The DCIT(A),SR-2, Ahmedabad V. Smt. Vidyaben H. Shah L/H of late Hemendra R Shah, Ahmedabad

ITA 205/AHD/1998

• Counselvise Citation: 20520514 RSA 1998
• Duration Of Justice: 14 year(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-02-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 09-02-2012
• Assessment Year: 1994-1995
• Appeal Filed On: 02-02-1998
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B K S PANDYA
• Keywords: Unexplained investment; Gift; Business income; Depreciation; Business expenditure; Income from undisclosed sources; Search and seizure
• Section: 80HHC; 132

Judgement Text

-1- IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'B' BEFORE SHRI D K TYAGI JUDICIAL MEMBER AND SHRI A L GEHLOT ACCOUNTANT MEMBER ITA NO.205/AHD/1998 WITH C O NO.247/AHD/1998 (ASSESSMENT YEAR:-1994-95) THE DEPUTY COMMISSIONER OF INCOME- TAX (ASSESSMENT) SPECIAL RANGE-2, AHMEDABAD V/S SMT. VIDYABEN H SHAH, L/H OF LATE SHRI HEMENDRA R SHAH, 8 TH FLOOR, CENTRE POINT, PANCHVATI, AHMEDABAD PAN/GIR NO. 31-000-PY-0118 [APPELLANT] [RESPONDENT] REVENUE BY :- SHRI B. K. S. PANDYA, CIT DR ASSESSEE BY:- SHRI S. N. SOPARKAR WITH MS. URVASHI SHODHN, ARS DATE OF HEARING:- 09-02-2012 DATE OF PRONOUNCEMENT:- 29-02-2012 O R D E R PER D K TYAGI (JM) :- THIS APPEAL FILED BY REVENUE AND CROSS OBJECTION FILED BY ASSESSEE ARE DIRECTED AGAINST AN ORDER DATED 24-11-1997 PASSED BY LEARNED COMMISSIONER OF INCOME -TAX (APPEALS)-IV, AHMEDABAD [HEREINAFTER REFERRED TO AS THE LEARNED CIT(A)] FOR ASSESSMENT YEAR 1994-95. THE GROUNDS R AISED BY THE REVENUE AND THE ASSESSEE ARE AS UNDER:- ITA NO.205/AHD/1998 [REVENUES APPEAL] :- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN 2 (I) DELETING THE ADDITION ON ACCOUNT OF UNACCOUNTED AMO UNT ADVANCED TO VARIOUS PERSONS AS UNDER:- (A) DELETING THE ADDITION OF RS.4,18,600/- IN THE CASE OF RAJA ANJAN. (B) REDUCING THE ADDITION FROM RS.1,89,000/- TO RS.89,0 00/- IN THE CASE OF SUREKHABEN. (C) CONFIRMING THE ADDITION OF RS.11,031/- OUT OF TOTAL ADDITION OF RS.1,07,531/- MADE IN THE CASE OF ASHITBHAI. (D) DELETING THE ADDITION OF RS.5,00,000/- IN THE CASE OF SHRI MANOJ GHIA. (II) REDUCING THE DISALLOWANCE OF UNACCOUNTED EXPENSES O F RS.4,83,500/- TO RS.1,20,500/- AND ALLOWING THE REL IEF OF RS.3,63,000/-. (III) DELETING THE ADDITION OF RS.4,29,453/- ON ACCOUNT O F EXCESS CONSUMPTION OF CHLORO SULPHORIC ACID. (IV) DIRECTING TO CONSIDER THE INCOME DISCLOSED U/S 134( 4) AS INCOME FROM BUSINESS OR PROFESSION INSTEAD OF INCOME FRO M OTHER SOURCES. (V) ALLOWING DEDUCTION U/S 80I ON INCOME DISCLOSED IN T HE STATEMENT U/S 132(4) OF RS.7,00,000/- STATED TO BE PURCHASE D ISCOUNT WHICH CANNOT BE TREATED AS INCOME ATTRIBUTABLE TO INDUSTR IAL UNDERTAKING. FURTHER, THE CIT(A) HAS ALSO ERRED IN DIRECTING TO ALLOW DEDUCTION U/S 80I ON SALES-TAX SET OFF RS.1,0 3,725/- AND KASAR OF RS.8828/- WHICH IS NOT IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. (VI) DIRECTING TO CONSIDER RS.27 LACS DISCLOSED IN PROFI T AND LOSS ACCOUNT IN DYES DIVISION AND INTERMEDIATE DIVISION TO BE ELIGIBLE FOR DEDUCTION U/S 80HHC OF THE ACT. C.O.NO.247/AHD/1998 BY ASSESSEE:- 1. IN LAW AND IN THE FACTS AS WELL AS THE CIRCUMST ANCES OF THE RESPONDENT'S CASE, THE LEARNED CIT(A) HAS GROSSLY E RRED IN UPHOLDING 3 THE FOLLOWING ADDITIONS/DISALLOWANCES WHILE DECIDIN G THE RESPONDENT'S APPEAL ON THE FOLLOWING GROUNDS RAISED BY THE RESPO NDENT: I) RS.68,000 ON ACCOUNT OF ALLEGED UNEXPLAINED INVE STMENT IN FURNITURE AND FIXTURES AT CENTRE POINT OFFICE. II) RS.89,000 ON ACCOUNT OF ALLEGED UNACCOUNTED MON EY ADVANCED TO SUREKHABEN OUT OF THE ADDITION OF RS.1,89,000 MA DE BY THE ASSESSING OFFICER. III) RS.11,031 ON ACCOUNT OF ALLEGED UNACCOUNTED MO NEY ADVANCED TO ASHITBHAI OUT OF THE ADDITION OF RS.1,07,531 MAD E BY THE ASSESSING OFFICER. IV) RS.1,20,500 ON ACCOUNT OF ALLEGED UNEXPLAINED E XPENSES OUT OF THE ADDITION OF RS.4,83,500 MADE BY THE ASSESSING O FFICER. V) RS.5,00,000 ON ACCOUNT OF EXPENSES ON PROFESSION AL FEES WITH A DIRECTION TO ALLOW PAYMENT OF SUCH PROFESSIONAL FEE S ON ACTUAL PAYMENT BASIS. VI) RS.2.71,766 ON ACCOUNT OF UNDERVALUATION OF CL OSING, STOCK OF WORK IN PROGRESS. VII) DISALLOWANCE OF RS.6843/- OUT OF CAR EXPENSES RS.6,944 OUT OF CAR DEPRECIATION AND RS.5,003 OUT OF TELEPHONE EXPE NSES ESTIMATED FOR PERSONAL USE. THIS HONOURABLE TRIBUNAL MAY, THEREFORE, BE PLEASED TO HOLD THAT THERE IS NO JUSTIFICATION IN UPHOLDING THE ADDITIONS/DISA LLOWANCES IN RESPECT OF THE AFORESAID ADDITIONS/DISALLOWANCES MADE BY TH E ASSESSING OFFICER AND DIRECT THE DELETIONS THEREOF. 2 IN LAW AND IN THE FACTS AS WELL AS THE CIRCUMSTAN CES OF THE RESPONDENT'S CASE, THE LEARNED CIT(A) HAS GROSSLY E RRED IN HOLDING THAT THE DEDUCTION U/S. 80-I OF THE INCOME-TAX ACT IS NOT ADMISSIBLE IN RESPECT OF INTEREST INCOME OF RS.30,453 AND THE DIS CLOSED INCOME OF RS.7,00,000 AGGREGATING TO RS.7,30,453 WHEN SUCH DE DUCTION U/S. 801 IS ADMISSIBLE ON THE AFORESAID INCOME. 4 THIS HONOURABLE TRIBUNAL MAY, THEREFORE, BE PLEASED TO HOLD THAT THE RESPONDENT IS ENTITLED TO DEDUCTION U/S. 801 OF THE INCOME-TAX ACT IN RESPECT OF INTEREST INCOME OF RS.30,453 AND DISCLOS ED INCOME OF RS.7,00,000 AGGREGATING TO RS.7,30,453 AND DIRECT T HE ASSESSING OFFICER ACCORDINGLY. 3. IN LAW AND IN THE FACTS AS WELL AS THE CIRCUMSTA NCES OF THE RESPONDENT'S CASE, THE LEARNED CIT(A) HAS GROSSLY E RRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER INCLUDING CENTR AL EXCISE DUTY OF RS.15,92,851, CENTRAL SALES-TAX OF RS.52,839 AND GU JARAT SALES-TAX OF RS.8,80,941 TOTALING UP TO RS.25,26,631 IN THE TOTA L TURNOVER OF THE RESPONDENT FOR THE PURPOSE OF COMPUTING DEDUCTION U /S. 80HHC OF THE INCOME-TAX ACT WHEN IT OUGHT TO HAVE BEEN EXCLU DED FROM SUCH TOTAL TURNOVER. THIS HONOURABLE TRIBUNAL MAY, THEREFORE, BE PLEASED TO HOLD THAT THERE IS NO JUSTIFICATION FOR INCLUDING THE AFORESAID AMO UNTS AGGREGATING TO RS.25,26,631 IN THE TOTAL TURNOVER OF THE RESPONDEN T FOR COMPUTING DEDUCTION U/S. 80HHC OF THE INCOME-TAX ACT AND DIRE CT THE ASSESSING OFFICER ACCORDINGLY. 