Neelesh Satish Kanade, Pune V. ACIT, Central Circle-2, Pune

ITA 1702/PUN/2013

• Counselvise Citation: 170224514 RSA 2013
• Duration Of Justice: 1 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-03-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 17-10-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 06-09-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K MODI
• Assessee Lawyers: MRS DEEPA KHARE
• Keywords: Unexplained expenditure; Business income; Depreciation; Business expenditure; Search and seizure; Loose papers; Document seized; Question of law; Cost of acquisition; Corroborative evidences; Block assessment; Documents seized
• Section: 69C; 43B; 143(3); 133A; 153A; 68; 145; 132; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NOS.1702 TO 1704/PN/2013 ASSESSMENT YEARS: 2006-07 TO 2008-09 NEELESH SATISH KANADE 1073, BHOSALE MYSTIQA, MODEL COLONY, PUNE 411016 . APPELLANT PAN: AGDPK4376L VS. THE ASST. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE -2, PUNE . RESPONDENT APPELLANT BY : MRS. DEEPA KHARE RESPONDENT BY : MR. A.K. MODI DATE OF HEARING : 03-12-2014 DATE OF PRONOUNCEMENT : 03-03-2015 ORDER PER SUSHMA CHOWLA, JM: THIS BUNCH OF THREE APPEALS FILED BY THE SAME ASSES SEE ARE AGAINST THE CONSOLIDATED ORDER OF CIT(A)-CENTRAL, PUNE DATED 30 .07.2013 RELATING TO ASSESSMENT YEARS 2006-07, 2007-08 AND 2008-09 PASSED UNDER SEC TION 143(3) R.W.S. 153A OF THE INCOME-TAX ACT, 1961. 2. ALL THE APPEALS RELATING TO THE SAME ASSESSEE WE RE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR TH E SAKE OF CONVENIENCE. HOWEVER, REFERENCE IS BEING MADE TO THE FACTS AND ISSUES IN ITA NO.1702/PN/2013 TO ADJUDICATE THE ISSUE. 3. THE ASSESSEE IN ITA NO.1702/PN/2013 HAS RAISED T HE FOLLOWING GROUNDS OF APPEAL:- 1. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN DISALLOWING LOSS OF RS.6,88,171/- ARISING FROM FINIX CONSTRUCTIONS . 2. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.83,39,142/- ON ACCOUNT OF EXPENSES INCURRED BY T HE APPELLANT WHILE VALUING THE CLOSING STOCK. ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 2 3. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN DISALLOWING EXPENSES OF RS.1,14,666/- TOWARDS TELEPHONE, TRAVELLING AND PET ROL ON ACCOUNT OF PERSONAL EXPENSES. 4. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING AN AMOUNT OF RS.98,25,736/- ON ACCOUNT OF ESTIMATION OF ON-MONEY AT 30% ON PURCHASES. 5. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING AN AMOUNT OF RS.2,77,700/- ON ACCOUNT OF ON-MONEY SALES. 6. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING ADDITION OF RS.32,25,000/- ON ACCOUNT OF CASH CREDIT. 7. THE LEARNED AO ERRED IN LAW AND ON FACTS IN CONS IDERING THE SPECIAL AUDIT REPORT U/S 142(2A) WHICH WAS PASSED BEYOND THE TIME LIMIT SPECIFIED IN PROVISO TO SEC 142(2C). 8. THE APPELLANT CRAVES TO ADD, ALTER, MODIFY OR SUBST ITUTE ANY GROUND OF APPEAL AT THE TIME OF HEARING. 4. THE ISSUE IN GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE IS AGAINST THE DISALLOWANCE OF LOSS OF RS.6,88,171/- ARISING FROM FINIX CONSTRUCTIONS. 5. THE BRIEF FACTS OF THE CASE ARE THAT, SEARCH UND ER SECTION 132 OF THE ACT WAS CARRIED OUT AT THE RESIDENTIAL PREMISES OF THE ASSE SSEE AT PLOT NO.71, AMCHI COLONY, BAVDHAN, PUNE AND ALSO AT OFFICE PREMISES AT 313/B/ 1, FINIX HOUSE, SHANIWAR PETH, PUNE ON 24.02.2008. SURVEY UNDER SECTION 133A OF T HE ACT WAS ALSO CARRIED OUT AT THE ASSESSEES OFFICE PREMISES AT BHOSALE MYSTICA, MODEL COLONY, PUNE AND ALSO AT SITE OFFICE ON MUMBAI-PUNE EXPRESSWAY, PUNE ON 24.0 2.2008. DURING THE COURSE OF SEARCH, CASH, JEWELLERY AND OTHER RECEIPTS WERE FOU ND AND SEIZED BY THE SEARCH TEAM AS TABULATED AT PAGE 1 OF THE ASSESSMENT ORDER. TH E ASSESSEE WAS DEALING IN PURCHASE AND SALE OF LAND. HE WAS ALSO WORKING AS LAND AGGREGATOR FOR M/S. EDIFICE PROPERTIES PVT. LTD. AND M/S. EARN MORE CAPITAL SER VICES PVT. LTD. HAVING THEIR REGISTERED OFFICES AT MUMBAI. BOTH THE COMPANIES W ERE INTENDING TO PURCHASE NEARLY 105 ACRES OF LAND AT KIWALE AND MAMURDI LOCATED AT THE STARTING POINT OF PUNE- MUMBAI EXPRESSWAY, NEAR PUNE. THE ASSESSEE WAS AGG REGATING LANDS FOR THE COMPANIES WITH HIS TEAM THROUGH NEELESH KANADE GROU P (NKG) I.E. PROPRIETARY CONCERN OF THE ASSESSEE. ALL THE ACTIVITIES OF THE PROCUREMENT OF LAND WERE BEING CARRIED OUT BY THE ASSESSEE FROM HIS OFFICE AT FINI X HOUSE, SHANIWAR PETH, PUNE AND ALSO AT HIS SITE OFFICE AT POST & POST KIWALE, MUMB AI-PUNE EXPRESSWAY, PUNE. FURTHER, THE ASSESSEE HAD PURCHASED LARGE QUANTITY OF LAND AT FERGUSSON COLLEGE ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 3 ROAD, AT PUNE AND ALSO AT PUNAWALE, WAKAD AND SOME OF THE LANDS PURCHASED BY THE ASSESSEE WERE ALSO SOLD BY HIM. 6. DURING THE COURSE OF SEARCH, INCRIMINATING DOCUM ENTS SUCH AS PAYMENT CHARTS IN RESPECT OF THE PAYMENTS MADE TO THE SELLERS / LA ND OWNERS WERE FOUND AND SEIZED. AS PER THE SAID PAYMENT CHARTS, THE PAYMENTS FOR LA ND HAD TWO COMPONENTS I.E. PAYMENT OF AGREEMENT PRICE OF THE LAND AS INDICATED IN THE DEEDS TO BE PAID THROUGH CHEQUES AND PAYMENTS OF ON-MONEY OVER AND ABOVE THE AGREEMENT PRICE I.E. BLACK MONEY TO BE PAID IN CASH. AS PER THE ASSESSING OFF ICER, THESE PAYMENT CHARTS WERE FOUND FOR SOME OF THE PURCHASES EFFECTED BY THE ASS ESSEE IN THE BUSINESS OF NKG AND ALSO FOR THE LAND PURCHASED THROUGH HIM FOR EDI FICE PROPERTIES PVT. LTD. AND EARN MORE CAPITAL SERVICES PVT. LTD. FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD ORIGINALLY FILED THE RETURN OF INCOME DECLARING TOT AL INCOME OF RS.23,15,002/-. HOWEVER, IN RESPONSE TO THE NOTICE UNDER SECTION 15 3A OF THE ACT, THE ASSESSEE FURNISHED THE RETURN OF INCOME DECLARING TOTAL INCO ME OF RS.89,21,624/-. THE NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED AND SERV ED UPON THE ASSESSEE, IN RESPONSE TO WHICH, THE COUNSEL FOR THE ASSESSEE ATT ENDED FROM TIME TO TIME AND ALSO FURNISHED THE DETAILS. AFTER SCRUTINY OF THE RETUR N AND ACCOMPANYING DOCUMENTS, SEIZED MATERIAL AND ALSO THE BOOKS OF ACCOUNT, THE ASSESSING OFFICER WAS OF THE VIEW THAT HAVING REGARD TO THE NATURE AND COMPLEXITY OF THE ACCOUNTS OF THE ASSESSEE AND IN THE INTEREST OF REVENUE, IT WAS NECESSARY TO DIR ECT THE ASSESSEE TO GET THE ACCOUNTS AUDITED BY AN ACCOUNTANT UNDER SECTION 142 (2A) OF THE ACT. ONE OF THE ASPECTS NOTED BY THE ASSESSING OFFICER WAS THAT ORI GINALLY, THE ASSESSEE HAD FURNISHED AUDITED BALANCE SHEET AND PROFIT & LOSS A CCOUNT. HOWEVER, ALONG WITH THE RETURN FURNISHED UNDER SECTION 153A OF THE ACT, THE ACCOUNTS FURNISHED WERE UN- AUDITED AND THE REPORTS UNDER SECTION 44AB OF THE A CT WERE NOT FILED. THE ASSESSING OFFICER ALSO SHOW CAUSED THE ASSESSEE AS TO THE VAR IANCE BETWEEN THE ACCOUNTS ORIGINALLY FILED AND REVISED ACCOUNTS FILED LATER F OR ASSESSMENT YEARS 2006-07 AND 2007-08 AS TABULATED AT PAGE 3 OF THE ASSESSMENT OR DER. THE ASSESSING OFFICER NOTED THAT THERE WAS DIFFERENCE IN THE FIGURES OF B ANK OVERDRAFT ACCOUNT ALSO. ANOTHER POINT SHOW CAUSED TO THE ASSESSEE WAS THAT THE DOCU MENTS SEIZED DURING THE COURSE OF SEARCH INDICATED PAYMENTS FOR PURCHASE OF LAND O VER AND ABOVE THE CONSIDERATION ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 4 STATED IN THE PURCHASE DEED AND ALSO SEIZURE OF CER TAIN PAYMENT CHARTS FOR PURCHASE OF LAND, WHICH INDICATED CASH PAYMENTS TO THE LAND OWNERS OVER AND ABOVE THE AMOUNTS MENTIONED IN THE PURCHASE DEEDS. THE ASSES SING OFFICER ON THE EXAMINATION OF THE BANK ACCOUNTS ALSO NOTED WITHDRA WAL OF THE EXACT AMOUNTS OF SUCH CASH PAYMENTS THROUGH BEARER CHEQUES IN THE NAMES O F PAYEES. HOWEVER, IN MANY INSTANCES, THE AMOUNTS WERE RE-INTRODUCED SUBSEQUEN TLY IN THE CASH BOOK / BANK ACCOUNTS. IN REPLY, THE ASSESSEE FURNISHED WRITTEN SUBMISSIONS WHICH ARE REPRODUCED UNDER PARA 9 AT PAGES 5 TO 7 OF THE ASSESSMENT ORDE R, IN WHICH THE ASSESSEE OBJECTED TO THE REFERENCE TO SPECIAL AUDIT UNDER SE CTION 142(2A) OF THE ACT. IT WAS FURTHER POINTED OUT BY THE ASSESSEE THAT THERE WAS DIFFERENCE BETWEEN ORIGINAL AUDITED BALANCE SHEET AND PROFIT & LOSS ACCOUNT FIL ED AND THE BALANCE SHEETS FILED FOR THE SAME PERIOD AFTER THE DATE OF SEARCH SINCE THE ENTRIES ARISING OUT OF THE SEIZED DOCUMENTS WERE NOT RECORDED IN THE BOOKS OF ACCOUNT . HOWEVER, BECAUSE OF THE SAID DIFFERENCE, THE REFERENCE FOR SPECIAL AUDIT UNDER S ECTION 142(2A) OF THE ACT WAS CHALLENGED BY THE ASSESSEE SINCE RECONCILIATION OF ALL THE AMOUNTS AND THE DOCUMENTS ALONG WITH FUNDS FLOW STATEMENT WERE SUBM ITTED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICER HOWEV ER, MADE A REFERENCE TO THE CIT(CENTRAL), PUNE SEEKING HIS APPROVAL FOR ISSUING DIRECTIONS UNDER SECTION 142(2A) OF THE ACT, WHO IN TURN, VIDE LETTER DATED 29.12.20 09 ACCORDED THE SANCTION FOR REFERRING THE CASE TO THE SPECIAL AUDITOR. IN VIEW THEREOF, THE ASSESSEE WAS DIRECTED TO GET HIS ACCOUNTS AUDITED FROM THE SPECIAL AUDITO R. AFTER CONSIDERING THE REPORT OF THE SPECIAL AUDITOR, DETAILED QUESTIONNAIRE WAS ISS UED TO THE ASSESSEE, WHICH WAS REPLIED TO BY THE ASSESSEE. SUBSEQUENT TO WHICH, C ERTAIN ADDITIONS WERE MADE IN THE HANDS OF THE ASSESSEE ON ACCOUNT OF DIFFERENT ISSUE S WHICH, WE SHALL DEAL WITH IN THE PARAS HEREIN BELOW. 7. THE FIRST ISSUE RAISED BY THE ASSESSEE WAS AGAIN ST THE NON-ALLOWANCE OF THE LOSS ARISING FROM FINIX CONSTRUCTIONS. THE ASSESSE E WAS A PROPRIETOR OF THE BUSINESS RUN UNDER THE NAME AND STYLE FINIX CONSTRUCTIONS, U NDER WHICH IT CLAIMED A LOSS OF RS.8,12,631/-. THE ASSESSING OFFICER NOTED THAT TH E PROFIT & LOSS ACCOUNT OF THE SAID CONCERN REVEALED THAT THERE WERE NO TRANSACTIONS OF PURCHASE OR SALE DURING THE YEAR. THE LOSS CLAIMED WAS ENTIRELY ON ACCOUNT OF CLAIM O F DEPRECIATION OF RS.1,24,460/- ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 5 AND BANK INTEREST OF RS.6,88,171/-. THE ASSESSEE W AS SHOW CAUSED TO JUSTIFY AS TO WHY THE CLAIM OF THE INTEREST SHOULD BE ALLOWED AS THE USER OF THE LOANS FOR THE PURPOSE OF BUSINESS HAD NOT BEEN ESTABLISHED. FURT HER, THE INTEREST WAS ALSO PROPOSED TO BE DISALLOWED AS IT WAS A CONTINGENT LI ABILITY AS POINTED OUT BY THE SPECIAL AUDITOR. IN REPLY, THE ASSESSEE POINTED OUT THAT T HE SAID CONCERN WAS ENGAGED IN CONSTRUCTION BUSINESS IN THE EARLIER YEARS AND THE LOAN WAS TAKEN BY THE ASSESSEE. THE SPECIAL AUDITOR ALSO OBJECTED TO THE ALLOWANCE OF THE SAID INTEREST AS ACCORDING TO HIM, THE SAID LIABILITY WAS A CONTINGENT LIABILITY. THE SPECIAL AUDITOR NOTED THAT NO INTEREST HAS BEEN PAID TO THE BANK, BUT SUM OF RS.6 ,88,171/- WAS DEBITED FROM YEAR TO YEAR TO THE PROFIT & LOSS ACCOUNT AND THE AMOUNT PA YABLE TO THE BANK I.E. THE CURRENT LIABILITY HAD INCREASED OVER THE YEARS, BUT THE AMO UNT OF INTEREST DEBITED TO THE PROFIT & LOSS ACCOUNT FROM YEAR TO YEAR WAS THE SAME. HE FURTHER WAS OF THE VIEW THAT SINCE NO INTEREST WAS BEING PAID, THE ACCOUNT COULD HAVE BECOME NON-PERFORMING ACCOUNT, ON WHICH THE BANK WOULD BE CHARGING NO INT EREST. IN VIEW THEREOF, AS PER THE SPECIAL AUDITOR, SUM OF RS.6,88,171/- TOWARDS INTER EST DEBITED TO THE PROFIT & LOSS ACCOUNT SHOULD BE DISALLOWED. 8. IN REPLY, THE ASSESSEE EXPLAINED THAT THE INTERE ST WAS PAYABLE TO SHRI SUVARNA SAHAKARI BANK LTD., WHICH WAS NOT COVERED UNDER THE PROVISIONS OF SECTION 43B OF THE ACT AS THE BANK WAS NOT A SCHEDULED BANK. THE NEXT PLEA RAISED BY THE ASSESSEE WAS THAT EVEN IF THE ACCOUNT WAS NPA, THE AMOUNT AL WAYS REMAINED TO BE PAYABLE BY THE ASSESSEE AND WHERE THE ASSESSEE WAS MAINTAINING THE BOOKS OF ACCOUNT ON MERCANTILE BASIS, THE PROVISION OF INTEREST PAYABLE WAS MADE IN THE BOOKS OF ACCOUNT. THE ASSESSING OFFICER REJECTING THE CONTENTION OF T HE ASSESSEE AND IN VIEW OF THE ASSESSEE DEBITING SAME AMOUNT OF INTEREST I.E. 6,88 ,171/- IN ASSESSMENT YEARS 2006- 07 AND 2007-08 AND ALSO IN ASSESSMENT YEAR 2008-09, HELD THAT THE DEBIT WAS NOT TOWARDS AN ASCERTAINED LIABILITY, BUT TOWARDS CONTI NGENT LIABILITY. THE ASSESSING OFFICER ALSO NOTED THE FACT THAT IN MARCH, 2009 AS A ONE TIME SETTLEMENT (OTS), THE ENTIRE LOAN WAS CLEARED BY PAYMENT OF ONLY RS.61,82 ,814/- AND INTEREST OUTSTANDING AS ON 31.03.2008 WAS RS.87,53,708/-. ACCORDINGLY, THE CLAIM OF THE ASSESSEE WAS DISALLOWED BEING A CONTINGENT LIABILITY. THE ASSES SING OFFICER ALSO NOTED THE ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 6 ADMISSION OF THE ASSESSEE THAT THE LOAN HAD BECOME NPA AND NO INTEREST WAS BEING CHARGED BY THE BANK. 9. THE CIT(A) WAS OF THE VIEW THAT EXPENDITURE RELA TING TO THE BUSINESS COULD BE ALLOWED AS DEDUCTION ONLY IF THE BUSINESS HAD ACTUA LLY BEING CARRIED ON AT ANY TIME DURING THE PREVIOUS YEAR. IN VIEW THEREOF, WHERE T HE ASSESSEE WAS NOT CARRYING ON ANY BUSINESS, THE CIT(A) HELD THAT THE SAID ITEMS O F EXPENDITURE WERE NOT ALLOWABLE IN THE HANDS OF THE ASSESSEE. SINCE THE LOAN HAD BECO ME NPA AND NO INTEREST WAS CHARGED BY THE BANK, THE CIT(A) WAS OF THE VIEW THA T THE INTEREST ON THE SAID NPA LOAN DID NOT MEET THE STANDARDS OF EXPENDITURE ACTU ALLY INCURRED DURING THE YEAR AND WAS NOT ALLOWABLE AS BUSINESS EXPENDITURE. 10. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF CIT(A) AND IT WAS THE CONTENTION OF LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT ADMITTEDLY, NO CONSTRUCTION ACTIVITY WAS CARRIED ON BY THE ASSESSE E DURING THE YEAR UNDER CONSIDERATION, BUT THERE IS NOTHING ON RECORD TO ES TABLISH THAT THE PROPRIETARY BUSINESS HAD STOPPED. IT WAS THE CONTENTION OF THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT THE ASSESSEE WAS CONTINUING THE BUSIN ESS. FURTHER, IT WAS POINTED OUT BY HER THAT THE LOAN OBTAINED FROM THE BANK WAS IN THE EARLIER YEARS AND THE AMOUNT OF INTEREST HAD ACCRUED ON SUCH LOANS. MERELY BECA USE THE LOAN HAD BECOME NPA AND WAS TREATED AS SUCH BY THE BANK, DOES NOT MAKE THE LIABILITY AS CONTINGENT. ANOTHER ASPECT OF THE ISSUE POINTED OUT BY THE LEAR NED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE WAS THAT THE FACT OF ONE TIME SETTLEME NT REFLECTS THAT LIABILITY EXISTS. THE CONTENTION OF THE CIT(A) THAT THE SAID LOAN WAS NOT USED FOR BUSINESS, WAS CLAIMED BY THE LEARNED AUTHORIZED REPRESENTATIVE FO R THE ASSESSEE TO BE INCORRECT AS THE LOAN WAS TAKEN IN THE EARLIER YEARS AND INTERES T PAID THEREON WAS ALLOWED THOUGH IN THE ASSESSMENT PROCEEDINGS COMPLETED UNDER SECTI ON 143(1) OF THE ACT. IT WAS FURTHER POINTED OUT BY THE LEARNED AUTHORIZED REPRE SENTATIVE FOR THE ASSESSEE THAT THERE WAS DIFFERENCE BETWEEN CESSATION OF BUSINESS AND BUSINESS NOT BEING CARRIED ON DURING THE YEAR. 11. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ON THE OTHER HAND PLACED RELIANCE ON THE ORDER OF CIT(A) AND POINTED OUT THAT THERE WAS NO MOVEMENT ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 7 AND THERE WAS NO ACTIVITY OF BUSINESS, HENCE, THE I NTEREST PAID ON THE LOAN ACCOUNT WHICH HAD BECOME NPA WAS NOT ALLOWABLE AS AN EXPEND ITURE. IT IS ALSO POINTED OUT BY THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE THAT THE LIABILITY WAS NOT AN ASCERTAINED LIABILITY. 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD CLAIMED LOS S FROM HIS PROPRIETARY CONCERN I.E. M/S. FINIX CONSTRUCTIONS. ADMITTEDLY, DURING THE Y EAR UNDER CONSIDERATION, NO BUSINESS RECEIPTS WERE SHOWN BY THE ASSESSEE. THE CLAIM OF THE ASSESSEE WAS THAT IT WAS ENGAGED IN THE CONSTRUCTION ACTIVITY, BUT FO R THE CAPTIONED ASSESSMENT YEAR THOUGH THE BUSINESS WAS CONTINUING, BUT THERE WERE NO RECEIPTS FROM THE PROPRIETARY BUSINESS. THE ISSUE BEFORE US IS IN RELATION TO TH E ALLOWABILITY OF THE EXPENDITURE CLAIMED TO HAVE BEEN INCURRED IN THE YEAR UNDER APP EAL. THE ASSESSEE HAD OBTAINED LOAN FROM SRI SUVARNA SAHAKARI BANK LTD. IN THE EAR LIER YEARS AND SUM OF RS.6,88,171/- WAS DEBITED AS INTEREST DUE ON SUCH L OAN. THE ASSESSEE IN THE PRECEDING YEARS AND ALSO IN THE SUCCEEDING YEARS HA D DEBITED SAME AMOUNT OF INTEREST I.E. RS.6,88,171/- AS INTEREST PAYABLE TO THE BANK. THE CLAIM OF THE ASSESSEE WAS THAT THE SAID INTEREST WAS NOT TO BE DISALLOWED UNDER THE PROVISIONS OF SECTION 43B OF THE ACT SINCE THE BANK WAS NOT A SCHEDULED B ANK. ANOTHER ISSUE RAISED BY THE ASSESSEE WAS THAT EVEN WHERE THE ACCOUNT HAD BECOME NPA, THE RECOGNITION OF THE LIABILITY IN CASES WHERE THE PERSON WAS MAINTAINING THE BOOKS OF ACCOUNT ON MERCANTILE BASIS HAD TO BE MADE IN THE YEAR OF ACCR UAL ITSELF, IRRESPECTIVE OF THE AMOUNT BEING PAID IN THE YEAR OR NOT. ANOTHER PLEA RAISED BY THE ASSESSEE WAS THAT THE LIABILITY WAS EXISTING ON THE CLOSE OF THE YEAR AS IS EVIDENT FROM THE FACT THAT THE SAID LIABILITY WAS SETTLED BY WAY OF OTS IN ASSESSM ENT YEAR 2009-10 AND DIFFERENCE ON SETTLEMENT OF THE LOAN ACCOUNT WAS OFFERED TO TA X. THE ASSESSEE HAS PLACED ON RECORD THE COPY OF THE BANK STATEMENT REFLECTING TH E STATEMENT OF LOAN AND INTEREST THEREON AT PAGE 439 OF THE PAPER BOOK AND THE ENTRI ES PASSED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AS PER THE COPY OF ACCOUNTS PLACED AT PAGE 440 OF THE PAPER BOOK. THE INTEREST DEBITED TO THE PROFIT & LOSS AC COUNT IN THE EARLIER YEARS TO THE EXTENT OF RS.25,70,909/- WAS OFFERED FOR TAXATION I N ASSESSMENT YEAR 2009-10 AS IS EVIDENT FROM THE COMPUTATION OF INCOME FILED FOR TH E SAID YEAR, WHICH IS PLACED AT ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 8 PAGES 418 AND 419 OF THE PAPER BOOK. ADMITTEDLY, D URING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD NO CONTRACT RECEIPT S BUT THE LOAN RAISED BY THE ASSESSEE IN THE EARLIER YEARS FOR THE PURPOSE OF CA RRYING ON THE BUSINESS WAS STILL PAYABLE AND THE INTEREST ON SUCH LOAN WAS BOOKED BY THE ASSESSEE IRRESPECTIVE OF THE ACCOUNT HAVING BECOME NPA. THE ASSESSEE HAS RECOGN IZED THE LIABILITY AND HAS FURTHER IN ASSESSMENT YEAR 2009-10 HAS ENTERED INTO OTS WITH THE BANK, UNDER WHICH THERE WAS WAIVER OF INTEREST LIABILITY, WHICH HAS B EEN OFFERED TO TAX AS INCOME OF THE ASSESSEE IN ASSESSMENT YEAR 2009-10. IN VIEW OF TH E ABOVE SAID FACTS AND CIRCUMSTANCES, WE FIND MERIT IN THE CLAIM OF THE AS SESSEE AND ACCORDINGLY, DIRECT THE ASSESSING OFFICER TO ALLOW THE EXPENDITURE OF RS.6, 88,171/- AS INTEREST DUE ON THE LOAN OUTSTANDING DURING THE YEAR UNDER CONSIDERATIO N. THE GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE IS THUS, ALLOWED. 13. THE ISSUE IN GROUND OF APPEAL NO.2 RAISED BY TH E ASSESSEE IS IN RELATION TO THE VALUATION OF CLOSING STOCK. 14. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE SPECIAL AUDITOR MADE CERTAIN PROPOSITIONS IN RESPECT OF THE METHOD OF VALUATION OF CLOSING STOCK EMPLOYED BY THE ASSESSEE. AS PER THE AUDIT REPORT, THE ASSESSEE WA S DEALING IN TWO TYPES OF BUSINESSES I.E. DEALING IN LAND AS COMMISSION AGENT AND DEALING IN LAND AFTER CERTAIN DEVELOPMENTS ON LAND. THE AUDITOR IN THE TAX AUDIT REPORT FILED BY THE ASSESSEE HAD CERTIFIED THAT THE STOCK MAINLY CONSISTS OF THE LAN D PURCHASED BY THE ASSESSEE AND THE SAME WAS VALUED AT COST. HOWEVER, IN ASSESSMENT YE AR 2007-08, THERE WAS AN AMENDMENT IN THE REPORTING BY THE AUDITOR IN WHICH, IT WAS REPORTED THAT STOCK CONSISTS OF LAND PURCHASED BY THE ASSESSEE AND THE SAME WAS VALUED AT PURCHASE COST PLUS EXPENDITURE IF ANY, INCURRED ON ACQUISITI ON THEREOF. THE SPECIAL AUDITOR IN THE AUDIT REPORT NOTED THAT IN RESPECT OF THE BUSIN ESS AS COMMISSION AGENT, THE ASSESSEE HAD REPORTED PROFIT AS WELL AS COMMISSION RECEIVED ON CERTAIN TRANSACTIONS OF LAND AND CREDITED THE SAME TO THE PROFIT & LOSS ACCOUNT. HOWEVER, THE LAND ACQUIRED FOR DEVELOPMENT AND ITS SALE HAVE BEEN DEB ITED TO THE TRADING ACCOUNT. THE ALLOCATION OF DIRECT AND INDIRECT COSTS WAS ONLY FO R THE PURPOSE OF APPORTIONMENT OF EXPENDITURE AT THE TIME OF VALUATION OF CLOSING STO CK. AS PER THE SPECIAL AUDITOR, WHERE THE ASSESSEE WAS DEALING IN LAND DEVELOPMENT AND SALE, THE EXPENDITURE ON ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 9 DEVELOPMENT OF LAND SHOULD BE TREATED AS PART OF TH E LAND COST ONLY AND SHOULD BE CONSIDERED AT THE TIME OF VALUATION OF CLOSING STOC K. FURTHER, PAYMENTS / EXPENSES INCURRED ON OR BEFORE THE ACTUAL TRANSACTION OF ACQ UISITION OF LAND ALONG WITH DOCUMENTATION CHARGES, LEGAL FEES, ETC. SHOULD BE A TTRIBUTED TO THE COST OF LAND. THE SPECIAL AUDITOR WAS ALSO OF THE VIEW THAT EXPENDITU RE ON SETTLEMENT CHARGES, COMMISSION TO AGENTS, ETC. ALSO SHOULD BE CONSIDERE D WHILE VALUING THE CLOSING STOCK OF THE ASSESSEE. THE PROPOSED VALUATION OF CLOSING STOCK AS TABULATED AT PAGE 18 OF THE ASSESSMENT ORDER, WAS SHOW CAUSED TO THE ASSESS EE. IN REPLY, THE ASSESSEE STATED THAT THE SPECIAL AUDITOR HAD CHANGED THE MET HOD OF VALUATION OF CLOSING STOCK APPLIED BY THE ASSESSEE AND THEY HAD NO RIGHT TO CH ANGE THE METHOD OF VALUATION OF CLOSING STOCK APPLIED BY THE ASSESSEE. IN RESPECT OF THE COMMENTS OF THE SPECIAL AUDITOR, IT WAS POINTED OUT BY THE LEARNED AUTHORIZ ED REPRESENTATIVE FOR THE ASSESSEE THAT RETURN OF INCOME FILED PURSUANT TO THE NOTICE ISSUED UNDER SECTION 153A OF THE ACT WAS NOT BACKED BY THE EARLIER AUDIT REPORT FILED BY THE ASSESSEE AND SAME SHOULD NOT BE CONSIDERED FOR MAKING ADDITIONS IN THE HANDS OF THE ASSESSEE. IN RESPECT OF VARIOUS EXPENDITURE INCURRED BY THE ASSESSEE, IT WA S POINTED OUT BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT THE EXPENDITURE WAS INCURRED FOR THE WHOLE INVESTMENT MADE BY THE ASSESSEE, OUT OF WHICH , CERTAIN PORTIONS WERE SOLD AND CERTAIN PORTIONS WERE NOT SOLD AND HENCE, THERE WAS NO MERIT IN THE RE-VALUATION OF CLOSING STOCK IN THE HANDS OF THE ASSESSEE. THE AS SESSING OFFICER OBSERVED THAT WHILE VALUING THE CLOSING STOCK AT COST, ONLY DISPU TE WAS WHAT CONSTITUTES THE COST. THE SPECIAL AUDITOR HAD MENTIONED CERTAIN OTHER EXP ENSES TO BE CONSIDERED AS PART OF COST WHILE VALUING THE CLOSING STOCK. THUS, NO ADD ITION WAS BEING MADE BY THE SPECIAL AUDITOR OR THE ASSESSING OFFICER TO VARY TH E METHOD EMPLOYED BY THE ASSESSEE FOR VALUING THE CLOSING STOCK. 15. THE FIRST ADDITION PROPOSED BY THE ASSESSING OF FICER WAS COMMISSION OF RS.90,86,421/-. THE ASSESSEE EXPLAINED THAT THE CO MMISSION PAID BY THE ASSESSEE WAS ON DIFFERENT ACCOUNTS AND IT RELATED EVEN TO TH E TRANSACTION WHICH HAD NOT MATERIALIZED OR AGAINST THE LAND PURCHASED AND SOLD DURING THE YEAR ITSELF. THE ASSESSING OFFICER IN VIEW THEREOF, DID NOT MAKE ANY ADDITION IN RESPECT OF COMMISSION TOTALING RS.11,50,500/-. HOWEVER, COMMISSION PAID AGAINST THE PURCHASE OF LAND ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 10 DURING THE YEAR, WHICH WAS INCLUDED IN THE CLOSING STOCK AND IT WAS HELD BY THE ASSESSING OFFICER THAT THE COMMISSION ATTRIBUTABLE TO THE PIECES OF LAND WHICH HAD REMAINED IN THE CLOSING STOCK FORMS PART OF THE DIR ECT COST OF LAND AND CONSEQUENTLY, THE VALUE OF CLOSING STOCK WAS RE-WORKED. THE SECO ND ADDITION MADE BY THE ASSESSING OFFICER WAS ON ACCOUNT OF ADVERTISEMENT E XPENSES OF RS.15,060/- BEING DIRECTLY RELATED TO THE LAND PURCHASE AND ALSO ADDI TION WAS MADE ON ACCOUNT OF OTHER EXPENSES OF RS.3,93,041/-. ACCORDINGLY, THE CLOSIN G STOCK WAS RE-VALUED WHICH WAS UPHELD BY THE CIT(A), EXCEPT GIVING A RELIEF OF RS. 4,680/- OUT OF ADVERTISEMENT EXPENSES. 16. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF CIT(A). 17. IT WAS POINTED OUT BY THE LEARNED AUTHORIZED RE PRESENTATIVE FOR THE ASSESSEE THAT WHILE VALUING THE CLOSING STOCK, THERE WAS NO MERIT IN MAKING THE SAID ADDITIONS ON ACCOUNT OF COMMISSION, ADVERTISEMENT EXPENSES AN D ADVOCATE FEES. OUR ATTENTION WAS DRAWN TO THE DETAILS OF COMMISSION PL ACED AT PAGES 443 TO 446 OF THE PAPER BOOK AND IT WAS POINTED OUT BY THE LEARNED AU THORIZED REPRESENTATIVE FOR THE ASSESSEE THAT COMMISSION WAS PAID IN RESPECT OF VAR IOUS DEALS WHICH WERE CANCELLED. FURTHER CONTENTION OF THE LEARNED AUTHORIZED REPRES ENTATIVE FOR THE ASSESSEE WAS THAT CONSIDERING THE NATURE OF ACTIVITIES UNDERTAKE N BY THE ASSESSEE AND ALSO THE ASSESSEE HAVING FOLLOWED THE METHOD FROM YEAR TO YE AR, IT WAS NOT CORRECT TO ADD COMMISSION WHILE VALUING THE CLOSING STOCK OF THE P ROPERTY HELD BY THE ASSESSEE, ESPECIALLY IN THE LINE OF BUSINESS CARRIED ON BY TH E ASSESSEE. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE ALSO POINTED OUT TH AT THE ASSESSING OFFICER IN- CONSISTENTLY ALLOWED THE COMMISSION ON ADVANCES MAD E FOR THE PURCHASE OF THE PROPERTY AT RS.5,66,500/-. 18. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ON THE OTHER HAND, POINTED OUT THAT THE ASSESSEE WAS NOT FOLLOWING CON SISTENT METHODS OF VALUING ITS CLOSING STOCK FOR THE TWO YEARS I.E. 2006-07 AND 20 07-08. FURTHER, RELIANCE WAS PLACED ON THE ACCOUNTING STANDARDS AS-2 OF INSTITUT E OF CHARTERED ACCOUNTANTS OF INDIA (ICAI) FOR THE PROPOSITION THAT THE CLOSING S TOCK HAD TO BE VALUED AT COST PLUS ALL DIRECT EXPENSES WHERE THE EXPENSES DIRECTLY RELATED TO THE STOCK, THEN THE SAME HAD ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 11 TO BE ADDED TO THE VALUE OF THE STOCK FOR DETERMINI NG THE VALUE OF CLOSING STOCK. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE FURTHER STATED THAT OUT OF COMMISSION OF RS.90 LAKHS, RS.79 LAKHS WERE DIRECTLY RELATABLE TO THE PURCHASES MADE WHICH WAS PART OF THE CLOSING STOCK. IN ANY C ASE, WHEREVER THE CLOSING STOCK VALUE IS ENHANCED, THEN THE SAME IS TO BE ADOPTED A S OPENING STOCK IN THE NEXT YEAR AND HENCE, AS PER THE LEARNED DEPARTMENTAL REPRESEN TATIVE FOR THE REVENUE, THERE WAS NO DIFFERENCE ON ACCOUNT OF REVENUE. IN RESPEC T OF THE ADDITION OF ADVERTISEMENT EXPENSES AND ADVOCATE FEES TO THE VALUE OF THE CLOS ING STOCK, THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACED RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. 19. IN REJOINDER, THE LEARNED AUTHORIZED REPRESENTA TIVE FOR THE ASSESSEE POINTED OUT THAT THE ASSESSING OFFICER HAD NOT RELIED ON TH E AUDIT REPORT OF THE SPECIAL AUDITOR AND HAD APPLIED ANOTHER FORMULA WHICH SHOULD NOT BE FOLLOWED IN THE CASE OF THE ASSESSEE. IN RESPECT OF THE COMMISSION PAID, THE L EARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE SAME COULD NO T BE CONSIDERED AS CORRECT POLICY FOR ADOPTING THE VALUATION OF STOCK. 20. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING IN THE PRESENT GROUND OF APPEAL IS IN RELAT ION TO THE METHOD OF VALUATION OF CLOSING STOCK. IN ORDER TO DETERMINE THE CORRECT M ANNER OF VALUATION OF STOCK, THE ORDINARY COMMERCIAL PRINCIPLES FOR VALUATION OF STO CK AND THE PROVISIONS OF INCOME TAX LAW IN THIS REGARD HAVE TO BE LOOKED INTO. AS REGA RDS THE COMMERCIAL PRINCIPLES APPLICABLE TO THE VALUATION OF CLOSING STOCK, THE A CCOUNTING STANDARD AS-2 PRESCRIBED BY ICAI, WHICH HAS BEEN REFERRED TO BY ASSESSING OF FICER, CIT(A) AND THE ASSESSEE, THE MANNER OF VALUING THE INVENTORIES, THE SAID ACC OUNTING STANDARD IS A MANDATORY AUDITING REQUIREMENT BY THE ICAI FROM 01.04.1999 ON WARDS. UNDER THE SAID STANDARD, INVENTORIES HAVE TO BE VALUED AT THE LOWER OF COST OR NET REALIZABLE VALUE. IN THE CASE OF THE ASSESSEE, THE AUDITOR IN THE AUDIT REPORT FU RNISHED UNDER SECTION 44AB OF THE ACT, WHICH WAS ENCLOSED ALONG WITH ORIGINAL RETURN OF INCOME FILED BY THE ASSESSEE STATES THAT THE ASSESSEE HAD VALUED THE STOCK AT CO ST IN ASSESSMENT YEAR 2006-07 AND AT COST PLUS EXPENDITURE IF ANY, INCURRED ON AC QUISITION THEREOF, IN ASSESSMENT YEAR 2007-08. ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 12 21. UNDER THE PROVISIONS OF INCOME TAX ACT, I.E. SE CTION 145 OF THE ACT, THE METHOD OF ACCOUNTING TO BE EMPLOYED BY THE ASSESSEE IS EITHER CASH OR MERCANTILE SYSTEM OF ACCOUNTING. SECTION 145A OF THE ACT PRES CRIBED THAT THE VALUATION OF PURCHASE AND SALE OF GOODS AND INVENTORIES FOR THE PURPOSE OF DETERMINING THE INCOME CHARGEABLE UNDER THE HEAD INCOME FROM PROFI TS AND GAINS FROM THE BUSINESS OR PROFESSION, SHALL BE IN ACCORDANCE WITH THE METH OD OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE. FURTHER ADJUSTMENT TO BE INCLUDED IS THE AMOUNT OF ANY TAX, DUTIES, CESS OR FEES ACTUALLY PAID OR INCURRED BY THE ASSESSEE, TO BRING THE CASE TO ITS PLACE OF LOCATION AND CONDITION, AS ON THE D ATE OF VALUATION SHALL BE ADDED. THE FIRST PRINCIPLE OF SECTION 145A OF THE ACT VIS--VI S VALUATION OF CLOSING STOCK IS THAT THE SAME SHOULD BE IN ACCORDANCE WITH THE METHOD OF ACC OUNTING REGULARLY EMPLOYED BY THE ASSESSEE. THE STANDARD METHOD OF ACCOUNTING PR ESCRIBED BY ICIA AND AS-2 REFERS TO THE PRINCIPLES APPLICABLE TO THE VALUATIO N STOCK WHICH READS AS UNDER:- 6. THE COST OF INVENTORIES SHOULD COMPRISE ALL COS TS OF PURCHASE, COSTS OF CONVERSION AND ALL OTHER COSTS INCURRED IN BRINGING THE INVENTORIES TO THEIR PRESENT LOCATION AND CONDITION. 22. THE SAID AS-2 FURTHER DEFINES THE SCOPE AND AMB IT OF 'COSTS OF PURCHASE', 'COSTS OF CONVERSION', AND 'OTHER COSTS'. ACCORDING TO THE AS-2, 'COSTS OF PURCHASE' INCLUDE PURCHASE PRICE, INCLUDING DUTIES AND TAXES, FREIGHT INWARDS, AND OTHER EXPENDITURE DIRECTLY ATTRIBUTABLE TO THE ACQUISITIO N. 'COSTS OF CONVERSION OF INVENTORY INCLUDE COSTS DIRECTLY RELATED TO THE UNITS OF PROD UCTION SUCH AS DIRECT LABOUR, A SYSTEMATIC ALLOCATION OF FIXED AND VARIABLE PRODUCT ION OVERHEADS SUCH AS DEPRECIATION, MAINTENANCE OF FACTORY BUILDING, COST OF FACTORY MANAGEMENT AND ADMINISTRATION, INDIRECT MATERIAL AND INDIRECT LABO UR. 'OTHER COSTS ' INCLUDE COST IN BRINGING THE INVENTORIES TO THEIR PRESENT LOCATION AND CONDITION. THE STANDARD FURTHER PRESCRIBES THAT CERTAIN COSTS SUCH AS ABNORMAL WAST AGE OF MATERIAL, LABOUR OR OTHER PRODUCTION COSTS, STORAGE COSTS, SELLING AND DISTRI BUTION COSTS, AND ADMINISTRATIVE OVERHEADS THAT DO NOT CONTRIBUTE TO BRINGING THE IN VENTORIES TO THEIR PRESENT LOCATION AND CONDITION SHOULD BE EXCLUDED. 23. APPLYING THE SAID ACCOUNTING PRINCIPLES TO THE FACTS OF THE CASE, THE FIRST ITEM TO BE CONSIDERED IS THE COMMISSION PAID BY THE ASSESSE E AGAINST THE PURCHASE OF LAND, ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 13 WHICH WAS BEING HELD AS CLOSING STOCK BY THE ASSESS EE. THE ASSESSEE HAD FURNISHED THE TABULATED CHART BEFORE THE ASSESSING OFFICER WH ICH WAS REPRODUCED AT PAGE 22 OF THE ASSESSMENT ORDER, UNDER WHICH, THE ASSESSEE HAD DECLARED THAT THE COMMISSION RELATING TO LAND PURCHASE IN FINANCIAL YEAR 2005-06 WHICH WAS INCLUDED IN THE CLOSING STOCK WAS RS.79,35,721/-. IT WAS THE ADMISSION OF THE ASSESSEE THAT THE SAID EXPENDITURE WAS DIRECTLY RELATABLE TO THE ACQUISITI ON OF LAND. WHILE ALLOWING THE EXPENDITURE IN THE HANDS OF THE ASSESSEE, THE BASIC PRINCIPLE IS THAT THE EXPENDITURE SHOULD BE INCURRED FOR THE PURPOSE OF CARRYING ON T HE BUSINESS OF THE ASSESSEE. WHERE THE ASSESSEE WAS ENGAGED IN THE SALE AND PURC HASE OF LAND AND CERTAIN PIECES OF LAND PURCHASED BY THE ASSESSEE HAVING NOT BEEN SOLD TILL THE CLOSE OF THE YEAR, FORMS PART OF ITS CLOSING STOCK. THE EXPENDI TURE OF COMMISSION INCURRED BY THE ASSESSEE FOR THE ACQUISITION OF SUCH PIECES OF LAND WHICH FORMS PART OF ITS CLOSING STOCK WAS DIRECTLY RELATABLE TO THE ACQUISITION OF LAND AND WAS A DIRECT COST INCURRED BY THE ASSESSEE FOR THE PURPOSE OF ACQUISITION OF LAND , HENCE, THE VALUE OF COMMISSION PAID BY THE ASSESSEE IS TO BE INCLUDED IN THE VALUE OF CLOSING STOCK OF LAND HELD BY THE ASSESSEE AT THE CLOSE OF THE YEAR. THE SAID CLOSIN G STOCK WOULD BE THE OPENING STOCK OF THE NEXT YEAR AND THE ADJUSTMENT IF ANY, AS PROV IDED IN THE ACT, IN THIS REGARD IS TO BE MADE BY THE AUTHORITIES BELOW. WHERE THE EXPENS ES ARE DIRECTLY RELATABLE TO THE PURCHASE OF STOCK, WHICH HAS NOT BEEN DISPOSED OF T ILL THE CLOSE OF THE ACCOUNTING YEAR, WOULD IN SUCH CIRCUMSTANCES BE ADDED TO THE C LOSING STOCK. ACCORDINGLY, WE UPHOLD THE ORDER OF CIT(A) INCLUDING THE COMMISSION OF RS.79,35,721/- AS COST DIRECTLY RELATABLE TO THE STOCK HELD BY THE ASSESSEE AT THE CLOSE OF THE YEAR. 24. THE OTHER ADDITIONS MADE BY THE CIT(A) TO THE V ALUE OF STOCK WERE THE ADVERTISEMENT EXPENSES OF RS.10,380/- AND ADVOCATE FEES OF RS.3,93,041/-. THE SAID EXPENDITURES HAVING BEEN INCURRED BY THE ASSES SEE IN THE COURSE OF CARRYING ON ITS BUSINESS THOUGH SOME PART OF IT MAY BE RELATABL E TO THE CLOSING STOCK OF THE ASSESSEE FOR THE YEAR, BUT IN VIEW OF THE NATURE OF BUSINESS CARRIED ON BY THE ASSESSEE AND IN THE ABSENCE OF SUFFICIENT DETAILS T O ESTABLISH THAT THE SAID EXPENDITURE WAS DIRECTLY ATTRIBUTABLE TO THE SAID C LOSING STOCK, WE FIND NO MERIT IN THE ORDERS OF AUTHORITIES BELOW. ACCORDINGLY, WE DIREC T THE ASSESSING OFFICER TO EXCLUDE THE ADVERTISEMENT EXPENSES OF RS.10,380/- AND ADVOC ATE FEES OF RS.3,93,041/- FROM ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 14 THE VALUATION OF CLOSING STOCK. THE GROUND OF APPE AL NO.2 RAISED BY THE ASSESSEE IS THUS, PARTLY ALLOWED. 25. THE ISSUE IN GROUND OF APPEAL NO.3 RAISED BY TH E ASSESSEE IS AGAINST THE DISALLOWANCE OF EXPENDITURE FOR PERSONAL USE OUT OF TELEPHONE EXPENSES, TRAVELLING EXPENSES AND PETROL EXPENSES TO THE EXTENT OF 20%. WE HOLD THAT THE PERSONAL ELEMENT OF USE OF THE TELEPHONE AND CAR CANNOT BE R ULED OUT. HOWEVER, WE ARE RESTRICTING THE DISALLOWANCE TO 1/10 TH OF THE EXPENDITURE ON ACCOUNT OF TELEPHONE AND PETROL EXPENSES. WE FIND NO MERIT IN THE DISALLOWA NCE BEING MADE ON ACCOUNT OF PERSONAL USE OUT OF TRAVELLING EXPENSES IN THE ABSE NCE OF ANY DETAILS HAVING BEEN POINTED OUT BY THE AUTHORITIES BELOW. ACCORDINGLY, WE DELETE THE SAME. 26. THE NEXT ITEM OF DISALLOWANCE IS OUT OF SALES P ROMOTION EXPENSES OF RS.1,34,231/-. THE NATURE OF THE EXPENSES DEBITED BY THE ASSESSEE WERE AS UNDER:- 1. GOLD ORNAMENTS. RS. 10,170/- AKASH JEWELL ERS 2. GOLD ORNAMENTS. RS. 18,900/- RANKA JEWELL ERS 3. GOLD ORNAMENTS. RS. 3,060/- RANKA JEWEL LERS 4. PAYMENT THROUGH CREDIT CARD RS. 76,774/- RS.1,08,904/- 27. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE SAID EXPENDITURE FOR PURCHASE OF JEWELLERY WERE PRIMA FACIE OF PERSONAL NATURE AN D THE ASSESSEE HAD NOT FURNISHED ANY DETAILS AS REGARDS THE PAYMENT THROUGH CREDIT C ARD, THE TOTAL EXPENDITURE OF RS.1,34,231/- WAS DISALLOWED BY THE ASSESSING OFFIC ER. 28. THE PLEA OF THE ASSESSEE BEFORE THE CIT(A) WAS THAT THOUGH THE ASSESSING OFFICER REFERRED TO TOTAL EXPENDITURE OF RS.1,08,90 4/-, DISALLOWANCE OF RS.1,34,231/- WAS MADE IN THE CASE OF THE ASSESSEE. IT WAS FURTH ER CONTENDED THAT NO EXPENDITURE ON GOLD ORNAMENTS OF RS.10,170/-, RS.18,900/- AND R S.3,060/- WERE INCURRED DURING THE YEAR. FURTHER, WITH REGARD TO THE SUM OF RS.76 ,774/-, BILLS AND VOUCHERS ALONG WITH CREDIT CARD STATEMENT WERE PRODUCED BOTH BEFOR E THE SPECIAL AUDITOR AND THE ASSESSING OFFICER. IN RESPECT OF THE ALLOWANCE OF THE SAID EXPENDITURE, THE PLEA OF THE ASSESSEE WAS THAT THE SAME WAS BECAUSE OF BUSINESS EXIGENCY AND HENCE, ALLOWABLE. THE CIT(A) RESTRICTED THE ADDITION TO 4 0% OF THE TOTAL CLAIM AND DISALLOWED RS.53,700/-. ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 15 29. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE A SSESSEE FAILED TO FURNISH THE DETAILS OF EXPENDITURE AND IN THE ABSENCE OF THE SA ME AND THE REVENUE HAVING NOT FILED ANY APPEAL, WE UPHOLD THE ORDER OF CIT(A) IN ESTIMATING THE ADDITION TO BE MADE IN THE HANDS OF THE ASSESSEE. ACCORDINGLY, WE FIND NO MERIT IN THE GROUND OF APPEAL RAISED BY THE ASSESSEE VIS--VIS DISALLOWANCE OF SA LES PROMOTION EXPENSES. THE GROUND OF APPEAL RAISED BY THE ASSESSEE IS THUS, PA RTLY ALLOWED. 30. THE GROUNDS OF APPEAL NOS.4 & 5 RAISED BY THE A SSESSEE ARE ON ACCOUNT OF THE ADDITION MADE IN RELATION TO THE ON-MONEY RECEI VED ON PURCHASES AND SALES, WHICH WE SHALL DEAL ALONG WITH THE APPEALS OF OTHER YEARS. 31. THE ISSUE IN GROUND OF APPEAL NO.6 RAISED IS AG AINST CASH CREDIT OF RS.32,25,000/-. 32. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE H AD INTRODUCED CASH OF RS.32,25,000/- IN THE CAPITAL ACCOUNT OF NKG WHICH IS A SOLE PROPRIETARY CONCERN OF THE ASSESSEE. THE ASSESSEE WAS ASKED TO EXPLAIN TH E SOURCE OF CASH INTRODUCED IN NKG. THE ASSESSEE EXPLAINED THAT THE SOURCE OF THE SAID CASH BALANCE AVAILABLE IN HIS OTHER PROPRIETARY CONCERN OF M/S. FINIX CONSTRU CTIONS. THE ASSESSING OFFICER OBSERVED THAT AS ADMITTED BY THE ASSESSEE, THERE WE RE NO TRANSACTIONS IN M/S. FINIX CONSTRUCTIONS DURING THE YEAR AND THEREFORE, THERE COULD NOT BE ANY GENERATION OF CASH IN M/S. FINIX CONSTRUCTIONS. FURTHER, THE ASS ESSING OFFICER COMPARED THE BALANCE SHEET OF M/S. FINIX CONSTRUCTION FOR THE YE AR ENDING 31.03.2005 AND YEAR ENDING 31.03.2006 WHICH WERE REPRODUCED AT PAGES 14 AND 15 OF THE ASSESSMENT ORDER AND NOTED THAT THE CASH IN HAND AS ON 31.03.2 005 WAS RS.25,35,036/- AND AS ON 31.03.2006 WAS ALSO RS.25,35,036/-. IN VIEW THE REOF, THE ASSESSING OFFICER HELD THAT THE ASSESSEE HAD FAILED TO EXPLAIN THE SOURCE OF CASH INTRODUCED IN NKG AND AN ADDITION OF RS.32,25,000/- WAS MADE UNDER SECTION 6 8 OF THE ACT. THE SAID ADDITION WAS UPHELD BY THE CIT(A). 33. THE PLEA OF THE LEARNED AUTHORIZED REPRESENTATI VE FOR THE ASSESSEE BEFORE US WAS THAT THE ASSESSEE WAS HOLDING CASH IN OTHER PRO PRIETARY CONCERN BUT BY AN ERROR, NO ENTRY OF CASH WAS PASSED. ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 16 34. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACED RELIANCE ON THE ORDER CIT(A). 35. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. DURING THE YEAR UNDER CONSIDERATION HAD INTRODUCED RS.32,25,000/- I N HIS PROPRIETARY CONCERN OF NKG AS UNDER:- DATE ACCOUNT CREDITED NARRATION GIVEN AMOUNT (R S.) 01-04-2005 DRAWING-OTHER CASH DEPOSITED IN BANK 10,00,000.00 04-04-2005 DRAWING-OTHER CASH DEPOSITED IN BANK 25,000.00 24-08-2005 NEELESH KANADE CASH RECEIVED FROM NEELESH KANADE 10,00,000.00 28-10-2005 NEELESH KANADE CASH RECEIVED FROM NEELESH KANADE 12,00,000.00 TOTAL 32,25,000.00 36. THE EXPLANATION OF THE ASSESSEE IN RELATION TO THE SOURCE OF THE SAID CASH INTRODUCTION WAS OUT OF HIS OTHER PROPRIETARY BUSIN ESS M/S. FINIX CONSTRUCTION WHICH ADMITTEDLY WAS NOT CARRYING ON ANY BUSINESS DURING THE YEAR AND HENCE, THERE WAS NO GENERATION OF CASH IN M/S. FINIX CONSTRUCTION. FUR THER, THE BALANCE SHEET OF THE SAID CONCERN FOR THE YEAR ENDING 31.03.2005 AND YEAR END ING 31.03.2006 REFLECTED EXACT CASH IN HAND I.E. RS.25,35,036/-. IN THESE FACTS A ND CIRCUMSTANCES, THE CASH OF RS.25,35,036/- WHICH WAS AVAILABLE WITH M/S. FINIX CONSTRUCTION AS ON 31.03.2005 REMAINED WITH THAT CONCERN AS ON 31.03.2006 ALSO. IN VIEW THEREOF, THE ASSESSEE FAILED TO JUSTIFIABLY TO EXPLAIN THE SOURCE OF INVE STMENT OF RS.32,25,000/- BEING CAPITAL CONTRIBUTION IN OTHER PROPRIETY CONCERN NKG. IN TH E ABSENCE OF THE SAME, WE FIND NO MERIT IN THE GROUND OF APPEAL NO.6 RAISED BY THE AS SESSEE. UPHOLDING THE ORDER OF THE CIT(A), WE DISMISS THE SAME. 37. IN ITA N0.1703/PN/2013, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN DISALLOWING LOSS OF RS. 6,88,171/- ARISING FROM FINIX CONSTRUCTIONS. 2. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.4,27,327/- ON ACCOUNT OF EXPENSES INCURRED BY TH E APPELLANT WHILE VALUING THE CLOSING STOCK. 3. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN DISALLOWING EXPENSES OF RS.2,81,117/- TOWARDS TELEPHONE, TRAVELLING AND PET ROL ON ACCOUNT OF PERSONAL EXPENSES. 4. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING AN AMOUNT OF RS.1,10,12,342/- ON ACCOUNT OF ESTIMATION OF ON-MON EY AT 30% ON PURCHASES. ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 17 5. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING AN AMOUNT OF RS.3,95,28,000/- ON ACCOUNT OF ON-MONEY SALES. 6. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.34,65,500/- TOWARDS UNEXPLAINED EXPENDITURE ON P URCHASES. 7. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.26,15,000/- TOWARDS UNEXPLAINED EXPENDITURE OF S ALARY AND SETTLEMENT EXPENSES. 8. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING ADDITION OF RS.31,40,000/- ON ACCOUNT OF CASH CREDIT. 9. THE LEARNED AO ERRED IN LAW AND ON FACTS IN CONS IDERING THE SPECIAL AUDIT REPORT U/S 142(2A) WHICH WAS PASSED BEYOND THE TIME LIMIT SPECIFIED IN PROVISO TO SEC 142(2C). 10. THE APPELLANT CRAVES TO ADD, ALTER, MODIFY OR S UBSTITUTE ANY GROUND OF APPEAL AT THE TIME OF HEARING. 38. THE ISSUE IN GROUND OF APPEAL NO.1 IS AGAINST T HE DISALLOWANCE OF LOSS OF M/S. FINIX CONSTRUCTION ON ACCOUNT OF INTEREST PAYABLE T O THE BANK ON LOANS RAISED THEREFROM. 39. THE ISSUE RAISED VIDE GROUND OF APPEAL NO.1 IN ASSESSMENT YEAR 2007-08 IS IDENTICAL TO THE ISSUE RAISED IN GROUND OF APPEAL N O.1 IN ASSESSMENT YEAR 2006-07 AND FOLLOWING THE SAME PARITY OF REASONING, WE DIRE CT THE ASSESSING OFFICER TO ALLOW THE EXPENDITURE OF RS.6,88,171/- IN THE HANDS OF TH E ASSESSEE. THE GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE IS THUS, ALLOWED. 40. THE ISSUE IN GROUND OF APPEAL NO.2 IS AGAINST T HE VALUATION OF CLOSING STOCK ON ACCOUNT OF COMMISSION PAID IN RELATION TO THE PURCH ASE OF LAND WHICH WAS SHOWN AS CLOSING STOCK IN THE HANDS OF THE ASSESSEE. BOTH T HE AUTHORIZED REPRESENTATIVES FAIRLY ADMITTED THAT THE ISSUE VIDE GROUND OF APPEA L NO.2 IS IDENTICAL TO THE ISSUE RAISED VIDE GROUND OF APPEAL NO.2 IN ASSESSMENT YEA R 2006-07 AND FOLLOWING THE SAME PARITY OF REASONING, WE UPHOLD THE ORDERS OF A UTHORITIES BELOW IN INCLUDING THE COMMISSION PAID AS PART OF COST OF STOCK AND RE-VAL UING THE CLOSING STOCK THEREFROM. THUS, THE GROUND OF APPEAL NO.2 RAISED BY THE ASSES SEE IS DISMISSED. 41. THE NEXT GROUND OF APPEAL NO.3 RAISED IS AGAINS T THE DISALLOWANCE OF 20% OUT OF TELEPHONE, TRAVELLING AND PETROL EXPENSES FOR PE RSONAL USE BY THE ASSESSEE. ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 18 42. THE SAID ISSUE WAS ALSO RAISED BY THE ASSESSEE VIDE GROUND OF APPEAL NO.3 IN ASSESSMENT YEAR 2006-07 AND FOLLOWING THE SAME PARI TY OF REASONING, WE DIRECT THE ASSESSING OFFICER TO DISALLOW 10% OUT OF TELEPHONE AND PETROL EXPENSES. FURTHER, NO DISALLOWANCE IS TO BE MADE OUT OF TRAVELLING EXPENS ES IN THE ABSENCE OF ANY EVIDENCE HAVING BEEN REFERRED BY THE AUTHORITIES BELOW FOR P ERSONAL USE. WE FIND NO MERIT IN THE SAID ADHOC DISALLOWANCE MADE OUT OF TRAVELLING EXPENSES. THE GROUND OF APPEAL NO.3 RAISED BY THE ASSESSEE IS THUS, PARTLY ALLOWED . 43. THE ISSUE IN GROUNDS OF APPEAL NOS.4 AND 5 IS I N RELATION TO THE ON-MONEY ON PURCHASE AND SALES, WHICH WE SHALL DEAL WITH IN THE PARAS HEREINAFTER ALONG WITH OTHER APPEALS. 44. THE ASSESSEE BY WAY OF GROUND OF APPEAL NO.6 HA S RAISED THE ISSUE AGAINST THE ADDITION OF RS.34,65,000/- MADE ON ACCOUNT OF U NEXPLAINED EXPENDITURE. 45. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT SPECIAL AUDITOR NOTED THAT THERE WAS WITHDRAWAL OF CERTAIN AMOUNTS FROM THE BANK ACC OUNT OF THE ASSESSEE IN CASH ON ACCOUNT OF ON-MONEY PAYMENTS IN RELATION TO PURCHAS E OF LAND. THE SAID BANK ACCOUNT REFLECTED WITHDRAWAL OF THE FOLLOWING AMOUN TS FOR THE PAYMENT OF ON-MONEY IN RESPECT OF PURCHASES BY EDIFICE, AS SEEN FROM THE N ARRATIONS:- RAUT VITHAL S. 12-2-2007 RS.13,12,750/- RAUT CHANDRAKANT. 14-2-2007 RS. 8,40,000/- RAUT SUNIL SADASHIV. 14-2-2007 RS.13,12,750/- RS.34,65,500/- 46. THE ASSESSING OFFICER FURTHER NOTED THAT THE AM OUNTS WITHDRAWN FROM THE BANK ACCOUNT TALLIED EXACTLY WITH THE ON-MONEY NOTED ON THE SEIZED DOCUMENTS I.E. THE PAYMENTS CHART FOR THESE TRANSACTIONS AT PAGES 2 AN D 20 OF ITEM 1, PAGE 4 OF ITEM 2 AND PAGE 24 OF ITEM 2. IN OTHER WORDS, IT WAS CLEA R THAT THE ASSESSEE HAD MADE THE SAID CASH PAYMENTS FOR THE PURCHASE OF PROPERTY TO THE SAID PERSONS. HOWEVER, THE ASSESSEE HAD REFLECTED CASH WITHDRAWN AS PART OF IT S CASH IN HAND IN CASH BOOK. ACCORDINGLY, THE PAYMENT OF RS.34,65,000/- WAS HELD TO BE UNEXPLAINED UNDER SECTION 69C OF THE ACT. THE CIT(A) UPHELD THE ADDITION MAD E BY THE ASSESSING OFFICER. 47. THE PLEA OF THE LEARNED AUTHORIZED REPRESENTATI VE FOR THE ASSESSEE WAS THAT NO CHART / SEIZED MATERIAL WERE FOUND FOR THESE TRA NSACTIONS I.E. CASH PAYMENTS ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 19 AGAINST THE PURCHASES MADE BY THE ASSESSEE. IT WAS FURTHER POINTED OUT BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THOUGH THE ASSESSING OFFICER BASED THE ADDITION ON CASH WITHDRAWALS AS REFERRED TO BY THE SPECIAL AUDITOR IN THE AUDIT REPORT, THE PLEA OF THE LEARNED AUTHORIZED RE PRESENTATIVE FOR THE ASSESSEE BEFORE US WAS THAT THE ASSESSEE WAS THE DIRECTOR OF M/S. EDIFICE AND THE LAND PURCHASED WAS DONE BY THE COMPANY FROM THESE PERSON S AND THE ASSESSEE DENIES THE PAYMENT OF ANY ON-MONEY. 48. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE POINTED OUT THAT THE ENTRIES IN THE BANK CLEARLY MENTIONS THE NAMES OF PERSONS TO WHOM THE PAYMENT HAS BEEN MADE AND ADMITTEDLY, THE ASSESSEE WAS THE DIRECTOR OF THE COMPANY WHO HAD PURCHASED THE SAID LAND. THE AMOUNT WITHDRAWN FROM THE BANK ACCOUNT WAS PART OF THE CASH IN HAND AND HENCE, THERE WAS NO EXPLANA TION VIS--VIS SOURCE OF SAID PAYMENT, HENCE ADDITION UNDER SECTION 69C OF THE AC T WAS WARRANTED. 49. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE PERUSAL OF ASSESSMENT ORDER REFLECTS THAT THE SPECIAL AUDITOR HAD POINTED OUT THAT THE ASSESSEE HAD BUILT UP THE CASH BALANCE IN HAND AT RS.2,10,10 ,876/- AS ON 31.03.2007. AS PER THE NARRATION GIVEN IN THE BOOKS AND THE ACTUAL USE TO WHICH THE CASH WAS BEING PUT, THERE WAS COMPLETE MIS-MATCH. ON THE BASIS OF SCRU TINY OF SEIZED DOCUMENTS AND ON THE BASIS OF NARRATION TO THE WITHDRAWALS, THE SPEC IAL AUDITOR REPORTED THAT THE CASH BALANCES IN THE BOOKS SEEMS TO BE BLOATED ONLY BECA USE THE ENTRIES OF PAYMENT OF ON-MONEY FOR PURCHASE OF LAND WERE NOT RECORDED IN THE CASH BOOK. THE SPECIAL AUDITOR TABULATED THE DETAILS OF THE INSTANCES WHER E CASH HAD BEEN WITHDRAWN AND FOR WHICH THE NARRATION HAD BEEN GIVEN. HOWEVER, THE E XPENSES FOR WHICH THE CASH WAS PURPORTEDLY WITHDRAWN WERE NOT RECORDED ON THE PAYM ENT SIDE OF THE CASH BOOK. THE CONTENTION OF THE ASSESSEE IN REPLY, WAS THAT THE A MOUNTS HAD REMAINED WITH HIM IN CASH. HOWEVER, HE ADMITTED UTILIZING THE WITHDRAWA LS FOR SAID PURPOSE IN A FEW CASES AND AFTER THE SEARCH, HE DEBITED THE AMOUNTS TO AN ACCOUNT UN-RECORDED CASH EXPENDITURE SEIZED CASH BOOK. IN VIEW THEREOF, TH E ASSESSING OFFICER WAS OF THE VIEW THAT CASH PAID TO THE LANDLORDS IN SUCH CIRCUMSTANC ES BECOMES UNEXPLAINED AND IS TO BE TREATED AS ASSESSEES INCOME UNDER SECTION 69C O F THE ACT. HOWEVER, SINCE THE ASSESSING OFFICER HAD ALREADY ADDED SUM OF RS.8,54, 25,094/- TOWARDS UNEXPLAINED ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 20 EXPENDITURE OF THE ASSESSEE ON PAYMENT OF ON-MONEY TO THE LANDLORDS, THE ADDITION OF RS.5,68,37,310/- WAS HELD BY THE ASSESSING OFFICER TO HAVE GOT SUBSUMED IN ADDITION TOWARDS ON-MONEY AND NO SEPARATE ADDITION WAS MADE IN THIS REGARD. IN ADDITION TO THE ABOVE SAID WITHDRAWALS, THERE WAS A NARRATION O F WITHDRAWAL FOR PAYMENT OF ON- MONEY IN RESPECT OF PURCHASE BY EDIFICE WHICH IS A COMPANY, IN WHICH THE ASSESSEE WAS THE DIRECTOR. THE CASH PAYMENTS WERE MADE ON D IFFERENT DATES WHICH TALLIED WITH ON-MONEY NOTED ON THE SEIZED PAYMENT CHART. THOUGH THE ASSESSEE HAD WITHDRAWN EXACT AMOUNT FROM THE BANK ACCOUNT, BUT THE SAME WE RE PART OF CASH IN HAND SHOWN BY THE ASSESSEE IN THE BOOKS OF ACCOUNT. IN VIEW T HEREOF, THE AMOUNTS WERE ADDED IN THE HANDS OF THE ASSESSEE AS UNEXPLAINED UNDER SECT ION 69C OF THE ACT. THE PLEA OF THE ASSESSEE BEFORE US WAS THAT NO SEIZED MATERIAL WAS FOUND FOR THE TRANSACTION ALTHOUGH THE ASSESSING OFFICER BASED THE ADDITION O N CASH WITHDRAWAL REFERENCE OF SPECIAL AUDITOR. FURTHER, THE ASSESSEE DENIES THE PAYMENT OF THE SAID ON-MONEY AND ALSO POINTS OUT THAT THE PROPERTY WAS PURCHASED BY THE COMPANY AND THERE WAS NO MERIT IN ANY ADDITION IN THE HANDS OF THE ASSESSEE. THE CASE OF THE ASSESSING OFFICER WAS THAT THE AMOUNTS TALLIED EXACTLY WITH ON-MONEY NOTED ON THE SEIZED DOCUMENTS FOR THESE TRANSACTIONS AT PAGE 2 AND 20 OF ITEM 1, PAGE 4 OF ITEM 2 AND PAGE 24 OF ITEM 2. THE PLEA OF THE ASSESSEE BEFORE US IS THAT NO CHART OR SEIZED MATERIAL WAS FOUND FOR THESE TRANSACTIONS. HOWEVER, THE ASSESSE E HAS FAILED TO BRING TO OUR ATTENTION THE NOTINGS OF THE TRANSACTION ON THE DOC UMENTS REFERRED TO BY THE ASSESSING OFFICER. IN THE ABSENCE OF THE SAME, WE FIND NO ME RIT IN THE PLEA OF THE ASSESSEE IN THIS REGARD, WHERE THE DOCUMENTS HAVE BEEN SEIZED I N THE HANDS OF THE ASSESSEE EVIDENCING WITHDRAWAL OF AMOUNTS FOR PAYMENT OF ON- MONEY IN RESPECT OF CERTAIN PURCHASES BEING MADE BY THE COMPANY IN WHICH, HE WA S DIRECTOR, THEN THE SAID WITHDRAWAL FROM THE BANK ACCOUNT BEING REFLECTED IN THE CASH BOOK FILED BY THE ASSESSEE AS PART OF HIS CASH IN HAND, DOES NOT EXPL AIN THE SOURCE OF PAYMENT OF ON- MONEY. CONSEQUENTLY, WE UPHOLD THE ADDITION OF RS. 34,65,500/- IN THE HANDS OF THE ASSESSEE UNDER SECTION 69C OF THE ACT. THE GROUND OF APPEAL NO.6 RAISED BY THE ASSESSEE IS THUS, DISMISSED. 50. THE ISSUE IN GROUND OF APPEAL NO.7 RAISED BY TH E ASSESSEE IS NOT PRESSED AND THE SAME IS DISMISSED AS NOT PRESSED. ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 21 51. THE ISSUE IN GROUND OF APPEAL NO.8 IS AGAINST T HE ADDITION OF RS.31,40,000/- ON ACCOUNT OF CASH CREDIT. THE SPECIAL AUDITOR HAD PROPOSED ADDITION ON ACCOUNT OF UNDISCLOSED INCOME I.E. UN-RECORDED CASH EXPENDITUR E SEIZED CASH BOOK, DEBITED TO PROFIT & LOSS ACCOUNT OF RS.2,24,78,050/-, WHICH WA S ADDED TO THE INCOME OF ASSESSEE BY ASSESSING OFFICER. THE CIT(A) DELETED THE SAID ADDITION AS HAVING BEEN INADVERTENTLY MADE BY THE ASSESSING OFFICER. 52. ANOTHER ADDITION MADE IN THE HANDS OF THE ASSES SEE ON ACCOUNT OF UNEXPLAINED CASH INTRODUCED IN THE BOOKS OF ACCOUNT AMOUNTING TO RS.31,40,000/-. THE ASSESSEE HAD CREDITED SUM OF RS.31,40,000/- TO THE ACCOUNT TITLED UN-RECORDED CASH EXPENDITURE EFFECT NULLIFIED. THE ASSESSING O FFICER NOTED THAT THERE WERE VARIOUS DEBITS TO THIS ACCOUNT WHICH WERE TO COVER UP THE P AYMENTS NOTED IN THE SEIZED PAYMENT CHART AND AT THE END OF THE YEAR THE CLOSIN G BALANCE WAS NIL. AS THE ASSESSEE HAD FAILED TO OFFER ANY EXPLANATION, AN AD DITION OF RS.31,40,000/- WAS MADE IN THE HANDS OF THE ASSESSEE. 53. BEFORE THE CIT(A), THE EXPLANATION OF THE ASSES SEE WAS THAT THE ASSESSEE HAD MADE PAYMENT OF RS.31,40,000/- TO VARIOUS PERSONS F OR BUSINESS PURPOSES, WHICH WERE RETURNED BY THOSE PERSONS AND HENCE, THERE WAS NO MERIT IN THE ADDITION. THE ASSESSEE FURTHER EXPLAINED THAT DURING THE SEARCH, CERTAIN DOCUMENTS EVIDENCING CERTAIN EXPENDITURES WERE FOUND, WHICH WERE NOT REC ORDED IN THE BOOKS OF ACCOUNT. FURTHER, IN THE BOOKS OF ACCOUNT SUBSEQUENTLY PREPA RED BY THE ASSESSEE, THERE WAS AN ACCOUNT TITLED UN-RECORDED EFFECT NULLIFIED, IN WHICH THE ASSESSEE RECORDED THE EXPENDITURES, EVIDENCE OF WHICH WAS FOUND DURING TH E SEARCH. HOWEVER, AGAINST THE SAID EXPENDITURE, AMOUNTS WERE CLAIMED TO HAVE RECE IVED BACK FROM THE SAID PARTIES FROM TIME TO TIME WHICH WERE ALSO RECORDED AND SET OFF AGAINST THE PAYMENTS MADE. THE ASSESSEE FAILED TO FURNISH ANY EVIDENCE OF HAVI NG RECEIVED THE AMOUNT BACK AND ALSO THAT THE SUM RELATED TO THE ASSESSEES OWN EMP LOYEES WHO WERE ALSO WORKING AS COMMISSION AGENTS AND THE ENTRIES OF BOTH RECEIPTS AND PAYMENTS WERE VERIFIABLE FROM THEIR RECORDS. THE CIT(A) OBSERVED THAT THE C LAIM MADE BY THE ASSESSEE WAS AN AFTERTHOUGHT AND IN THE ABSENCE OF ANY EVIDENCE, DO CUMENTARY OR OTHERWISE, THE ADDITION MADE BY THE ASSESSING OFFICER WAS UPHELD. ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 22 54. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE A SSESSEE MADE SUBMISSIONS AS BEFORE THE CIT(A) AND POINTED OUT THAT THE ADDIT ION WAS MADE AS THERE WAS NO SUPPORTIVE EVIDENCE. 55. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACED RELIANCE ON THE ORDER OF CIT(A). 56. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THERE WERE ENTRIES IN THE BOOKS OF ACCOUNT MADE BY THE ASSESSE E, THE ACCOUNT WAS TITLED UN- RECORDED EFFECT NULLIFIED. THE DEBITS IN THE SAID ACCOUNT WERE AGAINST THE EXPENDITURE INCURRED BY THE ASSESSEE, EVIDENCE OF WHICH WAS FOU ND DURING THE COURSE OF SEARCH. HOWEVER, THE ASSESSEE CLAIMED THAT AGAINST THE SAID EXPENDITURE, SOME PARTIES FROM TIME TO TIME HAD RETURNED BACK THE AMOUNTS. ANOTHE R PLEA RAISED BY THE ASSESSEE WAS THAT MOST OF THE PERSONS CONCERNED WERE ASSESSE ES OWN EMPLOYEES WHO WERE ALSO WORKING AS COMMISSION AGENTS. ONCE THE AMOUNT S HAVE BEEN PAID BY THE ASSESSEE TO HIS EMPLOYEES, WHO WERE WORKING AS COMM ISSION AGENTS, THE REASON FOR RETURN OF AMOUNTS FROM THE SAID PERSONS HAS NOT BEE N EXPLAINED BY THE ASSESSEE. MERELY THOSE PERSONS ARE ASSESSED TO TAX DOES NOT E STABLISH THE CONTENTION OF THE ASSESSEE VIS--VIS SOURCE OF THE CREDIT ENTRIES, IN THE ABSENCE OF ASSESSEE HAVING DISCHARGED HIS ONUS EXPLAINING THE SOURCE WITH EVID ENCE. WE FIND NO MERIT IN THE PLEA OF THE ASSESSEE AND THE SAME IS REJECTED. THE GROUND OF APPEAL NO.8 RAISED BY THE ASSESSEE IS DISMISSED. 57. THE ASSESSEE FURTHER FILED AN ADDITIONAL GROUND OF APPEAL, WHICH READS AS UNDER:- THE LEARNED CIT(A) ERRED ON FACTS AND IN LAW IN CO NFIRMING THE ACTION OF LEARNED AO IN MAKING ADDITION OF RS.75 LAKHS IN RES PECT OF AMI ESTATE PRIVATE LIMITED ON THE GROUND THAT CASH RECEIVED ON SALE OF LAND WITHOUT APPRECIATING THAT THE TRANSACTION OF SALE WAS NOT MATERIALIZED A ND THEREFORE NO CASH WAS RECEIVED BY THE APPELLANT. 58. THE PLEA OF THE ASSESSEE WAS THAT BY AN ERROR, THE SAID GROUND OF APPEAL WAS NOT INCLUDED IN THE MEMO OF APPEAL ALTHOUGH THE SAI D GROUND OF APPEAL WAS RAISED BEFORE THE CIT(A). IT WAS ALSO CONTENDED BY THE LE ARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT THE SAID GROUND OF APPEAL DOE S NOT REQUIRE ANY INVESTIGATION INTO THE FACT AND HENCE, THE SAME MAY BE ADMITTED. THE CIT(A) AT PARA 32.5 IN PAGE ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 23 157, HAD ADJUDICATED THE SAID ADDITION. WE ADMIT T HE SAID GROUND OF APPEAL IN VIEW THEREOF AND PROCEED TO DECIDE THE SAME. 59. THE FACTS RELATING TO THE ADDITIONAL GROUND OF APPEAL ARE THAT FROM THE PERUSAL OF THE SEIZED DOCUMENTS AT PAGES 4 & 5 OF ITEM 1 SE IZED FROM THE RESIDENCE OF THE ASSESSEE, THE ASSESSING OFFICER NOTED THAT THERE WA S A MENTION OF CHEQUE RECEIPT FROM M/S.AMI ESTATE PRIVATE LIMITED OF RS.4 CRORES AND CASH RECEIPTS OF RS.255 LAKHS. THE CHEQUE RECEIPTS FROM M/S.AMI ESTATE PRIVATE LIM ITED WERE RECORDED IN THE BOOKS OF ACCOUNT, WHEREAS THE CASH RECEIPTS WERE NOT RECO RDED IN THE BOOKS OF ACCOUNT. THE ASSESSEE EXPLAINED THAT M/S. AMI ESTATE PRIVATE LIMITED WAS SUPPOSED TO PAY THE AMOUNT. HOWEVER, THE SAID AMOUNT WAS NOT YET R ECEIVED. THE PLEA OF THE ASSESSEE BEFORE THE ASSESSING OFFICER WAS THAT THER E WAS LITIGATION ABOUT THE PROPERTY AND CASES WERE PENDING IN THE COURT. HENC E, THE FINAL CONVEYANCE DEED BETWEEN THE ASSESSEE AND M/S. AMI ESTATE PRIVATE LI MITED WAS NOT EXECUTED TILL DATE. HOWEVER, THE ASSESSING OFFICER NOTED THAT THE ASSES SEE HAD DECLARED THE INCOME OF RS.1.80 CRORES FROM THE TRANSACTION WITH M/S. AMI E STATE PRIVATE LIMITED DURING THE COURSE OF SEARCH. AS PER THE ASSESSEE, THE LAND AT WAKAD WAS PROPOSED TO BE SOLD TO M/S. AMI ESTATE PRIVATE LIMITED, AGAINST WHICH, HE RECEIVED AN ADVANCE OF RS.4 CRORES. THE SAID AGREEMENT WAS EXPECTED TO BE COMP LETED BEFORE MARCH, 2008. SALES ON THE PROPERTY WAS CALCULATED AND DECLARED B Y THE ASSESSEE IN HIS STATEMENT RECORDED UNDER SECTION 132(4) OF THE ACT. THE NET PROFIT DECLARED BY THE ASSESSEE WAS RS.1.80 CRORES, WHICH INCLUDED THE NAZARANA AMO UNT OF RS.0.80 CRORES. THE ASSESSING OFFICER REJECTED THE EXPLANATION OF THE A SSESSEE THAT THE INCOME OF RS.1.80 CRORES SHOWN IN THE RETURN WAS THE ESTIMATED PROFIT ON THE TRANSACTION, WHICH WAS EXPECTED TO BE FINALIZED BY 31.03.2008. THE ASSESS ING OFFICER OBSERVED THAT THERE WAS NO NEED TO SHOW THE INCOME IN ASSESSMENT YEAR 2 007-08 AND WAS OF THE VIEW THAT THE AMOUNTS SHOWN BY THE ASSESSEE WAS ON-MONEY COMPONENT OF THE TRANSACTION WHICH THE ASSESSEE HAD ALREADY RECEIVED IN ASSESSMENT YEAR 2007-08. AS PER THE SEIZED DOCUMENTS, THERE WAS ON-MONEY PAY MENT OF RS.2.55 CRORES AND THE ASSESSING OFFICER HELD THE ASSESSEE HAD RECEIVE D CASH OF RS.2.55 CRORES, OUT OF WHICH HE HAD DECLARED RS.1.80 CRORES AS HIS INCOME IN ASSESSMENT YEAR 2007-08 AND THE BALANCE AMOUNT OF RS.75 LAKHS WAS THEREFORE , ADDED TO HIS INCOME. ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 24 60. THE PLEA OF THE ASSESSEE BEFORE THE CIT(A) WAS THAT SINCE THE DEAL COULD NOT MATERIALIZE, NO PROFIT WAS OFFERED FOR TAXATION. A NOTHER CONTENTION RAISED BY THE ASSESSEE WAS THAT WHEN THE ASSESSING OFFICER HAD AL READY ADDED SUM OF RS.5.27 CRORES AS ON-MONEY ON SALE, THEN THIS PARTICULAR AD DITION AMOUNTED TO DOUBLE ADDITION. THE CIT(A) OBSERVED THAT THE CONTENTION OF THE ASSESSEE THAT THE TRANSACTION DID NOT FRUCTIFY OR THAT THE AMOUNT OF PROFIT SHOWN IN THE RETURN WAS EXPECTED PROFIT AND THAT CASH AMOUNT WAS MEANT TO B E FOR PAYMENT OF NAZARANA TO THE GOVERNMENT WERE NOT CREDIBLE AND AN AFTERTHOUGH T. HOWEVER, SINCE THE ASSESSING OFFICER HAD MADE THE ADDITION ON ACCOUNT OF ON-MONEY ON SALE OF PROPERTY. THE ADDITION ON ACCOUNT OF SALE TRANSACTION WITH M/ S. AMI ESTATES PRIVATE LIMITED, AS PER THE CIT(A) WAS A DOUBLE ADDITION. ACCORDINGLY, THE ADDITION OF RS.75 LAKHS CONTEMPLATED UNDER THIS GROUND WAS CONSIDERED TO HA VE BEEN SUBSUMED IN THE ADDITION OF RS.4.94 CRORES ON ACCOUNT OF ON-MONEY O N SALE OF PROPERTY AND THE GROUND OF APPEAL WAS TREATED AS HAVING BEEN ALLOWED . 61. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE FIRST ASPECT OF THE ADDITION IS THE ON-MONEY RECEIVED ON A TRANS ACTION RELATING TO SALE OF PROPERTY INTENDED TO BE SOLD TO M/S. AMI ESTATE PVT. LTD. T HE ASSESSEE WHILE OFFERING THE INCOME UNDER SECTION 132(4) OF THE ACT HAD INCLUDED THE PROFIT ARISING ON THE SALE OF PROPERTY AT WAKAD AND COMPUTED THE GAIN ON THE SAID SALE OF THE PROPERTY AS INCOME AND OFFERED INCOME AS ADDITIONAL INCOME IN THE HAND S OF THE ASSESSEE. HOWEVER, THE DEAL DID NOT MATERIALIZE AND CONSEQUENTLY, THE ASSE SSEE DID NOT OFFER THE SAID AMOUNT AS ADDITIONAL INCOME IN THE RETURN OF INCOME. HOWE VER, THE ASSESSEE HAS FAILED TO BRING ON RECORD ANY EVIDENCE TO ESTABLISH THAT THE TRANSACTION DID NOT FRUCTIFY AND FURTHER, THE CASH AMOUNT WAS MEANT FOR NAZARANA TO THE GOVERNMENT. IN THE ABSENCE OF ANY CREDITABLE EVIDENCE, WE FIND NO MERIT IN THE PLEA OF THE ASSESSEE. IN ANY CASE, THE CIT(A) HAD NOT MADE ANY SEPARATE ADDITION ON TH IS ACCOUNT, BUT HAD OBSERVED THAT THE SAID ADDITION OF RS.75 LAKHS WAS SUBSUMED IN THE ADDITION OF RS.4.94 CRORES. ACCORDINGLY, NO SEPARATE ADDITION WAS WARRANTED. I N THE TOTALITY OF THE ABOVE SAID FACTS AND CIRCUMSTANCES, WE FIND NO MERIT IN THE PL EA OF THE ASSESSEE IN THE ADDITIONAL GROUND OF APPEAL AND THE SAME IS DISMISSED. ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 25 62. THE ASSESSEE IN ITA NO.1704/PN/2013 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN DISALLOWING LOSS OF RS.6,88,171/- ARISING FROM FINIX CONSTRUCTIONS . 2. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.33,30,195/- ON ACCOUNT OF EXPENSES INCURRED BY T HE APPELLANT WHILE VALUING THE CLOSING STOCK. 3. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN DISALLOWING EXPENSES OF RS.6,24,655/- TOWARDS TELEPHONE, TRAVELLING AND PET ROL ON ACCOUNT OF PERSONAL EXPENSES. 4. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING AN AMOUNT OF RS.48,96,751/- ON ACCOUNT OF ESTIMATION OF ON-MONEY AT 30% ON PURCHASES. 5. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING AN AMOUNT OF RS.53,40,067/- ON ACCOUNT OF ON-MONEY SALES. 6. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN DISALLOWING DEPRECIATION OF RS.39,35,283/- ON OFFICE PREMISES AND OTHER ASSETS. 7. THE LEARNED AO ERRED IN LAW AND ON FACTS IN CONS IDERING THE SPECIAL AUDIT REPORT U/S 142(2A) WHICH WAS PASSED BEYOND THE TIME LIMIT SPECIFIED IN PROVISO TO SEC 142(2C). 8. THE APPELLANT CRAVES TO ADD, ALTER, MODIFY OR SU BSTITUTE ANY GROUND OF APPEAL AT THE TIME OF HEARING. 63. THE ISSUE RAISED VIDE GROUND OF APPEAL NO.1 IN ASSESSMENT YEAR 2008-09 IS IDENTICAL TO THE ISSUE RAISED IN GROUND OF APPEAL N O.1 IN ASSESSMENT YEAR 2006-07 AND FOLLOWING THE SAME PARITY OF REASONING, WE DIRE CT THE ASSESSING OFFICER TO ALLOW THE EXPENDITURE OF RS.6,88,171/- IN THE HANDS OF TH E ASSESSEE. THE GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE IS THUS, ALLOWED. 64. THE ISSUE IN GROUND OF APPEAL NO.2 IS AGAINST T HE VALUATION OF CLOSING STOCK ON ACCOUNT OF COMMISSION PAID IN RELATION TO THE PURCH ASE OF LAND WHICH WAS SHOWN AS CLOSING STOCK IN THE HANDS OF THE ASSESSEE. BOTH T HE AUTHORIZED REPRESENTATIVES FAIRLY ADMITTED THAT THE ISSUE VIDE GROUND OF APPEA L NO.2 IS IDENTICAL TO THE ISSUE RAISED VIDE GROUND OF APPEAL NO.2 IN ASSESSMENT YEA R 2006-07 AND FOLLOWING THE SAME PARITY OF REASONING, WE UPHOLD THE ORDERS OF A UTHORITIES BELOW IN INCLUDING THE COMMISSION PAID AS PART OF COST OF STOCK AND RE-VAL UING THE CLOSING STOCK THEREFROM. THUS, THE GROUND OF APPEAL NO.2 RAISED BY THE ASSES SEE IS DISMISSED. 65. THE NEXT GROUND OF APPEAL NO.3 RAISED IS AGAINS T THE DISALLOWANCE OF 20% OUT OF TELEPHONE, TRAVELLING AND PETROL EXPENSES FOR PE RSONAL USE BY THE ASSESSEE. ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 26 66. THE SAID ISSUE WAS ALSO RAISED BY THE ASSESSEE VIDE GROUND OF APPEAL NO.3 IN ASSESSMENT YEAR 2006-07 AND FOLLOWING THE SAME PARI TY OF REASONING, WE DIRECT THE ASSESSING OFFICER TO DISALLOW 10% OUT OF TELEPHONE AND PETROL EXPENSES. FURTHER, NO DISALLOWANCE IS TO BE MADE OUT OF TRAVELLING EXPENS ES IN THE ABSENCE OF ANY EVIDENCE HAVING BEEN REFERRED BY THE AUTHORITIES BELOW FOR P ERSONAL USE. WE FIND NO MERIT IN THE SAID ADHOC DISALLOWANCE MADE OUT OF TRAVELLING EXPENSES. THE GROUND OF APPEAL NO.3 RAISED BY THE ASSESSEE IS THUS, PARTLY ALLOWED . 67. THE ISSUE IN GROUNDS OF APPEAL NOS.4 AND 5 IS I N RELATION TO THE ON-MONEY ON PURCHASE AND SALES, WHICH WE SHALL DEAL WITH IN THE PARAS HEREINAFTER ALONG WITH OTHER APPEALS. 68. IN LIEU OF GROUND OF APPEAL NO.6, THE ASSESSEE RAISED AN ADDITIONAL GROUND OF APPEAL WHICH READS AS UNDER:- THE LEARNED CIT(A) ERRED ON FACTS AND IN LAW IN CO NFIRMING THE ADDITION ON ACCOUNT OF DEPRECIATION OF RS.39,35,283/- BEING DIF FERENCE BETWEEN DEPRECIATION AS PER THE ASSESSEE AND AS PER THE SPE CIAL AUDITOR WITHOUT GIVING PROPER OPPORTUNITY TO THE APPELLANT. THE APPELLANT PRAYS THAT THE APPELLANT MAY KINDLY BE AFFORDED PROPER OPPORTUNITY TO SUBSTA NTIATE ITS CLAIM OF DEPRECIATION AS ALSO THE BASIS OF DEPRECIATION CALC ULATED BY THE SPECIAL AUDITOR MAY KINDLY BE PROVIDED TO THE APPELLANT SO AS TO EXPLAIN THE DIFFERENCE. 69. THE PLEA OF THE ASSESSEE BEFORE US WAS THAT THE SAID GROUND OF APPEAL WAS RAISED BEFORE THE CIT(A). HOWEVER, BY AN ERROR, WA S LEFT OUT IN FORM NO.36. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THERE WAS NO REQUIREMENT OF ANY INVESTIGATION INTO THE FACTS AND THE ADDITIONAL GROUND OF APPEAL MAY BE ADMITTED. IN THE TOTALITY OF THE FACTS AND CIRCUMSTANCES, WE ADMIT THE ADDITIONAL GROUND OF APPEAL FILED BY THE ASSESSEE, IN WHICH THE ISSUE RAISED IS VIS-- VIS THE ADDITION MADE ON ACCOUNT OF DEPRECIATION OF RS.39,35,283/-. 70. THE PLEA OF THE LEARNED AUTHORIZED REPRESENTATI VE FOR THE ASSESSEE BEFORE US WAS THAT THE SAID ADDITION WAS MADE ON THE BASIS OF DEPRECIATION CALCULATED BY THE SPECIAL AUDITOR WHICH WAS NOT CONFRONTED TO THE ASS ESSEE AND HENCE, NO EXPLANATION IN THIS REGARD WAS FILED BEFORE THE ASSESSING OFFIC ER. EVEN THE BREAK-UP OF THE SAID DEPRECIATION WAS NOT FORWARDED TO THE ASSESSEE. TH E LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FURTHER STATED THAT THE CIT(A) HAS DISMISSED THE ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 27 CLAIM OF THE ASSESSEE. THE CIT(A) DISMISSED THE CL AIM OF THE ASSESSEE IN THE ABSENCE OF ANY PROOF. 71. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACED RELIANCE ON THE ORDER OF CIT(A). 72. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. ON THE PERUSAL OF RECORD AND THE ORDERS OF AUTHORITIES BELOW, WE F IND THAT THE DEPRECIATION ON ASSETS WAS RE-WORKED BY THE SPECIAL AUDITOR AT RS.70,28,43 7/- AS AGAINST THE CLAIM OF DEPRECIATION BY THE ASSESSEE AT RS.1,09,63,720/-. THE PERUSAL OF THE ASSESSMENT ORDER DOES NOT REFLECT THE DETAILS OF DEPRECIATION ALLOWABLE TO THE ASSESSEE AS PER THE REPORT OF THE SPECIAL AUDITOR. THE PLEA OF THE ASS ESSEE BEFORE US WAS THAT THE SAID BREAK-UP OF THE DETAILS WERE NOT CONFRONTED TO THE ASSESSEE AND IN THE ABSENCE OF THE SAME, NO EXPLANATION COULD BE FILED. IN THE ENTIRE TY OF THE ABOVE SAID FACTS AND CIRCUMSTANCES AND IN THE INTEREST OF JUSTICE, WE DE EM IT FIT TO RESTORE THE ISSUE BACK TO THE ASSESSING OFFICER WITH A DIRECTION TO CONFRONT THE DEPRECIATION CHART PREPARED BY THE SPECIAL AUDITOR TO THE ASSESSEE AND DECIDE THE ISSUE IN ACCORDANCE WITH THE LAW AFTER AFFORDING REASONABLE OPPORTUNITY OF HEARING T O THE ASSESSEE. THE ADDITIONAL GROUND OF APPEAL RAISED BY THE ASSESSEE IS THUS, AL LOWED FOR STATISTICAL PURPOSES. 73. THE ISSUE IN GROUNDS OF APPEAL NOS.4 AND 5 IS A GAINST THE ADDITION MADE ON ACCOUNT OF ON-MONEY RECEIVED ON PURCHASES AND SALES MADE BY THE ASSESSEE. 74. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE ASSESSEE WAS DEALING IN PURCHASE AND SALES OF LAND AND HE WAS ALSO WORKING AS LAND AGGREGATOR FOR M/S. EDIFICE PROPERTY PVT. LTD. AND M/S. EARN MORE CAPIT AL SERVICES PVT. LTD. THE ASSESSEE WAS THE PROPRIETOR OF NEELESH KANADE GROUP (NKG) AND HE WAS AGGREGATING ABOUT 105 ACRES OF LAND AT KIWALE AND M AMURDI LOCATED AT THE STARTING POINT OF PUNE-MUMBAI EXPRESS WAY, NEAR PUNE. SEARC H UNDER SECTION 132 OF THE ACT WAS CARRIED OUT AT THE RESIDENTIAL AND OFFICE PREMI SES OF THE ASSESSEE ON 24.02.2008. FURTHER, SURVEY UNDER SECTION 133A OF THE ACT WAS A LSO CARRIED OUT AT ANOTHER OFFICE PREMISES OF THE ASSESSEE AND ALSO AT THE SITE OFFIC E I.E. MUMBAI-PUNE EXPRESSWAY, PUNE ON 24.02.2008 ITSELF. DURING THE COURSE OF SE ARCH, EVIDENCES WERE FOUND THAT THE ASSESSEE WAS PAYING ON-MONEY ON THE PURCHASE OF LAND AND WAS ALSO RECEIVING ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 28 ON-MONEY ON SALE OF LAND. THE PERUSAL OF THE INCRI MINATING DOCUMENTS FOUND FROM THE RESIDENTIAL AND OFFICE PREMISES OF THE ASSESSEE REF LECTED THE PAYMENTS CHARTS PREPARED BY THE ASSESSEE FOR THE PURCHASE OF VARIOU S LANDS BOTH FOR HIMSELF AND FOR AND ON BEHALF OF THE TWO COMPANIES. THE PAYMENT CH ARTS INDICATED THE SURVEY NUMBER OF THE LAND IN QUESTION, THE TOTAL AREA OF L AND, CONSIDERATION TO BE SHOWN IN THE AGREEMENT AND THE AMOUNTS TO BE PAID AS ON-MONE Y IN CASH. THE AMOUNTS TO BE PAID AS ON-MONEY WERE INDICATED BY THE LETTER B W HICH STOOD FOR BLACK MONEY PAYMENTS. THE PAYMENT CHARTS ALSO INDICATED THE SC HEDULE OF PAYMENTS. THE ASSESSING OFFICER PREPARED A SUMMARY OF PAYMENT CHA RTS IN RESPECT OF THE LANDS PURCHASED BY THE ASSESSEE WHICH WAS ANNEXED AS ANNE XURE C TO THE ASSESSMENT ORDER. ANOTHER POINT NOTED BY THE ASSESSING OFFICE R WAS THAT THE PAYMENT OF ON- MONEY FOR PURCHASE OF LAND WAS FURTHER CORROBORATED BY THE FACT THAT THE AGREEMENT VALUE AS SHOWN IN THE SEIZED PAYMENT CHARTS FOR THE TRANSACTIONS TALLIED EXACTLY WITH THE AGREEMENT VALUE SHOWN IN THE BOOKS OF ACCOUNT. SINCE PART OF THE ENTRIES IN THE SEIZED PAPERS TALLIED EXACTLY WITH THE ENTRIES IN T HE BOOKS OF ACCOUNT, THE ASSESSING OFFICER WAS OF THE VIEW THAT A REASONABLE PRESUMPTI ON COULD BE DRAWN THAT OTHER ENTRIES IN THE SEIZED PAPERS WERE ALSO CORRECT I.E. THERE WAS CLEAR EVIDENCE OF PAYMENT OF ON-MONEY AT THE TIME OF PURCHASE OF LAND . FURTHER, WHEN THE ASSESSEE WAS CONFRONTED WITH THE EVIDENCE IN THE SEIZED MATE RIAL, HE ADMITTED THE PAYMENT OF ON-MONEY ON PURCHASE OF LAND BOTH IN RESPECT OF LAN D PURCHASED BY HIM AND THOSE PURCHASED FOR AND ON BEHALF OF TWO COMPANIES. THE RELEVANT QUESTION IN THIS REGARD WAS QUESTION NO.4 TO WHICH, HE REPLIED THAT IN MANY CASES, THE LAND OWNERS ASKS US FOR THE PAYMENT OF PART CONSIDERATION IN CASH AND D UE TO BUSINESS NEEDS, THE ASSESSEE WAS MAKING SUCH PAYMENTS. ANOTHER ASPECT NOTED BY THE ASSESSING OFFICER WAS THAT THE ASSESSEE WAS WITHDRAWING LARGE AMOUNTS OF CASH FROM THE BANK ACCOUNT ON VARIOUS DATES. THE NARRATIONS INDICATED THE PURPOSE OF WITHDRAWAL I.E. FOR THE PURCHASE OF LAND. THE ASSESSING OFFICER HAS TA BULATED IN CHART FORM THE WITHDRAWALS OF CASH FROM BANK WHERE THE CASH WITHDR AWN TALLIED WITH THE ON-MONEY AS PER THE PAYMENT CHARTS AND ANNEXED AS ANNEXURE D TO THE ASSESSMENT ORDER. THE ASSESSING OFFICER NOTED THAT THE AMOUNTS WITHDRAWN FROM THE BANK TALLIED EXACTLY WITH THE ON-MONEY COMPONENT NOTED IN THE PAYMENT CHARTS. THE PAYMENT CHARTS IN RESPECT OF THE PROPERTIES PURCHASED FOR EDIFICE WER E ALSO FOUND, WHICH ESTABLISHES THE ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 29 PAYMENT OF ON-MONEY. THE ASSESSING OFFICER FURTHER NOTED THAT THE CASH WITHDRAWN WAS ORIGINALLY SHOWN IN THE BOOKS OF ACCOUNT AS CAS H IN HAND. HOWEVER, AFTER SEARCH, THE ASSESSEE HIMSELF DEBITED SOME OF THE AMOUNTS TO AN ACCOUNT UN-RECORDED CASH EXPENDITURE SEIZED CASH BOOK IN ASSESSMENT YEAR 20 07-08. THE SAID AMOUNTS WERE IN RESPECT OF PURCHASES MADE BY NKG. IN THE EXPENS ES DEBITED TO THIS ACCOUNT, THE ASSESSEE HAD EVEN GIVEN THE REFERENCE TO THE PAGE N UMBERS OF THE SEIZED BUNDLES, WHICH EVIDENCED SUCH ON-MONEY PAYMENTS. SOME OF TH ESE PAYMENTS WERE FOR LANDS FOR WHICH PAYMENT CHARTS WERE NOT FOUND DURING THE COURSE OF SEARCH. THE ASSESSING OFFICER THUS, WAS OF THE VIEW THAT ON-MONEY PAYMENT S WERE INVOLVED IN RESPECT OF LANDS FOR WHICH PAYMENT CHARTS WERE FOUND AND ALSO IN RESPECT OF THOSE FOR WHICH, THE PAYMENT CHARTS WERE NOT FOUND DURING THE COURSE OF SEARCH. THE ACCOUNT OF UN- RECORDED CASH EXPENDITURE SEIZED CASH BOOK RELATIN G TO THE FINANCIAL YEAR 2006-07 WAS SCANNED AND REPRODUCED AT PAGE 29 OF THE ASSESS MENT ORDER. FURTHER, PAYMENT CHARTS WERE ALSO FOUND IN RESPECT OF LAND PURCHASED BY THE TWO COMPANIES THROUGH THE ASSESSEE AND THE SUMMARY OF THE SAID PAYMENTS A RE ENCLOSED AS ANNEXURE E, WHICH INDICATED ON-MONEY PAYMENTS. THE ASSESSEE HA D MADE SOME PAYMENTS TOWARDS SUCH ON-MONEY ON BEHALF OF TWO COMPANIES. AFTER THE SEARCH SUCH UNACCOUNTED PAYMENTS HAVE BEEN DEBITED BY THE ASSES SEE TO THE ACCOUNT UNRECORDED EXPENDITURE EDIFICE AND UNRECORDED EX PENDITURE EARN MORE CAPITAL SERVICES. THE ASSESSING OFFICER THUS CONCLUDED TH AT AFTER THE SEARCH, THE ASSESSEE HIMSELF HAD ADMITTED TO THE FACT THAT ON-MONEY PAYM ENTS FOR PURCHASE OF LAND BOTH IN THE CASE OF LANDS PURCHASED FOR HIMSELF AND LANDS P URCHASED FOR EDIFICE AND EARN MORE. 75. AS REGARD THE RECEIPT OF MONEY ON SALE OF LAND, ONE PAPER WAS FOUND DURING THE COURSE OF SEARCH I.E. PAGE 29 OF ITEM 1 FROM TH E RESIDENCE OF THE ASSESSEE WHICH IS ENCLOSED AS ANNEXURE F TO THE ASSESSMENT ORDER, IN WHICH THE ASSESSEE HAD NOTED AMOUNTS DUE FROM EDIFICE PROPERTIES PVT. LTD. A SU M OF RS.72 LAKHS WAS SHOWN AS DUE IN RESPECT OF SHRI JANANNATH RAUT DOCUMENTS AND AN AMOUNT OF RS.41,90,663/- WAS SHOWN AS DUE IN RESPECT OF SHAKUNTALA TARAS DOC UMENT. THESE WERE IN RESPECT OF SALE OF LAND BY THE ASSESSEE TO EDIFICE PROPERTI ES PVT. LTD. AT KIWALE. HOWEVER, THE ASSESSING OFFICER NOTED THAT THE SALE CONSIDERA TION SHOWN BY THE ASSESSEE IN ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 30 RESPECT OF THE SALE OF LAND TO EDIFICE PROPERTIES P VT. LTD. WAS ONLY RS.36 LAKHS OF THE PROPERTY OF SHRI JANANNATH RAUT AND RS.24,50,000/- IN RESPECT OF PROPERTY OF SHAKUNTA TARAS. THE ASSESSING OFFICER THUS, WAS OF THE VIEW THAT THE RECEIPT OF ON- MONEY WAS INVOLVED IN SALE OF LAND BY THE ASSESSEE. 