIONER OF INCOME-TAX(APPEALS) ERRED IN CONFIRMING THE ADDITION OF ` 1,26,797/- ON ACCOUNT OF ESTIMATED GROSS PROFIT FROM UNDISCLOSED JEWELLERY BUSINESS. THE ENTIRE ADDITION IS BASED ON ASSUMPTI ONS AND ESTIMATES UNSUBSTANTIATED BY EVIDENCE ON RECORD AND HENCE OUGHT TO HAVE BEEN DELETED. 7. THE GROUNDS RAISED IN APPEAL AND THE CROSS OBJECTIO N ARE INTERCONNECTED, THEREFORE, WE PROCEED TO DECIDE THE SAME SIMULTANEOUSLY. 8. THE FIRST COMMON ISSUE RELATES TO ADDITION MADE ON ACCOUNT OF UNDISCLOSED INVESTMENT IN GOLD JEWELLERY FOUND AT T HE TIME OF SEARCH AT ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 8 -: THE RESIDENTIAL PREMISES OF THE ASSESSEE. TO NARRA TE AND UNDERSTAND THE ENTWINED FACTS OF THIS ISSUE, THE FOLLOWING OBS ERVATION OF THE ASSESSING OFFICER WOULD BE HELPFUL TO A GREATER EXT ENT. THESE ARE BEING EXTRACTED FROM THE LD. CIT(A)S ORDER HEREIN AS BELOW: IN REPLY TO NOTICE U/S 142(1), THE ASSESSEE SUBMIT TED VIDE LETTER DATED 29.11.2007 THAT 'POINT-1: EXPLANATION FOR THE JEWELLERY FOUND AT NO.42, VENKATANARAYANA ROAD, T. NAGAR, CHENNAI. PLEASE ANNEXURES 1, 2 & 3 TO THIS LETTER WHEREIN TH E FIGURES HAVE BEEN RECONCILED.' IN THOSE ANNEXURES, WHICH ACTUALLY IS THE 'NOTE-APPENDED TO THE RETURN OF INCOME', THE ASSESSEE GAVE A COMPLETE REVERSE PICTURE:- DEFICIT OF GOLD 5910.950 GRMS. DEFICIT OF SILVER 221.899 KGS. DEFICIT OF DIAMONDS 201.360 CTS. DURING THE HEARING STAGE, THE AR OF THE ASSESSEE WA S ASKED TO EXPLAIN THE BASIS OF HIS CALCULATION WHICH HAVE L ED TO SHOWING DEFICIT IN RESPECT OF ALL THE ITEMS. HE STATED THAT APART FROM THE JEWELLERIES DISCLOSED UNDER VDIS 1997, MOST OF THE ASSESSEES HAD STOCK OF OPENING JEWELLERY IN THEIR HANDS AND A S AN EVIDENCE, HE PRODUCED THE LAST WEALTH TAX RETURN FI LED BY THOSE ASSESSEES WHICH WERE WAY BACK IN AY 1986-87. THE AR HAS ALSO PRODUCED THE RESPECTIVE PERSONS' INCOME TAX RE CORDS STARTING FROM A Y 1987-88 (FOR SMT. NIRMALA AY 1983 -84) WHEREFROM IT COULD BE SEEN THAT DURING THE INTERVEN ING PERIOD I.E. BETWEEN 1985-86 AND 2000-01 (THE FIRST YEAR OF SEARCH ASSESSMENT), NONE OF THE FAMILY MEMBERS HAS SHOWN A NY CAPITAL GAIN LOSS IN THEIR TOTAL INCOME COMPUTATION SHEETS. SO, THE AR PLEADED THAT IT SHOULD BE REASONABLY PRESUME D THAT THE JEWELLERIES APPEARING IN THE WEALTH TAX RETURNS FOR AY 1985-86 FOR ALL THE FAMILY MEMBERS, INCREASED BY THE AMOUNT S DISCLOSED UNDER VDIS 1991 SHOULD BE TREATED AS THE JEWELLERY AVAILABLE IN THE HANDS OF RESPECTIVE PERSONS AS ON 1.4.2000. ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 9 -: HERE IT MAY BE NOTED THAT IN RESPECT OF THOSE PERSO NS IN THE FAMILY OF SHRI SHRI SURENDRA KUMAR GALADA (INDL .) WHO HAD SHOWN OPENING JEWELLERY IN THEIR HANDS IN THEIR RES PECTIVE WEALTH TAX RETURNS, LAST FILED, I.E. ASST. YEAR 1986-87 AN D HAD ALSO DISCLOSED JEWELLERIES UNDER VDIS '97 SCHEME, I HAVE COMPARED THEIR TRIAL BALANCES AS ON 31-03-1997 AND AS ON 31- 03-1998. AS ON 3103-1997, NO JEWELLERY IS REFLECTED IN THE TRIA L BALANCE WHILE IN THE TRIAL BALANCE AS ON 31-03-1998 THAT AMOUNT O F JEWELLERY ONLY IS REFLECTED WHICH WERE DISCLOSED IN VDIS '97. THE AR WAS ASKED WHY THE TRIAL BALANCE AS ON 31-3-97 DID NOT S HOW ANY JEWELLERY FOR THESE ASSESSEES IF THEY HAD OPENING J EWELLERY BEFORE 1997 (AS PER WT RECORD), THE AR EXPLAINED THAT THE JEWELLERIES WHICH THOSE ASSESSEES SHOWED IN THEIR W T RETURNS (FOR 1986-87) WERE EITHER INHERITED JEWELLERY OR JE WELLERIES RECEIVED AS GIFTS DURING MARRIAGE CEREMONIES AND ON VARIOUS OTHER OCCASIONS. THAT IS WHY SO FAR, IT HAD BEEN KE PT OUT OF THE TRIAL BALANCE AND SHOWN IN WEALTH TAX RETURNS ONLY. THIS IS NOT ACCEPTABLE BECAUSE TRIAL BALANCE OF A PERSON IS A R EFLECTION OF HIS TOTAL LIABILITIES AND ASSETS. AND MOREOVER, EVE N IN THE DECADES OF EIGHTIES, THE ASSESSEES HAD OPTED FOR AM NESTY SCHEMES WHERE ALSO THEY DISCLOSED CERTAIN QUANTITY OF JEWELLERIES. NOW, IF AFTER VDIS 1997 THEY HAVE STAR TED TO SHOW THOSE JEWELLERIES UNDER THAT SCHEME, IN THEIR TRIAL BALANCES WITH INCOME TAX RETURNS, FOLLOWING THE SAME ACCOUNTING P OLICY, THEY SHOULD HAVE CONTINUED TO SHOW AT LEAST THOSE JEWELL ERIES (DECLARED UNDER AMNESTY) IN THEIR TRIAL BALANCES FI LED ALONG WITH THE INCOME TAX RETURNS FILED AFTER AY 1986-87 AND U PTO AY 1997- 98. ALSO IT IS PERTINENT TO MENTION HERE THAT IN TH E NOTE APPENDED TO RETURN (FOR AY 2006-07), ANNEXURE-1 THERETO, THE ASSESSEE HAS GIVEN A CHART OF OPENING JEWELLERIES OF THE FAM ILY MEMBERS. IN THAT CHART, APART FROM THE SEVEN MEMBERS, VIZ. S URENDER KUMAR GALADA (INDIVIDUAL, HUF AND SMALL HUF), ABHIS EK GALADA (INDIVIDUAL & HUF), SMT. NIRMALA KANWAR GALADA AND SMT. SURYAKANTH GALADA, FOUR OTHER NAMES ARE INCLUD ED AS UNDER: NAME QTY. OF JEWELLERY SMT. SUSHMA GALADA 520.90 GRM RAJUL GALADA 520.130 GRM AKSHAY GALADA 142.74 GRM MS. ISHITA GALADA (MINOR) 52.30 GRM ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 10 - : ALL THESE PERSONS WERE STATED TO HAVE RECEIVED THE SE JEWELLERIES AS GIFT ON VARIOUS OCCASIONS. I HAVE GO NE THROUGH THE RETURNS OF SMT. SUSHMA GALADA FOR AY 2005-06 AND 2006-07; FOR RAJUL GALADA FOR A Y 2006- 07; FOR AKSHAY GALADA AY 2006-07. IN NONE OF THESE CASES, THE TRIAL BALANCES ATTACHED WITH THE RETURNS REFLECT ANY JEWELLERY. IN RESPECT OF MINOR MS. ISHITA, WHO IS THE DAUGHTER OF MR ABHISEK, NO MENTION OF THIS 52.30 GRMS OF JEWELL ERY IS REFLECTED IN THE RETURNS OF MR ABHISEK GALADA FOR A NY OF THE YEARS UPTO A Y 2006-07. ACCORDINGLY, I CONCLUDE THA T THE ASSESSEE HAS ONLY COOKED THESE UP AS AN AFTERTHOUGH T TO EXPLAIN THE EXCESS JEWELLERIES AND IT IS NOT TO BE ACCEPTED. BECAUSE OF THIS CONTRADICTION, IN ARGUMENT AS PUT F ORWARD BY THE ASSESSEE AND REJECTION OF OPENING JEWELLERY IN THE HANDS OF THE FOUR PERSONS MENTIONED IN THE IMMEDIATE PREC EDING PARAGRAPHS, I DECIDE TO REJECT THE ASSESSEE'S CLAIM OF OPENING JEWELLERY IN THE HANDS OF SOME OF THE FAMILY MEMBER S TO THE EXTENT OF THE QUANTUM AS FURNISHED BY THE ASSESSEE. T O T A L JEWE L LE R Y O F SU RENDER K U MAR GALADA AND F AM I LY AS PE R VD I S ' 9 7 R ECORDS AND SUBSEQUENT PURCHASE : GO L D JEWELLERY D I AMO N D ( CT. ) S I LVER ( KG ) (IN GRAMS) NAME O F THE A SSESSEE GOLD B I T (IN GRAMS ) S U R ENDE R 320 2082.9 + 25 - 33 KU MAR 21.44 22 . 21 ( SOLD) GALA DA ( PURCHASE ) -150 (I ND L . ) ( SOLD ) N I RMALA 2198.20 40.76 + 39 (IN D L . ) 6.14 ( PURCHASE ) A B I SHE K 650 214.50 + 40 . 83 (I ND L . ) .85 (PURCHASE) SU R Y AKANTA 2602.85 30.32 + 35 ( INDL . ) 6.8 CT SU R ENDE R 650 549.90 27.58 38 ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 11 - : ( HUF ) S U RE N D ER 250 1707.20 20 30 ( S . HUF ) TOT A L 1870 9227.84 175.22 175 NOTE :IN THE CASES OF SMT. NIRMALA KANWAR GALADA AN D SMT. SURYAKANTH GALADA, THE ASSESSEE COULD NOT SUBSTANTI ATE THE PURCHASES OF DIAMOND OF 16 & 17 CARATS RESPECTIVELY WITH BILLS, BUT AT THE SAME TIME, THEIR ASSESSMENT RECORDS AS P RODUCED BY THE AIR FOR AY 1998-99, REFLECTS THAT LOOSE DIAMOND S WORTH ` 1,50,625 AND ` 1 ,66,750/- RESPECTIVELY HAD BEEN PURCHASED WITHOUT INDICATING THE QUANTITY IN CARATS. SO, THE FOLLOWING METHOD WAS ADOPTED TO QUANTIFY THE CARAT OF DIAMOND S PURCHASED:- DURING THE SEARCH ON 19.5.2005, THE VALUER VALUED T HE DIAMOND AT ` 37,000 PER CARAT. THE AR STATED THAT THE NORMAL PRA CTICE WHILE FILING WT RETURNS IS TO INCREASE THE VALUE OF DIAMOND ITEMS BY 5% EVERY YEAR. SO I DECIDE THAT STARTING WITH ` 37,000 PER CARAT FOR FY 2005-06, THE VALUE PER CARAT WILL BE R EDUCED BY 5% EACH YEAR AND THIS WAY, THE VALUE OF DIAMOND PER CA RAT DURING FY 1997-98 WAS REACHED AT ` 24,546. THEN, THE FIGURE OF ` 1,50,625 (AS PER IT RETURN OF A.Y.1998-99) WAS DIVI DED BY ` 24,546 TO ARRIVE AT THE QUANTITY OF DIAMOND IN CARA TS, WHICH WORKED OUT TO 6.14 CARAT FOR SMT. NIRMALA INSTEAD O F HER CLAIM OF 16 CARATS. THEN, THE FIGURE OF ` 1 ,66,750 (AS PER IT RETURN OF A. Y.1998-99) WAS DIVIDED BY ` 24,546 TO ARRIVE AT THE QUANTITY OF DIAMOND IN CARATS, WHICH WORKED OUT TO 6.80 CARAT F OR SMT. SURYAKANTH INSTEAD OF HER CLAIM OF 17 CARATS. FOLLO WING SIMILAR METHOD FOR SMT. NIRMALA GALADA , THE FIGURE OF ' DI AMOND PURCHASE' DURING 1998 , WAS WORKED OUT TO BE 6.14 C ARATS INSTEAD OF HER CLAIM OF 16 CARATS. DURING SURVEY U/S 133A AT THE BUSINESS PREMISES OF M/S T.B. JEWELLERY AT NO.10, NAGESWARAN ROAD, T.NAGAR, CHENNAI- 600 017, FIVE COMPACT DISCS (CDSS) WERE IMPOUNDED V IDE ANN/ AVK/CD/LMP. (TO MAHAZARNAMA DATED 20.5.2005) IN WHI CH THE ACCOUNT ETC. WHICH WERE STORED IN COMPUTER AT THE B USINESS PREMISES OF M/S T.B. JEWELLERY. ON 2.11.2007, PRINT -OUTS OF SOME SELECTED FILES COPIED IN THE CDS WERE TAKEN OU T IN THE PRESENCE OF SHRI LALITH KUMAR GALADA, WHO IS A CO-P ARCENAR AND MANDATE HOLDER OF THE HUF, M/S ABIRCHAND GALADA, PR OPRIETOR OF M/S T.B. JEWELLERY. ON 17.12.2007, MR LALITH GALADA APPEARED BEFORE THE UNDERSIGNED AND HE EXPLAINED ABOUT THE C ONTENTS OF ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 12 - : THE SEIZED/IMPOUNDED DOCUMENTS MADE DURING SURVEY/S EARCH AT THE RESIDENCES AND IN THE SHOPS. AT THAT TIME, THE PRINT-OUTS TAKEN FROM CDS (MARKED PAGE-1 TO 18) WERE ALSO SHOW N TO SHRI LALITH KUMAR GALADA AND DISCUSSED. WHEN ASKED TO EX PLAIN THE CONTENTS OF PAGE-14 OF THOSE PRINT-OUTS (A PHOTOCOP Y OF WHICH IS MADE OVERLEAF AS PER PAGE-11 OF THIS ASSESSMENT ORD ER), HE REPLIED THAT HE WOULD REFER BACK TO HIS ACCOUNTANT AND AUDITOR AND WOULD SUBMIT A RECONCILIATION STATEMENT. THEREA FTER, ON 12.12.2007, A REPLY WAS FILED BY SHRI ABHIRCHAND GA LADA (HUF) IN THIS MATTER (KEPT IN THE FOLDER OF SHRI ABHIRCHA ND GALADA (HUF) FOR AY 200607) WHICH IS REPRODUCED BELOW: 'PLEASE REFER TO THE LOOSE SHEET, SHRI HEERALAL, HU F AND SMT. ASHA NAHAR. IN THE SAID SHEET IT HAS BEEN DEPICTED THAT GOLD 7345 GRMS HAS BEEN SHOWN AS DEPOSITED WITH M/S T.B. JEWELLERY. IN RESPONSE TO THE SAME, I SUBMIT THAT THE SAID SHE ET IS ONLY A PROPOSAL SHEET AND WAS MADE FOR FURTHER PROSPECTS. BUT THEN, LATER ON ONLY GOLD 7345 GRMS. WAS DEPOSITED WITH T. B. JEWELLERY AND THE REST WAS NOT TAKEN. THIS IS EVIDENT FROM TH E BOOKS OF ACCOUNT AND THE CD WHICH HAS BEEN SEIZED BY THE DEP ARTMENT. THIS FACT HAS BEEN NOTED BY THE SEARCH AUTHORITIES AND THAT THE REASON, THEY HAVE ALSO REFERRED TO ONLY 7345 GRMS. GOLD FROM FAMILY MEMBERS FOR WHICH CREDIT WAS SOUGHT BY US DU RING THE COURSE OF SEARCH, AND THAT THEY HAVE NOT REFERRED T O OR GIVEN CREDIT FOR ANY SILVER OR DIAMOND. AS HAS ALREADY BEEN EXPLAINED WITH THE HELP OF VDIS 3220 GRMS WE ARE ALSO NOW PRODUCING THE VDIS CERTIFICATE OF H EERALAL (HUF) AND SMT. ASH NAHAR. ... WITH THIS THE TOTAL OF 7345 GRMS STANDS EXPLAINED.' I HAVE GONE THROUGH THE REPLY CAREFULLY. THE ASSESS EE IS TERMING IT AS A 'PROPOSAL SHEET; AND IS ACCEPTING O NLY THAT PART OF THE PRINT OUT WHICH SUITS ITS PURPOSE. THIS IS NOT ACCEPTABLE. ANY DOCUMENTARY EVIDENCE IS TO BE CONSIDERED, WHETHER A CCEPTED OR REJECTED, IN ITS ENTIRETY. SO, THE EXPLANATION OF T HE ASSESSEE OFFERED AS PER LETTER DT.12.12.2007 IS REJECTED. GOLD BIT OF 1745 GRAMS WAS DEPOSITED WITH TB JEWELL ERY AS PER PRINT OUT TAKEN FROM CDS (COPIED DURING SURVEY), VIDE PAG E NO.14. 50, THE BALANCE OF (1870.1745) = 125 GRAMS IS TREATED AS GO LD AVAILABLE AT RESIDENCE, OVER AND ABOVE 9227.84 GRAMS OF JEWELLER Y, WHICH WORKS ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 13 - : OUT TO 9352.84 GMS. AS PER THE SAME PRINTOUT, THEY (I.E. MR. SURENDER A ND HIS FAMILY MEMBER AND THE HUFS) ALSO DEPOSITED 77.79 CARATS OF DIAMOND WITH T.B. JEWELLERY AS UNDER :- SURENDER (INDL.) 2.79 SURENDER (HUF) 20.00 SURENDER (S.HUF) 20.00 NIRMALA 25.00 SURYANKANTA 10.00 BUT THIS DID NOT COME TO LIGHT DURING SEARCH/SURVEY AT RESIDENCE OF SURENDER GALADA OR AT THE PREMISES OF T.B. JEWELLER Y. NOW, ON BASIS OF SEIZED RECORD, I.E. PARGE NO.14 OF PRINTOU T, THIS ALSO BECOMES FURTHER QUANTITY OF DIAMOND, AS POSSESSED B Y THE FAMILY OF SURENDER GALADA, OVER AND ABOVE 15 CT. FOUND, AS ON THE DATE OF SEARCH. THUS THE TOTAL DIAMOND POSSESSED BY MR. SUR ENDER AND HIS FAMILY MEMBERS ON 20-05-2005 COMES TO 92.80 CT. GOLD JEWELLERY OF 10956 GRAMS WAS FOUND AT RESIDENC E OF MR. SURENDER. ALSO VIDE LETTER DT.27-11-2007, MR. SURE NDER OWNED UP 5537.85 GRAMS OF JEWELLERY WHICH WAS FOUND AT THE R ESIDENCE OF MR. LATITH GALADA DURING SEARCH. SO THE TOTAL JEWELLERY FOUND TO BE OWNED BY MR. SURENDER AS ON 20-05-2005 COMES TO (10 956 + 5537.85) GRAMS = 16493.85 GRAMS WHEREAS AS PER RECORDS IT SHOULD HAVE BEEN 9352.84 GRAMS. ACCORDINGLY EXCESS JEWELLE RY FOUND COMES TO (16493.85 - 9352.84) GRAMS = 7141.01 GRAMS. TAKING THE RATE OF RS.570/GRAMS AS VALUE OF GOLD (DONE BY REGI STERED VALUER) ON 20-5-2005, THE TOTAL UNACCOUNTED INVESTMENT MADE IN GOLD JEWELLERY DURING F. Y. 2005-06 COMES TO(7141.01 X 5 70) ` 40, 70,375/-. TOTAL DIAMOND FOUND ON THE DATE OF SEARCH (AT RESID ENCE + AS PER PAGE 14 OF CD PRINTOUT WAS 92.80 CARAT WHEREAS AS P ER THE CHART ABOVE, IT SHOULD HAVE BEEN 175.22 CT. SO THERE WAS A DEFICIT STOCK OF 82.42 CT OF DIAMONDS. TOTAL SILVER FOUND AT RESIDENCE OF MR. SURENDER GAL ADA, ON 20-5-2005 WAS 33.547 KGS, WHEREAS THE TOTAL QUANTIT Y DISCLOSED IN VDIS '97 BY THE FAMILY MEMBERS IS 175 KG. THIS MEAN S (175- 33.547) I.E. 141.453 KG OF DEFICIT SILVER WAS FOUND AS ON 20.5.2005 AT THE RESIDENCE OF SHRI SURENDER. ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 14 - : THERE MAY BE MANY REASONS FOR FINDING SUCH DEFICIT STOCK OF SILVER AND DIAMONDS VIZ. THE ASSESSEE COULD HAVE LOST THEM OR MIGHT HAVE GIFTED THEM TO A PERSON OR SOME TEMPL E AUTHORITIES (FOR EGO IT IS VERY COMMON PRACTICE AT LORD VENKATESWARA TEMPLE AT TIRUPATHI TO DONATE GOLD, SI LVER ETC. BESIDES CASH). IN THIS CASE, IT IS ALSO POSSIBLE TH AT THOSE SILVER AND DIAMONDS WHICH WERE FOUND TO BE IN DEFICIT COMP ARED TO WHAT SHOULD HAVE BEEN AVAILABLE, WERE ACTUALLY KEPT AT THE KODAIKANAL HOUSE WHICH BELONGS TO MR. SURENDER AND MR. LATITH JOINTLY, BUT WHICH SPOT WAS NOT COVERED DURING SEAR CH. AGAIN, ANOTHER REASON MAY BE THAT THE ASSESSEE SOLD OFF TH E SILVER AND DIAMONDS. BUT SINCE THE ASSESSEE FAILED TO PRODUCE ANY SUPPORTING DOCUMENTS FOR SALE OF SILVER AND DIAMOND S, THIS DEFICIT QUANTITY OF SILVER AND DIAMONDS CANNOT BE S ET OFF AGAINST EXCESS GOLD FOUND EITHER IN RESIDENCE OR AT THE PRE MISE OF M/S GOLDEN MOMENTS JEWELLERY (PROPRIETORSHIP CONCERN OF SHRI SURENDER). IN EFFECT, THIS WILL HAVE NO BEARING IN DETERMINING ASSESSEE'S UNDISCLOSED INVESTMENT MADE IN EXCESS GO LD FOUND EITHER AT HIS RESIDENCE OR AT HIS PROPRIETORSHIP CO NCERN, VIZ. M/S GOLDEN MOMENTS JEWELLERY. SO THE ASSESSEE'S UNDISCL OSED INVESTMENT IN GOLD JEWELLERY FOUND AT RESIDENCE FOR FINANCIAL YEAR 2005-06 RELEVANT TO AY 2006-07 COMES TO ` 40, 70,375/-. SO, I DECIDE TO ADD BACK ` 40,70,375 TO THE RETURNED- INCOME OF THE ASSESSEE AS INVESTMENT MADE FROM UNDISCLOSED INCOME FOR THE FY 2005- 6 RELEVANT TO AY 2006-07. 9. BEFORE THE LD. CIT(A), THE ASSESSEE FURTHER MADE TH E FOLLOWING SUBMISSIONS: 'THE ASSESSING OFFICER HAS DETERMINED THE EXCESS JE WELLERY FOUND AT THE RESIDENCE AT 7141.01 GM, VALUED THE SA ME AT THE RATE OF RS.570 PER GRAM, AND MADE ADDITION OF ` 40,70,375. THIS HE HAS DONE ON THE FOLLOWING BASIS: TOTAL JEWELLERY FOUND AT THE RESIDENCE, AND AT THE RESIDENCE OF BROTHER LALITHKUMAR 16,493.85 LESS: JEWELLERY ITEMS DECLARED IN VDIS AND SUBSEQUENT 9,352.84 PURCHASE + 125 GMS OUT OF THE GOLD BITS DECLARED ------------ UNDER VDIS (REFER PARA 7.8 I PAGE 4 OF THE ASST. ORDER 7,141.01 ------------ THUS, HE HAS ARRIVED AT AN EXCESS GOLD JEWELLERY NO T DISCLOSED AND BROUGHT IT TO TAX. THE APPELLANT SUBMITS THAT W HILE COMPUTING THE TOTAL JEWELLERY OWNED BY THE APPELLAN T AND HIS ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 15 - : FAMILY MEMBERS AT 9352.84 GM, THE ASSESSING OFFICER HAS NOT CONSIDERED THE ITEMS OF JEWELLERY OWNED BY THE FAMI LY MEMBERS AND WHICH HAD BEEN DISCLOSED IN THE RETURNS OF WEALTH FURNISHED FOR THE ASSESSMENT YEAR 1986-87 (COPY ENCLOSED FOR KIND PERUSAL), THE DETAILED BREAK UP BEING: SURENDRAKUMAR GALADA(INDL.) 178.39 GM SURENDRAKUMAR GALADA(HUF) 597.00 G M SURYAKANTA GALADA(WIFE) 1,555 .40 GM NIRMALA KAWAR GALADA(MOTHER) 3,066.95 GM ----------------- 5397.74 GM ----------------- THE ASSESSING OFFICER ALSO DID NOT TAKE INTO ACCOU NT THE JEWELLERY OWNED BY OTHER MEMBERS OF THE FAMILY, THE DETAILS B EING: SUSHMA GALADA(DAUGHTER-IN-LAW) 520.90 GM RAJUL GALADA(DAUGHTER) 520.130 GM AKSHAY GALADA(SON) 142.74 GM ISHITA GALADA(GRAND DAUGHTER) 5 2.30 GM -------------- 1236.07 GM IF THESE TWO CLAIMS ARE CONSIDERED, THE POSITION WOULD BE AS UNDER: TOTAL GOLD JEWELLERY FOUND 16,493.85 LESS: JEWELLERY ITEMS DECLARED IN VDIS AND SUBSEQUENT PURCHASE+125 GMS OUT OF THE GOLD BITS DECLARED UNDER VDIS (REFER PARA 7.8/PAGE 4 OF THE ASST. ORDER ACCEPTED BY THE ASSESSING OFFIC ER 9,352.84 WEALTH OF THE FAMILY MEMBERS IN WHOSE CASES WT RETURNS WERE FILED PRIOR TO THE DATE OF SEARCH I.E 1986-87 5,397.74 WEALTH OF THE FAMILY MEMBERS IN WHOSE CASES RETURNS WERE FILED AFTER THE SEARCH 1,236.07 15,986.65 ----------- EXCESS 507.20 ------------ - THE ASSESSING OFFICER HAS SUMMARILY REJECTED THE CL AIM OF THE APPELLANT. THE ASSESSING OFFICER HAS BEEN FURNISHED WITH COPIES OF THE WEALTH TAX RETURNS OF THE FAMILY MEMBERS, FI LED BEFORE THE DEPARTMENT BASED ON WHICH ASSESSMENTS HAVE ALSO BEE N COMPLETED. THE ASSESSING OFFICER HAD ALSO VERIFIED THE INCOME-TAX RETURNS FURNISHED BY THESE FAMILY MEMBERS RIGHT FRO M 1986-87 TO 2000-01 AND SATISFIED HIMSELF THAT THERE WAS NO SAL E OF JEWELLERY ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 16 - : BY ANY OF THE FAMILY MEMBERS DURING THIS PERIOD. AP ART FROM THIS, ALL THESE PERSONS HAD FILED WEALTH TAX RETURNS FOR THE ASSESSMENT YEARS 2000-01 TO 2006-07, AFTER THE SEARCH. IN THE ASSESSMENTS MADE UNDER SECTION 16(3) FOR THE ASSESSMENT YEAR 20 04-05, THE ASSESSING OFFICER HAD ACCEPTED THE VALUE OF JEWELLE RY DISCLOSED IN THE RETURNS FILED. COPIES OF THE ASSESSMENT ORDERS ARE ENCLOSED FOR KIND PERUSAL. THESE ASSESSMENT ORDERS WERE PASSED BY THE ASSESSING OFFICER ON 20-12-2006 WHICH IS MUCH BEFOR E THE INCOME-TAX ASSESSMENT COMPLETED BY HIM, AND WHICH I S NOW BEFORE YOUR GOODSELF IN APPEAL. THE ASSESSING OFFIC ER HAS NOT DOUBTED THE RELIABILITY OR GENUINENESS OF THE RECOR DS. THESE RECORDS ARE PART AND PARCEL OF HIS OWN ASSESSMENT R ECORDS. DESPITE THIS, THE ASSESSING OFFICER HAS CHOSEN TO S UMMARILY REJECT THE EVIDENCE WHICH IS HIS OWN RECORDS. THE ASSESSING OFFICER HAS THUS TAKEN POSITIONS WHIC H ARE CONTRADICTORY TO EACH OTHER. ON THE ONE HAND, WHILE COMPLETING THE WEALTHTAX ASSESSMENT FOR ASSESSMENT YEAR 2004-0 5 WHICH WAS PRIOR TO THE COMPLETION OF THE INCOME-TAX ASSES SMENTS FOR ASSESSMENT YEARS UPTO 2006-07, HE HAS ACCEPTED THE WEALTH STATEMENTS. THEREAFTER WHILE COMPLETING THE INCOME- TAX ASSESSMENT, HE TAKES A COMPLETELY OPPOSITE STAND ON THE SAME SET OF DOCUMENTS. THIS CLEARLY SHOWS THAT THERE IS NO MATERIAL OR GROUND AVAILABLE WITH THE ASSESSING OFFICER TO REJE CT THE CLAIM OF THE APPELLANT'S WEALTH-TAX RECORDS. FURTHER IN PAGE 6 OF THE ASSESSMENT ORDER (PARA 7.11 AND 7.12 OF HIS ORDER, HE HAS ARRIVED AT A DEFICIT STOCK OF SILVER AND DIAMONDS BY GIVING CREDIT ONLY TO THE VDIS RECORDS, AND NOT THE ITEMS DISCLOSED IN TH E WEALTH TAX RETURNS OF THE ABOVE MENTIONED PERSONS. IF DUE CRED IT IS GIVEN, THE DEFICIT OF SILVER WILL BE 221.899 KGS, AND 201.36 C TS OF DIAMONDS. THE APPELLANT THEREFORE SUBMITS THAT DUE CREDIT OUG HT TO HAVE BEEN GIVEN NOT ONLY TO THE JEWELLERY DECLARED UNDER VDIS, BUT ALSO FOR THE JEWELLERY DECLARED IN THE RETURNS OF WEALTH FURNISHED BY THE FAMILY MEMBERS. THE ASSESSING OFFICER HAS GONE WRON G IN CONCLUDING THAT THE OTHER FAMILY MEMBERS, VIZ., THE DAUGHTER IN LAW, DAUGHTER, SON AND GRAND DAUGHTER COULD NOT HAV E OWNED EVEN ONE GRAM OF JEWELLERY. CREDIT NEEDS TO BE THER EFORE GIVEN FOR THE JEWELLERY OWNED BY THESE PERSONS OF 1236.07 GM. THE APPELLANT SUBMITS HEREWITH A CHART WHICH INDICA TES THE DETAILS OF JEWELLERIES AS PER THE WEALTHTAX RECORDS , THE DECLARATIONS MADE BY THE FAMILY MEMBERS UNDER VDIS, VIS A VIS THE JEWELLERY FOUND ON THE DATE OF SEARCH. THE SAME IS DEPICTED HEREUNDER: ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 17 - : CHART OF GOLD / SILVER DIAMOND / CASH FOUND AS ON DATE OF SEARCH VIS--VIS RECORDS PARTICULARS FOUND AS PER RECORDS E XCESS / REFER SCH . I REFER SCH. II DEFICIT GOLD 10956.000 [GRMS] 16866.950[GR M S] - 59 1 0.950 [G RMS] SILVER 33.54 7 [ KG] 255.446 [KGS] - 221 . 899 [K G S ] CASH ` 59700.00 ` 3 , 04 , 377 . 00 ` 2 , 44 , 6 7 7.00 [-] DIAMOND 15.00 CA R ATS 216 . 360 [CARATS] - 201 . 360 [ C ARATS] AS PER SC H EDULE I AS PER SCHEDULE II S.NO. PANCHANAMA NO. GOLD SILVER CASH D IAM O NDS GRMS KGS. RS . CAR A TS 1 ] ANNEXURE ANN / DV / GJ/NS3 3570 . 000 .... .. 2 ] ANNEXURE ANN/DV /GJ/NS 1 5278.000 . . . 3] ANNEXURE ANN/DV/GJ/NS 2108.000 . . . 4] ANNEXURE ANN/DV/SILVER/ NS . 33.547 . . 5] ANNEXURE ANN/DR/CASH/ NS . . 59700 AS PER INCOME TAX PANCHANAMA NOT MENTIONED 15.000 10956.00 33.547 59700. 15.000 THE EXCESS OR DEFICIT HAS BEEN WORKED OUT AND LISTE D IN THE LAST COLUMN. THESE DETAILS HAVE BEEN ENUMERATED ON THE BASIS OF THE LAST WEALTHTAX RETURN FILED WITH THE DEPARTMENT AND ON THE BASIS O F THE VDIS DECLARATIONS. ALL THESE MATERIALS HAVE BEEN PLACED BEFORE THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS AND THE SAME ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 18 - : HAVE ALSO BEEN VERIFIED BY THE AASSESSING OFFICER. THE ASSESSING OFFICER, HOWEVER, DID NOT ACCEPT THE CLAIM OF THE A PPELLANT FOR THE REASON THAT THE JEWELLERIES REFLECTED IN THE WEALTHTAX RET URNS HAVE NOT BEEN REFLECTED IN THE TRIAL BALANCE. THE ASSESSING OFFIC ER AS FAILED TO APPRECIATE THE CONCEPTUAL DIFFERENCE BETWEEN A WEAL TH STATEMENT AND AN INCOME-TAX STATEMENT. THE ASSESSING OFFICER OUGH T TO HAVE APPRECIATED THAT ALL THE RECORDS PRODUCED BY THE A PPELLANT BEFORE FOR ASSESSMENT YEAR 1986-87 (INCOME-TAX & WEALTHTAX) WERE THE ONES WHICH HAVE ALREADY BEEN FILED BEFORE THE DEPARTMENT , AND MUST BE AVAILABLE WITH THE DEPARTMENT. THE ASSESSING OFFIC ER OUGHT TO HAVE NOTED THAT IT IS NOT NECESSARY FOR ALL THE ITEMS OF HIS WEALTH TO APPEAR IN TRIAL BALANCE. FOR EXAMPLE, THE FOLLOWING ITEMS ARE NOT USUALLY SHOWN IN THE TRIAL BALANCE OF A BUSINESSMAN: (A) ITEMS WHICH ARE INHERITED (B) ITEMS WHICH ARE RECEIVED AS GIFTS (C) ITEMS WHICH ARE DEBITED TO CAPITAL ACCOUNTS (D) ITEMS WHICH HAVE COME OUT OF DRAWINGS (E) ITEMS WHICH ARE WRITTEN OFF IN THE P & L ACCOUN TS IN THE YEAR OF PURCHASE MERELY BECAUSE SOME OF THE ITEMS OF WEALTH DO NOT F IND A PLACE IN THE TRIAL BALANCE, IT CANNOT BE PRESUMED THAT THOSE ITE MS DO NOT FORM PART OF THE WEALTH OF A PERSON. SUCH A PRESUMPTION IS AGAIN ST ALL LOGIC AND REASON. IN FACT, THE ASSESSING OFFICER HAS MADE THI S AS A SINGLE POINT TO REJECT THE EXPLANATION OFFERED BY THE APPELLANT DES PITE THE FACT THAT THE EXPLANATION IS BASED ONLY ON THOSE RECORDS WHICH WE RE AVAILABLE WITH THE DEPARTMENT. WEALTH OF FAMILY MEMBERS IN WHOSE CASES RETURNS WER E NOT FILED BEFORE THE DATE OF SEARCH, BUT WERE FILED AFTER THE DATE O F SEARCH: ANOTHER IMPORTANT ASPECT WHICH IS QUITE RELEVANT TO THE POINT AT ISSUE IS THE SOCIAL STATUS OF THE APPELLANT AND HIS FAMIL Y. THE FAMILY HAS BEEN IN THE JEWELLERY BUSINESS IN CHENNAI FROM 1936, I.E . FOR MORE THAN SEVEN DECADES. THE APPELLANT HAS ALSO BEEN OFFERING QUITE A SUBSTANTIAL AMOUNT OF INCOME FOR ASSESSMENT, YEAR AFTER YEAR. A CHART SHOWING THE INCOME RETURNED BY THE APPELLANT, AND HIS FAMILY ME MBERS FOR THE YEARS 1998-99 TO 2004-05 IS ENCLOSED (ANNEXURE 1 )FOR KIN D PERUSAL, WHICH IS AN INDICATION OF THE SOCIAL STATUS OF THE GROUP. IT CAN BE SEEN THAT THE INCOME RETURNED BY THE FAMILY MEMBERS FROM ASSESSME NT YEAR 2001- 02TO 2005-06 HAS BEEN ` 70.99 LAKHS, 104.61 LAKHS, 82.81 LAKHS, 79.75 LAKHS AND 118.10 LAKHS, RESPECTIVELY. THESE FACTORS SHOULD THEMSELVES INDEPENDENTLY JUSTIFY THE POSSESSION OF THE SMALL Q UANTIFY OF JEWELLERY BY THE APPELLANT'S DAUGHTER-IN-LAW, SON, DAUGHTER A ND THE GRAND DAUGHTER. THE ASSESSING OFFICER, HOWEVER, DID NOT T AKE COGNIZANCE OF THESE FACTORS. ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 19 - : IN CONCLUSION, THE APPELLANT SUBMITS THAT THE ASSES SING OFFICER HAS OBSERVED IN PAGE 4 OF THE ASSESSMENT ORDER THAT THE APPELLANT HAS COOKED UP EXPLANATIONS AS AN AFTERTHOUGHT. THIS ALL EGATION IS BASELESS AND AGAINST FACTS OF THE CASE. AS ALREADY SUBMITTED ABOVE, THE RECORDS PRODUCED BEFORE THE ASSESSING OFFICER AND ON WHICH THE EXPLANATION IS BASED, ARE PART OF THE RECORDS WITH THE DEPARTMENT FOR THE PAST SEVERAL YEARS. AND THEREFORE, NOW TO TURN A BLIND EYE AND C ALL EACH AND EVERY DOCUMENT AS AN AFTERTHOUGHT IS AGAINST THE FACTS AVAILABLE WITH HIM. COPIES OF THE WEALTH-TAX RETURNS FURNISHED BY THE A PPELLANT AND FAMILY MEMBERS HAVE BEEN ANNEXED HERE.(ANNEXURE-2)' 10. AFTER EXAMINING THE ABOVE SUBMISSION, THE LD. CIT(A ) HAS MADE THE FOLLOWING OBSERVATION: 5.2. I HAVE EXAMINED THE FACTS OF THE CASE. TH E FIRST ISSUE INVOLVED IS REGARDING DISALLOWANCE OF CREDIT FOR JE WELLERY WEIGHING 5397.74 GMS AS DECLARED IN THE WEALTH TAX RETURN OF ASST. YEAR 1985-86 OF THE APPELLANT AND FAMILY MEMBERS. THE A. O. HAS NOT GIVEN CREDIT FOR THE JEWELLERY SHOWN IN THE WEALTH TAX RETURN MAINLY FOR THE REASON THAT IN THE TRIAL BALANCE OF THE FAM ILY MEMBERS FILED ALONG WITH THE RETURN FOR SUBSEQUENT YEAR JEWELLERY WAS NOT MENTIONED. THIS IS NOT A VALID REASON FOR REJECTING THE JEWELLERY SHOWN IN THE WEALTH TAX RECORD PARTICULARLY IN VIEW OF THE FACT THAT THERE IS NO EVIDENCE TO SHOW THAT ANY JEWELLERY HAS BEEN SOLD OR TRANSFERRED OTHERWISE. IN VIEW OF THIS FACT THE CRE DIT FOR JEWELLERY SHOWN IN THE WEALTH TAX RECORD HAS TO BE GIVEN. THE SECOND ISSUE RELATES TO THE CLAIM OF GOLD JEWEL LERY AT 1236.07 GMS OF THE FAMILY MEMBERS WHO HAVE FILED WE ALTH TAX RETURN FROM 2000-01 TO 2006-07 AFTER DATE OF SEARCH . IT IS IMPORTANT TO NOTE THAT THE JEWELLERY SHOWN IN THESE WEALTH TAX RETURNS HAVE NOT BEEN DISTURBED BY THE A.O AS IN TH E WEALTH TAX ASSESSMENT. MOREOVER, IT IS FOUND THAT THE JEWELLER Y CLAIMED BY THE FOUR MEMBERS OF THE FAMILY ARE AT REASONABLE QU ANTUM IN THE SOCIO-ECONOMIC BACKGROUND OF THE APPELLANT'S FAMIL Y. IN PARA 7.4, THE A.O. HAS GIVEN FINDING THAT JEWELLERY DISCLOSED IN VDIS, 1997 SHOULD BE TREATED AS JEWELLERY AVAILABLE IN THE HAN DS OF THE RESPECTIVE PERSONS AS ON 01/04/2000. IN PARA 7.8, T HE A.O. HAS DETERMINED THE TOTAL QUANTUM OF JEWELLERY DECLARED UNDER VDIS FOR WHICH CREDIT IS TO BE GIVEN AT 9358.84 GMS. IN VIEW OF THE ABOVE FINDINGS THE EXCESS JEWELLERY FOUND AT THE TI ME OF SEARCH IS WORKED OUT AS UNDER: ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 20 - : EXCESS DETERMINED BY THE A.O 16493 .85 GMS LESS: JEWELLERY DISCLOSED IN WT RETURNS OF A.Y 1985-86 5397.74 GMS LESS: JEWELLERY DECLARED BY FAMILY MEMBERS IN THE WT RETURNS FILED AFTER DATE OF SEARCH 1236.07 GMS LESS: JEWELLERY DECLARED IN VDIS 1997 9352.84 GM S --- ---------------- 15986.65 GMS ------------------ EXCESS 507.20 GMS ----------------- VALUE OF EXCESS JEWELLERY = 507.20X507 = ` 2,89,104/- IN VIEW OF THE ABOVE THE IMPUGNED ADDITION IS REDUC ED FROM ` 40,70,375/- TO ` 2,89,104/-. THIS GROUND OF APPEAL IS PARTLY ALLOWED. 11. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO THE FACTS AND THE CIRCUMSTANCES OF THIS CASE IN THE LIGHT OF THE EVID ENCE AVAILABLE ON RECORD. IN FACT, A SURVEY U/S 133A WAS CONDUCTED O N 19.5.2005 IN THE BUSINESS-CUM-RESIDENCE OF SHRI SURENDRA KUMAR GALAD A, THE PRESENT ASSESSEE, AT NO.42, VENKATANARAYANA ROAD, T. NAGAR , CHENNAI. DURING SURVEY, IT WAS NOTICED THAT SHRI SURENDRA KU MAR GALADA AND OTHER MEMBERS OF HIS FAMILY WERE IN POSSESSION OF U NACCOUNTED GOLD JEWELLERY, SILVER JEWELLERY, DIAMOND STUDDED JEWELL ERY, LOOSE DIAMONDS, CASH ETC., FOR THAT MATTER, THE SURVEY PROCEEDINGS WERE CONVERTED INTO SEARCH OPERATION U/S 132 WHICH WAS INITIATED O N 20.5.2005 I.E THE ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 21 - : FOLLOWING DAY AFTER THE SURVEY. IN THE PANCHNAMA P REPARED ON 20.5.2005 INVENTORIES OF GOLD, DIAMOND, SILVER ETC WERE PREPARED. THE CASH FOUND ALSO INVENTORIZED. SUBSEQUENTLY, ON 14. 6.2005, ANOTHER PANCHANAMA WAS PREPARED VIDE WHICH CERTAIN BOOKS AN D DOCUMENTS WERE SEIZED AS PER ANNEXURE CB/B&D/S FROM SHRI SURE NDRA KUMAR GALADAS RESIDENCE. THESE DOCUMENTS RELATED TO THR EE FINANCIAL CONCERNS NAMELY, S.J INTERNATIONAL (PROP. SHRI SURE NDRA KUMAR GALADA, A.G INTERNATIONAL (PROP. SHRI ABHISHEK GALADA) AND L.G INTERNATIONAL (PROP. SHRI LALITH KUMAR GALADA). IT IS AN UNDENIA BLE FACT THAT IN THE STATEMENT RECORDED DURING SURVEY ON 20.5.2005, SHRI SURENDRA KUMAR GALADA HAS STATED THAT JEWELLERIES FOUND BELONGED T O HIM AND TO OTHER MEMBERS OF HIS FAMILY. IT WAS ALSO STATED THAT THE RE EXISTED THREE HUFS NAMELY, SURENDRA KUMAR GALADA (HUF), SURENDRA KUMAR GALADA (S.HUF) AND ABHISHEK GALADA (HUF). M/S T.B JEWELL ERY IS THE PROPRIETARY CONCERN OF ABISHEK GALADA (HUF) WHOSE KARTA IS SURENDRA KUAMR GALADA AND SHRI LALITH KUMAR GALADA IS A COPA RCENER IN THE HUF. THE SURVEY OPERATION CARRIED ON 19.5.2005 ALS O COVERED M/S T.B JEWELLERY AS WELL AS FOUR PROPRIETARY CONCERNS NAME LY, M/S GOLDEN MOMENT JEWELLERY, M/S S.J INTERNATIONAL, M/S A.G. INTERNATIONAL AND M/S L.G INTERNATIONAL. FROM THESE PLACES, VARIOUS BOOKS OF ACCOUNT, DOCUMENTS, ETC. WERE IMPOUNDED AND PHOTOCOPIES OF C ERTAIN PAPERS ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 22 - : WERE TAKEN AND ALSO COPIES OF FILES/DATA MAINTAINED IN THE COMPUTER AT M/S T.B JEWELLERY WERE ALSO TAKEN ON CDS. 12. DURING SEARCH, FROM THE RESIDENCE AS PER PANCHNAMA DATED 20.5.2005, GOLDEN JEWELLERY WEIGHING 10956 GMS [AS PER ANNEXURE DV/GJ/NS 1 5278.000 GMS , ANNEXURE DV/GJ/NS 2 2108 GMS AND DV/GY/NS-3 33.547 GMS ] WAS FOUND. LIKEWISE, SILV ER WEIGHING 33.547 KGS AS PER ANNEXURE DV/SILVER/NS AND DIAMOND OF 15 CTS WERE ALSO FOUND. CASH OF ` 59,700/- WAS FOUND AS PER ANNEXURE DV/CASH/NS. THE SEARCH PARTY SEIZED 9009 GMS OF GOL D JEWELLERY (LEAVING ASIDE THE REMAINING WITH THE MEMBERS OF TH E FAMILY AS PER THE CBDT CIRCULAR) AND DIAMOND OF 15 CTS WERE SEIZED VI DE ANNEXURE DV/DJ/S AS PER THE SAME PANCHNAMA DATED 20.5.2005. VIDE PANCHNAMA DATED 14.6.2005, CERTAIN BOOKS, DOCUMENTS AS STATED ABOVE WERE SEIZED AS PER THE ANNEXURE CB/B&D/S. FO R ASSESSMENT YEAR 2006-07, IN THIS ASSESSEES HANDS, FOLLOWING S EVEN ASSETS/INCOMES WERE CONSIDERED: (I) EXCESS GOLD JEWELLERY FOUND FROM RESIDENTIAL PREMISES DURING SEARCH AND EXCESS STOCK OF GOLD JEWELLERY FOUND DURING SURVEY AT M/S GOLDEN MOMENTS JEWELLERY. (II) EXCESS STOCK OF DIAMOND FOUND DURING SURVEY FROM M/S GOLDEN MOMENT JEWELLERY ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 23 - : (III) UNDISCLOSED FIXED ASSETS FOUND AT M/S GOLDEN MOMENT JEWELLERY (IV) CONTRAVENTION OF TDS PROVISIONS U/S 40A(A) OF THE ACT (V) GROSS PROFIT FROM UNDISCLOSED JEWELLERY BUSINESS; AND (VI) CAPITAL INTRODUCED IN M/S GOLDEN MOMENT JEWELLERY. 13. THE CASE AS PUT BEFORE THE ASSESSING OFFICER FROM T HE SIDE OF THE ASSESSEE THROUGH LETTER DATED 29.11.2007, EXPLAINED JEWELLERY FOUND AT 42, VENKATANARAYANA ROAD, T. NAGAR RESIDENCE, RECO NCILED THE FIGURES IN ANNEXURE 1, 2 AND 3 APPENDED TO THE LETTER BY WA Y OF A NOTE AND APPENDED TO THE RETURN OF INCOME, AS UNDER: DEFICIT OF GOLD 5910.950 GMS DEFICIT OF SILVER 221.899 GMS DEFICIT OF DIAMONDS 201.360 CTS 14. AS AGAINST EXCESS GOLD, SILVER AND DIAMOND FOUND, T HE ASSESSEE HAS GIVEN DETAILS SHOWING DEFICIT OF ALL THESE THRE E ITMES. THE CLARIFICATION FOR THE ABOVE ANOMALY IS THAT APART F ROM JEWELLERIES DISCLOSED UNDER VDIS 1997, THE ASSESSEE AND HIS FAM ILY MEMBERS HAD STOCK OF OPENING JEWELLERY IN THEIR HANDS. TO SUBS TANTIATE THIS CLAIM, COPIES OF WEALTH TAX RETURNS FILED FOR ASSESSMENT Y EAR 1986-87 WERE PRODUCED. THE INCOME TAX RECORDS STARTING FROM ASS ESSMENT YEAR 1987-88 OF THE MEMBERS OF THE FAMILY EXCEPT IN THE CASE OF SMT ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 24 - : NIRMALA KANWAR GALADA IN WHICH CASE RECORDS STARTIN G FROM ASSESSMENT YEAR 1983-84, WERE PRODUCED. THE CLAIM OF THE ASSESSEE IS THAT A PROBABLE PRESUMPTION IN THE GIVEN CIRCUMS TANCES IS THAT THE JEWELLERY APPEARING IN THE WEALTH TAX RETURNS FOR A SSESSMENT YEAR 1985-86 FOR ALL THE FAMILY MEMBERS PLUS THE QUANTUM OF JEWELLERY DISCLOSED UNDER VDIS 1997 HAS TO BE TREATED AS THE JEWELLERY AVAILABLE IN THEIR RESPECTIVE HANDS AS ON 1.4.2000. TO OUR M IND, THIS CONTENTION OF THE ASSESSEE SEEMS TO BE VERY NORMAL AND PLAUSIB LE. BUT THE ASSESSING OFFICER HAS REFERRED TO TRIAL BALANCES WH ICH REFLECT TOTAL LIABILITIES AND ASSETS OF AN ASSESSEE. IN THE TRIA L BALANCE AS ON 31.3.1997 VIS-A-VIS ON 31.3.1998, NO JEWELLERY IS REFLECTED. BUT IN THE TRIAL BALANCE AS ON 31.3.1998, ONLY JEWELLERY DISCL OSED IN VDIS 1997 HAS BEEN SHOWN BUT NOT THE OPENING JEWELLERY AS CLA IMED BY THE ASSESSEE AS PER THE WEALTH TAX RECORDS. WE CAN AP PRECIATE THE CONCERN OF THE ASSESSING OFFICER IN THIS REGARD BUT WE CANNOT IGNORE THE WEALTH TAX RECORDS OF THESE PERSONS AS THE WEAL TH TAX ASSESSMENTS WERE DONE BY THE SAME ASSESSING OFFICER AND THE ENT IRE RECORDS WERE AVAILABLE BEFORE HIM. THE NON-REFLECTION OF THE OP ENING JEWELLERY IN THE TRIAL BALANCES OF THE RESPECTIVE RETURNS WOULD NOT NECESSARILY RESULT IN REJECTION OF THE ENTIRE CLAIM OF THE ASSESSEE BE CAUSE WHEN TWO SETS OF PROBABLE CONCLUSIONS ARE PITTED AGAINST EACH OTH ER ONE THAT ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 25 - : FAVOURS THE ASSESSEE, WHICH IS FURTHER SUPPORTED BY WEALTH TAX RETURNS AND THE SECOND BEING NEGATIVE INFERENCE BASED ON NO N-DISCLOSURE OF THE VERY SAME JEWELLERY WHICH HAS BEEN ACCEPTED BY THE DEPARTMENT DID NOT REFLECT IN THE TRIAL BALANCE, THE WEIGHT OF PROBABILITY WOULD DEFINITELY TILT IN FAVOUR OF THE ASSESSEES CLAIM. THE REASON FOR THE SAME IS THAT WHEN THE DEPARTMENT HAS ACCEPTED ONE C LAIM OF THE ASSESSEE, MAY BE IN WEALTH TAX ASSESSMENT, IT CANN OT BE IGNORED OR REJECTED OR DENIED LATER ON ON ACCOUNT OF NON-DISCL OSURE IN TRIAL BALANCES. MOREOVER, WHEN TWO PROBABLE CONCLUSIONS /OPINIONS/VIEWS CAN BE DRAWN FROM A GIVEN SET OF FACTS, THE ONE FAV OURING THE ASSESSEE HAS TO BE ACCEPTED AND THIS IS THE VERY WELL ESTABL ISHED DICTUM OF HON'BLE SUPREME COURT RENDERED IN THE CASE OF CIT V S VEGETABLE PRODUCT LTD, 88 ITR 192. THERE IS NOTHING ABNORMAL IN SHOWING JEWELLERY DECLARED IN VDIS WHICH WAS A VALID SCHEME UNDER WHICH IF THE DECLARATION HAS BEEN ACCEPTED, IT HAS TO BE AC CEPTED FOR ALL PURPOSES. IN THIS CASE, THERE IS NO DISPUTE WITH R EGARD TO THE DECLARED JEWELLERY IN THIS SCHEME WHICH HAS ALSO BEEN ACCEPT ED UNDER THIS SCHEME AND THE REQUISITE CERTIFICATE HAS BEEN ISSUE D BY THE CIT. THE ASSESSEE HAS FURTHER EXPLAINED THAT JEWELLERIES WER E NOT SHOWN EARLIER BECAUSE IT WAS THOUGHT THAT THE JEWELLERY RECEIVED AT THE TIME OF MARRIAGE, FROM GIFTS, ON FAMILY FUNCTIONS, NEED NOT BE DISCLOSED TO THE ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 26 - : DEPARTMENT. IN OUR OPINION, THIS IS NOT AN INVALID EXPLANATION RATHER THIS EXPLANATION SEEMS TO BE BASED ON REALITY OF LI FE AND CANNOT BE IGNORED. THE ASSESSEE HAS GIVEN A CHART OF OPENING JEWELLERY OF THE FAMILY MEMBERS. IN THIS CHART APART FROM SEVEN MEM BERS, VIZ SHRI SURENDRA KUMAR GALADA (INDIVIDUAL, HUF, S.HUF), SH RI ABHISHEK GALADA (INDIVIDUAL AND HUF0, SMT NIRMALA KANWAR GAL ADA AND SMT SURYAKANTH GALADA, FOUR OTHER NAMES ARE INCLUDED AS UNDER : SMT SUSHMA GALADA 520.90 GM RAJUL GALADA 520.130 GM AKSHAY GALADA 142.74 GM MS. ISHITA GALADA(MINOR) 52.30 GM 15. THESE PERSONS, AS PER THE ASSESSEE RECEIVED THE JEW ELLERY, MENTIONED AGAINST THEIR NAMES, FROM GIFTS ON VARIOU S OCCASIONS. AGAIN IN THE INCOME TAX RETURNS OF SHRI RAJUL GALADA AND SHRI AKSHAY GALADA FOR ASSESSMENT YEAR 2006-07 AND ALSO FOR ASSESSMENT YEAR 2005-06 IN THE CASE OF SUSHMA GALADA IN THE TRIAL BALANCES ATT ACHED WITH THEIR RETURNS, THESE JEWELLERIES ARE NOT REFLECTED. LIKE WISE, IN THE CASE OF THE MINOR, IN HER FATHER, SHRI ABIRCHAND GALADAS R ETURN FOR ASSESSMENT YEAR 2006-07, IN THE APPENDED TRIAL BALANCE, NO SUC H JEWELLERY IS FOUND REFLECTED. ON THAT BASIS, THE ASSESSING OFFICER AG AIN HAS CONCLUDED THAT THIS IS A MADE UP AND COOKED UP CLAIM OF THE A SSESSEE BUT AGAIN ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 27 - : WE ARE UNABLE TO ACCEPT THIS FINDING OF THE ASSESSI NG OFFICER CONSIDERING THE SOCIAL STATUS OF THE FAMILY AND THE TRADITIONS WHICH PREVAIL IN THIS COMMUNITY OF GOLD SMITHS. IN OUR C ONSIDERED OPINION, THE OPENING JEWELLERY IN ALL THESE CASES CANNOT BE IGNORED. AND THE REJECTION BY THE ASSESSING OFFICER OF THE OPENING J EWELLERY, IN TOTO IN THE HANDS OF SHRI SURENDRA KUMAR GALADA AND FAMILY MEMBERS AS DECLARED IN VDIS 1997 HAS BEEN INCORPORATED BY WAY OF CHART AT PAGE 10 OF THIS ORDER IS NOT JUSTIFIED. AS PER THIS CHA RT, SMT NIRMAL KANWAR GALADA HAD PURCHASED 6.14 CTS OF DIAMOND AND SMT SU RYAKANTA HAD PURCHASED 6.8 CARATS OF DIAMOND SUBSEQUENT TO THEIR DECLARATIONS IN VDIS. THESE PURCHASES WERE REFLECTED IN THE ASSESS MENT RECORDS FOR ASSESSMENT YEAR 1998-99 BUT INSTEAD OF CARATS THE D IAMONDS VALUE HAS BEEN ADMITTEDLY REFLECTED IN RUPEES AS ` 1,50,625/- AND ` 1,66,750/-, RESPECTIVELY. THE ASSESSING OFFICER H AS WITHOUT ANY REASONABLE BASIS, EVEN THOUGH THESE ARE REFLECTED I N THE INCOME TAX RETURNS, HAS TRIED TO QUANTIFY THE CARATS OF DIAMON DS PURCHASED ON THE BASIS OF VALUE OF DIAMOND AS PER THE VALUATION REPO RT ADOPTED @ ` 37,000 PER CARAT IN THE MONTH OF MAY 2005. HE HAS ALSO TAKEN INTO ACCOUNT THE SUBMISSION OF THE LD.AR THAT NORMALLY T HE PRACTICE IS THAT WHILE FILING WEALTH TAX RETURNS FOR SUBSEQUENT YEAR S, THE VALUE OF THE DIAMOND IS INCREASED BY 5% EVERY YEAR. BY REDUCING 5% THE VALUE OF ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 28 - : DIAMOND FOR FINANCIAL YEAR 1997-98 HE HAS ARRIVED A T A RATE OF ` 24,546 AS PER THE INCOME TAX RETURNS OF ASSESSMENT YEAR 19 98-99. IN THIS WAY, HE HAS ARRIVED AT 6.14 CARAT IN THE CASE OF SM T NIRMALA KANWAR GALADA INSTEAD OF 16 CARATS CLAIMED BY HER AND SHOW N IN THE INCOME TAX RETURNS. LIKEWISE, IN THE CASE OF SURYAKANTA I NSTEAD OF 17 CARATS CLAIMED, HE HAS WORKED OUT 6.80 CARATS. IN OUR CON SIDERED OPINION, THIS IS NOT A JUSTIFIED AND CORRECT ACTION OF THE A SSESSING OFFICER BECAUSE HE HAS REFUSED TO ACCEPT THE RECORDS AND AT THE SAME TIME, HE HAS NOT ACCEPTED THE EARLIER CLAIM OF THE ASSESS EE REGARDING DISCLOSED JEWELLERY IN WEALTH TAX RETURNS ONLY BECA USE IT WAS NOT REFLECTED IN THE INCOME TAX RETURNS (IN THE TRIAL B ALANCE). THE ASSESSING OFFICER CANNOT BLOW HOT AND COLD AT THE S AME TIME TO SIMPLY REJECT THE CLAIM OF THE ASSESSEE. IN OUR CONSIDERE D OPINION, WHATEVER HAS BEEN DISCLOSED IN THE RETURNS HAS TO BE ACCEPTE D FOLLOWING THE SAME THEORY OF PROBABILITY AS WE HAVE DISCUSSED ABO VE. 16. FIVE COMPACT DISCS WHICH WERE IMPOUNDED DURING SURV EY AT THE BUSINESS PREMISES OF T.B. JEWELLERY, AT NO.10, NAGE SWARAN ROAD, T.NAGAR, CHENNAI, ON 20.5.2005. ON 2.11.2007, PRI NT OUTS OF SOME SELECTED FILES, COPIED IN THE CDS, WERE TAKEN OUT I N THE PRESENCE OF SHRI LALITH KUMAR GALADA. ON 17.12.2007, THE CONTE NTS OF THESE PRINT- OUTS WERE GOT EXPLAINED FROM SHRI LALITH KUMAR GALA DA BY SHOWING ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 29 - : PAGES 1 TO 18 OF PRINT-OUT TAKEN FROM THESE CDS. H E WAS SPECIFICALLY ASKED TO EXPLAIN PAGE-14 (A PHOTOCOPY OF WHICH IS MADE OVERLEAF AT PAGE 11 OF THE ASSESSMENT ORDER). ON 12.12.2007 A REPLY WAS FILED BY SHRI ABIRCHAND GALADA IN THIS MATTER. THE REPLY IS ENCLOSED AT PAGE 5 OF ASSESSING OFFICERS ORDER. THIS EXPLANATION W AS NOT ACCEPTED BY THE ASSESSING OFFICER BUT WE ARE NOT IN AGREEMENT W ITH THE REASONING GIVEN BY THE ASSESSING OFFICER. 17. AS PER PAGE 14, GOLD BIT OF 1745 GMS WAS DEPOSITED WITH M/S T.B JEWELLERY. SHRI SURENDRA KUMAR GALADA AND HIS FAMILY MEMBERS DEPOSITED 77.79 CARATS OF DIAMOND WITH M/S T.B JEWE LLERY. THIS HAS BEEN TREATED BY THE ASSESSING OFFICER AS EXCESS JEW ELLERY ON THE BASIS OF THE SEIZED RECORD. LIKEWISE, GOLD JEWELLERY OF 10956 GMS WAS FOUND AT THE RESIDENCE OF SHRI SURENDRA KUMAR GALADA. VI DE LETTER DATED 27.11.2007 SHRI SURENDRA KUMAR GALADA OWNED 5537.85 GMS OF JEWELLERY FOUND AT THE RESIDENCE OF SHRI LALITH KUM AR GALADA DURING SURVEY. THUS, TOTAL OF 16493.85 GMS WAS TREATED AS FOUND DURING THE PROCEEDINGS AS AGAINST RECORDS WHICH SHOULD BE 9352 .84 GMS. ACCORDINGLY, EXCESS GOLD JEWELLERY FOUND WEIGHTING 7141.01 GMS WAS VALUED A ` 40,70,375/- BY TAKING THE RATE OF ` 570/- PER GM. THE TOTAL DIAMOND FOUND DURING SURVEY INCLUDING AS PER PAGE 1 4 OF THE CD PRINT OUT CAME TO 92.80 CTS AS AGAINST AS PER THE CHART IT SHOULD BE 175.22 ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 30 - : CTS, SO A DEFICIT OF 82.42 CTS OF DIAMOND WAS NOTIC ED. TOTAL SILVER FOUND AT THE RESIDENCE OF SHRI SURENDRA KUMAR GALAD A ON 20.5.2005 WAS 33.547 KGS WHEREAS THE TOTAL QUANTITY DISCLOSED IN VDIS 97 BY THE ENTIRE FAMILY MEMBERS COMES TO 175 KG, HENCE, THE D EFICIT OF 141.453 KG OF SILVER WAS NOTICED AS ON 20.5.2005. SURPRISI NGLY, THE ASSESSING OFFICER HAS MENTIONED THAT THERE WERE VARIOUS REASONS FOR SUCH DEFICIT OF SILVER AND DIAMOND, LIKE HE COULD HAVE L OST THEM OR MIGHT HAVE SHIFTED THEM OR DONATED TO SOME TEMPLE AUTHORI TIES, ETC. HE HAS ALSO MENTIONED ABOUT A POSSIBILITY THAT THE SILVER AND DIAMOND WHICH WERE FOUND TO BE DEFICIT WERE ACTUALLY KEPT AT THE KODAIKANAL HOUSE WHICH BELONGS TO SHRI SURENDRA KUMAR GALADA AND SHR I LALITH KUAMR GALADA JOINTLY BUT SINCE THAT HOUSE WAS NOT COVERE D DURING SEARCH, THE SAME MIGHT HAVE BEEN KEPT THERE. SURPRISINGLY, THE ASSESSING OFFICER WANTED PROOF OF EITHER SELLING OF SILVER AN D DIAMOND AFTER REJECTING THE ASSESSEES CONTENTION AND REFUSED TO SET OFF THE DEFICIT QUANTITY OF SILVER AND DIAMOND AGAINST EXCESS FOUND . IN OUR CONSIDERED OPINION, IN SEARCH CASES, THIS IS NOT AT ALL JUSTIFIABLE WHEN PARTICULARLY THE ASSESSEE IS A JEWELLER, THE MORE P ROBABLE FINDING OF FACT IS THAT EXCESS IN ONE KIND OF BULLION MAY HAVE BEEN CONVERTED INTO ANOTHER FORM OF BULLION. BUT THE WAY THE ASSESSING OFFICER HAS CAME TO HIS CONCLUSION IS SIMPLY BASED ON SURMISES AND C ONJECTURES AND IS ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 31 - : RATHER CONTRADICTORY. HE HAS IGNORED THE DEFICIT A ND HAS ADDED THE VALUE OF EXCESS GOLD FOUND EITHER AT ASSESSEES RES IDENCE OR PROPRIETORYSHIP CONCERN, WHICH IS NOT CORRECT ACCO RDING TO OUR CONSIDERED OPINION, THE ONLY PLAUSIBLE WAY IS TO SE T OFF THE SAME AGAINST DEFICIT. HE CANNOT ADD THE EXCESS ON ACCOU NT OF UNDISCLOSED INVESTMENT AND JUST IGNORED THE DEFICIT. IN CASE W E VENTURE TO ADD GROSS PROFIT ON THE SALE OF DEFICIT, PARTICULARLY I N THE GIVEN FACTS AND THE CIRCUMSTANCES, WHERE EXCESS OF ONE BULLION IS ALSO NOTICED, IS NOT AT ALL REASONABLE AND JUSTIFIED. THE ONLY ACCEPTABLE POSS IBILITY IS THAT IT MAY HAVE BEEN CONVERTED FROM CONVERT ONE KIND OF JEWELL ERY INTO DIFFERENT KIND OF JEWELLERY, BEING THE BUSINESS ROUTINE. THI S IS THE ONLY PLAUSIBLE VIEW WHICH A JUDICIAL FORUM CAN TAKE IN THE GIVEN F ACTS AND CIRCUMSTANCES OF THE CASE. THE HYPOTHETICAL VIEW O F ASSESSING OFFICER THAT THE DEFICIT JEWELLERY MAY HAVE BEEN KEPT AT TH E HOUSE NOT COVERED BY SEARCH/SURVEY IS BASELESS AND DEVOID OF MERITS. IT IS FOUND FOR A FACT THAT WEALTH TAX RETURNS HAD BEEN FURNISHED BY THE ASSESSEE AND HIS FAMILY MEMBERS. THE JEWELLERY WEIGHING 5397.74 0 GMS HAD BEEN DECLARED IN THE WEALTH TAX RETURNS FOR ASSESSMENT YEAR 1985-86 OF THE ASSESSEE AND HIS FAMILY MEMBERS. QUA THE DECLARED WEALTH CREDIT HAS TO BE GIVEN. IN OUR OPINION, NOT SHOWING JEWEL LERY IN THE TRIAL BALANCE OF THE FAMILY MEMBERS FILED ALONGWITH THE R ETURN, FOR THE ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 32 - : SUBSEQUENT YEAR, CANNOT BE AS FATAL AS TO DENY THE AVAILABILITY OF DECLARED JEWELLERY AND THE SAME CAN BE PROOF OF THE ALLEGED INVESTMENT. THE DEPARTMENT CANNOT IGNORE THE DECLA RED ASSET TO DENY ITS AVAILABILITY WITH THE ASSESSEE UNLESS A CLEAR P ROOF OF DISPOSAL OF THAT JEWELLERY IS BROUGHT ON RECORD. THERE IS NO SUCH P ROOF ON RECORD TO SHOW THAT THE ASSESSEE HAD DISPOSED OF THIS DECLARE D JEWELLERY BY ANY MEANS, WHATSOEVER. HENCE, IN THE GIVEN FACTS AND THE CIRCUMSTANCES OF THE CASE, WE ARE LEFT WITH NO OPTION BUT TO ACCE PT THE AVAILABILITY OF 5397.74 GMS OF JEWELLERY, WHICH WAS DECLARED IN WEA LTH TAX RETURNS OF THE YEAR 1985-86 BY THE ASSESSEE AND OTHER MEMBERS OF HIS FAMILY AND ALSO ACCEPTED BY THE ASSESSING OFFICER. IN OUR OPI NION ALSO, IN CASE THE ASSESSEE HAS NOT SHOWN IN THE TRIAL BALANCE OF THE FAMILY MEMBERS FILED ALONGWITH THE WEALTH TAX RETURNS FOR THE SUBS EQUENT YEARS, THIS FACT IN ITSELF CANNOT BE A VALID REASON FOR NOT ACC EPTING THE AVAILABILITY OF THIS RETURNED WEALTH IN THE ABSENCE OF ANY CONTR ARY EVIDENCE BROUGHT ON RECORD. LIKEWISE, JEWELLERY TOTALLING T O 1236.07 GMS SHOWN AND DECLARED IN ASSESSMENT YEARS 2000-01 TO 2006-07 , AFTER THE DATE OF SEARCH AND THE SAME HAVING BEEN ACCEPTED CANNOT BE DENIED AND ITS CREDIT HAS TO BE GIVEN. IN ANY CASE, THE JEWEL LERY DECLARED IN VDIS HAS TO BE HONOURED AND ACCEPTED. SO, OUT OF TOTAL 16493.85 GMS JEWELLERY WEIGHING 15986.65 GMS (5397.74 + 1236.07 +9352.84 GMS) ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 33 - : HAS TO BE ACCEPTED AS EXPLAINED. THE REMAINING JEW ELLERY COULD NOT BE EXPLAINED EVEN BEFORE US. IN THIS REGARD, THE DECIS IONS OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF S.HASTIMAL VS CIT, 49 ITR 273 AND IN THE CASE OF CIT VS GANI SILK PALACE, 171 ITR 373 AR E RELEVANT. IN THESE CASES, IT HAS BEEN HELD AS UNDER: S.HASTIMAL VS CIT : HELD, THE ASSESSEE HAD BEEN ABLE TO POINT OUT A SOURCE FOR THE SUM OF 15,000 AND HIS EXPLANATION COULD NOT BE REJECTED BY THE MERE DISABILITY OF THE DEPARTMENT T O FIND OUT WHETHER G WAS VS AGENT. THERE WAS NO EVIDENCE TO H OLD THAT THE SUM OF ` 15,000 WAS INCOME FROM UNDISCLOSED SOURCES. BUT THE SUM OF ` 10,000 REPRESENTED INCOME FROM UNDISCLOSED SOURCES. AFTER THE LAPSE OF A DECADE, AN ASSESSEE SHOULD NO T BE PLACED UPON THE RACK AND CALLED UPON TO EXPLAIN NOT MERELY THE ORIGIN AND SOURCE OF A CAPITAL CONTRIBUTION BUT THE ORIGIN OF ORIGIN AND SOURCE OF SOURCE AS WELL. THE DIFFICULTY ON THE PART OF AN Y ASSESSEE TO EXPLAIN A TRANSACTION WHICH TOOK PLACE BEFORE A DEC ADE HAS TO BE BORNE IN MIND BY THE DEPARTMENT AND SHOULD UNDER NO CIRCUMSTANCES BE UNDER-ESTIMATED OR TAKEN ADVANTAGE OF BY THEM. GANI SILK PALACE: HELD, THAT WHEN THE ASSESSEE ON ITS PART HAD PRODUCED THE DISCHARGED HUNDIS AND ALSO VOUCHERS SHOWING PAYMENT OF INTEREST, THAT WAS SUFFICIENT FOR THE ASSESSEE TO DISCHARGE ITS INITIAL BURDEN AND IT WAS FOR THE INCOME-TAX OFFICER TO HAVE EXAMINED THE BANKERS ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 34 - : WHEN HE WANTED TO RELY ON THE STATEMENTS OBTAINED FROM THEM AND GIVEN AN OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE THEM BEFORE TAKING INTO ACCOUNT THE CONTENTS OF THOSE STATEMENTS. WHEN THE APPELLATE ASSISTANT COMMISSIONER HAD GIVEN A SPECIFIC DIRECTION TO THE OFFICER TO EXAMINE THE BANKERS BEFORE MAKING USE OF THEIR STATEMENTS, THE INCOME-TAX OFFICER COULD NOT, WITHOUT COMPLYING WITH THE SAID DIRECTION, MAKE REASSESSMENT ON THE SAME BASIS AS WAS DONE ON THE PRIOR OCCASION, AS THE TRIBUNAL HAD POINTED OUT THAT THE ORDER OF REASSESSMENT MADE BY THE OFFICER WAS A VERBATIM REPRODUCTION OF THE ORIGINAL ORDER OF ASSESSMENT EXCEPT FOR THE PREAMBLE PORTION AND HAD COME TO THE CONCLUSION THAT THERE WAS NOTHING TO SHOW THAT THE CREDIT ENTRIES IN THE BOOKS OF ACCOUNT WERE FALSE, THIS FINDING OF THE TRIBUNAL, BEING BASED ON THE FACTS AND CIRCUMSTANCES, COULD NOT BE SAID TO BE UNREASONABLE OR PERVERSE. THE TRIBUNAL WAS, THEREFORE, RIGHT IN DELETING THE ADDITIONS MADE BY THE OFFICER. 18. CONSEQUENTLY, WE DO NOT FIND ANY FALLACY IN THE I MPUGNED FINDING OF THE LD. CIT(A) GIVEN IN THIS REGARD. THE RATIO OF THE ABOVE JURISDICTIONAL HIGH COURT DECISIONS ALSO SUPPORTS O UR CONCLUSION. ACCORDINGLY, BOTH GROUND NO.2 OF REVENUES APPEAL A ND GROUND NO.1 OF THE ASSESSEES CROSS OBJECTION STAND DISMISSED. IN THE CROSS OBJECTION, THE REMAINING SUSTAINED ADDITION OF ` 2,89,104/- HAS BEEN CHALLENGED, WHICH HAS TO BE CONFIRMED. 19. THE THIRD GROUND OF REVENUES APPEAL AND SECOND AN D THIRD GROUND OF ASSESSEES CROSS OBJECTION RELATE TO ADD ITION OF ` 75,69,499/- ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 35 - : BY THE ASSESSING OFFICER ON ACCOUNT OF EXCESS GOLD JEWELLERY FOUND AT THE TIME OF SEARCH AT ASSESSEES BUSINESS PREMISES AND GOLDEN MOMENTS JEWELLERY DURING SURVEY ON 19.5.2005. AT T HE ASSESSEES PROPRIETARY CONCERN, EXCESS STOCK OF GOLD JEWELLER Y TO THE TUNE OF 13780.924 GMS WAS FOUND, THE BREAK-UP OF WHICH IS A S UNDER: SL. NO DESCRIPTION OF THE INVENTORY NET WEIGHT 1. ANN./PC/GJ/FACTORY/NS-1 1501.13 GRAMS 2. ANN./PC/GJ/NS 12536.74 GRAMS 3. ANN./PC/GJ/FACTORY/NS-2 3716.41 GRAMS TOTAL WEIGHT 17754.280 GRAMS LESS: STOCK AS PER BOOKS AS ON 19.5.05 3973.356 GRAMS EXCESS STOCK 13780.924 GRAMS H E R E I T S H OULD BE MENTIONED THAT AS ON THE DATE OF SEARCH , THE STOCK BOOK WA S NO T FOU N D TO BE UPDATED AND IT SHOWED A BALANCE OF 1269.538 GRAMS AS ON 1- 04 - 05. MR. S. KASI VISWANATHAN, THE THEN ACCOUNTANT OF THE CONCERN WAS ALLOWED TO ENTE R ALL THE SALES/PURCHASE ENTRIES UPTO 19-05-2005 AND ONLY AFT ER THIS EXERCISE WAS DONE THE CLOSING STOCK FIGURE OF 3973.356 GRAMS HAD BEEN ARRIVED AT. IN NOTICE U/S 142(1), THE ASSESSEE WAS REQUIRED TO EXPLAIN THE SOURCE OF I SUCH, EXCESS STOCK WHICH WO RKED OUT TO ` 7855170/ - TAKING THE RATE OF GOLD ON THAT DATE AT ` .570/- PER GRAM. 20. THE ASSESSEE OBJECTED TO THE ABOVE PROPOSED ADDITIO N AND GAVE HIS OWN COMPUTATION TO ARRIVE AT EXCESS STOCK AT 80 49.189 GMS. THE ASSESSEES COMPUTATION IS AS UNDER: TOTAL JEWELLERY FOUND AT THE TIME OF SEARCH 17754.2 80 GRAMS POSSESSION OF JEWELLERY AS PER RECORDS 3973.356 GRA MS CUSTOMERS STOCK AVAILABLE ON THE DATE OF SEARCH 501.100 GRAMS JEWELLERY PURCHASED ON THE DATE OF SEARCH, 5230.635 GRAMS ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 36 - : NOT 9705.091 GRAMS BOOKED AS THE ENTRIES HAD NOT BEEN UPDATED, THOUGH THE BILL WAS AVAILABLE AND NOTED BY THE SEARCH PARTY EXCESS 8049.189 GRAMS THUS THERE WAS EXCESS JEWELLERY TO THE EXTENT OF 80 49.189 GRAMS. APART FROM THIS, GOLD JEWELLERY TO THE EXTENT OF 53 57.850 GRAMS, FOUND AT THE RESIDENCE OF LALIT KUMAR GALADA, ALSO BELONG ED TO SURENDRA KUMAR GALADA FAMILY. INVESTMENT IN GOLD HAS BEEN MA DE OUT OF THE SALE OF SILVER, DIAMOND AND OUT OF THE FINANCE BUSI NESS ALONG WITH ITS ACCRETIONS'. AGAIN VIDE LETTER DATED 12.12.2007 THE ASSESSEE, IN RESPECT OF THE CHART AS GIVEN IN PARA 8.1 ABOVE GAVE A DIFFERENT E XPLANATION WHICH IS AS UNDER: 'THIS, WE SUBMIT IS NOT CORRECT. THE PURE GOLD ISSU ED TO GOLDSMITH FOR CONVERSION TO HIIMANSHU ACHARY 4106.036 GRAMS HAS BEEN TREATED AS ISSUED OUTSIDE. HOWEVER, HIIMANSHU ACHARY IS IN THE SHOP ITSELF IN THE SAME PREMISES AND AS SUCH THE SAME WAS INCLUDED IN THE PHYSICAL STOCK FOUND AT SHOP (I.E.) 17754.28 GR AMS. AS SUCH, THE GOLD TREATED AS ISSUED OUTSIDE THE PREMISES IS NOT CORRECT AND HENCE, THE ERROR NEEDS TO BE RECTIFIED. THIS IS ALSO TESTIFIED BY THE FACT TH AT NO WERE GOLD WAS FOUND WITH THE GOLDSMITH, HIMANSHU ACHARY OTHER THAN THIS BUT THE SAME IS RECORD HAS B EEN TREATED AS ISSUED TO HIM. THIS ERROR HAS TO BE RECT IFIED. FURTHER, THE ALLOY CONTENT OF 1077.364 HAS NOT BEEN CONSIDERED WHILE WORKING OUT THE STOCK. THE ALLOY CONTENT IS NORMALLY AROUND 8% TO 9%. THUS, THE CORR ECT STOCK POSITION AS PER BOOKS WILL BE AS UNDER:- GOLD FOUNDS 17754.28 GRAMS AS PER RECORDS (3973.356) GRAMS CUSTOMER STOCK (501.100) GRAMS ENTRY UPDATED AFTER SEARCH (5230.635) GRAMS ----------------------- TOTAL EXCESS 8049.189 GRAMS 21. THE ASSESSING OFFICER TREATED THE EXPLANATION GIVEN IN THESE LETTERS AS AN AFTER THOUGHT STORY BEING PARADOXICA L. HE ALSO REJECTED ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 37 - : THE TWO ENTRIES MADE ON 19.5.2005 TREATING THEM TO BE A RESULT OF AN AFTER THOUGHT. THE CLAIM OF ALLOY CONTENT WAS ALSO NOT ACCEPTED ON THE BASIS OF THE REASONING THAT IN THE LEDGER ITSE LF THERE IS A COLUMN ALLOY AND THE SAME HAS ALREADY BEEN TAKEN CARE OF BY THE ASSESSEE HIMSELF. CONSEQUENTLY, THE VALUE OF EXCESS STOCK W HICH COMES TO 13780.924 501.1 = 13279.824 GMS WAS ADDED @ ` 570/-PR GM WHICH WORKS OUT TO ` 75,69,499/- AND ADDED THE SAME IN FINANCIAL YEAR 2005-06 RELEVANT TO ASSESSMENT YEAR 2006-07. BEFORE THE LD. CIT(A), THE ASSESSEE MADE FOLLOWING SUBMISSIONS: THE ASSESSING OFFICER HAS STATED THAT THERE IS AN EXCESS STOCK OF 13279.824 GMS OF GOLD JEWELLERY AND VALUED THE SAME AT ` 75,69,499. THIS HE HAS WORKED OUT AS UNDER, BASED O N THE MAHASSARNAMA, AND CONSISTS OF GOLD FOUND IN THE SHO P AND FACTORY PREMISES, THE BREAK UP BEING: ANN/PC/GJ/FACTORY/NS-1 1501.13 GMS ANN/PC/GJ/NS 12536.74 GMS ANN/PC/GJ/FACTORY/NS-2 3716.41 GMS 17754.280 GMS LESS: STOCK AS PER BOOKS AS ON 19.5.05 3973 .356 GMS 13780.924 GMS CUSTOMERS STOCK 501.100 GMS -------------------------- 13279.824 GMS =============== THE ABOVE EXCESS WAS ARRIVED AT ON THE BASIS OF THE G-11 REGISTER WHEREIN THE STOCK AS PER BOOKS WAS ARRIVED AT 3973. 356. THIS DOCUMENT WAS SEIZED BY THE SEARCH PARTY. A COPY OF THE SAME IS ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 38 - : ENCLOSED FOR REFERENCE (ANNEXURE 3). WHILE ARRIVING AT THE STOCK POSITION AS PER BOOKS, THE GOLD BITS ISSUED TO OUR WORK SHOP TO OUR ACHARY (MR. HIMANSHU) OF 4106 GMS WAS REDUCED FROM THE BOOKS AND THEREBY THE STOCK AS PER OUR BOOKS AT SHOW ROOM CAM E DOWN BY 4106 GMS. HOWEVER, WHILE ARRIVING AT THE PHYSICAL STOCK, THE GOLD AT SHOWROOM AND THE WORKSHOP WAS TAKEN TOGETHER. THIS HAS LED TO THE DISCREPANCY. IF THE GOLD AT SHOWROOM IS COMPARED TO GOLD FOUND IN SHOWROOM, THEN THIS DISCREPANCY WILL NOT BE THERE A ND THE GOLD ISSUED TO THE WORKSHOP (TO MR. HIMANSHU ACHARY) OF 4106 AF TER CONVERSION INTO JEWELLERY (ADDING ALLOYS) COME TO 5230.635 GMS . IN THE NORMAL PRACTICE, ONCE THE GOLD IS RECEIVED FROM WORKSHOP / ACHARY, IT IS RECREDITED IN BOOKS. THIS DID NOT TAKE PLACE. THE S HOW ROOM AND THE WORKSHOP ARE TWO DIVISIONS OF THE SAME ESTABLISHMEN T AND CANNOT BE SEEN IN TWO COMPARTMENTS. IF THE ESTABLISHMENT IS SEEN IN TOTO AS ONE, THERE IS NO DISCREPANCY. IN CONCLUSION, THE APPELLANT SUBMITS THAT WORKING O UT THE EXCESS AS ABOVE, THE ASSESSING OFFICER HAS IGNORED THE FACT THAT THE APPELLANT HAD EARLIER ISSUED 4106.046 GM OF PURE GOLD TO ONE MR. HIMANSHU. HE SITS IN THE BUSINESS PREMISES OF THE APPELLANT ONLY AND DOES HIS WORK. THE SYSTEM FOLLOWED BY THE APPELLANT IS TO HAND OVER PURE GOLD TO THE GOLDSMITH, AND AT THE TI ME OF HANDING OVER THE GOLD, AN ENTRY FOR ISSUE OF GOLD IS MADE I N THE COMPUTER. USING THE PURE GOLD, THE GOLDSMITH HAD MANUFACTURED GOLD JEWELLERY, AND RETURNED THE MANUFACTURED GOLD JEWEL LERY WEIGHING 5230.635. ON THE DATE OF SEARCH, ENTRY FOR THE RECEIPT OF WHI CH WAS YET TO BE MADE IN THE BOOKS. THEREFORE THE QUANTITY OF GOLD ISSUED TO MR. HIMANSHU FOR WHICH AN ENTRY IS AVAILABLE I N THE ACCOUNTS MAINTAINED BY THE APPELLANT AND NOTED BY THE AUTHOR ISED OFFICER, IS NOTHING BUT THE STOCK OF THE APPELLANT. THE ASSESSI NG OFFICER HAS NOT CONSIDERED THE GOLD ISSUED TO MR. HIMANSHU (WH ICH WORKS OUT TO 5230 GMS. OF GOLD JEWELLERY), WHILE QUANTIFYING THE STOC K AS PER BOOKS. THE APPELLANT WISHES TO SUBMIT THE FOLLOWING: (VII) THAT THE ASSESSING OFFICER HAS FAILED TO TAKE COGNIZANCE OF THE LETTERS FILED BEFORE HIM ON 12.12.2007 9COPY ENCLOSED). (VIII) THAT IN THE SAID LETTER, IT WAS CLEARLY EXPL AINED THAT THE EXCESS STOCK AT SHOP WILL BE ONLY 8049.189 GMS AND NOT 13279.824, THE BREAK UP BEING: TOTAL JEWELLERY FOUND 17754.280 STOCK AS PER BOOKS 3973.356 CUSTOMERS STOCK AVAILABLE ON DAY OF SEARCH 50 1.00 ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 39 - : JEWELLERY RECEIVED FROM MR.HIMANSHU, NOT BOOKED AS THE ENTRIES HAD NOT BEEN UPDATED THOUGH THE BILL WAS AVAILABLE AND HAD BEEN NOTED BY THE SEARCH PARTY 5230. 635 9705.091 EXCESS: 8049.189 (IX) THAT THERE WAS AN EXCESS OF 8049.189 GMS IS NO T DISPUTED BY THE APPELLANT. (X) T HAT THIS BEING THE CASE, THE CASH DEFICIT AS ON THE DATE OF SEARCH ` 28,81,767AND ALSO THE ACCRETIONS FROM FINANCE BUSINESS AND INTEREST INCOME AND ALSO THE REALISATIONS ON SALE OF SILVER AND DIAMOND (WHI CH WERE PHYSICALLY NOT FOUND AT THE TIME OF SURVEY) HA S TO BE TELESCOPED TO THE PHYSICAL WEALTH AVAILABLE IN T HE FORM OF GOLD ON THE DATE OF SURVEY ; (XI) THAT THE SEARCH / SURVEY OPERATIONS HAVE RESULTED IN BRINGING TO FORE THE POSITIONS WHEREIN THERE WAS: EXCESS OF GOLD 8049.189 GMS DEFICIT OF SILVER 221.899 KGS DEFICIT OF DIAMONDS 201.36 CTS NO FINANCE BUSINESS THIS BEING THE CASE, THE ASSESSING OFFICER ALSO HAV ING ADMITTED TO THE FACT THAT THE APPELLANT HAS BEEN EN GAGING IN SELLING AND PURCHASING OF JEWELLERY, SILVER AND DIA MONDS, AND ALSO DOING FINANCE BUSINESS WHICH WERE NOT FOUN D IN REGULAR BOOKS, OUGHT TO HAVE ACCEPTED THE NET POSIT ION AS ON DATE OF SEARCH / SURVEY AND NOT IGNORED THE EVIDENC ES SO STRONG IN NATURE,. BEFORE HIM., I.E., AVAILABILITY OF EXCESS GOLD ON THE ONE HAND, AND NON-AVAILABILITY OF SILVER, DI AMOND, CASH AND FINANCE. (VI) THAT IN THE ENTIRE PROCEEDINGS, THE APPELLANT 'S STATEMENT ON OATH HAS BEEN RELIED UPON VERY HEAVILY. IT IS NOT O UT OF PLACE TO MENTION THAT THE VERY DOCUMENT 'DHANRAJ' ON THE BASIS OF WHICH THE ASSESSING OFFICER HAS RELIED VERY HEAVILY FOR ASSESSING THE FUNDS INVOLVED IN THE FINANCE BUSINES S FOR ASSESSMENT YEAR 2004-05, DOES NOT SPEAK ANYTHING BY ITSELF. IN ALL THAT IT COULD BE REFERRED TO AS A 'DUMB DOCUMEN T'. THE ZEROS TO THE FIGURES HAVE BEEN ARRIVED AT ONLY ON THE BAS IS OF THE STATEMENT RECORDED ON OATH BY THE AUTHORISED OFFICE R. THERE IS NO OTHER MATERIAL OR DOCUMENT OR PRONOTES OR SECURI TIES ON THE ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 40 - : BASIS OF WHICH THESE FIGURES COULD HAVE BEEN ARRIVE D AT. THE SOLE FACTOR OR BASIS ON WHICH THE FIGURES IN 'DHANR AJ' HAS BEEN ARRIVED AT IS ASSESSEE'S OWN STATEMENT RECORDED ON OATH AT THE TIME OF SEARCH. THE APPELLANT SUBMITS THAT THIS BEI NG THE CASE, THE ASSESSING OFFICER HAS CONVENIENTLY IGNORED THE OTHER PART OF THE STATEMENT WHEREIN, THE APPELLANT HAS EXPLAINED HIS OPERATIONS WHICH INVOLVED BUYING AND SELLING OF GOL D / SILVER / DIAMONDS AND THE CIRCULATION OF FUNDS IN FINANCE. T HE RELEVANT EXTRACTS FROM THE APPELLANT'S STATEMENT ARE REPRODU CED BELOW: 'QN. NO.4: DURING THE COURSE OF SURVEY CONDUCTED AT YOUR PREMISES AT NO.4, SEETHAMMAL COLONY 2 ND MAIN ROAD, ON 19-05-2005 & 20-05-2005, WE HAVE EXAMINED THE BOOKS OF ACCOUNT AND RELATED FIELDS MAINTAINED IN THE SYSTEM AND FOUND A FILE, VIZ., DHANRAJ. THIS PARTICULAR ACCOUNT IS MAINTAINED IN 'QUICKEN SOFTWARE'. AS SEEN FROM THE FILE MAINTAINE D IN THE NAME OF 'DHANRAJ', CERTAIN TRANSACTIONS HAVE BEEN REFLECTED UNDER CASH ACCOUNT. A COPY OF THE ACCOUNT WAS TAKEN AND SHOWN THE SAME TO YOUR SON MR. ABISHEK GALADA WHO WAS PRESENT AT THE RESIDENCE ON THE DATE OF SURVEY AND MR. KASI VISWANATHAN, ACCOUNTANT WHO WAS OPERATING THE SYSTEM. AS PER THE SWORN STATEMENT RECORDED FROM THEM THE TRANSACTIONS REFLECTED IN THE FILE VIZ.; DHANRAJ, WERE ACTUALLY MAINTAINED BY YOU. KINDLY GO THROUGH THE PRINTOUT O F THE ACCOUNT AND EXPLAIN THE NATURE OF THE TRANSACTI ONS REFLECTED THEREIN. ANS: I HAVE GONE THROUGH THE PRINTOUTS TAKEN FROM T HE SYSTEM AND EXAMINED THE SAME. FURTHER I HAVE SIGNED THE PRINTOUTS FOR HAVING GONE THROUGH THE SAME. THIS PARTICULAR ACCOUNT WAS MAINTAINED IN THE SYSTEM FOR THE FY. 03-04 IN THE NAME OF DHANRAJ BY ME IN 'QUICKEN' SOFTWARE. THESE TRANSACTIONS ARE PERTAINING TO MY GOLD JEWELLERY BUSINESS AND FINANC E BUSINESS WHICH ARE NOT REFLECTED IN THE REGULAR BOO KS OF ACCOUNT MAINTAINED BY ME. THE ENTRIES APPEARING IN THIS ARE MENTIONED IN CODED FORM IN THOUSANDS. B UT IN REALITY THEY ARE IN LAKHS, I.E. TWO ZEROS ARE OM ITTED. IN ORDER TO ARRIVE AT THE CORRECT AMOUNTS, THE DECI MAL APPEARING BEFORE THE LAST TWO ZEROS SHOULD BE REMOVED. FURTHER, 'MINUS' APPEARING BEFORE SOME OF THE ENTRIES REPRESENTS AMOUNT DUE FROM THE PARTIES ON ACCOUNT OF SALE OF GOLD JEWELLERY/BULLION ITEMS. I SHALL ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 41 - : EXPLAIN THE EXACT NATURE OF THE TRANSACTION IN RESP ECT OF ALL THE ENTRIES APPEARING IN THE ACCOUNT IN A CO UPLE OF DAYS TIME. Q.5: WHAT WAS THE MODE OF PAYMENT/RECEIPT IN RESPEC T OF THE ABOVE UNACCOUNTED TRANSACTIONS? ANS. ALL THE TRANSACTIONS REFLECTED IN THE ABOVE AC COUNT ARE DONE IN CASH. Q.6: WHAT ARE THE SOURCE OF FUNDS IN RESPECT OF UNA CCOUNTED LOANS AND PURCHASE OF GOLD JEWELLERY REFLECTED IN T HE ABOVE ACCOUNT? ANS: THE MAIN SOURCE FOR THE UNACCOUNTED INVESTMENT IN FINANCE AND GOLD JEWELLERY BUSINESS IS PROFIT GENER ATED ON ACCOUNT OF UNACCOUNTED PURCHASE AND SALE OF GOLD JEWELLERY /BULLION AND UNDISCLOSED INTEREST INCOME FROM FINANCE BUSINESS. Q.7: DURING THE COURSE OF SURVEY OPERATIONS CONDUCT ED AT NO.4 SEETHAMMAL COLONY 2 ND MAIN ROAD ON 19/5/05 & 20/5/05, THE CLOSING CASH BALANCE AS PER BOOKS WAS NOTED DOWN AS GIVEN BELOW: NAME OF THE CONCERN AMOUNT SJ INTERNATIONAL 581,222 AG INTERNATIONAL 584,041 LG INTERNATIONAL 503,581 GOLDEN MOMENTS JEWELLERY 13,36,508 THE PRINTOUT CONTAINING THE CASH BALANCE HAD BEEN T AKEN FROM THE SYSTEM AND SIGNED BY YOUR ACCOUNTANT MR. KASI VISWANATHAN AND YOUR SON MR. ABISHEK GALADA WHO WER E PRESENT AT THE PREMISES. ON THE OTHER HAND, AS PER THE INVENTORY OF THE CASH FOUND IN THE PREMISES, THE AC TUAL CASH AVAILABLE AS ON THE DATE OF SURVEY WAS ` 123,585. KINDLY GO THROUGH THE PRINT OUTS CONTAINING THE CASH BALANCE AS PER BOOKS AND PHYSICAL INVENTORY OF CASH VIDE ANN/PC/CA SH/NS AND EXPLAIN THE DISCREPANCY? ANS: I HAVE GONE THROUGH THE CASH BALANCE AS PER BO OKS AND INVENTORY OF PHYSICAL CASH PREPARED BY SURVEY TEAM AND VERIFIED THE SAME. IT IS TRUE THAT THERE IS A SHORT AGE OF CASH TO THE TUNE OF ` 28,81,767. I HAD INVESTED THIS CASH FOR THE ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 42 - : PURPOSE OF PURCHASE AND SALE OF GOLD JEWELLERY /BUL LION WITHOUT BILLS AND ALSO SOME AMOUNTS IN FINANCE BUSINESS. (VII) THAT THIS BEING THE CASE, THE ASSESSING OFFI CER HAS BEEN VERY MUCH IN THE WRONG BY ARRIVING AT CONCLUSIONS LIKE ' DEPOSITING THE ENTIRE DEFICIT CALCULATED TO THE LAST GRAMS AND CARATS IN THE HUNDI OF THIRUPATHI TEMPLE ETC. ETC. '. THE ASSESSI NG OFFICER OUGHT TO HAVE REFRAINED FROM MAKING SUCH OBSERVATIO NS AND RESTRICTED HIMSELF TO THE FACTS THAT HAD EMERGED FR OM THE SEARCH / SURVEY AND EXPLANATIONS OFFERED DURING SEA RCH ON OATH (WHICH HE RELIES ON) AND ARRIVED AT THE TRUE PICTUR E. THUS, IN CONCLUSION, IT IS SUBMITTED THAT THE APPEL LANT HAS ALREADY PAID THE TAXES ON THE FUNDS UTILIZED TO INVEST IN THE EX CESS GOLD IN SHOP OF 8049.189 GMS AND THERE IS NO FURTHER ADDITION WARRA NTED HERE ON THIS GROUND. THE FUND FLOW STATEMENT FILED BEFORE THE AS SESSING OFFICER IS BEING REPRODUCED HEREUNDER FOR READY REFERENCE CASH FLOW STATEMENT ASST. YEAR 2003-04 DR. ` . CR ` . AMOUNT RECEIVED ON SALE OF 221.899 KGS OF SILVER 1,775,192.00 INTEREST 29,589.00 DEBTORS 1,600,000.00 ASST. YEAR: 2004-2005 3,044,087.00 AMOUNT RECEIVED ON SALE OF 5910.850 GRAMS OF GOLD AMOUNT RECEIVED ON SALE OF 201.360 CARATS OF DIAMOND 3,624,480.00 INTEREST 774,558.00 DEBTORS 6,500,000.00 ASST. YEAR: 2005-2006 INTEREST 1,335,000.00 REFUND BY DEBTORS 8,100,000.00 ASST. YEAR: 2006-2007 PURCHASE OF JEWELLERY 5357.850 GRAMS 2,946,817.00 PURCHASE OF JEWELLERY 8049.189 GRAMS 4,427,054.00 PURCHASE OF 5454.54 GRAMS OF JEWELLERY & CONTRIBUTED TO ABIRCHAND GALADA HUF 3,000,000.00 BALANCE C/O. 18,682,906.00 18,682,906.00 FUND FLOW RECONSTRUCTED: PS : NO EVIDENCE OR RECORDS ARE AVAILABLE WITH US. THE FUND FLOW HAS BEEN RECONSTRUCTED BASED ON FLOW OF EVENTS AND AS I COULD REMEMBER. ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 43 - : HOWEVER I HAVE INCLUDED THE FINANCES AS PER FINANCI ES AS PER THE SHEET, ESTIMATED THE INTEREST FOR A. Y. 2004 - 2005 AND PAID THE TAXES THEREUPON. THE SAME HAS ALSO BEEN INCLUDED IN THE F UND FLOW. THERE ARE LOOSE SHEETS WITH THE DEPARTMENT EVIDENCING THE PURCHASES AND SALE OF GOLD, DIAMOND, SILVER ETC., BUT THEY ARE NO T CONTINUOUS IN NATURE. THIS BEING THE CASE, THE FUND FLOW HAS BEEN RECONSTRUCTED PARTLY BASED ON MATERIAL AND ALSO TO THE EXTENT I C OULD RECALL. (VIII) THAT NOTWITHSTANDING THE ABOVE, THE APPELLAN T ALSO SUBMITS THAT THE EXTRA INCOME OFFERED ON ACCOUNT OF SALE OF SILV ER, DIAMONDS, AND GOLD BELONGING TO THE FAM IL Y MEMBERS , AND THE INTEREST INCOME FROM THE FINANCE BUSINESS , WH IC H H A S BEEN O FF ERED FOR TAX BY THE APPELLANT , AND BROUGHT TO TAX IN THE RESPECTIVE ASSESSMENT YEA RS, WAS AVAILABLE FOR INVESTMENT IN THE EXCESS GOLD FOUND AT THE T I ME OF SEARCH I SURVEY. ASSESSMENT YEAR INCOME OFFERED 2003-04 29,589 2004-05 7,74,568 2005-06 13,35,000 THE APPELLANT REQUESTS THAT THE HON'BLE COMMISSIONE R OF INCOME-TAX MAY KINDLY DELETE THE ADDITION OF ` 75,69,499 MADE ON THIS ACCOUNT. 22. ON THE BASIS OF THE ABOVE EXPLANATION, THE LD. CIT( A) HELD THAT THE GROSS REPAYMENT COULD SHOW THAT GOLD OF 24 CT W AS ISSUED TO VARIOUS GOLDSMITHS FOR MAKING JEWELLERY. ON EXAMIN ATION OF G-11 REGISTER MAINTAINED BY THE ASSESSEE IT WAS FOUND TH AT 4106 GMS OF GOLD OF 24 CT WAS ISSUED TO SHRI HIMANSHU ACHARY WH O WAS PRESENT IN THE WORKSHOP AT THE TIME OF SEARCH ALSO. SO A BARE CREDIT OF JEWELLERY WEIGHTING 5230.635 GMS CONVERTED OUT OF STOCK ISSUE D TO SHRI HIMANSHU ACHARY (4106.036 OF 24 CT JEWELLERY ) WAS RECOVERED FOR ARRIVING AT THE BOOK BALANCE AS AGAINST, THE ASSESS ING OFFICER HAS ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 44 - : WORKED OUT EXCESS STOCK OF 13279.424 GMS AND AFTER REDUCING THE DULY CONVERTED FROM RAW GOLD ISSUED TO GOLD SMITH. HE D ETERMINED THE EXCESS STOCK AT 13279.824 GMS 5230.635 GMS = 8049 .189 GMS. ACCORDINGLY, HE DETERMINED THE VALUE OF THE EXCESS STOCK OF GOLD JEWELLERY VALUING AT ` 45,88,037/-. THE INCOME OFFERED IN ASSESSMENT YEARS 2003-04 TO 2005-06 TOTALLING TO ` 21,39,157/- WAS TREATED AS AVAILABLE WITH THE ASSESSEE ON THE DATE OF SEARCH A ND THEREFORE, SET OFF OF THE ABOVE AMOUNT WAS ALLOWED AND ACCOUNT AN AMOU NT OF ` 24,48,880/- WAS SUSTAINED. IT WAS ARGUED BY THE LD .AR THAT THIS IS A WRONG WORKING DONE BY THE LD. CIT(A) BECAUSE THE TE LESCOPING OF TOTAL AMOUNT OF ` 18682906 WAS TO BE ALLOWED BECAUSE CASH DEPOSIT, RECOVERY FROM DEBTS, CASH BALANCE OF THE YEAR 2004- 05 AND UNACCOUNTED INCOME OFFERED TO TAX IN EARLIER YEARS WAS ALSO AVAILABLE. IN THIS REGARD, THE ASSESSEE HAS RAISED GROUND NO.2 AND 3 IN THE CROSS OBJECTION. THE CASE OF THE ASSESSEE IS THAT THE EN TIRE AMOUNT NEEDS TO BE DELETED AND THE SUSTAINED AMOUNT CANNOT BE CONFI RMED IN THE HANDS OF THE ASSESSEE. 23. THE LD.D.R., HOWEVER, SUBMITTED THAT THE WORKING OF T HE CIT(A) GIVING CREDIT TO THE JEWELLERY STATED TO HAVE BEEN ISSUED TO SHRI HIMANSHU ACHARY WAS NOT CORRECT AND FURTHER GIVING CREDIT TO THE INCOME DECLARED HAS ALSO NOT CORRECT. THE ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 45 - : REVENUE IS CONTESTING THESE ISSUES IN GROUND NO.3. A FTER CONSIDERING THE RIVAL SUBMISSION WE ARE OF THE OPIN ION THAT THE CLAIMS IN THIS REGARD ARE TO BE EXAMINED BY THE ASS ESSING OFFICER AFRESH. IN THE PAPER BOOK NO.4, PAGES 3, 4 & 5 FILED BY THE REVENUE ARE ANNEXURE 1 PREPARED AT THE TIME OF SEARCH IN THE PREMISES OF GOLDEN MOMENTS. AS SEEN FROM THE AB OVE WORKING, STATED TO HAVE BEEN UPDATED ON THE DATE OF SEARCH, THE OPENING STOCK WAS ARRIVED AT 126889.538 GMS. PA GE 3 CONTAINS THE PURCHASE OF STOCK FROM 01.04.2005 TO 17 .04.2005 TOTALLING TO 27436.185 GMS. WHICH INCLUDE ALLOY CONT ENT MENTIONED IN THE SECOND COLUMN. AS AGAINST THE TOTAL STOCK ARRIVED AT LIKE THAT AT 40125.703 GMS., THE SALES W ERE DETAILED IN PAGES 4 & 5 AND ARRIVED AT THE STOCK AT 3973.356 GMS. THE PHYSICAL STOCK FOUND WAS 17670.120 GMS. EVEN THOUGH, IT IS NOT STATED WHETHER THE PHYSICAL STOCK WAS PURE GOLD OR ALLOY, THE ASSESSEE, HOWEVER, HAS NOT DISPUTED THE EXCESS ST OCK ARRIVED AT 8049.189 GMS VALUED AT ` 45,88,037/-. TO THIS EXTENT THE LD. CIT(A)'S ORDER CONFIRMS THE ADDITION . THE DISPUTE BY THE REVENUE IS WITH REFERENCE TO THE CREDIT GIVE N TO SHRI HIMANSHU ACHARY FOR THE STOCK AVAILABLE IN THE WORK PREMISES. THE LD. CIT(A) SEEMS TO HAVE EXAMINED THE G-11 REGIS TER. ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 46 - : HOWEVER, THIS REGISTER WAS NOT PRODUCED BEFORE THE ASSESSING OFFICER NOR PRODUCED BEFORE US TO EXAMINE THE ENTR IES THEREIN. IN THE ABSENCE OF ANY ENTRIES IN G-11 REGISTER, SUCH CREDITS AND DEBITS CANNOT BE WORKED OUT ON THAT BASIS ALON E. THEREFORE, WE ARE OF THE OPINION THAT THIS ISSUE OF JEWELLERY RECEIVED FROM SHRI HIMANSHU ACHARY HAS TO BE EXAMIN ED BY THE ASSESSING OFFICER AFRESH. IF THE ENTRIES ARE FO UND SUBSEQUENTLY IN THE G-11 REGISTER, THE ASSESSING OF FICER IS DIRECTED TO GIVE CREDIT FOR THE JEWELLERY TO THAT E XTENT WORKED OUT EITHER AT PURE GOLD BASIS OR WITH ALLOY CONTENT . THE STOCK STATEMENT ON 19.05.2005 INDICATES THAT ONLY A DEBIT OF 4106.036 GMS GOLD WAS STATED TO BE ISSUED TO SHRI H IMANSHU ACHARY. IF ANY AMOUNT OF CREDIT IS TO BE CONSIDERED, IT IS TO BE A T 4106.037 GMS. AND NOT 5230.635 GMS. GIVEN CREDIT BY THE LD. CIT(A). HOWEVER, THIS ASPECT REQUIRES EXAMINATION A S WE ARE NOT IN A POSITION TO VERIFY WHETHER THE PHYSICAL STOCK FOUND WAS PURE GOLD OR WITH ALLOY CONTENT. MOREOVER, THE ISSUE TO SHRI HIMANSHU ACHARY WAS DATED 19.05.2005 ONLY (AS ISSUED TO HIM ACCO UNTED IN STOCK STATEMENT SHEETS). IT IS DOUBTFUL WHETHER HE COULD HAVE MANUFACTURED THE JEWELLERY IMMEDIATELY ON THE SAME DAY BY THE TIME THE SEARCH HAD OCCURRED. THIS ASPECT REQUIRES EXAMINATION. SUBJECT TO THE FINDING OF GOLD INVENTORY PREPARED, WITH REFERENCE ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 47 - : TO PHYSICAL STOCK FOUND ON 19.05.2005 OF 17670.120 GMS., T HE ASSESSING OFFICER IS DIRECTED TO EXAMINE THIS ASPE CT AND GIVE CREDIT ACCORDINGLY. 24. THE NEXT ASPECT WHICH WAS CONTESTED BY THE REVENUE AS WELL AS RAISED BY THE ASSESSEE IN GROUND NOS. 2 &3 I N THE CROSS OBJECTION IS WITH REFERENCE TO THE CREDIT OF AMOUNT STATED TO BE AVAILABLE WITH THE ASSESSEE. AS STATED EARLIER THE LD.CIT(A) GAVE CREDIT TO THE AMOUNT DISCLOSED AT ` 21,33,152/- AND CONFIRMED AN AMOUNT OF ` 24,48,880/AS EXCESS INVESTMENT IN THE VALUE OF STOCK AVAILABLE. IT WAS THE CONTENTION OF THE ASSESSEE TH AT THE CASH AVAILABLE IN DHANRAJ'S ACCOUNT SHOULD BE GIVEN CRED IT. IN THE STATEMENT PREPARED AND EXTRACTED IN PAGE 42 OF THE OR DER IN PARA 21, THE ASSESSEE HAS TAKEN CREDIT FOR PURCHASE OF JEW ELLERY AT RESIDENCE AND PURCHASE OF JEWELLERY IN THE BUSINESS PREMISES AND ALSO FOR THE AMOUNTS CONTRIBUTED TO ABIRCHAND GALAD A HUF. SINCE THIS CASH FLOW WAS NOT CONSIDERED BY THE ASSESSING OFFICER, WE ARE OF THE OPINION THAT THIS ISSUE REQUIRES RE-EXAMINAT ION BY THE ASSESSING OFFICER IN ORDER TO MAKE THE CORRECT WOR KING AS CLAIMED BY THE ASSESSEE. WE RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER TO EXAMINE IT AFRESH AND CONSEQUENTLY THE ISSUE RAISED BY THE REVENUE IN THIS REGARD VIDE GROUND NO.3 AND GRO UND NOS. 2 & ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 48 - : 3 OF THE CROSS OBJECTION STAND ALLOWED FOR STATISTIC AL PURPOSES. THE ISSUES ARE RESTORED TO THE FILE OF THE ASSESSING OF FICER. 25. THE FOURTH GROUND OF CROSS OBJECTION RELATES TO ES TIMATION OF GROSS PROFIT FROM UNDISCLOSED JEWELLERY BUSINESS. THIS ISSUE WAS NOT SERIOUSLY ARGUED BY THE LD.AR AND THEREFORE, WE DO NOT INTERFERE IN THE APPELLATE FINDING. 26. IN THE RESULT, THE APPEAL OF THE REVENUE AND THE C ROSS OBJECTION OF THE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. I.T.A.NO. 1484/MDS/08 AND C.O 15/MDS/09 27. THE APPEAL OF THE REVENUE AND THE CROSS OBJECTION OF THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE LD. CIT(A) DATED 4.4.2008. 28. THE GROUNDS RAISED IN REVENUES APPEAL READ AS UNDE R: 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO LAW AND FACTS OF THE CASE. 2. THE LEARNED CIT(A) ERRED IN DELETING THE UNDISCL OSED INCOME TO THE EXTENT OF ` 1,90,47,759/- FROM THE UNACCOUNTED FINANCE BUSINESS AND JEWELLERY BUSINESS. 3. THE ID CIT(A) ERRED IN INTERPRETING THE 'MINUS' SIGN APPEARING IN THE SEIZED MATERIAL TO MONEY RECEIVED WHEN EVEN AS PER THE ADMISSIONS OF THE ASSESSEE IT REPRE SENTS THE MONEY 'DUE' FROM THE DEBTORS. ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 49 - : 4. THE ID CIT(A) ERRED IN ALLOWING RELIEF BY DEDUCT ING THE VALUE OF UNACCOUNTED SALE OF JEWELLERY TO THE EXTE NT OF ` 84,44,759/ . 5. THE ID CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT THE CLAIM OF SALE OF JEWELLERY BELONGING TO FAMILY MEMB ERS WAS NOT SUPPORTED ANY DOCUMENTARY EVIDENCES. 6. THE ID CIT(A) ERRED IN NOT CONSIDERING THE FA CT THE CLAIM OF THE ASSESSEE REGARDING THE SALE OF JEWELLERY WIT HOUT THE KNOWLEDGE OF THE OTHER MEMBERS CANNOT BE TRUE AS TH E ASSESSEE IS THE KARTA OF SURENDRA KUMAR (HUF) AND T HE TRANSACTIONS COULD NOT TAKE PLACE WITHOUT THE KNOWL EDGE OF THE ASSESSEE. 7. IT IS ALSO POINTED OUT HERE THAT GOLD WAS FOUN D TO BE IN EXCESS I AT THE RESIDENCE OF THE ASSESSEE AND THE D EFICIT OF SILVER AND DIAMOND WAS 141.453 KG AND 82.42 CARAT A S AGAINST 221 KG AND 201.36 CARAT CLAIMED BY THE ASSE SSEE AND ACCEPTED BY THE CIT(A). 8. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUC ED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING O FFICER RESTORED. 29. IN THE CROSS OBJECTION, THE ASSESSEE HAS RAISED TH E FOLLOWING GROUNDS: 1. THE COMMISSIONER OF INCOME-TAD(APPEALS) ERRED IN CONFIRMING THE ADDITION OF ` 57,52,241/- OUT OF A TOTAL ADDITION OF ` 2,48,39,000. THE ENTIRE ADDITION OF ` 2 ,48,39,000/- OUGHT TO HAVE BEEN DELETED. 2. THE COMMISSIONER OF INCOME-TAX (APPEALS) HAVING ACCEPTED THAT THE APPELLANTS CLAIM OF SOURCE OF TH E UNACCOUNTED DEPOSIT AND CASH IS PLAUSIBLE OUGHT TO HAVE DELETED THE ENTIRE ADDITION. HE ERRED IN HOLDING T HAT OUT OF THE TOTAL AMOUNT OF UNDISCLOSED CASH AND DEPOSITS, SOURCE IS EXPLAINED ONLY TO THE EXTENT OF ` 84,43,759/- AND THE BALANCE OF ` 57,52,241/- IS LIABLE TO BE ADDED AS UNDISCLOSED INCOME. ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 50 - : 30. BRIEFLY STATED, THE RELEVANT FACTS OF THE CASE ARE THAT IN RESPONSE TO NOTICE U/S 153A, RETURN OF INCOME WAS FILED BY T HE ASSESSEE ON 27.9.2007 SHOWING TOTAL INCOME OF ` 2,72,813/- AS AGAINST WHICH THE ASSESSMENT ORDER WAS PASSED ON 26.12.2007 AT A TOT AL INCOME OF ` 2,51,11,814/-. IN DOING SO, THE ASSESSING OFFICER M ADE ADDITION OF ` 2,48,39,000/- ON ACCOUNT OF UNACCOUNTED CASH AND DE POSITS AND PURCHASE OF GOLD AND BULLION. DURING THE COURSE OF SURVEY U/S 133A AT THE PREMISES NO.4, SEETHAMMAL COLONY, TEYNAMPET, CH ENNAI, AT THE TIME OF CHECKING THE CONTENTS AND FILES MAINTAINED IN THE COMPUTER, ONE FILE NAMED DHANRAJ FOR THE FINANCIAL YEAR 200 3-04 WAS DISCOVERED WHICH WAS CREATED IN QUICKEN SOFTWARE. IT WAS NO TICED THAT THE WORD DHANRAJ IS NICKNAME OF SHRI SURENDRA KUMAR GALADA . A PRINTOUT OF THAT FILE RUNNING INTO FOUR PAGES WAS TAKEN DURING SURVEY AND BROUGHT ALONGWITH THE OTHER IMPOUNDED DOCUMENTS. THIS DOCU MENT CONTAIN 20 ENTRIES AS UNDER: CASH ACCOUNT (34,178.50), ACRIS (3,500), BALAJI (0 ), BASKER (0), D C S, GRAND CARS (29,141.50), KRG (700 .00), M K B (0), MEENAKTCHI SILKS (1,050.00), PURPLE LOGISTICS DC SEKAR (2,190.00), PURPLE MAHA (28,200.00), RAJJAPA (6000.00), SIVAMANI (1000.00), USHA RAJAGOPAL (0), VASANTHI VISWANATHAN (15,000.00), VASU (16,000.00), VENKATALACHALAPATHY (5000.00). TH IS LIST ALSO CONTAINS A FEW CODE NAMES PREFIXED WITH - VE SIGN (I.E. NEGATIVE SIGN) A.L.G. (- 58,930.00), DEEP CHANDJI ( 42,000.00), GOLDEN MOMENTS( -4,500.00), KANNAN (-) 1 ,000.00). AS CAN BE SEEN, THIS PRINT OUT WAS AUTHENTICATED BY SHRI SURE NDER KUMAR GALADA HIMSELF ON 26.5.2005 DURING THE COURSE OF PR OCEEDINGS U/S 132(4). ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 51 - : 31. SINCE SHRI SURENDRA KUMAR GALADA WAS NOT PRESENT AT THE TIME OF SURVEY, HE WAS QUESTIONED LATER ON 26.5.2006 REG ARDING THIS PRINTOUT AND HIS REPLY IS AS UNDER: ANS: I HAVE GONE THROUGH THE PRINTOUTS TAKEN FROM THE SYSTEM AND EXAMINED THE SAME. FURTHER, I . HAVE SIGNED THE PRINTOUTS FOR HAVING GONE THROUGH THE SAME. THIS PARTICULAR A CCOUNT WAS MAINTAINED IN THE SYSTEM FOR THE F. Y. 03-04 IN THE NAME OF DHANARAJ BY ME IN 'QUICKEN SOFTWARE'. THESE TRANSAC TIONS ARE PERTAINING TO MY GOLD JEWELLERY BUSINESS AND FINANC E BUSINESS WHICH ARE NOT REFLECTED IN THE REGULAR BOOKS OF ACC OUNT MAINTAINED BY ME. THE ENTRIES APPEARING IN THIS ARE MENTIONED IN CODED FORM IN THOUSANDS. BUT IN REALLY THEY ARE IN LAKHS. I.E. TWO ZEROS ARE OMITTED. IN ORDER TO ARRIVE AT THE CO RRECT AMOUNTS, THE DECIMAL APPEARING BEFORE THE LAST TWO ZEROS SHO ULD BE REMOVED . FURTHER, 'MINUS' APPEARING BEFORE SOME OF THE ENTRIES REPRESENTS AMOUNT DUE FROM THE PARTIES ON ACCOUNT O F SALE OF GOLD JEWELLERY /BULLION ITEMS. I SHALL EXPLAIN THE EXACT NATURE OF THE TRANSACTION IN RESPECT OF ALL THE ENTRIES APPEA RING IN THE ACCOUNT IN A COUPLE OF DAYS TIME. 32. THE OBSERVATIONS OF THE ASSESSING OFFICER IN THIS R EGARD IS AS UNDER: THIS SECRET FILE, AS EXPLAINED BY SHRI SURENDER KU MAR GALADA CONTAINED DETAILS OF LOANS FORWARDED AS WELL AS AMOUNT DUE FROM PERSONS TO WHOM GOLD ETC. WAS SOLD TOTALLI NG UPTO ` 2, 14,21,150/ - (IN THE LIGHT OF THE EXPLANATION B Y SHRI SURENDER GALADA AS EXTRACTED ABOVE THAT FIGURES WHICH ARE AP PEARING IN THOUSANDS SHOULD BE TREATED IN LAKHS AND LIKE-WISE) FOR FINANCIAL YEARS 2003-04. FURTHER, THE ACCOUNT SHOWS THAT AN A MOUNT OF ` 34,17,850 HAS BEEN SHOWN UNDER CASH ACCOUNT INDICAT ING THAT THIS AMOUNT WAS AVAILABLE IN CASH. BUT, AT THE SAME TIME, AT THE SAME OF SURVEY, IT WAS DETECTED THAT THERE WAS A CA SH DEFICIT FOUND IN THE PREMISES AT SEETHAMAL COLONY, IN RESPE CT OF THE OTHER FOUR PROPRIETORSHIP CONCERNS (VIZ. AG INTERNA TIONAL, SJ INTERNATIONAL AND LG INTERNATIONAL & GOLDEN MOMENTS JEWELLERY) WHEN COMPARED WITH THEIR BOOKS OF ACCOUNTS, COMES T O ` 28,81, 767 ( ` 30,05,352 MINUS ` 1,23,585). SHRI SURENDER, IN HIS SWORN STATEMENT DATED 26.5.2005 (IN REPLY TO QUESTION NO. 7) EXPLAINED THE DEFICIT, WHICH IS EXTRACTED AS BELOW: ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 52 - : 'Q.7: DURING THE COURSE OF SURVEY OPERATIONS CONDUC TED AT NO.4, SEETHAMMAL COLONY, 2 ND MAIN ROAD, ON 19/05/05 & 20/05/05, THE CLOSING CASH BALANCE AS PER BOOKS WAS NOTED DOWN AS GIVEN BELOW: NAME OF THE CONCERN AMOUNT SJ INTERNATIONAL 5,81,222 AG INTERNATIONAL 5,84,041 LG INTERNATIONAL 5,03,581 GOLDEN MOMENTS JEWELLERY 13,36,5 08 30,05,352 THE PRINTOUT CONTAINING THE CASH BALANCE HAD BEEN T AKEN FROM THE SYSTEM AND SIGNED BY YOUR ACCOUNTANT MR.KASI VI SWANATHAN AND YOUR SON MR.ABHISEKH GALADA WHO WERE REPRESENT AT THE PREMISES. ON THE OTHER HAND, AS PER THE INVENTORY O F THE CASH FOUND IN THE PREMISES, THE ACTUAL CASH AVAILABLE AS ON THE DATE OF SURVEY WAS ` 123585. AS SEEN FROM THIS, IT IS QUITE CLEAR THAT THERE WAS A DEFICIT CASH TO THE TUNE OF ABOUT ` 28,81,767. KINDLY GO THROUGH THE PRINT OUTS CONTAINING THE CASH BALAN CE AS PER BOOKS AND PHYSICAL INVENTORY OF CASH VIDE ANN/PC/CA SH/NS AND EXPLAIN THE DISCREPANCY? ANS: I HAVE GONE THROUGH THE CASH BALANCE AS PER BO OKS AND INVENTORY OF PHYSICAL CASH PREPARED BY SURVEY TEAM AND VERIFIED THE SAME . IT IS TRUE THAT THERE IS A SHORTAGE OF C ASH TO THE TUNE OF ` 28,81,767. I HAD INVESTED THIS CASH FOR THE PURPOSE OF PURCHASE AND SALE OF GOLD JEWELLERY/BULLION WITHOUT BILLS AND ALSO SOME AMOUNTS IN FINANCE BUSINESS.' IN OTHER WORDS, THE ASSESSEE IMP L IES THAT THE DEFICIT CASH OF ` 28 , 81 , 767 T O BE SET OFF AGAINST THE TOTAL FUND CIRCULATED I N THE GUISE OF 'D H ANRAJ'. IN THE CONTEXT OF ISSUE RELATING TO DHANRAJ, THE AI R SUBMITTED THE FOLLOWING: 'THE ASSEESEE HAS ALREADY AGREED TO THE FINANCES HAVING BEEN MADE BETWEEN THE PERIOD 1.1.2003 TO 7.2.2004 THEREAFTER ALL THE FINANCES HAVE BEEN RECEIVED BACK BY MARCH 2005 FOR THE PURPOSE OF ACQUIRING JEWELLERY. THE ASSESSEE FURTHER CLAIMS TH AT EVEN FOR THE FINANCES HE USED TO SELL GOLD, SILVER OR ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 53 - : DIAMOND BELONGING TO HIMSELF AND HIS FAMILIES MEMBERS AS AND WHEN THE NEED USED TO ARISE WITHOUT THEIR KNOWLEDGE AND USED TO REPURCHASE THE GOLD, SILVER & DIAMOND. THIS CYCLE USED TO CONTINUE AND CONTINUED TILL THE DATE OF SEARCH. THE ASSESSEE NOW CONTENDS THAT THE AMOUNT IN CIRCULATION EITHER BY WAY OF FINANCE OR BY WAY OF S ALE OR PURCHASE OF GOLD, SILVER, DIAMOND SHOULD BE TELESCOPED AGAINST EACH OTHER. THE ASSESEE FURTHER SUBMITS THAT THERE ARE NO CONCLUSIVE EVIDENCES TO SUPPORT EACH AND EVERY TRANSACTION BE IT THE SALE OF JEWELLERY OR ITS REPU RCHASE THERE OF OR ITS DEPLOYMENT IN FINANCE BUSINESS. AS A MATTER OF FACT THE ASSESSEE STRONGLY CONTENDS THAT EVEN FOR THE FINANCE BUSINESS THERE ARE NO EVIDENCE S EITHER IN THE FORM OF PROMISSORY NOTES, SECURITES, DOCUMENTS OR ANY KIND OF RECORD EITHER IN THE POSSESSION OF DEPARTMENT OR HIMSELF. THE FINANCE MADE IN THE NAME OF DHANRAJ WERE EXPANDED WITH TWO ZEROS ONLY ON THE BASIS OF HIS STATEMENT. THERE IS NO OTHER RECORD OR DOCUMENT TO SUGGEST THAT THE BASIS OF FINANCE WERE CARRIED ON IN SUCH MAGNITUDE. THE ASSESSEE SUBMITS THAT HE HAS SOLD THE JEWELLERIES FROM THE FAMILY MEMBERS AND UTILISED THEM FOR THE PURPOSE OF FINANCE AND THERE AFTER THE MONEY'S RECEIVED BACK AFTER 7.2.2004 UPTO MARCH 2005 HAVE BEEN TOTALLY UTILISED IN THE ACQUISITION OF GOLD. T HE ASSESSEE SUBMITS AND CONTENDS THAT WHILE THE DEPARTMENT IS ACCEPTING ONE PART OF THE SUBMISSION WITH REGARD TO FINANCE -MERELY ON THE BASIS OF HIS STATEMENT NOT ACCEPTING THE SECOND PART OF THE SUBMISSION WHICH IS OF THE HIGHEST PROBABILITY SHAL L NOT BE CORRECT.' THE ASSESSEE HAS ALSO POINTED OUT THAT THERE ARE LO T OF INSTANCES OF PURCHASE AND SALE OF JEWELLERIES OUTSI DE THE BOOKS ON THE LOOSE SHEETS. THIS HE SUBMITS IS AN EN OUGH INDICATION OF THE FACT THAT THE JEWELLERIES SOLD AN D PURCHASE OUTSIDE THE BOOKS. HE HAS FURTHER ELABORAT ED THAT THOUGH THE EVIDENCES ARE NOT CONCLUSIVE IN NAT URE BUT THEN THEY CAN'T BE DISMISSED OF EITHER. THE EVI DENCES THOUGH DISJOINED AND NOT IN CONTINUOUS IN NATURE HO WEVER CAN'T BE IGNORED ALTOGETHER. HE STATES THAT THE POS ITION AS ON THE DATE OF SEARCH WHERE THE POSITION HAD IN A S TATE OF AFFAIRS WHERE THERE WAS EXCESS GOLD, DEFICIT SILVER , DEFICIT ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 54 - : DIAMOND, DEFICIT CASH AND NIL FINANCE ONLY GOES TO FURTHER TESTIFY THAT THE AMOUNTS HAVE BEEN IN CIRCULATION A ND HAVE BEEN CHANGING ONE FORM OR THE OTHER. IN A SUM UP THE ASSESSEE STATES THAT ASSESSING THE FINANCE AND THE JEWELLERY INDEPENDENT OF EACH OTHER WITHOUT SETTING OFF AND ALSO WITHOUT ALLOWING SET OFF TO INTERMEDIATE POSSESSION OF GOLD, SILVER AND DIAMOND AGAINST EACH OTHER SHALL LEAD TO A DISTORTED ASSESSMENT WHICH IS NOT BASED ON FACTS AND AGAINST THE REALITY. THE ASSESSEE , MR. S U RENDRA KUM A R G A LA D A , H AS CON T ENDED IN THE N O TES A TTA CHED TO THE RETURN FOR THE A . Y.2003-04 ( IN F A CT THE SAM E NOTE H AS BE E N AT TACHED WITH THE RETURNS FOR ALL YEARS) THAT I HAVE BEEN INCHARGE OF ALL THE AFFAIRS AND HAV E BEEN CARRYING ON ALL THE ACTIVITIES. IN THE COURSE OF B USINESS, DUE TO VARIOUS EMERGENCIES, THERE HAVE BEEN OCCASIO NS WHEN THE ASSETS IN PARTICULAR GOLD, SILVER AND DIAM OND BELONGING TO VARIOUS FAMILY MEMBERS AND ALSO OF BUSINESS HAVE BEEN UTILISED AND DISPOSED AND DEPL OYED ON FINANCE OR FOR REINVESTMENT IN GOLD, SILVER, DIA MOND ETC. ESSENTIALLY, THE JEWELLERIES AVAILABLE WITH FA MILY MEMBERS AND THE STOCKS IN BUSINESS HAVE BEEN UTILIS ED FOR VARIOUS ACTIVITIES. PRINCIPALLY, THERE ARE OCCA SIONS WHEN ITEMS HAVE BEEN SOLD AND USED FOR FINANCE AND .THE COLLECTIONS THEREOF HAVE BEEN REINVESTED EITHER IN GOLD, SILVER OR DIAMOND. NONE OF MY FAMILY MEMBERS WAS AWARE OR HAS ANY PARTICIPATION IN THE ENTIRE ACTIVI TY. I HAVE NOT MAINTAINED ANY DETAILED RECORD OF THE JEWELLERI ES DISPOSED OFF OR PURCHASES MADE THEREUPON. THE SURPLUSES ARISING OUT OF JEWELLERY BUSINESS WERE BE ING CIRCULATED IN THE FINANCE BUSINESS AND THE RECEIPTS AND THE INCOME ACCRETIONS WERE AGAIN BEING UTILISED FOR BEING REINVESTED IN GOLD, SILVER, DIAMOND ETC. AT VARIOUS POINTS OF TIME. THE FUNDS KEPT ON CIRCULATING AND KEPT CHA NGING FROM ONE FORM TO ANOTHER. THUS, AFTER THE SEARCH ON 19.05.2005, I HAVE TAKEN STOCK OF THE ENTIRE SITUAT ION AND HAVE INCLUDED THE OMISSIONS MADE IN THE HANDS OF TH E RESPECTIVE MEMBERS RECORDS. I HAVE CONSIDERED THE FINANCE TRANSACTIONS AND HAVE OFFERED THE INTEREST, INCOME THEREON. I HAVE ALSO ESTIMATED THE PROFIT FR OM THE SALE OF GOLD, SILVER, DIAMONDS ETC AND OFFERED THE SAME TO TAX. AS THE DETAILED RECORDS WERE NOT AVAILABLE, I HAVE ADOPTED THE APPLICATION OF FUNDS ON THE BASIS OF PANCHANAMA AND PHYSICAL STOCKS AS THE BASIS OF COMPUTING THE INCOME AND OFFERED TO TAX ..... ' ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 55 - : FURTHER, IN HIS REPLY DATED 21.11.07 TO THE NOTICE U/S 142(1) BY THIS OFFICE, THE ASSESSEE HAS WRITTEN AGAINST POIN T NO.4 THAT NO DETAILS OF JEWELLERY SOLD AND PURCHASED HAVE BEEN MAINTAINED. HENCE, IT IS NOT POSSIBLE TO FURNISH THE SAID DETAILS. AS MENTIONED IN THE LETTE R APPENDED WITH THE RETURN, NO SEPARATE DETAILS HAVE BEEN MAINTAINED. THE MONEY KEPT CHANGING FROM ONE FORM TO ANOTHER. HENCE, I HAVE OFFERED THE ACCRETIONS AS FAR AS POSSIBLE OF THE RESPECTIVE YEA RS FOR ASSESSMENT'. REGARDING THIS POINT OF SALE OF JEWELLERY, THE ASSE SSEE IN HIS REPLIES TO NOTICES U/S. 142(1) FOR A. Y.2004-05 AND 2005-06 HAS STATED THAT THERE WAS NO SALE DURING TH E YEARS. AGAIN, IN THE NOTE APPENDED TO THE RETURN FO R THE YEAR 2006-07 (PAGE 2), THE ASSESSEE HAS WRITTEN - ' I N THE CASE OF GOLD: A. SURENDRA KUMAR GALADA: DURING THE COURSE OF SEAR CH, 10956 GMS OF GOLD WAS MENTIONED AGAINST MY NAME. AS PER THE RECORDS, THE TOTAL JEWELLERY SHOULD WORK OU T TO 16866.950 GMS. THUS THERE WAS A DEFICIT OF 5910.950 , GMS. THIS REPRESENTS SALE OF GOLD DURING THE F.Y.20 03-04 RELEVANT TO THE A. Y.2004-05 FOR ` 30,44,087/-' IN PAGE 3, THE ASSESSEE HAS STATED THAT ' IN THE CASE OF SILVER: ON THE DATE OF SEARCH, SIL VER OF 33.547 KG. WAS FOUND WHEREAS AS PER THE RECORDS, TH E POSSESSION OF SILVER MUST BE 255.446 KG. THUS THERE WAS A DEFICIT OF 221.899 KGS. OF SILVER. THE DEFICIT WA S BECAUSE 221.899 KG. OF SILVER WAS SOLD DURING THE F .Y. RELEVANT TO THE A.Y.2003-04 FOR ` 17,75,192. THE PROFIT ON THIS SALE AMOUNTING TO ` 1,50,000 HAS BEEN OFFERED FOR ASSESSMENT IN THE RETURN NOW FILED FOR A.Y.2003-04. OUT OF THESE SALE PROCEEDS; ` 16 LAKHS WAS ADVANCED AS LOANS. THE INTEREST DUE ON THIS LOAN AMOUNTING TO ` 29,589 HAS BEEN OFFERED FOR ASSESSMENT IN THE RETUR N NOW FILED FOR A.Y.2003-04. ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 56 - : IN THE CASE OF DIAMONDS: ON THE DATE OF SEARCH, 15 CARATS OF DIAMONDS WAS FOUND WHEREAS AS PER RECORDS THE POSSESSION MUST BE 216.360 CARATS. THUS THERE W AS A DEFICIT OF 201.360 CARATS OF DIAMONDS. THIS REPRE SENTS SALE OF DIAMONDS DURING THE PREVIOUS YEAR RELEVANT FOR A. Y.2004-05 FOR A TOTAL AMOUNT OF ` 66,68,567. THE PROFIT OF ` 2,50,000 HAS BEEN OFFERED FOR ASSESSMENT IN THE RE TURN NOW FILED FOR A.Y.2004-05. OUT OF THE SALE PROCEEDS , ` 65 LAKHS WAS ADVANCED AS LOANS DURING THE YEAR. ON THE TOTAL ADVANCE OF ` 81 LAKHS (16 LAKHS + 65 LAKHS), INTEREST DUE OF ` 7,74,558 HAS BEEN OFFERED FOR ASSESSMENT IN THE RETURN OF INCOME FOR THE A.Y.2004-05.' ON ACCOUNT OF UNDISCLOSED FINANCE BUSINESS AND JEWELLERY BUSINESS, THE ASSESSEE HAS SHOWN THE FOLL OWING INCOMES ON ESTIMATE BASIS FOR THREE YEARS: A. Y NATURE OF INCOME AMOUNT DISCLOSED 2003-04 ESTIMATED GP FROM ` 1,50,000 JEWELLERY SALE INTEREST RECEIPT ON LOAN FORWARDED ` 29,589 2004-05 ESTIMATED GP FROM ` 2,50,000 JEWELLERY SALE INTEREST RECEIPT ON LOAN FORWARDED ` 7,74,558 2005-06 INTEREST RECEIPT ON LOAN FORWARDED ` 13,35,300 THUS, IT CAN BE SEEN THAT THOUGH THE ASSESSEE BASIC ALLY ACCEPTED THE TRANSACTIONS IN 'DHANRAJ' BUT REGARDIN G THE AMOUNT INVOLVED OF ` 1,07,78,150,WHICH IS THE SUM TOTAL OF LOANS ADVANCED BY THE ASSESSEE, HE IS ONLY FORWARDING EST IMATED INTEREST INCOME FOR THREE YEARS BUT FOR THE PRINCIP AL AMOUNT, HE HAS NOT FORWARDED ANY AMOUNT. HE IS EXPLORING THE SOURCE FROM SALE OF FAMILY JEWELLERY. IN FACT, FOR A.Y. 20 06-07, HE HAS NOT OFFERED ANY INCOME ON THIS ACCOUNT AND EXPLAINE D IN PAGE 4 OF THE NOTE APPENDED TO THE RETURN THAT 'SO FAR AS THE FINANCE BUSINESS IS CONCERNED, NO DA Y TO DAY RECORDS HAVE BEEN MAINTAINED AND THE FUNDS HAVE BEE N IN CIRCULATION AND ALSO UTLISED FOR INVESTMENTS. THE L OANS TOGETHER WITH INTEREST DUE HAD BEEN REALISED DURING MARCH 20 05 AND THE REALISATION OF ` 1,01,39,147/- WAS UTILISED FOR PURCHASE OF ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 57 - : JEWELLERY. THE JEWELLERY BELONGING TO THE INDIVIDUA L MEMBERS WAS RETURNED TO THEM AND JEWELLERY TO THE EXTENT OF 5454.55 GMS HAD BEEN CONTRIBUTED TO T.B. JEWELLERY.' HERE I WOULD LIKE TO MENTION THAT THE ABOVE CONTENT ION OF SELLING OF THE JEWELLERIES UTILISING THAT FUND FOR THREE YE ARS AND AGAIN GETTING BACK THE ENTIRE FUND AND WITH THAT FUND PUR CHASING JEWELLERIES AGAIN SEEMS VERY UNLIKELY. FIRSTLY HE H IMSELF HAS ADMITTED (AS QUOTED EARLIER) THAT NO RECORD OF SALE OR PURCHASE OF JEWELLERIES HAS BEEN KEPT. ACCORDING TO HIS OWN ADMISSION THE SALE TOOK PLACE DURING F. Y. 2002-03 AND 2003-0 4, I.E. APPROXIMATELY FOUR TO FIVE YEARS AGO. BUT WHILE EST ABLISHING THE AMOUNT OF JEWELLERIES WHICH AS PER HIM SHOULD BE TR EATED AS AVAILABLE IN RESPECT OF ALL THE ASSESSEES(INDIVIDUA LS AND HUFS) ON THE DAY OF SEARCH, HE WAS ABLE TO PRODUCE THEIR W.T. RETURNS AND LT. RETURNS WHICH ARE MORE THAN TWENTY YEARS OL D. IN THIS BACKGROUND IT IS HARD TO BELIEVE THAT SUCH RECENT D OCUMENTS REGARDING SALE AND PURCHASE OF JEWELLERY ARE NOT A VAILABLE. IT IS MORE LIKELY THAT SUCH DOCUMENTS CANNOT BE PRODUCED ONLY BECAUSE NO SUCH SALE OR PURCHASE EVER TOOK PLACE. I T ONLY IS AN AFTERTHOUGHT BEING PUT FORWARD TO EXPLAIN THE SOURC E OF FUND CIRCULATED IN 'DHANRAJ'. THAT SUCH AN EXPLANATION GIVEN BY THE ASSESSEE IS A N AFTERTHOUGHT IS ALSO EVIDENT FROM THEIR W. T. RETUR NS FOR A. YRS. 2000-01 TO 2005-06 WHICH THE ASSESSES FILED AFTER. THE SEARCH, EXCEPT IN THE CASE OF MR. SURENDAR KUMAR GALADA (IN DIVIDUAL). WHILE COMPARING THE W.T. STATEMENTS 'ATTACHED WITH THEIR RETURNS IN CASES OF ALL THE ASSESSES FOR ALL THE FI VE YEARS, IT CAN BE SEEN THAT THE QUANTUM OF WEALTH I.E. GOLD, SILVE R, DIAMOND ETC., REMAINED M9RE OR LESS SAME THROUGHOUT THE PER IOD EXCEPT FOR SOME MINOR PURCHASES BY SOME OF THE ASSESSES DU RING THAT PERIOD. IN COURSE OF HEARING THE AIR WAS ASKED ABOU T THIS EVIDENT ANOMALY AND HE EXPLAINED THAT ALL THE FAMIL Y MEMBERS USED TO KEEP THEIR JEWELLERIES IN CUSTODY OF THE SE NIOR MOST PERSON OF THE FAMILY, MR.SURENDAR KUMAR GALADA AND THEY WERE NOT AWARE THAT WHAT MR. GALADA DID WITH THE JEWELLE RY IN THE INTERVENING PERIOD. ACCORDINGLY ON GOOD FAITH THE OTHER MEMBERS HAD FILED THEIR W.T. RETURNS FOR ALL FIVE Y EARS SHOWING THE SAME QUANTITY OF JEWELLERY BEING POSSESSED THRO UGH OUT. THIS EXPLANATION HAS GOT A MAJOR LOOPHOLE. MR. SURE NDAR KUMAR GALADA HIMSELF IS THE KARTA OF TWO HUFS SURENDAR KU MAR GALADA (HUF) AND SURENDAR KUMAR GALADA (SMALL HUF). HERE THE PLEA THAT THESE TWO ASSESSEES WERE NOT AWARE OF THE SALE AND SUBSEQUENT RE-PURCHASE OF THE JEWELLERIES IS SI MPLY NOT ACCEPTABLE BECAUSE MR. SURENDAR KUMAR GALADA (INDIV IDUAL) HIMSELF IS THE KARTA AND HE CANNOT BE UNAWARE OF HI S OWN ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 58 - : ACTIONS. THEN AGAIN, EVEN THOUGH MR. SURENDAR GALAD A HAS NOT FILED HIS W.T. RETURNS BUT ALONG WITH HIS LT. RETUR NS :FOR A.Y. 2000-01 TO 2006-07 TRIAL BALANCES ARE ATTACHED WHERE THE ITEM JEWELLERY IS APPEARING. AGAIN FOR ALL THE RETURNS T HE AMOUNT MENTIONED AGAINST 'JEWELLERY' IN THOSE TRIAL BALANC ES REMAIN THE SAME EXCEPT FOR A. Y. 200102 WHEN HE SOLD CERTAIN QUANTITY OF GOLD JEWELLERY AND DIAMONDS WHICH YIELDED ` 5,53,975 I -. THIS IS REFLECTED IN HIS ACCOUNTS AND CANNOT BE A SOURCE OF INVESTMENT IN 'DHANRAJ'. IT CAN BE SEEN FROM THE ABOVE PARAS WHERE ASSESSEE' S SUBMISSION ARE REPRODUCED, THAT HE HAS MENTIONED MO RE THAN ONCE THAT ALL THE FINANCES CIRCULATING IN 'DHANRAJ' , (STARTING ON 1-1-03) HE HAD RECEIVED BACK THE MONEY BY MARCH 200 5 AND THOSE MONEY HAD BEEN TOTALLY UTILIZED IN ACQUISITIO N OF GOLD. BUT THE ASSESSEE ALSO STATED THAT HE DID NOT MAINTAIN A NY EVIDENCE FOR SUCH PURCHASE. FURTHER THE ASSESSEE SUBMITTED A LETTER DT. 11-12-2007, WHERE IN THE FIFTH PAGE HE HAS GIVEN TH E FOLLOWING CHART :- 1.PURCHASE OF JEWELLERY 5357,850 GMS ` 2,946,817/- 2. PURCHASE OF JEWELLERY 8049.189 GMS ` 4,427,054/- 3. PURCHASE OF 5454.54 GMS OF JEWELLERY ` 3,000,000/- & CONTRIBUTED TO ABIRCHAND GALADA,HUF IN THIS REGARD IT IS NOTE WORTHY THAT ALONGWITH THE AUDIT REPORT (SUBMITTED WITH RETURN OF INCOME FOR A. Y. 06-07) T HE AUDITOR MENTIONED THE FOLLOWING TWO PARAS:- '4. DURING THE YEAR, THE ASSESSEE HAS INTRODUCED FU NDS FROM HIS PERSONAL SOURCES. HE HAS ALSO OFFERED THE INCOM E IN HIS PERSONAL HANDS FOR EARLIER YEARS. JEWELLERY WORTH ` 30,00,000/ - (RUPEES THIRTY LACS ONLY) HAS BEEN GIVEN TO T.B. JE WELLERY. THE ASSESSEE HAS GIVEN NO DOCUMENTARY EVIDENCE OTHE R THAN REVISED TOTAL INCOME OF EARLIER YEARS AND A LETTER EXPLAINING HIS ACQUISITIONS. WE HAVE RELIED UPON THE SAME AND HAVE NO OTHER SUPP ORTING DOCUMENT TO RELY UPON. 5. IN RESPECT OF PURCHASE OF GOLD JEWELLERY OF 1340 7.039 GRAMS VALUED AT ` 73.73 LACS, NO INDEPENDENT EVIDENCE WAS MADE AVAILABLE TO US TO VERIFY THE PURCHASE VALUE A ND THE ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 59 - : SAME HAS BEEN TAKEN AS PER THE STATEMENT GIVEN TO U S BY THE 'ASSESSEE'. THE ABOVE FIGURE OF 13407.039 GRAMS IS THE SUM TOTA L OF 5357.850 GRAMS AND 8049.189 GRAMS WHICH ARE MENTION ED IN THE CHART IMMEDIATELY BEFORE THE PARA WHERE THE 'AUDITOR'S NOTE' STARTED. THIS IMPLIES THAT THE DOCUMENTS REGA RDING PURCHASE OF GOLD WAS NOT PRODUCED BEFORE THE AUDITO R EITHER. THUS IT MAY BE SUMMED UP THAT THE ENTIRE EXPLANATIO N REGARDING THE CIRCLE OF SALE OF FAMILY MEMBERS' JEW ELLERY- UTILIZING THE FUND FOR UNACCOUNTED FINANCE AND JEWE LLERY BUSINESS-GETTING THE FUNDS BACK WITHIN MARCH 2005 - AND AGAIN REUTILIZING THE FUND FOR PURCHASE OF JEWELLERY IS N OTHING BUT AN AFTERTHOUGHT AND IS NOT ACCEPTABLE. THUS IT IS CONCLUDED THAT AS PER THE COMPUTER PRINT -OUT OF THE 'DHANRAJ' CHART, THE TOTAL AMOUNT OF ` 1,07,78,150/- WHICH REPRESENTS THE LOANS FORWARDED BY THE ASSESSEE DURI NG FINANCIAL YEAR 2003-04 AND AN AMOUNT OF ` 1,06,43,000/ - WHICH IS DUE TO THE ASSESSEE ON ACCOUNT OF SALE OF GOLD J EWELLERY / BULLION (AS PER THE STATEMENT OF MR. SURENDER U/S 1 32(4) ON 26.05.05 - IN ANSWER TO Q.NO4) IS TO BE TREATED AS LOAN FORWARDED/GOLD, BULLION PURCHASED (CORRESPONDING TO THE SALE OF WHICH GOLD/BULLION, ` 1,06,43,000/ - IS DUE TO HIM) BY THE ASSESSEE FROM SOURCES WHICH IS NOT DISCLOSED AND HE NCE THE TOTAL AMOUNT OF ` 2,14,21,150/- IS TO BE TREATED AS ASSESSEE'S INCOME FROM UNDISCLOSED SOURCE FOR THE F. Y.2003-04 RELEVANT TO THE A. Y.2004-05. FURTHER, AS PER THE SAME CHART PRINTED FROM COMPUTER AND COUNTER-SIGNED BY THE ASSESSEE, A CASH BALANCE OF ` 34,17,850/- WAS ALSO AVAILABLE TO THE ASSESSEE IN F.Y. 2003-04 AND THIS ALSO IS TO BE TREATED AS UNDI SCLOSED INCOME OF THE ASSESSEE FOR THE A. Y.2004-05. THUS, THE TOTAL UNDISCLOSED INCOME AS WORKED OUT FROM THE SECRET CH ART 'DHANRAJ' IS TO BE TAKEN AS ` 2,48,39,000/-.' 33. AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE THE LD . CIT(A). BEFORE THE LD. CIT(A), THE ASSESSEE FURTHER EXPLAIN ED THE ENTIRE FACTS IN DETAIL BY GIVING YEARWISE BREAK-UP, FUND FLOW STATE MENT, WHICH IN NUT SHELL CAN BE SUMMARIZED AS UNDER: ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 60 - : [I] THAT THE ADDITION OF ` 2,48,39,000/- MADE BY ASSESSING OFFICER IS AGAINST THE FACT OF THE CASE AND AGAINST THE MATERIAL EVIDENCES BEFORE HIM. [II] THAT HE HAS NOT CONSIDERED THE EVIDENCES FO UND DURING THE SEARCH IN TOTO BUT CHOSE TO DISCUSS ONLY ONE PIECE OF PAPER [ON PAGE 3 OF THIS BOOK] [III] THAT HE HAS CHOSE TO IGNORE THE VERY RECEIPTS AND INVESTMENTS AND BUNDLED UP ALL AS UNEXPLAINED INVES TMENTS. THIS DESPITE THE FACT THAT THE SAME DOCUMENT. REVEA LS THE NET BALANCE OF UNEXPLAINED INVESTMENT AT ` 35,530/- [WHICH ON EXPANDED FIGURE MEANS ` 35,53,000/- ] . [IV] THAT HE HAS NOT EVEN DISCUSSED THE OTHER EVIDE NCES AS DETAILED IN EXHIBIT - 2 AND EXHIBIT - 3 OF THIS PAP ER BOOK WHICH WERE PART OF THE SEARCH MATERIAL AND ALSO BEEN QUES TIONED UPON BY THE SEARCH AUTHORITIES. [V] THAT WHILE ACCEPTING THE INCOME NOW RETURNED, H E HAS ACCEPTED THE PROFIT MADE ON SALE OF SILVER IN A.Y. 2003 - 2004 AND PROFIT MADE OF SALE OF GOLD AND DIAMOND IN A;Y. 2004 - 05. THE BREAKUP OF INCOME FOR' A.Y. 2003 - 04 & 2004 - 2005 HEREIN UNDER: PARTICULARS A.Y 2003-04 A.Y 2004-05 SILVER PROFIT ON SALE OF ` 17,75,192/- ` 1,50,000 .. GOLD/DIAMOND PROFIT ON SALE ` 66,68,567/- ` 2,50,000/- [VI] THAT HE HAS ALSO ACCEPTED THE FACT OF DEFICIT SILVER AND DIAMOND AS ON DATE OF SEARCH AFTER DETAILED VERIFICATION OF ALL VDIS RECORDS AND WEALTH TAX RECORDS PRODUCED BY APPELLANT. HOWEVER, HE HAS CHOSE TO ACCEPT ONLY VDIS RECORDS FOR COMPUTING THE DEFIC IT [ PLEASE REFER PAGE 6 OF ASST. ORDER 2006 - 07] AND NOT GIVEN CRE DIT FOR WEALTH TAX RECORDS. ONCE THE WEALTH TAX RECORDS ARE GIVEN CRED IT THE DEFICIT STOCK ON SEARCH WILL BE AS UNDER: ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 61 - : CHART-A PARTICULARS FOUND AS PER RECORDS [OPENING BALANCE] EXCESS/DEFICIT AS PER WT AS PER VDIS GOLD 10956.000 GMS 5405.740 GMS 11261.210 GMS -5910 .950 GMS SILVER 33.547 KGS 080.446 KGS 180.000 KGS -221.899 KGS DIAMOND 15.00 CARATS 11.60 CARATS 214.76 CARATS -201 .360 CARATS [VII] THAT THE ASSESSING OFFICER HAS PRESUMED THAT THE ENTIRE DEFICIT SILVER AND DIAMOND HAS BEEN DEPOSITED BY THE APPELL ANT IN THE HUNDI OF TIRUMALA TEMPLE. [VIII] THAT THE ASSESSING OFFICER HAS COMPLETELY IG NORED ALL THE SUBMISSION MADE BY THE APPELLANT AND THE EVIDENCES AVAILABLE WITH HIM ON RECORDS AND MADE AN ADHOC ADDITION OF ` 2,48,00,000/- WHICH IS WITHOUT ANY BASIS AND NEEDS TO BE QUASHED. THE COMMISSIONER OF INCOME TAX (APPEALS) MAY BE PLE ASE TO CONSIDER THE SUBMISSIONS AND DELETE THE ADDITION MA DE IN TOTO. 12. THE APPELLANT THEREFORE SUBMITS THAT THE ADDITION MADE BY THE ASSESSING OFFIEER IS AGAINST THE FACTS OF THE CASE AND THEREFORE MAY KINDLY BE DELETED IN TOTO. 34. AFTER EXAMINING THE ENTIRE DETAILED ARGUMENT OF THE ASSESSEE, THE LD. CIT(A) HAS GIVEN HIS FINDING IN PARA 5.2 AS UNDER: 5.2 I HAVE EXAMINED THE FACTS OF THE CASE. IT IS F OUND THAT THE IMPUGNED ADDITLON IS BASED ON SEIZED DOCUMENT DOWNL OADED FROM THE 'QUICKEN SOFTWARE'; THESE DOCUMENTS ARE RE FERRED AS 'DHANRAJ'. THE ASSESSEE WAS EXAMINED REGARDING THIS DOCUMENT. THE RELEVANT QUESTION AND ANSWER ARE AS U NDER: QN. NO.4: DURING THE COURSE OF SURVEY CONDUCTED AT YOUR PREMISES AT NO.4, SEETHAMMAL COLONY 2 ND MAIN ROAD, ON 19-05-2005 & 20-05-2005, WE HAVE EXAMINED THE BOOKS OF ACCOUNT AND RELATED FIELDS MAINTAINED IN THE SYSTEM AND FOUND A ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 62 - : FILE, VIZ., DHANRAJ. THIS PARTICULAR ACCOUNT IS MAI NTAINED IN 'QUICKEN SOFTWARE'. AS SEEN FROM THE FILE MAINTAINE D IN THE NAME OF 'DHANRAJ', CERTAIN TRANSACTIONS HAVE BEEN R EFLECTED UNDER CASH ACCOUNT . A COPY OF THE ACCOUNT WAS TAKEN AND SHOWN THE SAME TO YOUR SON MR. ABISHEK GALADA WHO W AS PRESENT AT THE RESIDENCE' ON THE DATE OF SURVEY AND MR. KASI VISWANATHAN, ACCOUNTANT WHO WAS OPERATING THE SYSTE M. AAS PER THE SWORN STATEMENT RECORDED FROM THEM THE TRAN SACTIONS REFLECTED IN THE FILE VIZ., DHANRAJ, WERE ACTUALLY MAINTAINED BY YOU. KINDLY GO THROUGH THE P'RINTOUT OF THE ACCOUNT AND EXPLAIN THE NATURE OF THE TRANSACTIONS REFLECTED THEREIN. ANS: I HAVE GONE THROUGH THE PRINTOUTS TAKEN FROM T HE SYSTEM AND EXAMINED THE SAME. FURTHER I HAVE SIGNED THE PR INTOUTS FOR HAVING GONE THROUGH THE SAME. THIS PARTICULAR ACCOU NT WAS MAINTAINED IN THE SYSTEM FOR THE FY. 03-04 IN THE N AME OF DHANRAJ BY ME IN QUICKEN' SOFTWARE. THESE TRANSACT IONS ARE PERTAINING TO MY GOLD JEWELLERY BUSINESS. AND FINAN CE BUSINESS WHICH ARE NOT REFLECTED IN THE REGULAR BOOKS OF ACCOUNT MAINTAINED BY ME. THE ENTRIES APPEARING IN THIS ARE MENTIONED IN CODED FORM IN THOUSANDS. BUT IN REALITY THEY ARE IN LAKHS, I.E. TWO 'ZEROS ARE OMITTED. IN .ORDER TO ARRIVE AT THE CORRECT AMOUNTS,. THE DECIMAL APPEARING BEFORE' THE LAST TW O ZEROS SHOULD BE REMOVED. (FURTHER, 'MINUS' APPEARING BEFO RE SOME OF THE ENTRIES REPRESENTS AMOUNT DUE FROM THE PARTIES ON ACCOUNT OF SALE OF GOLD JEWELLERY/BULLION ITEMS) I SHALL EX PLAIN THE EXACT NATURE OF THE TRANSACTION IN RESPECT OF ALL THE ENT RIES APPEARING IN THE ACCOUNT IN A COUPLE OF DAYS TIME.' IT IS SEEN THAT THE A.O. HAS UTILIZED THE P ART OF THE ANSWER IN DETERMINING THE TOTAL OF UNDISCLOSED CASH, DEPOSITS AND TRANSACTIONS IN BULLION AND JEWELLERY. IT IS WELL S ETTLED THAT WHEN AN ADMISSION IS TO BE UTILIZED FOR THE PURPOSE OF A NY PROCEEDING THE ADMISSION HAS TO BE READ IN FULL. IT IS IMPORTA NT TO NOTE THAT THE TOTAL OF UNACCOUNTED CASH AND DEPOSITS IN THE D OCUMENTS SEIZED AS 'ANNEXURE 2' REPRODUCED ON PAGE 3 OF THE ASSESSMENT ORDER COMES TO ` ,41,960/- ONLY. IT IS ON THE BASIS OF THE APPELLANT'S STATEMENT ONLY THAT THE FIGURE OF UNEXP LAINED CASH AND DEPOSITS IS TAKEN AT ` 1,41,96,000/ -. IF THE ASSESSEE'S ADMISSION IS NOT RELIED UPON IN THE ASST. PROCEEDIN G THE TOTAL OF UNACCOUNTED CASH AND INVESTMENT WILL COME TO ONLY ` 1,41,960/ - IN THE SAME ANSWER THE APPELLANT HAD STATED THAT TH E TRANSACTIONS ARE PERTAINING TO HIS UNACCOUNTED PURC HASE AND SALE OF JEWELLERY AND FINANCING. THE APPELLANT BAD SAID THAT MINUS FIGURE REPRESENT AMOUNT DUE FROM THE PARTIES ON ACCOUNT OF SALE OF GOLD JEWELLERY/BULLION IS ALSO TO BE REA D CORRECTLY IN COHESION WITH THE SEIZED DOCUMENTS ON WHICH HE IS E XAMINED. ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 63 - : IN 'ANNEXURE 2' THE TOTAL OF POSITIVE FIGURE, IS ` 1,41,960/ -. AND THE TOTAL OF NEGATIVE FIGURE IS ` 1,06,430/ -. AT THE BOTTOM OF THE ANNEXURE THE DIFFERENCE BETWEEN PLUS AND' MINUS FIG URE IS WRITTEN AS ` 35,530/ -. (ON CAREFUL READING OF THE APPELLANT'S DEPOSITION ON THE SEIZED DOCUMENT, IT BECOMES CLEAR THAT THE MINUS FIGURE OF ` 1,06,43,000/ - IS THE AMOUNT RECEIVED ON SALE OF JEWELLERY FROM 5 PARTIES. OUT OF THIS REALIZATIO N AND THE UNACCOUNTED AMOUNT OF ` 35,53,000/- SHOWN AS BALANCE AT THE BOTTOM OF THE SEIZED DOCUMENT , THE UNACCOUNTED DEP OSITS TO VARIOUS PARTIES TOTALLING TO ` 1,07,78,150/ - IS ADVANCED AND BALANCE AMOUNT OF ` 34,17,850/- IS KEPT AS UNACCOUNTED CASH. IN VIEW OF THESE FACTS IT IS HELD THAT THE ENDING B ALANCE OF UNACCOUNTED CASH AND DEPOSITS IS DETERMINED AT ` 1,41,96,000/-) REGARDING THE SOURCE OF UNACCOUNTED CASH AND DEPOSI TS THE APPELLANT HAD DEPOSED THAT THESE ARE MADE OUT O F UNACCOUNTED PURCHASE AND SALE OF GOLD JEWELLERY/BUL LION. THIS CLAIM IS SUPPORTED BY THE FACT THAT AT THE TIME OF SEARCH, SUBSTANTIVE AMOUNT OF FOLD JEWELLERY, SILVER AND DI AMONDS WERE FOUND IN DEFICIT OF THE BOOK BALANCE. IT IS FOUND THAT IN THE RETURN FOR A.Y 2003-04 AND 2004-05 THE APPELLANT HAS SHOWN UNACCOUNTED PROFIT OF ` 1,50,000/- AND ` 2,50,000/- RESPECTIVELY FOR THE UNACCOUNTED SALE OF JEWELLERY, SILVER ITEM S ETC. TOTALING TO ` 17,75,192/- IN A.Y 2003-04 AND ` 66,68,567/- IN THE A.Y 2004-05. THE A.O HAS NOT DISPUTED THE QUANTUM OF UNACCOUNTED SALE AND PROFIT SHOWN IN THE RETURN FOR A.YRS 2003- 04 AND 2004-05. THIS FACT SHOWS THAT THE APPELLANT S CLAIM OF SOURCE OF THE UNACCOUNTED DEPOSIT AND CASH IS PLAUS IBLE TO THE EXTENT OF THE AMOUNT RECEIVED ON ACCOUNT OF UNACCOU NTED SALE TOTALING TO ` 84,44,759/- MADE IN THE FINANCIAL YEAR RELEVANT TO ASSESSMENT YEARS 2003-04 AND 2004-05. THE APPELLAN TS CLAIM FOR SETTING OFF THE SHORTAGE OF CASH FOUND DURING T HE SEARCH AGAINST THE UNACCOUNTED CASH BALANCE SHOWN IN THE S EIZED DOCUMENT IS NOT PLAUSIBLE FOR THE REASON THAT THE C ASH SHOWN IN THE SEIZED DOCUMENT IS POSITIVE FIGURE WHICH WAS AV AILABLE WITH THE APPELLANT ON THE DATE OF CLOSING BALANCE. IN V IEW OF THE ABOVE THE TOTAL AMOUNT UNDISCLOSED CASH AND DEPOSIT S IS DETERMINED AT ` 1,41,96,000/- OUT OF WHICH THE SOURCE OF FUND IS EXPLAINED TO THE EXTENT OF ` 84,43,759/-. THE SOURCE OF BALANCE AMOUNT OF ` 57,52,241/- IS NOT EXPLAINED. IN VIEW OF THE ABOV E THE IMPUGNED ADDITION IS REDUCED FROM ` 2,48,00,000/- TO ` 57,52,241/-. ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 64 - : 35. NOW, THE REVENUE IS AGGRIEVED AGAINST THE RELIEF GR ANTED, BUT ASSESSEE IS AGGRIEVED AGAINST THE SUSTAINED ADDITIO N. 36. AFTER HEARING BOTH SIDES CAREFULLY, WE ARE OF THE CONSIDERED OPINION THAT UNACCOUNTED CASH AND DEPOSITS WOULD CO ME ONLY TO ` 1,41,96,000/- OUT OF WHICH UNACCOUNTED PROFITS FOR ASSESSMENT YEAR 2003-04 AND 2004-05 CAME TO ` 1,50,000/- AND ` 2,50,000/-, RESPECTIVELY ON ACCOUNT OF SALE OF JEWELLERY, SILVE R ITEMS ETC. TOTALING TO ` 17,75,192 IN ASSESSMENT YEAR 2003-04 AND ` 55,68,567/- IN ASSESSMENT YEAR 2004-05. THE REVENUE HAS NOW DISP UTED THE QUANTUM OF UNACCOUNTED SALE AND PROFITS THEREON. I N THE RETURNS FOR THESE TWO YEARS TO THE CLAIM OF THE ASSESSEE REGARD ING SOURCE OF THE UNACCOUNTED DEPOSIT AND CASH SEEMS TO BE PLAUSIBLE AND ONE OF THE POSSIBLE VIEW. WHEN TWO POSSIBLE VIEWS ARE THERE O NE VIEW WHICH FAVOURS THE ASSESSEE HAS TO BE ACCEPTED. THE SHORT AGE OF CASH FOUND DURING SEARCH HAS TO BE SET OFF AGAINST UNACCOUNTED CASH BALANCE SHOWN IN THE DOCUMENTS AND TO THAT EXTENT WE ARE IN AGREEMENT WITH THE ABOVE FINDING OF THE LD. CIT(A). IN FACT, TH E ASSESSING OFFICER HAS MADE ADDITION OF ` 2,48,39,000/- ON ACCOUNT OF UNACCOUNTED CASH, DEPOSITS AND PURCHASE OF GOLD AND BULLION. DURING SURVEY, THE TAXMAN LAID HANDS AT A COMPUTERIZED FILE NAMED DHANRAJ PERTAINING TO FINANCIAL YEAR 2003-04. THIS FILE WAS CREATED IN QUICKEN SOFTWARE. ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 65 - : THE PRINT OUT OF THIS FILE IS EXTRACTED IN PARA 23 OF THIS ORDER. IN HIS STATEMENT RECORDED ON 26.5.2006, DURING SURVEY, SHR I SURENDRA KUMAR GALADA, REVEALED THE MODUS OF RECORDING THE ENTRIES ON THIS FILE, IN CODED LANGUAGE. HE STATED THAT A CORRECT FIGURE W OULD ARRIVE IF IN ANY GIVEN TRANSACTION TWO ZEROS ARE ADDED. THE MINUS (-) SIGN IT WAS EXPLAINED THAT REPRESENTED AMOUNTS DUE. ALTHOUGH HE HAD CATEGORICALLY STATED THAT HE WOULD EXPLAIN THE ENTI RE TRANSACTIONS LATER ON WITHIN A COUPLE OF DAYS TIME. AS PER THE ASSES SING OFFICER, THIS FILE NAMED DHANRAJ CONTAINED DETAILS OF LOAN FORWARDE D AS WELL AS AMOUNT DUE FROM PERSONS TO WHOM GOLD, DIAMOND, BULL ION, ETC. WERE SOLD AND IT TOTALLED TO ` 2,14,21,150/-. IN ARRIVING AT THE ABOVE FIGURE, HE HAS SELECTIVELY RELIED ON THE STATEMENT OF SHRI SURENDER KUMAR GALADA . THIS FILE PERTAINS TO ASSESSMENT YEAR 200 3-04. AS PER THIS ACCOUNT, ` 34,17,850/- IS SHOWN UNDER CASH ACCOUNT WHICH INDIC ATED THAT ABOVE AMOUNT WAS AVAILABLE IN CASH. BUT DURIN G SURVEY, CASH DEFICIT WAS FOUND. CASH DEFICIT WAS EXPLAINED BY S TATING THAT AS PER THE BOOKS THERE WAS A CASH BALANCE SHORTAGE TO THE TUNE OF ` 28,81,767/- BECAUSE THIS AMOUNT WAS INVESTED FOR T HE PURCHASE OF GOLD JEWELLERY AND BULLION WITHOUT BILLS AND SOME OF THE AMOUNTS WERE ALSO INVESTED IN FINANCE BUSINESS. IN FACT, T HE CASE BUILD-UP BY THE ASSESSEE IS THAT THIS LARGE AMOUNT OF ` 28,81,767/- WAS CIRCULATED ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 66 - : IN THE TRANSACTIONS RECORDED ON THIS SECRET BOOK AN D THIS REQUIRES TO BE ADJUSTED AGAINST ANY UNDISCLOSED INCOME SO COMPUTED . BUT THE ASSESSING OFFICER WANTED EACH AND EVERY TRANSACTION TO BE SUPPORTED WITH EVIDENCE, WHICH WAS FOUND TO BE IMPOSSIBLE BY THE ASSESSEE. THUS, THE ASSESSING OFFICER HAS NOT GIVEN CREDIT FO R WHAT THE ASSESSEE HAS SOUGHT FOR ON THE BASIS OF THE SAME STATEMENT W HICH WAS RECORDED DURING SURVEY BUT, AT THE SAME TIME, HE HAS RELIED PARTLY ON THIS STATEMENT TO MAKE IMPUGNED ADDITION. WE HAVE NOTI CED THAT FROM THE LOOSE SHEETS FOUND DURING SEARCH/SURVEY, VARIOU S PURCHASES/SALES WERE DETECTED TO HAVE BEEN MADE OUTSIDE THE BOOKS O F ACCOUNT. THIS FACT CLEARLY ESTABLISHES THAT THE ASSESSEE WAS P URCHASING AND SELLING JEWELLERY OUTSIDE THE BOOKS OF ACCOUNT. IN OUR OPI NION, THE LOOSE SHEETS COUPLED WITH THE STATEMENT OF THE ASSESSEE C ANNOT BE LIGHTLY IGNORED AND BRUSHED ASIDE. THE FACTUAL POSITION FO UND DURING SEARCH THAT THERE WAS EXCESS GOLD, DEFICIT SILVER, DEFICIT DIAMOND, DEFICIT CASH AND NIL FINANCE, ONLY GOES TO PROVE THAT THE AMOUNT S HAVE BEEN CHANGING ONE FORM OR THE OTHER. TO SUMMARIZE, IF W E DO NOT CREDIT FOR THE DEFICIT AND THE CIRCULATION OF MONEY IN THE EN TIRE BUSINESS, IT WOULD DEFINITELY GIVE A DISTORTED FIGURE OF ASSESSEES I NCOME. FROM THE CIRCUMSPECTION OF THE ENTIRE RECORDS, IT CANNOT BE DENIED THAT THE ASSESSEE HAD TO UTILIZE GOLD, SILVER AND DIAMOND BE LONGING TO VARIOUS ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 67 - : FAMILY MEMBERS AND THE MONEY BETWEEN THE TWO BUSINE SSES HAVE BEEN FLOWING TO AND FRO. IT IS A WELL ESTABLISHED LEGAL POSITION THAT WHEN THE DEPARTMENT HAS TO RELY ON A PARTICULAR PIE CE OF EVIDENCE OR ANY STATEMENT, IT HAS TO REPLY ON IT IN ITS ENTIRET Y AND NOT BY WAY OF PICK AND CHOOSE. WE FIND FORCE IN THE SUBMISSION O F THE LD.AR WHEN HE SAYS THAT AFTER THE DATE OF SEARCH ENTIRE SITUAT ION HAS BEEN TAKEN STOCK OF AND OMISSIONS HAVE BEEN TRIED TO BE CORREC TED. THE ASSESSEE HAS CONSIDERED THE FINANCE TRANSACTIONS AND HAS ALS O OFFERED THE INTEREST INCOME FOR TAX. HE HAS ALSO ESTIMATED PRO FIT FROM SALE OF SILVER, GOLD AND DIAMOND AND OFFERED THE SAME FOR T AX. THE ASSESSEE HAS RELIED MAINLY ON THE INVENTORY AND PHYSICAL STO CK FOR COMPUTING THE INCOME WHICH HAS BEEN OFFERED FOR TAX. IT IS T RUE THAT THE ASSESSEE HAS NOT MAINTAINED DETAILED RECORDS REGARDING JEWEL LERY SOLD AND PURCHASED, AND HAS OFFERED THE ACCRETIONS, IN RESPE CTIVE YEARS, FOR ASSESSMENT. THIS ASSESSEE HAD A DEFICIT OF 5910.95 0 GM GOLD BECAUSE DURING THE SEARCH 10956 GMS OF GOLD WAS FOUND RELAT ED TO HIM AS PER THE INVENTORY AND AS AGAINST THAT AS PER THE RECORD THE TOTAL JEWELLERY IN HIS HANDS SHOULD BE 16,866.950 GMS. LIKEWISE, SILVER WAS FOUND DEFICIT DURING SEARCH BECAUSE THE ASSESSEE HAS SOLD 221.89 KGS DURING FINANCIAL YEAR 2002-03 FOR A CONSIDERATION OF ` 17,75,192/- ON WHICH PROFIT HAS BEEN DECLARED AND OFFERED FOR TAX. OUT OF ` 17,75,192, THE ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 68 - : ASSESSEE CLAIMS TO HAVE ADVANCED ` 16 LAKHS AS LOAN AND INTEREST DUE ON THIS LOAN AMOUNTING TO ` 29,589/- HAS BEEN OFFERED FOR TAX IN ASSESSMENT YEAR 2003-04. IN THE CASE OF DIAMONDS, ON THE DATE OF SEARCH, 15 CT WAS FOUND WHEREAS AS PER THE RECORDS THERE SHOULD BE 216.360 CARATS AVAILABLE WITH HIM. ACCORDINGLY, TH ERE WAS DEFICIT OF 201.360 CARAT OF DIAMONDS. AGAIN, THE ONLY PRESUMP TION WHICH CAN BE DRAWN ON FROM THIS FACT IS THAT DURING THE PREVIOUS YEAR, RELEVANT TO ASSESSMENT YEAR 2004-05, THE ASSESSEE SOLD THIS DIA MOND FOR A TOTAL AMOUNT OF ` 66,68,567/-. THE ASSESSEE HAS OFFERED PROFIT OF ` 2,50,000/- IN THIS YEAR. FROM THIS SALE CONSIDERAT ION, ` 65 LAKHS IS STATED TO HAVE BEEN ADVANCED AS LOAN ON WHICH INTER EST DUE OF ` 7,74,558/- HAS BEEN OFFERED FOR TAX. SO, IT IS FOU ND THAT MOST OF THE TRANSACTIONS RECORDED ON THIS SECRET DOCUMENT NAMED DHANRAJ STAND EXPLAINED. HE HAS TREATED ` 1,07,78,150/- AS TOTAL LOANS ADVANCED AND ON WHICH ESTIMATED INTEREST HAS BEEN OFFERED FOR TA X. THE ASSESSING OFFICER HAS SIMPLY BRUSHED ASIDE THIS EXPLANATION O F THE ASSESSEE AND HAS ALSO IGNORED THE WEALTH TAX RETURNS FILED FOR T HE YEARS 2000-01 TO 2005-06 WHICH WERE OBVIOUSLY FILED AFTER SEARCH. S INCE IT IS A CASE OF SEARCH AND IN SUCH CASES NOTHING CAN BE ADDED WITHO UT THERE BEING ANY INCRIMINATING PROOF OR CONNECTED PROOF COLLECTE D DURING INVESTIGATION. NO ADDITION CAN BE BASED SIMPLY ON SURMISES AND ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 69 - : CONJECTURES. IN OUR CONSIDERED OPINION, THE ASSESS ING OFFICER IS BOUND TO GIVE CREDIT FOR THE DEFICIT IN GOLD, SILVER AND DIAMOND AS PER CHART A EXTRACTED AT PAGE 47 OF THIS ORDER. THE LD. CIT(A) HAS RIGHTLY OBSERVED THAT THE ASSESSING OFFICER HAS UTILIZED PART OF THE ANSWER GIVEN IN HIS STATEMENT IN DETERMINING THE TOTAL UNDISCLOSED CASH , DEPOSITS AND TRANSACTIONS IN BULLION AND JEWELLERY. AS HAS BEEN CORRECTLY NOTICED BY THE LD. CIT(A) THAT THE TOTAL OF PLUS AND MINUS (+A ND -) FIGURES HAVE TO BE CONSIDERED TOGETHER AND IN THIS CASE, THE TOTAL NEGATIVE FIGURE COMES TO ` 1,06,430/-. THE ASSESSING OFFICER HAS NOT DISPUTED THE QUANTITY OF UNACCOUNTED SALES AND PROFIT ON SALE FO R ASSESSMENT YEARS 2003-04 AND 2004-05. THUS, IN OUR CONSIDERED OPINI ON, THE LD.CIT(A) HAS NOT GIVEN CREDIT TO THE SURPLUS CASH IN THE 'DHANRAJ' A/C ON THE PRETEXT THAT THERE WAS NO EXCESS CASH AND IN FACT DEFICIT IN VARIOUS ASSETS. HOWEVER, THIS ST ATEMENT OF THE LD.CIT(A) CANNOT BE ACCEPTED FOR THE FACT THAT MA NY OF THE TRANSACTIONS WERE ACCEPTED AS INDICATING ASSESSEE'S BUSINESS TRANSACTIONS. ON THE DATE OF SEARCH NO CASH WA S FOUND AND WHATEVER SURPLUS REMAINED AS PER THE DOCUMENTS HAVE BEEN CIRCULATED IN ADVANCE OR AVAILABLE IN THE FORM OF GOLD. THEREFORE, WE ARE OF THE OPINION THAT THE ISSUE OF GI VING CREDIT TO THE AMOUNT OF ` 57,52,241/ - SHOULD BE RESTORED TO ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 70 - : THE FILE OF THE ASSESSING OFFICER AS THE REQUIREMENT OF CASH FLOW ON SALE OF SILVER, GOLD AND DIAMONDS SHOULD BE GIVE N CREDIT. FURTHER THERE IS EXCESS STOCK CONFIRMED IN A.Y. 20 04- 05. THESE ASPECTS REQUIRE EXAMINATION BY THE ASSESSING OFFICER AND THE ASSESSING OFFICER IS DIRECTED TO EXAMI NE THE SOURCE OF AMOUNT OF ` 1,41,96,000/- AN AMOUNT OF ` 84,43,747/- WAS GIVEN CREDIT BY THE LD. CIT(A) ON THE B ASIS OF DISCLOSED AMOUNTS IN EARLIER YEARS. WE AGREE WITH T HE SAME AS THE WORKING IS CORRECT ON THE FACTS. WITH REFERE NCE TO THE BALANCE AMOUNT OF ` 57,52,451/ - THE ISSUE IS RESTORED TO THE FILE OF THE ASSESSING OFFICER TO EXAMINE THE SOURC E OF FUND ON THE BASIS OF ASSESSEE'S SUBMISSIONS. THEREFORE TH E ISSUE RAISED IN REVENUE'S GROUND ARE REJECTED AND TO THE EXTENT ASSESSEE HAS TAKEN IN CROSS OBJECTION THE MATTER I S RESTORED TO THE FILE OF THE ASSESSING OFFICER. ASSESSEE SHOULD BE GIVEN PROPER OPPORTUNITY TO EXPLAIN IN THE LIGHT OF THE CONFIRMED AMOUNT IN EARLIER YEARS AND DURING THIS YEAR. 37. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DIS MISSED AND THE CROSS OBJECTION OF THE ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 71 - : I.T.A.NO. 1485/MDS/08 & C.O NO.23/MDS/09 38. THE APPEAL OF THE REVENUE AND THE CROSS OBJECTION O F THE ASSESSEE, FOR ASSESSMENT YEAR 2006-07, ARE DIRECTED AGAINST THE ORDER OF THE LD. CIT(A) DATED 3.4.2008. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS IN ITS APPEAL: 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY T O LAW AND FACTS OF THE CASE. 2. THE LEARNED CIT(A) ERRED IN DELETING THE UNDISC LOSED INCOME TO THE EXTENT OF ` 41,51,070/- MADE TOWARDS EXCESS STOCK OF GOLD JEWELLERY 3. THE ID CIT(A) ERRED IN HOLDING THAT THE STOCK OF 6632.810 FOUND AT THE RESIDENCE OF LALITH KUMAR GALADA IS TO BE CONSIDERED IN THE HANDS OF LALITH KUMAR GALADA ONLY . 4. THE ID CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT THE CLAIM WAS MADE BY THE PARTIES CONCERNED AND DISPUTED BY T HE THEM AT ANY STAGE LATER AND ALLOWANCE WAS GIVEN TOT HIS EXTENT IN THE ASSESSMENT OF SHRI.LALITH KUMAR GALADA. 5. THE ID CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT THE CLAIM OF 5454.55 GMS OF GOLD BELONGING TO SHRLSURENDRA KU MAR GALADA IS NOT ACCEPTABLE AS ALREADY EXCESS JEWELLER Y WAS ASSESSED IN THE HANDS OF SHRL.SURENDRA KUMAR GALADA . 6. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED . 39. THE GROUNDS RAISED IN THE CROSS OBJECTION ARE AS UN DER: 1. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ADDITION OF ` 13,09,613 ON ACCOUNT OF THE ALLEGED EXCESS STOCK OF SILVER OF 165.107 KGMS. THE RE IS NO BASIS FOR THE ADDITION AND THE SAME OUGHT TO HAV E BEEN DELETED. ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 72 - : 2. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ADDITION OF ` 1,33,208 ON ACCOUNT OF THE ALLEGED STOCK DEFICIT IN DIAMONDS. 3. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGH T TO HAVE DELETED THE ENTIRE ADDITION OF ` 25,000 ON ACCOUNT OF ALLEGED EXCESS STOCK OF ITEMS OF RUBY AND EMERALD. THE ENTIRE ADDITION OUGHT TO BE DELETED IN SO FAR AS TH E SAME IS NOT BASED ON ANY MATERIALS. 4. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ADDITION OF ` 3,09,080 ON ACCOUNT OF ALLEGED UNACCOUNTED SALES. THE CONCLUSION THAT THESE SALES ARE RECORDED IN THE SEIZED DOCUMENTS IS NOT CORRECT. TH E ENTIRE ADDITION HAS BEEN CONFIRMED WITHOUT ANY MATERIALS B UT BASED ON PRESUMPTIONS AND OUGHT TO HAVE BEEN DELETE D. 40. THE RELEVANT FACTS OF THIS CASE ARE THAT AS A RESUL T OF THE SEARCH AND SURVEY AS STATED ABOVE, IN RESPONSE TO NOTICE U /S 153A, THIS ASSESSEE ABIRCHAND GALADA(HUF) FILED THE RETURN OF INCOME ON 27.9.2009 SHOWING TOTAL INCOME OF ` 52,79,200/-. AS AGAINST THIS, THE ASSESSING OFFICER PASSED ASSESSMENT ORDER ON 26.12. 2007, AT A TOTAL INCOME OF ` 1,20,87,710/-. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A). THE ASSESSING OFFICER HAD MADE AN ADDITION OF ` 41,51,070/- ON ACCOUNT OF STOCK OF GOLD JEWELLERY FOUND DURING SEARCH. DURING THE COURSE OF SURVEY AT M/S T.B JEW ELLERY, PHYSICAL INVENTORY OF STOCK OF GOLD JEWELLERY WAS FOUND AT 8 7653.02 GMS AS PER ANNEXURE AVK/JEWELLERY STOCK/NI-1 TO 4. IN REPLY TO NOTICE U/S 142(1), THE ASSESSEE HAS CONTENDED ON THIS ISSUE AS UNDER: ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 73 - : 'DURING THE COURSE OF SEARCH, THERE WAS AN EXCESS G OLD JEWELLERY TO THE EXTENT OF 640.124 GMS. 6632.810 GMS OF GOLD JEWELLERY FOUND IN THE RESIDENCE OF LALITH BELONGED TO ABIRCH AND GALADA (HUF) WHOSE KARTHA IS SURENDER KUMAR GALADA. JEWELLERY TO THE EXTENT OF 5454.55 GMS BELONGING TO 5URENDER (INDL.) HAS BEEN GIVEN BY HIM TO THE HUF. THEREFORE, THE TOTAL EXCESS OF GOLD WILL COME TO 1818.38 GMS. THE SAME HAS BEEN VALUED AT ` 550 PER GRAM 'AND A SUM OF ` 10,00,113/- HAS ALREADY BEEN OFFERED BY US IN THE RETURN OF INCOME FILED.' IT IS CORRECT THAT THE ASSESSEE HAD IN WRITING OWNE D UP 6632.81 GMS OF GOLD JEWELLERY WHICH WAS FOUND DURING SEARCH AT THE RESIDENCE OF MR. LALITH GALADA. SO, WHEN ADDED UP WITH 649.77 GMS OF GOLD (QUANTIFIED AS EXCESS DURING SURVEY), T HE TOTAL EXCESS COMES TO 7282.58 GMS. BUT THE ASSESSEES CONTENTIO N THAT IT SHOULD BE REDUCED BY 5454.55 GMS BECAUSE THAT QUANT ITY OF GOLD WAS TRANSFERRED FROM MR.SURENDER (INDL.) RESULTING INTO NET EXCESS OF 1818.38 GMS CANNOT BE ACCEPTED FOR THE FOLLOWING TWO REASONS: (A) DURING THE SURVEY, NO SUCH TRANSFER ENTRY WAS N OTED IN THE BOOKS OF EITHER OF THE ASSESSEES AND NEITHER DID MR SURENDER GALADA (KARTHA) MENTION THIS IN HIS DEPOSITIONS DAT ED 19.05.05, 20.05.05 AND 26.05.05, NOR DID THE OTHER COPARCENER, MR.LALITH GALADA IN THE COURSE OF SWORN STATEMENTS RECORDED ON 19/20.5.2005. MOREOVER, EV EN AT THIS ASSESSMENT STAGE, TILL THE DATE OF THIS ORDE R, THE ASSESSEE WAS UNABLE TO SUBSTANTIATE ITS CLAIM OF TR ANSFER OF ANY GOLD JEWELLERY FROM THE PERSONAL HANDS OF SREE SURENDER GALADA TO THAT OF M/S T.B JEWELLERY FROM THE BOOKS OF ACCOUNT OF EITHER OF THE PERSONS. (B) MORE IMPORTANTLY, ON THE DATE OF SURVEY I SEARCH I.E 19.05.05 AND 20.05.05, MR. SURENDER WAS FOUND TO HAVE OWNED A TOTAL JEWELLERY OF 16493.85 GMS. (10956 GMS. AT HIS RESID ENCE AND 5537.85 GMS. AT THE RESIDENCE OF HIS BROTHER MR. LA UTH) WHEREAS THE RECORDS SHOWED THAT HIS ACCOUNTED JEWEL LERY WAS 9352.84 GMS. SO, ALREADY AN EXTRA QUANTITY OF 7266. 01 GMS OF GOLD JEWELLERY WAS DETERMINED IN RESPECT OF MR. SU RENDER AND HIS FAMILY MEMBERS. THEN, WHEREFROM CAN HE TRANSFER A FURTHER QUANTITY OF 5454.55 GMS. OF GOLD JEWELLERY TO M/S T.B. JEWELLERY? THIS IS MATHEMATICALLY IMPOSSIBLE. IT CAN ONLY IMPLY THAT E ITHER MR. SURENDER AND HIS FAMILY. MEMBERS' OWNED FURTHER UNACCOUNTED JEWELLERY OF 5454.55 GMS (APART FROM 7 266.01 ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 74 - : GMS) OR THAT THE EXPLANATION OF TRANSFER OF 5454.55 GMS. OF GOLD BY MR. SURENDER TO M/S T;B. JEWELLERY, AS FURNISHED BY THE ASSESSEE, IS:FALSE AND ONLY AN AFTERTHOUGHT TO AVOID TAX BY WAY OF INTER-ASSESSEE SETTING OFF OF GOLD JEWELLERY . SINCE, THIS EXPLANATION IS GIVEN BY M/S . T.B. JEWELLERY AND NOT MR. SUREDNER GALADA, IT IS CONCLUED THAT NO JEWELLERY W AS TRANSFERRED BY SHRI SURENDER GALADA TO M/S T.B. JEWELLERY, AS SUBMITTED BY THE ASSESSEE. THUS THE EXPLANATION IS REJECTED AS DEVOID OF ANY MERIT AND UNSATISFACTORY, AND THE REALITY IS THAT AS ON THE DATE OF SURVEY, M/S T.B. JEWELLERY WAS IN POSSESSION OF EXCESS GOLD OF JEWELLERY TO THE EX TENT OF 7282.58 GRMS; TAKING THE VALUE OF GOLD AT ` 570 PER GM., THE VALUATION OF THIS GOLD COMES TO ` 41, 51,070 /-, WHICH IS TREATED AS STOCK ACQUIRED BY THE ASSESSEE FROM UNDISCLOSED SOURCES.' 41. BEFORE THE LD. CIT(A), THE SAME EXPLANATION AS WAS MADE BEFORE THE ASSESSING OFFICER WAS FILED, WHICH READS AS UNDER: 'THE APPELLANT IS THE PROPRIETOR OF T.B. JEWELLERY. AT THE TIME OF SURVEY ON 19-5-2005, AT THE BUSINESS PREMIS ES, STOCK OF GOLD JEWELLERY OF T.B. JEWELLERY WAS TAKEN BY THE S EARCH PARTY. THE ACTUAL QUANTITY OF GOLD JEWELLERY FOUND WAS 862 72.344 GMS. HOWEVER, AS PER THE BOOKS, THE STOCK OF GOLD JEWELL ERY OUGHT TO HAVE BEEN 85632.220 GMS, INDICATING THAT THERE WAS AN EXCESS STOCK OF 640.124 GMS. ON THE SAME DAY, THE RESIDENT IAL PREMISES OF LALIT KUMAR GALADA, ONE OF THE CO-PARC ENERS OF THE APPELLANT HUF WAS SEARCHED UNDER SECTION 132. AT TH E RESIDENCE OF LALIT KUMAR GALADA, EXCESS GOLD JEWEL LERY TO THE EXTENT OF 6632.810 GMS WAS FOUND. IT WAS EXPLAINED TO THE SEARCH PARTY THAT THE EXCESS JEWELLERY FOUND AT THE RESIDENCE BELONGED TO T.B. JEWELLERY. THUS, THE TOTAL OF THE EXCESS JEWELLERY CAME TO 7272.58 GMS. IT WAS EXPLALNED TO THE ASSESSING OFFICER THAT OUT OF 7272.58 GMS, GOLD JEW ELLERY OF 5454.55 GMS REPRESENTED GOLD JEWELLERY TRANSFERRED FROM SHRI SURENDRAKUMAR GALADA (INDL). ON THIS BASIS, IN THE RETURN OF INCOME FILED BY THE APPELLANT, A SUM OF ` 23 LAKHS WAS OFFERED BY THE' APPELLANT TOWARDS THE VALUE OF EXCESS JEWELLER Y FOUND. THIS WAS WORKED OUT AS UNDER: ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 75 - : VALUE OF EXCESS JEWELLERY FOUND OF 7272.934 GMS ` 40,00,113 SILVER 108-296 KGS ` 10,82,960 DIAMONDS 4.83 CTS ` 1,20,750 CASH(DEFICIT) ( ` 50,452) SILVER FANCY ` 2,26,653 PLATINUM ` 75,052 OTHERS ` 893 ------------------ ` 53,05,865 LESS: VALUE OF GOLD RECEIVED FROM SURENDRAKUMAR GA LADA ` 30,00,000/-** ` 23,05,865 ROUNDLY TAKEN AT ` 23,00,000 ** VALUE OF 5454.55 GMS OF GOLD JEWELLERY . THE ASSESSING OFFICER, HOWEVER, DID NOT ACCEPT THE SUBMISSION OF THE APPELLANT THAT GOLD JEWELLERY TO THE EXTENT OF 5454.55 GMS HAD BEEN RECEIVED FROM SURENDRA KUMAR GALADA. WHILE DOING SO, HE HAS WORKED OUT THE TOTAL AVAILABILITY OF GOL D JEWELLERY WITH SURENDRA KUMAR GALADA AND HIS FAMILY MEMBERS, AND G IVEN A FINDING THAT SURENDRA KUMAR GALADA DID NOT HAVE SUF FICIENT POSSESSION TO PART WITH 5454.55 GMS OF GOLD JEWELLERY IN FAVOUR OF ABIRCHAND GALADA (HUF), I.E. T.B. JEWELLERY. THE AP PELLANT SUBMITS THAT WHILE CALCULATING THE TOTAL QUANTUM OF JEWELLERY POSSESSED BY SURENDRA KUMAR GALADA AND HIS FAMILY M EMBERS, THE ASSESSING OFFICER HAS TOTALLY IGNORED THE QUANT UM OF JEWELLERY DISCLOSED BY SHRI SURENDRAKUMAR GALADA AN D THE FAMILY MEMBERS, AS DECLARED IN THE RETURNS OF WEALT H FILED BY THEM UPTO ASSESSMENT YEARS 1986- -87, THE DETAILS OF WHICH ARE AS UNDER: SURENDRAKUMAR GALADA(INDL) 178.390.00 GMS SURENDRAKUMAR GALADA(HUF) 597.000 NIRMALA KANWAR GALADA(MOTHER) 2286.950 SURYAKANTHA GALADA 1555.400 5497.740 SHRI SURENDRA KUMAR GALADA, IN THE COURSE OF HIS AS SESSMENT PROCEEDINGS, HAD FURNISHED THE COPIES OF THE RETURN S OF WEALTH FILED BY THE ABOVE PERSONS FOR ASSESSMENT YEAR 1986-87, AND IN SPITE OF THIS, THE ASSESSING OFFICER HAS IGNORED TH E CLAIM OF POSSESSION OF GOLD JEWELLERY TO THE ABOVE EXTENT BY SURENDRAKUMAR GALADA ON THE GROUND THAT NO RETURNS WERE FURNISHED IN THE LATER YEARS. ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 76 - : THE APPELLANT SUBMITS THAT IN VIEW OF THE EXPLANATI ON OFFERED BY THE APPELLANT, THE ASSESSING OFFICER OUGHT TO HAVE ACCEPTED THE SOURCE FOR 5454.55 GMS OF GOLD JEWELLERY. IT IS REQUESTED THAT THE HON'BLE COMMISSIONER OF INCOME-TAX MAY KINDLY DELET E THE ADDITION MADE.' 42. THE LD. CIT(A) HAS GIVEN FOLLOWING OBSERVATION VIDE PARA 5.2 OF HIS ORDER AS UNDER: 5.2 I HAVE EXAMINED THE FACTS OF THE CASE. IN PARA 7.1 OF THE ASSESSMENT ORDER THE A.O. HAS GIVEN A FINDING THAT DURING THE SURVEY AT M/S.T.B.JEWELLERY, THE GOLD JEWELLERY TOT ALLING TO 87653.02 GMS WAS FOUND AND THE BOOK BALANCE ON THE DATE WAS 87003.247 GMS AND THAT EXCESS STOCK WAS ARRIVED AT 649.77 GR,NS. IN PARA 7.2 OF THE ASSESSMENT ORDER THE A.O. HAS TREATED THE JEWELLERY WEIGHING 6632.81 GMS FOUND AT THE RESIDENCE OF LALITH GALADA AS BELONGING TO THE APPELLANT HUF. HE HAS REJECTED THE CLAIM THAT OUT OF THIS JEWELLERY 5454. 55 GMS BELONG TO SHRI SURENDRA GALADA. IT IS FOUND THAT THE A.O.' S FINDING IN THIS RESPECT IS BASED ON A LETTER SUBMITTED BEFORE THE A .O. IN WHICH TWO CLAIMS WERE MADE THAT JEWELLERY WEIGHING 6632.8 10 GMS FOUND AT THE RESIDENCE OF SHRI LALITH GALADA BELONG TO THE APPELLANT AND THAT OUT OF THIS JEWELLERY 5454.55 GM S WAS GIVEN_ TO THE APPELLANT BY SHRI SURENDRA GALADA, INDL. THE A.O. HAS ACCEPTED THE FIRST CLAIM BUT REJECTED THE SECON D ONE. THE A.O. 'S DECISION IS BASED MAINLY FOR THE REASON TH AT THERE IS NO EVIDENCE TO SUPPORT THAT JEWELLERY WEIGHING 5454.5 5 GMS WAS GIVEN BY SHRI SURENDRA GALADA. IT IS IMPORTANT TO NOTE THAT THERE IS NO EVIDENCE ALSO IN SUPPORT OF THE CLAIM T HAT JEWELLERY WEIGHING 6632.810 GMS, FOUND AT THE RESIDENCE OF S HRI LAITH GALADA, ACTUALLY BELONGS TO, THE APPELLANT HUF. IN VIEW OF THIS FACT THERE IS NO JUSTIFICATION FOR TREATING THE JEW ELLERY FOUND AT THE RESIDENCE OF SHRI LALITH GALADA AS BELONGING TO THE APPELLANT HUF. THE SOURCE OF JEWELLERY FOUND AT THE RESIDENC E OF SHRI LALITH KUMAR GALADA CAN BE EXAMINED IN THE CASE OF SHRI LALITH GALADA ONLY. SINCE THERE IS NO BASIS FOR TREATING T HE JEWELLERY FOUND AT THE RESIDENCE OF SHRI LALITH GALADA AS BEL ONGING TO THE APPELLANT HUF, THE ADDITION MADE IN THE HANDS OF TH E APPELLANT HUF ON ACCOUNT OF THE JEWELLERY FOUND AT THE RESIDE NCE OF SHRI LALITH GALADA IS INVALID. IN THE APPELLANT'S CASE T HE EXCESS STOCK OF GOLD JEWELLERY COMES TO ONLY 649.77 GMS. THE APP ELLANT HUF HAS DECLARED 1818.43 GMS AS EXCESS STOCK IN THE RE TURN OF INCOME FOR ASST.YEAR 2006-07. HENCE NO ADDITION ON ACCOUNT OF THE EXCESS STOCK FOUND IS JUSTIFIED. IN VIEW OF THE ABOVE IT IS HELD ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 77 - : THAT THE IMPUGNED ADDITION OF ` 41,51,070 / -IS INVALID HENCE THE SAME IS DELETED. THIS GROUND OF APPEAL IS ALLOWED. 43. AFTER HEARING BOTH SIDES, WE FIND THAT THERE IS NO FALLACY IN THE FINDING OF THE LD. CIT(A) AND DESERVES TO BE CONFIR MED IN THIS REGARD. THE REASONS FOR OUR ABOVE FINDING ARE THAT DURING S URVEY CONDUCTED AT M/S T.B JEWELLERY, TOTAL GOLD JEWELLERY WEIGHING 87 653.02 GMS WAS FOUND AS AGAINST THE BOOK BALANCE AS ON DATE OF 870 03.247 GMS. THUS, THE EXCESS STOCK WAS ARRIVED AT 649.77 GMS. DURING ASSESSMENT PROCEEDINGS, JEWELLERY WEIGHING 6632.81 GMS FOUND AT THE RESIDENCE OF SHRI LALITH KUMAR GALADA WAS TREATED AS BELONGIN G TO THE ASSESSEE- HUF. THE CLAIM OF THE ASSESSEE IS THAT OUT OF THIS JEWELLERY 5454.55 GMS BELONGED TO SHRI SURENDRA KUMAR GALADA. IN FA CT, BEFORE THE ASSESSING OFFICER IT WAS CLAIMED BY SHRI LALITH KU MAR GALADA THAT JEWELLERY WEIGHING 6632.81 GMS FOUND FROM HIS POSS ESSION BELONGED TO HIM, BUT OUT OF THAT, JEWELLERY WEIGHING 5454.55 GMS WAS GIVEN TO HIM BY SHRI SURENDRA KUMAR GALADA (INDIVIDUAL). TH E ASSESSING OFFICER HAS ADDED VALUE OF THIS GOLD JEWELLERY ON T HE BASIS OF TWO LETTERS, BUT HE HAS NOT ACCEPTED CONTENTS OF THE LE TTER IN ENTIRETY, BUT HAS INTERPRETED THE AVERMENTS OF THE LETTERS IN HIS OWN WAY. HE HAS MADE THE IMPUGNED ADDITION ON THE BASIS OF THESE TW O LETTERS SENT TO HIM DURING ASSESSMENT PROCEEDINGS. THERE IS NO OTH ER EVIDENCE TO ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 78 - : SUPPORT THIS FINDING OF THE ASSESSING OFFICER AND T HIS IS A SETTLED LAW THAT THE ASSESSING OFFICER CANNOT RELY ON A PART OF A PARTICULAR STATEMENT AND REFUSE TO ACCEPT THE OTHER PART WHICH DOES NOT SUIT HIM. HE HAS TO RELY ON ANY PIECE OF EVIDENCE IN ITS ENTI RETY. THUS, ONLY EXCESS STOCK OF 649.77 GMS CAN BE CONSIDERED IN ASS ESSEE-HUFS CASE AND SINCE THE HUF HAS ALREADY DECLARED 1818.43 GMS JEWELLERY AS EXCESS STOCK IN THE RETURN OF INCOME FOR ASSESSMENT YEAR 2006-07, NO FURTHER ADDITION ON ACCOUNT OF EXCESS STOCK FOUND C AN BE MADE IN ITS HANDS. THUS, THE IMPUGNED ADDITION WAS CORRECTLY D ELETED FROM THE HUFS HANDS. WE ARE FULLY IN AGREEMENT WITH THE LD . CIT(A) IN THIS REGARD AND CONFIRM THE SAME. 44. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DIS MISSED. 45. NOW WE PROCEED TO DECIDE THE GROUNDS OF CROSS OBJE CTION RAISED BY THE ASSESSEE, ONE BY ONE. IT WAS NOTICED THAT THE CROSS OBJECTION WAS TIME BARRED BY FOUR DAYS. A CONDONATION PETIT ION SUPPORTED BY DULY ATTESTED AFFIDAVIT HAS BEEN FILED. THE DELAY OF FOUR DAYS IS STATED TO BE A RESULT OF RAISING ADDITIONAL GROUNDS IN PRO PER FORMAT ALTHOUGH THE ORIGINAL CROSS OBJECTION WAS FILED IN TIME. T HEREFORE, CONSIDERING THE FACTS, WE CONDONE THIS DELAY AND ADMIT THE CRO SS OBJECTION AS APART FROM BEING A CASE OF REVISING THE GROUNDS FIL ED IN TIME, THE ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 79 - : ASSESSEE HAS GOT A REASONABLE CAUSE FOR THIS DELAY WHICH WAS CAUSED AS A RESULT OF LEGAL ADVICE. 46. THE FIRST ISSUE OF THE CROSS OBJECTION RELATES TO C ONFIRMATION OF ADDITION OF ` 13,09,630/- MADE ON ACCOUNT OF EXCESS STOCK OF SI LVER WEIGHING 165.107 KGS. THE FACTS APROPOS THIS ISSUE ARE THAT DURING SURVEY, INVENTORY OF SILVER WAS PREPARED AND ON PHY SICAL VERIFICATION, SILVER AGGREGATING TO 4,80,928 GMS WAS FOUND, BUT AS PER BOOKS THE STOCK OF SILVER WAS AT 3,15,821.670 GMS(315.821 KGS ). THUS, AN EXCESS STOCK OF SILVER TO THE TUNE OF 165.106 KGS W AS FOUND. THE ASSESSEE HAS ACCEPTED THIS EXCESS SILVER IN ITS RET URN OF INCOME. THE ASSESSING OFFICER VALUED THE SILVER AT ` 18,16,177/- BY TAKING THE RATE AT ` 11,000/- PER KG. THE ASSESSING OFFICER TREATED TH IS STOCK TO BE OUT OF UNDISCLOSED SOURCES AND HAS ADDED THE ENTIR E AMOUNT. APART FROM THIS, CERTAIN FANCY SILVER ITEMS WERE ALSO FOU ND IN RESPECT OF WHICH, THE ASSESSING OFFICER HAS OPINED THAT QUA NTIFICATION WAS NOT POSSIBLE SO VALUATION WAS DONE ON PIECE-BASIS WHICH COMES TO ` 2,26,653/-. THIS ACTION OF THE ASSESSING OFFICER H AS RESULTED INTO A TOTAL ADDITION OF ` 20,42,830/- MADE ON ACCOUNT OF ASSESSEES INCOME FROM UNDISCLOSED SOURCES. IN FIRST APPEAL, THE ASS ESSEE COULD NOT GET ANY RELIEF. NOW, THE ASSESSEE IS FURTHER AGGRIEVED . ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 80 - : 47. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE P ERUSED THE ENTIRE MATERIAL AVAILABLE ON RECORD. THE RECORDS R EVEALED THAT IN FACT THE ASSESSING OFFICER HAS MADE TOTAL ADDITION ON AC COUNT OF EXCESS STOCK OF SILVER JEWELLERY AT ` 20,42,380/-. THE CASE OF THE ASSESSEE IS THAT IN SO FAR AS EXCESS STOCK OF SILVER, TO THE TU NE OF 165.170 KGS IS CONCERNED, WAS WRONGLY VALUED BY TAKING ` 11,000/- PER KG AS AGAINST THE PREVAILING RATE OF ` 10,000/- PER KG. FURTHER, THAT THE ASSESSEE HAS ITSELF OFFERED A SUM OF ` 13,09,613/- IN THE RETURNS AND HAS FURTHER RATIFIED THE SAME VIDE LETTER DATED 3.12.2007. UNF ORTUNATELY, THE LD. CIT(A) HAS NOT CONSIDERED THIS ASPECT OF THE MATTER DESPITE EXTRACTING THE ENTIRE SUBMISSION OF THE ASSESSEE IN PARA 6.1 A T PAGE 8 OF HIS ORDER. HE HAS SIMPLY MENTIONED ABOUT THE ADOPTION OF RATE AT ` 11,000 PER KG WHICH, ACCORDING TO HIM WAS NOT OBJEC TED TO BY THE ASSESSEE AT THE TIME OF ASSESSMENT. HE HAS CONFIRM ED THE ADDITION OF ` 13,09,613/- AND HAS IMPLIEDLY DELETED THE REMAINI NG ADDITION. SINCE THE ASSESSEE HAS ITSELF OFFERED THE VALUE OF EXCESS STOCK OF SILVER VALUING AT ` 13,09,613/- IN ITS RETURN OF INCOME, THE SAME AMOU NT CANNOT BE ADDED TWICE. WE ARE IN AGREEMENT WITH TH IS SUBMISSION OF THE ASSESSEE AND THEREFORE, CANNOT SUSTAIN THIS ADD ITION AND DELETE THE SAME FROM THE HANDS OF THIS ASSESSEE. HENCE, WE AL LOW GROUND NO.1 OF THE CROSS OBJECTION. ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 81 - : 48. THE SECOND ISSUE OF CROSS OBJECTION IS REGARDING EX CESS STOCK OF DIAMONDS. THE FACTS OF THIS ISSUE ARE THAT ADDITIO N OF ` 1,33,208/- WAS MADE ON ACCOUNT OF DEFICIT STOCK OF DIAMONDS FOUND DURING SURVEY AS COMPARED TO BOOKS OF ACCOUNTS. AS A RESULT OF SURV EY, 42.832 CTS DEFICIT STOCK OF DIAMONDS WAS FOUND AT THE RESIDENC E OF SHRI LALITH KUMAR GALADA. THIS EXCESS STOCK OF DIAMOND HAS BEE N DEALT WITH IN THE HANDS OF SHRI LALITH KUMAR GALADA BY THE ASSES SING OFFICER HIMSELF. IN RESPECT OF CERTAIN ITEMS OF JEWELLERY CONTAINING DIAMONDS, AS PER THE ASSESSING OFFICER, QUANTIFICATION IN TER MS OF CARATS WAS NOT POSSIBLE, THEREFORE, HE HAS ASSESSED THEIR VALUE PI ECE BY PIECE AT ` 1,33,208/- IN TOTAL. THE LD. CIT(A) HAS ALSO CONFI RMED THIS ADDITION. THE CONTENTION OF THE ASSESSEE IS THAT IT HAS ITSEL F OFFERED THE VALUE OF EXCESS STOCK OF DIAMOND AMOUNTING TO ` 1,20,750/-. THE DIFFERENCE OF LITTLE AMOUNT HAS BEEN ATTRIBUTED TO THE ADOPTION O F MULTIPLE VALUE OF DIAMONDS ON THE GIVEN DATE. FROM THE PERUSAL OF PA RA 7.2, AT PAGE 10 OF THE LD. CIT(A)S ORDER, WE COME TO A QUICK CONC LUSION THAT HE HAS GIVEN NO REASONING FOR SUSTAINING THIS ADDITION DES PITE THE FACT THAT THE ASSESSEE HAS SUBMITTED THAT TOWARDS EXCESS STOCK OF DIAMONDS, IT HAS ALREADY SURRENDERED ` 1,20,750/-. IN OUR CONSIDERED OPINION, THE FINDING OF THE ASSESSING OFFICER AS WELL AS THE LD. CIT(A) ARE NOT JUSTIFIABLE AND DESERVE TO BE CORRECTED BY DELETIN G THE ENTIRE ADDITION ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 82 - : SO MADE. THE SLIGHT DIFFERENCE NOTICED IS DUE TO T HE RATE OF DIAMONDS ADOPTED BY THE ASSESSING OFFICER WHEN HE WAS UNABLE TO QUANTIFY THE CARATS. THERE IS ALWAYS POSSIBILITY OF VARIATION I N VALUATION OF THE DIAMONDS AS PER THEIR PURITY, REGARDING WHICH THE C LAIM OF THE ASSESSEE SEEMS TO BE MORE PLAUSIBLE. HENCE, WE ALL OW GROUND NO.2 OF THE CROSS OBJECTION BY ORDERING TO DELETE THE IM PUGNED ADDITION. 49. GROUND NO.3 RELATES TO PROFITS FROM UNACCOUNTED SAL ES OF GOLD JEWELLERY AMOUNTING TO ` 25,000/-. THE FACTS OF THIS ISSUE ARE THAT DURING SURVEY RUBY MEASURING 1.76 CARATS AND EMERAL D MEASURING 1.46 CARATS WERE FOUND. AS THESE ITEMS WERE NOT FO UND MENTIONED IN THE BOOKS, THE ASSESSING OFFICER ADDED THEIR TOTAL VALUE TAKING THEIR PRICE AT ` 25,000/-. THE LD. CIT(A) HAS SIMPLY CONFIRMED THI S ADDITION BY STATING THAT THERE IS NO FLAW IN ASSESSING OFFIC ERS FINDING IN THIS REGARD. 50. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE FOUND THAT THE ASSESSING OFFICER HAS NOT GIVEN ANY BASIS FOR VALUI NG THESE ITEMS AT ` 25,000/-. THE CASE OF THE ASSESSEE IS THAT RUBY AN D EMERALD ARE NOT AS PRECIOUS STONES AS DIAMOND BUT THESE ARE ONLY SE MI-PRECIOUS STONES WHICH COST APPROXIMATELY ` 250 TO ` 300 PER CARAT AND IN THAT VIEW OF THE MATTER, THE TOTAL VALUE OF THESE ITEMS WOULD CO ME TO A VERY LESS ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 83 - : AMOUNT. IT IS STATED THAT IN THIS REGARD, THE ASSE SSEE HAS ALREADY ADMITTED ` 893/- WHILE FILING ITS RETURN OF INCOME. IT HAS B EEN PRAYED THAT THE ADDITION MADE IN THIS REGARD IS BASELESS A ND DESERVES TO BE DELETED. THE LD.DR HAS SUPPORTED THE VERSION OF TH E ASSESSING OFFICER BUT COULD NOT SUCCESSFULLY CONFRONT THE ASSESSEES ABOVE VERSION. IT IS TRUE THAT THE ASSESSING OFFICER HAS SIMPLY ESTIMATE D THE VALUE OF THESE ITEMS WITHOUT ANY BASIS AS AGAINST WHICH THE CLAIM OF THE ASSESSEE SEEMS TO BE MORE PLAUSIBLE. SINCE THE ASSESSEE HAS ALREADY ADMITTED INCOME ON ACCOUNT OF THESE TWO ITEMS, NO FURTHER AD DITION CAN BE MADE IN THIS ACCOUNT. CONSEQUENTLY, WE ORDER TO DE LETE THIS ADDITION AND ALLOW GROUND NO.3 OF THE CROSS OBJECTION. 51. THE LAST ISSUE RAISED VIDE GROUND NO.4 IS IN REGAR D TO ADDITION OF ` 3,09,080/- MADE ON ACCOUNT OF UNACCOUNTED SALES. DURING SURVEY, CERTAIN BOOKS OF ACCOUNT AND LOOSE SHEETS W ERE FOUND AND SEIZED. SHRI LALITH KUMAR GALADA APPEARED ON BEHAL F OF THE ASSESSEE ON 7.12.2007 AND EXPLAINED THE SEIZED MATERIAL IN T HE LIGHT OF BOOKS OF ACCOUNT. THE EXPLANATION WAS FILED IN WRITING CONT AINING SEVEN PAGES. DURING ASSESSMENT PROCEEDINGS, THE ASSESSEE ADMITTE D SOME DOCUMENTS WHICH ARE OSTENSIBLY ESTIMATE-SLIPS CONTA INING SALES MADE DURING FINANCIAL YEAR 2005-06. ON THESE LOOSE SHEE TS, NAMES AND AMOUNTS ARE MENTIONED. THE ASSESSING OFFICER DID N OT FIND ASSESSEES ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 84 - : EXPLANATION AS CONVINCING. THEREFORE, AS PER THE T ABLE EXTRACTED IN ASSESSING OFFICERS ORDER, THE EXPLANATION OF THE A SSESSEE THAT WHEN A CUSTOMER VISITS THE SHOWROOM AND SELECTS CERTAIN IT EM OF JEWELLERY, A PRIMA-FACIE, ROUGH COST OF ARTICLE IS MADE WHICH I S FURTHER BARGAINED UPON. IT WAS FURTHER STATED THAT THE CUSTOMER MAY OR MAY NOT ACCEPT THE PROPOSED PRICE OF THE JEWELLERY ITEM AND FROM S UCH SLIPS WHICH ARE FOUND DURING SEARCH/SURVEY IT IS NOT POSSIBLE TO SA Y WHETHER THAT PARTICULAR ITEM WAS ACTUALLY SOLD OR NOT SOLD. SIN CE THE ASSESSING OFFICER WAS NOT AGREEABLE, HE HAS MADE THE IMPUGNED ADDITION IN ASSESSMENT YEARS 2004-05 TO 2006-07. IN ASSESSMEN T YEAR 2006-07, ADDITION OF ` 3,09,080/- HAS BEEN MADE ON ACCOUNT OF UNDISCLOSED SALES. THE LD. CIT(A) HAS ALSO CONFIRMED THIS ADDI TION. 52. AFTER HEARING THE RIVAL SUBMISSIONS, WE AGREE W ITH THE LD.CIT(A). IN FACT THE SIMILAR GROUND RAISED BY SH RI A. SURENDRA KUMAR GALADA IN CO NO. 15/MDS/2009 WAS NOT SERIOUSLY PRES SED AND WAS REJECTED VIDE PARA 25 ABOVE. MOREOVER WHILE CONSIDE RING THE CASH FLOW IN THE CASE OF THE ASSESSEE WE HAVE OBSERVED IN PAR A 36 THAT LOOSE - SHEETS COUPLED WITH STATEMENT OF THE ASSESSEE CANNO T BE LIKELY IGNORED AND BRUSHED ASIDE. SINCE THE ASSESSEE SEEMS TO BE INDULGING IN PURCHASE AND SALE OUTSIDE THE BOOKS OF ACCOUNT AND CERTAIN LOOSE SHEETS WERE FOUND DURING THE ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 85 - : SEARCH/SURVEY WHICH ESTABLISHED THAT ASSESSEE WAS PURCHASING AND SELLING JEWELLERY OUTSIDE THE BOOKS OF ACCOUNT. IN VIEW OF THIS WE CONFIRM THE UNDISCLOSED SALES ARRIVED AT ON THE BASIS OF THE LOOSE SLIPS FOUND. THIS FIND ING IS ALSO IN CONFORMITY WITH THE FINDINGS GIVEN IN PARA 36 WIT H REFERENCE TO THE MODUS OPERANDI OF THE ASSESSEE 53. IN THE RESULT, THE CROSS OBJECTION STANDS PARTLY AL LOWED. I.T.A.NO. 1293 & 1294/MDS/09 54. THESE TWO APPEALS BY THE ASSESSEE, ABIRCHAND GALADA (HUF), FOR ASSESSMENT YEARS 2004-05 AND 2005-06, ARE DIRECTED AGAINST THE COMMON ORDER OF THE LD. CIT(A), DATED 1.7.2009. T HE COMMON GROUNDS RAISED IN THESE APPEALS CAN BE READ AS UNDE R: THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEA LS) II, CHENNAI, IN ITA NO. 106 & 107 / 07-08 DATED 01-07- 2009, IT IS SUBMITTED, IS OPPOSED TO LAW, FACTS AND CIRCUMSTANCES OF THE CASE. THE LEARNED COMMISSIONER OF INCOME-TAX (.APPEALS) ERRED IN UPHOLDING THE ADDITION OF ` 642,824 UNDER THE HEAD 'UNDISCLOSED SALES' . THE LEARNED COMMISSIONER OF INCOME-TAX FAILED TO, N OTE THAT THE ADDITION MADE BY THE ASSESSING OFFICER WA S BASED ON CERTAIN LOOSE SLIPS FOUND AT THE APPELLANT'S SHOP, AND SUCH SLIPS DID NOT ACTUALLY REPRESENT SAL E BILLS, BUT WERE ONLY ESTIMATE SLIPS PROVIDED TO THE CUSTO MERS ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 86 - : THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT PROVIDING ESTIMATE S LIPS TO PROSPECTIVE PURCHASERS WHEN THEY VISIT THE JEWEL!ER Y SHOPS IS A TRADE PRACTICE PREVALENT AMONG IEWELLERY SHOPS, AND THEREFORE THE JOTTINGS IN SUCH SLIPS CAN NOT BE TREATED AS SALES EFFECTED BY THE APPELLANT FOR THESE AND OTHER GROUNDS WHICH THE APPELLANT MAY BE PERMITTED TO ADDUCE AT THE TIME OF THE APPEAL, IT I S PRAYED, THE ORDER OF THE LEARNED COMMISSIONER OF INCOME- TAX(APPEALS) MAY BE SET ASIDE, AND JUSTICE RENDERED . 55. CONSEQUENT UPON THE SAME SEARCH, A NOTICE U/S 153A WAS ISSUED TO THE ASSESSEE AND ORDERS U/S 153C/153A R.W.S 143( 3) OF THE ACT WERE PASSED FOR ASSESSMENT YEARS 2004-05 AND 2005-0 6. IN THE ASSESSMENT ORDERS ADDITION ON ACCOUNT OF UNDISCLOSE D SALES WERE MADE IN BOTH THE YEARS. THE ASSESSEE WAS AGGRIEVED AND PREFERRED FIRST APPEAL. THE LD. CIT(A) WAS NOT AGREEABLE WITH THE ASSESSEE AND, THEREFORE, HAS SUSTAINED THE IMPUGNED ADDITIONS. 56. BEFORE US IT WAS ARGUED THAT THE ADDITIONS HAVE BEE N MADE IN BOTH YEARS ONLY ON THE BASIS OF SOME LOOSE SHEETS WHICH WERE SEIZED AT THE TIME OF SEARCH FROM THE BUSINESS PREMISES, W HICH ARE DETAILED AT PAGES 2,3 & 4 OF THE ASSESSMENT ORDER. THE CONTENT ION OF THE ASSESSEE IS THAT IT IS A CUSTOM/PRACTICE PREVALENT IN THE JEWELLERY BUSINESS THAT WHEN A PROSPECTIVE BUYER COMES TO THE SHOP, HE WILL INFORM THE SALESMAN ABOUT HIS REQUIREMENTS AND A LSO DEMAND A FAIR ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 87 - : ESTIMATE REGARDING WEIGHT AND VALUE OF THE ARTICLE S OF JEWELLERY HE PROPOSES TO PURCHASE. IN THE ORDINARY COURSE OF BU SINESS, MANY CUSTOMERS WOULD ASK FOR A COPY OF ESTIMATE SLIP WHI CH HE MAY TAKE HOME WITH AN UNDERSTANDING TO COME BACK AFTER CONS ULTING HIS FAMILY MEMBERS, ETC. A COPY OF SUCH A SLIP SO GIVEN TO TH E PROPOSED CUSTOMER IS RETAINED IN THE SHOP. SUCH SLIPS WERE FOUND IN THE SHOP AND ON THE BASIS OF WHICH THE ASSESSING OFFICER HAS ESTIMATED THE UNACCOUNTED SALES IN BOTH THESE YEARS. ACCORDING T O THE ASSESSEE, THIS SLIP DOES NOT AT ALL A SALE BILL. THE STATEMENT OF SHRI LALITH KUMAR GALADA WAS RECORDED IN THIS REGARD. THE ASSESSING OFFICER, WITHOUT LOOKING INTO THE ANSWER RELEVANT TO SUCH QUESTION, HAS PROCEEDED TO MAKE ADDITIONS ON THE BASIS OF SLIP NO.64 BY TREATI NG THE AMOUNT RECORDED THEREON AS ASSESSEES UNACCOUNTED SALES AN D THE ASSESSING OFFICER HAS TOTALLY REFUSED TO GIVE CREDENCE TO THE PREVAILING PRACTICE/CUSTOMS IN THIS LINE OF BUSINESS. IN OUR CONSIDERED OPINION, THE CLAIM OF THE ASSESSEE IS TO BE REJECTED IN THE LIGHT OF OUR FINDINGS IN A.Y. 2006-07 VIDE PARA 52 ABOVE. THEREFORE TH IS GROUND IS DISMISSED. 57. IN THE RESULT, BOTH THE APPEALS STAND DISMISSED. I.T.A.NO. 1482/MDS/08 & C.O 13/MDS/09 ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 88 - : 58. THE APPEAL OF THE REVENUE AND THE CROSS OBJECTION BY THE ASSESSEE, SHRI A.LALITH KUMAR GALADA, ARE DIRECTED AGAINST THE ORDER OF THE LD. CIT(A), DATED 3.4.2008. 59. IN REVENUES APPEAL, FOLLOWING GROUNDS HAVE BEEN R AISED. 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRA RY TO LAW AND FACTS OF THE CASE. 2. THE LEARNED CIT(A) ERRED IN DELETING THE ADDIT ION OF ` 25,21,365/ BEING ADDITION MADE TOWARDS UNDISCLOSED INVESTMENT IN DIAMOND JEWELLERY. 3. THE CIT(A) ERRED IN GIVING ALLOWANCE FOR THE JEWELLERY DECLARED UNDER VDIS WHEN THE SAME WAS SHOWN IN THE TRIAL BALANCE FOR THE SUBSEQUENT YEARS. 4. THE CIT(A) FAILED TO APPRECIATE THE FACT THAT THE LAST WEALTH TAX FILED WAS FOR THE ASSESSMENT YEAR 1986- 87 AND THE SAME WAS NOT SHOWN IN THE OPENING BALANCE IN ANY OF THE TRIAL BALANCE FILED FOR THE SUBSEQUENT YEARS. 5. THE CIT(A) ERRED IN DELETING THE VALUE OF DIAMOND ADDED BASED ON THE MATERIAL FOUND IN THE COURSE OF SEARCH. 6. THE CIT(A) OUGHT TO HAVE APPRECIATED THE FA CT THAT THE ASSESSEE HIMSELF HAS ACCEPTED PART OF THE DETAILS A ND CLAIMED RELIEF BASED ON THE SAME, IN WHICH CASE THE EVIDENTIARY VALUE OF THIS DETAIL CANNOT BE IGNORED. 7. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDU CED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 60. THE ONLY ISSUE RAISED IN REVENUES APPEAL IS REGARD ING DELETION OF ADDITION OF ` 25,21,365/- MADE ON ACCOUNT OF UNDISCLOSED ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 89 - : INVESTMENT IN DIAMOND JEWELLERY. THE FACTS APROPOS THIS ISSUE ARE THAT TOTAL DIAMOND FOUND AT THE RESIDENCE OF THE ASSESSE E WAS 139.037 CARATS. THE ASSESSEE, SHRI LALITH KUMAR GALADA HAD EXPLAINED THIS JEWELLERY. WHILE REPLYING QUESTION NO.6 IN HIS STA TEMENT RECORDED ON 20.5.2005, HE STATED THAT CERTAIN QUANTITY OF DIAMO ND WAS ACTUAL STOCK OF T.B JEWELLERY. A DEFICIT STOCK OF 42.382 CT DIAM ONDS WAS FOUND COMPARED TO BOOKS OF ACCOUNT. THE ASSESSING OFFICE R HAS WORKED OUT THE QUANTITY OF DIAMONDS BELONGING TO SHRI LALITH KUMAR GALADA AT 96.655 CARAT. IN THE DATA FOUND FROM CD, 68 CARAT OF DIAMONDS WAS FURTHER NOTICED. THUS, TOTAL DIAMONDS BELONGING TO SHRI LALITH KUMAR GALADA COMES TO 164.655 CARATS. THE ASSESSING OFFI CER HAS TREATED TOTAL 164.655 CARATS AS ACTUALLY FOUND ON 20.5.20 05. IN THIS WAY, HE HAS WORKED OUT EXCESS DIAMONDS FOUND AT 68.145 CARA TS. HE HAS TAKEN THE RATE AT ` 37,000/- PER CARAT, AS ON DATE OF SEARCH, AND HAS ARRIVED AT ITS VALUE AT ` 25,21,365/-. BY TREATING THIS AMOUNT AS UNDISCLOSED INVESTMENT OF THE ASSESSEE, IN FINANCIA L YEAR 2005-06, ON ACCOUNT OF DIAMONDS, HE HAS MADE THIS ADDITION. BE FORE THE LD. CIT(A), IT WAS EXPLAINED THAT THE ASSESSING OFFICER HAS NOT CORRECTLY DETERMINED THE QUANTUM OF UNACCOUNTED DIAMONDS OWNE D BY THE ASSESSEE. IT WAS STATED THAT THE ASSESSING OFFICER HAD FAILED TO NOTE THAT THE ASSESSEE HAD BEEN FILING WEALTH TAX RETURN S AND HAS BEEN ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 90 - : FURNISHING THEM YEAR AFTER YEAR, IN WHICH HE HAS AD MITTED THE POSSESSION OF DIAMOND JEWELLERY WHICH HAS BEEN ENTI RELY IGNORED BY THE ASSESSING OFFICER. IT WAS ARGUED THAT THE ASSE SSING OFFICER HAS SIMPLY IGNORED THE DOCUMENTARY EVIDENCE IN THE FORM OF VDIS FILED AND ACCEPTED BY THE DEPARTMENT IN THE HANDS OF THIS ASS ESSEE, HIS HUF AND WIFE IN THE YEAR 1997. IT WAS ALSO ARGUED THAT HE ASSESSING OFFICER HAS ERRED IN CONCLUDING THAT 68 CARATS OF D IAMOND JEWELLERY HAD BEEN DEPOSITED WITH M/S T.B JEWELLERY. SUCH A CONC LUSION OF THE ASSESSING OFFICER IS WITHOUT BASIS AND SIMPLY BASED ON HIS PRESUMPTIONS. THE LD. CIT(A) HAS CONSIDERED THESE SUBMISSIONS AND HAS GIVEN DUE CREDIT TO THESE VALID DOCUMENTS AND H AS COME TO A CONCLUSION THAT NO SUCH ADDITION CAN BE MADE ON TH E BASIS OF SLIGHT DIFFERENCE NOTICED BETWEEN THE EXPLAINED QUANTITY O F DIAMOND AND THE TOTAL QUANTITY OF DIAMOND FOUND. NOW, THE REVENUE IS AGGRIEVED AND HAS REPEATED THE SAME REASONS WHICH HAVE BEEN GIVEN BY THE ASSESSING OFFICER IN HIS ORDER. THE LD.AR HAS RELI ED ON APPELLATE FINDINGS. 61. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE C AREFULLY PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS AN UNDENIABLE AND UNDISPUTED FACT THAT ON THE DATA FOUND IN CD, THE I NFORMATION AVAILABLE IS REGARDING PROPOSED DEPOSIT WHICH WAS PROPOSED TO BE DEPOSITED BY ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 91 - : SRI LALITH KUMAR GALADA(INDIVIDUAL), LALITH KUMAR G ALADA (HUF) AND SMT ILLA GALADA. BUT IN THE BOOKS OF ACCOUNT OF T.B .JEWELLERY UNDENIABLY, NO SUCH CREDIT HAS BEEN FOUND. THUS, W E ARE IN AGREEMENT WITH THE LD. CIT(A) AS WELL AS THE LD.AR THAT ADDITION OF 68 CARAT DIAMONDS BASED ON THE INFORMATION AVAILABLE O N THE CD CANNOT BE DEFINITELY SAID TO BE IN THE POSSESSION OF THI S ASSESSEE AND HAVING BEEN GIVEN TO T.B.JEWELLERY. WHEN TWO VIEWS FROM O NE SET OF FACTS ARE POSSIBLE, THE VIEW FAVOURING THE ASSESSEE HAS T O BE ACCEPTED AS PER THE SETTLED POSITION OF LAW BY THE HON'BLE APEX COURT. THUS, THE TOTAL QUANTITY OF DIAMONDS FOUND DURING SURVEY HAS TO BE TAKEN AT 96.655 CARATS ONLY. THE ASSESSEE HAS SUBMITTED T HAT CERTAIN AMOUNT OF CARATS OF DIAMONDS WERE DECLARED IN VDIS BY HIM AND HIS FAMILY MEMBERS AND CERTAIN ITEMS HAD BEEN DECLARED IN WEAL TH TAX RETURNS OF SHRI LALITH KUMAR GALADA AND SOME ITEMS BY SMT. ILL A GALADA. THESE DOCUMENTARY PROOFS WERE NOT CONSIDERED AT ALL BY TH E ASSESSING OFFICER. THIS ACTION OF THE ASSESSING OFFICER CANN OT BE JUSTIFIED AT ALL UNLESS HE DISPROVES THE CLAIM OF THE ASSESSEE. THE ASSESSEE HAS CLAIMED THE FOLLOWING AMOUNT OF CARATS DECLARED OR DISCLOSED BY THEM AND PURCHASED BY HIS WIFE AS UNDER: ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 92 - : DECLARATION IN VDIS OF SHRI LALITH GALADA 29.72 CTS DECLARATION IN VDIS BY LALITH GALADA(HUF) 30.00 C TS DECLARATION IN VDIS BY SMT. ILLA GALADA 29.59 CTS AS PER WEALTH TAX RETURN OF SHRI LALITH GALADA 5.70 CTS PURCHASED BY SMT ILLA GALADA 7.20 CTS ------------- 102.20 CTS ------------- 62. IN THIS WAY, THE POSSESSION OF DIAMOND JEWELLERY CO MES TO MORE THAT WHAT WAS FOUND DURING SURVEY AT 164.655 CTS. THEREFORE, WE ARE UNABLE TO UNDERSTAND HOW THE IMPUGNED ADDITION CAN BE MADE. WE DO NOT FIND ANY FAULT IN THE FINDING OF THE LD. CIT (A) IN THIS REGARD AND CONFIRM THE SAME. 63. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DIS MISSED. 64. IN THE CROSS OBJECTION, THE CONNECTED ISSUE HAS BEE N RAISED VIDE GROUND NO.1 & 2 WHICH READ AS UNDER: 1. THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN CONFIRMING THE ADDITION OF ` 4,32,900 WHICH WAS ADDED BY THE ASSESSING AUTHORITY ON ACCOUNT OF THE CASH F OUND DURING THE COURSE OF THE SEARCH. THE APPELLANT HAS EXPLAINED THE SOURCE OF HE CASH. THE CASH BALANCE AS PER BOOKS AS WELL AS CASH BALANCE OF LG INTERNATIO NAL WHO IS ENGAGED IN FINANCE BUSINESS HAVE NOT BEEN CONSIDERED WHILE WORKING OUT THE CASH BALANCE. 2. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED I N CONFIRMING THE ADDITION OF ` 10,610 OUT OF THE ADDITION OF ` 30,610 ON ACCOUNT OF THE DEPOSITS IN THE BANK ACCOU NTS OF THE MINOR DAUGHTERS. HE ERRED IN RESTRAINING THE ALLOWANCE TO ` 10,000 EACH AND DISALLOWING THE BALANCE. ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 93 - : 65. DURING SEARCH AT THE RESIDENCE OF SHRI LALITH KUMAR GALADA, CASH OF ` 5,63,000/- WAS FOUND. IN HIS STATEMENT RECORDED O N 20.5.2005, WHILE REPLYING TO QUESTION NO.11, HE EXPLAINED THE SOURCE OF THIS CASH TO BE FROM M/S T.B.JEWELLERY AND GIFTS AND FINALLY HE OFFERED ` 4 LAKHS IN TOTAL TOWARDS CASH FOUND DURING SEARCH. IN HIS RETURNS FILED ON 27.9.2007 FOR ASSESSMENT YEAR 2006-07, HE EXPLAINED THE SOURCE BY WAY OF A NOTE APPENDED TO THE RETURN AS UNDER: THERE WAS AN EXCESS OF CASH OF ` 3,71,300/- WHICH WAS WORKED OUT BASED ONLY ON THE PERSONAL BOOKS OF SHR I LALITH KUMAR GALADA. BUT SHRI LALITH KUMAR GALADA IS ALSO THE PROPRIETOR OF L.G INTERNATIONAL IN WHOSE BOOKS THER E WAS A CASH BALANCE OF ` 5,03,581/- WHICH WAS NOT CONSIDERED WHILE WORKING OUT THE EXCESS CASH. THE DIFFERENCE WAS ADJUSTED AGAINST CREDITORS. 66. AFTER CONSIDERING THE ENTIRE FACTS, THE ASSESSING OFFICER HAS MADE ADDITION OF ` 4,32,900/- ON ACCOUNT OF CASH FOUND BY TREATING IT AS INCOME OF THE ASSESSEE OF THE FINANCIAL YEAR 2 005-06. THIS ADDITION WAS ALSO CONFIRMED BY THE LD. CIT(A). 67. THE CASE OF THE ASSESSEE IS THAT THE CALCULATION MA DE BY THE ASSESSING OFFICER REGARDING EXCESS CASH IS NOT CORR ECT BECAUSE HE HAS FAILED TO NOTE THAT THE ASSESSEE IS THE PROPRIETOR OF A CONCERN NAMELY, LG INTERNATIONAL, WHICH DOES FINANCE BUSINESS AND I N THE SAID BUSINESS ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 94 - : AS PER THE BOOKS OF ACCOUNT MAINTAINED, THERE WAS A CASH BALANCE OF ` 5,03,581/-. THIS EXPLANATION WAS GIVEN TO THE ASSE SSING OFFICER EVEN AT THE TIME OF ASSESSMENT PROCEEDINGS. BUT THE ASS ESSING OFFICER DID NOT ACCEPT THIS EXPLANATION IN VIEW OF THE STATEMEN T GIVEN BY THE ASSESSEES BROTHER. SO, IT WAS ARGUED THAT THE ST ATEMENT OF ASSESSEES BROTHER HAS NO RELEVANCE TO EXPLAIN THE CASH FOUND AT THE TIME OF SEARCH. ON THE CONTRARY, THE CASE OF THE REVENUE IS THAT THIS ADDITION IS BASED ON PHYSICAL AVAILABILITY OF CASH WHICH COULD NOT BE EXPLAINED BY THE ASSESSEE. WHEN WE EXAMINED THE AP PELLATE ORDER, THE LD. CIT(A) HAS NOT GIVEN ANY REASONS TO CONFIR M THIS ADDITION. HE HAS WRITTEN I HAVE EXAMINED THE FACTS OF THE CASE. ON EXAMINAT ION, IT IS FOUND THAT THE FINDING OF THE A.O IS FLAWLESS HENCE THIS ADDITION IS BEING CONFIRMED . NOWHERE IT HAS BEEN REFUTED BY THE REVENUE TH AT THE ASSESSEE IS NOT THE PROPRIETOR OF LG INTERNATIO NAL, WHICH DOES FINANCE BUSINESS. AS PER THE BOOKS MAINTAINED, CAS H BALANCE OF ` 5,03,581/- WAS AVAILABLE ON THE DATE OF SEARCH. TH E ASSESSING OFFICER HAS NEITHER REJECTED THIS EXPLANATION NOR SAID ANYT HING ABOUT THIS. THE AVAILABILITY OF CASH IN RESPECT OF INDIVIDUAL MEMB ERS OF THE FAMILY AND THE (HUF) HAS BEEN ACCEPTED AT ` 1,30,100/-. IF THESE TWO AMOUNTS ARE ADDED, IT COMES TO ` 6,33,681/-. THUS, THE AVAILABILITY OF CASH OF ` 5,63,000/- FOUND DURING SEARCH/SURVEY CLEARLY STAND S EXPLAINED. ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 95 - : THEREFORE, WE FIND THE CASH EXPLAINED AND HENCE WE ORDER TO DELETE THE ENTIRE ADDITION MADE IN THIS REGARD. 68. THE OTHER LIMB OF GROUND RAISED IN THE CROSS OBJECT ION IS REGARDING ADDITION OF ` 30,600/- ON ACCOUNT OF DEPOSITS IN THE BANK ACCOUNT OF MINOR DAUGHTERS. THE ASSESSEE HAS GOT T WO MINOR DAUGHTERS NAMELY, MS. POOJA GALADA AND MS. SAKSHI G ALADA. DURING SEARCH, EVIDENCE WAS FOUND THAT THESE TWO MINORS WE RE MAINTAINING TWO SAVINGS BANK ACCOUNTS WITH CORPORATION BANK, T. NAGAR BRANCH, WHICH WERE NOT REFLECTED IN THE RESPECTIVE DAUGHTER S TRIAL BALANCES. THE ASSESSEE STATED THAT THESE ACCOUNTS WERE BEYOND HIS KNOWLEDGE AND HIS WIFE WAS MAINTAINING THEM. THE SOURCE OF D EPOSITS WAS STATED TO BE OUT OF GIFTS RECEIVED ON VARIOUS OCCASIONS, B UT THE ASSESSING OFFICER DID NOT BELIEVE IN THE ABSENCE OF SUPPORTI NG EVIDENCE. HE HAS TREATED THE ENTIRE AMOUNT IN ASSESSEES HANDS. BUT THE LD. CIT(A) HAS REDUCED THE ADDITION TO ` 10,610/- BY ACCEPTING THE ABOVE EXPLANATION. IN OUR OPINION, THE FINDING OF THE LD. CIT(A) IS QU ITE BALANCING AND JUSTIFIABLE. WE DO NOT FIND ANY INFIRMITY IN THE S AME AND DISMISS THIS LIMB OF THE ISSUE TAKEN BY THE ASSESSEE. 69. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED AND THE CROSS OBJECTION OF THE ASSESSEE IS PARTLY ALLOWED. ITA1482 TO 1485/08 1293 & 1294/09 C.O 13 TO 15 & 23/09 :- 96 - : 68. TO SUMMARIZE THE RESULT, I.T.A.NO.1483/MDS/08 - PARTLY ALLOWED FOR ST ATISTICAL PURPOSES C.O.NO. 14/MDS/09 - PARTLY ALLOWED FOR STATIS TICAL PURPOSES I.T.A.NO. 1484/MDS/08 - DISMISSED C.O.NO.15/MDS/09 - ALLOWED FOR STA TISTICAL PURPOSES I.T.A.NO. 1485/MDS/08 - DISMISSED C.O.NO.23/MDS/09 - PARTLY ALLOWED I.T.A.NO.1293& 1294/MDS/09 - DISMISSED I.T.A.NO. 1482/MDS/08 - DISMISSED C.O.NO.13/MDS/09 - PARTLY ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 18.4.11. SD/- SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER ( HARI OM MARATHA ) JUDICIAL MEMBER DATED: 18.04. 11 RD COPY TO: APPELLANT /RESPONDENT/CIT(A)/CIT/DR
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