4 IN LAW AND IN THE FACTS AS WELL AS THE CIRCUMSTAN CES OF THE RESPONDENT'S CASE, THE LEARNED CIT(A) HAS GROSSLY E RRED IN HOLDING THAT THE AMOUNT OF RS.20,74,897 RECOVERED FROM E.C. G.C. CANNOT BE CONSIDERED AS REALIZATION OF THE EXPORT TURNOVER FO R THE PURPOSE OF COMPUTING DEDUCTION U/S. 80HHC OF THE INCOME-TAX AC T WHEN IT OUGHT TO HAVE BEEN SO CONSIDERED. THIS HONOURABLE TRIBUNAL MAY, THEREFORE, BE PLEASED TO HOLD THAT THE AMOUNT OF RS.20,74,897 RECOVERED FROM E.C.G.C. IS T HE REALIZATION OF THE EXPORT TURNOVER AND SHOULD BE SO CONSIDERED FOR THE PURPOSE OF COMPUTING DEDUCTION U/S. 80HHC AND DIRECT THE ASSES SING OFFICER ACCORDINGLY. 5 IN LAW AND IN THE FACTS AS WELL AS THE CIRCUMSTAN CES OF THE RESPONDENT'S CASE, THE LEARNED CIT(A) HAS GROSSLY E RRED IN REJECTING THE CLAIM OF THE RESPONDENT THAT THE AMOUNT OF RS.2 ,33,764 BEING UNREALIZED SALE PROCEEDS AS ALLOWABLE DEDUCTION UND ER THE HEAD BAD DEBT WHEN HE OUGHT TO HAVE ALLOWED SUCH DEDUCTION. 5 THIS HONOURABLE TRIBUNAL MAY, THEREFORE, BE PLEASED TO HOLD THAT THE UNREALIZED SALE PROCEEDS OF RS.2,33,764 IS ALLOWABL E AS BAD DEBT AND DIRECT THE ASSESSING OFFICER ACCORDINGLY. 2 AT THE OUTSET, THE LEARNED COUNSEL OF THE ASSESSE E DID NOT PRESS GROUND NOS.1, 2, 4 AND 5 OF THE CROSS OBJECTI ON. THEREFORE, THE SAME ARE DISMISSED, AS NOT PRESSED. 3. AS REGARDS GROUND NO.1(I)(A) IN THE REVENUES AP PEAL, THE FACTS IN BRIEF ARE THAT SEARCH AND SEIZURE IN THE C ASE OF THE ASSESSEE WAS CONDUCTED ON 23-06-94 DURING THE COURS E OF WHICH, UNACCOUNTED CASH OF RS.36,40,000/- AND UNEXPLAINED JEWELLERY WORTH RS.1,65,350/- WERE SEIZED FROM THE RESIDENCE OF THE ASSESSEE. FURTHER, AS A RESULT OF STATEMENT U/S 132 (4) ON 23-06-94 AND 24-06-94, THE FOLLOWING DISCLOSURE WAS MADE BY THE ASSESSEE AS UNACCOUNTED INCOME OF THE GROUP, BASED ON THE ID ENTIFIED ASSETS / EXPENDITURES ACQUIRED THROUGH THIS UNACCOU NTED INCOME:- (1) UNACCOUNTED CASH SEIZED AS PER ANNEXURE C RS.36,40,000 (2) UNACCOUNTED INVESTMENT IN RS. 5,00,000 FURNITURE & FIXTURES AND VALUABLES AS PER ANNEXURE-V (3) UNACCOUNTED INVESTMENT IN LAND AT MOHAMMADPURA RS.25,00,000 (4) CASH ADVANCED TO VARIOUS PERSOS REFLECTED IN ANNEXURE A-1 WHICH ARE STILL OUTSTANDING RS.33,86,000 (5) INVESTMENT IN FURNITURE AND FIXTURES AT CENTRE POINT OFFICE OUTSIDE THE BOOKS OF A/CS RS. 5,00,000 6 (6) INVESTMENT IN LAND ADJACENT TO HOUSE AND IN CENTRE POINT COMPLEX, NOT REFLECTED IN BOOKS RS.10,50,000 (7) INVESTMENT IN RANCHEDA LAND (UNACCOUNTED PORTION) RS. 1,76,600 (8) MATHERAN & KULLY TRIPS UNDERTAKEN BY SELF & FAMILY MEMBERS RS. 1,00,000 (9) INVESTMENT IN GOLD ORNAMENTS AND SILVER (UNACCOUNTED PORTION) RS. 2,05,350 (10) OTHER MISCELLANEOUS EXPENSES AND INVESTMENT RS. 4,64,200 ----------------- RS.1,25,22,150/- 4 AS REGARDS THE AMOUNT OF RS.4,18,600/- ADVANCED T O RAJA RANJAN, THE AO STATED THAT IN THE STATEMENT U/S 132 (4) RECORDED DURING THE COURSE OF SEARCH PROCEEDINGS, THE ASSESS EE HAD MADE DISCLOSURE ON ACCOUNT OF UNACCOUNTED ADVANCE NOTED IN THE SEIZED DIARY, ANNEXURE-A-1 OF THE PANCHNAMA. HE STATED TH AT ON THE BASIS OF THE NOTINGS IN THE DIARY, TOTAL AMOUNT OF RS.33,86,000/- WAS DISCLOSED AS UNEXPLAINED AMOUNTS ADVANCED TO DI FFERENT PERSONS, WHICH WERE OUTSTANDING AT THE TIME OF SEAR CH. IN THE STATEMENT U/S 132(4), THIS AMOUNT WAS DISCLOSED FOR AY 1994-95. THE AO HAS STATED THAT THE SEIZED DIARY REFLECTED R ECEIPTS AND PAYMENTS ON PAGES 1 TO 8 AND LEDGER ACCOUNTS OF VAR IOUS PERSONS FROM PAGES 10 TO 21. THE AO NOTED THAT IN THE DISCL OSURE AN AMOUNT OF RS.10 LACS WAS DISCLOSED AS OUTSTANDING F ROM RAJA RANJAN. HOWEVER, IT HAS BEEN CLAIMED IN THE EXPLANA TION GIVEN BY THE ASSESSEE AT THE TIME OF SEARCH THAT OUT OF OUTS TANDING OF RS.10 7 LACS, A SUM OF RS.4.03 LACS HAS BEEN GIVEN TO THIS PERSON BY CHEQUE AND THIS FACT HAS BEEN RECORDED IN THE SEIZE D DIARY. THEREFORE, THIS AMOUNT OF RS.4.03 LACS WAS CONSIDER ED AS EXPLAINED AND THE BALANCE AMOUNT OF RS.5.97 LACS WA S DISCLOSED IN THE RETURN OF INCOME FILED FOR AY 1994-95. THE AO DID NOT ACCEPT THE EXPLANATION GIVEN BY THE ASSESSEE. HE ST ATED THAT ON PAGE 11 OF THE SEIZED DIARY, IT IS MENTIONED THAT R S.13.5 LACS WERE GIVEN TO RAJA RANJAN IN SEPTEMBER, 1993 AND RS .20 LACS WERE TO BE RECEIVED BACK FROM HIM. HE STATED THAT A S PER THE NOTINGS IN THE DIARY TOTAL AMOUNT OF RS.9,84,400/- WAS RECEIVED FROM HIM INCLUDING THE AMOUNT OF RS.4.03 LACS RECEI VED BY CHEQUE. HE, THEREFORE, WORKED OUT THE OUTSTANDING B ALANCE AT RS.20,00,000/- - RS.9,84,400/-, I.E. RS.10,15,600/ -. CONSIDERING THAT THE AMOUNT OF RS.5.97 LACS HAS BEEN DISCLOSED BY THE ASSESSEE IN THE RETURN OF INCOME FILED, HE ADDED TH E BALANCE AMOUNT OF RS.4,18,600/- (RS.10,15,600 MINUS RS.5.97 LACS). 5 ON APPEAL, THE LEARNED CIT(A) DELETED THE ADDITIO N WITH THE FOLLOWING OBSERVATIONS:- 4.3 I HAVE CONSIDERED THE FACTS OF THE CASE, DISC USSION MADE IN THE ASSESSMENT ORDER AND THE SUBMISSION MADE BY THE APP ELLANT. FROM THE NOTINGS GIVEN ON PAGE 11 OF THE SEIZED DIARY AND TH E SUBMISSION MADE BY THE APPELLANT, IT APPEARS THAT AN AMOUNT OF RS.1 3.5 LACS WAS GIVEN BY THE APPELLANT TO RAJA RANJAN IN SEPTEMBER, 1993 AND AN AMOUNT OF RS.20 LACS INCLUDING THE INTEREST WAS TO BE RECEIVE D IN MONTHLY INSTALMENTS OF RS.31,400/-. THE APPELLANT HAS ALSO SUBMITTED THAT THE AMOUNT OF RS.20 LACS WAS TO BE RECEIVED OVER A PERI OD OF ABOUT FIVE AND A HALF YEARS IN MONTHLY INSTALMENTS OF RS.31,40 0/-. IT HAS BEEN STATED THAT RAJA RANJAN FAILED TO MAKE PAYMENTS OF MONTHLY INSTALMENTS AS PER THE UNDERSTANDING AND THEREFORE, APPELLANT INSISTED FOR EARLY RETURN OF THE AMOUNT GIVEN. THE CONTENTIO N MADE BY THE APPELLANT APPEARS TO BE CORRECT, AS THERE ARE NO NO TINGS IN THE SEIZED 8 DIARY REGARDING THE RECEIPT OF MONTHLY INSTALMENTS OF RS.31,400/- FOR THE MONTHS OF OCTOBER, NOVEMBER AND DECEMBER, 1993. THE APPELLANT HAS STATED THAT OUT OF RS.13.5 LACS GIVEN TO RAJA R ANJAN, AMOUNT OF RS.3.5 LACS WAS GIVEN BY CHEQUE AND BALANCE AMOUNT OF RS.10 LACS WAS GIVEN IN CASH. AS AGAINST THE AMOUNT OF RS.3.5 LACS GIVEN BY CHEQUE, A SUM OF RS.4.03 LACS WAS RECEIVED BY CHEQU E ON 26-1-1994. IT APPEARS THAT THE AMOUNT OF RS.4.03 LACS RECEIVED BY CHEQUE INCLUDES THE INTEREST OF RS.53,000/- ON THE AMOUNT OF RS.3.5 LACS GIVEN BY CHEQUE. THE APPELLANT HAS SUBMITTED THAT AGAINST TH E AMOUNT OF RS.10 LACS GIVEN IN CASH TOTAL SUM OF RS.5,81,400/- WAS R ECEIVED DURING THE ACCOUNTING PERIOD UNDER CONSIDERATION IN THE MONTHS OF JANUARY AND FEBRUARY, 1994. THUS THE BALANCE AMOUNT OUTSTANDING WAS RS.10 LACS MINUS RS.5,81,400/- I.E. RS.4,18,600/-. THE APPELLA NT HAS STATED THAT AFTER INCLUDING THE INTEREST OF RS.1,78,400/- ON TH E AMOUNT OF RS.10 LACS GIVEN IN CASH, A SUM OF RS.5.97 LACS WAS OUTST ANDING AT THE END OF THE ACCOUNTING PERIOD AND THIS AMOUNT OF RS.5.97 LA CS HAS BEEN DISCLOSED IN THE RETURN OF INCOME FILED FOR THE AY 1994-95. THE EXPLANATION GIVEN BY THE APPELLANT FOR DISCLOSING A N AMOUNT OF RS.5.97 LACS IN THE RETURN OF INCOME FILED FOR THE AY 1994- 95, FOR THE AMOUNT RECEIVABLE FROM RAJA RANJAN, APPEARS TO BE REASONAB LE. THEREFORE, THE ADDITION OF RS.4,18,000/- MADE BY THE AO IS NOT JUS TIFIED AND THE SAME IS DELETED. 6 THE REVENUE IS NOW IN APPEAL BEFORE US. THE LEARN ED DR SUPPORTED THE ORDER OF THE AO. THE LEARNED COUNSEL OF THE ASSESSEE, ON THE OTHER HAND, REITERATED THE SUBMISS IONS MADE BEFORE THE FIRST APPELLATE AUTHORITY AND SUPPORTED THE ORDER OF THE LEARNED CIT(A). 7 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RE CORDS. WE FIND THAT THE ASSESSEE HAD ADVANCED A SUM OF RS.13. 5 LACS TO RAJA RANJAN, OUT OF WHICH RS.3.5 LACS WERE GIVEN BY CHEQ UE AND RS.10 LACS WERE GIVEN IN CASH. BUT AS PER THE UNDERSTANDI NG WITH RAJA RANJAN, HE WAS REQUIRED TO PAY TOTAL SUM OF RS.20 L ACS TO THE ASSESSEE OVER A PERIOD OF ABOUT FIVE AND A HALF YEA RS IN MONTHLY INSTALMENTS OF RS.31,400/-, AND RAJA RANJAN FAILED TO MAKE THE 9 PAYMENTS OF MONTHLY INSTALMENTS AS PER THE UNDERSTA NDING. THEREFORE, THE ASSESSEE INSISTED FOR EARLY RETURN O F THE AMOUNT GIVEN. THEREAFTER, RAJA RANJAN MADE THE PAYMENTS OF RS.5,50,000/- IN CASH ON 26-1-94, RS.4,03,000/- ON 26-1-94 BY CHEQUE AND RS.31,400/- ON 9-2-94 BY CASH. THUS, IN THE RETURN OF INCOME FILED FOR THE AY 1994-95, AGAINST THE AMOUNT ADVANCED TO RAJA RAJNAN, A SUM OF RS.5.97 LACS HAS BEEN DISCLOS ED. THUS, AGAINST THE AMOUNT OF RS.4,18,600/- OUTSTANDING AT THE END OF ACCOUNTING PERIOD AMOUNT OF RS.5.97 LACS HAS BEEN D ISCLOSED. THE DIFFERENCE BETWEEN THE AMOUNTS OF RS.5.97 LACS AND RS.4,18,600/- I.E. RS.1,78,400/- IS THE INTEREST ON THE AMOUNT OF RS.10 LACS ADVANCED IN CASH. THIS CONTENTION OF THE ASSESSEE WAS NOT CONTROVERTED BY HE REVENUE. WE ARE, THEREFORE, OF T HE VIEW THAT THE LEARNED CIT(A) HAS RIGHTLY DELETED THE ADDITION . WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT( A). THE SAME IS HEREBY UPHELD. GROUND NO.1(I)(A) RAISED BY THE REVE NUE IS DISMISSED. 8 AS REGARDS GROUND NO.1(I)(B) IN THE REVENUES APP EAL, THE FACTS OF THE CASE ARE THAT THE AO FOUND THAT IN THE ABOVE SEIZED DIARY ANNEXURE A-1, PAGE ACCOUNT OF SUREKHABEN IS G IVEN AS STATED IN THE STATEMENT U/S 132(4) OF THE ASSESSEE. HOWEVER, THIS PAGE SHOWED THAT OUTSTANDING AMOUNT IS RS.2.10 LACS AGAINST WHICH DECLARATION IS ONLY RS.21,000/- ON THIS PAGE. THE ASSESSEE WAS CONFRONTED WITH THE ABOVE VIDE SHOW CAUSE NOTIC E DATED 17- 3-97. THE ASSESSEE EXPLAINED THAT THIS AMOUNT OF RS .21,000/- ONLY AND IT WAS, AFTER VERIFICATION BY SEARCH PARTY THAT THIS FIGURE WAS TAKEN IN THE DISCLOSURE. THE AO MADE AN ADDITIO N OF 10 RS.1,80,000/- ON THE GROUND THAT THE ASSESSEE HAS D ISCLOSED THE AMOUNT OF RS.21,000/- ONLY FOR THE AMOUNT RECEIVABL E FROM SUREKHABEN, IN THE RETURN OF INCOME. 9 ON APPEAL, THE LEARNED CIT(A) CONFIRMED THE ADDIT ION OF RS.89,000/- AND ALLOWED RELIEF OF RS.1,00,000/- WIT H THE FOLLOWING OBSERVATIONS:- 5.1 I HAVE CONSIDERED THE FACTS OF THE CASE, DISCU SSION MADE IN THE ASSESSMENT ORDER AND THE SUBMISSIONS MADE BY THE AP PELLANT. FROM THE ENTRY MADE IN THE SEIZED DIARY AND THE DISCUSSION M ADE IN THE ASSESSMENT ORDER IT IS APPARENT THAT THE AMOUNT RE CEIVABLE FROM SUREKHABEH WAS RS.2.10,000/- AND NOT RS.21,000/-, A S STATED BY THE APPELLANT AND DISCLOSED IN THE RETURN OF INCOME FILED. HOWEVER, IT IS SEEN THAT AS PER NOTINGS ON PAGES 7 AND 8 OF THE SE IZED DIARY, THE APPELLANT RECEIVED AMOUNTS OF RS.30,000/- AND RS.70 ,000/- ON 24-3-94 AND 24-5-94 RESPECTIVELY, FROM HER. THE SUBMISSION MADE BY THE APPELLANT THAT THIS CASH OF RS.30,000/- + RS.70,000 /- I.E. RS.1,00,000/- WAS INCLUDED IN THE CASH OF RS.36.40 LACS FOUND AND SEIZED DURING THE COURSE OF THE SEARCH AND DISCLOSED IN THE RETURN OF INCOME FILED FOR THE AY 95-96, APPEARS TO BE REASONABLE AND THE SAME IS ACCEPTABLE. OUT OF THE BALANCE AMOUNT OF RS.2,10,000/- MINUS RS.1,00,0 00/- I.E. OF RS.1,10,000/-, A SUM OF RS.21,000/- HAS BEEN DISCLO SED BY THE APPELLANT IN THE RETURN OF INCOME FILED FOR THE AY 1994-95. THEREFORE, THE FURTHER ADDITION REQUIRED TO BE MADE FOR THE AM OUNT RECEIVABLE FROM SUREKHABEN COMES TO RS.1,10,000/- MINUS RS.21, 000/- I.E. RS.89,000/-. THUS, THE ADDITION OF RS.1,89,000/- MA DE BY THE AO IS CONFIRMED TO THE EXTENT OF RS.89,000/- AND RELIEF O F RS.1,00,000/- IS ALLOWED. 10 THE REVENUE IS NOW IN APPEAL BEFORE US. THE LEAR NED DR SUPPORTED THE ORDER OF THE AO. THE LEARNED COUNSEL OF THE ASSESSEE, ON THE OTHER HAND, REITERATED THE SUBMISS IONS MADE BEFORE THE FIRST APPELLATE AUTHORITY AND SUPPORTED THE ORDER OF THE LEARNED CIT(A). 11 11 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS. WE FIND THAT FROM THE ENTRY MADE IN THE SEIZED DIARY A ND THE DISCUSSION MADE IN THE ASSESSMENT ORDER IT IS APPAR ENT THAT THE AMOUNT RECEIVABLE FROM SUREKHABEH WAS RS.2.10,000/- AND NOT RS.21,000/-, AS STATED BY THE ASSESSEE AND DISCLOSE D IN THE RETURN OF INCOME FILED. THE LEARNED CIT(A) HAS NOTE D THAT HOWEVER, IT IS SEEN THAT AS PER NOTINGS ON PAGES 7 AND 8 OF THE SEIZED DIARY, THE ASSESSEE RECEIVED AMOUNTS OF RS.3 0,000/- AND RS.70,000/- ON 24-3-94 AND 24-5-94 RESPECTIVELY, FR OM HER. THE LEARNED CIT(A) HAS RIGHTLY HELD THAT THE CASH OF RS .30,000/- + RS.70,000/- I.E. RS.1,00,000/- WAS INCLUDED IN THE CASH OF RS.36.40 LACS FOUND AND SEIZED DURING THE COURSE OF THE SEARCH AND DISCLOSED IN THE RETURN OF INCOME FILED FOR THE AY 95-96. OUT OF THE BALANCE AMOUNT OF RS.2,10,000/- MINUS RS.1,0 0,000/- I.E. OF RS.1,10,000/-, A SUM OF RS.21,000/- HAS BEEN DIS CLOSED BY THE ASSESSEE IN THE RETURN OF INCOME FILED FOR THE AY 1 994-95. THEREFORE, THE LEARNED CIT(A) HAS RIGHTLY CONFIRMED THE ADDITION OF BALANCE AMOUNT OF RS.89,000/- AND THE ORDER PASS ED BY HIM IS HEREBY UPHELD. GROUND NO.1(I)(B) RAISED BY THE REVE NUE IS DISMISSED. 12 AS REGARDS GROUND NO.1(9)(C) IN THE REVENUES AP PEAL, THE FACTS OF THE CASE ARE THAT THE AO NOTED THAT THE AM OUNTS OF RS.5 LACS AND RS.10 LACS WERE ADVANCED BY THE ASSESSEE T O SHRI ASHITBHAI ON 7-9-93 AND 6-11-93 RESPECTIVELY. AGAIN ST THESE ADVANCES OF RS.15 LACS, THE ASSESSEE RECEIVED BACK TOTAL SUM OF RS.13,92,469/- FROM HIM BEFORE THE DATE OF SEARCH. THE AO ACCORDINGLY OBSERVED THAT AN AMOUNT OF RS.15,00,000 /- MINUS 12 RS.13,92,469/- I.E. OF RS.1,07,531/- WAS OUTSTANDIN G ON THE DATE OF SEARCH. AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE, THE AO MADE AN ADDITION OF RS.1,07,538/- FOR THE UNACCO UNTED MONEY ADVANCED TO SHRI ASHITBHAI. 13 ON APPEAL, THE LEARNED CIT(A) CONFIRMED THE ADDI TION OF RS.11,031/- OUT OF TOTAL ADDITION OF RS.1,07,538/- AND ALLOWED RELIEF OF RS.96,500/- WITH THE FOLLOWING OBSERVATIO NS:- 6.2 I HAVE CONSIDERED THE FACTS OF THE CASE, DISCU SSION MADE IN THE ASSESSMENT ORDER AND THE SUBMISSION MADE BY THE APP ELLANT. FROM THE ENTRY ON PAGE 3A OF THE SEIZED DIARY, IT IS SEEN TH AT MONTHLY INSTALMENT OF RS.96,500/- WAS PAID ON 7-9-1993 AGAINST THE AMO UNT OF RS.5,00,000/- OUTSTANDING ON THAT DATE. AS PER ENTR Y ON PAGE 4A OF THE SEIZED DIARY, IT IS SEEN THAT FURTHER LOAN OF RS.10 LACS WAS ADVANCED ON 10-11-1993. THUS, MONTHLY INSTALMENTS OF RS.68,000/ - EACH PAID IN MAY 93, JUNE 93 AND JULY 93, WERE NOT PAID AGAINST THE TOTAL LOAN OF RS.5,00,000/- + RS.10 LACS I.E. RS.15 LACS. THEREFO RE, THE APPELLANTS CONTENTION THAT 3 MONTHLY INSTALMENTS OF RS.68,000/ - EACH PAID IN MAY, JUNE AND JULY, 1993 WHICH HAVE NOT BEEN TAKEN INTO ACCOUNT BY THE AO SHOULD BE CONSIDERD AGAINST THE LOAN TOTALIN G TO RS.15,00,000/- IS NOT JUSTIFIED AND THE SAME IS REJECTED. HOWEVER, IT IS SEEN THAT THE INSTALMENT OF RS.96,560/- PAID IN NOVEMBER, 1993 AN D MENTIONED ON PAGE 4A OF THE SEIZED DIARY HAS NOT BEEN CONSIDERED BY THE AO AGAINST THE LOAN AMOUNT OF RS.15,00,000/-. IN THE ASSESSMEN T ORDER, THE AO HAS CONSIDERED THE TOTAL PAYMENTS RECEIVED FROM SHR I ASHITBHAI AGAINST THE LOAN PAYMENT OF RS.15,00,000/- AT RS.13 ,92,469/-. IF THIS AMOUNT OF RS.96,500/- PAID IN NOVEMBER, 1993, NOT T AKEN INTO CONSIDERATION BY THE AO IS TAKEN INTO ACCOUNT THEN THE TOTAL AMOUNT RECEIVED FROM SHRI ASHITBHAI COMES TO RS.13,92,469/ - + RS.96,500/- I.E. RS.14,88,969/-. THEREFORE, THE AMOUNT RECEIVAB LE FROM SHRI ASHITBHAI ON THE DATE OF SEARCH COMES TO RS.15,00,0 00/- MINUS RS.14,88,969/- I.E. RS.11,031/-, INSTEAD OF RS.1,07 ,531/- TAKEN BY THE AO. THUS, THE ADDITION OF RS.1,07,531/- MADE BY THE AO, FOR THE AMOUNT OUTSTANDING FROM SHRI ASHITBHAI ON THE DATE OF SEARCH IS CONFIRMED TO THE EXTENT OF RS.11,031/- AND THE BALA NCE ADDITION MADE IS DELETED. RELIEF ALLOWED COMES TO RS.1,07,531/- M INUS RS.11,031/- I.E. RS.96,500/-. 13 14 THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST T HE AFORESAID FINDINGS OF THE LEARNED CIT(A). THE LEARN ED DR SUPPORTED THE ORDER OF THE AO. THE LEARNED COUNSEL OF THE ASSESSEE, ON THE OTHER HAND, REITERATED THE SUBMISS IONS MADE BEFORE THE FIRST APPELLATE AUTHORITY AND SUPPORTED THE ORDER OF THE LEARNED CIT(A). 15 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS. WE FIND THAT BEFORE THE LEARNED CIT(A) THE ASSESSEE SU BMITTED THAT THE TOTAL AMOUNT OF RS.3,00,000/- RECEIVED FROM THE ASSESSEE FROM SHRI ASHITBHAI BEFORE THE DATE OF SEARCH, WAS NOT CONSIDERED BY THE AO. IF THIS AMOUNT OF RS.3,00,000/- IS TAKE INTO CONSIDERATION, THEN NO AMOUNT WAS RECEIVABLE FROM S HRI ASHITBHAI ON THE DATE OF SEARCH. WE FIND THAT THE L EARNED CIT(A) HAS RIGHTLY OBSERVED THAT IT IS SEEN THAT THE INSTA LMENT OF RS.96,560/- PAID IN NOVEMBER, 1993 AND MENTIONED ON PAGE 4A OF THE SEIZED DIARY HAS NOT BEEN CONSIDERED BY THE AO AGAINST THE LOAN AMOUNT OF RS.15,00,000/-. IN THE ASSESSMENT OR DER, THE AO HAS CONSIDERED THE TOTAL PAYMENTS RECEIVED FROM SHR I ASHITBHAI AGAINST THE LOAN PAYMENT OF RS.15,00,000/- AT RS.13 ,92,469/-. IF THIS AMOUNT OF RS.96,500/- PAID IN NOVEMBER, 1993, NOT TAKEN INTO CONSIDERATION BY THE AO IS TAKEN INTO ACCOUNT THEN THE TOTAL AMOUNT RECEIVED FROM SHRI ASHITBHAI COMES TO RS.13, 92,469/- + RS.96,500/- I.E. RS.14,88,969/-. THEREFORE, THE AMO UNT RECEIVABLE FROM SHRI ASHITBHAI ON THE DATE OF SEARCH COMES TO RS.15,00,000/- MINUS RS.14,88,969/- I.E. RS.11,031/ -, INSTEAD OF RS.1,07,531/- TAKEN BY THE AO. WE, THEREFORE, DO NO T FIND ANY 14 INFIRMITY IN THE ORDER OF THE LEARNED CIT(A). THE S AME IS HEREBY UPHELD. GROUND NO.1(I)(C) IS DISMISSED. 16 AS REGARDS GROUND NO.1(I)(D) IN THE REVENUES AP PEAL, THE FACTS OF THE CASE AS NOTED BY THE LEARNED CIT(A) AR E THAT THE AO FOUND THAT IN THE STATEMENT RECORDED U/S 132(4), TH E ASSESSEE HAD STATED THAT TOTAL AMOUNT GIVEN TO MANOJ GHIA, WAS R S.25 LACS, OUT OF WHICH RS.15 LACS WERE RECEIVED BACK AND RS.10 LA CS ARE OUTSTANDING. THIS AMOUNT OF RS.10 LACS WAS DISCLOSE D IN THE RETURN OF INCOME. HOWEVER, ACCORDING TO THE AO, ONL Y AN AMOUNT OF RS.10 LACS GIVEN EARLIER WAS SQUARED UP AND CANC ELLED ON PAGE 18 AND THE AMOUNT OF RS.5 LACS AND RS.10 LACS SHOWN ON OTHER PAGES WERE NOT SQUARED UP. THE AO ACCORDINGLY CONCL UDED THAT THE OUTSTANDING AMOUNT ON THE DATE OF SEARCH WAS RS .15 LACS AS AGAINST THE AMOUNT OF RS.10 LACS DISCLOSED BY THE A SSESSEE. HE, THEREFORE, MADE AN ADDITION OF RS.5,00,000/-. 17 ON APPEAL, THE LEARNED CIT(A) HAS DEALT WITH THE ISSUE AS UNDER:- 7.1 BEFORE THE UNDERSIGNED, THE COUNSEL FOR THE AP PELLANT SUBMITTED THAT THE APPELLANT HAD RIGHTLY DISCLOSED THE OUTSTA NDING AMOUNT ON THE DATE OF SEARCH OF RS.10 LACS, IN THE RETURN OF INCO ME FILED FOR THE AY 1994-95. THE PRESUMPTION OF THE AO THAT ONLY RS.10 LACS WERE RECEIVED BACK IS NOT THE BASIS. IT HAS BEEN SUBMITT ED THAT IN FACT, AGAINST THE AMOUNT OF RS.25 LACS GIVEN TO MANOJ GHI A, THE APPELLANT HAD RECEIVED BACK A SUM OF RS.20.87 LACS BEFORE THE DATE OF THE SEARCH. IN SUPPORT OF THE CONTENTION, THE APPELLANT FILED T HE FOLLOWING DETAILS:- SR. NO. MONTH OF PAYMENT PAGE NO. OF THE SEIZED DIARY AMOUNT PAID (IN RS.) AMOUNT RECEIVED BACK (IN RS.) 1 JULY,93 3 33,000/- - 2 JUNE,93 2 - 20,000 15 3 JULY,93 3 - 1,10,000 4 -DO- 3 - 20,000 5 SEPT. 93 4 - 20,000 6 NOV. 93 4A - 20,000 7 JANUARY,94 5 - 5,50,000 8 JANUARY,94 5 - 1,30,000 9 MARCH,94 6 - 20,000 10 APRIL,94 7 - 1,10,000 11 APRIL,94 7A - 3,00,000 12 MAY,94 7A - 3,00,000 13 MAY,94 7A - 3,50,000 14 MAY,94 7A - 1,50,000 15 MAY,94 8 - 20,000 TOTAL 33,000/- 21,20,000 THE COUNSEL FOR THE APPELLANT SUBMITTED THAT FROM THE DETAILS GIVEN ABOVE IT MAY BE SEEN THAT AS AGAINST THE AMOUNT OF RS.25 LACS GIVEN TO MANOJ GHIA, THE APPELLANT RECEIVED BACK NET AMOUNT OF RS.21,20,000/- MINUS RS.33,000/- I.E. RS.20,87,000/- BEFORE THE DA TE OF SEARCH. THUS, THE BALANCE AMOUNT OUTSTANDING ON THE DATE OF SEARC H WAS RS.25,00,000/- MINUS RS.20,87,000/- I.E. RS.4,13,00 0/-. IT HAS BEEN SUBMITTED THAT AS AGAINST THE AMOUNT OUTSTANDING ON THE DATE OF SEARCH OF RS.4,13,000/- THE APPELLANT HAD DISCLOSED THE AM OUNT OF RS.10 LACS IN THE RETURN OF INCOME FILED FOR THE AY 1994-95 AN D THEREFORE, FURTHER ADDITION OF RS.5,00,000/- MADE BY THE AO IS NOT JUS TIFIED AND MAY KINDLY BE DELETED. 7.2 I HAVE CONSIDERED THE FACTS OF THE CASE, SUBMI SSION MADE BY THE APPELLANT AND THE ENTRIES MADE IN THE SEIZED DIARY. FROM THE ENTRIES MADE IN THE SEIZED DIARY AS GIVEN ABOVE, IT IS APPA RENT THAT AS AGAINST THE AMOUNT OF RS.25 LACS GIVEN BY THE APPELLANT TO MANOJ GHIA THE APPELLANT RECEIVED BACK A TOTAL SUM OF RS.20.87 LAC S BEFORE THE DATE OF THE SEARCH. THUS, THE BALANCE AMOUNT OUTSTANDING ON THE DATE OF THE SEARCH WAS RS.4,13,000/- ONLY, AGAINST WHICH THE AP PELLANT HAD ALREADY DISCLOSED A SUM OF RS.10,00,000/- IN THE RETURN OF INCOME FILED FOR THE AY 1994-95. IN VIEW OF THE SPECIFIC ENTRIES IN THE SEIZED DIARY THERE IS NO BASIS FOR THE AOS OBSERVATION THAT ONLY RS.10 L ACS WERE RECEIVED BACK FROM MANOJ GHIA. FROM THE DETAILS OF ENTRIES I N THE SEIZED DIARY GIVEN ABOVE, IT APPEARS THAT THE AO HAS CONSIDERED THE PAYMENTS RECEIVED UPTO MARCH, 1994 ONLY AND ENTRIES MENTIONE D AT SR. NO.10 TO 15 ABOVE IN THE SEIZED DIARY REGARDING PAYMENTS REC EIVED IN THE MONTH 16 OF APRIL AND MAY, 1994 HAVE NOT BEEN TAKEN INTO ACC OUNT BY HIM. CONSIDERING THE NATURE OF THE NOTINGS IN THE DIARY AND THE FACTS THAT DISCLOSURES HAVE BEEN MADE REGARDING THE RECEIVABLE S / ASSETS / INVESTMENTS AS ON THE DATE OF THE SEARCH AND SEPARA TE DISCLOSURE OF RS.36.40 LACS HAS BEEN MADE FOR THE AY 1995-96 REGA RDING THE CASH FOUND AT THE TIME OF THE SEARCH, THE AO WAS NOT JUS TIFIED IN TAKING THE OUTSTANDING AMOUNT FROM MANOJ GHIA AT RS.15,00,000/ -. THE ADDITION OF RS.5,00,000/- MADE BY THE AO IS THEREFORE, DELET ED. 18 THE REVENUE IS IN APPEAL AGAINST THE AFORESAID F INDING OF THE LEARNED CIT(A). THE LEARNED DR SUPPORTED THE OR DER OF THE AO. THE LEARNED COUNSEL OF THE ASSESSEE, ON THE OTH ER HAND, REITERATED THE SUBMISSIONS MADE BEFORE THE LEARNED CIT(A). 19 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS. WE AGREE WITH THE VIEW OF THE LEARNED CIT(A) THAT IN V IEW OF THE SPECIFIC ENTRIES IN THE SEIZED DIARY THERE IS NO BA SIS FOR THE AOS OBSERVATION THAT ONLY RS.10 LACS WERE RECEIVED BACK FROM MANOJ GHIA. FROM THE DETAILS OF ENTRIES IN THE SEIZED DIA RY GIVEN ABOVE, IT APPEARS THAT THE AO HAS CONSIDERED THE PAYMENTS RECEIVED UPTO MARCH, 1994 ONLY AND ENTRIES MENTIONED AT SR. NO.10 TO 15 ABOVE IN THE SEIZED DIARY REGARDING PAYMENTS RECEIVED IN THE MONTH OF APRIL AND MAY, 1994 HAVE NOT BEEN TAKEN INTO ACCOUN T BY HIM. THE LEARNED CIT(A) HAS ALSO OBSERVED THAT ONSIDERIN G THE NATURE OF THE NOTINGS IN THE DIARY AND THE FACTS THAT DISC LOSURES HAVE BEEN MADE REGARDING THE RECEIVABLES / ASSETS / INVE STMENTS AS ON THE DATE OF THE SEARCH AND SEPARATE DISCLOSURE OF R S.36.40 LACS HAS BEEN MADE FOR THE AY 1995-96 REGARDING THE CASH FOUND AT THE TIME OF THE SEARCH, THE AO WAS NOT JUSTIFIED IN TAKING THE OUTSTANDING AMOUNT FROM MANOJ GHIA AT RS.15,00,000/ -. WE ARE, THEREFORE, NOT INCLINED TO INTERFERE WITH THE ORDER OF THE LEARNED 17 CIT(A). THE SAME IS HEREBY UPHELD. GROUND NO.1(I)(D ) IS DISMISSED. 20 GROUND NO.1(II) IN THE REVENUES APPEAL RELATES TO ALLOWANCE OF RELIEF OF RS.3,63,000/- OUT OF TOTAL R S.4,83,500/-. THE FACTS OF THE CASE AS NOTED BY THE LEARNED CIT(A ) ARE THAT THE AO STATED THAT THE ASSESSEE HAS MADE DISCLOSURE OF INCOME OF RS.1.35 LACS REGARDING THE EXPENDITURE INCURRED ON MATHERAN AND KULLU TRIP AND HOUSEHOLD EXPENSES. HE STATED THAT I N THE STATEMENT RECORDED U/S 132(4), THE ASSESSEE MADE A DISCLOSURE OF RS.4,64,200/- FOR OTHER MISC. EXPENSES AND INVESTM ENT. BEFORE THE AO, THE ASSESSEE SUBMITTED THAT THIS AMOUNT OF RS.4,64,200/- WAS ONLY A BALANCING FIGURE OF TOTAL DISCLOSURE OF RS.1,25,00,000/-. THE AO REJECTED THE SUBMISSION MA DE BY THE ASSESSEE ON THE GROUND THAT THIS AMOUNT OF RS.4,64, 200/- WAS DISCLOSED IN THE STATEMENT U/S 132(4) AND IT WAS NO T THE BALANCING FIGURE, AS THE TOTAL DISCLOSURE AS PER STATEMENT U/ S 132(4) WAS NOT OF A ROUNDED FIGURE BUT IT WAS RS.1,25,22,150/-. IN THE ANNEXURE A TO THE ASSESSMENT ORDER, THE AO HAS LISTED THE EX PENSES TOTALING TO RS.6,18,500/- ON THE BASIS OF ENTRIES I N THE SEIZED DIARY. AFTER CONSIDERING THE AMOUNT OF RS.1.35 LACS DISCLOSED FOR THE YEAR UNDER APPEAL, THE AO MADE AN ADDITION OF R S.6,18,500/- MINUS RS.1,35,000/- I.E. RS.4,83,500/-. 21 ON APPEAL BEFORE THE LEARNED CIT(A), THE ASSESSE E SUBMITTED AS UNDER:- 8.1 BEFORE THE UNDERSIGNED, THE COUNSEL FOR THE AP PELLANT SUBMITTED THAT THE DISCLOSURE AS RECORDED IN THE STATEMENT U/ S 132(4) WAS AT THE ROUNDED FIGURE OF RS.1.25 CRORE AND AT THE TIME OF CONCLUSION OF THE SEARCH, THE FIGURE WAS REVISED, AS ONE ITEM OF ORNA MENTS WAS TREATED AS 18 UNEXPLAINED, BY THE SEARCH PARTY. IT HAS BEEN SUBMI TTED THAT THE DISCLOSURE MADE IN THE RETURN OF INCOMES ON ACCOUNT OF EXPENDITURE INCURRED WAS ADEQUATE TO COVER THE ROUGH NOTINGS AN D JOTTINGS IN THE SEIZED DIARY. THE APPELLANT POINTED OUT THAT MOST OF THE ITEMS OF EXPENDITURE MENTIONED BY THE ASSESSING OFFICER IN ANUEXURE-A TO THE ASSESSMENT ORDER ARE BUSINESS EXPENSES SUCH AS TOUR EXPENSES, GIFTS MADE DURING THE TOURS FOR THE BUSINESS PURPOSE, F ACTORY EXPENSES, CAR EXPENSES GIFTS MADE AND EXPENSES INCURRED ON TH E OCCASION OF DIWALI, FOR THE BUSINESS PURPOSE ETC. THEREFORE, E VEN IF IT IS PRESUMED THAT SUCH ITEMS OF EXPENSES ARE UNEXPLAINED EXPENDI TURE THE SAME ARE BUSINESS EXPENSES AND; HENCE, DEDUCTIBLE OUT OF INC OME. IN SUPPORT OF THE CONTENTION MADE, THE APPELLANT RAILED UPON T HE DECISIONS OF THE LEARNED 1TAT, AHMEDABAD BENCH, REPORTED IN 19 ITD 3 06, ITAT, MADRAS BENCH, REPORTED IN 35 TTJ 417 AND OF ITAT, BANGALORE REPORTED IN 50 TTJ 117. THE COUNSEL FOR THE APPEL LANT FILED BIFURCATION OF THE EXPENSES ACCORDING TO WHICH O UT OF TOTAL EXPENSES OF RS.6,18,500/- CONSIDERED BY THE AO, EXP ENSES TO THE EXTENT OF RS.2,64,600/- DIRECTLY PERTAIN TO THE BUSINESS AND ARE ALLOWABLE AS BUSINESS EXPENSES. THE EXPENSES TO THE EXTENT OF RS.1,98,900/- ARE ON ACCOUNT OF PERSONAL EXPENSES. IT HAS BEEN SUBMITTED THAT AGAINST THE PERSONAL EXPENSES OF RS. 1,98,900/-, THE TOTAL DISCLOSURE MADE FOR THE AYS 1994-95 AND 1995-96 IS RS.1,35,000/- + RS.74,000/- I.E. RS.2,09,000/-. REGARDING THE BALAN CE AMOUNTS OF RS.1,05,000/- AND RS.50,000/- SHOWN AS AZ ON THE PA YMENT SIDE OF THE SEIZED DIARY, THE APPELLANT SUBMITTED THAT AZ MEANS ANUBHAI ZAVERI AND THE AMOUNTS OF RS.1,05,000/- AND RS.50,000/- WE RE GIVEN TO HIM AS ADVANCES FOR THE PURCHASE OF GOLD ORNAMENTS FOR THE FAMILY MEMBERS. HOWEVER, WHEN THE ACTUAL PURCHASES HAD BEE N TAKEN PLACE, THE ASSESSEE MADE PAYMENT OF RS.1,80,815/- BY CHEQU E AND THE ADVANCE PAYMENT OF RS.1,05,000/- + RS.50,000/- I.E. RS.1,55,000/- WAS RETURNED BACK. IT HAS BEEN SUBMITTED THAT THIS FACT IS EVIDENT FROM THE FOLLOWING JOTTINGS MADE IN THE SEIZED DIARY REG ARDING THE TRANSACTIONS WITH ANUBHAI ZAVERI:- MONTH OF TRANSACTION PAGE NUMBER OF THE SEIZED DIARY DEBIT (IN RS.) CREDIT (IN RS.) JUNE, 1993 2 1,05,000 -- JULY, 1993 3 50,000 -- AUGUST, 1993 3A -- 1,80,865 19 IT HAS BEEN SUBMITTED THAT SINCE THE AMOUNT OF RS. 1,80,865/- HAS BEEN PAID BY CHEQUE AND IS DULY REFLECTED IN THE ACCOUNT S, NO ADDITION IS REQUIRED TO BE MADE REGARDING THE ADVANCE PAYMENTS OF RS.1,05,000/- AND RS.50,000/- MADE TO SHRI ANUBHAI ZAVERI, TOWARD S THE PURCHASE OF GOLD ORNAMENTS. THE COUNSEL FOR THE APPELLANT SUBMI TTED THAT IN VIEW OF THESE FACTS, THE ADDITION OF RS.4,83,000/- MADE BY THE AO IS NOT JUSTIFIED AND MAY KINDLY BE DELETED. 22 AFTER CONSIDERING THE AFORESAID SUBMISSIONS MADE BY THE ASSESSEE, THE LEARNED CIT(A) HAS HELD AS UNDER:- 8.2 I HAVE CONSIDERED THE FACTS OF THE CASE, DISC USSION MADE IN THE ASSESSMENT ORDER AND SUBMISSION MADE BY THE APPELLA NT. IN VIEW OF THE BIFURCATION OF THE EXPENSES SUBMITTED BY THE APPELL ANT, THE UNEXPLAINED EXPENSES OF RS.6,18,500/- MENTIONED IN ANNEXURE A TO THE ASSESSMENT ORDER ARE CLASSIFIED AS UNDER:- (I) EXPENSES CONSIDERED AS BUSINESS RS.2,64,600/ - EXPENSES BY THE APPELLANT (II) PERSONAL EXPENSES OF THE APPELLANT RS.1,98, 900/- (III) ADVANCE PAID TO ANUBHAI ZAVERI RS.1,55,000 /- FOR PURCHASE OF GOLD ORNAMENTS ---------------- TOTAL RS.6,18,500/- HOWEVER, FROM THE DETAILS OF EXPENSES TOTALING TO RS.2,64,600/- IT IS SEEN THAT EXPENSES TOTALING TO RS.57,500/- INCLUDED IN IT ARE EXPENSES OF INADMISSIBLE NATURE AND THE BALANCE EXPENSES OF RS.2,64,500/- MINUS RS.57,500/- I.E. RS.2,07,100/- WERE INCURRED FOR THE PURPOSES OF THE BUSINESS AND THEREFORE, ARE ALLOWABLE AS BUSINE SS EXPENSES. IN VIEW OF THE DECISIONS OF THE LEARNED ITAT AHMEDABAD BENC H IN THE CASE REPORTED AT 19 ITD 306 AND OF OTHER TRIBUNALS REFER RED TO BY THE APPELLANT, A DEDUCTION OF RS.2,07,100/- IS TO BE AL LOWED AGAINST THE ADDITION OF RS.2,64,600/- MADE FOR UNEXPLAINED EXPE NDITURE. 8.3 AGAINST THE PERSONAL EXPENSES OF THE APPELLANT AMOUNTING TO RS.1,98,900/- DEBITED IN THE SEIZED DIARY, FOR THE ACCOUNTING PERIOD UNDER CONSIDERATION, A DISCLOSURE OF RS.1,35,000/- HAS BEEN MADE IN 20 THE RETURN OF INCOME FILED FOR THE AY 1994-95. THER EFORE, ADDITION TO BE MADE FOR PERSONAL EXPENSES MET OUT OF THE UNDISC LOSED INCOME COMES TO RS.1,98,000/- MINUS RS.1,35,000/- I.E. RS. 63,000/-. CONSIDERING THE SUBMISSION MADE BY THE APPELLANT AN D THE NOTINGS MADE IN THE SEIZED DIARY REGARDING THE TRANSACTIONS WITH ANUBHAI ZAVERI, AS MENTIONED ABOVE, NO ADDITION IS REQUIRED TO BE MADE REGARDING THE ADVANCES OF RS.1,05,000/- + RS.50,000 /- I.E. RS.1,55,000/- PAID TO ANUBHAI ZAVERI, AS THE ACTUAL PURCHASE PRICE OF RS.1,80,865/- HAS BEEN PAID BY CHEQUE AND IS DULY R EFLECTED IN THE ACCOUNTS. THUS, THE ADDITION OF RS.4,83,500/- MADE BY THE AO IS CONFIRMED TO THE EXTENT OF RS.63,000/- + RS.57,500/ - I.E. RS.1,20,500/- AND THE BALANCE ADDITION OF RS.4,83,500/- MINUS RS. 1,20,500/- I.E. OF RS.3,63,000/- IS DELETED. 23 THE REVENUE IS IN APPEAL AGAINST THE AFORESAID F INDING OF THE LEARNED CIT(A). THE LEARNED DR SUPPORTED THE OR DER OF THE AO. THE LEARNED COUNSEL OF THE ASSESSEE, ON THE OTH ER HAND, REITERATED THE SUBMISSIONS MADE BEFORE THE LEARNED CIT(A). 24 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS. WE FIND THAT THE LEARNED CIT(A) HAS FOLLOWED THE DECIS IONS OF THE ITAT AHMEDABAD BENCHES AND OTHER BENCHES OF THE TRI BUNAL WHILE DELETING THE ADDITION OF RS.3,63,000/-. WE AR E, THEREFORE, NOT INCLINED TO INTERFERE WITH THE ORDER OF THE LEA RNED CIT(A) IN THIS REGARD. THE SAME IS HEREBY UPHELD. GROUND NO.1 (II) RAISED BY THE REVENUE IS DISMISSED. 25 AS REGARDS GROUND NO.1(III) IN THE REVENUES APP EAL RELATES TO DELETION OF THE ADDITION OF RS.4,29,453/- ON ACC OUNT OF EXCESS CONSUMPTION OF CHLORO SULPHORIC ACID. THE FACTS OF THE CASE ARE THAT THE AO STATED THAT AS PER THE STATEMENT OF THE EMPLOYEES OF THE ASSESSEE, SHRI GHANSHYAM MEHTA AND SHRI J V CHO KSHI RECORDED AT THE TIME OF SEARCH, THE AVERAGE CONSUMP TION OF 21 CHLORO SULPHORIC ACID PER BATCH SHOULD BE 2700 KGS. , WHEREAS IN THE RECORD FOUND DURING THE COURSE OF SEARCH, IT RA NGED BETWEEN 3000 KGS. TO 3700 KGS. PER BATCH. DURING THE COURS E OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS CONFRONTED WITH THE ABOVE MENTIONED CONTENTS OF THE STATEMENTS. IN REP LY, THE ASSESSEE SUBMITTED THAT IF THE GOODS ARE OF INFERIO R QUALITY, THEN THE CONSUMPTION IS LIKELY TO BE MORE TO THAT EXTENT . THE AO STATED THAT THE ASSESSEE HAS SHOWN TOTAL CONSUMPTIO N OF 6,44,180 KGS. FOR 213 BATCHES AND THE AVERAGE CONSUMPTION CO MES TO 3024 KG. PER BATCH. THE AO AFTER TAKING INTO ACCOUNT TH E NORMAL VARIATION WORKED OUT THE EXCESS CONSUMPTION SHOWN B Y THE ASSESSEE AT 47,717 KGS., AND VALUING THE SAME AT TH E AVERAGE PURCHASE PRICE OF RS.9/- PER KG., WORKED OUT VALUE OF EXCESS CONSUMPTION OF CHLORO SULPHORIC ACID CLAIMED BY THE ASSESSEE AT RS.4,29,453/- AND DISALLOWED THE SAME. 26 ON APPEAL, THE LEARNED CIT(A) DELETED THE ADDITI ON IN THE FOLLOWING MANNER:- 10.3 I HAVE CONSIDERED THE FACTS OF THE CASE, DI SCUSSION MADE IN THE ASSESSMENT ORDER AND THE SUBMISSION MADE BY THE APPELLANT. IT IS SEEN THAT THE AVERAGE CONSUMPTION OF CHLORO SULPHOR IC ACID PER BATCH SHOWN BY THE APPELLANT IS 3024 KGS. PER BATCH. AS P ER THE STATEMENT OF SHRI GHANSHYAM MEHTA, AN EMPLOYEE OF THE APPELLANT COMPANY, RECORDED DURING THE COURSE OF SEARCH, THE AVERAGE C ONSUMPTION OF CHLORO SULPHORIC ACID PER BATCH SHOULD BE ABOUT 270 0 KGS. THE APPELLANT IN HIS STATEMENT RECORDED DURING THE COUR SE OF SEARCH HAS STATED THE AVERAGE CONSUMPTION OF CHLORO SULPHORIC ACID PER BATCH MAY BE BETWEEN 2700 KGS. TO 3000 KGS. OF THE REGULA R DENSITY. HE HAS ALSO STATED THAT IF THE ACID IS OF INFERIOR QUALITY THAN THE CONSUMPTION IS LIKELY TO BE MORE TO THAT EXTENT. SHRI GHANSHAM MEHTA, IN HIS AFFIDAVIT DATED 14-7-94 FILED BEFORE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAS STATED THAT HIS STATEMEN T WAS RECORDED BY THE OFFICER-IN-CHARGE OF THE SEARCH PARTY AT 2 IN T HE NIGHT, AFTER HE 22 RETURNED FROM BARODA AT ABOUT 10-30 P.M. AND HE WAS MENTALLY AND PHYSICALLY EXHAUSTED AT THAT TIME. HE ALSO STATED T HAT FACTS STATED BY HIM HAVE ALSO NOT BEEN CORRECTLY RECORDED. HE HAS A LSO STATED THAT THE ACID ALSO EVAPORATES WITH THE PASSAGE OF TIME AND I TS DENSITY ALSO REDUCES. AFTER THE FILING OF AFFIDAVIT FROM GHANSHA M MEHTA, THE STATEMENT OF SHRI GHANSHAM MEHTA HAVE NOT BEEN RECO RDED BY THE AO. CONSIDERING THE SUBMISSION MADE BY THE ASSESSEE, TH E AO ADOPTED THE AVERAGE CONSUMPTION OF CHLORO SULPHORIC ACID PER BA TCH AT 2800 KGS. AS AGAINST OF 3024 KGS. SHOWN BY THE ASSESSEE. CONS IDERING THE VARIOUS FACTS ON RECORD, THE AVERAGE CONSUMPTION OF CHLORO SULPHORIC ACID PER BATCH SHOWN AT 3024 KGS., APPEARS TO BE EXCESSI VE. HOWEVER, TAKING INTO CONSIDERATION THE VARIATION IN QUALITY AND DENSITY OF THE CHLORO SULPHORIC ACID USED BY THE APPELLANT AND THE EVAPORATION OF ACID WITH THE PASSAGE OF TIME, THE REASONABLE CONSU MPTION OF C.S. ACID MAY BE ABOUT 3000 KGS. PER BATCH. HOWEVER, TAK ING INTO ACCOUNT THE ALTERNATIVE PLEA MADE BY THE APPELLANT IN PARA 10.2 ABOVE AND THE FACT THAT THE DISCLOSURE HAS BEEN MADE ON THE BASIS OF ASSETS AS ON THE DATE OF SEARCH WHICH INCLUDED CASH OF RS.36.40 LACS , EVEN IF THERE WERE ANY SALES OF CHLORO SULPHORIC ACID RELATING TO THE ALLEGED EXCESS CONSUMPTION, CLAIMED BY THE APPELLANT, THE SALE PRO CEED WOULD HAVE BEEN INCLUDED IN THE CASH / ASSETS FOUND AT THE TIM E OF THE SEARCH AND DECLARED BY THE APPELLANT IN THE RETURNS OF INCOME FILED, FOR THE AYS 1994-95 TO 1995-96. THEREFORE, NO SEPARATE ADDITION IS REQUIRED TO BE MADE FOR THE EXCESS CONSUMPTION OF CHLORO SULPHORIC ACID. THUS, THE ADDITION OF RS.4,29,453/- MADE BY THE AO IS NOT JUS TIFIED AND THE SAME IS DELETED. 27 THE REVENUE IS IN APPEAL BEFORE US. THE LEARNED DR SUPPORTED THE ORDER OF THE AO WHEREAS THE LEARNED C OUNSEL OF THE ASSESSEE SUPPORTED THE ORDER OF THE LEARNED CIT(A). 28 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS AND FIND AGREE WITH THE CONTENTION OF THE ASSESSEE THAT THE DISCLOSURE HAS BEEN MADE ON THE BASIS OF THE ASSETS AS ON THE DATE OF SEARCH, WHICH INCLUDED CASH OF RS.36.40 LACS. THEREFORE, EV EN IF IT IS PRESUMED THAT THERE WAS ANY SALE OF THE ALLEGED EXC ESS CONSUMPTION, THE SAID WAS REFLECTED IN THE CASH / A SSETS FOUND AT 23 THE TIME OF SEARCH AND DECLARED BY THE ASSESSEE. TH EREFORE, THERE IS NO QUESTION OF MAKING ANY SEPARATE ADDITION IN T HIS REGARD. WE, THEREFORE, DO NOT FEEL TO INTERFERE WITH THE OR DER OF THE LEARNED CIT(A). THE SAME IS HEREBY UPHELD. THIS GRO UND RAISED BY THE REVENUE IS DISMISSED. 29 GROUND NO.1(I)(IV) IN THE REVENUES APPEAL IS RE GARDING AOS FINDING THAT THE INCOME DISCLOSED BY THE ASSES SEE IN THE STATEMENT U/S 132(4) WAS NOT AN INCOME FROM BUSINE SS OR PROFESSION AND THE SAME IS TO BE TREATED AS INCOM E FROM OTHER SOURCES. THE AO HAS STATED THAT THE ASSESSEE HAS MADE GROSS DISCLOSURE OF RS.70 LCS IN THE RETURN OF INCOME AND AFTER CLAIMING DEDUCTION FOR EXPENSES OF RS.5,00,000/-, NET DISCLO SURE OF RS.65 LACS HAS BEEN SHOWN AS UNDER:- (I) INCOME CREDITED IN P&L ACCOUNT OF THE DYES DIVISION RS.20,00,000 (II) INCOME CREDITED IN P&L ACCOUNT OF THE INTERMEDIATE DIVISION RS. 7,00,000 (III) INCOME FROM OTHER SOURCES SEPARATELY SHOWN IN THE RETURN OF INCOME GROSS INCOME RS.43,00,000 LESS: EXPENSES RS. 5,00,000 ---------------- NET INCOME -- -- RS.38,00,000 ----------------- TOTAL RS.65,00,000 24 BEFORE THE AO, THE ASSESSEE SUBMITTED THAT THE AMOU NTS OF RS.20 LACS AND RS.7 LACS CREDITED IN THE P&L ACCOUNT OF T HE DYES DIVISION AND INTERMEDIATE DIVISION RESPECTIVELY WER E ON ACCOUNT OF DISCOUNT ALLOWED AGAINST THE PURCHASES MADE BY T HE ASSESSEE. THE AO HAS STATED THAT THE ASSESSEE HAS NOT PROVIDE D THE LIST OF SUPPLIERS OF RAW MATERIALS FROM WHOM THE PURCHASE D ISCOUNT WAS RECEIVED. HE, THEREFORE, TREATED THESE AMOUNTS AS INCOME FROM OTHER SOURCES AND NOT INCOME FROM BUSINESS. 30 ON APPEAL, THE LEARNED CIT(A) DIRECTED THE AO TO CONSIDER THE INCOMES OF RS.20 LACS AND RS.7 LACS AS ASSESSEE S INCOME UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION , ON THE GROUND THAT THESE AMOUNTS OF RS.20 LACS AND RS.7 LA CS ARE ON ACCOUNT OF PURCHASE DISCOUNT AND THUS THESE AMOUNTS ARE PART OF THE BUSINESS INCOME OF THE TWO DIVISIONS. 31 BEFORE US, THE LEARNED DR SUPPORTED THE ORDER OF THE AO. THE LEARNED COUNSEL OF THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LEARNED CIT(A). 32 HAVING HEARD BOTH THE PARTIES AND PERUSING THE R ECORDS, WE FIND THAT FINDING OF THE LEARNED CIT(A) THAT THESE AMOUNTS OF RS.20 LACS AND RS.7 LACS WERE ON ACCOUNT OF PURCHAS E DISCOUNT WAS NOT DISPUTED BY THE REVENUE AND, THEREFORE, THE LEARNED CIT(A) HAS RIGHTLY HELD THAT THESE AMOUNTS WERE BUS INESS INCOME OF THE ASSESSEES TWO DIVISIONS. WE, THEREFORE, DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT(A). THE S AME IS HEREBY UPHELD. GROUND NO.1(I)(IV) IS DISMISSED. 25 33 GROUND NO.1(I)(V) RELATES TO DEDUCTION U/S 80I O N INCOME DISCLOSED IN THE STATEMENT U/S 132(4) OF RS.7,00,00 0/- STATED TO BE PURCHASE DISCOUNT. THE AO OBSERVED THAT THE WORK ERS EMPLOYED BY THE CONTRACTORS WERE NOT PERMANENT WORK ERS OF THE ASSESSEE AND WERE EMPLOYEES ON PART TIME BASIS, THE REFORE, THERE IS NO EMPLOYER AND EMPLOYEE RELATIONSHIP BETWEEN TH E ASSESSEES CONCERN AND THESE WORKERS. HE, THEREFORE, DISALLOWE D DEDUCTION U/S 80I CLAIMED BY THE ASSESSEE. THE AO ALSO STATED THAT IN CASE DEDUCTION U/S 80I IS HELD TO BE ALLOWABLE IN APPEAL , THE FOLLOWING INCOMES OF THE ASSESSEE CREDITED TO THE P&L ACCOUNT IN INTERMEDIATE DIVISION SHOULD BE EXCLUDED FOR THE PU RPOSE OF CALCULATION OF DEDUCTION U/S 80I:- (I) INCOME DISCLOSED AS A RESULT OF SEARCH RS.7,00,000 (II) SALES-TAX SET OFF RS.1,03,725 (III) KASAR RS. 8,828/- THE AO OBSERVED THAT THE ABOVE INCOMES WERE NOT DIR ECTLY DERIVED FROM THE MANUFACTURING ACTIVITY OF THE INDU STRIAL UNDERTAKING AND THEREFORE DEDUCTION U/S 80I IS NOT ADMISSIBLE ON THESE INCOMES. 34 ON APPEAL, THE LEARNED CIT(A) DIRECTED THE AO TO GIVE DEDUCTION U/S 80I OF THE ACT. 35 BEFORE US, THE LEARNED DR SUPPORTED THE ORDER OF THE AO. WHILE THE LEARNED COUNSEL OF THE ASSESSEE REITERATE D THE SUBMISSIONS MADE BEFORE THE LEARNED CIT(A). 26 36 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORD. WE FIND THAT THE LEARNED CIT(A) HAS DIRECTED THE AO TO ALLOW DEDUCTION U/S 80I, FOLLOWING HIS ORDER DATED 24-7-1 996 FOR THE AY 1993-94 IN THE ASSESSEES CASE, ON THE GROUND TH AT THE CONDITIONS PRESCRIBED U/S 80I ARE SATISFIED IN ASSE SSEES CASE. BEFORE US NOTHING HAS BEEN BROUGHT ON RECORD BY THE REVENUE WHETHER FOR AY 1993-94, THE ABOVE FINDING HAS BEEN REVERSED BY ANY AUTHORITY. FURTHER, WE FIND THAT THE LEARNED CI T(A) HAS RIGHTLY OBSERVED THAT THE PURCHASE DISCOUNT OF RS.7 ,00,000/- EARNED BY THE ASSESSEE IS A PART OF THE BUSINESS PR OFITS OF THE INDUSTRIAL UNDERTAKING. THEREFORE, THE AO WAS DIREC TED TO ALLOW DEDUCTION U/S 80I OF THE ACT ON THIS AMOUNT OF RS.7 ,00,000/-. THE SALES TAX PAID ON PURCHASES IS SET OFF AGAINST SALES TAX PAYABLE ON SALES AND THUS, IT GOES TO REDUCE THE CO ST OF THE MATERIALS. SIMILARLY, KASAR WHICH IS THE UNPAID PUR CHASE PRICE WRITTEN OFF, ALSO GOES TO REDUCE THE COST OF THE RA W MATERIALS. THEREFORE, THE LEARNED CIT(A) HAS RIGHTLY HELD THAT SALES TAX SET OFF AND KASAR ARE A PART OF THE BUSINESS PROFITS OF THE INDUSTRIAL UNDERTAKING AND DEDUCTION U/S 80I IS ADMISSIBLE ON THESE ITEMS. WE ACCORDINGLY UPHOLD THE ORDER OF THE LEARNED CIT( A) IN THIS REGARD. THE GROUND RAISED BY THE REVENUE IS DISMISS ED. 37 GROUND NO.1(I)(V) OF THE REVENUES APPEAL AND GR OUND NO.3 OF THE CROSS OBJECTION ARE RELATED TO DEDUCTION U/S 80HHC OF THE ACT. THE FACTS OF THE CASE ARE THAT THE ASSESSEE CL AIMED DEDUCTION OF RS.2,16,23,096/-. THE AO ALLOWED DEDUCTION OF RS.1,38,30,329/- RELYING ON VARIOUS DECISIONS OF TH E ITAT IN THE CASES OF CHOWRINGHEE SALES BUREAU PVT. LTD. 87 ITR 542, 27 SINCLARE MURRAY AND CO. PVT. LTD., 97 ITR 615, AND THE DECISION IN THE CASE OF MCDOWELL AND CO. LTD. VS. CIT 154 IT R 140, HELD THAT THE FOLLOWING AMOUNTS ARE TO BE INCLUDED IN TH E TOTAL TURNOVER OF THE ASSESSEE FOR THE PURPOSE OF COMPUTI NG THE DEDUCTION U/S 80HHC ADMISSIBLE TO THE ASSESSEE: (I) CENTRAL EXCISE COLLECTED RS.15,92,851 (II) CENTRAL SALES-TAX RS. 52,839 (III) GUJARAT SALES-TAX RS. 8,80,941 ---------------- TOTAL RS.25,26,631 38 ON APPEAL, THE LEARNED CIT(A) DISCUSSED THE ISSU E AS UNDER:- 17.4 I HAVE CONSIDERED THE FACTS OF THE CASE, DI SCUSSION MADE IN THE ASSESSMENT ORDER AND THE SUBMISSION MADE BY THE APPELLANT. IN VIEW OF THE DISCUSSION MADE AND THE FINDING GIVEN I N MY ORDER DATED 24-7-1996 FOR THE AY 1993-94 IN APPELLANTS CASE, O N THIS ISSUE, THE AOS ACTION IN INCLUDING THE CENTRAL EXCISE DUTY, C ENTRAL SALES-TAX AND GUJARAT SALES-TAX COLLECTED IN THE TOTAL TURNOV ER OF THE APPELLANT IS JUSTIFIED AND THE SAME IS CONFIRMED. 39 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS. WE FIND THAT THE ISSUE IS NOW COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F CIT VS. LAKSHMI MACHINE WORKS (2007) 290 ITR 667 (SC), WHER EIN IT HAS BEEN HELD THAT CENTRAL EXCISE DUTY AND SALES TA X CANNOT FORM PART OF THE TOTAL TURNOVER OF THE ASSESSEE FOR TH E PURPOSE OF COMPUTING DEDUCTION U/S 80HHC(3) OF THE ACT. WE, AC CORDINGLY, FOLLOWING THE SAID DECISION, DECIDE THE ISSUE IN FA VOUR OF THE ASSESSEE. THEREFORE, THE GROUND RAISED BY THE REVEN UE IS 28 DISMISSED AND THE GROUND RAISED BY THE ASSESSEE IN THE CROSS OBJECTION IS ALLOWED. 40 IN THE RESULT, THE REVENUES APPEAL IS DISMISSED AND THE ASSESSEES CROSS OBJECTION IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT TODAY ON 29-02-2012 SD/- SD/- (A L GEHLOT) ACCOUNTANT MEMBER (D K TYAGI) JUDICIAL MEMBER DATE : 29-02-2012 COPY OF THE ORDER FORWARDED TO: 1. SMT. VIDYABEN H SHAH, L/H OF LATE SHRI HEMENDRA R SHAH, 8 TH FLOOR, CENTRE POINT, PANCHVATI, AHMEDABAD 2. THE DEPUTY COMMISSIONER OF INCOME-TAX (ASSESSMEN T) SPECIAL RANGE-2, AHMEDABAD 3. CIT CONCERNED 4. CIT(A)-IV, AHMEDABAD 5. DR, ITAT, AHMEDABAD BENCH-B, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD