SHRI KANHA RAM AGARWAL, Jaipur V. DCIT, Jaipur

ITA 176/JPR/2012

• Counselvise Citation: 17623114 RSA 2012
• Duration Of Justice: 2 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 23-11-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 27-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K KHANDELWA
• Assessee Lawyers: S L PODDAR
• Keywords: Unexplained investment; Gift; Income from undisclosed sources; Document seized; Opportunity of being heard; Earning of tax free income; Additional evidence; Reasonable cause
• Section: 133A; 153A; 14A; 131; 69; 132; 10

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH, JAIPUR ( BEFORE SHRI HARI OM MARATHA AND SHRI N.K. SAINI ) ITA NO. 176/JP/2012 ASSESSMENT YEAR: 2003-04 PAN: ABSPA 0791 P SHRI KANHA RAM AGARWAL VS. THE DCIT 120-E, GOVIND NAGAR CENTRAL CIRCLE-3 DUSHERRA KOTHI, AMER ROAD,JAIPUR JAIPUR (APPELLANT) (RESPONDENT) ITA NO. 323/JP/2012 ASSESSMENT YEAR: 2003-04 PAN: ABSPA 0791 P THE DCIT VS. SHRI KANHA RAM AGARWAL CENTRAL CIRCLE-3 120-E, GOVIND NAGAR JAIPUR DUSHERRA KOTHI, AMER ROAD,JAIPUR (APPELLANT) (RESPONDENT) ITA NO. 177/JP/2012 ASSESSMENT YEAR: 2009-10 PAN: ABSPA 0791 P SHRI KANHA RAM AGARWAL VS. THE DCIT 120-E, GOVIND NAGAR CENTRAL CIRCLE-3 DUSHERRA KOTHI, AMER ROAD,JAIPUR JAIPUR (APPELLANT) (RESPONDENT) 2 ASSESSEE BY : SHRI S.L.PODDAR DEPARTMENT BY : SHRI A.K. KHANDELWA DATE OF HEARING : 29.01.2014. DATE OF PRONOUNCEMENT : 07.03 .2014 ORDER PER HARI OM MARATHA, J.M. THE ABOVE CAPTIONED APPEALS ARE BEING DISPOSED OFF BY A COMMON ORDER. FOR THE A.Y. 2003-04, BOTH THE PARTIES ARE IN APPEAL AND FOR THE A.Y. 2009-10 ONLY ASSESSEE IS IN APPEAL. ITA NO.176/JP/2012 ASSESSEE & ITA NO.323/JP/2012- REVENUE (A.Y. 2003-04) 2.0 THESE ARE THE CROSS APPEALS FILED AGAINST THE O RDER OF THE LD CIT(A), CENTRAL, JAIPUR DATED 31-01-2012 FOR THE A.Y. 2003- 04. 2.1 BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE AS AN INDIVIDUAL DERIVES HIS INCOME FROM HOUSE PROPERTY, CAPITAL GAIN AND FROM OTHER SOURCES. FOR THE A.Y. 2003-04, THE ASSESSEE H AD FILED HIS RETURN OF INCOME [ROI] ON 30-11-2004 DECLARING TOTAL INCOME O F RS. 1,85,840/-. THEREAFTER, A SEARCH U/S 132 OF THE INCOME-TAX ACT, 1961 (THE ACT FOR SHORT) WAS CONDUCTED ON 27-08-2008 IN HIS CASE. DURING SEA RCH, VARIOUS ASSETS/ BOOKS OF ACCOUNT AND DOCUMENTS WERE FOUND AND SEIZE D AS PER ANNEXURE PREPARED. ACCORDINGLY, A NOTICE U/S 153A OF THE ACT WAS ISSUED ON 19-02- 2009 FOR THE A.YS. 2003-04 TO 2008-09. IN COMPLIANC E THEREOF, THE ASSESSEE 3 FILED THE RETURN OF INCOME FOR THE A.Y. 2003-04 ON 26-10-2009 DECLARING TOTAL INCOME OF RS. 2,26,090/-. THE ASSESSEE HAS CL AIMED INCOME TO THE TUNE OF RS. 82,63,942/- AS EXEMPT U/S 10 OF THE ACT REPR ESENTING PROFIT FROM FIRM M/S. CARPET PALACE AT RS. 76,01,442/- AND INTEREST ON TAX FREE BOND AT RS. 6,62,500/-. THE ASSESSEE WAS REQUIRED TO FURNISH TH E EVIDENCE REGARDING AVAILABILITY OF CASH AMOUNT OF RS. 6,86,083/-.DURIN G THE YEAR, THE ASSESSEE HAS PURCHASED THE KVPS OF RS. 1.60 LACS AND GOLD O RNAMENTS OF RS. 43,895/- OUT OF CASH BALANCE AVAILABLE WITH HIM. HE STATED T HAT HE HAD OPENING CASH BALANCE OF RS. 6,86,063/- ON 01-04-2002 AND DURING THIS YEAR, HE RECEIVED RS. 7.20 LACS CASH FROM CARPET PALACE. THUS THE ASS ESSEE STATED THAT THE CASH STANDS FULLY EXPLAINED. IN SUPPORT OF THIS, THE CAS H BOOK WAS ALSO FILED. DURING SEARCH CERTIFICATE OF KVPS WERE FOUND FROM T HE RESIDENCE OF THE ASSESSEE IN VARIOUS NAMES. THE GOLD JEWELLERY VALUE D AT RS. 39,79,600/- WHICH INCLUDED THE JEWELLERY OF FAMILY OF SHRI RAM KUMAR AGARWAL AND SHRI SATISH AGARWAL, BOTH YOUNGER BROTHER OF THE AS SESSEE, WAS FOUND. OUT OF TOTAL CERTIFICATES OF KVPS, CASH INVESTMENT OF RS. 1.60 LACS WAS MADE FOR ACQUISITION OF KVPS BY THE ASSESSEE IN OWN ACCOUNT AND KVPS OF RS. 2.00 LACS WERE PURCHASED IN THE NAME OF SHRI RAJESH J AN D OF RS. 3.00 LACS IN THE NAME OF SMT.RITU DURING THE F.Y. 2002-03.THE ASSESS EE HAS SHOWN ACQUIRED GOLD ORNAMENTS OF RS. 18,68,871/- PRIOR TO 01-04-20 02. THE STATEMENT OF 4 SHRI KANHA RAM AGARWAL ,I.E. THE ASSESSEE , WAS REC ORDED DURING SEARCH ON 27-08-2008 U/S 132(4) OF THE ACT. IN REPLY TO QUEST ION NO. 22, THE ASSESSEE MADE SURRENDER OF RS. 1.50 CRORES IN RESPECT OF KV PS, NSCS , CASH AND DOCUMENT ON THE BASIS OF THE FILE AND IN RESPECT OF HIS BROTHER. HE HAD STATED THAT HE WILL GIVE DETAILS OF THIS SURRENDER LATER O N. THEREAFTER, THROUGH LETTER DATED 24-10-2008 DULY SIGNED BY THE ASSESSEE AND HI S BROTHER ALONGWITH HIS ADVANCE, FOLLOWING SURRENDER WAS ADMITTED. S.N. PARTICULARS AMOUNT 1. SURRENDER OF INCOME ON ACCOUNT OF KVP/NSC FOUND AND SEIZED DURING SEARCH 40,00,000 2. SURRENDERED ON ACCOUNT OF EXCESS STOCK FOUND DUR ING THE COURSE OF SEARCH IN THE PREMISES OF VARIOUS CONCERNS / FIRMS COVERED U/S 132 AND 133A OF THE INCOME-TAX ACT, 1961 60,00,000 3. SURRENDERED ON ACCOUNT OF VARIOUS DISCREPANCIES FOUND DURING THE COURSE OF SEARCH AND ON ACCOUNT OF VARIOUS INCOME EXPENDITURE NOT ACCOUNTED FOR IN THE BOOKS OF ACCOUNT INCLUDING INVESTMENT IN MONEY LENDING BUSINESS, SHARES, SECURITIES, GIFT RECEIVED IN THE NAME OF VARIOUS FAMILY MEMBERS DURING THE BLOC K PERIOD 50,00,000 TOTAL SURRENDER AMOUNT 1,50,00,000 HOWEVER, ON 21-07-2009, THE ASSESSEE GROUP RETRACTE D FROM THE SURRENDER OF INCOME MADE IN THE STATEMENT REFERRED TO ABOVE. THE STORY STATED FOR RETRACTING THE STATEMENT WAS TREATED AS WEIRD AND U NACCEPTABLE BASED ON AFTER-THOUGHT AND, THEREFORE, REJECTED. AFTER CONSI DERING THE SUBMISSIONS OF THE ASSESSEE, THE A.O. HAS ADDED FOLLOWING AMOUNTS TO THE DECLARED INCOME 5 OF RS. 2,26,090/- AND HAS ARRIVED AT A TOTAL INCOME OF RS. 27,98,860/- AS UNDER:- (I) UNEXPLAINED INVESTMENT IN KVP RS. 6,60,000/- (II) UNEXPLAINED INVESTMENT INN GOLD JEWELLERY RS. 43,895/- IN CASH (III) UNEXPLAINED JEWELLERY ADDED U/S 69A RS. 18, 68,871/- TOTAL RS. 25,72,766/- 2.2 AGGRIEVED, THE ASSESSEE WENT IN APPEAL BEFORE T HE LD CIT(A) WHO HAS GIVEN A PART RELIEF BY DELETING THE ADDITION OF RS. 18,68,871/- MADE ON ACCOUNT OF INVESTMENT IN GOLD ORNAMENTS. HE HAS ALS O DELETED AN AMOUNT OF RS. 1.60 LACS IN KVPS ACCOUNT. SIMILARLY, HE HAS DE LETED A SUM OF RS. 43,895/- BY TREATING IT AS EXPLAINED. THE REMAINING ADDITION HAS BEEN SUSTAINED. 2.3 NOW BOTH THE PARTIES ARE AGGRIEVED AND HAVE PRE FERRED THEIR APPEALS BEFORE TRIBUNAL. 2.4 THE ASSESSEE HAS RAISED FOLLOWING GROUNDS:- 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CAS E, THE LD CIT(A) HAS ERRED IN SUSTAINING THE ADDITION OF RS . 5.00 LACS ON ACCOUNT OF PURCHASE OF KVPS WITHOUT CONSIDERING T HE SUBMISSION OF THE ASSESSEE AND MATERIAL EVIDENCE SUBMITTED DURING THE ASSESSMENT PROCEEDINGS. 