Shri Anil Kumar Khandelwal, Agra V. ITO, Agra

ITA 174/AGR/2003

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0449 (ITAT-AGRA)
• Duration Of Justice: 7 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 28-05-2010
• Assessment Year: 1999-2000
• Appeal Filed On: 16-04-2003
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHEFALI JUNEJA
• Keywords: Unexplained cash credit; Unexplained investment; Business income; Income from undisclosed sources; Search and seizure; Loose papers; Principle of natural justice; Peak credit; Additional evidence; Question of law; Corroborative evidences; Assessment record; Block assessment; Onus to prove; Retraction
• Section: 44AD; 143(3); 133A; 131; 132

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA BEFORE SHRI R.K. GUPTA, JUDICIAL MEMBER AND SHRI P.K. BANSAL, ACCOUNTANT MEMBER ITA NO.174/AGR/2003 ASST. YEAR: 1999-2000 SHRI ANIL KUMAR KHANDELWAL, VS. THE INCOME-TAX O FFICER, 45, JANTA COLONY, WARD 2(1), AGRA. SHAHGANJ, AGRA. (PAN : AGVPK 0647 C). ITA NO.146/AGR/2003 ASST. YEAR: 1999-2000 THE INCOME-TAX OFFICER, VS. SHRI ANIL KUMAR KHAN DELWAL, WARD 2(1), AGRA. PROP. KHANDELWAL BUILDING MAT ERIAL, 45, JANTA COLONY, SHAHGANJ, AGRA. (PAN : AGVPK 0647 C). (APPELLANTS) (RESPONDENTS) ASSESSEE BY : SHRI ANURAG SINHA, ADVOCATE REVENUE BY : SMT. SHEFALI JUNEJA, SR. D.R. ORDER PER P.K. BANSAL, A.M.: THESE CROSS APPEALS HAVE BEEN FILED BY THE ASSESSEE AND THE REVENUE AGAINST THE ORDER OF THE CIT(A) DATED 01.01.2003 FOR THE A.Y. 1999-2000. 2. THE GROUNDS NO.1 & 2 ARE NOT PRESSED BY THE ASSE SSEE IN THE APPEAL, THEREFORE, THE SAME STAND DISMISSED AS NOT PRESSED. 2 3. AFTER EXCLUDING THESE GROUNDS, THE FOLLOWING GRO UNDS SURVIVE IN THE APPEAL FILED BY THE ASSESSEE :- 3.(A) BECAUSE THE LD, CIT(A)-I, AGRA HAS ERRED IN H OLDING THAT THE PROVISIONS OF SECTION 44AF DO NOT APPLY WITHOUT GIVING ANY REASON S FOR SUCH A FINDING AND DIRECTING THE ASSESSING OFFICER TO APPLY GROSS PROF IT RATE OF 11% AND ALLOW EXPENSES OF RS. 25,000/- TO ARRIVE AT THE NET PROFIT. (B) BECAUSE THE LEARNED CIT(A)-I, AGRA HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO APPLY GROSS PROFIT RATE OF 11% AND ALLOW CERTAIN EXPENSES WITHOUT GIVING DETAILS OF ANY COMPARABLE CASE AND GIVING OPPORTUNI TY OF BEING HEARD TO THE ASSESSEE. (C) BECAUSE THE LEARNED CIT(A)-I, AGRA HAS ERRED IN NOT ACCEPTING THE ASSESSEES CONTENTION THAT NO BOOKS OF ACCOUNT HAVE BEEN MAINT AINED ON THE GROUND THAT SALES HAVE BEEN SHOWN TO THE NEAREST RUPEES WHICH WOULD N OT HAVE BEEN POSSIBLE WITHOUT BOOKS AND IN MAKING SUCH OBSERVATION THE EXPLANATIO N OFFERED HAVE NOT BEEN CONSIDERED THAT THE SALES BEEN SHOWN ON THE BASIS O F CASH MEMOS. (D) BECAUSE THE LEARNED CIT(A)-I, AGRA HAS RELIED O N CERTAIN DETAILS OF SALES, PURCHASES AND EXPENSES FOR THE A.Y. 1998-99 IN PARA S 3.11 OF THE APPELLATE ORDER WITHOUT CONFRONTING THE ASSESSES WITH THESE DETAILS AND SOURCE FROM WHICH THIS INFORMATION WAS COLLECTED BY THE DEPARTMENT AS NO S UCH DETAILS WERE EVER FILED BY THE APPELLANT AND THE RETURN FOR THE ASSESSMENT YEAR 19 98-99 WAS FILED UNDER SECTION 139/44AF. (E) BECAUSE THE LEARNED CIT(A)-I, AGRA HAS ERRED IN PLACING RELIANCE ON THE RECONCILIATION STATEMENT IN WHICH GROSS PROFIT RATE OF 11% WAS APPLIED BUT THAT WAS BECAUSE THE ASSESSEE HAD STATED IN THE STATEMENT IN THE COURSE OF SURVEY THAT GENERALLY THERE IS GROSS PROFIT RATE OF 11% BUT FOR THE PURPO SE OF SECTION 44AF, IT IS ONLY THE NET PROFIT WHICH IS TO BE CONSIDERED. (F) BECAUSE THE LEARNED CIT(A)-I, AGRA HAS DRAWN IN CORRECT INFERENCE THAT BOOKS OF ACCOUNT WERE MAINTAINED BY THE ASSESSEE ON THE B ASIS OF A ROUGH DIARY FOUND IN THE COURSE OF SURVEY OUT NO REGULAR BOOKS OF ACCOUNT WE RE EVER FOUND. (G) BECAUSE THE LEARNED CIT(A)-I, AGRA HAS ERRED I N HOLDING THAT SECTION 44AF DOES NOT PROHIBIT THE COMPLETION OF ASSESSMENT ON T HE BASIS OF MATERIAL FOUND IN SURVEY BUT IF EVEN AFTER SUCH EVIDENCE, THE SALES D O NOT EXCEEDS RS. 40 LACKS, SECTION 44AF WILL STILL THE APPLICABLE. (H) BECAUSE THE LEARNED CIT(A)-I, AGRA HAS ERRED IN RELYING ON THE RAJASTHAN HIGH-COURT DECISION IN RAMESHWAR LAL MALI VS. CIT (256) ITR 536 AS THE FACTS OF THE CASE WERE ENTIRELY DIFFERENT. 3 (4) BECAUSE THE LEARNED CIT(A)-I, AGRA HAS ERRED IN NOT ACCEPTING THAT 19 ITEMS OUT OF 31 ITEMS APPEARING IN ANNEXURE-(GHA) TO THE ASSESSMENT ORDER REPRESENTS DEBIT ENTRIES WHEN COMPLETE MATERIAL WAS PLACED BEFORE HI M WHICH WAS NOT CONTROVERTED BY THE A.O. 5(A) BECAUSE THE LEARNED CIT(A)-I, AGRA HAS ERRED I N NOT GIVING ANY FINDING IN RESPECT OF THE ASSESSEES CONTENTION THAT THERE WER E NO LOTTERIES BUT ONLY KITTIES TO WHICH THE PRINCIPLE OF MUTUALITY APPLIES. (B) BECAUSE THE LEARNED CIT(A)-I, AGRA HAS ERRED IN NOT FINALLY DECIDING THE ISSUE BUT LEAVING IT TO THE AO IN OF SPITE OF THE FACTS T HAT ALL THE MATERIAL WERE BROUGHT BEFORE HIM. (C) BECAUSE THE LEARNED CIT(A)-I, AGRA HAS ERRED IN DIRECTING THE AO TO WORKOUT THE PEAK IN RESPECT OF EACH LOTTERY AND NOT CUMULAT IVE PEAK IN RESPECT OF ALL THE LOTTERIES. 6(A) BECAUSE THE LEARNED CIT(A)-I, AGRA HAS ERRED I N NOT DECIDING THE ISSUE RELATING TO CREDITS IN THE ACCOUNTS OF A, S & KMG WHEN COMPLETE DETAILS WERE AVAILABLE WITH HIM. (B) BECAUSE THE LEARNED CIT(A)-I, AGRA HAS ERRED IN DIRECTING THE AO TO WORKOUT THE PEAK CREDITS IN THESE THREE ACCOUNTS SEPARATELY AND NOT ON CUMULATIVE BASIS. (C) BECAUSE THE LEARNED CIT(A)-I, AGRA HAS ERRED IN RESTRICTING THE BENEFIT OF CASH AVAILABLE IN HOME CHEST ACCOUNT TO ONLY THE CREDITS IN THE NAME OF A WHEREAS IT SHOULD HAVE BEEN GIVEN PROPER CREDIT IN RESPECT OF ALL THE THREE ACCOUNTS. 7. BECAUSE THE LEARNED CIT(A)-I, AGRA HAS ERRED IN MAI NTAINING THE ADDITION OF RS.20,000/- FOR UNEXPLAINED INVESTMENT IN THE PURCH ASE OF PROPERTY WHEREAS THE ENTRY IN THE DIARY ITSELF SHOWS THAT IT WAS A REFUND OF A MOUNT EARLIER GIVEN FOR REGISTRY. 8. BECAUSE THE LEARNED CIT(A)-I, AGRA HAS ERRED IN HOLDING THAT THE OPENING STOCK WAS RS.68,018/- AND NOT RS.8,94,410/- WHEREAS THE CORRECT POSITION IS THAT THE OPENING STOCK WAS RS.8,94,410/- AS PER DETAILS FILE D WITH SALES TAX DEPARTMENT AND THE PAPER SHOWING OPENING STOCK OF RS.68,018/- WAS NOT FOUND IN SURVEY. 9. BECAUSE THE LEARNED CIT(A)-I, AGRA HAS ERRED IN TAKING THE VALUE OF STOCK FOUND AT THE TIME OF SURVEY AT PRICE INSTEAD OF COS T PRICE AS PER RECONCILIATION FILED IN THE COURSE OF APPELLATE PROCEEDINGS. 10. BECAUSE THE LEARNED CIT(A)-I, AGRA HAS ERRED IN NOT GIVING THE CREDIT OF OPENING STOCK. 4 11. BECAUSE THE LEARNED CIT(A)-I, AGRA HAS ERRED IN DIRECTING THE AO TO MAKE SEPARATE ADDITION FOR STOCK AFTER ADJUSTING ARITHME TICAL ERROR AS THE INCOME HAS BEEN DIRECTED TO BE WORKED OUT ON ESTIMATED SALES AND ES TIMATED GROSS PROFIT RATE AND, THEREFORE, NO SEPARATE ADDITION INS CALLED FOR. 12(A) BECAUSE THE LEARNED CIT(A)-I, AGRA HAS ERRED IN RELYING ON THE ITAT, AHMEDABAD DECISION IN PUSHPANJALI DYING & PRINTING MILLS (P) LTD. VS. JCIT (72) 886 IN AS MUCH AS THE ASSESSEE HAD NOT AGREED BEFOR E THE AO TO THE ADDITION OF ALLEGED EXCESSIVE STOCK. (B) BECAUSE THE CONFESSIONAL STATEMENT OBTAINED BY THE SURVEY PARTY WAS WITHDRAW THE VERY NEXT DAY WHEN IT WAS REALIZED THA T THE INVENTORY HAS NOT BEEN PREPARED CORRECTLY. (C) BECAUSE THE PROVISION OF EXPLANATION 5 TO SECTI ON 271 (I) DO NOT APPLY TO SURVEY PROCEEDINGS AND THEREFORE THERE IS NOT JUSTI FICATION FOR MAKING ANY DECLARATION. 13(A) BECAUSE THE LEARNED CIT(A)-I, AGRA HAS ERRED IN MAINTAINING THE ADDITION OF RS.2,91,000/- FOR MARRIAGE EXPENSES ON THE BASIS OF A DUMB PAPER WHICH NEITHER CONTAINS NAME NOT DATE OR ANY DETAILS TO LINK IT WI TH THE ASSESSEE. (B) BECAUSE THE LEARNED CIT(A)-I, AGRA AND THE AO D ID NOT MAKE ANY INQUIRY TO CONTROVERT THE AFFIDAVIT FILED IN THE COURSE OF APP ELLATE PROCEEDINGS DENYING ANY MARRIAGE IN THE FAMILY. 14 BECAUSE THE LEARNED CIT(A)-I, AGRA HAS ERRED IN HOLDING THAT INTEREST WAS CHARGEABLE UNDER SECTION 234A & 234B. 4. THE REVENUE IN ITS CROSS APPEAL HAS RAISED THE F OLLOWING GROUNDS:- (1) THAT THE LEARNED CIT(A) HAS ERRED IN LAW AND O N FACTS IN HOLDING THAT THE ESTIMATED SALES SHOULD BE MULTIPLIED BY A FACTOR OF 365/222, IN PLACE OF 365/6372 AS ADOPTED BY THE AO. (2) THAT THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN HOLDING THE SALES SO WORKED OUT SHOULD NOT BE EASED BY 25%. (3) THAT THE LEARNED CIT(A) HAS ERRED IN LAW IN DIR ECTING THAT ON ESTIMATED GROSS PROFIT A SUM OF RS.25,000/- SHOULD BE ALLOWED AS EX PENSES TO WORK OUT NET INCOME. (4) THAT THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE AO TO VERIFY THE EACH ITEM OF ADDITION OF RS.37,90,322/- AND DELETE THE ADDITION IN RESPECT OF 5 ADDITIONS REPRESENTING DEBIT ENTRIES. THE LEARNED I N LAW IN GIVING THE AFORESTATED DIRECTION IS BASED ON THE EVIDENCE ADDUCED FOR THE FIRST TIME IN APPEAL PROCEEDINGS. (5) THAT THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE AO TO WORK OUT THE PEAK IN RESPECT OF EACH OF THE LOTTERY ACCOUNT AND ADD ONLY THE PEAK SO DETERMINED AS UNDISCLOSED INCOME OF THE APPELLANT O N ACCOUNT OF UNEXPLAINED CASH CREDIT. (6) THAT THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE AO TO WORK OUT THE PEAK CREDIT IN THE NAME OF A.S AND KMG . (7) THAT THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 2,00,000/- MADE ON ACCOUNT OF INVESTMENT IN PURCHASE OF A PLOT. (8) THAT THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.3,00,000/- MADE BY THE AO ON ACCOUNT OF UNEXP LAINED INVESTMENT FOR EARNING INCOME OF RS.45,000/-. (9) THAT THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.2,60,000/- OUT OF ADDITION OF RS.5,51,000/- M ADE ON ACCOUNT OF MARRIAGE EXPENSES. (10) THAT THE LEARNED CIT(A) HAS ERRED IN LAW AND O N FACTS IN HOLDING THAT OUT OF ADDITION OF RS.24,00,000/- THE AMOUNT ON ACCOUNT OF OBVIOUS MISTAKE SHOULD BE WORKED OUT AND EXCLUDED FROM THE AMOUNT SO SURRENDE RED BY THE APPELLANT. (11) THAT THE APPELLANT CRAVES LEAVE TO ADD OR ALTE R ONE OR MORE GROUND(S) DURING THE HEARING OF APPEAL. (12) THAT THE ORDER OF THE LEARNED CIT(A)-I, AGRA B EING ERRONEOUS IN LAW AND ON FACTS BE SET ASIDE AND THAT OF THE AO BE RESTORED. 5. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS RUNNING THE BUSINESS AS PROPRIETOR OF KHANDELWAL BUILDING MATERIAL. HE WAS FILING INCOME -TAX RETURN ESTIMATING THE PROFIT AS PER THE PROVISIONS OF SECTION 44AF OF THE INCOME-TAX ACT, 1 961 (THE ACT HEREINAFTER). HE HAS ALSO SHOWN THE INCOME FROM OTHER SOURCES. DURING THE YE AR UNDER CONSIDERATION, RETURN WAS FILED ON 29.12.1999 IN RESPONSE TO NOTICE UNDER SECTION 142( 1) ISSUED ON 14.11.1999 DISCLOSING THE FOLLOWING INCOME :- 6 INCOME @ 5% ON THE SALE OF RS.10,85,547/- U/S.44AF RS.54,280/- INCOME FROM OTHER SOURCES RS.45,000/- RS.99,280/- 6. THERE HAD BEEN SURVEY IN THE CASE OF THE ASSESSE E ON 28.01.1999 WHEREIN CERTAIN INCRIMINATING DOCUMENTS, LOOSE NOTE BOOKS AND LOOSE PAPERS ETC. WERE FOUND WHICH WERE IMPOUNDED. IN THE STATEMENT RECORDED DURING THE CO URSE OF SURVEY, THE ASSESSEE AGREED TO SURRENDER A SUM OF RS.24,00,000/- ON ACCOUNT OF INV ESTMENT IN THE STOCK WHICH WAS RETRACTED ON THE VERY NEXT DAY. 7. GROUNDS NO.3, 9, 10, 11 & 12 IN ASSESSEES APPEA L AS WELL AS GROUND NO.1, 2 & 3 IN REVENUES APPEAL RELATE TO THE ADDITION ON ACCOUNT OF DISCREPANCY IN THE STOCK, ESTIMATION OF THE SALES AND THE GROSS PROFIT. 8. BRIEF FACTS RELATING TO THESE GROUND ARE THAT TH E A.O. NOTED FROM THE NOTE BOOK IMPOUNDED THAT FOR THE PERIOD FROM 01.05.1998 TO 27.01.1999 S ALES AT RS.31,51,090/- WERE MENTIONED. HE, AFTER PROVIDING OPPORTUNITY TO THE ASSESSEE, WORKED OUT THE SALES AT RS.42,28,525/- (31,51,091 X 365/272). AFTER TAKING NOTE OF THE STATEMENT OF TH E ASSESSEE WHO ADMITTED THAT THE PURCHASES ARE UNDER-INVOICED BY 20% TO 30%, THE SALES WERE INCREA SED BY 25% AND FINALLY ESTIMATED AT RS.52,85,657/-. ON THESE SALES, THE PROFIT RATE @ 10% WAS APPLIED. IN CONSEQUENCE THEREOF, ADDITION OF RS.5,28,561/- WAS MADE TO THE INCOME OF THE ASSESSEE OVER AND ABOVE THE ADDITION AMOUNTING TO RS.24,00,000/- SURRENDERED DURING THE COURSE OF SURVEY, IGNORING THE FACT THAT THE SAID SURRENDER WAS RETRACTED BY THE ASSESSEE ON THE VERY NEXT DAY. THE ASSESSEE CHALLENGED THE ESTIMATION OF THE SALE AT RS.52,85,657/- AND THE AP PLICATION OF PROFIT RATE AT 10% ON THE PRESUMPTION THAT THE SALES WERE BELOW RS.40 LACS AN D CONTENDED THAT HE BEING A SMALL TRADER, 7 PROVISIONS OF SECTION 44AF WERE APPLICABLE AND THE INCOME HAS TO BE COMPUTED BY APPLYING PRESUMPTIVE RATE @ 5%. THE CIT(A), AFTER TAKING IN TO CONSIDERATION THE REMAND REPORT AND WRITTEN SUBMISSIONS OF THE ASSESSEE NOTED AT PAGE 2 1 THAT THE ESTIMATED DIFFERENCE BETWEEN THE SALES AS PER THE WORKING OF THE A.O. AND AS PER THE WORKING OF THE ASSESSEE IS RS.19,67,361/-. HE, ACCORDINGLY, AFTER APPRECIATING THE ROUGH BOOK, HELD THAT THE ASSESSEE COULD NOT EXPLAIN SATISFACTORILY AS TO HOW THESE FIGURES COULD NOT BE CONSIDERED AS SALES FOR THE RELEVANT PERIOD AND TO THAT EXTENT THE ACTION OF THE A.O. WAS UPHELD. THE CIT(A) FURTHER NOTED THAT THERE IS OTHER DIFFERENCE ON ACCOUNT OF OPENING CASH BALANCE AND P ETTY DIFFERENCE AND THE A.O. HIMSELF HAD NOTED THE DIFFERENCE ON OPENING CASH BALANCE AT RS. 1,84,929/-. AS SUCH, THE SAID AMOUNT WAS DIRECTED TO BE REDUCED FROM THE ESTIMATE OF FIGURE OF SALES. 9. FOR THE OTHER AMOUNTS NAMELY CASH BY A RS.4,27,6 46/-,CASH BY SHANKER LAL RS.15,000/- AND CASH BY KMGRS.60,000/-,IT WAS OBSERVED THAT THE SE AMOUNTS ALREADY STOOD INCLUDED IN THE ADDITION MADE BY THE ASSESSING OFFICER IN RESPECT O F THESE PARTIES, THE STAND OF THE ASSESSING OFFICER WAS CONSIDERED TO BE CONTRARY TO THAT EXTEN T. AS SUCH FOR THE PURPOSE OF ESTIMATE OF SALES THE ASSESSING OFFICER WAS DIRECTED TO REDUCE FROM T HAT FIGURE THE ABOVE MENTIONED AMOUNTS. WHILE HOLDING SO, THE CIT(A) TOOK CARE TO MENTION T HAT THE ADDITION ON ACCOUNT OF CASH DEPOSITS IN REGARD TO THE ABOVE MENTIONED PARTIES HAD BEEN U PHELD BY HIM IN THE LATER PART OF THIS ORDER. ACCORDINGLY, THE ASSESSING OFFICER WAS DIRECTED TO CALCULATE THE FIGURE OF SALES FOR THE PERIOD 01.05.1998 TO 27.01.1999 BY MAKING THE FOLLOWING AD JUSTMENTS:- I) OPENING CASH BALANCE SHOULD BE EXCLUDED WHILE COMPU TING THE ESTIMATED FIGURE OF SALES. II) THE DEPOSITS APPEARING IN THE NAMES OF A, S AN D KMG SHOULD BE EXCLUDED TO THE EXTENT THE ADDITION MADE IN RESPECT OF DEP OSITS OF THESE PARTIES IS FINALLY UPHELD BY ME IN LATER PART OF THIS ORDER 8 10. FURTHER, THE CIT(A) OBSERVED THAT THE ASSESSING OFFICER HAS TAKEN THE NUMBER OF DAYS ON THE BASIS OF THE ROUGH NOTE BOOK AS 272. THE ASSES SEE HAS TAKEN THE NUMBER AS 222 AND THE ASSESSING OFFICER IN THE REMAND PROCEEDING HAD CONS IDERED THE NUMBER OF DAYS AS 222. IT WAS CONSIDERED THAT INSTEAD OF 365 DAYS, THE TOTAL NUMB ER OF DAYS FOR THE WHOLE YEAR SHOULD BE TAKEN AS 300 EXCLUDING THE WEEKLY OFF AND OTHER HOLIDAYS. ACCORDINGLY, FOR PROJECTING THE FIGURE OF SALE FOR THE PART OF THE YEAR THE ABOVE FIGURE OF S ALE FOR PART OF THE YEAR SHOULD BE MULTIPLIED BY A FRACTION THE NUMERATOR OF WHICH IS 300 AND THE DEN OMINATOR IS THE NUMBER OF ACTUAL WORKING DAYS INCLUDED IN THE PART PERIOD. THE CIT(A) NOTED THE FACT AT PAGE 23 THAT ON THE BASIS OF ASSESSING OFFICERS OWN WORKING SUCH FRACTION SHOUL D BE 300/222 I.E 1.35. ACCORDINGLY, THE ASSESSING OFFICER WAS DIRECTED TO MULTIPLY THE ESTI MATED FIGURE OF SALES FOR THE PERIOD 15.09.1998 TO 27.01.1999 BY 1.35 TO ARRIVE AT THE FIGURE OF SA LE FOR THE WHOLE YEAR. THUS THE ASSESSING OFFICER WAS DIRECTED TO MULTIPLY BY A FACTOR OF 300 /222, THE FIGURE OF SALES ESTIMATED FOR 222 DAYS TO ARRIVE AT THE SALE OF FULL YEAR. 11. FURTHER, THE ACTION OF THE ASSESSING OFFICER IN INCREASING THE SALES THUS ESTIMATED BY 25% WAS NOT UPHELD BY THE CIT(A) AS THE SALE WAS ALREAD Y TAKEN FROM THE DIARY SO FOUND AND IMPOUNDED SUBSEQUENTLY FOR WANT OF EVIDENCE WHICH J USTIFIED THE INCREASE IN THE SALES ESTIMATED. 12. REGARDING THE APPLICABILITY OF NET PROFIT RATE OF 10% INSTEAD OF THE RATE OF 5% IN TERMS OF SECTION 44AF OF THE I.T. ACT, TAKING INTO CONSIDERA TION THE FACTS OF THE ASSESSEES BROTHER SHRI RAJ KUMAR KHANDELWAL AND THE PAST HISTORY OF THE ASSESS EE THE CIT(A) DIRECTED THAT ON FACTS OF THE PRESENT CASE, THE G.P. RATE OF 11% OUGHT TO BE APPL IED. THE CIT(A) NOTED THE FACT THAT IN THE RECONCILIATION STATEMENT FILED BY THE ASSESSEE FROM THE WORKING OF THE STOCK FOUND AT TIME OF 9 SURVEY THE ASSESSEE HAD HIMSELF TAKEN THE G.P. RATE OF 11%. HOWEVER, FROM THE SAME CIT(A) CONSIDERED IT APPROPRIATE TO GIVE RELIEF TO THE EXT ENT OF RS.25,000/- AS ALLOWABLE EXPENSES IN LINE WITH THE VIEW TAKEN IN THE CASE OF THE ASSESSEES B ROTHER. THE CIT(A) HELD THAT ESTIMATE OF THE SALE BASED ON THE DIARY/ROUGH CASH BOOK FOUND AT TH E PREMISES OF THE ASSESSEE JUSTIFIED THE ESTIMATE SO MADE WHICH WAS ADMITTEDLY FOUND TO HAVE BEEN RECORDED IN THE HANDWRITING OF THE ASSESSEE HIMSELF AND IT ALSO HAD NOT BEEN DENIED TH AT THE DIARY WAS RELATING TO THE BUSINESS OF THE ASSESSEE. FURTHER THE CIT(A) ALSO NOTED THE FACT T HAT THE STAND OF ASSESSEE CANNOT BE ACCEPTED THAT HE HAS NO BOOKS OF ACCOUNTS. SINCE IN THE COU RSE OF THE SURVEY, THE ASSESSEE IS FOUND TO HAVE ADMITTED THAT ITS BOOKS OF ACCOUNTS FOR THE EARLIER PERIOD WERE WITH CHARTERED ACCOUNTANT SHRI B.K. GOYAL AS PER PARA 3.13 OF THE IMPUGNED ORDER. THE CIT(A) ALSO DID NOT ACCEPT THE STAND OF THE ASSESSEE THAT IT HAD FILED ASSESSMENT ORDER OF TRADE TAX BEFORE THE ASSESSING OFFICER SINCE IT WAS NOT FOUND IN THE ASSESSMENT RECORDS AND EVEN IN THE APPELLANT PROCEEDING BEFORE THE CIT(A) IT HAD NOT BEEN FILED BY THE ASSESSEE. MOREOVER, A S PER THE ASSESSEES OWN SUBMISSION BEFORE THE ASSESSING OFFICER, THE CIT(A) NOTED THE FACT THAT T HE ASSESSEE HIMSELF STATED THAT THIS APPEAL IS PENDING BEFORE THE TRADE TAX OFFICER WHO PASSED AN EX-PARTE ORDER WHICH WAS THE BASIS OF THE SURVEY CONDUCTED BY THE INCOME TAX DEPARTMENT AND T HEREIN A FINDING WAS GIVEN THAT NO CREDENCE WILL BE GIVEN TO THE FIGURE OF SALES FURNI SHED BY THE ASSESSEE. IN THE BACKGROUND, THE CIT(A) AS PER PARA 3.16 OF THE ORDER TOOK NOTE OF T HE FACT THAT THE ASSESSEE HAS MAINTAINED SOME SORT OF RECORD. HOWEVER, HE HAD NOT PRODUCED ANY R ECORD OR ACCOUNT BOOK BEFORE THE ASSESSING OFFICER. AS SUCH, THE ASSESSING OFFICER WAS JUSTIF IED IN ESTIMATING THE SALES ON THE BASIS OF THE MATERIAL FOUND DURING THE SURVEY OR AS SUCH THE APP LICABILITY OF SECTION 44AF ON FACTS WAS HELD TO BE NOT APPLICABLE AS IT WOULD AMOUNT TO GIVING A PR EMIUM TO THE ASSESSEE ON CONCEALMENT. 10 13. LD. A.R. BEFORE US VEHEMENTLY SUBMITTED THAT TH E ASSESSEE DEALS IN MARBLE AND GRANITE STONES ON RETAILS BASIS. THE TOTAL SALES SHOWN BY T HE ASSESSEE ON THE BASIS OF CASH MEMOS WAS RS.1085547/-. AS THE CASE IS COVERED BY SECTION 44 AF, INCOME AT 5% WAS SHOWN AT RS.54280/-. INITIALLY, ON THE BASIS OF DIARY PERTAINING TO THE PERIOD FROM 01.05.1998 TO 27.01.1999, THE A.O. HAS WORKED OUT THE SALES AT RS.3151091/- THIS WAS F URTHER INCREASED BY 25% TO RS.5285657/-IN WHICH NET PROFIT WAS WORKED OUT AT 10% I.E. 528566/ -. IN APPEAL, A DETAILED STATEMENT, PREPARED ON THE BASIS OF DIARY, WAS FURNISHED ACCORDING TO W HICH, THE SALES FOR THE PERIOD OF 222 DAYS COMES TO RS.2767790/-. IT WAS POINTED OUT THAT SAL ES ESTIMATED BY THE AO INCLUDED CERTAIN CASH CREDITS AND ALSO OPENING BALANCE OF CASH. THE CASH CREDIT HAS ALSO BEEN ADDED SEPARATELY. THESE FIGURES WERE SENT TO THE A.O. FOR HIS COMMENTS. TH E CIT (A) HAS EXPRESSED HIS DISPLEASURE IN PARA 3.3 & AT VARIOUS OTHER PLACES IN THE APPELLATE ORDER THAT 'IN SPITE OF REPEATED REMINDER AND AN ORDER U/S 250/(4), THE A.O. DID NOT CARRY OUT THE I NSTRUCTION OF THE CIT(A). THE LEARNED CIT(A) THEREFORE, DIRECTED THE A.O. TO WORK OUT THE SALES IN ACCORDANCE WITH THE DIRECTION CONTAINED IN PARAS 3.7 & 3.8 OF THE APPELLATE ORDER. IN THE LIGH T OF THESE DIRECTION, THE A.O. HAS PASSED AN ORDER U/S 251 ON 23.07.2003 WORKING OUT SALES AT RS.32,37 ,611/-. THE FIGURE OF SALES AS WORKED OUT BY THE A.O. IS FOR 300 DAYS WHEREAS THE DIARY WAS ONLY FOR 222 DAYS. NO EVIDENCE WAS FOUND IN SURVEY REGARDING SUPPRESSION OF SALES EITHER FOR PE RIOD PRIOR TO IT OR THEREAFTER. THERE WAS, THEREFORE, NO JUSTIFICATION FOR ESTIMATION OF SALES FOR THE ENTIRE PREVIOUS YEAR . RELYING ON THE DECISION OF DR. R. M. L. MEHROTRA VS. ACIT (1999) 68 ITD 288 (ALL.), IT WAS POINTED OUT THAT THE TRIBUNAL DID NOT APPROVE THE MULTIPLICATION FOR MULA FOR THE ENTIRE PREVIOUS YEAR AS NO OTHER DIARY OR OTHER RECORD COMPARABLE TO THE NOTE BOOK W AS FOUND BY THE SEARCH PARTY. THE THIRD MEMBER BENCH OF THE PUNE TRIBUNAL TOOK SIMILAR VIEW IN THE CASE OF SAMRAT BEER BAR VS. ACIT (2000) 69 TTJ 113 BY HOLDING THAT AS THERE WAS NO I NDICATION ANYWHERE IN THE SEIZED RECORDS TO 11 SHOW THAT EVEN IN RESPECT OF OTHER PERIODS, THE ASS ESSEE WAS MAINTAINING SUCH A DIARY AND, THEREFORE, THE ASSESSING OFFICER WAS WRONG IN ESTIM ATING THE SUPPRESSION OF SALES FOR A LARGE PERIOD. IN THE ASSESSEES CASE, THEREFORE, THERE W AS NO JUSTIFICATION FOR ESTIMATING THE SALES FOR 300 DAYS ON THE BASIS OF NOTE BOOK FOR THREE HUNDRE D DAYS IN THE ABSENCE OF ANY MATERIAL OR EVIDENCE FOUND IN SURVEY. IT WAS POINTED OUT THAT RECENTLY THE DECISION OF HONBLE APEX COURT IN THE CASE OF CST VS H.M. ESUFALI H.M. ABDULALI 90 IT R 271 (SC) CAME UP FOR CONSIDERATION BEFORE THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS DR R.M.L. MEHROTRA (2010) 320 ITR 403 (ALL.) WHEREIN IT WAS OBSERVED BY THE HONB LE HIGH COURT THAT NOW PASSING ON TO THE MULTIPLICATION FORMULA ADOPTED BY THE A.O., WE FIND OURSELVES UNABLE TO ACCORD OUR NOD TO IT. IN THE FIRST PLACE, ONE SHOULD NOT FORGET THAT IT IS A SEARCH CASE IN WHICH A SEARCH PARTY IS SUPPOSED AND EXPECTED TO FIND OUT ALL THE INCRIMINATING DOCU MENTS, MATERIAL AS ALSO UNDISCLOSED ASSETS. A SEARCH ASSESSMENT, MUCH LESS A BLOCK ASSESSMENT, TH EREFORE, STANDS ON A FOOTING DIFFERENT THAN A NORMAL ASSESSMENT MUCH LESS AN ASSESSMENT BASED ON THE BEST JUDGMENT OF AN A.O. IT IS FOR THIS REASON THAT THE RATIO OF THE APEX COURT DECISION RE PORTED IN THE CASE OF H.M. ESUFALI H.M. ABDULALI (SUPRA) WOULD NOT COME TO THE RESCUE OF TH E DEPARTMENT, AS IT WAS A SALES-TAX MATTER AND A BEST JUDGMENT ASSESSMENT WAS REQUIRED TO BE MADE. THE MATERIAL THAT THE SALES TAX OFFICER HAD POSSESSED WAS THE FIGURE OF 19 DAYS SALE BY THE ASS ESSEE NOT ENTERED IN THEIR BOOKS OF ACCOUNTING. THE SUPREME COURT HELD THAT IN SUCH A SITUATION, IT WAS NOT POSSIBLE FOR THE A.O. TO FIND OUT PRECISELY THE TURNOVER SUPPRESSED AND HE COULD ONLY EMBARK ON ESTIMATING THE SUPPRESSED TURNOVER ON THE BASIS OF THE MATERIAL BEFORE HIM, I N WHICH SOME AMOUNT OF GUESS WORK WAS INEVITABLE. IN CONTRADISTINCTION TO THESE FACTS, IN THE PRESENT CASE, THE ASSESSEE WAS SEARCHED (EMPHASIS PROVIDED). DURING THIS SEARCH FIRSTLY, NO OTHER DIARY OR OTHER RECORD COMPARABLE TO THE NOTEBOOK MARKED AS B-1/23 WERE FOUND BY THE SEARC H PARTY FOR THE REMAINING PERIOD, WHICH 12 NORMALLY WOULD HAVE BEEN, WERE BEING MAINTAINED AND KEPT. WE ARE CONSCIOUS THAT SUCH A RECORD HAS BEEN DESTROYED ALSO FROM TIME TO TIME. BUT IN S UCH A SITUATION ALSO, IF THE ASSESSEE HAD ACTUALLY MADE A FORTUNE OF SIMILAR RECEIPTS IN RESP ECT OF THE REMAINING PART OF THE YEAR, THEY MUST BE REFLECTED BY CERTAIN ASSETS, MOVABLE OR IMMOVABL E WHICH OUGHT TO HAVE BEEN FOUND DURING THE COURSE OF SEARCH. NO SUCH ASSETS, DESPITE THE EXTRE ME STEP OF SEARCH WHICH AMOUNTS TO A SERIOUS INVASION ON THE RIGHTS OF SUBJECTS AND WHICH IS PER HAPS THE LAST WEAPON IN THE ARSENAL OF THE DEPARTMENT, WERE FOUND, WHICH COULD BE ATTRIBUTED T O ANY SUCH HYPOTHETICAL RECEIPTS. IN VIEW OF THIS, WE ARE UNABLE TO CONCUR WITH THE DEPARTMENT T O THE MULTIPLICATION FORMULA ADOPTED BY THE LEARNED AO. 14. THE CIT (A) ACCEPTED THE ASSESSEE'S CONTENTION THAT THE SEIZED DIARY WAS THE ACTUAL RECORD OF THE SALES. HE, THEREFORE, AGREED THAT THERE WAS NO CASE FOR INCREASING THE SALES BY 25%. VIDE GROUND NO.2, THE DEPARTMENT IS OBJECTING THIS DIREC TION. THE ASSESSEE RELIES ON THE OBSERVATION OF CIT (A) AS CONTAINED IN PARA 3.9 ALONGWITH DECIS ION IN THE CASE OF SHRI RAJ KUMAR KHANDELWAL, BROTHER OF THE ASSESSEE IN ITA NO. 173/AGRA/2003 WH EREIN ON PAGE 10, PARA 19, THE HONBLE ITAT HELD THAT THERE IS NO MATERIAL OR EVIDENCE IN POSSESSION OF T HE ASSESSING AUTHORITY TO SUPPORT THE ALLEGATION THAT THE PURCHA SES ARE UN-INVOICED BY 25%. BEFORE US ALSO, REVENUE DOES NOT BRING SUCH MATERIAL TO ENABLE US T O DEVIATE FROM THE FINDING REACHED BY THE LEARNED CIT(APPEALS). THE LEARNED CIT (APPEALS), T HUS, CAN BE HELD TO BE JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO REFRAIN FROM ENHANCING THE VALUE OF SALES FURTHER BY 25%. THE DEPARTMENT HAS ALSO RAISED GROUND OF APPEAL NO. 4 O BJECTING TO THE WORKING OF SALES AFTER EXCLUDING THE DEBIT BALANCES ON CERTAIN ITEMS ON TH E GROUND THAT THIS WAS A NEW EVIDENCE. IT IS SUBMITTED THAT IT IS NOT NEW EVIDENCE AND HAD TO BE SUBMITTED BECAUSE OF RECALCITRANT ATTITUDE OF 13 THE A.O. TO FURNISH THE WORKING OF SALES AND CASH C REDITS INCLUDED THEREIN. THIS WAS SENT TO A.O. FOR HIS COMMENTS BY THE CIT (A), THUS, THE A.O. WAS GIVEN OPPORTUNITY TO OFFER HIS COMMENTS. THE REQUIREMENT OF RULE 46A HAS THUS BEEN SATISFIED . EVEN IF, THIS WAS A NEW EVIDENCE, THE CIT (A) HAVING CALLED A REMAND REPORT WAS JUSTIFIED IN ADMITTING THE ADDITIONAL EVIDENCE, REFERENCE IS INVITED TO SHAHRUKH KHAN VS. DCIT (2007) 13 SOT 61 (MUM). 15. REGARDING THE APPLICATION OF THE RATE OF 11%., IT WAS CONTENDED THAT EVEN AFTER, ARBITRARILY ENHANCING THE SALE, ON THE BASIS OF DIARY, THE EST IMATED SALE COMES TO LESS THAN RS.40 LACS I.E. 37,40,257/-. IN PARA 3.16 OF THE APPELLATE ORDER P AGE 28, THE CIT (A) HAS OBSERVED THAT IN THE COURSE OF SURVEY, IF ANY MATERIAL IS FOUND, THE DEP ARTMENT IS ENTITLED TO ESTIMATE THE INCOME ON THAT BASIS. FOR THIS VIEW, HE HAS RELIED ON THE RA JASTHAN HIGH COURT DECISION IN RAMESHWAR LAL MALI VS CIT 256 ITR 536 (RAJ) . THE ASSESSEE IS NOT OBJECTING TO THE SALES WORKED OUT ON THE BASIS OF DIARY BUT THE DIARY IS AN INCOMPLETE RECOR D AND DOES NOT SHOW THE PROFIT EARNED DURING THE YEAR. SINCE, THE SALES ARE LESS THAN RS. 40 LAC S; THE PROVISIONS OF SECTION 44AF ARE CLEARLY APPLICABLE. IN BALAJI CONSTRUCTIONS V ACIT (2000) 72 TTJ 559 (PUNE) , THE TRIBUNAL HAS HELD THAT SECTION 44AD (ANALOGOUS TO SECTION 44AF) APPLI ES EVEN IN SEARCH CASES. IF IT IS APPLIED IN SEARCH CASES, THEN THERE APPEARS TO BE NO JUSTIFICA TION FOR NOT APPLYING THE PROVISION OF SECTION 44AF IN CASES WHERE SURVEY U/S 133A WAS CARRIED OUT . THUS IT WAS VEHEMENTLY CONTENDED THAT THIS COURT SHOULD DIRECT THE AO TO APPLY NET PROFIT RATE OF 5% ON THE SALES AS WORKED OUT IN THE ORDER PASSED U/S 251. IT WAS ALSO POINTED OUT THAT FOR ASSESSMENT YEAR 2003-04, THE ASSESSMENT OF THE ASSESSEE WAS COMPLETED UNDER SECTION 143(3) OF THE INCOME TAX ACT WHEREIN THE ASSESSING OFFICER VIDE ORDER DATED 21-02-2006 ACCEP TED ASSESSEES RETURNED INCOME FURNISHED 14 ON THE BASIS OF PROVISIONS OF SECTION 44AF OF THE A CT. ATTENTION WAS DRAWN IN THIS REGARD TO II PB PAGES 170-171. 16. IT WAS ALSO SUBMITTED REFERRING TO PAGES 20-34 OF PB THAT IN ASSESSEE BROTHERS CASE IN ITA NO.173/AGRA/2003 VIDE ORDER DATED 15.05.2007, T HE ITAT ADJUDICATING THE SIMILAR ISSUE HELD ON PAGE 10 OF THE JUDGMENT THEREFORE, IT IS O PEN FOR THE ASSESSING AUTHORITY TO WORK OUT THE SALES AFRESH AND MAKE ESTIMATE OF SALE FOR THE YEAR UNDER CONSIDERATION ON THE BASIS OF NUMBER OF DAYS ACCORDINGLY BY APPLYING A PROFIT RAT E OF 5% IN TERM OF PROVISIONS OF SECTION 44AF OF THE ACT AS AGAINST THE RATE OF 11% DIRECTED BY THE LEARNED CIT(APPEALS). 17. THE LD. D.R., ON THE OTHER HAND, VEHEMENTLY REL IED ON THE ORDER OF THE ASSESSING OFFICER AND CONTENDED THAT IN THIS CASE THE DOCUMENTS WERE FOUND FOR THE PERIOD 01.05.1998 TO 27.01.1999 AND THE ACTUAL SALES FOUND NOTED IN THE DIARY IMPOUNDED FOR THIS PERIOD WAS RS.31,51,091/-. THE A.O., THEREFORE, WAS CORRECT I N LAW IN ESTIMATING THE SALES FOR THE WHOLE YEAR MATHEMATICALLY. THE ASSESSEE HIMSELF HAS ACCEPTED T HAT PURCHASES ARE UNDER-INVOICED FROM 20% TO 30%., THEREFORE, THE A.O. INCREASED THE SALES BY 25%. THE ESTIMATION SO MADE IS VERY REASONABLE. THE CIT(A) WAS NOT CORRECT IN REDUCING THE SALES AS ESTIMATED BY THE AO. SO FAR THE GROUND OF ESTIMATION OF THE PROFIT TAKEN BY THE ASS ESSEE IS CONCERNED, SINCE THE SALES OF THE ASSESSEE EXCEEDED RS.40 LACS AS PER THE ESTIMATION WORKED OUT BY THE A.O., THEREFORE, THE PROVISIONS OF SECTION 44AF ARE NOT APPLICABLE IN TH E CASE OF THE ASSESSEE AND ACCORDINGLY THE INCOME HAS TO BE COMPUTED AS PER THE NORMAL PROVISI ONS OF THE INCOME TAX . THE A.O. HAS MADE THE ESTIMATE TO THE BEST OF HIS KNOWLEDGE ON THE BA SIS OF THE EVIDENCE AVAILABLE ON RECORD AND FOUND AT THE TIME OF SURVEY. THE ASSESSEE HAD TAKE N THE G.P. RATE @ 11% IN THE RECONCILIATION 15 STATEMENT FILED BY THE ASSESSEE. THIS FACT WAS DUL Y NOTICED BY THE CIT(A). THE G.P. RATE SHOULD HAVE BEEN ADOPTED @ 11% NOT EVEN 10%. THEREFORE, T HE CIT(A) HAS TAKEN PROFIT @ 11%. THE ORDER OF ASSESSING OFFICER ESTIMATING THE SALES AND THAT OF CIT(A) ESTIMATING NET PROFIT @ 11% BE RESTORED. 18. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ALONG WITH THE ORDERS OF THE TAX AUTHORITIES BELOW. THERE IS NO DISPUTE TO THE FACT THAT DURING THE COURSE OF SURVEY AT THE BUSINESS PREMISES OF THE ASSESSEE A DIARY CONTAINING DETAILS OF THE SALE S FROM 01.05.1998 TO 27.01.1999 WAS SEIZED. ON THE BASIS OF THE DIARY, THE A.O. HAS WORKED OUT THE SALES AT RS.31,51,091/- BUT WHEN THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A) THE ASSES SEE PUT UP RECONCILIATION AND ACCORDING TO THE SAME WORKING OF THE ASSESSEE, THE SALES FOR THE SAM E PERIOD SHOULD HAVE BEEN RS.3,79,928/- WHICH WAS REFERRED TO THE A.O. BY THE CIT(A). THE A.O. IN REPLY THERETO VIDE LETTER DATED 13.12.2002, INFORMED THAT THIS FIGURE ON THE BASIS OF THE IMPOUNDED DOCUMENT COMES TO RS.29,52,719/- AGAINST THE ORIGINAL FIGURE OF RS.31 ,37,648/-. IN REPLY THERETO, THE ASSESSEE POINTED TO THE CIT(A) VIDE HIS LETTER DATED 03.12.2 002 THAT THESE FIGURES ARE ALSO TO BE REDUCED FURTHER BY RS.6,45,399/- DETAILED AS PER PARA NO.3. 5 OF THE ORDER OF THE CIT(A) AND THUS HE PLEADED THE CORRECT SALES SHOULD BE RS.23,07,320/-. THE CIT(A), AFTER APPRECIATING THE FACTS, NOTED THAT THE MAJOR DIFFERENCE BETWEEN THE SALES A S PER THE WORKING OF THE A.O. AND AS PER THE WORKING OF THE ASSESSEE IS ON ACCOUNT OF FIGURE OF RS.19,67,361/- WHICH IS STATED TO BE THE CASH RECEIPT FROM VARIOUS PARTIES. THE CIT(A) OBSERVED THAT HE HAD SEEN THESE ENTRIES IN THE NOTE BOOK. THESE ENTRIES APPEARED TO BE EITHER SALES DO NE IN THE PAST FOR WHICH VALUE HAS BEEN RECEIVED OR THESE REPRESENT THE AMOUNT RECEIVED PAR TLY OR FULLY IN RESPECT OF THE GOODS FOR WHICH THE SUPPLY WAS TO BE MADE IN FUTURE. HE ACCORDINGLY REDUCED SALES BY FOLLOWING AMOUNT :- 16 CASH BY A RS.4,27,646/- CASH BY SHANKER LAL RS.15,000/- CASH BY KMG RS.60,000/- 19. THE CIT(A) ALSO NOTED THAT THE A.O. HAS MADE TH E FOLLOWING ADDITIONS IN RESPECT OF THESE PARTIES DEPOSIT BY :- A RS.14,32,540/- KMG RS.60,550/- S RS.3,26,100/- 20. IT WAS ALSO POINTED OUT THAT THE A.O. HAS NOT G IVEN ANY REASON AS TO HOW THE SAME AMOUNT CAN BE TREATED AS UNEXPLAINED DEPOSIT AS WELL AS SA LES. THE ENTIRE AMOUNT HAS BEEN ADDED AS INCOME OF THE ASSESSEE. THEREFORE, IT CANNOT BE AD DED AND TAXIING AGAIN 10% THEREOF AS NET PROFIT (NP) AND THE TOTAL ADDITION THUS IN RESPECT OF THE CASH CREDIT WOULD BE 110% OF CASH CREDIT. ACCORDINGLY, THE CIT(A) DIRECTED THE A.O. THAT THE SALES SHOULD BE CALCULATED BY THE A.O. FOR THE PERIOD 01.05.1998 TO 27.01.1999 BY MAKING THE FOLLO WING ADJUSTMENTS :- I) OPENING CASH BALANCE SHOULD BE EXCLUDED WHILE CO MPUTING THE ESTIMATED FIGURE OF SALES; II) THE DEPOSITS APPEARING IN THE NAME OF A, S AND KMG SHOULD BE EXCLUDED TO THE EXTENT THE ADDITION MADE IN RESPECT OF THE DEPOSITS AND UP HELD BY THE CIT(A). 21. WE NOTED THAT THE CIT(A) ALSO GIVEN THE FOLLOWI NG DIRECTIONS FOR COMPUTING THE SALES TO THE A.O. UNDER PARA NO.3.8 AS UNDER :- THE SECOND STEP TO ESTIMATE THE SALES FOR ENTIRE Y EAR ON PRO RATA BASIS FROM THE FIGURE OF SALES FOR THE PERIOD 1.5.1998 TO 27.1.1999 AS DETERMINED IN THE PRECEDING PARAGRAPH. AS PER THE WORKING OF THE AO HIMSELF THE SALES WERE COMPUTED FOR A PERIOD OF 222 DAYS. THE APPELLANT H AS TAKEN THE NUMBER OF DAYS 17 AS 223. IN THE ASSESSMENT ORDER THE AO HAD TAKEN T HE NUMBER OF DAYS AS 272. THE NUMBER OF DAYS SHOULD BE TAKEN AS 222 AS WORKED OUT BY THE AO AS PER THE DETAILED WORKING GIVEN IN THE SUBMISSIONS FILED BY THE AO ON 18.12.2002. HOWEVER, THE NUMBER OF DAYS FOR THE WHOLE YEAR SHOU LD BE TAKEN AS 300, EXCLUDING THE WEEKLY DAYS OF CLOSURE OF BUSINESS AN D OTHER HOLIDAYS. THUS FOR PROJECTING THE FIGURE OF SALES FOR THE WHOLE YEAR, THE ABOVE FIGURE OF SALE FOR PART OF THE YEAR SHOULD BE MULTIPLIED BY A FRACTION; THE NUMERATOR OF WHICH IS 300 AND THE DENOMINATOR IS THE NUMBER OF ACTUAL WORKING DAY S INCLUDED IN THE PART PERIOD. FOR EXAMPLE IN THE PRESENT CASE ON THE BASIS OF AO S OWN WORKING SUCH FRACTION WILL BE 300/222 I.E. 1.35. THE AO SHOULD MULTIPLY THE ESTIMATED FIGURE OF SALES FOR THE PERIOD 15.9.98 TO 27.1.1999 BY 1.35 TO ARRIVE A T THE FIGURE OF SALE FOR THE WHOLE YEAR. THE AO, THEREFORE, SHOULD MULTIPLY BY A FACTOR OF 300/222, THE FIGURES OF SALES ESTIMATED FOR 222 DAYS BY HIM IN ACCORDANC E WITH MY DIRECTIONS CONTAINED IN THE PREVIOUS PARAGRAPHS TO ARRIVE AT T HE SALES FOR THE FULL YEAR. 22. THE LD. D.R. BEFORE US EVEN THOUGH VEHEMENTLY C ONTENDED THAT THE ESTIMATED SALES SHOULD HAVE BEEN MULTIPLIED BY A FACTOR OF 365/272 IN THE PLACE OF 300/222 AS DIRECTED BY THE CIT(A) BUT COULD NOT PRODUCE ANY COGENT EVIDENCE OR MATERI AL WHICH MAY PROVE THAT THE ACTUAL WORKING DAYS IN THE CASE OF THE ASSESSEE WERE 365 NOT 300 D AYS. THE A.O. EVEN THOUGH HAS GIVEN THE NUMBER OF DAYS IN THE ASSESSMENT ODER AS 272 FOR TH E PERIOD 01.05.1998 TO 27.01.1999, BUT THE ASSESSEE HAS GIVEN THE DETAILED WORKING POINTING OU T THE NUMBER OF DAYS SHOULD BE 222 EXCLUDING THE CLOSURE OF THE BUSINESS AND OTHER HOLIDAYS. TH IS IS A FACT THAT THERE IS ALWAYS ONE WEEKLY HOLIDAY AS WELL AS OTHER HOLIDAYS WHEN THE SHOPS DO NOT OPEN. THEREFORE, WE DO NOT FIND ANY INFIRMITY OR ILLEGALITY IN THE ORDER OF THE CIT(A) DIRECTING THE A.O. TO MULTIPLY THE FIGURE OF THE SALES ESTIMATED FOR 222 DAYS BY A FACTOR OF 300/222 . THE A.O. HAS CALCULATED THE SALES AFTER GIVING EFFECT TO THE APPELLATE ORDER AT A FIGURE OF RS.32,37,611/- VIDE ORDER DATED 23.07.2003 EVEN THOUGH CHALLENGED BY THE ASSESSEE BEFORE US. WE DO NOT AGREE WITH THE SUBMISSION OF THE LD. A.R. THAT THE FIGURE OF SALES IS TO BE TAKEN WHICH WAS ACTUALLY FOUND IN THE DIARY SEIZED FOR THE PERIOD 01.05.1998 TO 27.01.1999 FOR THE WHOLE YEAR I.E. RS.27,67,790/-. IN OUR OPINION, WHEN THERE ARE EVIDENCE THAT THE ASSESSEE HAS MADE THE S ALES FOR THE PERIOD 01.05.1998 TO 27.01.1999 AT 18 A PARTICULAR FIGURE, SALES OF THE BALANCE PERIOD CA N BE ESTIMATED PROPORTIONATELY SO AS TO WORK OUT THE FIGURE FOR THE WHOLE YEAR. SUCH ESTIMATION, IN OUR OPINION, CANNOT BE REGARDED TO BE HYPOTHETICAL ESTIMATION. IN OUR OPINION, THE CASE OF THE ASSESSEE IS DULY COVERED BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CST VS. H.M. ESUFALI H.M. ABDULALI, 90 ITR 271 (SC). IN THAT CASE ALSO THERE HAS BEEN EX-PARTE AS SESSMENT ON THE DEALER. IT WAS DETECTED THAT SALES FOR 19 DAYS WERE NOT ENTERED IN THE ACCOUNT B OOKS. WHEN THE MATTER WENT BEFORE THE HONBLE SUPREME COURT, WHETHER ON THAT BASIS ESCAPE D TURNOVER FOR THE WHOLE YEAR CAN BE ESTIMATED. THE HONBLE SUPREME COURT HAS HELD AS U NDER :- HELD, THAT THE REASSESSMENTS WERE VALID. FROM THE CIRCUMSTANCE THAT THE ASSESSEE HAD DEALINGS OUTSIDE THE ACCOUNTS OF THE V ALUE OF RS.31,17128 FOR 19 DAYS, IT WAS OPEN TO THE OFFICER TO INFER THAT THE ASSESSEE HAD LARGE-SCALE DEALINGS OUTSIDE THE ACCOUNTS. IN SUCH A SITUATION, 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 BE FORE HIM. SO LONG AS THE ESTIMATE MADE BY HIM WAS NOT ARBITRARY AND HAD A RE ASONABLE NEXUS WITH THE FACTS DISCOVERED, IT COULD NOT BE QUESTIONED. IT WAS WRO NG TO HOLD THAT THE OFFICER MUST HAVE MATERIAL BEFORE HIM TO PROVE THE EXACT TURNOVE R SUPPRESSED. IN ESTIMATING ANY ESCAPED TURNOVER, IT IS INEVITABL E THAT THERE IS SOME GUESS-WORK. THE ASSESSING AUTHORITY WHILE MAKING T HE BEST JUDGEMENT ASSESSMENT, NO DOUBT, SHOULD ARRIVE AT HIS CONCLUSI ON WITHOUT ANY BIAS AND ON A RATIONAL BASIS. THAT AUTHORITY SHOULD NOT BE VINDI CTIVE OR CAPRICIOUS. IF THE ESTIMATE MADE BY THE ASSESSING AUTHORITY IS A BONA FIDE ESTIMATE AND IS BASED ON RATIONAL BASIS, THE FACT THAT THERE IS NO GOOD PROO F IN SUPPORT OF THAT ESTIMATE IS IMMATERIAL. PRIMA FACIE, THE ASSESSING AUTHORITY I S THE BEST JUDGE OF THE SITUATION. IT IS HIS BEST JUDGEMENT AND NOT ANY ONE ELSES. T HE HIGH COURT CANNOT SUBSTITUTE ITS BEST JUDGEMENT FOR THAT OF THE ASSESSING AUTHOR ITY. 23. IN THE CASE OF THE ASSESSEE, WE NOTED THE A.O. HAS GIVEN THE NOTICES TO THE ASSESSEE BUT ULTIMATELY THE ASSESSMENT WAS PASSED EX-PARTE ON TH E BASIS OF THE MATERIAL AVAILABLE ON RECORD. IT IS NOT DENIED BY THE LD. A.R. THAT THE DIARY CONTAI NS DETAILS OF THE SALES FOR THE PERIOD 01.05.1998 TO 27.01.1999 AND WHATEVER WAS THE DISCREPANCY THE SAME WERE SET RIGHT BY THE DIRECTIONS OF THE 19 CIT(A). WE HAVE ALSO GONE THROUGH THE DECISION OF THE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. R.M.L. MEHROTRA, 320 ITR 403 (ALLD.) ON WHICH T HE LD. A.R. VEHEMENTLY RELIED. THIS CASE, IN OUR OPINION, WILL NOT ASSIST THE ASSESSEE AS THIS C ASE RELATES TO THE DETERMINATION OF THE INCOME DURING THE COURSE OF BLOCK ASSESSMENT. THIS IS SET TLED LAW THAT BLOCK ASSESSMENT IN THE CASE OF SEARCH HAS TO BE CONFINED TO THE INCOME ATTRIBUTABL E TO THE MATERIAL EVIDENCE FOUND THEREIN OR OTHER INFORMATION AVAILABLE WITH THE A.O. RELATING TO SUCH MATERIAL. SECTION 158BB IN THIS REGARD IS VERY CLEAR. IT CLEARLY LAYS DOWN THAT INCOME OF THE BLOCK PERIOD SHALL BE THE AGGREGATE OF THE TOTAL INCOME OF THE PREVIOUS YEAR FALLING WITH THE BLOCK PERIOD COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THE SAID SECTION ON THE BASIS OF THE EVIDENCE FOUND AS A RESULT OF THE SEARCH OR REQUISITION OF THE BOOKS OF ACCOUNTS OR OTHER DOCUM ENTS AND SUCH OTHER MATERIAL OR INFORMATION AS ARE AVAILABLE WITH THE A.O. AND RELATABLE TO SUC H EVIDENCE. HONBLE ALLAHABAD HIGH COURT, IN THIS JUDGEMENT, HAS CLEARLY DISTINGUISHED THE DECIS ION OF THE APEX COURT IN THE CASE OF CST VS. H.M. ESUFALI H.M. ABDULALI, 90 ITR 271 (SC) BY HOLD ING AS UNDER :- UNDER SECTION 158BB OF THE ACT THE PROCEDURE FOR C OMPUTING THE UNDISCLOSED INCOME OF THE BLOCK PERIOD HAS BEEN GIV EN. IT PROVIDES THAT THE UNDISCLOSED INCOME OF THE BLOCK PERIOD SHALL BE THE AGGREGATE OF THE TOTAL INCOME OF THE PREVIOUS YEAR FALLING WITHIN THE BLOCK PERIO D COMPUTED, IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT, ON THE BASIS OF EVIDENC E FOUND AS THE RESULT OF SEARCH OR REQUISITION OF BOOKS OF ACCOUNT OR OTHER DOCUMENTS AND SUCH OTHER MATERIALS OR INFORMATION AS ARE AVAILABLE WITH THE ASSESSING OFF ICER AND RELATABLE TO SUCH EVIDENCE WITH CERTAIN OTHER CONDITIONS. THE EMPHAS IS HAS BEEN GIVEN FOR DETERMINATION OF TOTAL INCOME ON THE BASIS OF EVIDE NCE FOUND AS THE RESULT OF SEARCH OR REQUISITION OF BOOKS OF ACCOUNT OR OTHER DOCUMENTS AND SUCH OTHER MATERIALS OR INFORMATION AS ARE AVAILABLE WITH THE ASSESSING OFFICER AND RELATABLE TO SUCH EVIDENCE. IT IS NOT IN DISPUTE THAT IN THE SEARCH CONDUCTED ON SEPTEMBER 25, 1996 CERTAIN PAPERS WERE FOUND MARKED B-1/23 WHICH SHOWED RECEIPT OF RS.6,670, RS.85,820 AND RS.72,915. HOWEVER, THERE WAS NO MATERIAL TO SHOW THAT ANY OTHER INCOME WHICH MAY HAVE BEEN CONCEALED AND ANY UNDISCLOSED ASSETS HAVE BEEN FOUND IN THE SEARCH. THEREFORE, BEST JUD GEMENT ASSESSMENT, WHICH HAD BEEN MADE ON THE BASIS OF SEARCH ALONE COULD NOT HA VE BEEN MADE AS THE BLOCK ASSESSMENT IN CASE OF SEARCH HAS TO BE CONFINED TO INCOME ATTRIBUTABLE TO THE 20 MATERIAL AND EVIDENCE FOUND THEREIN OR OTHER INFORM ATION AVAILABLE WITH THE ASSESSING OFFICER RELATING TO SUCH MATERIALS. THE PRINCIPLE LAID DOWN BY THE APEX COURT IN THE CASE OF H.M. ESUFALI H.M. ABDULALI [19 73] 90 ITR 271 IS, THEREFORE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. W E MAY MENTION HERE THAT IF THE ASSESSING OFFICER HAD COME TO THE CONCLUSION THAT S OME OTHER INCOME OF THE ASSESSEE (UNCONNECTED WITH THE MATERIALS FOUND AT T HE TIME OF SEARCH) HAS ESCAPED ASSESSMENT HE IS AT LIBERTY TO INITIATE PROCEEDINGS UNDER SECTION 147/148 OF THE ACT IN ACCORDANCE WITH LAW. 24. IN THE CASE RELIED ON BY THE LD. A.R., NOWHERE THE HONBLE HIGH COURT HAS HELD THAT THE SALES FOR THE WHOLE YEAR CANNOT BE ESTIMATED ON THE BASIS OF THE SALES FOUND FOR THE PART OF THE YEAR. THE DECISION OF THE HONBLE SUPREME COURT, I N OUR OPINION, WILL BE CLEARLY APPLICABLE IN THE CASE OF THE ASSESSEE AND THERE IS NO ILLEGALITY OR INFIRMITY IN THE ORDER OF THE CIT(A) WHEN HE HAS DIRECTED TO THE A.O TO ESTIMATE THE FIGURE OF T HE SALES FOR THE ENTIRE YEAR ON PRORATA BASIS FROM THE FIGURE OF THE SALES FOR THE PERIOD 01.05.1998 T O 27.01.1999 AFTER MAKING CERTAIN ADJUSTMENTS AS DIRECTED BY HIM. THUS, WE DISMISS THE PLEA TAKE N BY THE LD. A.R. THAT THE SALES FOR THE ENTIRE YEAR CANNOT BE ESTIMATED BY THE A.O. ON THE BASIS O F THE SALES FOUND IN THE DIARY OF THE ASSESSEE FOR THE PART OF THE YEAR. 25. COMING TO THE NEXT ISSUE IN THESE GROUNDS TAKEN BY THE REVENUE BY WAY OF GROUND NO.2 IS AGAINST THE DIRECTIONS OF THE CIT(A) THAT THE SALES SHOULD NOT BE INCREASED BY 25%., WE NOTED THAT THE CIT(A) HAS RIGHTLY HELD THAT THERE IS NO E VIDENCE FOUND AT THE TIME OF SURVEY TO SUGGEST THAT THE SALES RECORDED IN THE ROUGH NOTE BOOK WAS AFTER REDUCING ACTUAL SALES PRICE BY 25%. THE A.O., WE NOTED, HAS GIVEN THE REASON THAT THE ASSES SEE HAS ADMITTED DURING THE COURSE OF STATEMENT RECORDED AT THE TIME OF SURVEY THAT THE P URCHASES ARE UNDER-BILLED TO THE EXTENT OF 20% TO 30%. THE ASSESSEE HAS RETRACTED THE STATEMENT W HETHER THE RETRACTION WAS VALID OR NOT BUT THIS FACT IS ON RECORD THAT THERE IS NO ADMISSION BY THE ASSESSEE THAT THE SALES WERE RECORDED IN THE 21 ROUGH NOTE BOOK AT A FIGURE WHICH WAS LESS BY 25% T HAN ACTUAL SALES PRICE RECEIVED. THE ASSESSEE WAS WRITING THE NOTE BOOK WITH THE FIGURES OF SALES WHICH ARE GIVEN IN THE NOTE BOOK FOR THE PERIOD 01.05.1998 TO 27.01.1999 AND THAT RELATE TO 222 DAYS. ON THAT BASIS ALREADY WE HAVE CONFIRMED THE FINDING OF CIT(A) THAT THE A.O. HAS T O ESTIMATE THE SALES FOR THE WHOLE YEAR BY MULTIPLYING THIS SALES BY A FACTOR OF 300/222 DAYS . IN OUR OPINION, ONCE THE ROUGH NOTE BOOK CONTAINS THE FIGURES OF THE SALES, IT CANNOT BE PRE SUMED THAT THE ASSESSEE WOULD HAVE NOTED IN THE ROUGH NOTE BOOK THE SALES AT A LESSER FIGURE. 26. LD. D.R. EVEN THOUGH SUPPORTED THE ORDER OF THE A.O. VEHEMENTLY BUT COULD NOT ADDUCE ANY EVIDENCE WHICH MAY PROVE THAT THE SALES RECORDE D IN THE ROUGH NOTE BOOK WAS LESS BY 25%. WE, THEREFORE, DO NOT FIND ANY MERIT IN THE GROUND TAKEN BY THE REVENUE AGAINST THE ORDER OF THE CIT(A) THAT THE SALES ESTIMATED NEED NOT BE FURTHER INCREASED BY 25% AS HAS BEEN DONE BY THE A.O. THUS, GROUND NO.2 OF THE REVENUE STANDS DISMI SSED. 27. THE NEXT ISSUE ARISING OUT OF THESE GERUNDS REL ATE TO THE APPLICABILITY OF NET PROFIT (N.P.) RATE, THE LD. A.R. BEFORE US POINTED OUT THAT THE T OTAL SALES IN THE CASE OF THE ASSESSEE SINCE WAS LESS THAN RS.40 LACS, EVEN ON THE BASIS OF THE MATE RIAL FOUND IN THE COURSE OF SURVEY THE PROVISIONS OF SECTION 44AF IS CLEARLY APPLICABLE IN THE CASE OF THE ASSESSEE. WE ARE OF THE VIEW THAT THE PROVISIONS OF SECTION 44AF ARE CLEARLY APP LICABLE IN THE CASE OF THE ASSESSEE SINCE THE SALES AS CONFIRMED BY US IS LESS THAN 40 LACS AS WO RKED OUT BY AO IN THE ORDER PASSED IN CONSEQUENCE OF THE ORDER OF THE CIT(A). SECTION 44 AF IS VERY CLEAR. IT CLEARLY LAYS DOWN THAT WHERE AN ASSESSEE IS ENGAGED IN RETAIL TRADE IN ANY GOODS OR MERCHANDISE, A SUM EQUAL TO FIVE PER CENT OF THE TOTAL TURNOVER IN THE PREVIOUS YEAR ON ACCOUNT OF SUCH BUSINESS OR, AS THE CASE MAY BE, 22 A SUM HIGHER THAN THE AFORESAID SUM AS DECLARED BY THE ASSESSEE IN HIS RETURN OF INCOME SHALL BE DEEMED TO BE THE PROFITS AND GAINS OF SUCH BUSINESS CHARGEABLE TO TAX UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. THIS PROVISION I S NOT APPLICABLE WHERE THE TOTAL TURNOVER EXCEEDS RS.40 LACS IN THE PREVIOUS YEAR. IN THE CA SE OF THE ASSESSEE, THE TURNOVER, AS CONFIRMED BY US, IS LESS THAN RS.40 LACS. THERE IS NO PROVIS ION IN SECTION 44AF WHICH PROHIBITS THAT THE PROVISIONS OF SECTION 44AF WILL NOT APPLY IN THE CA SES WHERE THE SURVEY UNDER SECTION 133A HAS TAKEN PLACE. WE NOTED THIS TRIBUNAL HAS ALSO IN TH E CASE OF SHRI RAJ KUMR KHANDELWAL IN ITA NO.173/AGR./2003 VIDE ORDER DATED 15.05.2007 HAS DI RECTED THE A.O. TO ESTIMATE THE N.P. BY APPLYING A RATE OF 5% IN TERMS OF PROVISION OF SECT ION 44AF BY HOLDING AS UNDER:- THEREFORE, IT IS OPEN FOR THE ASSESSING AUTHORITY TO WORK OUT THE SALE AFRESH AND MAKE ESTIMATE OF SALES FOR THE YEAR UNDE R CONSIDERATION ON THE BASIS OF NUMBER OF DAYS ACCORDINGLY BY APPLYING A PROFIT RAT E OF 5% IN TERMS OF PROVISIONS OF SECTION 44AF OF THE ACT AS AGAINST THE RATE OF 1 1% DIRECTED BY THE LD. CIT (APPEALS). THIS IS SO BECAUSE THE APPELLANT IS A S MALL TRADER AND HIS TURNOVER WORKS OUT BELLOW RS.40 LAKHS. 28. SIMILAR VIEW HAS ALSO BEEN TAKEN BY THE PUNE BE NCH IN THE CASE OF BALAJI CONSTRUCTION VS. ACIT, 72 TTJ 559. WE RESPECTFULLY FOLLOWING THE DE CISION OF THIS BENCH DIRECT THE A.O. TO ESTIMATE THE N.P. BY APPLYING A PROFIT RATE OF 5% I N TERMS OF PROVISIONS OF SECTION 44AF AS AGAINST THE RATE OF 11% DIRECTED BY THE CIT(A), AS THE ASSESSEE IS A SMALL TRADER AND THE TURNOVER AS CONFIRMED BY US IS BELOW RS.40 LACS. THUS, THE GROUND NO.3 TAKEN BY THE ASSESSEE IS ALLOWED WHILE GROUND NO.3 TAKEN BY THE REVENUE STANDS DISMI SSED. 29. GROUND NOS.9 TO 12 IN ASSESSEES APPEAL AND GRO UND NO.10 IN REVENUES APPEAL PERTAIN TO THE ADDITION MADE AMOUNTING TO RS.24 LACS BY THE AS SESSING OFFICER ON ACCOUNT OF INVENTORY 23 FOUND DURING THE COURSE OF SURVEY ON THE BASIS OF T HE STATEMENT OF THE ASSESSEE RECORDED DURING SURVEY. THE A.O. NOTED THAT DURING THE COURSE OF S URVEY THE VALUE OF THE STOCK INVENTORISED WAS ESTIMATED AT RS.29,69,826/- AND WAS DULY SIGNED BY THE ASSESSEE. THE ASSESSEE HAS SURRENDERED A SUM OF RS.24 LACS AS ITS INCOME. THE A.O., ON TH E BASIS OF SURRENDER MADE BY THE ASSESSEE, ADDED A SUM OF RS.24 LACS AS INCOME SURRENDERED BY THE ASSESSEE DURING THE COURSE OF SURVEY. THE ASSESSEE WENT IN APPEAL. BEFORE THE CIT(A) THE ASSESSEE CONTENDED THAT HE HAD RETRACTED FROM THE ALLEGED SURRENDER VIDE PETITION DATED 29.0 1.1999 FILED ON THE VERY NEXT DAY AFTER THE SURVEY. THERE IS NO PROVISION OF SURRENDER OR DISC LOSURE IN THE COURSE OF SURVEY PROCEEDINGS. EXPLANATION 5 TO SECTION 271(1)(C) DOES NOT APPLY T O SURVEY PROCEEDINGS. THE STOCK WAS INVENTORISED ON ESTIMATE BASIS WITHOUT ANY PHYSICA L VERIFICATION FROM PURCHASE VOUCHER AND FOR THIS PURPOSE RELIANCE WAS PLACED ON LIST NO.5. IT WAS POINTED OUT THAT EVEN THE TOTAL QUANTITY FOUND HAS NOT BEEN MENTIONED. THE TOTAL VALUE OF T HESE ITEMS AS PER THE PURCHASE VOUCHERS WHICH ARE IN THE POSSESSION OF THE DEPARTMENT CAME TO RS.11,58,256/- AS AGAINST RS.29,69,826/- WORKED OUT BY THE SURVEY PARTY. THE RECONCILIATION WAS DULY PREPARED AND SUBMITTED BEFORE THE CIT(A). THE TOTAL INVENTORY AS PER THE ASSESSEE WA S RS.11,50,126/-. THUS, THERE WAS A PETTY DIFFERENCE OF RS.8,130/-. THE CIT(A) CALLED FOR TH E REMAND REPORT OF THE A.O. THE A.O. RELIED ON THE SURRENDER MADE BY THE ASSESSEE DURING THE CO URSE OF SURVEY. IN THE REJOINDER, THE ASSESSEE SUBMITTED THE A.O. HAS NOT OFFERED ANY ADVERSE COMM ENTS ON THE SUBMISSION OF THE ASSESSEE. THE A.O. HAS AGAIN ASKED FOR THE SPECIFIC COMMENTS. THE ASSESSEE FURTHER SUBMITTED THAT AS PER THE A.O. THE STOCK FOUND WAS RS.29,69,826/- BUT THE A.O. ADDED A SUM OF RS.24 LACS. THIS PROVES THAT THE A.O. GAVE THE CREDIT OF RS.5,69,826 /-. THE OPENING STOCK AS PER THE ASSESSEE WAS RS.8,94,410/- AND THE PURCHASE TILL DATE WAS RS.9,5 4,562/-. THERE WAS NO BASIS GIVING CREDIT FOR 24 THE STOCK AVAILABLE AT RS.5,69,826/. THE CIT(A) GA VE THE PART RELIEF TO THE ASSESSEE BY HOLDING AS UNDER :- 5.8 THE SURVEY TEAM HAD WORKED OUT THE TOTAL VALUE OF THE CLOSING STOCK AT RS.29,01,826/-. THE APPELLANT MADE A SURRENDER OF R S.24,00,000/- BEING UNDECLARED INVESTMENT IN THE STOCK. THE SAME FIGURE HAS BEEN TAKEN BY THE AO FOR MAKING ADDITION TO THE INCOME. IT IS NOT CORRECT TO SAY THAT THE AO HAS IMPLIEDLY GIVEN CREDIT FOR RS.5,69,826/- FOR STOCK AS PER THE SEIZED BOOKS. THE FIGURE OF RS.24,00,000/- WAS WORKED OUT BY THE APPELLANT HIMS ELF. IT WAS ONLY THE APPELLANT WHO KNOW HOW THIS FIGURE WAS WORKED OUT. IN FACT HE INCREASED THE SUM OF SURRENDER FROM RS.24,00,000/- IN THE FINAL STATEMEN T. THERE IS NO QUESTION OF GIVING ANY CREDIT FOR OPENING STOCK OF RS.5,69,826/ - BY THE AO. THE APPELLANT HAD DECLARED RS.24,00,000/- AFTER CONSIDERING THE FACT THAT THE VALUE CLOSING STOCK WAS TAKEN ON THE BASIS OF SALE PRICE. NATURALLY HE SHO ULD HAVE REDUCED CERTAIN GROSS PROFIT AND OPENING STOCK (AS PER HIS OWN STATEMENT) OF RS.68,018/- AND OUTSTANDING LIABILITIES IF ANY TO DETERMINE THE AMO UNT INVESTED IN THE UNDISCLOSED INVESTMENT IN THE STOCK. THE APPELLANT IN HIS WORKI NG SUBMITTED ALONG WITH THE RETURN HAD CLAIMED TO HAVE WORKED OUT THE STOCK BY APPLYING THE PURCHASE RATE. THIS CANNOT BE ACCEPTED AT THIS JUNCTURE. THE INVEN TORY OF THE STOCK HAD BEEN PREPARED IN THE PRESENCE OF THE APPELLANT AND THE R ATES APPLIED FOR VALUATION WERE ALSO ACCEPTED BY HIM. THE VALUATION OF INVENTORY WH ICH WAS DONE IN THE PRESENCE OF THE APPELLANT CANNOT BE CHALLENGED NOW SPECIALLY WHEN THERE IS NO DISPUTE REGARDING THE QUANTITY. THE RATES FOR THE VALUATION PURPOSES WERE TAKEN TO BE THE SALE PRICE FOR WHICH THE APPELLANT HAD AGREED. THE ENTIRE EXERCISE OF INVENTORY TAKING WAS DONE IN THE PRESENCE OF THE APPELLANT AN D WITH HIS ACTIVE INVOLVEMENT. THE SALE PRICE WAS ALSO AGREEABLE. THE VALUE OF SUR RENDER WHICH WAS BASED ON THE BASIS OF VALUATION OF STOCK CANNOT BE NOW REDUC ED BY REVALUATION OF THE STOCK AT A DIFFERENT RATE. THE APPELLANT HAS TRIED TO REC ONCILE THE STOCK BY TAKING CERTAIN OPENING STOCK OF RS.8,94,410.12 AS AGAINST RS.68,01 8/- AS STATED DURING THE COURSE OF SURVEY (IT IS AGAIN INTERESTING THAT THE OPENING STOCK FIGURE IS BEING GIVEN TO THE NEAREST PAISE BUT THE APPELLANT CLAIMS THAT NO BOOKS OF ACCOUNTS ARE MAINTAINED) ON 1.4.1998. THE ENTRIES EXERCISE OF SU CH RECONCILIATION IS NOT HAVING ANY MEANING IN THE ABSENCE OF REGULAR BOOKS OF ACCO UNTS BEING MAINTAINED. 5.9 THERE ARE CERTAIN OBVIOUS ERRORS WHICH HAVE BEE N POINTED OUT THE APPELLANT IN RESPECT OF THE INVENTORY OF THE CLOSIN G STOCK PREPARED DURING THE COURSE OF SURVEY. THE DIFFERENCE HAS BEEN WORKED OU T BY THE APPELLANT AND GIVEN THE FORM OF A TABLE. THE VALUATION OF THE CLOSING S TOCK CONSISTING OF 70 ITEMS OF INVENTORY WHICH HAS BEEN WORKED OUT AT RS.3,81,274/ - HAS BEEN REVALUED BY THE APPELLANT ON ACCOUNT OF CERTAIN ERRORS OF CALCULATI ON AND CERTAIN TOTALLING ERRORS AT RS.3,02,579/-. THE WORKED OF THE APPELLANT IS GI VEN IN ANNEXURE IV ATTACHED WITH THIS ORDER. THE AO IS DIRECTED TO VERIFY THE T OTALLING AND OTHER MISTAKES IF ANY AND TAKE CORRECT FIGURE OF CLOSING STOCK. 25 5.10 THE VALUE OF THE CLOSING STOCK IN RESPECT OF T HE 262 ITEMS HAS BEEN TAKEN AT RS.12,01,291/- BY THE SURVEY TEAM. THE APPELLANT HA S WORKED OUT THIS AMOUNT AFTER POINTING OUT CERTAIN OBVIOUS ERRORS LIKE CALC ULATION ERROR. FOR EXAMPLE IN ITEM AT S. NO. 111 IT IS POINTED OUT THAT THERE IS AN ERROR OF TAKING 1-3/4 FEET AS 13- 1/4 FEET. THUS, THERE IS DIFFERENCE OF RS.83,188/- ON ACCOUNT OF CALCULATION ERROR OR OTHER. THE WORKING OF THE APPELLANT IS GIVEN IN ANN EXURE V TO THIS ORDER. THE ASSESSING OFFICER IS DIRECTED TO VERIFY THE MISTAKE S POINTED OUT BY THE APPELLANT AND TAKE THE CORRECT FIGURES AFTER MAKING CORRECTIO N FOR ARITHMETICAL OR OTHER OBVIOUS ERRORS. 5.11 THE INVENTORY IN RESPECT OF 78 ITEMS HAS BEEN VALUED AT RS.7,01,058/- BY THE SURVEY TEAM. THE APPELLANT HAS POINTED OUT MIST AKES IN THE WORKING OF THE VALUE OF THE CLOSING STOCK AND THE WORKING OF THE A PPELLANT IS ENCLOSED AT ANNEXURE VI TO THIS ORDER. THE ASSESSING OFFICER IS DIRECTED TO CHECK THE ERRORS POINTED OUT BY THE APPELLANT AND TAKE THE CORRECT V ALUE OF INVENTORY AFTER CORRECTING THE SAME FOR ARITHMETICAL AND OTHER ERRO RS. 5.12 THE INVENTORY OF 95 ITEMS HAS BEEN PREPARED BY THE SURVEY TEAM AT RS.3,66,542/-. THE APPELLANT HAS POINTED OUT CERTAI N MISTAKES IN THE WORKING OF THE INVENTORY. THE WORKING OF THE APPELLANT IS GIVE N IN ANNEXURE VII TO THIS ORDER. THE ASSESSING OFFICER IS DIRECTED TO CHEEK T HE ERRORS AS POINTED OUT BY THE APPELLANT AND TAKE CORRECT VALUE OF THE INVENTORY A FTER CORRECTING THE SAME FOR ARITHMETICAL AND OTHER OBVIOUS ERRORS. 5.13 THE ASSESSING OFFICER AFTER REWORKING THE VALU E OF THE INVENTORY AS PER THE DIRECTED GIVEN ABOVE SHOULD REDUCE THE AMOUNTS OF A DDITION BY THE MISTAKES OF ARITHMETICAL ERRORS AND OTHER OBVIOUS ERRORS POINTE D OUT BY THE APPELLANT FROM THE VALUE OF SURRENDERED AMOUNT WHICH ITSELF WAS BASED ON THE VALUE OF STOCK FOUND AT THE TIME OF SURVEY. IN THIS CONNECTION RELIANCE HAS ALSO BEEN PLACED ON THE DECISION OF HONBLE ITAT AHMEDABAD BENCH C IN THE CASE OF PUSHPANJALI DYEING AND PRINTING MILLS (P) LTD. VS JCIT 72 TTJ ( AHD.) 886. THE HEAD NOTES OF THIS DECISION ARE AS UNDER: APPEAL SCOPE SETTLED ISSUE ONCE ASSESSEE AGR EED ON CERTAIN ISSUES BEFORE THE ASSESSING OFFICER, HE CANNOT RAISE THE S AME ISSUE AGAIN BEFORE ANY APPELLANT AUTHORITY, UNLESS REASONABILITY OF AGAIN RAISING SUCH ISSUE IS ESTABLISHED IN THAT CASE THE APPELLANT HAD AGREED FOR A DISALL OWANCE OUT OF TELEPHONE EXPENSES OF RS. 22,422/- AND OUT OF CAR EXPENSES OF RS.10,364/- BEFORE THE ASSESSING OFFICER. THE CIT (APPEALS) REJECTED THE I SSUE ON THE BASIS THAT THESE EXPENSES WERE NOT RELATED TO BUSINESS OF ASSESSEE. THE HONBLE TRIBUNAL OBSERVED AS UNDER: WE CONSIDERED THE RIVAL SUBMISSIONS OF THE REPRES ENTATIVES OF BOTH THE PARTIES AND PERUSED THE RECORD. ONCE THE ASSESSEE A GREED ON CERTAIN ISSUES BEFORE 26 THE ASSESSING OFFICER HE CANNOT RAISE THE SAME ISSU E AGAIN BEFORE ANY APPELLATE AUTHORITY, UNLESS REASONABILITY OF AGAIN RAISING SU CH IS ESTABLISHED. THE ASSESSEE FAILED IN THIS REGARD. 5.14 RELIANCE IS ALSO PLACE ON THE DECISION OF HON BLE RAJASTHAN HIGH COURT IN THE CASE OF RAMESHWAR LAL MALI VS CIT 256 ITR 536(R AJ.) REFERRED TO ABOVE. THE HONBLE HIGH COURT IN THIS CASE HAS HELD (HEAD NOTE S) HELD, THAT IN THE INSTANT CASE, THE ESTIMATION OF SALES HAD NOT BEEN MADE SOLELY ON THE BASIS OF THE STATEMENTS OF THE WITNES SES RECORDED DURING THE SURVEY ...................... NO SUBSTANTIAL QUESTION OF LAW AROSE FROM THE ORDER OF THE TRIBUNAL 5.15 IN VIEW OF THE ABOVE FACTUAL AND LEGAL POSITIO N THE SURRENDER MADE BY THE APPELLANT IS LIABLE TO BE INCLUDED IN THE INCOME OF THE APPELLANT SUBJECT TO MY OBSERVATION GIVEN EARLIER REGARDING THE OBVIOUS MIS TAKES IN THE PREPARATION OF THE INVENTOR OF CLOSING STOCK. THE AMOUNT ON ACCOUNT OF OBVIOUS MISTAKES SHOULD BE WORKED OUT AND EXCLUDED FROM THE AMOUNT SO SURRENDE RED BY THE APPELLANT AND THE BALANCE SHOULD BE ADDED TO THE INCOME OF THE AP PELLANT. 30. THE LD. A.R. BEFORE US VEHEMENTLY CONTENDED THAT ON THE DIRECTIONS OF THE CIT(A), THE TOTAL ADDITION ON ACCOUNT OF EXCESS STOCK WAS SUSTA INED TO THE EXTENT OF RS.22,20,423/-. IT WAS POINTED OUT THAT NO ADDITION CAN BE MADE ON THE BAS IS OF MERE SURRENDER IN THE STATEMENT RECORDED IN THE COURSE OF SURVEY. THE KERALA HIGH COURT HAS HELD IN PAUL MATHEWS & SONS VS. CIT (2003) 263 ITR 101 THAT THE INCOME-TAX AUTHORITIES CANNOT RECORDS STATEMENT ON OATH IN THE COURSE OF SURVEY. THE STATEMENT SO RECORDED HAS NO EVIDENTIARY VALUE. THE ABOVE DECISION OF THE KERALA HIGH COURT WAS FOLLOWED IN KURUNNEM VELIL FI NANCIER (P) LTD. VS. DCIT (2005) 2 SOT 402 (COCH). IN ITO VS. HANUMAN PODDAR & OTHERS (2005) 98 TTJ (A SR) 705, THE TRIBUNAL HELD THAT NO ADDITION CAN BE MADE ONLY ON THE BASIS OF D ISCLOSURE MADE IN THE STATEMENT UNLESS THERE IS SOME CORROBORATED EVIDENCE. IN MAHESHWARI INDUSTRIE S VS. ACIT (2003) 81 TTJ (JODH) 914, THE TRIBUNAL OBSERVED 'CONSIDERING THE FACTS AND CIRCUM STANCES OF THE CASE, I AM OF THE OPINION THAT THE ADDITION MADE BY HE AO SHOULD BE CONSIDERED ON MERITS RATHER THAN THE SURRENDER MADE BY THE ASSESSEE IN THE SEARCH PROCEEDINGS. COMING TO T HE MERITS OF THE ADDITION, IT IS SEEN THAT THE 27 ASSESSEE HAS BEEN ABLE TO SUBSTANTIATE THAT THE DIF FERENCE AS FOUND OUT IS THE RESULT OF THE RATE DIFFERENCE AND THIS FACT HAS NOT BEEN REFUTED EITHE R BY THE AO OR BY THE CIT(A) WHO HAVE GONE ONLY ON THE SOLE GROUND OF SURRENDER MADE DURING TH E SEARCH PROCEEDINGS. IN ACIT VS. JORABAR SINGH M. RATHORE (2005) 94 TTJ 867, THE AHEMDABAD B ENCH OF THE TRIBUNAL ALSO EXPRESSED THE OPINION THAT NO ADDITION CAN BE MADE ON THE BASIS O F SURRENDER RECORDED IN THE COURSE OF SURVEY/SEARCH UNLESS THERE IS SOME MATERIAL TO SUPP ORT THE DISCLOSURE MADE. IN ITO VS. VARDHMAN INDUSTRIES (2006) 99 TTJ 509 , THE JODHPUR BENCH OF TRIBUNAL HAS HELD THAT 'WHERE ADDITION WAS MADE MERELY ON THE BASIS OF STATEMENT AND WHICH WAS RETRACTED SUBSEQUENTLY, THE ADDITION WAS NOT JUSTIFIED. RELIANCE WAS ALSO PLACED ON THE FOL LOWING DECISIONS :- (I) ACIT VA. T. ASSOCIATES (2006) 99 TTJ 74 (II) LAXMI NARAIN JANGID V ITO (2006) 152 TAXMAN 61 (MAZ ) (III) ACIT V RAMESH CHAND R. PATEL (2004) 89 ITD 203 (IV) N.D. PATEL V ACIT (1999) 104 TAXMAN 80 (MAZ) (V) R. P. LOCKS COMPANY V DCIT (2000) INDLAW 188 (DELHI ) 31. ATTENTION WAS ALSO INVITED TO BOARD CIRCULAR F. NO. 286/2/2003/IT (INV) DATED 10.03.2003. THE BOARD DIRECTED THAT THE ASSESSMENT SHOULD BE MADE ON THE BASIS OF EVIDENCE/MATERIAL COLLECTED IN THE COURSE OF SURVEY OPERATION OR THEREAFTER WHILE FRAMING THE RELEVANT ASSESSMENT ORDER. TACITLY, THE BOARD ALSO AGREED THAT NO ADDITION SHOULD BE MADE SIMPLY ON THE BASIS OF STATEMENT RECORDED IN THE CO URSE OF SURVEY. THE LD. A.R., THEREFORE, SUBMITTED THAT THE STOCK BE VALUED ON THE BASIS OF COST PRICE AS STATED IN HIS VERY FIRST STATEMENT RECORDED ON 28.01.1999. THE STATEMENT PREPARED BY THE ASSESSEE AT PAGE 74 OF THE PAPER BOOK-II SHOWS ONLY PETTY DIFFERENCE OF RS.8,130/-. THE COR RECTNESS OF THIS STATEMENT HAS NEITHER BEEN 28 DOUBTED BY THE CIT (A) NOR ADVERSELY COMMENTED BY T HE AO IN HIS REMAND REPORT IN SPITE OF THE DIRECTION OF THE CIT (A). 32. EVEN ON MERIT, IT WAS CONTENDED THAT THE ADDITI ON CAN BE SUSTAINED ONLY TO THE EXTENT OF RS.8,130/-. FOR THIS IT WAS POINTED OUT THAT THE A SSESSING OFFICER, IN THE ASSESSMENT ORDER, HAS MADE ADDITION OF RS.24 LACS TOWARDS ALLEGED SURREND ER MADE BY THE ASSESSEE. THE REVENUE IS IN APPEAL VIDE GROUND NO. 10 AGAINST THE ACTION OF THE CIT(A). FACTS, MATERIAL TO THE ADJUDICATION OF THE APPEAL ARE THAT IN THE COURSE OF SURVEY ON 2 8.01.1999 THE AUTHORIZED PERSON MADE INVENTORY OF THE STOCK FOUND IN THE BUSINESS PREMIS ES. THE TOTAL VALUE OF STOCK WAS WORKED OUT AT RS.2969826/-. THE ASSESSEE'S STATEMENT WAS RECOR DED IN SURVEY ON 28.01.1999. IN THIS STATEMENT, THE ASSESSEE HAS POINTED OUT THAT INVENT ORY HAS BEEN PREPARED ON THE BASIS OF SALE PRICE AND NOT COST PRICE (P.B.-II, PAGE 47). THE ASSESSEE HAD ALSO EXPRESSED HIS INABILITY TO GET THE STOCK VERIFIED AS THERE WAS NO STOCK REGISTER. SUR RENDER OF RS.24 LAKHS WAS MADE TO COVER THE EXCESS STOCK. ON THE VERY NEXT DAY, THE ASSESSEE R EALIZED THAT THE INVENTORY HAS NOT BEEN CORRECTLY WORKED OUT. THE ASSESSEE THEREFORE, RETR ACTED FROM THE STATEMENT (P.B.-II, PAGE 44). IN THE COURSE OF APPELLATE PROCEEDINGS, THE ASSESSEE S UBMITTED DETAILED WORKING OF THE STOCK FOUND IN SURVEY ON THE BASIS OF COST PRICE DULY SUPPORTED BY BILLS (P.B. II, PAGE 58-73) . THE BILLS HAD BEEN SEIZED BY THE DEPARTMENT AND ARE STILL AVAILAB LE WITH THE AUTHORITIES. BESIDES DIFFERENCE OF MARKET RATE AND COST PRICE, THERE WERE CERTAIN CALC ULATION MISTAKES OF RS.179627/- (P.B.-II, PAGE 74) . THE COST PRICE OF THE STOCK COMES TO RS.1158256/- AS AGAINST RS.2969826/- WORKED OUT BY THE DEPARTMENT. THE VALUATION CHART PREPARED BY TH E ASSESSEE ON THE BASIS OF COST PRICE WAS SENT BY THE CIT (A) TO THE A.O. FOR HIS COMMENTS. THE CI T (A) EVEN PASSED AN ORDER UNDER SECTION 250 (4) IN THIS REGARD (P.B.-II, PAGE 103). BUT TH E A.O. DID NOT OFFER ANY COMMENT IN SPITE OF 29 REPEATED DIRECTION GIVEN. REFERENCE WAS MADE TO PA RA NOS.5.2 TO 5.4 OF THE CIT(A)'S ORDER, PAGES 40 & 41. THE CIT (A), HOWEVER, DID NOT ACCEPT THE E XPLANATION OFFERED AND PASSED AN ORDER DIRECTING THE A.O. TO ADJUST ONLY ARITHMETICAL MIST AKES. 33. ACCORDING TO THE ASSESSEE, THE OPENING STOCK WA S RS.894410/. THE CIT(A) HAS REFERRED TO A PAPER ON WHICH THE OPENING STOCK WAS RS.68018/-. THIS PAPER WAS NEVER SHOWN TO THE ASSESSEE. IT WAS NEITHER FILED WITH THE RETURN OF INCOME NOR FOUND IN THE COURSE OF SURVEY. THE ASSESSEE WAS ALSO NEVER ASKED TO EXPLAIN THIS PAPER. THIS PAPER HAS THEREFORE NO EVIDENTIARY VALUE. IT IS ALSO SUBMITTED THAT THE ASSESSEE'S CASE IS COVERED BY SE CTION 44AF. THE ASSESSEE HAD ONLY FILED DETAILS OF SALES ON THE BASIS OF BILLS/CASH MEMOS ISSUED DU RING THE PERIOD AND NET PROFIT RATE OF 5% WAS APPLIED. THE OPENING STOCK OR RS.894410/- HAS BEEN ACCEPTED BY THE TRADE TAX DEPARTMENT. THE OPENING STOCK OF RS.894410/- IS VERIFIABLE FROM THE ASSESSMENT ORDER DATED 04.12.2000 PASSED BY THE TRADE TAX OFFICER, SECTOR-9, AGRA WHE REIN OPENING STOCK HAS BEEN FOUND AT RS.894410/-. XEROX COPY OF THE ASSESSMENT ORDER WA S FURNISHED BEFORE US (PBP 15-19) . 34. IT WAS SUBMITTED THAT INVENTORY PREPARED IN THE COURSE OF SURVEY CONTAINS MORE THAN 600 ITEMS. THE WEIGHT, NUMBER, QUANTITIES HAVE ALL BEEN NOTED BY ESTIMATE. THERE WAS NEITHER ANY PHYSICAL COUNTING NOR WEIGHMENT OF THE ITEMS FOUND. ATTENTION WAS DRAWN TO 3 PAGES OF THE INVENTORY (PAPER BOOK-II PAGES 184-186), AND POINTE D OUT THAT THERE ARE AS MANY AS 88 ITEMS OF WHICH ONLY QUANTITY HAS BEEN MENTIONED BUT NO RATE HAS BEEN APPLIED. AT THE END OF PAGE 186 OF THE PAPER BOOK-II, THE VALUE WRITTEN IS RS.267433/- . IT IS NOT REFLECTED IN THE LIST AS TO HOW THIS VALUATION HAD BEEN ARRIVED AT. IT WAS HUMANLY IMPOS SIBLE TO MAKE A LIST OF MORE THAN 600 ITEMS AFTER MEASUREMENT AND WEIGHMENT WITHIN THE TIME SUR VEY WAS CARRIED OUT. THE INVENTORY IS 30 THEREFORE, QUITE UNREALISTIC. THE ASSESSEE HAS PRE PARED A DETAILED RECONCILIATION STATEMENT IN FIVE PARTS CORRESPONDING TO THE FIVE INVENTORIES PREPARE D BY THE DEPARTMENT RESPECTIVELY PLACED AT P.B.-II, PAGE 58 TO 73 (PREPARED BY ASSESSEE) AND 172 TO 195 (PREPARED BY DEPARTMENT) ALONG WITH CONSOLIDATED INVENTORY PREPARED BY THE ASSESSE E (P.B.-II, PAGE74) AND WHICH IS BASED ON THE BILLS FORMING PART OF THE SEIZED RECORDS, TAKIN G THE QUANTITY AND MEASUREMENT ADOPTED BY THE DEPARTMENT TO BE CORRECT, ON THE BASIS OF WHICH, DI FFERENCE COMES TO RS.(RS.1158256 - RS.1150126 = 8130/-) (P.B.-II, PAGE 74) WHICH SUBMISSION ALONG WITH RELATED EVIDENCES WAS A LSO FURNISHED BEFORE THE CIT(A) SPECIFICALLY VIDE PARA NO.14 OF THE WRITTEN SUBMISSIONS DATED 09.08.2002 PLACED AT P.B.-II, PAGE-12. 35. LD. D.R., ON THE OTHER HAND, POINTED OUT THAT T HE A.O. HAS RIGHTLY ADDED THE SUM OF RS.24 LACS AS INCOME OF THE ASSESSEE. THE INVENTORY TO T HE EXTENT OF RS.29,69,826/- WAS FOUND DURING THE COURSE OF SURVEY WHICH WAS ALSO ACCEPTED BY THE ASSESSEE. THE ASSESSEE HIMSELF SURRENDERED A SUM OF RS.24 LACS IN HIS STATEMENT RECORDED DURIN G THE COURSE OF SURVEY ON 28.01.1999. THUS, THE ORDER OF THE A.O. BE RESTORED. 36. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED THE MATERIAL ON RECORD. WE HAVE GONE THROUGH THE ORDERS OF THE TAX AUTHORIT IES BELOW ALONG WITH THE MATERIAL REFERRED TO BEFORE US. THIS IS THE SETTLED LAW IN VIEW OF T HE DECISION OF PAUL MATHEWS & SONS VS. CIT, 263 ITR 101 (KERALA) AND THAT OF MADRAS HIGH COURT IN THE CASE OF CIT VS. S. KHADER KHAN SON, 300 ITR 157 (MAD.) THAT THERE IS BASIC DIFFERENCE B ETWEEN THE STATEMENT RECORDED ON OATH IN THE CASE OF SURVEY AND THE STATEMENT RECORDED UNDER SEC TION 132(4). SECTION 133A ENABLES THE AUTHORITY TO RECORD THE STATEMENT OF ANY PERSON WHI CH MAY BE USEFUL FOR OR RELEVANT TO ANY 31 PROCEEDINGS UNDER THE ACT, BUT DOES NOT AUTHORIZE T AKING ANY SWORN STATEMENT WHILE SECTION 132(4) CONFERS SUCH POWER ON THE AUTHORIZED OFFICER DURING THE COURSE OF SEARCH OR SEIZURE. THEREFORE, WHATEVER STATEMENT IS RECORDED UNDER SEC TION 133A, IT HAS NO EVIDENTIARY VALUE, OBVIOUSLY, FOR THE REASONS THAT THE OFFICER IS NOT AUTHORIZED TO ADMINISTER THE OATH OR TO TAKE ANY SWORN STATEMENT WHICH ALONE HAS EVIDENTIARY VALUE A S CONTEMPLATED UNDER THE LAW. HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. S. KHADER KHAN SON, 300 ITR 157 (MAD.) HAS HELD AS UNDER :- THE PRINCIPLES RELATING TO SECTION 133A OF THE INC OME-TAX ACT, 1961, ARE AS FOLLOWS : (I) AN ADMISSION IS AN EXTREMELY IMPOR TANT PIECE OF EVIDENCE BUT IT CANNOT BE SAID THAT IT IS CONCLUSIVE AND IT IS OPEN TO THE PERSON WHO MADE THE ADMISSION TO SHOW THAT IT IS INCORRECT AND THAT THE ASSESSEE SHOULD BE GIVEN A PROPER OPPORTUNITY TO SHOW THAT THE BOOKS OF ACCOUN T DO NOT CORRECTLY DISCLOSE THE CORRECT STATE OF FACTS; (II) IN CONTRADISTINCTION T O THE POWER UNDER SECTION 133A, SECTION 132(4) ENABLES THE AUTHORISED OFFICER TO EX AMINE A PERSON ON OATH AND ANY STATEMENT MADE BY SUCH PERSON DURING SUCH EXAMINATI ON CAN ALSO BE USED IN EVIDENCE UNDER THE ACT. ON THE OTHER HAND, WHATEVE R STATEMENT IS RECORDED UNDER SECTION 133A IS NOT GIVEN ANY EVIDENTIARY VALUE OBV IOUSLY FOR THE REASON THAT THE OFFICER IS NOT AUTHORISED TO ADMINISTER OATH AND TO TAKE ANY SWORN STATEMENT WHICH ALONE HAS EVIDENTIARY VALUE AS CONTEMPLATED UNDER L AW; (III) THE EXPRESSION SUCH OTHER MATERIALS OR INFORMATION AS ARE AVAILABLE WIT H THE ASSESSING OFFICER CONTAINED IN SECTION 158BB WOULD INCLUDE THE MATERI ALS GATHERED DURING THE SURVEY OPERATION UNDER SECTION 133A; (IV) THE MATER IAL OR INFORMATION FOUND IN THE COURSE OF SURVEY PROCEEDING COULD NOT BE A BASIS FO R MAKING ANY ADDITION IN THE BLOCK ASSESSMENT; AND (V) THE WORD MAY USED IN SE CTION 133A(3)(III) OF THE ACT, VIZ., RECORD THE STATEMENT OF ANY PERSON WHICH MAY BE USEFUL FOR, OR RELEVANT TO, ANY PROCEEDING UNDER THIS ACT MAKES IT CLEAR THAT THE MATERIALS COLLECTED AND THE STATEMENT RECORDED DURING THE SURVEY UNDER SECTION 133A ARE NOT CONCLUSIVE PIECE OF EVIDENCE BY ITSELF 37. IN THE PRESENT CASE, THE STATEMENT HAS BEEN REC ORDED UNDER SECTION 131 OF THE ACT DURING THE COURSE OF SURVEY. EVEN THOUGH THE STOCK HAS BE EN INVENTORISED, THE VALUE OF THE SAME WAS WORKED OUT AND THE A.O. NOTED THE VALUE OF SUCH STO CK AT RS.29,69,826/- AS VALUED BY THE SURVEY TEAM BUT IN THE STATEMENT GIVEN BY THE ASSESSEE, TH ERE WAS SURRENDER OF RS.24,00,000/-. THE SUM 32 OF RS.24,00,000/- WERE ADDED MERELY ON THE BASIS OF THE STATEMENT OF THE ASSESSEE. THE STATEMENT HAS BEEN RETRACTED BY THE ASSESSEE ON THE VERY NEXT DAY. IN OUR OPINION, NO ADDITION CAN BE MADE MERELY ON THE BASIS OF THE STATEMENT UNLESS AND UNT IL THE MATERIAL IS FOUND IN THE COURSE OF SURVEY. THIS IS THE SETTLED LAW THAT THE STATEMENT SO RECORDED, IN THE EYES OF LAW, DOES NOT HAVE ANY EVIDENTIARY VALUE. EVEN OTHERWISE ALSO WE NOTE D THAT THE ASSESSEE HAS RETRACTED THE STATEMENT ON THE VERY NEXT DAY WHEN HE REALISED THAT VALUE OF THE STOCK IS MUCH LESS AND THE STOCK HAS BEEN VALUED AT MARKET VALUE. GENERAL PRINCIPLE SO FAR T HE RETRACTION OF THE STATEMENT IS CONCERNED, IT IS WELL SETTLED LAW THAT THE STATEMENT IS NOT THE LAST WORD AND IF A PERSON CONCERNED RETRACTS/CLARIFIES THE SAME SUBSEQUENTLY ON THE ASCERTAINMENT OF CORRE CT FACT OR STATEMENT OF AFFAIRS AND EXPLAIN THE SAME, THE RETRACTION CAN BE ALLOWED. THE BURDEN TO PROVE THAT THE ASSESSEE HAD GIVEN THE STATEMENT UNDER MISUNDERSTANDING AND THAT THE SUBSE QUENT STATEMENT WAS CORRECTED LIES ON THE ASSESSEE. EVEN THE RETRACTION SHOULD HAVE BEEN DON E AT THE EARLIEST WITHIN THE REASONABLE TIME, OTHERWISE IT CAN BE REGARDED TO BE AFTER THOUGHT. UNDER SECTION 292C PRESUMPTION IS AVAILABLE TO THE REVENUE IN RESPECT OF ANY BOOKS OF ACCOUNT, OTH ER DOCUMENTS, MONEY, BULLIONS, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING IF FOUND IN THE POS SESSION OR CONTROL OF ANY PERSON IN THE COURSE OF SEARCH U/S 132 OR SURVEY U/S 133A, IN ANY PROCEEDIN GS UNDER THIS ACT. THIS SECTION STATES AS UNDER:- 292C. WHERE ANY BOOKS OF ACCOUNT, OTHER DOCUMENTS, MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING ARE OR IS FOUND IN THE POSSESSION OR CONTROL OF ANY PERSON IN THE COURSE OF SEARCH UNDER SECTION 132, I T MAY, IN ANY PROCEEDING UNDER THIS ACT, BE PRESUMED (I) THAT SUCH BOOKS OF ACCOUNT, OTHER DOCUMENTS, MONEY, BULLION, JEWELLERY JOR OTHER VALUABLE ARTICLE OR THING BELONG OR BELONGS TO SUCH PERSON; (II) THAT THE CONTENTS OF SUCH BOOKS OF ACCOUNT AND OTHE R DOCUMENTS ARE TRUE; AND 33 (III) THAT THE SIGNATURE AND EVERY OTHER PART OF SUCH BOO KS OF ACCOUNT AND OTHER DOCUMENTS WHICH PURPORT TO BE IN THE HANDWRITING OF ANY PARTICULAR PERSON OR WHICH MAY REASONABLY BE ASSUMED TO HAVE BEEN SIGNED BY, OR TO BE IN THE HANDWRITING OF, ANY PARTICULAR PERSON, ARE IN THAT PERSONS HANDWRITING, AND IN THE CASE OF A DOCUMENT STAMPED, EXECUTED OR ATTESTED, T HAT IT WAS DULY STAMPED AND EXECUTED OR ATTESTED BY THE PERSON BY WHOM IT PURPO RTS TO HAVE BEEN SO EXECUTED OR ATTESTED. 38. THE PRESUMPTION AVAILABLE U/S 292C IS NOT A CON CLUSIVE PRESUMPTION. IT IS A REBUTTABLE ONE. IT MAY BE USED AGAINST THE ASSESSEE UNTIL AND UNLESS IT IS NOT REBUTTED BY THE ASSESSEE. THE ONUS IS ON THE ASSESSEE TO REBUT THE PRESUMPTION TH AT THE BOOKS OF ACCOUNT OR THE DOCUMENTS FOUND DURING THE COURSE OF SEARCH DO NOT BELONG TO HIM OR ARE NOT IN HIS HAND. DURING THE COURSE OF THE SURVEY INVENTORY WAS TAKEN AND VALUED AT MAR KET VALUE NOT AT COST. THIS IS THE SETTLED LAW THAT THE STATEMENT RECORDED U/S 131 CANNOT BE REGAR DED TO THE MATERIAL FOUND DURING THE COURSE OF THE SEARCH/SURVEY. EVEN IF IT IS REGARDED TO BE A MATERIAL FOUND DURING THE COURSE OF THE SEARCH, NO ADDITION CAN BE MADE MERELY ON THE BASIS OF THE STATEMENT RECORDED DURING SURVEY AS IT HAS NO EVIDENTIARY VALUE AS PER THE LAW PRONOUNCED AS POIN TED OUT EARLIER. EVEN THE STATEMENT RECORDED U/S 131 IS NOT CONCLUSIVE EVIDENCE FOR MAKING THE A DDITION. THE RELEVANT CASE LAWS IN THIS REGARD ARE GIVEN AS UNDER:- PULLANGODE RUBBER PRODUCE CO. LTD. VS STATE OF KERA LA (1973) 91 ITR 18 (SC) AN ADMISSION IS AN EXTREMELY IMPORTANT PIECE OF EVI DENCE BUT IT CANNOT BE SAID THAT IT IS CONCLUSIVE. IT IS OPEN TO THE ASSESSEE WHO MADE THE ADMISSION TO SHOW THAT IT IS INCORRECT. NAGUBAI ARMAL VS B. SHARMA RAO AIR 1965 SC 100 AN ADMISSION IS NOT CONCLUSIVE AS TO THE TRUTH OF T HE MATTERS STATED THEREIN. IT IS ONLY A PIECE OF EVIDENCE, THE WEIGHT TO BE ATTACHED TO WHICH MUST DEPEND ON THE CIRCUMSTANCES UNDER WHICH IT IS MADE. IT CAN BE SHO WN TO BE ERRONEOUS OR UNTRUE. SARWAN SINGH RATTAN SINGH VS STATE OF PUNJAB (1957) SC637 34 IN LAW IT IS ALWAYS OPEN TO THE COURT TO CONVICT AN ACCUSED ON ITS CONFESSION ITSELF THOUGH HE HAS RETRACTED IT AT A LATER STAGE. NEVER THELESS USUALLY COURTS REQUIRE SOME CORROBORATION TO THE CONFESSIONAL STATEMENT BEFORE CONVICTING AN ACCUSED PERSON ON SUCH A STATEMENT. WHAT AMOUNT OF CORROBORATION WOULD BE NECESSARY IN SUCH A CASE WOULD ALWAYS BE A QUESTION OF FACT TO BE DETERMINED IN TH E LIGHT OF THE CIRCUMSTANCES IN HIS CASE. INDIA SEED HOUSE V. ASSTT. CIT (2000) 69 TTJ (DELHI ) (TM) 241 IN CASE OF BLOCK ASSESSMENT NO ADDITION CAN BE MADE MERELY ON THE BASIS OF STATEMENT RECORDED AT THE TIME OF SEARCH WHICH STAN DS FULLY PROVED TO BE INCORRECT IN VIEW OF THE MATERIAL ITSELF WHICH WAS SEIZED AT THE TIME OF SEARCH. SOHANLAL JAIN VS. ACIT (2000) 67 TTJ 782(JP.) INCOME FROM UNDISCLOSED SOURCES ADDITION STATEM ENT RECORDED UNDER S. 132(4) VIS--VIS ACCOUNTS BASED IN INCRIMINATING DOCUMENTS ASSESSEE DID NOT RECORD ALL PURCHASES AND SALES UNACCOUNTED STOCKS ALSO FOUND ASSESSEE SURRENDERED RS.2,50,000/- DURING THE COURSE OF SEARCH HOWEVER , UNDISCLOSED PROFITS CAME OF RS.21,692/- ON THE BASIS OF DOCUMENTS FOUND DURING SEARCH COGNIZANCE SHOULD NOT BE TAKEN ON THE STATEMENT MADE BY A PERSON AT THE TIME OF SEARCH IF THAT STATEMENT IS REBUTTABLE OR ASSESSEE EXPLAINS HIS POSITION LATER ADMISSION BY A PARTY IS THE BEST EVIDENCE ON A POINT BUT IT IS NOT CONCLUSIVE THER EFORE, THE DETERMINATION OF UNDISCLOSED INCOME MADE BY DEPARTMENT SHOULD BE ADOPTED MATTE R RESTORED TO AO TO RECTIFY CERTAIN DISCREPANCIES IN DETERMINATION OF CORRECT FIGURE OF PROFIT. S. ARJUN SINGH VS. CWT (1989) 175 ITR 91 (DEL) AN ADMISSION IS AN IMPORTANT PIECE OF EVIDENCE, BUT IT IS NOT CONCLUSIVE AND IT IS OPEN TO THE ASSESSEE TO SHOW THAT IT IS INCORRECT. ASSTT. CIT V. MRS. SUSHILADEVI S. AGGARWAL [1994] 5 0 ITD 524 (AHD.) WHERE THE ASSESSEE HAS RETRACTED FROM STATEMENT GIV EN ON SEARCH DAY, ASSESSING OFFICER WILL NOT BE JUSTIFIED IN DRAWING ADVERSE IN FERENCE. ALL THAT IS STATED BY ANY DEPONENT ON THE SEARCH DAY SHOULD NOT BE TAKEN AS T RUTH, THE WHOLE TRUTH AND NOTHING BUT THE TRUTH. SUCH STATEMENTS INDUBITABLY HAVE EVIDENT IARY VALUE AND CREDIBILITY IN LAW, BUT THE SAME SHOULD BE VIEWED WITH GREAT CAUTION, PARTI CULARLY WHEN THE SAME DENIED, VARIED OR RETRACTED OR ESTABLISHED BY THE DEFENDANT TO HAV E BEEN OBTAINED OR GIVEN UNDER MENTAL STREETS, COERCION, UNDUE INFLUENCE OR DUE TO ANY OT HER ABNORMAL CONDITION AND 35 CIRCUMSTANCES WHEN SUCH STATEMENT WAS GIVEN. IF A P ERSON AT LATER STAGE RETRACTS FROM THE STATEMENT GIVEN ON THE SEARCH DAY, THEN THE COURT O F TRIBUNAL SHOULD TRY TO ASCERTAIN THE REASONS OR CIRCUMSTANCES FROM SUCH PERSON FOR DOING SO AND, IF SATISFIED, NOT TO PLACE HEAVY RELIANCE ON SUCH EARLIER STATEMENT WHICH HAS SUBSEQUENTLY BEEN DENIED AND RETRACTED. DINESHCHANDRA J.DINA VS. ITO (2000) 112 TAXMAN 107( AHD.)(MAG.) A PARTY IS ENTITLED TO SHOW AND PROVE THAT AN ADMIS SION MADE BY HIM PREVIOUSLY WAS IN FACT NOT CORRECT AND TRUE. SHRI KRISHAN VS. KURUKSHETRA UNIVERSITY AIR 1976 SC 376 HELD THAT AN ADMISSION BASED ON IGNORANCE OF FACT I S NOT BINDING. KRISHAN LAL SHIV CHAND RAI VS. CIT (1973)88ITR 293 (P&H) HELD THAT IT IS AN ESTABLISHED PRINCIPLE OF LAW THA T A PARTY IS ENTITLED TO SHOW AND PROVE THAT AN ADMISSION IS NOT CORRECT. 39. THUS, IT IS WELL ESTABLISHED THAT DEPARTMENT CA NNOT MAKE ADDITION SOLELY ON THE BASIS OF STATEMENT RECORDED EVEN IF IT IS TAKEN THAT THE STATEMENT RECORDED DURING SURVEY HAS EVIDENTIARY VALUE. ALL OTHER EVIDENCES FOUND DURING SURVEY THAT ARE MATERIAL ARE REQUIRED TO BE TAKEN INTO CONSIDERATION AND CONCLUSIONS ARE TO BE REACHED AFTER CONSIDERING ALL THE EVIDENCES TAKEN TOGETHER. THE AHMEDABAD BENCH IN THE CASE OF ACIT VS. JORAWAR SINGH M. RATHOD (94 TTJ 867) IN THIS REGARD HELD AS UNDER E VEN THOUGH IN THE CASE WHERE SEARCH HAS TAKEN PLACE NOT THE SURVEY :- 6. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF T HE PARTIES AND PERUSED THE RECORD. AFTER CONSIDERING THE FACTS OF THE CASE, WE FIND THAT THE AO HAD MADE THE ADDITION MERELY ON THE BASIS OF STATEMENT RECORDED UNDER S. 132(4) AT THE TIME OF SEARCH- WE FIND THAT AT THE TIME OF SEARCH NO EVIDE NCE OR MATERIAL OR ASSETS, 36 IMMOVABLE OR MOVABLE PROPERTIES WERE FOUND WHICH SU PPORTS THE DISCLOSURE OF RS. 16 LAKHS. THE ASSESSEE HAD RETRACTED FROM THE SAID DISCLOSURE WHICH HAS NOT BEEN ACCEPTED BY THE DEPARTMENT. IT IS TRUE THAT SI MPLE DENIAL CANNOT BE CONSIDERED AS A DENIAL IN THE EYES OF LAW BUT AT TH E SAME TIME, IT IS ALSO TO BE SEEN (THAT) THE MATERIAL AND VALUABLE AND OTHER ASSETS A RE FOUND AT THE TIME OF SEARCH. THE EVIDENCE OUGHT TO HAVE BEEN COLLECTED BY THE RE VENUE DURING THE SEARCH IN SUPPORT OF THE DISCLOSURE STATEMENT. THE DECISION C ITED BY LEARNED DEPARTMENTAL REPRESENTATIVE IS DISTINGUISHABLE ON FACTS. IN THE SAID CASE, THE DISCLOSURE WAS OF RS. 7 LAKHS WHICH WAS SUPPORTED BY INVESTMENT IN HOUSE PROPERTY, UNACCOUNTED CASH, UNACCOUNTED INVESTMENT IN FURNITURE AND UNACCOUNTED IN GOLD ORNAMENTS, ETC., WHEREAS IN THE CASE UNDER CONSIDERATION NO SUCH ASS ETS OR VALUABLES WERE SUPPORTED TO THE DISCLOSURE. IT IS SETTLED POSITION OF THE LAW THAT AUTHORITIES UNDER THE ACT ARE UNDER AN OBLIGATION TO ACT IN ACC ORDANCE WITH LAW. TAX CAN BE COLLECTED ONLY AS' PROVIDED UNDER THE ACT. IF AN AS SESSEE, UNDER A MISTAKE, MISCONCEPTION OR ON NOT BEING PROPERLY INSTRUCTED, IS OVER-ASSESSED, THE AUTHORITIES UNDER THE ACT ARE REQUIRED TO ASSIST HIM AND ENSURE THAT ONLY LEGITIMATE TAXES DUE ARE COLLECTED [S.R. KOSHTI VS. CIT (2005) 193 CTR ( GUJ) 518]. THE ITO IS NOT ENTITLED TO MAKE A PURE GUESS AND MAKE AN ASSESSMENT WITHOUT REFERENCE TO ANY EVIDENCE OR ANY MATERIAL AT ALL. THERE MUST BE SOMETHING MORE T HAN BARE SUSPICION TO SUPPORT THE ASSESSMENT OR ADDITION. [DHAKESWAN COTTON MILLS LTD. VS. CIT (1954) 26 ITR 775 (SC)}. IT IS TRUE THAT AN APPARENT STATEMENT MUST B E CONSIDERED REAL UNTIL IT WAS SHOWN THAT THERE WERE REASONS TO BELIEVE THAT THE A PPARENT WAS NOT THE REAL. SCIENCE HAS NOT YET INVENTED ANY INSTRUMENT TO TEST THE REL IABILITY OF THE EVIDENCE PLACED BEFORE A COURT OR TRIBUNAL. THEREFORE, THE COURTS A ND TRIBUNALS HAVE TO JUDGE THE EVIDENCE BEFORE THEM BY APPLYING THE TEST OF HUMAN PROBABILITIES [CIT VS. DURGA PRASAD MORE 1973 CTR (SC) 500 : (1971) 82ITR 540 (SC)}. IN THE LIGHT OF ABOVE DISCUSSION, WE APPLY THE RATIO OF APEX COURT IN THE CASE OF DURGA PRASAD (SUPRA), I.E., TEST OF HUMAN PROBABILITIES, WE DO NOT FIND ANY MATERIAL ON RECORD ON WHICH BASIS IT CAN BE SAID THAT THE DISCLOSURE OF THE ASSESSEE FOR RS.16 LAKHS IS IN ACCORDANCE WITH LAW AND IN SPIRIT OF S. 132(4). UNDER THE CIRCUMSTANCES, WE FIND THAT THE CIT(A) HAS CORRECTLY DELETED THE ADDITION. 40. AT THIS JUNCTURE, WE MAY REFER TO GAUHATI HIGH COURTS DECISION IN THE CASE OF GREENVIEW RESTAURANT 263 ITR 169 (GAU). IN THIS CASE DURING T HE SEARCH AND SEIZURE CERTAIN STATEMENTS OF ONE OF ITS PARTNERS WERE RECORDED ON THE BASIS OF W HICH AN ADDITION OF RS.4 LACS WAS MADE BY WAY OF UNDISCLOSED INCOME THOUGH IN THE MEANTIME, THE S TATEMENT MADE IN THE COURSE OF THE SEARCH HAD BEEN RETRACTED, THERE WAS NO REFERENCE THERETO IN THE ORDERS. HIGH COURT HELD THAT THERE WAS NOTHING ON RECORD TO INDICATE EITHER THAT IN VIEW O F THE RETRACTION OF THE STATEMENT, THE ASSESSEE 37 WAS PROVIDED WITH ANY OPPORTUNITY OF EXPLAINING THE DISCLOSURE VIS-A-VIS ITS LIABILITY IN RESPECT THEREOF. THE MATTER WAS SET ASIDE. 41. WE HAVE GONE THROUGH THE VARIOUS OTHER CASE LAW S AS WERE RELIED ON BEFORE US. IN VIEW OF THESE CASE LAWS, IN OUR OPINION, THE ADDITION CANNO T BE MADE MERELY ON THE BASIS OF THE STATEMENT. THESE STATEMENTS IF NOT RETRACTED, MAY BE USED BY T HE A.O. AS A SUPPORTING EVIDENCE, PROVIDED THERE ARE MATERIAL FOUND DURING THE COURSE OF SURVE Y WHICH PROVES THAT THE ASSESSEE HAS EARNED THE INCOME. IN VIEW OF THESE CASES, THE PROPOSITIO N OF LAW IN RESPECT OF ADDITION TO BE MADE ON THE BASIS OF THE STATEMENT RECORDED CAN BE LAID DOW N AS UNDER:- (I) THAT PRESUMPTION AVAILABLE U/S.292C IS REBUTTAB LE. (II) IF THE ASSESSEE IS ABLE TO DEMONSTRATE WITH T HE HELP OF MATERIAL THAT SUCH ADMISSION WAS EITHER MISTAKEN OR UNTRUE, THEN SOLELY ON THE B ASIS OF SUCH ADMISSION, ADDITION IS NOT REQUIRED TO BE MADE. (III) BEFORE MAKING ADDITION ON THE BASIS OF RETRACTED DI SCLOSURE, THE ASSESSING OFFICER SHOULD SUPPORT SUCH ADMISSION BY INDEPENDENT EVIDEN CE. 42. IN THIS CASE, THE ASSESSEE HAS ALREADY RETRACTE D THE STATEMENT IMMEDIATELY ON THE VERY NEXT DAY BY POINTING OUT THAT THE VALUE OF THE STOCK IS MUCH LESS AS HAS BEEN WORKED OUT BY THE SURVEY TEAM. EVEN THE SURVEY PARTY HAS NOT MEASURED EACH AND EVERY ITEMS AND ADHOC VALUE FOR THE STOCK HAS BEEN TAKEN INTO ACCOUNT. UNDER THESE FAC TS, THE STATEMENT RETRACTED BY THE ASSESSEE CANNOT BE REGARDED TO BE ONE WHICH MAY BE REGARDED AFTER THOUGHT. THE ASSESSEE HAS WORKED OUT THE VALUE OF THE STOCK ON COST BASIS WHICH IS AVAIL ABLE IN THE PAPER BOOK, COPY OF WHICH WAS GIVEN TO US ALSO. THE VALUE SO WORKED OUT WAS GIVE N EVEN TO THE AUTHORITIES BELOW BUT NO CONTRARY EVIDENCE WERE BROUGHT ON RECORD. EVEN NO ADVERSE COMMENT ON THE VALUE ESTIMATED BY THE ASSESSEE WERE BROUGHT ON RECORD. THE ADDITION WAS MADE MERELY ON THE BASIS OF THE 38 STATEMENT. EVEN THE ASSESSING OFFICER HAS HIMSELF REJECTED THE VALUE WORKED OUT BY THE SURVEY TEAM OTHERWISE THE ADDITION WOULD HAVE BEEN FOR RS. 29,69,826/- NOT OF RS.2400000/-. THE ASSESSEE HAS VALUED THE STOCK ON THE BASIS OF THE C OST. THE COST HAS BEEN WORKED OUT ON THE BASIS OF THE BILLS WHICH WERE IMPOUNDED BY THE DEPARTMENT . THE COPIES OF THE BILLS WERE ALSO PLACED IN THE PAPER BOOK. 43. LD. D.R. COULD NOT POINT OUT ANY DEFECT OR MIST AKE IN THE WORKING OF THE VALUE OF THE STOCK AT COST BASIS AS WORKED OUT BY THE ASSESSEE. EVEN THE ASSESSEE HAS ALSO POINTED OUT THE CALCULATION MISTAKE TO THE EXTENT OF RS.1,79,627/- BY WAY OF CHART FILED BEFORE THE AUTHORITIES BELOW AND ALSO BEFORE US. THIS CHART ALSO SHOWS TH AT THERE IS A CALCULATION MISTAKE. WE ALSO NOTED FROM PAGE 184 AND 186 OF THE PAPER BOOK THAT AGAINST 88 ITEMS ONLY QUANTITY HAS BEEN MENTIONED. EVEN NO RATE HAS BEEN MENTIONED BY THE SURVEY TEAM. THE VALUE AT THE END HAS BEEN TAKEN IN LUMP SUM AT RS.2,67,433/-. THIS ALSO PROV ES THE CONTENTION OF THE ASSESSEE THAT THE STOCK HAS BEEN VALUED JUST ON ESTIMATE BASIS WITHOU T ANY ACTUAL MEASUREMENT SO THAT THE CORRECT VALUE COULD HAVE BEEN WORKED OUT. THE ASSESSEE ALS O GIVEN THE DETAILS OF THE INVENTORY ALONG WITH RECONCILIATION WHICH IS AVAILABLE AT PAGE NO.1 73 OF THE PAPER BOOK WHICH WE PERUSED AND ACCORDING TO THE SAID CHART WE NOTED, THE INVENTORY AS ON 27.01.1999 WAS WORKED OUT AT RS.11,50,127/- WHILE THE ACTUAL COST OF THE INVENTO RY AS PREPARED BY THE ASSESSEE COMES TO RS.11,58,256/-. WHILE CALCULATING THE FIGURE OF RS .11,50,127/-, WE NOTED THAT THE ASSESSEE HAS REDUCED OUT OF THE SALES G.P. @ 11% TO WORK OUT THE COST OF THE GOODS SOLD. THE CIT(A), WE ALSO NOTED, HAS TAKEN THE REDUCTION OF 11% G.P. TO BE THE BASIS FOR THE ESTIMATION OF THE INCOME OF THE ASSESSEE. WE MAY POINT OUT THAT THERE IS A DIFFERENCE IN THE NET PROFIT AND THE GROSS PROFIT. SECTION 44AF TALKS OF THE COMPUTATION OF THE PROFIT BY APPLYING A RATE OF 5%. THERE, THE RATE OF 39 5% MEANS THE NET PROFIT. THE NET PROFIT IS ALWAYS WORKED OUT AFTER REDUCING THEREFROM THE EXPENSES WHATEVER HAS BEEN INCURRED BY THE ASSESSEE FOR THE PURPOSE OF BUSINESS. WHILE THE GROSS PROFIT REPRESENTS ONLY THE GROSS MARGIN OF TH E PROFIT, BEING THE DIFFERENCE BETWEEN THE COST OF THE PURCHASE AND THE SALES. ALL THESE PAPERS, W E NOTED, WERE FILED BEFORE THE AUTHORITIES BELOW ALSO BUT NO COGENT MATERIAL OR EVIDENCE WERE BROUGHT ON RECORD BY THE REVENUE WHICH MAY PROVE THAT THE COST OF THE STOCK AS FOUND DURIN G THE COURSE OF SURVEY WORKED OUT BY THE ASSESSEE WERE NOT CORRECT. VALUING THE STOCK AT CO ST IS ONE OF THE RECOGNIZED METHOD OF VALUATION AND IS BASED ON THE PRINCIPLES OF PRUDENCY. A BUSI NESSMAN IS NOT SUPPOSED TO ACCOUNT FOR THE INCOME UNTIL AND UNLESS IT IS REALISED, THAT IS WHY THE STOCK IS VALUED AT COST. THE CBDT HAS NOTIFIED TWO ACCOUNTING STANDARDS VIDE NOTIFICATION DATED 25.1.1996 ON THE BASIS OF THE POWER ENTRUSTED U/S 145(2) OF THE INCOME TAX ACT. THE AC COUNTING STANDARD NO. 1 AND ACCOUNTING STANDARD NO.2. THESE ACCOUNTING STANDARDS ARE MAND ATORY TO BE FOLLOWED IN VIEW OF SECTION 145(3). DUE TO THIS CHANGE, THE VALUE OF THE SHARES HAS GONE DOWN BY RS16,88,76,463/- AND THIS FACT HAS BEEN STATED BY THE ASSESSEE IN NOTE NO. 8 IN SCHEDULE-14 OF ITS AUDITED FINAL ACCOUNTS. WE NOTED THAT CLAUSE 4 ON ACCOUNTING STANDARD NO.1 LAYS DOWN AS UNDER :- 4. ACCOUNTING POLICIES ADOPTED BY AN ASSESSEE SHOU LD BE SUCH SO AS TO REPRESENT A TRUE AND FAIR VIEW OF THE STATE OF AFFA IRS OF THE BUSINESS, PROFESSION OR VOCATION IN THE FINANCIAL STATEMENTS PREPARED AND P RESENTED ON THE BASIS OF SUCH ACCOUNTING POLICIES. FOR THIS PURPOSE, THE MAJOR C ONSIDERATIONS GOVERNING THE SELECTION AND APPLICATION OF ACCOUNTING POLICIES AR E FOLLOWING, NAMELY:- (I) PRUDENCE: PROVISIONS SHOULD BE MADE FOR ALL KNO WN LIABILITIES AND LOSSES EVEN THOUGH THE AMOUNT CANNOT BE DETERMINED WITH CE RTAINTY AND REPRESENTS ONLY A BEST ESTIMATE IN THE LIGHT OF AVA ILABLE INFORMATION; (II) SUBSTANCE OVER FORM: THE ACCOUNTING TREATMENT AND PRESENTATION IN FINANCIAL STATEMENTS OF TRANSACTIONS AND EVENTS SHO ULD BE GOVERNED BY THEIR SUBSTANCE AND NOT MERELY BY THE LEGAL FORM; 40 (III) MATERIALITY : FINANCIAL STATEMENTS SHOULD DIS CLOSE ALL MATERIAL ITEMS, THE KNOWLEDGE OF WHICH MIGHT INFLUENCE THE DECISIONS OF THE USER OF THE FINANCIAL STATEMENTS. 44. FROM THE ABOVE, IT IS APPARENT THAT THE ACCOUNT ING STANDARD NO.1 RECOGNIZE PRUDENCE TO BE ONE OF THE MAJOR CONSIDERATION FOR APPLYING ACCO UNTING POLICIES. IT REQUIRES THAT PROVISION SHOULD BE MADE FOR ALL KNOWN LIABILITIES AND LOSSES EVEN THOUGH AMOUNT CANNOT BE DETERMINED WITH CERTAINTY AND REPRESENTS ONLY A BEST ESTIMATE IN THE LIGHT OF THE AVAILABLE INFORMATION. IN OTHER WAY, IT RECOGINSES THAT ANTICIPATE ALL THE LO SSES BUT NOT PROVIDE FOR THE PROFIT UNTIL AND UNLES S IT IS NOT REALISED. VALUING THE CLOSING STOCK AT CO ST OR MARKET VALUE WHICHEVER IS LOWER IS A WELL ESTABLISHED METHOD OF ACCOUNTING. THIS METHOD IS BA SED ON THE PRINCIPLE OF PRUDENCY. HONBLE SUPREME COURT IN THE CASE OF CHAINRUP SAMPATRAM VS. CIT 24 ITR 481 AS RELIED ON BY THE LD. AR ACCEPTED THIS PRINCIPLE. WE NOTED FROM THIS DECI SION THAT THE HONBLE COURT EXPLAINED THE REASONS FOR THE SAID PRACTICE AT PAGE 485 WHICH IS REPRODUCED AS UNDER :- IT IS WRONG TO ASSUME THAT THE VALUATION OF THE CL OSING STOCK AT MARKET RATE HAS, FOR ITS OBJECT, THE BRINGING INTO CHARGE ANY APPRECIATION IN THE VALUE OF SUCH STOCK. THE TRUE PURPOSE OF CREDITING THE VALUE OF UNSOLD STOCK IS TO BALANCE THE COST OF THOSE GOODS ENTERED ON THE OTHER SIDE O F THE ACCOUNT AT THE TIME OF THEIR PURCHASE, SO THAT THE CANCELLING OUT OF THE ENTRIES RELATING TO THE SAME STOCK FROM BOTH SIDES OF THE ACCOUNT WOULD LEAVE ONLY THE TRAN SACTIONS ON WHICH THERE HAVE BEEN ACTUAL SALES IN THE COURSE OF THE YEAR SHOWING THE PROFIT OR LOSS ACTUALLY REALISED ON THE YEARS TRADING. AS POINTED OUT IN P ARAGRAPH 8 OF THE REPORT OF THE COMMITTEE ON FINANCIAL RISKS ATTACHING TO THE HOLDI NG OF TRADING STOCKS, 1919. AS THE ENTRY FOR STOCK WHICH APPEARS IN A TRADING ACCOUNT IS MERELY INTENDED TO CANCEL THE CHARGE FOR THE GOODS PURCHASED, WHICH HA VE NOT BEEN SOLD, IT SHOULD NECESSARILY REPRESENT THE COST OF THE GOODS. IF IT IS MORE OR LESS THAN THE COST, THEN THE EFFECT IS TO STATE THE PROFIT ON THE GOODS WHIC H ACTUALLY HAVE BEEN SOLD AT THE INCORRECT FIGURE. FROM THIS RIGID DOCTRINE, ONE EX CEPTION IS VERY GENERALLY RECOGNISED ON PRUDENTIAL GROUNDS AND IS NOW FULLY S ANCTIONED BY CUSTOM, VIZ., THE ADOPTION OF MARKET VALUE AT THE DATE OF MAKING UP A CCOUNTS, IF THAT VALUE IS LESS, THAN COST. IT IS OF COURSE AN ANTICIPATION OF THE L OSS THAT MAY BE MADE ON THOSE GOODS IN THE FOLLOWING YEAR, AND MAY EVEN HAVE THE EFFECT, IF PRICES RISE AGAIN, OF 41 ATTRIBUTING TO THE FOLLOWING YEARS RESULTS A GREAT ER AMOUNT OF PROFIT THAN THE DIFFERENCE BETWEEN THE ACTUAL SALE PRICE AND THE AC TUAL COST PRICE OF THE GOODS IN QUESTION (EXTRACTED IN PARAGRAPH 281 OF THE REPORT OF THE COMMITTEE ON THE TAXATION OF TRADING PROFIT PRESENTED TO BRITISH PAR LIAMENT IN APRIL, 1951). WHILE ANTICIPATED LOSS IS THUS TAKEN INTO ACCOUNT, ANTICIPATED PROFIT IN THE SHAPE OF APPRECIATED VALUE OF THE CLOSING STOCK IS NOT BROUG HT INTO THE ACCOUNT, AS NO PRUDENT TRADER WOULD CARE TO SHOW INCREASED PROFIT BEFORE ITS ACTUAL REALISATION. THIS IS THE THEORY UNDERLYING THE RULE THAT THE CLO SING STOCK IS TO BE VALUED AT COST OR MARKET PRICE WHICHEVER THE LOWER IS, AND IT IS N OW GENERALLY ACCEPTED AS AN ESTABLISHED RULE OF COMMERCIAL PRACTICE AND ACCOUNT ANCY. AS PROFIT FOR INCOME- TAX PURPOSES ARE TO BE COMPUTED IN CONFORMITY WITH THE ORDINARY PRINCIPLES OF COMMERCIAL ACCOUNTING, UNLESS OF COURSE, SUCH PRINC IPLES HAVE BEEN SUPERSEDED OR MODIFIED BY LEGISLATIVE ENACTMENTS, UNREALISED P ROFITS IN THE SHAPE OF APPRECIATED, VALUE OF GOODS REMAINING UNSOLD AT THE END OF AN ACCOUNTING YEAR AND CARRIED OVER TO THE FOLLOWING YEARS ACCOUNT IN A BUSINESS THAT IS CONTINUING ARE NOT BROUGHT INTO THE CHARGE AS A MATTER OF PRA CTICE, THOUGH, AS ALREADY STATED, LOSS DUE TO A FALL IN PRICE BELOW COST IS ALLOWED E VEN IF SUCH LOSS HAS NOT BEEN ACTUALLY REALISED. AS TRULY OBSERVED BY ONE OF THE LEARNED JUDGES IN WHIMSTER AND CO. V. COMMISSIONERS OF INLAND REVENUE [1926] 12 TC 813,827. UNDER THIS LAW (REVENUE LAW) THE PROFITS ARE THE P ROFITS REALISED IN THE COURSE OF THE YEAR. WHAT SEEMS AN EXCEPTION IS RECOGNISED WHE RE A TRADER PURCHASED AND STILL HOLDS GOODS OR STOCKS WHICH HAVE FALLEN IN VA LUE. NO LOSS HAS BEEN REALISED. LOSS MAY NOT OCCUR. NEVERTHELESS, AT THE CLOSE OF T HE YEAR HE IS PERMITTED TO TREAT THESE GOODS OR STOCKS AS OF THEIR MARKET VALUE. 45 EVEN THE CBDT HAS ALSO RECOGNIZED UNDER THE ACCO UNTING STANDARD NOTIFIED THEM IN ACCORDANCE WITH SECTION 145(3) OF THE INCOME-TAX AC T. THIS IS ALSO SETTLED LAW IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F CHAINRUP SAMPATRAM VS. CIT, 24 ITR 481 (SC) THAT THOUGH LOSS DUE TO A FALL IN PRICE BELOW COST IS ALLOWED EVEN IF SUCH LOSS HAS NOT BEEN ACTUALLY REALISED, NO QUESTION OF CHARGING THE APP RECIATED VALUE OF CLOSING STOCK AS NOTIONAL PROFITS CAN ARISE. IT WAS ALSO OBSERVED BY THE HO NBLE SUPREME COURT IN THIS CASE THAT IT IS A MISCONCEPTION TO THINK THAT ANY PROFIT ARISES OUT OF THE VALUATION OF THE CLOSING STOCK AND THE SITUS OF ITS ARISING OR ACCRUAL IS WHERE THE VALUAT ION IS MADE. THUS, VALUATION OF STOCK AT STOCK, IN 42 OUR OPINION, IS ONE OF THE RECOGNIZED METHOD. EVEN THE HONBLE SUPREME COURT HAS ALSO ACCEPTED IT IN THE CASE OF INVESTMENT LIMITED VS. C IT, 77 ITR 533 (SC) AND SANJEEV WOOLLEN MILLS VS. CIT, 279 ITR 434 (SC). IN VIEW OF THE SA ID POSITION OF LAW AND THE ACCOUNTING STANDARD AS NOTIFIED BY THE CBDT, WE ARE OF THE VIEW THAT TH E STOCK FOUND DURING THE COURSE OF SURVEY SHOULD HAVE BEEN VALUED AT COST, NOT AT THE MARKET VALUE. SINCE THE ASSESSEE WAS SUBMITTING THE INCOME-TAX RETURNS, COMPUTING THE INCOME IN ACCORDA NCE WITH THE PROVISIONS OF SECTION 44AF, WE FIND FORCE IN THE SUBMISSION OF THE LD. A.R. THA T THE ASSESSEE WAS NOT HAVING ANY DAY TODAY STOCK REGISTER. 46. THE OTHER MISTAKE AS POINTED OUT BY THE LD. A.R ., WE NOTED, IN THE VALUATION OF THE STOCK, IS THAT THE ASSESSEE WAS NOT ALLOWED CREDIT FOR THE OPENING STOCK. THE EVIDENCE WAS PRODUCED IN THE FORM OF TRADE TAX ASSESSMENT ORDER, COPY OF WHI CH IS AVAILABLE AT PAGES 15 TO 19 OF THE PAPER BOOK. WE NOTED, THE STOCK HAS BEEN ACCEPTED A T RS.8,94,410/-. THE ASSESSMENT ORDER MADE BY TRADE TAX CANNOT BE BRUSHED ASIDE UNLESS AN D UNTIL SOME CONTRARY MATERIAL IS AVAILABLE ON RECORD. THE ASSESSEE WAS NOT MAINTAINING STOCK REGISTER BUT TRADE TAX DEPARTMENT HAS DULY ACCEPTED THE STOCK TO THE EXTENT OF 8,94,410/-. WE ARE OF THE OPINION THAT, TO THE EXTENT THE OPENING STOCK IS AVAILABLE, IT CANNOT BE ADDED TO T HE INCOME OF THE ASSESSEE. IF CREDIT FOR THE OPENING STOCK IS GIVEN THERE WILL BE INCREASE IN TH E STOCK AS COMPARED TO THE EARLIER YEAR TO THE EXTENT OF RS.2,63,846/-. WE ARE OF THE VIEW THAT T HE ASSESSEE IS BOUND TO EXPLAIN THE SOURCE OF INCREASE IN THE STOCK. IF THE STOCK IS SET OFF AGA INST THE INCOME AS REDUCED BY DRAWINGS MADE BY THE ASSESSEE, IT CANNOT BE SAID THAT THE INCREASE I N THE STOCK IS DULY COVERED BY THE NET PROFIT OF THE INCOME EARNED BY THE ASSESSEE . THE PROFIT OF T HE ASSESSEE FROM BUILDING MATERIAL BUSINESS @ 5% ON THE SALES OF RS.3237611/- COMES TO RS.161881/ -,THE ASSESSEE HAS SHOWN INCOME FROM 43 OTHER SOURCES AT RS.45,000/-, THIS INCOME IN OUR OP INION IS NOT SUFFICIENT TO EXPLAIN THE SOURCES OF INVESTMENT IN THE INCREASE OF THE STOCK OF RS.2 63846/-. IT CANNOT BE HELD THAT THE ASSESSEE HAS NOT INCURRED ANY EXPENSE ON PERSONAL DRAWING. IF W E ESTIMATE THE DRAWING AT RS.60,000/-, THE SOURCES AVAILABLE TO MEET THE INCREASE IN THE CLOSI NG STOCK AVAILABLE WILL BE RS.146881/- AND ACCORDING THE INCREASE IN THE STOCK TO THE EXTENT O F RS.116965/- (RS.263846-RS.146881/-) REMAINS UNEXPLAINED AND THEREFORE THE ADDITION TO T HAT EXTENT STAND CONFIRMED OUT OF THE ADDITION MADE ON ACCOUNT OF UNEXPLAINED STOCK FOUND DURING T HE COURSE OF SURVEY. 47. GROUND NO.5 & 6 IN ASSESSEES APPEAL AND GROUND NO.4, 5 & 6 IN REVENUES APPEAL RELATE TO THE COMMON ISSUE RELATING TO ADDITION OF RS.37,9 0,323/- MADE BY THE A.O. AND REDUCED BY THE CIT(A) TO RS.3,54,429/-. THE BRIEF FACTS RELATING T O THIS ADDITION ARE THAT THE A.O. NOTED THAT THE ROUGH CASH BOOK SHOWED THE DEPOSIT IN THE FOLLO WING NAMES AS REPRODUCED IN ANNEXURE-GHA OF THE ASSESSMENT ORDER AND ADDED THE SAME IN THE I NCOME OF THE ASSESSEE AS DETAILED BELOW :- 1) DEPOSITS OF A RS. 14,32,540/- 2) VARIOUS LOTTERIES RS. 11,30,162/- 3) INDO ALWAR RS. 3,25,000/- 4) DEPOSITS OF TAX RS. 3,36,100/- 5) SHARAD KHANDELWAL RS. 30,000/- 6) KMG RS. 60,550/- 8) AND VARIOUS OTHER PEOPLE RS. 4,61,471/- ----------------- RS.37,90,323/- ---------------- 48. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A) A ND STATED THAT THE LOTTERIES ARE NOT ALLOWED IN THE STATE OF U.P. THERE WERE ENTRIES ON BOTH THE SIDES I.E. DEBIT AS WELL AS CREDIT SIDES. ACTUALLY THEY WERE KITTIES CONTRIBUTED BY EACH MEMB ER JOINING A PARTICULAR GROUP. AT THE END OF EACH MONTH OR SUCH OTHER TIME AS THE MEMBERS MAY MU TUALLY DECIDE, THE LOTTERY IS TAKEN OUT AND 44 THE AMOUNT IS GIVEN TO THE PERSON WHO HAS WON THAT KITTY. IT WAS STATED THAT THERE IS NO ELEMENT OF PROFITS OR LOSSES. OTHERWISE ALSO, THESE ARE TH E TRANSACTIONS RELATING TO THE MUTUAL ASSOCIATION. WHATEVER MONEY IS COLLECTED, THE SAME IS GIVEN TO T HE SUCCESSFUL PERSON WHO WON THE KITTY. THUS, THE PRINCIPLE OF MUTUALITY IS INVOLVED AND NO SURPLUS HAS ARISEN IN THESE LOTTERIES. THE THREE ITEMS OF THE ADDITION IN THE ACCOUNTS OF A, S AND KMG OF RS.14,32,540/-, RS.3,26,100/- AND RS.60,550/- RESPECTIVELY REFERS T O THE ASSESSEE (MENTIONED AS A IT STANDS FOR ANIL KHANDELWAL), (S STANDS FOR ASSESSEES FATHER SHRI SHANKER LAL KHANDELWAL) AND KMG STANDS FOR KHANDELWAL MARBLE AND GRANITE) WHOSE PRO PRIETOR IS ASSESSEES BROTHER SHRI RAJ KUMAR KHANDELWAL. IT WAS SUBMITTED THAT THE ROUGH C ASH BOOK WOULD SHOW THAT WHENEVER THERE IS A SURPLUS CASH, IT IS TAKEN TO THE HOME CHEST AC COUNT AND WHENEVER REQUIRED IT IS BROUGHT BACK AND WHOSOEVER BROUGHT THIS AMOUNT BACK HAS MADE ENT RY IN HIS HAND AND IN HIS OWN NAME. 49. THE CIT(A) AS PER PARA NOS. 4.6 TO 4.8 CAME TO THE CONCLUSION THAT THE ASSESSING OFFICER HAS ASKED THE ASSESSEE TO GIVE THE DETAILS OF THE D EPOSITS APPEARING IN THE NAME OF A, S AND DIFFERENT PARTIES AND THE ASSESSEE HAS CHOSEN NOT T O REPLY TO THAT STATING THE MATTER IS MORE THAN 3 YEARS OLD AND HE DOES NOT REMEMBER. SIMILARLY, THE EXPLANATION WITH REGARD TO THE LOTTERY, REGISTRY CHARGES OF RS.20,000/- WAS ALSO CALLED FOR . HOWEVER DESPITE SEEKING TIME, NO EXPLANATION WAS FILED BY THE ASSESSEE. AS THE A.O. HAD ALSO NOT GIVEN THE ASSESSEE THE BASIS FOR ARRIVING AT THE FIGURE OF RS. 37,90,323/-, THE CIT (A) WAS OF THE VIEW THAT ON FACTS IT WAS AGAINST THE PRINCIPLES OF NATURAL JUSTICE. THE CIT(A) ALSO TOOK NOTE OF THE FACT THAT OUT OF 31 ITEMS MENTIONED IN THE ANNEXURE-GH TO THE ASSESSMENT ORDE R, 19 ITEMS REPRESENTED THE DEBIT ENTRIES. LIST OF THESE ITEMS WERE FURNISHED BY THE ASSESSEE WHICH ARE ATTACHED AS ANNEXURE-I WHEREIN THE CIT(A) FOUND THAT IT CONTAINED CERTAIN ITEMS CONTAI NED IN THE LIST FOR EXAMPLE ELECTRICITY BILLS 45 EXPENSES OF RS.8,000/- AND CAR TRIP EXPENSES OF RS. 4,500/- MENTIONED AT ITEMS NO. 29 AND 26 RESPECTIVELY. CIT (A) WAS OF THE VIEW THAT THESE AR E NOT TO BE TREATED AS REPRESENTING INCOME OF THE ASSESSEE AND WERE IN THE NATURE OF DEBIT ENTRIE S. HE FURTHER TOOK NOTE OF THE FACT THAT THE CASE OF THE ASSESSING OFFICER IS NOT THAT ON THE DATES T HESE EXPENSES WERE INCURRED, SUFFICIENT CASH BALANCE WAS NOT AVAILABLE WITH THE ASSESSEE. ACCORD INGLY, THE ASSESSING OFFICER WAS DIRECTED TO GO THROUGH EACH OF THESE ITEMS AND DELETE THAT ADDI TION MADE IN RESPECT OF THESE ITEMS IF THESE REPRESENTED DEBIT ENTRIES. 50. WITH REGARD TO THE CLAIM OF THE ASSESSEE THAT T HESE WERE NOT LOTTERY EXPENSES. THE CIT(A) DIRECTED THE ASSESSING OFFICER TO WORK OUT THE PEAK IN RESPECT OF EACH OF THE LOTTERY AND THE SAME SHOULD BE ADDED AS INCOME BEING IN THE NATURE OF UN EXPLAINED CASH CREDIT. THE PLEA OF THE ASSESSEE THAT COMBINED PEAK SHOULD BE WORKED OUT IN RESPECT OF ALL THE LOTTERIES TOGETHER WAS NOT ACCEPTED BY THE CIT(A) AS THERE WAS NO EVIDENCE IN THE IMPOUNDED DIARY TO INDICATE THAT THESE LOTTERIES WERE INTERCONNECTED WITH EACH OTHER AND T HE CREDIT ENTRY IN RESPECT OF ONE LOTTERY WAS REQUIRED TO BE BALANCED BY DEBIT ENTRY IN RESPECT O F OTHER LOTTERIES AND VISE VERSA. AS REGARDS THE 3 ITEMS REPRESENTING CREDITS IN THE NAME OF A, S AND KMG, HE DIRECTED THE ASSESSING OFFICER TO WORK OUT THE PEAK IN THE NAMES OF THESE PARTIES SEPARATELY. THE CREDIT FOR THE CASH TAKEN HOME FROM THE CASH BOOK, IT WAS DIRECTED CRED IT SHOULD BE GIVEN IN THE HANDS OF A BECAUSE THE CASE BOOK/IMPOUNDED DIARY PERTAINED TO THE ASSESSEE. ACCORDINGLY THE PEAK CREDIT IN THE NAMES OF A, S AND KMG WORKED OUT, WAS DIR ECTED TO BE ADDED TO THE INCOME OF THE ASSESSEE. 46 51. THE LD. A.R. INVITED OUR ATTENTION TO THE ANNEX URE GHA TO THE ASSESSMENT ORDER WHICH SHOWS 31 ITEMS IN RESPECT OF CREDITS IN THE INDIVID UAL ACCOUNTS OF A, S, KMG AND ALSO ALLEGED LOTTERIES. THERE IS OVERWRITING, CORRECTIO NS, SUBSTITUTIONS IN CERTAIN FIGURES. THEREFORE, I T WAS CONTENDED THAT IT WAS NOT POSSIBLE TO WORK OUT THE EXACT AMOUNT BY THE A.O. AND THE MANNER IN WHICH THE SAID FIGURES HAVE BEEN ARRIVED AT BY T HE A.O. THE A.O. WAS REQUESTED VIDE LETTER DATED 09.04.2002 (PAGE 20 OF PB-I), 11.04.2002 (PAG ES 31 OF PB-I) AND VIDE LETTER DATED 18.04.2002 (PAGE 52 OF PB-I) TO FURNISH THE WORKING OF 31 ITEMS MENTIONED IN THE ANNEXURE. THE A.O. SIMPLY STATED THAT THE DETAILS ARE AVAILAB LE IN THE ASSESSMENT ORDER. FOR THIS, OUR ATTENTION WAS DRAWN TO PAGE NO.75, PARA 3 OF PB-II. THUS, IT WAS CONTENDED THAT THE A.O. AVOIDED FURNISHING THE WORKING OF THE BALANCES AS W ORKED OUT BY HIM SO THAT THE ASSESSEE CAN VERIFY THE CORRECTNESS OF THE FIGURE. IT WAS POINT ED OUT THAT THERE ARE SEVERAL ACCOUNTS WHICH ARE DEBIT BALANCES AND HAS BEEN ADOPTED BY THE A.O. AS CREDIT BALANCES AND FOR THIS OUR ATTENTION WAS DRAWN TO PAGE NO.152 OF THE PB-II AND POINTED OUT T HAT THE BALANCE OF RS.3,25,000/- FOR INDU, ALWAR WAS ADOPTED BY THE A.O. AS CREDIT BUT IN FACT THERE WAS DEBIT BALANCE OF RS.3,25,000/-. SIMILARLY, IN THE CASE OF PARASHAR, THE A.O. ADOPTE D RS.5,000/- AS CREDIT WHILE IT WAS DEBIT. THE A.O. HAS DULY VERIFIED AND FOUND THE TOTAL DEBITS E NTRIES AS RS.6,26,925/- WHILE PASSING ORDER U/S.251. DURING THE APPELLATE PROCEEDINGS BEFORE T HE CIT(A), THE ASSESSEE HAS FURNISHED THE STATEMENT SHOWING PEAK CREDITS IN INDIVIDUAL AS WEL L AS CONSOLIDATED ACCOUNTS OF A. S AND KMG I.E. ANIL KUMAR KHANDELWAL, SHANKAR LAL KHAND ELWAL AND KHANDELWAL MARBLES & GRANITE. FOR THIS, OUR ATTENTION WAS DRAWN TO PAGE NOS.159 TO 161 OF PB-II. IT WAS POINTED OUT THAT THE CIT(A) VIDE PARA NOS.4.8 AT PAGES 38 OF TH E ORDER DIRECTED THE A.O. TO ADOPT THE PEAK IN EACH INDIVIDUAL ACCOUNTS. SIMILARLY, IN RESPECT OF LOTTERY ACCOUNTS, THE ASSESSEE SUBMITTED A STATEMENT SHOWING PEAK CREDITS IN RESPECT OF EACH L OTTERY INDIVIDUALLY AS WELL AS ON CONSOLIDATED 47 BASIS. FOR THIS, OUR ATTENTION WAS DRAWN TO PAGE N OS. 153 TO 157 OF THE PB-II. IT WAS CONTENDED THAT SINCE THE REVENUE IS TREATING ALL THE ACCOUNTS BELONGING TO THE ASSESSEE, THE DEPARTMENT SHOULD HAVE TAKEN THE CONSOLIDATED PEAK NOT OF THE PEAK OF THE INDIVIDUAL PERSON SEPARATELY, FOR WHICH RELIANCE WAS PLACED ON THE DECISION IN THE C ASE OF SURENDRA M. KHANDAR VS. ACIT, 76 ITD 121 (MUM.) IN WHICH THE TRIBUNAL HAS STATED AS UNDE R :- THEREFORE, IT WAS TO BE DIRECTED THAT PEAK BE WORK ED OUT BY ARRANGING A TRANSACTION IN THE ACCOUNT DATE-WISE, THEN SUCH ACC OUNT SHOULD BE CONSIDERED FOR CONSOLIDATION AND DATE-WISE BALANCES WOULD HAVE TO BE WORKED OUT. THE PEAK OF ALL THE DEPOSIT SHOULD BE ASCERTAINED. 52. THUS, IT WAS CONTENDED THAT THE A.O. BE DIRECTE D TO TAKE CONSOLIDATED PEAK WHICH IS AVAILABLE AT ASSESSEES PAPER BOOK. THUS, IT WAS V EHEMENTLY CONTENDED THAT THE ADDITION CAN BE SUSTAINED TO THE EXTENT OF CONSOLIDATED PEAK. 53. LD. D.R., ON THE OTHER HAND, REFEREED TO THE AN NEXURE-GHA TO THE ASSESSMENT ORDER AND POINTED OUT THAT THE AMOUNT NOTED IN THE NOTE BOOK REPRESENTS ONLY CREDIT ITEMS. THIS FACT HAS BEEN CLEARLY MENTIONED BY THE A.O. ACCORDINGLY, HE HAS SUMMARIZED ALL THESE ITEMS IN GROUPING AND IN 31 ITEMS AS MENTIONED IN THE DIARY. ALL THE SE ITEMS RELATE TO THE PERIOD 01.05.1998 TO 27.01.1999 I.E. FOR THE FINANCIAL YEAR ENDED ON 31 ST MARCH, 1999. THE ONUS IS ON THE ASSESSEE TO PROVE THAT THESE ITEMS CONSIST OF NOT ONLY THE CRED IT BUT ALSO THE DEBIT ITEMS. THE CIT(A) WAS NOT CORRECT IN DIRECTING THE A.O TO WORK OUT THE PEAK O F THE ITEMS IN THE DIARY. THE ONUS IS ON THE ASSESSEE TO EXPLAIN THE SOURCE OF THESE ITEMS AS AR E AVAILABLE IN THE DIARY FOUND DURING THE COURSE OF SURVEY. 48 54. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS ALONG WITH THE ORDERS OF THE TAX AUTHORITIES BELOW AS WELL AS THE MATERIAL PLACED BE FORE US. WE NOTED THAT THE A.O. MADE THE ADDITION OF RS.37,90,323/- IN RESPECT OF 31 ITEMS P URPORTED TO BE THE CREDIT IN THE ACCOUNT OF A, S, KMG AND ALSO ALLEGED LOTTERIES. ALL THESE I TEMS HAVE BEEN SHOWN IN ANNEXURE-GHA TO THE ASSESSMENT ORDER. THE ASSESSEE VIDE HIS LETTER DAT ED 09.04.2002, COPY OF WHICH IS AVAILABLE AT PAGE NO.20 OF THE PB-I, ASKED THE A.O. TO GIVE THE DETAILS REGARDING ARRANGING OF RS.37,90,323/-. FURTHER, THE ASSESSEE HAS ASKED THE A.O. VIDE LETTE R DATED 11.04.2002 AND 18.04.2002, COPIES OF WHICH ARE AVAILABLE AT PAGE NOS.31 AND 52 OF THE PB -I, TO PROVIDE HIM THE DETAILS IN RESPECT OF SUM OF RS.37,90,323/- ALONG WITH EVIDENCES BUT WE W ERE SURPRISED TO NOTE THAT NO SUCH DETAILS WERE EVER SUPPLIED TO THE ASSESSEE BY THE A.O., RAT HER IT WAS POINTED OUT THAT ALL THESE DETAILS ARE AVAILABLE IN THE ASSESSMENT ORDER. IN OUR OPINION, IF THE A.O. HAS MADE THE ADDITION ON THE BASIS OF THE MATERIAL BEFORE HIM, HE IS BOUND TO SUPPLY C OPY OF THE MATERIAL SO THAT THE ASSESSEE MAY REBUT THE ORDER OF THE A.O. IN THE ABSENCE OF THE MATERIAL BEING SUPPLIED, THE ADDITION MADE BY THE A.O. WILL REMAIN TO HAVE BEEN MADE AT THE BACK OF THE ASSESSEE. THE ASSESSEE HAS ALREADY RECEIVED COPY OF THE ASSESSMENT ORDER. NO DOUBT, T HE DETAILS OF THE AMOUNTS IN THE SHAPE OF 31 ITEMS ARE AVAILABLE THEREIN BUT THE ASSESSMENT ORDE R DOES NOT CONTAIN THE MATERIAL OR THE EVIDENCE ON THE BASIS OF WHICH THESE 31 ITEMS HAVE BEEN WORKED OUT BY THE A.O. WE NOTED THAT THE A.O. HAS PASSED THE CONSEQUENTIAL ORDER ON THE DIRECTIONS OF THE CIT(A) BY WHICH THE CIT(A) HAS ASKED THE A.O. TO GIVE THE CREDIT IN RESPECT OF 19 DEBIT ENTRIES OUT OF THE 31 ITEMS AS HAS BEEN TAKEN BY THE ASSESSEE BEFORE US IN GROUND NO.4. TH E A.O. HAS DULY VERIFIED THESE ITEMS AND FOUND THE DEBIT ENTRIES TO THE EXTENT OF RS.6,26,925/-. THE ADDITION TO THAT EXTENT WAS DELETED BY HIM VIDE ORDER DATED 23.07.2003. 49 55. THE LD. D.R. EVEN THOUGH CHALLENGED THE DIRECTI ONS OF THE CIT(A) BUT NO COGENT MATERIAL OR EVIDENCE WAS SUBMITTED BEFORE US WHICH MAY POINT THAT OUT OF THE 31 ITEMS ADDED BY THE A.O. 19 ITEMS ARE NOT THE DEBIT ENTRIES. WE, THEREFORE, CONFIRM THE ORDER OF THE CIT(A) ON THIS ISSUE. THE GROUND NO.4 TAKEN BY THE ASSESSEE ALSO, IN OUR OPINION, HAS BECOME INFRUCTUOUS AND STANDS DISMISSED AS INFRUCTUOUS AS THE A.O. HAS ALREADY AL LOWED RELIEF TO THE ASSESSEE FOR A SUM OF RS.6,26,925/- IN THE ORDER PASSED UNDER SECTION 251 OF THE ACT DATED 23.07.2003. 56. THE NEXT ISSUE INVOLVED IN THESE GROUNDS RELATE TO THE ADDITION MADE ON ACCOUNT OF LOTTERIES. EVEN THOUGH THE ASSESSEE HAS TAKEN GROU ND NO.5(A) STATING THEREIN THAT THERE WERE NO LOTTERIES BUT ONLY KITTIES TO WHICH THE PLEA OF MUT UALITY APPLIES BUT AT THE TIME OF HEARING HE DID NOT PRESS THIS CONTENTION. THEREFORE, THIS GROUND TO THAT EXTENT STANDS DISMISSED. 57. SO FAR THE CONTENTION OF THE ASSESSEE THAT THE CIT(A) SHOULD HAVE DIRECTED THE A.O. TO TAKE THE CUMULATIVE PEAK IN RESPECT OF ALL THE LOTT ERIES. WE HAVE GONE THROUGH THE CHART SUBMITTED BY THE ASSESSEE IN THE PAPER BOOK GIVING CUMULATIVE PEAK CREDIT OF ALL THE LOTTERIES. WE NOTED THAT THE A.O. HAS NOT WORKED OUT THE PEAK CREDIT IN RESPECT OF EACH OF THE LOTTERIES SEPARATELY BUT HAS SUSTAINED THE ADDITION IN RESPEC T OF PEAK CREDIT TO THE EXTENT OF RS.41,711/- IN THE ORDER PASSED UNDER SECTION 251 DATED 23.07.2003 . AFTER VERIFYING THE PEAK CREDIT, WE DO NOT AGREE WITH THE GROUND TAKEN BY THE REVENUE THAT THE TOTAL OF ALL THE LOTTERIES HAS TO BE TREATED AS THE UNDISCLOSED INCOME OF THE ASSESSEE. IN OUR OPI NION, THE CIT(A) WAS NOT CORRECT. WE ARE OF THE VIEW THAT SINCE THE ASSESSEE WAS CONDUCTING VAR IOUS LOTTERIES, THE PEAK CREDIT IN RESPECT OF ALL THE LOTTERIES TAKEN TOGETHER SHOULD HAVE WORKED OUT AND THE ADDITION SHOULD BE SUSTAINED TO THAT EXTENT. WE HAVE GONE THROUGH THE ORDER PASSED UNDE R SECTION 251 OF THE ACT BY THE A.O. AS WELL 50 AS THE CONSOLIDATED PEAK CREDIT CHART AS WORKED OUT BY THE ASSESSEE AND WE NOTED THAT THE A.O. HAS SUSTAINED THE ADDITION IN RESPECT OF THE PEAK C REDIT AS WORKED OUT ON THE BASIS OF ALL THE LOTTERIES TAKEN TOGETHER NOT ON THE BASIS OF EACH O F THE LOTTERIES SEPARATELY. WE, THEREFORE, APPROVE THE ACTION OF THE A.O. IN THE ORDER PASSED UNDER SECTION 251 OF THE ACT IN THIS REGARD. LD. A.R. WAS ALSO FAIR ENOUGH TO CONCEDE BEFORE US THAT THE PEAK CREDIT TAKEN TOGETHER IN RESPECT OF ALL THE LOTTERIES WILL NOT BE LESS THAN RS.41,71 1/-. WE, THEREFORE, DISMISS THE GROUND NO.5 OF THE ASSESSEE AS WELL AS GROUND NO.5 OF THE REVENUE. 58. NOW COMING TO GROUND NO.6 TAKEN BY THE ASSESSEE AS WELL AS BY THE REVENUE WHICH RELATE TO THE ADDITION MADE IN RESPECT OF THE CREDIT IN TH E ACCOUNTS OF A, S AND KMG, WE NOTED THAT THE A.O. HAS MADE THE ADDITION TO THE EXTENT OF RS. 14,32,540/- IN RESPECT OF A, RS.3,36,100/- (CORRECT FIGURE IS RS.3,26,100/-) IN RESPECT OF S AND RS.60,550/- IN RESPECT OF KMG. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). THE CIT (A) HAS GIVEN THE DIRECTIONS TO THE A.O. TO WORK OUT THE PEAK CREDIT SEPARATELY IN RESPECT OF A, S AND KMG AND THE ADDITION TO THAT EXTENT BE SUSTAINED. THE REVENUE HAS CHALLENGED TH E DIRECTIONS. THE GRIEVANCE OF THE ASSESSEE IS ONLY TO THE EXTENT THAT PEAK CREDIT SHOULD NOT HAVE WORKED OUT SEPARATELY IN RESPECT OF THESE THREE ACCOUNTS BUT SHOULD HAVE BEEN WORKED OUT ON CUMULAT IVE BASIS. THE ADDITION SHOULD HAVE BEEN SUSTAINED ONLY IN RESPECT OF PEAK AS MAY BE WORKED OUT ON THE BASIS OF THE CUMULATIVE. 59. WE HAVE GONE THROUGH THE ORDER OF THE A.O. PASS ED UNDER SECTION 251 IN CONSEQUENCE TO THE ORDER OF THE CIT(A). WE NOTED THAT THE A.O. HA S DELETED THE ADDITION OF RS.17,20,518/- OUT OF THE ADDITION OF RS.18,19,190/-. THE ADDITION ONLY TO THE EXTENT OF RS.98,672/- WAS SUSTAINED BY THE A.O. SO FAR AS THE ISSUE CONCERNING WHETHER TH E TOTAL CREDIT OF ALL THE THREE PARTIES SHOULD BE 51 SUSTAINED OR THE PEAK CREDIT SHOULD BE SUSTAINED. IN OUR OPINION, THIS IS THE SETTLED LAW THAT IF THE ASSESSEE IS HAVING A REGULAR ACCOUNT WHICH CONTAINS DEPOSITS AND WITHDRAWALS FROM THE PARTIES WHICH THE ASSESSEE COULD NOT PROVE, THE PEAK IN RES PECT OF ALL THESE PARTIES TAKEN TOGETHER SHOULD BE WORKED OUT BECAUSE THE FUNDS BEING SHOWN AS RECE IVED FROM ONE PARTY MIGHT HAVE COME THROUGH THE WITHDRAWAL MADE FROM THE OTHER PARTIES. THE ASSESSEE, IN OUR OPINION, WILL BE ENTITLED FOR THE SET OFF OF THE WITHDRAWAL. IT IS ONLY THE PEAK WHICH MAY BE WORKED OUT ON THE BASIS OF THE DAY TODAY CHART THAT CAN BE ADDED INTO THE INCOME OF THE ASSESSEE. WE, THEREFORE, DO NOT AGREE WITH THE CONTENTION OF THE REVENUE THAT T HE TOTAL AMOUNT OF CREDIT OF ALL THE THREE PARTIES BE ADDED IN THE INCOME OF THE ASSESSEE NOT THE PEAK. SO FAR AS THE QUESTION WHETHER THE PEAK SHOULD BE WORKED OUT SEPARATELY IN RESPECT OF EACH OF THE THREE ACCOUNTS, WE DO NOT AGREE WITH THE DIRECTION OF THE CIT(A). IN OUR OPINION, WHEN FUNDS ARE COMING TO A COMMON POOL IN THE NAME OF VARIOUS PARTIES, THE CUMULATIVE PEAK SH OULD HAVE BEEN WORKED OUT AND THEN ONLY CUMULATIVE PEAK WHICH CAN BE ADDED IN THE INCOME OF THE ASSESSEE. WE HAVE ALSO GONE THROUGH THE DECISION AS RELIED BY THE LD. A.R. WE NOTED TH AT IN THE CASE OF SURENDRA M. KHANDAR VS. ACIT, 76 ITD 121 (MUM.), THE MUMBAI BENCH OF THE TR IBUNAL HAS ALSO TAKEN THE SAME VIEW. THE LD. A.R. EVEN THOUGH FURNISHED IN THE PAPER BOO K CHART SHOWING THE CONSOLIDATED PEAK OF ALL THE THREE ACCOUNTS BUT HE COULD NOT CONVINCE US THA T THE PEAK IN THE CONSOLIDATED CHART TAKEN TOGETHER IN RESPECT OF ALL THE THREE ACCOUNTS IS LE SS THAN RS.98,672/- AS HAS BEEN CONFIRMED BY THE A.O. AFTER VERIFYING THE RECORD OF THE ASSESSEE IN THE ORDER PASSED UNDER SECTION 251 ON THE DIRECTIONS OF THE CIT(A). HE WAS ALSO FAIR ENOUGH TO CONCEDE THAT THE PEAK CREDIT TAKEN TOGETHER IN RESPECT OF ALL THESE THREE ACCOUNTS WILL NOT BE LESS THAN RS.98,672/-. TO THAT EXTENT, WE CONFIRM THE ACTION OF THE A.O. PASSED IN THE ORDER UNDER SECTION 251 OF THE ACT. WE, ACCORDINGLY, DISMISS THE GROUND NO.6 TAKEN BY THE R EVENUE WHILE PARTLY ALLOW THE GROUND OF THE 52 ASSESSEE BY AMENDING THE DIRECTIONS OF THE CIT(A) T HAT THE A.O. SHOULD WORK OUT THE PEAK CREDIT IN THE THREE ACCOUNTS OF A, S AND KMG ON CUMU LATIVE BASIS AND TO THAT EXTENT THE ADDITION IS SUSTAINED. THIS DISPOSES OF GROUND NOS.4, 5 & 6 IN ASSESSEES APPEAL AS WELL AS GROUND NOS.4, 5 & 6 IN REVENUES APPEAL. 60. GROUND NO.7 IN ASSESSEES APPEAL AND REVENUES APPEAL RELATE TO THE ADDITION MADE IN RESPECT OF THE UNEXPLAINED INVESTMENT IN THE PURCHA SE OF PROPERTY. THE BRIEF FACTS RELATING TO THIS ADDITIONS ARE THAT THE A.O. INTERPRETED ON THE BASI S OF THE PAPERS FOUND DURING THE COURSE OF SURVEY THAT THE ASSESSEE HAD INCURRED RS.20,000/- A S REGISTRATION CHARGES. HE ACCORDINGLY ESTIMATED THAT THE ASSESSEE WOULD HAVE INVESTED A S UM OF RS.2,00,000/- FOR THE PURCHASE OF LAND AND ACCORDINGLY THE ADDITION OF RS.2,20,000/- WAS M ADE. WHEN THE MATTER WENT BEFORE THE CIT(A), THE CIT(A) SUSTAINED THE ADDITION TO THE EX TENT OF RS.20,000/- AS ACCORDING TO HIM THERE WAS NO NARRATION IN THE IMPUGNED DIARY ABOUT THE IN VESTMENT MADE IN THE PROPERTY. 61. BEFORE US, THE LD. A.R. VEHEMENTLY CONTENDED TH AT ON THE BOTTOM OF THE PAGE IN THE SEIZED DIARY THERE IS NOTHING WHICH STATES THAT THE ASSESS EE HAS PAID RS.20,000/- ON 18.12.1998 FOR THE REGISTRATION CHARGES. THE NARRATION ITSELF SHOWS T HAT THE AMOUNT OF RS.20,000/- RECEIVED BACK WHICH WAS EARLIER GIVEN FOR REGISTRATION. THUS, IT WAS CONTENDED THAT BY NO STRETCH OF IMAGINATION THE AMOUNT REPRESENTS INVESTMENT, LIABLE TO BE ADDE D IN THE HANDS OF THE ASSESSEE. IN RESPECT OF THE DELETION OF ADDITION OF RS.2,00,000/-, RELIANCE WAS PLACED ON THE ORDER OF THE CIT(A). THE LD. D.R., ON THE OTHER HAND, SUPPORTED THE ORDER OF THE A.O. 53 62. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS ALONG WITH THE ORDERS OF THE TAX AUTHORITIES BELOW AND THE DOCUMENTS SUBMITTED BEFOR E US. WE FIND FORCE IN THE SUBMISSION OF THE LD. A.R. IF THE NARRATION ITSELF SHOWS THAT TH E AMOUNT OF RS.20,000/- WAS RECEIVED BACK WHICH WAS EARLIER GIVEN FOR REGISTRATION, THIS WILL NOT T ANTAMOUNT TO THE UNEXPLAINED INVESTMENT/EXPENDITURE INCURRED BY THE ASSESSEE. T HEREFORE, NO ADDITION UNDER SECTION 69 CAN BE MADE. 63. SO FAR AS THE DELETION OF THE ADDITION OF RS.2, 00,000/- IS CONCERNED , WE AGREE WITH THE FINDING OF THE CIT(A) THAT NO INVESTMENT HAS BEEN M ADE BY THE ASSESSEE FOR THE SUM OF RS.2,00,000/-. IN THE ABSENCE OF PROOF OF INVESTME NT FOR WHICH THE ONUS LIES ON THE DEPARTMENT, THE ADDITION CANNOT BE MADE. WE, ACCORDINGLY, SUST AIN THE DELETION OF RS.2,00,000/- AND DELETE THE SUM OF RS.20,000/- AS SUSTAINED BY THE CIT(A). ACCORDINGLY, GROUND NO.7 OF THE ASSESSEE IS ALLOWED WHILE THAT OF THE REVENUE STANDS DISMISSED. 64. GROUNDNO.8 IN REVENUES APPEAL RELATES TO THE D ELETION OF THE ADDITION OF RS.3,00,000/- MADE BY THE A.O. THE BRIEF FACTS RELATING TO THIS GROUND ARE THAT THE A.O. NOTED THAT THE ASSESSEE HAS DISCLOSED AN INCOME OF RS.45,000/- FRO M OTHER SOURCES. THEREFORE, HE WAS OF THE VIEW THAT THE ASSESSEE MIGHT HAVE INVESTED A SUM OF RS.3,00,000/- AS WITHOUT MAKING ANY INVESTMENT THE ASSESSEE COULD NOT HAVE EARNED THE I NCOME. HE ACCORDINGLY MADE THE ADDITION OF RS.3,00,000/-. WHEN THE MATTER WENT BEFORE THE CIT (A), THE CIT(A) DELETED THE ADDITION IN THE ABSENCE OF ANY EVIDENCE BEING BROUGHT ON RECORD BY THE A.O. 54 65. THE LD. D.R. RELIED ON THE ORDER OF THE A.O. WH ILE THE LD. A.R. POINTED OUT THAT THE ASSESSEE HAS DECLARED INCOME OF RS.45,000/- FROM JO B WORK. THE ASSESSEE ENTRUSTED THE WORK OF CUTTING, POLISHING ETC. OF GRANITE STONES AND OTHER SIMILAR JOB WORKS TO KARIGARS. IN THIS PROCESS, IF THE LABOUR ASKS FOR A CERTAIN AMOUNT PER SQUARE FEET, THE CHARGES QUOTED TO THE CUSTOMER ARE SLIGHTLY MORE THAN THAT DEMANDED BY THE LABOUR AND THE DIFFERENCE IS RETAINED BY THE ASSESSEE AND THIS INCOME HAS BEEN SHOWN BY THE ASSESSEE AS ITS I NCOME. THE ASSESSEE HAS NOT INVESTED ANYTHING. IN THIS REGARD, RELIANCE WAS PLACED ON T HE ORDER OF CIT(A). 66. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS ALONG WITH THE ORDERS OF THE TAX AUTHORITIES BELOW. WE NOTED THAT THE ADDITION HAS BEEN MADE BY THE A.O. MERELY ON THE BASIS OF SUSPICION, PRESUMING THAT THE ASSESSEE WOULD HAVE M ADE THE INVESTMENT FOR EARNING A SUM OF RS.45,000/-. THERE HAD BEEN SURVEY. NO EVIDENCE O R MATERIAL SHOWING THE INVESTMENT WAS FOUND OR BROUGHT ON RECORD. IN OUR OPINION, NO INT ERFERENCE IS CALLED FOR IN THE ORDER OF THE CIT(A). THE CIT(A) HAS RIGHTLY DELETED THE ADDITIO N. THUS, GROUND NO.8 TAKEN BY THE REVENUE STANDS DISMISSED. 67. GROUND NO.9 IN THE REVENUES APPEAL AS WELL AS GROUND NO.13 IN ASSESSEES APPEAL RELATE TO THE ADDITION MADE AND SUSTAINED IN RESPECT OF TH E MARRIAGE EXPENSES. THE BRIEF FACTS RELATING TO THIS GROUND ARE THAT THE A.O. NOTED FROM PAPER AT S L. NO.5 FOUND DURING THE COURSE OF SURVEY THAT IT CONTAINS THE DETAILS OF MARRIAGE EXPENSES AMOUNT ING TO RS.5,51,000/-. WHEN QUESTIONED, THE ASSESSEE REPLIED THAT THIS PAPER DOES NOT BELONG TO HIM OR HIS FAMILY. AGAIN ON 14.03.2002, IN THE STATEMENT THE ASSESSEE REITERATED THE SUBMISSION TH AT THIS PAPER DOES NOT BELONG TO HIM OR HIS FAMILY BUT THE A.O. TREATED THE PAPER AS BELONGING TO THE ASSESSEE AND MADE THE ADDITION OF 55 RS.5,51,000/- AS UNDISCLOSED INCOME OF THE ASSESSEE BY OBSERVING THAT SINCE THE PAPER WAS FOUND FROM THE BUSINESS PREMISES OF THE ASSESSEE, THEREFO RE, IT IS INCUMBENT UPON THE ASSESSEE TO TELL HIM THAT THE PAPER DOES NOT BELONG TO HIM OTHERWISE THE PAPER WILL BE DEEMED TO HAVE BELONGED TO THE ASSESSEE. THE ASSESSEE WENT IN APPEAL BEFOR E THE CIT(A). THE ASSESSEE CONTENDED THAT THE CORRECT TOTAL OF THE ITEMS ARE RS.2,91,000/-. IN T HE STATEMENT RECORDED ON 28.01.1999 AND 14.03.2002, IN RESPONSE TO QUESTION NOS. 4 & 9, THE ASSESSEE HAS CLEARLY POINTED OUT THAT THIS PAPER NEITHER RELATES TO HIM NOR TO ANY OF HIS FAMI LY MEMBERS. AFFIDAVIT TO THAT EXTENT WAS ALSO FILED. THE CIT(A) WAS NOT SATISFIED WITH THE EXPLA NATION OF THE ASSESSEE BUT HE WAS OF THE VIEW THAT THE TOTAL OF THE EXPENSES WERE RS.2,91,000/- A ND ACCORDINGLY HE REDUCED THE ADDITION TO RS.2,91,000/-. AGAINST THE DELETION OF THE ADDITIO N OF RS.2,60,000/- THE REVENUE IS IN APPEAL WHILE AGAINST SUSTENANCE OF THE ADDITION OF RS.2,91 ,000 THE ASSESSEE IS IN APPEAL BEFORE US. 68. LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE THE CIT(A) AND POINTED OUT THAT THERE WAS NO MARRIAGE IN THE FAMILY OF THE ASSESSEE . TH E ASSESSEE HAS GIVEN AFFIDAVIT TO THIS EFFECT BEFORE THE CIT(A) WHICH IS APPEARING AT PAGE NO.88 OF THE PB-I.. IT WAS ALSO SUBMITTED THAT IN THE STATEMENT RECORDED ON 28.01.1999 AND 14.03.2002 ALSO THE ASSESSEE HAS CLEARLY STATED THAT THE PAPER DOES NOT BELONG TO THE ASSESSEE OR HIS FAMILY MEMBERS. RELIANCE WAS PLACED ON THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF NEM CHAND DAGA VS. ACIT, 1 SOT 515 (DEL) AND THAT OF DRA. C. BALKRISHNA NAIYAR VS. CIT, 103 TAXMAN 242 (KER.) IN WHICH IT WAS HELD THAT THE ENTRY FOUND IN A LOOSE PAPER CANNOT H AVE ANY AUTHENTICITY OR EVIDENTIARY VALUE. IT DOES NOT CONTAIN EITHER THE NAME OF THE ASSESSEE OR ANY DATE HAS BEEN MENTIONED THEREIN. 56 69. THE LD. D.R., ON THE OTHER HAND, CONTENDED FROM THE COPY OF THE LOOSE PAPER THAT THE PAPER CONTAINS THE DETAIL OF THE MARRIAGE EXPENSES. THE TOTAL OF THE ITEMS IN THE PAPER COMES TO RS.5,51,000/- AND NOT 2,91,000/-. THE ONUS IS ON T HE ASSESSEE TO PROVE THAT THE PAPER DOES NOT BELONG TO HIM AND HE SHOULD ALSO POINT OUT TO WHOM THE PAPER BELONGS AS THE PAPER HAS BEEN FOUND FROM HIS POSSESSION. 70. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ON AND PERUSED THE MATERIAL ON RECORD ALONG WITH THE ORDERS OF THE TAX AUTHORITIES BELOW. THE ASSESSMENT BEFORE US RELATES TO THE A.Y.1999-2000. THE SURVEY IN THE CASE OF THE ASSES SEE WAS TAKEN PLACE ON 21.08.1998 AND DURING THE COURSE OF SURVEY PAPER WAS SEIZED FROM T HE POSSESSION OF THE ASSESSEE. AT THE TIME OF SURVEY, STATEMENT OF THE ASSESSEE WAS RECORDED AND THE ASSESSEE DENIED THAT THE PAPER BELONGED TO HIM OR HIS FAMILY MEMBERS. WE NOTED FROM THE COPY OF THE PAPER THAT IN THE PAPER NEITHER ANY DATE NOR THE NAME OF THE ASSESSEE IS MENTIONED. EV EN THERE IS NO ALLEGATION OF THE DEPARTMENT THAT THE PAPER IS IN THE HANDWRITING OF THE ASSESSE E OR HIS FAMILY MEMBERS. THERE WAS NO PRESUMPTION UNDER SECTION 133A AS IS AVAILABLE TO T HE DEPARTMENT IN THE CASE OF SEARCH TAKEN PLACE UNDER SECTION 132. IN THE CASE OF SEARCH, TH ERE IS PRESUMPTION AVAILABLE TO THE DEPARTMENT UNDER SECTION 132(4). EVEN THOUGH THE PRESUMPTION IS AVAILABLE TO THE DEPARTMENT UNDER SECTION 292C WHICH WAS INSERTED BY THE FINANCE ACT 2007 W.E .F. 01.10.1975, EVEN IN CASE OF SURVEY ALSO BUT SUCH PRESUMPTION IS NOT CONCLUSIVE AND IS REBUT TABLE. EVEN SECTION 292C WAS BROUGHT INTO STATUTE BY THE FINANCE ACT 2007 ALTHOUGH WITH RETRO SPECTIVE EFFECT BUT THE SAME COULD NOT HAVE BEEN INVOKED BY THE A.O. AS THE ASSESSMENT ORDER IN THIS CASE HAS BEEN PASSED MUCH PRIOR TO 01.04.2007 I.E. ON 22.03.2002. THE ASSESSEE EVEN T HOUGH SUBMITTED AFFIDAVIT, THE AFFIDAVIT HAS BEEN FILED BEFORE THE CIT(A) NOT BEFORE THE AO. TH E CIT(A), IN OUR OPINION, BEFORE REJECTING THE 57 AFFIDAVIT, SHOULD HAVE CROSS-EXAMINED THE ASSESSEE AS HE HAS CO-TERMINUS JURISDICTION WITH THE A.O. IT IS NOT THE CASE WHERE THE A.O. HAS NOT ADM ITTED THE AFFIDAVIT UNDER RULE 46A OF THE INCOME-TAX RULES. EVEN, NO SUCH GROUND HAS BEEN TA KEN BY THE REVENUE. UNDER THESE FACTS AND CIRCUMSTANCES, THE CONTENTS OF THE AFFIDAVIT CANNOT BE REJECTED UNTIL AND UNLESS THE DEPARTMENT HAS CROSS-EXAMINED THE ASSESSEE. IN THE AFFIDAVIT, IT IS CATEGORICALLY STATED THAT THERE HAD BEEN NO MARRIAGE DURING THE IMPUGNED A.Y. IN HIS FAMILY. W E, THEREFORE, ARE OF THE VIEW THAT THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F MEHTA PARIK & CO. VS. CIT, 30 ITR 594 (SC) WILL CLEARLY BE APPLICABLE. WE, ACCORDINGLY, DELETE THE ADDITION. THUS, THE GROUND NO.9 TAKEN BY THE REVENUE STANDS DISMISSED WHILE GROUND NO.13 TAKEN BY THE ASSESSEE STANDS ALLOWED. 71. IN THE RESULT, BOTH THE APPEALS ARE PARTLY ALLO WED. (ORDER PRONOUNCED IN THE OPEN COURT ON 27.08.2010). SD/- SD/- (R.K. GUPTA) (P.K. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: AGRA DATE: 27 TH AUGUST, 2010. PBN/* COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT BY ORDER 3. CIT CONCERNED 4. CIT (APPEALS) CONCERNED 5. DR, ITAT, AGRA BENCH, AGRA 6. GUARD FILE ASSIST ANT REGISTRAR INCOME-TAX APPELLATE TRIBUNAL, AGRA TRUE COPY