76. THE ASSESSEE WHILE RECORDING STATEMENT DURING T HE COURSE OF SEARCH, HAD DECLARED ADDITIONAL PROFIT ON SALE OF LAND WHICH WA S UNRECORDED IN ITS BOOKS OF ACCOUNT IN THE RETURN OF INCOME FILED FOR ASSESSMEN T YEAR 2007-08. THE ASSESSEE HAD DECLARED ADDITIONAL INCOME OF RS.1,80,00,000/- TOWARDS PROFIT ON SALE OF PROPERTY TO RAJAN RAISONI AND PROFIT ON SALE OF LAND AT PUNA WALE TO AMIT ENTERPRISES OF RS.75 LAKHS. BOTH THESE PROFITS / GAINS WERE NOT RECORDE D IN THE BOOKS OF ACCOUNT OF THE ASSESSEE PRIOR TO SEARCH. THE ASSESSING OFFICER TH US, WAS OF THE VIEW THAT THE ADMISSION BY THE ASSESSEE DURING THE COURSE OF SEAR CH THAT ON-MONEY RECEIPTS WERE INVOLVED IN SALE OF LAND BY THE ASSESSEE WAS CONFIR MED BY DECLARING SUCH ADDITIONAL INCOME IN THE RETURN OF INCOME FILED MORE THAN ONE YEAR AFTER THE SEARCH. THE ASSESSING OFFICER THUS, CONCLUDED THAT ON-MONEY COM PONENT WAS INVOLVED BOTH IN THE PURCHASE OF LAND BY THE ASSESSEE AS ALSO SALE OF LA ND BY THE ASSESSEE. THE ASSESSING OFFICER THEREAFTER, COMPUTED PROVISIONAL WORKING OF ON-MONEY ON THE BASIS OF PAYMENT CHARTS IN THE CASE OF ASSESSEE DURING TH E YEAR UNDER CONSIDERATION AND TABULATED THE SAME AS ANNEXURE G TO THE ASSESSMENT ORDER. THE ASSESSING OFFICER NOTED THAT ON-MONEY COMPONENT IN ASSESSEES PURCHAS E TRANSACTIONS WERE TO THE TUNE OF 54% OF THE AGREEMENT VALUE. IN VIEW THEREO F, A PROPOSAL WAS PUT TO THE ASSESSEE TO COMPUTE THE TOTAL ON-MONEY PAYMENTS ON PURCHASE OF LAND AT 54% OF THE TOTAL PURCHASE PRICE SHOWN AND ADD THE SAME TO THE ASSESSEES INCOME. SIMILAR ADDITION WAS PROPOSED IN RESPECT OF SALES ALSO. TH E ASSESSEE FILED A REPLY DATED 07.08.2010 EXPLAINING EACH OF THE ENTRIES IN ANNEXU RE D. THE SAID ANNEXURE D ENLISTS 11 TRANSACTIONS OF PURCHASES MADE BY THE AS SESSEE IN RESPECT OF VARIOUS PIECES OF LAND. IN SOME OF THE CASES, THE ASSESSEE ACCEPTED THAT ON-MONEY WAS PAID FOR THE PURCHASE OF LAND AND IN SOME OF THE CASES, IT WAS POINTED OUT THAT NO ON- MONEY WAS PAID. THE CLAIM OF THE ASSESSEE WAS THAT WHEREVER ACTUAL ON-MONEY WAS PAID, THE SAME WAS RECORDED IN THE RE-CASTED BOOKS OF ACCOUNT AND WHERE NO SUCH ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 31 PAYMENTS WERE INVOLVED, THE ASSESSEE HAD FURNISHED THE REASONING / JUSTIFICATION IN RESPECT THEREOF. 77. ANOTHER OBJECTION RAISED BY THE ASSESSEE WAS TH AT THERE WERE DIFFERENT TYPES OF LANDS AND KEY FACTORS IN THE PURCHASE OF THE LAN D AND THE SETTLEMENT AMOUNTS VARIED FROM LAND TO LAND AND HENCE, ADDITION OF RS. 53,40,067/- WAS UNWARRANTED. AS PER THE ASSESSEE, THE ON-MONEY WORKS OUT TO 11.84% IN CASE OF PUNAWALE, 0% IN CASE OF WAKAD AND 0.60% IN CASE OF SUS. AND NOT 54% AS STATED BY THE ASSESSING OFFICER IN THE NOTICE. ANOTHER ISSUE RAISED BY THE ASSESSEE WAS THAT NO HYPOTHETICAL ADDITION CAN BE MADE ESPECIALLY WHERE THE ASSESSMEN T WAS BEING COMPLETED ON THE BASIS OF SEIZED DOCUMENTS RELATING TO CONCEALMENT O F INCOME. IN ANY CASE, ALL THE DOCUMENTS WERE VERIFIED AND SCRUTINIZED BY THE ASSE SSING OFFICER AND ALSO BY THE SPECIAL AUDITOR AND THE SAID VERIFICATION HAD NOT R EVEALED ANY ON-MONEY PAYMENT EXCEPT THAT SPECIFICALLY ACCEPTED BY THE ASSESSEE. 78. AS REGARDS THE ADDITION TO THE SALES, THE CLAIM OF THE ASSESSEE WAS THAT IT WAS TOTALLY WITHOUT ANY BASIS AS THE ASSESSEE HAD ENTER ED INTO VERY FEW TRANSACTIONS OF SALE AND NO ON-MONEY WAS RECEIVED ON THE SALES WHIC H WERE NOT ACCOUNTED FOR. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD NOT C ONTESTED THE FACT OF PAYMENT OF ON-MONEY. HOWEVER, THE CONTENTION OF THE ASSESSEE WAS THAT THE ON-MONEY PAYMENT IN MANY OF THE CASES WAS LESS THAN THAT INDICATED I N THE PAYMENT CHARTS. THE ASSESSING OFFICER AT PAGES 38 TO 42 OF THE ASSESSME NT ORDER, CONSIDERED THE PAYMENT CHARTS IN RESPECT OF VARIOUS PERSONS FROM W HOM THE ASSESSEE HAD PURCHASED THE LAND AND ALSO ANNEXED THE COPIES OF S EIZED PAYMENT CHARTS AS ANNEXURE H TO THE ASSESSMENT ORDER. THE ASSESSING OFFICER THEREAFTER, COMPUTED THE ON-MONEY PAYMENT IN RESPECT OF THE TRANSACTIONS FOR WHICH, THE PAYMENT CHARTS WERE FOUND DURING THE COURSE OF SEARCH AND ENCLOSED THE SAME AS ANNEXURE I TO THE ASSESSMENT ORDER. AS PER THE SAID CHART, THE TOTAL AGREEMENT COST IN RESPECT OF THE TRANSACTIONS WAS RS.7,54,64,050/- AND THE ON-MONEY COMPONENT WAS RS.4,59,19,952/-. THUS, THE ON-MONEY WAS 61% OF TH E AGREEMENT COST. THE ASSESSING OFFICER ADMITS THAT THE PAYMENT CHARTS WE RE FOUND ONLY IN RESPECT OF SOME OF THE PURCHASE TRANSACTIONS BUT THE PROPOSAL WAS P UT UP TO THE ASSESSEE TO CONSIDER ON-MONEY PAYMENT IN RESPECT OF ENTIRE PURCHASES, IN VIEW OF THE FACT THAT THE ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 32 ASSESSEE HAD NOT CONTESTED THE FACT THAT THERE WERE NO ON-MONEY PAYMENTS AND ALSO HAD NOT CONTESTED THE FACT THAT THERE WERE NO ON-MO NEY PAYMENTS EVEN IN RESPECT OF THE TRANSACTIONS FOR WHICH, THE PAYMENT CHARTS WERE NOT FOUND DURING THE COURSE OF SEARCH. THE ASSESSING OFFICER REJECTED THE CONTENT ION OF THE ASSESSEE THAT ON- MONEY PAYMENT WAS ONLY WHAT WAS RECORDED IN THE BOO KS OF ACCOUNT AFTER THE SEARCH. THE ASSESSING OFFICER FURTHER OBSERVED THA T WHILE CONSIDERING THE EXTENT OF ON-MONEY PAYMENT, IT WAS MORE REASONABLE TO RELY ON THE PAYMENT CHARTS FOUND AND SEIZED RATHER THAN THE ON-MONEY WHICH THE ASSESSEE HAD DECIDED TO RECORD IN HIS BOOKS OF ACCOUNT AFTER THE SEARCH. FURTHER, THE AS SESSING OFFICER NOTES THAT THE PAYMENT CHARTS IN RESPECT OF PROPERTY PURCHASED BY THE ASSESSEE AT ALL LOCATIONS I.E. PUNAWALE, WAKAD, SUS. WERE FOUND INDICATING ON-MONE Y PAYMENT AND IF THE ASSESSEE NOW WANTS TO CLAIM THAT IN RESPECT OF SOME OF THE TRANSACTIONS, NO ON- MONEY WAS PAID OR THE PROPORTIONATE OF ON-MONEY PAI D WAS LESS THAN AS INDICATED IN THE PAYMENT CHARTS, THE SAME COULD NOT BE ACCEPTED IN THE ABSENCE OF ANY EVIDENCE. THE ASSESSEE HAVING FAILED TO DISCHARGE HIS ONUS WA S HELD TO BE IN DEFAULT AND THE ASSESSING OFFICER ESTIMATED THE ON-MONEY COMPONENT ON THE ENTIRE PURCHASE BY THE ASSESSEE AT 61%. SINCE THE SOURCE OF ON-MONEY PAYM ENT WAS NOT PROVED, THE ASSESSING OFFICER HELD THAT THE SAME IN THE NATURE OF UNEXPLAINED EXPENDITURE AND IT WAS DEEMED TO BE THE ASSESSEES INCOME UNDER SECTIO N 69C OF THE ACT. THE TOTAL PURCHASES FOR THE ASSESSMENT YEAR 2006-07 WERE RS.4 ,82,07,325/- AND THE ON- MONEY ON THE SAME WORKS OUT TO BE RS.2,94,06,468/- WHICH WAS DEEMED TO BE THE ASSESSEES INCOME UNDER SECTION 69C OF THE ACT. IT WAS FURTHER OBSERVED BY THE ASSESSING OFFICER THAT AS PER THE PROVISO TO SECTIO N 69C OF THE ACT THOUGH ON-MONEY PAYMENT TOWARDS COST OF LAND PURCHASED BY THE ASSES SEE HAS BEEN ADDED AS INCOME OF THE ASSESSEE, BUT NO DEDUCTION WOULD BE ALLOWED FOR THE SAME WHILE COMPUTING THE ASSESSEES INCOME. THE PAYMENT WOULD ADD TO THE CO ST OF LAND AND ACCORDINGLY, IN RESPECT OF THE LANDS WHICH REMAINED TO BE SOLD, THE VALUE OF CLOSING STOCK WOULD BE INCREASED TO THE EXTENT OF ON-MONEY PAYMENT. 79. AS REGARDS THE MONEY RECEIVED ON SALE OF LAND B Y THE ASSESSEE ONE DOCUMENT AT PAGE 29 OF ITEM 1 WAS SEIZED FROM THE R ESIDENCE OF THE ASSESSEE, WHICH INDICATED THE SALE OF LAND TO EDIFICE PROPERTIES PV T. LTD. FOR RS.72 LAKHS WHICH IN TURN ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 33 WAS RECORDED IN THE BOOKS AT RS.36 LAKHS. THUS, TH E ON-MONEY IN THIS TRANSACTION WAS 100% OF THE AGREEMENT VALUE. THE OTHER SALE OF THE PROPERTY TO EARN MORE CAPITAL SERVICES PVT. LTD WAS FOR RS.41,90,663/- AN D WAS RECORDED AT RS.24,50,000/- IN THE BOOKS OF ACCOUNT. THE ON-MONEY ON THIS TRAN SACTION WORKED OUT TO 71% OF THE AGREEMENT VALUE. THE ASSESSING OFFICER IN VIEW THE REOF OBSERVED THAT SINCE THE SAMPLE SIZE WAS TOO SMALL, IT WAS NOT FAIR TO COMPU TE THE ON-MONEY ON THE ENTIRE SALES ON THESE PERCENTAGES. IN THE CIRCUMSTANCES, THE ASSESSING OFFICER WAS OF THE VIEW THAT IT WAS FIT AND REASONABLE TO COMPUTE THE ON-MONEY ON SALES ALSO @ 61%. THE TOTAL SALES DURING ASSESSMENT YEAR 2006-07 OF R S.61,94,250/- AND THE ON-MONEY COMPONENT WAS WORKED OUT AT RS.37,78,492/-. 80. THE CIT(A) UPHELD THE ORDER OF ASSESSING OFFICE R IN RELATION TO THE RECEIPT OF ON-MONEY ON THE PURCHASE OF LAND. HOWEVER, THE CIT (A) WAS OF THE VIEW THAT WHILE THE FACT OF PAYMENT OF ON-MONEY ON PURCHASES WAS UN DENIABLE BUT THE ASSESSING OFFICERS ACTION OF APPLYING HIGH RATE OF 61% ON AL L THE PURCHASES WAS NOT JUSTIFIED AND CONSEQUENTLY, THE CIT(A) ESTIMATED THE ON-MONEY COM PONENT AT 30%. IT WAS ALSO HELD BY THE CIT(A) THAT CERTAIN TRANSACTIONS DID NO T CALL FOR ANY ADDITION ON THIS ACCOUNT DUE TO THE SPECIFIC FACTS PREVAILING IN REL ATION TO THE TRANSACTION IN QUESTION. CONSEQUENTLY, THE ADDITION ON ACCOUNT OF PAYMENT OF ON-MONEY ON PURCHASE TRANSACTIONS WERE RE-CALCULATED AND THE NET PURCHAS ES ON WHICH ESTIMATE OF 30% WAS TO BE APPLIED WERE COMPUTED AT RS.3,47,19,120/- AND 30% ON-MONEY COMPONENT ON THEREOF WAS WORKED OUT AT RS.1,04,15,736. THE ASSE SSEE HAD ALREADY OFFERED RS.5,90,000/- IN THE COMPUTATION OF INCOME FILED WI TH RETURN OF INCOME AND HENCE, THE NET ADDITION ON ACCOUNT OF ON-MONEY PURCHASES IN AS SESSMENT YEAR 2006-07 WAS REDUCED TO RS.98,25,736/- AS AGAINST THE ADDITION O F RS.2,94,06,468/- MADE BY THE ASSESSING OFFICER. 81. THE CIT(A) ESTIMATED ON-MONEY COMPONENT ON THE SALE OF PLOTS BY THE ASSESSEE AND HELD AS UNDER:- 13.13A HAVING CONSIDERED THIS SUBMISSION OF THE APPELLANT, IN PRINCIPLE, I FIND FORCE IN THE CONTENTION OF THE APPELLANT. UPON PERUSAL OF THE APPELLANT'S RETURNS OF INCOME FILED AFTER THE SEARCH ACTION, IT IS SEEN THAT FOR AY 2007-08 AND 2008-09 THE CREDIT SIDE OF THE P & L ACCOUNT CO NTAINS AN ENTRY 'INCOME DECLARED'. THAT BEING THE CASE, THE APPELLANT WAS C LEARLY ENTITLED FOR THE INCOME ALREADY DECLARED BY HIM AGAINST THE TOTAL AD DITIONAL INCOME ADDED BY THE LD. AO. THE LD. AO HAS NOWHERE STATED THAT HIS ESTIMATION OF UNDISCLOSED INCOME IS OVER AND ABOVE THE ADDITIONAL INCOME DECL ARED BY THE APPELLANT ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 34 HIMSELF. IN PRINCIPLE, THEREFORE, I AM IN AGREEMENT WITH THE CONTENTION OF THE APPELLANT ON THIS ISSUE. FOR THE AY PRESENTLY UNDER CONTENTION, HOWEVER, THE FACTS ARE SOMEWHAT DIFFERENT IN SO FAR AS NO AMOUNT WAS CREDITED TO THE P & L ACCOUNT AS 'INCOME DECLARED'. HOWEVER, THE APPELLAN T VOLUNTARILY ADDED AN AMOUNT OF RS.22,00,000/- IN HIS COMPUTATION OF INCO ME FILED WITH THE RETURN FILED IN RESPONSE TO NOTICE UNDER SECTION 153A WITH THE REMARKS 'CASH RECEIPTS THROUGH SEIZED MATERIALS'. AS SUCH, THE AP PELLANT IS ENTITLED TO A SET OFF OF THE SAID AMOUNT AGAINST THE ESTIMATED ON MON EY RECEIPTS OF RS.24,77,700/-. THE NET ADDITION ON ACCOUNT OF ON M ONEY RECEIVED ON SALE TRANSACTIONS WOULD THEREFORE BE RS.2,77,700/-. 82. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE A SSESSEE MADE ELABORATE SUBMISSIONS AND TOOK US THROUGH THE FACTS OF THE CA SE AND POINTED OUT THAT THE MAIN ISSUE RAISED IN THE PRESENT APPEAL IS AGAINST AN ES TIMATION OF ON-MONEY ON THE PURCHASE OF LANDS MADE BY THE ASSESSEE FOR THE YEAR S UNDER APPEAL AND ALSO AGAINST THE ON-MONEY RECEIVED ON THE SALES MADE BY THE ASSE SSEE. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT SE ARCH ON THE PREMISES OF ASSESSEE WAS CARRIED ON 24.02.2008 AND LOOSE DOCUMENTS WERE FOUND FROM THE POSSESSION OF THE ASSESSEE WHICH INDICATED THE TRANSACTIONS IN LA ND. BECAUSE OF THE VOLUMINOUS ENTRIES, REFERENCE WAS MADE TO THE SPECIAL AUDIT. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FURTHER CLARIFIED T HAT ON THE BASIS OF DOCUMENTS FOUND DURING THE COURSE OF SEARCH IN RELATION TO THE ON-M ONEY PAID, REVISED BOOKS OF ACCOUNT WERE PREPARED AND WERE PRESENTED BEFORE THE SPECIAL AUDITOR, WHICH IN TURN, PREPARED AUDIT REPORT, AGAINST WHICH THE ASSESSEE F ILED OBJECTIONS WHICH WERE REJECTED BY THE ASSESSING OFFICER. THE LEARNED AUT HORIZED REPRESENTATIVE FOR THE ASSESSEE FURTHER POINTED OUT THAT THE ASSESSEE HAD DECLARED RS.5.20 CRORES IN ASSESSMENT YEARS 2007-08 AND 2008-09. THE ASSESSIN G OFFICER THEREAFTER, PICKED UP 11 DOCUMENTS AND ON THAT BASIS, ESTIMATED THE ON-MO NEY PAID BY THE ASSESSEE FOR THE ENTIRE TRANSACTIONS. IT WAS FURTHER POINTED OU T BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT OUT OF 11 DOCU MENTS REFERRED TO BY THE ASSESSING OFFICER, TWO DOCUMENTS WERE ACCEPTED BY T HE ASSESSING OFFICER, ON WHICH THERE WERE NO ON-MONEY PAYMENTS, BUT ALL THE DOCUME NTS RELATED TO ASSESSMENT YEAR 2007-08. THE PLEA OF THE LEARNED AUTHORIZED REPRES ENTATIVE FOR THE ASSESSEE WAS THAT IN CERTAIN TRANSACTIONS, THERE WAS NO WHISPER OF ON-MONEY, BUT THE ASSESSING OFFICER MADE ESTIMATION IN RESPECT OF ALL THE TRANS ACTIONS. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FAIRLY SUBMITTED TH AT THE ASSESSEE DURING THE COURSE OF RECORDING OF STATEMENT, WHICH IS INCORPORATED AT PAGE 28 OF THE ASSESSMENT ORDER ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 35 ADMITTED THAT ON-MONEY WAS PAID ON CERTAIN TRANSACT IONS. IN LINE THEREOF, THE ASSESSEE ON ITS OWN HAD REVISED ITS ACCOUNTS AND AC COUNTED FOR ON-MONEY TRANSACTION OF RS.3.10 CRORES IN ASSESSMENT YEAR 20 07-08 AND RS.1.90 CRORES IN ASSESSMENT YEAR 2008-09. IT WAS FURTHER CLARIFIED BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT ALL THE LANDS PURCHASED BY THE ASSESSEE WERE VATAN LANDS FOR WHICH, PERMISSION HAD TO BE OBTAINE D TO TRANSFER THE PROPERTIES. OUR ATTENTION WAS DRAWN TO THE CHART PREPARED BY THE AS SESSING OFFICER PLACED AT PAGE 11 OF THE PAPER BOOK AND ALSO OUR ATTENTION WAS DRAWN TO THE VARIOUS DOCUMENTS IN WHICH, THOUGH THERE WAS MENTION OF ON-MONEY, BUT TH E AMOUNT WAS ADOPTED. OUR ATTENTION WAS ALSO DRAWN TO THE BANK STATEMENTS, WH EREIN CASH WAS WITHDRAWN FOR MAKING THE PAYMENT OF ON-MONEY TO THE RESPECTIVE PA RTIES. THE STAND OF THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE WAS THAT NO VERIFICATION EXERCISE OR ENQUIRIES ON ON-MONEY PAYMENTS WERE MADE BY THE ASS ESSING OFFICER. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE TOOK US THROUGH ALL THE ENTRIES ON THE RESPECTIVE PAGES REFERRED TO BY THE ASSESSING OFFIC ER, WHICH WE SHALL DEAL WITH WHILE DECIDING THE ISSUE. 83. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE A SSESSEE POINTED OUT THAT IN ASSESSMENT YEAR 2006-07 ONLY TWO PLOTS WERE SOLD AN D THERE WAS NO ON-MONEY. HOWEVER, IN ASSESSMENT YEAR 2007-08 THERE WAS SERIE S OF PLOTS SOLD AND ADDITIONAL INCOME OF RS.3.10 CRORES WAS OFFERED IN THIS YEAR. IN ASSESSMENT YEAR 2008-09, ADDITIONAL INCOME OF RS.1.90 CRORES WAS OFFERED ON THE BASIS OF SEIZED DOCUMENTS. IT WAS STRESSED BY THE LEARNED AUTHORIZED REPRESENTATI VE FOR THE ASSESSEE THAT CERTAIN DOCUMENTS WERE FOUND DURING THE COURSE OF SEARCH, W HICH REFLECTS NO ON-MONEY PAID WHICH WAS NOT REFERRED TO BY THE ASSESSING OFFICER. OUR ATTENTION WAS DRAWN TO THE DOCUMENT AT PAGES 313, 342 AND 367 OF THE PAPER BOO K. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FURTHER REFERRED TO THE ORDER OF CIT(A) AND POINTED OUT THAT THE RELIANCE PLACED UPON BY THE CIT(A) ON VARIOUS CASE LAWS WERE MIS- PLACED. IT WAS STRESSED BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT NO DOCUMENTS OF ON-MONEY WERE FOUND RELATING T O ASSESSMENT YEAR 2006-07 IN RESPECT OF SALE OF PLOTS AND THERE WAS NO MERIT IN ESTIMATION OF ON-MONEY ON SUCH ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 36 SALE OF PLOTS. FURTHER, THE LEARNED AUTHORIZED REP RESENTATIVE FOR THE ASSESSEE PLACED RELIANCE ON THE FOLLOWING CASE LAWS:- 1. ACIT VS. M/S. METRO CONSTRUCTION CO, ITA NO.48 11/MUM/2010; 2. SAMRAT BEER BAR VS. ACIT (2000) 75 ITD 19 (PUNE ) (TM) 3. CIT VS. DR. MKE MEMON (2001) 248 ITR (310) (BOM ) 4. ACIT VS SRJ PEETY STEELS P LTD (2011) 53 DTR (P UNE)(TRIB) 347 84. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE POINTED OUT THAT THERE WAS A PREVALENT PRACTICE IN THE MARKET TO UND ER-VALUE THE DOCUMENTS OF PURCHASE AND SALE OF LAND OR PROPERTY. IN THE CASE OF THE ASSESSEE, THERE WERE CASH WITHDRAWALS IN THE NAMES OF VARIOUS PERSONS. HOWEV ER, SOME AMOUNT WAS RE- DEPOSITED IN THE BANK ACCOUNT AND THERE WAS NO SOUR CE OF ON-MONEY PAYMENTS. IN ADDITION, THERE WERE DOCUMENTS FOUND I.E. PAYMENT D ETAILS WHICH CLEARLY MENTIONED THE ON-MONEY PART OF THE TRANSACTIONS. HOWEVER, TH ERE WERE CERTAIN TRANSACTIONS WHERE NO DOCUMENTS WERE FOUND BUT SINCE THE ASSESSE E OFFERED ON-MONEY ON PURCHASE TRANSACTIONS I.E. RS.5,90,000/- IN ASSESSMENT YEAR 2006-07 AND RS.3.10 CRORES IN ASSESSMENT YEAR 2007-08 AND RS.1.90 CRORE S IN ASSESSMENT YEAR 2008-09 ESTABLISHED THE CASE OF REVENUE AND LOOKING AT THE TOTAL SCENARIO, WHERE NO ON- MONEY WAS MENTIONED, IT COULD NOT BE SAID THAT NO O N-MONEY WAS PAID. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE REFERRE D TO THE RELIANCE WAS PLACED ON THE RATIO LAID DOWN BY THE ASSESSING OFFICER ON THE RATIO LAID DOWN BY THE PUNE BENCH OF THE TRIBUNAL IN KHOPDE KISANRAO MANIKRAO VS. ACI T REPORTED IN 74 ITD 25 (PUNE) (TM). IT WAS FURTHER POINTED OUT BY THE CIT-DR THA T ONUS WAS ON THE ASSESSEE TO PROVE THAT NO ON-MONEY WAS INVOLVED IN THE TRANSACT IONS AND SINCE THE ASSESSEE HAS NOT DISCHARGED HIS ONUS AND ON THE OTHER HAND, OFFE RED ADDITIONAL INCOME ON ACCOUNT OF ON-MONEY PAYMENTS, THE ADDITION IS TO BE UPHELD IN THE HANDS OF THE ASSESSEE. 85. AT THE CLOSE OF HEARING, THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FURNISHED WRITTEN SUBMISSIONS, WHICH READ AS UNDER:- 1. THE MAIN GRIEVANCE ARISING OUT OF THE APPEAL IS REGARDING ESTIMATION OF ON MONEY BY THE LEARNED AO. THE QUESTION THEREFORE IS WHETHER THE LEARNED AO WAS JUSTIFIED IN RESORTING TO THE ESTIMATION OF ON MONEY ON ALL THE PURCHASES AND SALES? AFTER THE SEARCH ACTION, THE APPELLANT R EVISED THE BOOKS OF ACCOUNTS BY CONSIDERING THE ENTIRE SEIZED MATERIAL AND OFFERED RS 5 CRORES IN TWO YEARS I.E. AY 2007-08 RS 3.10 CRORES AND FOR AY 2008-09,1.90 CRORES. ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 37 THIS INCOME OFFERED TAKES CARE OF THE ENTIRE SEIZED MATERIAL. THE APPELLANT RECORDED THE ON MONEY PAID THAT WAS FOUND IN THE SE IZED MATERIAL. THERE IS NO ACCEPTANCE BY THE APPELLANT OF ANY ON MONEY FOR ANY TRANSACTION FOR WHICH NO EVIDENCE IN THE FORM OF SEIZED PAPER OR CHART WAS F OUND. 2. THE LEARNED AO ACCEPTS THAT ON MONEY PAID WAS FO UND IN CERTAIN CASES IN THE ASSESSMENT ORDER. IN ORDER TO ESTIMATE ON MONEY ON EVERY TRANSACTION, THERE MUST BE SOME EVIDENCE TO PROVE T HAT ON MONEY IS PAID ON EVERY TRANSACTION. THAT EVIDENCE CAN BE TO THE EFFE CT OF SHOWING ANY STANDARD MODUS ADOPTED BY ASSESSEE OR ON THE BASIS OF ANY EN QUIRY. IN THE CASE OF THE APPELLANT, THERE IS NO EVIDENCE TO PROVE THAT THE A PPELLANT FOLLOWED UNIFORM PRACTICE OF PAYING AND RECEIVING ON MONEY FOR EVERY SINGLE TRANSACTION. MERELY BECAUSE IN SOME TRANSACTIONS, ON MONEY IS PAID THAT DOES NOT LEAD TO ANY CONCLUSION THAT ON MONEY IS PAID IN EVERY TRANSACTI ON. THE APPELLANT DOES NOT CLAIM THAT THERE IS NO ON MONEY AT ALL. THE APPELLA NT HAS OFFERED RS 5 CRORES TO TAKE CARE OF THE ON MONEY FOUND DURING THE COURSE O F SEARCH. 3. THE LEARNED AO RELIES ON 11 CHARTS IN THE FORM O F LOOSE PAPERS FOUND DURING THE COURSE OF SEARCH WHERE ACCORDING TO HIM ON MONEY WAS PAID AND THEREAFTER ON THE BASIS OF DECISION OF HON PUNE ITA T IN CASE OF KISANRAO KHOPADE, HE RESORTS TO ESTIMATION OF ON MONEY. THES E 11 CHARTS RELATE TO THREE MONTHS FOR AY 2007-08. FOR OTHER PERIOD NO EV IDENCE OR LOOSE PAPERS WERE FOUND. IN 11 CHARTS, THERE ARE THREE TRANSACTI ONS WHERE IT IS UNDISPUTED THAT ON MONEY IS NOT PAID. THEY ARE USHA OVAL, PARA MOUNT CONSTRUCTION AND SAMINDRA NADHE. AO HIMSELF ACCEPTS NO MONEY IN USHA OVAL CASE AND OTHER TWO SEIZED PAPERS ITSELF DOES NOT REFLECT ANY ON MO NEY I.E. THERE IS NO MENTION OF ON MONEY OR CASH OR BLACK BUT THEY ARE MERELY CA LCULATION CHARTS. NO CONCLUSION CAN BE DRAWN THAT THE ASSESSEE IS PAYING AND RECEIVING ON MONEY ON EVERY TRANSACTION. AS AGAINST THAT THE APPELLANT HAS REFERRED TO OTHER CHARTS WHERE ON MONEY IS NOT PAID. THESE CHARTS ARE ALSO F OUND AND SEIZED AT THE TIME OF SEARCH. THE POSITIVE EVIDENCE WAS FOUND DUR ING THE COURSE OF SEARCH IN THE FORM OF LOOSE PAPERS WHERE ON MONEY IS NOT P AID. IN PRESENCE OF SUCH EVIDENCE, IT WOULD BE UNJUSTIFIED TO ESTIMATE THAT ON MONEY WAS PAID AND FURTHER TO ESTIMATE ON MONEY ON SUCH TRANSACTIONS. EVEN ON THE BASIS OF THESE 11 CHARTS NO CONCLUSION CAN BE DRAWN THAT ON MONEY IS PAID ON EVERY TRANSACTION. AO RESORTED TO ESTIMATION WITHOUT GIVI NG ANY FINDING THAT ON MONEY IS PAID FOR EVERY TRANSACTION AND FURTHER FOR NOT GIVING ANY BASIS OR MATERIAL FOR SUCH INFERENCE. 4. IN RESPECT OF SALES, SPECIFIC LOOSE PAPERS SIMIL AR TO ONE RELIED ON BY AO HAVE BEEN FOUND THAT SHOWED NO ON MONEY WAS PAID. I N FACT FOR AY 2007-08, FOR MOST OF THE SALES EFFECTED FOR THAT YEAR CHARTS HAVE BEEN FOUND WHICH DOES NOT REFLECT ANY ON MONEY. THIS CONCLUSIVELY PROVES THAT ON MONEY WAS NOT RECEIVED FOR THOSE SALES. IT IS THEREFORE SUBMITTED THAT THERE IS A POSITIVE EVIDENCE TO SHOW ON MONEY WAS NOT INVOLVED ON THE T RANSACTIONS OF SALES. THE AO RELIES ON ONLY ONE LOOSE PAPER TO SHOW THAT ON MONEY WAS RECEIVED ON SALES. THE PAPER RELATES TO ONLY ONE YEAR I.E. A Y 2008-09. THAT TRANSACTION ON LOOSE PAPER WAS A DIFFERENT TRANSACTION AND THE PAPER HAS BEEN EXPLAINED BY THE APPELLANT. THE MAIN TRANSACTION WAS DONE BY THE COMPANY EDIFICE PROPERTIES P LTD IN WHICH THE APPELLANT WAS A DIREC TOR. NO INFERENCE CAN BE DRAWN THAT ON SALES ALSO ON MONEY WAS RECEIVED WHER E POSITIVE EVIDENCE OF LOOSE PAPERS WAS FOUND SHOWING NO ON MONEY. 5. OTHER REASONS WHY ON MONEY CANNOT BE ESTIMATED O N EVERY TRANSACTIONS ARE- A. THE BUSINESS OF THE APPELLANT IS TO PURCHASE AND SALE OF LAND AFTER AGGREGATING THE LANDS. ALL THE LANDS ARE VATA N LANDS. EVERY DEAL OR TRANSACTION IS DIFFERENT IN TERMS OF NATURE OF L AND SIZE OF LAND, THE OWNERS, LITIGATION INVOLVED, NATURE OF AGREEMENT EN TERED INTO. THE APPELLANT DOES NOT CARRY OF ACTIVITY OF BUYING AND SELLING PLOTS OF UNIFORM NATURE AND CHARACTER. ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 38 B. THE CHARTS ARE ALSO NOT UNIFORM. THE LOOSE PAPER S REFERRED OR RELIED ARE ALSO DIFFERENT TYPES. THE UNIFORM MODUS OPERAND! IN TERMS OF PAPERWORK OR ACTUAL CONDUCT IS NOT FOUND. C. THE AO DOES NOT MAKE ANY ENQUIRY AND PROCEEDS ON THE MERE PRESUMPTION OR SUSPICION THAT ON MONEY IS REQUIRED TO BE ESTIMATED WITHOUT BRINGING ANY MATERIAL ON RECORD. D. THE AO DOES NOT REJECT THE REVISED BOOKS AND INC OME DECLARED BY THE APPELLANT. HE ACCEPTS THE RETURN AND THE BAS IS OF COMPUTATION OF INCOME. HE ALSO MAKES FURTHER ADDITION OR DISALLOWA NCES TO THE INCOME. HE MAKES A SEPARATE AND INDEPENDENT ADDITIO N OF ESTIMATION OF ON MONEY. IT IS THEREFORE SUBMITTED THAT THE EST IMATION IS RESORTED FOR ADDITION OF A SPECIFIC INCOME ON ACCOUNT OF ON MONE Y AND NOT FOR COMPUTING INCOME OF THE APPELLANT IN TOTALITY. ESTI MATION OF INCOME AND ESTIMATION OF UNDISCLOSED INCOME ARE DIFFERENT. UND ISCLOSED INCOME CAN BE ESTIMATED ONLY IF EVIDENCE IS FOUND THAT IT WAS IN FACT EARNED. 6. THE DECISION OF KISANRAO KHOPDE IS DISTINGUISHAB LE. IN THAT CASE, A REGISTER CALLED BHARNA REGISTER WAS FOUND THAT RECORDED ON M ONEY. THE HON ITAT EXAMINED THE REGISTER AND CAME TO THE CONCLUSION TH AT THE BHARNA REGISTER WAS NOT A COMPLETE RECORD OF ON MONEY BUT THE ENTRI ES WERE FOUND TO HAVE BEEN MADE IN THAT BOOK ON THE BASIS OF SOME OTHER M ATERIAL OR RECORD. THE POSITIVE MATERIAL THUS WAS FOUND IN THAT CASE THAT APPELLANT IS IN RECEIPT OF ON MONEY OTHER THAN OR IN ADDITION TO THAT WAS FOUND I N THE BHARNA REGISTER. THE FACTS OF THE APPELLANT'S CASE ARE EXACTLY OPPOSITE. IN CASE OF THE APPELLANT, CONCRETE EVIDENCE IS FOUND TO SHOW THAT IN OTHER TR ANSACTIONS ON MONEY IS NOT PAID OR RECEIVED. SUCH EVIDENCE IS COMPLETELY IGNOR ED AND BRUSHED ASIDE. THE DECISION OF KISANRAO KHOPDE IS FURTHER DISTINGUISHE D BY THE HON THIRD MEMBER DECISION OF PUNE ITAT IN SAMRAT BEER BAR WHERE IS D ECISION IS DISTINGUISHED ON THE LINES MENTIONED ABOVE. THE COPIES OF DECISIO NS ARE ALREADY PLACED ON RECORD. THE DECISION OF BOMBAY HIGH COURT IN MKE ME NON ALSO SUPPORTS THE CASE OF THE APPELLANT THAT UNDISCLOSED INCOME CANNO T BE ESTIMATED IN ABSENCE OF EVIDENCE. THE DECISIONS IN CASE OF ACIT V METRO CONSTRUCTION COMPANY 36 CCH 249 IS RELIED ON BY THE APPELLANT WHERE THE FAC TS AND ISSUE IS SIMILAR. THE ON MONEY WAS FOUND IN CASE OF FEW FLATS AND THE HON ITAT HELD THAT ON THE BASIS OF FEW FLATS ON MONEY CANNOT BE ESTIMATED FOR ALL THE FLATS. THIS WAS A CASE OF SEARCH AND YEAR INVOLVED WAS YEAR OF SEARCH . THE ASSESSMENT WAS TO BE MADE U/S 143(3] RWS SEC 153A. SIMILARLY RELIANCE IS ALSO PLACED ON A DECISION OF KOLKATA BENCH OF ITAT IN CASE OF FORT P ROJECTS (P) LTD V DCIT 145 TTJ 340 KOL WHEREIN THE HON ITAT HELD THAT ON THE B ASIS OF FEW TRANSACTIONS ON MONEY CANNOT BE ESTIMATED FOR ALL TRANSACTIONS. 7. THE LEARNED CIT(A] RELIED ON THE DECISION OF DE LHI HIGH COURT IN CASE OF CHETANDAS LACHMAN DAS 354 CTR 392 DEL TO SUPPORT THE ESTIMATION. THIS DECISION IS DISTINGUISHABLE ON FACTS. SINCE IN THAT CASE, THE APPELLANT WAS DEALING IN 'HING' AND HE WAS FOUND TO HAVE BEEN INVOLVED IN UNDER INVOICING. THE NATURE OF BUSINESS ACTIVITY WA S DIFFERENT. IT WAS A COMMODITY AND NOT LAND AND UNIFORM PRACTICE OF UNDE R INVOICING WAS FOUND. THE PRICES OF UNIFORM COMMODITIES ARE SAME AND THE MATERIAL FOUND WAS IN THE FORM OF PRACTICE FOLLOWED BY THE ASSESSEE IN TH AT CASE. THIS DECISION HOWEVER HAS BEEN CONSIDERED BY HON MUM ITAT IN CASE OF METRO CONSTRUCTION COMPANY MENTIONED ABOVE AND CONSIDERIN G THE DECISION OF DELHI HIGH COURT THE HON ITAT CAME TO THE CONCLUSIO N THAT THE ON MONEY CANNOT BE ESTIMATED FOR ALL THE TRANSACTIONS. 8. WITHOUT PREJUDICE TO THE ABOVE SUBMISSIONS, IT IS SUBMITTED THAT IF THE HON BENCH IS OF THE VIEW THAT ESTIMATION IS CAL LED FOR, IT IS HUMBLY PRAYED THAT A FAIR AND REASONABLE ESTIMATE OF UNDISCLOSED INCOME MAY BE MADE AS AGAINST A HYPOTHETICAL FORMULA OF APPLYING A FIXED RATE FOR ALL THE TRANSACTIONS. THE POSITIVE EVIDENCE FOUND SHOWING NO. OF PAYMENT OF CASH CONSIDERATION (ON MONEY) FOR OTHER TRANSACTIONS OF PURCHASE AS WE LL AS SALES, NON ENQUIRY BY AO, INCOME DECLARED IN THE RETURN OF INCOME, NO SPECIFIC TANGIBLE ASSETS ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 39 FOUND PROPORTIONATE TO THE ON MONEY ESTIMATED BY LO WER AUTHORITIES MAY KINDLY I BE CONSIDERED WHILE MAKING A FAIR ESTIMATE. 9. WITHOUT PREJUDICE TO THE ABOVE SUBMISSIONS, IT IS SUBMITTED THAT IF ON MONEY IS ESTIMATED ON PURCHASES AND SALES, THE A DDITION OF ON MONEY ON SALES MADE IN THE FIRST YEAR MAY KINDLY BE ALLOWED TO BE SET OFF AGAINST ADDITION OF ON MONEY FOR PURCHASES IN SECOND YEAR. SIMILARLY ADDITION OF ON MONEY ON SALES MADE IN SECOND YEAR MAY KINDLY BE AL LOWED TO BE SET AGAINST ADDITION OF ON MONEY FOR PURCHASES IN THIRD YEAR. I T IS RESPECTFULLY SUBMITTED THAT SINCE THE INCOME OF ON MONEY ON SALES IS AVAIL ABLE FOR PAYMENT OF ON MONEY, SET OFF OF THE SAME MAY KINDLY BE ALLOWED. R ELIANCE IS PLACED ON THE DECISION OF BOMBAY HIGH COURT IN THE CASE CIT V JAW ANMAL GEMAJI GANDHI REPORTED IN 151 ITR 353 WHEREIN THE HON BOMBAY HIGH COURT HELD THAT SECRET PROFIT EARNED BY THE ASSESSEE MAY CONSTITUTE A FUND . THE ASSESSEE ACQUIRED GOLD IN LATTER HALF OF THE ASSESSMENT YEAR WHICH CA N BE SAID TO HAVE COME FROM THE INCOME WHICH THE ASSESSEE EARNED IN THE VE RY ASSESSMENT YEAR. SIMILARLY MADHYA PRADESH HIGH COURT IN ADDITION.CIT V. DHARAMDAS AGARWAL REPORTED IN 144 ITR 143 HELD THAT CASH CREDITS REPR ESENTS INCOME EARNED IN EARLIER YEAR WHICH TAXED IN THAT YEAR. MADRAS HIGH COURT IN CIT V R R PICTURES REPORTED IN 147 ITR 150 HELD THAT UNDISCLOSED INCOM E ADDED IN THE ASSESSEE'S CASE REPRESENT HIS REAL INCOME WHICH MUS T BE REGARDED AS AVAILABLE TO HIM SUBSEQUENTLY WHEN IS HIS ASKED TO EXPLAIN THE UNDISCLOSED INVESTMENTS. FURTHER RELIANCE IS PLACED ON CIT V M A UNNERIKUTTY (154 ITR 844) (KER) , CIT V TYARYAMAL BALCHAND (165 ITR 453) WHEREIN THE RAJASTHAN HIGH COURT HELD THAT THE ADDITION MADE U/S 68 CAN B E HELD TO HAVE COME FROM ADDITION MADE TO TRADING RESULTS OF THE ASSESSEE. 10. IN VIEW OF THESE SUBMISSIONS, IT IS RESPECTFULL Y SUBMITTED THAT THE ADDITION OF ON MONEY ON SALES AND PURCHASES MAY KIN DLY BE DELETED. 86. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ALSO FURNISHED WRITTEN SUBMISSIONS WHICH READ AS UNDER:- 1. KINDLY REFER TO THE 10 LINES ABOVE THE BOTTOM O F THE PARA 13.9 PAGE 51 OF CIT(A)'S ORDER WHEREIN IT IS BEEN MENTIONED THAT IN HIS STATEMENT U/S 132(4) RECORDED ON 24.02.2008 THE APPELLANT ADMITTED AN AG GREGATE ADDITIONAL INCOME OF RS. 13.30 CR. IN HANDS OF VARIOUS ENTITIE S OF THE GROUP, THOUGH HE SUBSEQUENTLY DID NOT ADHERE TO THE DISCLOSURE AND A S AGAINST THIS ASSESSEE CLAIMS THAT AFTER CONSIDERING ENTIRE SIZED MATERIAL HE HAS DISCLOSED RS. 3.10 CRORES FOR A.Y. 2007-08 AND RS. 1.90 CRORES FOR A.Y . 2008-09. TOTAL INCOME FOR A.Y. 2008-09 AFTER INCLUDING ADDITIONAL INCOME OFFE RED WAS COMPUTED A LOSS OF RS.(-) 2,08,20,708/-. THEREFORE ASSESSEE HAS NOT PA ID TAXES ON DECLARATION MADE BY HIM. IT IS ALSO NOTICED FROM PAGE 549 OF PA PER BOOK FILED BY ASSESSEE THAT FOR AY 06-07 HE HAS OFFERED INCOME OF RS 30,06 ,950/- ON BASIS OF SEIZED MATERIAL. 2. APPELLANT HAS ADMITTED THE PRACTICE OF RECEIVING AND PAYING OF ON- MONEY IN SALE AND PURCHASE OF LAND. DURING THE COU RSE OF SEARCH THE DOCUMENTS SHOWING ON-MONEY PAYMENTS WERE FOUND FOR THE F.Y. 2007-08 RELEVANT TO A.Y. 2008-09. IT IS COMMON PRACTICE THA T ASSESSEE KEEPS ON DESTROYING SUCH EVIDENCES REGULARLY HENCE SAME COUL D BE SEIZED ONLY FOR THE F.Y. 2007-08 I.E. CURRENT YEAR IN WHICH SEARCH TOOK PLACE. THE FACT THAT SUCH PRACTICE WAS PREVALENT IN EARLIER FINANCIAL YEARS A S WELL IS EVIDENT FROM THE FACT THAT ASSESSEE HIMSELF HAS OFFERED ON-MONEY IN RETUR N OF INCOME FILED FOR AY 2006-07 OF RS. 5,90,0007- FOR WHICH CREDIT HAS BEEN GIVEN BY CIT(A) ON PAGE 125 OF HIS ORDER. SIMILARLY FOR A.Y. 2007-08 A SSESSEE HAS OFFERED ON- MONEY OF RS. 3,10,00,000/- FOR WHICH CREDIT WAS GIV EN BY THE CIT(A) IN HIS ORDER VIDE PARA 23 OF PAGE 136. SO ON ONE HAND ASSE SSEE CLAIMS THAT THERE WAS EVIDENCE OF ON-MONEY ONLY FOR A.Y. 2008-09 BUT HIMSELF OFFERED ON- MONEY FOR A.Y. 2006- 07 AND 2007-08. THEREFORE IT P ROVES THAT APART FROM THE TRANSACTIONS FOR WHICH EVIDENCES WERE FOUND DURING SEARCH THERE ARE ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 40 OTHER TRANSACTIONS INVOLVING PAYMENT / RECEIPTS OF ON-MONEY. THE AO AS WELL AS LD.CIT(A) HAS MENTIONED THIS FACT IN DETAIL. KIN DLY REFER TO PARA 14.2, PAGE 55-56 OF CIT(A) ORDER WHERE IT IS MENTIONED THAT ON-MONEY PAYMENTS WERE INVOLVED IN RESPECT OF THE LANDS FOR WHICH CASH PAY MENT CHARTS WERE FOUND AND ALSO IT RESPECT OF THOSE FOR WHICH THE PAYMENT CHAR TS WERE NOT FOUND DURING THE SEARCH. 3. THE AO HAS REFERRED TO 11 INSTANCES WHERE CHARTS FOR ON-MONEY PAYMENTS WERE FOUND AND IN MANY INSTANCES EQUAL AMO UNT OF CASH WAS WITHDRAWN BY WAY OF BEARER CHEQUE AND AMOUNT HAS BE EN CREDITED TO THE LEDGER ACCOUNT OF THE SELLER IN THE BOOKS PREPARED TO PRIOR TO SEARCH. OUT OF THESE INSTANCES THE ASSESSEE ON HIS OWN SWEET WILL ACCEPTED SOME OF THESE TRANSACTIONS AS ON-MONEY PAID AND OFFERED THE SAME IN THE RETURN OF INCOME FILED AFTER THE SEARCH BUT OTHER TRANSACT IONS WERE DENIED WITHOUT ANY CORROBORATIVE EVIDENCES. IN THE BOOKS PREPARED AFTER THE SEARCH CASH WITHDRAWN IN CASES WHERE ON MONEY PAYMENTS HAVE BEE N DENIED, HAS BEEN SHOWN AVAILABLE WITH ASSESSEE FOR USING THE SAME FO R OTHER PURPOSES. 4. IN THE CIRCUMSTANCES AND IN VIEW OF THE OVERWHEL MING EVIDENCES THERE WAS NO CHOICE WITH THE AO OR CIT(A) BUT TO ESTIMATE THE ON-MONEY PAYMENTS / RECEIPTS. ASSESSING OFFICER HAS RELIED ON THE DECIS ION OF PUNE ITAT IN CASE OF KHOPADE KISANRAO MANIKRAO (74 ITD 25). THE LD. CIT( A) ALSO EXAMINED VARIOUS CASE LAWS CITED BY THE ASSESSEE ON PAGE 116 TO 118 OF HIS ORDER. RELYING ON THE DECISION OF HON'BLE SUPREME COURT AN D DELHI HIGH COURT IN CASE OF H.N. ESUFALI H.M. ABDUALI AND CHETAND AS LAXMANDAS RESPECTIVELY HE HELD THAT ESTIMATION OF TOTAL INCOME BASED ON THE MATERIAL AND EVIDENCES COLLECTED DURING THE SEARCH IS PERFECTLY ALRIGHT IN ASSESSING TOTAL INCOME U/S 153A OF THE I. T. ACT.( KINDLY REFER PAGE 120 -122 OF THE CIT(A) ORDER). 5. IT IS EVIDENT FROM THE CHARTS PREPARED BY THE AO AND PLACED AS ANNEXURE -C TO HIS ORDER THAT PERCENTAGE OF ON-MO NEY VARIES FROM 0%(IN CASE OF OVAL USHA) TO 542% OF DOCUMENTED PURCHA SE VALUE (IN CASE OF NIKETA AVINASH BORAGE). THE AO HAS TAKEN AVERAGE R ATE OF 61% WHEREAS LD.CIT(A) HAS CONFIRMED ON MONEY PAYMENT ONLY TO TH E EXTENT OF 30% OF DOCUMENTED PURCHASE VALUE WHICH IS MORE THAN REAS ONABLE AND REQUESTED TO BE UPHELD. 6. THE CASE LAWS CITED BY THE APPELLANT THAT UNDISC LOSED INCOME CANNOT BE ESTIMATED IN SEARCH CASES ARE ON PARTICULAR FACTS O F THE CASE WHEREAS VALIDITY OF ESTIMATING INCOME IN SEARCH CASES HAS BEEN UPHEL D BY HON'BLE SUPREME COURT AND DELHI HIGH COURT. EVEN IN BLOCK ASSESSMEN TS HON'BLE ANDHRA PRADESH HIGH COURT HAS HELD ESTIMATION OF UN ACCOUN TED INCOME IN CASE OF RAJNIK & CO 251 ITR 561 . HON'BLE BOMBAY HIGH COURT IN ITS ORDER IN CASE OF M K E MENON 248 ITR 310 (BOM) ON PAGE 313 AGREED WITH CONTENTION OF THE DEPARTMENT THAT IN MATTERS UNDER CHAPTER XIV B ASSE SSING OFFICER MAY ESTIMATE UNDISCLOSED INCOME. SINCE ESTIMATION IN PR INCIPLE HAS BEEN UPHELD EVEN IN BLOCK ASSESSMENT CASES WHERE ONLY UNDISCLOS ED INCOME WAS TO BE ASSESSED, IT WOULD APPLY MORE IN PROCEEDINGS U/S 15 3A OF THE ACT WHERE TOTAL INCOME IS TO BE ASSESSED. 7. IN THE FACTS OF THIS CASE AND ALSO IN VIEW OF RA MPANT PREVALENCE OF ON MONEY PAYMENTS IN REAL ESTATE TRANSACTIONS THERE IS NO CHOICE BUT TO ESTIMATE EXTENT OF ON MONEY INVOLVED. AO HAS CONSIDERED INST ANCES WHERE SUCH AMOUNTS WERE FOUND AND ADOPTED AVERAGE OF PERCENTAG E OF ON MONEY INVOLVED. CIT(A) HAS BEEN MAGNANIMOUS TO ALLOW FURT HER RELIEF IN THAT. HENCE ADDITIONS AS UPHELD BY CIT(A) ARE REQUESTED TO BE U PHELD. 87. AFTER HEARING BOTH THE PARTIES AND CONSIDERING THE VARIOUS EVIDENCES AND DOCUMENTS REFERRED TO BY BOTH THE AUTHORIZED REPRES ENTATIVES AND THE WRITTEN ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 41 SUBMISSIONS FILED BY BOTH THE AUTHORIZED REPRESENTA TIVES, WE PROCEED TO DECIDE THE ISSUE OF ADDITIONAL INCOME TO BE ASSESSED IN THE HA NDS OF THE ASSESSEE ON ACCOUNT OF ON-MONEY PAYMENTS IN RESPECT OF PURCHASES AND SALES MADE BY THE ASSESSEE IN THE CAPTIONED ASSESSMENT YEARS I.E. 2006-07 TO 2008-09. 88. SEARCH AND SEIZURE AND ALSO SURVEY ACTIONS WERE CARRIED OUT AT THE PREMISES OF THE ASSESSEE ON 24.02.2008. DURING THE COURSE O F SEARCH, VOLUMINOUS DOCUMENTS WERE FOUND IN RESPECT OF BUSINESS TRANSACTIONS UNDE RTAKEN BY THE ASSESSEE. THE ASSESSEE WAS ENGAGED IN PURCHASE OF LAND IN DIFFERE NT AREAS AND WAS ALSO WORKING AS LAND AGGREGATOR FOR TWO COMPANIES M/S. EDIFICE P ROPERTIES PVT. LTD. AND M/S. EARN MORE CAPITAL SERVICES PVT. LTD. THE TRANSACTIONS O F PURCHASE AND SALES OF LAND WERE CARRIED OUT BY THE ASSESSEE AS A PROPRIETOR OF THE CONCERN M/S. NEELESH KANNADE GROUP. ON THE RECONCILIATION OF THE DOCUMENTS FOUN D DURING THE COURSE OF SEARCH, IT TRANSPIRES THAT THE ASSESSEE WAS PAYING ON-MONEY ON THE PURCHASE OF LAND AND WAS ALSO RECEIVING ON-MONEY ON THE SALE OF LAND. CERTA IN PAYMENT CHARTS WERE FOUND FROM THE POSSESSION OF THE ASSESSEE WHICH REFLECTED THE SURVEY NUMBER OF THE LAND IN QUESTION, TOTAL AREA OF THE LAND, CONSIDERATION TO BE SHOWN IN THE AGREEMENT AND THE AMOUNT TO BE PAID AS ON-MONEY IN CASH. THE ON-MONE Y PAYMENTS IN SOME DOCUMENTS WERE INDICATED BY THE LETTER B WHICH IN TURN INDICATED BLACK MONEY PAYMENTS. THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS PREPARED A SUMMARY OF ALL SUCH PAYMENTS, WHICH ARE ANNEXED AS ANNEXURE C TO THE ASSESSMENT ORDER. THE CASE OF THE REVENUE WAS THAT THE PAYMENT OF ON-MONEY FOR PURCHASE OF LAND WAS CORROBORATED BY THE FACT THAT THE AMOUNT OF CONSIDERATION MENTIONED IN THE SAID PAYMENT CHARTS TALLIED EXACTL Y WITH THE AGREEMENT VALUE SHOWN IN THE BOOKS OF ACCOUNT. WHERE PART OF THE ENTRIES IN THE SEIZED DOCUMENTS I.E. THE CONSIDERATION PAID BY CHEQUE WAS REFLECTED IN THE B OOKS OF ACCOUNT AND TALLIED, THEN THE OTHER PART OF THE TRANSACTION THAT ON-MONEY WAS PAID IN CASH OVER AND ABOVE THE AGREEMENT VALUE SHOWN IN THE BOOKS OF ACCOUNT ALSO STANDS TO BE ACCEPTED. IN SUCH CIRCUMSTANCES, REASONABLE PRESUMPTION COULD BE DRAW N THAT THE ASSESSEE IN ADDITION TO THE AGREED VALUE REFLECTED IN THE BOOKS OF ACCOU NT, HAD INDULGED IN THE PAYMENT OF ON-MONEY, SOURCE OF WHICH IS TO BE EXPLAINED BY THE ASSESSEE. ANOTHER EVIDENCE FOUND INDICATING ON-MONEY PAYMENT WAS CASH WITHDRAW AL MADE FROM THE BANK ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 42 ACCOUNTS, WHEREIN EXACT AMOUNTS IN THE NAME OF RESP ECTIVE PERSONS WERE WITHDRAWN, BUT THE SAME WERE LATTER RE-INTRODUCED AS CASH IN T HE BOOKS OF / BANK ACCOUNT. THE ASSESSEE WAS CONFRONTED WITH THE EVIDENCE IN THE SE IZED MATERIAL FOUND FROM HIS POSSESSION AND HE ADMITTED THAT ON-MONEY WAS BEING PAID ON THE PURCHASE OF LAND BOTH IN RESPECT OF LANDS PURCHASED BY HIM IN DIFFER ENT AREAS AND ALSO IN RESPECT OF LANDS PURCHASED ON BEHALF OF TWO COMPANIES. THE AD MISSION WAS MADE BY THE ASSESSEE IN THE STATEMENT RECORDED DURING THE COURS E OF SEARCH AND IT WAS CATEGORICALLY ADMITTED BY THE ASSESSEE THAT IN SUCH DEALS OF LAND, THE LAND OWNERS ASKS FOR PAYMENT OF PART CONSIDERATION IN CASH AND DUE TO BUSINESS NEEDS, THE SAID PAYMENTS WERE BEING MADE. THE ASSESSING OFFICER DU RING THE COURSE OF ASSESSMENT PROCEEDINGS HAD ALSO TABULATED THE CHART OF WITHDRA WALS OF CASH FROM THE BANK, WHICH IN TURN TALLIED WITH THE ON-MONEY PAID AND THE SAID DETAILS ARE ANNEXED AS ANNEXURE D TO THE ASSESSMENT ORDER. 89. ANOTHER ASPECT TO BE NOTED WITH REGARD TO THE O N-MONEY PAYMENTS WERE THE ENTRIES MADE BY THE ASSESSEE IN THE REVISED BOOKS O F ACCOUNT PURSUANT TO THE SEARCH, WHEREIN CERTAIN AMOUNTS WERE DEBITED TO AN ACCOUNT UN-RECORDED CASH EXPENDITURE SEIZED CASH BOOK. THE SAID ENTRIES WERE MADE IN A SSESSMENT YEAR 2007-08 IN RESPECT OF LAND PURCHASES BY THE ASSESSEE IN THE CO NCERN NKG. THE ASSESSEE HAD ALSO REFERRED TO THE PAGE NUMBERS OF THE SEIZED BUN DLES, WHICH EVIDENCED THE ON- MONEY PAYMENTS. SOME OF THESE PAYMENTS WERE FOR LA NDS FOR WHICH, NO EVIDENCE OF ON-MONEY PAYMENT CHARTS WERE FOUND DURING THE COURS E OF SEARCH. IN VIEW OF THE ABOVE SAID FACTS AND CIRCUMSTANCES, WE ARE IN CONFO RMITY WITH THE STAND OF THE REVENUE AUTHORITIES THAT THE ON-MONEY PAYMENTS WERE MADE BY THE ASSESSEE NOT ONLY IN RESPECT OF THE LAND DEALS FOR WHICH PAYMENT CHARTS WERE FOUND, BUT ALSO IN RESPECT OF THE OTHER LAND DEALS FOR WHICH, NO PAYME NT CHARTS WERE FOUND. IN VIEW THEREOF, THERE IS NO MERIT IN THE PLEA OF THE ASSES SEE THAT WHILE ESTIMATING THE ON- MONEY PAYMENTS BY THE ASSESSEE ONLY SUCH TRANSACTIO NS SHOULD BE CONSIDERED, EVIDENCE OF WHICH WAS FOUND DURING THE COURSE OF SE ARCH. WE FIND NO MERIT IN THE PLEA OF THE ASSESSEE THAT NO ESTIMATION IS TO BE MA DE IN THE HANDS OF THE ASSESSEE, IN RESPECT OF OTHER TRANSACTIONS FOR WHICH, NO PAYM ENT CHARTS WERE FOUND DURING THE COURSE OF SEARCH, IN VIEW OF THE ADDITIONAL INCOME OFFERED BY THE ASSESSEE. ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 43 DISMISSING THE PLEA OF THE ASSESSEE IN THIS REGARD, WE UPHOLD THE ORDERS OF AUTHORITIES BELOW IN ESTIMATING THE INCOME IN THE HANDS OF THE ASSESSEE VIS--VIS TOTAL TRANSACTIONS UNDERTAKEN BY THE ASSESSEE IN RESPECT OF PURCHASE OF LAND IN ALL THE CAPTIONED ASSESSMENT YEARS UNDER APPEAL. 90. THE SECOND ASPECT OF THE ISSUE WAS THE LAND PUR CHASED BY THE ASSESSEE ON BEHALF OF TWO COMPANIES FOR WHICH, IT WAS AGGREGATI NG THE LAND. THE ASSESSEE WAS A DIRECTOR IN M/S. EDIFICE PROPERTIES PVT. LTD. AND P AYMENT CHARTS WERE FOUND IN RESPECT OF PURCHASE OF LAND FOR AND ON BEHALF OF M/S. EDIFI CE PROPERTIES PVT. LTD., WHICH REFLECTED COMPONENT OF ON-MONEY PAYMENTS. CORRESPO NDINGLY, THERE WERE CASH WITHDRAWALS FROM THE BANK ACCOUNT OF THE ASSESSEE I N HIS INDIVIDUAL CAPACITY FOR PAYMENTS TO BE MADE TO THE PARTY FROM WHOM THE LAND ON BEHALF OF M/S. EDIFICE PROPERTIES PVT. LTD. HAD TO BE PURCHASED. ON A LAT ER DATE, EQUIVALENT AMOUNT OF CASH IN HAND WAS DEPOSITED IN THE BANK ACCOUNT OF THE AS SESSEE, WHICH ASSESSEE EXPLAINED TO BE OUT OF HIS EARLIER WITHDRAWALS. SO ME WITHDRAWALS OF CASH AND RE- DEPOSIT OF CASH IN RESPECT OF ON-MONEY PAYMENTS MAD E BY THE ASSESSEE IN RESPECT OF LAND PURCHASED IN HIS INDIVIDUAL CAPACITY WERE FOUN D AND WE HAVE ALREADY REFERRED TO THE SAME AND HELD THAT THE ASSESSEE WAS ENGAGED IN THE PAYMENT OF ON-MONEY IN RESPECT OF THE LAND DEALS UNDERTAKEN BY THE ASSESSE E. SIMILARLY, IN THE CASE OF PROPERTY OF M/S. EDIFICE PROPERTIES PVT. LTD., WHER E IDENTICAL EVIDENCES WERE FOUND, WE FIND NO MERIT IN THE PLEA OF THE ASSESSEE THAT N O ADDITION SHOULD BE MADE IN HIS HANDS ON ACCOUNT OF SUCH UN-RECORDED EXPENDITURE. 91. NOW, COMING TO THE TRANSACTION OF SALE OF LAND UNDERTAKEN BY THE ASSESSEE. DURING THE COURSE OF SEARCH, ONE PAPER WAS FOUND I. E. PAGE 29 OF ITEM NO.1 FROM THE RESIDENCE OF ASSESSEE WHICH IS ENCLOSED AS ANNEXURE F TO THE ASSESSMENT ORDER, WHEREIN THE ASSESSEE HAD NOTED AMOUNTS DUE FROM M/S . EDIFICE PROPERTIES PVT. LTD. THE ASSESSEE HAD SHOWN SALE OF KIWALE LAND AND SALE OF MAMURDI LAND. IN RESPECT OF SALE OF LAND TO M/S. EDIFICE PROPERTIES PVT. LTD., SUM OF RS.36 LAKHS OF THE PROPERTY OF SHRI JANANNATH RAUT AND RS.24,50,000/- IN RESPECT O F PROPERTY OF SHAKUNTALA TARAS DOCUMENT WERE REFLECTED IN THE BOOKS OF ACCOUNT. H OWEVER, THE PAYMENT CHARTS REFLECT A SUM OF RS.70 LAKHS AS DUE IN RESPECT OF S HRI JANANNATH RAUT DOCUMENTS AND SUM OF RS.41,90,663/- WAS SHOWN AS DUE IN RESPECT O F SHAKUNTALA TARAS DOCUMENTS. ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 44 IN VIEW OF THE ABOVE SAID EVIDENCE FOUND FROM THE P OSSESSION OF THE ASSESSEE, WE HOLD THAT THE ASSESSEE HAD ENGAGED IN THE TRANSACTI ONS OF ON-MONEY RECEIPT IN RESPECT OF THE LANDS SOLD BY IT AND SINCE THE SAME HAS NOT BEEN ACCOUNTED FOR IN THE BOOKS OF ACCOUNT, ADDITION TO THAT EFFECT HAS TO BE MADE IN THE HANDS OF THE ASSESSEE. ANOTHER ASPECT OF THE ISSUE OF SALE OF LAND WAS THA T THE ASSESSEE HIMSELF HAD DECLARED ADDITIONAL INCOME OF RS.1,80,00,000/- IN T HE RETURN OF INCOME FILED FOR ASSESSMENT YEAR 2007-08 TOWARDS PROFIT ON SALE OF P ROPERTY TO RAJAN RAISONI AND RS.75 LAKHS ON ACCOUNT OF PROFIT ON SALE OF LAND AT PUNAWALE TO AMIT ENTERPRISES. BOTH THESE TRANSACTIONS WERE UN-RECORDED IN THE BOO KS OF ACCOUNT PRIOR TO SEARCH. HOWEVER, DURING THE COURSE OF SEARCH, THE ASSESSEE ADMITTED ON-MONEY RECEIPTS INVOLVED IN THE SALE OF LAND, WHICH IN TURN WAS DEC LARED AS ADDITIONAL INCOME IN THE RETURN OF INCOME. IN VIEW OF THE ABOVE SAID FACTS AND CIRCUMSTANCES, THE CONCLUSION OF THE AUTHORITIES BELOW THAT THE ON-MONEY COMPONEN T WAS INVOLVED BOTH IN THE PURCHASE OF LAND BY THE ASSESSEE AS ALSO IN THE SAL E OF LAND BY THE ASSESSEE, MERITS TO BE UPHELD. 92. THE NEXT ISSUE WHICH ARISES IN THE CASE WAS THE COMPUTATION OF ON-MONEY COMPONENT IN THE HANDS OF THE ASSESSEE IN THE CAPTI ONED ASSESSMENT YEARS. THE ASSESSING OFFICER HAD COMPUTED THE TOTAL AGREEMENT COST IN RESPECT OF THE PURCHASES AT RS.7,54,64,050/- AND THE ON-MONEY COMPONENT WAS COMPUTED AT RS.4,59,19,952/-. THE ASSESSING OFFICER THUS, COMPUTED ON-MONEY COMPO NENT TO BE 61% OF THE AGREEMENT COST AND THE SAME WAS APPLIED BY THE ASSE SSING OFFICER TO COMPUTE THE ADDITIONAL INCOME IN THE HANDS OF THE ASSESSEE UNDE R SECTION 69C OF THE ACT. THE TOTAL PURCHASES FOR ASSESSMENT YEAR 2006-07 WERE RS .4,82,07,325/- AND THE ON- MONEY ON THE SAME WAS WORKED OUT TO RS.2,94,06,468/ -. FURTHER, THE TOTAL PURCHASES FOR ASSESSMENT YEAR 2007-08 WERE RS.14,00,41,139/- AND THE ON-MONEY COMPONENT ON THE SAME WAS WORKED OUT TO RS.8,54,25,094/-. FU RTHER, IN ASSESSMENT YEAR 2008- 09, THE TOTAL PURCHASES FOR THE YEAR WERE RS.3,79,1 0,552/- AND THE ON-MONEY ON THE SAME WAS WORKED OUT TO RS.2,31,25,436/-. THE ASSES SEE HAD DECLARED RS.5,90,000/- IN ASSESSMENT YEAR 2006-07, RS.3.10 CRORES IN ASSES SMENT YEAR 2007-08 AND RS.1.90 CRORES IN ASSESSMENT YEAR 2008-09, FOR WHIC H NO CREDIT WAS ALLOWED BY THE ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 45 ASSESSING OFFICER AND CONSEQUENTLY, INCOME IN THE H ANDS OF THE ASSESSEE FOR THE RESPECTIVE ASSESSMENT YEARS WAS WORKED OUT AS UNDER :- ASSESSMENT YEAR INCOME 2006-07 - RS.2,94,06,468/- 2007-08 - RS.8,54,25,094/- 2008-09 - RS.2,31,25,436/- 93. THE ASSESSING OFFICER APPLIED THE SAME RATIO OF 61% ON THE SALES MADE BY THE ASSESSEE. THE TOTAL SALES DURING ASSESSMENT YE AR 2006-07 WERE RS.61,94,250/- AND THE ON-MONEY COMPONENT WAS WORKED OUT TO RS.37, 78,492/-. FURTHER, IN ASSESSMENT YEAR 2007-08, THE TOTAL SALES WERE RS.9, 88,20,000/- AND THE ON-MONEY COMPONENT WAS WORKED OUT TO RS.6,02,80,200/- SINCE THE ASSESSEE HAD ALREADY CREDITED ON-MONEY OF RS.75,000/- ON SALE OF LAND TO M/S. AMIT ENTERPRISES, THE ADDITION OF RS.5,27,80,200/- WAS MADE TO THE RETURN ED INCOME. IN ASSESSMENT YEAR 2008-09, THE TOTAL SALES WERE RS.1,13,90,663/- AND THE ON-MONEY COMPONENT WAS WORKED OUT TO RS.53,40,663/- AND ADDITION TO THAT E FFECT WAS MADE IN THE HANDS OF THE ASSESSEE. 94. THE CIT(A) FIRST CONSIDERED LEGAL ARGUMENT THAT THE INFORMATION UN-EARTHED DURING THE COURSE OF SEARCH RELATED TO ONLY TWO MON THS OF ONE PREVIOUS YEAR I.E. PREVIOUS YEAR 2006-07 AND WHERE THE DOCUMENT FOUND DID NOT INDICATE ANY ON-MONEY PAYMENT AND WHERE THE ADDITION WAS MADE ON ESTIMATI ON BASIS AND OBSERVED AS UNDER:- 14.12 I HAVE GIVEN CAREFUL CONSIDERATION TO THE A BOVE SUBMISSIONS OF THE APPELLANT. THE LEGAL ARGUMENTS RAISED BY THE APPELL ANT CHALLENGING THE ADDITION ON ESTIMATE BASIS MAY BE TAKEN UP FIRST. IN FAVOUR OF HIS CONTENTION, THE APPELLANT HAS RELIED UPON A SERIES OF CASE JAWS . 14.13. FOR THE SAKE OF CONVENIENCE, BREVITY AND EAS Y REFERENCE, THE CASE LAWS CITED, THE LEGAL PROPOSITIONS FOR WHICH THEY A RE CITED, AND MY REMARKS/OBSERVATIONS THEREON ARE SUMMARISED BELOW I N THE FORM OF A TABLE. SI CASE TITLE & CITATION CITED FOR THE PROPOSITION REMARKS 1 CIT V. MAHESH CHAND [1992] 63 TAXMAN 27 (ALL.) ASSESSMENTS HAVE TO BE COMPLETED ONLY ON THE BASIS OF EVIDENCE BEFORE THE AO IN THAT CASE THE AO REJECTED THE ASSESSEE'S BOOKS OF ACCOUNT AND DETERMINED TAXABLE INCOME IN ACCORDANCE WITH PRECEDING YEAR'S ASSESSMENT WHICH HAPPENED TO BE AN EX PARTE ASSESSMENT. THE AAC DELETED THE ADDITION AND THE ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 46 ITAT UPHELD THE AAC'S ORDER. THE HON. ALLAHABAD HC REJECTED THE DEPARTMENT'S APPEAL HOLDING THAT NO QUESTION OF LAW AROSE. THE CASE IS DISTINGUISHABLE ON FACTS AS WELL AS ON LAW. THE CASE IN QUESTION WAS NOT A SEARCH CASE AND THE ASSESSMENT WAS NOT COMPLETED UNDER THE SPECIAL PROVISIONS GOVERNING SEARCH ASSESSMENTS. THE PRESENT SCHEME OF SEARCH ASSESSMENTS UNDER CHAPTER XIV WAS NOT EVEN IN EXISTENCE WHEN THE CASE WAS DECIDED. MOREOVER, A VERY SPECIAL SET OF CIRCUMSTANCES PREVAILED IN THAT CASE WHEREIN THE AO BASED HIS ESTIMATION BLINDLY ON THE EARLIER YEAR'S ASSESSMENT WHICH, SIGNIFICANTLY, WAS AN EX PARTE ASSESSMENT. 2 D.N.KAMANI (HUF) VS. DY CIT [2000] 241 ITR (ATS) 85 (TM-PAT.) SEARCH ASSESSMENTS HAVE TO BE COMPLETED ONLY ON THE BASIS OF EVIDENCE ACTUALLY FOUND DURING SEARCH THE DECISION RELATES TO THE SCHEME OF 'BLOCK ASSESSMENTS' COMPLETED IN ACCORDANCE WITH THE ERSTWHILE 'SPECIAL PROCEDURE UNDER CHAPTER XIV-B WHICH WAS CONSIDERABLY DIFFERENT FROM THE CURRENT SCHEME OF ASSESSMENT IN SEARCH CASES U/S 153A/153C FALLING UNDER CHAPTER XIV ('PROCEDURE FOR ASSESSMENT') UNDER THE EXPRESS PROVISIONS OF THE ERSTWHILE SECTION 158BB, ONLY 'UNDISCLOSED INCOME 1 WAS TO BE DETERMINED AND THAT TOO, STRICTLY ON THE BASIS OF EVIDENCE FOUND DURING THE SEARCH. THE CONCEPT OF 'BLOCK PERIOD' HAS SINCE BEEN DONE AWAY WITH, AS ALSO THE REQUIREMENT OF ASSESSING 'UNDISCLOSED INCOME' TO THE EXCLUSION OF OTHER INCOME EARNED BY THE APPELLANT EVEN THE LEGAL REQUIREMENT OF THE ERSTWHILE S.158B8 REQUIRING THAT UNDISCLOSED INCOME MUST BE COMPUTED 'ON THE BASIS OF EVIDENCE FOUND AS A RESULT OF SEARCH' NO LONGER SURVIVES. UNDER THE NEW PROVISIONS UNDER WHICH THE APPELLANT'S CASE HAS BEEN ASSESSED, THE TOTAL INCOME' OF THE APPELLANT AS NORMALLY UNDERSTOOD UNDER THE ACT IS TO BE DETERMINED. ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 47 AS SUCH THE RATIO OF CASE CITED CLEARLY WILL NOT APPLY TO THE APPELLANT'S CASE. REFERENCE MAY ALSO BE HAD IN THIS REGARD TO THE DECISIONS IN SHIVNATH RAI HAMARAIN (INDIA) LTD. VS DCIT (ITAT, DEL) 304 ITR (AT) 271; 117 ITD 74 SHYAM LATA KAUSHIK VS ACIT (ITAT, DEL) 114ITD 305]. THE CASE WAS WHOLLY DISTINGUISHABLE ON FACTS TOO. THE INCRIMINATING DOCUMENT IN THAT CASE WAS SEIZED NOT FROM THE POSSESSION OF THE ASSESSEE BUT FROM THE POSSESSION OF A THIRD PARTY (A CUSTOMER WHO HAD BOUGHT A FLAT FROM THE APPELLANT). EVEN SO, IT WAS HELD THAT AT THE SAME WAS SO COMPLETE AND FULL OF INFORMATION THAT IT WAS DIFFICULT TO DISBELIEVE THE GENUINENESS OF THE DOCUMENT AND CONTENTS THEREOF, HOWEVER, AS TO THE FURTHER QUESTION WHETHER ON THE BASIS OF THE SAME DOCUMENT (WHICH WAS SEIZED, AS ALREADY POINTED OUT, FROM THE PREMISES OF THE THIRD PARTY), PRESUMPTION ABOUT RECEIPT OF 'ON MONEY' BY ASSESSEE FROM HIS OTHER CLIENTS COULD ALSO BE MADE, THE ITAT HELD AGAINST THE REVENUE. EVEN ON FACTS, THEREFORE, THE PRESENT CASE WHERE EVIDENCE OF ON MONEY WAS SEIZED FROM THE APPELLANT'S OWN PREMISES AND WAS ALSO SUBSTANTIALLY OWNED UP BY THE APPELLANT IS WHOLLY DISTINGUISHABLE 3 SAMRAT BEER BAR V, ACIT [2000] 75 ITD 19 (PUNE) (TM) SEARCH ASSESSMENTS HAVE TO BE COMPLETED ONLY ON THE BASIS OF EVIDENCE ACTUALLY FOUND DURING SEARCH, THIS CASE TOO RELATES TO THE ERSTWHILE 'BLOCK ASSESSMENT' PROVISIONS AND CANNOT APPLY TO THE NEW SCHEME OF SEARCH ASSESSMENTS AS POINTED OUT UNDER SI. NO. 2 ABOVE. THIS IS EVIDENT FROM THE FOLLOWING OBSERVATION MADE THE HON. PUNE BENCH IN ITS ORDER 'IN THE VERY SCHEME OF A BLOCK ASSESSMENT, ANY GUESSWORK OR ESTIMATE IS EXCLUDED FROM RECKONING.' THUS THE APPLICABILITY OF THE RATIO RELIED UPON BY THE APPELLANT IS CLEARLY CONFINED ONLY TO BLOCK ASSESSMENTS. 4 SATISH R, GUPTA [2004] 3 SOT 857 (MUM.) SEARCH ASSESSMENTS HAVE TO BE IN THIS CASE IT WAS HELD THAT ON THE BASIS OF A ROUGH EXERCISE BOOKS SHOWING ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 48 COMPLETED ONLY ON THE BASIS OF EVIDENCE ACTUALLY FOUND DURING SEARCH. HOUSEHOLD EXPENSES FOR ONLY 4 MONTHS, ADDITION FOR ENTIRE BLOCK PERIOD COULD NOT BE MADE. THE ENTIRE CASE REVOLVED AROUND INTERPRETATION OF S, 158BB, AND THE EFFECT OF S. 69A AND S. 69C WHEN READ WITH S.158BB. THE INTERPRETATION OF S. 158BB IS OF NO RELEVANCE TO THE PRESENT ASSESSMENT WHICH WAS NOT COMPLETED UNDER BLOCK ASSESSMENT PROVISIONS. 5 ABDULGAFAR A NADIADWAJA [2004] 3 SOT 857 (MUM.) SEARCH ASSESSMENTS HAVE TO BE COMPLETED ONLY ON THE BASIS OF EVIDENCE ACTUALLY FOUND DURING SEARCH THIS TOO WAS A CASE OF BLOCK ASSESSMENT AND WAS DECIDED ON THE BASIS OF THE LANGUAGE OF S.158BB WHICH HAS NO APPLICATION TO THE PRESENT CASE. MOREOVER, THERE WAS A CLEAR FINDING THAT THE FACTUAL CIRCUMSTANCE ON WHICH ADDITION FOR ONE YEAR WAS MADE WAS NOT PREVAILING IN THE OTHER YEAR TO JUSTIFY SIMILAR ADDITION. 6 DAVID DHAWAN [1999] 71 ITD1 (MUM.) SEARCH ASSESSMENTS HAVE TO BE COMPLETED ONLY ON THE BASIS OF EVIDENCE ACTUALLY FOUND DURING SEARCH. THIS CASE TOO RELATES TO THE IMPLICATION OF S, 158BB, MOREOVER, THE CASE TURNED ON ITS OWN PARTICULAR SET OF FACTS (ESPECIALLY THE ABSENCE OF ANY PROOF OF THE ALLEGED BENAMI TRANSACTION) WHICH DO NOT PREVAIL IN THE PRESENT CASE. HENCE NOT COMPARABLE EITHER ON LAW OR ON FACTS. 7 HOTEL VRINDAVAN (2000]67TTJ139(PUNE) NO SCOPE FOR , PRESUMPTION OF SUPPRESSION OF SALES FOR OTHER YEARS WIDER CHAPTER-XIVB ALSO DECIDED UNDER BLOCK ASSESSMENT PROVISIONS AND HAS NO APPLICATION TO THE PRESENT CASE, FT WAS OBSERVED: 'THE PROVISIONS UNDER CHAPTER XIV-B ARE THE SPECIAL PROVISIONS. THESE WERE BROUGHT ON THE STATUTE BOOK SPECIALLY AND SPECIFICALLY FOR ASSESSMENT OF UNDISCLOSED INCOME' [EMPHASIS ADDED] 8 SHREE VASTU CONSTRUCTION [IT (SS) APPEAL NO. 32 (PUNE) OF 1997 DATED 4-2-1998] THERE MUST BE INDEPENDENT MATERIAL IN RESPECT OF EACH PROJECT/LAND TO JUSTIFY ESTIMATION BECAUSE DIFFERENT CIRCUMSTANCES MAY PREVAIL IN RESPECT OF EACH PROJECT/LAND. ALSO A BLOCK ASSESSMENT CASE AS IS EVIDENT FROM THE FOLLOWING OBSERVATION: 'SUCH A DISALLOWANCE CANNOT BE CONSIDERED AS UNDISCLOSED INCOME WITHIN THE AMBIT OF CHAPTER XIV- B.' 14.14 IN ADDITION TO THE ABOVE, WHILE THIS ORDER WA S AT A DRAFT STAGE, THE LD. AR OF THE APPELLANT HAS SUBMITTED A DECISION OF ITA T 'J' BENCH OF THE TRIBUNAL, MUMBAI IN ACIT V. METRO (INSTRUCTION CORPORATION 11 , A COPY OF WHICH HAS ALSO BEEN FURNISHED BY HIM. UPON PERUSAL THEREOF, IT I S SEEN THAT WHILE UPHOLDING THE ORDER OF THE CIT(A) DELETING THE ADDITION ON AC COUNT OF ON ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 49 MONEY ESTIMATED ON OTHER FLATS ON THE BASIS OF EVID ENCE FOUND IN RESPECT OF ONLY 39 FLATS, THE HON. TRIBUNAL HAS HELD THAT T HE TRIGGERING POINT OF THE ASSESSMENT IN SUCH CASES IS THE EVIDENCE FOUND BY W AY OF SEIZED MATERIAL. WHILE THE AO, TAKING A CLUE FROM THE SAME , COULD HAVE CARRIED OUT FURTHER INQUIRY FROM FLAT OWNERS OR OTHERWISE, HE WAS NOT ENTITLED TO MAKE AN ADDITION ON ESTIMATE BASIS IN RESPECT OF AL L OTHER FLATS. THE TRIBUNAL OBSERVED THAT THE RATES OF FLATS ARE DEPEN DENT UPON LOCATION, DIRECTION, INITIAL BOOKING, STAGE OF DEVELOPMENT, N EGOTIATION AMONG THE PARTIES AND OTHER SUCH CONSIDERATIONS. IT WAS FURTHER HELD THAT ESTIMATE HAS TO BE BASED ON COGENT MATERIAL ON RECORD AND NOT ON THE B ASIS OF SUSPICION. THE ASSESSMENT HAS TO HAVE A 'LIVE LINK NEXUS' WITH THE MATERIAL AND EVIDENCE ON RECORD WHICH THE ASSESSEE IS UNABLE TO CONTROVERT. PURE GUESS WORK AND WILD ESTIMATE DIVORCED FROM THE EVIDENCE OR MATERIAL ON RECORD IS NOT PERMISSIBLE. 14.14.1 ALTHOUGH THE ABOVE MENTIONED ORDER OF THE H ON. ITAT MUMBAI IS IN RELATION TO AN ORDER UNDER THE NEW SEARCH ASSESSMEN T PROVISIONS UNLIKE THE OTHER ORDERS CITED BY THE APPELLANT, HAVING PERUSED THE SAME CAREFULLY, I FIND THAT THE SAME ALSO IS DISTINGUISHABLE ON FACTS FROM THE APPELLANT'S CASE. IN THAT CASE, IN RESPECT OF A PART OF THE TOTAL NUMBER OF FLATS, THE ASSESSING OFFICER HIMSELF HAD ACCEPTED THE PRICE DECLARED BY THE ASSESSEE. AS SUCH, THE PRINCIPLE OF ESTIMATION WAS NOT APPLIED UNIFORM LY BY THE AO IN RESPECT OF ALL I THE FLATS SOLD BY THE ASSESSEE. SECONDLY, THE YEA R UNDER ASSESSMENT IN THAT CASE WAS THE YEAR OF SEARCH AND THEREFORE, THE TRIB UNAL OBSERVED THAT NORMAL PRINCIPLES OF ASSESSMENT UNDER SECTION 143(3) WERE APPLICABLE TO THE CASE. THIRDLY, IT WAS ALSO OBSERVED THAT WHERE NOTHING WA S CONFRONTED TO THE ASSESSEE AT THE TIME OF SEARCH, THERE CANNOT BE ANY PRESUMPTION THAT THE ASSESSEE WAS INVOLVED IN TAKING ON MONEY IN RESPECT OF SALE OF EVERY FLAT. FOR ALL THESE REASONS, THIS CASE IS ALSO DISTINGUISHABL E FROM THE APPELLANTS CASE. 14.14.2 AS AGAINST THE ABOVE CASE LAWS CITED BY THE APPELLANT, IN CIT V. H.N. ESUFALI H.M. ABDULALI [90 ITR 271(SC)], THE HON. SU PREME COURT HELD THAT DETECTION OF UNACCOUNTED SALES OF 19 DAYS CAN FORM BASIS FOR ESTIMATING ESCAPED TURNOVER FOR THE WHOLE YEAR, IN THE SPECIFI C CONTEXT OF S.153A, THE HON. DELHI HIGH COURT IN CIT V. CHETAN DAS LACHMAN DAS (2012) 25 TAXMANN.COM 227 (DELHI) HAS UPHELD SUCH ESTIMATION. RELEVANT EXTRACTS FROM THE SAID ORDER ARE REPRODUCED BELOW: 11. WE HAVE CONSIDERED THE FACTS AND THE RIVAL SUBMISSI ONS. WE ARE CONCERNED WITH THE SEARCH ASSESSMENTS MADE UNDER SE CTION 153A OF THE ACT, UNLIKE CHAPTER XIV-B WHICH PROVIDED FOR A SPECIAL PROCEDURE FOR ASSESSMENT OF SEARCH CASES, SECTION 153A WHICH PROVIDES FOR AN ASSESSMENT IN CASE OF SEARCH, AND WAS INTRODUCED BY THE FINANCE ACT, 2003 W.E.F. 01.06,2003, DOES N OT PROVIDE THAT A SEARCH ASSESSMENT HAS TO BE MADE ON THE BASIS OF EV IDENCE FOUND AS A RESULT OF SEARCH OR OTHER DOCUMENTS AND SUCH OTHER MATERIALS OR INFORMATION AS ARE AVAILABLE WITH THE ASSESSING OFFICER AND RELATABLE TO THE EVIDENCE FOUND. THE EARLIER SECTION 158BB WHICH IS NOT APPLICABLE IN CASE OF A SEARCH CONDUCT ED AFTER 31.05,2003, PROVIDED THAT THE COMPUTATION OF THE UN DISCLOSED INCOME CAN ONLY BE ON THE BASIS OF THE EVIDENCE FOU ND AS A RESULT OF SEARCH OR OTHER DOCUMENTS AND MATERIALS OR INFORMATION AS ARE AVAILABLE WITH THE ASSESSING OFFICER, PROVIDED THEY ARE RELATABLE TO THE EVIDENCE FOUND. SECTION 153A(1)(B) PROVIDES FOR THE ASSESSMENT OR REASSESSMENT OF THE TOTAL INCOME OF THE SIX ASSESSM ENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE SEARCH TOOK PLACE. TO REPEAT, THERE IS NO CONDITION IN THIS SECTION THAT ADDITIONS SHOULD BE STRICTLY M ADE ON THE BASIS OF EVIDENCE FOUND IN THE COURSE OF THE SEARCH OR OTHER POST-SEARCH MATERIAL OR INFORMATION AVAILABLE WITH THE ASSESSIN G OFFICER WHICH CAN BE RELATED TO THE EVIDENCE FOUND. THIS, HOWEVER, DO ES NOT MEAN THAT THE ASSESSMENT UNDER SECTION 153A CAN BE ARBITRARY OR MADE WITHOUT ANY RELEVANCE OR NEXUS WITH THE SEIZED MATERIAL. OB VIOUSLY AN ASSESSMENT HAS TO BE MADE UNDER THIS SECTION ONLY O N THE BASIS OF SEIZED MATERIAL. THE QUESTION, HOWEVER, IS WHETHER THE SEIZED ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 50 MATERIAL CAN BE RELIED UPON TO ALSO DRAW THE INFERE NCE THAT THERE CAN BE SIMILAR TRANSACTIONS THROUGHOUT THE PERIOD O F SIX YEARS COVERED BY SECTION 153A, IT IS IN THIS CONTEXT IT I S RELEVANT TO NOTE THE JUDGMENT OF THE SUPREME COURT IN H.M. ESUFALI H .M, ABDULALI (SUPRA). WE HAVE TO REMEMBER THAT WITH THE ADVENT O F SECTION 153A WE ARE TAKEN BACK TO THE PRE-CHAPTER XIV-B SIT UATION, WHERE ASSESSMENTS WERE MADE ON THE BASIS OF MATERIAL AND EVIDENCE COLLECTED DURING SEARCH. IN THE CITED JUDGMENT THE FACTS WERE THESE. THE CASE AROSE UNDER THE SALES TAX LAW. ASSE SSMENTS UNDER THE MP GENERAL SALE TAX ACT AND CENTRAL SALES TAX ACT HAD BEEN COMPLETED ON A DEALER OF IRON AND STEEL. THEY WERE MADE PRIMARILY ON THE BASIS OF THE RETURNED FILED BY THE ASSESSEE AND THE BOOKS OF ACCOUNTS. SUBSEQUENTLY, THE FLYING SQU AD OF THE SALES TAX DEPARTMENT INSPECTED THE BUSINESS PREMISE S OF THE ASSESSEE AND FOUND A BILL BOOK FOR THE PERIOD OF 19 DAYS FROM SEPTEMBER 1 TO 19, 1960 SHOWING SALES OF THE VALUE OF RS. 31,171/- WHICH HAD NOT BEEN ENTERED IN THE ACCOUNT BOOKS MAI NTAINED BY THE DEALER. ON THIS BASIS THE SALES TAX OFFICER INI TIATED REASSESSMENT AND AFTER REJECTING THE ACCOUNT BOOKS ESTIMATED THE ESCAPED TURN OVER AT RS. 2,50,000/- UNDER THE M P GENERAL SALES TAX ACT AND RS. 1,00,000/- UNDER THE CENTRAL SALES TAX ACT, ADOPTING THE SALE OF RS. 31,171/- AS ESCAPED TURNOV ER FOR A PERIOD OF 19 DAYS AS THE BASIS. THE CONTENTION OF THE ASSE SSEE IN THAT CASE WAS THAT THE ACTION OF THE SALES TAX OFFICER W AS ARBITRARY INASMUCH AS HE HAD NO EVIDENCE OF ESCAPED TURNOVER FOR THE ENTIRE ACCOUNTING PERIOD AND HE WAS NOT LEGALLY COR RECT IN ESTIMATING OR INFERRING THAT THE ASSESSEE WOULD HAV E INDULGED IN SALES OUTSIDE THE BOOKS OF ACCOUNTS FOR THE ENTIRE ACCOUNTING PERIOD. THE SUPREME COURT REJECTED SUCH A CONTENTIO N IN THE FOLLOWING WORDS: - 'IT IS NOW PROVED AS WELL AS ADMITTED THAT HIS DEAL INGS OUTSIDE HIS ACCOUNTS DURING A PERIOD OF 19 DAYS WERE OF THE VALUE OF RS. 31,171.28. FROM THIS CIRCUMSTANCE, IT WAS OPEN TO THE SATES TAX OFFICER TO INFER THAT THE ASSESSEE HAD LA RGE-SCALE DEALINGS OUTSIDE HIS ACCOUNTS. THE ASSESSEE HAS NEI THER PLEADED NOR ESTABLISHED ANY JUSTIFIABLE REASON FOR NOT ENTERING IN HIS ACCOUNTS THE DEALINGS NOTED IN THE BILL BOOK SEIZED. IT IS OBVIOUS THAT HE WAS MAINTAINING FALSE ACCOUNTS TO E VADE PAYMENT OF SALES TAX. IN SUCH A SITUATION, IT WAS N OT POSSIBLE FOR THE SALES TAX OFFICER TO FIND OUT PRECISELY THE TUR NOVER SUPPRESSED. HE COULD ONLY MAKE AN ESTIMATE OF THE SUPPRESSED TURNOVER ON THE BASIS OF THE MATERIAL BE FORE HIM. SO LONG AS THE ESTIMATE MADE BY HIM IS NOT ARBITRAR Y AND HAS NEXUS WITH FACTS DISCOVERED, THE SAME CANNOT BE QUE STIONED. IN THE VERY NATURE OF THINGS THE ESTIMATE MADE MAY BE AN OVER- ESTIMATE OR AN UNDER-ESTIMATE OR AN UNDERESTIMATE. BUT, THAT IS NO GROUND FOR INTERFERING WITH HIS 'BEST JUDGMENT'. IT IS TRUE THAT THE BASIS ADOPTED BY THE OFFICER SHOULD BE RELEVANT TO THE ESTIMATE MADE. THE HIGH COURT WAS WRONG IN ASSUMING THAT THE ASSESSING AUTHORITY MUST HAVE MATERIAL BEFORE I T TO PROVE THE EXACT TURNOVER SUPPRESSED. IF THAT IS TRUE, THE RE IS NO QUESTION OF 'BEST JUDGMENT' ASSESSMENT. THE ASSESSE S CANNOT BE PERMITTED TO TAKE ADVANTAGE OF HIS OWN ILLEGAL A CTS. IT WAS HIS DUTY TO PLACE ALL FACTS TRUTHFULLY BEFORE THE A SSESSING AUTHORITY. IF HE FAILS TO DO HIS DUTY, HE CANNOT BE A/LOWED TO CALL UPON THE ASSESSING AUTHORITY TO PROVE CO NCLUSIVELY WHAT TURNOVER HE HAD SUPPRESSED. THAT FACT MUST BE WITHI N HIS PERSONAL KNOWLEDGE. HENCE, THE BURDEN OF PROVING TH AT FACT IS ON HIM. NO CIRCUMSTANCE HAS BEEN PLACED BEFORE THE ASSESSING AUTHORITY TO SHOW THAT THE ASSESSEE'S DEALINGS DURI NG SEPTEMBER 1, 1960, TO SEPTEMBER 19, 1960, OUTSIDE H IS ACCOUNTS WERE DUE TO SOME EXCEPTIONAL CIRCUMSTANCE OR THAT ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 51 THEY WERE PROPORTIONATELY MORE THAN HIS DEALINGS OU TSIDE HIS ACCOUNTS DURING THE REMAINING PERIODS. THE ASSESSIN G AUTHORITY COULD NOT HAVE BEEN IN POSSESSION OF ANY CORRECT ME ASURE TO FIND OUT THE ESCAPED TURNOVER DURING THE PERIODS NO VEMBER 1, 1959, TO AUGUST 31, 1960, AND SEPTEMBER 20, 1960, T O OCTOBER 20, 1960. THE TASK OF THE ASSESSING AUTHORITY IN FI NDING OUT THE ESCAPED TURNOVER WAS BY NO MEANS EASY. IN ESTIMATIN G ANY ESCAPED TURNOVER, IT IS INEVITABLE THAT THERE IS SO ME GUESS- WORK. THE ASSESSING AUTHORITY WHILE MAKING THE 'BE ST JUDGMENT' ASSESSMENT, NO DOUBT, SHOULD ARRIVE AT IT S CONCLUSION WITHOUT ANY BIAS AND ON RATIONAL BASIS. THAT AUTHORITY SHOULD NOT BE VINDICTIVE OR CAPRICIOUS. I F THE ESTIMATE MADE BY THE ASSESSING AUTHORITY IS A BONA FIDE ESTI MATE AND IS BASED ON A RATIONAL BASIS, THE FACT THAT THERE IS N O GOOD PROOF IN SUPPORT OF THAT ESTIMATE IS IMMATERIAL. PRIMA FACIE , THE ASSESSING AUTHORITY IS THAT BEST JUDGE OF THE SITUA TION. IT IS HIS 'BEST JUDGMENT' AND NOT OF ANYONE ELSE. THE HIGH CO URT COULD NOT SUBSTITUTE ITS 'BEST JUDGMENT' FOR THAT OF THE ASSESSING AUTHORITY. IN THE CASE OF 'BEST JUDGMENT' ASSESSMEN TS, THE COURTS WILL HAVE TO FIRST SEE WHETHER THE ACCOUNTS MAINTAINED BY THE ASSESSES WERE RIGHTLY REJECTED AS UNRELIABLE. I F THEY COME TO THE CONCLUSION THAT THEY WERE RIGHTLY REJECTED, THE NEXT QUESTION THAT ARISES FOR CONSIDERATION IS WHETHER THE BASIS ADOPTED IN ESTIMATING THE TURNOVER HAS REASONABLE NEXUS WITH T HE ESTIMATE MADE. IF THE BASIS ADOPTED IS HELD TO BE A RELEVANT BASIS EVEN THOUGH THE COURTS MAY THINK THAT IT IS NOT THE MOST APPROPRIATE BASIS, THE ESTIMATE MADE BY THE ASSESSING AUTHORITY CANNOT BE DISTURBED. IN THE PRESENT CASE, THERE IS NO DISPUTE THAT THE ASSESSEE'S ACCOUNTS WERE RIGHTLY DISCARDED. WE DO N OT AGREE WITH THE HIGH COURT THAT IT IS THE DUTY OF THE ASSE SSING AUTHORITY TO ADDUCE PROOF IN SUPPORT OF ITS ESTIMATE. THE BAS IS ADOPTED BY THE SALES TAX OFFICER WAS A RELEVANT ONE WHETHER IT WAS THE MOST APPROPRIATE OR NOT. HENCE THE HIGH COURT WAS N OT JUSTIFIED IN INTERFERING WITH THE SAME.' 14.15 THE HON. DELHI HIGH COURT, IN THE ABOVE CASE HELD THAT SUPPRESSED TURNOVER FOR ALL THE AYS UNDER CONTENTION COULD BE MADE ON THE BASIS OF EVIDENCE OF SEIZED DOCUMENTS REVEALING SUPPRESSION OF TURNOVER WHICH PERTAINED TO ONLY 18 DAYS OF ONE PY. CONSIDERING TH E PREVAILING LEGAL POSITION ON ESTIMATION OF INCOME IN SUCH CASES, THEREFORE, I HEREBY UPHOLD THE LEGALITY OF ESTIMATING INCOME FOR ONE AY BASED ON THE EVIDEN CE UNEARTHED DURING THE SEARCH IN RESPECT OF ANOTHER AY, EVEN IF IT DID NOT COVER THE WHOLE OF THE PY UNDER CONSIDERATION. 95. THE CIT(A) ON THE OTHER HAND, ESTIMATED THE ON- MONEY COMPONENT AT 40% ON SALES AND 30% ON PURCHASES AFTER TAKING NOTE OF THE FACT THAT CERTAIN TRANSACTIONS DID NOT CALL FOR ANY ADDITION ON THIS ACCOUNT DUE TO TH E SPECIFIC FACTS PREVAILING IN RESPECT OF THE SAID TRANSACTIONS. THE RELEVANT FINDING OF THE CIT(A) IN THIS REGARD WAS AS UNDER:- IN RESPECT OF SALES TRANSACTIONS:- 13.9 THE SECOND SET OF ARGUMENTS, AS ALREADY STATE D, ARE FACTUAL IN NATURE. IN THIS REGARD, I HAVE PERUSED THE SEIZED DOCUMENT IN QUESTION WHICH LENDS SUPPORT TO THE FACTS POINTED OUT BY THE LD. AO IN T HE SECOND PARAGRAPH OF PAGE 30 OF HIS ORDER. AS REGARDS THE CONTENTION L ISTED AT SI.NO. [VIII] OF PARA - 13.6 (SUPRA), NAMELY, THAT THE DIFFERENCE BETWEEN T HE AMOUNT MENTIONED ON THE SEIZED DOCUMENT AND THE AMOUNTS ENTERED IN THE BOOKS BY THE APPELLANT WAS MEANT FOR REMOVAL OF ADVERSE POSSESSION BY A BR ICK FACTORY, THE LD. AR ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 52 HIMSELF HAS ADMITTED THAT THE APPELLANT IS NOT IN A POSITION TO ADDUCE ANY EVIDENCE IN THIS REGARD. I HAVE ALSO TAKEN INTO AC COUNT THE FACT THAT IN CONSEQUENCE OF THE SEARCH ACTION, THE APPELLANT HIM SELF ADMITTED ADDITIONAL PROFITS ON SALE OF LAND WHICH WAS PREVIOUSLY UNRECO RDED IN HIS BOOKS. !N FACT, IN HIS STATEMENT U/S 132(4) RECORDED ON 24.02.08, THE APPELLANT ADMITTED AN AGGREGATE ADDITIONAL INCOME OF RS.RS.13,30 CRORE IN THE HANDS OF VARIOUS ENTITIES OF HIS GROUP, THOUGH HE SUBSEQUENTLY DID N OT ADHERE TO THIS DISCLOSURE. IN THE RETURN OF, INCOME SUBSEQUENTLY FILED BY HIM, HE DECLARED ADDITIONAL INCOME OF RS.1,80,00,000/-. IT IS ALSO NO SECRET TH AT UNACCOUNTED MONEY ALMOST INVARIABLY CHANGES HANDS IN PROPERTY TRANSAC TIONS NOT ONLY IN THE STATE OF MAHARASHTRA BUT EVERYWHERE IN THE COUNTRY. THE F OLLOWING BRIEF EXTRACT FROM THE 'WHITE PAPER ON BLACK MONEY' TABLED IN THE PARL IAMENT BY THE GOVERNMENT OF INDIA, IN MAY 2012 SERVES TO ILLUSTRATE THE POIN T: B.2 REAL ESTATE 5.2.14 THE REAL ESTATE SECTOR IN INDIA CONSTITUTES ABOUT 11 PER CENT OF THE GDP. INVESTMENT IN PROPERTY IS A COMMON MEANS O F PARKING UNACCOUNTED MONEY AND A LARGE NUMBER OF TRANSACTION S IN REAL ESTATE ARE NOT REPORTED OR ARE UNDER-REPORTED:' [EMPHASIS ADDED] 13.10 THE SAME FACT IS UNDERLINED IN THE FOLLOWING EXTRACT FROM THE HON. FINANCE MINISTER'S BUDGET SPEECH IN THE PARLIAMENT EARLIER THIS YEAR: '145. TRANSACTIONS IN IMMOVABLE PROPERTIES ARE USUA LLY UNDERVALUED AND UNDERREPORTED. .WITH A VIEW TO IMPROVE THE RE PORTING OF SUCH TRANSACTIONS AND THE TAXATION OF CAPITAL GAINS, I P ROPOSE TO APPLY TDS AT THE RATE OF ONE PERCENT ON THE VALUE OF THE TRAN SFER OF IMMOVABLE PROPERTY WHERE THE CONSIDERATION EXCEEDS RS. 50LAKH S.'[EMPHASIS ADDED] 13.11 IT IS, THEREFORE, EVIDENT THAT WHATEVER THE N OMENCLATURE GIVEN TO IT ('BLACK MONEY' OR 'ON MONEY' OR 'CASH' COMPONENT OR ANY OTHER) UNACCOUNTED MONEY ALMOST INVARIABLY CHANGES HANDS IN PROPERTY TRANSACTIONS. MOREOVER, EVEN IN THE APPELLANT'S OWN CASE, APART FROM THE EVIDENCE OF ON MONEY ON SALE TRANSACTIONS MENTIONED IN PARA- 13.9 (SUPRA), A MUCH LARGER BODY OF EVIDENCE HAS BEEN FOUND OF ON M ONEY ON PURCHASE OF LAND. THUS, HAVING PAID ON MONEY ON PURCHASE OF LAN D, IT IS INCONCEIVABLE THAT THE APPELLANT WILL NOT SIMILARLY COLLECT ON MONEY W HEN HE SELLS THE SAME BECAUSE IN THAT EVENT, HE WILL EITHER HAVE TO DECLA RE A VERY HIGH LEVEL OF PROFIT (IF HE ACCOUNTS FOR THE WHOLE OF THE ACTUAL CONSIDE RATION) OR ACTUALLY SUFFER A LOSS (IN THE UNLIKELY EVENT HE CHOOSES TO FORGO THE ON MONEY COMPONENT IN THE COST OF PURCHASE). 13.12 IN VIEW OF THIS, AND ALSO CONSIDERING MY DECI SION (PARA-14.15 INFRA) REGARDING THE LEGALITY OF ESTIMATION BASED ON PARTI AL EVIDENCE, THE AO'S ACTION OF ESTIMATION OF ON MONEY ON SALE TRANSACTIONS PER SE IS UPHELD. THE NEXT QUESTION THEN IS OF THE QUANTUM THEREOF. IT IS NO O NE'S CASE THAT ON MONEY COMPONENT IS THE SAME IN ALL TRANSACTIONS IN ALL AR EAS, ON ALL LANDS AND AT ALL TIMES. UNDOUBTEDLY, THE ON MONEY COMPONENT WILL VAR Y FROM LOCATION TO LOCATION AND FROM TRANSACTION TO TRANSACTION. IN TH E PRESENT CASE, THE AO HIMSELF HAS ADMITTED THE SMALLNESS OF THE SAMPLE SI ZE (THE NUMBER OF SALE TRANSACTIONS IN RESPECT OF WHICH SEIZED DOCUMENTS H AVE BEEN FOUND) AVAILABLE TO HIM. KEEPING THESE FACTS IN MIND, TAKING INTO CO NSIDERATION THE MARKET INFORMATION REGARDING THE LEVELS OF BLACK MONEY PRE VAILING IN PROPERTY TRANSACTIONS IN THE FAST-GROWING AREAS LOCATED IN T HE PERIPHERY OF PUNE CITY WHE R E THE APPELLANT WAS OPERATING, AND ALSO TAKING INTO ACCOUNT THE WIDE FLUCTUATION FROM TRANSACTION, TO TRANSACTION, I AM OF THE VIEW THAT THE ENDS OF JUSTICE WOULD BE MET IF THE AO'S ESTIMATION OF ON M ONEY ON SALE OF LAND IS REDUCED FROM 61 PER CENT TO 40 PERCENT. THE QUANTUM OF ADDITION ON ACCOUNT OF ESTIMATION OF ON MONEY ON SALE WOULD ACC ORDINGLY BE REDUCED FROM 37,78,492/- ESTIMATED AT THE RATE OF 6 1 PERCENT OF SALES, TO RS.24,77,700/- AT THE RATE OF 40 PERCENT. THE AO IS DIRECTED ACCORDINGLY. THE APPELLANT WOULD THUS BE ENTITLED TO PARTIAL RELIEF ON THIS COUNT. ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 53 13.13 WITH THE ABOVE, IT IS NOW TIME TO TURN TO THE THIRD SET OF THE ARGUMENTS RAISED BY THE APPELLANT. IT IS POINTED OUT BY THE A PPELLANT THAT AFTER THE SEARCH, WHILE FILING HIS RETURN OF INCOME, HE HIMSELF HAD V OLUNTARILY DECLARED AN AMOUNT OF RS.22,00,000/- TO COVER THE UNDISCLOSED CASH TRA NSACTIONS FOUND IN SEIZED DOCUMENTS, BUT THE AO HAS NOT GIVEN CREDIT FOR THIS , AMOUNT WHILE MAKING THE ADDITION ON ACCOUNT OF ON MONEY RECEIVED. ELABORATI NG ON THIS CONTENTION, IT IS STATED THAT THE AMOUNT DECLARED WAS INCLUDED IN THE P & L ACCOUNT AS 'INCOME DECLARED'. THE AO, WHILE ADOPTING THE NET P ROFIT AS PER THE SAME P & L ACCOUNT, MADE ADJUSTMENTS THEREON BY ESTIMATING T HE UNDISCLOSED INCOME ON VARIOUS ACCOUNTS. AFTER SUCH ESTIMATION, HE SHOU LD HAVE REDUCED THE AMOUNT OF ESTIMATION BY THE AMOUNT ALREADY DECLARED BY THE APPELLANT AND INCLUDED IN HIS P & L ACCOUNT AS MENTIONED ABOVE. I N SUPPORT OF HIS CONTENTION, THE APPELLANT HAS PRODUCED A COPY OF TH E P & L ACCOUNT FILED WITH THE RETURN OF INCOME SUBSEQUENT TO THE SEARCH. 13.13A HAVING CONSIDERED THIS SUBMISSION OF THE APPELLANT, IN PRINCIPLE, I FIND FORCE IN THE CONTENTION OF THE APPELLANT. UPON PERUSAL OF THE APPELLANT'S RETURNS OF INCOME FILED AFTER THE SEARCH ACTION, IT IS SEEN THAT FOR AY 2007-08 AND 2008-09 THE CREDIT SIDE OF THE P & L ACCOUNT CO NTAINS AN ENTRY 'INCOME DECLARED'. THAT BEING THE CASE, THE APPELLANT WAS C LEARLY ENTITLED FOR THE INCOME ALREADY DECLARED BY HIM AGAINST THE TOTAL AD DITIONAL INCOME ADDED BY THE LD. AO. THE LD. AO HAS NOWHERE STATED THAT HIS ESTIMATION OF UNDISCLOSED INCOME IS OVER AND ABOVE THE ADDITIONAL INCOME DECL ARED BY THE APPELLANT HIMSELF. IN PRINCIPLE, THEREFORE, I AM IN AGREEMENT WITH THE CONTENTION OF THE APPELLANT ON THIS ISSUE. FOR THE AY PRESENTLY UNDER CONTENTION, HOWEVER, THE FACTS ARE SOMEWHAT DIFFERENT IN SO FAR AS NO AMOUNT WAS CREDITED TO THE P & L ACCOUNT AS 'INCOME DECLARED'. HOWEVER, THE APPELLAN T VOLUNTARILY ADDED AN AMOUNT OF RS.22,00,000/- IN HIS COMPUTATION OF INCO ME FILED WITH THE RETURN FILED IN RESPONSE TO NOTICE UNDER SECTION 153A WITH THE REMARKS 'CASH RECEIPTS THROUGH SEIZED MATERIALS'. AS SUCH, THE AP PELLANT IS ENTITLED TO A SET OFF OF THE SAID AMOUNT AGAINST THE ESTIMATED ON MON EY RECEIPTS OF RS.24,77,700/-. THE NET ADDITION ON ACCOUNT OF ON M ONEY RECEIVED ON SALE TRANSACTIONS WOULD THEREFORE BE RS.2,77,700/-. IN RESPECT OF PURCHASE TRANSACTIONS:- 14.16 THE NEXT SET OF CONTENTIONS RAISED BY THE APP ELLANT IS FACTUAL IN NATURE. THE APPELLANT HAS MADE ELABORATE SUBMISSIONS WHICH HAVE BEEN REPRODUCED VERBATIM IN PARA 14.8 (SUPRA) AND THE SAME HAVE ALS O BEEN SUMMARIZED IN PARA 14.10. UPON CAREFUL CONSIDERATION OF THE FACTU AL ARGUMENTS AND CONTENTIONS IT IS SEEN THAT THE PURCHASE TRANSACTIO NS FALL INTO MANY DIFFERENT CATEGORIES. FIRSTLY, THERE ARE TRANSACTIONS IN RESP ECT OF WHICH PAYMENT CHARTS HAVE BEEN FOUND AND SEIZED AND THE CASH AMOUNTS MEN TIONED THEREIN ('BLACK') ARE SUPPORTED BY IDENTICAL WITHDRAWALS FR OM BANK ACCOUNTS. SECONDLY, THERE ARE TRANSACTIONS IN RESPECT OF WHIC H PAYMENT CHARTS ARE FOUND BUT MENTION OF 'BLACK' COMPONENT IS NOT FOUND. THIR DLY, THERE ARE LARGE CASH WITHDRAWALS FOR VERY SPECIFIC AMOUNTS SUCH AS RS.8, 50,000/- ON 21/04/2006, RS.30,42,000/- ON 19/06/2006, RS.14,07,100/- ON 08/ 06/2006 ETC, WHICH DEFINITELY APPEAR TO BE FOR THE PURPOSE OF PAYMENT OF ON MONEY ON PURCHASES FOR WHICH CORRESPONDING PAYMENT CHARTS WERE NOT FOU ND. FOURTHLY, THERE ARE STATED TO BE TRANSACTIONS E.G., THE TRANSACTION IN RESPECT OF F.C. ROAD PROPERTY, WHICH APPEAR IN THE APPELLANT'S PURCHASE ACCOUNT, FOR WHICH THE CONSIDERATION HAS FLOWED FROM OTHER JV PARTNERS. 14.17 HAVING GIVEN CAREFUL CONSIDERATION TO ALL THE FACTS BEFORE ME, AND ALSO KEEPING IN VIEW THE FACTS MENTIONED IN PARA 13.9 TO 13.13 (SUPRA) OF THIS ORDER IN RELATION TO THE ISSUE OF ON MONEY RECEIVED ON SA LE OF LAND, I AM OF THE VIEW THAT WHILE THE FACT OF PAYMENT OF ON MONEY ON PURCH ASES MADE BY THE APPELLANT IS UNDENIABLE, THE AO'S ACTION OF APPLYIN G A VERY HIGH RATE OF 61% OF ALL THE PURCHASES CANNOT BE JUSTIFIED. AS SUCH, KEE PING IN MIND, TRANSACTION TO TRANSACTION DIFFERENCES IN THE RATE OF ON MONEY, TH E GAPS IN THE EVIDENCE UNEARTHED AND THE PATTERN OF CASH WITHDRAWALS AND A LSO THE SPECIFIC FACTS PREVAILING IN RELATION TO CERTAIN SPECIFIC TRANSACT IONS, THE ESTIMATE OF ON MONEY SHOULD BE REDUCED TO 30%. FURTHER, CERTAIN TRANSACT IONS DO NOT CALL FOR ANY ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 54 ADDITION ON THIS COUNT DUE TO THE SPECIFIC FACTS PR EVAILING IN RELATION TO THE TRANSACTIONS IN QUESTION. KEEPING ALL THESE FACTS I N MIND, THE ADDITION ON ACCOUNT OF PAYMENT OF ON MONEY ON PURCHASE TRANSACT IONS IS RECALCULATED AS BELOW :- TOTAL PURCHASES FOR THE YEAR AS PER REVISED P & L A/C. RS.4,82,07,325 PURCHASES ON WHICH NO ON MONEY WAS PAID : ACQUISITION OF DEVELOPMENT RI GHTS FROM MR.BIBIKAR ENTERED ONLY ON THE BASIS OF MOU, NO ACTUAL PAYMENT MADE PURCHASE OF PLOT OF MR.DOSHI ALONG WITH JV PARTNER SHRI BELWALKAR REGISTRATION OF POA OF MR.BIBIKAR ACQUISITION OF RIGHTS OF SLUM DWELLERS AGAINST ALLOTMENT OF FLAT TO THEM RS.69,50,000 RS.52,50,000 RS.240 RS, 12,87,965 RS. 1,34,88,205 NET PURCHASES ON WHICH ESTIMATE OF 30% IS APPLIED RS.3,47,19,120 30% THEREOF BEING ESTIMATED ON MONEY PAYMENT ON PURCHASES RS.1,04,15,736 LESS: INCOME OFFERED AS 'EXPEND ITURE ADDED TO INCOME THROUGH SEIZED MATERIALS' IN THE COMPUTATION OF INCOME FILED WITH RETURN FILED IN RESPONSE TO NOTICE UNDER SECTION 153A. RS.5,90,000 NET ADDITION ON ACCOUNT OF ON MONEY ON PURCHASES RS.98,25,736 AS SUCH, THE ADDITION ON ACCOUNT OF PAYMENT OF ON M ONEY ON PURCHASES IS HEREBY REDUCED TO THE ABOVE AMOUNT OF RS,98,25,736/ - AS AGAINST RS.2,94,06,468/- ADDED BY THE LD. AO. ACCORDINGLY T HIS GROUND OF APPEAL MAY BE TREATED AS PARTLY ALLOWED. 96. THE ASSESSING OFFICER HAD SUMMARIZED THE PURCHA SES MADE BY THE ASSESSEE VIS--VIS 11 TRANSACTIONS AND THE DETAILS WERE ANNE XED AS ANNEXURE C WHICH IS AS UNDER:- ANNEXURE C SUMMARY OF PAYMENT CHART IN RESPECT OF PURCHASES BY NEELESH SATISH KANADE GROUP DURING FINANCIAL YEARS 2005-06, 2006-07 AND 2007-08 ITEM NO. PAGE NO. NAME OF SELLER. SURVEY NO. AGREEMENT COST TOTAL COST. ON MONEY ITEM NO 1 SEIZED FROM THE RESIDENCE OF SHRI NEELESH KANADE 18 AND 19 BORAGE NIKITA AVINASH 6,59,050 42,36,750 35,77,700 42 BOCHARE BUVASAHEB JANU. 4,75,000 22,99,950 13,19,950 39 OVAL USHA MOHAN. 10/2 AND 10/25 11,00,000 11,00,000 - 40 SHINDE SHANTABAI RAMCHANDRA 11/4, 11/13 35,00,000 42,00,000 7,00,000 48 OVHAL SHANKAR SAKHARAM 10/4B/3, 10/23/A.10/ 2 3/B 24,30,000 98,05,050 73,75,050 38 BODAKE SHANTARAM. 11 40,00,'000 60,00,000 5,00,000 ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 55 ITEM NO.6 SEIZED FROM THE RESIDENCE OF SHRI NEELESH KANADE. 30 CHANDERE BABURAO M. 205/3/1, 205/3/2, 205/3/3 39,00,000 46,22,500 7,22,500 31 CHANDERE ROHIDAS RAGHU 205/2/1, 205/2/2 & 205/2/3 18,00,000 21,00,000 3,00,000 32 AND 33 SHITOLE DNYANOBA DAGADU 213/3, 215/3 2,77,30,000 3,51,77,500 74,47,500 ITEM NO.1 SEIZED FROM THE OFFICE AT BHOSALE MYSTIQUA. 90 PARAMOUNT INFRASTRUCTURE. 143/2 2,82,50,000 4,86,91,152 2,04,41,152 91 NADHE SAMINDRA ARJUN. 153/24 16,20,000 38,73,600 22,53,600 TOTAL 7,54,64,050 12,13,84,002 4,59,19,952 TOTAL AGREEMENT COST RS. 7,54,64,050/- TOTAL ON MONEY RS. 4,59,19,952/- % OF ON MONEY RS. 4.59.19.952/- X 100 RS. 7,54,64,050/- = 61% 97. THE ABOVE SAID DETAILS WERE TABULATED ON THE BA SIS OF PAYMENT CHARTS FOUND FROM THE POSSESSION OF THE ASSESSEE WHICH ARE ANNEX ED AS ANNEXURE H 1, 2 AND 9 TO THE ASSESSMENT ORDER. FOR READY REFERENCE, ONE OF THE PAYMENT CHARTS I.E. ANNEXURE H-7 IS REPRODUCED HEREUNDER:- LAND OWNERS NAME : DHYANOBA DAGADU SHITOLE S.NO. : 214/3 215/3 AREA : 241.5 R 89.5 R RATE : 49,00,000.00 25,00,000.00 TOTAL LAND COST : 2,95,83,750.00 55,93,750.00 3,51,77,500.00 AGREEMENT VALUE : 2,77,30,000.00 AT THE TIME OF AGREEMENT (B) : 74,47,500.00 AT THE TIME OF AGREEMENT (W) : 1,28,65,000.00 AFTER 1 MONTH : 69,32,500.00 AFTER 1 MONTH : 69,32,500.00 OTHER EXPENSES : 14,07,100.00 (STAMP DUTY, REGISTRATION FEES, LEGAL CHARGES, OFFICE EXPENSES) COMMISSION OF THE AGENT ASHOK JADHAV : 2,00,000.00 BALASAHEB DANGAT : 51,000.00 ADV. KOLASE PATIL : 1,25,000.00 ADV. KAKUELE : 1,25,000.00 98. DURING THE COURSE OF HEARING, THE LEARNED AUTHO RIZED REPRESENTATIVE FOR THE ASSESSEE REFERRED TO THE VARIOUS SEIZED DOCUMENTS A ND POINTED OUT THAT IN RESPECT OF ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 56 THE FIRST DOCUMENT OF PAYMENT CHART IN RESPECT OF B ORAGE NIKITA AVINASH WAS FOUND AND PLACED AT PAGE 26 OF THE PAPER BOOK AND THE ASS ESSEE ACCEPTED THE PAYMENT OF ON-MONEY BUT DISPUTED THE AMOUNT. OUR ATTENTION WA S DRAWN TO PAGE 28 OF THE PAPER BOOK, AS PER WHICH THERE WAS MENTION OF CASH OF RS. 6,59,050/- WHEREAS IN THE DOCUMENTS PLACED AT PAGE 26, THE BLACK MONEY COMPON ENT IS MENTIONED AT RS.29,18,650/-. THE ASSESSING OFFICER FURTHER REFE RRED TO THE DOCUMENT PLACED AT PAGE 29A OF THE PAPER BOOK IN WHICH ON-MONEY WAS OF RS.6,59,050/- WAS PAID ON 19.05.2006. OUR ATTENTION WAS FURTHER DRAWN TO THE ENTRIES AT PAGE 29A OF THE PAPER BOOK WHICH REFLECTED CASH WITHDRAWAL OF RS.29,18,65 0/- ON 18.05.2006 AND THEREAFTER, RE-DEPOSIT OF RS.23 LAKHS BY CASH IN VA RIOUS BANK ACCOUNTS ON VARIOUS DATES. IT MAY BE POINTED OUT THAT ON PAGE 26 OF TH E PAPER BOOK, THE ON-MONEY COMPONENT WAS MENTIONED AT RS.29,18,650/- AND ON PA GE 29A OF THE PAPER BOOK, WHICH IS NOT A SEIZED DOCUMENT, THE ASSESSEE IN HIS OWN WRITING, HAS SHOWN CASH WITHDRAWAL OF RS.29,18,650/- ON 18.05.2006. IN THE ABOVE SAID FACTS AND CIRCUMSTANCES, ADMITTEDLY, THE ASSESSEE HAD WITHDRA WN THE EXACT AMOUNT OF CASH TO BE PAID TO BORAGE NIKITA AVINASH AND WAS THE PRACTI CE FOLLOWED BY THE ASSESSEE THAT AFTER WITHDRAWAL OF CASH FROM THE BANK ACCOUNT, EQU IVALENT AMOUNT WAS RE-DEPOSITED IN THE BANK ACCOUNT, HENCE, THE CASE OF THE REVENUE STANDS ESTABLISHED. FURTHER, THE ASSESSEE HAD ALSO PLACED ON RECORD THE COPY OF THE BANK STATEMENT AND AS PER THE ENTRY ON PAGE 30 OF THE PAPER BOOK, THERE WAS CASH WITHDRAWAL OF RS.29,18,650/- ON 18.05.2006 IN THE NAME OF NA BORAGE. THE PLEA OF T HE ASSESSEE IN THIS REGARD WAS THAT IN VIEW OF TWO DIFFERENT DOCUMENTS HAVING BEEN FOUND, WHICH REFLECT THE CONTRARY DETAILS, IN WHICH ONE OF THE PAPER REFLECTS CASH PA YMENT OF RS.6,59,050/-, WHEREAS THE SECOND PAGE REFLECTS CASH OF RS.29,18,650/-. P AGE 26 OF THE PAPER BOOK WHICH IS THE PAYMENT CHART FOR PUNAWALE PROPERTY SHOWS AGREE MENT VALUE OF RS.6,59,050/-, AMOUNT PAID AT THE TIME OF MOU OF RS.7,09,050/- AND AT THE TIME OF AGREEMENT ON- MONEY OF RS.29,18,650/-. THE CASE OF THE ASSESSEE WAS THAT THERE WAS NO VERIFICATION EXERCISE CARRIED OUT BY THE ASSESSING OFFICER AND NO ENQUIRIES WERE MADE IN RELATION TO ON-MONEY PAYMENT BY THE ASSESSING OF FICER AND IF WE CONSIDER THE PAYMENT OF ABOUT RS.29 LAKHS AS BLACK COMPONENT / O N-MONEY, THEN ON-MONEY PAYMENT WAS MORE THAN 500% AGAINST WHICH THE ASSESS ING OFFICER HAD ESTIMATED ONLY 61%. THE ASSESSEE HAD ADMITTED TO PAYMENT OF ON-MONEY AND ASSESSING ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 57 OFFICER HAS ONLY APPLIED RATIO OF 61% AND NOT INCLU DED THE ENTIRE AMOUNT AS ON- MONEY. HENCE, THE PLEA OF THE ASSESSEE IN PART HAD BEEN ACCEPTED. 99. NOW, COMING TO THE SECOND SET OF ENTRIES I.E. B OCHARE BUVASAHEB JANU. THE DOCUMENTS REFLECT THE TOTAL VALUE AT RS.22,99,950/- , BIFURCATED INTO AGREEMENT VALUE OF RS.4,80,000/- AND ON-MONEY PAYMENT OF RS.18,19,9 50/-. THE COPY OF THE PAYMENT CHART IS PLACED AT PAGE 54 OF THE PAPER BOOK. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT TH E SAID PAYMENT CHART IS NOT CORRECT AS THE AGREEMENT VALUE WAS RS.4,75,000/- AND NOT RS .4,80,000/-. FURTHER, OUR ATTENTION WAS DRAWN TO THE DOCUMENT PLACED AT PAGE 55 OF THE PAPER BOOK, IN WHICH THE AGREEMENT VALUE IS REFLECTED AT RS.4,75,000/-. AS PER THE ASSESSEE, NO ON-MONEY WAS PAID AS IN THE LEDGER ACCOUNT OF THE SAID PARTY ONLY PAYMENT OF RS.4,80,000/- HAS BEEN REFLECTED ON ACCOUNT OF SETTLEMENT PRICE PAID. THE CASE OF THE ASSESSEE WAS THAT THE SAID LAND WAS AGGREGATED AND DIFFERENT ARE A WAS PASSED ON, AGAINST WHICH, THE ASSESSING OFFICER HAS FAILED TO CARRY OUT ANY E NQUIRY NOR EXAMINED THE PERSONS. AS PER THE ASSESSEE, ALTHOUGH TWO NAMES HAVE BEEN M ENTIONED, BUT ONLY ONE PROPERTY WAS SOLD OUT OF THE BATCH. WE FIND NO MER IT IN THE PLEA OF THE ASSESSEE IN THIS REGARD IN VIEW OF THE ADMISSION OF THE ASSESSE E AND ALSO VARIOUS EVIDENCES IN ADDITION TO THE PAYMENT CHARTS BEING FOUND FROM THE ASSESSEE. THE ASSESSEE HAVING FAILED TO ESTABLISH ITS CASE OF PAYMENT OF NO ON-MO NEY, THE PLEA RAISED BY THE ASSESSEE IS DISMISSED. 100. NOW, COMING TO THE DOCUMENT NO.3 OVAL USHA MOH AN. IN THIS CASE, IN THE PAYMENT CHART PLACED AT PAGE 94 OF THE PAPER BOOK, THERE IS NO MENTION OF ANY ON- MONEY. IT IS THE CASE OF THE LEARNED AUTHORIZED RE PRESENTATIVE FOR THE ASSESSEE THAT THE ASSESSING OFFICER HAD ACCEPTED THE SAID TRANSAC TION, THAT THERE WAS NO ON-MONEY WHICH IN TURN, ESTABLISHED THE CASE OF THE ASSESSEE THAT IN SOME TRANSACTIONS, NO ON- MONEY WAS PAID. 101. THE FOURTH TRANSACTION IS WITH SHINDE SHANTABA I RAMCHANDRA, AGAINST WHICH THE PAYMENT CHART WAS FOUND AND THERE WAS ON-MONEY PAYMENT OF RS.7 LAKHS. THE SAID DOCUMENT IS PLACED AT PAGE 104 OF THE PAPER BO OK AND THE ASSESSEE ACCEPTS ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 58 THAT THE SAID ON-MONEY WAS ACCEPTED BY THE ASSESSEE AND THE SAME WAS OFFERED AS ADDITIONAL INCOME IN ASSESSMENT YEAR 2007-08. 102. THE NEXT TRANSACTION IS WITH OVHAL SHANKAR SAK HARAM. THE PAYMENT CHART OF THE SAID PARTY IS PLACED AT PAGE 125 OF THE PAPER B OOK AND IS DATED 20.06.2006. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE ASSESSEE HAS NOT ACCEPTED THE SAID TRANSACTION AS HAVING BEE N COMPLETED AND THE ASSESSING OFFICER WAS ASKED TO MAKE ENQUIRIES. THE LEARNED A UTHORIZED REPRESENTATIVE FOR THE ASSESSEE FURTHER EXPLAINED THAT THE PAYMENT CHART W AS A PRELIMINARY CHART PREPARED AND THERE WAS A DEVELOPMENT AGREEMENT AND ALSO A PO WER OF ATTORNEY WAS EXECUTED, BUT THESE WERE AGRICULTURAL LANDS AND THE USER COULD NOT BE CHANGED WITHOUT PROPER SANCTIONS, HENCE THE AMOUNT OF ON-MO NEY NOT TO BE TAXED IN THIS YEAR. 103. IN REPLY, THE LEARNED DEPARTMENTAL REPRESENTAT IVE FOR THE REVENUE POINTED OUT THAT THE DOCUMENT DATED 20.06.2006, IN WHICH TH E ON-MONEY COMPONENT IS MENTIONED AT RS.73,75,050/- AND THE PERUSAL OF THE REGISTERED DOCUMENT AT PAGE 128 OF THE PAPER BOOK REFLECTS THAT THE STAMPS WERE PUR CHASED ON 20.06.2006 AND THE DOCUMENT WAS REGISTERED ON 26.06.2006, HENCE, THERE WAS NO MERIT IN THE PLEA OF THE ASSESSEE. WE ARE IN CONFORMITY WITH THE OBSERVATIO NS OF THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE IN VIEW OF THE DOCUM ENTS AVAILABLE ON RECORD, THE PAYMENT CHART IS DATED 20.06.2006, WHICH REFLECTS T HE ON-MONEY TO BE PAID VIS--VIS THE SAID TRANSACTION. FURTHER, THE ASSESSEE HAD PU RCHASED THE STAMPS IN RESPECT OF THE SAID TRANSACTION ON 20.06.2006 AND THE DEVELOPM ENT AGREEMENT WAS EXECUTED ON 26.06.2006, WHICH WAS REGISTERED ALSO ON 26.06.2006 . IN VIEW OF THE ABOVE SAID EVIDENCES BEING AVAILABLE, COPIES OF WHICH HAVE BEE N FILED BY THE ASSESSEE IN THE PAPER BOOK AND ARE AVAILABLE AT PAGES 128 TO 146 OF THE PAPER BOOK, DOES NOT DIS- PROVE THE CASE OF THE ASSESSEE AND THE SAME IS REJE CTED. 104. THE NEXT TRANSACTION IS WITH BODAKE SHANTARAM, WHEREIN IN THE PAYMENT CHART, THE AMOUNT OF RS.5 LAKHS IS MENTIONED I.E. PAID IN CASH. HOWEVER, THERE IS ANOTHER NARRATION CASH PAYMENT OF RS.10 LAKHS AT THE TIME O F AGREEMENT. THE ASSESSING OFFICER HAD ADOPTED RS.5 LAKHS AS ON-MONEY. THE EX PLANATION OF THE ASSESSEE IN THIS REGARD WAS THAT THE AMOUNT OF RS.10 LAKHS SUBSEQUEN TLY MENTIONED ON THE SAID ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 59 PAYMENT CHART, WAS NOT INCLUDED IN THE HANDS OF THE ASSESSEE. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE POINTED OUT THAT NO CHART WAS FOUND FOR THIS TRANSACTION OF RS.10 LAKHS AND THE ASSESSEE EX PLAINED THAT THIS WAS FOR A DIFFERENT AGREEMENT. IN VIEW THEREOF, THE ORDER OF THE ASSESSING OFFICER IN ADOPTING THE ON-MONEY OF RS.5 LAKHS, MERITS TO BE ACCEPTED. WE FIND MERIT IN THE PLEA OF THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE AND DISMISS THE CLAIM OF THE ASSESSEE. 105. ANOTHER TRANSACTION OF WHICH, THE DOCUMENTS WE RE SEIZED WAS WITH CHANDERE BABURAO M., IN WHICH ON-MONEY OF RS.7,22,500/- IS M ENTIONED. OUR ATTENTION WAS DRAWN TO THE DOCUMENT PLACED AT PAGE 175 OF THE PAP ER BOOK, WHICH WAS SEIZED DURING THE COURSE OF SEARCH AND IN WHICH CASH TRANS ACTION OF RS.7,22,500/- IS RECORDED. THERE IS NO MENTION OF WORD BLACK MONEY OR ON-MONEY AND THERE WERE FOUR TRANSACTIONS TOTALING RS.39 LAKHS AND FURTHER, AN A MOUNT OF RS.7,22,500/- WAS MENTIONED. AS PER THE ASSESSEE, THIS AMOUNT WAS PA ID AS SETTLEMENT CHARGES. OUR ATTENTION WAS DRAWN TO THE LEDGER ACCOUNT OF THE SA ID PERSON PLACED AT PAGE 195 OF THE PAPER BOOK, IN WHICH THE AMOUNT WAS REFLECTED. OUR ATTENTION WAS DRAWN TO THE ORDER OF ASSESSING OFFICER AT PAGE 41 OF THE ASSESS MENT ORDER, UNDER WHICH, THE ASSESSING OFFICER ACCEPTS THE CONTENTION OF THE ASS ESSEE, BUT INCLUDED THE NAME OF PERSON IN THE LIST OF 11 PARTIES FROM WHOM ON-MONEY WAS RECEIVED. THE CASE OF THE ASSESSEE WAS THAT THIS WAS NOT TRANSACTION OF PAYME NT OF ON-MONEY, BUT WAS A CASE OF PAYMENT OF SETTLEMENT PRICE IN ANOTHER ACCOUNT A ND THE SAME HAVING BEEN REFLECTED IN THE BOOKS OF ACCOUNT, DOES NOT MERIT T O BE INCLUDED. 106. THE ASSESSING OFFICER VIDE PARA 7 AT PAGE 41 O F THE ASSESSMENT ORDER OBSERVED AS UNDER:- 7. SHRI CHANDERE BABURAO M. THE PAYMENT CHART IN RESPECT OF THIS TRANSACTION IS AT PAGE NO.30 OF ITEM NO.6 SEIZED FROM THE RESIDENCE OF THE ASSESSEE . THE CONTENTION OF THE ASSESSEE IS THAT RS.7,22,500/- IS NOT ON MONEY, BUT IT IS PAYMENT MADE TO THIRD PARTY AS CLEARLY INDICATED BY THE SEIZED PAPE R AND IT IS RECORDED IN THE BOOKS OF THE ASSESSEE. THIS CONTENTION OF THE ASSE SSEE IS FOUND TO BE ACCEPTABLE 107. THE NEXT DOCUMENT REFERRED TO IN THE ANNEXURE D IS TRANSACTION WITH CHANDERE RAHIDAS RAGHU, IN WHICH ON-MONEY OF RS.3 LAKHS HAS BEEN TAKEN BY THE ASSESSING ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 60 OFFICER. THE CASE OF THE ASSESSEE WAS THAT ON-MONE Y WAS ACCEPTED, BUT IT WAS ONLY RS.2 LAKHS AND NOT RS.3 LAKHS. 108. ANOTHER TRANSACTION WAS WITH SHITOLE DNYANOBA DAGADU, IN WHICH THERE IS ON- MONEY PAYMENT OF RS.74,47,500/-. THE RELEVANT DOCU MENT PLACED AT PAGE 197 OF THE PAPER BOOK. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THERE WAS NO TRANSACTION COMPLETED WITH THE SA ID PARTY THOUGH THE AMOUNT WAS DRAWN FROM THE BANK ACCOUNT, BUT THE SAME WAS RE-DE POSITED AND HENCE, NO PAYMENT ON THIS ACCOUNT WAS MADE. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE POINTED OUT THAT AT THE TIME OF AGREEMENT, THE ENTIRE AMOUNT WAS PAID AND IN THE ABSENCE OF ANY EVIDENCE OF CANCELLATION OF AGRE EMENT, THE REVERSAL OF CASH CANNOT BE BELIEVED. WE FIND MERIT IN THE PLEA OF L EARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE AS THE ASSESSEE IN V ARIOUS TRANSACTIONS HAD WITHDRAWN THE CASH FROM THE BANK ACCOUNT AND HAD RE -DEPOSITED THE SAME IN THE BANK ACCOUNT. WE HAVE ALREADY DISMISSED THE SAID E XPLANATION OF THE ASSESSEE AS NOT TENABLE AND IN VIEW THEREOF, SINCE THE ASSESSEE HAS FAILED TO EXPLAIN THE SOURCE OF ON-MONEY PAYMENT IN CASH, THE SAID AMOUNT HAS TO BE ADDED AS ADDITIONAL INCOME OF THE ASSESSEE. 109. THE NEXT TRANSACTION REFERRED TO IN THE ANNEXU RE D IS PARAMOUNT INFRASTRUCTURE DOCUMENT IN RESPECT OF WHICH IS PLACED AT PAGE 250 OF THE PAPER BOOK. THE PERUSAL OF THE SAID DOCUMENT REFLECTS NO CASH PAYMENT OF AN Y BLACK MONEY OR ANY ON-MONEY, AS PER THE LEARNED AUTHORIZED REPRESENTATIVE FOR TH E ASSESSEE. THE PAYMENT CHART REFLECTS THE AGREEMENT VALUE TO BE RS.4.86 CRORES A ND AS PER THE AGREEMENT, THE ASSESSEE HAD ONLY PAID A SUM OF RS.2.82 CRORES, HEN CE THE BALANCE OF RS.2.04 CRORES WAS ADDED AS ON-MONEY PAYMENT BY THE ASSESSI NG OFFICER. THE CASE OF THE ASSESSEE WAS THAT THE SAID PAYMENT CHART WAS A DUMP DOCUMENT AND THE ASSESSING OFFICER HAD IGNORED THE REGISTERED DOCUMENT AND THE FIGURES IN THE SAID DOCUMENT DO NOT MATCH WITH THE PAYMENT CHART FOUND FROM THE POS SESSION OF THE ASSESSEE. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT IN THE PAYMENT CHART, THERE WAS MENTION OF AGREEMENT OF RS.4.86 CR ORES, THEN THERE WAS MENTION OF STAMP OF RS.9,73,023/-, LEGAL CHARGES OF EQUIVALENT AMOUNT, REGISTRATION CHARGES OF RS.81 LAKHS AND THEN TOTAL EXPENSES AT THE TIME OF REGISTRATION I.E. COLUMN NO.G, H ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 61 AND I, TOTALING RS.1,00,47,646/-. THE LEARNED AUTH ORIZED REPRESENTATIVE FOR THE ASSESSEE FURTHER REFERRED TO THE REGISTERED DOCUMEN T AND POINTED OUT THAT AS PER THE SAID DOCUMENT, THE TOTAL AMOUNT PAID WAS RS.2,82,50 ,000/-. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE STRESSED THAT WHEN THE PAYMENT CHART DID NOT TALK OF ANY CONSIDERATION PAID IN CASH AND IN VIEW OF THE T OTALING ERRORS, IT COULD NOT BE DEDUCED THAT THERE WAS ON-MONEY PAYMENT IN THIS CAS E. WE FIND MERIT IN THE PLEA OF THE ASSESSEE IN THE TOTALITY OF THE FACTS AND CIRCU MSTANCES, WHERE THE DOCUMENT FOUND FROM THE POSSESSION OF THE ASSESSEE DOES NOT REFLECT ANY ON-MONEY PAYMENT, HENCE, NO PRESUMPTION CAN BE DRAWN AGAINST THE ASSE SSEE. 110. THE LAST TRANSACTION IS WITH NADHE SAMINDRA AR JUN, IN WHICH ON-MONEY PAYMENT OF RS.22,53,600/- HAS BEEN CONSIDERED AS HA VING BEEN PAID. THE PAYMENT CHART ITSELF REFLECTS PAYMENT BY CROSSED CHEQUE AT RS.10 LAKHS AND BEARER CHEQUE AT RS.22,53,600/-, WHICH WAS ADOPTED BY THE ASSESSING OFFICER AS ON-MONEY PAID IN THE SAID TRANSACTIONS. THE LEARNED AUTHORIZED REPRESEN TATIVE FOR THE ASSESSEE POINTED OUT THAT THE SAID AMOUNT WAS RECORDED AS SETTLEMENT CHARGES AND THERE WAS NO REASON TO TAKE THE SAID AMOUNT INTO CONSIDERATION W HILE COMPUTING THE ON-MONEY PAYMENT BY THE ASSESSEE. THE PLEA OF THE LEARNED A UTHORIZED REPRESENTATIVE FOR THE ASSESSEE WAS THAT THE ASSESSING OFFICER HAD REJECTE D THE EXPLANATION OF THE ASSESSEE AND RESORTED TO ESTIMATION, WHEREAS THERE WAS NO JUSTIFICATION FOR ESTIMATING ALL THE TRANSACTIONS. THE LEARNED DEPARTMENTAL REP RESENTATIVE FOR THE REVENUE IN CONCLUSION POINTED OUT THAT THE DIFFERENCE WAS ON A CCOUNT OF ON-MONEY FOR WHICH, BEARER CHEQUE WAS PAID AND THE SAME WOULD NOT BE RE CORDED IN THE BOOKS OF ACCOUNT AND HENCE, THERE WAS NO MERIT IN THE SUBMISSIONS OF THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE IN VIEW OF THE DIFF ERENT DOCUMENTS SEIZED FROM THE POSSESSION OF THE ASSESSEE, NO ANOTHER CONCLUSION C OULD BE DRAWN. IN VIEW OF THE NOTINGS ON INCRIMINATING DOCUMENT FOUND FROM THE PO SSESSION OF THE ASSESSEE, WE FIND NO MERIT IN THE PLEA OF THE ASSESSEE. 111. AFTER GOING THROUGH THE DOCUMENTS SEIZED FROM THE POSSESSION OF THE ASSESSEE AND THE NARRATION ON THE SAID DOCUMENTS, W E ARE IN CONFORMITY WITH THE ORDERS OF AUTHORITIES BELOW THAT THE ASSESSEE HAD I NDULGED IN ON-MONEY PAYMENTS AGAINST PURCHASES OF DIFFERENT PLOTS. IN VIEW OF T HE ABOVE SAID FACTS AND ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 62 CIRCUMSTANCES, WHERE EVEN IN CASES WHERE NO DOCUMEN T OF ON-MONEY PAYMENTS WERE FOUND FROM THE POSSESSION OF THE ASSESSEE, IN THE RECASTED BOOKS OF ACCOUNT, ADDITIONAL INCOME HAS BEEN OFFERED BY THE ASSESSEE IRRESPECTIVE OF THE FACT WHETHER ANY ON-MONEY PAYMENT CHARTS FOUND OR NOT, ESTABLISH ED THE CASE OF REVENUE AUTHORITIES THAT A PRESUMPTION HAS TO BE DRAWN AGAI NST THE ASSESSEE THAT FOR INDULGING IN THE TRANSACTION OF PURCHASES OF LAND, THE ASSESS EE HAD MADE PAYMENTS IN CASH FOR WHICH, THERE ARE NO EXPLAINABLE SOURCES AND HENCE, THE SAID AMOUNT PAID ON ACCOUNT OF ON-MONEY IS TO BE ADDED AS INCOME OF THE ASSESSE E UNDER SECTION 69C OF THE ACT. ADMITTEDLY, THE PAYMENT CHARTS REFLECT VARIOUS PERC ENTAGES OF ON-MONEY PAYMENT AND THERE IS NOT A SET RATE AT WHICH THE ON-MONEY WAS B EING PAID BY THE ASSESSEE. THE ASSESSING OFFICER HAD ESTIMATED THE ON-MONEY CONSID ERATION @ 61% OF THE TOTAL PURCHASES VALUE BY ADOPTING THE FIGURES AS COMPUTED IN ANNEXURE D. THE CIT(A) REDUCED THE PERCENTAGE TO BE ADOPTED TO 30%, AGAINS T WHICH THE REVENUE IS NOT IN APPEAL. HENCE THE ONLY CONSIDERATION TO BE SEEN IS WHAT PERCENTAGE IS TO BE ADOPTED FOR WORKING OUT THE ADDITIONAL INCOME IN THE HANDS OF THE ASSESSEE ON ACCOUNT OF PURCHASE OF LAND. DURING THE COURSE OF HEARING, IT WAS PUT TO THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE TO COMPUTE THE ADDI TIONAL INCOME ON ACCOUNT OF VARIOUS PURCHASES MADE FROM YEAR TO YEAR, BUT NO SU CH DOCUMENTS OR DETAILS OR EVIDENCES WERE FILED BY THE ASSESSEE, DESPITE REPEA TED DATES OF HEARING. ON THE OTHER HAND, THE LEARNED AUTHORIZED REPRESENTATIVE F OR THE ASSESSEE RAISED AN OBJECTION THAT IN THE PRESENT CASE AS SEARCH PROCEE DINGS HAD TAKEN PLACE AGAINST THE ASSESSEE, THERE WAS NO MERIT IN THE ESTIMATION OF T HE INCOME IN THE HANDS OF THE ASSESSEE. RELIANCE IN THIS REGARD WAS PLACED ON TH E RATIO LAID DOWN BY MUMBAI BENCH OF THE TRIBUNAL IN ACIT VS. M/S. METRO CONSTR UCTION CO (SUPRA). THE SAID CASE WAS ALSO RELIED UPON BY THE LEARNED AUTHORIZED REPR ESENTATIVE FOR THE ASSESSEE BEFORE THE CIT(A) AND THE FACTS OF THE SAID CASE WE RE FOUND TO BE AT VARIANCE WITH THE FACTS OF THE PRESENT CASE BEFORE US. 112. IN THE FACTS BEFORE THE MUMBAI BENCH OF THE TR IBUNAL, THE TRIBUNAL HAD HELD THAT THE TRIGGERING POINT OF THE ASSESSMENT WAS THE EVIDENCE FOUND BY WAY OF SEARCH MATERIAL. IN THAT CASE, IN RESPECT OF PART OF THE PLOTS, THE ASSESSING OFFICER HAD ACCEPTED PRICE DECLARED BY THE ASSESSEE AND FOR THE BALANCE FLATS, ESTIMATION WAS ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 63 MADE BY THE ASSESSING OFFICER ON THE BASIS OF EVIDE NCE FOUND IN RESPECT OF ONLY 39 FLATS. SUCH PRINCIPLE OF ESTIMATION APPLIED BY THE ASSESSING OFFICER IN RESPECT OF ALL THE FLATS SOLD BY THE ASSESSEE WAS DELETED BY THE T RIBUNAL ESPECIALLY WHERE NOTHING WAS CONFRONTED TO THE ASSESSEE AT THE TIME OF SEARC H. HOWEVER, IN THE FACTS OF THE PRESENT CASE BEFORE US, THE EVIDENCE FOUND DURING T HE COURSE OF SEARCH WAS CONFRONTED TO THE ASSESSEE AND ADDITIONAL INCOME TO THE EXTENT OF RS.13.30 CRORES WAS OFFERED TO TAX BY THE ASSESSEE DURING THE COURS E OF SEARCH. BUT, IN THE RETURN OF INCOME FILED, THE ASSESSEE HAD DECLARED ONLY ADDITI ONAL INCOME TO THE EXTENT OF RS.5.00 CRORES WHICH IN TURN WAS BASED NOT ONLY ON THE PAYMENT CHART BUT OTHER DETAILS AVAILABLE WITH THE ASSESSEE. IN THE PRESEN T CASE, THE ASSESSEE HAD ADMITTED TO HAVE RECEIVED ON-MONEY ON THE SALES BY HIM AND A LSO PAID ON-MONEY ON THE PURCHASES MADE BY HIM. IN VIEW OF THAT THERE IS NO MERIT IN THE RELIANCE PLACED UPON BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE AS SESSEE IN ACIT VS. METRO CONSTRUCTION COMPANY (SUPRA). 113. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL RE PRESENTATIVE FOR THE REVENUE AND ALSO THE CIT(A) HAD PLACED RELIANCE ON THE RATI O LAID DOWN BY THE HONBLE SUPREME COURT IN COMMISSIONER OF SALES TAX VS. H.M ESUFALI H.M. ABDULALI & OTHERS (1973) 90 ITR 271 (SC), WHEREIN IT WAS HELD THAT EV EN IN CASE WHERE THERE IS DETECTION OF SALES FOR 90 DAYS, THE SAME CAN FORM T HE BASIS FOR ESTIMATING THE ESCAPED TURNOVER FOR THE WHOLE YEAR. THE RELEVANT OBSERVATION OF THE HONBLE SUPREME COURT IS AS UNDER:- HELD, THAT THE REASSESSMENTS WERE VALID. FROM THE CIRCUMSTANCE THAT THE ASSESSEE HAD DEALINGS OUTSIDE THE ACCOUNTS OF T HE VALUE OF RS.31,17,128/- FOR 19 DAYS, IT WAS OPEN TO THE OFFICER TO INFER TH AT THE ASSESSEE HAD LARGE- SCALE DEALINGS OUTSIDE THE ACCOUNTS. IN SUCH A SIT UATION, IT WAS NOT POSSIBLE FOR THE OFFICER TO FIND OUT PRECISELY THE TURNOVER SUPPRESSED AND HE COULD ONLY MAKE AN ESTIMATE OF THE SUPPRESSED TURNOVER ON THE BASIS OF THE MATERIAL BEFORE HIM. SO LONG AS THE ESTIMATE MADE BY HIM WA S NOT ARBITRARY AND HAD A REASONABLE NEXUS WITH THE FACTS DISCOVERED, IT COUL D NOT BE QUESTION. IT WAS WRONG TO HOLD THAT THE OFFICER MUST HAVE MATERIAL B EFORE HIM TO PROVE THE EXACT TURNOVER SUPPRESSED. IN ESTIMATING ANY ESCAPED TURNOVER, IT IS INEVITABL E THAT THERE IS SOME GUESS-WORK. THE ASSESSING AUTHORITY WHILE MAKING T HE BEST JUDGMENT ASSESSMENT, NO DOUBT, SHOULD ARRIVE AT HIS CONCLUSI ON WITHOUT ANY BIAS AND ON A RATIONAL BASIS. THAT AUTHORITY SHOULD NOT BE VIN DICTIVE OR CAPRICIOUS. IF THE ESTIMATE MADE BY THE ASSESSING AUTHORITY IS A BONA FIDE ESTIMATE AND IS BASED ON A RATIONAL BASIS, THE FACT THAT THERE IS NO GOOD PROOF IN SUPPORT OF THAT ESTIMATE IS IMMATERIAL. PRIMA FACIE, THE ASSESSING AUTHORITY IS THE BEST JUDGE OF THE SITUATION. IT IS HIS BEST JUDGMENT AND NOT ANYONE ELSES. THE HIGH COURT CANNOT SUBSTITUTE ITS BEST JUDGMENT FOR THAT OF THE ASSESSING AUTHORITY. ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 64 114. FURTHER, THE HONBLE ANDHRA PRADESH HIGH COURT IN RAJNIK AND CO. VS. ACIT (2001) 251 ITR 561 (AP) IN THE CASE OF BLOCK ASSESS MENT WHERE DETECTION OF SUPPRESSED SALES FOR 24 DAYS AND FURTHER OF 15 DAYS WAS FOUND TO BE NOT ENTERED IN THE ACCOUNTS BOOKS AND IN VIEW OF THE STATEMENT OF THE PARTNER OF THE ASSESSEE FIRM, THAT THE ASSESSEE PRACTICED SUPPRESSION OF SALES FR OM YEAR TO YEAR, THE ESTIMATION OF UNDISCLOSED INCOME FOR THE BLOCK PERIOD BASED ON TH E MATERIAL ON RECORD AND STATEMENT OF PARTNER, WAS HELD TO BE PROPER. THE H ONBLE HIGH COURT FURTHER HELD THAT THOUGH THERE IS NO MATERIAL AVAILABLE FOR ADDITION IN CERTAIN YEARS, YET IT WAS ONCE ADMITTED BY THE ASSESSEE FIRM THAT IT HAD PRACTICED SUPPRESSION OF SALES TURNOVER EVEN IN THOSE YEARS AND TAKING THE QUANTUM OF SUPPR ESSED ESTIMATION AT 20% WAS AN ACCEPTED MODE OF ASSESSING THE INCOME IN THE HANDS OF THE ASSESSEE. 115. FURTHER, THE CIT(A) HAD PLACED RELIANCE ON THE RATIO LAID DOWN BY HONBLE DELHI HIGH COURT IN CIT VS. CHETANDAS LACHMAN DAS (SU PRA), WHEREIN THE ASSESSMENT WAS MADE UNDER THE PROVISIONS OF SECTION 153A OF TH E ACT. THE HONBLE DELHI HIGH COURT HAD HELD THAT THERE WAS NO CONDITION IN THE S ECTION THAT ADDITION SHOULD BE STRICTLY MADE ON THE BASIS OF EVIDENCE FOUND IN THE COURSE OF SEARCH OR OTHER BASED SEARCH MATERIAL OR INFORMATION AVAILABLE WITH THE A SSESSING OFFICER. THE HONBLE DELHI HIGH COURT FURTHER HELD THAT THE SEIZED MATER IAL COULD BE RELIED UPON TO DRAW THE INFERENCE THAT THERE COULD BE SIMILAR TRANSACTION T HROUGHOUT THE PERIOD OF SIX YEARS COVERED BY SECTION 153A OF THE ACT. REFERENCE WAS MADE TO THE JUDGMENT OF HONBLE SUPREME COURT IN COMMISSIONER OF SALES TAX VS. H.M ESUFALI H.M. ABDULALI & OTHERS (SUPRA). THE RELEVANT EXTRACT OF THE SAID JUDGMENT WAS REPRODUCED BY US UNDER PARA 90 AND THE SAME IS BEING REFERRED TO IN ENTIRETY. IN VIEW OF THE ABOVE SAID RATIO LAID DOWN BY THE HONBLE SUPREME COURT AND HIGH COURTS, WE FIND NO MERIT IN THE RELIANCE PLACED UPON BY THE LEARNED AUTHORIZED REPRESENTATIV E FOR THE ASSESSEE ON THE RATIO LAID DOWN BY DIFFERENT BENCHES OF THE TRIBUNAL. 116. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FURTHER PLACED RELIANCE ON THE RATIO LAID DOWN BY THE HONBLE BOMB AY HIGH COURT IN CIT VS. DR. MKE MEMON (SUPRA), WHEREIN THE ASSESSMENT WAS MADE AFTE R SEARCH CONDUCTED ON THE PREMISES OF THE ASSESSEE AND UNDISCLOSED INCOME FOR THE BLOCK PERIOD WAS ASSESSED ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 65 IN THE HANDS OF THE ASSESSEE. IN VIEW OF THE PROVI SIONS OF SECTION 158BB R.W.S. 158BC OF THE ACT, THE ESTIMATION OF INCOME OF PROFE SSIONAL WHO WAS SEARCHED, WAS HELD TO BE NOT JUSTIFIED FOR THE PERIOD FROM APRIL, 1986 TO DECEMBER, 1996 ON THE BASIS OF APPLYING THE PEAK OF POST NOVEMBER, 1993. THE F ACTUAL ASPECTS OF THE CASE WERE CONSIDERED AND IT WAS HELD BY THE HONBLE BOMBAY HI GH COURT THAT SUCH ARBITRARY METHOD COULD NOT BE ADOPTED IN ESTIMATING THE INCOM E OF ASSESSEE UNDER CHAPTER XIV-B. THE HONBLE BOMBAY HIGH COURT AT PAGE 313 O F THE REPORT HAD OBSERVED THAT WE AGREE WITH THE CONTENTION ADVANCED ON BEHALF OF THE DEPARTMENT THAT IN MATTERS UNDER CHAPTER XIV-B THE ASSESSING OFFICER IS REQUIR ED TO ESTIMATE THE UNDISCLOSED INCOME. WE AGREE WITH THE CONTENTION OF THE DEPART MENT THAT THIS ESTIMATION INVOLVES GUESS WORK. HOWEVER, THE ASSESSING OFFICER UNDER C HAPTER XIV-B CANNOT ACT ARBITRARILY WHILE ESTIMATING THE UNDISCLOSED INCOME . FURTHER, REFERENCE WAS MADE TO THE JUDGMENT OF THE HONBLE SUPREME COURT IN COMMIS SIONER OF SALES TAX VS. H.M ESUFALI H.M. ABDULALI & OTHERS (SUPRA), WHEREIN UNR EPORTED DETAILS WERE DETECTED FOR A PERIOD OF 90 DAYS IN A YEAR AND THE ASSESSING OFF ICER ESTIMATED THE TURNOVER FOR THE ENTIRE PERIOD OF ONE YEAR ON THE BASIS OF SUCH UNRE PORTED SALES. THE HONBLE APEX COURT HELD THAT IN THE MATTER INVOLVING UNREPORTED SALES, THE ASSESSING OFFICER HAS TO PROCEED ON THE BASIS OF ESTIMATION, WHICH INVOLVES SOME AMOUNT OF GUESS WORK. THE HONBLE BOMBAY HIGH COURT IN CIT VS. DR. MKE MEMON (SUPRA) OBSERVED THAT THE SAID JUDGMENT OF THE HONBLE SUPREME COURT MUST BE SEEN IN THE CONTEXT OF FACTS OF EACH CASE. APPLYING THE SAID RATIO LAID DOWN BY TH E HONBLE SUPREME COURT AND ALSO PROPOUNDED BY THE HONBLE BOMBAY HIGH COURT AND VAR IOUS OTHER COURTS REFERRED TO BY US IN THE PARAS HEREINABOVE AND KEEPING IN CONSI DERATION THE FACTUAL ASPECTS OF THE PRESENT CASE, WHERE IN ADDITION TO THE INCRIMIN ATING DOCUMENTS FOUND DURING THE COURSE OF SEARCH, THE ASSESSEE HAD MADE CERTAIN ENT RIES POST SEARCH IN ITS REVISED BOOKS OF ACCOUNT IN RELATION TO SUCH UNACCOUNTED ON -MONEY PAYMENTS ON PURCHASES AND HAD ALSO OFFERED ADDITIONAL INCOME IN THE RETUR N OF INCOME ON ACCOUNT OF SUCH ON- MONEY ON PURCHASES OF LAND, PRESUMPTION HAS TO BE D RAWN AGAINST THE ASSESSEE THAT IT WAS INDULGING IN PAYMENT OF ON-MONEY FOR MAKING PURCHASE OF LANDS. BUT IN THE ABSENCE OF COMPLETE DETAILS BEING MADE AVAILABLE BY THE ASSESSEE AND EVEN NO INFORMATION HAVING BEEN FILED BY THE LEARNED AUTHOR IZED REPRESENTATIVE FOR THE ASSESSEE DURING THE COURSE OF HEARING TO TABULATE T HE LIST OF PURCHASES MADE BY THE ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 66 ASSESSEE FROM YEAR TO YEAR AND THE QUANTUM OF ON-MO NEY IN RESPECT OF EACH OF THE TRANSACTIONS, THERE IS NO OTHER OPTION BUT TO ESTIM ATE THE ON-MONEY COMPONENT OF THE SAID TRANSACTIONS UNDERTAKEN BY THE ASSESSEE. 117. ANOTHER RELIANCE RELIED UPON THE RATIO LAID DO WN BY PUNE BENCH OF THE TRIBUNAL IN ACIT VS SRJ PEETY STEELS (P) LTD. (SUPRA), WAS A CASE THAT NOTHING INCRIMINATING WAS FOUND DURING THE COURSE OF SEARCH AND NO ASSESS MENT WAS PENDING ON THE DATE OF INITIATION OF SEARCH. IN THE ABOVE SAID FACTS, IT WAS HELD THAT THERE WAS NO BASIS FOR COMPUTING THE SUPPRESSED PRODUCTION IN THE HANDS OF THE ASSESSEE ON THE BASIS OF ELECTRICITY CONSUMPTION. HOWEVER, IN THE FACTS OF THE PRESENT CASE AS POINTED OUT BY US IN THE EARLIER, THE INCRIMINATING DOCUMENTS WERE FOUND THOUGH FOR SHORT PERIOD COVERED, BUT THE ASSESSEE ON ITS OWN HAD FURNISHED ADDITIONAL INCOME OVER AND ABOVE THE INCOME REFLECTED IN THE SEIZED DOCUMENTS AND HENCE, THE ESTIMATION OF INCOME IN THE HANDS OF THE ASSESSEE, IS JUSTIFIED. 118. IN THE TOTALITY OF THE ABOVE SAID FACTS AND CI RCUMSTANCES, WE HAVE NO ALTERNATIVE BUT TO ESTIMATE THE ON-MONEY COMPONENT IN RESPECT OF PURCHASES MADE BY THE ASSESSEE. WE ARE OF THE VIEW THAT IT WOULD BE DEEMED PROPER TO APPLY PERCENTAGE OF 20% TO THE TOTAL TRANSACTIONS VALUE I N ORDER TO DETERMINE THE ADDITIONAL INCOME IN THE HANDS OF THE ASSESSEE IN THE CAPTIONE D ASSESSMENT YEARS. THE ASSESSEE HAD OFFERED CERTAIN ADDITIONAL INCOME FROM YEAR TO YEAR AND THE SAME WOULD BE ASSESSED IN THE HANDS OF THE ASSESSEE AND THE ADDITIONAL INCOME SO COMPUTED @ 20% AFTER EXCLUDING THE INCOME OFFERED B Y THE ASSESSEE SHOULD BE BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE FROM YE AR TO YEAR. IN VIEW THEREOF, WE DIRECT THE ASSESSING OFFICER TO RE-COMPUTE THE ADDI TION IN THE HANDS OF THE ASSESSEE IN LINE THEREOF BY APPLYING THE PERCENTAGE OF 20%. 119. NOW, COMING TO THE SECOND SET OF TRANSACTIONS I.E. SALE OF PLOTS. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS FILE D ON RECORD THE BREAK-UP OF THE TRANSACTIONS FROM YEAR TO YEAR WHICH ARE LIMITED IN THE THREE YEARS UNDER APPEAL. THE ASSESSING OFFICER IS ALSO DIRECTED TO WORK OUT THE ON-MONEY COMPONENT IN RESPECT OF RECEIPT OF ON-MONEY COMPONENT IN THE AFORESAID TRAN SACTIONS BY APPLYING RATE AT 20% ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 67 TO THE DECLARED VALUES. HOWEVER, IN ASSESSMENT YEA R 2006-07, THE ASSESSEE HAD OFFERED THE INCOME AT RS.22,00,000/- AND THE ASSESS MENT IN THE HANDS OF THE ASSESSEE WAS MADE AT ADDITIONAL INCOME OF RS.2,77,7 00/- ON ACCOUNT OF ON-MONEY ON SALES. THE LEARNED AUTHORIZED REPRESENTATIVE FO R THE ASSESSEE HAD RAISED AN ALTERNATE PLEA THAT THE ADDITION ON ON-MONEY ON ACC OUNT OF SALES MADE IN THE FIRST YEAR BE ALLOWED TO BE SET OFF AGAINST THE ADDITION OF ON-MONEY FOR PURCHASES IN THE SECOND YEAR. WE FIND MERIT IN THE ALTERNATE PLEA I N THIS REGARD AND WE DIRECT THE ASSESSING OFFICER TO SET OFF OF THE ADDITIONAL INCO ME ASSESSED IN THE HANDS OF THE ASSESSEE AGAINST THE ADDITION MADE ON ACCOUNT OF ES TIMATION OF ON-MONEY ON PURCHASES. THUS, THE GROUNDS OF APPEAL NOS.4 & 5 R AISED BY THE ASSESSEE ARE PARTLY ALLOWED. 120. NOW, COMING TO THE APPEAL FOR ASSESSMENT YEAR 2007-08, THE CIT(A) VIDE PARA 23 HAD APPLIED THE EARLIER PRINCIPLES OF ESTIMATING THE ADDITIONAL INCOME AT 30% AND OBSERVED AS UNDER:- 23. GROUND NO. 9 AND 10: THESE TWO GROUNDS RELATE TO THE ADDITION MADE ON ACCOUNT OF PAYMENT OF ON MONEY ON PURCHASE OF LAND AND CORRESPOND TO GROUNDS NO. 17 AND 18 FOR ASSESSMENT YEAR 2006-07. FOR THE REASONS DISCUSSED IN GREATER DETAIL IN PARA-14.17 (SUPRA), THE QUANTUM OF DISALLOWANCE @ 30% (INSTEAD OF 61%) OF PURCHASES IS RE-COMPUTED AT RS.4,20,12,342/-, IT MAY BE NOTED THAT FOR THE PRESENT YEAR, THERE ARE N O SPECIFIC TRANSACTIONS GOVERNED BY SPECIFIC FACTS WHICH CALL FOR THEIR EXC LUSION FROM ESTIMATION AS ABOVE. HOWEVER, THE LD. AR HAS POINTED OUT THAT THE APPELLANT HAS MADE A DECLARATION OF RS,3,10,00,000/- FOR THE AY UNDER CO NSIDERATION IN HIS RETURN OF INCOME FILED SUBSEQUENT TO THE SEARCH. UPON PERUSAL OF THE P & L ACCOUNT FILED WITH THE RETURN OF INCOME, IT IS SEEN THAT AN AMOUNT OF RS.3,10,00,000/- APPEARS ON THE CREDIT SIDE AGAINST THE NARRATION 'I NCOME DECLARED'. THOUGH THE SAID AMOUNT IS NOT SPECIFICALLY STATED TO BE ON ACCOUNT OF ON MONEY ON PURCHASES, THE APPELLANT IS NEVERTHELESS ENTITLED T O THE BENEFIT OF THIS DISCLOSURE AGAINST THE ASSESSED INCOME. ACCORDINGLY , THE BENEFIT OF SET OFF OF RS.3,10,00,000/- IS ALLOWED TO HIM AGAINST THE ADDI TION OF RS.4,20,12,342/- ESTIMATED AS ON MONEY ON PURCHASES. THE NET ADDITIO N THEREFORE WORKS OUT TO RS.1,10,12,342/-. AS SUCH, THIS GROUND MAY BE TREAT ED AS PARTLY ALLOWED. 121. WE DIRECT THE ASSESSING OFFICER TO RE-COMPUTE THE ADDITION IN THE HANDS OF THE ASSESSEE IN LINE THEREOF BY APPLYING THE PERCENTAGE OF 20%. THE GROUNDS OF APPEAL NOS.4 & 5 ARE THUS, PARTLY ALLOWED. 122. FURTHER, IN ASSESSMENT YEAR 2008-09, THE RELEV ANT PART OF THE ORDER OF THE CIT(A) IS AS UNDER:- 43. GROUNDS NO. 11 & 12 : THESE TWO GROUNDS RELATE TO AN ADDITION O F RS.2,31,25,436/- MADE BY THE AO ON ACCOUNT OF ON MO NEY PAYMENT ON PURCHASE OF LAND AND CORRESPOND TO GROUND NO. 17 & 18 FOR AY 2006-07. IT IS ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 68 ADDITIONALLY SUBMITTED FOR THIS PY, THAT THERE WERE TWO TRANSACTIONS FOR ' WHICH THE APPELLANT DID NOT PAY ANY AMOUNT AT ALL TO THE LANDOWNERS. IN THE CASE OF THE F.C. ROAD PROPERTY OF SHRI DOSHI, THE PROPERTY WAS ORIGINALLY PURCHASED BY THE APPELLANT AND THE BELWAIKAR GROUP. LATER IN A Y 2008-09, THE BELWALKAR GROUP SOLD ITS RIGHTS TO THE TWINKLE GROUP AND THE PROPERTY WAS PURCHASED ONLY BY THE APPELLANT. HE RECORDED THE SAME AS PURCHASE OF LAND BUT THE FULL PAYMENT FOR THE LAND WAS MADE BY THE TWINKLE GROUP AND NO AMOUNT WAS PAID BY THE APPELLANT FOR THE REASONS DISCUSSED IN GREAT ER DETAIL IN MY ORDER FOR AY 2006-07, THE QUANTUM OF DISALLOWANCE UNDER THE HEAD IS REWORKED AS FOLLOWS:- TOTAL PURCHASES FOR THE YEAR AS PER REVISED P & L A/C. RS.3,79,10,552 PURCHASES ON WHICH NO ON MONEY WAS PAID: PURCHASE OF PLOT OF MR. DOSHI ALONG WITH JV PARTNER SHRI BELWALKAR. ADDITIONAL COST ON CANCELLATION OF RIGHTS OF BELWALKAR GROUP DIRECTLY PAID BY TWINKLE GROUP. RS. 52,50,000 RS. 1,63,38,049 RS. 2,15,88,049 NET PURCHASES ON WHI CH ESTIMATE OF 30% IS APPLIED. RS. 1,63,22,503 30% THEREOF BEING ESTIMATED ON MONEY PAYMENT ON PURCHASES. RS.48,96,751 LESS: SET OFF FOR INCOME OFFERED AS 'INCOME DECLARED' IN P & L ACCOUNT FILED WITH RETURN FILED IN RESPONSE TO NOTICE UNDER S ECTION 153A (RS.1,90,00,000/- RESTRICTED TO ESTIMATED ON MONEY PAYMENT AS ABOVE). RS. 48,96,751 NET ADDITION ON ACCOUNT OF ON MONEY ON PURCHASES. NIL ACCORDINGLY, THIS GROUND OF APPEAL MAY BE TREATED A S PARTLY ALLOWED. 123. WE DIRECT THE ASSESSING OFFICER TO RE-COMPUTE THE ADDITION IN THE HANDS OF THE ASSESSEE IN LINE THEREOF BY APPLYING THE PERCENTAGE OF 20%. THE GROUNDS OF APPEAL NOS.4 & 5 ARE THUS, PARTLY ALLOWED. 124. NOW, COMING TO THE SECOND ASPECT OF ESTIMATION OF INCOME ON ON-MONEY RECEIVED ON SALE OF LAND. THE CIT(A) HAD APPLIED 4 0% IN ASSESSMENT YEAR 2007-08 AND COMPUTED THE ADDITIONAL INCOME AT RS.3,95,28,00 0/- AND IN ASSESSMENT YEAR 2008-09, THE QUANTUM OF ADDITION WAS WORKED OUT AS UNDER:- TOTAL PURCHASES FOR THE YEAR AS PER REVISE D P & L A/C. RS.3,79,10,552 PURCHASES ON WHICH NO ON MONEY WAS PAID: PURCHASE OF PLOT OF MR. DOSHI ALONG WITH JV PARTNER SHRI BELWALKAR. ADDITIONAL COST ON CANCELLATION OF RIGHTS OF BELWALKAR GROUP DIRECTLY PAID BY TWINKLE GROUP. RS. 52,50,000 RS. 1,63,38,049 RS. 2,15,88,049 ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 69 NET PURCHASES ON WHICH ESTIMATE OF 30% IS APPLIED. RS. 1,63,22,503 30% THEREOF BEING ESTIMATED ON MONEY PAYMENT ON PURCHASES. RS.48,96,751 LESS: SET OFF FOR INCOME OFFERED AS 'INCOME DECLARED' IN P & L ACCOUNT F ILED WITH RETURN FILED IN RESPONSE TO NOTICE UNDER SECTION 153A (RS.1,90,00,000/- RESTRICTED TO ESTIMATED ON MONEY PAYMENT AS ABOVE). RS. 48,96,751 NET ADDITION ON ACCOUNT OF ON MONEY ON PURCHASES. NIL 125. APPLYING THE RATIO IN ASSESSMENT YEAR 2006-07, WE DIRECT THE ASSESSING OFFICER TO RE-WORK THE ADDITION IN THE HANDS OF THE ASSESSEE BY APPLYING @ 20% FOR ESTIMATING THE ON-MONEY ON THE SALES MADE BY THE AS SESSEE. WE FIND MERIT IN THE ALTERNATE PLEA IN THIS REGARD AND WE DIRECT THE ASS ESSING OFFICER TO SET OFF OF THE ADDITIONAL INCOME ASSESSED IN THE HANDS OF THE ASSE SSEE AGAINST THE ADDITION MADE ON ACCOUNT OF ESTIMATION OF ON-MONEY ON PURCHASES. CONSEQUENTLY, THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN ASSESSMENT YEARS 2 007-08 AND 2008-09 ARE THUS, PARTLY ALLOWED. 126. ANOTHER ISSUE WHICH IS COMMON IN ALL THE CAPTI ONED ASSESSMENT YEARS WAS RAISED IN THE GROUNDS OF APPEAL AGAINST THE VALIDIT Y OF THE SPECIAL AUDIT REPORT PASSED UNDER SECTION 142(2A) OF THE ACT BEING BEYOND THE T IME LIMIT. HOWEVER, THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE NEITHER DURING THE COURSE OF HEARING NOR IN THE CHART FILED IN RESPECT OF THE ISSUES RAISED IN RESPECTIVE YEARS, HAS MADE ANY SUBMISSIONS IN RESPECT THEREFOR AND HENCE, THE SAID GROUND OF APPEAL I.E. GROUND OF APPEAL NO.7 IN ASSESSMENT YEAR 2006-07, GROUND OF A PPEAL NO.9 IN ASSESSMENT YEAR 2007-08 AND GROUND OF APPEAL NO.7 IN ASSESSMENT YEA R 2008-09 IS DISMISSED. 127. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 3 RD DAY OF MARCH, 2015. SD/- SD/- (R.K. PANDA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 3 RD MARCH, 2015. GCVSR ITA NOS.1702 TO 1704/PN/2013 NEELESH SATISH KANADE 70 COPY OF THE ORDER IS FORWARDED TO: - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-CENTRAL, PUNE; 4) THE CIT-CENTRAL, PUNE; 5) THE DR B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE