Sri Kantilal Agarwal, Hyderabad V. DCIT, Central Circle - 4, Hyderabad

ITA 209/HYD/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5566 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 08-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P SOMASEKHAR REDDY
• Assessee Lawyers: B SAI PRASAD
• Keywords: Unexplained cash credit; Unexplained investment; Gift; Business income; Depreciation; Business expenditure; Search and seizure; Loose papers; Document seized; Source of fund; Additional evidence; Question of law; Valuation report; Assessment record; Documents seized; Revenue expenditure
• Section: 143(3); 153A; 68; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER S.NO ITA NO. AY ASSESSEE RESPONDENT 1 208/H/12 2009-10 M/S SRI SHIVA SPINNING MILLS LTD., HYDERABAD. PAN AAECS4791H DY. COMMISSIONER OF INCOME-TAX, CC-4, HYD. 2 266/H/12 2008-09 ASST. COMMISSIONER OF INCOME-TAX, CC-4, HYDERABAD. M/S SRI SHIVA SPINNING MILLS LTD., HYDERABAD. PAN AAECS4791H 3 267/H/12 2009-10 -DO- -DO- 4 209/H/12 2009-10 SRI KANTILAL AGARWAL, HYDERABAD. PAN AAAPA3053K DY. COMMISSIONER OF INCOME-TAX, CC-4, HYD. 5 250/H/12 2008-09 ASST. COMMISSIONER OF INCOME-TAX, CC-4, HYDERABAD. SRI KANTILAL AGARWAL, HYDERABAD. PAN AAAPA3053K 6 251/H/12 2009-10 -DO- -DO- 7 262/H/12 2008-09 SRI KANTILAL AGARWAL, HYDERABAD. PAN AAAPA3053K DY. COMMISSIONER OF INCOME-TAX, CC-4, HYD. ASSESSEE BY : SHRI B. SAI PRASAD REVENUE BY : SHRI P. SOMA SEKHAR REDDY DATE OF HEARING : 21/02/2014 DATE OF PRONOUNCEMENT : 28/03/2014 ORDER PER CHANDRA POOJARI, A.M.: THESE APPEALS ARE PREFERRED BY THE REVENUE AS WELL AS BY THE TWO DIFFERENT ASSESSEES DIRECTED AGAINST THE SEPARA TE ORDERS OF CIT(A) FOR THE ASSESSMENT YEARS 2008-09 AND 2009- 10. SINCE COMMON ISSUES ARE INVOLVED IN THESE APPEALS, THEY W ERE CLUBBED AND 2 ITA NOS. 208, 266, 267, 209, 250, 251 & 262/H/12 M/S SRI SHIVA SPINNING MILLS LTD. & SHRI KANTILAL A GARWAL. HEARD TOGETHER AND, THEREFORE, A COMMON ORDER IS PA SSED FOR THE SAKE OF CONVENIENCE. ITA NO. 208/HYD/2012 FOR AY 2009-10 IN CASE OF M/S SRI SHIVA SPINNING MILLS PVT. LTD. 2. THIS APPEAL IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-VII, HYDERABAD DATED 30/11/2011 WHEREIN THE ASSESSEE HAS RAISED THE FOLLOWING SUBSTANTIVE GROUNDS: 2. THE CIT(A) OUGHT TO HAVE DELETED THE ESTIMATED DISALLOWANCE OF RS. 8,71,441/- OUT OF ELECTRICITY E XPENDITURE INCURRED OF RS. 34,85,767/- 3. THE CIT(A) OUGHT TO HAVE APPRECIATED THE FACT TH AT THE ASSESSEE HAD EMPHATICALLY PROVED PAYMENT OF RS. 34, 85,767/- TOWARDS ELECTRICITY CHARGES WHICH FACT WAS ACCEPTED BOTH BY THE ASSESSING OFFICER AS ALSO THE CIT(A). 4. THE CIT(A) ERRED IN ENHANCING THE ADDITION OF RS . 34,85,767/- ON TOTALLY IRRELEVANT CONSIDERATIONS. 5. THE CIT(A) OUGHT TO HAVE APPRECIATED THAT THE LI ABILITY TOWARDS ELECTRICITY WAS CRYSTALLIZED AND ASCERTAINE D SUBSEQUENT TO TAKE OVER OF THE UNIT BY THE ASSESSEE. 6. THE CIT(A) FAILED TO NOTE THAT ALONG WITH THE LI ABILITY, THE ELECTRICITY DEPOSIT OF RS. 78,70,191/- WAS ALSO TRA NSFERRED TO THE ASSESSEE AGAINST WHICH THE LIABILITY FOR ELECTRICIT Y CAN BE ADJUSTED. 3. THE SUM AND SUBSTANCE OF THE SAID GROUNDS RELATE S TO THE ENHANCEMENT OF ADDITION MADE BY THE CIT(A). 4. BRIEFLY THE FACTS RELATING THE SAID GROUNDS ARE THAT THE ASSESSEE CLAIMED ELECTRICITY EXPENSES OF RS. 34,85,767/-. TH E ASSESSING OFFICER DISALLOWED 25% OF THE SAID EXPENDITURE BY H OLDING THAT THE PAYMENT TOWARDS THE ELECTRICITY CHARGES WAS NOT COM MENSURATE WITH THE BUSINESS ACTIVITY OF THE ASSESSEE. 5. BEFORE THE CIT(A), IT WAS SUBMITTED THAT IT IS A N ACCEPTED LEGAL PRINCIPLE THAT IN THE ABSENCE OF ANY SPECIFIC DISCR EPANCY IN THE BOOKS 3 ITA NOS. 208, 266, 267, 209, 250, 251 & 262/H/12 M/S SRI SHIVA SPINNING MILLS LTD. & SHRI KANTILAL A GARWAL. OF ACCOUNTS, DISALLOWANCE CANNOT BE MADE OUT OF THE CLAIMED EXPENSES, THAT TOO WHEN THE ASSESSMENT MADE IS NOT A BEST JUDGE ASSESSMENT BY REJECTING THE BOOKS OF ACCOUNTS. IT W AS ARGUED THAT IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT THE A SSESSEE DID NOT MAKE THE PAYMENT TO CLAIM AS EXPENSES. IT WAS SUBMI TTED THAT THE PAYMENT WAS MADE TOWARDS ELECTRICITY CHARGES BY WAY OF BANK CHEQUES/DRAFTS, AND THE STATUS OF THE PAYMENT IS AL SO AVAILABLE IN THE BOOKS OF ACCOUNT. THE ASSESSEE FURTHER STATED THAT THE LIABILITY TO PAY ELECTRICITY CHARGES AMOUNTING TO RS. 34,85,767/- WA S CRYSTALLIZED IN FEBRUARY, 2009 AND THE ASSESSEE HAD PAID A SUM OF R S. 18,00,000/- DURING THE YEAR AND PROVIDED TO MAKE THE BALANCE WH ICH WAS PAID IN THE SUBSEQUENT ACCOUNT YEAR RELEVANT FOR THE AY 201 0-11. AS A PROOF OF THIS, A LETTER DATED 18/02/2009 AS ISSUED BY THE SUPDT. ENGINEER, OPERATION CIRCLE, AP TRANSCO, MAHABOOBNAGAR DIVISIO N, ALONG WITH THE NECESSARY ACCOUNT EXTRACTS FROM THE BOOKS OF FY 2009-10 WERE FILED. THE ASSESSEE FURTHER SUBMITTED THAT DISCHARG E OF LIABILITY CRYSTALLIZED DURING THE RELEVANT ACCOUNTING YEAR IS ALLOWABLE AS DECIDED IN THE CASE OF CIT VS. VEEKAY ENGINEERING C ORPORATION [2010] 323 ITR 252 (CHATTISGARH). THE ASSESSEE HAD ALSO PLACED RELIANCE TO THE DECISION OF THE CIT(A)-III, HYDERAB AD IN ITA NO. 0287/CIT(A)-III/09-10 DATED 13/10/2010 WHEREIN A SI MILAR ISSUE WAS DECIDED IN THE CASE OF SRI RAMKUMAR AGARWAL FOR THE AY 2007-08. 6. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E, THE CIT(A) OBSERVED THAT THERE WERE TWO ISSUED TO BE CONSIDERE D. FIRSTLY, IT IS TO BE SEEN WHETHER THE AMOUNT OF RS. 34,85,767/- IS AN ASCERTAINED LIABILITY DURING THE YEAR; AND SECONDLY WHETHER THE ASSESSING OFFICER CAN RESORT TO ESTIMATED DISALLOWANCE OF THE SAME. O N THE ISSUE OF LIABILITY PERTAINING TO THE ELECTRICITY CHARGES, TH E CIT(A) NOTED THAT AS SEEN FROM THE COMMUNICATION DATED 18/02/2009 OF THE SUPDT. ENGINEER, OPERATION CIRCLE, AP TRANSCO, MAHABOOBNAG AR DIVISION, IT REVEALS THAT A.P. TRANSCO HAD RESOLVED TO CONSIDER THE REQUEST OF MAHAVEER FERRO ALLOYS FOR WAIVER OF DEEMED ENERGY C HARGES AND REVISION OF BILLS TO THE EXTENT OF AMOUNT THAT IS A LLOWABLE AS PER 4 ITA NOS. 208, 266, 267, 209, 250, 251 & 262/H/12 M/S SRI SHIVA SPINNING MILLS LTD. & SHRI KANTILAL A GARWAL. REVISED GUIDELINES OF APERC AND HAD ACCORDINGLY REV ISED ANNUAL LOAD FACTOR CHARGES TOWARDS DEEMED ENERGY FOR AN AMOUNT OF RS. 34,85,767/- FOR THE PERIOD FROM MAY, 2005 TO JULY, 2005. THE ASSESSEE'S CLAIM IN THIS REGARD IS THAT SINCE IT HA D TAKEN OVER THE SAID MAHAVEER FERRO ALLOYS WITH ALL ASSETS AND LIABILITI ES, THE LIABILITY WHICH IS ASCERTAINED SUBSEQUENT TO ITS TAKE OVER BY THE A SSESSEE HAD TO BE DISCHARGED BY THE ASSESSEE, APPEARS REASONABLE AND LOGICAL. IN SUPPORT OF THE ADMISSIBILITY OF THE SAID DEDUCTION, IT WAS ARGUED THAT DISCHARGE OF LIABILITY CRYSTALLIZED DURING THE RELE VANT ACCOUNT IS ALLOWABLE AS DECIDED IN THE CASE OF CIT VS VEEKAY E NGINEERING CORPORATION (2010) 323 ITR 252 (CHATTISGARH). AS CO ULD BE MADE OUT OF THE ABOVE FACTS, THE LIABILITY TOWARDS ELECTRICI TY CHARGES HAS BEEN CRYSTALLIZED DURING THE FY 2008-09, RELEVANT FOR TH E AY 2009-10 AND AN ALLOWABLE EXPENSE, AS IT RELATE TO THE BUSINESS PAID BY CHEQUE AND IT IS NOT JUSTIFIED IN DISALLOWING A PORTION OF EXP ENSES, PURELY ON ESTIMATION BASIS. 6.1 HOWEVER, IT WAS OBSERVED BY THE CIT(A) AND FOUN D THAT THE AGREEMENT BETWEEN THE ASSESSEE COMPANY AND M/S MAHA VIR FERRO ALLOYS, THE PROPRIETARY CONCERN OF MR.RAMPRASAD AGA RWAL THAT DECIDING THE LIABILITY OF ELECTRICITY CHARGES. AS P ER THE AGREEMENT, THE ASSESSEE COMPANY IS RESPONSIBLE FOR ALL THE LIABILI TIES STANDING IN BOOKS AS ON 1.4.2008 ALONE AND LIST OF SUCH ASSETS AND LIABILITIES ARE LISTED IN AGREEMENT. THE REFERRED LIABILITY OF ELEC TRICITY CHARGES OF RS.34,8S,767 DOES NOT FIND A PLACE AMONG THEM. HENC E, IT CANNOT BE TERMED AS LIABILITY OF THE ASSESSEE AND AS SUCH THE ENTIRE AMOUNT BECOMES DISALLOWABLE AS AGAINST THE PART OF IT DISA LLOWED BY THE ASSESSING OFFICER. FOR THE SAKE OF CLARITY AND CONF IRMATION, IT IS RELEVANT TO REFER TO THE AGREEMENT DT.1.4.2008, BET WEEN THE ASSESSEE COMPANY (FIRST PARTY) AND MR.RAMPRASAD AGARWAL, PRO PRIETOR OF M/S MAHAVIR FERRO ALLOYS (SECOND PARTY) ALONG WITH THE ANNEXURE-A ANNEXED TO IT. PARA NO.3 OF THE AGREEMENT, THE LANG UAGE USED THEREIN MAKES THE POSITION VERY CLEAR, IF READ WITH THE ANN EXURE, CONTAINING THE DETAILS OF EXISTING LIABILITIES AND ASSETS OF T HE UNIT OF M/S MAHAVIR 5 ITA NOS. 208, 266, 267, 209, 250, 251 & 262/H/12 M/S SRI SHIVA SPINNING MILLS LTD. & SHRI KANTILAL A GARWAL. FERRO ALLOYS AS ON 3L.3.2008. THE SAME ARE REPRODUC ED AS UNDER; 'THE SECOND PARTY HERE TO, WHO IS A PROPRIETOR OF M LS MAHAVIR FERRO ALLOYS, HEREBY CONFIRMED THAT THERE ARE NO OT HER LIABILITIES OF THE SAID CONCERN OTHER THAN WHAT HAS BEEN STATED IN THE ANNEUXRE-A TO THIS AGREEMENT AND IN (READ AS IF) TH E COMPANY IS FORCED TO PAYOR PAYS ANY LIABILITIES OF MLS MAHAVIR FERRO ALLOYS, WHICH ARE NOT INCORPORATED IN ANNEXURE-A TO THIS AGREEMENT, THE S ECOND PARTY HERE TO SHALL INDEMNIFY THE SAME WITHOUT ANY ALLEGATIONS/OBJECTIONS. 6.2 THE RATIOS AND FACTS OF CASE LAWS ON THE SUBJEC T CITED BY ASSESSEE, REFERRING TO THE DECISION OF HON'BLE CHAT TISGARH HIGH COURT IN THE CASE OF CIT VS VEEKAY ENGINEERING CORPORATIO N AS REPORTED IN 323 ITR 252 WERE EXAMINED FROM THE POINT OF VIEW OF ASSESSEE'S CASE AND FOUND THAT THE FACTS OF THE CASE ARE DISTINGUIS HABLE IN THIS REGARD. FURTHER, THE FACTS IN THE CASE OF ASSESSEE ARE SO R EVEALING THAT IT IS NOT A LIABILITY OF THE ASSESSEE TO PAY THE ELECTRIC AL CHARGES PERTAINING TO FINANCIAL YEAR 2006-07, RELATED TO THE ERSTWHILE CONCERN OF MAHAVIR FERRO ALLOYS, TAKEN OVER BY THE ASSESSEE COMPANY SU BSEQUENTLY IN TERMS OF THE AGREEMENT REFERRED ABOVE, THE ASSESSEE COMPANY IS NOT LIABLE TO INCUR THE EXPENDITURE WHICH RELATED TO TH E PERIOD OF MAY '05 TO JULY '05 WHICH MEANS THE LIABILITY WAS NOT EXIST ING AS ON THE DATE OF TAKEOVER OF THE UNIT. AS SUCH, THE EXPENSES CLAIMED BY THE ASSESSEE IS NOT AN ALLOWABLE EXPENSE AND AS SUCH, IS LIABLE TO BE DISALLOWED. IT MAY BE PERTINENT TO QUOTE THE FAMOUS LEGAL DICTUM T HAT LAW IS NO SUBSTITUTE FOR FACTS. ACCORDINGLY, THE EXPENDITURE OF RS. 34,85,767/- IS DISALLOWABLE IN ITS ENTIRETY AS AGAINST THE DISALLO WANCE OF RS.8,71,441 MADE BY THE ASSESSING OFFICER. 6.3 ON THE PROPOSAL FOR TREATING THE ENTIRE AMOUNT OF RS.34,85,767 AS DISALLOWABLE, FOR THE REASON THAT THE LIABILITY DO NOT PERTAIN TO THE ASSESSEE SINCE THE SAID LIABILITY HAS ARISEN SUBSEQ UENT TO THE AGREEMENT DT.1.4.2008 BY VIRTUE OF WHICH THE UNIT O F MAHAVIR FERRO ALLOYS TAKEN OVER BY THE ASSESSEE COMPANY AND WHERE AGREEMENT IS CLEAR ABOUT THE LIABILITIES AND ASSETS FOR WHICH TH E ASSESSEE COMPANY 6 ITA NOS. 208, 266, 267, 209, 250, 251 & 262/H/12 M/S SRI SHIVA SPINNING MILLS LTD. & SHRI KANTILAL A GARWAL. IS RESPONSIBLE FOR, THE ASSESSEE FURNISHED THE WRIT TEN SUBMISSIONS DT.28.11.2011. IT WAS SUBMITTED THAT THE LIABILITY TO PAY ELECTRICITY CHARGES AMOUNTING TO RS.34,85,767 WAS CRYSTALLIZED ON 18.2.2009 AND THERE IS NO WAY FOR THE ASSESSEE TO DISHONOR TH E PAYMENT OF THE SAME IN WHICH CASE THE POWER SUPPLY WILL NOT BE CON TINUED RESULTING IN HAMPERING OF CONTINUED BUSINESS ACTIVITY. IT WAS FURTHER SUBMITTED THAT AS A PRUDENT BUSINESSMAN AND IN VIEW OF THE BU SINESS EXPEDIENCY, THE ASSESSEE HAD TO MAKE THE PAYMENT TO SEE THE UNIT GETTING THE REGULAR POWER SUPPLY. ACCORDINGLY, THE ASSESSEE HAS DISCHARGED THE LIABILITY PARTLY DURING THE YEAR WIT H BALANCE PAID IN AY 2010-11 BY PROVIDING FOR THE SAID EXPENS ES. IT IS FURTHER CONTENDED THAT WHEN A BUSINESS WAS SOLD AND TAKEN O VER BY AN ASSESSEE AS A GOING CONCERN AND THE BUSINESS CONTIN UED AT THE SAME PLACE AND UNDER THE SAME TRADE NAME, EVEN BACK DEBT S OF THE BUSINESS OF THE PERIOD PRIOR TO PURCHASE OF BUSINES S WERE HELD TO BE ALLOWABLE IN THE HANDS OF THE ASSESSEE WHO HAD SUCC EEDED TO THE BUSINESS. 6.4 FURTHER, THERE IS NO DISPUTE ABOUT SUCCESSION O F LIABILITIES AND ASSETS WHICH ARE PART OF THE BUSINESS CONTINUED AS GOVERNED BY THE TERMS OF THE AGREEMENT. IN THIS CASE, IT IS NOT THE LOGIC OR ACCOUNTING PRINCIPLES, WHICH COMING INTO THE SCENE, BUT THE AG REEMENT BINDING THE VENDOR AND VENDEE, WHEREIN IT WAS CLEARLY STATE D THAT THE VENDEE OF THE UNIT IS NOT RESPONSIBLE FOR ANY OF THE LIABI LITIES THAT WILL ARISE SUBSEQUENT TO THE DATE OF THE AGREEMENT. FOR THE SA KE OF CLARITY, THE CLAUSE (1) & (3) OF THE SAID AGREEMENT IS REPRODUCED, WHICH RUNS AS UNDER; 'CLAUSE (1)- THE RUNNING BUSINESS OF MAHAVIR FERRO ALLOYS WHICH HAS BEEN GIVEN ON LEASE TO TEAM FERRO ALLOYS PVT LTD BY THE SECOND PARTY SHALL STAND TRANSFERRED AND VESTED IN SRI SHIVA SPINNING MILLS PVT LTD W.E.J. 1 ST APRIL 2008 WITH ALL ITS ASSETS, OBLIGATIONS AND LIABILITIES AS STATED IN ANNEXURE-A .' 'CLAUSE (3)- THE SECOND PARTY (MR.RAMPRASAD AGARWAL) WHO IS A PROPRIETOR OF M/S MAHAVIR FERRO ALLOYS HEREBY CONFI RMS THAT 7 ITA NOS. 208, 266, 267, 209, 250, 251 & 262/H/12 M/S SRI SHIVA SPINNING MILLS LTD. & SHRI KANTILAL A GARWAL. THERE ARE NO OTHER LIABILITIES OF THE SAID CONCERN OTHER THAN WHAT HAS BEEN STATED IN ANNEXURE-A TO THIS AGREEMENT AND IF THE COMPANY IS FORCED TO PAYOR PAYS ANY LIABILITIES OF MAHAVIR FERRO ALLOYS WHICH ARE NOT INCORPORATED IN ANNEXURE-A TO THIS AGREEMENT, THE SECOND PARTY HERETO SHALL INDEMNIFY THE SAME WITHOUT ANY ALLEGATIONS/OBJECTIONS.' (ANNEXURE-A IS ANNEXED TO THIS ORDER VIDE PARA 6.4 OF THIS ORDER) 6.5 HENCE, CIT(A) OBSERVED THAT SINCE THE LANGUAG E OF THE AGREEMENT IS CLEAR, THERE IS NO NEED TO FALL ON THE JUDICIAL OR ACCOUNTING PROPOSITIONS. IN THIS CASE, THE CLAUSE T O THE AGREEMENT CLEARLY SPECIFIES THE RESPONSIBILITY FOR THE LIABIL ITY THAT ARISE AFTER THE DATE OF AGREEMENT I.E. 1.4.2008 AND LIABILITY AS SU BJECT MATTER OF REFERENCE, HAS ARISEN ONLY ON 18.2.2009 AND CLAUSE (III) OF THE AGREEMENT STIPULATES THE RESPONSIBILITY OF THE PART Y WHO TRANSFERRED SUCH UNIT. TO MAKE IT CLEAR, IT IS THE RESPONSIBILI TY OF MR.RAMPRASAD AGARWAL TO UNDERTAKE SUCH DISCHARGE OF LIABILITY AN D IN CASE IF IT IS DISCHARGED BY THE ASSESSEE COMPANY, MR.RAMPRASAD AG ARWAL WOULD BE INDEMNIFYING SUCH PAYMENTS. THERE IS NO UNDERTAK ING BY MR.RAMPRASAD AGARWAL NOR THERE ARE ANY ENTRIES RELA TED TO THIS, IN THE BOOKS OF ACCOUNT. EVEN, ON THAT COUNT THE LIABILITY WOULD HAVE BEEN THE EXPENSE OF MR.RAMPRASAD AGARWAL, BUT NOT THE CO MPANY. UNDER THE CIRCUMSTANCES, SUCH EXPENSES CANNOT BE TREATED AS THE LIABILITY OF THE ASSESSEE AND AS SUCH IT IS NOT ALLOWABLE AS EXP ENSES BEING THE EXPENSE NOT RELATABLE TO THE BUSINESS. HENCE, THE S UBMISSION OF THE ASSESSEE IS REJECTED ON THE BASIS OF THE FACTS AND THE ENTIRE AMOUNT STANDS DISALLOWED AS AGAINST ONLY A PART OF IT (RS. 8,71,441) WHICH WAS DISALLOWED BY THE ASSESSING OFFICER IN ASSESSMENT O RDER. ACCORDINGLY, THIS ADDITION STANDS ENHANCED BY THE CIT(A). 7. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESS EE IS IN APPEAL BEFORE US. 8. THE LEARNED AR OF THE ASSESSEE SUBMITTED THAT TH E LIABILITY FOR ENHANCED PAYMENT OF ELECTRICITY WAS CRYSTALLIZED VI DE LETTER DATED 8 ITA NOS. 208, 266, 267, 209, 250, 251 & 262/H/12 M/S SRI SHIVA SPINNING MILLS LTD. & SHRI KANTILAL A GARWAL. 13/02/2009 OF THE AP ELECTRICITY BOARD, WHICH IS PL ACED AT PAGE 46 OF THE PAPER BOOK AND THE SAID ELECTRICITY CHARGES ARE DEBITED TO THE P&L ACCOUNT, WHICH IS PLACED AT PAGE 39 OF THE PAPER BO OK. FURTHER, THE LEARNED AR SUBMITTED THAT THE ASSESSEE CANNOT AVOID PAYMENT OR POSTPONE PAYMENT OF ELECTRICITY CHARGES AS NON-PAYM ENT WILL HAMPER ITS BUSINESS ACTIVITIES AND EVEN IF THE SAME IS POS TPONED TILL THE SETTLEMENT WITH THE PREVIOUS OWNER, THE SAME CANNOT BE ALLOWED AS EXPENDITURE IN THE SUBSEQUENT YEARS. IT WAS SUBMITT ED THAT THE LIABILITY OF THE ASSESSEE, FOLLOWING MERCANTILE SYSTEM OF ACC OUNTING, WHICH ACCRUED DURING THIS AY AND WAS ALLOWABLE IN THIS AY OF ACCRUAL AND DID QUALIFY FOR DEDUCTION IN THE COMPUTATION OF BU SINESS INCOME FOR THIS AY. FOR THIS PROPOSITION HE RELIED ON THE DEC ISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. DELHI TAMBA KA UDYOG (P) LTD., 247 ITR 816 (DELHI.). HE ALSO RELIED ON THE D ECISION IN THE CASE OF SAURASHTRA CEMENT & CHEMICAL INDUSTRIES LTD. VS. CIT, 213 ITR 523 (GUJ) BUSINESS EXPENDITURE YEAR OF ALLOWABI LITY MERCANTILE SYSTEM OF ACCOUNTING LIABILITY IS ALLOWABLE ONLY IN THE YEAR IN WHICH IT HAS CRYSTALLIZED AND DETERMINED IT CANNOT BE DISA LLOWED MERELY BECAUSE IT RELATED TO EARLIER PREVIOUS YEAR. THE AR ALSO RELIED ON THE DECISION IN THE CASE OF SHAJDA NANDA & SONS VS. CIT , 108 ITR 358 (SC). 9. ON THE OTHER HAND, THE LEARNED DR RELIED UPON TH E ORDER OF THE CIT(A). 10. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PERUSED THE RECORD AS WELL AS GONE THROUGH THE ORDERS OF TH E AUTHORITIES BELOW. IN THIS CONNECTION, THE CONTENTION OF THE AS SESSEES COUNSEL IS THAT THE PAYMENT OF EXPENDITURE OF RS. 34,85,767/- INCURRED BY THE ASSESSEE TOWARDS LIABILITY OF ELECTRICITY CHARGES I S TO BE ALLOWED AS REVENUE EXPENDITURE THOUGH IT WAS RELATING TO PRIOR PERIOD. ACCORDING TO HIM, AS PER THE MOU ENTERED BY THE ASSESSEE WITH MR. RAMPRASAD AGARWAL ON 01/04/2008, THE ASSESSEE HAS TAKEN ALL A SSETS AND LIABILITIES OF M/S MAHAVIR FERRO ALLOYS WITH EFFECT FROM 01/04/2008 AS A 9 ITA NOS. 208, 266, 267, 209, 250, 251 & 262/H/12 M/S SRI SHIVA SPINNING MILLS LTD. & SHRI KANTILAL A GARWAL. GOING CONCERN AND BEING SO, ALL LIABILITIES ATTACHE D TO THE BUSINESS OF MAHAVIR FERRO ALLOYS IS THE LIABILITY OF THE ASSES SEE, THEREFORE, THE SAME SHOULD BE ALLOWED AS REVENUE EXPENDITURE. FOR THIS PURPOSE, HE RELIED ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. T. VEERABHADRA RAO, K. KOTESWARA RAO & CO, [1985] 155 ITR 152 (SC) WHEREIN IT WAS HELD THAT THE LIABILITY OF BAD DEBT U/S 36(2) IT IS NOT NECESSARY THAT THE ASSESSEE MENTIONED IN CL. (A) OF S. 36(2) SHOULD BE IDENTICAL ASSESSEE MENTIONED IN CL. (B) A ND A SUCCESSOR TO THE BUSINESS WITH ALL ASSETS AND LIABILITIES IS ENT ITLED TO WRITE OFF THE AMOUNTS AS BAD DEBT. ACCORDING TO THE ASSESSEE, AS PER MOU, THE ASSESSEE HAS TAKEN ALL ASSETS AND LIABILITIES INCLU DING ELECTRICITY DEPOSIT , BEING SO, THE LIABILITY INCURRED TOWARDS ELECTRICITY CHARGES OF ERSTWHILE FIRM TO BE ALLOWED AS AN EXPENDITURE. AF TER GOING THROUGH THE AGREEMENT ENTERED BY THE ASSESSEE WITH M/S RAMK UMAR AGARWAL ON 01/04/2008, THE ASSESSEE HAS TAKEN ALL ASSETS AN D LIABILITY AS PER ANNEXURE-A TO THE AGREEMENT. THERE IS NO MENTIONING OF THIS LIABILITY, WHICH RAMKUMAR AGRWAL IS REQUIRED TO BE INCURRED TO WARDS BUSINESS TAKEN OVER BY THE ASSESSEE. ASSESSEE IS ENTITLED F OR ASSETS MENTIONED IN THE ANNEXURE-A TO THE AGREEMENT AND TH E ASSESSEE IS LIABLE FOR LIABILITIES MENTIONED THEREIN. IN OUR OP INION, THE ASSESSEE CANNOT CLAIM ANY LIABILITY OTHER THAN THE MENTIONED IN THE ANNEXURE-A TO THE AGREEMENT. BEING SO, THE JUDGMENT RELIED UPO N BY THE ASSESSEES COUNSEL IN THE CASE OF T. VEERABHADRA RA O, T. KOTESWARA RAO & CO. CITED SUPRA CANNOT BE APPLIED TO THE FAC TS OF THE CASE. FURTHER, THERE IS NO QUESTION OF ADJUSTING THIS LIA BILITY WITH ELECTRICITY DEPOSIT AS THIS DEPOSIT IS INDEPENDENT ASSET AND NO THING TO DO WITH THIS EXPENDITURE AND THIS EXPENDITURE NOT INCURRED FOR THE PURPOSE OF ASESSSEES BUSINESS. THEREFORE, WE ARE OF THE OPINI ON THAT THE CIT(A) IS JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE AND THE ORDER OF THE CIT(A) IS CONFIRMED ON THIS ISSUE. 10.1 IN THE RESULT, APPEAL OF ASSESSEE IN ITA NO. 2 08/H/12 IS DISMISSED. 10 ITA NOS. 208, 266, 267, 209, 250, 251 & 262/H/12 M/S SRI SHIVA SPINNING MILLS LTD. & SHRI KANTILAL A GARWAL. ITA NO. 267/H/12 FOR AY 2009-10 BY THE REVENUE IN T HE CASE OF SRI SHIVA SPINNING MILLS PVT. LTD. 11. GROUND NO. 1 AND 5 ARE GENERAL IN NATURE. 12. GROUND NO. 2 RAISED THE REVENUE IS AS FOLLOWS: THE LD. CIT(A) HAS ERRED IN ALLOWING RELIEF ON TOTA L AMOUNT OF RS. 1.31 CRORES, SINCE THE ASSESSEE FAILED TO PRODU CE ANY DETAILS AND DOCUMENTARY EVIDENCE FOR RECEIPT OF DEP OSITS AGAINST SALES AMOUNTING TO RS. 1,31,00,000/-. THUS, IT IS CLEAR CASE OF UNEXPLAINED CREDITS. 13. ON VERIFICATION OF THE INFORMATION AVAILABLE O N RECORD, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE COMPAN Y IS IN RECEIPT OF DEPOSITS AGAINST SALES AMOUNTING TO RS. 1,31,00, 000/-. WHEN THE ASSESSING OFFICER ASKED THE AUTHORISED REPRESENTATI VE OF THE ASSESSEE COMPANY WAS ASKED TO PRODUCE THE DETAILS F OR THE SAME, THE AUTHORIZED REPRESENTATIVE DID NOT PRODUCE THE D ETAILS FOR SAME. IN ABSENCE OF THE DETAILS AND KEEPING IN VIEW THE FACT THAT THE SALES OF THE ASSESSEE COMPANY FOR THE YEAR RELEVANT TO THE INSTANT ASST. YEAR IS RS. 67,61,500/- ONLY, THE ASSESSING OFFICER HELD THAT THE ADVANCES CLAIMED AGAINST SALES OF RS. 1,31,00,000/- IS CLEAR LY UNEXPLAINED CREDITS AND, HE THEREFORE, ADDED THE SAME TO THE I NCOME RETURNED. 14. IN THE COURSE OF APPEAL PROCEEDINGS BEFORE THE CIT(A), IT WAS STATED THAT THE AMOUNT OF RS. 1,31,00,000/- SHOWN A S ADVANCE RECEIVED WAS, IN FACT A BROUGHT FORWARD FIGURE. IT IS FURTHER EXPLAINED THAT THE ASSESSEE HAD TAKEN OVER THE RUNNING BUSINE SS OF MAHAVIR FERRO ALLOYS AND AS PER THE AGREEMENT EXECUTED ON 1 -4-2008 BETWEEN THE TWO PARTIES, THE ASSESSEE HAD TAKEN OVER THE SA ID MAHAVIR FERRO ALLOYS WITH ITS ASSETS AND LIABILITIES AS PER THE S AID ANNEXURE-A. AS CAN BE SEEN FROM THE SAID ANNEXURE-A TO THE SAID AG REEMENT, THE EXISTING LIABILITIES WERE OF RS. 2,45,04,067 WHICH INCLUDED THE LIABILITY OF RS. 1,31,00,000/- DUE TO TEAM FERRO ALLOYS PVT L TD DEPOSIT. IT WAS ALSO ARGUED THAT THE ASSESSING OFFICER NEITHER ASKE D FOR ANY INFORMATION ON THIS TRANSACTION NOR DID HE ISSUE SH OW CAUSE NOTICE 11 ITA NOS. 208, 266, 267, 209, 250, 251 & 262/H/12 M/S SRI SHIVA SPINNING MILLS LTD. & SHRI KANTILAL A GARWAL. SEEKING TO CLEAR THE DOUBT IN HIS MIND; AND THAT HE HAD MERELY ASSUMED THE SAID AMOUNT OF RS. 1,31,00,000/- AS UNE XPLAINED DEPOSIT RECEIVED DURING THE PREVIOUS YEAR THAT TOO AGAINST THE SALES WHICH IS FACTUALLY INCORRECT AND BROUGHT THE SAME TO TAX. 15. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESS EE, THE CIT(A) OBSERVED THAT THE FACTS RELATING TO THIS TRANSACTIO N IS THAT M/S MAHAVIR FERRO ALLOYS LEASED ITS UNIT TO TEAM FERRO ALLOYS P VT LTD AND RECEIVED A DEPOSIT OF RS. 1,31,00,000/-. BUT WITH EFFECT FRO M 1-4-2008, THE SAID MAHAVIR FERRO ALLOYS UNIT WAS TAKEN OVER BY THE ASS ESSEE AS PER AGREEMENT DATED 1-4-2008 AND TAKEN OVER THE LIABILI TIES ALONG WITH THE ASSETS WHICH INCLUDE THE AMOUNTS UNDER REFERENCE. C OPY OF THE DEED DATED 1-4-2008 EXECUTED BETWEEN THE ASSESSEE AND MA HAVIR FERRO ALLOYS WHILE TAKING OVER THE PLANT, HAS BEEN OBTAIN ED AND PERUSED BY CIT(A). CLAUSE (1) OF THE SAID AGREEMENT STIPULATE THAT 'THE RUNNING BUSINESS OF MAHAVIR FERRO ALLOYS WHICH HAS BEEN GIV EN ON LEASE TO TEAM FERRO ALLOYS PVT LTD BY THE SECOND PARTY SHALL STAND TRANSFERRED AND VESTED IN SRI SHIVA SPINNING MILLS PVT LTD WITH EFFECT FROM 1-4- 2008 WITH ALL ITS ASSETS, OBLIGATIONS AND LIABILITI ES AS STATED IN ANNEXURE - A ANNEXED TO THIS AGREEMENT'. AS SEEN FROM ANNEXURE A TO THE SAID AGREEMENT, AS ON THE DATE OF TAKING OVE R THE SAID MAHAVIR FERRO ALLOYS HAD EXISTING LIABILITIES OF RS. 2,45,0 4,067 WHICH INCLUDED THE AMOUNT OF RS. 1,31,00,000/- RECEIVED FROM 'TEAM FERRO ALLOYS PVT LTD' AS DEPOSIT. IN TERMS OF THE CLAUSE (1) OF THE AGREEMENT, THIS LIABILITY ALSO RECEIVED BY THE ASSESSEE AND IS SHOWN AS AN ITEM OF OUTSTANDING LIABILITY AS AT THE END OF THE ACCOUNT YEAR. IN SUPPORT OF THIS THE ASSESSEE HAD ALSO FURNISHED A CERTIFICATE FURNISHED BY THE TEAM FERRO ALLOYS PVT LTD CONFIRMING THE DEPOSIT OF THE AMOUNT OF RS. 1,31,00,000/- MADE WITH MAHAVIR FERRO ALLOYS WHICH WAS SUBSEQUENTLY TAKEN OVER BY THE ASSESSEE AS PER AGRE EMENT DATED 1- 4-2008. IN VIEW OF THE ABOVE OBSERVATIONS, THE CIT( A) HELD THAT THE SOURCE OF THE DEPOSIT OF RS. 1,31,00,000/- IS PROPE RLY EXPLAINED AND THEREFORE, IT CANNOT BE BROUGHT TO TAX AS UNEXPLAIN ED CREDIT OR DEPOSIT. THE ADDITION MADE OF RS. 1,31,00,000/- IS DELETED. 12 ITA NOS. 208, 266, 267, 209, 250, 251 & 262/H/12 M/S SRI SHIVA SPINNING MILLS LTD. & SHRI KANTILAL A GARWAL. 16. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 17. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE REC ORD AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. T HE CIT(A) GAVE A CATEGORICAL FIND THAT THE ASSESSEE HAD FURNISHED A CERTIFICATE FURNISHED BY THE TEAM FERRO ALLOYS PVT. LTD. CONFIR MING THE DEPOSIT OF THE AMOUNT OF RS. 1,31,00,000/- MADE WITH MAHAVIR F ERRO ALLOYS WHICH WAS SUBSEQUENTLY TAKEN OVER BY THE ASSESSEE A S PER AGREEMENT DATED 01/04/2008. FURTHER, HE HELD THAT THE SOURCE OF THE DEPOSIT OF RS. 1,31,00,000/- IS PROPERLY EXPLAINED AND THEREFORE, IT CANNOT BE BROUGHT TO TAX AS UNEXPLAINED CREDIT OR D EPOSIT. IN VIEW OF THE ABOVE CATEGORICAL FINDINGS OF THE CIT(A), WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) ON THIS ISSUE AND THE ORDER OF THE CIT(A) IS HEREBY UPHELD ON THIS COUNT. ACCORDINGLY, THIS GROUND RAISED BY THE REVENUE IS DISMISSED. 18. GROUND NO. 3 IS AS FOLLOWS: THE LEARNED CIT(A) HAS ERRED IN ALLOWING RELIEF ON TOTAL AMOUNT OF RS. 60,95,682/- AS THE ASSESSEE COMPANY HAS ADMI TTED THE RENTAL INCOME RECEIVED FROM M/S TEAM FERRO ALLOYS A MOUNTING TO RS. 96,00,000/- AS BUSINESS INCOME BUT M/S TEAM ALLOYS HAS DEDUCTED TDS ON RENT. THUS, THE TOTAL AMOUNT SHOULD BE TAXED AND NO EXPENDITURE REGARDING BUSINESS SHOULD BE ALL OWED. 19. THE FACTS RELATING TO THIS ISSUE ARE THAT THE ASSESSEE HAD LEASED ITS UNIT, VIZ., MAHAVIR FERRO ALLOYS, TO M/S TEAM FERRO ALLOYS PVT LTD AND RECEIVED LEASE AMOUNT OF RS. 96,00,000/ - FOR THE PERIOD OF ONE YEAR STARTING FROM 1.4.2008. THE ASSESSEE TREAT ED THE RECEIPT OF RS. 96 LAKHS AS BUSINESS INCOME AND AFTER MEETING T HE EXPENSES, THE RESULTANT NET INCOME OF RS. 35,04,318/- WAS OFFERED TO TAX. HOWEVER, THE ASSESSING OFFICER TREATED THE ENTIRE AMOUNT OF LEASE RENT OF RS. 96 LAKHS AND BROUGHT IT TO TAX BY DISALLOWING ALL T HE EXPENSES THAT HAVE BEEN CLAIMED BY THE ASSESSEE. SINCE INCOME OF RS. 35,04,318/- WAS ALREADY ADMITTED BY THE ASSESSEE, THE DIFFERENC E OF RS. 60,95,683/- WAS BROUGHT TO TAX AS INCOME FROM OTHER SOURCES. 13 ITA NOS. 208, 266, 267, 209, 250, 251 & 262/H/12 M/S SRI SHIVA SPINNING MILLS LTD. & SHRI KANTILAL A GARWAL. 19.1 WHILE TREATING THE SAID LEASE RENT AS 'INCOME FROM THE OTHER SOURCES', THE ASSESSING OFFICER MADE THE FOLLOWING/ FINDINGS VIDE PARA NO.4.1 OF ASSESSMENT ORDER : 'IN THE AUDIT REPORT IN FORM 3CD, THE ASSESSEE HAS CLAIMED THAT IT HAS ALSO STARTED LEASE RENT BUSINESS AND THIS IS TH E FIRST OF SUCH BUSINESS. HOWEVER, NO DOCUMENTARY EVIDENCE LIK E MINUTES OF SHARE HOLDERS MEETING, ALTERATION TO THE MEMORANDUM OF ARTICLES OF THE ASSOCIATION OF THE COMPANY HAVE BEE N PRODUCED. IT IS A CLEAR CASE WHERE ASSESSEE HAS ONLY LET OUT A PART OF ITS PROPERTY. HENCE, THE RENTAL AMOUNT RECEIVED FROM TE AM FERRO ALLOYS AMOUNTING TO RS.96 LAKHS IS TREATED AS INCOME FROM OTHER SOURCES. 19.2 ASSESSING OFFICER ALSO REFERRED TO THE TDS CER TIFICATE ISSUED BY M/S TEAM FERRO ALLOYS PVT. LTD, THE LESSE E, WHEREIN SUCH RECEIPTS WERE INDICATED UNDER THE HEAD 'RENT', WITH THE TDS MADE ON SUCH RECEIPTS UNDER SEC.194- I OF THE I.T. ACT, 1961. IT IS THE ANOTHER GROUND CONSIDERED BY THE ASSESSING OFFICER, FOR TRE ATING THE SAID INCOME AS INCOME FROM OTHER SOURCES. 20. THE ASSESSEE OBJECTED THE SAID ADDITION BEFORE THE CIT(A) AND THE ARGUMENTS ADVANCED THROUGH THE WRITTEN SUBMISSI ONS FILED BEFORE THE CIT(A), WHICH ARE AS UNDER: 'THE ASSUMPTION OF THE ASSESSING OFFICER IS INCORRE CT. THE ACCEPTED LEGAL PROPOSITION IS THAT MERELY BECAUSE I NCOME IS ATTACHED TO ANY IMMOVABLE PROPERTY, IT CAN NOT BE THE SOLE FACTOR FOR ASSESSMENT OF SUCH INCOME AS INCOME FROM PROPERTY OR OTHER SOURCES. WHAT HAS TO BE SEEN IS WHAT WAS THE PRIMARY OBJECT OF THE ASSESSEE WHILE EXPLOITING THE PROPERT Y. IN CASE IT IS FOUND THAT THE MAIN INTENTION IS TO EXPLOIT THE IMMOVABLE PROPERTY BY WAY OF COMPLEX COMMERCIAL ACTIVITY IN T HAT EVENT IT MUST BE HELD AS BUSINESS INCOME. SUPPORT FOR THIS V IEW WAS DERIVED FROM THE RATIO LAID DOWN BY THE CALCUTTA HI GH COURT IN THE CASE OF CLT VS SHAMBHU INVESTMENT {P} LTD (249 ITR 47). SIMILAR VIEWS WERE ALSO EXPRESSED BY CALCUTTA TRIBU NAL IN THE CASE OF PFH MALL AND RETAIL MANAGEMENT LTD VS I TO (298 ITR (AT) 371 PLACING RELIANCE ON SEVERAL DECISIONS OF THE HON'BLE COURTS. IN THE INSTANT CASE THE ASSESSEE ACQUIRED MAHAVIR F ERRO ALLOYS FROM SRI RAMAKRISHNA AGARWAL WHO WAS EARLIER OWNING THE SAID 14 ITA NOS. 208, 266, 267, 209, 250, 251 & 262/H/12 M/S SRI SHIVA SPINNING MILLS LTD. & SHRI KANTILAL A GARWAL. UNIT AS A PROPRIETARY CONCERN. THE UNIT WAS ACQUIRED BY MEANS OF AN AGREEMENT EXECUTED ON 1-4-2008. AS CAN BE SEE N FROM ANNEXURE B TO THE SAID AGREEMENT, THE UNIT CONSISTS OF MAIN FURNACE, CHIMNEY, SEVERAL OTHER ITEMS RUNNING THE U NIT, ETC. APART FROM IMMOVABLE PROPERTY. IN ALL THERE ARE 15 ITEMS OF MACHINERY, FURNITURE, WEIGHING MACHINES, ETC. ALL T HESE FORMED PART OF THE UNIT CALLED MAHAVIR FERRO ALLOYS. BEFOR E ACQUISITION OF THE SAME BY THE ASSESSEE, THE PREVIOUS OWNER WAS ALSO EXPLOITING THE UNIT FOR COMMERCIAL ACTIVITY AND IN THE PROCESS HAD LEASED OUT THE UNIT TO TEAM FERRO ALLOYS LTD. AFTER ACQUISITION OF THE PROPERTY, THE ASSESSEE ALSO CONT INUED THE SAID LEASE WITH THE PRIMARY OBJECT OF EXPLOITING TH E SAID PROPERTY FOR COMMERCIAL ACTIVITY FOR A TEMPORARY PERIOD MAIN LY BECAUSE IT IS THE FIRST YEAR OF ACQUISITION; AND THE ASSESSEE- COMPANY REQUIRES THE NECESSARY WHEREWITHAL TO RUN THE UNIT ON ITS OWN. 21. FURTHER, THE AR SUBMITTED THAT THE LEASE BY M/S SRI SHIVA SPINNING MILLS PVT LTD WITH THAT OF TEAM FERRO ALLO YS PVT LTD IS NOT SUPPORTED BY WRITTEN LEASE AGREEMENT AND THE TERM O F THE LEASE IS STATED TO BE ONE YEAR STARTING FROM 1.4.2008. THE A SSESSEE COMPANY STATED TO HAVE REDUCED SUCH AGREEMENT INTO WRITING, ONLY ON 1.7.2009 WITH THE STIPULATION OF LEASE RENT FOR A PERIOD OF THREE YEARS FROM THE DATE OF SIGNING OF LEASE DEED. IT IS ALSO STATED TH AT THE UNIT WAS ACQUIRED BY THE ASSESSEE ON 1-4-2008 AND BEFORE ITS TAKEOVER, THE PREVIOUS OWNER OF THE UNIT I.E. MR.RAMPRASAD AGARWA L HAD ALSO LEASED THE SAID UNIT TO THE EXISTING LESSEE I.E. MLS TEAM FERRO ALLOYS PVT LTD. IT HAS BEEN SUBMITTED THAT IN VIEW OF THE PRACTICAL DIFFICULTIES SUCH AS INEXPERIENCE IN SETTING-UP AND RUNNING OF T HE BUSINESS, THE ASSESSEE DECIDED TO CONTINUE THE LEASE FOR A TEMPOR ARY PERIOD OF ONE YEAR WITH THE EXISTING LESSEE OF MR.RAMPRASAD AGARW AL IMMEDIATELY AFTER TAKING OVER OF THE UNIT. IT IS FURTHER SUBMIT TED THAT IN THE FIRST YEAR OF TAKE OVER IT WAS ORALLY AGREED TO CONTINUE THE L EASE FOR AN YEAR AND WITH THE EXPIRY OF THE LEASE ON 30-6- 2012, THE ASS ESSEE WILL TAKE OVER THE UNIT AND RUN IT ON ITS OWN. THUS, ASSESSEE TRI ED TO EMPHASIZE THE FACT THAT THE ASSESSEE COMPANY HAS GRANTED THE LEAS E ONLY FOR A SHORT AND TEMPORARY PERIOD OF ONE YEAR AND AS SUCH THE LE ASE RENT RECEIVED FOR THE SAID PERIOD TO BE CONSIDERED AS BUSINESS IN COME. IN SUPPORT OF ITS SAID CONTENTION, THE ASSESSEE RELIED ON THE DEC ISION IN THE CASE OF CLT VS SMT SURESHINI MITTAL 277 ITR 88 (ALL) . 15 ITA NOS. 208, 266, 267, 209, 250, 251 & 262/H/12 M/S SRI SHIVA SPINNING MILLS LTD. & SHRI KANTILAL A GARWAL. 22. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS O F THE ASSESSEE PERUSED AND OBSERVATIONS/FINDINGS OF THE ASSESSING OFFICER, IN ASSESSMENT ORDER, OBSERVED THAT ASSESSEE COMPANY H AS LEASED ITS WHOLE UNIT CONSISTING OF LAND, PLANT & MACHINERY AN D WAS FETCHING IT THE LEASE RENT. AGAINST THE LEASE RENTS RECEIVED, T HE ASSESSEE COMPANY SHOWN TO HAVE INCURRED SOME EXPENSES MAINLY FALLING UNDER THE HEAD 'DEPRECIATION' (RS.27,87,107), 'INTEREST O N BANK LOAN' (RS.9,30,609) AND 'ELECTRICAL CHARGES' (RS.34,85,76 7) AND CLAIMED IN ARRIVING AT THE PROFIT UNDER THE HEAD 'BUSINESS INC OME'. HOWEVER, THE ASSESSING OFFICER CONCLUDED THAT THE LEASE RENT WAS RECEIVED ON ACCOUNT OF LETTING OUT PART OF ITS PROPERTY ALONE. IN THIS CASE, IT IS ALSO A FACT THAT THE AGREEMENT FOR LEASE WAS NOT SIGNED BETWEEN THE LESSOR AND LESSEE FOR THE PERIOD UNDER CONSIDERATION BUT T HE SAME HAS BEEN MATERIALIZED WITH THE AGREEMENT REDUCED INTO WRITIN G IN THE SUBSEQUENT YEARS, AS REFERRED ABOVE. INFORMATION IN THE FORM OF COPIES OF INCOME TAX RETURNS FURNISHED BY THE ASSES SEE DURING THE COURSE OF APPEAL PROCEEDINGS ALSO INDICATE THAT SIM ILAR INCOME EARNED BY THE EARLIER OWNER OF THE UNIT AND THE ASSESSEE I TSELF IN THE SUBSEQUENT YEARS, WERE OFFERED UNDER THE HEAD 'BUSI NESS INCOME'. THOUGH THERE IS NO WRITTEN AGREEMENT BETWEEN THE AS SESSEE AND LESSEE FOR LEASING OUT OF THE SPONGE IRON UNIT, IT CLEARLY INDICATES BY ITS NATURE OF THE BUSINESS THAT THE UNIT NOT ONLY C ONSIST OF THE LAND BUT ALSO HUGE PLANT & MACHINERY ASSOCIATED WITH IT. THE ANNEXURE ATTACHED TO THE AGREEMENT FOR TAKING OVER THE UNIT DT.L.4.2008 CLEARLY INDICATE THAT THE UNIT CONSIST OF CERTAIN PLANT & M ACHINERY ALONG WITH OTHER ASSETS. THAT BEING THE CASE SO, THERE IS NO A BNORMALITY IN TREATING THE SAID INCOME AS BUSINESS INCOME FOR THE YEAR UNDER REFERENCE KEEPING THE FACT THAT THE MANUFACTURING A CTIVITY IS CONTINUED WITH THE WEAR AND TEAR OF THE PLANT & MACHINERY. FU RTHER, THIS YEAR BEING THE TRANSIT YEAR FOR THE ASSESSEE, FOR COMMEN CEMENT OF BUSINESS OF MANUFACTURING WITH THE UNIT WAS TAKEN O VER ON 1 ST OF APRIL, 2008 WAS LEASED OUT ON SHORT TERM BASIS BUT CONVERT ED TO LONG LEASE, SUBSEQUENTLY IN THE YEAR 2009-10. EVEN OTHERWISE, S HOULD THE SAID 16 ITA NOS. 208, 266, 267, 209, 250, 251 & 262/H/12 M/S SRI SHIVA SPINNING MILLS LTD. & SHRI KANTILAL A GARWAL. INCOME TO BE TAXED AS INCOME FROM OTHER SOURCES, TH E ASSESSEE IS ENTITLED FOR THE EXPENSES SUCH AS DEPRECIATION AND INTEREST ON BANK LOAN, ETC. WHICH ARE DIRECTLY RELATED TO THE INCOME , AS PER THE PROVISIONS OF SEC.S7 OF THE I.T. ACT,1961. THIS ASP ECT WAS COMPLETELY IGNORED BY THE ASSESSING OFFICER. 22.1 THE CIT(A) FURTHER OBSERVED THAT ASSUMING THAT LEASE RENT TO BE TREATED AS INCOME FROM PROPERTY/RENT, AS PER THE PR OVISIONS OF SEC.194- I OF THE I.T. ACT, 1961, UNDER WHICH THE TDS WAS MAD E FOR THE PAYMENTS RELATED TO THE SAID LEASE RENT, AS REFERRE D IN THE ASSESSMENT ORDER, THE ASSESSEE IS ELIGIBLE FOR STANDARD DEDUCT IONS AS PER SEC.24 OF THE I.T. ACT,1961. THIS WAS ALSO NOT TAKEN INTO CONSIDERATION WHILE MAKING THE ADDITIONS BY THE ASSESSING OFFICER. FURT HER, THE EXPENSES TO THE TUNE OF RS.34,85,767, UNDER THE HEAD 'ELECTR ICAL CHARGES' CLAIMED BY THE ASSESSEE HAS ALREADY BEEN DISALLOWED FOR THE YEAR UNDER REFERENCE, AS PER THE DISCUSSION IN PARA 6.0 OF THIS ORDER, SINCE SUCH EXPENSE WAS TREATED AS UNRELATED TO THE INCOME OF THE ASSESSEE. HENCE, THE DISALLOWANCE OF SAID EXPENSE A MOUNTS TO DOUBLE ADDITION IN THIS CASE. CONSIDERING ALL THESE FACTS AND ALSO ON CONSIDERING THE FACT THAT THERE IS NO LOSS OF REVENUE, THERE WAS NO BASIS FOR THE ASSESSING OFFIC ER TO TREAT THE SAME AS INCOME FROM OTHER SOURCES. THE CASE LAW QUO TED BY THE ASSESSEE IN THE CASE OF CIT VS SMT SURESHINI MITTAL 277 ITR 88 (ALL) IS RELEVANT FOR THE ASSESSEE'S CASE UNDER CONSIDERA TION AND AS SUCH THERE IS NO CASE FOR THE ASSESSING OFFICER TO TREAT THE LEASE RENT AS INCOME FROM OTHER SOURCES. FURTHER, AS IT WAS ESTAB LISHED IN THIS CASE THAT THE PERIOD OF ONE YEAR TO BE TREATED AS TRANSI TION PERIOD WHEREIN IT WAS NOT POSSIBLE TO DECIDE THE NATURE OF INCOME. EVEN ON THE FACTS, THE EXPENSES SUCH AS DEPRECIATION AND INTEREST ON L OANS RELATED TO THE ASSETS OF THE UNIT ARE NOT LIABLE TO BE REJECTE D SINCE THEY ARE RELATED DIRECTLY TO THE INCOME EARNED. HENCE, THE C IT(A) HELD THAT THE ADDITION OF ENTIRE AMOUNT AS INCOME OF THE ASSESSEE IS WITHOUT ANY BASIS AND AS SUCH THE ADDITION IS DELETED. ACCORDIN GLY, THE ASSESSING OFFICER IS DIRECTED TO RECOMPUTE THE INCOME TREATIN G THE SAME AS 17 ITA NOS. 208, 266, 267, 209, 250, 251 & 262/H/12 M/S SRI SHIVA SPINNING MILLS LTD. & SHRI KANTILAL A GARWAL. BUSINESS INCOME WHILE GIVING APPEAL EFFECT TO THIS ORDER, BY EXCLUDING THE ELECTRICITY CHARGES. 23. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 24. BEFORE US, THE LEARNED DR SUBMITTED THAT IN THE AUDIT REPORT IN FORM 3CD, THE ASSESSEE HAS CLAIMED THAT IT HAS ALSO STARTED LEASE RENT BUSINESS AND THIS IS THE FIRST OF SUCH BUSINES S. HOWEVER, NO DOCUMENTARY EVIDENCE LIKE MINUTES OF SHARE HOLDERS MEETING, ALTERATION TO THE MEMORANDUM OF ARTICLES OF THE ASS OCIATION OF THE COMPANY HAVE BEEN PRODUCED. HE, THEREFORE, SUBMITTE D THAT IT IS A CLEAR CASE WHERE ASSESSEE HAS ONLY LET OUT A PART O F ITS PROPERTY AND HENCE, THE ASSESSING OFFICER HAS RIGHTLY TREATED TH E RENTAL AMOUNT RECEIVED FROM TEAM FERRO ALLOYS AMOUNTING TO RS. 96 LAKHS IS TREATED AS INCOME FROM OTHER SOURCES. 25. ON THE OTHER HAND, THE LEARNED AR OF THE ASSESS EE HAS RELIED ON THE ORDER OF THE CIT(A). 26. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PERUSED THE RECORD AS WELL AS GONE THROUGH THE ORDERS OF TH E AUTHORITIES BELOW. IN THIS CASE, THE ASSESSEE COMPANY HAS LEASE D ITS WHOLE UNIT CONSISTING OF LAND, PLANT & MACHINERY AND WAS FETCH ING IT THE LEASE RENT. AGAINST THE LEASE RENTS RECEIVED, THE ASSESSE E COMPANY SHOWN TO HAVE INCURRED SOME EXPENSES MAINLY FALLING UNDER THE HEAD 'DEPRECIATION' (RS.27,87,107), 'INTEREST ON BANK LO AN' (RS.9,30,609) AND 'ELECTRICAL CHARGES' (RS.34,85,767) AND CLAIMED IN ARRIVING AT THE PROFIT UNDER THE HEAD 'BUSINESS INCOME'. HOWEVER, T HE ASSESSING OFFICER CONCLUDED THAT THE LEASE RENT WAS RECEIVED ON ACCOUNT OF LETTING OUT PART OF ITS PROPERTY ALONE. WHEREAS THE CIT(A) OBSERVED THAT ASSUMING THAT LEASE RENT TO BE TREATED AS INCO ME FROM PROPERTY/RENT, AS PER THE PROVISIONS OF SEC.194- I OF THE I.T. ACT, 1961, UNDER WHICH THE TDS WAS MADE FOR THE PAYMENTS RELAT ED TO THE SAID LEASE RENT, AS REFERRED IN THE ASSESSMENT ORDER, TH E ASSESSEE IS 18 ITA NOS. 208, 266, 267, 209, 250, 251 & 262/H/12 M/S SRI SHIVA SPINNING MILLS LTD. & SHRI KANTILAL A GARWAL. ELIGIBLE FOR STANDARD DEDUCTIONS AS PER SEC.24 OF T HE I.T. ACT,1961. THIS WAS ALSO NOT TAKEN INTO CONSIDERATION WHILE MA KING THE ADDITIONS BY THE ASSESSING OFFICER. FURTHER, THE EXPENSES TO THE TUNE OF RS.34,85,767, UNDER THE HEAD 'ELECTRICAL CHARGES' C LAIMED BY THE ASSESSEE HAS ALREADY BEEN DISALLOWED FOR THE YEAR U NDER REFERENCE, SINCE SUCH EXPENSE WAS TREATED AS UNRELATED TO THE INCOME OF THE ASSESSEE. HENCE, THE DISALLOWANCE OF SAID EXPENSE A MOUNTS TO DOUBLE ADDITION IN THIS CASE. CONSIDERING THE TOTAL ITY OF THE FACTS OF THE CASE, WE ARE OF THE VIEW THAT THE CIT(A) HAS RI GHTLY DIRECTED THE ASSESSING OFFICER TO RECOMPUTE THE INCOME TREATING THE SAME AS BUSINESS INCOME WHILE GIVING APPEAL EFFECT TO HIS O RDER, BY EXCLUDING THE ELECTRICITY CHARGES. FURTHER, THIS VIEW OF OURS IS ALSO SUPPORTED BY THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CA SE OF UNIVERSAL PLAST LTD. ETC VS. CIT [1999] 237 ITR 454 WHEREIN I T WAS HELD AS FOLLOWS: NO PRECISE TEST CAN BE LAID DOWN TO ASCERTAIN WHETH ER INCOME (REFERRED TO BY WHATEVER NOMENCLATURE, LEASE AMOUNT , RENTS, LICENCE FEE) RECEIVED BY AN ASSESSEE FROM LEASING O R LETTING OUT OF ASSETS WOULD FALL UNDER THE HEAD PROFITS AND GA INS OF BUSINESS OR PROFESSION. IT IS A MIXED QUESTION OF LAW AND FACT AND HAS TO BE DETERMINED FROM THE POINT OF VIEW OF A BUSINESSMAN IN THAT BUSINESS ON THE FACTS AND IN TH E CIRCUMSTANCES OF EACH CASE INCLUDING TRUE INTERPRET ATION OF THE AGREEMENT UNDER WHICH THE ASSETS ARE LET OUT. WHERE ALL THE ASSETS OF THE BUSINESS ARE LET OUT, THE PERIOD FOR WHICH THE ASSETS ARE LET OUT IS A RELEVANT FACTOR TO FIND OUT WHETHER THE INTENTION OF THE ASSESSEE IS TO GO OUT OF BUSINESS ALTOGETHER OR TO COME BACK AND RESTART THE SAME. IF ONLY OR A FEW OF THE BUSINESS ASSETS ARE LET OUT TEMPORARILY WHILE THE A SSESSEE IS CARRYING OUT HIS OTHER BUSINESS ACTIVITIES THEN IT IS A CASE OF EXPLOITING THE BUSINESS ASSETS OTHERWISE THAN EMPLO YING THEM FOR HIS OWN USE FOR MAKING PROFIT FOR THAT BUSINESS ; BUT IF THE BUSINESS NEVER STARTED OR HAS STARTED BUT CEASED WI TH NO INTENTION TO BE RESUMED, THE ASSETS ALSO WILL CEASE TO BE BUSINESS ASSETS AND THE TRANSACTION WILL ONLY BE EX PLOITATION OF PROPERTY BY AN OWNER THEREOF, BUT NOT EXPLOITATION OF BUSINESS ASSETS. 19 ITA NOS. 208, 266, 267, 209, 250, 251 & 262/H/12 M/S SRI SHIVA SPINNING MILLS LTD. & SHRI KANTILAL A GARWAL. 26.1 FURTHER, THE COORDINATE BENCH IN THE CASE OF M /S VENKATA BALAJI STEEL ROLLING MILLS PVT. LTD. IN ITA NO. 431 TO 433 /HYD/2012 VIDE ORDER DATED 11/07/2012 CONSIDERED SIMILAR VIEW AND HELD AS FOLLOWS: 7. WE HEARD THE PARTIES AND PERUSED THE MATERIAL A VAILABLE ON RECORD. WE FIND THAT THE ASSESSING OFFICER, IN SUPP ORT OF HIS ACTION TO BRING TO TAX THE LEASE RENTAL INCOME OF T HE ASSESSEE UNDER THE HEAD OTHER SOURCES RELIED ON THE TDS CE RTIFICATES ISSUED BY THE LESSEE, HARIYANA STEEL CENTRE, WHICH WERE ISSUED IN TERMS OF S.194-IOF THE ACT, SHOWING THE INCOME U NDER THE HEAD RENT. BUT FOR THE RELIANCE ON THE SAID TDS C ERTIFICATES, THE ASSESSING OFFICER HAS NOT MADE ANY SERIOUS EFFORT T O ASCERTAIN THE INTENTION BEHIND THE LEASING OUT OF THE ASSETS, NEXUS OF THE BUSINESS OF THE ASSESSEE WITH THE EXPLOITATION OF T HE ASSETS, AND COMPOSITION OF THE TOTAL INCOME OF THE ASSESSEE , AND SUCH OTHER FACTORS WHICH CLINCH THE ISSUE RELATING TO DE TERMINATION OF THE HEAD UNDER WHICH THE LEASE RENTAL IS ASSESSABLE . IN THE APPELLATE PROCEEDINGS, THE ASSESSEE EXPLAINED THESE FACTORS TO SUPPORT ITS STAND FOR ASSESSING THE LEASE RENTAL IN COME UNDER THE HEAD BUSINESS ONLY. WE FIND THAT THE IMPUGNED ORDERS OF THE CIT(A) ARE BASED ON MERE APPRECIATION OF THEMAT ERIAL AVAILABLE ON RECORD, AND NO SPECIFIC MATERIAL AMOUN TING TO ADDITIONAL EVIDENCE, ENTERTAINED BY THE CIT(A) IN V IOLATION OF RULE 46A OF THE ACT, HAS BEEN BROUGHT TO OUR NOTIC E BY THE LEARNED DEPARTMENTAL REPRESENTATIVE. IT IS EVIDENT FROM RECORD THAT THE ASSESSEE HAS LEASED OUT PART OF ITS COMMER CIAL ASSETS ONLY FOR A TEMPORARY PERIOD OF THREE YEARS AND THE LEASE RENTALS RECEIVED CONSISTED OF ONLY A PORTION OF ITS TOTAL INCOME, WITH SUBSTANTIAL PORTION OF ITS INCOME HAVING BEEN DERIV ED FROM THE REGULAR BUSINESS. THE LETTING OUT HAS ALSO BEEN DON E BY THE ASSESSEE TO A CONCERN ENGAGED IN CONNECTED LINE OF BUSINESS. IT IS STATED AT THE BAR THAT AFTER THE EXPIRY OF TH E LEASE PERIOD OF THREE YEARS, THE LEASED PROPERTY IN QUESTION WAS B EING EXPLOITED BY THE ASSESSEE FOR ITS OWN BUSINESS PURP OSES. IN THE CIRCUMSTANCES, WE FIND THAT THE DECISION OF THE APE X COURT IN THE CASE OF UNIVERSAL PLAST LTD. (SUPRA) CLEARLY AP PLIES TO THE FACTS OF THE PRESENT CASE. THE CIT(A) AFTER TAKING NOTE OF THE PROPOSITIONS LAID DOWN BY THE APEX COURT IN THAT CA SE, HAS CONCLUDED, AS TAKEN FROM PARAS 3.4 OF HIS IMPUGNED ORDER FOR THE ASSESSMENT YEAR 2007-08, AS FOLLOWS- 3.4 AS COULD BE SEEN FROM THE RATIO OF THE DECISION OF THE HONBLE SUPREME COURT, WITH SPECIAL REFERENCE TO TH E PROPOSITIONS AS INDICATED ABOVE (AT PARA B), THE EXPLOITATION OF PROPERTIES WILL AMOUNT TO EXPLOITAT ION OF BUSINESS WHERE THE ASSETS OF THE BUSINESS ARE LET O UT TEMPORARILY FOR MAKING PROFIT FOR THE BUSINESS AND THE FACTS OF THE CASE ARE VERY MUCH IN LINE WITH THE SA ID PROPOSITIONS IN THIS CASE. BASED ON THE FACTS OF TH IS CASE, THE RATIO OF THE HONBLE SUPREME COURT APPEARS SQUA RELY 20 ITA NOS. 208, 266, 267, 209, 250, 251 & 262/H/12 M/S SRI SHIVA SPINNING MILLS LTD. & SHRI KANTILAL A GARWAL. APPLICABLE TO THIS CASE. ACCORDINGLY, IT IS HELD TH AT THE LEASE RENT BY VIRTUE OF EXPLOITATION OF THE COMMERC IAL ASSTS OF THE APPELLANT COMPANY, AMOUNTS TO THE BUS INESS INCOME AND TO BE TAXED ACCORDINGLY. WE FIND NO INFIRMITY IN THE ABOVE CONCLUSION ARRIVE D AT BY THE CIT(A). WE ACCORDINGLY, UPHOLD THE IMPUGNED ORDERS OF THE CIT(A), AND CONSEQUENTLY, GROUNDS OF THE REVENUE IN THESE APPEALS ARE DISMISSED. 26.2 IN VIEW OF THE ABOVE, WE CONFIRM THE ORDER OF THE CIT(A) DISMISSING THE GROUND RAISED BY THE REVENUE ON THIS ISSUE. 27. GROUND NO. 4 IS DIRECTED THAT THE LD. CIT(A) HA S ERRED IN ADMITTING ADDITIONAL EVIDENCE WITHOUT GRANTING ANY OPPORTUNITY TO THE ASSESSING OFFICER AS REQUIRED UNDER RULE 46A OF THE IT RULES. 28. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORD AS WELL AS GONE THROUGH THE ORDERS OF THE REVENUE AUTHORITI ES. SINCE WE HAVE CONFIRMED THE ORDER OF THE CIT(A) IN PARA 26 TO 26. 2, THIS GROUND BECOMES INFRUCTUOUS AND ACCORDINGLY THIS GROUND IS DISMISSED AS INFRUCTUOUS. 30. IN THE RESULT, APPEAL OF THE REVENUE IN ITA NO. 267/HYD/12 IS DISMISSED. ITA NO. 262/H/12 FOR AY 2008-09 IN CASE OF SRI KANT ILAL AGARWAL 31. THIS APPEAL IS DIRECTED AGAINST THE ORDER OF TH E CIT(A)-VII, HYDERABAD DATED 30/11/2011. 32. GROUND NOS. 1, 6 & 7 ARE GENERAL IN NATURE. 21 ITA NOS. 208, 266, 267, 209, 250, 251 & 262/H/12 M/S SRI SHIVA SPINNING MILLS LTD. & SHRI KANTILAL A GARWAL. 33. GROUND NO. 2 TO 5 ARE THAT THE CIT(A) OUGHT T O HAVE DELETED THE ENTIRE ADDITION OF RS. 6,10,00,000/- MADE TOWAR DS UNEXPLAINED INVESTMENT IN M/S MAA SACHIYA SPONGE IRON (P) LTD., JALNA INSTEAD OF RETAINING ADDITION TO THE EXTENT OF RS. 18,25,000/- AS UNEXPLAINED. 34. THE FACTS RELATING TO THIS ISSUE ARE THAT DURIN G THE COURSE OF SEARCH PROCEEDINGS, LOOSE SHEETS CONTAINING CERTAIN NOTINGS WERE SEIZED, MARKED AS ANNEXURE MIP/A/2. MR. RAMPRASAD A GARWAL, SON OF THE ASSESSEE WAS EXAMINED ON OATH ON THE CONTENTS O F THE SAME. AS PER THE CONTENTS OF THE SEIZED DOCUMENT, THE ASSESS EE GROUP PROPOSED TO PURCHASE THE STEEL UNIT LOCATED AT JALN A. ON BEING QUESTIONED ABOUT THE NATURE AND DETAILS OF THE CONT ENTS ON THE SAID DOCUMENT, IT WAS CONFIRMED AS A DOCUMENT RELATED TO THE PROPOSAL FOR TAKING OVER THE SPONGE IRON UNIT BY NAME M/S. MAA S ACHIYA SPONGE IRON (P) LTD AT JALNA AND IT WAS ANSWERED THAT AN AMOUNT OF RS.5.51 CRORES WAS THE AGREED AMOUNT AGAINST WHICH SOME AMOUNTS WERE PAID IN THE FINANCIAL YEAR 2007-08 & 2008-09. IT WAS ALSO SUBMITTED THAT THE DEAL COULD NOT BE COMPLETED AND THE AMOUNTS GIVEN AS ADVANCE TO THE SAID COMPANY ARE LYING AS A DVANCES. 34.1 WHILE COMPLETING THE ASSESSMENT, THE ASSESSING OFFICER HAS MADE AN ADDITION OF RS. RS.6,10,00,000/- TREATING T HE ENTIRE AMOUNT AS UNACCOUNTED INVESTMENT BEING THE CONSIDERATION P AID FOR TAKING OVER THE UNIT BY THE ASSESSEE GROUP. THE ASSESSING OFFICER ARRIVED AT THE SAID FIGURE OF RS. 6.10 CRORES AS AGAINST RS.6. 0 CRORES INDICATED IN BEGINNING OF THE SEIZED MATERIA REFERRED AT PAGE NO.102 OF ANNEXURE MIP/A/2. THE ASSESSING OFFICER DISCUSSED A BOUT THE FIGURES AS REFLECTED IN THE SAID PAPER OF THE ANNEXURE IN B RIEF AND CONCLUDED AS UNDER; 'FROM THE AVAILABLE EVIDENCE, IT IS CRYSTAL CLEAR T HAT THE ASSESSEE PROPOSED TO INVEST RS. 6.10 CRORES AND ACCORDINGLY INCURRED EXPENDITURE ON 30.9.2007 ITSELF. HENCE, THE ASSESSEE'S ORAL ASSERTION THAT THEY DID NOT PROCEED WITH THE ACQUISITION OF THE COMPANY CANNOT BE ACCEPTED. AS M ENTIONED, IT IS A FACT THAT THE ASSESSEE PROCEEDED TO ACQUIRE THE COMPANY 22 ITA NOS. 208, 266, 267, 209, 250, 251 & 262/H/12 M/S SRI SHIVA SPINNING MILLS LTD. & SHRI KANTILAL A GARWAL. SITUATED AT JALNA BY INVESTING RS. 6.10 CRORES. THE MATTER MAY NOT HAVE REACHED FINALITY AND THE FACTORY MIGHT NOT HAVE COME TO THE POSSESSION OF THE ASSESSEE BUT IT WILL NOT WIPE OUT THE CONCRETE EVIDENCE, THAT THE ASSESSEE INCURRED SUBST ANTIAL EXPENDITURE IN THE PROCESS OF ACGUIRING THE COMPANY. IT MAY NOT BE OUT OF PLACE TO MENTION EVEN THE AMOUNTS OF EXPENDITURE STATED TO HAVE BEEN INCURRED BY THE ASSESSEE AS MEN TIONED IN ANSWER TO QUESTION NO.18 (OF THE SWORN STATEMENT RE CORDED FROM SRI RAMPRASAD AGARWAL ON 22.5.2009), THE ASSESSEE COULD NOT IDENTIFY THE ENTRIES IN THE ACCOUNT BOOKS OF EITHER THE COMPANY OR THE INDIVIDUAL. AS MENTIONED BY THE ASSE SSEE WITH AN INTENTION TO ACQUIRE THE COMPANY AT JALNA, HE IN VESTED AN AMOUNT OF RS.6.10 CRORES. MOST PROBABLY THE MATTER MAY HAVE YET TO REACH ITS FINALITY BUT THE ASSESSEE CANNOT DISOWN H IS RESPONSIBILITY TO EXPLAIN THE SOURCES OF FUNDS SO FAR INVESTED / EXPENDITURE IN RESPECT OF THE PROCESS OF ACQUIRING THE COMPANY.' 34.2 REGARDING THE FACTS ON FINALITY OF THE DEAL AN D TRANSFER OF THE ASSETS/UNIT, THE ASSESSING OFFICER COME TO THE CONC LUSION THAT DEAL IS THROUGH, WITH SUBSTANTIAL AMOUNTS PAID. HIS COMMENT S REFLECT ON THE SPECIFIC ASPECT, ARE AS UNDER: 'THE MATTER MAY NOT HAVE REACHED FINALITY AND THE F ACTORY MIGHT NOT HAVE COME INTO THE POSSESSION OF THE ASSESSEE B UT IT WILL NOT WIPE OUT THE CONCRETE EVIDENCE THAT THE ASSESSE E INCURRED SUBSTANTIAL EXPENDITURE IN THE PROCESS OF ACQUIRING THE COMPANY. ' 34.3 THE ASSESSEE CONTENDED THAT NOTING UNDER THE SAID DOCUMENT IS A PLANNING PAPER FOR ACQUISITION OF THE UNIT, PR OVIDED ALL THE CONDITIONS ARE FULFILLED. IT WAS FURTHER SUBMITTED THAT DURING THE COURSE OF SEARCH PROCEEDINGS MR. RAMPRASAD AGARWAL WAS EXA MINED ON THE NOTINGS OF THE SAID LOOSE SHEET VIDE THE SWORN STAT EMENT DT.22.5.2009, IN WHICH IT WAS CATEGORICALLY STATED THAT THE PROPOSAL FOR TAKING OVER THE COMPANY AT JALNA WAS DROPPED BECAUSE OF SOME LITIGATIONS, BUT AN ARROUNT OF RS.15 LAKHS WAS PAI D DURING THE FINANCIAL YEAR 2007-08 AND RS.23.5 LAKHS PAID DURING THE FINA NCIAL YEAR 2008- 09 AND THE SAID AMOUNT WAS RECORDED IN THE BOOKS OF ACCOUNTS. THE FURTHER SUBMISSIONS OF THE ASSESSEE ARE REPRODUCED, WHICH ARE AS UNDER: 23 ITA NOS. 208, 266, 267, 209, 250, 251 & 262/H/12 M/S SRI SHIVA SPINNING MILLS LTD. & SHRI KANTILAL A GARWAL. 'THE ASSESSING OFFICER DISREGARDED THE INFORMATION FURNISHED BY THE ASSESSEE EVEN DURING THE COURSE OF SEARCH AND BROUG HT TO TAX THE ENTIRE VALUE OF THE UNIT AMOUNTING TO RS. 6.10 CRORES AS IF THE ASSESSEE INVESTED THE ENTIRE AMOUNT FOR ACQUISITION OF THE SAID COMPANY. THE LIABILITY DUE TO THE BANK WHICH SHOULD BE DISCHARGED BY THE ASSESSEE IF THE COMPANY IS ACQUIRED SHOWN AT RS. 4.27 CRORES IN THE SAME LOOSE PAPER WAS ALSO TREATED BY THE ASSESSING OFFICER AS INVESTMENT MADE BY THE ASSESSEE. THUS AP PARENTLY, THE A.O. FOR THE SAKE OF MAKING THE ADDITION DID NAT TA KE COGNIZANCE OF A PART OF THE SEIZED MATERIAL. IT IS A SETTLED LAW TH AT 'IF ANY MATERIAL SEIZED IS TO BE RELIED UPON, ENTIRE CONTENT APPEARI NG ON IT SHOULD BE CONSIDERED AND REVENUE CANNOT IGNORE SOME OF THE EN TRIES WHICH DO NOT SUIT IT AND ACCEPT OTHER. THE A. O'S ACTION IN IGNORING THE PORTION OF THE OVER DRAFT LIABILITY AND CONSIDER THE SAME A S INVESTMENT MADE BY THE ASSESSEE IS TOTALLY WRONG. IT MAY NOT BE OUT OF PLACE TO MENTION THAT THE RELEVANT BANK ACCOUNTS WHICH SPECI FY THE DEBT DUE TO THE BANK WERE ALSO SEIZED AND ARE PART OF THE SE IZED MATERIAL. COPIES OF THE SAME ARE ALSO PRODUCED FOR YOUR KIND PERUSAL. IT IS AN ACCEPTED LEGAL PROPOSITION THAT DUMB DOCUMENTS WITH NO CERTAINTY HAVE NO EVIDENTIARY VALUE. IN THE ABSENCE OF ADEQUATE MATERIAL AS TO NATURE AND OWNERSHIP OF THE TRANSACT IONS, UNDISCLOSED INCOME COULD NOT BE ASSESSED IN THE HANDS OF THE AS SESSEE MERELY BY ARITHMETICALLY TOTALING VARIOUS FIGURES JOTTED D OWN ON THE LOOSE DOCUMENTS. ON THE BASIS OF MERE ENTRY IN LOOSE SHEETS OF PAPER WITHOUT THERE BEING ANY EVIDENCE OF CASH PAYMENTS O R DISCHARGE OF LOAN DUE TO BANK, THE LOOSE ENTRIES IN THE PAPER IS ONLY A PLANNING. ADDITION ON THE BASIS OF SUCH ENTRY ON LOOSE SHEET WITHOUT CASH PAYMENTS ETE. COULD BE ON MERE SUSPICI ON WITHOUT ANY CORROBORATIVE EVIDENCE. AS SUCH, SUCH ADDITIONS ARE TO BE DELETED. TO CITE A CASE: IN NEMI CHAND DAGA VS ACLT (2005) 1 SOT 575 (DEL) IT WAS HELD THAT- (I) ENTRIES FOUND ON LOOSE PAPERS DURING A SEARCH CANNOT HAVE ANY AUTHENTICITY OR EVIDENTIARY VALUE IN ITSELF,' (II) IN OUR OPINION, THE AD COULD NOT HAVE GIVEN S UCH SIGNIFICANCE TO THE SCRIBBLING IN THE LOOSE PAPERS. IT HAS BEEN HELD BY MANY COURTS THAT PAPER ENTRIES FOUND IN LOOSE PAPERS HAV E NO EVIDENTIARY VALUE. (III) WHEN LOOSE PAPERS SEIZED SHOW THAT THE ASSES SEE WAS NOT BENEFITTED IN ANY MANNER, THEN IT HAS TO BE ACCEPTED, BECAUSE TAX CANNOT BE THRUST ON HIM 017 ASSUMPTION (IV) IF A MATERIAL SEIZED IS TO BE RELIED UPON, ENTIRE CONTENT APPEARING ON IT SHOULD BE CONSIDERED AND REVENUE CA NNOT IGNORE SOME OF THE ENTRIES WHICH DO NOT SUIT IT AND ACCEPT OTHER. 24 ITA NOS. 208, 266, 267, 209, 250, 251 & 262/H/12 M/S SRI SHIVA SPINNING MILLS LTD. & SHRI KANTILAL A GARWAL. AS SUCH THE ADDITION MADE ON THE BASIS OF ENTRY ON LOOSE SHEET WITHOUT CORROBORATIVE EVIDENCE OF CASH PAYMENTS ETE . WAS PURELY ON MERE SUSPICION. AS SUCH, THE SAID ADDITIO N SHOULD BE DELETED. 34.4 IT HAS BEEN FURTHER CONTENDED THAT THE ASSESSM ENT ORDER IS SILENT AS TO WHAT WAS THE EVIDENCE IN THE POSSESSIO N OF THE ASSESSING OFFICER TO CONCLUDE INVOLVEMENT OF SUBSTANTIAL EXPE NDITURE BY THE ASSESSEE WHEN THE CONTENTS OF THE DOCUMENT CLEARLY INDICATE A BANK LIABILITY. 35. AFTER CONSIDERING THE FINDINGS/OBSERVATIONS O F THE ASSESSING OFFICER AND THE SUBMISSIONS OF THE ASSESSEE ALONG W ITH THE DOCUMENTS FURNISHED, THE CIT(A) OBSERVED THAT THE ASSESSING OFFICER HAS ARRIVED AT SOME CONCLUSIONS, BASED ON THE MERE CONTENTS OF THE LOOSE SHEET, WITHOUT ENQUIRIES AND CORROBORATIVE EV IDENCES AND ALSO WHILE IGNORING SOME OF THE CONTENTS OF THE SAID DOC UMENT. ON THE OTHER HAND, THE ASSESSEE ALSO DO NOT APPEAR TO HAVE CONCRETE EVIDENCE TO EXPLAIN THE TRANSACTIONS OF THE SAID DO CUMENT. THOUGH THE ADDITIONS RESORTED TO BY THE ASSESSING OFFICER ARE BASED ON THE DOCUMENTS THAT FORMED PART OF THE SEIZED MATERIAL A S REFERRED ABOVE, THE ADDITION OF ENTIRE AMOUNT OF RS.6.10 CRORES, AP PEAR PRIMA FACIE, DO NOT STAND ON A GROUND THAT HAS BEEN CLEARLY ESTA BLISHED. THE ADDITION OF ENTIRE PROPOSED CONSIDERATION FOR TAKIN G OVER THE SPONGE IRON UNIT IS NOT FULLY EXPLAINABLE THROUGH THE DOCU MENT RELIED UPON BY THE ASSESSING OFFICER. AT THE SAME TIME, THE CONTEN TS OF THE LOOSE SHEET THAT HAS BEEN SEIZED DURING THE COURSE OF SEA RCH & SEIZURE PROCEEDINGS CANNOT BE TREATED AS DUMB MATERIAL IN L IGHT OF THE FACT THAT SOME OF THE CONTENTS OF THE SAID LOOSE SHEET A RE CORROBORATED AND CONFIRMED BY THE ASSESSEE HIMSELF. UNDER THE CI RCUMSTANCES, IT IS RELEVANT TO EXAMINE THE ISSUE INVOLVED WITH THE HEL P OF CIRCUMSTANTIAL/CORROBORATIVE EVIDENCE AS AVAILABLE IN THE SEIZED MATERIAL AS WELL AS IN THE ASSESSMENT RECORDS APART FROM THE INFORMATION FLOWN FROM THE SWORN STATEMENT OF ONE O F THE MAIN PERSONS OF THE GROUP. IT IS ALSO NOT OUT OF PLACE T O SAY THAT SOME OF 25 ITA NOS. 208, 266, 267, 209, 250, 251 & 262/H/12 M/S SRI SHIVA SPINNING MILLS LTD. & SHRI KANTILAL A GARWAL. THE TRANSACTIONS ARE ATTEMPTED TO BE EXPLAINED BY T HE ASSESSEE WITH THE HELP OF BOOKS MAINTAINED. UNDER THE CIRCUMSTANC ES, THE DOCUMENT CANNOT BE TERMED AS DUMB DOCUMENT, AS REFERRED BY T HE ASSESSEE. 35.1 THE CIT(A) NOTED THAT IN THIS CONTEXT, THE FAC TUAL POSITION RELATING TO THE ACTUAL CONSIDERATION DETERMINED FOR TAKING O VER THE UNIT WITH REFERENCE TO THE FIGURES AS APPEARING ON THE LOOSE SHEET VIS-A-VIS THE AMOUNTS TAKEN BY MR. RAMPRASAD AGARWAL, VIDE STATEM ENT DT.22.5.2009, ASSUMES IMPORTANCE. THE FIGURE OF RS. 5.51 CRORES AS INDICATED BY MR. RAMPRASAD AGARWAL, DOES NOT APPEAR S TO HAVE FOOL PROOF BASIS, AS REGARDS TO THE DOCUMENTARY EVIDENCE , EITHER FOUND DURING THE SEARCH PROCEEDINGS OR FURNISHED BY THE A SSESSEE HIMSELF OR ANY OTHER PERSON OF THE GROUP, DURING THE SEARC H & SEIZURE PROCEEDINGS OR THE ASSESSMENT PROCEEDINGS. NO BALAN CE SHEET OR VALUATION REPORT OF THE PROPOSED SPONGE IRON UNIT W ERE TRACED/AVAILABLE TO ARRIVE AT THE VALUE TO BE DETER MINED. IN ABSENCE OF THE CONTRARY EVIDENCE, THE EVIDENTIAL VALUE OF THE SEIZED MATERIAL, TAKES THE LEAD. UNDER THE CIRCUMSTANCES, ON THE BAS IS OF THE EVIDENTIARY VALUE OF THE SEIZED DOCUMENT, THE NATUR E OF THE DEAL FOR SPONGE IRON UNIT AT JALNA CAN BE CONCLUDED SAFELY A T RS.6.0 CRORES, AS AGAINST RS.6.10 CRORES DETERMINED AND ADOPTED BY TH E ASSESSING OFFICER IN ASSESSMENT ORDER. HOWEVER, IT CANNOT BE THE ONLY CONCLUSION. 35.2 AS REGARDS THE TOTAL CONSIDERATION, THE CIT(A) OBSERVED THAT EVEN IF IT TO BE BELIEVED AT RS.6.0 CRORES, AS ENUM ERATED ON THE LOOSE SHEET, THE TOTAL AMOUNT THAT CAN BE TREATED AS THE INVESTMENT MADE BY THE GROUP, COULD ONLY BE QUANTIFIED BY TAKING THE O THER ASPECTS SUCH AS THE AMOUNTS ACTUALLY PAID AND THE EMBEDDED LIABI LITIES SUCH AS BANK LOANS RELATED TO THE PURCHASE OF THE UNIT, INT O CONSIDERATION. IT IS ALSO FOUND THAT SOME AMOUNTS WERE REDUCED FROM THE AGREED CONSIDERATION SUCH AS THE VALUE TOWARDS THE COST OF THE LAND RETAINED BY THE OWNERS OF THE UNIT, WHICH HAS BEEN CONFIRME D BY ASSESSEE AND NOT DISPUTED BY THE ASSESSING OFFICER EITHER. O N THIS BASIS, THE 26 ITA NOS. 208, 266, 267, 209, 250, 251 & 262/H/12 M/S SRI SHIVA SPINNING MILLS LTD. & SHRI KANTILAL A GARWAL. NET CONSIDERATION AGREED TO BE PAID BY THE ASSESSEE WAS QUANTIFIED AT RS. 1,43,20,245, IN ABSENCE OF ANY CLAIMS OR COUNTE R CLAIMS AND RELATED INFORMATION THERETO COMPUTATION IS AS UNDER ; AGREED CONSIDERATION 6,00,00,000 LESS: COST OF THE LAND RETAINED BY OWNER OF THE UNIT 30,00,000 5,70,00,000 LESS: BANK LOAN 4,26,79,755 1,43,20,245 ========== 35.3 THE CIT(A) NOTED THAT THE NEXT ISSUE REMAINED UNRESOLVED IS THE AMOUNT PAID OR PAYABLE OUT OF THE SAID AGREED CONSI DERATION, WITH REFERENCE TO NOTINGS IN THE SEIZED MATERIAL, AS WEL L AS THE CONTENTS OF THE SWORN STATEMENTS, APART FROM THE SUBMISSIONS/IN FORMATION FURNISHED BY THE ASSESSEE. AS REFERRED ABOVE, IF TH E SAID CONSIDERATION WAS TO BE TAKEN AT RS.6.0 CRORES AS P ER THE LOOSE SHEET, THE BALANCE AMOUNT PAID OR PAYABLE WOULD BE RS.1.43 CRORES WHEREAS, IF THE AGREED CONSIDERATION TO BE TAKEN AT RS.5.51 CRORES AS REFERRED BY MR.RAMPRASAD AGARWAL VIDE HIS STATEMENT DT.22.5.2007, THE BALANCE PAYABLE OR PAID WOULD BE RS.94.20 LAKHS . OUT OF THE SAID AMOUNTS, THE ASSESSEE AS A GROUP, ADMITTED TO HAVE PAID AN AMOUNT OF RS.38.50 LAKHS TILL THE END OF THE FINANCIAL YEA R 2008-09, INCLUDING THE AMOUNT OF RS.15 LAKHS PAID IN FY 2007-08. IT IS RELEVANT TO DRAW ATTENTION TO THE AVERMENT MADE BY MR.RAMPRASAD AGAR WAL IN THE SWORN DEPOSITION RECORDED ON 22-5-2009 DURING THE S EARCH PROCEEDINGS. AN EXTRACT OF THE SAME READS AS UNDER: 'Q.NO.18:- I AM SHOWING YOU ANNEXURE MIP/A/2 SEIZED FROM YOUR OFFICE PREMISES, CONTAINING LOOSE SHEETS AND DOCUMENTS AND NUMBERED 1 TO 148. PLEASE EXPLAIN THE DETAILS OF THE TRANSACTION ANS:- ORIGINALLY IT WAS AGREED TO BUY M/S MAA SACHI YA SPONGE IRON {P} LTD, JALNA FOR AN AMOUNT OF RS. 5.51 CRORES INCLUDING BANK LIABILITY. THE DEAL COULD NOT THROUGH. HOWEVER , DURING THE PROCESS OF NEGOTIATIONS WE HAVE MADE FOLLOWING PAYM ENTS RS. 15,00,000/- DURING THE FINANCIAL YEAR 2007-08 AND RS. 23,50,000/- DURING THE FINANCIAL YEAR 2008-09. DEDUCTING 27 ITA NOS. 208, 266, 267, 209, 250, 251 & 262/H/12 M/S SRI SHIVA SPINNING MILLS LTD. & SHRI KANTILAL A GARWAL. THERE FROM VALUE OF LANDS AMOUNTING TO RS. 30,00,000/- RETAINED BY THEM, THE BALANCE AMOUNT PAYABLE IS RS. 5.21 CRORES. BANK LIABILITY TO THE EXTENT OF RS. 4,27,00,000/- {APPROX} BALANCE WORKS OUT TO RS. 38,50,000/-. IF THE DEAL GOES THROUGH WE WILL HAVE TO PAY AN AMOUNT OF RS. 38,50.000/-. DUE TO FINANCIAL AND POLITICOL REASONS WE ARE NOW NOT INTE RESTED TO GO THROUGH THE DEAL SPECIALLY FOR THE WRONG PROMISES A ND PICTURE GIVEN BY THE PROMOTERS. WE ARE TRYING TO RECOVER OUR ADVANCE BUT THERE IS NO HOPE. THE ADVANCES MADE TO M/S MAA SACHIYA IRON {P} LTD ARE RECORDED IN OUR BOOKS.' 35.4 THE CIT(A) OBSERVED THAT IT IS ALSO RELEVANT T O REFER TO THE CONTENTION OF THE ASSESSEE THAT EVEN IF THE PRESUMP TION UNDER SECTION 132 IS INVOKED AND THE ENTRIES IN THE SEIZED PAPERS ARE PRESUMED TO BE CORRECT, THE ASSESSING OFFICER DID NOT TAKE NOTE OF THE ENTRIES ON THE LIABILITIES SIDE AND HAD MERELY PROCEEDED WITH THE ENTIRE FIGURE OF RS. 6.10 CRORES SHOWN. WHILE GIVING THE BASIS FOR T HE FIGURE OF RS.5.51 CRORES BEING THE AGREED CONSIDERATION FOR TAKING OV ER THE UNIT AT JALNA, THE ASSESSEE EXPLAINED THAT THE SAID FIGURE OF RS.5.51 CRORES IS THE AMOUNT OFFERED BY THE ASSESSEE GROUP AS AGAINST THE FIGURE OF RS.6.0 CRORES MENTIONED ON THE LOOSE SHEET WHICH WA S NOTHING BUT COPY OF THE FAX SENT BY THE OTHER PARTY, GIVING THE IR OFFER. IT WAS FURTHER EXPLAINED THAT AFTER REDUCING THE FIGURE OF RS.30 LAKHS TOWARDS THE COST OF THE LAND RETAINED BY THE OWNER AND THE BANK LOAN OF RS.4.26 CRORES, THE NET CONSIDERATION PAYABLE OR PA ID WOULD BE RS.1.33 CRORES AFTER CONSIDERING FURTHER AMOUNT OF RS.10 LAKHS SHOWN TO HAVE PAID THROUGH DEMAND DRAFT AS PER LOOSE SHEE T. THE ASSESSEE FURTHER STRESSED ON THE RELEVANCE OF OTHER LIABILIT IES THAT ARE REFLECTED ON THE RIGHT SIDE OF THE LOOSE SHEET UNDER REFERENC E. REGARDING THE NATURE AND DETAILS OF THE FIGURES OF RS.70,75,900 A PPEARING ON THE RIGHT SIDE OF THE LOOSE SHEET, THE ASSESSEE HAS EXP LAINED THAT THEY ARE THE LIABILITIES TO BE PROVIDED AND DISCHARGED B Y THE OWNER OF THE PROPERTY. WHILE EXPLAINING THE DETAILS, IT WAS INDI CATED THAT RS. 4 LAKHS WAS SHOWN AS VALUE OF THE GENERATOR SET TO BE PROVIDED BY THE OWNER, RS.39.75 LAKHS ARE THE PAYMENTS DUE TO POLLU TION, EXCISE AND WAS MADE BY THE OWNER, RS. 11 LAKHS IS THE PAYMENT TO BE MADE TO ,MR.NANDUJI, THE BROKER WHO ARRANGED THE DEAL, TO W HOM THE OWNER IS 28 ITA NOS. 208, 266, 267, 209, 250, 251 & 262/H/12 M/S SRI SHIVA SPINNING MILLS LTD. & SHRI KANTILAL A GARWAL. TO PAY AND RS.16.05 LAKHS IS THE BANK INTEREST ON E XISTING LOAN FOR THREE MONTHS BEFORE CLOSURE TO BE DISCHARGED BY THE OWNER. ON REDUCING THE SAID AMOUNT FROM THE NET VALUE OF RS. 1,33,20,245/-, ON THE BASIS OF FIGURE OF RS. 6.00 CRORES AS INDICATED IN LOOSE SHEET, THE NET AGREED PRICE TO BE PAID WAS DETERMINED AT RS.62 ,44,345 AS AGAINST THE AMOUNT OF RS.38,50,000 ACTUALLY PAID BY THE ASSESSEE GROUP AS ON THE DATE OF SEARCH. 35.5 THE CIT(A) OBSERVED THAT THE ASSESSING OFFICER 'S CONCLUSION REGARDING THE FINALITY OF THE DEAL, AND THE ACTUAL PRICE FOR TAKING OVER THE UNIT AT JALNA WAS NOT BASED ON THE INFORMATION GATHERED EITHER WITH THE HELP OF THE ENQUIRIES CONDUCTED THROUGH HI MSELF OR THE INFORMATION COLLECTED FROM THE ASSESSEE GROUP. ON T HE OTHER HAND, THE ASSESSEE HAS EXPLAINED WITH THE HELP OF FEW DETAILS REGARDING THE DEAL AND SUBMITTED THAT THE DEAL COULD NOT BE COMPL ETED AND THE AMOUNTS PAID AS ADVANCE ARE STILL LYING WITH THE UN IT OWNER. THERE IS NO CONCRETE INFORMATION AS REGARDS TO THE EXECUTION OR OTHERWISE OF THE DEAL FOR TAKING OVER THE UNIT AT JALNA. IT WAS FURTHER SUBMITTED THAT THE AMOUNTS THAT WERE PAID AS ADVANCES WERE PAID BY THE INDIVIDUAL MEMBER OF THE GROUP, APART FROM MR. KANTILAL AGARWA L, THE ASSESSEE. UNDER THE CIRCUMSTANCES, IT IS INEVITABLE TO FALL O N THE PROBABILITIES OR CIRCUMSTANTIAL EVIDENCES. IN THIS CASE. AS PER THE STATEMENT RECORDED FROM MR.RAMPRASAD AGARWAL ON 22.5.2009, THE PART OF THE CONSIDERATION PAID WAS INDICATED AT RS.38.50 LAKHS, BEING THE TOTAL OF THE AMOUNTS OF RS.15.00 LAKHS PAID DURING THE FY 2007-08 AND RS.23.50 LAKHS PAID IN THE FY 2008-09. THE SAID AMOUNT OF RS.38.50 LAKHS IS MORE THAN THE AMOUNT PAYABLE AFTE R CONSIDERING THE OTHER LIABILITIES OF RS.70.75 LAKHS AND RS.426.79 L AKHS TOWARDS BA NK LOAN, AS REFLECTED ON THE LOOSE SHEET OF THE SEIZED MATERIAL, PRESUMING THE TOTAL AGREED CONSIDERATION IS PUT AT RS.5.5L CRORES AS INDICATED BY MR.RAMPRASAD AGARWAL IN HIS SWORN STAT EMENT. THE AMOUNTS PAID ARE NOT TALLYING WITH THE AMOUNTS PAYA BLE AS PER BOTH THE PRESUMPTIONS. IN CASE, THE PRESUMED AMOUNTS TAK EN AT RS.6.00 CRORES, IT LEAVES A BALANCE FOR PAYMENTS AFTER CONS IDERING THE 29 ITA NOS. 208, 266, 267, 209, 250, 251 & 262/H/12 M/S SRI SHIVA SPINNING MILLS LTD. & SHRI KANTILAL A GARWAL. AMOUNTS ACTUALLY PAID, WHICH APPEARS TO BE A CORREC T CONSIDERATION DETERMINED FOR THE DEAL OF TAKING OVER THE UNIT. TH IS IS NEARER TO THE REAL POSITION IN NORMAL TRANSACTIONS WHERE THE PAYM ENTS ARE LESS THAN THE AGREED CONSIDERATION IN A DEAL WHICH IS YET TO BE CONCLUDED. THIS IS IN CONTRAST TO THE OTHER PRESUMPTION WHERE THE C ONSIDERATION IS TAKEN AT RS. 5.5L CRORES LEAVING EXCESS PAYMENTS AS AGAINST THE CONSIDERATION PAYABLE. UNDER THE CIRCUMSTANCES, THE CIT(A) OBSERVED THAT THE CONSIDERATION DETERMINED CAN BE SAFELY TAK EN AT RS.6.00 CRORES. 35.6 REGARDING THE ISSUE OF CONCLUSION/STALEMATE O N THE TAKEOVER OF THE JALNA UNIT, THE CIT(A) NOTED THAT IT HAS BEEN E XPLAINED BY THE ASSESSEE WITH THE HELP OF RETURNS OF INCOME OF THE GROUP, SAYING THAT THERE IS NO MENTION OF THE MACHINERY OR THE GENERAT ION OF INCOME BY SUCH UNIT. IN ANY OF THE YEARS, IN THE HANDS OF ANY CONCERNS OR INDIVIDUALS OF THE ASSESSEE GROUP. IT WAS ALSO SUBM ITTED THAT, SINCE THE MATTER IN DISPUTE, IT WAS NOT POSSIBLE TO OBTAI N THE CONFIRMATIONS FROM THE OTHER PARTY TO THE DEDUCTION/AGREEMENT. 35.7 THE CIT(A) HELD THAT IN ABSENCE OF ANY CONCLUS IVE PROOF AS REGARD TO THE TRANSACTION UNDER REFERENCE, IT IS HE LD THAT ACTION OF THE ASSESSING OFFICER IN ASSUMING AND COMING TO THE CON CLUSION THAT A TRANSACTION COMPLETED WILL ONLY AMOUNTS TO AN HYPOT HETICAL BELIEF, NOT SUPPORTED BY ANY CONCRETE EVIDENCE. SIMILARLY, THE ACTION OF THE ASSESSING OFFICER IN DETERMINING THE COST OF THE TR ANSACTION AT RS.6.10 CRORES AND TO TAX THE ENTIRE AMOUNT IN THE HANDS OF THE ASSESSEE AS UNACCOUNTED INVESTMENT WITHOUT CONSIDER ING THE FULL FACTS, INCLUDING THE LIABILITIES STANDING AGAINST T HE BANK AS WELL AS OTHER HEADS, WHICH ARE VERY MUCH EMBEDDED IN THE SE IZED MATERIAL, WILL ALSO AMOUNTS TO CONCLUSIONS THAT LACKS ANY BAS IS AND CLARITY. AS SUCH, THE ADDITION OF RS.6.10 CRORES MADE BY THE AS SESSING OFFICER TREATING THE ENTIRE PRESUMED CONSIDERATION AS THE T OTAL INCOME OF THE ASSESSEE, IS NOT SUSTAINABLE, IN ITS ENTIRETY. 30 ITA NOS. 208, 266, 267, 209, 250, 251 & 262/H/12 M/S SRI SHIVA SPINNING MILLS LTD. & SHRI KANTILAL A GARWAL. 35.8 THE CIT(A) OBSERVED THAT HAVING CONCLUDED THAT THE TRANSACTION HAS NOT BEEN EXECUTED BUT THE CONSIDERATION, EXCLUD ING THE LIABILITIES HAS BEEN PAID, IT IS RELEVANT TO EXAMINE SUCH PAYME NTS WITH REFERENCE TO THE SOURCES IN THE HANDS OF THE PERSONS OF THE A SSESSEE GROUP INCLUDING THE ASSESSEE MR.KANTILAL AGARWAL. IT IS A LSO PERTINENT TO MENTION HERE THAT NO SPECIFIC ENTITY/INDIVIDUAL WAS SHOWN TO HAVE SIGNED/ENTERED THE AID PROPOSAL FOR TAKING OVER THE UNIT AT JALNA, WHICH APPEARS TO BE A JOINT EFFORT BY THE GROUP AS A WHOLE, IF THE DETAILS OF THE PAYMENTS MADE AS A PART PAYMENT, INT O CONSIDERATION. DURING THE COURSE OF SEARCH & SEIZURE PROCEEDINGS, IT WAS SUBMITTED THAT AN AMOUNT OF RS.15.00 LAKHS WAS PAID DURING TH E FINANCIAL YEAR 2007-08 AND RS.23.50 LAKHS DURING THE FINANCIAL YEA R 2008-09. THE DETAILS OF THE AMOUNTS PAID BY INDIVIDUAL MEMBERS A GAINST THE AMOUNTS OF RS.38.50 LAKHS ADMITTED TO HAVE BEEN PAI D, ARE AS UNDER. IT HAS BEEN SUBMITTED FURTHER THAT THE AMOUNTS ARE RECORDED IN THE BOOKS, OF THE INDIVIDUAL MEMBERS OF THE GROUP, PAID TOWARDS THE CONSIDERATION FOR TAKING OVER THE UNIT, AS INDICATE D IN THE INCOME TAX RETURNS FILED BY THEM. NAME OF THE ASSESSEE AMOUNT INVESTED/F.Y DATE OF FI LING OF RETURN 1. RAMPRASAD K. AGARWAL 2,25,000/2007-08 JUNE, 2008 2. SHIVARAM K AGARWAL 3,00,000/2007-08 JUNE, 2008 3. VIJAYARAM KANTILALHUF) 5,00,000/2008-09 SEPTEMBER 2009 4. VIJAYARAM K AGARWAL 10,00,000/2008-09 SEPTEMBER 2009 AY AMOUNTS SHOWN TO HAVE PAID AMOUNTS REFLECTED IN INCOME TAX RETURNS BALANCE TREATED AS UNACCOUNTED 31 ITA NOS. 208, 266, 267, 209, 250, 251 & 262/H/12 M/S SRI SHIVA SPINNING MILLS LTD. & SHRI KANTILAL A GARWAL. 35.9 THE CIT(A) NOTED THAT ON VERIFICATION OF THE D ETAILS OF THE ADVANCES PAID WITH REFERENCE TO THE SOURCES FOR THE SAME AS MENTIONED BELOW, IT REVEALED THAT THE AMOUNTS CONTR IBUTED BE CONTRIBUTED BY INDIVIDUAL ENTITIES OF THE GROUP WIT H MAJOR AMOUNTS SHOWN TO HAVE BEEN CONTRIBUTED BY MR. VIJAYARAM K.A GARWAL, MR.RAMPRASAD AGARWAL AND MR. SHIVRAM AGARWAL, THE S ONS OF ASSESSEE. SINCE THE AMOUNTS SHOWN TO HAVE REFLECTED IN THE RETURNS OF INCOME OF INDIVIDUAL ENTITIES, THEY MAY BE TREAT ED AS ACCOUNTED, SUBJECT TO THE ENQUIRIES TO BE MADE BY THE ASSESSIN G OFFICER, IF REQUIRED. 35.10 THE CIT(A) HELD THAT IN CASE OF MR.KANTILAL AGARWAL, THE AMOUNTS OF RS.15,00,000/- SHOWN TO HAVE BEEN PAID I N THE FINANCIAL YEAR 2009-10, CANNOT BE CONSIDERED AS EXPLAINABLE S OURCE FOR THE ABOVE INVESTMENT, AS IT HAS BEEN PAID IN THE SUBSEQ UENT YEAR. THUS, THE UNEXPLAINABLE INVESTMENTS WITH REFERENCE TO THE SOURCES OF INCOME CAN BE QUANTIFIED AT RS.18,25,000/- FALLING IN TWO ASSESSMENT YEARS VIZ. AY 2008-09 AND AY 2009-10. AS THE ASSESS EE MR.KANTILAL AGARWAL, HAS UNDERTAKEN TO PAY TAX ON THE AMOUNTS A S QUANTIFIED ABOVE. THE ASSESSING OFFICER IS DIRECTED TO RECOMPU TE THE INCOME OF THE ASSESSEE BY TAKING THE SAID INCOMES IN THE RELE VANT ASSESSMENT YEARS. 2008-09 15,00,000 MR. RAMPRASAD K. AGARWAL 2,25,000 MR. SHIVRAM K. AGARWAL 3,00,000 9,75,000 2009-10 23,50,000 MR. VIJAYARAM K. AGARWAL (HUF) 5,00,000 MR. VIJAYARAM K. AGARWAL 10,00,000 8,50,000 18,25,000 32 ITA NOS. 208, 266, 267, 209, 250, 251 & 262/H/12 M/S SRI SHIVA SPINNING MILLS LTD. & SHRI KANTILAL A GARWAL. 36. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSES SEE IS IN APPEAL BEFORE US. 37. BEFORE US, THE LEARNED AR SUBMITTED THAT THE CI T(A) HAD NOT GIVEN CREDIT FOR RS. 15 LAKHS INVESTMENT SHOWN IN T HE RETURN FILED BY THE ASSESSEE FOR THE AY 2009-10 ON THE GROUND THAT IT WAS PAID IN THE SUBSEQUENT YEAR. THE LEARNED AR FURTHER SUBMITTED T HAT IN THE SWORN DEPOSITION DATED 22/05/2009, SRI RAMPRASAD WHILE AN SWERING Q.NO. 18 HAD CLEARLY STATED THAT DURING THE PROCESS OF NE GOTIATIONS PAYMENT OF RS. 15.00 LAKHS MADE DURING FY 2007-08 AND RS. 2 3,50,000/- DURING THE FY 2008-09. THEREFORE, THE INVESTMENT OF RS. 15 LAKHS MADE IN FY 2008-09 RELEVANT TO AY 2009-10, WHICH HA S BEEN ADMITTED IN THE RETURN FILED AND ACCORDINGLY, THE SAME HAS T O BE ALLOWED. 38. ON THE OTHER HAND, THE LEARNED DR HAS RELIED UP ON THE ORDER OF THE CIT(A). 39. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES , PERUSED THE RECORD AND HAVE GONE THROUGH THE ORDERS OF THE AUTH ORITIES BELOW. THE CONTENTION OF THE LEARNED AR OF THE ASSESSEE IS THA T THE AMOUNT OF RS. 15,00,000/- WAS OFFERED TO TAX IN THE AY 2009-1 0 BY THE ASSESSEE IN HIS RETURN OF INCOME AND ANOTHER AMOUNT OF RS. 2 3,50,000/- WAS OFFERED TO TAX BY THE ASSESSEE-HUF IN AY 2008-09, B EING, SO THERE CANNOT BE ANY DOUBLE TAXATION. AS SUBMITTED BY THE ASSESSEE, THERE CANNOT BE ANY DOUBLE TAXATION IN ASSESSEES HANDS O NCE AGAIN AND, THEREFORE, WE REMIT THE ISSUE BACK TO THE FILE OF T HE AO TO EXAMINE THE ISSUE IN THE LIGHT OF THE SUBMISSIONS OF THE ASSESS EE AND DECIDE THE ISSUE IN ACCORDANCE WITH LAW. ACCORDINGLY, THE GROU NDS RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 40. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO . 262/H/12 IS ALLOWED FOR STATISTICAL PURPOSES. 33 ITA NOS. 208, 266, 267, 209, 250, 251 & 262/H/12 M/S SRI SHIVA SPINNING MILLS LTD. & SHRI KANTILAL A GARWAL. ITA NO. 250/H/12 BY THE REVENUE FOR AY 2008-09 IN CASE OF SRI KANTILAL AGARWAL 41. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS IN THIS APPEAL: 2. THE LD. CIT(A) HAS ERRED IN RELYING ON ONLY ONE DOCUMENT AND IGNORING OTHER SEIZED MATERIAL CONTAINED IN ANN EXURE- MIP/A/2 WHICH CONTAINS FULL DETAILS OF THE TRANSACT ION RELATED TO ACQUISITION OF M/S MAA SACHIYA SPONGE IRON (P) LTD. BY THE ASSESSEE. 3. THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE LIA BILITIES OF MAA SACHIYA SPONGE IRON (P) LTD. WHICH WERE DISCHARGED BY THE ASSESSEE WILL NOT FORM PART OF THE TOTAL INVESTMENT MADE BY THE ASSESSEE IN ACQUISITION OF M/S MAA SACHIYA SPONGE I RON (P) LTD. 4. THE LD. CIT(A) HAS ERRED IN DELETING THE PROTECT IVE ADDITION OF RS. 58,42,800 AS UNEXPLAINED DEPOSITS IN THE BANK A CCOUNT OF THE ASSESSEE WITHOUT CONFIRMING THE SUBSTANTIVE ADD ITION. 42. THE FACTS RELATING TO THIS ISSUE ARE THAT IN TH E BANK ACCOUNT NO. 1627 STANDING IN THE NAME OF THE OF THE ASSESSEE AT NASIK COOPERATIVE URBAN BANK LTD, CASH DEPOSITS AMOUNTING TO RS.58,42,800/- WERE FOUND, MADE DURING THE YEAR. DU RING THE COURSE OF SEARCH PROCEEDINGS AS WELL AS AT THE TIME OF SCR UTINY ASSESSMENT, THE ASSESSEE SHOWN TO HAVE EXPLAINED THAT THE DEPOS ITS IN THE BANK ACCOUNT WERE OUT OF CASH GIVEN BY THE SAID COMPANY FOR CLEARING ITS ELECTRICITY DUES. HOWEVER, WHILE REJECTING THE CONT ENTION OF THE ASSESSEE, THE ASSESSING OFFICER HAS ADDED THE SAID AMOUNT IN THE HANDS OF THE ASSESSEE ON PROTECTIVE BASIS. 43. BEFORE THE CIT(A), THE ASSESSEE HAD SUBMITTED THAT THIS POSITION IS VERY MUCH CLEAR FROM THE SAID BANK ACCO UNT AND AFTER DEPOSITING THE CASH, CHEQUES WERE ISSUED BY THE ASS ESSEE TOWARDS DISCHARGE OF ELECTRICITY DUES PERTAINING TO THE SAI D COMPANY. AS SUCH, THE ASSESSEE SUBMITTED, THAT THE DEPOSITS AS WELL A S THE OUTGOINGS FROM THE SAID BANK ACCOUNT PERTAIN TO THE TRANSACTI ONS OF THE M/S MAHAVIR ISPAT PVT LTD. THUS, IT WAS CONTENDED THAT IT IS RELEVANT TO TREAT THE SAID DEPOSITS IN THE HANDS OF THE COMPANY AND THE ADDITION 34 ITA NOS. 208, 266, 267, 209, 250, 251 & 262/H/12 M/S SRI SHIVA SPINNING MILLS LTD. & SHRI KANTILAL A GARWAL. OF RS.58,42,800/- MADE ON PROTECTIVE BASIS IN THE A SSESSEE'S HANDS IS TO BE DELETED. IN SUPPORT OF THE SAID CONTENTION AND SUBMISSION, THE ASSESSEE HAS FURNISHED THE CONFIRMATION LETTER FROM M/S MAHAVIR ISPAT PVT LTD STATING THAT THE COMPANY IS ALSO IN APPEAL FOR THE SAID ASSESSMENT YEAR BEFORE CIT(A)-VII, HYDERABAD IN ITA NO.1210/DCIT CC- 4/CIT(A)-VII/2010-11 AND REQUESTED TO CONSIDER THE MATTER IN THE HANDS OF COMPANY ONLY AND IGNORE THE PROTECTIVE ADD ITION MADE IN THE HANDS OF SRI KANTILAL AGARWAL. 44. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSES SEE, THE CIT(A) OBSERVED THAT THE ADDITIONS MADE BY THE ASSESSING OFFICER ON PROTECTIVE BASIS IN THE ASSESSMENT ORDER OF THE ASSESSEE. IN VIEW OF THE FACTS THAT HAVE EMERGED AND BASED ON THE CON FIRMATION FURNISHED BY M/S MAHAVIR ISPAT PVT LTD., THE CASH D EPOSITS INTO THE BANK OF THE ASSESSEE WHICH WERE DRAWN TO MEET THE L IABILITY OF M/S MAHAVIR ISPAT PVT LTD, THE ADDITION IS TO BE CONSID ERED IN THE HANDS OF MAHAVIR ISPAT PVT LTD ONLY. AS SUCH THE ADDITION OF RS. 58,42,800/- MADE IN THE HANDS OF ASSESSEE ON PROTECTIVE BASIS, STANDS DELETED. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 45. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES , PERUSED THE RECORD AND HAVE GONE THROUGH THE ORDERS OF THE AUTH ORITIES BELOW. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A ) AS THERE IS NO EVIDENCE TO SUGGEST THAT THE LIABILITIES OF THE SAI D COMPANY ARE DISCHARGED BY THE ASSESSEE. BEING SO, WE CONFIRM TH E ACTION THE CIT(A) IN DELETING THE ADDITION OF RS. 58,42,800/- MADE IN THE HANDS OF THE ASSESSEE ON PROTECTIVE BASIS AND DISMISS THE GROUND RAISED BY THE REVENUE. 45.1 FURTHER, THE ISSUE OF SUBSTANTIVE ADDITION, DE ALT BY THE COORDINATE BENCH IN THE CASE OF M/S MAHAVIR ISPAT P VT. LTD. IN ITA NO. 1089 & 990/HYD/2012 VIDE ORDER DATED 21/02/2014 WHE REIN THE TRIBUNAL HELD AS FOLLOWS: 35 ITA NOS. 208, 266, 267, 209, 250, 251 & 262/H/12 M/S SRI SHIVA SPINNING MILLS LTD. & SHRI KANTILAL A GARWAL. 25. WE HAVE HEARD BOTH THE PARTIES AND PERUSED TH E MATERIAL ON RECORD. IN THIS CASE THERE IS AN UNACCOUNTED DEP OSIT IN THE BANK ACCOUNT AT RS. 2,44,96,200 AND AFTERWARDS THE SAME AMOUNT WAS USED FOR PAYMENT OF ELECTRICITY CHARGES AT RS. 2,42,60,675. THEREAFTER, THE CIT(A) WORKED OUT THE TURNOVER ON THE BASIS UNACCOUNTED ELECTRICITY CHARGES WORKED OU T AT RS. 13,98,08,035 AND ESTIMATED THE PROFIT ON IT AT 2.76 %. THE DECLARED TURNOVER BY THE ASSESSEE IN ITS BOOKS OF A CCOUNT IS AT RS. 12,53,14,790. ACCORDING TO THE CIT(A) UNACCOUNT ED TURNOVER IS MORE THAN THE ACCOUNTED TURNOVER. HE DE TERMINED THE TURNOVER IN PROPORTION TO THE ELECTRICITY CHARG ES INCURRED BY THE ASSESSEE AS COMPARED TO THE ACCOUNTED ELECTRICI TY CHARGES AND ACCOUNTED TURNOVER. THIS IS ONE OF THE POSSIBLE METHOD OF DETERMINING THE UNACCOUNTED TURNOVER. WE DO NOT FIN D ANY INFIRMITY IN THIS METHOD ADOPTED BY THE CIT(A) AND CONFIRM THE ESTIMATION OF UNACCOUNTED TURNOVER ON THE BASIS OF UNACCOUNTED ELECTRICITY CHARGES WHICH IS IN PROPORTION TO THE A CCOUNTED ELECTRICITY CHARGES AND ACCOUNTED TURNOVER. HOWEVER , IN OUR OPINION, INSTEAD OF APPLYING RATE OF PROFIT AT 2.76 % AS INCOME ON UNACCOUNTED TURNOVER, IT IS APPROPRIATE TO DETERMIN E THE NET PROFIT ON THE BASIS OF MEAN RATE OF NET PROFIT WHI CH WAS WORKED AT 2.06%, AS RECORDED BY THE CIT(A) IN HIS ORDER. T HIS VIEW OF OURS IS SUPPORTED BY THE DECISION OF VIZAG BENCH OF THIS TRIBUNAL IN THE CASE OF PRAKASH ARTS MOVING MEDIA IN ITA NO. 305-308 AND 348-351/VIZAG/2008 DATED 23.11.2010. ACCORDINGLY, WE DIRECT THE AO TO RECOMPUTE THE NET PROFIT ON UNACCOUNTED TURNOVER AT RS. 13,98,08,035 BY APPLYIN G THE MEAN RATE OF NET PROFIT AS MENTIONED IN CIT(A)'S ORDER A T 2.06%. THIS GROUND OF THE ASSESSEE IS ALLOWED. 45.2 IN VIEW OF THE CATEGORICAL FINDING GIVEN BY TH E TRIBUNAL IN THE SAID CASE, PROTECTIVE ADDITION CANNOT BE MADE IN TH E HANDS OF THE ASSESSEE AS THE ADDITION ON THIS COUNT WAS MADE IN THE CASE OF MAHAVIR ISPAT PVT. LTD. THEREFORE, THE GROUND RAISE D BY THE REVENUE IS DISMISSED. 46. IN THE RESULT, APPEAL IN ITA NO. 250/HYD/2012 O F THE REVENUE IS DISMISSED. ITA NO. 266/HYD/2012 APPEAL BY REVENUE FOR AY 200 8-09 IN CASE OF M/S SHIVA SPINNING MILLS P. LTD. 47. THE REVENUE HAS RAISED THE FOLLOWING SUBSTANTIA L GROUNDS IN THIS APPEAL: 36 ITA NOS. 208, 266, 267, 209, 250, 251 & 262/H/12 M/S SRI SHIVA SPINNING MILLS LTD. & SHRI KANTILAL A GARWAL. 2. THE LD. CIT(A) HAS ERRED IN ADMITTING ADDITIONAL EVIDENCE WITHOUT GRANTING ANY OPPORTUNITY TO THE AO AS REQUI RED UNDER RULE 46A OF THE IT RULES. 3. THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE SAI D ADDITION DOES NOT FALL U/S 68 OF THE IT ACT, 1961. 48. AS REGARDS THE FIRST GROUND PERTAINING TO ADMIT TING ADDITIONAL EVIDENCE, THIS GROUND IS COVERED BY THE DECISION OF THE COORDINATE BENCH IN CASE OF M/S VENKATA BALAJI STEEL ROLLING M ILLS P. LTD. IN ITA NO. 431 TO 433/HYD/2012 VIDE ORDER DATED 11/07/2012 . THEREFORE, AS MENTIONED IN PARA 26 (SUPRA) OF THIS ORDER, THIS GR OUND OF APPEAL IS DISMISSED. 49. AS REGARDS GROUND NO.2, THE AO NOTED THAT ON V ERIFICATION OF THE INFORMATION AVAILABLE ON RECORD, IT HAS BEEN OB SERVED THAT THERE WAS AN INCREASE IN SUNDRY CREDITORS FROM RS. 20,094/- TO RS. 34,48,931/-. OUT OF RS. 34,48,931/- AN AMOUNT OF RS. 34,23,143/- PERTAINS TO RAIN CALCINING. HOWEVER, THE ASSESSEE H AS FAILED TO PRODUCE ANY DOCUMENTARY EVIDENCE IN SUPPORT OF HIS CREDITOR. EXCEPT STATING THAT RS. 34,23,143/- PERTAINS TO 'RAIN CALCINING' NO OTHER DETAILS ARE FURNISHED DESPITE SUFFICIENT TIME AND O PPORTUNITIES BEING GIVEN TO THE ASSESSEE'. 49.1 THE ASSESSING OFFICER ARRIVED AT THE CONCLUSI ON THAT THE ASSESSEE FAILED TO DISCHARGE ITS ONUS OF PROVING TH E IDENTITY OF THE CREDITOR, AND BROUGHT THE SAID AMOUNT TO TAX, AS UN EXPLAINED CREDIT. 50. ON APPEAL, BEFORE THE CIT(A), T HE ASSESSEE CONTESTED THE ADDITION OF RS. 34,23,143/- AND THE SUM AND SUBSTAN CE OF THE ASSESSEE'S ARGUMENT IS THAT LITHE BASIS FOR THE ASS ESSING OFFICER, IN MAKING THE ADDITION, AS SEEN FROM PAGE 2 OF THE ASS ESSMENT ORDER, IS FROM THE STATEMENTS ANNEXED TO THE RETURNS OF INCOM E ORIGINALLY FILED AS ALSO IN RESPONSE TO NOTICE U/S 153A, AND DOCUMEN T WAS SEIZED1URING THE COURSE OF SEARCH AND NO INCRIMINAT ING MATERIAL OR DOCUMENT RELATING TO THIS TRANSACTION IS FOUND'. TH E ASSESSEE'S 37 ITA NOS. 208, 266, 267, 209, 250, 251 & 262/H/12 M/S SRI SHIVA SPINNING MILLS LTD. & SHRI KANTILAL A GARWAL. REPRESENTATIVE FURTHER SUBMITTED AS UNDER: 'SECTION 153A SIGNIFIES COMPUTATION OF UNDISCLOSED INCOME THAT SHALL FORM OF TOTAL INCOME THAT IS REQUIRED TO BE A GGREGATED WITH THE INCOME ALREADY ASSESSED IN CASES OF COMPLETED ASSESSMENTS MORE SO WHEN SECTION 132 OF THE ACT COMPREHENDS ACTION TO SEARCH OF A PERSON IN POSSESS ION OF UNDISCLOSED INCOME OR PROPERTY. IN THE INSTANT CASE, ADMITTEDLY, THE SEIZED DOCUMENTS DID NOT CONTAIN ANY INCRIMINAT ING MATERIAL REGARDING THIS TRANSACTION. APART FROM THIS, DURING THE COURSE OF THE SCRUTINY PROCEEDINGS ALSO, THE ASSESSING OFFICE R DID NOT CALL FOR ANY INFORMATION RELATING TO THIS TRANSACTION. I T IS ALSO TOTALLY INCORRECT ON HIS PART TO SAY THAT THE INFORMATION WAS FILED FOR THE FIRST TIME. NOTWITHSTANDING THE A.O'S OBSERVATION, THE ASSESSEE 'S WISHES TO EXPLAIN THE FACTUAL POSITION RELATING TO THE TRANSACTIONS WITH RAIN CALCINING (RCL). RCL IS A POWER SUPPLYING UNIT FROM WHOM THE ASSESSEE PURCHASES POWER. IT HAD REGULAR TRANSA CTIONS WITH THE RCL SINCE SEVERAL YEARS. AS ON 31-3-2008 THE ASSESSEE IS DUE TO PAY AN AMOUNT OF RS. 34,23,143/- TO THE SAID COMPANY FOR SUPPLY OF POWER. THE FIGURE WHICH IS A LIABILITY WAS WRONGLY ASSUMED BY THE A.O. AS CASH CREDIT. THE SAID LIABILITY WAS BROUGHT FORWARD AS ON 1-4-2008 AND THE SAME WAS DISCHARGED BY 31-3-2009 AND THE ACCOUNT WAS CLOSED. IN PROOF OF TRADE TRANSACTIONS WITH THE SAID RCL WE ARE PROD UCING HEREWITH COPY OF AN INVOICE DATED 29-3-2008 ISSUED BY THE SAID RCL SHOWING THE AMOUNT DUE TO THEM. AS A MATTER OF FACT IT MAY BE STATED THAT THE ENTIRE LIABILITY OF RS. 34,23,143/- WAS DISCHARGED DURING THE F. Y. 2008-09 RELEVANT FOR THE AY 2009- 10. THE SAME IS VERIFIABLE FROM THE AUDITED ACCOUNT S FILED FOR THE AY 2009-10. ' 50.1 IT WAS FURTHER CONTENDED THAT AS A MATTER OF F ACT, THE A.O. DID NOT ASK THE ASSESSEE TO FURNISH ANY INFORMATION REL ATING TO THE SAID INFORMATION, THE ASSESSING OFFICER'S ARGUMENT THAT LITHE ASESSEE DID NOT FURNISH THE INFORMATION DESPITE SUFFICIENT TIME ' IS FACTUALLY INCORRECT. IT WAS ALSO ARGUED THAT THE ENTIRE INFOR MATION IS AVAILABLE IN THE RECORDS AND THE RETURNS FILED BY THE ASSESSEE. 51. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESS EE, THE CIT(A) OBSERVED THAT THE MAIN ISSUE TO BE CONSIDERED HERE IS WHETHER THE AMOUNT OF RS. 34,23,143/- DUE TO RCL CAN BE CONSIDERED FOR ADDITION AS UNEXPLAINED CASH CREDIT IN TERMS OF SECTION 68 O F THE I.T. 38 ITA NOS. 208, 266, 267, 209, 250, 251 & 262/H/12 M/S SRI SHIVA SPINNING MILLS LTD. & SHRI KANTILAL A GARWAL. ACT. A PLAIN READING OF SECTION 68 SHOWS THAT THERE HAS TO BE A CREDIT OF AMOUNT IN THE BOOKS MAINTAINED BY THE ASSESSEE A ND SUCH CREDIT HAS TO BE A SUM DURING THE PREVIOUS YEAR WITH THE A SSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE OF SUCH CRE DIT FOUND IN THE BOOKS OF ACCOUNT OR THE EXPLANATION OFFERED BY THE ASSESSEE IN THE OPINION OF THE ASSESSING OFFICER IS NOT SATISFACTOR Y. ONLY UNDER SUCH CIRCUMSTANCES, THE SUM SO CREDITED MAY BE CHARGED T O INCOME TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. T HE EXPRESSION 'THE ASSESSES OFFERS NO EXPLANATION' MEANS WHERE THE ASS ESSEE OFFER NO PROPER, REASONABLE AND ACCEPTABLE EXPLANATION AS RE GARDS THE SUMS FOUND CREDITED IN THE BOOKS MAINTAINED BY THE ASSES SEE. IT IS TRUE THAT THE OPINION OF THE ASSESSING OFFICER FOR NOT ACCEPT ING THE EXPLANATION OFFERED BY THE ASSESSEE AS NOT SATISFACTORY IS REQU IRED TO BE BASED ON PROPER APPRECIATION OF MATERIAL FACTS AND OTHER INF ORMATION AVAILABLE ON RECORD. THE OPINION OF THE ASSESSING OFFICER IS REQUIRED TO BE FORMED OBJECTIVELY WITH REFERENCE TO THE MATERIAL A VAILABLE ON RECORD. 51.1 THE CIT(A) NOTED THAT AS COULD BE SEEN FROM T HE INFORMATION FURNISHED BY THE ASSESSEE; AND ALSO FROM THE ASSESS MENT ORDER, THE AMOUNT OF RS. 34,23,143/- IS APPEARING AS A LIABILITY TO BE DISCHARGED FOR PURCHASE OF POWER FROM M/S RAIN CLANCINING LTD (RCL). THE ASSESSING OFFICER HAD CLEARLY STATED THAT 'ON VERIFICATION OF THE INFORMATION AVAILABLE ON RECORD, IT HAS BEEN OBSERV ED THAT THERE WAS AN INCREASE IN SUNDRY CREDITORS FROM RS. 20,094/- TO RS. 34,48,931/-. OUT OF RS. 34,48,931/-, AN AMOUNT OF RS. 34,23,143/- PERTAINS TO RAIN CALCINING.' IT WAS ALSO SUBMITTED THAT THE ASSESSING OFFICER DI D NOT ASK FOR ANY INFORMATION OR CLARIFICATION BEFORE RESORTING TO THE ADDITION AND THE ASSESSMENT ORDER IS ALSO SILENT ON THIS. THUS IT CANNOT BE SAID THAT THE ASSESSEE FAILED TO DISCHARG E THE ONUS ON IT. AS STATED BY THE ASSESSING OFFICER THE BALANCE SHEE T AVAILABLE BEFORE HIM INDICATED THE AMOUNT DUE TO THE SAID RCL. IN TH IS REGARD, IT IS SUBMITTED THAT THIS LIABILITY WAS DISCHARGED IN THE FINANCIAL YEAR 2008- 09 (RELEVANT FOR THE AY 2009-10) AND EVIDENCED THROUGH COPIES OF THE RELEVANT LEDGER ACCOUNTS. THUS LIABILITY OF RS. 34,23,143/- TO BE 39 ITA NOS. 208, 266, 267, 209, 250, 251 & 262/H/12 M/S SRI SHIVA SPINNING MILLS LTD. & SHRI KANTILAL A GARWAL. DISCHARGED AT THE END OF THE ACCOUNTING YEAR CANNOT BE CONSIDERED AS A CREDIT WITHIN THE MEANING OF SECTION 68. THE CIT( A) HELD THAT THE FACTS FURTHER REVEAL THAT THE LIABILITY IS NOT AN O NE TIME CREDIT, BUT IS THE RUNNING ACCOUNT FOR AN EXPENSE INCURRED FOR THE BUSINESS PURPOSE. BEING THE POWER SUPPLIER TO ONE OF THE UNI TS OF THE COMPANY, THE LIABILITY ARISEN DURING THE YEAR, WHICH HAS BEE N DISCHARGED IN THE SUBSEQUENT YEAR. UNDER THESE CIRCUMSTANCES, IT CAN NOT BE TREATED AS CREDIT FOR THE PURPOSE OF SECTION 68 OR THE UNEXPLA INED CASH CREDIT. HENCE, THE ADDITION OF RS. 34,23,143/- IS DELETED. 52. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 53. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES , PERUSED THE RECORD AND HAVE GONE THROUGH THE ORDERS OF THE REVE NUE AUTHORITIES. BEFORE DELETING THE ADDITION, THE CIT(A) GAVE A CAT EGORICAL FINDING THAT BEING THE POWER SUPPLIER TO ONE OF THE UNITS O F THE COMPANY, THE LIABILITY ARISEN DURING THE YEAR, WHICH HAS BEEN DI SCHARGED IN THE SUBSEQUENT YEAR AND UNDER THESE CIRCUMSTANCES, IT C ANNOT BE TREATED AS CREDIT FOR THE PURPOSE OF SECTION 68 OR THE UNEX PLAINED CASH CREDIT. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDE R OF THE CIT(A) IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER U/S 68 AND ACCORDINGLY WE CONFIRM THE SAME DISMISSING THE GROU ND RAISED BY THE REVENUE. 54. IN THE RESULT, REVENUE APPEAL IN ITA NO. 266/HY D/2012 IS DISMISSED. ITA NO. 209/HYD/2012 ASSESSEES APPEAL FOR AY 200 9-10 IN CASE OF SRI KANTILAL AGARWAL 55. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOL LOWING GROUNDS OF APPEAL: 1. THE ORDER OF THE CIT(A) IN SO FAR AS IT WENT AGA INST THE ASSESSEE, IS ERRONEOUS BOTH ON FACTS AND IN LAW. 40 ITA NOS. 208, 266, 267, 209, 250, 251 & 262/H/12 M/S SRI SHIVA SPINNING MILLS LTD. & SHRI KANTILAL A GARWAL. 2. THE CIT(A) OUGHT TO HAVE DELETED THE ENTIRE ADDI TION OF RS. 43,00,000/- MADE TOWARDS UNEXPLAINED JEWELLERY, INS TEAD OF DELETING RS. 10,25,765/- ONLY. 3. THE CIT(A) OUGHT TO HAVE APPRECIATED THE FACT TH AT THE JEWELLERY FOUND DURING THE COURSE OF SEARCH BELONGE D TO THE MEMBERS OF THE FAMILIES, COMPRISING IN ALL 22 MEMBE RS; BUT NOT TO THE ASSESSEE ALONE. 4. THE CIT(A) WHILE HOLDING THAT 25% OF THE VALUE O F SILVER-WARE BELONG TO OTHER MEMBERS OF THE FAMILY, OUGHT TO HAV E EXTENDED THE SAME DECISION IN QUANTIFYING UNDISCLOSED GOLD J EWELLERY, WHICH HE FAILED TO DO. 5. THE CIT(A) ERRED IN HOLDING THAT AN AMOUNT OF RS . 9,75,000/- IS ASSESSABLE ON ACCOUNT OF UNEXPLAINED INVESTMENT IN M/S MA SACHIYA SPONGE IRON (P) LTD., JALNA. 56. BRIEFLY THE FACTS OF THE CASE ARE THAT THERE WA S A SEARCH AND SEIZURE OPERATION ON 29 TH JANUARY, 2009. THE ASSESSEE FILED HIS RETURN OF INCOME DECLARING AN INCOME OF RS. 22,58,430/-. T HE AO COMPLETED THE ASSESSMENT U/S 143(3) ON 31/12/2010, DETERMININ G TOTAL INCOME AT RS. 71,58,430/-, WHILE DOING SO, HE MADE THE FOLLOW ING ADDITIONS: 1. VALUE OF UNEXPLAINED JEWELLERY RS. 43,00,000 2. UNEXPLAINED CASH FOUND AT THE TIME OF SEARCHRS. 6,00,000 TOTAL RS. 49,00,000 =========== 57. ON APPEAL AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE CIT(A) OBSERVED THAT DURING THE COURSE OF SEAR CH & SEIZURE PROCEEDINGS, THE JEWELLERY FOUND BELONGING TO ASSES SEE HIMSELF AS WELL AS THE FAMILY MEMBERS, WAS INVENTORISED AND VA LUED. THERE IS NO DISPUTE AS REGARDS TO THE QUANTUM OF THE JEWELLERY AND SILVER WARE FOUND. THE DISPUTE IS MAINLY RELATED TO THE BASIS F OR QUANTIFICATION OF THE EXCESS JEWELLERY AND THE METHOD 'OF VALUATION O F THE JEWELLERY AS ADOPTED BY THE ASSESSING OFFICER. ON THE ISSUE OF Q UANTIFICATION OF EXCESS JEWELLERY, THE OBSERVATION OF THE ASSESSING OFFICER INDICATE THAT THE RELEVANT DETAILS PERTAINING TO THE INDIVID UALS OF THE FAMILY WITH REFERENCE TO THEIR WEALTH TAX RETURNS WERE STATED T O HAVE BEEN CONSIDERED BEFORE ARRIVING AT THE EXCESS JEWELLERY WHICH HAS BEEN TAXED IN THE HANDS OF THE ASSESSEE. IT IS A FACT TH AT THE ASSESSING OFFICER HAS NOT ELABORATED THE DETAILS AS REGARDS T O THE JEWELLERY IN 41 ITA NOS. 208, 266, 267, 209, 250, 251 & 262/H/12 M/S SRI SHIVA SPINNING MILLS LTD. & SHRI KANTILAL A GARWAL. POSSESSION OF EACH OF THE INDIVIDUAL WITH REFERENCE TO THEIR INCOME TAX / WEALTH TAX RETURNS. BUT ON VERIFICATION, IT WAS F OUND THAT NONE OF THEM WERE FILING THE WEALTH TAX RETURNS EXCEPT BY M RS. PRABHA DEVI WHO ALSO FOUND TO HAVE FILED HER WEALTH TAX RETURN FOR THE AY 2008-09 ON 6.2.2009 WHICH IS SUBSEQUENT TO THE DATE OF SEAR CH AND AFTER EXPIRY OF THE DUE DATE, FOR WHICH NO CORRECT CREDEN CE CAN BE GIVEN. THE EXPLANATION GIVEN BY THE ASSESSEE VIDE THE LETT ER DT.23.12.2010 STATING THAT POSSESSING JEWELLERY IS A NORMAL FEATU RE IN MARWADI COMMUNITY IS COMMON AND THE JEWELLERY BELONGED TO A LL THE FAMILY MEMBERS BROUGHT TO ONE PLACE FOR INVENTORISING AND VALUATION, IS ALSO NOT VERY ELABORATE OR EVIDENTIAL EXCEPT BEING INDIC ATIVE IN NATURE. THERE WAS ONUS ON THE ASSESSEE TO PROVE THAT JEWELL ERY IS ACCOUNTED IN HIS HANDS AS WELL AS IN THE HANDS OF THE FAMILY MEMBERS THROUGH THE RECORDED DOCUMENTS SUCH AS WEALTH TAX RETURNS, ETC. INSTEAD, THE ASSESSEE HAS CHOSEN TO EXPLAIN THE SAME THROUGH THE HELP OF AFFIDAVITS FILED BY FATHERS OF DAUGHTERS-IN-LAW OF THE ASSESSEE AND THE OTHER GENERAL STATEMENTS. THE AFFIDAVITS FILED BY F ATHERS OF TWO DAUGHTERS-IN-LAW WERE NOT ACCEPTED BY THE ASSESSING OFFICER SINCE THEY ARE NOT SUPPORTED BY MINIMUM INFORMATION SUCH AS THE SOURCES FOR ACQUISITION OF JEWELLERY IN THE HANDS OF PERSON S WHO HAVE FILED THE AFFIDAVITS AND SUCH REJECTION FOUND TO BE JUSTIFIED BY THE CIT(A). 57.1 SINCE, THE ASSESSEE HAS GIVEN THE BIFURCATION OF JEWELLERY STANDING IN THE NAMES OF EACH OF THE MEMBERS OF FAM ILY ALONG WITH THE VALUE OF THE SILVER AS TAKEN FROM THE VALUATION REP ORT IT WAS ARGUED BY THE ASSESSEE THAT CBDT'S CIRCULAR COULD HAVE TAKEN INTO CONSIDERATION WHILE DETERMINING THE QUANTUM AS WELL AS VALUE OF T HE JEWELLERY FOR THE PURPOSE OF SEIZURE AS WELL AS IN DETERMINATION OF THE UNACCOUNTED JEWELLERY. IT WAS ALSO ARGUED THAT A QUANTUM OF AS MUCH AS 132 KGS OF SILVER CANNOT BE ASSESSED IN ONE HAND WHEN THERE AR E AS MANY AS 22 FAMILY MEMBERS AND PLEADED FOR TREATING SUCH SILVER TO BE APPORTIONED AMONG THE FAMILY MEMBERS IN DETERMINING THE EXCESS JEWELLERY. 57.2 THE CIT(A) OBSERVED THAT THE JEWELLERY BELON GED TO THE ENTIRE 42 ITA NOS. 208, 266, 267, 209, 250, 251 & 262/H/12 M/S SRI SHIVA SPINNING MILLS LTD. & SHRI KANTILAL A GARWAL. FAMILY AND THE RELEVANT WEIGHTAGE TO BE GIVEN AS CR EDIT, AS IT IS HELD THAT BOTH THE VALUATION REPORTS MADE A MENTION OF T HE FACT THE JEWELLERY BELONGING TO THE ENTIRE FAMILY. IT SEEMS THE ASSESSING OFFICER HAS TAKEN THESE FACTORS INTO CONSIDERATION AT ARRIVING THE EXCESS JEWELLERY OF THE FAMILY. IT IS ONLY PRESUMED IN THAT WAY SINCE THE ASSESSING OFFICER HAS NOT DRAWN THE CHART OF ASCERTAINING THE ACCOUNTED AND UNACCOUNTED JEWELLERY IN INDIVIDUAL H ANDS. IN ABSENCE OF WEALTH TAX RECORD AND OTHER RELATED RECORDS, THE ASSESSING OFFICER APPEARS TO HAVE TAKEN A STAND IN ARRIVING AT THE EX CESS JEWELLERY BASED ON SOME CALCULATIONS WHICH WERE NOT BROUGHT O N RECORD, THOUGH IT IS A FACT THAT ASSESSING OFFICER HAS CONSIDERED THE JEWELLERY EQUIVALENT TO AS MUCH AS RS.69,38,208 AS EXPLAINED JEWELLERY. ON THE ISSUE OF VALUATION AND QUANTIFICATION OF SILVER IN THE HANDS OF THE ASSESSEE ALONE, THE ARGUMENT OF THE ASSESSEE APPEAR S TO HAVE SOME STRENGTH AND ACCORDINGLY, A PORTION OF THE JEWELLER Y NOT MORE THAN 25% OF SUCH SILVER ARTICLES CONSISTED OF SILVER PLA TES, MAY BE TREATED AS THE SILVER ARTICLES BELONGING TO THE OTHER MEMBE RS SINCE ONE INDIVIDUAL CANNOT PRESUMED TO HAVE SO MANY SILVER P LATES TO HIS NAME, AS AGAINST NIL IN CASE OF OTHER 22 MEMBERS OF FAMILY. ACCORDINGLY, THE ASSESSEE GOT RELIEF, BEING 25% OF THE VALUE OF THE SILVER ARTICLES WHICH CAN BE TERMED TO BE BELONGING TO THE OTHER MEMBERS OF FAMILY WHOSE WEALTH WOULD BE BELOW THE T AXABLE LIMITS AND EXPLAINABLE IN THEIR HANDS, WHICH WAS NOT CONSI DERED IN DETAIL BY ASSESSING OFFICER. SUCH VALUE IS TAKEN AS RS.6,47,4 97/- BASED ON THE VALUATION ADOPTED BY THE ASSESSING OFFICER WHICH IS EQUIVALENT TO 25% OF THE TOTAL VALUE OF SILVER ARTICLES OF RS.25,89,9 90, WHICH APPEARS TO HAVE TAKEN INTO CONSIDERATION IN QUANTIFICATION OF THE UNACCOUNTED JEWELLERY. ASSESSEE GETS A RELIEF OF RS. 6,47,497/- BEING THE VALUE OF SILVER ARTICLES, TREATED AS SILVER ARTICLES IN THE HANDS OF OTHER FAMILY MEMBERS. 57.3 REGARDING THE VALUATION OF JEWELLERY AS ADOPTE D BY THE ASSESSING OFFICER,THE CIT(A) OBSERVED THAT THE CLA IM OF THE ASSESSEE APPEAR TO BE REASONABLE SINCE THERE IS NO VARIATION IN THE QUANTITY OF 43 ITA NOS. 208, 266, 267, 209, 250, 251 & 262/H/12 M/S SRI SHIVA SPINNING MILLS LTD. & SHRI KANTILAL A GARWAL. THE VALUABLES FOUND IN THE COURSE OF SEARCH & SEIZU RE PROCEEDINGS. THE VARIATION WAS ON ACCOUNT OF THE VALUATIONS CARR IED ON TWO DIFFERENT DATES BY TWO DIFFERENT VALUERS WITH A GAP OF TWO MONTHS. THE PURPOSE OF VALUATION OF THE JEWELLERY IS TO ASCERTA IN THE VALUE OF THE INVESTMENT WITH A PURPOSE OF BRINGING THE UNACCOUNT ED INVESTMENT, IF ANY, INTO TAX NET. THAT BEING THE CASE SO, THE MOST APPROPRIATE VALUATION TO BE ADOPTED IS A VALUATION AS ON THE DA TE OF SEARCH I.E. 29.1.2009 IN THIS CASE. UNLESS, THERE IS A TECHNICA L DEFECT IN THE VALUATION REPORT OF AS ON DATE OF SEARCH, THERE IS NO REASON FOR THE ASSESSING OFFICER TO ADOPT THE DIFFERENT VALUATION ON A SUBSEQUENT DATE WITH OUT ANY VARIATION IN THE PHYSICAL QUANTIT IES AND WITHOUT ANY DEFECTS POINTED OUT IN THE VALUATION ADOPTED BY THE APPROVED VALUER. HENCE, THE PLEA OF THE ASSESSEE TO ADOPT THE VALUAT ION OF THE JEWELLERY AS ON THE DATE OF SEARCH I.E. AT RS.1,09, 28,308 IS REASONABLE AND AS A GROUND TO BE ACCEPTED. ACCORDIN GLY, THE CIT(A) DIRECTED THE ASSESSING OFFICER TO ADOPT THE VALUE O F JEWELLERY AT RS.1,09,28,308 AS AGAINST RS.1,13,00,576 ADOPTED IN THE ASSESSMENT ORDER AND COMPUTE THE EXCESS/UNACCOUNTED JEWELLERY ACCORDINGLY. ON THIS COUNT, THE ASSESSEE GOT A RELIEF OF RS.3,78,26 8, BEING THE DIFFERENCE IN TWO VALUATIONS. THUS, THE TOTAL RELIE F ON THE ISSUE OF EXCESS JEWELLERY IS QUANTIFIED AT RS.10,25,765/- (R S. 6,47,497 + RS.3,78,268). 58. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSES SEE IS IN APPEAL BEFORE US. 59. BEFORE US, THE ASSESSEE'S OBJECTION TO THE ABOV E ADDITION ARE ON TWO COUNTS, I.E., (A) METHOD OF VALUATION OF JEW ELLERY AND (B) QUANTIFICATION OF THE UNACCOUNTED JEWELLERY. REGARD ING THE VALUATION OF JEWELLERY, IT HAS BEEN CONTENDED THAT DURING THE COURSE OF SEARCH, GOLD JEWELLERY AND SILVER WARE FOUND WERE VALUED. WHILE THE FIRST APPROVED VALUER QUANTIFIED THE VALUE OF THE SAME VI DE VALUATION REPORT DT. 29-1-2009 AT RS.1,09,28,308/- AND THE VALUE AS PER THE 44 ITA NOS. 208, 266, 267, 209, 250, 251 & 262/H/12 M/S SRI SHIVA SPINNING MILLS LTD. & SHRI KANTILAL A GARWAL. SUBSEQUENT REPORT DT.17.3.2009 HAS BEEN PUT THE VAL UE AT RS. 1,13,06,576/-. THUS, THERE IS DIFFERENCE OF RS. 3,7 8,268/- BEING THE VARIATION IN TWO VALUATIONS. THE ASSESSING OFFICER ADOPTED THE FIGURE OF RS. 1,13,06,576/- FOR THE PURPOSE OF DETERMINING THE VALUE OF UNDISCLOSED JEWELLERY. IT WAS CONTENDED THAT, AS BO TH THE VALUATIONS WERE CARRIED OUT AT THE INSTANCE OF THE DEPARTMENT AND THE VALUATION AS ON THE DATE OF SEARCH I.E. 29.1.2009 SHOULD BE A DOPTED SINCE THE LATTER VALUATION WAS MADE AFTER A PERIOD OF TWO MON THS. THE ASSESSEE, THUS, REQUESTED THAT THE DIFFERENCE IN VA LUE AMOUNTING TO RS. 3,78,268/- BROUGHT TO TAX BY THE ASSESSING OFFI CER IS INCORRECT AND REQUIRES TO BE DELETED. 59.1 REGARDING THE QUANTIFICATION OF THE EXCESS JEW ELLERY OF RS.43,00,000/- WHICH WAS TREATED AND ADDED AS UNACC OUNTED INVESTMENT IN THE HANDS OF THE ASSESSEE, IT WAS SUB MITTED THAT JEWELLERY BELONGED TO THE ENTIRE FAMILY AND THE SAM E IS SUBSTANTIATED BY THE FACT THAT VALUERS IN THE REPORTS DT.29.1.200 9 & 17.3.2009 HAD CLEARLY MENTIONED THE POSITION THAT JEWELLERY BELON GED TO MR.KANTILAL AGRWAL AND FAMILY. IT WAS ALSO SUBMITTED THAT GOLD WAS RECEIVED BY TWO OF THE ASSESSEE'S DAUGHTERS-IN-LAW FROM THEIR F ATHERS WHO HAS SUBMITTED THE AFFIDAVITS IN THIS REGARD BUT NOT EXA MINED BY THE ASSESSING OFFICER. IT WAS ALSO CONTENDED BY THE ASS ESSEE THAT AS ON THE DATE OF SEARCH, THERE ARE FOUR MARRIED WOMEN WH OSE JEWELLERY WAS ALSO POOLED FOR VALUATION AND IN THIS CONNECTIO N, (CBDT'S INSTRUCTION IN F.NO.288/63/93-IT (LNV.) DT.11.5.199 4 CONTAINING THE GUIDELINES ON POSSESSION OF GOLD JEWELLERY BY MARRI ED WOMEN IS REFERRED TO. IT WAS ALSO SUBMITTED BY THE ASSESSEE THAT SINCE THE INDIVIDUAL MEMBERS HAD NO LIABILITY TO WEALTH TAX, NO RETURNS OF WEALTH TAX WERE FILED BY THEM AND IN CASE OF MRS.PRABHA DE VI, WEALTH TAX RETURNS WERE FILED AND AS SUCH THE POSSESSION OF JE WELLERY IN EACH OF THE MEMBERS MAY BE ACCEPTED AS REASONABLE . 60. ON THE OTHER HAND, THE LEARNED DR HAS RELIED UP ON THE ORDER OF THE CIT(A). 45 ITA NOS. 208, 266, 267, 209, 250, 251 & 262/H/12 M/S SRI SHIVA SPINNING MILLS LTD. & SHRI KANTILAL A GARWAL. 61. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES , PERUSED THE RECORD AND HAVE GONE THROUGH THE ORDERS OF THE AUTH ORITIES BELOW. THE MAIN CONTENTION OF THE ASSESSEES COUNSEL IS TH AT ON THE DATE OF SEARCH, THE ASSESSEES FAMILY CONSISTS OF FOLLOWING : 1. KANTILAL - HUF 2. KANTILAL SON OF SRI GULABRAI, AGE 72 YEARS 3. SITA DEVI W/O SRI KANTILAL, AGE 67 YEARS 4. RAMPRASAD HUF 5. RAMPRASAD S/O SRI KANTILAL, AGE 47 YEARS 6. REKHA DEVI W/O SRI RAMPRASHAD, AGE 45 YEARS 7. VIJAYRAM HUF 8. VIJAYRAM S/O SRI KANTILAL, AGE 44 YEARS 9. PRABHA DEVI W/O SRI VIJAYRAM, AGE 44 YEARS 10. SHIVRAM HUF 11. SHIVRAM S/O SRI KANTILAL, AGE 42 YEARS 12. VANITA DEVI W/O SRI SHIVRAM, AGE 40 YEARS 13. RAMKISHORE S/O RAMPRASHAD, AGE 24 YEARS 14. RIDHI D/O SRI RAMPRASHAD, AGE 22 YEARS 15. ANMOL D/O SRI RAMPRASHAD, AGE 19 YEARS 16. RAMANAND S/O VIJAYRAM, AGE 23 YEARS 17. POOJA D/O SRI VJAYRAM, AGE 20 YEARS 18. RUCHI D/O SRI VIJAYRAM, AGE 14 YEARS 19. RAMRATAN S/O SRI SHIVRAM, AGE 17 YEARS 20. SHIVANI D/O SHRI SHIVRAM, AGE 14 YEARS 21. NARAYAN S/O SRI SHIVRAM, AGE 13 YEARS. 61.1 HE ALSO SUBMITTED THAT DURING THE COURSE OF SE ARCH AND SEIZURE PROCEEDINGS, JEWELLERY OF ALL FAMILY MEMBERS HAVE BEEN BROUGHT FROM DIFFERENT ROOMS AND FROM THE POSSESSION OF DIFFEREN T FAMILY MEMBERS AND KEPT AT ONE PLACE AND THE DEPARTMENT INVENTORIZ ED THE SAME GOT VALUED. ONE FAMILY MEMBER NAMELY, SMT. PRABHA DEVI (PAN NO. ABVPD5570E) AS SHE WAS OWNING JEWELLERY OVER RS. 15 ,00,000/- USED TO FILE HER WEALTH TAX RETURNS AND COPIES OF W EALTH TAX RETURNS ETC., HAVE BEEN FILED WITH THE ADDITIONAL DIRECTOR OF INCOME-TAX, IN SUPPORT OF HER FILING OF WEALTH TAX RETURNS EVEN PR IOR TO SEARCH. THE OTHER FAMILY MEMBERS DID NOT FILE THE WEALTH TAX RE TURNS FOR THE REASON THAT THE VALUE OF POSSESSION OF JEWELLERY BY EACH F AMILY MEMBER WAS BELOW THE TAXABLE . HE, THEREFORE, REQUESTED THAT N OT TO TREAT THE VALUE OF GOLD ORNAMENTS AS INCOME OF ANY FAMILY MEM BERS AS IT BELONG TO DIFFERENT PERSONS AND REQUESTED TO RELEAS E THE JEWELLERY. 46 ITA NOS. 208, 266, 267, 209, 250, 251 & 262/H/12 M/S SRI SHIVA SPINNING MILLS LTD. & SHRI KANTILAL A GARWAL. HE STATED THAT NO INVESTMENT WAS MADE FROM 01/04/20 02 TILL THE DATE OF SEARCH I.E. 29 TH JANUARY, 2009 IN THE ACQUISITION OF ANY ADDITIONAL JEWELLERY OR GOLD ORNAMENTS EXCEPTING SMALL QUANTUM OF JEWELLERY ETC. RECEIVED AS GIFT/PRESENTS ETC. FORM OTHER MATERNAL PARENTS AND PARENTS OF LADIES. HE DREW OUR ATTENTION TO THE AFFIDAVIT F ROM SRI MURARILAL GOYAL, FATHER OF SMT. RADHA DEVI, (W/O SRI RAMPRASH AD) AND VIJAY KUMAR GOYAL OF KANPUR FATHER OF SMT. VANITA DEVI (W /O SRI SHIVRAM) WHEREIN THEY CONFIRMED THAT AT THE TIME OF MARRYING OF THEIR DAUGHTER, THEY HAVE GIVEN JEWELLERY. 61.2 IN VIEW OF THE ABOVE, WE INCLINE TO HOLD THAT MINIMUM AMOUNT OF JEWELLERY TO BE CONSIDERED IN EACH HAND OF THE FAMI LY MEMBERS OF THE ASSESSEE AS PER THE CBDT INSTRUCTION NO. 1916, DATE D 11/05/1994, WHEREIN IT HAS BEEN MENTIONED AS UNDER: ( I ) IN THE CASE OF A WEALTH-TAX ASSESSEE, GOLD JEWELL ERY AND ORNAMENTS FOUND IN EXCESS OF THE GROSS WEIGHT DECLA RED IN THE WEALTH-TAX RETURN ONLY NEED BE SEIZED. ( II ) IN THE CASE OF A PERSON NOT ASSESSED TO WEALTH-TA X GOLD JEWELLERY AND ORNAMENTS TO THE EXTENT OF 500 GMS. PER MARRIED LADY, 250 GMS. PER UNMARRIED LADY AND 100 GMS PER MALE MEMBER OF THE FAMILY NEED NOT BE SEIZED. ( III ) THE AUTHORISED OFFICER MAY, HAVING REGARD TO THE STATUS OF THE FAMILY, AND THE CUSTOM AND PRACTICES OF THE COMMUNI TY TO WHICH THE FAMILY BELONGS AND OTHER CIRCUMSTANCES OF THE C ASE, DECIDE TO EXCLUDE A LARGER QUANTITY OF JEWELLERY AND ORNAMENT S FROM SEIZURE. THIS SHOULD BE REPORTED TO THE DIRECTOR OF INCOME- TAX/COMMISSIONER AUTHORISING THE SEARCH AT THE TIME OF FURNISHING THE SEARCH REPORT. ( IV ) IN ALL CASES, A DETAILED INVENTORY OF THE JEWELLE RY AND ORNAMENTS FOUND MUST BE PREPARED TO BE USED FOR ASSESSMENT PU RPOSES. 61.3 AS SUBMITTED BY THE AR, THE INTENTION UNDERLIN ING THE CBDT INSTRUCTION ISSUED ON 11/056/1994 IS ALSO RELEVANT WITH REFERENCE TO DEEMING PROVISIONS OF SECTION 69A. IT IS OBSERVED F ROM THE SAID INSTRUCTION THAT 500 GRAMS JEWELLERY IS PERMITTED T O BE RETAINED IN THE CASE OF A MARRIED LADY, 250 GRAMS FOR UNMARRIED LAD Y AND 100 GRAMS FOR MALE MEMBER OF THE FAMILY. IT IS ALSO OBSERVED FROM PARA (III) OF THE SAID INSTRUCTION THAT THE AUTHORISED OFFICER MA Y HAVING REGARD TO 47 ITA NOS. 208, 266, 267, 209, 250, 251 & 262/H/12 M/S SRI SHIVA SPINNING MILLS LTD. & SHRI KANTILAL A GARWAL. THE STATUS OF THE FAMILY AND THE CUSTOM AND PRACTIC ES OF THE COMMUNITY TO WHICH THE FAMILY BELONGS AND OTHER CIR CUMSTANCES DECIDE TO EXCLUDE A LARGER QUANTITY OF JEWELLERY AN D ORNAMENTS FROM SEIZURE. WE ALSO MENTION HERE THAT WE HAVE COME ACR OSS THE DECISION OF THE TRIBUNAL IN THE CASE OF DEVILAL SONS VS. ACI T [1998] 99 TAXMAN 324 (JAIPUR) WHEREIN THE AFORESAID CBDT INST RUCTION DATED 11/05/1994 HAS BEEN CONSIDERED IN THE CONTEXT OF SE CTION 69. IN THE SAID CASE, THE ASSESSING OFFICER MADE ADDITION OF R S. 2,14,720/- AS UNEXPLAINED INVESTMENT IN GOLD JEWELLERY. THE ASSES SEE SUBMITTED THAT ORNAMENTS BELONG TO VARIOUS LADIES OF FAMILY A ND ASSESSEES WIFE ALSO EXPLAINED POSSESSION OF ITEM OF JEWELLERY. THE TRIBUNAL HELD THAT SINCE THE ASSESSING OFFICER HAD NOT CHALLENGED THE POSSESSION OF 94 GRAMS OF GOLD ORNAMENTS AND HE ONLY DOUBTED AND POI NTED OUT THE DIFFERENCE IN STATEMENTS OF THE ASSESSEE AND HIS WI FE, WHICH MENTIONED THE GIFT OF ORNAMENTS, WHICH VARIED SLIGH TLY AND THE ASSESSING OFFICER HAD NOT REBUTTED THE OTHER THINGS DID NOT BRING ANY EVIDENCE ON RECORD TO DISPROVE VARIOUS EVIDENCES, A DDITION COULD NOT BE SUSTAINED. THE TRIBUNAL ALSO TOOK INTO ACCOUNT T HE FACTS LIKE STATUS, CUSTOM, GIFTS AT THE TIME OF MARRIAGE, CHIL D BIRTH AND HELD THAT THE ENTIRE JEWELLERY IN POSSESSION OF THE ASSESSEE WAS WELL EXPLAINED. FURTHER, IN THE CASE OF STM. NEENA SAYAL VS. ACIT, 70 ITD 62 (CHAND.), THE TRIBUNAL CONSIDERED THE SAME CBDT CIR CULAR (SUPRA) AND REMITTED THE ISSUE TO RECOMPUTE THE ADDITION AN D ALLOW PROPER RELIEF TO THE ASSESSEE ON THE BASIS OF THE SAID CBD T CIRCULAR. IN VIEW OF THE ABOVE, THE ASSESSING OFFICER IS DIRECTED TO DECIDE THE ISSUE IN THE LIGHT OF THE AFORESAID CBDT CIRCULAR AND IN ACC ORDANCE WITH LAW. 61.4 FURTHER, THE OTHER OBJECTIONS OF THE ASSESSEE S COUNSEL IS THAT THERE IS NO GRANTING OF CROSS-EXAMINATION TO THE DE PONENT IN THE AFFIDAVIT THOUGH THE DONOR OF THE GOLD JEWELLERY TO THE ASSESSEE HAS CONFIRMED GIVING THE GIFT. FOR THIS PURPOSE, HE REL IED ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF MEHTA PARIKH AND CO. VS. CIT, 30 ITR 181 (SC) THE ARGUMENT OF THE ASSESS EE IS NOT 48 ITA NOS. 208, 266, 267, 209, 250, 251 & 262/H/12 M/S SRI SHIVA SPINNING MILLS LTD. & SHRI KANTILAL A GARWAL. CONSIDERED. IN THE SAID CASE THE HONBLE APEX COURT HELD AS FOLLOWS: THE CASH BOOK OF THE APPELLANTS WAS ACCEPTED AND T HE ENTRIES THEREIN WERE NOT CHALLENGED. NO FURTHER DOCUMENTS O R VOUCHERS IN RELATION TO THOSE ENTIES WERE CALLED FOR, NOR WA S THE PRESENCE OF THE DEPONENTS OF THE THREE AFFIDAVITS CONSIDERED NECESSARY BY EITHER PARTY. THE APPELLANTS TOOK IT THAT THE AF FIDAVITS OF THESE PARTIES WERE ENOUGH AND NEITHER THE AAC, NOR THE IT O, WHO WAS PRESENT AT THE HEARING OF THE APPEAL BEFORE THE AAC , CONSIDERED IT NECESSARY TO CALL FOR THEM IN ORDER TO CROSS- EX AMINE THEM WITH REFERENCE TO THE STATEMENTS MADE BY THEM IN TH EIR AFFIDAVITS. UNDER THESE CIRCUMSTANCES, IT WAS NOT O PEN TO THE REVENUE TO CHALLENGE THE CORRECTNESS OF THE CASH EN TRIES OR THE STATEMENTS MADE BY THOSE DEPONENTS IN THEIR AFFIDAV ITS. THE TRIBUNAL COULD NOT NEGATIVE THE POSSIBILITY OF THE APPELLANT BEING IN POSSESSION OF A SUBSTANTIAL NUMBER OF THESE HIGH DENOMINATION CURRENCY NOTES. IT, HOWEVER, CONSIDERE D THAT IT WAS IMPOSSIBLE FOR THE APPELLANTS TO HAVE HAD 61 SU CH NOTES IN THE CASH BALANCE IN THEIR HANDS ON 12TH JAN., 1946, AND THEN IT APPLIED A RULE OF THE THUMB TREATING 31 OUT OF SUCH 61 NOTES AS WITHIN THE BOUNDS OF POSSIBILITY, EXCLUDING 30 SUCH NOTES AS NOT COVERED BY THE EXPLANATION OF THE APPELLANTS. THIS WAS PURE SURMISE AND HAD NO BASIS IN THE EVIDENCE, WHICH WAS ON THE RECORD OF THE PROCEEDINGS. FACTS PROVED OR ADMITTED MAY PROVIDE EVIDENCE TO SUPPORT FURTHER CONCLUSIONS TO BE DEDUCED FROM THEM, WHICH CONCLUSIONS MAY THEMSELVES BE CONC LUSIONS OF FACT AND SUCH INFERENCES FROM FACTS PROVED OR AD MITTED COULD BE MATTERS OF LAW. THE COURT WOULD BE ENTITLED TO I NTERVENE IF IT APPEARS THAT THE FACT FINDING AUTHORITY HAS ACTED W ITHOUT ANY EVIDENCE OR UPON A VIEW OF THE FACTS, WHICH COULD N OT REASONABLY BE ENTERTAINED OR THE FACTS FOUND ARE SU CH THAT NO PERSON ACTING JUDICIALLY AND PROPERLY INSTRUCTED AS TO THE RELEVANT LAW WOULD HAVE COME TO THE DETERMINATION I N QUESTION. THE TRIBUNAL HAD NOT INDICATED UPON WHAT MATERIAL I T HELD THAT RS. 30,000 SHOULD BE TREATED AS SECRET PROFIT OR PR OFITS FROM UNDISCLOSED SOURCES AND THE ORDER PASSED BY IT WAS BAD. THE APPELLANTS HAD FURNISHED A REASONABLE EXPLANATION F OR THE POSSESSION OF THE HIGH DENOMINATION NOTES OF THE FA CE VALUE OF RS. 61,000 AND THERE WAS NO JUSTIFICATION FOR HAVIN G ACCEPTED IT IN PART AND DISCARDED IT IN RELATION TO A SUM OF RS . 30,000. 61.5 IN VIEW OF THE SAID JUDGMENT ALSO, WE ARE INCL INED TO REMIT THE ISSUE TO THE FILE OF THE ASSESSING OFFICER TO REAPP RAISE POSSESSION OF THE JEWELLERY AND GIVE CORRESPONDING RELIEF ON THE BASIS OF THE HOLDING OF EACH PERSON OF FAMILY AND THE FAMILY MEMBERS ARE STAYING UNDER SINGLE ROOF, IF IT IS SUPPORTED BY DOCUMENTARY EVID ENCE. ACCORDINGLY, 49 ITA NOS. 208, 266, 267, 209, 250, 251 & 262/H/12 M/S SRI SHIVA SPINNING MILLS LTD. & SHRI KANTILAL A GARWAL. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 62. GROUND NO. 5 REGARDING ACTION OF THE CIT(A) IN HOLDING THAT AN AMOUNT OF RS. 9,75,000/- IS ASSESSABLE ON ACCOUNT O F UNEXPLAINED INVESTMENT IN M/S MAA SACHIYA SPONGE IRON (P) LTD., JALNA, DOES NOT ARISE OUT OF THE ORDER OF THE CIT(A) AND, THEREFORE , THE SAME IS DISMISSED. 63. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO . 209/H/12 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 251/H/12 FOR AY 2009-10 BY THE REVENUE IN C ASE OF SRI KANTILAL AGARWAL 64. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLL OWING GROUNDS OF APPEAL: 2. THE LD. CIT(A) HAS ERRED IN GRANTING RELIEF OR R S. 6,47,497/- BEING 25% OF THE TOTAL VALUE OF SILVER ARTICLES OF RS. 25,89,990/- AS THE UNACCOUNTED JEWELLERY SEIZED DURING THE COUR SE OF SEARCH WHICH WAS ADDED IN THE ASSESSMENT ORDER DID NOT INCLUDE SILVER ARTICLES. 3. THE LD. CIT(A) HAS ERRED IN GRANTING RELIEF OF R S. 3,78,268/- BEING DIFFERENCE IN THE VALUATION REPORTS IGNORING THE FACT THAT THE SECOND VALUATION WAS MADE ON 17/03/2009 AS THER E WAS A TECHNICAL DEFECT IN THE FIRST VALUATION REPORT DT. 29/01/2009, AS THE ITEMS WERE NOT TAGGED PROPERLY. THIS FACT WAS C ONFRONTED TO THE ASSESSEE AND WAS ALSO CONFIRMED BY HIM IN HIS S TATEMENT RECORDED ON 17/03/2009. 65. AS WE HAVE UPHELD THE ORDER OF THE CIT(A) IN AS SESSEES APPEAL IN ITA NO. 209/HYD/2012 (SUPRA), THE GROUNDS RAISED BY THE DEPARTMENT BECAME INFRUCTUOUS, THEREFORE, THE SAME ARE DISMISSED AS INFRUCTUOUS. 66. IN THE RESULT, APPEAL OF THE REVENUE IN ITA NO. 251/HYD/2012 IS DISMISSED. 50 ITA NOS. 208, 266, 267, 209, 250, 251 & 262/H/12 M/S SRI SHIVA SPINNING MILLS LTD. & SHRI KANTILAL A GARWAL. 67. TO SUM UP, THE RESULT OF ALL THE APPEALS UNDER CONSIDERATION ARE AS FOLLOWS: 1. APPEAL OF THE ASSESSEE IN CASE OF M/S SRI SHIVA SPINNING MILLS LTD. IN ITA NO. 208/HYD/12 IS DISMISSED. 2. APPEAL OF THE REVENUE IN CASE OF M/S SRI SHIVA S PINNING MILLS LTD. IN ITA NO. 266/HYD/12 FOR AY 2008-09 AN D IN ITA NO. 267/HYD/.2012 FOR AY 2009-10 ARE DISMISSED. 3. APPEAL OF THE ASSESSEE IN CASE OF SRI KANTILAL A GARWAL IN ITA NO. 209/HYD/12 FOR AY 2009-10 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND IN ITA NO. 262/HYD/12 FOR AY 2008-09 I S ALLOWED FOR STATISTICAL PURPOSES. 4. APPEAL OF THE REVENUE IN CASE OF SRI KANTILAL AG ARWAL IN ITA NO. 250/HYD/12 FOR AY 2008-09 AND IN ITA NO. 251/HY D/12 FOR AY 2009-10 ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 28/03/2014. SD/- SD/- (SAKTIJIT DEY) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOU NTANT MEMBER HYDERABAD, DATED: 28/03/2014. KV COPY TO:- 1) M/S SHIVA SPINNING MILLS P. LTD., 48/1, INDUSTRI AL DEV. AREA, KATEDAN, HYDERABAD. 2) SRI KANTILAL AGARWAL, 21-2-631, HYDERABAD 3) ACIT, CENTRAL CIRCLE 4, HYDERABAD. 4) CIT(A)-VII, HYDERABAD 5) CIT(CENTRAL), HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T. A.T., HYDERABAD. 51 ITA NOS. 208, 266, 267, 209, 250, 251 & 262/H/12 M/S SRI SHIVA SPINNING MILLS LTD. & SHRI KANTILAL A GARWAL.