Manoj Kumar Jain, V. The Deputy Commissioner of Income Tax, Belgaum

ITA 180/PAN/2013

• Counselvise Citation: 18024114 RSA 2013
• Duration Of Justice: 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2004-2005
• Appeal Filed On: 05-07-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASHA DESAI
• Assessee Lawyers: H N KHINCHA
• Keywords: Bogus purchase; Unexplained investment; Business income; Search and seizure; Document seized; Cost of acquisition; Accommodation entries; Documents seized
• Section: 40A(3); 153A; 131

Judgement Text

P IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI P.K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO. 179 TO 18 4 /PNJ/2013 : (ASST. YEAR S : 200 3 - 0 4 & 200 8 - 0 9 ) MANOJ KUMAR JAIN PROP. : M/S. MAHAVEER ELECTRONICS & M/S. GURURAJENDRA MINERAL TRADING CO., SATYANARAYANA NILAYA, 100 BED HOSPITAL ROAD, HOSPET (APPELLANT) PAN : ACOPJ6760G VS. DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1, BELGAUM (RESPONDENT) APPELLANT BY : H.N. KHINCHA, CA RESPONDENT BY : SMT. ASHA DESAI, DR DATE OF HEARING : 27 /0 8 /2013 DATE OF PRONOUNCEMENT : 08 /1 1 /2013 O R D E R PER P.K. BANSAL : 1. ALL THESE APPEALS HAVE BEEN FILED BY THE ASSESSEE AGAINST THE COMMON ORDER OF CIT(A) DT. 29.1.2010. 2. THE APPEAL FOR A.Y 2003 - 04 WAS NOT PRESSED BY THE COUNSEL OF THE ASSESSEE AT THE TIME OF HEARING. THEREFORE, THE SAID APPEAL STANDS DISMISSED AS NOT PRESSED. 3. IN THE A.Y. 2004 - 05, THE ASSESSEE DID NOT PRESS GROUND NOS. 1 TO 5 AND GROUND NO. 7 AND THEREFORE THESE GROUNDS STAND DISMISSED AS NOT PRESSED. THE 2 ONLY EFFECTIVE GROUND S REMAIN ING FOR ADJUDICATION FOR A.Y 2004 - 05 READS AS UNDER : 6.1 THE LEARNED ASSESS ING OFFICER HAD ERRED IN ADDING A SUM OF RS. 12,43,158/ - U/S. 40A(3) OF THE ACT AND THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAD ERRED IN ENHANCING THIS ADDITION TO RS.98,82,976/ - HOLDING THAT THE ENTIRE EXPENSES IS NOT ACCOUNTED AND HENCE THE ENTI RE AMOUNT IS TO BE ADDED TO THE INCOME OF THE APPELLANT. 6.2 THE LOWER AUTHORITIES HAVE ERRED IN HOLDING THAT THE SCRIBBLING IN THE SEIZED DOCUMENTS WERE IN THE NATURE OF EXPENDITURE AND THAT THESE EXPENSES WERE INCURRED BY THE APPELLANT. THE APPELLANT N EVER INCURRED OR SPENT ANY SUCH AMOUNT AND THEREFORE THE ADDITION, HAVING BEEN MADE ON THE WRONG PREMISE AND BEING ERRONEOUS BOTH ON FACTS AND LAW IS TO BE DELETED. 6.3 IN ANY CASE THE ENHANCEMENT AS MADE BY COMMISSIONER OF INCOME - TAX (APPEALS) BEING BAD IN LAW IS TO BE DELETED. 4. IN THE A.Y. 2005 - 06, GROUND NOS. 1 TO 5 AND GROUND NO. 8 WAS NOT PRESSED AND THEREFORE THE ONLY EFFECTIVE GROUND S REMAIN ING FOR ADJUDICATION READS AS UNDER : 6.1 THE LEARNED ASSESSING OFFICER HAD ERRED IN ADDING A SUM OF RS.1 ,69,768/ - U/S. 40A(3) OF THE ACT AND THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAD ERRED IN ENHANCING THIS AMOUNT OF RS. 81,05,775/ - HOLDING THAT THE ENTIRE EXPENSES IS NOT ACCOUNTED AND HENCE THE ENTIRE AMOUNT LIABLE IS TO BE ADDED TO THE INCOME OF THE APPELLANT, THOUGH NO SEPARATE ADDITION IS SUSTAINED ON THIS COUNT BY THE COMMISSIONER OF INCOME - TAX (APPEALS) ON ACCOUNT OF TELESCOPING. 6.2 THE LOWER AUTHORITIES HAVE ERRED IN HOLDING THAT THE SCRIBBLING IN THE SEIZED DOCUMENTS WERE IN THE NATURE OF EXPENDITURE AND THAT THESE EXPENSES WERE INCURRED BY THE APPELLANT. THE APPELLANT NEVER INCURRED OR SPENT ANY SUCH AMOUNT AND THEREFORE THE ADDITION HAVING BEEN MADE ON THE WRONG PREMISE AND BEING ERRONEOUS BOTH ON FACTS AND LAW IS TO BE DELETED. 6.3 IN ANY CASE THE ENHANCEMENT AS MADE BY COMMISSIONER OF INCOME - TAX (APPEALS) BEING BAD IN LAW IS TO BE DELETED. 7.1 THE LEARNED ASSESSING OFFICER HAD ERRED IN ADDING A SUM OF RS.2,88,25,000/ - BEING AMOUNT WITHDRAWN BY SEVERAL PERSONS FROM 25 BANK ACCOUNTS IN THE NAMES OF 3 AND BELONGING TO DIFFERENT PERSONS AND THE COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN CONFIRMING THE SAME. 7.2 THE LOWER AUTHORITIES HAVE ERRED IN HOLDING THAT THE APPELLANT HAD CONTROL OVER THE BANK ACCOUNTS. FURTHER THE LOWER AUTHORITIES HAVE ALSO ERRED IN HOLDING THAT THE EXPENSES CLAIMED BY THE APPELLANT ARE BOGUS TO THE EXTENT OF AMOUNTS WITHDRAWN FROM THE BANK. THIS CONCLUSION OF THE LOWER AUTHORITIES BEING WITHOUT BASIS AND BEING ONLY ON SURMISES AND CONJECTURES ARE TO BE TOTALLY IGNORED AND ADDITIONS AS MADE BY ASSESSING OFFICER AND SUSTAINED BY COMMISSIONER OF INCOME - TAX (APPEALS) IS TO BE DELETED. 5. IN THE A.Y. 2006 - 07, GROUND NOS. 1 TO 3 AND 6 AND 7 WERE NOT PRESSED AND THEREFORE THE ONLY EFFECTIVE GROUND S REMAIN ING FOR ADJUDICATION READS AS UNDER : 4.1 THE LEARNED ASSESSING OFFICER HAD ERRED IN ADDING A SUM OF RS.11,17,400/ - U/S. 40A(3) OF THE ACT AND THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAD ERRED IN ENHANCING THIS AMOUNT TO RS.2,68,97,758/ - HOLDING THAT THE ENTIRE EXPENSES ARE NOT ACCOUNTED AND HENCE THE ENTIRE AMOUNT IS LIABLE TO BE ADDED TO THE INCOME OF THE APPELLANT. THE COMMISSIONER OF INCOME - TAX (APPEALS) HAS FURTHER ERRED IN CONFIRMING/ENHANCING THE ADDITION OF RS.1,21,48,858/ - AFTER TELESCOP ING. 4.2 THE LOWER AUTHORITIES HAVE ERRED IN HOLDING THAT THE SCRIBBLING IN THE SEIZED DOCUMENTS WERE IN THE NATURE OF EXPENSES AND THAT THESE EXPENSES WERE INCURRED BY THE APPELLANT. THE APPELLANT NEVER INCURRED OR SPENT ANY SUCH AMOUNT AND THEREFORE TH E ADDITION HAVING BEEN MADE ON THE WRONG PREMISE AND BEING ERRONEOUS BOTH ON FACTS AND LAW IS TO BE DELETED. 4.3 IN ANY CASE THE ENHANCEMENT AS MADE BY COMMISSIONER OF INCOME - TAX (APPEALS) BEING BAD IN LAW IS TO BE DELETED. 5.1 THE LEARNED ASSESSING OFFI CER HAD ERRED IN ADDING A SUM OF RS.1,47,48,900/ - BEING AMOUNT WITHDRAWN BY SEVERAL PERSONS FROM 25 BANK ACCOUNTS IN THE NAMES OF AND BELONGING TO DIFFERENT PERSONS AND THE COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN CONFIRMING THE SAME. 5.2 THE LOW ER AUTHORITIES HAVE ERRED IN HOLDING THAT THE APPELLANT HAD CONTROL OVER THE BANK ACCOUNTS. FURTHER THE LOWER AUTHORITIES HAVE ALSO ERRED IN HOLDING THAT THE EXPENSES CLAIMED BY THE APPELLANT ARE BOGUS TO THE EXTENT OF AMOUNTS WITHDRAWN FROM THE BANK. TH IS CONCLUSION OF THE LOWER AUTHORITIES BEING WITHOUT BASIS AND BEING ONLY ON SURMISES AND CONJECTURES ARE TO BE TOTALLY IGNORED AND ADDITIONS AS MADE BY ASSESSING OFFICER AND SUSTAINED BY COMMISSIONER OF INCOME - TAX (APPEALS) IS TO BE DELETED. 4 6. IN THE A .Y. 2007 - 08, GROUND NOS. 1 TO 4 AND 12 WERE NOT PRESSED AND THEREFORE THE EFFECTIVE GROUNDS REMAIN ING FOR ADJUDICATION READS AS UNDER : 5.1 THE LEARNED ASSESSING OFFICER HAS ERRED IN HOLDING THAT A SUM OF RS. 1,85,63,104/ - IS LIABLE TO BE DISALLOWED U/S. 40(A)(3) OF THE ACT, THOUGH NO DISALLOWANCE IS MADE AFTER TELESCOPING THE SAME AGAINST DECLARATION MADE BY THE APPELLANT. 5.2 THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN MAKING A FRESH ADDITION OF RS.9,28,15,521/ - BY WAY OF ENHANCEMENT OF INCOME HOLDING THAT THE ENTIRE EXPENSES ARE NOT ACCOUNTED AND HENCE THE ENTIRE AMOUNT IS TO BE ADDED TO THE INCOME OF THE APPELLANT. 5.3 THE LOWER AUTHORITIES HAVE ERRED IN HOLDING THAT THE SCRIBBLING IN THE SEIZED DOCUMENTS WERE IN THE NATURE OF EXPENDITURE AND THAT THESE EXPENSES WERE INCURRED BY THE APPELLANT. THE APPELLANT NEVER INCURRED OR SPENT ANY SUCH AMOUNT AND THEREFORE THE ADDITION HAVING BEEN MADE ON THE WRONG PREMISE AND BEING ERRONEOUS BOTH FACTS AND LAW IS TO BE DELETED. 5.4 IN ANY CASE THE ENHANCEMENT AS MADE BY COMMISSIONER OF INCOME - TAX (APPEALS) BEING BAD IN LAW IS TO BE DELETED. 5.5 IN ANY CASE AND WITHOUT PREJUDICE, THE ENHANCEMENT MADE IS ERRONEOUS AND EXCESSIVE, IT REQUIRES TO BE TELESCOPED. 6.1 THE LEARNED ASSESSING OFFICE R HAD ERRED IN ADDING A SUM OF RS.4,96,39,000/ - BEING AMOUNT WITHDRAWN BY SEVERAL PERSONS FROM 25 BANK ACCOUNTS IN THE NAMES BY AND BELONGING TO DIFFERENT PERSONS AND THE COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN CONFIRMING THE SAME. 6.2 THE LOWER AUTHORITIES HAVE ERRED IN HOLDING THAT THE APPELLANT HAD CONTROL OVER THE BANK ACCOUNTS. FURTHER THE LOWER AUTHORITIES HAVE ALSO ERRED IN HOLDING THAT THE EXPENSES CLAIMED BY THE APPELLANT ARE BOGUS TO THE EXTENT OF AMOUNTS WITHDRAWN FROM THE BANK. THIS CO NCLUSION OF THE LOWER AUTHORITIES BEING WITHOUT BASIS AND BEING ONLY ON SURMISES AND CONJECTURES ARE TO BE TOTALLY IGNORED AND ADDITIONS AS MADE BY ASSESSING OFFICER AND SUSTAINED BY COMMISSIONER OF INCOME - TAX (APPEALS) IS TO BE DELETED. 6.3 IN ANY CASE, AND WITHOUT PREJUDICE THE ADDITION AS CONFIRMED IS EXCESSIVE, IT REQUIRES TO BE TELESCOPED. 7.1 THE LEARNED ASSESSING OFFICER HAD ERRED IN MAKING AN ADDITION OF RS.22,35,21,842/ - (20,32,03,707 + 2,03,18,135) AS INCOME ON ACCOUNT OF UNEXPLAINED 5 INVESTMENT IN PURCHASE OF IRON ORE AND PROFIT ELEMENT ON UNACCOUNTED SALES. THE ADDITION AS MADE BY ASSESSING OFFICER BEING WHOLLY ON SUSPICION AND SURMISES WAS WHOLLY ERRONEOUS. 7.2 THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAS HOWEVER RESTRICTED THE ABOVE A DDITION TO 2.92 CRORES ONLY BY HOLDING THAT THE APPELLANT HAD MADE UNACCOUNTED TURNOVER OF RS.29,25,88,980/ - ON BEHALF OF THIRD PERSON AND THAT ON SUCH TURNOVER BE MADE A PROFIT OF 10%. 7.3 THE CONCLUSIONS DRAWN BY COMMISSIONER OF INCOME - TAX (APPEALS) BA SED ON VARIOUS OBSERVATION IN THE COURSE OF APPELLATE ORDER ARE ABSOLUTELY WITHOUT ANY BASIS, THE OBSERVATIONS ARE TOTALLY UNSUBSTANTIATED AND THEREFORE TO BE TOTALLY IGNORED. 7.4 THE ADDITION ON THIS ACCOUNT AS SUSTAINED BEING TOTALLY BAD ON FACT AND IN LAW, REQUIRES TO BE DELETED. 8.1 THE LEARNED ASSESSING OFFICER HAS ERRED IN HOLDING A SUM OF RS. 1,43,000/ - AS UNEXPLAINED INVESTMENT IN PLOTS AND LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN CONFIRMING THE SAME. THERE WERE NO UNACCOUNTED INVESTMENT IN PLOTS AND THEREFORE THE ADDITION BEING BAD IN LAW AND ON FACTS IS TO BE DELETED. 8.2 IN ANY CASE AND WITHOUT PREJUDICE THE ADDITION IS EXCESSIVE AND IN ANY CASE IT REQUIRES TO BE TELESCOPED. 9.1 THE LEARNED ASSESSING OFFICER HAD ERRED IN MA KING AN ADDITION ON PROTECTIVE BASIS OF RS.5,88,72,447/ - AND ON SUBSTANTIVE BASIS RS.7,25,86,033/ - AS BOGUS PURCHASES AND THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN CONFIRMING THIS ENTIRE ADDITION AS SUBSTANTIVE ADDITION IN THE HANDS OF THE APPELLANT. THE ADDITION AS MADE AND SUSTAINED BEING WHOLLY ERRONEOUS ON FACT AND IN LAW BE DELETED. 9.2 IN ANY CASE THE ADDITION AS SUSTAINED IS ERRONEOUS AND EXCESSIVE. 10.1 THE LEARNED ASSESSING OFFICER HAD ERRED IN ADDING A SUM OF RS.86,97,774/ - AS SUPPRESSED UNDISCLOSED INCOME. ON ACCOUNT OF DIFFERENCE BETWEEN THE NET PROFIT SHOWN IN THE BALANCE SHEET SEIZED AND THE NET PROFIT DECLARED AND THE COMM ISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN HOLDING THAT THE ABOVE ADDITION IS TO BE CONFIRMED THO UGH AFTER TELESCOPING, NO ADDITION IS SUSTAINED ON THIS COUNT. 10.2 THE CONCLUSIONS DRAWN BY COMMISSIONER OF INCOME - TAX (APPEALS) ARE CONTRARY TO FACTS AND THE LAW APPLICABLE ARE TO BE DISREGARDED. 11. IN ANY CASE AND WITHOUT PREJUDICE THE APPELLANT IS ENTITLED TO THE BENEFIT OF TELESCOPING AND ATLEAST THE SAME HAS TO BE ALLOWED. 6 12. THE APPELLANT DENIES THE LIABILITY TO PAY INTEREST. THE INTEREST HAVING BEEN LEVIED ERRONEOUSLY IS TO BE DELETED. 11 . IN VIEW OF THE ABOVE AND ON OTHER GROUNDS TO BE ADDUCED AT THE TIME OF HEARING, IT IS REQUESTED THAT THE IMPUGNED ORDER BE QUASHED OR ATLEAST THE ADDITION AS SUSTAINED / ENHANCED BY THE COMMISSIONER OF INCOME - TAX (APPEALS) BE DELETED. THE APPELLANT BE GIVEN THE BENEFIT OF TELESCOPING, ANY OTHER APPROPRIATE RELIEF AS PER LAW IS TO BE ALLOWED AND INTEREST LEVIED BE DELETED. 7. IN THE A.Y. 2008 - 09, GROUND NOS. 1 TO 4 & 10 WERE NOT PRESSED AND THEREFORE THE EFFECTIVE GROUNDS REMAIN ING FOR ADJUDICATION READS AS UNDER : 5.1 THE LEARNED ASSESSING OFFICER HAD ERRED IN ADDING A SUM OF RS. 1,58,19,464/ - U/S. 40A(3) OF THE ACT AND THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAD ERRED IN ENHANCING THIS ADDITION TO RS.7,90,97,320/ - HOLDING THAT THE ENTIRE EXPENSES IS NOT ACCOUNTED AND HENCE THE ENTIRE AMOUNT IS LIABLE TO BE ADDED TO THE INCOME OF THE APPELLANT THOUGH NO ADDITION / ENHANCEMENT IS SUSTAINED / MADE ON THIS COUNT AFTER TELESCOPING. 5.2 THE LOWER AUTHORITIES HAVE ERRED IN HOLDING THAT THE SCRIBBLING IN THE SEIZED DOCUMENTS WERE IN THE NATURE EXPENDITURE AND THAT THESE EXPENSES WERE INCURRED BY THE APPELLANT. THE APPELLANT NEVER INCURRED OR SPENT ANY SUCH AMOUNT AND THEREFORE THE ADDITION HAVING BEEN MADE ON THE WRONG PREMISE AND BEING ERRONEOUS BOTH FAC TS AND LAW IS TO BE DELETED. 5.3 IN ANY CASE THE ENHANCEMENT AS MADE BY COMMISSIONER OF INCOME - TAX (APPEALS) BEING BAD IN LAW IS TO BE DELETED. 6.1 THE LEARNED ASSESSING OFFICER HAS ERRED IN HOLDING THAT THE APPELLANT HAD EXCESS UNACCOUNTED STOCK AND IN ADDING A SUM OF RS.4,75,00,000 / - TO THE INCOME OF THE APPELLANT AND THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN CONFIRMING THE SAME. 6.2 THERE WAS NO EXCESS STOCK AT ALL AND THERE IS NO EVIDENCE THEREFOR. NO INVENTORY OF SUCH STOCK WAS E VERR FOUND OR MADE BY THE INCOME - TAX DEPARTMENT. THE ADDITION WAS MADE ON CONJECTURE AND HENCE BEING WITHOUT BASIS AND CONFIRMED BY COMMISSIONER OF INCOME - TAX (APPEALS) ALSO WITHOUT BASIS REQUIRES TO BE DELETED. 7.1 THE LEARNED ASSESSING OFFICER HAD ERRED IN MAKING AN ADDITION OF RS.43,00,000 / - (39,09,130 + 3,90,870) AS INCOME ON ACCOUNT OF UNEXPLAINED INVESTMENT IN PURCHASE OF IRON ORE AND PROFIT ON SUCH UNACCOUNTED SALES. THE ADDITION AS MADE BY ASSESSING OFFICER BEING WHOLLY ON SUSPICION AND SURMISES WAS WHOLLY ERRONEOUS. 7 7.2 THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAD HOWEVER RESTRICTED THE ABOVE ADDITION TO 4,30,000 / - ONLY BY HOLDING THAT THE APPELLANT HAD MADE A UNACCOUNTED TURNOVER OF RS.43,00,000 / - ON BEHALF OF THIRD PERSON AND THAT ON SUCH TURNOVER BE MADE A PROFIT OF 10%. 7.3 THE CONCLUSIONS DRAWN BY COMMISSIONER OF INCOME - TAX (APPEALS) BASED ON VARIOUS OBSERVATION IN THE COURSE OF APPELLATE ORDER ARE ABSOLUTELY WITHOUT ANY BASES THE OBSERVATIONS ARE TOTALLY UNSUBSTANTIATED AND ARE TH EREFORE TO BE TOTALLY IGNORED. 7.4 THE ADDITION ON THIS ACCOUNT AS SUSTAINED BEING TOTALLY BAD ON FACT AND IN LAW, REQUIRES TO BE DELETED. 8.1 THE LEARNED ASSESSING OFFICER HAD ERRED IN MAKING AN ADDITION ON PROTECTIVE BASIS OF RS.47,33,66,646/ - AND ON S UBSTANTIVE BASIS RS. 1 13,84,41,573 / - AS BOGUS PURCHASES AND THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN CONFIRMING THIS ENTIRE ADDITION AS SUBSTANTIVE ADDITION IN THE HANDS OF THE APPELLANT. THE ADDITION AS MADE AND SUSTAINED BEING WHOLLY ERRONEOUS ON FACT AND IN LAW BE DELETED. 8.2 IN ANY CASE AND WITHOUT PREJUDICE THE ADDITION MADE / CONFIRMED IS ERRONEOUS AND EXCESSIVE. 9. IN ANY CASE AND WITHOUT PREJUDICE THE APPELLANT IS ENTITLED TO THE BENEFIT OF TELESCOPING AND ATLEAST THE SAME HA S TO BE ALLOWED. 11. IN VIEW OF THE ABOVE AND ON OTHER GROUNDS TO BE ADDUCED AT THE TIME OF HEARING, IT IS REQUESTED THAT THE IMPUGNED ORDER BE QUASHED OR ATLEAST THE ADDITION AS SUSTAINED / ENHANCED BY THE COMMISSIONER OF INCOME - TAX (APPEALS) BE DELETED. THE APPELLANT BE GIVEN THE BENEFIT OF TELESCOPING, ANY OTHER APPROPRIATE RELIEF AS PER LAW IS TO BE ALLOWED AND INTEREST LEVIED BE DELETED. 8. THERE HAD BEEN A SEARCH IN THE GROUP CASES OF SHRI B . P . ANANDKUMAR SINGH AND SHRI MANOJ KUMAR JAIN OF HOSPET O N 25.3.2008. NOTICE U/S 153A W AS ISSUED TO THE ASSESSEE I N RESPONSE TO WHICH THE ASSESSEE HAS FILED RETURN AND THE RETURNED INCOME AND INCOME ASSESSED ARE DETAILED AS UNDER : A.Y. INCOME RETURNED U/S 153A DATE OF FILING OF RETURN ASSESSED INCOME 2003 - 04 31.03.2009 1,30,934 2004 - 05 2,56,838 31.03.2009 20,82,332 8 2005 - 06 27,28,764 31.03.2009 3,35,83,130 2006 - 07 3,90,38,732 31.03.2009 5,57,13,703 2007 - 08 7,85,65,715 31.03.2009 49,23,75,811 2008 - 09 6,54,42,660 17.08.2009 2,02,90,39,645 IN MAKING THE ABOVE ASSESSMENT, THE AO ACCEPTED THE CLAIM OF THE ASSESSEE IN THE RETURN OF INCOME WITH REGARD TO THE TURNOVER OF IRON ORE BUSINESS DECLARED IN THE RETURN FILED AS IF IT WERE HIS OWN TURNOVER/SALES AND NOT ON BEHALF OF SHRI ANIL LAD OR ANIL LADS GROUP CONCERN S , M/S. VSL M INING ETC. HOWEVER, THE DISALLOWANCE S AND ADDITIONS WERE MADE AS DETAILED IN THE ASSESSMENT ORDER S INCLUDING THE ADDITIONS MADE BY TREATING SOME OF THE PURCHASES AS TOTALLY UNACCOUNTED SHOWN IN THE NAMES OF PERSONS AS DETAI LED IN THE ASSESSMENT ORDER S (RELEVANT FOR A.YS 2007 - 08 AND 2008 - 09). ALSO, WITH REGARD TO ANOTHER CATEGORY OF PURCHASES (AGAIN RELEVANT FOR A.YS 2007 - 08 AND 2008 - 09) MADE FROM CERTAIN PARTIES, THE ASSESSING OFFICER ACCEPTED THE CLAIM OF THE APPELLANT SIN CE THE PARTIES WERE EXISTING PARTIES BUT MADE A DISALLOWANCE ON PROTECTIVE BASIS, THE SUBSTANTIVE ADDITION BEING IN THE HANDS OF THE INDIVIDUAL PARTIES. THE ASSESSEE WENT IN APPEAL BEFORE CIT(A). CIT(A) NOTED THAT THE ASSESSEE HAS BEEN DEALING IN ELECTRO NICS UNDER THE NAME OF M/S. MA HAVEER ELECTRONICS AS ITS PROPRIETOR. THE ASSESSEES TURNOVER AND BUSINESS INCOME DECLARED IN RESPECT OF BUSINESS OF M/S. MA HAVEER ELECTRONICS HAS BEEN PRIMARILY ACCEPTED BY THE AO. IN ADDITION, THE ASSESSEE IS ALSO DEALING IN IRON ORE IN THE NAME OF M/S. GURU RAJENDRA MINERAL TRADING COMPANY . THE PROFIT S FROM THIS BUSINESS HAVE BEEN DECLARED UNDER THE NAME OF M/S. GURU RAJ ENDRA MINING CO MPANY , M/S. GURU RAJ ENDRA MINERAL P ROCESSING C OMPANY AND M/S. RAJENDRA TRANSPORT CO MPANY . THE CIT(A) ALSO NOTED THAT THE FINANC IALS OF THE BUSINESS CARRIED OUT IN THE NAME OF THESE 3 CONCERNS ARE MERGED IN THE FINANC IALS OF M/S. GURU RAJ ENDRA MINERAL T RADING C OMPANY WHICH IS THE CONSOLIDATED RESULT OF ALL OTHER MINING RELATED BUSINESSES. 9 A.Y 2004 - 05 - 9. THE ONLY ISSUE REMAINS FOR ADJUDICATION BEFORE US IN A.Y 2004 - 05 IS THE DISALLOWANCE MADE BY THE AO U/S 40A(3) SUSTAINED BY CIT(A) ON OTHER GROUND . THE FACTS RELATING TO THIS GROUND ARE THAT AS PER SEIZED DOCUMENTS MARKED AS A/MJ/56 D T. 1.4.2008 , THE AO NOTED THAT THE ASSESSEE HAD MADE PAYMENT IN EXCESS OF RS. 20,000/ - TOTALLING TO RS. 98,82,976/ - AND THEREFORE, HE ISSUED SHOW CAUSE TO DISALLOW 20% THEREOF. AFTER THE SUBMISSION S OF THE ASSESSEE AND VERIFICATION OF THE RECORDS, THE AO FOUND THE PAYMENT IN EXCESS OF RS. 20,000/ - TO BE RS. 62,15,790/ - . THEREFORE, THE AO DISALLOWED 20% THEREOF AMOUNTING TO RS.12,43,158/ - U/S 40A(3). WHEN THE MATTER WENT BEFORE CIT(A), CIT(A) TOOK THE VIEW THAT THE WHOLE OF THE EXPENDITURE OF RS.98,82,976 / - INCURRED WAS OUTSIDE THE BOOKS AND THEREFORE, AFTER ISSUING A NOTICE FOR ENHANCEMENT DT. 6.5.2013, HE ENHANCED THE ADDITION OF RS. 12,43,158/ - TO RS. 98,82,976/ - . 9.1 WE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME. IT IS NOT DISPUTED THAT THE CASH PAYMENT AS PER THE SEIZED DOCUMENTS WERE MADE BY THE ASSESSEE OUTSIDE THE BOOKS OF ACCOUNTS. THEREFORE, IN OUR OPINION, THE ONUS IS ON THE ASSESSEE TO PROVE THE SOURCE OF THESE EXPENSES. IT IS NOT A CASE WHERE THE ASSESSEE HAS CLAIMED DEDU CTION OF THESE EXPENSES BEING INCURRED IN CASH WHILE COMPUTING THE INCOME FROM BUSINESS. THEREFORE, THE PROVISIONS OF SEC. 40A(3), IN OUR OPINION, WILL NOT BE APPLICABLE. THE AO VERIFIED AND CAME TO THE CONCLUSION THAT THE ACTUAL CASH PAYMENT MADE BY THE ASSESSEE IS RS.62,15,790/ - AND NOT RS. 98,82,976/ - . CIT(A), THEREFORE, IN OUR OPINION IS NOT CORRECT IN ENHANCING THE DISALLOWANCE TO RS. 98,82,976/ - SINCE THE CORRECT AMOUNT WHICH REPRESENTS THE CASH PAYMENT AS PE R SEIZED DOCUMENT A/MJ/56 DT. 1.4.2008 AS PER AO IS RS. 62,15,790/ - . THEREFORE, THE ADDITION SHOULD HAVE BEEN ENHANCED TO RS. 62,15,790/ - . IN VIEW OF THIS, WE REDUCE THE ADDITION FROM RS. 98,82,976/ - 10 TO RS. 62,15,790/ - . TO THAT EXTENT, THE ORDER OF CIT( A) IS CONFIRMED. THUS, THE GROUND TAKEN BY THE ASSESSEE IS PARTLY ALLOWED. A.Y 2005 - 06 - 10. GROUND NO. 6 WHICH SURVIVES FOR OUR ADJUDICATION RELATES TO THE ISSUE REGARDING DISALLOWANCE MADE BY CIT(A) AMOUNTING TO RS.81,05,775/ - . THE BRIEF FACTS REL ATING TO THIS GROUND ARE THAT AS PER SEIZED DOCUMENTS MARKED AS A/MJ/7 DT. 1.4.2008 , THE AO NOTED THAT THE ASSESSEE HAD MADE CASH PAYMENT AMOUNTING TO RS. 81,05,775 / - . HE WORKED OUT 20% THEREOF TO BE RS. 16,21,155/ - AND GAVE OPPORTUNITY TO THE ASSESSEE TO EXPLAIN WHY THE AMOUNT OF RS.16,21,155/ - BE NOT DISALLOWED U/S 40A(3). THE ASSESSEE AFTER GOING THROUGH THE DETAILS OF THE PAYMENTS, WORKED OUT THE DETAILS IN RESPECT OF PAYMENTS ABOVE RS. 20,000/ - AT RS. 8,48,843/ - . THE AO VERIFIED THE SAME AND FOUND T HAT THE PAYMENT MADE BY THE ASSESSEE IN EXCESS OF RS. 20,000/ - RELATING TO THE IMPUGNED YEAR ARE RS. 8,48,843/ - AND THEREFORE, HE DISALLOWED 20% THEREOF AMOUNTING TO RS. 1,69,768/ - . WHEN THE MATTER WENT BEFORE CIT(A), CIT(A) ENHANCED THE DISALLOWANCE. CI T(A) TOOK THE VIEW THAT THESE EXPENDITURE HAVE BEEN INCURRED OUTSIDE THE BOOKS OF ACCOUNTS. THEREFORE, CIT(A) AFTER GIVING OPPORTUNITY TO THE ASSESSEE VIDE LETTER DT. 6.5.2013, ENHANCED THE ADDITION TO RS.81,05,775/ - EVEN IGNORING THE FACT THAT THE TOTAL PAYMENT MADE BY THE ASSESSEE DURING THE IMPUGNED ASSESSMENT WERE RS. 8,91,043/ - WHICH INCLUDES SUM OF RS.8,48,843/ - WHICH W ERE IN EXCESS OF RS.20,000/ - . BUT CIT(A) SINCE MADE THE ADDITION AMOUNTING TO RS.2,88,25,000/ - ON ACCOUNT OF AMOUNT WITHDRAWN FROM THE BANK ALLOWED TELESCOPING OF THIS ADDITION AGAINST THAT ADDITION. 10.1 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY CONSIDERED THE SAME. WE NOTED THAT THESE EXPENSES HAVE BEEN INCURRED BY THE ASSESSEE OUTSIDE THE 11 BOOKS OF ACCOUNTS. DETAILS OF THESE EXPENSES/PAYMENTS ALONGWITH VOUCHERS WERE FILED BEFORE US WHICH READS AS UNDER : TOTAL PAYMENTS MADE DURING ASSMT YEA R : 2005 - 06 SL.NO. DATE PARTY AMOUNT NATURE OF PAYMENT 1 19 - APR - 04 MOHINUDDIN 18,450 TRANSPORTATION CHARGES PAID @ VARIOUS TRIPS 2 02 - JAN - 05 PURCHASE A/C 200,000 VJJAIN GOWDA TOWARDS PURCHASE OF IRON ORE 3 04 - JAN - 05 PURCHASE A/C ANIL LAD 538,275 PURCHASE OF IRON ORE 4 26 - FEB - 05 AL (GHOUSE) 8,750 CASH PAID TO CLOTH PICES 5 12 - MAR - 05 VSL 40,000 PSK FOR PURCHASE FOR CLOTHS 6 12 - MAR - 05 VSL 45,568 ASHOK FANCY PURCHASE FOR CLOTHS 7 13 - MAR - 05 ANIL LAD SIR, SANDUR 25,000 CASH PAID TO MR. HIREMATH 8 15 - MAR - 05 VSL 15,000 CASH PAID TO SRI HIREMATH 891,043 THE TOTAL EXPENDITURE INCURRED BY THE ASSESSEE AS PER ANNEXURE A/MJ/7 WHICH RELATES TO THE IMPUGNED A.Y IS RS. 8,91,043/ - BUT THE PAYMENT IN EXCESS OF RS.20,000/ - ARE RS. 8,48,843/ - . SINCE THE ASSESSEE HAS NOT CLAIMED ANY DEDUCTION IN RESPECT OF THESE EXPENSES AND THESE EXPENSES HAVE BEEN INCURRED OUTSIDE THE BOOKS OF ACCOUNTS, THEREFORE, THE PROVISIONS OF SEC. 40A(3) WILL NOT BE APPLICABLE IN THIS CASE. CIT(A), WE NOTED, ENHANCED THE ADDITION TO RS.81,05,775/ - ON THE BASIS OF WHAT AO HAS NOTED AT THE INITIAL STAGE WHILE SUBSEQUENTLY THE ASSESSEE SUBMITTED BEFORE THE AO THE EXPENSES RELATING TO THIS YEAR ARE NOT RS. 81,05,775/ - BUT WERE ONLY RS 8,91,043/ - . IN OUR OPINION, THE ASSESSEE ONCE HAS INCURRED THE EXPENSES OR MADE THE PAYMENT OUTSIDE THE BOOKS OF ACCOUNTS, THE ONUS IS ON THE ASSESSEE TO EXPLAIN THE SOURCE THEREOF TO THE SATISFACTION OF THE INCOME TAX OFFICER. SINCE IN THIS CASE THE ASSESSEE FAIL ED TO EXPLAIN THE SOURCE OF THESE EXPENSES/PAYMENTS, THEREFORE, TO THAT EXTENT CIT(A), IN OUR OPINION, HAS CORRECTLY MADE THE ADDITION BUT THE QUANTUM OF THE ADDITION MADE BY CIT(A) IS NOT CORRECT. ACCORDING TO THE DETAILS SUBMITTED, THE TOTAL EXPENSES/PA YMENT RELATING TO THIS A.Y ARE ONLY RS. 8,91,043/ - . WE, THEREFORE, 12 REDUCE THE ADDITION TO RS. 8,91,043/ - . TO THAT EXTENT, ORDER OF CIT(A) IS CONFIRMED. THUS, THIS GROUND IS PARTLY ALLOWED. 11. GROUND NO. 7 RELATES TO THE SUSTENANCE OF THE ADDITION OF R S. 2,88,25,000/ - BY CIT(A) BEING THE AMOUNT WITHDRAWN BY SEVERAL PERSONS FROM 25 BANK ACCOUNTS IN THE NAMES OF AND BELONGING TO DIFFERENT PERSONS . THE BRIEF FACTS RELATING TO THIS GROUND ARE THAT DURING THE COURSE OF SEARCH AT THE BUSINESS PREMISES OF THE ASSESSEE EVIDENCE S OF 25 BOGUS BANK ACCOUNTS OPERATED THROUGH BANK OF INDIA, HOSPET WERE FOUND. THE PASSBOOKS AND THE CHEQUE BOOKS OF THESE BANK ACCOUNTS WHICH WERE LYING WITH THE ASSESSEE WERE SEIZED. THE SEIZED DOCUMENTS WERE MARKED GRM / 1 - GRM / 26 . DETAILS IN RESPECT OF EACH OF THE BANK ACCOUNTS AND THE YEAR COVERED BY THE BANK ACCOUNT ARE GIVEN AT PG . 6 - 8 OF THE ASSESSMENT ORDER. ON THE BASIS OF THESE DETAILS, THE AO NOTED THAT THE ASSESSEE HAS WITHDRAWN THE FOLLOWING AMOUNTS TOTALLING TO RS. 9,32 ,77,760/ - IN DIFFERENT FINANCIAL YEARS : - F.Y 2004 - 05 RS. 2,88,25,000/ - F.Y 2005 - 06 RS. 1,47,48,900/ - F.Y 2006 - 07 RS. 4,96,39,000/ - TOTAL RS. 9,32,77,760/ - O N THIS BASIS THE AO ASKED THE ASSESSEE WHY THE AMOUNT SO WITHDRAWN SHOULD NOT BE TREATED AS INCOME OF THE ASSESSEE, THE ASSESSEE EXPLAINED THAT THE SAID BANK ACCOUNTS BELONGED TO INDEPENDENT TRANSPORT OPERATORS AND THEY ARE NOT ASSOCIATED WITH THE CONCERN OF THE ASSES SEE IN ANY CAPACITY EXCEPT AS TRANSPORT OPERATORS. COP IES OF THE LEDGER ACCOUNTS OF THE TRANSPORT OPERATORS WERE FILED. IT WAS STATED THAT THESE TRANSPORT OPERATORS ARE NOT EMPLOYEES OF THE ASSESSEE AND SAME CAN BE CROSS - VERIFIED FROM THE SCHEDULE OF SALARIES GIV EN IN THE FINANCIAL STATEMENT. HE STATED THAT SINCE THE TRANSPORTERS ALWAYS INSIST FOR PAYMENT IN 13 EXCESS OF RS. 20,000/ - IN CASH, THEREFORE, THE ASSESSEE HEL PED THESE TRANSPORTERS TO OPEN BANK ACCOUNTS IN BANK OF INDIA SO THAT THE ASSESSEE CAN ISSUE CHEQUE S IN THEIR FAVOUR AFTER DEDUCTING TDS FROM WHERE THEY CAN WITHDRAW THE AMOUNT. IN EACH OF THE CASE, T HE TDS HAS DULY BEEN DEDUCTED. THE TRANSPORT EXPENSES H AVE DULY BEEN RECORDED IN THE BOOK S OF ACCOUNTS OF THE ASSESSEE. THE AO WAS NOT SATISFIED WITH TH E EXPLANATION OF THE ASSESSEE. ACCORDING TO THE AO, THE RELEVANT CHEQUE BOOKS AND THE PASSBOOKS OF THESE BANK ACCOUNTS WERE FOUND IN THE POSSESSION OF THE A SSE SSEE D URING THE COURSE OF SEARCH . DURING P OST - SEARCH INVESTIGATION, THE ASSESSEE ADMITTED THAT THESE EXPENSES ARE NOT GENUINE AND ALL THE BANK A CCOUNTS ARE INTRODUCED BY HIM. THE AO, THEREFORE, TREATED THE AMOUNTS SO WITHDRAWN IN EACH OF THE ASSESSMENT YEA RS TO BE THE UNDISCLOSED INCOME OF THE ASSESSEE AND ADDED IT TO HIS TOTAL INCOME. THUS, DURING THE IMPUGNED A.Y A SUM OF RS. 2,88,25,000/ - WAS ADDED WHILE RS.1,47,48,900/ - AND RS. 4,96,39,000/ - WERE ADDED AS THE UNDISCLOSED INCOME OF THE ASSESSEE DURING A .Y 2006 - 07 AND 2007 - 08 RESPECTIVELY . THE ASSESSEE WEN T IN APPEAL BEFORE THE CIT(A). CIT(A) CONFIRMED THE AMOUNT SO WITHDRAWN BY THE ASSESSEE IN EACH OF THE A.YS. 11.1 THE LD. AR BEFORE US VEHEMENTLY CONTENDED THAT THE VERY PREMISE OF THESE ADDI TIONS IS ABSOLUTELY ERRONEOUS. THE AO HAS NOT POINTED UNDER WHICH SECTION OR UNDER WHICH PROVISION OF LAW THE ADDITION HAS BEEN MADE. PER SE THE WITHDRAWAL FROM THE BANK ACCOUNTS CANNOT PAR - TAKE THE CHARACTER OF INCOME. THEREFORE, THE VERY BASIS OF THE AD DITION , BEING TOTAL WITHDRAWAL FROM THE BANK BE IT BOGUS OR OTHERWISE, IS NOT CORRECT AND THE ADDITION ON THIS BASIS ITSELF BE DELETED. THE AO HAS INCORRECTLY CONCLUDED THAT THE 25 BANK ACCOUNTS ARE BOGUS. THE ALLEGATION THAT THE BANK ACCOUNT - HOLDERS ARE ALL EMPLOYEES OF THE ASSESSEE IS TOTALLY BASELESS. THE STATEMENT OF SALARY PAID BY THE ASSESSEE CLEARLY SHOWS THAT NONE OF THESE PERSONS ARE THE EMPLOYEES OF THE ASSESSEE. NAME OF THE BANK ACCOUNT HOLDERS AS MENTIONED FROM PG. 6 - 8 OF THE ASSESSMENT ORDER DO NOT MATCH 14 WITH THE NAMES OF THE EMP LOYEES AS MENTIONED IN ANNEXURE A TO THE ASSESSMENT ORDER. MERELY SOME OF THE CHEQUE LEAVES, PASSBOOKS AND PAY SLIPS WERE FOUND IN THE ASSESSEES PREMISES AND THE BANK ACCOUNTS ARE CONSECUTIVELY NUMBERED DID NOT MAKE T HESE ACCOUNTS BOGUS. ALL THESE ACCOUNT HOLDERS ARE IN EXISTENCE, AVAILABLE AND REGULAR TAX PAYERS . THESE PERSONS HAVE DULY FILED THEIR RESPECTIVE RETURNS. THESE PERSONS HAVE CONFIRMED THAT ALL THE RELEVANT BANK ACCOUNT S BELONGED TO THEM ONLY. THE BANK ACCOUNTS ARE DULY REFLECTED IN THE BALANCE SHEET FILED B Y EACH OF THE ACCOUNT HOLDERS. ALL THESE PERSONS ARE TRANSPORT OPERATORS WHO WORKED FOR THE ASSESSEE TRANSPORTING THE GOODS DEALT IN BY TH E ASSESSEE. THE ASSESSEE IN ORDER TO COMPLY WITH THE LAW AND I N ORDER TO MAKE THE TRANSPORTERS HAVE THEIR OPERATIONS THROUGH BANKING CHANNEL ASSISTED THEM IN OPENING THE BANK ACCOUNTS. THE FACT THAT THE APPELLANT ENCOURAGED TRANSACTION THROUGH BANKING CHANNEL AND TRIED TO AVOID CASH TRANSACTION SHOULD BE APPRECIATED INSTEAD OF BEING CONDEMNED. THE TRANSPORTERS ARE AWAY FROM THEIR BUSINESS PLACE FOR VARIOUS REASONS. THE ASSESSEE OFFERED THE SERVICES OF ITS STAFF TO OFFER BANKING TRANSACTION FOR THE TRANSPORTERS. THE CHEQUE LEAVES, PASSBOOKS ETC. WERE FOUND IN THE AS SESSEES PREMISES DUE TO THIS REASON. IT IS ALSO INCORRECT TO STATE THAT THE ASSESSEE OR HIS EMPLOYEES WITHDREW THE CASH FROM THESE ACCOUNTS. THERE IS NO SUCH EVIDENCE BEING FOUND OR PUT TO THE ASSESSEE FOR HIS REBUTTAL. THE ACCOUNT DOES NOT BELONG TO T HE ASSESSEE. ASSESSEE HAS NOT OPERATED THESE ACCOUNTS. 11.2 THE LD. DR, ON THE OTHER HAND, RELIED ON THE ORDER OF THE AO AND CARRIED US TO PG. 4 - 9 OF THE ASSESSMENT ORDER. ON A QUERY FROM THE BENCH WHETHER THE AO HAD DISALLOWED ANY SUCH TRANSPORT EXPE NSES WHICH HAS BEEN CLAIMED BY THE ASSESSEE AS DEDUCTION WHILE COMPUTING HIS TOTAL INCOME, THE LD. DR WAS FAIR ENOUGH TO CONCEDE THAT NO SUCH DISALLOWANCE IS MADE. 15 11.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME. WE NOTED FRO M THE FACTS THAT DURING THE COURSE OF SURVEY AT THE PREMISES OF THE ASSESSEE, CHEQUE BOOKS, PASSBOOKS AND PAY SLIPS RELATING TO 24 SAVINGS BANK ACCOUNTS WERE FOUND IN POSSESSION OF THE ASSESSEE. THE ASSESSEE HAS INTRODUCED ALL THESE BANK ACCOUNTS. THE AO PRESUMED THAT ALL THESE BANK ACCOUNTS ARE IN THE NAMES OF THE EMPLOYEES OF THE ASSESSEE BUT FROM THE DETAILS OF THE BANK ACCOUNTS WHICH ARE AVAILABLE FROM PG. 6 - 8 OF THE ASSESSMENT ORDER AND THE ANNEXURE A TO THE ASSESSMENT ORDER WHICH CONTAINS NAMES OF THE EMPLOYEES OF THE ASSESSEE, IT IS APPARENT THAT NONE OF THESE SAVINGS BANK ACCOUNTS ARE IN THE NAME OF THE EMPLOYEES OF THE ASSESSEE. THE ASSESSEE EXPLAINED THAT THE ASSESSEE HAS ASSISTED THE TRANSPORTERS TO OPEN THESE BANK ACCOUNTS AS THE TRANSPORTER S ARE LOCATED AT FARAWAY PLACES SO THAT THE PAYMENT CAN BE MADE TO THESE TRANSPORTERS THROUGH CHEQUE AND THE TRANSPORTERS OR HIS TRUCK DRIVER MAY WITHDRAW THE AMOUNT AS AND WHEN IT IS NEEDED. IT IS NOT DENIED BY THE LD. DR THAT TDS HAS BEEN DEDUCTED OUT O F THE TRANSPORT CHARGES SO PAID. IT IS NOT DENIED BY THE REVENUE THAT THE TRANSPORT CHARGES SO PAID BY THE ASSESSEE HA VE BEEN CLAIMED BY THE ASSESSEE AS DEDUCTION. THE AO HAS NOWHERE HELD THAT THE TRANSPORT CHARGES PAID BY THE ASSESSEE ARE BOGUS EVEN THOUGH THE AO PRESUMED THAT THESE BANK ACCOUNTS BELONGED TO THE ASSESSEE AND MADE THE ADDITION IN RESPECT OF THE AMOUNT WITHDRAWN FROM THESE BANK ACCOUNTS. IN OUR OPINI ON, IT IS A FACT THAT NO ADDITION HAS BEEN MADE IN RESPECT OF THE DEPOSITS MADE IN THESE BANK ACCOUNTS. WE DO NOT AGREE WITH THE LD. AR THAT PER SE THE WITHDRAWAL FROM THESE BANK ACCOUNTS , EVEN IF THE BANK ACCOUNTS ARE TREATED TO BE BELONGING TO THE ASSES SEE, CANNOT BE REGARDED TO BE THE UNDISCLOSED INCOME. THERE IS NO PROVISION UNDER THE INCOME TAX ACT THAT THE AMOUNT WITHDRAWN BY THE ASSESSEE FROM THE BANK ACCOUNT IS DEEMED TO BE HIS INCOME. THE AMOUNT WITHDRAWN BY A PERSON FROM HIS BANK ACCOUNT CANNOT BE REGARDED TO BE HIS INCOME. UNDER SEC. 4 OF THE INCOME TAX ACT THE INCOME TAX IS CHARGEABLE ONLY ON THE REAL INCOME. THE AMOUNT WITHDRAWN FROM THE BANK ACCOUNT REPRESENTS 16 ONLY THE CURRENT ASSET OF THE ASSESSEE. ON THIS VERY BASIS, THE ADDITION SO MAD E IS LIABLE TO BE DELETED. WE, THEREFORE, SET ASIDE THE ORDER OF CIT(A) AND DELETE THE ADDITION IN RESPECT OF THE AMOUNT WITHDRAWN FROM THE BANK ACCOUNTS OF THE ASSESSEE IN EACH OF THE A.Y. 2005 - 06, 2006 - 07 AND 2007 - 08. THUS, GROUND NO. 7 IN THE A.Y 2005 - 06 IS ALLOWED. A.Y 200 6 - 0 7 - 12. AS GROUND NOS. 1 TO 3 AND 6 & 7 WERE NOT PRESSED, THEREFORE, THERE REMAINS ONLY 2 GROUNDS I.E. GROUND NOS. 4 & 5 FOR OUR ADJUDICATION. 13. GROUND NO. 4 RELATES TO THE SUSTENANCE OF THE ADDITION MADE BY THE AO U/S 4 0A(3) AMOUNTING TO RS. 11,17,400/ - . THE BRIEF FACTS RELATING TO THIS ISSUE ARE THAT AS PER THE SEIZED DOCUMENT MARKED A/MJ/7 DT. 1.4.2008 IT WAS NOTICED THAT THE ASSESSEE MADE CASH PAYMENT AMOUNTING TO RS.2,68,97,758/ - . THE AO, THEREFORE, SOUGHT AN EXPLA NATION FROM THE ASSESSEE FOR DISALLOWING 20% OF THE SAME AMOUNTING TO RS. 53,79,551/ - U/S 40A(3). THE AO, ON THE BASIS OF THE SEIZED DOCUMENTS WORKED OUT THAT THE PAYMENT IN EXCESS OF RS. 20,000/ - WERE ONLY RS.55,87,000/ - FOR THE IMPUGNED A.Y. THE AO AFT ER VERIFYING THE CONTENTION OF THE ASSESSEE DISALLOWED 20% THEREOF AMOUNTING TO RS.11,17,400/ - U/S 40A(3) OF THE INCOME TAX ACT. THE ASSESSEE WENT IN APPEAL BEFORE CIT(A). CIT(A) NOTED THAT THE ENTIRE EXPENSES WERE OUTSIDE THE BOOKS OF ACCOUNTS AND THERE FORE THE ADDITION WAS REQUIRED IN RESPECT OF THE ENTIRE EXPENSES AND ACCORDINGLY AFTER ISSUING ENHANCEMENT NOTICE DT. 6.5.2013 HE ENHANCED THE ADDITION TO RS. 2,68,97,758/ - . SINCE CIT(A) SUSTAINED THE ADDITION AMOUNTING TO RS. 1,47,48,900/ - ON ACCOUNT OF CASH WITHDRAWAL FROM 25 BANK ACCOUNTS, THEREFORE, AFTER TELESCOPING ONLY THE BALANCE ADDITION AMOUNTING TO RS.1,21,48,858/ - WAS ENHANCED. 17 13.1 THE LD. AR BEFORE US VEHEMEN TLY CONTENDED THAT THE DISALLOWANCE SHOULD HAVE BEEN RESTRICTED TO RS. 11,17,400/ - AS WAS WORKED OUT BY THE AO. ENHANCEMENT MADE BY THE CIT(A) IS NOT CORRECT. BY REFERRING TO THE INCOME TAX RETURN FILED BY THE ASSESSEE FOR THE IMPUGNED ASSESSMENT YEAR IN RESPONSE TO NOTICE U/S 153A, IT WAS SUBMITTED THAT THE ASSESSEE HAS SURRENDERED A SUM OF RS. 2,41,00,000/ - . A LTHOUGH INCOME IS EARNED ON ACCOUNT OF VSL GROUP BUT THE SAME HAS BEEN UTILIZED BY THE ASSESSEE IN MAKING PAYMENT OUTSIDE THE BOOKS OF ACCOUNTS A ND, TO THAT EXTENT, TELESCOPING SHOULD BE ALLOWED TO THE ASSESSEE. 13.2 THE LD. DR, ON THE OTHER HAND, RELIED ON THE ORDER OF CIT(A). 13.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME ALONGWITH THE ORDER OF THE TAX AUTHORITIES BELOW. IT IS NOT DENIED THAT THE SUM OF RS. 2,68,97,758/ - REPRESENTS THE PAYMENT MADE BY THE ASSESSEE OUTSIDE THE BOOKS OF ACCOUNTS. THE DETAILS OF THESE PAYMENTS WERE NOT PRODUCED TO US. IN OUR OPINION, IF THE ASSESSEE HAS INCURRED ANY EXPENDITURE OUTS IDE THE BOOKS OF ACCOUNTS, THE ONUS IS ON THE ASSESSEE TO PROVE THE SOURCE OF SUCH EXPENDITURE. WE NOTED THAT THE ASSESSEE, IN THIS CASE, SURRENDERED AN INCOME WHILE FILING THE RETURN ( COPY OF WHICH IS AVAILABLE IN THE PAPER BOOK ) U/S 153 A AMOUNTING TO RS .2,41,00,000/ - A LTHOUGH IN RESPECT OF RECONCILIATION WITH M/S. VSL GROUP BUT THE AMOUNT TO THAT EXTENT COULD BE REGARDED TO HAVE BEEN AVAILABLE WITH THE ASSESSEE. THEREFORE, IN OUR OPINION, TO THAT EXTENT THE EXPENSES INCURRED OUTSIDE THE BOOKS OF ACCOUNT S HAVE TO BE TREATED AS EXPENDITURE IN RESPECT OF WHICH THE SOURCE STANDS EXPLAINED AND IT IS ONLY THE ADDITION FOR THE BALANCE AMOUNT AMOUNTING TO RS. 27,97,758/ - (RS. 2,68,97,758 - RS. 2,41,00,000) TO BE TREATED AS UNEXPLAINED AND CAN BE ADDED TO THE INC OME OF THE ASSESSEE. TO THAT EXTENT, WE DELETE THE ADDITION. SO FAR AS THE TELESCOPING ALLOWED BY CIT(A) TO THE EXTENT OF RS. 1,47,48,900/ - IS CONCERNED, WE HAVE ALREADY DELETED THE ADDITION IN RESPECT OF THE WITHDRAWAL MADE FROM 25 BANK ACCOUNTS WHILE D EALING 18 WITH GROUND NO. 7 IN A.Y. 2005 - 06. THEREFORE, THE TELESCOPING FOR RS.1,47,48,900/ - CAN NO MORE BE ALLOWED TO THE ASSESSEE. WE, ACCORDINGLY, SUSTAIN THE ADDITION ONLY UP TO THE SUM OF RS. 27,97,758/ - . THUS, THIS GROUND IS PARTLY ALLOWED. 14. GROUND NO. 5 RELATES TO SUSTENANCE OF THE ADDITION OF RS. 1,47,48,900/ - BEING THE AMOUNT WITHDRAWN FROM 25 BANK ACCOUNTS. THIS ADDITION HAS BEEN MADE BY THE AO ON THE BASIS OF THE 25 BANK ACCOUNTS WHICH WERE TREATED TO BE BOGUS BANK ACCOUNTS ON THE BASIS OF WITHDRAWAL FROM THESE ACCOUNTS AMOUNTING TO RS. 9 , 32,7 7,7 60/ - DURING THE A.Y 2005 - 06 TO 2007 - 08. BOTH THE PARTIES AGREED THAT WHATEVER VIEW THIS BENCH MAY TAKE ON THIS ADDITION DURING THE A.Y 2005 - 06, THE SAME VIEW MAY BE TAKEN FOR THE IMPUGNED A.Y. WE HAVE ALREADY DELETED THIS ADDITION WHILE DEALING WITH GROUND N O. 7 DURING A.Y. 2005 - 06 IN THE PRECEDING PARAGRAPHS. RESPECTFULLY FOLLOWING OUR FINDING FOR A.Y. 2005 - 06 ON THIS ISSUE, WE DELETE THE ADDITION OF RS. 1,47,48,900/ - . THUS, GROUND NO. 5 IS ALLOWED. A.Y. 2007 - 08 15. SINCE GROUND NOS. 1 - 4 ARE NOT PRESSED, THEREFORE, THERE REMAINS ONLY GROUND NOS. 5 TO 9 FOR OUR ADJUDICATION. 16. GROUND NO. 5 RELATES TO THE ADDITION OF RS. 9,28,15,521/ - ENHANCED BY CIT(A) FROM RS. 1,85,63,104/ - . THE FACTS RELATING TO THIS GROUND ARE THAT THE AO FROM THE SEIZED DOCUMENTS M ARKED AS A/MJ/2 DT. 2.4.2008 AND A/MJ/29 DT. 2.4.2008 NOTED THAT THE ASSESSEE HAD MADE CASH PAYMENT INCLUDING CASH TO VSL GROUP AMOUNTING TO RS. 9,28,15,521/ - . HE, THEREFORE, SOUGHT EXPLANATION OF THE ASSESSEE WHY 20% OF THE EXPENSES AMOUNTING TO RS. 1,85 ,63,104/ - BE NOT DISALLOWED. THE ASSESSEE SUBMITTED THAT SINCE ALL THESE AMOUNTS HAVE ALREADY 19 BEEN OFFERED AS INCOME AND THE EXPENDITURE HAS NOT BEEN CLAIMED AS DEDUCTION UNDER THE INCOME TAX ACT, THE PROVISIONS OF SEC. 40A(3) CANNOT BE APPLIED. THE AO N OTED THAT IN THE DECLARATION MADE BEFORE THE ADIT DT. 20.11.2008, THE ASSESSEE TRIED TO RECONCILE THE FIGURES ARISING OUT OF THE SEIZED MATERIAL A/MJ/29 AND AGREED TO MAKE A DECLARATION OF RS. 16,10,04,519/ - BEING THE EXTENT OF OUTFLOWS WHICH ALSO INCLUDES CASH PAYMENTS AS PER ANNEXURE A/MJ/29 OF RS. 2,68,67,758/ - + RS.8,50,39,441/ - BUT IN THE RETURN, THE ASSESSEE HAS OFFERED A SUM OF RS. 6,31,00,000/ - AS DECLARATION FOR THE RELEVANT YEAR. THEREFORE, HE ACCEPTED THE EXPLANATION OF THE ASSESSEE AND NO DISAL LOWANCE U/S 40A(3) WAS MADE. WHEN THE APPEAL WENT BEFORE CIT(A) FOR THE RELEVANT A.Y. EVEN THOUGH NO GROUND OF APPEAL WAS TAKEN BY THE ASSESSEE ON THIS ISSUE, THE CIT(A) ISSUED A NOTICE OF ENHANCEMENT U/S 251(2) DT. 6.5.2013 AND ASKED THE ASSESSEE TO EXPL AIN THE SOURCE OF THE SUM OF RS. 9,28,15,521/ - . CIT(A) DID NOT AGREE WITH THE FINDING OF AO THAT THIS ADDITION IS TELESCOPED INTO ALREADY DECLARED ADDITIONAL INCOME OF RS. 6,3 1 ,00,000/ - . 16.1 THE LD. AR BEFORE US VEHEMENTLY CONTENDED THAT THE ENHANCEMENT MADE BY CIT(A) IS ILLEGAL AND VOID. THERE WAS NO GROUND OF APPEAL TAKEN BY THE ASSESSEE AS THE ASSESSEE WAS SATISFIED WITH THE FINDING OF THE AO THAT THE SUM OF RS. 9,28,15,521/ - WHICH WAS INCURRED BY TH E ASSESSEE OUTSIDE THE BOOKS OF ACCOUNTS WERE ALREADY COVERED BY THE DECLARATION MADE BY THE ASSESSEE. OUR ATTENTION WAS DRAWN TOWARDS THE DECLARATION MADE BY THE ASSESSEE AND IT WAS POINTED OUT THAT THE CORRECT AMOUNT IN RESPECT OF CASH PAYMENT AS PER SE IZED DOCUMENT A/MJ/29 FOR IMPUGNED A.Y. WAS RS. 8,50,39,441/ - . IN THIS REGARD, OUR ATTENTION WAS DRAWN TOWARDS THE DECLARATION MADE BY THE ASSESSEE DT. 20.11.2008 BEFORE THE ASST. DIRECTOR OF INCOME - TAX (INV.). IT WAS POINTED OUT THAT THERE WERE 3 CASH P AYMENTS IN ANNEXURE A/MJ/38 WHICH RELATE TO A.Y. 2008 - 09. THERE W ERE CASH PAYMENTS AS PER THE REVENUE OF RS.7,90,97,320/ - FOR ASSESSMENT YEAR 2008 - 09 WHICH CONTAINS DUPLICATE ENTRIES AT PG. 4 & 5 FOR RS. 3 20 CRORES . THE NET CASH PAYMENTS WERE ONLY RS. 4,90 ,97,320/ - FOR THE ASSESSMENT YEAR 2008 - 09 . THE CASH PAYMENT AS PER ANNEXURE A/MJ/29 FOR A.Y. 2006 - 07 WERE RS. 2,68,67,758/ - WHILE THE CASH PAYMENT FOR THE IMPUGNED A.Y AS PER ANNEXURE A/MJ/29 WERE RS. 8,50,39,441/ - AND NOT RS.9,28,15,521/ - . ALL THESE THRE E CASH PAYMENTS WERE DULY CONSIDERED BY THE ASSESSEE WHILE MAKING THE DECLARATION. IT WAS POINTED OUT THAT THE ASSESSEE HAS DECLARED A SUM OF RS. 16,10,04,519/ - AS HIS UNDISCLOSED INCOME. RS. 11 CRORES WERE DECLARED VIDE LETTER DT. 23.4.2008 WHILE BALANC E RS. 5,10,04,519/ - WERE DECLARED VIDE LETTER DT. 20.11.2008 WHICH WAS COMPUTED AS UNDER : - 1. CASH PAYMENTS MADE AS NOTED IN THE SEIZED MATERIAL A/MJ/38 RS. 7,90,97,320/ - LESS : DUPLICATION ENTRY AT PAGE 4 AND 5 RS. 3,00,00,000/ - UNDISCLOSED INCOME BASED ON THE ABOVE SEIZED MATERIAL RS. 4,90,97,320/ - 2. CASH PAYMENTS AS PER A/MJ/29 RS. 2,68,67,758/ - 3. CASH PAYMENTS AS PER A/MJ/29 RS. 8,50,39,441/ - RS.16,10,04,519/ - LESS : DISCLOSURE ALREADY GIVEN EARLIER RS.11,00,00,000/ - BALANCE BEING DISCLOSED NOW RS. 5,10,04 ,519/ - THUS, IT WAS CONTENDED THAT THE PAYMENT S MADE IN CASH OUTSIDE THE BOOKS OF ACCOUNTS WERE DULY COVERED BY THE DECLARATION MADE BY THE ASSESSEE AND, THEREFORE, NO ADDITION SHOULD BE MADE IN THIS REGARD. THE CASH PAYMENTS WERE MADE OUT OF THE CASH RECEIPT S FROM THE BUSINESS CARRIED ON BY THE ASSESSEE FOR WHICH THE NECESSARY EVIDENCE S WERE FOUND DURING THE COURSE OF SEARCH BY WAY OF UNACCOUNTED S ALE S AS WELL AS UNACCOUNTED PURCHASES. IN THIS REGARD SEPARATE ADDITION WERE MADE BY THE A.O. ULTIMATELY, AS ON THE DATE OF THE SEARCH THE ASSESSEE GOT THE UNDISCLOSED ASSETS TO THE EXTENT OF STOCK BEING OF ELEVEN CRORES. OUR ATTENTION WAS ALSO DRAWN TOWARDS PARA 8 OF THE IMPUGNED ASSESSMENT ORDER. THE AO ALSO AGREED THAT THE CORRECT FIGURE OF THE CASH PAYME NT OUTSIDE THE BOOKS OF ACCOUNTS FOR THE A.Y WERE RS. 8,50,39,441/ - . IT WAS ALSO CONTENDED THAT WHATEVER INCOME IS GENERATED BY MAKING UNACCOUNTED SALES AND PURCHASE THE SAID INCOME HAS EITHER BE EN INVESTED, CONSUMED OR WITHDRAWAL FOR MAKING 21 PERSONAL ASSET S. THERE HAD BEEN SEARCH IN THE CASE OF THE ASSESSEE AND ULTIMATELY ALL THESE PAYMENTS MADE OUTSIDE THE BOOKS OF ACCOUNTS CULMINATED INTO AN UNACCOUNTED ASSET BY WAY OF STOCK. IT WAS STATED THAT THE A.O MADE SEPARATE ADDITION ON ESTIMATE BASIS IN RESPECT O F THE PROFIT EARNED BY THE ASSESSEE ON UNACCOUNTED PURCHASE AND SALE CARRIED OUTSIDE THE BOOKS OF ACCOUNTS. THIS HAS BEEN CHALLENGED BY THE ASSESSEE IN THE IMPUGNED ASSESSMENT YEAR AS WELL AS IN THE ASSESSMENT YEAR 2008 - 09 BY WAY OF GROUND NO.7. IF YOUR HO NOUR SUSTAINS THE ADDITION ON ACCOUNT OF PROFIT ON UNACCOUNTED T URNOVER THE ASSESSEE BE ALLOWED TELESCOPING IN RESPECT OF PROFIT IF ANY SO SUSTAINED AS IT WILL BE A SOURCE FOR MAKING THE CASH PAYMENT S MADE OUTSIDE THE BOOKS OF ACCOUNTS. THEREFORE, THE ADDI TION MADE BY CIT(A) BE DELETED. 16.2 THE LD. DR ON THE OTHER HAND, CONTENDED THAT NO DOUBT THE ASSESSEE HAD SUBMITTED LETTERS BEFORE THE ASST. DIRECTOR OF INCOME - TAX (INV.) DT. 23.4.2008 AND 20.11.2008 MAKING THE TOTAL DISCLOSURE OF RS. 16,10,04,519/ - . T HE SUM OF RS. 11 CRORES WERE DISCLOSED VIDE LETTER DT. 23.4.2008 WHILE THE SUM OF RS.5,10,04,519/ - WERE DECLARED VIDE LETTER DT. 20.11.2008 AND WHILE WORKING OUT THE ADDITIONAL INCOME OF RS. 5,10,04,519/ - THE ASSESSEE HAS MENTIONED CASH PAYMENT FOR THE IMP UGNED A.Y AS PER ANNEXURE A/MJ/29 AT RS. 8,50,39,441/ - BUT IN FACT THE ASSESSEE HAS DISCLOSED ONLY A SUM OF RS. 6.31 CRORES FOR THE IMPUGNED A.Y. OUR ATTENTION WAS DRAWN TOWARDS PARA 6 OF THE LETTER DT. 20.11.2008 AND IT WAS POINTED OUT THAT AS PER THIS L ETTER, THE ASSESSEE HAS GIVEN THE YEAR - WISE BREAK - UP OF THE INCOME DISCLOSURE AS UNDER : RUPEES IN CRORES ASST YEAR STOCK (IN RS) INADMISSIBLE EXPENDITURE (IN ADMISSIBLE EXPENDITURE RS) BOOK RECONCILIATION DIFF WITH VSL (IN RS) TOTAL (IN RS) 2006 - 07 2.41 2.41 2007 - 08 6.00 0.23 0.08 0.00 6.31 2008 - 09 6.41 0.83 0.14 7.38 22 OUR ATTENTION WAS ALSO DRAWN TOWARDS COPY OF THE COMPUTATION STATEMENT FOR THE RETURNS SUBMITTED BY THE ASSESSEE IN THE PAPER BOOK AND IT WAS POINTED OUT THAT AS PER PG. 110 OF THE PAPER BOOK, THE ASSESSEE HAS DISCLOSED DURING THE YEAR ONLY A SUM OF RS. 6,31,00,000/ - AND NOT RS. 8,50,39,441/ - . THEREFORE, THE AO WAS NOT CORRECT IN TAKING A VIEW THAT THE CASH PAYMENT INCURRED BY THE ASSESSEE WERE DULY COVERED BY THE DECLARATION MA DE BY THE ASSESSEE. RELIANCE WAS PLACED ON THE ORDER OF CIT(A). 16.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME ALONGWITH THE ORDER OF THE TAX AUTHORITIES BELOW. WE HAVE GONE THROUGH THE LETTERS OF THE ASSESSEE DT. 23.4.2008 A ND 20.11.2008 WRITTEN TO THE ASST. DIRECTOR OF INCOME TAX (INV.). COPY OF THESE LETTERS WERE FILED BEFORE US DURING THE COURSE OF THE HEARING. WE NOTED THAT VIDE LETTER DTD. 23.4.2008 THE ASSESSEE AGREED TO DISCLOSE A SUM OF RS. 11 CRORES IN THE FOLLOWIN G MANNER : VALUE OF STOCK LYING AT KRISHNAPATNAM PORT, AP AROUND 35000 - 40000, KEPT FOR EXPORT/SALES TO EXPORTERS RS. 10,75,00,000/ - ADDITIONAL AMOUNT DECLARED TO COVER FOR ANY FURTHER DEFICIENCIES IN SEIZED MATERIAL, BOOKS OF ACCOUNTS AND FOR OTHER DISALLOWANCES THAT MAY BE CALLED FOR RS. 25,00,000/ - TOTAL RS. 11,00,00,000/ - WE FURTHER NOTICED THAT VIDE LETTER DT. 20.11.2008 THE ASSESSEE FURTHER AGREED TO MAKE AN ADDITIONAL DECLARATION OF RS. 5,10,04,519/ - IN ADDITION TO THE SUM OF RS. 11 CRORES AS UNDER : 1. CASH PAYMENTS MADE AS NOTED IN THE SEIZED MATERIAL A/MJ/38 RS. 7,90,97,320/ - LESS : DUPLICATION ENTRY AT PAGE 4 AND 5 RS. 3,00,00,000/ - UNDISCLOSED INCOME BASED ON THE ABOVE SEIZED MATERIAL RS. 4,90,97,320/ - 2. CASH PAYMENTS AS PER A/MJ/29 RS. 2,68,67,758/ - 3. CASH PAYMENTS AS PER A/MJ/29 RS. 8,50,39,441/ - 23 RS.16,10,04,519/ - LESS : DISCLOSURE ALREADY GIVEN EARLIER RS.11,00,00,000/ - BALANCE BEING DISCLOSED NOW RS. 5,10,04,519/ - WE HAVE ALSO NOTED THAT FOR A.Y 2007 - 08 THE ASSESSEE MENTIONS THAT THE CASH PAYMENT AS PER THE SEIZED DOCUMENTS ARE RS. 8,50,39,441/ - . THE AO HAS ALSO MENTIONED THE FIGURE IN THE ASSESSMENT ORDER WHILE ACCEPTING THAT THE SAID AMOUNT IS DULY COVERED BY THE DISCLOSURE MADE BY THE ASSESSEE BUT ULTIMATELY IN THE SAID DECLARATION, THE ASSESSEE HAS DIVIDED THE TOTAL DECLARATION OF RS.16,10,04,519/ - IN THE FOLLOWING ASSESSMENT YEARS AS UNDER : RUPE ES IN CRORES ASST YEAR STOCK (IN RS) INADMISSIBLE EXPENDITURE (IN ADMISSIBLE EXPENDITURE RS) BOOK RECONCILIATION DIFF WITH VSL (IN RS) TOTAL (IN RS) 2006 - 07 2.41 2.41 2007 - 08 6.00 0.23 0.08 0.00 6.31 2008 - 09 6.41 0.83 0.14 7.38 WE HAVE ALSO GONE THROUGH THE STATEMENT OF TOTAL INCOME COMPUTED BY THE ASSESSEE AND FILED BEFORE THE AO ALONGWITH THE RETURN FILED IN RESPONSE TO NOTICE ISSUED U/S 153A. AS PER THE SAID RETURN ALSO (COPY OF WHICH IS AVAILABLE IN THE PAPER BOOK), WE NOTED THAT THE ASSESSEE HAS DISCLOSED ONLY A SUM OF RS.6,31,00,000/ - DURING THE YEAR AS UNDISCLOSED INCOME OF THE ASSESSEE. IT IS UNDISPUTED FACT EVEN AS PER THE ASSESSEE, THAT THE ASSESSEE HAD MADE CASH PAYMENT DURING THE YEAR AMOUNTING TO RS. 8,50,39,441/ - . ADDITIONAL INCOME WHICH HAS BEEN DISCLOSED BY THE ASSESSEE DURING THE AFORESAID ASSESSMENT YEAR IS ONLY RS. 6,31,00,000/ - . AT THE MOST, AT THE MOST THE SUM OF RS.6,31,00,000/ - CAN BE SAID THAT DURING THE YEAR ONLY A SUM OF RS. 6,31,00,000/ - WERE AVAILABL E WITH THE ASSESSEE TO COVER UP THE CASH PAYMENT MADE BY THE ASSESSEE OUTSIDE THE BOOKS OF ACCOUNTS. UNTIL AND UNLESS THE INCOME IS EARNED BY THE ASSESSEE, IN OUR OPINION, THE ASSESSEE CANNOT MAKE THE PAYMENT. I NCOME IS EARNED BY THE 24 ASSESSEE PRIOR TO MA KING OF THE CASH PAYMENT. I T CANNOT BE SAID THAT THE ASSESSEE HAS UTILIZED THE INCOME FOR MAKING THE CASH PAYMENT S . THE INCOME DECLARED BY THE ASSESSEE IN THE SUBSEQUENT YEAR CANNOT COVER THE CASH PAYMENT S MADE BY THE ASSESSEE DURING THE YEAR. THEREFORE , OUT OF THE CASH PAYMENT S OF RS. 8,50,39,441/ - , WE ALLOW TELESCOPING ONLY TO THE EXTENT OF RS. 6,31,00,000/ - . WE ALSO NOTED THAT THE ASSESSEE HAD TAKEN THE GROUN D NO.7 IN RESPECT OF THE ADDITION MADE FOR THE ESTIMATED PROFIT ON THE UNACCOUNTED SALES. THE A.O ESTIMATED THE PROFIT ON UNACCOUNTED SALES OF RS. 20,32,03,707 / - AT RS.2 , 03 , 18 ,1 35/ - . W HEN THE MATTER WENT BEFORE THE CIT(A), THE CIT(A) ENHANCED THE ADDITION IN RESPECT OF THE PROFIT ESTIMATED AT RS. 2.92 CRORES, THIS GROUND HAS BEEN DEALT BY US IN THE SUBSEQUENT PARAGRAPHS AND WE HAVE SUSTAINED TH E ADDITION TO THE EXTENT OF RS. 89 , 40 , 874/ - . WE AGREE WITH THE ALTERNATE SUBMISSION OF THE LEARNED A.R THE ADDITION SO SUSTAINED BY US IN RESPECT OF THE PROFIT ON UNACCOUNTED SALES WILL ALSO BE AVAILABLE WITH TH E ASSESSEE AND THEREFORE WE ALLOW THE TELESCOPING OF THE SAID SUM OF RS. 89 , 40 , 874/ - ALSO ALONGWITH THE TELESCOPING OF RS.6,31,00,000/ - AND THEREFORE, WE, SUSTAIN THE BALANCE ADDITION OF RS. 1 , 29 , 98 , 567/ - . THUS, THIS GROUND IS PARTLY ALLOWED. 17. GROUND NO. 6 RELATES TO THE ADDITION OF SUM OF RS. 4,96,39,000/ - SUSTAINED BY CIT(A) , ADDED BY AO AS AMOUNT WITHDRAWN BY SEVERAL PERSONS FROM 25 BANK ACCOUNTS. BOTH THE PARTIES AGREED THAT THE ISSUE IS ALSO SIMILAR TO GROUND NO. 7 TAKEN IN A.Y. 2005 - 06 AND WHATEVER VIEW THIS TRIBUNAL MAY TAKE ON THIS ADDITION DURING THE A.Y 2005 - 06, THE SAME VIEW MAY BE TAKEN FOR THE IMPUGNED A.Y. WE HAVE ALREADY DELETED THIS ADDITION WHILE DEALING WITH GROUND NO. 7 DURING A.Y. 2005 - 06 IN THE PRECE DING PARAGRAPHS. RESPECTFULLY FOLLOWING OUR FINDING FOR A.Y. 2005 - 06 ON THIS ISSUE , WE DELETE THE ADDITION OF RS.4,96,39,000 / - . THUS, GROUND NO. 6 IS ALLOWED. 25 18. GROUND NO. 7 IN ASSESSMENT YEAR 2007 - 08 AND 2008 - 09 IS COMMON AND RELATES TO THE ADDITION OF RS. 2,92,00,000/ - SUSTAINED BY CIT(A) OUT OF ADDITION OF RS. 22,35,21,842/ - MADE BY THE AO IN THE ASSESSMENT YEAR 2007 - 08 AND RS.4,30,000/ - OUT OF THE ADDITION OF RS.43,00,000/ - MADE BY THE A.O IN THE ASSESSMENT YEAR 2008 - 09 . BOTH THE PARTIES AGREED THAT THIS GROUND DURING THE ASSESSMENT YEAR 2008 - 09 BE DISPOSED OF ON THE BASIS OF THE FACTS RELATING TO THE ASSESSMENT YEAR 2007 - 08 AS THE FACTS INVOLVED IN BOTH THE YEARS ARE COMMON EXCEPT THE QUANTUM OF THE UNACCOUNTED SALES BEING RS.39,09,130/ - DURING THE ASSESSMENT YEAR 2008 - 09. THE BRIEF FACTS RELATING TO THIS GROUND ARE THAT DURING THE SEARCH DOCUMENT MARKED AS A/MJ/29 DT. 2. 4 .2008 WAS SEIZED AND ON THAT BASIS, THE AO NOTED THAT THE ASSESSEE HAS MADE UNACCOUNTED CASH SALES TO THE EXTENT OF RS.22,35,2 1,842/ - DETAILED AS UNDER : - SI. NO. DOCUMENT NO. PARTICULARS UNACCOUNTED CASH SALE A.Y. 1 A/MJ/29 DATED 2/4/2008 UNACCOUNTED CASH SALES MADE TO 35 DIFFERENT PARTIES 18,01,25,800 2007 - 08 2 A//MJ/29 DATED 2/4/2008 PAGE NO. 22 TO 24 UNACCOUNTED CASH SALES (HAND WRITTEN EXTRACT WITHOUT NAME OF THE PARTY) 4,33,96,042 2007 - 08 TOTAL 22,35,21,842 THE AO FURTHER NOTED THAT DURING THE IMPUGNED A.Y, THE ASSESSEE HAS DECLARED THE NET PROFIT AT 3.84% BUT DURING THE A.Y. 2006 - 07, THE NET PROFIT WAS 14.33%. THE AO, THEREFORE, AFTER GIVING OPPORTUNITY TO THE ASSESSEE APPLIED NET PROFIT @ 9.09% ON UNACCOUN TED SALES OF RS. 22,35,21,842/ - AND ADDED THE SUM OF RS.2,03,18,135/ - INTO THE INCOME OF THE ASSESSEE. THE AO , AFTER DEDUCTING FROM THE UNACCOUNTED SALES THE NET PROFIT ESTIMATED BY HIM , WORKED OUT THE UNRECORDED PURCHASES AT RS.20, 32,03,707/ - AND ADDED THE S AME AS UNEXPLAINED INVESTMENT. SIMILARLY, DURING THE ASSESSMENT YEAR 2008 - 09 ALSO THE A.O WORKE D 26 OUT THE PROFIT@ 9 .09% ON UNACCOUNTED SALES OF RS.39,09,130/ - AT RS. 3 , 90 , 870/ - . THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). 18.1 CIT(A) AFTER REJEC TING THE SUBMISSION OF THE ASSESSEE THAT THE ASSESSEE WAS MERELY PROVIDING ACCOMMODATION ENTRIES ON COMMISSION BASIS ENHANCED THE QUANTUM OF UNACCOUNTED SALES FROM RS. 22,35,21,842/ - TO RS. 29,25,88,981/ - AFTER MAKING AN ABSTRACT FROM THE UNACCOUNTED PURCH ASE AND SALES MADE BY THE ASSESSEE ON THE BASIS OF THE SEIZED MATERIAL DETAILED AS UNDER : SI. NO. MONTH GRMTC QTY VSL QTY AMOUNT 1 APRIL 2006 19180.840 19180.840 23377609.00 2 MAY 2006 9750.880 9477.130 10424843.00 3 JUNE 2006 3525.030 3517.030 3868733.00 4 JULY 2006 16919.060 16899.620 16057098.00 5 AUG 2006 7020.340 7026.550 771978.00 6 SEP 2006 19213.060 19117.110 17063464.00 7 OCT 2006 40616.720 40585.830 37651577.00 8 NOV 2006 54528.950 53737.420 54671594.00 9 DEC 2006 40170.180 39505.420 32062623.00 10 JAN 2007 19378.850 19244.300 2306982.18 11 FEB 2007 56997.570 56417.330 66621779.50 287301.480 284708.580 292588980.68 CIT(A) IN VIEW OF THE STATEMENT OF THE ASSESSEE AND THE CIRCUMSTANTIAL EVIDENCE IN THE FORM OF SEIZED MATERIAL ACCEPTED THE CLAIM OF THE ASSESSEE THAT HE HAS EARNED ONLY A PROFIT MARGIN ON THIS UNACCOUNTED CASH SALES BUT WAS NOT SATISFIED WITH THE CLAIM OF THE ASSESSEE THAT THE COMMISSION EARNED BY THE ASSESSEE VARIES FROM 2 - 4% AND ASSESSEE WAS ONLY PROVIDING ACCOMMODATION ENTRIES TO SHRI ANIL LAD . HE ESTIMATED THE PROFIT OF THE ASSESSEE ON UNACCOUNTED SALES AMOUNTING TO RS. 29,25,88,981/ - @ 10% AND SUSTAI NED THE ADDITION TO THE EXTENT OF RS. 2,92,00,000/ - . DURING THE ASSESSMENT YEAR 2008 - 09 THE CIT(A) ESTIMATED THE UNACCOUNTED SALES AT RS. 43,00,000/ - AND WORKED OUT NET PROFIT @ 10% AT RS. 4,30,000/ - . EVEN NO TELESCOPING WAS GIVEN TO THE ASSESSEE IN RESPEC T OF THE SAID AMOUNT AGAINST CASH PAYMENT MADE BY THE ASSESSEE FOUND DURING THE 27 SEARCH AMOUNTING TO RS. 8,50,39,441/ - . THE ASSESSEE HAS COME IN APPEAL BEFORE US CHALLENGING THE ACTION OF CIT(A) ESTIMATING THE PROFIT ON ACCOUNT OF UNACCOUNTED TURNOVER AT R S. 2,92,00,000/ - . THE REVENUE HAS NOT COME IN APPEAL AGAINST THE DELETION OF THE ADDITION ON ACCOUNT OF UNACCOUNTED PURCHASES. 18. 2 THE LD. AR VEHEMENTLY CONTENDED THAT CIT(A) HAS INCORRECTLY WORKED OUT THE UNACCOUNTED CASH SALES. THE UNACCOUNTED CASH SA LES AS PER THE DOCUMENTS SEIZED BEING A/MJ/29 WHICH CONTAINS THE DETAILS FOR BOTH A.Y 2007 - 08 AND 2008 - 09 WERE ONLY RS. 22,35,21,842/ - FOR THE IMPUGNED ASSESSMENT YEAR AS HAS BEEN WORKED OUT BY THE AO. IN THIS REGARD, OUR ATTENTION WAS DRAWN TOWARDS THE R EMAND REPORT OF THE AO DT. 29.4.2013 PARTICULARLY AT P G. 217 - 219 OF THE PAPER BOOK. IT WAS POINTED OUT THAT IT IS APPARENT FROM THE SEIZED RECORDS THAT THE ASSESSEE IS PROVIDING BILLS TO ANIL LADS CONCERN AND HE WAS ONLY GETTING COMMISSION BETWEEN 2 - 4%. EVEN THE AO HAS ALSO ACCEPTED THIS FACT IN THE REMAND REPORT AT PARA 2 IN PG. 204 WHICH READS AS UNDER : 2. VARIOUS INCRIMINATING DOCUMENTS FOUND DURING THE COURSE OF SEARCH AND SEIZURE PROCEEDINGS AND POST SEARCH INVESTIGATIONS CONDUCTED IN THIS CASE R EVEALED THAT SRI. MANOJ KUMAR JAIN WAS ACTING AS AN AGENT FOR ANIL LAD GROUP OF CONCERNS TO REGULARIZE THEIR UNACCOUNTED ILLEGALLY EXTRACTED IRON - ORE AND SALE THE REOF THROUGH HIS OWN CONCERNS. SUCH UNACCOUNTED AND ILLEGALLY EXTRACTED IRON - ORE WAS BROUGHT TO THE MARKET AS PURCHASES FROM UNREGISTERED DEALERS IN THE CONCERN OF SRI. MANOJ KUMAR JAIN. THE SALES PROCEEDS RECEIVED IN CHEQUES ON SUCH SALES IS WITHDRAWN FROM BANK IN CASH AND AFTER DEDUCTING HIS OWN COMMISSION, BALANCE CASH WAS HANDED OVER TO MR. AN IL LAD AND HIS ASSOCIATES FROM TIME TO TIME . THE VARIOUS EVIDENCES FOUND DURING THE COURSE OF SEARCH PROCEEDINGS IN THE CASE OF MR. MANOJ KUMAR JAIN AND MR. ANIL H LAD AND THE SWORN STATEMENTS RECORDED FROM MR. MANOJ KUMAR JAIN CLEARLY PROVES THIS MODUS O PERANDI . OUR ATTENTION WAS ALSO DRAWN TOWARDS THE COPY OF THE AGREEMENT SEIZED , ENTERED INTO BETWEEN THE ASSESSEE AND SHRI ANIL LAD, A COPY OF WHICH IS PLACED AT PG. 181 - 182 OF THE PAPER BOOK. AS PER THIS AGREEMENT, SHRI MANOJ KUMAR JAIN I.E. THE PARTY OF SECOND PART HAS TO RECEIVE FOR THE SERVICES RENDERED BY HIM, PROFIT 28 @ 20% IN CASE THE IRON ORE IS FE LESS THAN 60% AND IF FE IS GREATER THAN 60%, THE ASSESSEE IS TO BE PAID A FIXED AMOUNT OF RS. 14/ - PER TON. THIS AGREEMENT IS DT. 7.10.2005 AND IS AVAI LABLE IN THE SEIZED MATERIAL A/MJ/29 (PG. 51 - 56). AS PER THE REMAND REPORT, THE EXCESS OF THE DECLARED QUANTITY OF THE FINES EXTRACTED IS 237863 MT. ON THAT BASIS ITSELF, AT THE MOST RS. 33 , 30 , 082/ - COULD BE ADDED TO THE INCOME OF THE ASSESSEE. ATTENTIO N WAS ALSO DRAWN TOWARDS PARA 8, PG. 216 OF THE PAPER BOOK WHICH FORMS PART OF THE REMAND REPORT AND IT WAS STATED THAT ON THE BASIS OF ANNEXURE A/MJ/77 THE AO OBSERVED THAT FOR PROCURING THE BILL, COMMISSION IS PAID @ 4% AS PER THE INSTRUCTIONS OF SHRI AN IL LAD. THUS, IT WAS CONTENDED THAT CIT(A) WAS NOT CORRECT IN ESTIMATING THE SALES AT RS. 29,25,88,981/ - INSTEAD OF RS. 22,35,21,842/ - AS HAS BEEN TAKEN BY THE AO. EVEN THE PROFIT ESTIMATED BY THE CIT(A) WAS ARBITRARY. IT IS A FACT THAT AT THE MOST THE PROFIT CAN BE ESTIMATED @ 4% WHICH THE ASSESSEE HAS STATED FROM TIME TO TIME THAT THE ASSESSEE WAS PROVIDING ACCOMMODATION ENTRIES AND ALL THE SALES MADE OUTSIDE THE BOOKS OF ACCOUNTS RELATE TO THE IRON ORE OF SHRI ANIL H. L AD. IT IS ALSO A FACT THAT ON THE BASIS OF THE SEIZED MATERIAL AS FOUND FROM THE COMPUTER DISK OF THE ASSESSEE MARKED AS A/MJ/77 AND AS IS APPARENT FROM PG. 216 OF THE PAPER BOOK RELATING TO THE REMAND REPORT THAT FOR PROCURING PURCHASE BILLS ALSO COMMISS ION IS PAID @ 4%. THEREFORE, ALTERNATIVELY IT WAS SUBMITTED THAT THE 4% CHARGES PAID FOR PROCURING THE BILL BE ALLOWED AS A DEDUCTION. OUR ATTENTION WAS ALSO DRAWN TOWARDS THE STATEMENT MADE BY THE ASSESSEE U/S 132(4) AS WELL AS SEC. 131. EVEN THE CIT(A ) HAS ALSO AGRE ED THAT THE ASSESSEE WAS PROVIDING ACCOMMODATION ENT RIES TO SHRI ANIL LAD AND HIS FI RM, THE MINING LEASE DO NOT BELONG TO THE ASSESSEE, BUT HE SIMPLY ESTIMATED THE PROFIT @ 10%. EVEN NO COMPARATIVE INSTANCE WAS BROUGHT ON RECORD TO JUSTIFY T HE ADAPTION OF PROFIT @ 10% . RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS FOR THE PROPOSITION OF LAW THAT IN RESPECT OF UNDISCLOSED SALES, IT IS ONLY THE NET PROFIT ELEMENT WHICH CAN BE ADDED: - 29 CIT VS. AGGARWAL ENGINEERING CO. 302 ITR 246 (P&H) CIT VS . GURUBACHAN SINGH JUNEJA, 302 ITR 63 (GUJ) CIT VS. DHANI RAM, 326 ITR 394 (P&H) CIT VS. SAMIR SYNTHETICS MILL, 326 ITR 410 (GUJ) IT WAS POINTED OUT THAT THE CIT(A) ULTIMATELY ENHANCED THE SALE AND ESTIMATED THE PROFIT BY APPLYING ENHANCED NET PROFIT RATE. THIS AMOUNTED TO ENHANCEMENT OF THE INCOME. AS PER SECTION 251, CIT(A) WAS BOUND TO GIVE NOTICE TO THE ASSESSEE BEFORE MAKING ANY ENHANCEMENT. N O NOT ICE FOR ENHANCEMENT OF THE SALES OR PROFIT WAS GIVEN BY THE CIT(A). ON TH IS BASIS ITSELF , THE ENHANCEMENT BE QUASHED. 18.3 THE LD. DR, ON THE OTHER HAND, RELIED ON THE ORDER OF CIT(A). ON A QUERY FROM THE BENCH BY REFERRING TO PG. 38 OF THE PAPER BOOK AS TO FROM WHERE CIT(A) HAS TAKEN THE QUANTITY OF PURCHASE AND SALES MADE OUTSIDE THE BOOKS OF ACCOUNTS, THE LD. DR COULD NOT BE ABLE TO SPECIFY THE ANNEXURE WHICH CONTAINS SUCH DETAILS. 18.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME ALONG WITH THE ORDER OF THE TAX AUTHORITIES BELOW AS WELL AS THE DOCUMENTS REFERRE D TO AND RELIED ON BEFORE US DURING THE COURSE OF THE HEARING. WE NOTED THAT IN THIS CASE CIT(A) HAS CALLED FOR THE REMAND REPORT FROM THE AO. THE AO IN PARA 2 OF THE REMAND REPORT LAID DOWN THE MODUS OPERANDI OF THE BUSINESS BEING CARRIED ON BY THE ASSE SSEE IN THE FOLLOWING MANNER : 2. VARIOUS INCRIMINATING DOCUMENTS FOUND DURING THE COURSE OF SEARCH AND SEIZURE PROCEEDINGS AND POST SEARCH INVESTIGATIONS CONDUCTED IN THIS CASE REVEALED THAT SRI. MANOJ KUMAR JAIN WAS ACTING AS AN AGENT FOR ANIL LAD GROUP OF CONCERNS TO REGULARIZE THEIR UNACCOUNTED ILLEGALLY EXTRACTED IRON - ORE AND SALE THE REOF THROUGH HIS OWN CONCERNS. SUCH UNACCOUNTED AND ILLEGALLY EXTRACTED IRON - ORE WAS BROUGHT TO THE MARKET AS PURCHASES FROM UNREGISTERED DEALERS IN THE CONCERN OF SRI. M ANOJ 30 KUMAR JAIN. THE SALES PROCEEDS RECEIVED IN CHEQUES ON SUCH SALES IS WITHDRAWN FROM BANK IN CASH AND AFTER DEDUCTING HIS OWN COMMISSION, BALANCE CASH WAS HANDED OVER TO MR. ANIL LAD AND HIS ASSOCIATES FROM TIME TO TIME. THE VARIOUS EVIDENCES FOUND DURING THE COURSE OF SEARCH PROCEEDINGS IN THE CASE OF MR. MANOJ KUMAR JAIN AND MR. ANIL H LAD AND THE SWORN STATEMENTS RECORDED FROM MR. MANOJ KUMAR JAIN CLEARLY PROVES THIS MODUS OPERANDI . FURTHER, AO IN PARA 4 OF THE REMAND REPORT OBSERVED AS UNDER : - 4. INCRIMINATING EVIDENCES IN FAVOUR OF MR. ANIL H. LAD AND HIS CONCERNS : DURING THE COURSE OF SEARCH PROCEEDINGS IN THE OFFICE AND THE RESIDENTIAL PREMISES OF SRI. MANOJ KUMAR JAIN, HUNDREDS OF INCRIMINATING DOCUMENTS IN THE DIFFERENT FORMATS SUCH AS LOOSE SHEETS, COMPUTER PRINTOUTS, HANDWRITTEN NOTING IN DIARIES/ NOTEBOOKS AND DIGITAL EVIDENCE IN THE FORM OF FILES IN HARD DISC WERE FOUND INDICATING VARIOUS TRANSACTIONS WITH MR. ANIL H LAD AND HIS GROUP CONCERNS AND ALSO INDICATING ILLEGAL IRON - ORE EX TRACTION AND TRANSPORT BY MR. ANIL H LAD AND HIS CONCERNS. THE EVIDENCES SHOW FOLLOWING SUCH TRANSACTIONS. A. CASH AND CHEQUE PAYMENTS TO MR. ANIL H LAD AND HIS CONCERNS, B. CASH AND CHEQUE RECEIPTS FROM MR. ANIL H LAD AND HIS CONCERNS C. ILLEGAL PAYMENTS ON BEHALF OF MR. ANIL H LAD AND HIS CONCERNS D. DISPATCHES RELATING TO MR. ANIL H LAD AND HIS CONCERNS E. TRANSACTIONS NOTING WHICH CLEARLY MENTIONS THAT MR. MANOJ KUMAR JAIN HAS ACTED ON INSTRUCTIONS OF SRI. ANIL LAD AND HIS EMPLOYEES WITH REGARD TO VARI OUS UNACCOUNTED TRANSACTIONS. F. COPY OF AGREEMENT DULY SIGNED BY MR. ANIL LAD WITH REGARD TO PROFIT SHARING WITH MR.MANOJ KUMAR JAIN FOR TRADING OF IRON ORE EXTRACTED FROM B R YOGENDRANATH SINGH MINES. G. FURTHER THE VARIOUS SWORN STATEMENTS RECORDED FROM MR. MANOJ KURNAR JAIN GIVEN THE TRANSACTION DETAILS WITH ANIL LAD GROUP OF CASES. IN PARA 5 OF THE REMAND REPORT, IT IS SPECIFICALLY MENTIONED BY AO THAT THE EVIDENCE FOUND AND SEIZED AND MARKED AS A/MJ/29 AT PG. 51 - 56 FROM THE PREMISES OF SHRI MANOJ KUMAR JAIN CONTAINS THE DETAILS OF THE AGREEMENT ENTERED INTO ON 7.10.2005 FOR MARKETING AND PROFIT SHARING ON THE SALE OF THE IRON ORE EXTRACTED FROM THE MINES BELONGING TO B.R. YOGENDRA NATH SINGH BETWEEN SHRI ANIL H. LAD, SHRI MANOJ KUMAR JAIN AN D SHRI K. SHAMSHULHAQ KHAN . COPY OF THE AGREEMENT WAS PLACED BEFORE US AND IS AVAILABLE AT PG. 181 - 31 182 OF THE PAPER BOOK. AS PER THIS AGREEMENT, WE NOTED THAT THE ASSESSEE IS ENTITLED FOR 20% OF THE PROFIT FOR THE SERVICES RENDERED BY HIM FOR TAKING CARE OF THE PRODUCTION AND MARKETING OF THE IRON ORE IN CASE THE IRON ORE FE IS LESS THAN 60% AND IN CASE THE IRON ORE FE IS GREATER THAN 60%, SHRI MANOJ KUMAR JAIN IS TO BE PAID FIXED AMOUNT @ RS. 14/ - PER TON. ULTIMATELY, AFTER DISCUSSING THE VARIOUS EVID EN CE FOUND IN THE REMAND REPORT, THE AO OBSERVED THAT THE ASSESSEE HAS LOADED AND TRANSPORTED IRON ORE MORE THAN THE PERMITTED QUANTITY . THIS PROVES THAT THE ASSESSEE WAS RESORTING TO UNACCOUNTED ILLEGAL EXTRACTION OF IRON ORE FROM THE MINES. THE REMAND REP ORT FURTHER STATES THAT EXCESS UNACCOUNTED STOCK S WAS FOUND DURING THE COURSE OF THE SEARCH IN THE PREMISES OF SHRI ANIL H. LAD AS WELL AS IN THE PREMISES OF THE ASSESSEE . THE ASSESSEE AGREED TO DECLARE AN ADDITIONAL INCOME OF RS. 10.75 CRORES IN RESPECT OF THE UNACCOUNTED STOCK. THE ASSESSEE EXPLAINED THE SOURCE TO BE THE CASH WITHDRAWAL FROM THE BOGUS ACCOUNTS AND CASH GENERATED THROUGH UNACCOUNTED SALES. THE ASSESSEE IN THE VARIOUS STATEMENTS RECORDED EITHER DURING THE COURSE OF THE SEARCH U/S 132(4) OR U/S 131 STATED THAT HE WAS MERELY ACTING AS COMMISSION AGENT AND OPERATING AFFAIRS OF SHRI ANIL H. LAD . T HE EXCESS STOCK WAS NOTHING BUT THE RESULT OF UNACCOUNTED EXTRACTED IRON ORE BELONGING TO SHRI ANIL H. LAD AND HIS CONCERNS. UNDER PARA 8 OF THE R EMAND REPORT, THE AO HAS STATED THAT DURING THE COURSE OF THE SEARCH VARIOUS EVIDENCES IN THE FORM OF LOOSE SHEETS WERE FOUND INDICATING SUBSTANTIAL CASH PAYMENTS MADE BY THE ASSESSEE TO SHRI ANIL H. LAD AND HIS TWO CONCERNS. THE DETAILS OF THESE PAYMENTS ARE GIVEN AS UNDER : - DOCUMENT PARTICULARS CASH A.Y A/MJ/ 38 , DATED: 0 1 .04.2008 CASH PAID TO M/S VSL(VSL MINING COMPANY; PROP MR. ANIL H LAD) 7,90,97,320 2008 - 09 A/MJ/2, DATED: 02.04.2008 CASH PAID TO VS LAD AND SONS 64,38,080 2007 - 08 A/MJ/29, DATED: 02.04.2008 CASH PAID TO VS LAD 2,68,67,758 2006 - 07 32 A/MJ/29, DATED: 02.04.2008, PAGE NO. 60 CASH PAID TO M/S VSL(VSL MINING COMPANY; PROP MR. ANIL H LAD) 24,92,610 2007 - 08 A/MJ/29, DATED: 02.04.2008, PAGE NO. 64 CASH PAID TO M/S VSL(VSL MINING COMPANY; PROP MR. ANIL H LAD) 8,25,46,831/ - 2007 - 08 A/MJ/7, DATED: 01.04.2008 CASH VOUCHERS IN VARIOUS NAMES 20,72,593/ - 2004 - 05 A/MJ/7, DATED: 01.04.2008 CASH VOUCHERS IN VARIOUS NAMES 81,05,775/ - 2005 - 06 A/MJ/7, DATED: 01.04.2008 CASH VOUCHERS IN VARIOUS NAMES 30,000 2006 - 07 IT WAS ALSO MENTIONED IN THE REMAND REPORT THAT THE COMPUTER HARD DISK MARKED A/MJ/77 WAS ALSO SEIZED FROM THE OFFICE PREMISES OF THE ASSESSEE. THIS CONTAINS INFORMATION IN EXCEL AT PG. 216 - 217 . FROM THE STATEMENT FOR THE MONTH S OF AUGUST TO DECEMBER, THE AO MENTIONED THAT THE EXCEL STATEMENTS CONTAINED DETAILS OF CASH PAYMENT AS WELL AS CHEQUE PAYMENTS AND UNACCOUNTED CASH SALES. EVEN IT HAS ALSO BE EN CLEARLY MENTIONED THAT THE ASSESSEE IS PAYING COMMISSION @ 4% FOR PROCURING THE BILLS AS PER THE INSTRUCTIONS OF SHRI ANIL H. LAD. THE QUANTUM OF CHARGES PAID FOR PROCURING SUCH BILLS FOR THESE MONTHS HAS ALSO BEEN MENTIONED AND GIVEN IN THE REMAND REP ORT. IN RESPECT OF ANNEXURE A /MJ/29, THE AO MENTIONED IN THE REMAND REPORT THAT IT CONTAINS DETAILS OF IRON ORE SALES BY GRMTC (THE PROPRIETORSHIP CONCERN OF THE ASSESSEE) TO VARIOUS PARTIES DURING THE F.Y 2006 - 07 AND 2007 - 08 AND THE ASSESSEE HAS USED THE CODE CQ FOR CHEQUE AND CC FOR CASH SALES. IN THE STATEMENT RECORDED ON 5.4.2008 THE ASSESSEE CONFIRMED THAT CC MEANS UNACCOUNTED CASH SALES. DETAILS OF THESE UNACCOUNTED CASH SALES ARE THE SAME AS REPRODUCED EARLIER AMOUNTING TO RS.22,35,21,842/ - . IN TH E REMAND REPORT, THE QUESTION ANSWER OF THE STATEMENT RECORDED ON 2.4.2008 HAS BEEN PRODUCED. IN THE STATEMENT RECORDED ON 5.4.2008 33 THE ASSESSEE CATEGORICALLY ACCEPTED THAT THE SALES AGAINST WHICH CC IS MENTIONED REPRESENTS THE CASH SALES. IN THE SAME VE RY STATEMENT, IN RESPECT OF THE SOURCE OF THE CASH PAYMENT, THE ASSESSEE CATEGORICALLY STATED THAT THE SOURCE OF THE CASH PAYMENT IS CASH WITHDRAWN FROM THE 25 BANK ACCOUNTS AS WELL AS CASH SALES APPEARING IN THE SEIZED MATERIAL. ULTIMATELY ON 24.6.2008 W HEN THE STATEMENT WAS RECORDED IN REPLY TO QUESTION NO. 4, THE ASSESSEE AGREED FOR DISCLOSURE OF ADDITIONAL INCOME OF RS. 11 CRORES AND STATED THAT THE ASSESSEE WAS OPERATING THE MINES OF ANIL H. LAD GROUP CONCERNS AND THE TRANSACTIONS ARE ROUTED THROUGH T HE PROPRIETORSHIP CONCERN OF THE ASSESSEE ON WHICH THE ASSESSEE WAS GETTING COMMISSION @ 2 - 4%. THE RELEVANT PORTION OF THE STATEMENT RECORDED ON 5.4.2008 AND 24.6.2008 ARE REPRODUCED AS UNDER : - 5.4.2008 : QUES NO. 2 DURING THE COURSE OF SEARCH AND SEIZURE PROCEEDINGS IN YOUR OFFICE PREMISES ON 01.04.2008 AND 02.04.2008, THE COMPUTERIZED BOOKS OF ACCOUNTS MAINTAINED BY YOU FOR YOUR BUSINESS CONCERNS AND OTHER DATA AVAILABLE IN THE COMPUTERS INCLUDING THE BOOKS OF ACCOU NTS IN THE FORM OF HARD DISC AND SOME LOOSE PAPER FILES WERE SEIZED. I AM SHOWING ONE OF THE FILE SEIZED AND MARKED AS ' A/MJ/29/02.04.2008'. PLEASE GO THROUGH THE PAGE NUMBERS 7, 8,12,14,15 TO 20, 22 TO 44, 46 TO 48,58 - TO 61, 64 TO 65, 78, 81,83 OF THIS FILE AND EXPLAIN THE TRANSACTIONS RECORDED ON THESE PAGES. ALSO STATE THE DIFFERENCE BETWEEN CQ SALES AND CC SALES? ALSO STATE WHO HAS MADE THESE SALES AND WHETHER CQ SALES AS WELL AS CC SALES ARE REFLECTED IN THE REGULAR BOOKS OF ACCOUNTS OF M/S GRMTC OR ANY OF YOUR BUSINESS CONCERNS? ANS. I HAVE GONE THROUGH THE PAGES SHOWN BY YOU. THESE DETAILS ARE SALES MADE BY M/S GRMTC. THE CQ SALES MEAN THE SALES AS PER INVOICE AND CC SALES MEANS THE CASH SALES. THE CQ SALES ARE REFLECTED IN THE BOOKS OF ACCOUNTS OF M/S GRMTC AND THE CC SALES ARE NOT REFLECTED IN THE BOOKS OF ACCOUNTS OF M/S GRMTC. QUES NO. 4 DURING THE COURSE OF SEARCH ACTION IN YOUR OFFICE ON 01.04.2008 AND 02.04.2008, NUMBER OF DOCUMENTS INDICATING CASH PAYMENTS HAVE BEEN SEIZED. PLEASE EXPLAIN THE SOURCE OF THESE CASH PAYMENTS? ANS. THE SOURCE OF THESE CASH PAYMENTS IS CASH WITHDRAWN BY ME FROM THE 25 BANK ACCOUNTS AS MENTIONED BY YOU IN QUES NO. 3. THE OTHER SOURCE OF CASH PAYMENT IS UNACCOUNTED CASH SALES APPEARING IN SEIZED MATERIAL AS CC SALES. 34 24.6.08 : QUES NO. 4 DURING THE COURSE OF SEARCH PROCEEDINGS THE COMPUTERIZED DATA AVAILABLE IN THE COMPUTERS KEPT IN YOUR OFFICE WAS SEIZED IN THE FORM OF CD'S /HARD DISC. DURING THE COURSE OF POST SEARCH PROCEEDINGS THE COMPUTERIZED DATA HAS BEEN VERIFIED AND PRINT OUT OF CERTAIN INCR IMINATING DOCUMENTS WERE OBTAINED. I AM SHOWING YOU SOME OF THE COMPUTER PRINT OUT S OF SUCH DATA IN THE FORM OF EXCEL SHEETS. THESE SHEETS ARE CLUBBED UNDER THE HEAD 'ANNEXURE E'. YOU ARE REQUESTED TO GO THROUGH THE PAGE NO 2 AND 31. PLEASE GO THR OUGH THE SAME AND OFFER YOUR COMMENTS WI TH REFERENCE TO QUESTION NO. 3. ANS. I HAVE ALREADY ADMITTED IN MY EARLIER STATEMENTS RECORDED U/S 132(4) AND 131 DURING THE COURSE OF SEARCH AND SEIZURE PROCEEDINGS AND POST SEARCH INVESTIGATIONS THAT I WAS OPERATI NG THE MINES OF SRI. ANIL H LAD GROUP OF CONCERNS. WHILE DOING THEIR BUSINESS A PART OF THE TRANSACTIONS ARE ROUTED THROUGH M/S GRMTC FOR WHICH I GOT ONLY COMMISSION OF 2 TO 4 % FOR ACCOMMODATING PART OF THEIR BUSINESS. THE TRANSACTIONS MENTIONED BY YOU IN QUES NO. 2 ARE ALSO OF THE SIMILAR NATURE I.E ACCOMMODATION ONLY AND MYSELF NOR MY STAFF MEMBER GOT MORE THAN 2 TO 4% AMOUNT IN OTHER WORDS WE GOT COMMISSION FOR SUCH ARRANGEMENT TO THE TUNE OF 2 TO 4%. I HAVE ALREADY DECLARED ADDITIONAL UNDISCLOSED INCO ME OF RS. 11 CRORES CONSIDERING THE ABOVE DISCREPANCIES. TO COOPERATE WITH THE DEPARTMENT AND TO AVOID FURTHER LITIGATION I HAVE DECLARED MORE UNDISCLOSED INCOME. 1 MAY MENTION HERE, THAT IF YOU WORK OUT THE TURNOVER BASED ON THE 4% COMMISSION SUCH UNACCOU NTED TURNOVER WOULD BE MORE THAN RS. 275 CRORES. HOWEVER YOU MUST HAVE SEEN FROM THE SEIZED DOCUMENTS THAT THE UNACCOUNTED TURNOVER IS NOT TO THAT EXTENT. THUS THE DECLARATION MADE BY ME IS CORRECT AS PER MY CALCULATION. IN THE CASE OF MY EMPLOYEES AND OTHER CONCERNS MENTIONED IN QUES NO. 2 PAYMENTS WERE MADE BY M/S GRMTC CONSIDERING THEIR MARGIN OF PROFIT AND EACH PERSON HAS PAID ADVANCE TAX FOR THE A.Y 2008 - 09 ON SUCH PROFIT (COMMISSION). I MAY MENTION HERE THAT WHILE MAKING THE PAYMENTS TO THE PERSON S MENTIONED, IN QUES NO. 2 DUE CARE HAS BEEN TAKEN TO CONSIDERATION THE VAT PAYMENTS WHICH HAVE BEEN PAID BY THE CONCERNED PERSONS TO THE CONCERNED AUTHORITIES. REMAINING MONEY HAS BEEN WITHDRAWN FROM THE RELEVANT ACCOUNTS AND THEY HAVE BEEN PAID TO SRI. A NIL H LAD GROUP OF CONCERNS OR HIS ASSOCIATES PARTLY AND WE HAVE PAID REMAINING AMOUNTS TO THE URD SELLERS OF IRON - ORE BECAUSE SOME PURCHASES MADE BY M/S GRMTC, ITS EMPLOYEES AND OTHER PERSONS MENTIONED IN QUES NO. 2 ARE GENUINE TRANSACTIONS'. ULTIMATELY THE AO AT PG. 18 OF THE REMAND REPORT TOOK THE VIEW AS UNDER : THE INCRIMINATING EVIDENCES WHICH CLEARLY SHOWS THE SYSTEMATIC RECORDING OF TRANSACTIONS FOR DIFFERENT PERIODS PERTAINING TO VARIOUS A.Y'S BOTH IN CASH AND CHEQUE FOUND DURING THE COURSE OF SEARCH AND SUBSEQUENT EXPLANATIONS GIVEN BY MR. MANOJ KUMAR JAIN CLEARLY SHOWS THAT MR. MANOJ KUMAR JAIN IS NOTHING BUT A CONDUIT OF MR. ANIL LAD WHO HAS SOLD THE UNACCOUNTED, ILLEGALLY EXTRACTED IRON - ORE OF M/S VSL MINING COMPANY IN THE GUISE OF URD PURCHASES AND SALES AND SUCH SALE 35 PROCEEDS WERE ROUTED AGAIN BACK TO MR. ANIL LAD IN THE FORM OF VARIOUS CASH PAYMENTS FROM WITHDRAWALS OF BANK ACCOUNTS OF VARIOUS PARTIES. THERE ARE VARIOUS INSTANCES ALSO FOUN D FROM THE SEIZED MATERIAL WHERE SU CH WITHDRAWALS HAVE BEEN UTILIZED TOWARDS THE ILLEGAL PAYMENTS IN CASH TOWARDS BRIBES ON BEHALF OF ANIL LAD AND HIS GROUP OF CONCERNS. 18.4.1 IN VIEW OF THE REMAND REPORT OF THE AO, IT IS APPARENT THAT THE ASSESSEE WAS ACCOMMODATING SHRI ANIL H. LAD FOR SELLING HIS UNACCOUNTED, ILLEGALLY EXTRACTED IRON ORE AND THE SALE PROCEEDS SO RECEIVED WAS ALSO DELIVERED BY HIM TO SHRI ANIL H. LAD OR BEING UTILIZED FOR MAKING THE PAYMENTS ON BEHALF OF SHRI ANIL H. LAD OR HIS GROUP CO NCERNS. THIS FACT IS APPARENT FROM THE CASH PAYMENT MADE OUTSIDE THE BOOKS OF ACCOUNT FOUND DURING THE COURSE OF SEARCH. THE ASSESSEE WAS SIMPLY GETTING COMMISSION ON THESE UNACCOUNTED SALES. THE AO HAS WORKED OUT THE FIGURE OF THE UNACCOUNTED SALES FOR T HE IMPUGNED A.Y AT RS. 22,35,21,842/ - AND ESTIMATED PROFIT @ 9.09%. THE CIT(A) HAS ENHANCED THE UNACCOUNTED TURNOVER TO RS. 29,25,88,981/ - AND EVEN ESTIMATED PROFIT @ 10% , THOUGH ACCEPTED THE EXPLANATION OF THE ASSESSEE WITH RESPECT TO THE CASH SALES OUTSIDE THE BOOKS THAT THESE PERTAINED TO SHRI ANIL H. LAD AND HE HAS ONLY EARNED A PROFIT MARGIN OF CERTAIN PERCENTAGE OF THESE SALES , MERELY BY OBSERVING THAT THE COMMISSION OF 2 - 4% CLAIMED BY THE ASSESSEE IS TOO SMALL. CIT(A), WE NOTED, EVEN INCREASED THE QUANTUM OF THE SALES EVEN THOUGH NO NOTICE FOR ENHANCEMENT WAS ISSUED BY CIT(A). THE PROVISIONS OF SEC. 251(2) WHICH ARE VERY CLEAR AND MANDATORY STIPULATES THAT THE CIT(A ) SHALL NOT ENHANCE THE ASSESSMENT UNLESS THE ASSESSEE HAS BEEN GIVEN A REASONABLE OPPORTUNITY OF SHOWING CAUSE AGAINST SUCH ENHANCEMENT. 18.4.2 THE LD. DR EVEN THOUGH RELIED ON THE ORDER OF CIT(A) BUT COULD NOT PRODUCE ANY COGENT MATERIAL OR EVIDENCE T O PROVE THAT THE CIT(A) HAS GIVEN ENHANCEMENT NOTICE TO THE ASSESSEE. EVEN NO MATERIAL WHATSOEVER WAS BROUGHT TO OUR KNOWLEDGE WHICH MAY PROVE THE FIGURES OF THE SALES TAKEN BY THE CIT(A) 36 ARE BASED ON THE BASIS OF THE SEIZED MATERIAL. UNDER THESE FACTS A ND CIRCUMSTANCES, IN OUR OPINION , THE FINDING OF THE AO ARE TO BE CONFIRMED THAT THE UNACCOUNTED CASH SALES WERE ONLY TO THE EXTENT OF RS. 22,35,21,842/ - . THE REVENUE HAS CATEGORICALLY ACCEPTED THAT THE ASSESSEE WAS A CONDUIT FOR CARRYING ON THE BUSINESS OF SHRI ANIL H. LAD IN RESPECT OF IRON ORE ILLEGALLY EXTRACTED. THE ASSESSEE HAS ALSO STATED THESE FACTS IN THE STATEMENT RECORDED FROM TIME TO TIME AND STATED THAT HE HAS BEEN PAID COMMIS SION FROM 2 - 4% ON SUCH CASH SAL ES. CIT(A) JUST ESTIMATED THE PROFI T ON SUCH UNACCOUNTED SALES @ 10%. INCOME TAX IS A TAX TO BE LEVIED ON THE REAL INCOME. UNTIL AND UNLESS THE INCOME IS EARNED BY THE ASSESSEE, TAX CANNOT BE LEVIED. THE ONUS, IN OUR OPINION, IS ON THE REVENUE TO PROVE THAT THE ASSESSEE HAS EARNED INCOME MORE THAN WHAT HAS BEEN ESTIMATED OR RETURNED BY THE ASSESSEE. THERE HAD BEEN A SEARCH IN THE CASE OF THE ASSESSEE. A NUMBER OF INCRIMINATING DOCUMENTS WERE FOUND AND SEIZED BUT NO DOCUMENTS PROVED THAT THE ASSESSEE HAS EARNED INCOME MUCH MORE THAN WHAT HAS BEEN ESTIMATED BY THE ASSESSEE. EVEN NO SUCH EVIDENCE WAS FOUND WHICH MAY PROVE THAT THE ASSESSEE HAD MADE THE INVESTMENT OR INCURRED PERSONAL EXPENSES MUCH MORE THAN THE INCOME AS HAS BEEN ESTIMATED BY THE ASSESSEE. ONCE A PERSON EARNS AN INCOME, EITHER HE WILL CONSUME THE INCOME BY ME ETING OUT HIS PERSONAL EXPENSES OR HE WILL INVEST THE SAID INCOME IN MOVEABLE OR IMMOVEABLE PROPERTIES. WE NOTED THAT DURING THE COURSE OF THE SEARCH UNACCOUNTED STOCK TO THE EXTENT OF RS. 10.75 CRORES WAS FOUND AND TO COVER UP THIS, THE ASSESSEE MADE THE DECLARATION OF INCOME OF RS. 11 CRORES. AT THE MOST, THAT CAN BE THE INVESTMENT OF THE INCOME WHATEVER THE ASSESSEE HAS EARNED DURING THE ASSESSMENT YEAR S IN WHICH THE ASSESSEE REMAINS ENGAGED IN UNACCOUNTED SALES. THE INCOME TAX ACT DOES NOT GIVE LICENC E TO THE DEPARTMENT TO ESTIMATE THE PROFIT ARBITRARILY OR CAPRICIOUSLY IN THE MANNER IN WHICH THE DEPARTMENT MAY LIKE. ONCE CIT(A) WAS NOT AGREEING WITH THE STATEMENT OF THE ASSESSEE, IN OUR OPINION, THE ONUS LIES ON THE REVENUE TO PROVE THAT THE ASSESSEE HAS EARNED PROFIT @ 10%. THE SEARCH IN THE CASE OF THE 37 ASSESSEE HAD TAKEN PLACE ON 25.3.2008 . DURING THE IMPUGNED A.Y, THE ASSESSEE HAS SHOWN NET PROFIT @ 3.84%. SO FAR AS THE UNACCOUNTED SALES ARE CONCERNED, IN OUR OPINION, ONCE THE REVENUE HAS FOUND T HE STATEMENT OF THE ASSESSEE TO BE CORRECT THAT THE ASSESSEE WAS ENGAGED IN UNACCOUNTED SALES TO ACCOMMODATE THE ILLEGAL MINING CARRIED OUT BY SHRI ANIL H. LAD, THERE CANNOT BE ANY FALSITY IN THE STATEMENT OF THE ASSESSEE THAT THE ASSESSEE WAS EARNING COMM ISSION ON THIS UNACCOUNTED SALES FROM 2 - 4%. THE REVENUE CANNOT BE PERMITTED TO BLOW HOT AND COLD WHENEVER THEY LIKE. THE ESTIMA TION OF THE PROFIT CANNOT BE AT THE WHIMS OF THE A.O THAT HE MAY APPLY ANY RATE OF PROFIT. THE ESTIMATION OF THE PROFIT MUST BE B ASED ON THE MATERIAL EVIDENCE FOUND DURING THE COURSE OF SEARCH OR AS MAY BE GATHERED BY THE A.O TO SUPPORT THAT THE ESTIMATE MADE BY THE A.O IS NOT ARBITRARY AND IS BONAFIDE. THIS IS A SETTLED LAW THAT PART OF THE STATEMENT CANNOT BE ACCEPTED AS TRUE AND THE OTHER PART OF THE STATEMENT AS FALSE. ONCE ON THE BASIS OF THE STATEMENT OF THE ASSESSEE REVENUE HAS AGREED THAT THE ASSESSEE WAS ENGAGED IN UNACCOUNTED SALES TO ACCOMMODATE THE ILLEGAL MINING CARRIED OUT BY SHRI ANIL LAD, IN OUR OPINION THE REVENUE IS BOUND TO ACCEPT THE OTHER PART OF THE STATEMENT THAT THE ASSESSEE HAS EARNED THE PROFIT ON SUCH UNACCOUNTED BUSINESS @ 2 - 4%. NO COGENT MATERIAL OR EVIDENCE WAS BROUGHT TO OUR KNOWLEDGE THAT THE ASSESSEE HAS EARNED THE PROFIT @ MORE THAN 4%. U NDER THESE FACTS AND CIRCUMSTANCES, IT WILL BE PROPER AND REASONABLE, IN OUR OPINION, THE ADDITION BE MADE BY ESTIMATING THE PROFIT ON SUCH UNACCOUNTED SALES @ 4 % AS IN CASE THE ASSESSEE HAS EARNED MORE INCOME, THE SURRENDER MADE BY THE ASSESSEE WILL TAKE CAR E OF THE SAME. WE, ACCORDINGLY DIRECT THE AO TO ESTIMATE THE PROFIT @ 4 % OF SALE OF RS. 22,35,21,8 42/ - . THUS, THIS GROUND OF THE ASSESSEE IS PARTLY ALLOWED. THUS, ADDITION OF RS. 2,92,00,000/ - SUSTAINED BY THE CIT(A) BE REDUCED TO RS. 8940874 / - . WE M AY MENTION HERE THAT THE NET PROFIT SO ADDED IS AVAILABLE TO THE ASSESSEE FOR TELESCOPING THE CASH PAYMENT MADE BY THE ASSESSEE OUTSIDE THE BOOKS OF ACCOUNTS DURING THE YEAR. SIMILARLY, IN THE ASSESSMENT YEAR 2008 - 09 38 WE REDUCED THE ADDITION OF RS. 4,30,0 00/ - TO RS.1,56,365/ - THUS THIS GROUND IN BOTH THE YEARS IS PARTLY ALLOWED. 19. THE NEXT GROUND OF APPEAL RELATES TO SUSTENANCE OF THE ADDITION OF RS.86,97,774/ - AS SUPPRESSED PROFIT OF THE ASSESSEE. THE FACTS RELATING TO THIS GROUND ARE THAT DURING THE COURSE OF SEARCH A COMPUTER PRINT - OUT OF THE BALANCE SHEET OF GRMTC (THE PROPRIETORSHIP CONCERN OF THE ASSESSEE) FOR THE IMPUGNED ASSESSMENT YEAR WAS FOUND AND SEIZED AND MARKED AS ANNEXURE A/MJ/27 DT. 2.4.2008. IN THE B ALANCE SHEET, CURRENT YEAR PROFIT WAS STATED ON THE LIABILITIES SIDE AT RS. 2,68,82,345/ - WHEREAS AS PER THE AUDITED PROFIT & LOSS ACCOUNT FURNISHED DURING THE SEARCH, THE NET PROFIT WAS RS. 1 , 81 , 84,571/ - . DIFFERENCE BEING RS. 86,97,774/ - WAS ADDED IN THE INCOME OF THE ASSESSEE AS UNDISCLOSED INCOME. THE EXPLANATION OF THE ASSESSEE WAS NOT ACCEPTED. THE ASSESSEE WENT IN APPEAL BEFORE CIT(A). CIT(A) CONFIRMED THE ORDER OF THE A . O. 19.1 BEFORE US, THE LD. AR VEHEMENTLY CONTENDED THAT THE STATEMENT OF THE ASSESSEE WAS RECORDED AND THE ASSESSEE HAS CATEGORICALLY MENTIONED THAT THE SEIZED PRINT - OUT OF THE BALANCE SHEET WAS UNAUDITED, WAS NOT SIGNED EITHER BY THE ACCOUNTANT OR BY THE ASSESSEE. IT WAS GENERATED IN TALLY PACKAGE BEFORE PASSING THE FINAL ENTRIES. THE STATEMENT OF THE ACCOUNTANT WAS ALSO RECORDED ON 6.11.2009 AND THE ACCOUNTANT ALSO STATED THESE FACTS. IT WAS MERELY A ROUGH UNAUDITED TALLY DATA AND DOES NOT REPRESENT THE TRUE AND FAIR VIEW OF THE PROFIT SHOWN BY THE ASSESSEE. 19.2 THE LD. DR , ON THE OTHER HAND , RELIED ON THE ORDER OF CIT(A). 19.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME. WE HAVE ALSO PERUSED THE PRINT OUT OF THE BALANCE SHEET SEIZED DURING THE COURSE OF THE SEARCH, COPY OF WHICH WAS FILED BEFORE US. FROM THIS PRINT OUT OF THE 39 BALANCE SHEET IT IS APPARENT THAT THIS BALANCE SHEET IS SUBJECT TO AUDIT AND WAS NOT SIGNED BY ANY OF THE RESPONSIBLE PERSONS. IT DOES NOT CONTAIN THE PROFIT & LOSS ACCOUNT. ONLY ON THE LIABILITIES SIDE OF THE BALANCE SHEET, PROFIT & LOSS FOR THE CURRENT YEAR IS MENTIONED. IT IS A NORMAL PRACTICE THAT THE PRINT OUT OF THE BALANCE SHEET SUBJECT TO PASSING OF THE FINAL ENTRIES IS TAKEN OUT AND THE BALANCE SHEET IS FINALISED ONLY AFTER PASSING THE CLOSING ENT RIES. THE BALANCE SHEET SO FOUND AND SEIZED, IN OUR OPINION, DOES NOT HAVE ANY CONCLUSIVE EVIDENCE ON THE BASIS OF WHICH THE INCOME CAN BE DETERMINED. THE ASSESSEE IS MAINTAINING THE REGULAR BOOKS OF ACCOUNTS. THE ACCOUNTS ARE DULY AUDITED BY THE AUDITO R AND THE AUDITOR HAS DULY CERTIFIED THE PROFIT & LOSS A/C AND BALANCE SHEET WHICH WERE FURNISHED ALONG WITH THE RETURNS. THE AUDITED PROFIT & LOSS AND BALANCE SHEET DEPICTS THE CORRECT AND FAIR PROFIT & LOSS ACCOUNT. THE UNAUDITED ROUGH PRINT OUT OF TH E BALANCE SHEET CANNOT SUBSTITUTE THE AUDITED PROFIT & LOSS AND BALANCE SHEET. IN VIEW OF THIS FACT, WE SET ASIDE THE ORDER OF CIT(A) AND DELETE THE ADDITION OF RS. 86,97,774/ - . 20. THE NEXT GROUND RELATES TO ADDITION OF RS. 1,43,000/ - SUSTAINED BY CIT(A). THE BRIEF FACTS RELATING TO THIS GROUND ARE THAT AS PER THE SEIZED DOCUMENT A/MJ/30 DT. 2.4.2008 IT WAS NOTED THAT THE ASSESSEE HAS MADE INVESTMENT IN PLOT/NA LAND AMOUNTING TO RS. 3,89,045/ - . WHEN ASKED FO R, THE ASSESSEE STATED THAT ALL THE PLOTS HAVE BEEN DULY DISCLOSED. THE AO NOTED FROM THE DETAILS FILED BY THE ASSESSEE THAT THE PLOT S MENTIONED AT SR. NOS. 16 TO 18 WERE NOT ACCOUNTED FOR ON THE DATE OF THE INVESTMENT I.E. 16.12.2006 BUT WERE ACCOUNTED F OR AS ON 1.4.2007. THE TOTAL INVESTMENT IN THESE PLOTS WAS RS.1,43,000/ - . THE AO ADDED THE SAME. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). CIT(A) CONFIRMED THE ADDITION. 20.1 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME . IN OUR OPINION, CIT(A) HAS RIGHTLY CONFIRMED THE ADDITION. IT IS A FACT THAT THE 40 INVESTMENT OF RS. 1,43,000/ - IN THE PLOT OF LAND MADE ON 16.12.2006 WAS NOT ACCOUNTED FOR DURING THE IMPUGNED ASSESSMENT YEAR. WE, THEREFORE, CONFIRM THE ORDER OF CIT(A) ON THIS ISSUE. THUS, THIS GROUND STANDS DISMISSED. 21. GROUND NO. 9 IN THE A.Y 2007 - 08 AND GROUND NOS. 8 AND 9 IN A.Y 2008 - 09 SINCE INVOLVE COMMON ISSUE, BOTH THESE GROUNDS ARE BEING DISPOSED OFF BY THIS COMMON ORDER. 21.1 THE AO MADE THE FOLLOWING PROT ECTIVE ADDITIONS ON ACCOUNT OF BOGUS PURCHASES AND PROFIT ELEMENT THEREON IN THE A.Y. 2007 - 08 AND 2008 - 09 : ADDITIONS MADE ON PROTECTIVE BASIS - A.Y. 2007 - 08 SI. NO. NAME OF THE PARTY AMOUNT PROFIT ELEMENT 01 GALAXY IMPEX 12,480,000.00 655,200.00 02 VIVERA MINERALS 17,265,300.00 906,428.00 03 NANDI ENTERPRISES 22,755,200.00 1,194,648.00 ADDITIONS MADE ON PROTECTIVE BASIS - A.Y. 2008 - 09 SI. NO. NAME OF THE PARTY (M/S) AMOUNT PROFIT ELEMENT 01 GALAXY IMPEX 165,247,498.00 13,568,683.00 / 93,203,618.00 02 MEGHA MINERAL TRADERS 40,815,840.00 2,142,832.00 03 BALAJI IMPEX 143,993,357.00 7,559,651 / 3,933,590.00 SIMILARLY, ADDITIONS WERE MADE FOR BOGUS PURCHASE ON SUBSTANTIVE BASIS ALONGWITH THE PROFIT THEREON IN RESPECT OF THE FOLLOWING PARTIES : PURCHASES MADE FROM THE FOLLOWING PARTIES TREATED AS BOGUS FOR A.Y. 2007 - 08 SI. NO. NAME OF THE PARTY AMOUNT PROFIT THEREON 01 PRIME ZAK MINES & MINERALS 9,360,000.00 491,400.00 41 02 RAGHAVENDRA AGENCIES 15,500,00.00 813,750.00 03 SAIRAM ASSOCIATES 12,409,800,00 651,515.00 04 VENKATESHWARA MINERALS 31,637,450.00 1,660,966.00 PURCHASES MADE FROM THE FOLLOWINQ PARTIES TREATED AS BOGUS FOR A.Y. 2008 - 09 SI. NO. NAME OF THE PARTY (M/S) AMOUNT PROFIT THEREON 01 PRIME ZAK MINES & MINERALS 42,633,200.00 22,43,572.00 02 GULAB SHAH TRADERS 42,557,580.00 22,34,272.00 03 RAGHAVENDRA AGENCIES 32,110,000.00 16,85,775.00/ 37,81,037.00 04 APN ENTERPRISES 166,447,840.00 87,38,512.00 05 SHAKAMBARI TRADING CO., 78,916,831.00 41,43,133.00 06 S R TRADING CO., 29,642,500.00 15,56,231.00 07 M/S HARIHANT ENTERPRISES 29,622,500.00 15,55,181.00 08 M/S HEMANT TRADING CO., 29,635,000.00 15,55,838.00 09 SAI MINERALS 220,834,577.00 1,12,62,563.00 10 BHAVANI ENTERPRISES 166,447,840.00 87,36,547.00 11 POOJA MINERALS & EARTH MOVERS 166,447,840.00 87,38,511.00 DURING THE COURSE OF THE SURVEY, MATERIAL MARKED GRM/29 TO 37, BLANK PURCHASE VOUCHER BOOKS OF THIRD PARTIES WERE FOUND IN THE ASSESSEES PREMISES. THE ASSESSEE SAID THAT THESE PURCHASE BILLS WERE PREPARED BY THE SUPPLIERS OF IRON ORE. THE DDIT CONDUCTED INQUIRY WITH REGARD TO 30 DIFFERENT PARTIES FROM WHOM THE ASSESSEE HAD CLAIMED TO HAVE MADE PURCHASES OF IRON ORE. THE INQUIRY REVEALED THAT PURCHASES FROM 18 PARTIES ARE BOGUS. IT WAS ALSO NOTICED IN THE STATEMENT RECORDED ON 24.6.2008 IN RESPONSE TO QU ESTION NO. 4 IN WHICH ASSESSEE HAS STATED THAT HE WAS OPERATING MINES OF ANIL H. LAD GROUP OF CASES AND HE WAS IN CHARGE OF TRANSPORTAT ION/SALES OF IRON ORE OF SHRI ANIL H. LAD AND GROUP CONCERNS. PART OF THE TRANSACTIONS ARE ROUTED THROUGH TH E PROPRIETOR SHIP CONCERN OF THE ASSESSEE AND HE GOT ONLY COMMISSION OF 2 - 4% FOR ACCOMMODATING PART OF THE BUSINESS. IN HIS STATEMENT, HE ALSO ADMITTED THAT HE USED THE STATIONARY/BILL BOOKS AND BANK ACCOUNTS OF SOME OF THE PARTIES FOR ACCOMMODATION ONLY AND CASH WAS WITHDRAWN BY BEARER CHEQUES FROM THE BANK ACCOUNTS OF THE PARTIES AND SAME WAS PARTLY PAID TO SHRI ANIL H. LAD AND GROUP 42 CONCERNS AND PARTLY PAID TO URD SELLERS OF IRON ORE WHERE PURCHASES MADE BY M/S. GRMTC ARE GENUINE TRANSACTIONS. IN THE STATEMENT IT W AS STATED THAT THE TOTAL TRANSACTION S DONE THROUGH ABOVE 22 PARTIES DURING THE F.Y. 2007 - 08 WAS AROUND RS. 100 CRORES AND CASH PAYMENT OF RS. 25 CRORES APPROXIMATELY PAID TO M/S. VSL MINING COMPANY. REMAINING AMOUNT OF RS. 75 CRORES CLAIMED TO BE PAID TO URD SELLERS OF IRON ORE IN CASH AGAINST PURCHASES MADE FROM THEM. EVIDENCE WAS ALSO FOUND AND SEIZED INDICATING THAT FOR CLAIMING BOGUS EXPENSES, NAMES OF EMPLOYEES/CONCERNS OF THE EMPLOYEES HAVE BEEN USED FOR WHICH THE EMPLOYEES HAVE BEEN GIVEN INCENTIVE @ 0.25% OF THE TOTAL TURNOVER AS PER PG. 33 OF A/MJ/26 DT. 1.4.2008 IN THE FORM OF FIXED DEPOSIT KEPT IN THEIR NAMES WITH LOCK IN PERIOD OF 3 YEARS. UNACCOUNTED MONEY SO GENERATED HAS BEEN USED FOR UNACCOUNTED CASH PAYMENTS TO M/S. VSL AGAINST UNACCOUNTED PURCHASES AND PART OF UNACCOUNTED PROFIT HAVE BEEN INVESTED IN PROPERTIES. IN THE SEIZED PAPERS AT PG. 33 & 34 NOTINGS OF THE FOLLOWING EXTENT ABOUT URD PURCHASES AND BENEFITS GIVEN TO THE EMPLOYEES WAS FOUND. BENEFIT OF URD PURCHASE ON PURCHASE OF RS.5 CRORES IS DECIDED TO BE GIVEN AT THE RATE OF 0.25% I.E., RS. 1,25,000 ON THE PURCHASE OF RS.5 CRORES. VAT AND INCOME TAX WILL BE PAID BY GRMTC. CAPITAL WILL BE RETAINED BY GRMTC. EMPLOYEE WILL BE GIVEN EITHER BENEFIT OF LOADING OR BEN EFIT URD WHICH WILL BE DECIDED ON QUARTERLY BASIS AND THE BENEFIT AMOUNT WILL BE KEPT IN FD FOR 3 YEARS COMPULSORILY. MONTHLY EXPENSES FROM RS.13,000 TO RS.20,000 WILL BE GIVEN TO EMPLOYEES WHICH INCLUDES SALARY, RENT, OFFICE EXPENSES, PETROL, MOBILE AND STATIONERY. PER FILE SALES TAX WILL BE GIVEN AT RS.1500. PER FILE INCOME TAX OF RS.5,000 WILL BE GIVEN. VAT CHEQUE STATEMENT TO BE GIVEN FOR TRANSFERRING OF FUNDS AND ISSUING CHEQUES. ALL THE REQUIRED VOUCHERS WILL BE MAINTAINED AND HANDED OVER WITHIN 30 DAYS OF 43 EVERY MONTH. SOME OF THE EMPLOYEE'S NAMES ARE ALSO WRITTEN ON THESE PAGES . THEY ARE NONE OTHER THAN SO CALLED PROPRIETORS OF VARIOUS BOGUS ENTITIES FROM WHICH THE ASSESSEE HAS SHOWN AS HE HAS MADE UNREGISTERED PURCHASES. NAME WRITTEN ON THE SEIZED MATERIAL NAME OF THE PROPRIETARY CONCERN SHOWN IN THE BOOKS ASHOK ASHOK CHAJJER JAIN PROP.APN ENTERPRIESES SHANKAR SHANKAR PERINJARI PROP. BHAVANI ENTERPRISES PATIL K.B. POLICE PATIL PROP. SHAKAMBARI TRADING CO., SRIPAL SRIPAL JAIN PROP. HARIHANT ENTERPRISES SHAILAJA CHANDRA P.N.CHANDRAKANTH PROP. VENKATESHWARA MINERALS LINGARAJ LINGARAJ MULIMANI PROP. SAI MINERALS HEMANT HEMANT JAIN PROP. HEMANT TRADING CO., DAVID MAILAR USHA SOWKAT SHOUKAT PIRAWALLE PROP. S.R.TRADING CO., AS PER PAGE NO.23 OF THE DOCUMENT NO.A /MJ/34 DATED 1.4.2008 IT IS SEEN THAT M/S GRMTC HAS ISSUED CIRCULAR ON 7.7.2007 TO HIS VARIOUS ABOVE EMPLOYEES AND OTHER EMPLOYEES (WHICH WERE SHOWN AS PROPRIETORS OF VARIOUS CONCERNS) DIRECTING THEM TO SUBMIT THEIR BIO DATA ALONG WITH SELF ADDRESSED 50 PA ISE POST CARD TO THE OFFICE MANAGER ON OR BEFORE 10.7.2007. ALL THE ABOVE EVIDENCES SHOW THAT IT WAS SYSTEMATICALLY PLANNED TO CREATE BOGUS ENTITIES WITH THE HELP OF EMPLOYEES BY GIVING SOME INCENTIVES TO THEM. APART FROM VOUCHER BOOKS IN THE NAMES OF THESE CONCERNS VARIOUS OTHER EVIDENCES WERE FOUND INDICATING THEY ARE NOTHING BUT PAPER CONCERNS FLOATED WITH HIS OWN PERSONS. THE AO, THEREFORE, TREATED THE PURCHASES MADE TO BE BOGUS ONE AND ADDED THE SAME IN THE INCOME OF THE ASSESSEE ALONG WITH THE P ROFIT ESTIMATED THEREON . THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). CIT(A) CONFIRMED THE ADDITION ON ACCOUNT OF BOGUS PURCHASES ON SUBSTANTIVE BASIS IN RESPECT OF THESE PARTIES BUT DELETED THE PROFIT ELEMENT ON THESE PURCHASES. 44 21.2 THE LD. AR BEFORE US VEHEMENTLY CONTENDED THAT ON THE BASIS OF THE LOOSE PAPER SHEETS CONTAINING EMPLOYEES NAMES AND THE NAMES OF THE CONCERNS, THESE CONCERNS ARE NOT BENAMI CONCERNS AND THE PROPRIETORS OF THESE CONCERNS ARE DIFFERENT FROM THE EMPLOYEES O F THE ASSESSEE. IN THIS REGARD, OUR ATTENTION WAS DRAWN TOWARDS PG. 143 - 144 OF THE PAPER BOOK WHICH CONTAINS THE VARIOUS DETAILS OF THESE PARTIES. IT WAS POINTED OUT THAT IT IS ONLY 5 CONCERNS WHICH ARE OWNED BY THE EMPLOYEES OF M/S. GRMTC , NAMELY APN ENTERPRISES, SHAKAMBARI TRADING CO., S.R. TRADING CO., BHAVANI ENTERPRISES AND POOJA MINERALS & EARTH MOVERS. ALL THESE CONCERNS ARE DULY REGISTERED WITH THE VAT AUTHORITIES. THEY ARE HAVING PAN AND TIN. THESE CONCERNS MADE THE PURCHASES FROM UNREGI STERED DEALERS. THEY ARE HAVING THEIR BANK ACCOUNTS IN VIJAYA BANK AND BANK OF INDIA. THE ASSESSEE IS THE INTRODUCER ONLY IN RESPECT OF 3 CONCERNS, VIZ. SHAKAMBARI TRADING CO., SAI MINERALS AND BHAVANI ENTERPRISES. LETTERS/SUMMONS WERE DULY SERVED BY THE AO. THESE PARTIES APPEARED BEFORE THE AO. EVEN THEIR STATEMENT S WERE ALSO RECORDED . EVEN THESE PARTIES HAVE FILED THEIR INCOME TAX RETURNS BEFORE ISSUANCE OF NOTICE U/S 153C. ALL THE SALES MADE TO THE ASSESSEE ARE DULY SHOWN. THE TOTAL PURCHASES FROM THE UNREGISTERED DEALERS ARE MUCH LESS. WITHIN THE GROUP, PURCHASES ARE TO THE EXTENT OF RS. 33,75,75,865/ - WHILE THE TOTAL PURCHASES MADE BY THE ASSESSEE IN BOTH THE YEARS IS RS. 89,06,89,046/ - . OUR ATTENTION WAS ALSO DRAWN TOWARDS THE SALES TAX RETURN FILED BY THESE CONCERNS AS WELL AS THEIR TRADING ACCOUNT WHICH ARE APPEARING FROM PG. 152 - 165 OF THE PAPER BOOK. ON THIS BASIS, IT WAS CONTENDED THAT IN SOME CASES THE EMPLOYEES OF THE ASSESSEE MAY BE THE PROPRIETOR BUT ALL THESE CONCERNS ARE GENUINE CON CERNS. IN RESPECT OF THE REST OF THE CONCERNS, OUR ATTENTION WAS DRAWN TOWARDS THE ORDER OF THE A . O AND IT WAS STATED THAT ALL THESE CONCERNS ARE INCOME TAX ASSESSEES AND ARE BEING REGULARLY CHARGED TO INCOME TAX. EVEN OTHERWISE, IT WAS CONTENDED THAT TH E ASSESSEE HAS SUBMITTED THE QUANTITATIVE STATEMENT OF THE PURCHASES AND SALES OF THE IRON ORE WHICH WAS DULY VERIFIED BY THE AO. FOR THIS, ATTENTION WAS DRAWN TOWARDS PG. 45 257 OF THE PAPER BOOK WHICH CONTAINS THE QUANTITATIVE DETAILS OF THE PURCHASES AND SALES AS WELL AS THE CLOSING STOCK. THE SALES MADE BY THE ASSESSEE HAS DULY BEEN ACCEPTED BY THE AO. IT IS NOT A CASE WHERE THE PURCHASE S HAVE BEEN INFLATED. SINCE IT IS A CASE WHERE ILLEGALLY MINED IRON ORE WAS TO BE ACCOUNTED FOR, THEREFORE, THE ASSES SEE HAS TO TAKE THE BILLS BY PAYING COMMISSION @ 4%. THIS FACT IS APPARENT FROM THE SEIZED COMPUTER DATA FOR THE MONTH OF AUGUST, OCTOBER, NOVEMBER AND DECEMBER, 2007 WHICH HAS BEEN REPRODUCED BY THE AO IN THE REMAND REPORT. TO THE EXTENT THE SALES ARE A CCOUNTED FOR, THE PURCHASE BILLS HAVE TO BE OBTAINED. IT IS NOT A CASE THAT THESE PURCHASES WERE NOT RECORDED IN THE BOOKS OF ACCOUNTS. ONCE THE ASSESSEE HAS MADE THE SALES AND SALES HAS BEEN DULY BEEN ACCEPTED, IT IS NOT POSSIBLE FOR THE ASSESSEE TO MAKE THE SALES WITHOUT ANY PURCHASES BEING MADE . EVEN IF THE BILLS OF THE PURCHASE MAY NOT BE GENUINE, BUT IT WILL NOT MAKE THE PURCHASES TO BE BOGUS AS THE ASSESSEE COULD HAVE NOT SOLD THE IRON ORE WITHOUT PROCURING THE SAME. IT IS ALSO A FACT THAT WHATEVER SALES AND PURCHASES HAVE BEEN ACCOUNTED FOR BY THE ASSESSEE IN HIS BOOKS OF ACCOUNTS, THOSE REPRESENTS THE SALES MADE ON BEHALF OF SHRI ANIL H. LAD. THERE ARE EVIDENCE BEING SEIZED WHICH PROVE THAT CASH PAYMENT OUTSIDE THE BOOKS WERE MADE TO SHRI ANIL H. LAD AND TO HIS CONCERNS FOR WHICH SEPARATE ADDITIONS WERE MADE BY THE REVENUE. THE ASSESSEE WAS SIMPLY PROVIDING ACCOMMODATION ENTRIES ON GETTING COMMISSION @ 2 - 4%. AT THE MOST, ONLY THE COMMISSION INCOME CAN BE ADDED IN THE HANDS OF THE ASSESSEE. IF THE PURCHASES ARE NOT ALLOWED TO THE ASSESSEE, THAT WILL TANTAMOUNT TO ASSESSING THE SALES. C OST OF THE GOO DS INCLUDING THE STOCK IN TRADE IS ALLOWED AS DEDUCTION U/S 28 OF THE INCOME TAX ACT. SEC. 28 STARTS WITH THE WORDS PROFITS AND GAINS. PROFIT S AND GAINS ARE TO BE UNDERSTOOD IN COMMERCIAL SENSE. SEC. 29 PROVIDES THAT THE PROFITS AND GAINS ARE TO BE COMPUTED IN THE MANNER PRESCRIBED U/S 30 TO 43D OF THE ACT. THE PURCHASE COST OF THE IRON ORE, IN ANY CASE, HAS TO BE ALLOWED HOWSOEVER IT HAS BEE N PROCURED BY THE ASSESSEE. THE PROCUREMENT OF THE IRON ORE IS NOT DENIED. THE ASSESSEE WAS NOT THE OWNER OF THE MINES WHO 46 WOULD HAVE EXTRACTED THE IRON ORE AT ITS OWN IF ANY IRON ORE ILLEGALLY EXTRACTED AND AN INCOME IS EARNED THAT WOULD BELONG TO THE OW NER OF THE MINE. IN THIS REGARD RELIANCE WAS PLACED ON THE DECISION OF HONBLE SUPREME C OURT IN CIVIL APPEALS NOS. 4540 - 4548 OF 2000 IN THE CASE OF THREESIAMMA JACOB & ORS VS GEOLOGISTS, DPTT. OF MINING & GEOLOGY & ORS IN WHICH HONBLE SUPREME COURT VIDE O RDER DATED 8 TH JULY, 2013 HONBLE SUPREME COURT HELD UNDER PARA 57 OF ITS ORDER THAT OWNERSHIP OF SUB - SOIL/MINERAL WEALTH SHOULD NORMALLY FOLLOW THE OWNERSHIP OF THE LAND, UNLESS THE OWNER OF THE LAND IS DEPRIVED OF THE SAME BY SOME VALID PROCESS. EVEN IN THIS CASE THE HONBLE SUPREME COURT WAS OF THE OPINION THAT THERE IS NOTHING IN LAW WHICH DECLARES THAT ALL MINERAL WEALTH SUB - SOIL RIGHTS VEST IN THE STATE. BEFORE US COPY OF THE TRADING ACCOUNT FOR BOTH THE YEARS ENDED AS ON 31.3.2007 AND 31.3.2008 WERE FILED AND IT WAS CONTENDED THAT THE GROSS PROFIT DURING THE YEAR 31.3.2007 AS PER THE BOOKS COMES TO 16.5% WHILE FOR THE YEAR ENDED 31.3.2008 COMES TO 6.06%. IF THE PURCHASES DISALLOWED ARE CONFIRMED THE GROSS PROFIT FOR T HE YEAR ENDED 31.3.2007 WILL SH O O T UP TO 50.89% WHILE FOR THE YEAR ENDED 31.3.2008 IT WILL SHO O T UP TO 90.72%. THIS SHOWED TOTALLY UNREALISTIC GROSS PROFIT. 21.3 THE LD. DR, ON THE OTHER HAND, RELIED ON THE ORDER OF THE CIT(A) AND VEHEMENTLY CONTENDED THAT ALL THE CONCERNS FROM WHOM THE PURCHASES WERE MADE ARE BOGUS. IN SOME CASES, BLANK BILL BOOK OF THE RELEVANT CONCERNS WERE FOUND FROM THE POSSESSION OF THE ASSESSEE. THE ASSESSEE HIMSELF WAS PREPARING THE BILLS AND PUTTING INTO THE BOOKS OF ACCOUNTS AND IN THIS MANNER THE ASSESSEE HAS REDUCED THE PROFIT. THE CIT(A) HAS RIGHTLY CONFIRMED THE PURCHASES SO CLAIMED BY THE ASSESSEE ON SUBSTANTIVE BASIS IN THE HANDS OF THE ASSESSEE. THE CIT(A) HAS DEALT THE FACTS OF EACH AND EVERY PARTY FOR WHICH THE ATTENTION WAS DRAWN TOWARDS PAGE 22 T O 3 0 OF THE ORDER OF THE CIT(A). 47 21.4 IN THE REJOINDER THE LEARNED A.R REFERRED TO PAGE 28 TO 29 OF THE ORDER OF CIT(A) CONTENDED THAT THE CIT(A) HAS GIVEN CLEAR CUT FINDING ON THE BASIS OF THE INCRIMINATING DOCUMENTS FOUND DURING THE COURSE OF THE SEARCH THAT THE ASSESSEE WAS CARRYING OUT TRA DING IRON ORE UNDER CLOSE MONITORING BY SHRI ANIL LAD EVEN HE HAS OBSERVED THAT THE SEIZED MATERIAL WAS CONFRONTED TO THE ASSESSEE AT THE TIME OF SEARCH, THE ASSESSEE HAS STATED ON 24.6.2008 THAT HE WAS INCHARGE OF THE MINING PLOTS OF SHRI ANIL H. LAD AND CARRYING OUR TRANSACTIONS ON THEIR INSTRUCTIONS AND A PART OF THEIR TRANSACTIONS WERE ROUTED THROUGH THE PROPRIETORSHIP CONCERN OF THE ASSESSEE GRMTC. THIS FACT WAS DENIED BY SHRI ANIL H. LAD AND CEO OF SHRI POOBALAM OF M/S VSL MINING COMPANY IN THEIR LETT ER DATED 20.11.2008 BEFORE THE ADIT. THIS FACT HAS ALSO BEEN CONFIRMED BY THE ASSESSEE ON THE STATEMENT RECORDED ON 23.4.2013 IN WHICH HE CATEGORICALLY STATED THAT HE WAS CARRYING OUT SALES ON BEHALF OF SHRI ANIL H. LAD FOR CERTAIN COMMISSION. THUS, IT WAS CONTENDED THAT THE INCOME EARNED FORM ILLEGAL MINING CANNOT BE THE INCOME OF THE ASSESSEE IT CAN ONLY BE THE INCOME OF M/S VSL MINING COMPANY AS MINES BELONG TO THEM NOT TO THE ASSESSEE. 21.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED T HE SAME. THE QUESTION ARISES FOR OUR CONSIDERATION OUT OF THE FACTS RELATING TO GROUND NO. 9 I N THE A.Y 2007 - 08 AND GROUND NO . 8 IN A.Y 2008 - 09 IS WHETHER THE PURCHASES MADE BY THE ASSESSEE CAN BE DISALLOWED WHEN THE SALES MADE BY THE ASSESSEE HAS DULY BEEN ACCEPTED. IT IS NOT DENIED FROM THE ORDER OF THE AUTHORITIES BELOW ON THE BASIS OF THE DOCUMENTS FOUND DURING THE COURSE OF THE SEARCH THAT THE ASSESSEE WAS ENGAGED IN THE TRADING OF THE IRON ORE. DURING THE COURSE OF CARRYING OUT THE TRADING IN IRON ORE THE ASSESSEE HAS ACCOMMODATED SHRI ANIL H. LAD AND M/S VSL AND SONS FOR SELLING IRON ORE PROCURED BY THEM THROUGH ILLEGAL MINING CARRIED OUT IN THEIR MINING. THUS, THE PURCHASES MADE BY THE ASSESSEE FROM THESE FIRMS WHICH WERE WITHOUT BILLS WERE SHOWN BY THE ASSESSEE IN HIS BOOKS OF ACCOUNTS AS IF THE ASSESSEE HAS MADE PURCHASES FROM 48 VARIOUS PARTIES SO THAT IT MAY APPEAR THAT THE ASSESSEE HAS MADE THE PURCHASES FOR THESE PARTIES. IT IS ALSO UNCONTROVERTED FACT THAT THE ASSESSEE DID NOT OWN ANY MINE AND WAS ENGAGED ONLY IN TRADING OF IRON ORE THROUGH ITS PROPRIETORSHIP CONCERN. THE SALES MADE BY THE ASSESSEE WERE DULY ACCEPTED BY THE REVENUE. WE HAVE GONE THROUGH THE DECISION OF THE HONBLE SUPREME COURT IN CIVIL APPEALS NOS. 4540 - 45 48 OF 2000 IN THE CASE OF THREESIAMMA JACOB & ORS VS GEOLOGISTS, DPTT. O F MINING & GEOLOGY & ORS IN WHICH HONBLE SUPREME COURT VIDE ORDER DATED 8 TH JULY, 2013 HONBLE SUPREME COURT HELD UNDER PARA 57 OF ITS ORDER THAT OWNERSHIP OF SUB - SOIL/MINERAL WEALTH SHOULD NORMALLY FOLLOW THE OWNERSHIP OF THE LAND, UNLESS THE OWNER OF THE LAND IS DEPRIVED OF THE SAME BY SOME VALID PROCESS. EVEN IN THIS CASE THE HONBLE SUPREME COURT WAS OF THE OPINION THAT THERE IS NOTHING IN LAW WHICH DECLARES THAT ALL MINERAL WEALT H SUB - SOIL RIGHTS VEST IN THE STATE. ON THE BASIS OF THE DICTUM OF LAW PRONOUNCED BY THE HONBLE SUPREME COURT THE IRON ORE ILLEGALLY EXTRACTED FROM THE MINES OF SHRI ANIL H. LAD AND THE FARM OWNED BY HIM BELONG TO SHRI ANIL H. LAD NOT TO THE ASSESSEE. THE RE ARE ALSO EVIDENCE S FOUND DURING THE COURSE OF SEARCH THAT THE ASSESSEE MADE CASH PAYMENT S TO SHRI ANIL H. LAD AND THE IRON ORE SO EXTRACTED ROUTED TO THE PROPRIETORSHIP CONCERN OF THE ASSESSEE. IT CANNOT BE SAID THAT WHATEVER IRON ORE ILLEGALLY EXTRACTE D FROM THE MINING BELONGING TO M/S VSL AND SONS A FIRM OF SHRI ANIL H. LAD , WAS GIVEN BY SHRI ANIL H. LAD T O THE ASSESSEE WITHOUT CHARGING ANY COST. T HE ASSESSEE HAS SUBMITTED QUANTITATIVE RECONCILIATION SHOWING THE QUANTITY OF THE MATERIAL PURCHASED AS WE LL AS MATERIAL SOLD. THE ASSESSEE HAS BOTH ACCOUNTED AS WELL AS UNACCOUNTED SALES. SO FAR AS THE UN ACCOUNTED SALES ARE CONCERNED, THE SAME HAS BEEN DEALT WITH SEPARATEL Y IN THE PRECEDING PARAGRAPHS. HERE, WE ARE CONCERNED WITH THE ACCOUNTED SALES AND ACC OUNTED PURCHASE BILLS. ON THE BASIS OF THE SEIZED MATERIAL THE AO CAME TO THE CONCLUSION THAT THE ASSESSEE HAS PROCURED THE BILLS FOR THE IRON ORE AND ACCOUNTED FOR THESE B ILLS IN HIS BOOKS OF ACCOUNTS. SOME OF THE CONCERNS ARE OWNED BY SOME OF THE EMPLOYE ES OF THE ASSESSEE WHILE OTHER CONCERNS ARE 49 OWNED BY THIRD PARTIES. ALL THESE CONCERNS, EXCEPT 2 - 3, WERE DULY REGISTERED WITH THE SALES TAX AUTHORITIES. ALL WERE HAVING PAN AS WELL AS TIN. ALL THESE CONCERNS WERE HAVING BANK ACCOUNTS A LTHOUGH IN 3 CASES THE BANK ACCOUNTS WERE INTRODUCED BY THE ASSESSEE . I T IS NOT DENIED BY THE ASSESSEE ALSO THAT THE ASSESSEE HAS SHOWN PURCHASES FROM THESE CONCERNS AND THE PAYMENTS WERE ALSO MADE TO THESE CONCERNS. THE AO DISALLOWED THESE PURCHASES TREATING THEM TO BE B OGUS PURCHASES WHICH WAS CONFIRMED BY THE CIT(A). WE MAY MENTION HERE THAT THE ASSESSEE WHO IS ENGAGED IN TRADING BUSINESS CANNOT SELL THE GOODS WITHOUT BUYING IT. THE ASSESSEE MIGHT HAVE BOUGHT IT FROM ONE PARTY WITHOUT BILLS BUT MIGHT HAVE PROCURED THE BILLS FROM OTHER PARTIES. THE ASSESSEE IN HIS STATEMENT WHICH WAS RECORDED BY THE REVENUE POST - SEARCH HAS CATEGORICALLY ACCEPTED THAT HE HAS PAID COMMISSION CHARGES FOR PROCURING THE BILLS @ 4%. THIS MA Y MAKE THE BILLS TO BE BOGUS BUT WE CANNOT CONCLUDE THAT THE ASSESSEE HAS NOT MADE THE PURCHASES. IT IS NOT A CASE WHERE THE ASSESSEE HAS INFLATED THE PURCHASES I.E. THE QUANTITY OF THE PURCHASES ARE MUCH MORE THAN THE QUANTITY OF THE IRON ORE SOLD. THE AO IN HIS REMAND REPORT HAS CATEGORICALLY ACCEPTED THE FACT THAT THE ASSESSEE WAS WORKING ON BEHALF OF SHRI ANIL H. LAD WHO WANT OWNED THE MINES AND HAS EXTRACTED IRON ORE ILLEGALLY MUCH MORE THAN PERMISSIBLE. TO COVER UP THE QUANTITIES OF PURCHASE MADE F ROM SHRI ANIL H. LAD CONCERN M/S VSL & SONS , THE ASSESSEE HAD TO PROCURE THE PURCHASE BILLS. IT IS NOT THE CASE OF THE REVENUE THAT THE IRON ORE PURCHASES AND SALES MADE BY THE ASSESSEE ARE NOT RECONCILABLE . THE ASSESSEE HAS SUBMITTED THE QUANTITATIVE RE CONCILIATION STATEMENT WHICH HAS BEEN REFERRED TO BY THE AO IN HIS REMAND REPO RT. THE SALES ACCOUNTED FOR AND MADE BY THE ASSESSEE HAVE NOT BEEN DISPUTED BY THE REVENUE. AT THE MOST, IN OUR OPINION, WHERE THE ASSESSEE HAD SAVED ANY TAX IN PROCURING THE BOG US BILLS, THE ASSESSEE COULD HAVE MADE MORE PROFIT BUT THE PURCHASES MADE BY THE ASSESSEE CANNOT BE DISALLOWED. THERE ARE EVIDENCES THAT T HESE FIRMS WERE DULY REGISTERED WITH THE INCOME TAX AS WELL AS SALE TAX AUTHORITIES. THE VAT HAS DULY BEEN PAID ON THE PURCHASES MADE BY THE 50 ASSESSEE. THESE CONCERNS FILED THEIR INCOME TAX RETURN PRIOR TO THE NOTICE ISSUED U/S 153C EVEN VAT RETUR N WAS DULY FILED. THESE CONCERN MADE THE SALES TO THE PROPRIETORSHIP CONCERN OF THE ASSESSEE TO THE EXTENT OF RS.50,33,07,161/ - IN BOTH THE YEARS AS PER THE DETAILS GIVEN AT PAGE 146 OF THE PAPER BOOK. THESE CONCERNS HAVE IN TER SALES ALSO TO THE EXTENT OF RS. 33,75,75,865/ - IN BOTH THE YEARS. WE NOTED THAT DURING THE YEAR ENDED 31.3.2007 THE PURCHASES WERE DISALLOWED BY THE A.O TO THE EXTENT OF RS.17 , 72 , 99 , 484/ - AND DURING THE YEAR ENDED 31.3. 2008, THE PURCHASES DISALLOWED WERE RS.23,26,29,989/ - . THE GROSS PROFIT S AS PER THE BOOKS OF ASSESSEE WERE 16.35% AND 6.06% FOR THE ASSESSMENT YEAR 2007 - 08 AND 2008 - 09 RESPECTIVELY. WE DO AGREE WITH THE LEAR NED A.R THAT ONCE THE PURCHASES ARE DISALLOWED THE GROSS PROFIT WILL INCREASE TO 50.9% AND 90.7% FOR THE ASSESSMENT YEAR 2007 - 08 AND 2008 - 09 RESPECTIVELY. NO MATERIAL OR EVIDENCE WHATSOEVER SHOWING THE COMPARATIVE INSTANCE WAS PRODUCED BEFORE US TO JUSTIFY SU CH A HIGH GROSS PROFIT. UNDER THESE FACTS IN OUR OP INION NO ADDITION ON ACCOUNT OF BOGUS IRON ORE PURCHASES CAN BE MADE AS WITHOUT PROCURING THE IRON ORE BY INCURRING THE COST IN OUR OPINION THE ASSESSEE CANNOT SELL THE IRON ORE. AT THE MOST THE REVENUE CO ULD HAVE ADDED THE PROFIT ON SUCH PURCHASES @ 4% AS HAS BEEN HELD BY US IN THE PRECEDING PARAGRAPH AS THE ASSESSEE CATEGORICALLY STATED THAT HE WAS CARRYING OUT THE SALES ON BEHALF OF SHRI ANIL H. LAD ON COMMISSION BASIS AND THE EVIDENCES FOUND DURING THE COURSE OF SEARCH AND SURVEY ALSO PROVE THAT THE ASSESSEE IS BEING USED AS CONDUIT TO SIPHON OF F IRON ORE WHICH WAS ILLEGALLY MINED BY M/S VSL & SONS FIRM OF SHRI ANIL LAD. WE NOTED THAT CIT(A) HAS DELETED THE ADDITION MADE BY THE A.O ON ACCOUNT OF PROFIT ESTIMATED ON SUCH SALES THE REVENUE HAS NOT COME IN APPEAL BEFORE US IN THIS REGARD IN THE ABSENCE OF THE GROUND OF APPEAL BEFORE US WE CANNOT DIRECT THE A.O TO ESTIMATE PROFIT @ 4% ON SUCH PURCHASES. WE ALSO NOTED THAT THE ASSESSEE HAS MADE SURRENDER BY WAY OF UNDISCLOSED STOCK BEING THE INVESTMENT OF THE INCOME EARNED BY THE ASSESSEE. THE SURRENDER SO MADE IN ANY CASE SINCE MORE THAN 4% OF THE PROFIT WHICH THE ASSESSEE WOULD HAVE EARNED OTHERWISE TAKES CARE OF 51 ADDITION OF SUCH ESTIMATED PROFIT S . BEFORE C ONCLUDING OUR FINDING ON THIS ISSUE WE MAY MENTION THAT THE ASSESSING OFFICER HAD DISALLOWED THE EXPENSES INCURRED BY THE ASSESSEE FOR THE PURCHASES U/S 37(1)OF THE INCOME TAX ACT. WE , THEREFORE, IN VIEW OF OUR AFORESAID DISCUSSION DELETE THE ADDITION MAD E ON ACCOUNT OF BOGUS PURCHASES. THE PURCHASE COST IN THE CASE OF A TRADER IN OUR OPINION IS ALLOWED AS DEDUCTION U/S 28 ITSELF AS U/S 28 IS ONLY THE PROFIT AND GAINS OF ANY BUSINESS OR PROFESSION WHICH ARE CHARGEABLE TO INC. THE CONSIDERATION RECEIVED BY THE ASSESSEE ON THE SALES CANNOT BE REGARDED TO BE THE PROFIT AND GAINS OF THE PROFESSION. SECTION 28(1) DOES NOT MAKE TOTAL REVENUE RECEIPT TO BE CHARGEABLE TO INCOME TAX ACT. ON THIS BAS IS ALSO THE ORDER OF THE CIT(A) CANNOT BE SUSTAINED IN OUR OPINION ON THIS ISSUE. IN VIEW OF OUR AFORESAID DISCUSSION WE DELETE THE ADDITION MADE ON ACCOUNT OF BOGUS PURCHASES MADE BY A.O AND SUSTAINED BY THE CIT(A). IN BOTH THE ASSESSMENT YEARS THUS THE GROUND NO. 9 IN ASSESSMENT YEAR 2007 - 08 AND GROUND NO. 8 IN ASSESSME NT YEAR 2008 - 09 ARE ALLOWED. ASSESSMENT YEAR 2008 - 09 : 22. GROUND NO.5 RELATES TO THE ADDITION OF RS.7 , 90 , 97 , 320/ - ENHANCED FROM RS. 1,58,19,464/ - . THE FACTS RELATING TO THIS GROUND ARE THAT THE A.O FROM THE SEIZED DOCUMENT MARKED AS A/MJ/38 DATED 1.4.20 08 NOTED THAT THE ASSESSEE HAS MADE CASH PAYMENT INCLUDING CASH TO M/S VSL GROUP BELONGING TO SHRI ANIL H. LAD TO THE EXTENT OF RS.7,90,97,320/ - . HE THEREFORE, SORT EXPLANATION OF THE ASSESSEE VIDE 20% OF THE EXPENSES AMOUNTING TO RS.1,58,19,464/ - BE NOT DISALLOWED. THE ASSESSEE SUBMITTED THAT THE CORRECT FIGURE IS AN AMOUNT OF RS. 4,90,97,320/ - ARISING OUT OF SEIZED MATERIAL MARKED AT A/MJ/38. THE ASSESSEE MADE DECLARATION BEFORE ADIT(INV) ON 20.11.2008 AGREED TO MAKE A D ECLARATION OF RS.16,10,04,519/ - WHICH INCL UDES AN AMOUNT OF RS. 4,90,97 ,320/ - . THE ASSESSING OFFICER TOOK THE VIEW THAT THE ASSESSEE MADE THE DECLARATION OF RS. 52 97,00,000/ - TOWARDS UNEXPLAINED AND INADMISSIBLE EXPENSES, THEREFORE HE DISALLOWED 20% OF RS.7,90, 97,320/ - AMOUNTING TO RS.1,58,19,464/ - U/S 40A(3) OF THE INCOME TAX ACT THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A) . THE CIT(A) AFTER GIVING NOTICE TO THE ASSESSEE FOR THE ENHANCEMENT U/S 251(2) DATED 6.5.2013 ENHANCED THE ADDITION TO RS.7,90,97,320/ - B UT TELESCOPED THE SAME AGAINST THE ADDITION MADE ON ACCOUNT OF BOGUS PURCHASES. 23. BEFORE US, THE LEARNED A.R VEHEMENTLY CONTENDED THAT THE ENHANCEMENT MADE BY THE CIT(A) IS ILLEGAL AND VOID. IT WAS POINTED OUT THAT THERE WERE THE CASH PAYMENT S AS PER ANNEXURE A/AMJ/38 WHICH RELATE TO THE ASSESSMENT YEAR 2008 - 09.THIS ANNEXURE CONTAINS DUPLICATE ENTRIES AT PAGE 4 AND 5 FOR RS. 3,00,00,000/ - . THE NET CASH PAYMENTS WERE ONLY RS. 4,90,97,320/ - . THE ASSESSEE HAS DULY CONSIDERED THESE CASH PAYMENTS ALONG WIT H THE CASH PAYMENT MADE FOR THE ASSESSMENT YEAR 2006 - 07 AND 2007 - 08 WHILE MAKING THE DECLARATION OF THE UNDISCLOSED INCOME OF RS.1,61,00,4519/ - . RS. 11 CRORES WERE DECLARED VIDE LETTER DT. 23.4.2008 WHILE BALANCE RS. 5,10,04,519/ - WERE DECLARED VIDE LETTER DT. 20.11.2008 WHICH WAS COMPUTED AS UNDER : 1. CASH PAYMENTS MADE AS NOTED IN THE SEIZED MATERIAL A/MJ/38 RS. 7,90,97,320/ - LESS : DUPLICATION ENTRY AT PAGE 4 AND 5 RS. 3,00,00,000/ - UNDISCLOSED INCOME BASED ON THE ABOVE SEIZED MATERIAL RS. 4,90,97,320/ - 2. CASH PAYMENTS AS PER A/MJ/29 RS. 2,68,67,758/ - 3. CASH PAYMENTS AS PER A/MJ/29 RS. 8,50,39,441/ - RS.16,10,04,519/ - LESS : DISCLOSURE ALREADY GIVEN EARLIER RS.11,00,00,000/ - BALANCE BEING DISCLOSED NOW RS. 5,10,04,519/ - THUS, IT WAS CONTENDED THAT THE PAYME NT MADE IN CASH OUTSIDE THE BOOKS OF ACCOUNTS WAS DULY COVERED BY THE DECLARATION MADE BY THE ASSESSEE AND, THEREFORE, NO ADDITION SHOULD BE MADE IN THIS REGARD. THE CASH PAYMENTS WERE MADE OUT OF THE CASH RECEIPT FROM THE BUSINESS CARRIED ON BY THE ASSESS EE FOR WHICH THE NECESSARY EVIDENCE WERE FOUND DURING THE COURSE OF SEARCH BY WAY OF 53 UNACCOUNTED SALES AS WELL AS UNACCOUNTED PURCHASES. IN THIS REGARD SEPARATE ADDITION WERE MADE BY THE A.O. ULTIMATELY, AS ON THE DATE OF THE SEARCH THE ASSESSEE GOT THE U NDISCLOSED ASSETS TO THE EXTENT OF STOCK BEING OF ELEVEN CRORES. OUR ATTENTION WAS ALSO DRAWN TOWARDS PARA 8 OF THE IMPUGNED ASSESSMENT ORDER. THE AO ALSO AGREED THAT THE CORRECT FIGURE OF THE CASH PAYMENT OUTSIDE THE BOOKS OF ACCOUNTS FOR THE A.Y WERE RS .4,90,97,320/ - . IT WAS ALSO CONTENDED THAT WHATEVER INCOME IS GENERATED BY MAKING UNACCOUNTED SALES AND PURCHASE THE SAID INCOME HAS EITHER BE INVESTED, CONSUMED OR WITHDRAWAL FOR MAKING PERSONAL ASSETS. THERE HAD BEEN SEARCH IN THE CASE OF THE ASSESSEE AN D ULTIMATELY ALL THESE PAYMENTS MADE OUTSIDE THE BOOKS OF ACCOUNTS CULMINATED INTO AN UNACCOUNTED ASSET BY WAY OF STOCK. IT WAS STATED THAT THE A.O MADE SEPARATE ADDITION ON ESTIMATE BASIS IN RESPECT OF THE PROFIT EARNED BY THE ASSESSEE ON UNACCOUNTED PURC HASE AND SALE CARRIED OUTSIDE THE BOOKS OF ACCOUNTS. THIS HAS BEEN CHALLENGED BY THE ASSESSEE IN THE IMPUGNED ASSESSMENT YEAR AS WELL AS IN THE ASSESSMENT YEAR 2007 - 08 BY WAY OF GROUND NO.7. IF YOUR HONOUR SUSTAINS THE ADDITION ON ACCOUNT OF PROFIT ON UNAC COUNTED TURNOVER THE ASSESSEE BE ALLOWED TELESCOPING BEING IN RESPECT OF PROFIT IF ANY SO SUSTAINED AS IT WILL BE A SOURCE FOR MAKING THE CASH PAYMENT OUTSIDE THE BOOKS OF ACCOUNTS. THEREFORE, THE ADDITION MADE BY CIT(A) BE DELETED. 24. THE LD. DR ON THE OTHER HAND, CONTENDED THAT NO DOUBT THE ASSESSEE HAD SUBMITTED LETTERS BEFORE THE ASST. DIRECTOR OF INCOME - TAX (INV.) DT. 23.4.2008 AND 20.11.2008 MAK ING THE TOTAL DISCLOSURE OF RS.16,10,04,519/ - . THE SUM OF RS. 11 ,00,00,000/ - WERE DISCLOSED VIDE LETTER DT . 23.4.2008 WHILE THE SUM OF RS.5,10,04,519/ - WERE DECLARED VIDE LETTER DT. 20.11.2008 AND WHILE WORKING O UT THE ADDITIONAL INCOME OF RS. 5,10,04,519/ - THE ASSESSEE HAS MENTIONED CASH PAYMENT S FOR THE IMPUGNED A.Y AS PER ANNEXURE A/MJ/29 AT RS. 4,90,97 ,320/ - AFTER MENTIONING THEREIN DUPLICATE ENTRIES AT PAGE 4 AND 5 AMOUNTING TO RS.3,00,00,000/ - BUT IN FACT THE ASSESSEE HAS DISCLOSED ONLY A SUM OF RS. 7.38 54 CRORES FOR THE IMPUGNED A.Y WHICH INCLUDES CLOSING STOCK AMOUNTING TO RS. 6.41 LAKHS . OUR ATTENTION WAS DRAWN TOWARDS PARA 6 OF THE LETTER DT. 20.11.2008 AND IT WAS POINTED OUT THAT AS PER THIS LETTER, THE ASSESSEE HAS GIVEN THE YEAR - WISE BREAK - UP OF THE INCOME DISCLOSURE AS UNDER : RUPEES IN CRORES ASST YEAR STOCK (IN RS) INADMISSIBLE EXPENDITURE (IN ADMISSIBLE EXPENDITURE RS) BOOK RECONCILIATION DIFF WITH VSL (IN RS) TOTAL (IN RS) 2006 - 07 2.41 2.41 2007 - 08 6.00 0.23 0.08 0.00 6.31 2008 - 09 6.41 0.83 0.14 7.38 OUR ATTENTION WAS ALSO DRAWN TOWARDS COPY OF THE COMPUTATION STATEMENT FOR THE RETURNS SUBMITTED BY THE ASSESSEE IN THE PAPER BOOK AT PG. 75 OF THE PAPER BOOK. THEREFORE, THE AO WAS NOT CORRECT IN TAKING A VIEW THAT THE CASH PAYMENT INCURRED BY THE ASSESSE E WERE DULY COVERED BY THE DECLARATION MADE BY THE ASSESSEE. RELIANCE WAS ALSO PLACED ON THE ORDER OF CIT(A). 25. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME ALONGWITH THE ORDER OF THE TAX AUTHORITIES BELOW. WE HAVE GONE THROUG H THE LETTERS OF THE ASSESSEE DT. 23.4.2008 AND 20.11.2008 , WRITTEN TO THE ASST. DIRECTOR OF INCOME TAX (INV.). COP IES OF THESE LETTERS WERE FILED BEFORE US DURING THE COURSE OF THE HEARING. WE NOTED THAT VIDE LETTER DTD. 23.4.2008 THE ASSESSEE AGREED TO DISCLOSE A SUM OF RS. 11 CRORES IN THE FOLLOWING MANNER : VALUE OF STOCK LYING AT KRISHNAPATNAM PORT, AP AROUND 35000 - 40000, KEPT FOR EXPORT/SALES TO EXPORTERS RS. 10,75,00,000/ - ADDITIONAL AMOUNT DECLARED TO COVER FOR ANY FURTHER DEFICIENCIES IN SEIZED MATERIAL, BOOKS OF ACCOUNTS AND FOR OTHER DISALLOWANCES THAT MAY BE CALLED FOR RS. 25,00,000/ - TOTAL RS. 11,00,00,000/ - 55 WE FURTHER NOTICED THAT VIDE LETTER DT. 20.11.2008 THE ASSESSEE FURTHER AGREED TO MAKE AN ADDITIONAL DECLARATION OF RS. 5,10,04,519/ - IN ADDITION TO THE SUM OF RS. 11 CRORES AS UNDER : 1. CASH PAYMENTS MADE AS NOTED IN THE SEIZED MATERIAL A/MJ/38 RS. 7,90,97,320/ - LESS : DUPLICATION ENTRY AT PAGE 4 AND 5 RS. 3,00,00,000/ - UNDISCLOSED INCOME BASED ON THE ABOVE SEIZED MATERIAL RS. 4,90,97,320/ - 2. CASH PAYMENTS AS PER A/MJ/29 RS. 2,68,67,758/ - 3. CASH PAYMENTS AS PER A/MJ/29 RS. 8,50,39,441/ - RS.16,10,04,519/ - LESS : DISCLOSURE ALREADY GIVEN EARLIER RS.11,00,00,000/ - BALANCE BEING DISCLOSED NOW RS. 5,10,04,519/ - 25.1 WE HAVE ALSO NOTED THAT FOR A.Y 2008 - 09 THE ASSESSEE MENTIONS THAT THE CASH PAYMENT AS PER THE SEIZED DOCUMENTS ARE RS. 4,90,97,320/ - AFTER REDUCING THERE FROM A SUM OF RS. 3 CRORES REPRESENTING DUPLICATE ENTRIES. THE AO HAS ALSO MENTIONED THE FIGURE IN THE ASSESSMENT ORDER WHILE ACCEPTING THAT THE SAID AMOUNT IS DULY COVERED BY THE DISCLOSURE MADE BY THE ASSESSEE BUT ULTIMATELY IN THE SAID DECLARATION, THE ASSESSEE HAS DIVIDED THE TOTAL DECLARATION OF RS.16,10,04,519/ - IN THE FOLLOWING ASSESSMENT YEARS AS UNDER : RUPEES IN CRORES ASST YEAR STOCK (IN RS) INADMISSIBLE EXPENDITURE (IN ADMISSIBLE EXPENDITURE RS) BOOK RECONCILIATION DIFF WITH VSL (IN RS) TOTAL (IN RS) 2006 - 07 2.41 2.41 2007 - 08 6.00 0.23 0.08 0.00 6.31 2008 - 09 6.41 0.83 0.14 7.38 25.2 WE HAVE ALSO GONE THROUGH THE STATEMENT OF TOTAL INCOME COMPUTED BY THE ASSESSEE AND FILED BEFORE THE AO ALONGWITH THE RETURN FILED IN RESPONSE TO NOTICE ISSUED U/S 153A. AS PER THE SAID RETURN ALSO (COPY OF WHICH IS AVAILABLE IN THE PAPER BOOK AT PAGE 75), WE NOTED THAT THE ASSESSEE HAS DISCLOSED ONLY A 56 SUM OF RS.6,41,00,000/ - DURING THE YEAR AS UNDISCLOSED INCOME O F THE ASSESSEE TOWARDS CLOSING STOCK. IT IS UNDISPUTED FACT EVEN AS PER THE ASSESSEE, THAT THE ASSESSEE HAD MADE CASH PAYMENT S DURING THE YEAR AMOUNTING TO RS. 4,90,97,320/ - . ADDITIONAL INCOME WHICH HAS BEEN DISCLOSED BY THE ASSESSEE DURING THE AFORESAI D ASSESSMENT YEAR IS RS. 7,38,00,000/ - . THUS, IT CAN BE SAID THAT DURING THE YEAR A SUM OF RS. 6,41,00,000 / - (TO THE EXTENT RELATING TO THE STOCK) WERE AVAILABLE WITH THE ASSESSEE TO COVER UP THE CASH PAYMENT S MADE BY THE ASSESSEE OUTSIDE THE BOOKS OF ACCO UNTS. THEREFORE, OUT OF THE CASH PAYMENT OF RS. 4,90,97,320 / - IF WE ALLOW ED TELESCOPING FOR THE STOCK DECLARED , NO ADDITION IN THIS REGARD CAN BE SUSTAINED . THUS THIS GROUND IS ALLOWED. 26. THE GROUND NO.6 RELATE S TO THE SUST ENA NCE OF RS. 4,75,00,000/ - MADE BY THE A.O ON ACCOUNT OF CASCADING EFFECT FOR ASSESSMENT YEAR 2006 - 07 WHILE DECLARING THE STOCK IN THE IMPUGNED ASSESSMENT YEAR AMOUNTING TO RS.10,75,00,000/ - . THE BRIEF FACTS RELATING TO THIS ADDITION ARE THAT THE ASSESSING O FFICER NOTED THAT AS PER THE BOOKS OF ACCOUNTS CLOSING STOCK AS ON 31.3.2008 WAS RS. 7,72,83,689/ - IN M/S JRMTC FOUND DURING THE COURSE OF SEARCH. IN THE SURVEY CONDUCTED IN HIS STOCK YARD AT SANKALANPUR VILLAGE BELLARY ROAD, HOSPET STOCK OF RS. 5,41,20,00 0/ - WAS FOUND. QUANTITY OF STOCK LYING AT STOCK YARD WAS RS. 51,00,000/ - M.T AND VALUE OF THE SAME IS RS. 7,51,00,000/ - THUS THERE WAS SHORTAGE OF RS. 2,31,00,000/ - STOCK. THE ASSESSEE IN THE STATEMENT RECORDED U/S 132(4) DATED 23.4.2008 STATED THAT UNAC COUNTED STOCK OF IRON ORE OF M/S JRMTC AMOUNTING TO RS.10.75 CRORES WAS LYING AT KRISHNAPATNAM, NELLORE, DISTRI CT ANDHRA PRADESH. THE ASSESSEE CLAIMED THAT THIS STOCK IS ACCUMULATED OUT OF THE CASH WITHDRAWN AND CASH GENERATED OUT OF THE UNACCOUNTED SALES. THE ASSESSEE SUBMITTED WHEN QUESTIONED BY THE A.O THAT THE ASSESSEE DULY CONSIDERED THE STOCK DECLARED BY HIM IN THE RETURN. THE A.O NOTED THAT THE ASSESSEE DECLARED DURING THE IMPUGNED ASSESSMENT YEAR STOCK TO THE EXTENT OF RS.6,41,00,000/ - AND CLAIMED CA SCADING EFFECT OF RS.6,00,00,000/ - FOR ASSESSMENT 57 YEAR 2006 - 07. THE A.O AFTER GIVING THE EFFECT OF RS. 6,00,00,000/ - OUT OF RS. 10,75,00,000/ - MADE THE ADDITION OF RS.4,75,00,000/ - AS DURING THE YEAR AFTER DEDUCTING RS. 6,00,00,000/ - THE NET DECLARATION WA S ONLY RS.41,00,000/ - . THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). THE CIT(A) CONFIRMED THE ADDITION. 27. WE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME ALONG WITH THE ORDERS OF THE TAX AUTHORITIES BELOW AS WELL AS THE DECLARATION MAD E BY THE ASSESSEE. WE NOTED FROM THE COMPUTATION STATEMENT S FOR THE IMPUGNED ASSESSMENT YEAR THAT THE ASSESSEE HAS DECLARED STOCK AT RS. 6,41,00,000/ - AND OUT OF WHICH HE REDUCED THE STOCK AMOUNTING TO RS. 6,00,00,000/ - CLAIMED TO HAVE BEEN DECLARED IN A SSESSMENT YEAR 2006 - 07. THE NET EFFECT IS THAT THE ASSESSEE ONLY DECLARED THE STOCK OF RS. 41,00,000/ - DURING THE IMPUGNED ASSESSMENT YEAR AND AS CLAIMED BY THE ASSESSEE AND ACCEPTED BY THE A.O RS. 6,00,00,000/ - IN THE ASSESSMENT YEAR 2006 - 07. THIS IS AN U NDISPUTED FACT DURING THE SEARCH , UNDISCLOSED STOCK OF RS.10.75 CRORES WAS FOUND AND ACCEPTED BY THE ASSESSEE LYING AT KRISHNAPATNAM, NELLORE DISTRICT, THE ASSESSEE VIDE ITS DECLARATION DATED 5.4.2008 AND CONFIRMED VIDE LETTER DATED 20.11.2008 DECLARED UN DISCLOSED STOCK AT RS.10,75,00,000/ - . IN THE SAID LETTER THE ASSESSEE HAS ALSO GIVEN THE BREAKUP OF THE DECLARATION IN WHICH THE STOCK OF RS.12.41 CRORES WERE SHOWN DURING THE TWO ASSESSMENT YEAR. FOR THE IMPUGNED ASSESSMENT YEAR THE INCOME BY WAY OF INVE STMENT IN STOCK WAS TO BE DECLARED AT RS. 6.41 CRORES BUT THE ASSESSEE WHILE FILING THE RETURN WE NOTED HAS CLAIM ED THE STOCK DECLARED IN THE EARLIER YEAR AT RS. 6 CRORES. THUS, THE NET DECLARATION FOR THE IMPUGNED ASSESSMENT YEAR COMES TO RS. 41,00,000/ - . THE LEARNED A.R EVEN THOUGH VEHEMENTLY CONTENDED FOR TELESCOPING FOR SUM OF RS. 6 CRORES AGAINST THE INCOME OF RS. 6,41,00,000/ - BUT WE ARE NOT CONVINCED WITH HIS SUBMISSION S AS NO ACCOUNTING PRINCIPLE IN OUR OPINION ALLOWS SUCH TELESCOPING. IF SUCH TELES COPING IS ALLOWED THE DECLARATION OF THE INCOME BY THE ASSESSEE VIDE LETTER DATED 20.11.2008 AMOUNTING TO RS. 16,10,04,519/ - SHALL GET REDUCED BY RS. 58 6,00,000/ - . WE NOTED THAT THE A.O MADE THE ADDITION IN THIS REGARD FOR RS. 4,75,00,000/ - COMPUTED IN THE M ANNER AS STATED BY US IN THE FACTS NARRATED HEREIN ABOVE. IN FACT THE ADDITION SHOULD HAVE BEEN MADE BY THE A.O FOR RS.6,00,00,000/ - BUT SINCE WE DO NOT HAVE ANY JURISDICTION FOR ENHANCEMENT WE CONFIRM THE ORDER OF THE CIT(A) SUSTAINING THE ADDITION TO RS. 4,75,00,000/ - THUS THIS GROUND TAKEN BY THE ASSESSEE IS DISMISSED. 28. THE GROUND NO.7 RELATE TO THE SUSTENANCE OF ADDITION OF RS. 4,30,000/ - BY THE CIT(A). WHILE DISPOSING OF GROUND NO.7 FOR THE ASSESSMENT YEAR 2007 - 08 WE HAVE ALREADY SUSTAINED THE ADD ITION TO THE EXTENT OF RS.1,56,365/ - FOR THE IMPUGNED ASSESSMENT YEAR. THUS THIS GROUND IS PARTLY ALLOWED. WE ALLOW THE TELESCOPING OF THIS ADDITION AGAINST THE STOCK DECLARED BY THE ASSESSEE AT RS. 6,41,00,000/ - IN THE RETURN. THUS, THE NET EFFECT OF THIS ADDITION IS THAT IT REMAINS DELETED. 29. GROUND NO.8 RELATE S TO THE ADDITION SUSTAIN ED ON ACCOUNT OF BOGUS PURCHASE. THIS ADDITION HAS ALREADY BEEN DELETED BY US WHILE DISPOSING OF GROUND NO.9 FOR ASSESSMENT YEAR 2007 - 08. THUS, THIS GROUND IS ALLOWED. 30. IN THE RESULT , THE APPEALS FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2003 - 04 STANDS DISMISSED WHILE THE APPEALS FOR THE ASSESSMENT YEAR 2004 - 05 TO 2008 - 09 STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 8 .11. 2013. SD/ - SD/ - (D.T. GARASIA) (P.K. BANSAL ) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE : PANAJI / GOA DATED : 8 . 11. 2013 * SSL & A* 59 COPY TO : (1) APPELLANT (2) RESPONDENT (3) CIT CONCERNED (4) CIT(A) CONCERNED (5) D.R (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, PANAJI, GOA