2. THE ASSESSEE CRAVES YOUR INDULGENCE TO ADD AME ND OR ALTER ALL OR ANY GROUNDS OF APPEAL BEFORE OR AT T HE TIME OF HEARING. 6 2.5 THE REVENUE HAS RAISED FOLLOWING GROUNDS. (1) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT(A)(CENTRAL) JAIPUR HAS ERRED IN LAW AS WELL AS ON FACTS IN DELETING THE ADDITION OF RS. 1,60,000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED INVESTMENT IN KVP'S DESPITE THE FACT THAT THE ASSESSEE HIMSELF ADMITTED U/S 132(4) OF THE IT ACT, 1961 THAT THE SAID INVESTMENT WAS MADE OUT OF UNACCOUNTED INCOME AND KVP OF RS.1,60,000/- WAS CASH INVESTMENT MADE BY THE ASSESSEE IN OWN ACCOUNT. (2) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT(A) (CENTRAL), JAIPUR HAS ERRED IN LAW AS WELL AS ON FACTS IN DELETING THE ADDITION OF RS. 43,895/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED INVESTMENT IN GOLD JEWELLERY IN CASH DESPITE THE FACT THAT THE ASSESSEE HAD FAILED TO EXPLAIN THE SOURCE OF CASH INVESTMENT IN PURCHASE OF JEWELLERY. (3)(I) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT(A)(CENTRAL), JAIPUR HAS ERRED IN LAW AS WELL AS ON FACTS IN DELETING THE ADDITION OF RS. 18,68,871/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED JEWELLERY DESPITE THE FACT THAT THE ASSESSEE HAD NEVER FURNISHED EVIDENCE WITH REGARD TO BALANCE SHEET OR ANY EVIDENCE BEFORE THE ASSESSING OFFICER AND THE CIT(A) CONSIDERED THE ADDITIONAL EVIDENCE OF BALANCE SHEET WITHOUT ANY OPPORTUNITY TO THE ASSESSING OFFICER. 3.(II) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT(A) (CENTRAL), JAIPUR HAS ERRED IN LAW AS WELL AS ON FACTS IN ADMITTING ADDITIONAL EVIDENCE UNDER RULE 46A AS THERE WAS NO REASONABLE CAUSE WHICH PREVENTED THE ASSESSEE FROM FILING 7 THE SAID EVIDENCES BEFORE THE ASSESSING OFFICER EVEN THOUGH THE ASSESSEE HAD BEEN GIVEN ADEQUATE OPPORTUNITIES DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND NO EVIDENCES HAD BEEN FILED BY THE ASSESSEE BEFORE THE SAID ASSESSMENT WAS COMPLETED BY THE ASSESSING OFFICER. 2.6 WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CA REFULLY PERUSED THE ENTIRE MATERIAL ON RECORD. AFTER HEARING BOTH THE S IDES IN THE LIGHT OF THE MATERIALS AVAILABLE ON RECORD, WE PROCEED TO DECIDE THE ISSUE REGARDING ADDITION OF RS. 1.60 LACS ON ACCOUNT OF CASH PURCHA SE OF KVPS AND RS. 43,895/- REGARDING PURCHASE OF GOLD JEWELLERY. THE FACTS OF THE ISSUE AS PER THE A.O. ARE THAT THE ASSESSEE MADE CASH INVESTMENT DURING THE ACCOUNTING YEAR 2002-03 ASUNDER:- (I) KVP IN OWN NAME RS..1,60,000/- (II) KVP IN THE NAME OF RAJESH RS. 2,00,000/- (III) KVP IN THE NAME OF RITU RS. 3,00,000/- JEWELLERY RS. 43,895/- BESIDES CLAIM OF OPENING B ALANCE OF JEWELLERY RS. 18,68,871/- AND JEWELLERY OF RS. 35 ,000/- + RS. 1,05,333/- PURCHASED THROUGH CHEQUE ISSUED FROM C ARPET PALACE. IT WAS EXPLAINED THAT SOURCE OF THE ABOVE INVESTMEN T IS FROM CASH OF RS. 6,86,063/- AVAILABLE AS OPENING BALANCE AND RS. 7. 20 LACS CASH WITHDRAWN FROM CARPET PALACE. REGARDING KVPS STANDING IN THE NAME OF SHRI RAJEH JI AND SMT. RITU, IT WAS STATED VIDE LETTER DATED 14-1 2-2010 THAT SHRI RAJESH AGARWAL IS BROTHER-IN-LAW OF THE ASSESSEE AND SMT R ITU IS WIFE WHO RESIDE AT 8 REWARI (HARYANA). IT WAS STATED THAT KVP WAS PURCHA SED BY THE ASSESSEE IN THE F.Y. 2006-07 OUT OF THE CASH SENT BY HIS BROTHE R-IN-LAW. THE EXPLANATION OF THE ASSESSEE WAS NOT FOUND SATISFACTORY. THE A.O . HAS FOUND THAT THE ASSESSEE HAS FAILED TO ESTABLISH THE AVAILABILITY O F CASH OF RS. 6,86,063/- AS DISCUSSED ABOVE. THE WITHDRAWAL FROM CARPET PALACE OF RS. 7.20 LACS WAS FOUND TO BE CORRECT BUT KEEPING IN VIEW THE SIZE OF THE FAMILY AND ON VERIFICATION OF THE CAPITAL ACCOUNT OF THE ASSESSEE IN WHICH RS. 15,000/- HAS BEEN SHOWN AS WITHDRAWAL TOWARDS HOUSE HOLD EXPENSE S. THE A.O. WITH REFERENCE TO THE SIZE OF THE FAMILY OF THE ASSESSEE , THEIR LIVING STANDARDS HAS FOUND THIS WITHDRAWAL INADEQUATE AND, THEREFORE, HA S ESTIMATED. THE A.O. HAS FOUND THAT THERE IS NO EVIDENCE THAT JEWELLERY WORTH RS. 18,68,871/- WAS AVAILABLE WITH THE ASSESSEE PRIOR TO 01-04-2002. HE IS NOT SATISFIED WITH THE EVIDENCE FURNISHED TO SUBSTANTIATE THAT THE CASH OF RS. 5.00 LACS WAS SENT TO HIM BY HIS BROTHER-IN-LAW SHRI RAJESH AGARWAL DURI NG F.Y. 2006-07. ACCORDINGLY, THE SOURCE OF TOTAL INVESTMENT OF R S. 6.60 LACS WHICH INCLUDED RS. 1.60 LACS IN HIS OWN NAME AND RS. 5.00 LACS IN THE NAME OF RELATIVE IN CASH TOWARDS PURCHASE OF KVP, HAS BEEN TREATED AS UNEXPLAINED. THEREFORE, THE ENTIRE AMOUNT OF RS. 6.60 LACS HAS B EEN ADDED IN THE INCOME OF THE ASSESSEE U/S 69 OF THE ACT. SIMILARLY CASH PURCHASE OF JEWELLERY TO THE TUNE OF RS. 43,895/- HAS NOT BEEN FOUND PROVED. 9 2.7 HOWEVER, THE LD CIT(A) HAS DELETED THE ADDITIO N OF RS. 1.60 ACS ALLEGEDLY INVESTED IN THE PURCHASE OF KVPS AND RS. 43,895/- INVESTED IN JEWELLERY BUT HE HAS SUSTAINED RS. 5.00 LACS IN RE KVPS PURCHASED IN THE NAMES OF SHRI RAJESH AGARWAL AND SMT. RITU AGARWAL. 2.8 AGAINST THE DELETED ADDITION OF RS. 1.60 LACS A ND RS. 43,895/-, THE REVENUE IS IN APPEAL AND REGARDING THE SUSTENANCE O F ADDITION OF RS. 5.00 LACS, THE ASSESSEE IS IN APPEAL. 2.9 AFTER CONSIDERING THE RIVAL SUBMISSIONS INCLUDI NG THE WRITTEN SUBMISSIONS OF THE LD. AR WHICH ARE AS UNDER:- THE LEARNED ASSESSING OFFICER HAD MADE THE ADDITI ON U/S 69 WHICH WAS UNLAWFUL. THE PROVISIONS OF SECTION 69 RE AD AS UNDER SECTION 69- UNEXPLAINED INVESTMENTS . WHERE IN THE FINANCIAL YEAR IMMEDIATELY PRECEDING THE ASSESSMENT YEAR THE ASSESSEE HAS MADE INVESTMENTS WHICH ARE NOT RECORDED IN THE BOOKS OF ACCOUNT , IF ANY, MAINTAINED BY HIM FOR ANY SOURCE OF INCOME, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE OF THE INVE STMENTS OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION OF THE ASSESS ING OFFICER, SATISFACTORY, THE VALUE OF THE INVESTMENTS MAY BE DEEMED TO BE THE IN COME OF THE ASSESSEE OF SUCH FINANCIAL YEAR. THE PERUSAL OF THE AFORESAID PROVISIONS REVEALS THA T THESE ARE APPLICABLE ONLY IN CASES WHERE THE INVESTMENT IS NOT RECORDED IN THE B OOKS OF ACCOUNTS. IN THIS CASE THE INVESTMENT OF RS. 1,60,000/- IN THE PURCHASE OF KVP AS WELL AS IN THE PURCHASE OF JEWELLERY OF RS. 43,895/- WAS FOUND RECORDED IN THE BOOKS OF ACCOUNTS BUT THE LEARNED ASSESSING OFFICER WAS NOT SATISFIED WITH TH E EXPLANATION OFFERED. ONCE THE INVESTMENT IS RECORDED IN THE BOOKS OF ACCOUNTS THE PROVISIONS OF SECTION 69 ARE NOT APPLICABLE. IN VIEW OF THIS THE ADDITION WA S MADE UNLAWFULLY. THE PROVISIONS OF SECTION 69 HAVE WRONGLY BEEN APPLIED. 3. INVESTMENT IN KVPS AND JEWELLERY IN THE NAME OF THE ASSESSEE IS PROPERLY EXPLAINED 10 IT WAS FURTHER SUBMITTED BEFORE THE LEARNED CIT(A) THAT THE INVESTMENT IN KVPS OF RS. 160000/- AND IN JEWELLERY OF RS. 43,895/- PURCH ASED IN THE NAME OF THE ASSESSEE WAS FULLY EXPLAINED. THE KVPS WERE PURCHAS ED ON 30.11.2002 AND JEWELLERY WAS PURCHASED ON 30.11.2002. THE SAME IS REFLECTED IN THE CASH BOOK MAINTAINED BY THE ASSESSEE. THE COPY OF THE RELEVAN T PAGE OF THE CASH BOOK IS AVAILABLE ON PAPER BOOK PAGE NO. 1 TO 2. IT WAS FURTHER SUBMITTED THE IMMEDIATE SOURCE OF WITHDRAWAL FOR PURPOSES OF INVESTMENT IS CASH WITHDRAWAL FROM FIRM M/S CARPET PALACE WHERE THE ASSESSEE WAS A PARTNER. A C OPY OF THE CAPITAL ACCOUNT OF THE ASSESSEE IN THE FIRM IS AVAILABLE ON PAPER BOOK PAGE NO. 3 TO 4. THE CASH WITHDRAWALS ARE FULLY REFLECTED IN THE BOOKS OF THE FIRM. IN VIEW OF THIS THE INVESTMENT IN KVPS OF RS. 160000/- AND JEWELLERY OF RS. 43,895/- PURCHASED IN THE NAME OF THE ASSESSEE IS FULLY EXPLAINED AND DID NOT REQUIRE TO BE ADDED TO THE INCOME OF THE ASSESSEE. THE LEARNED CIT(A) HAS ACCEPTED THE ARGUMENT OF THE ASSESSEE AND HAS OBSERVED THAT THE PURCHASE OF KVPS IS REFLECTED IN THE BALAN CE SHEET AS ON 31.03.2003 AND THE AMOUNT OF PURCHASE IS WITHDRAWN FROM AVAILABLE CASH FROM THE CASH BOOK. FURTHER THE AMOUNT IN CASH BOOK HAD COME AS WITHDRA WAL MADE FROM CARPET PALACE WHERE THE ASSESSEE WAS PARTNERS. IN VIEW OF THESE FACTS THE LEARNED CIT(A) DELETED THE ADDITIONS OF RS. 1,60,000/-. THE ACTION OF THE LEARNED CIT(A) IS PERFECTLY LOGICAL AND DESERVES TO BE CONFIRMED. THE APPEAL OF THE REVENUE ON THIS POINT DESERVES TO BE DISMISSED. 4. KVPS IN THE NAME OF SHRI RAJESH AND WIFE SMT. RITU RS. 500000/- (A) DOCUMENTARY EVIDENCE IGNORED DURING THE COURSE OF APPELLATE PROCEEDING BEFORE TH E LEARNED CIT(A) IT WAS SUBMITTED THAT DURING THE COURSE OF SEARCH KVPS PERTAINING TO SHRI RAJESH BROTHER IN LAW OF THE ASSESSEE AND HIS WIFE SMT. RITU WERE ALSO FOUND AND SEIZED. IT IS RELEVANT TO MENTION THAT TH E LEARNED ASSESSING OFFICER MADE DIRECT ENQUIRY FROM THE POST OFFICE AG ENT AND INVESTMENT CONSULTANT SHRI RAJENDRA PRASAD AGARWAL THROUGH WHO M THE ASSESSEE WAS MAKING PURCHASES OF KVPS. SHRI RAJENDRA PRASAD AGA RWAL IN HIS DETAILED LETTER DATED 26.08.2010 RUNNING INTO 6 PAGES FURNIS HED COMPLETE DETAILS OF PURCHASES OF KVPS BY SHRI KANHA RAM AGARWAL. IN THI S LETTER IN THE FINANCIAL YEAR UNDER CONSIDERATION THE PURCHASE OF KVPS IS ONLY OF RS. 160000/-. THIS DOCUMENT ESTABLISHES THAT NO OTHER I NVESTMENT WAS MADE BY THE ASSESSEE IN THE PURCHASE OF KVPS. A COPY OF THI S LETTER IS AVAILABLE ON PAPER BOOK PAGE NO. 5 TO 10. THUS BOTH THE LEARNED ASSESSING OFFICER AND THE LEARNED CIT(A) DISREGARDED THIS PIECE OF DOCUME NTARY EVIDENCE WITHOUT CONTROVERTING THE SAME AND WITHOUT EXAMININ G THE AGENT SHRI RAJENDRA PRASAD AGARWAL. (B) AFFIDAVITS DISREGARDED UNLAWFULLY 11 IT WAS ALSO SUBMITTED BOTH BEFORE THE LEARNED CIT(A ) AS WELL AS BEFORE THE LEARNED ASSESSING OFFICER THAT THE KVPS IN THE NAME OF SHRI RAJESH GUPTA AND SMT. RITU WERE PURCHASED IN FINANCIAL YEAR 2005 -06. AFFIDAVITS OF DR. RAJESH GOYAL AND HIS WIFE DR. RITU WERE ALSO FURNIS HED. IN THE DETAILED AFFIDAVIT IT HAS BEEN DEPOSED THAT THE INVESTMENT M ADE BY THEM AND THEY ARE ASSESSED TO TAX. THE PAN OF DR. RAJESH IS AGFPG 8742G AND OF SMT. RITU IS ACUPJ4746N. SMT. RITU AND SHRI RAJESH HAVE PURCHASED THESE NSCS/KVPS OUT OF THEIR WITHDRAWALS FROM SALARY ACCO UNT. IN THESE CIRCUMSTANCES IT WAS IMPROPER ON THE PART OF THE LE ARNED ASSESSING OFFICER TO HAVE CONSIDERED THE STATEMENT IN THE HAN DS OF THE ASSESSEE DISREGARDING THE AFFIDAVITS WITHOUT EXAMINING DR. R AJESH AND SMT. RITU. THE LEARNED ASSESSING OFFICER HAS ONLY RELIED ON TH E STATEMENTS GIVEN BY THE ASSESSEE AT THE TIME OF SEARCH. THE LEARNED ASS ESSING OFFICER HAS NOT CONSIDERED THE FACT THAT THE INVESTMENT WAS IN THE NAME OF SHRI RAJESH GUPTA AND SMT. RITU AND NOT IN THE NAME OF THE ASSE SSEE. THE LEARNED ASSESSING OFFICER DID NOT BRING ANY MATERIAL ON REC ORD WHICH SUGGEST OR PROVE THAT THE ASSESSEE IS BENAMI OWNER OF INVESTME NT IN KVPS. WHEREAS DR. RAJESH AND SMT. RITU HAS ACCEPTED THEIR OWNERSH IP IN SWORN AFFIDAVITS. THE LEARNED CIT(A) HAS ALSO NOT CONSIDERED THE FACT S AND WRONGLY CONFIRMED THIS ADDITION OF RS. 5 LACS IN THE HANDS OF THE ASSESSEE WHICH DESERVES TO BE DELETED. COPIES OF AFFIDAVIT OF SMT. RITU AND DR. RAJESH AND PAN CARDS ARE AVAILABLE ON PAPER BOOK PAGE NO. 11 TO 13. IT IS SETTLED POSITION OF LAW THAT THE CONTENTS OF THE AFFIDAVITS CANNOT BE DISREGARDED UNLESS AND UNTIL THE DEPONENT IS EXAMIN ED. IN THESE CIRCUMSTANCES THE ACTION OF THE LEARNED CIT(A) IN CONFIRMING THE ADDI TION OF RS. 5 LACS IS ILLEGAL AND UNLAWFUL. THE FOLLOWING CASE LAWS ARE QUOTED IN SUPPORT (I) MEHTA PARIKH & CO. VS. CIT (1956) 30 ITR 181 (SUPRE ME COURT) EVIDENCE MAY BE TENDERED ON AN AFFIDAVIT BEFORE AN ASSESSING OFFICER. SUCH EVIDENCE IS LEGAL AND CAN BE ACTED UPON BY THE AUTHORITIES. SHOULD THE AUTHORITY REGARD THE SAME AS NOT SUFFICIENT PRO OF OF THE CONTENT THEREOF, THEY SHOULD CROSS EXAMINE THE DEPONENT OR CALL UPON THE ASSESSEE TO PRODUCE DOCUMENTARY EVIDENCE IN SUPPORT OF THE CONT ENTS OF THE AFFIDAVITS. IF NO SUCH THING IS DONE THE AFFIDAVIT ITSELF, SHOU LD BE REGARDED AS SUFFICIENT PROOF. (II) L. SOHAN LAL GUPTA VS. CIT (1958) 33 ITR 786 (ALL) AFFIDAVIT CANNOT BE REJECTED STRAIGHTWAY UNLESS THE ASSESSEE HAS BEEN CROSS EXAMINED. (III) DILIP KUMAR ROY VS CIT (1974) 94 ITR 1 (BOM) (IV) RAJSHREE SYNTHETICS (P) LTD. VS. CIT (2002) 25 6 ITR 331 (RAJ) 12 IT IS SETTLED POSITION OF LAW THAT THE CONTENTS OF THE AFFIDAVITS CANNOT BE DISREGARDED UNLESS AND UNTIL THE DEPONENT IS EXAMIN ED. IN THESE CIRCUMSTANCES THE ACTION OF THE LEARNED CIT(A) IN CONFIRMING THE ADDI TION OF RS. 5 LACS IS ILLEGAL AND UNLAWFUL. THE FOLLOWING CASE LAWS ARE QUOTED IN SUPPORT (I) MEHTA PARIKH & CO. VS. CIT (1956) 30 ITR 181 (SUPRE ME COURT) EVIDENCE MAY BE TENDERED ON AN AFFIDAVIT BEFORE AN ASSESSING OFFICER. SUCH EVIDENCE IS LEGAL AND CAN BE ACTED UPON BY THE AUTHORITIES. SHOULD THE AUTHORITY REGARD THE SAME AS NOT SUFFICIENT PRO OF OF THE CONTENT THEREOF, THEY SHOULD CROSS EXAMINE THE DEPONENT OR CALL UPON THE ASSESSEE TO PRODUCE DOCUMENTARY EVIDENCE IN SUPPORT OF THE CONT ENTS OF THE AFFIDAVITS. IF NO SUCH THING IS DONE THE AFFIDAVIT ITSELF, SHOU LD BE REGARDED AS SUFFICIENT PROOF. (II) L. SOHAN LAL GUPTA VS. CIT (1958) 33 ITR 786 (ALL) AFFIDAVIT CANNOT BE REJECTED STRAIGHTWAY UNLESS THE ASSESSEE HAS BEEN CROSS EXAMINED. (III) DILIP KUMAR ROY VS CIT (1974) 94 ITR 1 (BOM) (IV) RAJSHREE SYNTHETICS (P) LTD. VS. CIT (2002) 25 6 ITR 331 (RAJ) (C) PURCHASERS OF KVPS ARE MAN OF MEANS IT IS SUBMITTED THAT DR. RAJESH AND SMT. RITU PURCH ASED THE KPVS AND PLACED THEM WITH THE ASSESSEE. THEY HAVE OWNED THEM. THEY ARE A SSESSED TO TAX. THE PAN OF DR. RAJESH IS AGFPG8742G AND OF SMT. RITU IS ACUPJ4 746N. SMT. RITU AND SHRI RAJESH HAVE PURCHASED THESE NSCS/KVPS OUT OF THEIR WITHDRAWALS FROM SALARY ACCOUNT. IN THESE CIRCUMSTANCES THE LEARNED CIT(A) HAS ALSO WRONGLY SHIFTED THE ONUS ON THE ASSESSEE TO PROVE THE SOURCE OF INVESTM ENTS MADE BY DR. RAJESH AND SMT. RITU. WHEN THE OWNERSHIP WAS ACCEPTED BY BOTH OF THEM AND IT BELONGS TO THEM SPECIALLY WHEN THEY ARE SEPARATELY ASSESSED TO INCOME TAX AND THEIR INCOME TAX PARTICULARS WERE FILED BEFORE THE LEARNED ASSES SING OFFICER THEN THE ASSESSEE WAS NOT LIABLE TO PROVE THE SOURCE OF INVESTMENT IN THE HANDS OF THIRD PERSON WHOSE ASSETS WAS FOUND IN THE PREMISES OF THE ASSES SEE. THEREFORE THIS ADDITION OF RS.5,00,000/-DESERVES TO BE DELETED. (D) CONCLUSION THUS THE ASSESSEE PRODUCED SUFFICIENT EVIDENCE BEFO RE THE LEARNED ASSESSING OFFICER AS WELL AS BEFORE THE LEARNED CIT(A) ESTABL ISHING THAT THE KVPS IN THE NAME OF DR. RAJESH GUPTA AND SMT. RITU DID NOT BELO NGED TO HIM. STATEMENT FURNISHED FROM THE AGENT HAS REMAINED UNCONTROVERTE D. THE AFFIDAVITS HAVE REMAINING UNEXAMINED. THE PURCHASERS ARE ASSESSED T O TAX. ALL THESE VITAL FACTS HAVE NOT BEEN TAKEN INTO CONSIDERATION BOTH THE LEA RNED ASSESSING OFFICER AS WELL AS BY THE LEARNED CIT(A). IN THESE CIRCUMSTANCES TH E LEARNED CIT(A) HAS FAILED IN HIS DUTY IN DELETING THE ADDITIONS. THE ASSESSEE PRAYS THAT THE DECISION OF THE 13 LEARNED CIT(A) ON THIS POINT DESERVES TO BE REVERSE D. THE ADDITION OF RS. 5 LACS DESERVES TO BE DELETED. 5. ADDITION WRONGLY BASED WITH REFERENCE TO THE STATEM ENT OF THE ASSESSEE THE LEARNED ASSESSING OFFICER HAS REFERRED TO THE S TATEMENT OF THE ASSESSEE RECORDED ON 27.08.2008 U/S 132(4). IT IS THE CASE O F THE LEARNED ASSESSING OFFICER THAT ASSESSEE SURRENDERED RS. 1.5 CRORE AS HIS INCO ME AND THEREFORE THE ADDITIONS ARE JUSTIFIED. THE LEARNED ASSESSING OFFICER HAS FU RTHER REFERRED TO THE LETTER OF THE ASSESSEE RETRACTING THE SURRENDER AS BEING UNAC CEPTABLE. IN THIS REGARD IT IS SUBMITTED THAT IN THE ENTIRE STATEMENT MADE BY THE ASSESSEE THERE IS NEITHER ANY SPECIFIC SURRENDER OF ANY PERSON OF THE GROUP NOR T HERE IS SURRENDER SPECIFICALLY WITH REFERENCE TO ANY ASSET. THE PERUSAL OF THE STA TEMENT REVEALS THAT THE SURRENDER HAS BEEN MADE TOWARDS THE END OF THE STAT EMENT WHICH IS UNDER THREAT AND DURESS. IN THIS REGARD THE FOLLOWING SUBMISSION ARE MADE - (I) THE STATEMENT OF ASSESSEE U/S 132(4) WAS NOT RECORD ED IN THE PRESENCE OF WITNESSES THE PERUSAL OF THE STATEMENT REVEALS THAT THE AUTHO RIZED OFFICER RECORDED THE STATEMENT ON 27.08.2008 AND THE ENTIRE PAGES OF THE STATEMENT BEAR HIS SIGNATURE DATED 27.08.2008 BUT THE WITNESSES HAVE P UT THEIR SIGNATURE DATED 29.08.2008. THIS SHOWS THAT WHEN THE STATEMEN T WAS RECORDED ON 27.08.2008 UNDER THREAT AND DURESS NO WITNESSES WER E PRESENT. THE SIGNATURES OF WITNESSES HAVE BEEN OBTAINED TWO DAYS LATER I.E. ON 29.08.2008. THE STATEMENT IS VITIATED HAVING NOT BE EN RECORDED IN THE PRESENCE OF WITNESSES. NO COGNIZANCE OF SUCH STATEM ENT CAN BE TAKEN. COPY OF THE STATEMENT IS AVAILABLE ON PAPER BOOK PAGE NO. 14 TO 30. (II) NO SURRENDER BY THE ASSESSEE THE LEARNED ASSESSING OFFICER HAS QUOTED THE STATEM ENT OF THE ASSESSEE WHEREIN HE ALLEGEDLY MADE SURRENDER OF INCOME OF RS . 1.5 CRORE IN RESPECT OF INCOME OF SELF AND HIS BROTHER PERTAINING TO KVP , NSC, CASH AND DOCUMENTS. IN THIS REGARD IT IS SUBMITTED THAT MUC H BEFORE THE ASSESSMENT PROCEEDINGS WERE TAKEN UP THE ASSESSEE HAS SUBMITTE D A DETAILED LETTER ALONG WITH REASONS RETRACTING THE SURRENDER. A COPY OF THIS LETTER IS AVAILABLE ON PAPER BOOK PAGE NO. 31 TO 35. THIS LETTER FULLY EXPLAINS THAT THERE WERE NO UNACCOUNTED ASSET FOUND AS SUCH THERE WAS NO QUESTION OF ANY SURRENDER. IT IS FURTHER SUBMITTED THAT IN THE STATEMENT THERE WAS NO SURRENDER ON ACCOUNT OF ANY ASSET SPECIFICALLY. HENCE THE LEARNE D ASSESSING OFFICER HAS ERRED IN MAKING REFERENCE TO THE STATEMENT OF SURRE NDER FOR MAKING ADDITION. A COPY OF THE STATEMENT IS AVAILABLE ON P APER BOOK PAGE NO CITED SUPRA. THE PERUSAL OF THIS STATEMENT REVEALS THAT I T WAS A VAGUE SURRENDER 14 AT THE END OF THE STATEMENT AS IF THE SURRENDER WAS MADE TO GET RID OFF THE PROLONGED AND HARASSING STAGE OF STATEMENT. IN THE STATEMENT THE SURRENDER IS FOR THE FAMILY OF THE ASSESSEE AS WELL AS IN RESPECT OF HIS BROTHER. THERE IS NO SPECIFIC REFERENCE OF ANY UNAC COUNTED ASSET REQUIRING THE SURRENDER. THERE IS NO SPECIFIC REFERENCE OF AN Y PERSON AND THE QUANTIFICATION OF SURRENDER. THE SURRENDER WAS UNDE R DURESS AND WITHOUT ANY SUBSTANCE. (III) THE LEARNED ASSESSING OFFICER HAS ALSO REFERR ED TO LETTER DATED 24.10.2008 SUBMITTED BEFORE THE DIT. IT IS SUBMITTED THAT THIS LETTER IS NO BETTER THAN THE STATEMENT OF THE ASSESSEE SINCE IT WAS SUBMITTE D IN PURSUANCE OF THE SAME. WHEN THE STATEMENTS ITSELF WAS ILLEGAL AND SU RRENDER WAS MADE UNDER DURESS THE LETTER WAS ALSO SUBMITTED JUST TO KEEP THE AUTHORITIES IN GOOD HUMOR SO AS TO ESCAPE FROM UNWARRANTED HARASSM ENT. EVEN IN THIS LETTER THERE IS NO QUANTIFICATION OF SURRENDER OF I NCOME PERSON WISE OR DOCUMENT WISE. THE LETTER IS APPARENTLY VAGUE AND D ESERVES TO BE DISREGARDED. THE CASE LAWS QUOTED BY THE ASSESSEE A RE OF NO HELP BECAUSE THE ASSESSEE HAS SUCCESSFULLY ESTABLISHED THAT THER E WAS NO EXCESS STOCK. SUPPORTING DOCUMENTS HAVE BEEN FURNISHED AND AS SUC H HE WAS FULLY COMPETENT AND WITHIN FOUR CORNERS OF LAW NOT TO MAK E ANY SURRENDER. THERE ARE DECISIONS OF COURTS IN FAVOUR OF THE ASSE SSEE WHICH ARE QUOTED BELOW. IT IS ESTABLISHES POSITION OF LAW THAT WHEN DIVERGENT OPINIONS ARE AVAILABLE ON AN ISSUE, THE ONE FAVOURABLE TO THE AS SESSEE HAS BE FOLLOWED. IT IS SUBMITTED THAT ADDITION CANNOT BE MADE SIMPLY ON THE BASIS OF STATEMENT THAT TOO RECORDED IN THE ABSENCE OF INDEP ENDENT WITNESSES WITHOUT SUPPORTING MATERIAL. (A) JAIN TRADING CO. V/S ITO (2007) 17 SOT 574 (MU M) ADDITIONAL INCOME DECLARED DURING THE COURSE OF INQ UIRY ASSESSEE NOT BOUND. (B) CIT V/S SHRI RAM DASS MOTOR TRANSPORT 238 ITR 177 (A.P.) WITHOUT SUPPORTING DOCUMENTS- STATEMENT RECORDED U/ S 132(4) HAS NO EVIDENTIARY VALUE. THE LEARNED CIT(A) HAS NOT GIVEN HIS OBSERVATION OR COMMENTS ON THE FACT THAT THE STATEMENT RECORDED U/S 132(4) WAS UNLAWFUL IN A S MUCH AS IT WAS NOT RECORDED IN THE PRESENCE OF TWO WITNESSES. THE FACTS HAVE BE EN DISCUSSED IN DETAILED ABOVE. WHEN THE STATEMENT ITSELF IS VITIATED THE SAME CANN OT BE MADE A BASE FOR MAKING THE ADDITION. THE LEARNED ASSESSING OFFICER MADE TH E ADDITION WITH REFERENCE TO THE STATEMENT OF THE ASSESSEE. THUS THE LEARNED ASS ESSING OFFICER COMMITTED A MISTAKE IN MAKING ADDITION WITH REFERENCE TO A STAT EMENT WHICH ITSELF WAS UNLAWFUL. HENCE ON THIS GROUND ALSO THE ADDITION DE SERVES TO BE DELETED. 15 6. UNCALLED FOR ADDITION OF JEWELLERY RS. 43,895/- THE ADDITION MADE BY THE LEARNED ASSESSING OFFICER ON ACCOUNT OF JEWELLERY PURCHASED ON 30.05.2002 IS TOTALLY MISPLACED AND UN CALLED FOR. IT IS SUBMITTED THAT THE ADDITION HAS NOT BEEN MADE WITH REFERENCE TO JEWELLERY FOUND OR ANY INCRIMINATING DOCUMENT SEIZED. IT IS SUBMITTED THAT THE LEARNED ASSESSING OFFICER HAS NOT MADE ANY REFERENCE TO JEWELLERY FOUND IN TH E CASE OF THE ASSESSEE DURING THE COURSE OF SEARCH NOR ANY ADDITION HAS BEEN MADE WITH REFERENCE TO SUCH JEWELLERY FOUND DURING SEARCH. THIS MEANS THAT THE JEWELLERY FOUND DURING COURSE OF SEARCH STANDS FULLY EXPLAINED. ONCE THIS IS THE POSITION NO ADDITION COULD BE MADE BY THE LEARNED ASSESSING OFFICER AS DONE IN TH E CASE OF THE ASSESSEE. THE PROVISIONS OF SECTION 153A COME INTO PLAY ONLY IN R ESPECT OF ADDITIONS RESULTING OUT OF SEARCH ACTION. IN THIS CASE THE LEARNED ASSE SSING OFFICER HAS TREATED THE PURCHASE OF JEWELLERY ACCOUNTED FOR BY THE ASSESSEE IN HIS BOOKS AS UNEXPLAINED WHICH IS NOT LAWFUL. THE LEARNED ASSESSING OFFICER HAS NOT BOTHERED TO ASCERTAIN THAT THE JEWELLERY PURCHASED ON 30.05.2002 WAS INCL UDED IN THE JEWELLERY FOUND DURING THE COURSE OF SEARCH. WHEN THE ENTIRE JEWELL ERY FOUND HAS BEEN TREATED AS EXPLAINED, IT IS NOT UNDERSTANDABLE HOW THE ADDITIO N HAS BEEN MADE. THE LEARNED CIT(A) HAS RIGHTLY DELETED THE ABOVE ADDITIONS. THE LEARNED CIT(A) HAS RIGHTLY THAT BALANCE SHEET AS ON 31.03.2002 AND 31.03.2003 DISCLOSED PURCHASE OF GOLD JEWELLERY OF RS. 1,84,229/- OUT OF WHICH RS. 43,595 /- WAS PAID IN CASH AND REMAINING AMOUNT WAS PAID BY CHEQUE. THE ASSESSING OFFICER HAD DISBELIEVED IT WITHOUT ANY REASON. NO ADVERSE MATERIAL HAS BEEN BR OUGHT ON RECORD. IN VIEW OF THIS THE DELETION OF THE ADDITION BY THE LEARNED CI T(A) IS FULLY JUSTIFIED. THE ACTION OF THE LEARNED CIT(A) DESERVES TO BE CONFIRMED. THE APPEAL OF THE REVENUE ON THIS POINT DESERVES TO BE DISMISSED. DEPARTMENTAL APPEALS GROUND NO. 3(I) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CAS E THE CIT(A)(CENTRAL), JAIPUR HAS ERRED IN LAW AS WELL AS ON FACTS IN DE LETING THE ADDITION OF RS. 18,68,871/- MADE BY THE ASSESSING OFFICER ON ACCO UNT OF UNEXPLAINED JEWELLERY DESPITE THE FACT THAT THE ASSESSEE HAD NEVER FURNI SHED EVIDENCE WITH REGARD TO BALANCE SHEET OR ANY EVIDENCE BEFORE THE ASSESSING OFFICER AND THE CIT(A) CONSIDERED THE ADDITIONAL EVIDENCE OF BALANCE SHEE T WITHOUT ANY OPPORTUNITY TO THE ASSESSING OFFICER. BEFORE THE LEARNED CIT(A) THE ADDITION WAS CHALLEN GED AS UNDER 'THE ADDITION MADE BY THE LEARNED ASSESSING OFFICE R IS ILLEGAL, UNLAWFUL AND UNJUSTIFIED. THE LEARNED ASSESSING OFFICER HAS MAD E THE ADDITION OF THE JEWELLERY FOUND RECORDED IN THE BOOKS OF ACCOUNTS OF THE ASS ESSEE AS OPENING BALANCE AS ON 01.04.2002 ON THE GROUND THAT THE CLAIM THAT JEWE LLERY OF RS. 18,68,871/- WAS AVAILABLE WITH HIM HAS NOT BEEN SUBSTANTIATED. THE SUM OF RS. 18,68,871/- IS 16 ADDED TO THE INCOME OF THE ASSESSEE U/S 69A OF THE ACT. IT IS UNFORTUNATE THAT SUCH A SUBSTANTIAL ADDITION MADE BY THE LEARNED ASSESSI NG OFFICER IN A CURSORY MANNER. THE ADDITION MADE IS ASSAILED AS UNDER 1. PROVISIONS OF SECTION 69A ARE NOT APPLICABLE THE LEARNED ASSESSING OFFICER HAS MADE THE ADDITION U/S 69A WHICH IS UNLAWFUL. THE PROVISIONS OF SECTION 69A READ AS UNDER UNEXPLAINED MONEY, ETC. 69A. WHERE IN ANY FINANCIAL YEAR THE ASSESSEE IS FOUND TO BE THE OWNER OF ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE AND SUCH MONEY, BULLION, JEWELLERY OR VALUABLE ARTICLE IS NOT RECORDED IN THE BOOKS OF ACCOUNT , IF ANY, MAINTAINED BY HIM FOR ANY SOURCE OF INCOME 20 , AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE OF ACQUISIT ION OF THE MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE, OR THE EXPLANA TION OFFERED BY HIM IS NOT, IN THE OPINION OF THE 21 [ASSESSING] OFFICER, SATISFACTORY, THE MONEY AND TH E VALUE OF THE BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE MAY BE DEEMED TO BE THE INCOME 20 OF THE ASSESSEE FOR SUCH FINANCIAL YEAR.] THE PERUSAL OF THE AFORESAID PROVISIONS REVEALS THA T THESE ARE APPLICABLE ONLY IN CASES WHERE THE JEWELLERY IS NOT RECORDED IN THE BO OKS OF ACCOUNTS. IN THIS CASE THE JEWELLERY OF RS. 18,68,871/- WAS FOUND RECORDED IN THE BOOKS OF ACCOUNTS. ONCE THE JEWELLERY IS RECORDED IN THE BOOKS OF ACCOUNTS THE PROVISIONS OF SECTION 69A ARE NOT APPLICABLE. IN VIEW OF THIS THE ADDITION HA S BEEN MADE UNLAWFULLY. THE PROVISIONS OF SECTION 69A HAVE WRONGLY BEEN APPLIED . WE ARE ENCLOSING COPIES OF ACCOUNTS OF THE ASSESSEE REFLECTING THE RECORDING O F THE AFORESAID JEWELLERY BOTH FOR THE PERIOD 01.04.2002 AS WELL AS 01.04.2001. TH E SAME ARE AVAILABLE ON PAPER BOOK PAGE NO. 36 TO 37. IT IS SUBMITTED THAT WHEN THE JEWELLERY HAS NOT BE EN PURCHASED DURING THE YEAR UNDER CONSIDERATION, THE SAME COULD NOT BE CONSIDERED BY THE LEARNED ASSESSING OFFICER. THEREFORE THE ADD ITION HAVE WRONGLY BEEN MADE. 2.10 PER CONTRACT, THE LD DR HAS HEAVILY RELIED ON THE ORDER OF THE A.O. TO THE EXTENT THE ADDITION SUSTAINED AND HE HAS RELIED ON THE ORDER OF THE LD CIT(A). 2.11 AFTER CONSIDERING THE SUBMISSIONS OF THE LD CI T(A), IT IS FOUND THAT THE INVESTMENT OF RS. 1.60 LACS MADE IN KVPS AND OF RS. 43,895/- MADE IN THE 17 JEWELLERY IN THE NAME OF THIS ASSESSEE STANDS FULLY EXPLAINED. THE KVPS WERE PURCHASED ON 30-11-2002 AND JEWELLERY WAS PURC HASED ON 30-11-2002. BOTH THESE ITEMS ARE REFLECTED IN THE CASH BOOK MAI NTAINED BY THE ASSESSEE. THE RELEVANT PAGES OF THE CASH BOOK ARE AT PAPER BO OK PAGES 1-2. WE HAVE SEEN THESE PAGES AND ARE SATISFIED THAT THE SAME AR E REFLECTED IN THAT PAGE. REGARDING SOURCE, THE SUBMISSION OF THE ASSESSEE IS THAT THE CASH WITHDRAWAL IS FROM THE FIRM M/S. CARPET PALACE IN WHICH THE AS SESSEE IS PARTNER AND TO SUPPORT THIS SUBMISSION, THE COPY OF THE BANK ACCOU NT OF THE ASSESSEE IN THE FIRM HAS BEEN FILED AND ENCLOSED AT PAPER BOOK PAGE S 3 TO 4. WE HAVE GONE THROUGH THESE PAGES AND FOUND THAT THESE CASH WITHD RAWALS ARE FULLY REFLECTED IN THE BOOKS OF THE FIRM. THUS IN OUR OPINION BOTH THESE PURCHASES STAND FULLY EXPLAINED ALONGWITH THEIR SOURCES AND, THEREFORE, T HE LD CIT(A) HAS CORRECTLY DELETED THE SAME FROM THE HANDS OF THE ASSESSEE. TH E ADMISSION MADE BY THE ASSESSEE DURING SEARCH PROCEEDINGS U/S 132(4) OF TH E ACT THAT KVPS WERE PURCHASED OUT OF UNACCOUNTED INCOME CANNOT BE TREAT ED AS UNREBUTABLE. ANY STATEMENT MADE DURING SEARCH CAN BE RETRACTED AND D ISPROVED WITH THE HELP OF EVIDENCE AND IF IT IS SO DONE ONLY ON THE BASIS OF SUCH ADMISSION MADE U/S 132(4) OF THE ACT IS NOT JUSTIFIED ANY ADDITION. TH EREFORE, LD CIT(A) HAS CORRECTLY DELETED THIS ADDITION. WE ARE NOT IN AGR EEMENT WITH THE SUBMISSIONS OF THE LD DR THAT SINCE THIS WAS ADMITT ED U/S 132(4) OF THE ACT 18 BY THE ASSESSEE THAT KVPS WORTH RS. 1.60 LACS WERE PURCHASED OUT OF HIS UNACCOUNTED INCOME AND THAT IS ENOUGH PROOF FOR MAK ING IMPUGNED ADDITION. WHEN THE ADMISSION OF THE ASSESSEE IS EXA MINED IN THE LIGHT OF THE EVIDENCE STATED ABOVE, WE HAVE TO CONCUR WITH THE L D CIT(A) FINDINGS. REGARDING DELETION OF ADDITION OF RS. 43,895/-, AS WE HAVE DISCUSSED ABOVE, WE ARE CONVINCED THAT THE ASSESSEE HAS CLEARLY EXPL AINED THE SOURCE THEREOF. WITH THE ABOVE OBSERVATIONS, WE DISMISS THE GROUND NO 1 AND 2 OF THE REVENUES APPEAL. 3.1 IT WAS ARGUED BY THE LD. AR THAT DURING SEARCH ITSE LF IT WAS EXPLAINED TO THE DEPARTMENT THAT KVPS PERTAINED TO SHRI RAJ ESH AGARWAL AND SMT. RITU AGARWAL. AS PER THE LD. AR, THIS FACT HAS BEEN INVESTIGATED BY THE DEPARTMENT DIRECTLY FROM THE POST OFFICE AND THEY H AVE FOUND THIS FACT THAT THESE KVPS FOUND DURING SEARCH PERTAINED TO THEM AS SHRI RAJENDRA PRASAD AGARWAL, WHO IS AGENT OF THE ASSESSEE FROM WHOM KVP S WERE PURCHASED ND THE COPY OF THE LETTER DATED 26-08-2011 RUNNING INT O 06 PAGES WHICH STATES THAT DURING THE RELEVANT PERIOD KVPS TO THE TUNE OF RS. 1.60 LACS WERE ONLY PURCHASED BY THIS ASSESSEE AND NO OTHER INVESTMENT WAS MADE BY HIM IN THE PURCHASE OF KVPS IN THE RELEVANT YEAR AND THE COPY OF THIS LETTER IS AVAILABLE AT PBP 5 TO 10. THE LD. AR HAS SUBMITTED THAT AFFID AVITS OF SHRI RAJESH GUPTA WHO IS HUSBAND OF SMT. RITU, AND SISTER OF TH E ASSESSEE STATING THEREIN 19 THAT THESE WERE PURCHASED IN F.Y. 2005-06 AND THEY BELONGED TO BOTH WIFE AND HUSBAND. THE AFFIDAVIT OF SMT. RITU HAS ALSO BE EN FURNISHED. IN THESE AFFIDAVITS, THE SOURCE OF INVESTMENT ALONGWITH THEI R PERMANENT ACCOUNTS NOS. HAVE BEEN GIVEN IN DETAIL. IN THE LIGHT OF THE SE SUBMISSIONS, IT WAS PLEADED THAT THE ADDITION OF RS. 5.000 LACS WAS SUS TAINED IN THE HANDS OF THE ASSESSEE IS UNCALLED FOR AND DESERVES TO BE DELETED . 3.2 ON THE OTHER HAND, THE LD DR HAS SUBMITTED THAT THESE AFFIDAVITS ARE AFTER THOUGHT AND THE ADDITION MADE BY THE ASSESSEE AND CONFIRMED BY THE LD CIT(A) ARE CORRECT AS PER LAW BECAUSE THESE DOCUMEN TS WERE FOUND FROM THE POSSESSION OF THE ASSESSEE DURING SEARCH. 3.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CA REFULLY PERUSED THE ENTIRE MATERIAL ON RECORD. WE HAVE FOUND THAT KVPS ETC. WORTH RS. 5.00 LACS WERE FOUND FROM THE POSSESSION OF THE ASSESSEE DURI NG SEARCH. ANYTHING FOUND FROM THE POSSESSION OF THE ASSESSEE DURING SE ARCH IS TO BE EXPLAINED BY THE ASSESSEE SO THAT IT CANNOT BE TREATED UNACCOUNT ED INVESTMENT OR OTHERWISE. HOWEVER, IF THE ASSESSEE EXPLAINS AND PR OVES THAT THE INVESTMENT DID NOT PERTAIN TO HIM, THE PRESUMPTION STATED ABOV E GETS REBUTTED. IN THIS CASE, THE ASSESSEE STATED DURING SEARCH ITSELF THAT THESE KVPS PERTAINED TO HIS BROTHER-IN-LAW SHRI RAJESH AND SISTER SMT. RITU, SO AT THE VERY FIRST INSTANCE, THE ASSESSEE MADE IT CLEAR TO THE DEPARTMENT AS TO WHOM THESE INVESTMENTS 20 BELONGED TO. WHATEVER IS STATED BY THE ASSESSEE DUR ING SEARCH WHICH FAVOURS HIS CASE CAN BE DISPROVED BY THE REVENUE WITH THE H ELP OF EVIDENCE AND IN THE ASSESSEE SAME MANNER WHATEVER IS STATED BY THE ASSESSEE AGAINST HIS OWN INTEREST THAT CAN BE REFUTED OR DISPROVED BY HIM DU RING ASSESSMENT PROCEEDINGS WITH THE HELP OF EVIDENCE WHICH ARE BRO UGHT ON RECORD. IN THIS CASE, THE REVENUE IS SIMPLY TRYING TO RELY ON PRESU MPTION OF SECTION 132(4A) OF THE ACT WHICH IS REBUTTABLE. THE A.O. HA S NOT REBUTTED THIS STATEMENT OF THE ASSESSEE MADE DURING SEARCH. ON TH E OTHER HAND, THE ASSESSEE SUBSTANTIATED HIS STATEMENT WITH THE HELP OF AFFIDAVIT OF BOTH THOSE PERSONS WHO ARE SEPARATELY ASSESSED TO TAX AND HAVE ALSO EXPLAINED THE SOURCE OF THEIR INVESTMENT. AT BEST, THESE KVPS CAN BE CONSIDERED IN THE HANDS OF BOTH OF THEM AND NOT IN THE HANDS OF THE A SSESSEE. ACCORDINGLY, THIS ADDITION OF RS. 5.00 LACS STANDS DELETED FROM THE H ANDS OF THE ASSESSEE. WE DRAW SUPPORT FROM THE DECISION RELIED ON BY THE LD. AR IN HIS WRITTEN SUBMISSION REGARDING UTILITY AND VALUE DULY SWORN I N THE AFFIDAVITS. AS A RESULT, WE ALLOW SOLE GROUND RAISED IN ASSESSEE'S A PPEAL. 4.1 IN REVENUES APPEAL GROUND NO 3(I) PERTAINS TO DELETION OF ADDITION OF RS. 18,68,871/- MADE BY THE A.O. ON ACCOUNT OF UNEX PLAINED JEWELLERY. 4.2 THE FACTS OF THIS CASE ALREADY BEEN NARRATED AB OVE. BEFORE US, BOTH THE PARTIES HAVE REITERATED THE SAME ARGUMENTS WHICH WE RE TAKEN BEFORE THE LD 21 CIT(A). THE LEGAL ARGUMENT OF THE ASSESSEE IS THAT THE IMPUGNED ADDITION CANNOT BE MADE U/S 69A OF THE ACT. WE HAVE FOUND TH IS SUBMISSION TO BE CORRECT. AS PER SECTION 69A ,ONLY THOSE ASSESSEE WHO ARE FOUND TO BE THE OWNER OF ANY MONEY, BULLION, JEWELLERY ETC. WHICH I S NOT RECORDED IN THE BOOKS OF ACCOUNT, IF ANY, MAINTAINED BY HIM FOR ANY SOURCE OF INCOME AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE OF ACQUISITION THEREOF OR THE EXPLANATION OF THIS, IS NOT FOUND SA TISFACTORY. IN THIS CASE, THE JEWELLERY OF RS. 18,68,871/- IS FOUND RECORDED IN H IS BOOKS OF ACCOUNT. THUS, TECHNICALLY, THIS ADDITION IS NOT CORRECT U/S 69A O F THE ACT. THE COPIES OF ACCOUNT OF THIS ASSESSEE REFLECTING JEWELLERY IN QU ESTION FOR THE PERIOD 01- 04-2002 AS WELL AS 01-04-2001 ARE FOUND TO BE CORR ECT AS PER RECORD. THE ASSESSEE HAS PLACED PAGES NO. 36 TO37 IN THE PAPER BOOK FROM WHICH THIS FACT IS FOUND TO BE PROVED. FROM THIS, IT IS ALSO INFERR ED THAT THIS JEWELLERY HAD NOT BEEN PURCHASED DURING THE YEAR UNDER CONSIDERATION. THE OTHER ARGUMENTS OF THE LD. AR IS THAT THE A.O. HAS NOT MADE ANY ADDITI ON REGARDING THE JEWELLERY FOUND DURING SEARCH IN THE HANDS OF THE ASSESSEE. T HE JEWELLERY FOUND DURING SEARCH BELONGING TO OTHER ASSESSEE IS AS UNDER:- SMT. MUNNI AGARWAL W/O RAMKUMAR RS. 1745900/- SMT. SHENLATA W/O SHRI KANHA RAM (ASSESSEE) RS. 155 9300/- SMT. RENU AGARWAL W/O SATISH AGARWAL RS. 674600/ - TOTAL RS. 3979600/- 22 IT WAS FOUND FROM THE RECORD THAT EVEN REGARDING JE WELLERY FOUND BELONGING TO SMT. SHENLATA W/O SHRI KANHA RAM (ASSESSEE) TO T HE TUNE OF RS. 15,59,300/-, NO ADDITION HAS BEEN MADE AND HAS BEEN TREATED BY THE A.O. HIMSELF AS EXPLAINED. WE HAVE FOUND THE SUBMISSION OF THE LD. AR THAT NO OTHER JEWELLERY WAS FOUND DURING SEARCH REGARDING W HICH THIS ADDITION HAS BEEN MADE, TO BE CORRECT AS PER RECORDS. THUS IT CA N BE SAFELY HELD THAT NO INCRIMINATING EVIDENCE REGARDING THIS ADDITION WAS FOUND DURING SEARCH. THE LD CIT(A) HAS CLEARLY MENTIONED IN HIS ORDER IN PAR A 4.3 THAT THE ASSESSEE IS REGULAR INCOME TAX ASSESSEE SINCE THE ASSESSMENT Y EAR 2000-01 AND THIS JEWELLERY STANDS DULY REFLECTED IN THE BALANCE SHEE T FILED BY THE ASSESSEE AND, THEREFORE, THERE CAN BE NO REASON TO DISBELIEVE THE BALANCE SHEET AVAILABLE BEFORE THE ASSESSING AUTHORITY. NO DIFFERENT VERSIO N OR EVIDENCE WAS BROUGHT BY THE LD DR TO DISPROVE THE ABOVE CONCLUSION REACH ED BY THE LD CIT(A). THE ONLY ARGUMENT OF THE LD DR IS THAT THE ASSESSEE HAD NEVER FURNISHED EVIDENCE WITH REGARD TO BALANCE SHEET BEFORE THE A. O. AND THE LD CIT(A) HAS CONSIDERED THE ADDITIONAL EVIDENCE OF BALANCE SHEET WITHOUT GIVING OPPORTUNITY OF BEING HEARD TO THE A.O. IN THIS REGA RD THE GROUND NO. 3(II) HAS ALSO BEEN RAISED. IN FACT THE AVAILABILITY OF THE B ALANCE SHEET BEFORE THE A.O. OF THE ASSESSEE IN ASSESSEE'S OWN CASE OF EARLIER Y EARS CANNOT BE SAID TO BE ANY ADDITIONAL EVIDENCE IN THE MEANING OF THE SENSE IN WHICH RULE 46A OF 23 THE INCOME TAX RULES, 1962 REFERRED TO ADDITIONAL E VIDENCE. OTHERWISE ALSO, IT HAS BEEN SUBMITTED BEFORE US THAT WHATEVER PAPER S WERE SUBMITTED BEFORE THE LD CIT(A) WERE PART AND PARCEL OF THE ASSESSMEN T RECORD. IT WAS STATED THAT THE BALANCE SHEET IN THE FORM OF ASSESSMENT RE CORD WAS AVAILABLE EVEN AT THE TIME OF FRAMING OF THE ASSESSMENT U/S 153A OF T HE ACT WITH THE A.O. OTHERWISE ALSO, THE ITAT JAIPUR BENCH WHILE DECIDIN G THE CASE IN THE CASE OF ANMOL COLOURS INDIA (P) LTD. VS ITO (2009) 121 TTJ 269 (JAIPUR ) INTERPRETED THE RULE 46A (4) OF THE RULES HAS CONCL UDED THAT POWERS OF THE FIRST APPELLATE AUTHORITY I.E. CIT(A) ARE VERY WID E AND COTERMINOUS WITH THOSE OF THE A.O. . THUS WHAT THE A.O. CAN DO, THE CIT(A) CAN ALSO DO. WHEN THE A.O. FAILS TO TAKE SOME ACTION, THE LD CIT (A) IS FREE TO TAKE THAT ACTION AS WELL. IT HAS BEEN FURTHER HELD THAT EMBAR GO PUT ON HIS POWER UNDER RULE 46A(1) AND (2) OF THE RULES HAS BEEN LOOSENED BY SUB-RULE(4) OF THIS RULE WHICH ALSO EMPOWERS THE CIT(A) TO DIRECT THE PRODUCTION OF ANY DOCUMENT ETC. WITH THE ABOVE OBSERVATION, THE GROUND NO.3 (I) AND 3 (II) OF REVENUES APPEAL CANNOT BE ALLOWED. CONSEQUENTLY, THE APPEAL OF THE ASSESSEE IS ALLOWE D AND THAT OF THE REVENUE IS DISMISSED. ITA NO.177/JP/2012 KANHA RAM AGARWAL (A.Y. 2008-0 9) 24 5.0 THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINS T THE ORDER OF THE LD CIT(A), CENTRAL, JAIPUR DATED 31-01-2012 FOR THE A .Y. 2009-10. 5.1 DURING HEARING, IT WAS INFORMED BY THE LD DR TH AT REVENUE HAS NOT FILED APPEAL AGAINST THIS ORDER. FOLLOWING TWO MAT ERIAL GROUNDS HAVE BEEN RAISED BY THE ASSESSEE. (1) UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 33,29,629/- ON ACCOUNT OF EXCESS STOCK FOUND DURING THE SURVEY U/S 69A OF THE IT ACT, 1961 WITHOUT CONSIDERATION THE SUBMISSION OF THE ASSESSEE AND MATERIAL EVIDENCES SUBMITTED DURING THE ASSESSMENT PROCEEDINGS. (2) UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) HAS ERRED IN SUSTAINING THE ADDITION OF RS. 2,25,000/- ON ACCOUNT OF INTEREST PAID TO BANK WITHOUT CONSIDERATION THE SUBMISSION OF THE ASSESSEE AND MATERIAL EVIDENCES SUBMITTED DURING THE ASSESSMENT PROCEEDINGS. 5.3 THE FACTS APROPOS GROUND NO. 1 ARE THAT A SURV EY U/S 133A OF THE ACT WAS CONDUCTED AT THE BUSINESS PREMISES OF THE CONCE RNS OF THE ASSESSEE FAMILY M/S. CARPET PALACE. THE INVENTORY OF THE STO CK WAS PREPARED AND THE POSITION OF THE STOCK WAS WORKED OUT AS UNDER:- TOTAL STOCK AS PER INVENTORY PREPARED RS. 84,17, 512/- STOCK AS PER BOOKS RS. 50,87,821/- EXCESS STOCK RS. 33,29,629/- 25 THE STATEMENT OF SHRI RAJENDER KUMAR SHARMA, ACCOUN TANT OF M/S. CARPET PALACE WAS RECORDED DURING SURVEY AND WHILE REPLYIN G TO QUESTION NO. 24, HE STATED THAT THE VALUE OF THE TOTAL CLOSING STOCK AS PER BOOKS OF ACCOUNT WORKS OUT TO RS. 50,87,281/-. DURING ASSESSMENT PRO CEEDINGS, THE A.O. PUT THE ASSESSEE TO EXPLAIN THE EXCESS STOCK VALUED AT RS. 33,29,629/-. THE ASSESSEE EXPLAINED VIDE LETTER DATED 13-12-2010 THA T STOCK FOUND DURING THE COURSE OF SURVEY INCLUDED THE STOCK OF RS. 66,33,07 2/- IN RESPECT OF CARPET AND RS. 17,84,440/- IN RESPECT OF RAW MATERIALS, B OTH WOOLEN AND COTTON YARN. IT WAS STATED THAT THE ACCOUNTANT FAILED TO T AKE INTO ACCOUNT THE GOODS LYING AND RECEIVED FOR APPROVAL FROM M/S. SUPREME C ARPET, A CONCERN IN WHICH THE WIFE AND THE BROTHER OF THE ASSESSEE ARE PARTNERS. THAT FIRM IS ALSO ENGAGED IN THE SIMILAR BUSINESS. IT WAS STATED THAT THE ACCOUNTANT FAILED TO TAKE INTO ACCOUNT THE CARPET RECEIVED ON APPROVAL B ASIS BEING4,475 SQ FT. VALUED AT RS. 11,50,075/- @ 257/- PER SQ FT. IT WAS STATED THAT THIS FACT CAN BE VERIFIED FROM THE BOOKS OF THAT FIRM. AFTER EXAMINI NG THE SUBMISSIONS SO MADE BY THE ASSESSEE, A.O. WAS NOT SATISFIED. HE HA S REFERRED TO THE STATEMENTS OF THE ACCOUNTANT WHO HAD STATED THAT NO STOCK OF ANY OTHER CONCERN WAS LYING AT THE SAID PREMISES AT THE TIME OF SURVEY. THE OTHER CONTENTION OF THE ASSESSEE IS THAT CARPET MEASURING 6452 SQ. FT BELONGING TO OTHER PARTIES WAS LYING AND HAD BEEN RECEIVED ON AP PROVAL. TO SUPPORT THIS 26 CONTENTION, THE ASSESSEE FILED COPIES OF CHALLANS O F GOODS RECEIVED ALONGWITH LETTER DATED 13-12-2010. THE VALUE OF THIS STOCK HA S BEEN TAKEN AT RS. 19,62,600/- @ RS. 300/- PER SQ. FT. THUS ACCORDING TO THE ASSESSEE, IF THE STOCK OF RS. 19,62,600/- AND OF RS. 11,50,075/- IS TAKEN INTO CONSIDERATION, THE STOCK OF RS. 2,06,954/- ONLY REMAINS TO BE EXPL AINED. SINCE THE ASSESSEE WAS UNABLE TO PRODUCE THE PARTIES BEFORE THE A.O., HE HAS TREATED THE EXPLANATION AS AN AFTERTHOUGHT. 5.3 THE LD CIT(A) HAS ALSO TAKEN THE SIMILAR VIEW A ND HAS CONFIRMED THE IMPUGNED ADDITION OF RS. 33,29,629/- ADDED U/S 69A OF THE ACT. 5.4 BEFORE US, BOTH THE PARTIES HAVE TAKEN SIMILAR STAND AS WAS TAKEN BEFORE THE LD CIT(A). 5.5 AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE HAV E FOUND THAT THE STATEMENT RECORDED ON OATH DURING SURVEY AS GOT NO EVIDENTIARY VALUE. THIS IS AS PER SETTLED POSITION OF LAW RENDERED IN THE ASSE SSEE CASE OF KADER KHAN SON BY THE HON'BLE SUPREME COURT IN WHICH THE DECIS ION OF HON'BLE MADRAS HIGH COURT REPORTED IN 300 ITR 157 (CIT VS KADER KH AN SON) HAS BEEN CONFIRMED AND APPROVED. AFTER EXCLUDING THIS STATE MENT OF THE ACCOUNTANT, THE ONLY FACTS REMAINS BEFORE US THAT THE STOCK PO SITION TAKEN DURING SURVEY COMES TO RS. 84,17,512/- AS AGAINST BOOK POSITION O F STOCK AT RS. 50,87,821/-. THE STATEMENT OF THE ASSESSEE HAD NOT BEEN RECORDED OR HE HAD 27 NOT BEEN EXAMINED ALSO. THE CONTENTION OF THE ASSES SEE IS THAT THE PHYSICAL STOCK OF CARPETS AND RAW MATERIAL WERE WRONGLY TAKE N AND TO EXPLAIN THE SAME RECONCILIATION OF STOCK POSITION HAS BEEN FILE D. THE CLAIM OF THE STOCK RECEIVED ON APPROVAL BASIS STANDS PROVED FROM THE D OCUMENTARY EVIDENCE FILED BEFORE THE A.O.. THERE IS NO REASON IN NOT AC CEPTING THE FACT THAT BOOKS OF ACCOUNT OF THE ASSESSEE WERE NOT UPTO DATE AT TH E TIME OF SURVEY. IT IS A FACT THAT THE ASSESSEE HAS CLAIMED TO HAVE BEEN PUR CHASING STOCK OF CARPET FROM M/S. SUPREME CARPET WHICH IS SISTER CONCERN OF THE GROUP. THERE CAN BE NO DENIAL OF THE FACT THAT IN BUSINESS STOCK IS TAKEN ON APPROVAL BASIS ALSO. THE CONFIRMATION OF M/S. SUPREME CARPET HAS BEEN FI LED IN THIS REGARD AND THE COPY OF WHICH IS PLACED AT PAGE 12 OF THE PAPER BOOK. THE ASSESSEE ASSESSMENT ORDER SUBMITTED A LIST OF OTHER PARTIES FROM WHOM CARPET MEASURING 6452 SQ. FT HAD BEEN RECEIVED ON APPROVAL WHICH IS AS UNDER:- SR. NO. DATE CHALLAN NO. NAME AREA IN SQ.FT. 1. 16.07.08 598 G.K. CARPETS 365.00 2. 25.07.08 PACKING LIST MANISHA CARPETS 1570.00 3. 25.07.08 635 AKSHAY ENTERPRISES 1835.00 4. 25.07.08 636 AKSHAY ENTERPRISES 356.00 5. 25.07.08 274 GAGAN ENTERPRISES 310.00 6. 28.07.08 99 JAIN CARPET & HANDICRAFTS 582.00 7. 29.07.08 599 G.K. CARPETS 982.00 8. 30.07.08 600 G.K. CARPETS 452.00 28 THE ASSESSEE ALSO ENCLOSED COPIES OF CHALLANS IN SU PPORT OF THE GOODS RECEIVED ON APPROVAL BASIS FROM THE ABOVE PARTIES A ND THE SAME ARE PLACED AT PAGE 13 TO 21 OF THE PAPER BOOK. IT WAS STATED THAT THE ASSESSEE HAD REQUESTED THE A.O. TO VERIFY THESE VOUCHERS BY ISSUING SUMMON S U/S 131 OF THE ACT. THIS CONTENTION OF THE ASSESSEE WAS NOT DENIED BY T HE LD DR. HOWEVER, IT WAS STATED THE A.O. WANTED THE ASSESSEE TO PRODUCE THEM BEFORE HIM AND THE ASSESSEE FAILED TO DO SO. IN OUR CONSIDERED OPINION , THIS COURSE ADOPTED BY THE A.O. IS NOT JUSTIFIED. IN MANY CASES WHEN IT BE COMES NOT REALLY POSSIBLE TO PRODUCE THE PARTIES FOR WHATEVER REASONS AND REQ UEST TO SUMMON U/S 131 OF THE ACT IS MADE, THE A.O. IS DUTY BOUND TO FOLLO W THAT PROCEDURE AND HE CANNOT BLAME THE ASSESSEE FOR NOT PRODUCING THOSE P ARTIES BEFORE HIM. IT WAS FURTHER STATED THAT APART FROM ABOVE STOCK RECEIVED ON APPROVAL BASIS, THERE WERE PURCHASES IN RESPECT OF WHICH GOODS HAD ALREA DY REACH THE ASSESSEE WITHOUT RELEVANT VOUCHERS. THUS PURCHASED GOODS WER E INCLUDED IN THE STOCK BUT RELEVANT VOUCHERS WERE IN PIPELINE. BEFORE THE A.O. DURING ASSESSMENT PROCEEDINGS, THE ASSESSEE MADE AVAILABLE ALL THESE PURCHASE VOUCHERS AND COPY OF WHICH ARE PLACED AT PAGE 22 TO 24 OF THE PA PER BOOK. THE DETAILS OF THESE PURCHASES ARE AS UNDER:- DATE BILL NO. NAME AREA IN SQ.FT. AMOUNT 29 08.07.08 24 SUPREME CARPETS 1805 463923.55 12.07.08 554 AKSHAY ENTERPRISES 856 171240.00 12.08.08 557 AKSHAY ENTERPRISES 456 113085.00 TOTAL 748248.55 ADMITTEDLY, THESE PURCHASES COULD NOT ACCOUNT FOR I N THE BOOKS OF ACCOUNT AS THE BILLS HAD NOT REACHED THE ASSESSEE. WE HAVE EXA MINED THE ABOVE CONTENTION OF THE ASSESSEE AND HAVE FOUND THAT THE AUTHORITIES HAVE NOT REJECTED THE SUBMISSIONS MADE AS ABOVE BUT HAVE REP EATEDLY RELIED ON THE STATEMENT RECORDED ON OATH OF THE ACCOUNTANT DURING SURVEY. IT IS QUITE NORMAL PRACTICE IN THE BUSINESS THAT GOODS MAY REAC H BEFORE THE BILLS. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CA SE, THE ENTIRE ADDITION OF RS. 33,29,629/- ADDED U/S 69A OF THE ACT STANDS DE LETED. CONSEQUENTLY, THE GROUND NO 1 OF THIS APPEAL IS ALLOWED. 6.1 THE FACTS APROPOS GROUND NO 2 OF ASSESSEE'S APP EAL ARE THAT THE ASSESSEE HAD A SUM OF RS. 4,37,921/- IN THE INCOME AND EXPENDITURE ACCOUNT UNDER THE HEAD INTEREST PAID TO BANK. THE ASSESSE E HAS UTILISED THE OVERDRAFT FACILITY FROM BANK. THE A.O. REQUIRED THE ASSESSEE TO EXPLAIN THE PURPOSE OF OVERDRAFT TAKEN FROM THE BANK ALONGWITH TREATMENT OF PAYMENT OF INTEREST IN SUCH ACCOUNT. THE ASSESSEE EXPLAINED VIDE LETTER DA TED 20-12-2010 AS UNDER:- 30 1. IT IS SUBMITTED THAT THE ASSESSEE HAS NOT BORR OWED ANY CAPITA ON INTEREST AND HAS THEREFORE, NOT PAID TO ANY OUTSIDE PARTY. IN THIS CIRCUMSTANCES THE QUESTION OF DISA LLOWING OF INTEREST DOES NOT ARISE. IT IS SETTLED POSITION OF LAW THAT ASSESSEE IS FREE TO USE HIS FUNDS THE WAY HE LIKES. THE RE VENUE HAS GOT NO SAY IN THE MANAGEMENT OF THE MONEY MATTERS OF THE ASSESSEE 2. THE COMPUTATION OF INCOME ALSO SHOWS THAT THE GROSS INCOME FROM OTHER SOURCES IS RS. 24,14,786/- AND AFTER DEDUCTION OF INTEREST OF RS. 4,37,921/- THE NET I NCOME UNDER THE HEAD INCOME FROM OTHER SOURCES S OF RS. 19,76,865 /-. THIS SHOWS THAT ASSESSEE HAS SHOWN INCOME UNDER THE HE AD INCOME FROM OTHER SOURCES AND HAS NOT PAID ANY INTEREST TO ANY OUTSIDE PARTY TO BE DISALLOWED. ASSESSEE WAS FREE TO USE HIS FUNDS FOR EARNING TAXABLE OR NON-TAXABLE INCOME. THE QUESTI ON OF DISALLOWANCE ARISES ONLY WHEN BORROWED FUNDS BEAR ING INTEREST ARE USED FOR EARNING EXEMPT INCOME. THIS IS NOT T HE CASE SO. THE PROVISIONS OF SECTION 14A ARE NOT APPLICABLE IN THE CIRCUMSTANCES OF THE CASE. 3. IT IS FURTHER SUBMITTED THAT EVEN THE UTILIZAT ION OF FUNDS ON WHICH BANK OD INTEREST OF RS. 4,37,921/- HAS B EEN CLAIMED, HAVE RESULTED IN SHORT TERM CAPITAL GAIN OF RS. 1 ,89,412/- AND FDRS INTEREST OF RS. 12,90,650/- WHICH ARE TAXABL E, THEREFORE, IT CANNOT BE SAID THAT INTEREST WAS PAID FOR EARNING EXEMPT INCOME. 4. IT IS FURTHER SUBMITTED THAT INTEREST CHARGED BY BANK ON OD IN FACT IS NOT EXPENDITURE IN THE STRICT SENSE OF THE WORD. IT IS A CASE WHERE LESSER INTEREST HAS BEEN EARNED BY T HE ASSESSEE ON HIS FUNDS AS PART OF THE FUNDS WAS DIVERTED FROM THE BANK TOWARDS INVESTMENT IN SHARES. THE ASSESSEE HAS UT ILIZED HIS OWN FUNDS. NO LOAN WAS TAKEN FROM BANK. IN FACT, ASS ESSEE WAS HAVING HIS OWN MONEY WITH THE BANK. IN THE CIRCUM STANCES, IT IS NOT A CLAIM OF INTEREST. IF AN ACCOUNT OF INTERES T FROM BANK IS DRAWN THE NET POSITION WOULD BE RECEIPT OF INCOME . IN THE CIRCUMSTANCES, NO DISALLOWANCE IS CALLED FOR. 5. THE FOLLOWING CASE LAW IS QUOTED IN SUPPORT. (I) REPL ENTERPRISES LTD. VS ITO (2010) 38 SOT 4 59 (MUMBAI). 31 (II) UCO BANK LTD. VS CIT 32 ITR 688 (SUPREME CO URT) 6.2 AFTER CONSIDERING THE ABOVE REPLY, THE A.O. WAS NOT SATISFIED BUT IN SIMILAR CIRCUMSTANCES WE HAVE TAKEN A FAVOURABLE VI EW IN OTHER CASES OF THIS GROUP WHEN SIMILAR DEFENCE WAS TAKEN. ACCORDINGLY, WE ALLOW NETTING OF INTEREST AND ALLOW THIS CLAIM. AS A RESULT, WE ORD ER TO DELETE THE ADDITION OF RS. 2,12,921/- ADDED ON ACCOUNT OF PAYMENT OF INTER EST TO BANK. THUS THE APPEAL OF THE ASSESSEE IS ALLOWED. 7.0 IN THE RESULT, APPEALS OF THE ASSESSEE ARE ALL OWED AND THE APPEAL OF THE REVENUE IS DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 07-0 3-2014. SD/- SD/- ( N.K. SAINI ) (HARI OM MARATHA ) ACCOUNTANT MEMBER JUDICIAL MEMBER *MISHRA COPY FORWARDED TO :- 1. SHRI KANHA RAM AGARWAL, JAIPUR 2. THE DCIT, CENTRAL CIRCLE-3, JAIPUR 3. THE LD.CIT(A) 4. THE LD CIT 5. THE D/R 6. GUARD FILE (ITA NO.176/JP/2012) BY ORDER, AR ITAT, JAIPUR 32 33